Question Period Note: BEEF AND PORK TRADE WITH THE U.S.

Q1 – Is the U.S. meeting its international trade obligations with these regulations? Q2 - What is Canada doing to ensure that patchwork of U.S. State-Level agricultural production regulations (related to animal welfare) does not disrupt the Canada-U.S. livestock and meat trade? Q3 – Will Canada adopt animal welfare standards reflected in these regulations? Q4 – What is Canada doing to defend Canadian meat products against the U.S. Voluntary Product of USA Labeling (VPUSA)? Q5 – What is the difference between voluntary “Product of USA” labelling and voluntary “Product of Canada” labelling guidelines? Q6 – Will Canada use retaliatory measures/tariffs against the final rule?

R.1 - Government officials are monitoring these regulations and their implementation to ensure that they comply with the U.S.’ obligations under the WTO and CUSMA. R.2 - Canada is concerned about the patchwork of state-level regulations in the United States that are related to agricultural production practices, and which can have a negative impact on pork production and trade in North America.

Regulations that impose prescriptive and burdensome farming practices for food production on a state-by-state basis make it difficult for producers to operate safely and efficiently.

The government of Canada continues to defend our agriculture sector through engagement with U.S. states and federal officials to seek clarification on the measures and to ensure they are implemented and enforced in a way that is compliant with U.S. international trade obligations. R.3 - Canada is a strong advocate for proper care and handling of farm animals, but California’s Proposition 12 and Massachusetts’ Question 3, do not appear to take a scientifically informed or whole-of-operation approach to advancing such objectives.

Animal welfare is important in Canada, a value reflected in our strong Codes of Practice for the Care and Handling of Farm Animals.

Canada’s Codes of Practice do not focus on a single aspect of animal welfare, such as housing, but instead use comprehensive and outcome-based approaches that address farm animal care issues. This is consistent with international guidance and rules-based trade.

The Codes are reviewed every five years and are typically revised and updated every ten years to remain aligned with current government policies and regulations, industry practices, and scientific research. R.4 - The finalized “Product of USA" labelling regulations for meat, poultry and eggs could have a detrimental impact on Canada’s livestock and meat industries.

Canada is disappointed that the rule does not reflect the unique Canada-U.S. trading relationship and could negatively impact supply chains, food inflation, and food security, on both sides of the border.

Canada is closely monitoring the impacts and implementation of the new regulations, which come into full effect on January 1, 2026, and continues to engage with U.S. officials. R.5 - Canada supports enabling consumers to make informed choices. However, the “Product of USA” labelling can only be used for animals born, raised, slaughtered and processed in the U.S., whereas Iin Canada, the guidelines allow the use of “Product of Canada” labelling for cattle that have spent a period of at least 60 days in Canada before slaughter.

Canada has had guidelines for the voluntary use of “Product of Canada” and “Made in Canada” claims since 2009, which are based on the Food and Drugs Act and since 2019, the Safe Food for Canadians Act. These guidelines apply to all foods sold in Canada. R.6 - Canada was granted retaliatory rights by the WTO when it successfully challenged the U.S.’s 2008 mandatory country-of-origin labelling (COOL) measure, which required all covered beef/pork products sold in the U.S. to indicate the country of origin.

The voluntary Product of USA rule is different than the U.S.’s mandatory COOL rule, which required all covered beef/pork products sold in the U.S. to indicate the country of origin.

Canada is closely monitoring the impacts and implementation of the final rule, in light of the U.S. international trade obligations.

• Several U.S. states, most notably California and Massachusetts, have adopted or proposed animal welfare regulations, which focus on minimum space requirements for certain animals and the use of breeding stalls.

• The differing regulations between states, as well as the stringent standards proposed in some cases, are expected to have a negative impact on Canada’s exports of hogs, pork and veal to the U.S. These concerns are also shared by some pork-, veal- and poultry-producing states, as well as U.S. industry groups.

• On May 11, 2023, the Supreme Court of the U.S. (SCOTUS) upheld California’s Proposition 12 animal housing law, paving the way for these regulations, and others, to come into force.

California Proposition 12

• The final regulations implementing Proposition 12 were published and entered into force on September 1, 2022. Among many provisions, the regulations required covered producers to be certified as Proposition 12-compliant as of January 1, 2024.

• The regulation mandates prescriptive space requirements for calves and breeding pigs: 43 sq. ft. of usable floor space for calves and 24 sq. ft for breeding pigs. For breeding pigs, the regulation also mandates specific limitations on the use of breeding stalls (i.e. sow not confined to a stall for more than 6 hours in a 24-hour period or for more than 24 hours in a 30-day period). It also requires that all eggs sold in California come from cage-free hens. The rule exposes companies in California to potential criminal penalties and the threat of civil lawsuits if the space requirements are not met.

• The provisions applying to veal calves and egg-laying hens were not the subject of the SCOTUS court challenges and were enforced September 1, 2022. Regarding breeding pigs, enforcement started on July 1, 2023.

