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Recourse to article 21.5 of the DSU by Canada and Mexico - Reports of the Panel

ABBREVIATIONS

AbbreviationDescription
2002 Farm Bill The Farm Security and Rural Investment Act of 2002, Pub. L. No. 107-171, § 10816, 116 Stat. 134, 533-535 (Exhibit CDA-4)
2008 Farm Bill The Food, Conservation, and Energy Act of 2008, Pub. L. No. 110-234, § 11002, 122 Stat. 923, 1351-1354 (Exhibit CDA-5)
2009 Final Rule Final Rule on Mandatory Country of Origin Labeling of Beef, Pork, Lamb, Chicken, Goat Meat, Wild and Farm-Raised Fish and Shellfish, Perishable Agricultural Commodities, Peanuts, Pecans, Ginseng, and Macadamia Nuts, United States Federal Register, Vol. 74, No. 10, (15 January 2009), p. 2658 (Exhibits CDA-2 and MEX-12)
2013 Final Rule Final Rule on Mandatory Country of Origin Labeling of Beef, Pork, Lamb, Chicken, Goat Meat, Wild and Farm-Raised Fish and Shellfish, Perishable Agricultural Commodities, Peanuts, Pecans, Ginseng, and Macadamia Nuts, United States Federal Register, Vol. 78, No. 101, (24 May 2013), p. 31367 (Exhibits CDA-1 and MEX-3)
AMS Agricultural Marketing Service of the United States Department of Agriculture
amended COOL measure The COOL statute, and the 2009 Final Rule as amended by the 2013 Final Rule
BCI Business confidential information
BSE Bovine spongiform encephalopathy
COOL Country of origin labelling
COOL statute The Agricultural Marketing Act of 1946, Public Law No. 107-171, 7 U.S.C. § 1638 (2012), as amended by the 2002 Farm Bill and the 2008 Farm Bill (Exhibit CDA-3)
DSB Dispute Settlement Body
DSU Understanding on Rules and Procedures Governing the Settlement of Disputes
eID Electronic identification
GATS General Agreement on Trade in Services
GATT 1994 General Agreement on Tariffs and Trade 1994
Hayes and Meyer paper D. J. Hayes and S. R. Meyer, "Impact of Mandatory Country of Origin Labelling on U.S. Pork Exports", Center for Agricultural and Rural Development, Iowa State University, (2003) (Exhibits CDA-89 and MEX-37)
Interim final rule (AMS) Interim Final Rule on Mandatory Country of Origin Labelling of Beef, Pork, Lamb, Chicken, Goat Meat, Perishable Agricultural Commodities, Peanuts, Pecans, Ginseng, and Macadamia Nuts, 7 CFR Part 65 (1 August 2008)
Interim final rule (FSIS) Interim Final Rule on Mandatory Country of Origin Labelling of Muscle Cuts of Beef (including Veal), Lamb, Chicken, Goat, and Pork, Ground Beef, Ground Lamb, Ground Chicken, Ground Goat, and Ground Pork, 9 CFR Parts 317 and 381(28 August 2008)
Interstate Livestock Traceability Rule Final Rule on Traceability for Livestock Moving Interstate, Parts 71, 77, 78, and 86, United States Federal Register, Vol. 78, No. 6(9 January 2013), p. 2040 (Exhibits CDA-93 and MEX-82)
ICVI Interstate certificate of veterinary inspection
KSU Consumer Valuation G. T. Tonsor, T. C. Schroeder and J. L. Lusk, "Consumer Valuation of Alternative Meat Origin Labels", Journal of Agricultural Economics, (2012) (Exhibits CDA-84 and MEX-34)
KSU Revealed Demand M. R. Taylor and G. T. Tonsor, "Revealed Demand for Country of Origin Labeling of Meat in the United States", Journal of Agricultural and Resource Economics 38(2), (2013), pp. 235-47 (Exhibits CDA-83, MEX-35, and MEX-62)
KSU Study Fact Sheet G. T. Tonsor, J. L. Lusk, T. C. Schroeder, and M. R. Taylor, "Mandatory Country of Origin Labeling: Consumer Demand Impact", Kansas State University, Department of Agricultural Economics, (Publication AM-GTT-2012.6) (2012) (Exhibit CDA-82)
Mexican variant of the Sumner Economic Analysis Application of the Sumner Economic Analysis to Mexico (Exhibit MEX-87)
MFN Most-favoured nation
NAFTA North American Free Trade Agreement
NAIS National Animal Identification System
original COOL measure The COOL statute and the 2009 Final Rule
PACA Perishable Agricultural Commodities Act of 1930, 7 U.S.C. § 499 (Exhibits CDA 10 and MEX‑7)
RFID Radio frequency identification
SPS Agreement Agreement on the Application of Sanitary and Phytosanitary Measures
Sumner Economic Analysis D. A. Sumner, "The magnitude of added compliance costs required for a non‑discriminatory alternative measure to have equivalent export losses (trade effects) as the original discriminatory COOL measure", 17 December 2013 (Exhibit CDA-126)
Sutherland letter Letter from Director-General of the GATT, P. D. Sutherland to Ambassador Schmidt (Geneva, December 15,1993) (Exhibit US-20)
TBT Agreement Agreement on Technical Barriers to Trade
Vienna Convention Vienna Convention on the Law of Treaties, Done at Vienna, 23 May 1969, 1155 UNTS 331; 8 International Legal Materials 679
USDA United States Department of Agriculture
Updated Sumner Econometric Study D. A. Sumner, "Differential Effects of the Original COOL Measure on Canadian Cattle and Hogs: Empirical Specification of the Statistical Equations and Econometric Methods, with an Update of the Data to Reflect Recent Impacts", 9 September 2013 (Exhibit CDA‑71); and D. A. Sumner, Detailed results from regressions quantifying the effects of the COOL measure on Canadian cattle and hogs, Part I (Exhibit CDA‑179), Part II (Exhibit CDA-180), and Part III (Exhibit CDA‑181)
WTO World Trade Organization
WTO Agreement Marrakesh Agreement Establishing the World Trade Organization

1 INTRODUCTION

1.1 COMPLAINTS BY CANADA AND MEXICO

1.1.
This compliance dispute concerns the challenges by Canada and Mexico of the measure taken by the United States in 2013 to comply with the Dispute Settlement Body (DSB) recommendations and rulings in United States – Certain Country of Origin Labelling (COOL) Requirements (DS384 and DS386).1
1.2.
On 10 June 2013, Canada and Mexico reached an understanding with the United States in "Agreed Procedures under Articles 21 and 22 of the Dispute Settlement Understanding" (Sequencing Agreement).2 According to paragraph 2 of this Sequencing Agreement, Canada and Mexico were not required to hold consultations with the United States before requesting the establishment of a panel under Article 21.5 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).

1.2 PANEL ESTABLISHMENT AND COMPOSITION

1.3.
On 19 August 2013, Canada and Mexico requested the establishment of a panel pursuant to Articles 6 and 21.5 of the DSU, Article 14 of the TBT Agreement, and Article XXIII of the GATT 1994, with standard terms of reference as set out in Article 7.1 of the DSU.3
1.4.
At its meeting on 25 September 2013, the DSB referred this dispute to the original panel if possible, in accordance with Article 21.5 of the DSU.
1.5.
The Panel's terms of reference are the following:

To examine, in the light of the relevant provisions of the covered agreements cited by the parties to the dispute, the matter referred to the DSB by Canada in document WT/DS384/26 and by Mexico in document WT/DS386/25, and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements.

1.6.
In accordance with Article 21.5 of the DSU, the Panel was composed on 27 September 2013 as follows:

Chairperson: Mr Christian Häberli

Members: Mr Manzoor Ahmad

Mr João Magalhães

1.7.
Australia; Brazil; Canada (for DS386); China; Colombia; the European Union; Guatemala; India; Japan; the Republic of Korea; Mexico (for DS384); and New Zealand reserved their rights to participate in the Panel proceedings as third parties.

1.3 PANEL PROCEEDINGS

1.3.1 General

1.8.
Taking into account the United States' letter of 10 October 2013 and after consultation with the parties, the Panel Working Procedures4 and timetable were adopted on 28 October 2013. After further consulting the parties, the Panel revised its Working Procedures on 21 January 2014 and its timetable on 5 March 2014.
1.9.
The substantive meeting with the parties was held on 18 and 19 February 2014. A session with the third parties took place on 19 February 2014. On 10 April 2014, the descriptive part of the Panel Reports was issued to the parties. The Interim Reports were issued to the parties on 27 June 2014. The Final Reports were issued to the parties on 29 July 2014.

1.3.2 Procedures for an open substantive meeting

1.10.
At the organizational meeting held on 18 October 2013, Canada and the United States requested, and the Panel agreed, that the substantive meeting would be open to public viewing. Mexico did not object to open hearings for these proceedings specifically, without prejudice to its systemic views on open hearings. The parties proposed additional procedures for an open substantive meeting. The Panel took into account the joint proposals received from the parties, and adopted additional procedures for an open substantive meeting on 28 October 2013, which were revised on 21 January 2014. These procedures provided for public viewing by means of simultaneous closed-circuit television broadcasting of the substantive meeting to a separate room. Closed sessions were foreseen for the parties to address business confidential information and for those third parties that had requested not to make their statements public.5

1.3.3 Procedures to protect Business Confidential Information (BCI)

1.11.
At the organisational meeting on 18 October 2013, the parties agreed to submit proposals for additional procedures to protect BCI. On 28 October 2013, additional procedures to protect BCI were adopted, which took into account the joint proposal received from the parties.6

1.3.4 Procedures and Reports for DS384 and DS386

1.12.
At the organizational meeting of 18 October 2013, the United States stated that the DSB had not established a single panel pursuant to Article 9.1 of the DSU, and expressed that the United States would be amenable to having two panels with harmonized procedures and timetables in accordance with Article 9.3 of the DSU. The United States requested that separate but harmonized Working Procedures be adopted for the compliance proceedings in DS384 and DS386.
1.13.
After having consulted the complainants, separate but substantively identical versions of the Working Procedures, as well as additional procedures to protect BCI and additional procedures for an open substantive meeting, were adopted on 28 October 2013. In addition, on the same date, a single joint timetable was adopted for DS384 and DS386.
1.14.
At the substantive meeting on 18 and 19 February 2014, the parties were asked whether they objected to including the Panel Reports in a single document with the understanding that, following the same approach as in the original dispute, the final sections on Conclusions and Recommendations would be printed on separate pages with the relevant DS symbol. The parties did not object to this. In light of this, the Panel did not consider further the issue raised by the United States under Article 9 of the DSU.

1.3.5 Request for enhanced third-party rights

1.15.
In its third-party written submission of 2 December 2013, the European Union requested certain enhanced third-party rights, namely that:

third parties be permitted to be present throughout the hearing; third parties should be permitted to comment, at the invitation of the Panel, on matters arising during the hearing; third parties should receive copies of any questions to the parties, their responses and comments, and be permitted to comment thereon; and third parties should similarly be permitted to be present at any subsequent meeting of the compliance Panel with the parties.7

1.16.
After consulting the parties, on 21 January 2014 the Panel granted the following enhanced rights to all third parties:

a. the right to be present during the entirety of the substantive meeting of the Panel;

b. the right in the substantive meeting to ask questions, at the invitation of the Panel, to the parties or the other third parties without any obligation to respond on the part of parties or other third parties; and

c. access to the Panel's written questions to the parties and each party's written answers to questions after the substantive meeting of the Panel.

2 FACTUAL ASPECTS

2.1 MEASURE AT ISSUE

2.1.
The claims brought by Canada and Mexico concern the United States' measure relating to the country of origin labelling of muscle cuts of meat (amended COOL measure). In their panel requests8, Canada and Mexico identified the following instruments as the subject of their claims:

a. the Agricultural Marketing Act of 1946 (7 U.S.C. 1621 et seq.), as amended by the Farm Security and Rural Investment Act of 2002 (Section 10816 of Public Law 107-171) and the Food, Conservation, and Energy Act of 2008 (Section 11002 of Public Law 110-246);

b. Mandatory Country of Origin Labeling of Beef, Pork, Lamb, Chicken, Goat Meat, Wild and Farm-Raised Fish and Shellfish, Perishable Agricultural Commodities, Peanuts, Pecans, Ginseng, and Macadamia Nuts (7 CFR Parts 60 and 65), 74 Fed. Reg. 2658-2707 (15 January 2009);

c. Mandatory Country of Origin Labeling of Beef, Pork, Lamb, Chicken, Goat Meat, Wild and Farm-Raised Fish and Shellfish, Perishable Agricultural Commodities, Peanuts, Pecans, Ginseng, and Macadamia Nuts (7 CFR Parts 60 and 65), 78 Fed. Reg. 31367-31385 (24 May 2013); and

d. any modifications or amendments to instruments listed in (a) through (c) above, including any further implementing guidance, directives, policy announcements or any other document issued in relation to those instruments.

2.2 PRODUCTS AT ISSUE

2.2.
As the complainants submitted in the original dispute, the products at issue are imported Canadian cattle and hogs as well as imported Mexican cattle, which are used in the United States to produce beef and pork, commodities covered by the amended COOL measure.9

3 PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS

3.1.
Canada and Mexico request that the Panel find that the United States has failed to comply with the recommendations and rulings adopted by the DSB on 23 July 2012 on the basis that the amended COOL measure violates Articles 2.1 and 2.2 of the TBT Agreement and Article III:4 of the GATT 1994. Canada and Mexico also request that the Panel find that the amended COOL measure nullifies or impairs benefits accruing to Canada and Mexico within the meaning of Article XXIII:1(b) of the GATT 1994.
3.2.
The United States requests that the claims made by Canada and Mexico be rejected in their entirety and that the complainants' claims under Article XXIII:(1)(b) of the GATT 1994 be found to be outside the terms of reference of this Panel.

4 ARGUMENTS OF THE PARTIES

4.1.
The arguments of the parties are reflected in their executive summaries provided to the Panel in accordance with paragraph 18 of the Panel Working Procedures.10

5 ARGUMENTS OF THE THIRD PARTIES

5.1.
The arguments of the third parties are reflected in their executive summaries provided to the Panel in accordance with paragraph 18 of the Panel Working Procedures.11 Australia and Guatemala did not submit written or oral statements to the Panel.

