Canadian retailers and manufacturers in the food and beverage
space should be aware of the upcoming decision of the Appellate
Body of the World Trade Organization (WTO) regarding
country-of-origin labelling (COOL) requirements in the United
States. Previously expected on January 27, 2015, this highly
anticipated decision will be released on May 18, 2015 and is likely
to have a serious impact on both sides of the border.
Since 2008, a U.S. agricultural policy law called the Food, Conservation and Energy Act of
2008 has imposed rules requiring detailed labels
identifying the country of origin of beef, pork, chicken and
certain other agricultural products sold in U.S. stores. The
additional cost of sorting, labelling and storing Canadian-sourced
meat differently in order to comply with the requirement has
deterred some companies in the U.S. from purchasing Canadian
Canada successfully challenged the COOL requirements
before a WTO panel in 2010, with the panel finding that the COOL
requirements are inconsistent with the U.S.'s WTO obligations.
The U.S. appealed unsuccessfully in 2012 and was
ultimately afforded until May 2013 to amend the COOL
requirements in order to make them compliant with trade rules.
In 2013, Canada challenged the U.S.'s amendments before a
WTO compliance panel, which agreed that the amended COOL measures
remained in contravention of the U.S.'s trade obligations. The
upcoming Appellate Body decision will be the result of a U.S.
appeal of that compliance panel finding.
Canada's Proposed Retaliation
If the current U.S. appeal is unsuccessful, Canada will be
permitted under WTO rules to retaliate by imposing import tariffs
on U.S. goods. In June 2013, the Canadian government published a
list of proposed retaliatory tariffs which would levy a 100% surtax
on select U.S. imports, including:
breads and pastries
The Canadian government may be in a position to begin applying
these retaliatory tariffs on U.S. imports by late 2015.
If implemented, the tariffs are likely to impact the
highly-integrated North American agri-food supply chain, affecting
industry players on both sides of the border.
The proposed tariffs are targeted almost exclusively at the food
and beverage sector, which affects the business of a large
cross-section of manufacturers and retailers, and may be passed on
in the form of increased grocery bills for Canadian consumers.
What can be done?
Before tariffs are implemented, potentially affected
manufacturers and retailers (and their U.S. affiliates) may reach
out to advise the Canadian government of the impact of the proposed
tariffs on their business and present alternatives.
If the proposed tariffs are implemented, potential avenues of
legal recourse available to affected companies include: (1) taking
action under Chapter 11 of the North American Free Trade Agreement
(NAFTA), which would generally proceed as an arbitration conducted
in accordance with a specified set of international rules (such as
UNCITRAL or ICSID); or (2) applying to the Federal Court to
judicially review the decision to retaliate, the outcome of which,
if successful, would be to obtain a declaration requiring the
Canadian government to revise its decision to impose tariffs
(rather than damages).
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