[Federal Register: January 15, 2009 (Volume 74, Number 10)]
[Rules and Regulations]
[Page 2657-2707]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15ja09-40]
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Part II
Department of Agriculture
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Agricultural Marketing Service
7 CFR Parts 60 and 65
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; Final Rule
[[Page 2658]]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Parts 60 and 65
[Docket No. AMS-LS-07-0081]
RIN 0581-AC26
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
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: The Farm Security and Rural Investment Act of 2002 (2002 Farm
Bill), the 2002 Supplemental Appropriations Act (2002 Appropriations),
and the Food, Conservation and Energy Act of 2008 (2008 Farm Bill)
amended the Agricultural Marketing Act of 1946 (Act) to require
retailers to notify their customers of the country of origin of covered
commodities. Covered commodities include muscle cuts of beef (including
veal), lamb, chicken, goat, and pork; ground beef, ground lamb, ground
chicken, ground goat, and ground pork; wild and farm-raised fish and
shellfish; perishable agricultural commodities; macadamia nuts; pecans;
ginseng; and peanuts. The implementation of mandatory country of origin
labeling (COOL) for all covered commodities, except wild and farm-
raised fish and shellfish, was delayed until September 30, 2008.
The 2008 Farm Bill contained a number of provisions that amended
the COOL provisions in the Act. These changes included the addition of
chicken, goat, macadamia nuts, pecans, and ginseng as covered
commodities, the addition of provisions for labeling products of
multiple origins, as well as a number of other changes. However, the
implementation date of September 30, 2008, was not changed by the 2008
Farm Bill. Therefore, in order to meet the September 30, 2008,
implementation date and to provide the newly affected industries the
opportunity to provide comments prior to issuing a final rule, on
August 1, 2008, the Department published an interim final rule with a
request for comments for all of the covered commodities other than wild
and farm-raised fish and shellfish. The Agency is issuing this final
rule for all covered commodities. This final rule contains definitions,
the requirements for consumer notification and product marking, and the
recordkeeping responsibilities of both retailers and suppliers for
covered commodities.
DATES: This final rule is effective March 16, 2009.
FOR FURTHER INFORMATION CONTACT: Erin Morris, Associate Deputy
Administrator, Poultry Programs, AMS, USDA, by telephone on 202-720-
5131, or via e-mail at: erin.morris@usda.gov.
SUPPLEMENTARY INFORMATION: The information that follows has been
divided into three sections. The first section provides background
information about this final rule. The second section provides a
discussion of the rule's requirements, including a summary of changes
from the October 5, 2004, interim final rule for fish and shellfish and
the August 1, 2008, interim final rule for the remaining covered
commodities as well as a summary of the comments received in response
to the relevant prior requests for comments associated with this
rulemaking and the Agency's responses to these comments. The prior
requests for comments include: The interim final rule for fish and
shellfish published in the October 5, 2004, Federal Register (69 FR
59708); the reopening of the comment period (for costs and benefits)
for the interim final rule that was published in the November 27, 2006,
Federal Register (71 FR 68431); the reopening of the comment period for
all aspects of the interim final rule that was published in the June
20, 2007, Federal Register (72 FR 33851); and the interim final rule
for the remaining covered commodities that was published in the August
1, 2008, Federal Register (73 FR 45106). The last section provides for
the required impact analyses including the Regulatory Flexibility Act,
the Paperwork Reduction Act, Civil Rights Analysis, and the relevant
Executive Orders.
I. Background
Prior Documents in This Proceeding
This final rule is issued pursuant to the 2002 Farm Bill, the 2002
Appropriations, and the 2008 Farm Bill, which amended the Act to
require retailers to notify their customers of the origin of covered
commodities. In addition, the FY 2004 Consolidated Appropriations Act
(Pub. L. 108-199) delayed the implementation of mandatory COOL for all
covered commodities except wild and farm-raised fish and shellfish
until September 30, 2006. The Agriculture, Rural Development, Food and
Drug Administration, and Related Agencies Appropriations Act of 2006
(Pub. L. 109-97) delayed the applicability of mandatory COOL for all
covered commodities except wild and farm-raised fish and shellfish
until September 30, 2008.
On October 11, 2002, AMS published Guidelines for the Interim
Voluntary Country of Origin Labeling of Beef, Lamb, Pork, Fish,
Perishable Agricultural Commodities, and Peanuts (67 FR 63367)
providing interested parties with 180 days to comment on the utility of
the voluntary guidelines.
On November 21, 2002, AMS published a notice requesting emergency
approval of a new information collection (67 FR 70205) providing
interested parties with a 60-day period to comment on AMS' burden
estimates associated with the recordkeeping requirements as required by
the Paperwork Reduction Act of 1995 (PRA). On January 22, 2003, AMS
published a notice extending this comment period (68 FR 3006) an
additional 30 days.
On October 30, 2003, AMS published the proposed rule for the
mandatory COOL program (68 FR 61944) with a 60-day comment period. On
December 22, 2003, AMS published a notice extending the comment period
(68 FR 71039) an additional 60 days. On June 20, 2007, AMS reopened the
comment period for the proposed rule for all covered commodities (72 FR
33917).
On October 5, 2004, AMS published the interim final rule for fish
and shellfish (69 FR 59708) with a 90-day comment period. On December
28, 2004, AMS published a notice extending the comment period (69 FR
77609) an additional 60 days. On November 27, 2006, the comment period
was reopened on the costs and benefits aspects of the interim final
rule (71 FR 68431). On June 20, 2007, the comment period was reopened
for all aspects of the interim final rule (72 FR 33851).
On August 1, 2008, AMS published an interim final rule for covered
commodities other than fish and shellfish (73 FR 45106) with a 60-day
comment period.
II. Summary of Changes From the Interim Final Rules
Definitions
In the regulatory text for fish and shellfish (7 CFR part 60), a
definition for ``commingled covered commodities'' has been added for
clarity and to conform to the regulatory text for the other covered
commodities.
In the regulatory text for the remaining covered commodities (7 CFR
part 65), the definition of ``ground beef'' has been modified in
response to
[[Page 2659]]
comments. Under this final rule, the term ``ground beef'' has the
meaning given that term in 9 CFR Sec. 319.15(a), i.e., chopped fresh
and/or frozen beef with or without seasoning and without the addition
of beef fat as such, and containing no more than 30 percent fat, and
containing no added water, phosphates, binders, or extenders, and also
includes products defined by the term ``hamburger'' in 9 CFR 319.15(b).
A full explanation of this change is discussed in the Comments and
Responses section.
In 7 CFR part 65, the definition of ``lamb'' has been modified in
response to comments to include mutton. Under this final rule, the term
``lamb'' means meat produced from sheep.
In 7 CFR part 65, the definition of ``NAIS-compliant system'' has
been deleted in response to comments received as it is no longer
needed.
A definition of ``pre-labeled'' has been added to both 7 CFR part
60 and 7 CFR part 65 for clarity in response to comments received.
Under this final rule, the term ``pre-labeled'' means a covered
commodity that has the commodity's country of origin, and, as
applicable, method of production information, and the name and place of
business of the manufacturer, packer, or distributor on the covered
commodity itself, on the package in which it is sold to the consumer,
or on the master shipping container. The place of business information
must include at a minimum the city and state or other acceptable locale
designation.
In 7 CFR part 65, the definition of ``produced'' has been modified
for clarity in response to comments. Under this final rule, the term
``produced'' in the case of perishable agricultural commodities,
peanuts, ginseng, pecans, and macadamia nuts means harvested.
Country of Origin Notification
Labeling Covered Commodities of United States Origin
The August 1, 2008, interim final rule contained an express
provision allowing U.S. origin covered commodities to be further
processed or handled in a foreign country and retain their U.S. origin.
The Agency received numerous comments requesting further clarification
of this provision as well as comments requesting that it be deleted.
Accordingly, under this final rule, this provision has been deleted. To
the extent that it is allowed under existing Customs and Border
Protection (CBP) and Food Safety and Inspection Service (FSIS)
regulations, U.S. origin covered commodities may still be eligible to
bear a U.S. origin declaration if they are processed in another country
such that a substantial transformation (as determined by CBP) does not
occur. In addition, to the extent that additional information about the
production steps that occurred in the U.S. is permitted under existing
Federal regulations (e.g., CBP, FSIS), nothing in this final rule
precludes such information from being included. A full explanation of
this change is discussed in the Comments and Responses section.
Country of Origin Notification for Muscle Cuts
Under the August 1, 2008, interim final rule, if an animal was
born, raised, and/or slaughtered in the United States and was not
imported for immediate slaughter as defined in Sec. 65.180, the origin
of the resulting meat products derived from that animal could have been
designated as Product of the United States, Country X, and/or (as
applicable) Country Y, where Country X and Country Y represent the
actual or possible countries of foreign origin.
During the comment period, the Agency received extensive feedback
from livestock producers, members of Congress, and other interested
parties expressing concern about the provision in the interim final
rule that allowed U.S. origin product to be labeled with a mixed origin
label. It was never the intent of the Agency for the majority of
product eligible to bear a U.S. origin declaration to bear a multiple
origin designation. The Agency made additional modifications for
clarity.
Under this final rule, 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 Sec. 65.180,
the origin may be designated as Product of the U.S., Country X, and (as
applicable) Country Y.
For muscle cut covered commodities derived from animals born,
raised, and slaughtered in the U.S. that are commingled during a
production day with muscle cut covered commodities derived from animals
that were raised and slaughtered in the United States, and were not
derived from animals imported for immediate slaughter as defined in
Sec. 65.180, the origin may be designated, for example, as Product of
the United States, Country X, and (as applicable) Country Y.
For muscle cut covered commodities derived from animals that are
born in Country X or Country Y, raised and slaughtered in the United
States, that are commingled during a production day with muscle cut
covered commodities that are derived from animals that are imported
into the United States for immediate slaughter as defined in Sec.
65.180, the origin may be designated as Product of the United States,
Country X, and (as applicable) Country Y.
In all of the cases above, the countries of origin may be listed in
any order. In addition, if animals are raised in another country and
the United States, provided the animals are not imported for immediate
slaughter as defined in Sec. 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.
A full explanation of these changes is discussed in the Comments
and Responses section.
Markings
Under the October 5, 2004, interim final rule for fish and
shellfish and the August 1, 2008, interim final rule for the remaining
covered commodities, only those abbreviations approved for use under
CBP rules, regulations, and policies were acceptable. The 2008 Farm
Bill and the August 1, 2008, interim final rule expressly authorized
the use of State, regional, or locality label designations in lieu of
country of origin for perishable agricultural commodities, peanuts,
pecans, ginseng, and macadamia nuts. In response to comments received,
under this final rule, abbreviations may be used for state, regional,
or locality label designations for these commodities whether
domestically harvested or imported using official United States Postal
Service abbreviations or other abbreviations approved by CBP. A full
explanation of this change is discussed in the Comments and Responses
section.
Recordkeeping
The 2008 Farm Bill made changes to the recordkeeping provisions of
the Act. Specifically, the 2008 Farm Bill states that records
maintained in the course of the normal conduct of the business of such
person, including animal health papers, import or customs documents, or
producer affidavits, may serve as such verification. Under the 2008
Farm Bill, the Secretary is prohibited from requiring the maintenance
of additional records other than those maintained in the normal conduct
of business. In addition to the changes made as a result of the 2008
Farm Bill, other changes were made in the August 1, 2008, interim final
rule to reduce the recordkeeping burden. Further changes are being made
in this final rule in response to comments received.
[[Page 2660]]
For retailers, this rule requires records and other documentary
evidence relied upon at the point of sale by the retailer to establish
a covered commodity's country(ies) of origin and method of production
(wild and/or farm-raised), as applicable, to be either maintained at
the retail facility or at another location for as long as the product
is on hand and provided to any duly authorized representative of USDA,
upon request, within 5 business days of the request. For pre-labeled
products, the label itself is sufficient information on which the
retailer may rely to establish the product's origin and method of
production, as applicable, and no additional records documenting origin
and method of production information are necessary. Under the August 1,
2008, interim final rule, retailers were required to maintain these
records for a period of 1 year.
Under this final rule, upon request by USDA representatives,
suppliers and retailers shall make available to USDA representatives,
records maintained in the normal course of business that verify an
origin and method of production (wild and/or farm-raised) claim, as
applicable. Such records shall be provided within 5 business days of
the request and may be kept in any location.
Under this final rule, producer affidavits shall also be considered
acceptable records that suppliers may utilize to initiate origin claims
for all covered commodities, provided it is made by someone having
first-hand knowledge of the origin of the covered commodity and
identifies the covered commodity unique to the transaction.
Responsibilities of Retailers and Suppliers
With regard to the ``safe harbor'' language that was contained in
the October 30, 2003, proposed rule and the October 5, 2004, interim
final rule, which allowed retailers and suppliers to rely on the
information provided unless they could have been reasonably expected to
have knowledge otherwise, based on comments received, similar ``safe
harbor'' language has been included in this final rule. A complete
discussion is contained in the Comments and Responses section of this
final rule.
With regard to the recordkeeping provision concerning livestock
that are part of a NAIS-compliant system, in response to comments
received, the Agency has clarified that packers who slaughter animals
that are tagged with an 840 Animal Identification Number device without
the presence of any additional accompanying marking indicating the
origin as being a country other than the U.S. (i.e., ``CAN'' or ``M'')
may use that information as a basis for a U.S. origin claim. In
addition, packers that slaughter animals that are part of another
country's recognized official system (e.g. Canadian official system,
Mexico official system) may also rely on the presence of an official
ear tag or other approved device on which to base their origin claims.
Highlights of This Final Rule
Covered Commodities
As defined in the statute, the term ``covered commodity'' includes:
Muscle cuts of beef, lamb, pork, chicken, and goat; ground beef, ground
lamb, ground pork, ground chicken, and ground goat; wild and farm-
raised fish and shellfish; perishable agricultural commodities (fresh
and frozen fruits and vegetables); peanuts; pecans; ginseng; and
macadamia nuts.
Exemption for Food Service Establishments
Under the statute and therefore this final rule, food service
establishments are exempt from COOL labeling requirements. Food service
establishments are restaurants, cafeterias, lunch rooms, food stands,
saloons, taverns, bars, lounges, or other similar facilities operated
as an enterprise engaged in the business of selling food to the public.
Similar food service facilities include salad bars, delicatessens, meal
preparation stations in which the retailer sets out ingredients for
different meals and consumers assemble the ingredients into meals to
take home, 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.
Exclusion for Ingredient in a Processed Food Item
Items are excluded from labeling under this regulation when a
covered commodity is an ingredient in a processed food item. Under this
final rule, a ``processed food item'' is defined 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 (e.g., chocolate, breading, tomato
sauce), except that the addition of a component (such as water, salt,
or sugar) that enhances or represents a further step in the preparation
of the product for consumption, would not in itself result in a
processed food item. Specific processing that results in a change in
the character of the covered commodity includes cooking (e.g., frying,
broiling, grilling, boiling, steaming, baking, roasting), curing (e.g.,
salt curing, sugar curing, drying), smoking (cold or hot), and
restructuring (e.g., emulsifying and extruding).
With regard to determining what is considered an ``other covered
commodity'' with respect to fruits and vegetables, the Agency will
generally rely on U.S. Grade Standards for fruits and vegetables to
make the distinction of whether or not the retail item is a combination
of ``other covered commodities''. For example, different colored sweet
peppers combined in a package will require country of origin
notification because there is one U.S. Grade Standard for sweet
peppers, regardless of the color. As another example, there are
separate U.S. Grade Standards for iceberg lettuce and romaine lettuce.
Therefore, this type of salad mix will not be required to be labeled
with country of origin information. While the Agency previously used
this example in the preamble of the August 1, 2008, interim final rule
and concluded that such a salad mix would be subject to COOL, the
Agency now believes the use of U.S. Grade Standards in determining when
a perishable retail item is considered a processed food item provides a
bright line to the industry and is an easy and straightforward approach
as regulated entities are already familiar with U.S. Grade Standards.
There are limited exceptions to this policy. One exception occurs
when there are different grade standards for the same commodity based
on the region of production. For example, although there are separate
grade standards for oranges from Florida, Texas, and California/
Arizona, combining oranges from these different regions would not be
considered combining ``other covered commodities'' and therefore, a
container with oranges from Texas and Florida is required to be labeled
with country of origin information.
As examples of processing steps that are considered to further
prepare product for consumption, meat products that have been needle-
tenderized or chemically tenderized using papain or other similar
additive are not considered processed food items. Likewise, meat
products that have been injected with sodium phosphate or other similar
solution are also not considered processed food items as the solution
has not changed the character of the covered commodity. In contrast,
meat products that have been marinated with a particular flavor such as
lemon-
[[Page 2661]]
pepper, Cajun, etc. have been changed in character and thus are
considered processed food items.
While the definition of a processed food item does exclude a number
of products from labeling under the COOL program, many imported items
are still required to be marked with country of origin information
under the Tariff Act of 1930 (19 U.S.C. 1304) (Tariff Act). For
example, while a bag of frozen peas and carrots is considered a
processed food item under this final rule, if the peas and carrots are
of foreign origin, the Tariff Act requires that the country of origin
information be marked on the bag. Likewise, while roasted peanuts,
pecans, and macadamia nuts are also considered processed food items
under this final rule, under the Tariff Act, if the nuts are of foreign
origin, the country of origin information must be indicated to the
ultimate purchaser. This also holds true for a variety of fish and
shellfish items. For example, salmon imported from Chile that is smoked
in the United States as well as shrimp imported from Thailand that is
cooked in the United States are also required to be labeled with
country of origin information under the Tariff Act. In addition, items
such as marinated lamb loins that are imported in consumer-ready
packages would also be required to be labeled with country of origin
information as both CBP and FSIS regulations require meat that is
imported in consumer-ready packages to be labeled with origin
information on the package.