6 INTERIM REVIEW

6.1.
On 27 June 2014, the Panel submitted its Interim Reports to the parties. On 8 July 2014, Canada, Mexico, and the United States each submitted written requests for the review of precise aspects of the Interim Reports pursuant to Article 15.2 of the DSU.12 On 15 July 2014, Canada, Mexico, and the United States submitted written comments on each other's requests for interim review. No party requested an additional meeting with the Panel on the issues identified in the written comments.
6.2.
In accordance with Article 15.3 of the DSU, this section of the Panel Reports sets out the Panel's response to the requests and comments made at the interim review stage. The Panel modified aspects of its Reports in light of the parties' interim review requests and comments where it considered it appropriate to do so, as explained below. Section and paragraph numbers are the same in the Interim and Final Reports. References to footnotes in this section relate to the Interim Reports, except as otherwise indicated.
6.3.
In addition to the modifications specified below, the Panel also corrected a number of typographical and other non-substantive errors throughout the Reports, including those specified by the parties.
6.4.
In issuing its Interim Reports on 27 June 2014, the Panel requested the parties to identify any business confidential information which the Interim Reports or its annexes may contain, and which the parties wish to be redacted from the Final Reports. The parties did not identify any such information in their requests for interim review. In accordance with its additional procedures to protect BCI, on 29 July 2014 the Panel further requested the parties to confirm that the Final Reports and its annexes do not contain any BCI.
6.5.
In its aforementioned communication to the parties dated 27 June 2014, the Panel also noted that it had received unsolicited follow-up comments by the parties on comments on the draft descriptive part of the Panel Reports sent to the parties on 10 April 2014.13 The Panel invited each party to indicate in its requests for interim review whether its unsolicited comments on the draft descriptive part of the Reports should be considered by the Panel as interim review comments. In response, Canada noted that since the descriptive part had become part of the Interim Reports, Canada sees no reason for the Panel to consider the unsolicited follow-up communications as part of the interim review. Mexico did not object to the unsolicited follow-up comments on the descriptive part not being incorporated in the interim review. At the same time, Mexico suggested that comments on the descriptive part be incorporated into the final report, provided that inclusion does not affect the date of the issuance of final report to the parties. The United States did not respond to the Panel's invitation. In light of the above, the Panel left the descriptive part of its Interim Reports unchanged, and did not incorporate the parties' unsolicited comments on the descriptive part into its interim review.
6.6.
Canada suggested revising paragraph 7.18 to reflect that there are instances where the place of occurrence of a production step can be omitted. The United States did not support Canada's requested insertion of the phrase "subject to certain flexibilities" and considered the Panel's statement to be accurate. In light of the parties' comments, the Panel added the word "generally" to paragraph 7.18 in reference to the amended COOL measure's point-of-production labelling.
6.7.
Canada objected to the characterization of its position in footnote 52 (footnote 68 in the Final Reports) to paragraph 7.18 and contends that it did not concede the accuracy of reference to a "single label". Conversely, the United States asserted that the Panel did not mischaracterize Canada's position, and considered the Panel to have correctly cited Canada's written submission. In light of the parties' comments, the Panel adjusted the latter part of footnote 52 (footnote 68 in the Final Reports) to paragraph 7.18 regarding Canada's position as to the establishment of a "single label".
6.8.
Canada pointed out that the description in paragraph 7.28 of the definition of "retailer" under the Perishable Agricultural Commodities Act of 1930 omitted the exclusion of entities that do not ship, receive, or contract to be shipped or receive perishable agricultural commodities in quantities exceeding 2,000 pounds (one ton) in a single day. The Panel supplemented footnote 72 (footnote 88 in the Final Reports) to paragraph 7.28 with respect to the definition of "retailer" under PACA.
6.9.
The United States requested that the Panel delete the references to "commingled covered commodities" from paragraphs 7.33 and 7.34 and from footnotes 85, 90, and 257 (footnotes 101, 206, and 275 in the Final Reports). According to the United States, the commingling flexibility for meat was set forth in § 65,300(e) of the 2009 Final Rule, whereas § 65,300(g) of the 2009 Final Rule "define[s]" the term "commingled covered commodities" only in regard to "perishable agricultural commodities", which exclude meat products. Canada objected to the United States' request. According to Canada, instead of a definition of any kind, § 65,300(g) sets out labelling rules; the term "commingled covered commodities" is defined in § 65,125.
6.10.
The Panel declines the United States' request. The Panel notes that § 65,300(g) of the 2009 Final Rule does not define the term "commingled covered commodities". As noted in footnote 85 (footnote 101 in the Final Reports) to paragraph 7.33, that term is defined in the unamended § 65,125 of the 2009 Final Rule without any distinction between different types of "covered commodities" as follows: "covered commodities (of the same type) presented for retail sale in a consumer package that have been prepared from raw material sources having different origins." In turn, §§ 65,300(e) and (g) set forth different labelling rules for commingled meat products and commingled perishable agricultural commodities. In addition, in introducing the term "commingled covered commodities", paragraph 7.33 explains that the amended COOL measure "defin[es] 'covered commodities' in relevant part as '[m]uscle cuts of beef and pork' and '[g]round beef … and ground pork'." (emphasis added) As indicated in section 7.3.2.1, the Panel's review of the amended COOL measure is limited to the products at issue identified in paragraphs 2.2 and 7.26 of the Reports.
6.11.
The United States commented that in sections 7.3.3.3 (paragraphs 7.38-7.43) and 7.3.4 (paragraph 7.44 and Table 2), as well as paragraph 7,108 the Panel "appear[s] to conclude that in the improbable case where an animal is imported for immediate slaughter after spending time in two different countries, the 2013 Final Rule would not allow similar flexibility in listing the country of raising as is the case under the B Label." The United States requested alteration in light of its arguments provided in response to the Panel's questions. Canada commented that the issue raised by the United States is addressed in paragraphs 7,245-7.254 and that the alteration of these sections proposed by the United States is thus unwarranted. Canada further stated that paragraph 7,108 simply summarizes the rules under the amended COOL measure that apply to Category C muscle cuts, and that there is no need to modify the paragraph as suggested by the United States.
6.12.
The Panel declines the United States' request. Section 7.3.3.3 describes the amended multiple countries of raising flexibility under the amended COOL measure. Section 7.3.4 simply sets out label variations in light of the flexibilities under the original and amended COOL measures. The specific point raised by the United States regarding Label C is discussed in paragraphs 7,107‑7,110, 7,245-7.254, and again in 7,351. In these paragraphs, the Panel outlines the parties' disagreement as well as the relevant provisions of the COOL statute and 2013 Final Rule. Further, the Panel examines the parties' competing interpretations, including their arguments provided in response to the Panel's questions, and the labelling implications for both scenarios as depicted in Tables 9 and 14. As the United States' position is already reflected in these paragraphs, no further changes were considered necessary.
6.13.
Canada suggested that the description of Label B in paragraph 7.42 reflect the country order flexibility that existed under the 2009 Final Rule. In this respect, the United States suggested replacing the word "would" with "could". The Panel adjusted the relevant portion of paragraph 7.42 in light of the parties' comments.
6.14.
In regard to paragraph 7,117 and Table 10, Canada argued that non-commingled muscle cuts derived from Category C animals were not eligible for Label B ("Product of the United States, Canada") under the 2009 Final Rule. Conversely, the United States argued that the Reports already address Canada's request in paragraph 7,114 and footnote 268 (footnote 284 in the Final Reports). Although the Reports address Canada's request in footnote 268 (footnote 284 in the Final Reports) to paragraph 7,114, for greater accuracy the Panel deleted the word "or" and "Product of U.S., Canada" from both paragraph 7,117 and Table 10. The Panel also made consequential adjustments to footnote 269 (footnote 285 in the Final Reports) and to the Note to Table 10.
6.15.
Canada argued that the statement that "many operators in the United States commingled" in the second sentence of paragraph 7,121 should not be attributed to Canada as it was not supported by the relevant reference in footnote 271. The United States considers that the Panel did not mischaracterise Canada's position on commingling. In light of the passages referenced in footnote 271, the Panel split the second sentence of paragraph 7,121 into two sentences. In addition, the Panel adjusted the final sentence of the same paragraph accordingly.
6.16.
Canada requested that the word "survey" in paragraph 7,124 be replaced with a less comprehensive term for referencing the public consultation process conducted by the USDA before adopting the 2013 Final Rule. The United States also considered the word "survey" to be inaccurate, and suggested replacing "survey conducted by the USDA" with "responses received to the proposed rule". The Panel has replaced the word "survey" with "comments the USDA received on the proposed 2013 Final Rule" in paragraph 7,124.
6.17.
Additionally, the United States requested that a sentence in paragraph 7,124 referencing the American Meat Institute's comments on the proposed 2013 Final Rule be relegated to a footnote and adjusted so as to avoid the suggestion that evidence on slaughter facilities processing "mixed-origin" livestock demonstrates commingling. According to the United States, these slaughterhouses could have processed B or C category animals without commingling. Conversely, Mexico noted that the American Meat Institute's comments use the term "mixed‑origin" to refer to animals born in different countries and processed in the United States. Canada also objected to the United States' request.
6.18.
The Panel declines the United States' request. The American Meat Institute's comments of April 2013 include a section entitled "The Meat Industry Utilizes the Current Rule's Practice of Commingling and Prohibiting that Practice Will Impose Significant Costs not Considered by AMS". Within this section, the comments state that "AMS seems to ignore the fact that commingling occurs regularly and that the Category B label is used in the marketplace."14 The rest of the section attempts to quantify commingling and the impact of its elimination under the proposed 2013 Final Rule. In this context, immediately after the sentence stating that "[t]here are at least 15 large cattle slaughter plants that process mixed origin livestock and at least 6 such hog slaughter facilities", the comments address the economic impact of "the loss of commingling" under the proposed 2013 Final Rule.15
6.19.
The United States suggested adjusting paragraph 7,125 to reflect more accurately its arguments on the percentages of commingling in the US meat industry as presented by the USDA in the 2013 Final Rule. In particular, the United States suggested inserting a sentence on how the USDA came to its estimates. Mexico objected to this suggested new sentence, arguing that the United States has not explained why it is necessary or appropriate.
6.20.
The Panel notes that the new sentence suggested by the United States is similar to the sentence in a paragraph of the United States' first written submission already referenced in footnote 288 (footnote 304 in the Final Reports) to paragraph 7,125. Accordingly, the Panel declines the United States' suggestion to insert this sentence. As for the existing first sentence of the paragraph, the Panel made editorial changes in light of the United States' suggestions, while leaving footnote 288 (footnote 304 in the Final Reports) unchanged.
6.21.
With regard to paragraphs 7,128-7.132 and Table 12, Canada did not agree that, in practice, the 2013 Final Rule amended the coverage of Label D. In particular, Canada contends that the origin of Category D meat products under the 2009 Final Rule was determined based on the country of slaughter. Thus, according to Canada, "in practice, under the 2009 Final Rule, covered muscle [cut] commodities imported from Canada and derived from animals that underwent production steps in the United States were required to be labelled as 'Product of Canada'." Canada further contends that the United States undertook no extraterritorial verification of the life histories of animals used to produce imported muscle cut covered commodities, and that Canada does not maintain records that would allow retailers to demonstrate that an imported muscle cut commodity was derived from an animal that underwent a production step in the United States. Referring to Table 12, Canada thus asserts that, in practice, "Label D applied in scenarios D2, D3, and D4 under the original COOL measure." The United States commented that, as the 2009 Final Rule was written, Category D meat imported into the United States would be derived from animals that were not born, raised, or slaughtered in the United States. However, under customs rules, Category D meat would receive a country of origin designation from the country where the meat was slaughtered (substantially transformed).
6.22.
The Panel declines to make any modifications to paragraphs 7,128-7.132 and Table 12. Canada's comments concern whether the 2013 Final Rule amended the coverage of Label D "in practice". As noted in the Panel's findings in paragraph 7.15, Category D origin is designated according to substantial transformation under both the 2009 and 2013 Final Rules. The amended terms of coverage introduced by the 2013 Final Rule are set out in paragraphs 7.15 and 7,128.16 The evidence of the practical likelihood of Scenarios D2, D3, and D4 in Table 12 is addressed in paragraph 7,279. Although Canada's comments concern Label D coverage "in practice" under the original and amended COOL measures, Canada does not dispute the textual amendments introduced by the 2013 Final Rule. Nor does Canada address the absence of evidence that Scenarios D2, D3, or D4 ever occurred "in practice" under the original COOL measure. Canada's allegation that such origin scenarios would not have been detectable, or distinguishable from Scenario D1, would only be relevant if such scenarios were shown to occur. Even if this allegation were to be substantiated by evidence regarding the treatment of imported muscle cuts "in practice", the explicit terms of the original and of the amended COOL measures should not be ignored. As the Reports reflected the relevant de jure and de facto considerations with respect to Label D under the original and amended COOL measures, the Panel did not consider any changes to be necessary.
6.23.
The United States suggested that paragraph 7,135 also address the evidence submitted by the United States on the lack of a material impact from the 2013 Final Rule on large processors, such as Tyson Foods. The complainants objected to the United States' request. Canada argued that the evidence shows one company's slight increase in beef sales over a three-year period, measured in value, which has no direct relevance for the impact of the 2013 Final Rule. Both complainants noted that the evidence in question relates to Tyson Foods' annual reports for the fiscal years ending in October 2011, September 2012, and September 2013, the last of which ended in September 2013, two months before the end of the six-month adjustment period under the 2013 Final Rule. Canada added that other exhibits cited in the Reports containing statements from Tyson Foods address more directly the impact of the 2013 Final Rule.
6.24.
The Panel considers that other exhibits referenced in the Reports, including in paragraph 7,135, in particular Exhibits CDA-25, CDA-42 (BCI), and CDA-70, more directly address the amended COOL measure's impact on the operations of Tyson Foods than the evidence referenced by the United States. In fact, these exhibits directly reflect Tyson Foods' views about the 2013 Final Rule before its adoption, and how Tyson Foods changed its sourcing policy following the 2013 Final Rule's entry into force. Accordingly, the Panel declines the United States' request and leaves paragraph 7,135 unchanged.
6.25.
The United States requested supplementing the findings in sections 7.5.4.1.2.4 (paragraphs 7,138-7.150) and 7.5.4.2.4.1 (paragraphs 7,220-7.221) to include certain arguments made in its written submissions. Canada considered that the United States' arguments regarding the impact of the amended COOL measure on recordkeeping requirements were already addressed in the Panel's assessment.
6.26.
The Panel declines the United States' request. Section 7.5.4.1.2.4 outlines the correlation between the nature of the origin claim and the recordkeeping requirements under the amended COOL measure. This covers the substance of the arguments referred to by the United States in its comments, including its reference to the Appellate Body's reasoning in the original dispute. In particular, relevant Appellate Body statements are reproduced in paragraph 7,142 and further addressed in footnote 324 (footnote 340 in the Final Reports). Therefore, the alterations requested by the United States were not considered necessary.
6.27.
The United States considered the Panel's reference in paragraphs 7,146-7.149 to "'augmentation of the records' to apparently mean the inclusion of 'additional information to a firm's bills of lading, invoices, or other records associated with movement of covered commodities from purchase to sale'." (quoting the 2009 Final Rule, p2699). With regard to the conclusion in paragraph 7,149, the United States submitted that it "does not see the logic in equating adding [sic] additional information to a bill of lading to the increase in a recordkeeping 'burden'". Canada commented that the Panel's conclusion is supported by an analysis that considers a broad range of factors extending beyond the impact of additional information added to bills of lading. Likewise, Mexico commented that the finding is not based exclusively on information requirements for bills of lading, and that the Panel cites other evidence in support of the conclusion in paragraph 7,149.
6.28.
The Panel declines the United States' request. The only reference to additional information on a firm's bills of lading is found in footnote 338 (footnote 354 in the Final Reports) as part of a long passage cited from the USDA that evidences the dynamic between greater information on labels and more upstream records. The conclusion in paragraph 7,149 draws heavily upon preceding paragraphs and the Panel's findings with respect to greater label variety and segregation under the amended COOL measure.
6.29.
The United States commented that paragraph 7,148 contained a "partial quotation" from the 2009 Final Rule that "may misleadingly exaggerate the role of segregation as a cost driver", and suggested additions of the complete quotation. Canada commented that the major cost drivers are noted as including segregation when firms are not using a multiple-origin label. Canada therefore considered that there was no need to include the additions to the excerpt from the 2009 Final Rule set out in this paragraph. Mexico considered that the proposed expansion of the quotation would make the paragraph as a whole confusing, and that the United States' concern could be addressed by adding the words "inter alia".
6.30.
The Panel cited the USDA's reference to "the major cost drivers" of the 2009 Final Rule as "including" scenarios of segregation without commingling. The Panel did not consider this citation to distort the USDA's statement, which is cited in combination with another statement made by the USDA to a similar effect in footnote 340 (footnote 356 in the Final Reports). In light of the parties' comments, the Panel added "inter alia" to paragraph 7,148 and "or products" in footnote 340 (footnote 356 in the Final Reports).
6.31.
The United States requested revision of paragraph 7,149 to include its argument that recordkeeping has not changed and that "the amended COOL measure simply implements the Appellate Body recommendations that the information already maintained by upstream producers, be conveyed to consumers through more detailed labelling." Canada commented that this paragraph summarizes the Panel's conclusions after assessing the arguments of the parties and the evidence before it. In Canada's view, the repetition of US arguments is inappropriate in this context. Mexico similarly considered that the United States' arguments are already reflected, and that its request is improper for interim review as it would alter the Panel's findings by incorporating the United States' arguments into the Panel's conclusions.
6.32.
The Panel declines the United States' request. Paragraph 7,149 summarizes the Panel's conclusions with respect to the recordkeeping burden under the amended COOL measure. The United States' arguments are reflected in the preceding paragraphs, and relevant Appellate Body statements are discussed in paragraph 7,142 and footnote 324 (footnote 340 in the Final Reports). Inasmuch as the United States is reasserting that the recordkeeping provisions under the original and amended COOL measures are formally identical, paragraphs 7,138-7.139 explain that the Panel's analysis focuses on whether in practice the amended COOL measure requires greater recordkeeping under formally unchanged provisions. The Appellate Body has held that Article 21.5 compliance panels may properly address "claims against measures taken to comply that incorporate unchanged aspects of original measures"17 as well as "new claims against inseparable aspects of a measure taken to comply, which are unchanged from the original measure".18 Further, the Appellate Body has indicated that, in the context of Article 21.5 proceedings, formally identical "wording" does not necessarily amount to challenged provisions having identical "meaning"; rather, this latter may depend on the interaction of different aspects of the measure under review.19
6.33.
The United States suggested replacing the word "confirm" in the first sentence of paragraph 7,162 with "assert in affidavits, but do not substantiate with specific evidence". The complainants objected to the United States' request. Mexico argued that the United States' is attempting to undermine the status of the evidence cited by the Panel. Canada pointed out that two pieces of evidence cited in the first sentence of paragraph 7,162 should not be qualified as affidavits as they are industry comments submitted to the USDA in its public comment exercise on the proposed 2013 Final Rule.
6.34.
The Panel notes that in essence the first sentence of paragraph 7,162 consists of two citations from comments submitted by an industry participant to the USDA in its comments to the proposed 2013 Final Rule. The footnote to the second citation also references comments from another industry participant to the USDA as well as affidavits by Mexican industry participants. Like the original panel, the Panel in this compliance dispute considers affidavits by industry participants as evidence that may be relied upon to reach or confirm findings. Accordingly, the Panel declines the United States' request and leaves the first sentence of paragraph 7,162 unchanged.
6.35.
Canada pointed out that the section in the original US – COOL panel reports referenced in footnote 378 (footnote 394 in the Final Reports) to paragraph 7,166 focuses more on the incentives arising from the measure than on the legal necessity of making a choice. The Panel has left paragraph 7,166 unchanged. The relevant paragraphs of the original US – COOL panel reports20 referenced in footnote 378 (footnote 394 in the Final Reports), while also addressing the issue of incentives, are entitled "[t]he legal necessity of making a choice" and specifically examine Appellate Body guidance related to this issue.
6.36.
The United States requested the Panel to adjust paragraph 7,184 to reflect more accurately the objective of the Updated Sumner Econometric Study. The Panel has adjusted paragraph 7,184 concerning the objective of the Updated Sumner Econometric Study. At the same time, the Panel declines the United States' suggested addition to the last sentence of the same paragraph concerning how the Panel evaluates the possible impact of the different factors that may explain the evolution of livestock's price basis and import ratio.
6.37.
Mexico requested additional references to its submissions in footnote 454 (footnote 470 in the Final Reports) to paragraph 7,200. The Panel included additional references in footnote 454 (footnote 470 in the Final Reports)to paragraph 7,200 to Mexico's submissions.
6.38.
With respect to footnote 467 (footnote 483 in the Final Reports) to paragraph 7,203, Mexico recalled its arguments as to the distinction between three different concepts, namely "detrimental impact", "relevant regulatory distinction(s)", and "facts and circumstances related to the design and application of the relevant regulatory distinction(s)". The Panel supplemented footnote 467 (footnote 483 in the Final Reports) to paragraph 7,203 in light of Mexico's request.
6.39.
According to Mexico, paragraphs 7,206-7.207 and 7,280 did not fully reflect Mexico's argument regarding Label E. The United States countered that these paragraphs are focused on expressing the Panel's findings rather than summarizing the parties' arguments. The Panel revised footnote 474 (footnote 490 in the Final Reports) to paragraph 7,206 in light of the parties' comments to reproduce the complainants' arguments in greater detail. No further changes were considered necessary.
6.40.
The United States requested supplementation of paragraph 7,229 to reflect its arguments that Label D "is typically, if not always, produced entirely within the exporting country and including additional steps within the label would not provide additional origin information". Canada commented that this paragraph sets out certain facts as well as the intended effect of the amended COOL measure. Canada added that the arguments of the parties regarding Label D are addressed elsewhere in the Reports. Mexico commented that the United States' proposed additions inaccurately describe its own argument on the reasons for not requiring point-of-production information on Label D. Mexico also questioned the United States' substantiation of its argument and considered the statement in paragraph 7,229 to be fully accurate. The Panel added a citation into footnote 521 (footnote 537 in the Final Reports) to paragraph 7,229 to cross-reference paragraph 7,279, and inserted additional reference into footnote 611 (footnote 629 in the Final Reports) to paragraph 7,279 to the United States' arguments.
6.41.
The United States requested that paragraph 7,240 reflect its position "regarding the potential that animals imported for immediate slaughter may become B label" that "such a situation is economically unrealistic". Canada commented that the United States' position that the situation referred to is "economically unrealistic" is without merit. Canada referred to evidence that some Canadian livestock exporters are sending slaughter-weight animals to the United States for short periods of feeding so that the animals qualify for the Category B production stream. Mexico commented that the United States' proposed addition would affect the coherence of the paragraph, and took issue with the content of the United States' proposal as seeking to have the Panel adopt the United States' argument as its own.
6.42.
In light of the parties' comments, the Panel declines to make the changes requested by the United States. Paragraph 7,240 sets out the relevant requirements of the amended COOL measure in the context of the complainants' contentions regarding the flexibility for multiple countries of raising. Immediately following this, the Panel describes in paragraph 7,241 the evidence and arguments submitted by the parties regarding the actual amount of time imported feeder and fed cattle spend in the United States, which includes reference to the evidence mentioned by Canada in its interim review comments.
6.43.
With respect to the average figures in paragraph 7,242, Canada pointed out that feeder cattle imported into the United States can spend more than 68% of their lives outside the United States. The Panel revised paragraph 7,242 by removing the phrase "as much as" and by inserting a footnote to explain that feeder cattle may spend an even greater amount of time outside the United States.
6.44.
Mexico requested the Panel to add a paragraph to its analysis in paragraphs 7,255-7.256 of the appearance and placement of labels in the context of legitimate regulatory distinctions. Mexico suggested that this new concluding paragraph should reflect Mexico's arguments that no retailers complied with the 2013 Final Rule during the six-month adjustment period following the Final Rule's entry into force in May 2013, and that some retailers still do not comply with it at this stage. Mexico suggested that this new paragraph conclude that "[t]he labels of those retailers do not provide any point of production information." Likewise, Mexico requested an adjustment to the Panel's analysis in paragraph 7,354 concerning the amended COOL measure's degree of contribution. The United States objected to Mexico's request to insert a new paragraph on an issue the United States considered "unrelated" to paragraphs 7,255-7.256. The United States also suggested leaving paragraph 7,354 unchanged because Mexico's proposed sentence concerns the distinct issue of the amended COOL measure's enforcement.
6.45.
The Panel notes that paragraph 7.8 addressed the entry into force of the 2013 Final Rule. Footnote 25 (footnote 41 in the Final Reports) to the same paragraph explains that the six-month adjustment period for the livestock and meat industry expired in November 2013. Nonetheless, for the sake of completeness, the Panel has inserted a footnote at the end of paragraph 7,256 addressing Mexico's evidence of labels following the end of the six-month adjustment period. In light of this, the Panel did not consider it necessary to adjust paragraph 7,354 and draw any conclusion from the unspecified prevalence of non-compliance with the 2013 Final Rule following the expiration of the six-month adjustment period.
6.46.
Mexico commented with respect to paragraph 7,258 that it had identified alternative sources of information for determining the share of beef products subject to the amended COOL measure. The Panel supplemented footnote 574 (footnote 592 in the Final Reports) to paragraph 7,258 to reflect Mexico's alternative sources regarding the share of beef products subject to the amended COOL measure.
6.47.
Canada commented on the figures in footnote 579 (footnote 597 in the Final Reports) to paragraph 7,260 that the original panel did not make findings to suggest that the percentages listed in this footnote were established facts. Conversely, the United States considered that the footnote accurately reflects what is already on the record from the original panel proceedings. The Panel modified footnote 579 (footnote 597 in the Final Reports) to paragraph 7,260 in light of the parties' comments to cite the original panel reports in greater detail.
6.48.
Canada and Mexico commented that the percentages referred to in paragraph 7,273 include all beef that is consumed in the United States, and not just muscle cuts. Likewise, the United States supported revising the paragraph to refer to all "beef consumed in the United States". The Panel adjusted paragraph 7,273 in light of the parties' comments.
6.49.
Mexico argued that paragraph 7,298 does not fully reflect Mexico's arguments, in particular Mexico's arguments in paragraphs 165-178 of its first written submission and in paragraphs 95-109 of its second written submission, on why the amended COOL measure falls into an exceptional situation where a comparative analysis of alternative measures would be redundant for finding a violation of Article 2.2 of the TBT Agreement. In addition, Mexico suggested adjusting footnote 628 (footnote 646 in the Final Reports) to paragraph 7,290 to also reference paragraph 179 of Mexico's first written submission and paragraph 94 of Mexico's second written submission. The United States objected to Mexico's requests, which – according to the United States – are merely re-stating Mexico's arguments already addressed by the Panel.
6.50.
The Panel declines Mexico's request concerning paragraph 7,298. Paragraphs 165-178 of Mexico's first written submission contain sections entitled "The Relative Importance of the Interests or Values Furthered by the Amended COOL Measure"; "The Degree of Contribution Made by the Amended COOL Measure to the Legitimate Objective"; "The Trade-Restrictiveness of the Amended COOL Measure"; "The Nature of the Risks at Issue and the Gravity of Consequences that would Arise from Non-fulfilment of the Objective"; and "Weighing and Balancing of Relevant Factors Demonstrates that the Trade-Restrictiveness of the Amended COOL Measure is Unnecessary". In the latter section, Mexico argues that:

[w]hen weighed and balanced in a holistic manner, it is clear from these factors that the trade-restrictiveness of the Amended COOL Measure is disproportionate to the risks that non-fulfilment would create. The fact that the Amended COOL Measure might make some contribution to the objective does not outweigh the other relevant factors. Accordingly, the trade-restrictiveness of the Amended COOL Measure is unnecessary and it is inconsistent with Article 2.2 of the TBT Agreement.21

6.51.
This assertion by Mexico does not explain why the amended COOL measure falls into the exceptional situation where a comparative analysis of alternative measures would be redundant for finding a violation of Article 2.2 of the TBT Agreement. As regards the factors addressed by Mexico under the above-mentioned headers, the Panel addressed the relevance of each of these factors for its Article 2.2 analysis and analysed each relevant factor in turn elsewhere in its Reports.
6.52.
Paragraphs 95-109 of Mexico's second written submission include sections carrying similar headers as the ones mentioned above. The key conclusion of these paragraphs22 is almost identical to the one cited from Mexico's first written submission above.
6.53.
As regards Mexico's request concerning footnote 628 (footnote 646 in the Final Reports), the Panel notes that paragraph 179 of Mexico's first written submission addresses how the comparative analysis should be conducted, not whether it is necessary in the case of the amended COOL measure. In turn, paragraph 94 of Mexico's second written submission references the Appellate Body's analysis of the original COOL measure's trade restrictiveness, and argues that a relational analysis of the amended COOL measure (including of the "relative importance" of the interests or values that it furthers) "will demonstrate" inconsistency with Article 2.2. As these arguments do not address why the amended COOL measure represents an exceptional situation, the Panel declines Mexico's request to adjust the footnote 628 (footnote 646 in the Final Reports) to paragraph 7,290.
6.54.
Mexico argued that paragraph 7,318 should not refer to compliance with the DSB recommendations and rulings in the original dispute as the "primary" purpose of the 2013 Final Rule. In light of Mexico's request, the Panel has replaced the word "primarily" with "in part".
6.55.
Canada commented that the percentages of coverage in paragraph 7,347 exaggerate the degree to which the amended COOL measure fulfils its objectives because they include Labels D and E. Canada accordingly requested revising the figures to correspond to the coverage of Labels A-C. Mexico similarly requested revision of this paragraph to reflect the focus on Labels A‑C. The United States requested modifications so that the percentages refer to overall US beef and pork consumption and adjustments to the wording of certain sentences. Canada did not object to the United States' requests to refer to overall US beef and pork consumption or to delete the words "muscle cuts" in this paragraph. However, Canada objected to the United States' requested revisions with respect to the degree of contribution achieved by exempted products. Mexico similarly opposed the United States' requests for rephrasing certain findings in this paragraph. The United States opposed Canada's request to insert the statement that "Labels A-C cover, at most, between 16.3% and 24.5% of all beef consumed in the United States". Similarly, the United States did not support changes requested by Mexico regarding percentages for Labels A-D and additional language with such percentages in paragraph. 7,348.
6.56.
In light of the parties' comments, the Panel revised paragraph 7,347 and inserted a new footnote explaining the beef and pork products represented by these figures. The Panel notes that the parties' data do not specify the proportion within Categories A-C that are labelled, as opposed to those that are exempted from coverage. Thus, although muscle cuts in Categories A-D comprise between 16.3% and 24.5% of US beef consumption, the proportion of exempted beef products that are muscle cuts as opposed to ground beef cannot be precisely determined based on the data provided by the parties. See also paragraph 7,258 below. The Panel further notes that, given the United States' importation of beef muscle cuts in Category D, the share of US beef consumption of muscle cuts in Categories A-C would be lower than 24.5%. As a final note, these ranges hinge on a number of assumptions, including the share of US beef or pork consumption sold in retailers and in food service establishments, as well as the share of processed food sold at (i) exempted retailers, (ii) food service establishments, or (iii) retailers subject to the amended COOL measure. Different values for these shares lead to different shares of beef or pork muscle cuts in relation to total US beef or pork consumption that are subject to the amended COOL measure.
6.57.
Mexico requested additional references to paragraphs of its written submissions to be inserted into footnote 842 (footnote 861 in the Final Reports) to paragraph 7,373. The Panel supplemented footnote 842 (footnote 861 in the Final Reports)to paragraph 7,373 as requested by Mexico.
6.58.
Canada argued that the Panel's analysis of the risks non-fulfilment would create in paragraphs 7,374-7.383 and 7,415-7.424 does not address Canada's arguments (i) that origin information is a "credence attribute"; and (ii) that there would be "no harm" from consumers not receiving information on production steps and hence "mak[ing] their purchasing decision on false food safety assumptions."
6.59.
The Panel declines Canada's request. In paragraph 7,379, the Panel explained that reviewing the risks of non-fulfilment of the amended COOL measure's objective under Article 2.2 of the TBT Agreement does not require defining any precise relationship with the relative importance of the interests or values protected under Article XX of the GATT 1994. For its Article 2.2 analysis of the amended COOL measure, the Panel therefore reviewed the risks non‑fulfilment of the amended COOL measure's objective would create strictly from the viewpoint of the objective, i.e. providing consumer information on origin. The Panel continues to consider it unnecessary to address how this objective – or the consequences of its non-fulfilment –compares with other objectives or values such as food safety. As regards the specific issue of "credence attributes", the Panel notes that Canada references the USDA's analysis of possible credence attributes in connection with market failure arguments; at the same time, Canada also argues that "[t]he USDA has not explained what these 'latent attributes' might be, whether they actually exist or why they may be important to certain consumers."23 In any event, the Panel does not review the risks non-fulfilment would create from a possible market failure perspective. As the Panel recalled in paragraph 7,421, "[t]here are … circumstances in which Members may decide to adopt particular regulations even in the absence of a specific demand from their citizens, and may do so without in fact shaping consumer expectations through regulatory intervention."
6.60.
In regard to paragraphs 7,415-7.424, Canada argued that the Panel has an obligation to make a finding on the "gravity of the consequences" in the context of its analysis under Article 2.2. The United States was of the view that the Panel was very clear that, on the basis of the available evidence, it could not reach a conclusion on this matter.
6.61.
In the paragraphs mentioned by Canada as well as the sections preceding these paragraphs, the Panel reviewed in detail the parties' evidence on the risks non-fulfilment would create. In light of this analysis, in paragraph 7,423 the Panel concluded that "based on th[is] evidence … [it] cannot ascertain the gravity of not fulfilling the amended COOL measure's objective." As explained by the Appellate Body, panels may not "make affirmative findings that lack a basis in the evidence contained in the panel record."24 As a result, the Panel declines Canada's request.
6.62.
Canada requested the Panel to delete from paragraph 7,469 the reference to the "Product of the U.S." label. The United States objected to Canada's request as Canada did not formally disagree with the Panel's formulation of the "Product of the U.S." label in response to Panel question No. 51. Furthermore, according to the United States, to the extent Canada argues that the label under its first alternative measure would be identical to Label D, "Product of the U.S." is an appropriate formulation of Labels A‑C under the first alternative measure. In light of Canada's request and the United States' comments, the Panel has adjusted the last sentence of paragraph 7,469.
6.63.
The United States requested that paragraph 7,489 be deleted because the parties did not address how less origin information might reduce consumer confusion, and there is no evidence on the record on this matter. Conversely, Canada considered that paragraph 7,489 should be kept as it sets out the Panel's reasoning similar to certain paragraphs in the Appellate Body Reports in the original US – COOL dispute. Mexico also objected to the United States' request, arguing that there is evidence on the record of labels that are difficult to understand.
6.64.
The Panel considers paragraph 7,489 to be part of its reasoning on the first alternative measure's degree of contribution to the objective of providing consumer information on origin. The Panel has therefore maintained this paragraph.
6.65.
In regard to paragraphs 7,491 and 7,503, Canada requested that the Panel complete the analysis and determine that the first and second alternative measures, respectively, are reasonably available and less-trade restrictive than the amended COOL measure. Mexico made a similar request in the context of paragraph 7,491 with regard to all four alternative measures. Specifically, in regard to the third and fourth alternative measures, Mexico requested the Panel to address the degree of contribution to the amended COOL measure's objective. The United States objected to the complainants' requests. The United States argued that the Panel addressed the first two alternative measures' degrees of contribution, and explained that the three factors of a comparative analysis are conjunctive. Further, according to the United States, the Panel found that the third and fourth alternative measures were not adequately identified to allow a meaningful Article 2.2 comparison.
6.66.
The Panel declines the complainants' request. The Panel notes that the complainants' interim review requests and comments do not address – let alone question – the Panel's analysis of the four alternative measures and its conclusion that the complainants did not make a prima facie case under Article 2.2 of the TBT Agreement for any of the four alternative measures. In particular, the complainants did not question the Panel's findings that the complainants had not persuasively demonstrated that the first two alternative measures achieve an equivalent degree of contribution as the amended COOL measure, specifically how increased coverage would compensate for less origin information provided on Labels A-C under these two alternatives. Likewise, the complainants did not call into question the Panel's findings that the complainants had not sufficiently explained how their third and fourth alternative measures would be implemented, and thus had not adequately identified these alternatives to allow a meaningful Article 2.2 comparative analysis. Finally, the complainants did not contest the conjunctive nature of the factors of an Article 2.2 comparative analysis, or the validity of the Appellate Body's reliance on the conjunctive nature of these factors in the original dispute25 referenced by the Panel in paragraph 7,491.
6.67.
Mexico requested the insertion of references into the footnotes to paragraph 7,515 to exhibits submitted by Mexico in connection with the NAIS and Interstate Livestock Traceability Rule. The United States commented that the Interstate Livestock Traceability Rule (Exhibit MEX‑82) is already referenced in multiple footnotes. As for other exhibits referred to by Mexico (Exhibits MEX-83, MEX-84, and MEX-85), the United States commented that these are APHIS documents submitted by Mexico, but that Mexico has not explained why these documents (unlike the official regulation of the Interstate Livestock Traceability Final Rule) should be included.
6.68.
As section 7.6.5.4 already provides references to the Interstate Livestock Traceability Rule as well as the parties' specific arguments on the third alternative measure, no further revisions to the footnotes to paragraph 7,515 were considered necessary.
6.69.
Regarding paragraph 7,518, Canada commented that its reference to Uruguay's trace-back system concerned the second stage, rather than the second pillar of the first stage, of a trace-back system. The United supported revision of this paragraph to reflect Canada's specific arguments. The Panel revised paragraph 7,518 in light of the parties' comments.
6.70.
The United States requested review of section 7.7 (paragraphs 7,617-7.643) in respect of the Panel's reliance on the Appellate Body's reports in EC – Seal Products. The United States noted that the circulation of those reports occurred after the period for the parties to make their arguments and submit evidence had ended. The United States referred to the Appellate Body's statement that "a Member's right to regulate under the sixth recital, is not, in principle, different from the balance set out in the GATT 1994, where obligations such as national treatment in Article III are qualified by the general exceptions provision of Article XX".26 In addition, the United States pointed to the Appellate Body's statement as to the lack of "any concrete examples of a legitimate objective that could factor into an analysis under Article 2.1 of the TBT Agreement, but would not fall within the scope of Article XX of the GATT 1994".27 According to the United States, the Panel's analysis "does not appear to take this further aspect of Article III:4, as found by the Appellate Body, into account". The United States opined that the Panel's analysis "would suggest that one would expect there to be a COOL measure that causes a detrimental impact on imports yet is consistent with Article 2.1 of the TBT Agreement. According to the Appellate Body's approach, then, there must be an Article XX exception that would be available for COOL." Asserting that "the current circumstances are extraordinary", the United States contended that "the parties were not able to shape their submissions" according to the Appellate Body's finding regarding a responding Member's reliance on an Article XX exception with respect to a claim under Article III:4 of the GATT 1994 even where the measure could be consistent with Article 2.1 of the TBT Agreement. The United States therefore requested the Panel to "address the availability of Article XX as an exception for Article III:4 with respect to COOL". In the view of the United States, the Panel's "existing analysis would support finding under Article XX", particularly in respect of reasonably available alternative measures. The United States considered that the Reports, "as currently structured, would appear at odds with [the] principle" that "a Member's right to regulate is not, in principle, different under Article 2.1 than under Article III:4".
6.71.
Canada commented that "[t]he nature of the United States' request to the Panel is unclear". Canada noted that the United States had not invoked Article XX as a defence, and was instead asking the Panel to address "issues on the 'availability' of an unspecified Article XX defence". Canada pointed to the burden of proof associated with Article XX of the GATT 1994 and asserted that interim review is not an appropriate stage in panel proceedings for a party to make new arguments or submit new evidence. Further, Canada disputed the suggestion that the findings of the Appellate Body in EC – Seal Products were unforeseeable, arguing that these findings were in line with those in US – Clove Cigarettes and simply upheld the panel's finding on the legal standard for claims under Article III:4 of the GATT 1994. Canada also disputed the United States' suggestion that the Panel could "transpose findings under … the TBT Agreement to a hypothetical analysis under GATT Article XX". In Canada's view, the United States could have structured its defence in this case to anticipate the findings of the Appellate Body, and that in this case it simply chose not to raise a defence under Article XX of the GATT 1994.
6.72.
Mexico similarly opposed the United States' request, noting that interim review is "not the stage for a complainant to seek a finding related to the general exceptions of the GATT 1994, particularly considering that this defence was not raised by the United States" in these proceedings. Mexico disagreed with the United States' view that the current circumstances are "extraordinary", and contended that the Appellate Body's findings in EC – Seal Products were not unforeseeable. According to Mexico, the United States' request is conditioned on the existence of a measure that is consistent with Article 2.1 of the TBT Agreement and inconsistent with Article III:4 of the GATT 1994. Given the Panel's finding that the amended COOL measure is inconsistent with both Article 2.1 and Article III:4, Mexico argued that "the United States' request is based on a hypothetical set of circumstances that does not exist in this dispute".
6.73.
The Panel notes that section 7.7 applies the legal standard under Article III:4 of the GATT 1994 as recently clarified by the Appellate Body in EC – Seal Products. The Panel further notes that the United States' request is quite general. The United States does not advance or argue a defence under Article XX of the GATT 1994, nor does it identify any sub-paragraph of that Article as relevant to the present dispute. The United States merely requests that the Panel "address this aspect of the Article III:4/Article 2.1 relationship and address the availability of Article XX as an exception with respect to COOL".
6.74.
The United States' position appears to be predicated on a perceived conflict between, on the one hand, the Appellate Body's clarification of the relationship of national treatment under the GATT 1994 and the TBT Agreement and, on the other hand, the implications for a hypothetical measure found to be consistent with Article 2.1 of the TBT Agreement but in violation of Article III:4 of the GATT 1994. The Panel has found the amended COOL measure to be in violation of both Article 2.1 of the TBT Agreement and Article III:4 of the GATT 1994. Therefore, the Panel is not faced with the situation hypothetically suggested by the United States. Under these circumstances, it is unclear how the assessment requested by the United States would be appropriate for securing a positive solution to the present dispute.
6.75.
Moreover, accepting the United States' request at this stage would require examination of an issue for which neither the United States, nor the complainants, have provided specific evidence or argument. Indeed, at no point did the United States invoke Article XX of the GATT 1994 or any relevant sub-paragraph(s) thereof, or adduce arguments under Article XX at an appropriate stage of these proceedings. The Panel therefore declines the United States' request with respect to section 7.7.
6.76.
Mexico requested the insertion of an additional citation into footnote 1362 (footnote 1380 in the Final Reports) to paragraph 7,648 to its written submission as to the treatment of the terms "conflict" and "violation" as equivalent. The Panel supplemented footnote 1362 (footnote 1380 in the Final Reports)to paragraph 7,648 as requested by Mexico.

