Revised U.S. country-of-origin labeling (COOL) rules continue to run afoul of international trade obligations, according to a decision by a World Trade Organization (WTO) panel and reported by Bloomberg News.  The decision, released in a pair of October 20 compliance panel reports, now leaves U.S. meat producers vulnerable to retaliatory sanctions from two of their largest trading partners–Canada and Mexico.

The revised 2013 COOL regulations require meat producers to specify on retail packaging where each animal was born, raised, and slaughtered. The rules, which stem from the 2008 farm law, also prohibit the mixing of muscle cuts from different countries under a general label, among other regulations.

An Office of the U.S. Trade Representative spokesman said that the agency was “disappointed” that the WTO found the rules to be discriminatory. “We are considering all options, including appealing the panels’ reports,” the spokesman said.  According to WTO rules, a party to a dispute has 60 days to appeal such a ruling.

The WTO panels found that the amended COOL rules violate Article 2.1 of the Technical Barriers to Trade agreement, which requires WTO members to ensure that they do not favor their own domestic products over those that are imported from other WTO countries. Specifically, the panel said that U.S. COOL requirements offer imported Canadian livestock “treatment less favorable than that accorded to like domestic livestock” and actually increase the “detrimental impact” on competition for Canadian livestock.

The decision marks the second time WTO has ruled in favor of Canada and Mexico against U.S. COOL requirements. In 2012, a WTO panel said that U.S. COOL rules discriminated against Canada and Mexico because they provided less favorable treatment to imported cattle and hogs than to domestic products, in violation of U.S. trade obligations. Supporters of COOL generally say that consumers have a right to know more about where their meat comes from.

Canadian and Mexican officials hailed the decision and urged the United States to reverse its “clearly protectionist policy,” according to a joint statement. U.S. COOL requirements for beef and pork are a “blatant breach of its international obligations as a member of the WTO,” said Canadian and Mexican trade officials. Canada and Mexico will monitor the U.S. reaction and will seek “authorization to implement retaliatory measures on U.S. agricultural and non-agricultural products” if the United States fails to adhere to WTO rules, they said.

 Canada has threatened retaliatory trade actions against the United States that could impact domestic meat producers by $2 billion, according to a 2014 House Appropriations Committee report. Canadian officials previously said that they will target nearly 40 U.S. products—such as beef, pork, poultry, cherries, chocolate, and frozen orange juice—if the United States fails to comply with the WTO’s initial ruling. Mexico has yet to release a list of U.S. products it would target if the United States continues to be in non-compliance with WTO rules.

National Cattlemen’s Beef Association President Bob McCan said in a press statement that the decision brings the U.S. “one step closer to facing retaliatory tariffs” from Canada and Mexico. “Our producers have already suffered discounts and faced the closure of a number of feedlots and packing plants due to the effects of this short-sighted regulation,” he said in a news release. The best way to avoid retaliation from Canada and Mexico is for Congress to seek a “permanent solution to this issue,” McCan said. “COOL is a failed program that will soon cost not only the beef industry, but the entire U.S. economy, with no corresponding benefit to consumers or producers.”

The most realistic path to resolving the issue is to negotiate the matter directly with the WTO, rather than continue down the path of continued litigation, said a senior U.S. official.  “Allowing this case to wait for resolution in Geneva will only prolong the market uncertainty we’ve seen on all sides of this issue,” the official said.