Examples of items excluded from country of origin labeling include
teriyaki flavored pork loin, meatloaf, roasted peanuts, breaded chicken
tenders, breaded fish sticks, flank steak with portabella stuffing,
steakhouse sirloin kabobs with vegetables, cooked and smoked meats,
blue cheese angus burgers, cured hams, bacon, corned beef briskets,
prosciutto rolled in mozzarella cheese, a salad that contains iceberg
and romaine lettuce, a fruit cup that contains cantaloupe, watermelon,
and honeydew, mixed vegetables, and a salad mix that contains lettuce
and carrots and/or salad dressing.
Labeling Covered Commodities of United States Origin
The law prescribes specific criteria that must be met for a covered
commodity to bear a ``United States country of origin'' declaration.
Therefore, covered commodities may be labeled as having a United States
origin if the following specific requirements are met:
(a) Beef, pork, lamb, chicken, and goat--covered commodities must
be derived from animals exclusively born, raised, and slaughtered in
the United States; from animals born and raised in Alaska or Hawaii and
transported for a period of time not more than 60 days through Canada
to the United States and slaughtered in the United States; or from
animals present in the United States on or before July 15, 2008, and
once present in the United States, remained continuously in the United
States.
(b) Perishable agricultural commodities, peanuts, pecans, ginseng,
and macadamia nuts--covered commodities must be from products
exclusively produced in the United States.
(c) Farm-raised fish and shellfish--covered commodities must be
derived exclusively from fish or shellfish hatched, raised, harvested,
and processed in the United States, and that has not undergone a
substantial transformation (as established by CBP) outside of the
United States.
(d) Wild fish and shellfish--covered commodities must be derived
exclusively from fish or shellfish either harvested in the waters of
the United States or by a U.S. flagged vessel and processed in the
United States or aboard a U.S. flagged vessel, and that has not
undergone a substantial transformation (as established by CBP) outside
of the United States.
Labeling Country of Origin for Imported Products
Under this final rule, a fish or shellfish imported covered
commodity shall retain its origin as declared to CBP at the time the
product enters the United States, through retail sale, provided it has
not undergone a substantial transformation (as established by CBP) in
the United States. Similarly, for the other covered commodities, an
imported covered commodity for which origin has already been
established as defined by the Act (e.g., born, raised, slaughtered or
harvested) and for which no production steps have occurred in the
United States shall retain its origin as declared to CBP at the time
the product enters the United States, through retail sale.
Covered commodities imported in consumer-ready packages are
currently required to bear a country of origin declaration on each
individual package under the Tariff Act. This final rule does not
change these requirements.
Labeling Fish and Shellfish Imported Products That Have Been
Substantially Transformed in the United States
Under this final rule, in the case of wild fish and shellfish, if a
covered commodity was imported from country X and substantially
transformed (as established by CBP) in the United States or aboard a
U.S. flagged vessel, the product shall be labeled at retail as ``From
[country X], processed in the United States.'' Alternatively, the
product may be labeled as ``Product of country X and the United
States''. The covered commodity must also be labeled to indicate that
it was derived from wild fish or shellfish.
In the case of farm-raised fish, if a covered commodity was
imported from country X at any stage of production and substantially
transformed (as established by CBP) in the United States, the product
shall be labeled at retail as ``From [country X], processed in the
United States.'' Alternatively, the product may be labeled as ``Product
of country X and the United States''. The covered commodity shall also
be labeled to indicate that it was derived from farm-raised fish or
shellfish.
Labeling Muscle Cut Covered Commodities of Multiple Countries of Origin
(That Includes the United States)
Under this final rule, 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 Sec. 65.180,
the origin may be designated, for example, as Product of the U.S.,
County X, and (as applicable) Country Y. The countries of origin may be
listed in any order.
For muscle cut covered commodities derived from animals born,
raised, and slaughtered in the U.S. that are commingled during a
production day with muscle cut covered commodities derived from animals
that were raised and slaughtered in the United States, and were not
derived from animals imported for immediate slaughter as defined in
Sec. 65.180, the origin may be designated as, for example, Product of
the United States, Country X, and (as applicable) Country Y. The
countries of origin may be listed in any order.
If an animal was imported into the United States for immediate
slaughter as defined in Sec. 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.
For muscle cut covered commodities derived from animals that are
born in Country X or Country Y, raised and slaughtered in the United
States, that are commingled during a production day with muscle cut
covered commodities that are derived from animals that are imported
into the
[[Page 2662]]
United States for immediate slaughter as defined in Sec. 65.180, the
origin may be designated as Product of the United States, Country X,
and (as applicable) Country Y. The countries of origin may be listed in
any order.
In all cases above, the origin declaration may include more
specific information related to production steps provided records to
substantiate the claims are maintained and the claim is consistent with
other applicable Federal legal requirements. In addition, if animals
are raised in another country and the United States, provided the
animals are not imported for immediate slaughter as defined in Sec.
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.
With regard to the commingling of meat of different origin
categories, the Agency has received comments requesting that the Agency
provide additional clarification on how commingled meat products can be
labeled. Under this final rule, it is permissible to commingle meat
derived from animals imported for immediate slaughter with meat derived
from mixed origin animals and label it as Product of U.S., Canada. It
is also permissible to commingle meat derived from animals imported for
immediate slaughter with meat of mixed origin and label it as category
C (product imported for immediate slaughter, i.e., Product of Canada,
U.S.). Further, the declaration for meat derived from mixed origin
animals may list the countries of origin in any order (e.g., Product of
U.S., Canada or Product of Canada, U.S.).
Labeling Commingled Covered Commodities
In this final rule, a commingled covered commodity is defined as a
single type of covered commodity (e.g., frozen peas, shrimp), presented
for retail sale in a consumer package, that has been prepared from raw
material sources having different origins. Further, a commingled
covered commodity does not include meat products. If the retail product
contains two different types of covered commodities (e.g., peas and
carrots), it is considered a processed food item and is not subject to
mandatory COOL.
In the case of perishable agricultural commodities, wild and farm-
raised fish and shellfish, peanuts, pecans, ginseng, and macadamia
nuts, for imported covered commodities that have not subsequently been
substantially transformed in the United States that are commingled with
commodities having different origins, the declaration shall indicate
the countries of origin for all covered commodities in accordance with
CBP marking regulations (19 CFR part 134). For example, a bag of frozen
peas that were sourced from France and India is currently required
under CBP regulations to be marked with that origin information on the
package.
In the case of wild and farm-raised fish and shellfish covered
commodities, when the retail product contains imported covered
commodities that have subsequently undergone substantial transformation
in the United States are commingled with other imported covered
commodities that have subsequently undergone substantial transformation
in the United States (either prior to or following substantial
transformation in the United States) and/or U.S. origin covered
commodities, the declaration shall indicate the countries of origin
contained therein or that may be contained therein.
Defining Country of Origin for Ground Meat Products
The law states that the origin declaration for ground beef, ground
pork, ground lamb, ground goat, and ground chicken covered commodities
shall list the countries of origin contained therein or shall list the
reasonably possible countries of origin. Therefore, under this final
rule, when a raw material from a specific origin is not in a
processor's inventory for more than 60 days, the country shall no
longer be included as a possible country of origin. This does not mean
that labels must change every 60 days. Labels containing the applicable
countries (e.g., Country x, y, z) may extend beyond a given 60-day
period depending on how long raw materials from those countries are
actually in inventory. If a country of origin is utilized as a raw
material source in the production of ground beef, it must be listed on
the label. The 60-day in inventory allowance speaks only to when
countries may no longer be listed. The 60-day inventory allowance is an
allowance for the Agency' enforcement purposes for when the Agency
would deem ground meat products as no longer accurately labeled. In the
event of a supplier audit by USDA, records kept in the normal course of
business should provide the information necessary to verify the origin
claim.
Remotely Purchased Products
For sales of a covered commodity in which the customer purchases a
covered commodity prior to having an opportunity to observe the final
package (e.g., Internet sales, home delivery sales, etc.) the retailer
may provide the country of origin and method of production information
(wild and/or farm-raised), as applicable, either on the sales vehicle
or at the time the product is delivered to the consumer.
Markings
Under this final rule, the country of origin declaration and method
of production (wild and/or farm-raised) designation, as applicable, may
be provided to consumers by means of a label, placard, sign, stamp,
band, twist tie, pin tag, 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. The
country of origin declaration and method of production (wild and/or
farm-raised) designation may be combined or made separately.
With respect to the production designation, various forms of the
production designation are acceptable, including ``wild caught,''
``wild,'' ``farm-raised,'' ``farmed,'' or a combination of these terms
for products that contain both wild and farm-raised fish or shellfish
provided it can be readily understood by the consumer and is in
conformance with other Federal labeling laws. Designations such as
``ocean caught,'' ``caught at sea'', ``line caught,'' ``cultivated,''
or ``cultured'' do not meet the requirements of this regulation.
Alternatively, the method of production (wild and/or farm-raised)
designation may also be in the form of a check box.
In general, country abbreviations are not acceptable. Only those
abbreviations approved for use under CBP rules, regulations, and
policies, such as ``U.K.'' for ``The United Kingdom of Great Britain
and Northern Ireland'', ``Luxemb'' for Luxembourg, and ``U.S.'' or
``USA'' for the ``United States of America'' are acceptable. The Agency
is aware of a few additional abbreviations allowed by CBP such as
``Holland'' for The Netherlands and has posted this information on the
COOL Web site.
The declaration of the country of origin of a product may be in the
form of a statement such as ``Product of USA,'' ``Produce of the USA'',
or ``Harvested in Mexico''; may only contain the name of the country
such as ``USA'' or ``Mexico''; or may be in the form of a check box
provided it is in conformance with CBP marking regulations and other
Federal labeling laws (i.e., FDA, FSIS). For example, CBP marking
regulations (19 CFR part 134) specifically require the use of the words
``product of'' in certain circumstances. The adjectival form of the
name of a country may be used as proper
[[Page 2663]]
notification of the country of origin of imported commodities provided
the adjectival form of the name does not appear with other words so as
to refer to a kind or species of product. Symbols or flags alone may
not be used to denote country of origin. The labeling requirements
under this rule do not supersede any existing Federal legal
requirements, unless otherwise specified, and any country of origin or
method of production (wild and/or farm-raised) designation, as
applicable, must not obscure or intervene with other labeling
information required by existing regulatory requirements.
For domestic and imported perishable agricultural commodities,
macadamia nuts, peanuts, pecans, and ginseng, State, regional, or
locality label designations are acceptable in lieu of country of origin
labeling. Such designations must be nationally distinct. For example,
Rio Grande Valley would not be an acceptable designation because
consumer would not know whether the country of origin was the U.S. or
Mexico. Abbreviations may be used for state, regional, or locality
label designations for these commodities whether domestically harvested
or imported using official United States Postal Service abbreviations
or other abbreviations approved by CBP.
With regard to the use of established State marketing programs such
as ``California Grown'', ``Go TEXAN'', ``Jersey Fresh'', etc., these
programs may be used for COOL notification purposes provided they meet
the requirements to bear a U.S. origin declaration as specified in this
final rule.
In 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 or method of
production (wild and/or farm-raised) declaration. However, such
declarations must be legible and conspicuous, and allow consumers to
find the country(ies) of origin and method of production, as
applicable, easily and read them without strain when making their
purchases, and provided that existing Federal labeling requirements
must be followed. For example, the country of origin declaration may be
located on the information panel of a package of frozen produce as
consumers are familiar with such location for displaying nutritional
and other required information. Likewise, in the case of store overwrap
and other similar type products, which is the type of packaging used
for fresh meat and poultry products, the information panel would also
be an acceptable location for the origin declaration and method of
production (wild and/or farm-raised) designation, as applicable, as
this is a location that is currently utilized for providing other
Federally-mandated labeling information (i.e., safe handling
instructions, nutrition facts, and ingredients statement). However, to
the extent practicable, the Agency encourages retailers and suppliers
to place this information on the front of these types of packages, also
known as the principal display panel, so it will be readily apparent to
consumers.
With respect to the use of signage for bulk displays for meat
covered commodities, the Agency has observed that a vast majority of
retailers are utilizing one sign for either the entire meat case or for
an entire commodity type (i.e., chicken) to provide the country of
origin notification. While the statute and this regulation provide
flexibility in how country of origin information can be provided, the
Agency believes that the use of such signage could potentially be false
or misleading to consumers. For example, frequently display cases also
contain noncovered meat commodities for which no origin information has
been provided to the retailer. Thus a sign that states, ``all of our
beef products are of U.S. origin'' may not be completely accurate and
may be in violation of other Federal laws, regulations, and policies
that have truth in labeling provisions such as the Federal Meat
Inspection Act, the Federal Trade Commission's ``Made in the USA''
policies, and the Federal Food, Drug, and Cosmetic Act. The Agency
encourages retailers to review signage that they have used in the
implementation of the fish and shellfish program for alternative
acceptable methods of providing COOL information.
With regard to the provision in both the interim final rule for
fish and shellfish and the interim final rule for the remaining covered
commodities concerning bulk containers that allows the bulk container
to contain a covered commodity from more than one country of origin,
under this final rule, it remains permissible provided all possible
origins are listed. For example, if a retailer puts apples from the
U.S. and New Zealand in a bulk bin, the sign for the bin should list
both the U.S. and New Zealand. If the retailer has apples in the store
from New Zealand, but has not added these apples to the bulk bin, it
would not be permissible to have New Zealand on the sign. Likewise in
the case of fish, if a retailer has salmon from both the U.S. and Chile
in the back of the store, but has only put out for display salmon from
Chile, the country of origin designation should only list Chile. It
would not be permissible to list both the U.S. and Chile at that time
because it is not possible that the display contains salmon of U.S.
origin.
Recordkeeping Requirements and Responsibilities
The law states that the Secretary may conduct an audit of any
person that prepares, stores, handles, or distributes a covered
commodity for retail sale to verify compliance. As such, records
maintained in the normal course of business that verify origin and
method of production (wild and/or farm-raised) declarations, as
applicable, are necessary in order to provide retailers with credible
information on which to base origin and method of production
declarations.
Under this final rule, any person engaged in the business of
supplying a covered commodity to a retailer, whether directly or
indirectly (i.e., growers, distributors, handlers, packers, and
processors, etc.), must make available information to the subsequent
purchaser about the country(ies) of origin and method of production, as
applicable, of the covered commodity. This information may be provided
either on the product itself, on the master shipping container, or in a
document that accompanies the product through retail sale provided it
identifies the product and its country(ies) of origin and method of
production, as applicable.
Any 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.
In addition, the supplier of a covered commodity that is
responsible for initiating a country of origin and, as applicable,
method of production declaration, must possess records that are
necessary to substantiate that claim for a period of 1 year from the
date of the transaction. In an effort to reduce the recordkeeping
burden associated with COOL, for that purpose, packers that slaughter
animals that are tagged with an 840 Animal Identification Number device
without the presence of any additional accompanying marking indicating
the origin as being a country other than the U.S. (i.e., ``CAN'' or
``M'') may use that information as a basis for a U.S. origin claim. In
addition, packers that slaughter animals that are part of another
country's recognized official system (e.g., Canadian official system,
[[Page 2664]]
Mexico official system) may also rely on the presence of an official
ear tag or other approved device on which to base their origin claims.
Producer affidavits shall also be considered acceptable records that
suppliers may utilize to initiate origin claims, provided it is made by
someone having first-hand knowledge of the origin of the covered
commodity and identifies the covered commodity unique to the
transaction.
Under this final rule, any intermediary supplier handling a covered
commodity that is found to be designated incorrectly as to the country
of origin and/or method of production, as applicable, shall not be held
liable for a violation of the Act by reason of the conduct of another
if the intermediary supplier relied on the designation provided by the
initiating supplier or other intermediary supplier, unless the
intermediary supplier willfully disregarded information establishing
that the country of origin and/or method of production, as applicable,
was false.
For an imported covered commodity, the importer of record as
determined by CBP, must ensure that records: Provide clear product
tracking from the United States port of entry to the immediate
subsequent recipient and accurately reflect the country(ies) of origin
of the item as identified in relevant CBP entry documents and
information systems; and maintain such records for a period of 1 year
from the date of the transaction.
Under this final rule, retailers also have responsibilities. In
providing the country of origin notification for a covered commodity,
retailers are to convey the origin and, as applicable, method of
production information provided by their suppliers. Only if the
retailer physically commingles a covered commodity of different origins
and/or methods of production, as applicable, in preparation for retail
sale, whether in a consumer-ready package or in a bulk display (and not
discretely packaged) (i.e., full service meat case), can the retailer
initiate a multiple country of origin designation that reflects the
actual countries of origin and methods of production, as applicable,
for the resulting covered commodity.