7 FINDINGS

7.1 CLAIMS

7.1.
Canada and Mexico claim that the amended COOL measure is inconsistent with the following four provisions of the covered Agreements:

a. Article 2.1 of the TBT Agreement and Article III:4 of the GATT 1994 because it accords cattle and hogs imported from Canada and cattle imported from Mexico treatment less favourable than that accorded to US cattle and hogs;

b. Article 2.2 of the TBT Agreement because it creates an unnecessary obstacle to international trade, as it is more trade restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create; and

c. Article XXIII:1(b) of the GATT 1994 because it nullifies or impairs benefits to Canada and Mexico in respect of imports of cattle and, for Canada, also hogs to the US.28

7.2 ORDER OF ANALYSIS

7.2.
The parties do not suggest a particular order of analysis. With one exception29, their written submissions address the national treatment claims first (Article 2.1 of the TBT Agreement, then Article III:4 of the GATT 1994), followed by Article 2.2 of the TBT Agreement, and conclude with the non-violation claim under Article XXIII:1(b) of the GATT 1994.
7.3.
In general, "panels are free to structure the order of their analysis as they see fit"30 – unless, based on the "structure and logic" of the provisions at issue, "there exists a mandatory sequence of analysis which, if not followed, would amount to an error of law" or affect the substance of the analysis itself.31 We do not consider, nor do the parties contend, that there is any such mandatory sequence of analysis in this compliance dispute.
7.4.
The original panel noted that, given the principle of specificity, "if the [measure at issue] is a technical regulation, then the analysis under the TBT Agreement would precede any examination under the GATT 1994."32 Accordingly, the original panel – like other TBT panels33addressed the TBT claims before the GATT claims.
7.5.
The original panel found that the original COOL measure was a "technical regulation" under the TBT Agreement.34 The parties agree35 that the COOL measure, in its amended form, continues to be a technical regulation. We agree with the parties in this respect. As explained below36, the amended COOL measure meets the definition of a technical regulation in the TBT Agreement.37
7.6.
Accordingly, we follow the approach of the original panel38and address the complainants' TBT claims before addressing their claims under Articles III:4 and XXIII:1(b) of the GATT 1994. Before turning to the complainants' legal claims, we provide an overview of the amended COOL measure and address the scope of this compliance dispute.

7.3 THE AMENDED COOL MEASURE

7.7.
The measures examined in the original dispute included the "COOL statute" (the Agricultural Marketing Act of 1946, as amended by the 2002 Farm Bill and the 2008 Farm Bill), and the regulatory provisions implementing the COOL statute in the 2009 Final Rule (AMS) (2009 Final Rule).39 Other measures considered by the original panel have either expired or have been withdrawn, and are not at issue in these compliance proceedings.40
7.8.
Following the original panel and appellate proceedings, the Agricultural Marketing Service (AMS) of the US Department of Agriculture (USDA) issued a final rule, effective 23 May 201341, "to make changes to the labelling provisions for muscle cut covered commodities and certain other modifications to the program".42 This rule (2013 Final Rule) is the only regulatory change identified by the parties as the United States' "measures taken to comply" with the DSB recommendations and rulings in the original dispute.43
7.9.
In these Reports, the COOL statute and the 2009 Final Rule in its unamended form will be jointly referred to as the "original COOL measure". The COOL statute (which remains unchanged), and the 2009 Final Rule as amended by the 2013 Final Rule, will be jointly referred to as the "amended COOL measure".44

7.3.1 Amended COOL Labels

7.3.1.1 Definition of origin

7.10.
The COOL statute defines the origin of muscle cuts of meat as a function of the country (or countries) where the animal from which they derive is born, raised, and slaughtered.45 Under the unamended provisions of the 2009 Final Rule, "raised" is defined as "the period of time from birth until slaughter or in the case of animals imported for immediate slaughter … the period of time from birth until date of entry into the United States".46 The term "slaughtered" is defined as "the point in which a livestock animal … is prepared into meat products (covered commodities) for human consumption".47 "Born" is not explicitly defined for cattle and hogs in either the original or amended COOL measures.48
7.11.
The 2009 Final Rule laid down origin labelling rules for meat based on the following five categories established by the COOL statute:

a. Category A muscle cuts: United States country of origin;

b. Category B muscle cuts: multiple countries of origin;

c. Category C muscle cuts: imported for immediate slaughter;

d. Category D muscle cuts: foreign country of origin; and

e. Category E: ground meat.49

7.12.
As the COOL statute is unchanged, these broad statutory categories remain applicable under the amended COOL measure50 – subject to the more detailed requirements of the implementing rules discussed below.
7.13.
Category A represents muscle cuts "[f]rom animals exclusively born, raised, and slaughtered in the United States".51
7.14.
Categories B and C pertain to animals slaughtered in the United States but born and/or raised in other countries, with distinct labelling requirements for each under the original and amended COOL measures.52 While both Categories B and C denote mixed-origin livestock53, Category C is specifically reserved for animals "imported into the United States for immediate slaughter".54 Unamended provisions of the 2009 Final Rule define the term "imported for immediate slaughter" as "consignment directly from the port of entry to a recognized slaughtering establishment and slaughtered within 2 weeks from the date of entry".55 Thus, an animal imported into the United States more than two weeks prior to its US slaughter would not qualify as being "imported for immediate slaughter", and would fall into Category B.
7.15.
Under the original COOL measure, Category D extended to "[i]mported covered commodities for which origin has already been established as defined by this law (e.g., born, raised, and slaughtered or produced) and for which no production steps have occurred in the United States".56 The 2013 Final Rule amends this provision and now refers to "[m]uscle cut covered commodities derived from an animal that was slaughtered in another country … including muscle cut covered commodities derived from an animal that was born and/or raised in the United States and slaughtered in another country".57 However, under the 2013 Final Rule, Category D origin is still designated according to the definition used for customs purposes58, i.ebased on substantial transformation. For muscle cuts of meat, origin according to this definition is the country where the animal is slaughtered.59
7.16.
With respect to Category E products (ground meat), unamended provisions of the 2009 Final Rule refer to "all countries of origin contained therein or that may be reasonably contained therein", adding that "when a raw material from a specific origin is not in a processor's inventory for more than 60 days, that country shall no longer be included as a possible country of origin".60

7.3.1.2 Information on labels

7.17.
The original COOL measure established labels for each of the above five categories, with various rules and flexibilities for the corresponding Labels A, B, C, D, and E. The 2009 Final Rule provided that muscle cuts in Category A "may bear a declaration that identifies the United States as the sole country of origin at retail".61 In such situation, Label A could state "Product of the United States" or some other variation permitted under the original COOL measure.62 With respect to Label B, the 2009 Final Rule provided that "[f]or muscle cut covered commodities derived from animals that were born in Country X or (as applicable) Country Y, raised and slaughtered in the United States … the origin may be designated as Product of the United States, Country X, and (as applicable) Country Y".63 In the case of Label C, when "an animal was imported into the United States for immediate slaughter as defined in § 65,180, the origin of the resulting meat products derived from that animal [had to] be designated as Product of Country X and the United States".64 As referenced above, Label D reflected the country of origin of imported muscle cuts "as declared to U.S. Customs and Border Protection", namely the country of slaughter based on the principle of substantial transformation.65 Finally, Label E required that ground meat products "shall list all countries of origin contained therein or that may be reasonably contained therein" based on the 60-day "inventory allowance" under the 2009 Final Rule.66
7.18.
As a result of the 2013 Final Rule, the amended COOL measure imposes new labelling requirements for Labels A, B, and C.67 For muscle cuts from animals slaughtered in the United States, the amended COOL measure now generally requires Labels A, B, and C to indicate the place of occurrence of each production step (born, raised, and slaughtered).68
7.19.
With respect to Label D, which applies to muscle cuts from non-US slaughtered animals, the 2013 Final Rule preserves the required origin label declaration of the original COOL measure, but adds a voluntary option to provide more information. Thus, Label D must continue to indicate the origin "as declared to U.S. Customs and Border Protection at the time the products entered the United States, through retail sale (e.g., 'Product of Country X')".69 In addition, Label D "may include more specific location information related to production steps (i.e., born, raised, and slaughtered) provided records to substantiate the claims are maintained".70
7.20.
The requirements of Label E for ground meat were not changed by the 2013 Final Rule.71 Label E for ground meat products "shall [continue to] list all countries of origin contained therein or that may be reasonably contained therein" based on the 60-day "inventory allowance" under the 2009 Final Rule.72
7.21.
Table 1 below compares the origin definitions and examples of basic muscle cut labels under the 2009 and 2013 Final Rules.

Table 1: definitions of origin and Basic labels for muscle cuts

[SEE TABLE IN SOURCE DOCUMENT]

[SEE TABLE IN SOURCE DOCUMENT]

"United States country of origin means … [f]rom animals exclusively born, raised, and slaughtered in the United States" (65,260(a)(1))

"A covered commodity may bear a declaration that identifies the United States as the sole country of origin at retail only if it meets the definition of United States country of origin as defined in § 65,260." (65,300(d) (emphasis added))

"The United States country of origin designation for muscle cut covered commodities shall include all of the production steps (i.e. 'Born, Raised, and Slaughtered in the United States')." (65,300(d) (emphasis added))

LABEL B

[SEE TABLE IN SOURCE DOCUMENT]

[SEE TABLE IN SOURCE DOCUMENT]

[SEE TABLE IN SOURCE DOCUMENT]

[SEE TABLE IN SOURCE DOCUMENT]

"For muscle cut covered commodities derived from animals that were born in Country X or (as applicable) Country Y, raised and slaughtered in the United States, and were not derived from animals imported for immediate slaughter as defined in § 65,180, the origin may be designated as Product of the United States, Country X, and (as applicable) Country Y." (65,300(e)(1) (emphasis added))

"If an animal was born and/or raised in Country X and/or (as applicable) Country Y, and slaughtered in the United States, the resulting muscle cut covered commodities shall be labelled to specifically identify the production steps occurring in each country…. " (65,300(e) (emphasis added))

LABEL C

[SEE TABLE IN SOURCE DOCUMENT]

[SEE TABLE IN SOURCE DOCUMENT]

"If an animal was imported into the United States for immediate slaughter as defined in § 65,180, the origin of the resulting meat products derived from that animal shall be designated as Product of Country X and the United States." (65,300(e)(3) (emphasis added))

"If an animal was born and/or raised in Country X and/or (as applicable) Country Y, and slaughtered in the United States, the resulting muscle cut covered commodities shall be labelled to specifically identify the production steps occurring in each country (e.g., 'Born and Raised in Country X, Slaughtered in the United States')." (65,300(e) (emphasis added))

LABEL D

[SEE TABLE IN SOURCE DOCUMENT]

[SEE TABLE IN SOURCE DOCUMENT]

"Imported covered commodities for which origin has already been established as defined by this law (e.g., born, raised, and slaughtered or produced) and for which no production steps have occurred in the United States, shall retain their origin, as declared to U.S. Customs and Border Protection at the time the product entered the United States, through retail sale." (65,300(f) (emphasis added))

"Muscle cut covered commodities derived from an animal that was slaughtered in another country shall retain their origin, as declared to U.S. Customs and Border Protection at the time the product entered the United States, through retail sale (e.g., 'Product of Country X')" (65,300(f)(2) (emphasis added))

*The excerpts from the 2013 Final Rule in the right-hand column replace the corresponding provisions from the 2009 Final Rule in the left-hand column, except for the excerpt in the top right-hand cell, which is additional to the excerpt in the top left‑hand cell.

