B. P RELIMINARY MATTERS
1. Measures at issue
7.6 The parties agreed to the standard of review by the Panel pursuant to Article 7.1 of the DSU.26 Accordingly, our terms of reference are defined by the complainants' respective requests for the establishment of a panel under Article 6.2 of the DSU. Canada27 and Mexico28 identified in their respective panel requests a number of measures allegedly pertaining to the mandatory country of origin labelling requirements imposed by the United States.29
7.7 Whilst not challenging the adequacy of the complainants' panel requests under Article 6.2, the United States questions the necessity for the Panel to examine expired measures. The parties also dispute how the Panel should treat the measures at issue in examining the complainants' claims, namely whether to treat them collectively as a single measure or separately as individual measures.
7.8 In light of the issues raised by the parties as well as the obligation imposed on us to make an objective assessment of the parties' claims based on the properly identified measures, we will examine in this section the following three matters:
• Which measures fall properly within the scope of our terms of reference;
• Whether we should examine the measures that were no longer in effect at the time of the Panel's establishment; and
• How we should treat the measures at issue in examining the complainants' claims, namely, whether to treat them collectively as a single measure or separately as individual measures.
26 See para. 1.6.
27 Canada defined the measures identified in its panel request as the provisions comprising the
"COOL measure".
28 Mexico refers to the measures identified in its panel request as the COOL measures (in plural). In subsequent written submissions, however, Mexico has taken the same position as Canada and argues that these instruments consistent one single "COOL measure".
29 See paras. 2.1-2.3.
(b) Measures that fall within the scope of the Panel's terms of reference
7.9 We have already described the measures at issue as identified by the complainants in their panel requests.30 In the course of the Panel proceedings, the complainants further elaborated on the measures that they challenge in this dispute.31 The following are the "provisions"32 that both Canada and Mexico claim constitute the "COOL measure":
• the Agricultural Marketing Act of 1946, as amended by the 2002 Farm Bill and 2008 Farm Bill;
• the Interim Final Rule33 (AMS34);
• the 2009 Final Rule (AMS); and
• the Vilsack letter.
7.10 In addition to the above listed "provisions", Mexico refers to three other measures:
• the Interim Final Rule (FSIS)35;
• the 2009 Final Rule (FSIS)36; and
• any further implementing guidance, directives or policy announcements.37
7.11 As the measures identified above consist of, inter alia, statutory and regulatory instruments pertaining to the mandatory country of origin labelling requirements, we will first briefly review the legislative and rulemaking process in the United States.
7.12 Under the United States' legal system, once a bill passes through Congress and becomes law, it is codified into the United States Code ("U.S.C."). An enacted statute then forms the legal authority and framework for a given subject matter. Subsequently, in order for the executive branch to implement the concerned statute, relevant government departments or agencies undertake, where necessary, the rulemaking process to introduce regulations. These regulations are codified into the Code of Federal Regulations ("C.F.R.").
30 See paras. 2.1-2.3.
31 Canada's and Mexico's responses to Panel question Nos. 1 and 2.
32 As described in Section II above, Canada used the term "provisions" to refer to various measures that, in its view, collectively constitute one single COOL measure.
33 See para. 7.84 for an explanation of the interim final rule in the context of the US legal system.
34 The Agricultural Marketing Service ("AMS") was vested with authority over the COOL rulemaking process, complementing the work that the USDA's Food Safety and Inspection Service ("FSIS") had been performing in the past. The United States explains that the "FSIS ultimately discontinued its independent rulemaking after Congress passed the 2002 Farm Bill and the AMS took over primary responsibility for determining when meat covered commodities could be designated as "U.S. origin", or some derivative thereof".
However, the FSIS still has the "authority within the US government for ensuring that meat food products are safe, wholesome and accurately labelled". (United States' first written submission, para. 31).
35 In its response to Panel question No. 2, Canada states that it did not include the Interim Final Rule and the Final Rule that were adopted by the FSIS as part of the COOL measure.
36 Canada clarified that it did not include the FSIS Final Rule as part of the "COOL measure" (Canada's responses to Panel question Nos. 1 and 2).
37 Mexico's first written submission, paras. 9, 29, 33 and 34; response to Panel question No. 1; and second written submission, paras. 20 and 42.
7.13 The statutory provisions enacted through the 2002 Farm Bill and 2008 Farm Bill in relation to the COOL requirements were inserted into the Agricultural Marketing Act of 1946.38 In other words, the Farm Bills introduced the COOL requirements in Congress, subsequently becoming part of the US statutes, codified in 7 U.S.C. 1621 et seq. For ease of reference, in our reports we will refer to the Agricultural Marketing Act of 1946, as amended by the 2002 Farm Bill and 2008 Farm Bill, as the
"COOL statute".