Records and other documentary evidence relied upon at the point of
sale by the retailer to establish a covered commodity's country(ies) of
origin and method of production, as applicable, must either be
maintained at the retail facility or at another location for as long as
the product is on hand and provided to any duly authorized
representatives of USDA within 5 business days of the request. For pre-
labeled products, the label itself is sufficient information on which
the retailer may rely to establish the product's origin and method of
production, as applicable, and no additional records documenting origin
and method of production information are necessary. A pre-labeled
covered commodity is a covered commodity that has the commodity's
country of origin and method of production, as applicable, and the name
and place of business of the manufacturer, packer, or distributor on
the covered commodity itself, on the package in which it is sold to the
consumer, or on the master shipping container. The place of business
information must include at a minimum the city and state or other
acceptable locale designation.
Additionally, records that identify the covered commodity, the
retail supplier, and for products that are not pre-labeled, the country
of origin and method of production information, as applicable, must be
maintained for a period of 1 year from the date the origin declaration
is made at retail.
Under this final rule, any retailer handling a covered commodity
that is found to be designated incorrectly as to the country of origin
and/or method of production, as applicable, shall not be held liable
for a violation of the Act by reason of the conduct of another if the
retailer relied on the designation provided by the supplier, unless the
retailer willfully disregarded information establishing that the
declaration of country of origin and/or method of production, as
applicable, was false.
Enforcement
The law encourages the Secretary to enter into partnerships with
States to the extent practicable to assist in the administration of
this program. As such, USDA has entered into partnerships with States
that have enforcement infrastructure to conduct retail compliance
reviews.
Routine compliance reviews may be conducted at retail
establishments and associated administrative offices, and at supplier
establishments subject to these regulations. USDA will coordinate the
scheduling and determine the procedures for compliance reviews. Only
USDA will be able to initiate enforcement actions against a person
found to be in violation of the law. USDA may also conduct
investigations of complaints made by any person alleging violations of
these regulations when the Secretary determines that reasonable grounds
for such investigation exist.
Retailers and suppliers, upon being notified of the commencement of
a compliance review, must make all records or other documentary
evidence material to this review available to USDA representatives
within 5 business days of receiving a request and provide any necessary
facilities for such inspections.
The law contains enforcement provisions for both retailers and
suppliers that include civil penalties of up to $1,000 for each
violation. For retailers and persons engaged in the business of
supplying a covered commodity to a retailer (suppliers), the law states
that if the Secretary determines that a retailer or supplier is in
violation of the Act, the Secretary must notify the retailer or
supplier of the determination and provide the retailer or supplier with
a 30-day period during which the retailer or supplier may take
necessary steps to comply. If upon completion of the 30-day period the
Secretary determines the retailer or supplier has (1) not made a good
faith effort to comply and (2) continues to willfully violate the Act,
after providing notice and an opportunity for a hearing, the retailer
or supplier may be fined not more than $1,000 for each violation.
In addition to the enforcement provisions contained in the Act,
statements regarding a product's origin and method of production, as
applicable, must also comply with other existing Federal statutes. For
example, the Federal Food, Drug, and Cosmetic Act prohibits labeling
that is false or misleading. In addition, for perishable agricultural
commodities, mislabeling country of origin is also in violation of PACA
misbranding provisions. Thus, inaccurate country of origin labeling of
covered commodities may lead to additional penalties under these
statutes as well.
With regard to the voluntary use of 840 tags on which to base
origin claims, 9 CFR 71.22 prohibits the removal of official
identification devices except at the time of slaughter. The importation
of animals and animal health are regulated by the Animal and Plant
Health Inspection Service (APHIS). This regulation does not alter any
APHIS requirements.
Comments and Responses
On October 30, 2003, AMS published the proposed rule for the
mandatory COOL program (68 FR 61944) with a 60-day comment period. On
December 22, 2003, AMS published a notice extending the comment period
(68 FR 71039) an additional 60 days. AMS received over 5,600 timely
comments from consumers, retailers, foreign governments, producers,
wholesalers, manufacturers, distributors, members of
[[Page 2665]]
Congress, trade associations and other interested parties. The majority
of the comments received were from consumers expressing support for the
requirement to label the method of production of fish and shellfish as
either wild and/or farm-raised. Numerous other comments related to the
definition of a processed food item, the recordkeeping requirements for
both retailers and suppliers, and the enforcement of the program. In
addition, over 100 late comments were received that generally reflected
the substance of the timely comments received.
On June 20, 2007, AMS reopened the comment period for the proposed
rule for all covered commodities (72 FR 33917). AMS received over 721
comments from consumers, retailers, foreign governments, producers,
wholesalers, manufacturers, distributors, members of Congress, trade
associations and other interested parties.
On October 5, 2004, AMS published the interim final rule for fish
and shellfish (69 FR 59708) with a 90-day comment period. On December
28, 2004, AMS published a notice extending the comment period (69 FR
77609) an additional 60 days. AMS received approximately 800 comments
on the interim final rule, the majority of which were form letters from
consumers expressing their support for country of origin labeling and
requesting that the definition of a processed food item be narrowed to
require labeling of canned, breaded, and cooked products.
On November 27, 2006, the comment period was reopened on the cost
and benefit aspects of the interim final rule (71 FR 68431). AMS
received over 192 comments from consumers, retailers, foreign
governments, producers, wholesalers, manufacturers, distributors,
members of Congress, trade associations and other interested parties.
The majority of the comments received were from consumers expressing
support for the requirement to label fish and shellfish with the
country of origin and method of production as either wild and/or farm-
raised, and to extend mandatory COOL to the remaining covered
commodities. Most of the comments did not address the specific question
of the rule's costs and benefits. A limited number of the comments did
relate to the costs and benefits of the documentation and recordkeeping
requirements of the law. Some commenters noted no increased sales or
demand for seafood as a result of COOL. Several commenters provided
evidence regarding the costs of compliance with the interim final rule
covering fish and shellfish. Other commenters cited academic and
Government Accountability Office studies to argue that USDA
overestimated the costs to implement systems to meet COOL requirements,
and that the true costs to industry will be much lower than those
projected by the economic impact analysis contained in the interim
final rule for fish and shellfish. On August 1, 2008, AMS published an
interim final rule with a 60-day comment period for the covered
commodities other than fish and shellfish. The Agency received 275
comments representing the opinions of 11,798 consumers, retailers,
foreign governments, producers, wholesalers, manufacturers,
distributors, members of Congress, trade associations and other
interested parties. The majority of comments received were on the
definition of a processed food item, labeling muscle cuts of multiple
countries of origin, and the recordkeeping provisions for both
retailers and suppliers.
When the proposed rule was published on October 30, 2003, the
regulatory provisions were all proposed to be contained in a new part
60 of Title 7 of the Code of Federal Regulations. Under the August 1,
2008, interim final rule, the regulatory provisions for the covered
commodities other than fish and shellfish appeared at 7 CFR part 65.
For the ease of the reader, the discussion of the comments has been
broken down by issue. To the extent that a comment or issue pertains
only to fish and shellfish covered commodities, it is noted in the
explanation.
Definitions
Covered Commodity
Summary of Comments: Several commenters requested that the Agency
add products to the list of commodities covered by COOL. One commenter
suggested that almonds should be included in mandatory COOL and another
commenter requested that fresh chestnuts be added. A final commenter
suggested that meat commodities derived from beefalo be included as
covered commodities. Another commenter asked that the Agency better
clarify what is a ``muscle cut.''
Agency Response: The statute specifically defines the commodities
covered by the mandatory COOL program. As such, the Agency does not
have the authority to include additional classes of covered
commodities. Accordingly, recommendations regarding covering additional
classes of commodities cannot be adopted. With regard to clarifying
what the Agency defined to be a muscle cut of beef, pork, lamb,
chicken, or goat, the Agency has provided information on its Web site
and in written form pertaining to specific items and will continue to
do so as questions arise. In general, the Agency views those cuts of
meat (with or without bone) derived from a carcass (e.g., beef steaks,
pork chops, chicken breasts, etc.) to be covered items. However, cuts
of meat that are removed during the conversion of an animal to a
carcass (e.g., variety meats such as pork hearts, beef tongues, etc.)
are not viewed to be muscle cuts nor are items sold as bones
practically free of meat (e.g., lamb neck bones, beef femur bones,
etc.) or fat practically free of meat (e.g., pork clear plate, chicken
skin, etc.) removed from a carcass.
Ground Beef
Summary of Comments: One commenter noted that fabricated steak is
not specifically listed as a covered commodity in the law and expressed
their belief that AMS could proactively cover a closely related
commodity rather than limit COOL to only statutorily listed
commodities. The commenter urged the Agency to broaden rather than
narrow its scope of covered commodities to include fabricated steak in
the definition of ground beef.
Another commenter noted the rule exempts ground beef, hamburger and
beef patties that have been seasoned (unless that seasoning is salt or
sugar), but does not exempt ground beef, hamburger and beef patties
that have not been seasoned. The commenter requested that the
definition for ground beef be reconsidered and clarified so that ground
beef, hamburger and beef patties where salt or sugar is added are
recognized as a processed food item and therefore exempt under this
rule.
Several commenters did not agree that the Agency's expansion of the
definition of ground beef to include hamburger and beef patties was
justified. The commenters pointed out that the covered product
specified by the 2008 Farm Bill is ``ground beef,'' which has its own
regulatory standard of identity separate from hamburger and beef
patties. One commenter also noted that the interim final rule's
definitions of ``ground lamb'' and other ground meats do not similarly
specify that patties made from such ground meats are covered items and
suggested that this disparity appears to ``favor'' non-beef patties
with possible exemption from the rule, to the disadvantage of beef
patties. Another commenter stated that had Congress intended a more
expansive range of processed food products to be subject to COOL, it
would have specifically included them,
[[Page 2666]]
particularly where all other processed foods are categorically exempt
from COOL requirements. The commenter urged the Agency to follow the
intent of Congress and promulgate a rule that encompasses products
captured in the regulatory standard of identity for ``ground beef'' and
not extend the scope to items meeting other definitions.
Agency Response: The Agency does not agree that commodities covered
by the statute can be construed to cover fabricated steaks. Fabricated
steaks are produced to appear like a whole muscle cut of meat but are
in fact constructed from many different cuts of meat. Therefore, they
are clearly not a ``muscle cut'' and, because the product is not ground
nor is it sold as ground, it is not ground beef either.
The Agency agrees that a regulatory standard of identity for the
term ``ground beef'' exists, but does not agree that it was the intent
of Congress to limit the mandatory COOL program to only those products
marketed under that standard of identity. Further, the Agency believes
it is not reasonable that consumers would understand why beef that is
ground and marketed as ``ground beef'' would require labeling and beef
that is ground and marketed as ``hamburger'' would not. The regulatory
standard of identities for ``ground beef'' and ``hamburger'' are
virtually identical with the minor exception of ``added fat'' being
allowed in beef that is ground and marketed as ``hamburger''. Both are
often marketed in bulk form or in patty form and can sit side by side
in the fresh or frozen meat case with only the name capable of
distinguishing them apart. Therefore, ground beef and hamburger sold in
bulk or patty form are covered commodities under this final rule.
However, in its analysis of the issue and the points raised by the
commenters, the Agency does concur with several of the commenters that
beef that is ground and marketed as ``imitation ground beef'',
``imitation hamburger'', and ``beef patty mix'' should be exempt in
this final rule. Products marketed under these standards of identities
typically contain a number of binders and extenders that are not
covered commodities and are not assumed by the consumer to be
interchangeable with beef that is ground and marketed as ``ground
beef'' or ``hamburger''. Because the Agency does not view such variety
meat items as beef heart meat and tongue meat (which are not allowed in
``ground beef'' or ``hamburger'') as covered commodities, requiring
such products as ``beef patty mix'' to carry COOL information would
also require the beef processing industry to identify the country of
origin for such beef variety meat items in the event they would be used
as extenders in commodities like ``beef patty mix'', which does allow
their inclusion. The Agency believes that the costs associated with
this segregation and identification of beef variety meats would be
overly burdensome and that these items were not intended to be included
as covered commodities under the statute. Accordingly, these
recommendations are adopted in part.
Farm-Raised
Summary of Comments: Some commenters expressed concerns regarding
the definition of farm-raised in the fish and shellfish interim final
rule. The commenters recommended that the Agency exempt molluscan
shellfish from the COOL requirements.
Agency Response: As the statute defines the term covered commodity
to expressly include shellfish, the Agency does not have the authority
to provide an exemption for molluscan shellfish. In addition, in the
Agency's experience in three years of enforcement of the COOL program
for fish and shellfish, it has found good compliance with the labeling
of this commodity. Accordingly, this recommendation is not adopted in
this final rule.
Lamb
Summary of Comments: Several commenters requested that the
regulation be revised to clarify the definition of lamb includes
mutton. One of these commenters stated that because there are no common
terminology differences describing the meat from different age groups
of species such as cattle, swine, goat or chicken, the Agency was in
error to exclude mutton in the definition of lamb in the interim final
rule. The commenter further stated while specific definitional
differences between lamb and mutton exist for other regulatory
purposes, it is appropriate to cover meat from all ages of sheep in the
rule as is done for the other livestock species.
Agency Response: The Agency agrees that it is appropriate to
include mutton under the definition of lamb as no distinctions
describing meat from the different age groups of other livestock
species were made. Accordingly, this recommendation has been adopted in
this final rule.
NAIS-Compliant System
Summary of Comments: Two commenters recommended that the Agency
eliminate the definition of a ``NAIS-compliant system'' and replace it
with the existing regulatory definition of ``Official identification
device or method'' that is contained in 9 CFR Sec. 93.400. The
commenters contend that this modification is necessary so as to not
mislead the public into believing that they must comply with all of the
requirements of USDA's NAIS (e.g., premises registration) in addition
to maintaining current compliance with existing official identification
systems. The commenters stated this change would be consistent with
USDA's assurance that the NAIS ``does not alter any regulation in the
Code of Federal Regulations or any regulations that exist at the State
level.''
Agency Response: The Agency continues to believe that voluntary use
of the National Animal Identification System is an acceptable and easy
option packers may utilize to obtain origin information on livestock.
However, the Agency believes that the definition of NAIS-compliant
should be deleted as it is not necessary. However, with regard to the
commenter's suggestion to replace this definition with the definition
of ``Official identification device or method'', because they may be
applied to imported animals, other identification devices or methods
alone cannot be used to establish the U.S.-origin of livestock.
Producers' management records will need to be used in conjunction with
these other identification devices and methods to establish U.S.
origin. Additional discussion on the NAIS provision is included later
in the Comments and Responses section.
Processed Food Item
Summary of Comments: Numerous commenters suggested that the Agency
should narrow its definition of a processed food item so that more food
items sold at retail are covered commodities subject to COOL
requirements. The commenters recommended that roasting, curing, smoking
and other steps that make raw commodities more suitable for consumer
use should not be the criteria for categorizing these commodities under
the statutory exemption of an ingredient in a processed food item and
therefore exempt from labeling. Many commenters stated that USDA's
overly expansive definition of a processed food item, which comes from
the 2004 interim final rule for fish and shellfish, should not be used
for the other covered commodities. The commenters stated that although
the definition was possibly appropriate for fish and shellfish, it
resulted in a much more substantial percentage of meat and nut covered
commodities sold at retail being exempt. The commenters urged USDA to
develop different definitions of a
[[Page 2667]]
processed food item for each specific category of covered commodity so
that as many items as possible would be covered by the mandatory COOL
program.
One commenter noted that relying on a change in character for the
definition of processed food is fine as long as the Agency makes it
clear that the change in character is such that a consumer would not
use the items in the same manner as they would the original commodity.
Thus, as spelled out in the 2003 proposed rule, not all forms of
cooking (e.g., frying, broiling, grilling, boiling, steaming, baking,
roasting), as well as canning would constitute a change in character.
This commenter added that for muscle cuts of beef, lamb, pork, chicken
and goat, chilling, freezing, cooking, seasoning or breading should not
render those products as being processed food items as defined in the
interim final rule and therefore exempt from mandatory COOL. The
commenter expressed their support for the alternative proposal in the
2003 proposed rule in which a covered commodity that is further
processed (i.e., cured, restructured, etc.) should not be excluded
unless the covered commodity is mixed with other commodities such as a
pizza or TV dinner. The commenter noted that by exempting restructured
and cured products from COOL, the rule excludes bacon, hams and corned
beef briskets from labeling. The commenter further stated that Congress
clearly stated that pork was included in COOL, but exempting bacon and
hams would exclude a significant portion of the pork market. This
commenter also recommended that orange juice be included as a covered
commodity since orange juice represents a major component of orange
consumption in the U.S. Finally, the commenter noted that in a series
of decisions, CBP determined that roasting of pistachios, pecan nuts
and coffee beans did not constitute substantial transformation.
Several commenters urged AMS to revise the provision in the
processed food item definition that states that combining different
covered commodities renders those products being exempt from mandatory
COOL. The commenters recommended that if covered commodities are
combined, yet are still recognizable, they should be required to be
labeled. The commenters suggested that broadly exempting all mixed
vegetables as a processed food item is an excessive exclusion because
most consumers would expect to have frozen mixed vegetables labeled.
Several commenters agreed with the Agency's definition of a
processed food item. The commenters noted that the processed food
definition that the Agency adopted in the interim final rule for fish
and shellfish is simple, straightforward and provides a bright line
test retailers and others can use to understand which covered
commodities are subject to mandatory COOL and which are not.
