Washington D. C. September 29, 2008.

**VIA ELECTRONIC SUBMISSION**

**U.S. Department of Agriculture**

**Agricultural Marketing Service**

Room 2607-S

1400 Independence Avenue, SW

Washington, DC 20250-0254

Attn: Country of Origin Labeling Program

**Re:** **Mandatory Country of Origin Labeling on** beef, pork, lamb,
chicken, goat meat, perishable agriculture commodities, peanuts, pecans,
ginseng and macadamia nuts ( **(7 CFR Part 65) \-- Comments on Interim
Final Rule.**

Dear Sir/Madam:

We are pleased to submit the following in response to the request for
public comment made in connection with the interim final rule mandatory
country of origin labeling ("COOL") rule relating to beef, pork, lamb,
chicken, goat meat, perishable agriculture commodities, peanuts, pecans,
ginseng and macadamia nuts (collectively referred to as "covered
commodities"). This interim final rule was published in the *Federal
Register* in August 1st, 2008 (73 *Fed. Reg.* No. 149/Rules and
Regulations).

Our concern with this rule is multi-faceted, and not new.[^1] The
proposed final rule at times conflicts not only with both the NAFTA and
WTO obligations of United States, but also with the United States' own
country of origin marking law (19 USC §1304) and implementing
regulations (19 CFR Part 134). This proposed final rule, will impose
significant costs on companies dealing with these covered commodities,
dissuading many from purchasing imported covered commodities subject to
this rule given the costs of compliance, and place importers and
retailers selling covered commodities in a dilemma, having to reconcile
conflicting requirements of the proposed rule with the U.S. country of
origin marking statute and implementing regulations.

Any discussion of mandatory COOL must begin with the underlying intent
of the COOL legislation. USDA has acknowledged that the mandatory COOL
requirements it intends to implement through this rule are "not a food
safety or animal health measure. COOL is a retail labeling program and
as such does not address food safety or animal health concerns."[^2]
USDA further stated that it was the intent of mandatory COOL to "provide
consumers with additional information on which to base their purchasing
decisions."[^3]

***[WTO Issues]{.underline}***

The final rule would likely run afoul of a number of provisions in the
WTO's Agreement on Technical Barriers to Trade ("TBT Agreement").[^4]
Article 2.2 of the TBT Agreement requires members to "ensure" that
technical regulations do not create "unnecessary obstacles to
international trade." Further, this provision requires that any
technical measures adopted must "not be more trade restrictive than
necessary to fulfill a legitimate objective." (TBT Agreement, Article
2.2).

The meaning of Article 2.2 have never been construed by WTO case law.
However, a rule which imposes costs which are so excessive that
retailers who have historically dealt with imported products switch
sourcing to domestic products to avoid the regulatory burdens and
associated costs imposed by this rule clearly amounts to an "obstacle"
to international trade. While the WTO has not yet had occasion to rule
on whether such an obstacle is "unnecessary", or whether these rules are
more trade restrictive "than necessary to fulfill a legitimate
objective," it should be noted that the objective of informing consumers
of the origin of imported goods has been accomplished by the U.S.
country of origin marking law for over 75 years without imposing the
cost of compliance which this final rule would impose. Assuming that
informing consumers of the country of origin of imported goods is a
"legitimate objective" of the government, it has been accomplished for
over 75 years by existing U.S. law which does not impose the cost and
other regulatory burdens of the final rule. Therefore, it can certainly
be strongly argued that the final rule is "more trade restrictive than
necessary to fulfill a legitimate objective."

Article 2.4 of the TBT Agreement states that when technical regulations
are required by a member, they should, to the extent possible, utilize
"relevant international standards" which either exist or whose
completion is imminent. Only if such international standards would be
ineffective or inappropriate should they be ignored. (TBT Agreement,
Article 2.4)

First, we would note that the existing U.S. country of origin law (19
USC §1304) comports with international standards for country of origin
marking. This rule, as previously noted, has been in place for over 75
years, and for this time has been deemed adequate to provide U.S.
consumers with information about the origin of the imported products
they consume. The final rule implementing mandatory COOL will at times
conflict with these longstanding and judicially confirmed rules. To the
extent this occurs, it clearly can be said that these final rules are
inconsistent with existing international standards.

Further, it cannot be argued that the current U.S. country of origin
marking law is either "ineffective or inappropriate" for the purpose of
informing consumers of the country of origin of imported product.
Seventy-five years of practice argues otherwise. Failure to conform
mandatory COOL to the U.S. country of origin marking rule seemingly
violates Article 2.4 of the TBT Agreement.

In addition to the U.S. country of origin marking rule, there are also
standards set forth by the Codex Alinentairus which constitute
international standards for country of origin marking. For example,
Sections 4.5.1 and 4.5.2 of the Codex Alinentairus set standard for the
labeling of prepackaged foods[^5].

There are rules in place in the United States which already provide
consumers information with respect to the country of origin of imported
goods, including the covered commodities. It may be that mandatory COOL
will provide U.S. consumers with more information than that provided by
the U.S. country of origin marking laws, but Section 4.5.1 of the CODEX
General Standards for prepackaged foods requires declaration of the
country of origin in food if its omission would "mislead or deceive" the
consumer. Simply because U.S. consumers may be less informed without the
mandatory COOL requirements does not mean they would be "misled or
deceived". Requiring marking in this instance would be inconsistent with
Section 4.5.1.