7.14 Further, the regulatory provisions implementing the COOL statute were introduced by the 2009 Final Rule (AMS). Most of the provisions in the 2009 Final Rule (AMS) were carried forward from those in the Interim Final Rule (AMS).39 These regulatory provisions are codified in 7 C.F.R.
Parts 60 and 65. Our reference in these reports to the implementing regulations in relation to the COOL requirements means the 2009 Final Rule (AMS).
7.15 To determine the scope of our terms of reference, we address, in turn, the measures identified by both Canada and Mexico and the three additional measures referred to only by Mexico.40
7.16 Both Canada and Mexico presented the COOL statute, the 2009 Final Rule (AMS), the Interim Final Rule (AMS) and the Vilsack letter as the measures at issue. The complainants properly identified these measures in their panel requests within the meaning of Article 6.2 of the DSU. In this connection, we note that the parties have not contested that all these measures, including the Vilsack letter, qualify as measures subject to WTO dispute settlement. The Appellate Body stated that, "in principle, any act or omission attributable to a WTO Member can be a measure of that Member for purposes of dispute settlement proceedings. The acts or omissions that are so attributable are, in the usual case, the acts or omissions of the organs of the state, including those of the executive branch".41 7.17 Accordingly, we conclude that the COOL statute, the 2009 Final Rule, the Interim Final Rule (AMS) and the Vilsack letter are properly within the Panel's terms of reference.
7.18 Turning now to the additional measures challenged only by Mexico (i.e. the Interim Final Rule (FSIS), the 2009 Final Rule (FSIS), and any further implementing guidance, directives or policy
38 Mexico's first written submission, para. 10; United States' first written submission, para. 33. Mexico further states that the Agricultural Marketing Act of 1946 contains provisions regulating the system for distributing and marketing agricultural products in the United States.
39 The 2009 Final Rule modified certain provisions of the Interim Final Rule (AMS). See paras. 7.90-7.100 for more detailed discussion in this regard.
40 See paras. 7.9-7.10.
41 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 81. The panel in US – Export Restraints also stated,
"[t]he Appellate Body [in Guatemala – Cement I] recalled the GATT Panel in Japan – Semiconductors that measures could consist of both binding and non-binding acts, including non-binding administrative guidance by a government. We agree, and in particular find no reason or basis to rule in the abstract that a given type of instrument or action cannot be subject of claims in WTO dispute settlement. This of course does not mean, however, that all measures are capable by themselves of giving rise to violations of WTO obligations."
(Panel Report, US – Export Restraints, paras. 8.80-8.81 (original footnote omitted), also referring to the Appellate Body Report, Guatemala – Cement I, footnote 47)
We observe that this is also consistent with the principle in the relevant provisions of the International Law Commission Articles on Responsibility of States for Internationally Wrongful Acts, as pointed out by the European Union, a third party participant in this dispute (European Union's third-party oral statement at the second substantive meeting of the Panel, paras. 3-4; parties' responses to Panel question No. 97). See also response of Canada and Mexico to Panel question No. 98.
announcements), we first find the Interim Final Rule (FSIS)42 to be properly within the scope of our terms of reference as it is specifically identified in Mexico's panel request.