One commenter recommended that the Agency designate that items with
distinct varietal names within a generic category of products be deemed
different products and excluded when two or more are combined. Several
commenters recommended that any fresh-cut produce item, even those not
combined with another substantive food item or other covered commodity,
be included in the definition of a processed food item. By taking a raw
agricultural commodity, washing it, then cutting it, the commenters
contend that a company does change the product from a raw agricultural
commodity to a ready-to-eat food item--similar to the way cooking
changes a raw meat product to a ready-to-eat food, and that cutting
fruit for a value-added package alters the commodity at retail.
One commenter noted that the interim rule provides that ``the
addition of a component (such as water, salt, or sugar) that enhances
or represents a further step in the preparation of the product for
consumption would not in itself result in a processed food item.'' The
commenter stated that as water, salt and sugar are used only as
examples, it is apparent that the Agency assumes other ingredients,
too, may merely enhance or further prepare the product for consumption
such that they would be insufficient to render a product a processed
food item.
Several commenters expressed that they were unclear when water,
salt or sugar can be added to a product and still be covered and
questioned why a marinated steak is exempt even though ``marinated'' is
not defined. These commenters urged the Agency to clarify what is meant
by enhancement steps that do not result in a processed food item. Some
of these commenters further urged that the clarification encompass a
much broader scope of flavorings, seasonings, etc., beyond water, salt
or sugar.
One commenter expressed support for the fact that the addition of a
component (such as water, salt, or sugar) does not represent a
processing step that changes the character of a covered commodity. The
commenter recommended that USDA also expressly state that the addition
of water-based or other types of flavoring--such as a solution
containing water, sodium phosphate, salt, and natural flavoring
purportedly injected into meat muscle-cut commodities by some
retailers--does not represent a processing step that changes the
character or identity of a covered commodity. Another commenter agreed
with the provision in the 2003 proposed rule in which oil, salt and
other flavorings were considered non-substantive ingredients. In
addition, the commenter also expressed support for the position laid
out in the 2003 proposed rule that ``needle-tenderized steaks; fully-
cooked entrees containing beef pot roast with gravy; seasoned, vacuum-
packaged pork loins; and water-enhanced case ready steaks, chops, and
roasts * * * would not be considered processed food items''.
One commenter discussed products made up of a variety of fresh pork
and beef muscle cuts that have been injected with a patented solution
which, beyond simple water, salt, or sugar, also includes sodium
phosphates, potassium lactate and sodium diacetate. The commenter
stated that these products should be considered to be ``covered
commodities'' and, therefore, subject to mandatory COOL requirements on
the grounds that these products have not undergone a change in
character and that because consumers cannot ascertain any difference
between such enhanced products and those covered commodities that do
not contain such additional ingredients, such an exemption would only
confuse consumers.
Several commenters asked that the list of examples of processed
food items be expanded. One commenter strongly supported inclusion of
the following examples for the types of meat and other covered
commodities that should be exempt as a processed food item as defined
under the definition and recommended to be included in the final rule:
flank steak with portabella stuffing, steakhouse sirloin kabobs with
vegetables, meatloaf, meatballs with penne pasta, pot roast with
roasted vegetables, cooked and smoked meats, blue cheese angus burgers,
cured hams, bacon, sugar cured bacon, dry cured meats, corned beef
briskets, marinated pork loin, marinated pork chops, marinated London
broil, prosciutto rolled in mozzarella cheese, fruit salad, cooked and
canned fruits and vegetables, orange juice, fresh apple sauce, peanut
butter, candy coated peanuts, peanut brittle, etc.
Agency Response: The Agency believes that the two-part definition
of a processed food item defined in the final rule is an appropriate
interpretation of the intent of Congress excluding covered commodities
that are
[[Page 2668]]
an ingredient in a processed food item and provides a bright line
differentiating the steps that do and do not result in a commodity
being covered by mandatory COOL.
Furthermore, the Agency does not agree that such processing steps
as cutting or enhancing render a covered commodity a processed food
item. The definition of a processed food item uses examples of the
addition of components ``such as water, salt, or sugar''; however, such
further preparation steps would also be meant to include other examples
of enhancements that do not fundamentally alter the character of the
product. For example, dextrose is a sugar, phosphate is a salt, and
beef stock and yeast are flavor ``enhancers''. In addition, the Agency
believes that enhancement with enzymatic tenderizers, such as ficin and
bromelain, do not by themselves change the character of the covered
commodity and therefore do not result in a processed food item.
The Agency does agree that specific examples of products that are
and are not covered can help the trade and consumers understand which
products are covered by mandatory COOL. Therefore, the Agency will work
to provide interpretive documents on its Web site and in print
materials developed that will provide as many examples as necessary.
Produced
Summary of Comments: One commenter noted that the interim final
rule defines the term ``produced'' in the case of a perishable
agricultural commodity, peanuts, ginseng, pecans, and macadamia nuts as
grown. The commenter recommended that since some plants may be
transplanted across national borders, the Agency should define the term
produced as harvested.
Agency Response: The Agency agrees with the commenter that the term
``harvested'' more accurately defines the term ``produced'' in the case
of a perishable agricultural commodity, peanuts, ginseng, pecans, and
macadamia nuts and has adopted this change in this final rule.
Country of Origin Notification
Exemption for Food Service Establishments
Summary of Comments: Several commenters disagreed with the
exemption for food service establishments from the COOL requirements.
These commenters contend that since items sold in these types of
establishments represent a major segment of the food industry, these
establishments should not be exempt from labeling.
Agency Response: The statute contains an express exemption for food
service establishments. Therefore, this exemption is retained in this
final rule.
Method of Production
Summary of Comments: Two commenters focused on details for the
designation of method of production for fish and shellfish (wild-caught
or farm-raised). One commenter sought a more thorough definition and
suggested the inclusion of the following additional information: for
wild fish, the method of harvest (i.e., long-line, gillnet, trawl,
purse seine, line and hook); and for farm-raised fish (1) whether it is
a genetically engineered, and (2) the feed conversion ratio (quantity
of fish feed required for producing the end-commodity). Another
commenter expressed concern about fraudulent labeling of method of
production for fish and shellfish. The commenter noted that there may
be an economic incentive to mislabel farm-raised fish as wild caught
fish, and the commenter provided evidence from a small sample they had
investigated in November and December 2005 during the off-season for
wild-caught salmon. They purchased 17 salmon products labeled as wild-
caught, tested them for the presence of a synthetic coloring agent fed
to farmed salmon to turn their flesh pink-orange and found that 7 of
the 17 salmon products labeled as wild-caught were determined through
this analysis to be actually farm-raised. The commenter noted that
supermarkets were more likely to label wild-caught salmon correctly
than fish markets.
Agency Response: The statute only provides the Agency with the
authority to require that fish and shellfish carry notification for
country of origin and that the covered commodity distinguish between
wild fish and farm-raised fish. Therefore, the additional labeling
information cannot be required. With regards to the mislabeling of
method of production identified by the commenter, in addition to
conducting retail surveillance enforcement activities, the Agency also
conducts supplier audits that are intended to prevent such mislabeling.
Labeling Covered Commodities of United States Origin
Summary of Comments: Two commenters requested that the Agency
revisit the regulatory requirements for labeling products as U.S.
origin when they have been further processed or handled in a foreign
country. One commenter recommended that USDA delete entirely Sec.
65.300(d)(2), and include language instead that expressly prohibits the
retention of a United States origin label for any commodity that
undergoes additional processing or handling in a foreign country.
Another commenter asked that the Agency clarify what it means by the
terms ``handled'' and ``processed'' in the context of this provision.
The commenter asked USDA to clarify if it intends to include meat
products in this section of the interim final rule, and noted that the
statute indicates that meat product processed in another country would
need to list that particular country on the label. They pointed out
that the interim final rule appears to have no discussion or rationale
explaining why a U.S. product processed in another country would be
eligible to maintain a U.S. origin label.
Another commenter requested that a fourth option for labeling
imported products be considered in the final rule. This commenter
pointed out that there are no provisions for labeling product that is
caught or harvested in the U.S. and substantially transformed in
another country. For example, wild fish that is caught in the U.S. and
then subsequently filleted in ``Country X'' must be marked as a product
of ``Country X'' with no allowable reference to the original U.S.
source. The commenter suggested an alternative would be to label
covered commodities harvested in the U.S. but substantially transformed
in another country as ``Harvested in U.S., processed in Country X.''
The commenter concluded that such a label would provide complete
information for the consumer while maintaining the original U.S. source
of the product.
Agency Response: With regards to the origin determination of United
States country of origin products that are exported to a foreign
country for processing prior to reimportation back into the United
States, the Agency has deleted the express provision in the final rule
as the Agency believes that the provision may have caused confusion.
However, to the extent that existing regulations, including those of
CBP and FSIS allow for products that have been minimally processed in a
foreign country to reenter the United States as Product of the U.S.,
nothing in this final rule precludes this practice. In addition, to the
extent that additional information about the production steps that
occurred in the U.S. is permitted under existing Federal regulations
(e.g., CBP, FSIS), nothing in this final rule precludes such
information from being included.
[[Page 2669]]
Labeling Imported Products That Have Not Undergone Substantial
Transformation in the United States
Summary of Comments: Four commenters offered suggestions relating
to labeling imported products that have not undergone substantial
transformation in the United States. One commenter contended that COOL
was illogical, unworkable and misleading. Another commenter elaborated
on the labeling for transshipped fish and shellfish. The commenter
pointed out that many fish and shellfish products are imported into the
U.S. from countries that are not necessarily the country where the fish
or shellfish were harvested. The commenter recommended that the final
rule for fish and shellfish require labeling to identify the location
where the seafood was harvested or raised. Another commenter noted that
frozen products of ``foreign origin,'' as determined by tariff laws,
already are subject to country of origin labeling under a comprehensive
set of regulations administered by CBP.
Agency Response: With regard to the origin of imported covered
commodities, the Agency follows existing regulations, including those
of CBP, regarding the origin of such products and requires that such
origin be retained for retail labeling.
Labeling Muscle Cut Covered Commodities of Multiple Countries of Origin
That Include the United States
Summary of Comments: Numerous commenters stated that commodities
derived from animals born, raised, and slaughtered in the U.S. should
be labeled as ``Product of the U.S.'' and not be diluted or commingled
with a multiple country of origin label such as, ``Product of the U.S.,
Canada, and Mexico''. These commenters stated that the provision
allowing this in the interim final rule directly contradicts the
statute and diminished consumer choice and producer benefits that could
have resulted from this program.
These commenters stated that the statute established four major
categories for meat labeling to enable consumers to have the right to
know specifically where their food originates. Other commenters stated
that the regulation does not contain specific provisions allowing
packers to label meat from livestock exclusively born, raised, and
processed in the U.S. as mixed origin and that packers doing so were
acting in violation of the regulation. Several members of Congress also
commented that it was not the intent of Congress that all U.S. products
or such product from large segments of the industry be combined with
the multiple countries of origin category nor was it provided for by
the statute. The members of Congress stated that the purpose of COOL is
to clearly identify the origin of meat products, providing consumers
the most precise information available.
One commenter stated that while processors claim that segregating
U.S. meat from foreign meat would be burdensome, processors already
easily segregate meat by grade (e.g. USDA. Choice vs. USDA. Prime) and
by source (e.g., USDA Certified Organic vs. nonorganic) and that
segregating the origin of U.S. and foreign meat is no more complicated
or burdensome.
In contrast, several other commenters expressed support for a more
flexible approach to labeling notifications for meat products sourced
from multiple countries of origin. One commenter indicated that
retailers desperately need the flexibility to commingle product in the
display, especially in a full-service display case. The commenter
stated that disallowing the commingling of meat from multiple origins
including the U.S. is a logistical nightmare for retailers. Another
commenter stated that the interim final rule affords critically
important flexibility to retailers and the entities that provide
covered commodities to retailers with respect to the labeling of
covered commodities derived from animals of U.S. origin, as well as
animals with multiple countries of origin. Another commenter urged the
Agency to apply flexibility consistently for all sectors of the chain
including retailers.
Several commenters stated their belief that Congress intended to
provide flexibility between categories A and B afforded in the rule
based on the permissive language of the statute for those two
categories, which is supported by the absence of that very flexibility
in subsections 282(a)(2)(C) and (D). The commenters noted that in
subsections 282(a)(2)(C) and (D) of the statute, Congress used the word
``shall'' with respect to types of covered commodities identified in
those categories, imported for immediate slaughter and foreign country
of origin, and arguably limited the Agency's discretion to interpret
how those categories of product should be labeled.
Another commenter recommended the same flexibility given to
processors to label meat from animals of U.S. origin with a mixed
origin label should be given to the labeling of meat from animals
imported directly for slaughter. The commenter recommended that the
final rule give processors the flexibility to make use of the order of
countries mandated under this category (Product of Country X and the
U.S.) when processing a production run including animals of U.S., mixed
origin, or imported for immediate slaughter.
Another commenter noted that little attention seems to have been
paid to the amount of exported meat this rule is putting at risk, which
is now sold to Mexico, compared to the small amount of cattle born in
Mexico and exported to the United States. Another commenter added that
producers on the border States rely on Mexican cattle imports. The
commenter warned that by establishing these categories, the value of
finished Mexican cattle will be discounted at the packing plant because
they will have to be sorted on the line in the plant, which costs the
packer money. Another commenter stated that COOL has effectively cut
off U.S-Mexican cattle trade and that because of COOL the packers have
advised producers that they will not buy Mexican cattle.
One commenter indicated that the multiple country label prescribed
in the rule for product derived from U.S.-raised pigs, regardless of
their birth country, provides packers, processors and retailers with
flexibility in labeling pork products. The commenter further stated
that this labeling flexibility, in turn, gives flexibility to U.S. pork
producers handling those pigs, which will reduce costs associated with
label changes, product segregation, and duplicate stock keeping units
at all levels of the pork marketing system.
Several commenters noted that the ``Product of the U.S.'' label
allows for the labeling of pork products exclusively from pigs born,
raised and slaughtered in the U.S. These commenters stated it will be
effectively used for pork products offered to buyers who find value in
that label. The commenters fully support the approach taken in the
interim final rule. The commenters also expressed that including U.S.-
raised pigs in the mixed origin labeling category also meets the
``common sense'' test as well as the economic reality of today's U.S.
pork industry since more than 95 percent of the total end weight of a
Canadian-born weaned pig is actually produced in the U.S. using U.S.
feed, labor and buildings.
A final commenter wrote that the Agency should harmonize the final
rule with the NAFTA Marking Rule. This commenter specifically
encouraged the Agency to adopt a final rule that uses the tariff-shift
method to determine the country of origin of covered commodities that
are produced in the United States using ingredients or raw
[[Page 2670]]
materials imported from Canada or Mexico.
Agency Response: The Agency recognizes that the multitude of
different production practices and possible sales transactions can
influence the value determinations made throughout the supply chain
resulting in instances of commingling of animals or covered
commodities, which will have an impact when mixing occurs. However, the
Agency feels it is necessary to ensure information accurately reflects
the origin of any group, lot, box, or package in accordance with the
intent of the statute while recognizing that regulated entities must
still be allowed to operate in a manner that does not disrupt the
normal conduct of business more than is necessary. Thus, allowing the
marketplace to establish the demand of categories within the bounds of
the regulations will provide the needed flexibility while maintaining
the structure needed to enforce these clearly defined categories. If an
initiator of the claim chooses to mix commodities of different origins
within the parameters of a production day, or if the retailer mixes
product from different categories willingly, the resulting
classification must reflect the broadest possible terms of inclusion
and be labeled appropriately. The initiator may elect to segregate and
specifically classify each different category within a production day
or mix different sources and provide a mixed label as long as accurate
records are kept. Likewise, if a retailer wants to mix product from
multiple categories, it can only be done in multi-product packages and
then only when product from the different categories is represented in
each package in order to correctly label the product. With regard to
producer benefits, while some U.S. producers may hope to receive
benefits from the COOL program for products of U.S. origin, the purpose
of the COOL program is to provide consumers with origin information.
With regard to the commenter's recommendation that the same
flexibility given to processors to label meat from animals of U.S.
origin with a mixed origin label should be given to the labeling of
meat from animals imported directly for slaughter, this final rule
allows muscle cut covered commodities derived from animals that are
born in Country X or Country Y, raised and slaughtered in the United
States, that are commingled during a production day with muscle cut
covered commodities that are derived from animals that are imported
into the United States for immediate slaughter as defined in Sec.
65.180, the origin may be designated as Product of the United States,
Country X, and (as applicable) Country Y.
With regard to using the tariff-shift method to determine the
country of origin of covered commodities that are produced in the
United States using ingredients or raw materials imported from Canada
or Mexico, the Act specifically defines the criteria for covered
commodities to be labeled with a U.S. origin declaration. Accordingly,
this recommendation is not adopted.
Labeling Commingled Covered Commodities
Summary of Comments: Several commenters expressed concerns about
the notification requirements for commingled covered commodities. One
produce supplier was concerned about their liability in the event
ready-to-eat produce they supplied was commingled with other product
from multiple vendors at retail stores. Another commenter voiced
opposition to an alphabetical listing on a product sourced and
commingled from multiple countries of origin. The commenter expressed
support for the provision in the voluntary COOL guidelines published in
2002 (67 FR 63367) that would have required country of origin for each
raw material source of the mixed or blended retail item by order of
predominance by weight.
Another commenter expressed support for the current provision. The
commenter noted that the current interim final rule states that for
these products, the country of origin must be designated in accordance
with CBP marking regulations, promulgated pursuant to the Tariff Act.
To the extent that this will prevent a conflict between the two laws,
this commenter supports the Agency's recent approach.