Notes to Table 1:Label A on the left is taken from the 2009 Final Rule, p. 2668. See also Panel Reports, US – COOL, para. 7,100. Label A on the right is taken from the 2013 Final Rule, § 65,300(d). The two Labels B on the left are taken from the 2009 Final Rule, § 65,300(e)(1) and p. 2661. The first Label B on the right is taken from the 2013 Final Rule, p. 31368. The second Label B on the right is taken from the 2013 Final Rule, § 65,300(e). Label C on the left is taken from the 2009 Final Rule, § 65,300(e)(3). Label C on the right is taken from the 2013 Final Rule, § 65,300(e) and pp. 31368-31369. Label D on the left is taken from Panel Reports, US – COOL, para. 7,100. Label D on the right is taken from the 2013 Final Rule, § 65,300(f)(2).

7.3.1.3 Methods of providing origin information

7.22.
The amended COOL measure permits the same methods for conveying origin information as the original COOL measure. In particular, the COOL statute sets forth that country of origin information "may be provided to consumers by means of a label, stamp, mark, placard, or other clear and visible sign on the covered commodity or on the package, display, holding unit, or bin containing the commodity at the final point of sale to consumers".73 The 2009 Final Rule additionally provides that "[c]ountry of origin declarations can either be in the form of a placard, sign, label, sticker, band, twist tie, pin tag, or other format that allows consumers to identify the country of origin".74 The declaration of country of origin in any of these forms "may be typed, printed, or handwritten"75 and "must be legible and placed in a conspicuous location, so as to render it likely to be read and understood by a customer under normal conditions of purchase".76
7.23.
The USDA explained in the 2009 Final Rule that "[i]n order to provide the industry with as much flexibility as possible, this rule does not contain specific requirements as to the exact placement or size of the country of origin … declaration", provided that the declaration be "legible and conspicuous, and allow consumers to find the country(ies) of origin … easily and read them without strain when making their purchases".77 The 2013 Final Rule adds with respect to labels and stickers that "abbreviations for the production steps are permitted as long as the information can be clearly understood by consumers", including the following specific examples: "'brn' as meaning 'born'"; "'raisd' as meaning 'raised'"; "'slghtrd' as meaning 'slaughtered'"; and "'hrvstd' as meaning 'harvested'"78.79
7.24.
Like the original COOL measure, the amended COOL measure provides that "[i]n general, country abbreviations are not acceptable" on meat labels.80 However, declarations of origin may use "country abbreviations, as permitted by Customs and Border Protection, such as 'U.S.' and 'USA' for the 'United States of America'".81

7.3.2 Coverage of the amended COOL measure

7.3.2.1 Products at issue

7.25.
The amended COOL measure continues to apply to a wide range of "covered commodities", which include muscle cuts of beef and pork as well as ground beef and pork.82
7.26.
As in the original dispute, the only covered products challenged in this compliance dispute are imported Canadian cattle and hogs and imported Mexican cattle, which are used in the United States to produce beef and pork commodities covered by the COOL measure.83 As the 2013 Final Rule does not modify the original COOL measure in respect of its application to meat and livestock, the following findings from the original dispute are equally valid for the amended COOL measure:

[T]he COOL measure applies not only to beef and pork but also to cattle and hogs. Formally speaking, the category of "covered commodities" under the COOL measure includes only beef and pork, not livestock, and the labelling requirements under the COOL measure apply to beef and pork only "at the final point of sale of the covered commodity to consumers". … [H]owever, without upstream livestock producers and processors providing the necessary information on origin as defined by the COOL measure, these retail labelling requirements are impossible to fulfil. The COOL measure recognizes this by creating obligations not only for retailers of beef and pork but also for the broad Category of "any person engaged in the business of supplying [these] to a retailer". The latter Category of upstream market participants "shall provide information to the retailer indicating the country of origin of the covered commodity". The COOL measure supports this obligation with an enforcement mechanism, including fines – again, applicable to both retailers and their suppliers.84

7.3.2.2 Exemptions

7.27.
The amended COOL measure retains the original COOL measure's three main exemptions from coverage, while slightly adjusting the first one:

a. entities not meeting the definition of the term "retailer";

b. ingredients in "processed food items"; and

c. products served in a "food service establishment".85

7.28.
Both the original and amended COOL measures require labelling at the retail stage.86 The original COOL measure defined "retailers" as "any person licensed as a retailer under the Perishable Agricultural Commodities Act of 1930" (PACA)."87 Pursuant to the terms of PACA, this means an entity whose invoice costs of purchases of perishable agricultural commodities are in excess of US $230,000 in any calendar year.88 Whereas the original COOL measure defined the term "retailer" as "retailer licensed under [PACA]", the 2013 Final Rule amends the definition to "any person subject to be licensed as a retailer under [PACA]".89
7.29.
The COOL statute excludes from its scope any covered commodity that is "an ingredient in a processed food item".90 The 2009 Final Rule defines "processed food item" as "a retail item derived from a covered commodity that has undergone specific processing resulting in a change in the character of the covered commodity, or that has been combined with at least one other covered commodity or other substantive food component".91 The 2013 Final Rule does not modify these provisions.92
7.30.
The COOL statute also exempts "food service establishments" from its labelling requirements.93 The COOL statute defines the term "food service establishment" as "a restaurant, cafeteria, lunch room, food stand, saloon, tavern, bar, lounge, or other similar facility operated as an enterprise engaged in the business of selling food to the public".94 As noted in the original proceedings, the 2009 Final Rule further develops this definition by adding that "[s]imilar food service facilities include salad bars, delicatessens, and other food enterprises located within retail establishments that provide ready-to-eat foods that are consumed either on or outside of the retailer's premises".95 The exemption of food service establishments is not amended by the 2013 Final Rule.96

7.3.3 Flexibilities

7.31.
The original COOL measure allowed for three main flexibilities from its general labelling requirements: (i) the commingling flexibility; (ii) the country order flexibility; and (iii) the multiple countries of raising flexibility. The 2013 Final Rule has removed the first two flexibilities, and amended the third one.

7.3.3.1 Commingling flexibility removed

7.32.
The 2009 Final Rule included flexibility with respect to the commingling of muscle cuts from US‑slaughtered livestock. This flexibility applied specifically between Label A and Label B97 muscle cuts, as well as between Label B and Label C98 muscle cuts, "commingled during a production day".99
7.33.
The original panel noted that "commingling c[ould] take place in multiple stages of the meat production process (e.g. processors and packers), including at the retail level."100 As to what might be commingled, the 2009 Final Rule referred to "commingled covered commodities"101, defining "covered commodities" in relevant part as "[m]uscle cuts of beef and pork" and "[g]round beef … and ground pork".102 In addition, as the original panel noted, the original COOL measure foresaw the possibility of commingling relevant types of animals.103 Both the original104 and amended COOL measures105 describe commingling as potentially involving animals, not just muscle cuts.
7.34.
The 2013 Final Rule deleted the original COOL measure's provisions on the modalities of commingling.106 Thus, as the USDA points out, the amended COOL measure "eliminates the allowance for commingling of muscle cut covered commodities of different origins."107 No party contests that the commingling flexibility is now completely eliminated. At the same time, the parties continue to differ on the extent to which this eliminated commingling flexibility was actually used, and disagree as to the implications of commingling for this compliance dispute.108

7.3.3.2 Country order flexibility removed

7.35.
The 2009 Final Rule contained flexibility concerning the order of countries of origin on Label B.109 The countries of origin could be listed in "any order"110, so Label B for muscle cuts of, for example, mixed US-Canadian origin could read "Product of U.S., Canada or Product of Canada, U.S."111 As a result, the Appellate Body noted that "[b]ecause the countries of origin for Category B meat c[ould] be listed in any order [under the original COOL measure], the labels for Categories B and C meat could look the same in practice."112
7.36.
Under the 2009 Final Rule, this country order flexibility also applied cumulatively in regard to the commingling flexibility between Label A and Label B113, as well as between Label B and Label C114 muscle cuts.115 Thus, the flexibility on the order of countries of origin, applied together with the commingling flexibilities, could result in commingled Label A, B, and C meat carrying the same, identical label:

When Category A and Category B meat is commingled during a single production day, all of the resulting meat may be labelled as if it were Category B meat, even though a particular piece of meat may have been derived from a Category A animal. Further, when Category B and Category C meat is commingled during a single production day, all of the resulting meat may be labelled as if it were Category B meat, even though a particular piece of meat may have been derived from a Category C animal. In both cases, since the resulting meat may be labelled as if it were Category B meat, the declared countries of origin for all commingled meat may be listed in any order.116

7.37.
By replacing the relevant provision in the 2009 Final Rule117, the 2013 Final Rule eliminated the country order flexibility altogether, including as applied in combination with the now removed commingling flexibility.

7.3.3.3 Amended multiple countries of raising flexibility

7.38.
In general, the 2013 Final Rule requires Labels B and C to "specifically identify the production steps occurring in each country."118 At the same time, based on practical considerations119, it includes some flexibility:

If an animal is raised in the United States as well as another country (or multiple countries), the raising occurring in the other country (or countries) may be omitted from the origin designation.120

7.39.
This flexibility does not apply to Label C ("if the animal was imported for immediate slaughter"), or "where by doing so the muscle cut covered commodity would be designated as having a United States country of origin."121 The parties dispute the implications of this flexibility and its carve-outs for the complainants' TBT claims.122
7.40.
The multiple countries of raising flexibility under the 2013 Final Rule resembles the flexibility under the 2009 Final Rule, which also applied only to Category B muscle cuts:

[I]f animals are raised in another country and the United States, provided the animals are not imported for immediate slaughter as defined in § 65,180, the raising that occurs in the United States takes precedence over the minimal raising that occurred in the animal's country of birth.123

7.41.
According to the USDA, "it is understood that an animal born in another country will have been raised at least a portion of its life in that other country."124
7.42.
The main difference between the two versions of this flexibility is that the 2013 Final Rule specifies that the other country or countries of raising may be "omitted"125, whereas the 2009 Final Rule refers to the US raising "tak[ing] precedence"126 over the raising in the country of birth. Under the 2009 Final Rule, Label B did not need to show point-of-production information explicitly, although origin was based on such information. A muscle cut from a US-slaughtered animal born in Canada, and raised in Canada and the United States, could have carried a "Product of United States, Canada" label. US raising "taking precedence" over Canadian raising had no practical implication for this label. The label had to mention Canada in any event, given the place of birth.127 Conversely, under the 2013 Final Rule, the flexibility means that for animals raised in the country of birth and the United States, Label B may read "'Born in Country X, Raised and Slaughtered in the United States' in lieu of 'Born and Raised in Country X, Raised and Slaughtered in the United States'".128
7.43.
The multiple countries of raising flexibility under the 2013 Final Rule also allows for omitting "countries" of raising.129 Thus, for instance, a Label B may now read "'Born in Country X, Raised and Slaughtered in the United States' in lieu of 'Born and Raised in Country X, Raised in Country Y, Raised and Slaughtered in the United States'".130 By contrast, the corresponding flexibility in the 2009 Final Rule covered only the "minimal raising that occurred in the animal's country of birth."131 In practice, this was again inconsequential for the label. Muscle cuts from an animal (i) born in Canada; (ii) raised in Canada, Mexico, and the United States; and (iii) slaughtered in the United States would carry a North American Label B ("Product of the United States, Canada, Mexico") in any case. Although raising in the United States could take precedence over raising in Canada, the label had to mention Canada in any event, given the place of birth.132

7.3.4 Label variations in light of the flexibilities

7.44.
Table 2 below compares some possible variations of the muscle cut labels under the original and the amended COOL measures, in light of the original flexibilities as removed or amended by the 2013 Final Rule.

Table 2: EXAMPLES OF POssible muscle cut labels in light of flexibilities

[SEE TABLE IN SOURCE DOCUMENT]

[SEE TABLE IN SOURCE DOCUMENT]

A+B commingled

[SEE TABLE IN SOURCE DOCUMENT]

Other label due to flexibility to list countries in "any order" iv:

[SEE TABLE IN SOURCE DOCUMENT]

Not

applicable

B

[SEE TABLE IN SOURCE DOCUMENT]

Other label due to flexibility to list countries in "any order" iv:

[SEE TABLE IN SOURCE DOCUMENT]

[SEE TABLE IN SOURCE DOCUMENT]

Born and Raised in Country X, Raised in Country Y, Raised and Slaughtered in the United States ix

Other label due to flexibility on raising x:

B+C commingled

[SEE TABLE IN SOURCE DOCUMENT]

Other label due to flexibility to list countries in "any order" iv:

Not

applicable

C

[SEE TABLE IN SOURCE DOCUMENT]

[SEE TABLE IN SOURCE DOCUMENT]

D

[SEE TABLE IN SOURCE DOCUMENT]

[SEE TABLE IN SOURCE DOCUMENT]

Footnotes to Table 2:i 2009 Final Rule, p. 2668. See also Panel Reports, US – COOL, para. 7,100. ii2013 Final Rule, § 65,300(d) and p. 31368. iii2009 Final Rule, pp. 2659 and 2661. iv2009 Final Rule, § 65,300(e)(4) and pp. 2659, 2661 and 2662. v2009 Final Rule, p. 2659. vi2009 Final Rule, § 65,300(e)(1) and p. 2661. vii2009 Final Rule, p. 2662. viii2013 Final Rule, p. 31368. ix 2013 Final Rule, § 65,300(e). x2013 Final Rule, § 65,300(e). xi 2013 Final Rule, § 65,300(e) and p. 31368. xii2013 Final Rule, p. 31369. xiii2009 Final Rule, § 65,300(e)(4) and pp. 2659, 2662 and 2670. xiv 2009 Final Rule, § 65,300(e)(3) and p. 2661. xv2013 Final Rule, § 65,300(e) and pp. 31368-31369. xviPanel Reports, US – COOL, para. 7,100. xvii2013 Final Rule, § 65,300(f)(2) and p. 31369.

7.3.5 Unchanged recordkeeping and verification rules

7.45.
The amended COOL measure leaves the original COOL measure's recordkeeping and verification rules unchanged.133 In particular, the recordkeeping and verification provisions of the COOL statute134 and its prohibition of traceback135 remain in effect. Further, the 2013 Final Rule does not amend the 2009 Final Rule's recordkeeping provisions.136 Although the parties agree that the amended COOL measure leaves the pre-existing rules on recordkeeping and verification unchanged137, they dispute whether the amended COOL measure entails more onerous recordkeeping and verification in practice.138

7.4 SCOPE OF THE COMPLIANCE DISPUTE

7.46.
According to the United States, the complainants should not be allowed an "unfair second chance" to challenge unchanged aspects of the original COOL measure, or to use compliance proceedings to "re-raise" claims and arguments rejected in the original proceedings.139 The United States identifies two aspects of the original COOL measure that "were not the subject of DSB recommendations and rulings and remained unchanged": (i) the ground meat rule; and (ii) the prohibition of a trace-back system. According to the United States, these are outside the terms of reference of this compliance Panel.140
7.47.
The task of a compliance panel is to "consider th[e] new measure in its totality", which requires "consider[ing] both the measure itself and the measure's application".141 In doing so, a compliance panel is "not confined to examining the 'measures taken to comply' from the perspective of the claims, arguments and factual circumstances that related to the measure that was the subject of the original proceedings".142 At the same time, compliance proceedings should not allow a complainant to re-litigate a claim regarding unchanged aspects of an original measure.143 Nor may a complainant use compliance claims to "re‑open" issues decided in substance in the original proceedings.144
7.48.
We note that the complainants' panel requests focus on muscle cut labels; they do not refer to either the ground meat rules or the trace-back prohibition.145 Accordingly, the ground meat rules and the trace-back prohibition are outside our terms of reference146, and we could not address them as claims in these proceedings even if the complainants had characterised them as such subsequent to their requests for establishing this compliance Panel.
7.49.
The complainants confirm that they are not bringing claims against the unchanged ground meat labelling scheme and the trace-back prohibition, but rather are referencing these as arguments.147 Indeed, there is an important distinction to be made between claims, i.e. allegations of violation of the substantive provisions of the WTO covered agreements, and arguments, i.emeans whereby a party progressively develops and supports its claims.148 Our mandate is limited to reviewing the complainants' above-mentioned claims149 with regard to aspects of the amended COOL measure identified in the complainants' panel requests. In reviewing these claims, however, we are not precluded from considering the complainants' arguments concerning the ground meat rule and the trace-back prohibition.150

7.5 ARTICLE 2.1 OF THE TBT AGREEMENT

7.5.1 Legal test

7.50.
The complainants bring national treatment claims under both the TBT Agreement and the GATT 1994.151 In relevant part, Article 2.1 of the TBT Agreement provides:

Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin ….

