Seafood Processor Sentenced for Fraud

Written by Tyler R. Etter

On August 11, 2015, Alphin Brothers Inc., a North Carolina seafood processor, was sentenced in federal court for falsely labeling imported shrimp. The sentencing follows a plea agreement made on February 10, 2015, where Alphin Brothers plead guilty to one count of making or submitting false records, a violation of the Lacey Act.

According to court documents, the company directed employees and another processing facility to label approximately 25,000 pounds of farm-raised, imported shrimp as a wild-caught “product of the United States.” The mislabeling is against the Country of Origin Labeling (COOL) regulations of the United States. The Lacey Act makes it illegal to “make or submit any false record, account, or label for...any fish or wildlife...intended to be imported, transported, purchased or received from any foreign country, or transported in interstate or foreign commerce.”

The company will have to pay a criminal fine of $100,000, as well as forfeit 21,450 pounds of shrimp. Further, the company will serve three years of probation, and be required to implement a training program to educate employees on federal labeling requirements.

Lisa Weddig, Secretary of the Better Seafood Bureau (BSB), commented on the case, stating “This case is an example of coordinated law enforcement, both state and federal, working together with the tools they already have to crack down on fish fraud.” Weddig emphasized the use of the pre-existing Lacey Act and coordination to show that enforcement and punishing these crimes do not require new laws or regulations.

COOL Dispute Arbitration Date Set

By Tyler R. Etter

A date has been set by the World Trade Organization’s Dispute Settlement Body for the arbitration hearing on Canada and Mexico’s retaliatory tariffs against the United States in response to Country of Origin Labeling (COOL). At the request of the parties, the hearing will be open to the public, occurring on September 15 and 16, 2015.

A decision in May found the mandatory COOL labeling to be in violation of the United States’ international obligations to Canada and Mexico. The two nations are seeking over $3 billion in retaliatory tariff measures against U.S. goods. The U.S. has requested a decision rejecting the proposed damages, instead setting totals at $43.22 million and $47.55 million.

The U.S. House of Representatives has since passed a bill to repeal COOL, but the Senate has passed competing measures. One proposal is for the creation of a voluntary “Product of the U.S.” label, and another would repeal COOL for beef, pork, and chicken from the surface transportation bill.

Canada and Mexico have already voiced opposition to the voluntary label, and will proceed if COOL is not fully repealed.

Plaintiffs Appeal Court’s Decision in Country of Origin Labeling Lawsuit

On September 23, 2013, the American Meat Institute (AMI) filed an appeal of the recent court ruling denying a preliminary injunction of the USDA Country of Origin Labeling rule (COOL). In the appeal, Plaintiffs state that the Agricultural Marketing Service (AMS) of the USDA did not have a justification for promulgating the COOL rule until AMI brought suit in July. They also contend that the rule exceeds the statutory authority of the AMS because it is not only a labeling regulation, but also interferes with meat production practices due to the ban of commingling of livestock born or raised in different countries. Plaintiffs assert that the rule is causing irreparable injury to their membership which will be furthered by enforcement of the rule. Enforcement is scheduled to begin on November 24, 2013.

For the lower court’s ruling denying a preliminary injunction, please see our September 19 blog post. For more information about the law suit, see our July 9 blog post. For more information on COOL generally, see our May 30 blog post.

 

Written by Sarah L. Doyle - Research Assistant

The Agricultural Law Resource and Reference Center

@PSUAgLawCenter

September 28, 2013

American Meat Institute Files Suit Against USDA Over Country of Origin Labeling Rule

On July 8, 2013 the American Meat Institute (AMI), together with several American and Canadian cattle and meat associations, filed a complaint against the United States Department of Agriculture alleging that the final mandatory Country of Origin Labeling (COOL) rule violates the First Amendment, the Agricultural Marketing Act, and the Administrative Procedure Act.

The revised COOL rule, designed to inform consumers of the country of origin of certain covered commodities, was challenged by Canada and Mexico before the World Trade Organization (WTO) in 2012 under the Technical Barriers to Trade agreement (TBT). According to Canada and Mexico, COOL requirements imposed burdens on the meat products supply chain that discriminated against their livestock exports. The WTO Appellate Body agreed, noting that there was no health and safety basis for COOL, and mandated that the United States bring COOL into compliance with the TBT agreement or potentially face retaliatory measures from affected foreign countries. The Agricultural Marketing Service of the USDA released the amended COOL rule on May 23, 2013 in an effort to bring COOL in compliance with the TBT. (For more information on COOL, please see our Current Issues Page on the Agricultural Law Center’s website.)