Section 4.5.2 of the CODEX General Standards for prepackaged foods
restates the well accepted rule of origin that when a food (or any
product) undergoes processing in a second country which changes its
nature, the country in which the processing is performed should be
considered the country of origin for the purposes of country of origin
labeling. This is indeed the general rule used by U.S. Customs and
Border Protection in determining the country of origin of imported
goods. To the extent that the proposed rule provides different
standards, it would be inconsistent with these generally accepted
international standards. For example, proposed Section 60.200(h) states
that blended food products, prepared from raw material sources having
different origins, shall have listed alphabetically the countries of
origin of the raw materials contained therein. Such a requirement goes
far beyond the requirements of the U.S. country of origin marking law,
which would find a single country of origin (most likely, the country
where the food products were processed) and require that only that
single country be named as the country of origin (and if the processing
were done in the United States, the article would need not bear a
country of origin mark at all).

***[NAFTA Issues]{.underline}***

The proposed regulations also raise concerns about consistency with U.S.
obligations under the NAFTA. Many of the NAFTA-related concerns are
similar to those discussed above, only relating to the NAFTA \-- not WTO
\-- consistency of the final rule with U.S. international obligations.

The NAFTA parties spent a considerable amount of time negotiating what
were then new and innovative rules of origin and country of origin
marking rules. These rules, based on tariff classification shifts, were
meant in most cases to replicate results which would have been obtained
had the long established "substantial transformation" test been used to
determine origin. However, even a cursory look at the final rules
implementing mandatory COOL show inconsistency with NAFTA rules of
origin. The so-called "born, raised and slaughtered" requirement of the
final rule, which permits beef to be labeled as U.S. origin only if an
animal was "born, raised or slaughtered" in the United States conflicts
with the NAFTA rules of origin (and the non-NAFTA substantial
transformation rule). This is but one example where conflicts between
the proposed new rules, and existing NAFTA rules, would occur.

The legislation and COOL final regulations are against the spirit and
the rules established in the NAFTA referring to origin rules. In fact,
for chapter 2, meat and offal, the origin is given when a change is made
to the HST 02.01 to 02.10 of any other chapter. All these, without
taking into account that a change in the harmonized system tariff
applies only to no origin materials. As we commented before implies that
a product that is considered from the U.S. for custom proposes, needs to
follow different rules related to labeling.

NAFTA Annex 311(4) requires that country of origin marking requirements
must minimize the difficulties, cost, and inconveniences that the
measure may cause to the commerce and industry of the other NAFTA
parties. As discussed above, USDA itself estimates that the
recordkeeping and operating cost to U.S. companies dealing with covered
commodities under the proposed rule may be as much as \$3.9 billion for
the first year alone.[^6] Tracking requirements, recordkeeping
requirements and other costs to implement the proposed rule would impose
significant additional costs on Mexican producers and suppliers to the
U.S. market. This does not take into account the cost of actually losing
business to established U.S. customers, who may well wish to avoid the
burdens and costs imposed by the final rules on covered commodities.

NAFTA Article 904(4) permits the United States to adopt or maintain
standards-related measures, such as technical regulations relating to
country of origin. This provision precludes a NAFTA member from adopting
such measures with either a view to or with the effect of creating an
unnecessary obstacle to trade. Given the fact that AMS itself has
acknowledged that the final regulations implementing mandatory COOL have
no health or safety-related basis, it is difficult to see how this final
rule could not be viewed as creating an *unnecessary* obstacle to trade.

NAFTA Article 905 provides that the standards-related measures should be
based on relevant international standards or international standards
whose completion is imminent. As discussed above (*see* *infra* at pages
3 - 4), the final regulations implementing mandatory COOL for the
covered commodities are inconsistent with existing international
standards, and thus are inconsistent with U.S. obligations under the
NAFTA.

We appreciate the opportunity to submit these comments on this very
important subject. Due the arguments expressed upwards, Mexico request
to eliminate the disposition contained in the Farm Security and Rural
Investment Act; the Food Conservation and Energy Act of 2008 and the
Interim Final Rule published on August 1^st^, 2008.

Finally, I will point out that our country reserved the right to promote
any complaints regarding the implementation of the final rule of country
of origin labeling to the organizations it deems appropriate.

**Respectfully submitted,**

**Oswaldo Cházaro Montalvo**

**President**

**CNOG**

[^1]: *See* SAGARPA's August 20, 2007 and February 23, 2004 , April 9,
    2003 comments on mandatory COOL. These comments are contained in
    *Attachment 1*, submitted to USDA in response to earlier requests
    for comments, and are incorporated herein by reference. In addition,
    please refer to Summary Meeting of the Technical Barriers to Trade
    (TBT) Committee of World Trade Organization (WTO) celebrated on July
    5, 2007 (2.i.67) published on August 6, 2007 document G/TBT/M/42.

[^2]: 68 *Fed. Reg.* 61945 (October 30, 2003)

[^3]: *Id*

[^4]: We are presuming WTO's Agreement on Sanitary and Phytosanitary
    ("SPS") Measures would not apply to these rules. The SPS Agreement
    addresses many of the same concerns as the TBT Agreement. However,
    were the SPS Agreement to apply, the TBT Agreement would not apply
    (TBT Agreement Article 1.5). We note that Annex A(1) of the SPS
    Agreement defines SPS measures as measures taken for the following
    designated purposes: protecting human, or plant life or health,
    animal, and preventing or limiting other damages within the
    territory of the member country from the entry, establishment or
    spread of pests. Given that USDA has clearly stated that mandatory
    COOL is not a food safety or animal health measure, but a retail
    labeling rule, we are taking the position, for the purpose of these
    comments, that it would not involve the WTO's SPS Agreement.

[^5]: CODEX General Standard for the labeling of prepackaged foods,
    CODEX STAN 1-1985 (Rev. 1-1991) provides that the country of origin
    of food shall be declared if its omission would "mislead or deceive"
    the consumer (Section 4.5.1), and further states that when a food
    undergoes processing in a second country which changes its nature,
    the country of origin will be the country in which the processing is
    performed (Article 4.5.2).

[^6]: *See* Footnote 1.