7.51.
The parties agree152 on the three main criteria to establish a violation of national treatment under Article 2.1:

a. the measure at issue is a "technical regulation" as defined in Annex 1.1 to the TBT Agreement;

b. the imported and domestic products at issue are "like products"; and

c. the measure at issue accords less favourable treatment to imported products than to like domestic products.153

7.5.2 Technical regulation

7.52.
According to the TBT Agreement, a "technical regulation" is a "[d]ocument which lays down product characteristics or their related processes and production methods, including the applicable administrative provisions, with which compliance is mandatory. It may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method."154
7.53.
In light of this definition, the original COOL measure was found to be a "technical regulation" based on three well-established criteria155:

a. compliance with the original COOL measure was mandatory;

b. the original COOL measure applied to an identifiable product or group of products (namely certain types of meat and livestock); and

c. the original COOL measure laid down one or more product characteristics by imposing a country of origin labelling requirement.156

7.54.
The complainants argue that there are no changes under the amended COOL measure to alter this finding.157 The United States accepts that it is "not in dispute" that the amended COOL measure is a technical regulation.158
7.55.
As noted159, the statutory element of the COOL measure, the COOL statute, remains unchanged. Accordingly, the original panel's findings that relevant aspects of the COOL statute fulfil the above three requirements160 also remain valid for the amended COOL measure. As regards the regulatory element of the amended COOL measure, the 2013 Final Rule amends the 2009 Final Rule only partially. As explained161, the main changes introduced by the 2013 Final Rule concern the introduction of point-of-production labelling for Category A-C muscle cuts as well as the elimination of the commingling and country order flexibilities. These changes do not affect aspects of the 2009 Final Rule examined by the original panel of relevance to the criteria and definition of a technical regulation.162
7.56.
Therefore, we find that the amended COOL measure continues to be a "technical regulation" as defined by the TBT Agreement.

7.5.3 Likeness

7.57.
The original panel found that "Canadian cattle and US cattle, and Mexican cattle and US cattle, are 'like products', and that Canadian hogs and US hogs are also 'like products' for purposes of Article 2.1".163
7.58.
The complainants argue that there is no relevant change to the factual circumstances supporting this finding, and that the imported and domestic products at issue in this case continue to be "like".164 The United States affirms that likeness is "not in dispute" in these compliance proceedings.165
7.59.
Absent any factual change relevant for assessing likeness, we find that the relevant products continue to qualify as like products. Thus, as the original panel held, "Canadian and US cattle are like products; moreover, Canadian and US hogs are also like products. Further, Mexican cattle … and US cattle … are also like products."166

7.5.4 Less favourable treatment

7.60.
In the context of Article 2.1, the parties' disagreement centres on whether the amended COOL measure accords less favourable treatment to Canadian and Mexican products than that accorded to like products of the United States.
7.61.
The parties agree167 that less favourable treatment is concerned with "whether the technical regulation at issue modifies the conditions of competition in the market of the regulating Member to the detriment of the group of imported products vis-à-vis the group of like domestic products."168 The parties also recognize that establishing such detrimental impact does not suffice to establish less favourable treatment under Article 2.1; it must additionally be shown that any such detrimental impact does not stem exclusively from legitimate regulatory distinctions.169
7.62.
Accordingly, we first assess whether the amended COOL measure has detrimental impact, and then proceed to inquire whether any such detrimental impact stems exclusively from legitimate regulatory distinctions.

7.5.4.1 Detrimental impact

7.63.
The complainants claim170 that the amended COOL measure has maintained and, in fact, increased the original COOL measure's detrimental impact on the competitive opportunities of imported livestock in comparison with like US products.171 The United States accepts that the amended COOL measure was not intended to "remove [the original COOL measure's] detrimental impact on imports"172; at the same time, it rejects the suggestion that there is any increase in detrimental impact.
7.64.
The original panel held that "[t]he [original] COOL measure create[d] a de facto incentive in favour of domestic, and to the detriment of imported, livestock in the particular circumstances of the US livestock and meat market"173, and "reduce[d] the competitive opportunities of imported livestock relative to domestic livestock."174 On this basis, the original panel "f[ou]nd that, in the context of the muscle cut labels, the COOL measure create[d] an incentive in favour of processing exclusively domestic livestock and a disincentive against handling imported livestock."175 Accordingly, the original panel "also f[ou]nd that, in the context of muscle cut labels, the COOL measure de facto discriminate[d] against imported livestock by according less favourable treatment to Canadian cattle and hogs, and to Mexican cattle, especially Mexican feeder cattle, than to like domestic livestock."176 As regards the ground meat label, the original panel "f[ou]nd that the complainants have not demonstrated that the ground meat label under the [original] COOL measure results in less favourable treatment for imported livestock."177
7.65.
The original panel's Article 2.1 finding concerning the ground meat label was not challenged on appeal. Regarding the muscle cut labels, the Appellate Body upheld the original panel's finding that the COOL measure resulted in less favourable treatment for imported livestock than for like domestic livestock.178 However, the Appellate Body declared the original panel's legal analysis under Article 2.1 to be "incomplete", as the original panel "should have continued its examination [beyond assessing detrimental impact] and determined whether … the detrimental impact stems exclusively from a legitimate regulatory distinction".179 Thus, while the Appellate Body endorsed the original panel's approach180 and conclusion181 regarding the detrimental impact aspect of the legal test, it also determined that the detrimental impact did not stem exclusively from a legitimate regulatory distinction.182 Under the circumstances, the Appellate Body ultimately upheld the original panel's finding that the COOL measure is inconsistent with Article 2.1 of the TBT Agreement, but for different reasons.183
7.66.
We shall follow the original panel's approach to detrimental impact184 – focusing on the muscle cut labels.185 As summarized by the Appellate Body, this approach involved three main legal considerations:

a. as a "starting point"186, whether the different categories of muscle cut labels under the COOL measure accord different treatment to imported livestock;

b. whether the COOL measure involves segregation and, consequently, differential costs for imported livestock; and

c. whether, through the compliance costs involved, the COOL measure creates any incentive to process domestic livestock, thus reducing the competitive opportunities of imported livestock.187

7.67.
In addition, the original panel examined the parties' evidence of actual trade effects – albeit stating that analysing actual trade effects was not indispensable for disposing of the complainants' Article 2.1 claims. Given that the Appellate Body did not find error in the original panel's approach to evidence on actual trade effects in the original dispute188, we review the extensive evidence submitted on the same matter in this compliance dispute.

7.5.4.1.1 Different treatment

7.68.
The original panel began by reviewing the statutory definitions of the four muscle cut labels.189 It then addressed the commingling flexibility between products eligible for Labels A and B.190 The original panel observed that under the original COOL measure, "imported livestock is ineligible for the label reserved for meat from exclusively US‑origin livestock, whereas in certain circumstances meat from domestic livestock is eligible for a label that involves imported livestock."191 The original panel considered this difference only as "the starting point"192 of its analysis because "different treatment" of imported products is "not necessarily inconsistent … as long as the treatment by the measure is 'no less favourable'."193
7.69.
On appeal, the Appellate Body confirmed its earlier finding that "'[a] formal difference in treatment between imported and like domestic products is … neither necessary, nor sufficient, to show a violation' of the national treatment obligation."194 It noted that the original panel's statement on different treatment is not a "finding or a legal conclusion"195, but "merely … a passing observation regarding the extent to which the COOL measure de jure treat[ed] imported livestock differently than domestic livestock."196
7.70.
As explained197, the 2013 Final Rule removed the commingling flexibility, which allowed Category A products to carry Label B in certain circumstances. Thus, the basis for observing any formally different treatment of domestic and imported livestock under the original COOL measure is not maintained under the amended COOL measure.
7.71.
We do not need to explore further the existence of any formally different treatment under the amended COOL measure. As in the original dispute, "the complainants are not contesting any formal difference in the treatment accorded to domestic and imported livestock per se"; they claim198 "de facto less favourable treatment to imported livestock."199
7.72.
In any event, any further assessment of formally different treatment could only serve as a starting point for our less favourable treatment analysis. It would lack any "direct… connect[ion]" or implication for our ultimate finding on whether or not the amended COOL measure entails de facto discrimination.200
7.73.
We turn to whether the amended COOL measure involves de facto201less favourable treatment, including detrimental impact. In analysing this matter, we are mindful of the Appellate Body's guidance in the original dispute:

[W]here a technical regulation does not discriminate de jure, a panel must determine whether the evidence and arguments adduced by the complainant in a specific case nevertheless demonstrate that the operation of that measure, in the relevant market, has a de facto detrimental impact on the group of like imported products. A panel's analysis must take into consideration the totality of the facts and circumstances before it, including any implications for competitive conditions discernible from the design and structure of the measure itself, as well as all features of the particular market at issue that are relevant to the measure's operation within that market. In this regard, "any adverse impact on competitive opportunities for imported products vis-à-vis like domestic products that is caused by a particular measure may potentially be relevant" to a panel's assessment of less favourable treatment under Article 2.1.202

7.5.4.1.2 Costs, segregation, and recordkeeping

7.5.4.1.2.1 Costs203

7.74.
The original panel started its analysis of whether there is de facto detrimental impact by establishing that – according to the 2009 Final Rule – the original COOL measure involved compliance costs.204
7.75.
Addressing the United States' arguments that "any regulation potentially involves costs"205 and that these costs "may [be] differential for different types of market participants"206, the original panel pointed out that "it is not the costs of the COOL measure in itself that the complainants contest."207 It added that "Article 2.1 is concerned with the equality of competitive conditions between domestic and imported products", and "no competitive disadvantage shall be accorded to imported products as compared to like domestic products."208 According to the original panel, "[a] cost resulting from a (technical) regulation may qualify as a competitive disadvantage if it is incurred only by imported and not like domestic products."209
7.76.
The same analytical approach applies to the amended COOL measure and this compliance dispute. Like its predecessor210, the 2013 Final Rule has a dedicated section on the costs of the amended COOL measure.211 And, as in the 2009 Final Rule212, the USDA "recognizes that additional costs will be borne by industry participants as they comply with the requirements of th[e 2013 F]inal [R]ule".213
7.77.
However, as in the original dispute, it is "not the costs of the COOL measure in itself that the complainants contest."214 Accordingly, we follow the original panel and turn to whether "the costs of the [amended] COOL measure are higher for imported than for domestic livestock". As explained below, this requires assessing whether the amended COOL measure involves215 – and possibly increases – segregation of meat and livestock according to origin as well as the implications of the amended COOL measure for recordkeeping burdens.

7.5.4.1.2.2 Segregation216

7.78.
Given the nature and limited extent of relevant changes to the original COOL measure, the original panel's analysis of segregation remains generally applicable to the amended COOL measure.
7.79.
Like its predecessor, the amended COOL measure "does not explicitly require segregation, let alone the segregation of domestic and imported livestock."217 At the same time, under the 2013 Final Rule it remains "necessary... to ensure label information accurately reflects the origin of muscle cut covered commodities in accordance with the intent of the statute."218 The 2013 Final Rule is categorical that, as a basic requirement, "all origin designations for muscle cut covered commodities slaughtered in the United States must specify the production steps of birth, raising and slaughter of the animal from which the meat is derived that took place in each country listed on the origin designation."219
7.80.
The COOL statute continues to require that "[a]ny person engaged in the business of supplying a covered commodity to a retailer … provide information to the retailer indicating the country of origin of the covered commodity."220 In addition, the original COOL measure's recordkeeping requirements and sanctions for violating these221 remain unchanged.222
7.81.
Thus, the original panel's finding that that the original COOL measure "prescribes an unbroken chain of reliable country of origin information with regard to every animal and muscle cut"223 remains valid for the amended COOL measure. In fact, the 2013 Final Rule refers to the need for, and existing processes224 to, "transfer information from one level of the supply chain to the next."225
7.82.
The original panel's findings on how to ensure the unbroken chain of reliable country of origin information226 necessitated by the original COOL measure remain valid for the amended COOL measure. The COOL statute continues to prohibit USDA from imposing a "traceability program"227 through "a mandatory identification system to verify the country of origin of a covered commodity."228 Further, the COOL statute continues to limit the recordkeeping requirements for retailers and their suppliers to "records maintained in the normal conduct of the business of such person, including animal health papers, import or customs documents, or producer affidavits"229, and it continues to explicitly prohibit USDA from requiring retailers and suppliers to maintain any "additional records".230 As summarized by the 2013 Final Rule:

the existing COOL regulations already require retailers to maintain records and other documentary evidence upon which they have relied to establish a covered commodity's country or countries of origin. Similarly, any person directly or indirectly engaged in the business of supplying a covered commodity to a retailer, including wholesalers, must make available information to the buyer about the country(ies) of origin of the covered commodity. Thus, to comply with existing COOL regulations, wholesalers must already have distribution systems to allow for the tracking of COOL‑related information for invoices and manifests and receiving procedures to verify the origin information received from packers and processors. This final rule does not alter those requirements ….231

7.83.
The original panel held that "a practical way to ensure that the chain of reliable information on country of origin required by the COOL measure remains unbroken is the segregation of meat and livestock according to origin as defined by the COOL measure."232 Despite the parties' disagreement, the original panel concluded that "for all practical purposes, the COOL measure necessitates segregation of meat and livestock according to origin."233 This finding was upheld on appeal.234
7.84.
The same conclusion continues to apply to the amended COOL measure, which has the same features that led the original panel to reach its conclusion regarding segregation. In fact, the 2013 Final Rule refers to segregation as a fact: "the [2003] regulatory impact analysis accounted for the fact that animals and products would need to be segregated to enable labeling of muscle cut covered commodities by country of origin."235
7.85.
As with the original COOL measure236, various United States entities and market participants have stated that the amended COOL measure will necessarily lead to segregation in the meat supply chain.237 Indeed, the United States itself seems to recognize that, like its predecessor, the amended COOL measure involves segregation.238
7.86.
Accordingly, like the original panel239, we conclude that for all practical purposes, the amended COOL measure necessitates segregation of meat and livestock according to origin.

7.5.4.1.2.3 Increased segregation under the amended COOL measure

7.87.
The parties disagree on the amended COOL measure's impact on segregation. In particular, the United States contests the complainants' argument that the amended COOL measure involves more segregation than the original COOL measure.
7.88.
As noted240, the COOL measure never formally prescribed segregation. However, the 2013 Final Rule introduced three potentially relevant changes:

a. point-of-production labelling, i.e. the requirement that Labels A, B, and C show the country(ies) where each production step, namely birth, raising, and slaughter, has taken place241;

b. the removal of the commingling242 and country order flexibilities243 of the original COOL measure; and

c. the amended coverage of Label D.

Point-of-production labelling

7.89.
As noted244, one of the main changes under the amended COOL measure is the requirement that Labels A, B, and C indicate the country of each production step (born, raised, and slaughtered).245 In the USDA's words, point-of-production labelling means that "muscle cut covered commodity COOL information will need to be augmented to provide the additional specific origin information required by th[e 2013 Final R]ule."246 More specifically, "information available to consumers at retail will need to be augmented to include information on the location in which the three major production steps occurred."247
7.90.
A closer look at Labels A-C is necessary for assessing whether, in practice, "provid[ing] consumers with more specific information"248 on these labels increases the number of distinct labels. We isolate point-of-production labelling to assess whether different origin muscle cuts that could carry a uniform origin label under the original COOL measure would need to carry more, distinct labels under the amended COOL measure. As the original panel found, more origins and labels means more segregation.249

Label A

7.91.
As regards Label A, the definition of origin is unchanged; Label A merely needs to be more detailed under the amended COOL measure and state, instead of "Product of the U.S."250, "Born, Raised, and Slaughtered in the United States"251. Muscle cuts from exclusively US-born, ‑raised and ‑slaughtered livestock shall carry labels with information about these production steps; however, Category A muscle cuts may continue to carry a uniform Label A.
7.92.
In brief, Label A shall be more detailed, but it may remain a uniform label. As shown in Table 3 below, point-of-production labelling in and of itself does not increase the number of labels for Category A muscle cuts, and thus does not lead to increased segregation.

