In 2009, the United-States implemented legislation to modify the labeling provisions for meat and meat products under the Country of Origin Labeling (COOL) program. This legislation has forced the livestock industry in Canada and other countries such as Mexico to implement lengthy labeling and tracking systems when trading with the U.S. The burden of this legislation is estimated to have cost Canadian trade in excess of $3.1 billion, severely damaging Canadian industry and jobs.
Canada and Mexico initiated WTO dispute proceedings as a result of the U.S. implementing the COOL legislation. In response, the U.S. challenged the dispute. Finally, after the US exhausted all avenues of the dispute settlement process, the WTO released its final ruling in May 2015, stating the country-of-origin labeling (COOL) on meat unfairly discriminates against meat imports and gives the advantage to domestic meat products.
The final WTO ruling allowed Canada and Mexico permission to respond, they went forward to the WTO stating they wanted to issue a 100% surtax on certain products to recover the costs as a result of the COOL legislation In June, 2015, both nations made a statement where the Canadian Minister of International Trade, Ed Fast jointly with Mexico´s Secretary of Economy, Ildefonso Guajardo Villarreal said; “Canada will request authorization from the WTO to impose over CA$3 billion in retaliatory measures against the U.S., while Mexico will seek authorization for over US$653 million.
How would surtax be assessed?
The 100% surtax can be assessed regardless of whether or not the product qualifies for the North American Free Trade Agreement (NAFTA). In simple terms, this means that if a targeted product is imported with a Canadian value of $1,000.00, then a $1,000.00 surtax will be assessed at time of importation even if the product qualifies for the NAFTA preferential duty rate.
Some of the products that may be targeted include:
Chemicals, jewelry, metal products, furniture, fresh meats, and food products such as: certain fruits and vegetables, prepared meals, various syrups, chocolate, pasta, cereals, breads and pastries, orange juice, ketchup and sauces, wines and spirits.
A final list of the products subject to retaliation along with the corresponding tariff items will be provided at the time of implementation of the surtax, as well as clarification of whether or not the surtax will only apply to products originating in the U.S. or to products imported from the U.S. regardless of the origin.
While there was a call by many to the U.S. Senate to repeal the legislation before the U.S. Senate recessed in August, this did not happen. The U.S. Government disputed the amount of damages claimed by Canada and made a request to the WTO, for arbitration. The WTO arbitrators have met with the parties on the 15th and 16th of September 2015 and held an open session to public viewing at the WTO Headquarters in Geneva.
It’s expected that the arbitration process will be completed by the late fall of 2015, after which Canada will have legal authority to proceed with retaliation against an annual value of trade equivalent to the level of damages determined by the WTO arbitration panel.