7.19 Mexico has also invoked the 2009 Final Rule (FSIS). Mexico, however, did not identify the 2009 Final Rule (FSIS) in its panel request43, although Mexico mentions it in its first written submission as well as in its response to a question from the Panel.44 Through the 2009 Final Rule (FSIS), the FSIS "[affirmed], without change, its interim final rule requiring a country of origin statement on the label of any meat or poultry product that is a covered commodity, as defined by the [AMS], and that is to be sold by a retailer …"45 Mexico submitted its request for the establishment of a panel on 9 October 2009. As of the date of Mexico's panel request, therefore, the 2009 Final Rule (FSIS) had already been enacted (i.e. 15 January 2009). The 2009 Final Rule (FSIS) is therefore not a measure that was enacted subsequent to the date of Mexico's request for the establishment of a panel, which may have made it fall within the scope of the Panel's terms of reference should it be found, inter alia, sufficiently connected to the measures at issue identified in the panel request. We conclude that the 2009 Final Rule (FSIS) falls outside the scope of the Panel's terms of reference.46
7.20 In addition, Mexico identified "any further implementing guidance, directives or policy announcements" in its panel request.47
7.21 The table below summarizes the measures at issue that fall within the scope of the Panel's terms of reference for the disputes brought by Canada and Mexico, respectively:
CANADA MEXICO THE COOL STATUTE
THE 2009FINAL RULE (AMS) THE VILSACK LETTER
THE INTERIM FINAL RULE (AMS)
THE INTERIM FINAL RULE (FSIS) ANY FURTHER IMPLEMENTING GUIDANCE,
DIRECTIVES OR POLICY ANNOUNCEMENTS
7.22 Among these measures, the Interim Final Rule (AMS) and the Interim Final Rule (FSIS) had already expired at the time of the Panel's establishment. As explained in more detail below, the fact that a measure ceased to exist or expired at the time of the establishment of a panel does not a priori make that measure fall outside the scope of the panel's terms of reference, insofar as the measure is specifically identified within the meaning of Article 6.2 of the DSU. Nonetheless, the question remains whether it is even necessary for us to examine the expired measures in pursuing the objective
42 Although Canada also identified the Interim Final Rule (FSIS) in its panel request, it subsequently submits that it "did not include the Interim Final Rule and the Final Rule that were adopted by the FSIS as part of the COOL measure" in its response to Panel question No. 2. We understand this statement to mean that it has decided not to pursue the Interim Final Rule (FSIS) as part of the measures at issue in this proceeding regardless of the fact that it was identified in its panel request.
43 WT/DS386/7 and WT/DS386/7/Corr.1.
44 Mexico's first written submission, para. 9, referring to Exhibit MEX-6; response to Panel question No. 1.
45 Exhibit MEX-6.
46 We note that the United States has not objected to Mexico's addressing the 2009 Final Rule (FSIS) in its submissions. This does not, however, cure the defect in Mexico's panel request that the concerned instrument was not identified as required by Article 6.2 of the DSU.
47 Mexico's first written submission, paras. 9, 29, 33 and 34; response to Panel question No. 1; and second written submission, paras. 20 and 42.
of bringing prompt resolution to the current dispute. We consider this question in the following section.
(c) Measures that were no longer in force at the time of the establishment of the Panel – Interim Final Rule (AMS) and Interim Final Rule (FSIS)48
(i) Main arguments of the parties
7.23 The United States argues that both the Interim Final Rule (AMS) and the Interim Final Rule (FSIS) have no effect in US law because they were superseded by the 2009 Final Rule (AMS) on 16 March 2009 and the 2009 Final Rule (FSIS) on 20 March 2009, respectively, and did not exist at the time of the establishment of the Panel.49
7.24 The United States asserts that an examination of the Interim Final Rule (AMS), which did not exist at the time of the establishment of the Panel, would not help achieve a satisfactory settlement of the matter at issue.50 The Interim Final Rule (AMS) does not provide evidence of the administration of the 2009 Final Rule (AMS) because of the substantive difference between these two instruments.
Further, the United States submits that the differences between the 2009 Final Rule (AMS) and the Interim Final Rule (AMS) are significant. Among these differences, the United States highlights the flexibility provided under the 2009 Final Rule (AMS)51 with regard to the use of B and C labels that did not exist under the Interim Final Rule (AMS): (i) a C label can be used on meat derived from a B animal in any circumstances; and (ii) B and C labels can be used when meat pertaining to category A, B, or C is commingled within a single production day in any combination.52 The United States, however, agrees that the 2009 Final Rule (AMS) does not allow the use of B labels on category A meat when it is not commingled.53
7.25 Regarding the Interim Final Rule (FSIS), the United States argues that Mexico has failed to make a prima facie case.54 The United States also reiterates that the Interim Final Rule (FSIS) is no longer in force.
7.26 Canada agrees that the Interim Final Rule (AMS) expired on 15 March 2009.55 Canada underlines, however, that the contents of the Interim Final Rule (AMS) were carried forward, with minor modifications, into the 2009 Final Rule (AMS), which became effective on 16 March 2009. In Canada's view, both the Interim Final Rule (AMS) and the 2009 Final Rule (AMS) implement the COOL statute.56 According to Canada, as the overall effect of the Interim Final Rule (AMS) was the
48 The Interim Final Rule (FSIS) is relevant only for the dispute brought by Mexico.
49 United States' first written submission, paras. 46 and 69-71.
50 United States' second written submission, paras. 23-25.
51 See Section VII.C.1(b)(i).
52 Exhibit CDA-5, p. 2706. The United States also refers to other differences between the 2009 Final Rule (AMS) and the Interim Final Rule (AMS) in para. 25 of its second written submission (footnotes 34-38) (Exhibit CDA-5, p. 2659-2660).