Table 3: Label A

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amended COOL measure

[SEE TABLE IN SOURCE DOCUMENT]

Notes to Table 3:The first label is taken from the 2009 Final Rule, p. 2668. See also Panel Reports, US – COOL, para. 7,100. The second label is taken from the 2013 Final Rule, § 65,300(d).

Label B

7.93.
Label B may involve livestock of a single foreign origin – in addition to raising252 and slaughter in the United States. For instance, Label B may be used for muscle cuts derived from animals (i) born in Canada and (ii) raised and slaughtered in the United States. Under the original COOL measure, muscle cuts from livestock "born in Country X …, raised and slaughtered in the United States"253 ("and … not derived from animals imported for immediate slaughter"254) could be designated as "Product of the United States, Country X …."255 Under the amended COOL measure, the same type of muscle cuts would now be designated "Born in Country X, Raised and Slaughtered in the United States".256
7.94.
Thus, like for Label A, the amended COOL measure requires more information on Label B, but Category B muscle cuts from livestock born in a single foreign country, and raised and slaughtered in the United States may continue to carry a uniform label. As shown in Table 4 below, point‑of-production labelling does not increase the number of labels and, hence, segregation for Category B muscle cuts of a single foreign origin in addition to raising and slaughter in the United States (Scenario B1).
7.95.
This is also applicable to Category B muscle cuts from livestock of a single foreign origin, born and also raised in the foreign country of birth, i.e. muscle cuts from livestock (i) born and raised in Country X; and (ii) raised and slaughtered in the United States. In the absence of point-of-production labelling, these muscle cuts could also carry the "Product of the United States, Country X … "257 label under the original COOL measure.258 Under the amended COOL measure, these muscle cuts could now carry the "Born in Country X, Raised and Slaughtered in the United States"259 label because of the multiple countries of raising flexibility.260 In light of this flexibility261, point-of-production labelling does not result in more segregation for Category B muscle cuts raised in both the foreign country of birth and in the United States.

Table 4: Label B on Category B muscle cuts of a single foreign origin

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amended COOL measure

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Notes to Table 4:The first label is taken from the 2009 Final Rule, § 65,300(e)(1). The second label is taken from the 2013 Final Rule, p. 31368, and § 65,300(e), including the multiple countries of raising flexibility.

7.96.
There is also the possibility of Category B muscle cuts being derived from livestock of multiple foreign origins in addition to US raising and slaughter. For instance, the 2009 Final Rule addressed muscle cuts from livestock "born in Country X or (as applicable) Country Y, raised and slaughtered in the United States"262 ("and … not derived from animals imported for immediate slaughter"263).
7.97.
Under this scenario (Scenario B2), the Category B muscle cuts in question originate from both (i) livestock born in Country X, and raised and slaughtered in the United States, as well as (ii) livestock born in Country Y, and raised and slaughtered in the United States. This scenario therefore represents a combination of livestock from two different foreign countries of origin, which fall within Category B.264
7.98.
According to the 2009 Final rule, the two types of muscle cuts in this scenario could be designated as "Product of the United States, Country X, and … Country Y." Conversely, under the 2013 Final Rule, these two types of muscle cuts would need to carry distinct labels to reflect their different countries of origin.
7.99.
As shown in Table 5 below, segregation increases as a result of point-of-production labelling under this scenario (Scenario B2) – even taking into consideration the multiple countries of raising flexibility under the amended COOL measure.265

Table 5: Label B on Category B muscle cuts of different foreign origins

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amended COOL measure

without multiple countries of raising flexibility

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[SEE TABLE IN SOURCE DOCUMENT]

with multiple countries of raising flexibility

[SEE TABLE IN SOURCE DOCUMENT]

[SEE TABLE IN SOURCE DOCUMENT]

7.100.
Another multiple foreign-origin scenario (Scenario B3) might entail Category B muscle cuts from livestock raised in more than one foreign country in addition to being raised (and slaughtered) in the United States. This would involve livestock (i) born in Country X; (ii) raised in Country X, Country Y, and the United States; and (iii) slaughtered in the United States. Arguably, absent point-of-production labelling, the Label B under this scenario could also read "Product of the United States, Country X, and … Country Y"266 under the original COOL measure.267
7.101.
As shown in Table 6 below, the same type of muscle cuts could also carry a uniform but more detailed Label B under the amended COOL measure (Scenarios B3a and B3b taken separately).268
7.102.
The situation is different regarding Category B muscle cuts from livestock (i) born in two different foreign countries; (ii) raised in the same two foreign countries and the United States; and (iii) slaughtered in the United States. Taking the example of a Category B muscle cut of US, Canadian, and Mexican origin, a uniform 'North American' label ("Product of the United States, Canada, and Mexico") could have been affixed on all of these muscle cuts under the original COOL measure. This is no longer possible under the amended COOL measure's point-of-production labelling. As shown in Table 6, distinct labels for these Category B muscle cuts would need to be affixed according to where each production step took place (Scenarios B3a and B3b taken together)269 – even taking into consideration the multiple countries of raising flexibility under the amended COOL measure.270

Table 6: Label B on Category B muscle cuts of different MULTIPLE FOREIGN origins

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amended COOL measure

Without multiple countries of raising flexibility

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With multiple countries of raising flexibility

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Label C

7.103.
Like for Label B, for Label C we address scenarios involving livestock with single and multiple foreign origins which, pursuant to the Category C definition, are imported for immediate slaughter into the United States.
7.104.
For single foreign-origin Category C muscle cuts, under the amended COOL measure, Label C would read "Born and Raised in Country X, Slaughtered in the United States"271 instead of "Product of Country X and the United States".272 Despite the more detailed information, Category C muscle cuts of a single foreign origin can thus continue to carry a uniform label under the amended COOL measure. As shown in Table 7 below, there is no increase in the number of labels or in segregation for single foreign-origin Category C muscle cuts as a result of point-of-production labelling.

Table 7: Label c on Category C muscle cuts of a single foreign origin

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amended COOL measure

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Notes to Table 7:The first label is taken from the 2009 Final Rule, § 65,300(e)(3). The second label is taken from the 2013 Final Rule, § 65,300(e) and pp. 31368-31369.

7.105.
Turning to Category C muscle cuts of multiple foreign origins, muscle cuts from two different single foreign-origin Category C animals had to carry two distinct labels under the original COOL measure.273 Muscle cuts from livestock born and raised in Canada, and muscle cuts of livestock born and raised in Mexico (both imported for immediate slaughter in the United States) would carry two distinct labels under the amended COOL measure.
7.106.
As shown in Table 8 below, no increase in the number of labels or in segregation is involved in this scenario (Scenario C2) as a result of point-of-production labelling.

Table 8: Label C ON Category C muscle cuts of different foreign origins

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amended COOL measure

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[SEE TABLE IN SOURCE DOCUMENT]

7.107.
Another multiple foreign-origin scenario might entail Category C muscle cuts from livestock (i) born and raised in a foreign country; (ii) also raised in a second foreign country; and (iii) imported for immediate slaughter to the United States. Using the same two foreign countries, there are four potential scenarios depending on whether the animals were born in Country X or Y, and in what sequence they were raised in these two countries (Scenarios C3-C6).
7.108.
The sequence of countries of raising might be relevant because of the parties' disagreement on which countries of raising need to be labelled for Category C muscle cuts from livestock raised in more than one country.274 The 2013 Final Rule requires, as a general rule, that "Muscle Cut Covered Commodities of Multiple Countries of Origin from Animals Slaughtered in the United States" be "labelled to specifically identify the production steps occurring in each country".275 Specifically, "the origin designation for muscle cut covered commodities derived from animals imported for immediate slaughter [i.e. Category C muscle cuts] … is required to include information as to the location of the three production steps."276 However, under the 2013 Final Rule, "the country of raising for animals imported for immediate slaughter … shall be designated as the country from which they were imported (e.g. 'Born and Raised in Country X, Slaughtered in the United States')."277 Further, the COOL statute foresees Category C labels listing a single foreign origin by prescribing that labels on muscle cuts imported for immediate slaughter "shall designate the origin … as (i) the country from which the animal was imported; and (ii) the United States."278
7.109.
If the 2013 Final Rule precludes countries other than the country of export from being listed as the country of raising, there are more labels and thus more segregation under the amended COOL measure for Scenarios C3‑C6. This is illustrated in the second to bottom row of Table 9 below.
7.110.
Alternatively, if the 2013 Final Rule permits countries of raising other than the country of immediate import on Label C – and provided the countries of raising do not have to be listed in strict chronological order – the label could be arranged so as to retain the same numberof distinct labels as under the original COOL measure, namely two distinct labels covering the four separate scenarios. This is illustrated in the bottom row of Table 9 below with the potentially overlapping labels having matching backgrounds.279

Table 9: LAbel C ON Category C muscle cuts of different multiple foreign origins

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amended COOL measure

country of raising = country of immediate import

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[SEE TABLE IN SOURCE DOCUMENT]

[SEE TABLE IN SOURCE DOCUMENT]

[SEE TABLE IN SOURCE DOCUMENT]

if additional countries of raising may be shown

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[SEE IMAGE IN SOURCE DOCUMENT]

[SEE IMAGE IN SOURCE DOCUMENT]

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* Countries listed in chronological order of raising.

Conclusion

7.111.
In light of the above, we conclude that point-of-production labelling, as prescribed by the amended COOL measure, in and of itself increases the number of distinct labels for:

a. Category B muscle cuts of different foreign origins (Scenario B2 – Table 5) – irrespective of the multiple countries of raising flexibility under the amended COOL measure;

b. Category B muscle cuts of different, multiple foreign origins (Scenarios B3a and B3b taken together – Table 6) – irrespective of the multiple countries of raising flexibility under the amended COOL measure; and

c. Category C muscle cuts of animals born in a foreign country, raised in that and another foreign country, and imported into the United States for immediate slaughter (Scenarios C3-C6 taken together – Table 9) – if only the country of immediate import can be shown as the country of raising on the label.280

7.112.
As mentioned, under the amended COOL measure more labels still mean more segregation.281 As a result of the unchanged requirement for an unbroken chain of reliable country of origin information, segregation of the downstream product (muscle cuts) necessarily entails segregation of the upstream product (livestock).282 The increase in the number of distinct labels for the above three types of muscle cuts also entails more segregation for the relevant types of muscle cuts and the originating livestock.
7.113.
We also conclude that, compared with the original COOL measure, point-of-production labelling in and of itself does not affect the number of labels for other types of Category B and C muscle cuts, and for Category A muscle cuts in general. In other words, point-of-production labelling under the amended COOL measure does not directly increase or decrease segregation for these types of muscle cuts and the originating livestock.

Removal of the two flexibilities under the original COOL measure

7.114.
In the original dispute, commingling between products eligible for Labels A and B, and Labels B and C, respectively, was found to have only partially mitigated the segregation necessitated by the original COOL measure.283 The flexibility of listing countries of origin in any order on Category B and commingled muscle cuts had a similar effect.284
7.115.
As shown in Table 2, these two flexibilities – applied cumulatively – meant that under the original COOL measure a uniform label could cover muscle cuts from livestock of possibly three different origins:

a. muscle cuts from livestock born, raised, and slaughtered in the United States;

b. muscle cuts from livestock raised, and slaughtered in the United States, and born elsewhere; and

c. muscle cuts from livestock imported into the United States for immediate slaughter after being born and raised elsewhere.

7.116.
Put differently, as a combined result of the commingling and country order flexibilities, it was possible to affix a uniform label on the following four different types of Category A, B, and C muscle cuts:

a. commingled muscle cuts from Category A and B animals;

b. muscle cuts from Category B animals;

c. commingled muscle cuts from Category B and C animals; and

d. muscle cuts from Category C animals;

7.117.
This is shown in the shaded parts on the left-hand side of Table 10 below, using the 2009 Final Rule's label example "Product of Canada, U.S.".285
7.118.
This diverse applicability of the same, uniform label was due to the commingling and country order flexibilities under the original COOL measure. As these two flexibilities are now removed, the four specific types of muscle cuts (shaded on the left) derived from the three different origins of livestock (shaded in the middle) must always carry distinct labels under the amended COOL measure, as shown (shaded on the right) in Table 10 below.

Table 10: more labelS as a result of the commingling and country order flexibilities being removed

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eligible for Label A, not commingled

Category A

US-born

US-raised

US-slaughtered

eligible for Label A

[SEE TABLE IN SOURCE DOCUMENT]

[SEE TABLE IN SOURCE DOCUMENT]

eligible for Labels A and B, commingled (listed in any order)

Category B

Canadian-born

US-raised

US-slaughtered

eligible for Label B

[SEE TABLE IN SOURCE DOCUMENT]

eligible for Label B, not commingled (listed in any order)

eligible for Labels B and C, commingled (listed in any order)

Category C

Canadian-born

Canadian-raised

and imported for immediate US slaughter

eligible for Label C

[SEE TABLE IN SOURCE DOCUMENT]

eligible for label C, not commingled

Notes to Table 10:The first label on the left is taken from the 2009 Final Rule p. 2668. See also Panel Reports, US – COOL, para. 7,100. The label in the shaded area on the left is taken from the 2009 Final Rule, p. 2662. The three labels on the right follow the general provisions of the amended COOL measure.

7.119.
The same conclusion applies also to the three main types of livestock and muscle cut origins in the US market – namely, exclusively US-origin (i.eCategory A) muscle cuts, and single foreign-origin muscle cuts of Categories B and C (i.emuscle cuts from US-slaughtered Mexican feeder and Canadian fed cattle) – taken together.
7.120.
Due to the commingling and country order flexibilities under the original COOL measure, a uniform 'North American' label ("Product of Canada, Mexico and the United States") could previously be affixed on all of these muscle cuts. Conversely, as shown in Table 11 below, absent the commingling and country order flexibilities, these three types of muscle cuts need to carry three distinct labels under the amended COOL measure.

Table 11: more labelS for muscle cuts from mexican feeder and canadian fed cattle as a result of the commingling and country order flexibilitiES being removed

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amended COOL measure

(absent commingling and country order flexibilities)

[SEE TABLE IN SOURCE DOCUMENT]

[SEE TABLE IN SOURCE DOCUMENT]

[SEE TABLE IN SOURCE DOCUMENT]

7.121.
The parties disagree on the extent of the removed commingling flexibility. According to the Mexico, in practice many operators in the United States commingled.286 According to Canada, the slaughterhouses that were accepting Canadian cattle and hogs under the 2009 Final Rule likely took advantage of the commingling flexibility, whereas under the amended COOL measure "when Canadian cattle and hogs are processed at these slaughterhouses, they will no longer be eligible for commingling.287 Conversely, the United States contends that only few individual meat processors were commingling.288 The parties held inverted positions on the prevalence of commingling in the original dispute.289
7.122.
The original panel reviewed evidence on the practice and extent of commingling290, and concluded that "[a]lthough it appears that some commingling is taking place, it is difficult to establish its precise extent."291 Based on a letter from the American Meat Institute referenced by all three parties in the original dispute, the original panel added:

even by the US meat industry's calculations, only some 5% of domestic meat might actually be commingled with imported meat. However, this evidence is silent on whether in practice less than 5% of domestic meat ends up being commingled. It does not specify either in what proportion such domestic meat might be commingled with imported meat, i.e. the quantities and share of non-US origin meat involved in any commingling.292

7.123.
In general, the complainants rely on witness statements to seek to prove that the elimination of the commingling flexibility "ha[s] significant impact on [processors'] plants"293 and "almost certainly … [leads] to distinct breaks in production".294 However, the complainants do not submit a list of identified enterprises that commingle or the extent of commingling by these entities. When asked to provide the number or share of commingling operators, Canada refers to a potential range of commingling calculated by the USDA295, and to cattle and hog procurement maps that do not provide direct data on the extent of commingling.296 Mexico has no official statistics on commingling.297 Instead, Mexico relies on statements illustrating the refusal of certain US producers to process imported meat298, reduced demand for Mexican cattle299, and other negative effects allegedly associated with the elimination of commingling.300 These statements do not specify the actual use of commingling or the extent thereof.
7.124.
The United States relies on the comments the USDA received on the proposed 2013 Final Rule concerning the actual extent of commingling, according to which only three beef processors and no pork processors confirmed that they commingled.301 Conversely, in its comments on the proposed 2013 Final Rule, the American Meat Institute stated that there were at least fifteen large cattle slaughter plants and at least six hog slaughter facilities in the United States that processed mixed origin livestock.302 Similarly, Mexico submits a statement of nine meat processors, "many" of which claim having practised commingling.303 While these statements show the existence of commingling, they do not quantify its extent in the US market.
7.125.
As regards the actual extent of commingling under the amended COOL measure, the United States relies on estimates made by the USDA in the 2013 Final Rule, which conclude that the extent of commingling in the US meat industry is between 5% and 20%, and that actual commingling likely fell closer to the lower end of 5%.304 Canada also relies on the USDA estimates of 5% and 20%.305 According to Mexico, the removal of commingling affected 18-21% of beef products sold in the US.306
7.126.
Based on the above, like the original panel307, we conclude that it appears that some commingling was taking place before the amended COOL measure both for cattle and hogs and resulting muscle cuts, but it is difficult to establish its precise extent. In light of the parties' arguments, we can only conclude that the use of the commingling flexibility did not exceed the rough estimate of 20% in the livestock and meat industry. However, we are unable to establish the share of commingling with any more specificity.
7.127.
As to the country order flexibility, the parties do not address its extent. Absent arguments and evidence, we cannot determine its extent either. In any event, we need not do so.308 For the purpose of comparing the design and structure of the original and amended COOL measures, it suffices to conclude that both the commingling and country order flexibilities were clearly available possibilities under the original COOL measure, and that these have now been eliminated. Having removed these flexibilities, the amended COOL measure leads to increased segregation for US-slaughtered livestock and resulting muscle cuts.309