One commenter asked for clarification about the use of the word
``or,'' the phrase ``and/or,'' commas, slashes or spaces to separate
the country names in a label listing multiple countries of origin for
commingled commodities. The commenter pointed out that a comma would be
equivalent to ``and,'' which might not be appropriate for labeling a
single produce item that could not physically have been produced in two
countries.
Agency Response: As noted in both the interim final rule for fish
and shellfish and the interim final rule for the other covered
commodities, the Agency determined that requiring origin notification
either by alphabetical listings or by listing the countries of origin
by order of predominance by weight was overly burdensome to the
regulated industries.
As commingling of the same type of products at retail containing
different origin is permissible under this final rule, the Agency
cannot prohibit the commingling of like products from multiple vendors
at retail. The COOL program is not a food safety program. Commingling
like products is a commercially viable practice that has been
historically utilized by retailers and any decision to continue this
practice has to be determined by the retailer.
The Agency does not agree that the statute allows for the use of
terms and phrases such as ``or, may contain, and/or'' that only convey
a list of possible origins. The intent of the statute is to require
retailers to provide specific origin information to consumers. In
addition, such disjunctive labeling schemes are not allowed under CBP
regulations except under special circumstances.
For commingled covered commodities, each country must be listed.
The Agency does not agree that the regulations should mandate how this
list of countries be punctuated with commas, slashes or spaces. The
Agency believes that it is best left to individual businesses to decide
how to convey the information in a way that is neither confusing nor
misleading.
Labeling Ground Meat Covered Commodities
Summary of Comments: Several commenters expressed the opinion that
the provision in the interim final rule that states, ``when a raw
material from a specific origin is not in a processor's inventory for
more than 60 days, the country shall no longer be included as a
possible country of origin'' is too long. The commenters stated that in
practical terms, this provision appears to allow a processor to have 60
days to correct the label of a product to delete specific country(s),
even though that country's product may no longer exist in its
inventory. The commenters provided the example that a processor on day
one could have product from the U.S. and Canada, and then on day 7 run
out of product from the U.S., and yet could continue using the
``Product of U.S. and Canada'' label for another 53 days. Commenters
feared this provision could be easily abused by meat processors.
Several commenters requested that the Agency reconfirm the
appropriateness of this time-frame and explain the rationale and
justification for this duration. Another commenter urged AMS to clarify
this issue for the public record because in the opinion of the
[[Page 2671]]
commenter, the wording in this section of the rule is confusing and
potentially misleading.
Another commenter pointed out this provision was intended to
reflect the sourcing processes of commercial grinders and not to
require them to change their labels simply because the market had
changed and source product was more expensive from one country than
another. As the statutory language that is interpreted here is directed
to retailers, this commenter understood this provision to apply to
retailers as well, and respectfully requested that the Agency confirm
the applicable standard in the final regulation.
One commenter was concerned about the impact that mandatory country
of origin labeling will have on imported beef, particularly ground beef
at retail. The commenter stated that mandatory origin labeling will add
significantly to meat production costs at a time of rapidly increasing
food costs, and consumers will have to bear the additional expense
resulting from the labeling regime. The commenter was concerned,
therefore, that retailers will be induced to simplify their labeling
obligations by excluding imported and certain domestic beef from ground
beef in order to minimize the resulting increase in the costs that will
be associated with compliance.
Agency Response: As already stated, the intent of the authorizing
statute was for consumers to have available to them for the purposes of
making purchasing decisions accurate information pertaining to the
country of origin of certain covered commodities sold at retailers as
defined. That said, the Agency believes this program should be
implemented in as least burdensome a manner possible while still
achieving this objective.
In developing the interim final rule, the Agency spent considerable
time analyzing the current production systems of the ground meat supply
chain and retail industry so that this program could be implemented in
a manner that was least burdensome as possible while still providing
consumers with accurate information to base their purchasing decisions
on. It also must be stressed that if a country of origin is utilized as
a raw material source in the production of ground beef, it must be
listed on the label. The 60-day in inventory allowance speaks only to
when countries may no longer be listed. The 60-day inventory allowance
is an allowance for the Agency' enforcement purposes for when the
Agency would deem ground meat products as no longer accurately labeled.
The Agency arrived at the 60-day allowance during its analysis of
the ground meat industry. In this analysis, the Agency determined that
in the ground beef industry a common practice is to purchase lean beef
trimmings from foreign countries and mix those with domestic beef
trimmings before grinding into a final product. Often those imported
beef trimmings are not purchased with any particular regard to the
foreign country, but the cost of the trimmings due to currency exchange
rates or availability due to production output capacity of that foreign
market at any particular time. Because of that, over a period of time,
the imported beef trimmings being utilized in the manufacture of ground
beef can and does change between various foreign countries.
As large scale beef grinders can have in inventory at any one time,
several days worth of beef trimmings (materials to be processed into
ground beef) from several different countries and have orders from yet
other foreign markets, or from domestic importers, trimmings from
several foreign countries that will fulfill several weeks worth of
ground beef production, the Agency determined that it was reasonable to
allow the industry to utilize labels representing that mix of countries
that were commonly coming through their inventory during what was
determined to be a 60-day product inventory and on order supply. To
require beef grinders to completely change their production system into
grinding beef based on specific batches was determined to be overly
burdensome and not conducive to normal business practices, which the
Agency believes was not the intent of the statute. Further, because
beef grinders often purchase their labeling material in bulk, if a
given foreign market that a beef grinder is sourcing from is no longer
capable of supplying product, the interim final rule allowed that
grinder a period of time to obtain new labels with that given country
of origin removed from the label.
With regard to the commenters' concerns with the potential of
``abuse'' of this allowance by processors, the Agency does not believe
widespread abuses of this provision will occur and will address any
issues with this provision during routine compliance reviews. As such
and for all the reasons stated above, the Agency continues to believe
that the 60-day inventory allowance is appropriate and was retained in
this final rule.
With regard to if this 60-day inventory allowance is made for
retailers or for suppliers of covered commodities, the Agency has made
no distinction in this final rule and, as such, the same requirements
would apply. Other concerns raised, including the impact of this
regulation on the utilization of imported meat and consumer food costs
are addressed in the economic impact analysis contained in this action.
Remotely Purchased Products
Summary of Comments: Two commenters expressed the opinion that the
provision on remotely purchased products is too weak because it allows
country of origin information to be disclosed either on the sales
vehicle or at the time the product is delivered to the consumer. The
commenters stated that for origin information to be of use to
consumers, it must be disclosed at the time that purchasing decisions
are made. The commenters recommended that the country of origin or the
possible country(ies) of origin could be listed on the sales vehicle
(i.e. Internet site, home delivery catalog, etc.) as part of the
information describing the covered commodity for sale. Another
commenter encouraged the Agency to maintain the provision for remotely
purchased products with the additional flexibility of permitting the
declaration either on the sales vehicle or on the product at the time
of delivery.
Agency Response: The Agency believes that the provision contained
in the interim final rules, which allows the information to be provided
either on the sales vehicle or on the product itself, provides
flexibility to suppliers and also provides useful information to
consumers. If a consumer desires to purchase a covered commodity of a
certain origin, they can so specify to the retailer.
Marking
General
Summary of Comments: Several commenters addressed the question of
preponderance of stickering and sticker efficacy. The commenters
recommended that the Agency define ``majority'' as it applies to bulk
display stickering for perishable agricultural commodities. The
commenters noted that the Agency has recognized that when fresh produce
is stickered with origin information, every product may not bear a
sticker for a variety of reasons, and that a majority of the product
should have stickers. Two commenters recommended that the Agency define
``majority'' as it applies to bulk display stickering for perishable
agricultural commodities as ``50% plus one'' so that the industry has a
specific understanding for compliance. Another commenter agreed with
this definition, citing that the FDA found 50% product
[[Page 2672]]
labeling sufficient even in a case of human health. The commenter
argued that such a standard would therefore be more than sufficient for
adequate disclosure of country of origin. Another commenter recommended
that the Agency not require more than a majority of produce items in
any given bin to carry a PLU sticker. The commenter added that price
look up (PLU) stickers, which include information on the supplier that
initiates the country of origin claim, should not only satisfy a
retailer's obligation to inform consumers of the country of origin of
the item, it should satisfy the retailer's country of origin
recordkeeping obligation as well.
Another commenter expressed concern that the lack of a specific
minimum labeling requirement could ultimately require suppliers to have
multiple containers and packaging inventories available. The commenter
stated that a producer supplying fruit for bulk sale that is not
currently stickering fruit may now be required by retailers to sticker
individual pieces of fruit because the rule only ``encourages''
retailers to use placards or other methods. The commenter recommended
that the rule establish a specific minimum standard to ensure greater
consistency in compliance.
As it pertains to fish and shellfish, another commenter suggested
that the Agency allow the use of statements such as ``wild and/or farm-
raised'' or ``may contain'' in addition to allowing the use of ``check
box'' labeling options to minimize the cost of labeling while still
providing the required information for the consumer.
Agency Response: As stated in the preamble of the August 1, 2008,
interim final rule, the Agency understands that stickering efficacy is
not 100%. Further, the Agency believes that under normal conditions of
purchase, consumers would likely be able to discern the country of
origin if the majority of items were labeled regardless if additional
placards or other signage was present. Accordingly, the Agency does not
believe it is necessary to modify the language with respect to this
provision. The Agency will address the issue of preponderance of
stickering in its compliance and enforcement procedures, as applicable,
to ensure uniform guidance is provided to compliance and enforcement
personnel.
With regard to this use of ``may contain'' and ``and/or''
statements, as previously stated, the Agency does not agree that the
statute allows for the use of terms and phrases such as ``or, may
contain, and/or'' that only convey a list of possible origins. Rather
the Agency believes that the intent of the statute is to require
retailers to provide specific origin information to consumers. In
addition, such disjunctive labeling schemes are not allowed under CBP
regulations except under special circumstances.
Signage Over Bulk Display Cases
Summary of Comments: Several commenters expressed concern that the
language authorizing a list of ``all possible origins'' on a bulk
container (such as a meat display case that may contain commodities
from different origins) would inadvertently allow a retailer to hang a
sign over the entire meat display case that stated that the entire
display contains products from the U.S. and one or more countries, even
if the display case contains only commodities from the U.S. The
commenters contend that nothing in the law expressly permits such
labels on displays, holding units, or bins to merely provide
information regarding ``all possible origins'' of the commodities
contained therein and recommended that the Agency add language to
require that if a meat display case contains commodities from more than
one country, the commodities must be physically separated according to
their origins within the meat display case and a separate origin
declaration must be associated with each section.
Another commenter stated that they understood that the Agency is
concerned that a sign such as ``All beef is Product of the US'' might
be interpreted by consumers to encompass beef products that are not
covered by the statute because they are processed. In order to provide
clarity, the commenter urged the Agency to provide ``safe harbor''
standards for language and placement in order to ensure that retailers
are properly meeting their obligations.
One commenter noted that retailers have the discretion to use
signs, placards or other communications to convey origin information.
Another commenter noted that the interim final rule allows for a bulk
container at retail level that contains commingled products to be
labeled with the country or countries of origin. However, the commenter
also pointed out that the rule is silent on whether the individual
pieces contained in bins must also be labeled, which would be difficult
for certain species (e.g., broccoli, lettuce). This commenter requested
confirmation that, for commingled produce sold in bins or trays,
individual pieces of produce do not need to be labeled provided their
origins are displayed on appropriate signage by the retailer.
Agency Response: With regard to the provision in both interim final
rules concerning bulk containers that allows the bulk container to
contain a covered commodity from more than one country of origin, as
previously stated, under this final rule it remains permissible
provided that the notification representing a container, display case,
bin or other form of presentation includes all possible country
designations available for purchase.
With respect to the use of signage for bulk displays for meat
covered commodities, as previously discussed, the Agency has observed
that a vast majority of retailers are utilizing one sign for either the
entire meat case or for an entire commodity type (i.e., chicken) to
provide the country of origin notification. While the statute and this
regulation provide flexibility in how the country of origin information
can be provided, the Agency believes that the use of such signage could
be false or misleading to consumers. The Agency encourages retailers to
review signage that they have used in the implementation of the fish
and shellfish program for alternative methods of providing COOL
information.
With regard to comment concerning the labeling of individual pieces
of produce, the rule provides flexibility in how the country of origin
information may be conveyed. Thus, this final rule does not contain a
requirement that individual pieces of product must be labeled with
country of origin information. However, retailers may request that
suppliers use specific methods of conveying origin information through
contractual arrangements with their suppliers.
Abbreviations
Summary of Comments: Several commenters requested additional
guidance on acceptable abbreviations, and they provided a variety of
recommendations to the Agency about specifying approved abbreviations.
These commenters all favored the use of country abbreviations when
marking country of origin declarations. One commenter requested that a
select group of countries be permitted for abbreviation to include New
Zealand, Guatemala, South Africa, Argentina and Australia. Another
commenter said that abbreviations would serve a useful purpose on
product labels and recommended that a list of reasonable abbreviations
be developed that could be used by processors and retailers (e.g., CAN
for Canada).
Other commenters appreciated the Agency's recognition of the need
to abbreviate the names of some countries
[[Page 2673]]
using abbreviations from CBP. The commenters recommended that the
language in section (e) be reworded to remove the first sentence (``In
general, abbreviations are not acceptable.''). The commenters reasoned
that the available space on product labels (e.g., price look-up [PLU]
sticker) or bills of lading is scarce. The commenters further stated
that it is important for the industry to be able to convey origin
information on both of those vehicles for several reasons. Information
on the product itself (through a PLU sticker, rubber band, twist tie,
tag, etc.) is particularly important because it informs the consumer at
point of purchase and moves with the product to the home. When industry
can include the information on a bill of lading, it allows companies to
use existing records as the statute requires. The commenters suggested
that the Agency remove the requirement that a key to abbreviations be
included with documents (each time or even once), because the industry
is well aware of the abbreviations used and their meanings.
Several commenters suggested that the Agency rely on the ISO 3166
country codes maintained by the International Standardization
Organization. One commenter disagreed with the Agency's determination
that such abbreviations may not be readily understood by the majority
of consumers. One commenter added that in addition to the ISO country
codes, CBP recognizes country codes as do other federal agencies such
as the Bureau of the Census. The commenter pointed out that the United
Nations also recognizes both the two letter and three letter ISO
country codes. Another commenter requested that a list of 3-digit
country abbreviations be developed and allowed to identify the
countries of origin. The commenter noted that these 3-digit codes would
not be confused with 2-digit codes used in the U.S. to identify
individual States.
One commenter indicated that in the event the Agency retains its
current prohibition on abbreviations for consumer information, the
Agency must be clear that origin information in records and paperwork
can be maintained with any acceptable abbreviations. The commenter
added that they strongly support the ability to utilize labeling of a
U.S. State, region or locality in which a product is produced to meet
label standards as product of United States. In addition, the commenter
stated that they support the ability to use State abbreviations, which
is standard practice in many current State labeling programs and is
readily accepted identification by consumers. One commenter described a
customer who had a requirement to list the State name in addition to
the U.S. This commenter asked if it would be permissible to abbreviate
State names when more than one needs to be listed (e.g., WA, CA, AZ).
The commenter suggested putting the State abbreviations in brackets
after USA (e.g., USA (CA, AZ)).
Agency Response: As previously stated, the Agency believes that the
limited application of abbreviations that unmistakably indicate the
country of origin is appropriate. CBP has a long history of
administering the Tariff Act and has issued a number of policy rulings
with respect to the use of abbreviations. Because many of the covered
commodities subject to the COOL regulation are also subject to country
of origin marking under the Tariff Act, it would be inconsistent with
CBP regulations to allow for the use of additional country
abbreviations under the COOL program. With regard to the use of ISO
codes that many commenters made reference to, CBP does allow for the
use of such codes for statistical and other purposes with respect to e-
commerce; however, CBP does not allow for the use of ISO codes for
marking purposes. The Agency has obtained a more complete list of
abbreviations from CBP and has posted this information to the COOL Web
site.
With regard to State labeling for perishable agricultural
commodities, peanuts, pecans, macadamia nuts, and ginseng, the Agency
does believe that the majority of consumers are familiar with the
standard State abbreviations used by the U.S. Postal Service and
because the purpose of the COOL program is to provide consumers with
origin information, it is reasonable to allow such abbreviations.
Allowing this flexibility will address industry's concerns about the
limited space on PLU stickers, twist ties, rubber bands and other
package labels typically used for produce. Under this final rule,
abbreviations may be used for state, regional, or locality label
designations for perishable agricultural commodities, peanuts, pecans,
macadamia nuts, and ginseng covered commodities whether domestically
harvested or imported using official United States Postal Service
abbreviations or other abbreviations approved by CBP. With regard to
the use of abbreviations by suppliers or retailers in conveying origin
information in records or documentary systems, there are no
restrictions on the use of abbreviations as long as the information can
be understood by the recipient. Accordingly, these recommendations are
adopted in part.
State, Regional, and Locality Labeling
Summary of Comments: Several commenters raised issues related to
the provision for state, regional, and locality labeling of covered
commodities. Three commenters requested that state, regional, and
locality labeling be acceptable for covered meat commodities. One
commenter sought confirmation that the provisions on State markings in
the interim final rule apply also to States, regional and local labels
of importing countries. This commenter understood that identification
by region and locality is acceptable provided it is nationally
distinct, but requested that this provision be clarified in the final
rule.