53 The United States explains in footnote 33 in its second written submission that this change was made at the request of consumer groups, among other interested parties, who believed that meat derived from animals born, raised, and slaughtered in the United States should largely be labelled as US-origin.
54 Canada clarified that it did not include either the 2009 Final Rule (FSIS) or the Interim Final Rule (FSIS) as part of the measures at issue.
As for Mexico's claim in respect of the 2009 Final Rule (FSIS), we concluded above that it is not within the scope of our review in this dispute as that specific instrument was not identified in Mexico's panel request.
55 Canada's response to Panel question No. 2.
56 Canada agrees that compared to the Interim Final Rule (AMS), the 2009 Final Rule (AMS) provides more flexibility with respect to the use of Label B on meat from animals imported directly for slaughter and
same as that of the 2009 Final Rule (AMS), the Panel must take into account the effects of the Interim Final Rule (AMS) although it has expired.57
7.27 Mexico also agrees that both the Interim Final Rule (AMS) and the Interim Final Rule (FSIS) have been superseded by the 2009 Final Rule (AMS) and the 2009 Final Rule (FSIS) respectively and therefore have no legal effect under US law.58 However, for the purposes of its challenge, Mexico submits that the Interim Final Rules are evidence of the implementation, operation and administration of the COOL measure in a manner that unjustifiably discriminates against and restricts imports of Mexican cattle into the United States. Specifically, Mexico refers to the decrease of Mexican feeder cattle imports into the United States59 and the increase in the average price differential between Mexican and like US cattle after the issuance of the Interim Final Rule (AMS).60 Mexico also points to announcements that were made at the end of 2008 concerning the reduction in plants accepting Mexican cattle.61
(ii) Analysis by the Panel Interim Final Rule (AMS)
7.28 We recall that the Interim Final Rule (AMS) was specifically identified in the complainants' panel requests and thus falls within the scope of the Panel's terms of reference.62 All parties also agree that the Interim Final Rule (AMS) had expired at the time of the establishment of the Panel and currently has no legal effect under US law.63 The complainants are not requesting us to make a finding or recommendation with regard to the Interim Final Rule (AMS). The contention between the complainants and the United States concerning this instrument is, therefore, whether the Panel should even examine it for the purpose of this dispute.
7.29 Specifically, the complainants take the position that the Panel should consider the Interim Final Rule (AMS) regardless of its legal status under US law. In support of its position, Canada points to the similarities between the Interim Final Rule (AMS) and the 2009 Final Rule (AMS) in substance as well as in their overall effect: both sets of regulations implement the COOL legislation.
commingled with US origin animals or mixed origin animals during a single production day (Canada's first written submission, para. 26; response to Panel question No. 2). At the same time, however, the 2009 Final Rule (AMS) removed the flexibility of labelling products from US origin animals as Label B, unless there is commingling with non-US origin animals during a single production day.
57 Canada's response to Panel question No. 2.
58 Mexico's response to Panel question No. 2. Mexico states that it "recognizes that these instruments are not currently nullifying or impairing benefits accruing to Mexico under the WTO Agreements since they have been superseded by the 2009 Final Rules".
59 Mexico's first written submission, para. 163; response to Panel question No. 2, citing to the 24 February 2009 report by the Congressional Research Service (Exhibit MEX-53).
60 Mexico's first written submission, para. 164; response to Panel question No. 2, citing to USDA price data contained in Exhibit MEX-47 and summarized in Exhibit MEX-48.
61 Mexico's first written submission, para. 157; response to Panel question No. 2, citing to Tyson letter of 24 December 2008 (Exhibit MEX-42) and Affidavit (Exhibit MEX-37).
62 We recall the Appellate Body's clarification in US – Upland Cotton that the text of Article 6.2 does not preclude a Member from making representations with respect to measures whose legislative basis has expired. The Appellate Body further stated that the fact that a measure has expired is not dispositive of the preliminary question of whether a panel can address claims in respect of that measure although it may affect whether, and if so, what recommendation a panel should make in respect of such a measure. (Appellate Body Report, US – Upland Cotton, para. 270) See also the Panel Report, Thailand – Cigarettes (Philippines), paras. 7.42-7.43.
63 Canada's response to Panel question No. 2; Mexico's response to Panel question No. 2;
United States' first written submission, paras. 13,46, 59.