As the trade landscape continues to evolve, food processing companies that import and export goods to and from Canada will encounter important changes. Developments in the mandatory country of origin labeling (COOL) and proposed revisions to Canada’s nutritional labeling regulations will likely change the way importers, exporters and customs brokers conduct business.
Country of origin labeling
While the dispute over COOL has been a long-running process, recent developments indicate that U.S. businesses could feel the effects of Canada’s retaliation against COOL as early as September, if the U.S. does not repeal it.
On June 10, the U.S. House of Representatives voted to repeal COOL requirements for beef, pork and chicken, urging the senate to do the same. If not repealed, Canada requested authorization from the World Trade Organization (WTO) to impose more than $3 billion in retaliatory measures against U.S. exports to Canada. The dollar figure represents the amount of annual damages that Canada claims is caused by COOL to the Canadian cattle and hog industries.
At the meeting of the WTO Dispute Settlement Body, the U.S. government disputed the amount of damages claimed by Canada and requested arbitration, which is expected to be completed by autumn 2015. If the settlement body rules in Canada’s favor, the country would have legal authority to proceed with retaliation against an annual value of trade equivalent to the level of damages determined by the WTO panel.
COOL is a U.S. federal law that requires meat sold in grocery stores to indicate the country or countries where the animal was born, raised and slaughtered. Mexico and Canada have claimed COOL puts Mexican and Canadian livestock at an unfair disadvantage against U.S.-born, raised and slaughtered animals. Canadian officials also have claimed COOL complicates the importing/exporting process for Canada, driving up the price of their exports.
In October 2014, the WTO ruled in favor of Canada and Mexico, finding COOL requirements put Canadian and Mexican livestock at an unfair disadvantage, putting into motion the current state of repeals and possible retaliation.
If the U.S. does not change COOL to comply with WTO rules, the Canadian government has warned of increased tariffs of more than $1 billion on 30 U.S. products that could include beef, pork, cereals, baked goods and fruit. The Canadian Dept. of Finance will review the original product list and make amendments that will be announced by October.
While businesses wait for the outcome, there are steps that should be taken now to prepare. In addition to being aware of the latest developments, businesses need to understand how they will be impacted if the tariffs are imposed.
Companies should start now by evaluating their goods to determine if they are listed among the products targeted by Canada and if there is an alternate sourcing option available in the event that the surtax is implemented. They should be analyzing their import activity to determine their current duty/tax outlay under today’s conditions versus the proposed changes.
Working with a global trade management company can assist in the data analysis and provide alternative solutions to be considered to ensure companies remain competitive and can still facilitate business.
Canadian nutritional labeling regulations
In an effort to help customers make more informed food choices, Canadian Minister of Health Rona Ambrose proposed changes to nutritional labeling regulations in June. One of these proposed changes includes an update to the nutrition facts table, food list, sugar information and serving size on food labels, as well as a new health claim to be included on fruit and vegetable labels.
For example, a new percent daily value (DV) for sugars based on Health Canada's recommendation of 100g per day will be added to labels, as well as a footnote stating whether the food has a little or a lot of sugar. Five percent DV or less is considered a little, and 15 percent DV or more is a lot.
Canadians will have an opportunity to voice their opinion on the proposed regulatory changes to the nutrition information on food labels for a 75-day comment period, ending on Aug. 27.
To ensure their exports are compliant, food processors in the U.S. will need to be aware of any newly proposed technical regulations and conformity assessment procedures Canada passes into law.
Also, food processors will need to understand what the new labels will mean for their product. If the new regulatory changes are approved, Canadian consumers will see different ingredients highlighted, which could affect their purchasing decisions.