Another commenter noted that USDA is silent on the use of locality
labeling, and requested that the final rule recognize that locality
labeling is likewise permitted by the statute. The commenter stated
that many retailers source products locally and choose to provide this
information to consumers because it is meaningful to these customers.
Agency Response: With regard to the commenters' recommendation to
allow State, regional, and locality labeling for meat covered
commodities, the statute contains an express provision for this type of
labeling for perishable agricultural commodities, peanuts, pecans,
macadamia nuts, and ginseng. As such, the Agency does not have the
authority to extend this provision to any other covered commodities.
With regard to the commenter's request that the Agency clarify that
this provision applies to imported perishable agricultural commodities,
nuts, and ginseng and that locality labeling is also permitted,
clarifying language has been added to section 65.400(f). Accordingly,
these recommendations have been adopted in part.
Supplier Responsibilities
Summary of Comments: Several commenters expressed concerns with the
Agency's assertion in the interim final rule that ``the supplier of a
covered commodity that is responsible for initiating a country of
origin claim * * * must possess or have legal access to records that
are necessary to substantiate that claim.'' The commenters maintained
that the Agency's jurisdiction stops with the initiator of the origin
claim of a covered commodity, which in the case of meat products is the
slaughter facility. The commenters further stated that the COOL law
authorizes only the Secretary
[[Page 2674]]
of Agriculture to conduct an audit for verification purposes, not the
packer, and that furthermore, the Secretary may not require a person
that prepares, stores, handles, or distributes a covered commodity to
maintain a record of the country of origin of a covered commodity other
than those maintained in the course of the normal conduct of the
business of such person. The commenters argued that the 2008 Farm Bill
language states that producer affidavits are sufficient in making a
country of origin claim; therefore, packers or processors should not be
given legal access to producers' records. The commenters recommended
that the Agency eliminate language referencing ``legal access'' from
the final regulation as they contend it is not authorized by the law.
Two commenters suggested that the Agency should require the
original suppliers of covered products to substantiate the chain of
custody and the accuracy of country of origin information. One
commenter expressed the opinion that it is unreasonable that the
liability ultimately is placed on the meat processor to provide country
of origin information when they are relying on the word of livestock
producers, who may or may not be providing accurate information.
Another commenter pointed out the importance of maintaining origin
information by all segments of the industry to verify origin claims and
to ensure the integrity of the labeling program. This commenter also
stated that it is important that producers not be asked for
unreasonable information that goes beyond what would be considered
acceptable or the lack of which is a pretext for penalties against a
producer or producers. The commenter recommended that the Agency
provide a safe harbor of reasonable or acceptable information that can
be asked of a producer to help avoid the possibility of unreasonable
requests for information that would be considered unfair or an effort
to single out a particular producer.
One commenter suggested removing the provision in the rule
regarding supply chain traceability in the recordkeeping requirement.
The commenter stated that the purpose of COOL is to inform consumers
about the origin of the covered commodities and that the added
recordkeeping requirement of traceability is not necessary and is an
added regulatory burden.
One commenter noted that while producers are not directly affected
by the COOL law, Section 282(3) of the statute expressly requires that
``anyone engaged in the business of supplying a covered commodity
provide country of origin information.'' The commenter further stated
that in the case of animals imported from Canada, this necessarily
implicates Canadian producers who must present health papers to APHIS
at the border. The commenter suggested further clarification is needed
about the manner in which that origin will be tracked and conveyed to
AMS should proof of origin be required further down the supply chain.
One commenter noted that Agency representatives have repeatedly
advised the industry of the need for significantly more extensive
records than are currently maintained in order to verify COOL. The
commenter strongly urged the Agency to clarify in the final rule that
the statutory prohibition of any new record requirement is recognized
and accepted. This commenter also encouraged the Agency to provide a
definitive declaration that suppliers may convey COOL information to
retailers through any method of their choosing in order to comply with
the regulation. The commenter stated that in current trade practice,
some have been confused as to whether supplier labeling of COOL on the
actual produce item is required, or whether multiple documents such as
invoices or bills of lading must contain COOL information. The
commenter suggested that USDA should make clear that COOL information
may be provided to the retailer in any form. The commenter further
suggested that relationships in the marketplace--not the statute--will
determine in what form that communication will take place, including
whether individual product eventually is labeled by a supplier.
One commenter stated that the most practical approach to meeting
the COOL requirements for most covered commodities is for those
producers to print the country of origin on all retail packaging for
case and consumer ready, and on all case end labels for all products
destined to be store processed or packaged by the retailer. The
commenter suggested that producers will not need to continuously
transmit country of origin information to the retailer on an order by
order basis. Instead, package and case labeling in conjunction with the
USDA establishment number (used to identify producer) and the lot or
batch number (used to identify the specific lot of live animals from
which products are derived) will already be on pre-packaged labels and
case end codes. The commenter further stated that retailers already
retain invoices to meet other reporting requirements, which identify
the producers of the product, and can be used to satisfy the COOL
recordkeeping obligation. The commenter also stated that there will be
no required change in business processes for retailers but producers
will be required to add accurate origin information to the retail
packaging and/or case end labels.
One commenter identified a business process flow they hoped could
be simplified with the intervention of the Agency. In import situations
where a consolidated shipment could have multiple origins covered by
one Bill of Lading (for example, a combined load of Navel Oranges from
Australia and South Africa, and Clementines and Lemons from Chile) the
commenter currently notes each line item on the documentation, which is
an added step in the paperwork process. The commenter requested that
the Agency provide suggestions in the rule about alternative means to
comply with COOL on Bills of Lading, invoices, or packing slips.
One commenter suggested that the Agency consider a longer period,
such as 10 business days, to provide records upon request to any duly
authorized representatives of USDA for COOL compliance purposes. Two
commenters referenced the statutory prohibition against the Agency
requiring records that are not maintained in the normal conduct of
business. These commenters noted that such records are deemed
sufficient to satisfy the Bioterrorism Act's mandate to be able to
identify immediate previous source and immediate subsequent recipient
of foods. The commenters recommended that the Agency likewise accept
multiple sourcing records for purposes of the mandatory country of
origin labeling requirement for intermediary suppliers to identify
their immediate previous source and immediate subsequent recipient.
Agency Response: It is correct to say that the Agency's authority
to audit ends at the slaughter facility as the slaughter facility is
the first handler of the covered commodity and the Agency has deleted
the requirement that suppliers have legal access to records from this
final rule. However, as initiators of origin claims, packers must have
records to substantiate those claims. With regard to records maintained
in the course of the normal conduct of the business of such person and
producer affidavits, the final rule states that producer affidavits
shall be considered acceptable records that suppliers may utilize to
initiate origin claims, provided it is made by someone having first-
hand knowledge of the origin of the covered commodity and identifies
the covered commodity
[[Page 2675]]
unique to the transaction. With regard to the commenter's assertion
that producers not be asked for unreasonable information that goes
beyond what would be considered acceptable, the Agency has provided
examples of records kept in the normal course of business that may be
used to substantiate origin claims. As previously stated, packers can
utilize producer affidavits to obtain origin information. This final
rule has been drafted to minimize the recordkeeping burden as much as
possible while still providing the Agency with the information
necessary to verify origin claims.
With regard to how suppliers may provide origin information to
retailers, this final rule states that the information can be provided
on the product itself, on the master shipping container, or in a
document that accompanies the product through retail sale. It is up to
the supplier and their retailer customers to decide which method is
most appropriate. The Agency agrees that bills of lading, invoices, and
packing slips may be used to provide origin information. Ultimately,
retailers must ensure that covered commodities displayed for retail
sale have country of origin designations.
With regard to the recommendation to allow a 10 day period to
supply documentation to USDA officials, the Agency believes that the 5
business days provided in the August 1, 2008, interim final rule
provides suppliers and retailers reasonable and appropriate time to
provide records to USDA upon request. With regard to the commenters'
reference to the statutory prohibition against the Agency requiring
records that are not maintained in the normal conduct of business and
that such records are deemed sufficient to satisfy the Bioterrorism
Act's mandate to be able to identify immediate previous source and
immediate subsequent recipient of foods, records maintained in the
normal conduct of business can be used to satisfy the COOL
recordkeeping requirements. However, the Agency recognizes that
suppliers and retailers may need to make modifications to their
existing records in order to provide the necessary information to be
able to substantiate COOL claims as provided for in the statute.
Visual Inspection
Summary of Comments: Several commenters expressed support for the
Agency policy to accept visual inspection as a means to verify the
origin of livestock during the period between July 15, 2008 and July
15, 2009. Specifically, the majority of commenters supported the
Agency's decision to authorize sellers of cattle to conduct a visual
inspection of their livestock for the presence or absence of foreign
marks of origin, and that such visual inspection constitutes firsthand
knowledge of the origin of their livestock for use as a basis for
verifying origin and to support an affidavit of origin. They noted that
visual inspection for verification of origin is particularly important
to the trade during the period between July 15, 2008, and whenever the
final regulation is published. The commenters stated that producers now
have livestock without all of the origin documentation that may be
necessary and that it would be very difficult, and in some cases
impossible, to recreate the paper trail on many of these animals. Other
commenters noted that the visual inspection of animals for import
markings is a highly reliable, cost effective method of verification of
origin and will significantly reduce compliance costs for livestock
producers. The commenters recommend that visual inspection be made a
permanent method on which to base origin claims.
Agency Response: The Agency initially allowed for a transition
period for the period July 16, 2008, through July 15, 2009, during
which producers may issue affidavits based upon a visual inspection at
or near the time of sale that identifies the origin of livestock for a
specific transaction. Affidavits based on visual inspection may only be
issued by the producer or owner prior to, and including, the sale of
the livestock for slaughter. The Agency agrees with the commenters that
affidavits based on visual inspection reduce the burden on producers.
Accordingly, the Agency is making the ability to utilize visual
inspection as the basis for forming an affidavit permanent.
Producer Affidavits
Summary of Comments: Numerous commenters expressed support for the
``Universal Country of Origin Affidavit/Declaration'' that was
developed by consensus across the livestock and chicken industry to
serve as verification from producers to slaughter facilities for the
country of origin of livestock. Several commenters requested that these
agreed-upon documents be incorporated in the final rule. Several
commenters also argued that producers should not be asked for
unreasonable information. They urged AMS to consider a standardized
producer affidavit that would accompany an animal from its first sale
throughout the chain of custody.
Several commenters expressed support for the Agency's decision to
allow composite affidavits where a producer can put together lots of
cattle for sale and have one new affidavit for that lot based on the
affidavits received for each animal, or lot of animals, that was
combined in the new lot. The commenters also expressed support for the
ability for producers to file an ``evergreen'' or ``continuous''
affidavit with the buyers of their livestock saying that, until
otherwise noticed or revoked, all the cattle they will deliver to that
buyer will be of a specific origin.
One commenter disagreed that a producer affidavit in conjunction
with animal ID records can be deleted after 1 year when a majority of
breeding stock lives beyond 5 years and 95% of cattle in the U.S. on
July 15, 2008 were not close to slaughter age. The commenter was of the
opinion that documentation and retention of affidavits needs to last
longer if the Agency has to audit and trace back meats.
Agency Response: The Agency believes the Universal Country of
Origin Affidavit/Declaration that was developed by consensus across the
livestock and chicken industry will assist the industry in implementing
the rule in as least burdensome manner as possible. While the statute
and this final rule allow for the use of producer affidavits, because
the statute does not provide the Agency with authority to regulate
producers, the Agency cannot mandate the use of such affidavits.
The Agency recognizes 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. However,
the Agency only has the authority to require record retention for
covered commodities. As the initiator of origin claims for meat,
packers may specify the length of time records need to be maintained by
entities outside the packer's system.
National Animal Identification System (NAIS)
Summary of Comments: Commenters had mixed opinions about relying on
NAIS as a safe-harbor for COOL compliance. Numerous commenters
supported the provision in the interim final rule stating that
voluntary participation in NAIS program will comply with COOL
verification requirements. The commenters that support the use of NAIS
stated that official USDA 840-tags can serve as a
[[Page 2676]]
universal passport for an animal during its lifetime indicating the
animal is of U.S. origin, no matter how many times ownership of the
animal changes during its lifetime. Commenters strongly encouraged the
Agency to utilize Radio Frequency Identification (RFID) tags in NAIS to
allow verification of country of origin at the speed of commerce and
stated that official NAIS USDA 840-RFID tags for livestock represent
the simplest way for producers to assist in the marketing of their
animals to ensure compliance with COOL.
One commenter recommended that NAIS should be made mandatory. Two
commenters suggested that the Agency could alleviate the record keeping
burden by simply requiring all foreign cattle to bear a permanent mark
that defines their origin. They suggested that this will not only aid
commerce by reducing paperwork, but it will also enhance compliance.
Three commenters expressed support for reliance on other existing
animal identification systems. One commenter noted that USDA/APHIS
currently operates the National Scrapie Eradication Program (NSEP),
which includes a regulated animal identification program. By
regulation, feeder and slaughter sheep that are imported from Canada
must carry official permanent identification. The commenter urged AMS
to help processors and others recognize the relatively straight-forward
nature of proving animal origin in the sheep industry. Two commenters
pointed out that livestock producers who participate in ``Age and
Source Verified'' programs administered by USDA should also be in
compliance with COOL for both origin and verification claims.
Another commenter stated that identification of animal origin by
ear tag is a cause for concern. This commenter noted that USDA has not
provided guidance about what records will suffice for imported animals,
stating only that for animals that are part of an official
identification system, such as the Canadian cattle identification
system, ear tags will suffice for proving origin at the slaughterhouse.
The commenter was concerned with having requirements imposed because of
a specific animal health concern, such as Canadian ear tags on cattle,
ensnared in separate regulations for an entirely different and
unrelated purpose. The commenter stated that this could restrict
Canada's abilities to adapt its national cattle identification system
to changing environments or technologies in the future.
A final commenter warned that the acceptance of an ear tattoo does
not meet the needs of modern industry practices. Due to issues
associated with the speed of commerce, recordkeeping, accuracy and
overall effectiveness of the program, the commenter stated that the
Agency should only allow a hot iron brand on all live foreign cattle.
Agency Response: The Agency believes that voluntary use of the
National Animal Identification System is an easy option packers may
utilize to obtain origin information on livestock. The Agency has also
made modifications to this provision for clarity. The Animal
Identification Number (AIN) is defined in the Code of Federal
Regulations as ``A numbering system for the official identification of
individual animals in the United States providing a nationally unique
identification number for each animal. The AIN contains 15 digits, with
the first 3 being the country code (840 for the United States), the
alpha characters USA, or the numeric code assigned to the manufacturer
of the identification device by the International Committee on Animal
Recording. The AIN beginning with the 840 prefix may be used only on
animals born in the United States.'' As stated in the interim final
rule published on September 18, 2008, (73 FR 54059), the AIN version
starting with 840 is prohibited for use on animals born outside the
United States. Therefore, under this final rule, packers that slaughter
animals that are tagged with an 840 Animal Identification Number device
without the presence of any additional accompanying marking (i.e.,
``CAN'' or ``M'') may use that information as a basis for a U.S. origin
claim. Packers that slaughter animals that are part of another
country's recognized official system (e.g. Canadian official system,
Mexico official system) may also rely on the presence of an official
ear tag or other approved device on which to base their origin claims.
With regard to the commenter's concern regarding having requirements
imposed because of a specific animal health concern, such as Canadian
ear tags on cattle, in separate regulations for an entirely different
and unrelated purpose, this regulation does not impact regulations
pertaining to animal health or importation. In addition, use of
official ear tags as the basis of origin claims is just one option that
can be utilized to obtain origin information.
The other comments received relevant to making NAIS mandatory and
allowing only hot iron brands on live foreign cattle are outside of the
scope of this rulemaking. Accordingly, these recommendations have been
adopted in part.
Retailer Responsibilities
Summary of Comments: Numerous commenters addressed issues relating
to the retailer recordkeeping provisions of COOL. One commenter stated
that the Agency has offered simple, effective rules for recordkeeping
by retailers. One commenter recommended that in Sec. 65.500(c)(1), the
Agency put the last sentence of the paragraph first (``For pre-labeled
products, the label itself is sufficient evidence on which the retailer
may rely to establish the product's origin.''). The commenter also
requested that the Agency state specifically that retailers need not
maintain any new or additional records documenting origin for those
products that are pre-labeled on the product itself or on the box/
container when the box/container is visible to consumers, such as when
it is used as part of a retail display.
One commenter suggested sample and common technological standards
such as the portable document format (PDF) or use of a common and
interoperable database file system such as Microsoft Excel to enable
both industry and the Agency to adopt a common computing platform.
Another commenter suggested that the Agency should refer to the two
different types of documents required to be maintained by retailers as
Verification Records and Supplier records. The commenter suggested that
the Agency should clarify in the final regulation that the information
to satisfy both requirements may be on the same or different documents,
provided all of the requirements are met. Several commenters encouraged
the Agency to permit retailers to rely on the records that are
currently maintained for Bioterrorism Act purposes.
One commenter strongly supported the specific recognition that
retailers may rely upon pre-labeled products as ``sufficient evidence''
of the country of origin. The commenter stated that this is an
important safe harbor for the produce and retail industries as an
increasing share of fresh produce now arrives at retail stores pre-
labeled with the country of origin. The commenter expressed concern
that the IFR and the Agency's Q&A documents are not written in a way
that conveys this information accurately, which is creating significant
confusion throughout the produce distribution chain. The commenter
recommended that the Agency clearly define pre-labeled products to
include all produce items that bear a COOL declaration, regardless of
any other information that may or may not be affixed directly to the
produce item. In turn, the Agency must then specify that additional
[[Page 2677]]
recordkeeping at retail is not required for pre-labeled products as the
vendor who supplied the pre-labeled produce has the responsibility to
verify the claim. One commenter recommended that the Agency only
require retailers to maintain the country of origin for covered
products in the retail store for as long as the product is on hand.