Amended coverage of Label D

7.128.
The 2013 Final Rule changed the coverage of Category D. As explained310, under the 2009 Final Rule, Category D extended to "[i]mported covered commodities for which origin has already been established as defined by this law (e.g., born, raised, and slaughtered or produced) and for which no production steps have occurred in the United States".311 The 2013 Final Rule refers to "[m]uscle cut covered commodities derived from an animal that was slaughtered in another country … including muscle cut covered commodities derived from an animal that was born and/or raised in the United States and slaughtered in another country".312
7.129.
The complainants do not challenge the amended COOL measure as regards imported muscle cuts from foreign-slaughtered livestock (Category D). As Canada explains, it "has not challenged the WTO-consistency of Label D under the COOL measure"313, and "does not make claims of inconsistency of the provision of the amended COOL measure pertaining to the labelling of muscle cuts of foreign origin imported into the United States (referred to as Label D)."314 Likewise, "Mexico is not challenging Label D."315
7.130.
For the sake of completeness and in light of the parties' arguments316, we nonetheless briefly review whether the amended coverage of Label D may lead to an increase in the number of distinct labels.
7.131.
The change in coverage of Label D means that, under the amended COOL measure, Label D can cover muscle cuts from livestock of possibly four different origins depending on whether – prior to foreign slaughter – birth and/or raising took place in the foreign country and/or the United States, namely:

a. livestock born, raised, and slaughtered outside the United States (Scenario D1);

b. livestock born outside the United States, raised in the United States, and slaughtered elsewhere (Scenario D2);

c. livestock born in the United States, and raised and slaughtered elsewhere (Scenario D3); and

d. livestock born and raised in the United States, and slaughtered elsewhere (Scenario D4).

7.132.
However, because Label D continues to indicate only the place of slaughter317, this change does not entail any increase in the number of labels, as shown in Table 12 below. Although muscle cuts from livestock of three of the above four different origins were not covered by Label D under the 2009 Final Rule (Scenarios D2-D4)318, under the 2013 Final Rule all four categories can use the same label as that permitted under the original COOL measure.

Table 12: CHange in coverage of label D

[SEE TABLE IN SOURCE DOCUMENT]

not

applicable

amended COOL measure

[SEE TABLE IN SOURCE DOCUMENT]

Conclusion on segregation

7.133.
We have reviewed the design and structure319 of the amended COOL measure with respect to the need for segregation. Like the original panel320, we have concluded that for all practical purposes, the amended COOL measure necessitates segregation of meat and livestock according to origin.321
7.134.
We have also reviewed the changes in the COOL measure's design and structure322 to compare the amended COOL measure's impact on segregation with that of the original COOL measure. In light of this, we have concluded323 that:

a. point-of-production labelling in and of itself:

i. increases the need for segregating Category B muscle cuts and livestock under two scenarios, namely muscle cuts of different single and different multiple foreign origins;

ii. increases the need for segregating Category C muscle cuts of different multiple foreign origins – provided that only the country of immediate import can be shown as the country of raising on the label;

iii. does not affect the need for segregation under other scenarios of Category B and C muscle cuts and livestock, or for Category A muscle cuts and livestock; and

b. the amended COOL measure's removal of the commingling and country order flexibilities increases the need for segregation.

7.135.
Various statements from individual industry participants324 and groups325 confirm that the amended COOL measure involves increased segregation throughout both the beef and pork muscle cuts supply chains, i.e. cattle and hogs as well as muscle cuts derived therefrom.
7.136.
Accordingly, we find that the amended COOL measure involves segregation, as did its predecessor. Indeed, as compared with the original COOL measure, for all practical purposes, the amended COOL measure necessitates increased segregation of livestock and the resulting muscle cuts of meat according to origin in order to meet the information requirements on origin labels.
7.137.
Like the original panel, we do not consider that segregation – or increased segregation for that matter – per se would constitute detrimental impact under Article 2.1 of the TBT Agreement, let alone a violation of Article 2.1.326 We need to address whether segregation "'modifies the conditions of competition … to the disadvantage of the imported product' by imposing higher costs on imported than on domestic livestock."327 Before doing so, however, we first assess the impact of the amended COOL measure on recordkeeping, which is closely linked to the need for segregation and its cost implications.

7.5.4.1.2.4 Recordkeeping

7.138.
The parties dispute the impact of the amended COOL measure on recordkeeping. In particular, the complainants argue that the revised labels and elimination of commingling under the amended COOL measure result in increased recordkeeping and verification burdens as compared to the original COOL measure.328 The United States counters that the 2013 Final Rule makes no changes to the recordkeeping provisions contained in the original COOL measure, which require accurate records irrespective of the origin of the products.329
7.139.
The provisions regarding recordkeeping and verification are formally identical under the original and amended COOL measures.330 We examine whether in practice the amended COOL measure requires greater recordkeeping as compared to the original COOL measure.
7.140.
The recordkeeping requirements of the original COOL measure established an audit verification system imposing certain recordkeeping requirements for producers along the livestock and meat production chain.331 In particular, the COOL statute grants authority to the Secretary of Agriculture to "conduct an audit of any person that prepares, stores, handles, or distributes a covered commodity for retail sale to verify compliance".332 Persons subject to audit under this provision must be able to make country of origin records available to the USDA for the purposes of origin verification.333 Further, "[a]ny person engaged in the business of supplying a covered commodity to a retailer shall provide information to the retailer indicating the country of origin of the covered commodity."334
7.141.
According to the 2009 Final Rule, "[a]ny person engaged in the business of supplying a covered commodity to a retailer, whether directly or indirectly …, must maintain records to establish and identify the immediate previous source (if applicable) and immediate subsequent recipient of a covered commodity for a period of 1 year from the date of the transaction."335
7.142.
As explained in the original dispute, these recordkeeping requirements necessarily entail information that "can only be obtained from the upstream livestock and meat supply chain".336 The 2009 Final Rule's explicit application to such upstream suppliers meant that:

the [original] COOL measure prescribes an unbroken chainof reliable country of origin information with regard to every animal and muscle cut. In other words, to comply with the COOL measure, livestock and meat processors need to possess, at each and every stage of the supply and distribution chain, the kind of origin information required by the various COOL labels for which each animal or portion of meat is eligible, and they need to transmit such information to the next processing stage.337

7.143.
Under the amended COOL measure, the information that needs to be obtained and maintained upstream continues to be closely tied to the "origin claim" that is made with respect to a covered commodity. This is based on the unchanged requirement that "suppliers and retailers … shall make available … records … that verify an origin claim".338 The "origin claim"339 is therefore a key determinant of the "records" and information that are required under the amended COOL measure for both retailersandsuppliers.340
7.144.
In this vein, the USDA's assertion that in practice "no additional recordkeeping is required by [the 2013 Final Rule]"341 is called into question by its earlier recognition that recordkeeping burdens for various stages in the production chain are correlated to the nature of the origin claim and the requisite accuracy of supporting information. To take one example, in 2009 the USDA "recognize[d] that animal production cycles vary greatly and depending upon which records are used for origin verification, retention of documents should be commensurate with the claim being affirmed through an affidavit or other means of declaration."342 For intermediary suppliers, the USDA anticipated that the transmission of information from "distribution centers" to retailers "likely will require modification of existing recordkeeping processes to ensure that the information passed from suppliers to retail stores permits accurate product labeling and permits compliance and enforcement reviews."343 In short, suppliers' recordkeeping burden and obligations are explicitly tied to the "information needed to correctly label the covered commodities".344
7.145.
This is consistent with the USDA's identification of two types of costs in relation to recordkeeping under the original COOL measure, namely "initial costs" and "maintenance costs".345 First, "initial or start-up costs" were considered to consist of "some additional incremental costs to record, maintain, and transfer country of origin … information to substantiate required claims made at retail".346 Second, "[i]n addition to these one-time costs to modify recordkeeping systems, enterprises will incur additional recordkeeping costs associated with storing and maintaining records".347 For livestock in particular, it was anticipated under the original COOL measure that "all producers of … livestock (in the case of the covered meat commodities) will establish recordkeeping systems sufficient to substantiate country of origin claims".348 Further, it was recognised that the nature of livestock production was such that both initial349 as well as maintenance350 costs of recordkeeping would be greater for these types of operations.
7.146.
As shown above351, an "origin claim" under the original COOL measure could consist of a muscle cut being a "product of" the country(ies) of origin involved. In addition, the original COOL measure stipulated that "the origin declaration [for Category B, Category C, and all commingled muscles cuts] may include more specific information related to production steps provided records to substantiate the claims are maintained".352 The 2013 Final Rule now mandates such information on all covered US‑slaughtered muscle cuts, and maintains the provision for voluntary specific information on production steps only for Category D imported muscle cuts ("provided records to substantiate the claims are maintained").353 This implies that the augmented origin claims with specific information related to production steps on Labels A-C, as mandated under the amended COOL measure, entail corresponding augmentation of the records kept by livestock and meat producers to substantiate such claims.354
7.147.
Further, it follows from the foregoing analysis of increased segregation under the amended COOL measure that the revised labels create a greater variety of scenarios that must be verifiable by retailer and supplier records. We concluded above that point-of-production in and of itself increased the number of distinct labels for various production-step scenarios of Category B and Category C muscle cuts.355 Just as the creation of more labels necessitates more segregation under the amended COOL measure, different "origin claims" require distinct substantiation for the segregated animals and meat. This is particularly evident in the case of the removal of commingling and country order flexibility. Tables 10 and 11 illustrate various scenarios for which, under the original COOL measure, animals and meat with different production-step origins could be consolidated under a unified "origin claim". Suppliers and retailers availing themselves of such a general "origin claim" would have a recordkeeping burden and obligation commensurate with the substantiation of that general claim. The greater diversity of labels resulting from the elimination of commingling and country-order flexibility creates a multiplicity of scenarios for which distinct and commensurate substantiating records are now required.
7.148.
The USDA also referred to "the major cost drivers" of the 2009 Final Rule as including inter alia "when livestock or other covered commodities are segregated in the production or marketing process when firms are not using a multiple-origin label".356 As a direct result of the 2013 Final Rule, "the flexibilities afforded by the use of multiple-origin labels"357 under the original COOL measure are no longer available. A "mixed origin label"358 under the amended COOL measure must now be understood to represent a greater diversity of mutually exclusive labels according to the possible variations of production steps.359 Consequently, what was originally considered a "major cost driver" is now the precise situation mandated by the revised labels and removed flexibilities under the amended COOL measure.
7.149.
In sum, the increase in the number of distinct labels and in segregation logically entails a higher recordkeeping burden. Although origin claims may be substantiated by documents maintained in the normal course of business, to the extent that origin claims become more diverse, they entail more burdensome recordkeeping. As products that could be covered by a uniform origin claim are now covered by more, distinct origin claims, the one set of normal business documentation to substantiate the previously uniform origin claim is now necessarily replaced with distinct sets of normal business documentation to substantiate the diverse origin claims. This logically leads to higher recordkeeping burdens and costs, as also confirmed by statements of industry participants.360
7.150.
In light of the above, we find that, compared with the original COOL measure, the amended COOL measure entails an increased recordkeeping burden in practice for US-slaughtered livestock and the resulting muscle cuts of meat.

7.5.4.1.3 Incentives for handling domestic products and effects on the competitive opportunities of imported products

7.151.
The original panel noted that segregation "does not necessarily impose differential implementation costs on imported and domestic products."361 At the same time, the original panel concluded that more segregation entails more costs:

[I]t is evident that the more origins and the more types of muscle cut labels involved, the more intensive the need for segregation throughout the livestock and meat supply and distribution chain. In turn, more intensive segregation leads to higher compliance costs with the COOL measure.362

7.152.
Given the Appellate Body's endorsement of this conclusion363, we see no reason to find otherwise in the context of these compliance proceedings.
7.153.
To assess whether segregation involves differential implementation costs for imports, the original panel compared five business scenarios based on whether the livestock being processed has domestic or imported origin(s):

"(a) processing domestic and imported livestock and meat irrespective of origin and solely according to price and quality;

(b) processing meat from exclusively domestic livestock;

(c) processing meat from exclusively imported livestock;

(d) processing exclusively domestic and exclusively imported livestock at different times; or

(e) processing both domestic and imported meat by commingling the two on the same production day."364

7.154.
The original panel concluded that "[t]he relatively less costly business scenarios are the ones that involve processing meat from either exclusively domestic or exclusively foreign livestock at all times" because, "as a direct result of the [original] COOL measure, business scenarios involving more than one origin or muscle cut label result in generally higher costs than scenarios involving only one origin."365
7.155.
In essence, this continues to apply in the context of this compliance dispute. Under the amended COOL measure, the first four business scenarios compared by the original panel remain valid. The fifth scenario involving commingling is no longer available. In any event, it was also found to be more costly than single-origin scenarios.366 As regards the relative costs of the remaining four scenarios, various industry participants indicated that different stages of the supply chain would move to a single-origin category approach in light of the increased costs of processing products of multiple origin under the amended COOL measure.367
7.156.
Comparing the two single-origin scenarios, the original panel concluded that "it seems logical that the scenario of processing exclusively domestic livestock and meat is in general less costly and more viable than processing exclusively imported livestock."368 In particular, the original panel considered that:

[l]ivestock imports have been and remain small compared to overall US livestock production and demand, and US livestock demand cannot be fulfilled with exclusively foreign livestock. And even if it could be, in light of the evidence before us, it appears that this scenario would in all likelihood involve more than one foreign origin, and thus in general more segregation and higher compliance costs than processing exclusively domestic livestock, which by definition has one single origin.369

7.157.
We see no significant change in the relative share of US and imported livestock and meat in the US market. The United States explains that the market has not changed in this regard.370 Accordingly, the original panel's logic continues to apply: processing exclusively domestic livestock and meat remains the least costly and most viable business scenario under the amended COOL measure. As the original panel held:

overall, the least costly way of complying with the COOL measure is to rely on exclusively domestic livestock. Thus, in general, business scenarios involving imported livestock, including the scenario involving exclusively imported products, are overall more costly than the exclusively Label A approach.371

7.158.
This is confirmed by statements from US industry participants of different sizes. AB Foods, a US packing plant processing approximately 1% of the United States' annual beef production372 noted that the segregation costs resulting from the amended COOL measure would place his company at a competitive disadvantage to packers in parts of the country, such as the Midwest, where there is a more consistent supply of US cattle.373 Likewise, Tyson, a major US processor stated with regard to the amended COOL measure:

[e]ven if a retail customer would be willing to accept 'B' or 'C' label products, there are not enough 'B' or 'C' livestock in any region to allow any Tyson plant (or, we believe, any other processor) to dedicate itself to 'B' or 'C' livestock, which would be the only way to avoid the segregation costs described above and remain viable.374

7.159.
Reviewing how compliance costs are borne in the supply chain, the original panel noted that "under the COOL measure and all other things being equal, either consumers pay more or livestock producers receive less for the livestock they sell to processors."375 The original panel added that "[a]s the 2009 Final Rule … explains, at least some of the compliance costs of the COOL measure will arise at the level of suppliers of covered commodities." The USDA estimates that the costs of the amended COOL measure will also arise in the supply chain:

[T]he Agency agrees that there will be additional costs associated with th[e 2013 F]inal [R]ule, although only those muscle cut covered commodities subject to COOL requirements will be affected by the changes in this final rule. Those costs will be incurred by processors and retailers as they adjust to the loss of commingling flexibility and to the new labeling requirements in this final rule.376

7.160.
Further, according to the original panel, "the additional costs [of the COOL measure] cannot be fully passed on to consumers."377 The original panel took into account "the lack of [consumer] interest in a voluntary COOL regime"378, as noted by the USDA at the time.379 Referencing previous disputes380, the original panel concluded that:

the COOL measure creates an incentive for participants to process domestic rather than imported livestock because, under the COOL measure, processing meat from exclusively domestic livestock is less costly than other business scenarios. Passing on these costs at least in part to imported livestock in turn creates a reduction in the competitive opportunities of imported livestock, relative to domestic livestock.381