• Few farms in the U.S. or Canada currently meet the requirements for breeding pigs. Limitations on the use of breeding stalls appear incompatible with current artificial insemination practices used by many operations in the industry. The rule will result in significant additional infrastructure costs and related certification and traceability costs throughout the value chain for products destined for the California market, or destined for the U.S., with the possibility of ending up in California. Negative impacts are also to be expected in the veal industry. Egg supply chains already differentiate between cage-free and conventional eggs.

Massachusetts Question 3

• In 2016, Massachusetts voters approved Question 3 - An Act to Prevent Cruelty to Farm Animals. In 2021, the state released the proposed rule to implement the act before a final rule was apparently released in 2022.

• Unlike California, the Massachusetts regulation does not prescribe minimum space requirements for pigs and veal calves but prescribes similar limitations on the use of breeding stalls. The regulation appears to: (1) prohibit in-state farmers from causing any covered animal to be “confined in a cruel manner” and (2) prohibit the sale of covered products derived from covered animals “confined in a cruel manner” within the state, whether this was produced in-state or elsewhere. “Confined in a cruel manner” is being defined as confining “a calf raised for veal or a breeding pig in a manner that prevents the animal from lying down, standing up, fully extending the animal's limbs or turning around freely”.

• While the Massachusetts regulation is less stringent than California’s Proposition 12, many swine herds in Canada confine their gilts and sow to gestation stalls/crates, although to different extents. Further, the Massachusetts regulation, similar to California’s regulation, provides an exemption for the end of the gestation period and the nursing of piglets, it does not appear to provide a lot of latitude to confine animals for significant length of time following breeding. Canada’s Code of Practice (for the care and handling of pigs) allows sows and gilts to be confined in stalls for up to 28 days after breeding.

• Since the release of the proposed rule in 2022, there has been some uncertainty surrounding the regulation, including regarding provisions on transshipment. Following pressure from the National Pork Producers Council, in May 2024, the Massachusetts’ Department of Agricultural Resources released an updated FAQ document which clarified that ground and comminuted pork would be exempt from these regulations. The document also clarified that there is a temporary exemption of transshipment obligations, pending litigation against the state. • On March 18, 2024, the United States (U.S.) government published a final rule on its voluntary Product of United States of America (PUSA) labelling requirements for meat, poultry, and egg products.

• Under the final rule, the authorized claims “Product of USA” or “Made in the USA” or a U.S. flag may be displayed on labels of U.S. Food Safety and Inspection Services (FSIS)-regulated products only if the product is derived from animals born, raised, slaughtered, and processed in the U.S.. The final rule also applies to processed products, which must meet the above-mentioned criteria, have all other inputs (except spices and other flavorings) grown and processed in the U.S. and also have the preparation and processing steps for the processed products, taking place in the U.S. This is a significant departure from the current rule that allowed “Product of USA” or “Made in the USA” to be displayed on meat products that are “processed” in the U.S.
• Also in March 2024, the USDA published draft guidelines for the implementation of voluntary labelling of products with U.S. Origin Claims. The guidance document and the option to use qualified claims (e.g. claims depicting specific step(s) taking place in the U.S. such as “slaughter and processed in the US”) do not address Canada’s concerns that the rule could lead to discrimination and segregation of animals and products.

• As of January 1, 2026, and going forward, establishments choosing to or forced to use the voluntary claim will have to comply with the new labelling regulations and have sufficient documentation in place to demonstrate compliance.

• This change could negatively impact Canada’s meat and livestock sector because it would likely require traceability and segregation of Canadian cattle, hogs, and meat products throughout the supply chain. However, the voluntary nature of this rule makes it challenging to predict impacts to Canada given that it will depend entirely on uptake.

• This differs from the U.S.’s mandatory COOL rule, which Canada successfully litigated at the World Trade Organization (WTO) for beef and pork products, as COOL applied to all covered products sold in the U.S.

• Canada is working closely with industry and provinces to monitor the impacts on our meat and livestock supply chains, and engaging with U.S. officials at all levels, when appropriate. We understand that large retailers and processors in the U.S. are reviewing the final rule before making labelling decisions. With a compliance date of January 1, 2026, it could take some time before potential impacts materialize.
• On July 18, 2024, during the Annual Conference of Federal, Provincial and Territorial Ministers of Agriculture, agriculture ministers committed to working together in collecting quantitative and qualitative evidence that demonstrates that the voluntary “Product of USA” final rule is having important impacts on our sector and bilateral trade.

• In its advocacy, Canada must be mindful of longstanding voluntary “Product of Canada” label guidelines that have similar requirements for meat as the new US rule (with the exception for beef feeder cattle residency of 60 days) and that have not resulted in complaints or concerns from trading partners.

• Canada and the U.S. share mutually beneficial supply chains for bovine, swine, beef and pork with bilateral trade valued at CAD$12.2 billion in 2024.

• The Government of Canada is concerned with the increase in measures that could have a negative impact on meat and livestock imports into the U.S. at both federal and state levels.

• We continue to monitor the implementation of these measures and engage with our U.S. counterparts, when appropriate, to ensure that the trade of Canadian livestock and meat products to the U.S. is not disrupted.

• Our government remains committed to defending Canadian farmers, ranchers, and meat processors and maintaining access to key markets, such as the U.S.