Agency Response: With regard to pre-labeled covered commodities,
the Agency has added a definition of pre-labeled in this final rule. In
addition, the Agency has clarified that for pre-labeled products, the
label itself is sufficient information on which the retailer may rely
to establish the product's origin and no additional records documenting
origin information are necessary. However, the Agency does not agree
with the commenter's recommendation to change the order of the
sentences with respect to the provision on pre-labeled products.
With regard to the recommendation that the Agency adopt a common
computing platform, the Agency does not have the authority to mandate a
specific system. In addition, the Agency believes that retailers and
suppliers should have the flexibility to choose whatever system works
best in their particular operation. Accordingly, this recommendation is
not adopted.
With regard to the suggestion that the Agency should refer to the
two different types of documents required to be maintained by retailers
as Verification Records and Supplier records and that the Agency should
clarify in the final regulation that the information to satisfy both
requirements may be on the same or different documents provided all of
the requirements are met, the Agency has added language to the preamble
to indicate that the supplier and origin information needed to satisfy
the COOL recordkeeping requirements can be in the same document or
different documents. However, the Agency does not believe that any
changes to how the required documents are referenced are necessary.
Accordingly, these recommendations have been adopted in part.
The Agency recognizes that several commenters encouraged the Agency
to permit retailers to rely on the records that are currently
maintained for Bioterrorism Act purposes. To the extent that these
records contain the necessary information to meet the COOL
recordkeeping requirements, the Agency agrees that records currently
maintained to meet the requirements under the Bioterrorism Act can also
be used to comply with the COOL recordkeeping requirements.
With regard to the recommendation that the Agency only require
retailers to maintain the country of origin for covered products in the
retail store for as long as the product is on hand, under this final
rule, records and other documentary evidence relied upon at the point
of sale to establish a covered commodity's country(ies) of origin must
be either maintained at the retail facility for as long as the product
is on hand or provided to any duly authorized representative of USDA in
accordance with Sec. 65.500(a)(2). For pre-labeled products, the label
itself is sufficient information on which the retailer may rely to
establish the product's origin and no additional records documenting
origin information are necessary. Accordingly, this recommendation has
been adopted in part.
Enforcement
Liability Shield
Summary of Comments: Several commenters discussed the concept of a
``liability shield'' found in the interim final rule for fish and
shellfish, but deleted from the interim final rule for the remaining
covered commodities. The commenters noted that the Agency had
previously contemplated a ``shield'' from liability for entities
subject to the law on the theory that they should be permitted to
reasonably rely on information provided by their suppliers. The
commenters recommended that the Agency add a clarification to the final
rule that will assure retailers that they will not be penalized when a
retailers' non-compliance results from the conduct of others. The
commenters further stated that the interim final rule holds suppliers
responsible for providing retailers with country-of-origin information
and that because the statutory liability standard only penalizes
retailers for ``willful'' violations, it follows that a retailer should
not be held responsible for its supplier's failure to provide COOL
information or its supplier's provision of inaccurate information. The
commenters recognized that the Agency deleted the safe harbor language
from the interim final rule for remaining covered commodities because
that language created a negligence standard of liability instead of the
willfulness standard specified in the 2008 Farm Bill. These commenters
agreed that a willfulness standard is required by statute. However,
they also stated that an explicit safe harbor should be restored to the
rule, in addition to the willfulness standard the statute requires.
Thus, paralleling the language that had been used in the safe harbor
provision for the fish and shellfish interim rule, a safe harbor
provision one commenter suggested new regulatory language, ``No
retailer shall be held liable for a violation of the Act by reason of
the conduct of another unless the retailer acted willfully in the same
regard''. Another commenter strongly urged the Agency to reinstate the
liability shield in the final rule, but given the change in the
liability standard as a result of the 2008 Farm Bill, recommended
alternative language.
Agency Response: As noted by the commenters, the Agency deleted the
liability shield language from the interim final rule for the remaining
covered commodities because that language created a negligence standard
of liability instead of the willfulness standard specified in the 2008
Farm Bill. Because of the willfulness standard contained in the 2008
Farm Bill, the Agency does not agree that the liability shield is
necessary. However, to the extent that the liability shield language
provides the industry with assurances that they will not be held liable
for the conduct of others, the Agency believes that the liability
shield is useful. Therefore, the Agency has included the liability
shield provision in this final rule and has modified the language to
reflect the willfulness standard contained in the 2008 Farm Bill.
Accordingly, this recommendation has been adopted.
Assurances Against Meat Recalls for COOL Violations
Summary of Comments: Several commenters expressed concerns about
how FSIS or other federal agency may use a country of origin labeling
failure as a reason to recall pork and other meat products. These
commenters noted that the law does not amend any food safety law and
that it is not a food safety program. The commenters further stated
since it is a marketing program, failure to properly label the origin
of products in the retail meat case should not force a product recall.
Many producers reported to be confused and fearful that this law will
be used to assert product liability claims. These commenters requested
clarification regarding the scope of the COOL law to eliminate this
confusion. They asked that USDA clarify that any violation of COOL will
not trigger a recall of meat products.
Agency Response: As noted by the commenter, the intent of the law
and this rule is to provide consumers with additional information on
which to base their purchasing decisions. COOL is a retail labeling
program and as such does not provide a basis for addressing food
safety. Food products, both imported
[[Page 2678]]
and domestic, must meet the food safety standards of the FDA and FSIS
and are subject to any recall requirements imposed by those agencies.
The Agency does note that FSIS did publish an interim final rule (73 FR
50701) on labeling to address concerns with compliance of their
voluntary labeling approval authority and requirements of the COOL
program. In addition, FSIS provided guidance that inspection program
personnel are not to take any action to enforce the FSIS interim final
rule until further notice and that during the next six months, FSIS
will defer to the AMS program of outreach and education to ensure that
there is compliance.
Timeframe for Implementation
Summary of Comments: Numerous commenters provided suggestions about
the Agency's informed compliance period during which the Department
will provide education and outreach to aid industry in understanding
the requirements of the COOL program.
Three commenters expressed appreciation for the 6-month phase-in
period articulated in the rule and stated that the Agency must be
prepared to provide producers, suppliers, retailers, and consumers with
assistance to understand the regulations through guidance documents,
seminars, and other resources that are readily available to the public
during this period of informed compliance. One commenter pointed out
that it will be critical for the AMS to work with officials with FSIS
to ensure that there is common understanding between the two USDA
agencies regarding questions that meat processing plant operators and
federal meat inspectors may have. One commenter urged the Agency to
withhold publishing a final rule until after the conclusion of the 6-
month period in order to maximize the lessons learned under the interim
final rule. Another commenter encouraged the Agency to provide as much
time as possible to acclimate both retailers and those involved within
the supply chain to the new requirements of the regulations prior to
any enforcement.
Several commenters expressed support that the requirements of the
interim final rule do not apply to covered commodities produced or
packaged before September 30, 2008. However, these commenters noted
that many firms in the industry procure packaging materials for a
year's worth (or more) of production. The commenters recommended that
given the short amount of time between the release of the Interim Final
Rule and the effective date, companies subject to the rule be given a
year from the effective date to use up existing packaging inventories,
provided those packaging inventories were acquired prior to the
effective date of the rule. One of these commenters expressed concern
that a 6-month grace period will prove insufficient to implement a
verifiable records system. This commenter stated that an 18-month
implementation period will allow current nut products in the
marketplace to rotate out and allow those in the field sufficient time
to comply with all aspects of COOL. Another commenter was concerned
about ensuring a reasonable phase-in period for the rule so that
suppliers could use existing inventory to the greatest extent possible.
This commenter supported a one-year phase-in as opposed to 6 months
because the shipping season for table grapes and tree fruit generally
runs from May through October. Therefore, a 6-month phase in from
October through March would be of little benefit for this food sector.
Another commenter noted that retailers, processors, and producers have
expressed their willingness to make a good faith effort to comply with
COOL; however, it is not clear that the 6-month industry education and
phase-in period is sufficient. They strongly encouraged USDA to extend
this period to 12 months in order that issues like recordkeeping and
auditing the supply chain can be fully understood.
Agency Response: In response to the commenters' request that the
Agency not publish the final rule until after the six month period of
education and outreach, the Agency is moving forward in an expeditious
manner of publishing the final rule in order to provide retailers and
suppliers as well as all other interested parties with the requirements
for a permanent program. The Agency will allow sufficient time for the
regulated industries to adapt to the changes in this final rule and
will continue to provide for a period of education and outreach. The
Agency believes that the six month period provided for in the interim
final rule is adequate time for retailers and suppliers to adapt to the
COOL program requirements. In addition, the Agency will continue to
ensure that retailers and suppliers are educated on the Agency's
compliance and enforcement procedures so that the regulated industries
have clear expectations as to how the Agency will enforce this rule.
With regard to using up existing packaging inventories, this final rule
does not require that covered commodities are individually labeled with
COOL information. Retailers can use placards and other signage to
convey origin information.
Miscellaneous
WTO/NAFTA Trade Agreements
Summary of Comments: Several commenters expressed concern that COOL
may violate U.S. trade commitments under the World Trade Organization
and the North American Free Trade Agreement, and that provisions of the
COOL regulation ignore the reality of an integrated North American meat
and livestock industry. Two foreign governments expressed that the
amendments passed with the 2008 Farm Bill are still cause for concern,
and that as they have consistently expressed in the past, COOL
requirements should be consistent with the United States' international
trade obligations. One commenter pointed out that the Codex General
Standard for the Labeling of Prepackaged Food was considered adequate
in the U.S. system for a number of years and will continue to remain
the standard for retailers outside of the U.S. The commenter further
stated that it remains the most practical, and also the most adaptable,
to evolving commercial practice and growing international trade; and
yet it is not the standard adopted in the COOL regulations.
One commenter stated that the COOL statute and regulation will
likely result in discrimination against imported product, contrary to
U.S. obligations under the WTO Agreement on Technical Barriers to
Trade. The commenter indicated that despite changes in the law and the
IFR that have made it less onerous for regulated firms to comply with
the requirements of the regulation, COOL will still discriminate
against imported cattle and beef. This commenter warned that the
industry practice of importing cattle for feeding and/or slaughter will
be discouraged by the increased complexity associated with the
identification, segregation, and labeling requirements mandated for the
resulting products to be sold at retail. This commenter suggested that
the simplest solution would be to allow processors and retailers to
label ground product with ``May contain U.S. and imported meat'' with
the option to list the specific countries if the producer or its
customers so desired. Another commenter acknowledged that the IFR makes
some concessions to earlier complaints by trading partners with
concerns regarding the compatibility of COOL with the WTO obligations
of the United States.
Agency Response: With respect to the commenters' concern regarding
[[Page 2679]]
international trade obligations, the Agency has considered these
obligations throughout the rulemaking process and concludes that this
regulation is consistent with U.S. international trade obligations.
Further, as described more fully in the Summary of Changes section of
this rule, the Agency has made a number of modifications in this final
rule that provide additional labeling flexibilities. In addition, the
Agency has worked closely with USDA's Foreign Agricultural Service to
educate U.S. trading partners on the requirements of COOL and to assist
them in complying with the regulation.
In regards to a commenter's statement that when a food undergoes
processing in a second country that changes its nature, the country in
which the processing is performed shall be considered to be the country
of origin for the purposes of labeling, existing CBP rules and
regulations with respect to determining origin of imported products
apply to the extent that it is permissible under the statute. However,
it is not permitted under the statute to consider imported products
that are substantially transformed in the U.S. to be of U.S. origin as
they do not meet the definition of U.S. origin provided in the Act.
With regard to the comment to allow a label to state ``May contain
U.S. and imported meats,'' the Agency does not believe this type of
labeling meets the intent of the statute. Accordingly, this
recommendation is not adopted.
COOL as a Food Safety Program
Summary of Comments: Commenters expressed differing opinions
regarding whether or not COOL serves as a food safety program. Several
commenters expressed the opinion that COOL is a retail labeling program
that does not provide a basis for addressing food safety. The
commenters argued that the U.S. has a safe food safety system; that all
meat sold at retail, whether grown domestically or imported, must be
inspected and declared safe for human consumption; and that country of
origin labeling is solely a marketing tool. One commenter found it
particularly problematic that mandatory COOL has been portrayed by some
advocates as contributing to efforts to make America's food safe, yet
there is no provision in the COOL statute or the interim final rule
that prescribes food safety or inspection standards. Another noted that
the food production, supply and retailing industry needs to help
consumers understand that geography cannot become shorthand for food
safety. Several commenters noted that Congressional intent is clear
that COOL is not intended to be a traceability law, but merely to
provide country of origin information to consumers. These commenters
urged the Agency to implement COOL in a way that is true to its goal to
inform consumers about where produce comes from, not create a new
regulatory infrastructure. Other commenters noted their support for the
provision of accurate information to consumers as required by the law
and agreed with the Agency's statement in the preamble that this law is
not a food safety law.
Two commenters wrote that COOL can serve as a risk management
measure. One commenter suggested that developing countries, which may
not have as stringent food safety regulations and/or have not
implemented/enforced those regulations as rigorously as the U.S., may
export hazardous food products. Another commenter referred to a GAO
study that reported three elements of food-safety systems that were
critical to respond to outbreaks of food borne illness: Traceback
procedures that allow industry and government officials to quickly
track food products to origin to minimize harm to consumers and the
impact on business; cooperative arrangements between veterinarians and
public health officials to document the names of suppliers and
customers as well as the dates of delivery; and authority to recall a
product from the market. The commenter noted that such food-safety
systems depend on a verifiable chain of custody for food products that
the COOL program can help institute. The commenter further stated that
the COOL law provides for traceback provisions and for cooperative
partnerships with states.
Agency Response: As previously stated, the COOL program is neither
a food safety or traceability program, but rather a consumer
information program. Food products, both imported and domestic, must
meet the food safety standards of the FDA and FSIS. Food safety and
traceability are not the stated intent of the rule and the COOL program
does not replace any other established regulatory programs that related
to food safety or traceability.
USDA COOL Labeling Surveys
Summary of Comments: Two commenters requested that USDA conduct
nationwide retail surveys to gather information regarding country of
origin labeling. One commenter requested that the Agency conduct a
``nationwide retail meat labeling survey'' within the year to discern
the amount of product, the kind of product and the locations where
exclusively U.S. labeled meat is being sold. The second commenter
suggested that the Agency insert additional data entry points in the
retail survey instrument used for existing retail reviews. The
commenter encouraged the Agency to gather information relative to the
availability and price of meat items by origin at the retail stores
under review. Furthermore, the commenter requested this information be
reported to the House Committee on Agriculture and the House Committee
on Appropriations 60 and 90 days after the labeling law takes effect.
Agency Response: The Agency is currently reviewing possible methods
to collect data relative to the availability and price of meat items by
origin at the retail stores under review. The Agency will work with
members of Congress to provide any information collected to the
appropriate Congressional committees.
Existing State Programs
Summary of Comments: One commenter agreed that the Agency had
properly concluded that the COOL law preempts conflicting federal and
state laws. This commenter stated it is imperative that companies
subject to the federal statute be subject to one uniform set of
regulatory requirements. One commenter agreed that it is preferable for
producers to have one law to govern compliance, but suggested it is
also important that the maximum amount of product information be
provided to consumers as intended by the COOL legislation. In the event
of conflict, this commenter preferred that the Agency err on the side
of more information to the consumer rather than less, and asked the
Agency to allow the States maximum flexibility to enforce their own
laws, if doing so will provide the most information to the consumer.
Agency Response: This rule has been reviewed under Executive Order
13132, Federalism. This Order directs agencies to construe, in
regulations and otherwise, a Federal statute to preempt State law only
where the statute contains an express preemption provision or there is
some other clear evidence to conclude that the Congress intended
preemption of State law, or where the exercise of State authority
conflicts with the exercise of Federal authority under the Federal
statute. This rule is required by the 2002 Farm Bill, as amended by the
2008 Farm Bill. While this statute does not contain an express
preemption provision, it is clear from the language in the statute that
Congress intended preemption of State law. The law assigns enforcement
responsibilities to the Secretary and encourages the Secretary to enter
into
[[Page 2680]]
partnerships with States with enforcement infrastructure to assist in
the administration of the program.
Impacts on Livestock Producers and Meat Packers
Summary of Comments: Several commenters felt that a large portion
of the implementation costs will be shouldered by the meat production
and packing industry because there is little evidence that consumers
are willing to pay more for products bearing country of origin
information and that these additional costs will not be successfully
passed through the supply chain. These commenters concluded that the
costs of COOL implementation and compliance will be highly detrimental
to the livelihood of numerous small meat processors. One meat packer
observed that COOL will require the company to incur additional costs
due to the recordkeeping and labeling requirements. Due to the nature
of the business, the company relies on livestock producers to provide
and verify origin information, yet as the originator of covered
commodities derived from those animals, the burden of proof is on the
company in the event the source information is ever questioned. Because
there is no universal animal identification system in place to provide
meat processors with proper background information, meat processors do
not have readily available information with which to accurately label
covered products. One commenter noted that COOL costs to livestock
producers will be $9 per head. This commenter was concerned that cattle
owners will end up paying all costs as other sectors of the supply
chain work on margin. This commenter urged USDA to consider costs when
implementing this law since extra costs would be detrimental to
consumers and producers.