As discussed in our previous COOL blog post, Canada and Mexico as well as many domestic organizations such as AMI were still unsatisfied with COOL. AMI alleges in its complaint that COOL violates the First Amendment of the U.S. Constitution because COOL compels speech that serves no substantial government interest since there is no health and safety basis for COOL. AMI also claims that COOL exceeds the authority granted by the Agricultural Marketing Act because COOL was not intended to implement point-of-processing labels as defined in the 2008 Farm Bill. Finally, AMI alleges that COOL violates the Administrative Procedures Act because it is arbitrary and capricious; COOL misleads consumers about the true origin of meat products and exacerbates the WTO violations.

The case was filed in the U.S. District Court for the District of Columbia and is docketed at 1:13-cv-01033. More information on COOL and the case can be found on AMI’s website.

Written by Sarah Doyle - Research Assistant

The Agricultural Law Resource and Reference Center

July 9, 2013

USDA/AMS Issues New COOL Rule

On May 23, 2013, the USDA’s Agricultural Marketing Service (AMS) issued the new Country of Origin Labeling (COOL) rule in response to successful challenges made by Canada and Mexico to the World Trade Organization (WTO).

Originating in the 2002 Farm Bill and expanded under the 2008 Farm Bill, COOL amended the Agricultural Marketing Act of 1946 to require mandatory retail-level country of origin labeling for various agricultural commodities. Canada and Mexico, along with several other countries, challenged COOL, stating that COOL violated the U.S.’s obligations under the WTO Agreement, including the Technical Barriers to Trade Agreement (TBT). In 2011, the WTO’s Appellate Body affirmed a previous WTO Panel’s ruling that the U.S. was in violation of the TBT. The WTO did find, however, that the U.S. had a right to label products according to their country of origin. Based on these findings, the U.S. was given a reasonable period of time to reform COOL.

The major reforms in the new COOL rule mostly deal with muscle cut covered commodities. These commodities must be labeled to specifically identify the countries in which each step in production occurred. The new rule also clarifies the definition of the term “retailer” to be any person subject to be licensed as a retailer under the Perishable Agricultural Commodities Act.  Furthermore, for six months after implementation, AMS will be conducting industry education concerning the new rule. According to the AMS, the costs of implementation of the new rule will be incurred primarily by packers and processors of muscle cut covered commodities and retailers subject to COOL.

Reactions to the new rule vary from outright disapproval to enthusiastic acceptance. Internationally, Canada’s Ministries of Agriculture and International Trade are still not appeased and Canada is considering retaliatory measures, stating that the new rule will “increase discrimination against Canadian cattle and hogs and increase damages to industry on both sides of the border.”

Domestically, the National Grocer’s Association (NGA) fears the new rule will increase cost burdens on independent grocers and hinder consumer choices. Also, the American Meat Institute and the National Cattlemen’s Beef Association are displeased with new rule and believe it will only harm American agriculture and will not satisfy the WTO.

In contrast, the United States Cattlemen’s Association applauds the new rule, stating that it will bring the U.S. into compliance with trade obligations while providing the consumer with more accurate information about their purchasing decisions. The National Farmers’ Union (NFU) is also pleased with the new rule and states that NFU will continue to “vigorously support it.”

For additional information about COOL, please see the AMS website: http://www.ams.usda.gov/AMSv1.0/cool 

Written by Sarah Doyle, Research Assistant

Penn State Law, Agricultural Law Resource Center

May 30, 2013

World Trade Organization Appellate Body Rules on Country of Origin Labeling

On June 29, 2012, the World Trade Organization (WTO) Appellate Body held that the United States’ Country of Origin Labeling (COOL) program negatively affects other countries’ rights to trade freely.  WT/DS384/AB/R; WT/DS386/AB/R.  Under COOL, retailers must inform consumers of the country of origin of certain food products, including most beef and pork products.  7 U.S.C. §§ 1638-1638d.  In 2008, Canada and Mexico filed disputes with the WTO, alleging that COOL was inconsistent with the United States’ international trade obligations because it disadvantaged livestock producers who export cattle and hogs to the United States.  Previously, a WTO panel found that COOL resulted in unfavorable treatment to exporting producers and that providing consumers with country of origin information was not a legitimate justification for COOL.  In ruling on the United States’ appeal, the WTO Appellate Body upheld the panel’s decision that COOL had a discriminatory impact on imported beef and pork, but held that COOL can be a legitimate tool to inform consumers about the origin of products as long as it does not affect other countries’ rights to trade freely.

Written by Joseph Negaard, Research Assistant

Penn State Law, Agricultural Law Center

July 11, 2012

Click Here for the WTO Appellate Body Decision