The rule approved in May by the USDA requires meat labels to detail where animals used for meat were born, raised and slaughtered.
It also prohibits processors from mixing meat from animals that come from different countries.
The American Meat Institute, a trade group for packers, processors, and suppliers, and seven other groups say the policy would be costly and offers no food safety or public health benefit.
The Canadian Cattlemen's Association has joined the lawsuit.
Martin Unrau, the association's president, said the rule will irreparably injure Canada’s livestock producers and their U.S. customers.
“The USDA chooses to continue down a path of unfair trade discrimination that undermines the job security of American workers and harms the U.S. meat processing industry in addition to placing an unfair burden on Canadian cattle producers,” he said Tuesday in a release.
The Canadian Pork Council has also joined the lawsuit. It estimates the labelling policy is already costing hog producers about $500 million per year.
"I am encouraged by the response and support we receive from the U.S. meat industry," pork council chairman Jean-Guy Vincent said in a release. "This will likely lead to increased prices for consumers.”
Last month the Government of Canada released a list of U.S. commodities that could be targeted for retaliation over the labelling dispute.
Agriculture Minister Gerry Ritz has said Ottawa could seek retaliatory compensation worth $1.1 billion in a move that is separate of the U.S. based lawsuit.
The USDA did not immediately comment.
Plaintiffs in the lawsuit include the CCA, the American Association of Meat Processors, American Meat Institute, Canadian Pork Council, National Cattlemen’s Beef Association, National Pork Producers Council, North American Meat Association and Southwest Meat Association.
Unrau said the CCA wants the U.S. government to comply with a June 2012 World Trade Organization ruling which found the labelling policy violates the U.S.’s WTO obligations.
Canada wants the U.S. to amend the legislation to allow either a single mandatory label for all meat produced in the U.S. or to allow for voluntary labelling.
— With files from The Canadian Press