Numerous state and national pork producer organizations submitted
comments contending that the majority of program costs would be driven
by two factors: Disruption of product flow through packers caused by
differentiated labels and record-keeping burdens for producers and
packers.
One commenter stated that since the true costs of COOL are as yet
vague, and the burden of who is going to pay for the cost of additional
recordkeeping requirements and labeling is unknown, the recordkeeping
and documentation requirements should be designed so American producers
do not end up paying for COOL.
Agency Response: The Agency believes that firms and establishments
throughout the supply chain for affected commodities will incur costs
associated with the implementation of COOL. This includes producers,
intermediaries, and retailers. Increased costs are likely to be
absorbed by all firms and establishments throughout the supply chain
and some costs may be passed on to consumers.
As previously stated, the Agency believes that voluntary use of the
National Animal Identification System is a straightforward option
packers may utilize to obtain origin information on livestock. In
addition, following the implementation of the August 1, 2008, interim
final rule, a coalition of representatives from throughout the
livestock and meat industries established a universal affidavit to
convey country of origin information. This rule provides flexibility in
how the required country of origin information is conveyed along the
supply chain, thus enabling firms to implement the requirements with
the least possible disruption to cost-efficient production methods and
trade flows.
Costs on Affected North American Industries
Summary of Comments: One commenter expressed concern that COOL will
impose unnecessary costs on affected North American industries. The
commenter stated that the substantial volume of two-way trade between
Canada and the United States has been a testament to the integrated and
cooperative nature of many of our industries and that trade with Canada
supports more than 7.1 million jobs in the United States. The commenter
further stated that trade is also vital in the agricultural sector
where Canada is the largest single-country export market for the United
States with more than US$15 billion in sales last year.
Agency Response: As discussed more fully in the Regulatory Impact
Analysis, the results of the Computable General Equilibrium (CGE) model
suggest that overall impacts on trade in livestock and meats will be
relatively small. The rule allows considerable flexibility, thus
enabling firms to implement the requirements with the least possible
disruption to cost-efficient production methods and trade flows.
Marketing Exclusion of Imported and Certain Domestically Produced Meat
Summary of Comments: One commenter expressed concern about the
impact that mandatory COOL will have on imported beef, particularly
ground beef at retail. The commenter stated that mandatory origin
labeling will add significantly to meat production costs at a time of
rapidly increasing food costs, and consumers will have to bear the
additional expense resulting from the labeling regime. This commenter
was therefore concerned that retailers will be induced to simplify
their labeling obligations by excluding imported and certain domestic
beef from ground beef in order to minimize the resulting increase in
the costs that will be associated with compliance. Another commenter
reported that over the last several years, the total number of Mexican
cattle crossing into the U.S. has ranged from 820,000 head to 1,200,000
per year, and that those numbers per year represent less than a two-
week kill volume on a national basis. The commenter concluded that the
loss to both the Mexican rancher and the U.S. producer will be
considerable. Another commenter indicated that there is no question
that while a vast majority of fresh beef in the retail sector is U.S.
beef, it remains a huge question as to the benefit of identifying U.S.
beef and adding costs to the producers and to consumers.
One commenter provided a more detailed assessment of potential
costs associated with this legislation and its regulations. The
commenter noted their belief that COOL is already causing economic
losses and threatening the survival of the hog industry in Manitoba,
Canada. The commenter pointed out that hog producers in Manitoba have
developed an integrated supply chain with family hog farms in the mid-
West U.S. by supplying over four million weanlings per year, and over
one million finished pigs to packing plants in this area. Finally, the
commenter stated that if the changes wrought in the marketplace by this
legislation continue, Manitoba producers will lose about $200 million
in finished hog sales to U.S. packers. This commenter reported that it
is currently preparing an assessment of the immediate financial impact
on its members and provided some examples of recent economic setbacks
to producers.
Agency Response: The Agency believes that there may be some
adjustment costs as industry adapts to the requirements of the rule.
Over the longer run, however, the Agency believes that uncertainty will
lessen and firms will continue to seek sources of livestock and meat
products consistent with efficient production and marketing operations.
It is believed that the major cost drivers for the rule occur when
livestock or other covered commodities are transferred from one firm to
another, when livestock or other covered commodities are commingled in
the production or marketing process, and
[[Page 2681]]
when products are assembled and then redistributed to retail stores. In
part, some requirements of the rule will be accomplished by firms using
essentially the same processes and practices as are currently used, but
with information on country of origin added to the processes. This
adaptation generally would require relatively small marginal costs for
recordkeeping and identification systems. In other cases, however,
firms may need to revamp current operating processes to implement the
rule. For example, a processing or packing plant may need to sort
incoming products by country of origin and, if applicable, method of
production in addition to weight, grade, color, or other quality
factors. This may require adjustments to plant operations, line
processing, product handling, and storage. Ultimately, it is
anticipated that a mix of solutions will be implemented by industry
participants to effectively meet the requirements of the rule.
Quantifying Benefits of COOL
Summary of Comments: One commenter expressed disappointment that
the Department continues to deny any benefits or consumer desire for
COOL. This commenter stated that since the COOL debate began, the
number of consumers and organizations supporting the mandatory program
has only expanded. The commenter further stated that numerous surveys
and polls have indicated that consumers overwhelmingly support COOL and
are willing to pay a premium for U.S.-origin labeled products and cited
a June 2007 Consumer Reports poll, which found 92 percent of consumers
think food should be labeled with country of origin information.
Several other commenters noted that all consumers will pay to secure
these labeling benefits demanded by a small minority.
Agency Response: As stated in the Regulatory Impact Analysis, the
Agency concludes after reviewing many studies and comments, the
economic benefits from COOL will be small and will accrue mainly to
those consumers who desire country of origin information. Several
analysts concluded that the main benefit is the welfare effect
resulting from removing informational distortions associated with not
knowing the origin of products. Numerous comments received during the
rulemaking process indicate that there clearly is interest by some
consumers in the country of origin of food. The mandatory COOL program
may provide additional benefits to these consumers. However, commenters
provided no additional substantive evidence to alter the Agency's
conclusion that the measurable economic benefits of mandatory COOL will
be small. Additional information and studies cited by commenters were
of the same type identified in the IRIA--namely, consumer surveys and
willingness-to-pay studies, including the most recent studies reviewed
for this analysis. The Agency does not believe that these types of
studies provide a sufficient basis to estimate the quantitative
benefits, if any, of COOL.
Improvements That Reduce COOL Costs
Summary of Comments: One commenter noted that USDA has made the
definition of a ``processed food item'' consistent with the definition
used in the interim final rule for fish and shellfish, thereby reducing
the number of affected establishments significantly. The commenter
further noted that the estimated first-year implementation cost per
producer operation is an average of $258, significantly lower than
previously stated. This commenter regarded the implementation cost
estimate as generally accurate. Another commenter noted that the use of
producer affidavits and reliance on visual inspection should
satisfactorily reduce costs of program compliance since import brands
are highly visible. Another commenter pointed out that Congressional
intent regarding the level of burden this law should impose on industry
is clear. In the 2008 Farm Bill, Congress included provisions that
expressly restrict USDA's ability to impact current business practices
under the mandatory country of origin labeling law.
A final commenter added comments related to USDA's administration
of the program. This commenter believes the final rule should make it
clear that it is essential that all costs to administer this program
must be supported by USDA's appropriated budget, and should not be paid
by an assessment of user fees or divert USDA staff time and commitment
from other AMS programs for which user fees are required.
Agency Response: The Agency is implementing COOL in the most cost-
effective way available while still meeting Congressional mandates. The
Agency currently receives appropriated funds for the administration of
the mandatory COOL program for fish and shellfish. As the budget for
fiscal year 2009 has not yet been passed, it is unknown at this time
whether the COOL program will received additional appropriated funds to
administer the program for all covered commodities.
COOL as an Economic Barrier to Entry
Summary of Comments: One commenter predicted that COOL will provide
an economic barrier to entry for smaller companies that may wish to
enter the food supply industry. This commenter noted that consumers who
wish to avoid products that do not declare the country of origin are
already free to do so. As a result, this commenter predicted that COOL
will cost all consumers, but particularly those consumers who do not
demand country of origin information.
Agency Response: The Agency agrees that COOL will benefit those
consumers who are seeking and using country-of-origin information in
their purchasing decisions. However, the costs will be absorbed by all
consumers shopping at covered retailers. The Agency disagrees that COOL
will provide a barrier to entry for smaller companies that may wish to
enter the food supply industry. These companies may decide to supply
products to retailers or food service companies not covered by COOL.
There is little evidence to support conclusions that complying with
COOL is more costly for small firms as opposed to larger firms. Indeed,
the likelihood is that smaller-scale operations would have more
flexibility in implementation of COOL requirements compared to larger
operations.
Executive Order 12866--Final Regulatory Impact Analysis
USDA has examined the economic impact of this final rule as
required by Executive Order 12866. USDA has determined that this
regulatory action is economically significant, as it is likely to
result in a rule that would have an annual effect on the economy of
$100 million or more in any one year. This rule has been reviewed by
the Office of Management and Budget (OMB). Executive Order 12866 and
OMB Circular A-4 requires that a regulatory impact analysis be
performed on all economically significant regulatory actions.
This final rule defines covered commodities as muscle cuts of beef,
lamb, goat, pork, and chicken; ground beef, ground lamb, ground pork,
ground goat, and ground chicken; wild and farm-raised fish and
shellfish; perishable agricultural commodities; ginseng; peanuts;
macadamia nuts; and pecans. Thus, this regulatory impact assessment
addresses the economic impacts of all covered commodities as defined by
law.
This regulatory impact assessment reflects revisions to the Interim
Regulatory Impact Assessment (IRIA)
[[Page 2682]]
(73 FR 45106). Revisions to the IRIA were made as a result of changes
to the rule relative to the August 1, 2008, interim final rule, and the
interim final rule for wild and farm-raised fish and shellfish
published October 5, 2004, Federal Register (69 FR 89708).
The Comments and Responses section includes the comments received
and provides the Agency's responses to the comments. When substantially
unchanged, results of the IRIA are summarized herein, and revisions are
described in detail. Interested readers are referred to the text of the
IRIA for a more comprehensive discussion of the assumptions, data,
methods, and results.
Summary of the Economic Analysis
The estimated economic benefits associated with this final rule are
likely to be small. The estimated first-year incremental costs for
growers, producers, processors, wholesalers, and retailers are $2.6
billion. The estimated cost to the United States economy in higher food
prices and reduced food production in the tenth year after
implementation of the rule is $211.9 million.
Note that this analysis does not quantify certain costs of the rule
such as the cost of the rule after the first year, or the cost of any
supply disruptions or any other ``lead-time'' issues. Except for the
recordkeeping requirements, there is insufficient information to
distinguish between first year start up and maintenance costs versus
ongoing maintenance costs for this final rule. Maintenance costs beyond
the first year are expected to be lower than the combined start up and
maintenance costs required in the first year.
While USDA recognizes that there appears to be consumer interest in
knowing the origin of food based on the comments received, USDA finds
little evidence that private firms are unable to provide consumers with
country of origin labeling (COOL) consistent with this regulation, if
consumers are willing to pay a price premium for it. USDA also finds
little evidence that consumers are likely to increase their purchase of
food items bearing the United States origin label as a result of this
rulemaking. Current evidence does not suggest that United States
producers will receive sufficiently higher prices for United States-
labeled products to cover the labeling, recordkeeping, and other
related costs. The lack of widespread participation in voluntary
programs for labeling products of United States origin provides
evidence that consumers do not have strong enough preferences for
products of United States origin to support price premiums sufficient
to recoup the costs of labeling.
Statement of Need
Justification for this final rule remains unchanged from the IRIA.
This rule is the direct result of statutory obligations to implement
the COOL provisions of the 2002 and 2008 Farm Bills. There are no
alternatives to federal regulatory intervention for implementing this
statutory directive.
The COOL provisions of the Act changed federal labeling
requirements for muscle cuts of beef, pork, lamb, goat, and chicken;
ground beef, ground pork, ground lamb, ground goat, and ground chicken;
wild and farm-raised fish and shellfish; perishable agricultural
commodities; ginseng; peanuts; macadamia nuts; and pecans (hereafter,
covered commodities).
As described in the IRIA, the conclusion remains that there does
not appear to be a compelling market failure argument regarding the
provision of country of origin information. Comments received on the
IRIA and previous requests for comments elicited no evidence of
significant barriers to the provision of this information other than
private costs to firms and low expected returns. Thus, from the point
of view of society, such evidence suggests that market mechanisms would
ensure that the optimal level of country of origin information would be
provided.
Alternative Approaches
The IRIA noted that many aspects of the mandatory COOL provisions
contained in the Act are prescriptive and provide little regulatory
discretion for this rulemaking. As stated previously, this final rule
provides flexibility in implementation to the extent allowed by the
statute. Some commenters suggested that USDA explore more opportunities
for less costly regulatory alternatives. Specific suggestions focused
on methods for identifying country of origin, recordkeeping
requirements, and the scope of products required to be labeled.
A number of comments on the IRIA and previous requests for comment
suggested that USDA adopt a ``presumption of United States origin''
standard for identifying commodities of United States origin. Under
this standard, only imported livestock and covered commodities would be
required to be identified and tracked according to their respective
countries of origin. Any livestock or covered commodity not so
identified would then be considered by presumption to be of United
States origin. As stated in this final rule, the Agency is allowing for
producers to issue affidavits based upon a visual inspection at or near
the time of sale that identifies the origin of livestock for a specific
transaction. Affidavits based on visual inspection may only be issued
by the producer or owner prior to, and including, the sale of the
livestock for slaughter (i.e., meat packers are not permitted to use
visual inspection for origin verification).
A number of commenters suggested that USDA reduce the recordkeeping
burden for the rule. For retailers, this rule requires records and
other documentary evidence relied upon at the point of sale by the
retailer to establish a covered commodity's country(ies) of origin and
method of production (wild and/or farm-raised), as applicable, to be
either maintained at the retail facility or at another location for as
long as the product is on hand and provided to any duly authorized
representative of USDA, upon request, within 5 business days of the
request. For pre-labeled products, the label itself is sufficient
information on which the retailer may rely to establish the product's
origin and method of production, as applicable, and no additional
records documenting origin and method of production information are
necessary. Under the August 1, 2008, interim final rule, retailers were
required to maintain these records for a period of 1 year.
These changes in recordkeeping requirements should lessen the
number of changes that entities in the distribution chain need to make
to their recordkeeping systems and should lessen the amount of data
entry that is required.
As noted in the IRIA, the law stated that COOL applies to the
retail sale of covered commodities other than fish and shellfish
beginning September 30, 2008. The implementation date for fish and
shellfish covered commodities was September 30, 2004.
III. Analysis of Benefits and Costs
As in the IRIA, the baseline for this analysis is the present state
of the affected industries absent mandatory COOL. USDA recognizes that
most affected firms have already begun to implement changes in their
operations to accommodate the law and the requirements of the August 1,
2008, interim final rule. Therefore, we will also discuss changes in
the final rule analysis due to regulatory changes between the IFR and
final rule.
Because the Act contains an effective date of September 30, 2004,
for wild and farm-raised fish and shellfish and September 30, 2008, for
all other covered commodities, the economic
[[Page 2683]]
impacts of the rule will be staggered by four years. The analysis
herein of benefits and costs of the rule abstracts away from the
staggered dates of implementation and treats all commodities as having
the same effective date of implementation. Since a two-pronged approach
was used to estimate the costs of this rule, direct fish and shellfish
costs have been updated using more recent data and included to estimate
the overall impacts of this rule on the United States economy even
though labeling of fish and shellfish was implemented in 2004. The
results of the analysis are not significantly affected by this
simplifying assumption.
Benefits: The expected benefits from implementation of this rule
are difficult to quantify. The Agency's conclusion remains unchanged,
which is that the economic benefits will be small and will accrue
mainly to those consumers who desire country of origin information.
Several analysts conclude that the main benefit is the welfare effect
resulting from removing informational distortions associated with not
knowing the origin of products (Ref. 1). Numerous comments received on
previous COOL rulemaking actions indicate that there clearly is
interest by some consumers in the country of origin of food. The
mandatory COOL program may provide additional benefits to these
consumers. However, commenters provided no additional substantive
evidence to alter the Agency's conclusion that the measurable economic
benefits of mandatory COOL will be small. Additional information and
studies cited by commenters were of the same type identified in the
IRIA--namely, consumer surveys and willingness-to-pay studies,
including the most recent studies reviewed for this analysis (Ref. 2;
Ref. 3). The Agency does not believe that these types of studies
provide a sufficient basis to estimate the quantitative benefits, if
any, of COOL.
There are several limitations with the willingness-to-pay
contingent valuation studies that call into question the
appropriateness of using this approach to make determinations about the
benefits to consumers of this rule. First, respondents in such studies
may overstate their willingness to pay for a product. This typically
happens because survey participants are not constrained by their normal
household budgets when they are deciding which product or product
feature they most value. Second, in most of these willingness-to-pay
studies, consumers are not faced with the actual or full choices they
would face at retail outlets, such as all of the labeling options
allowed under this final rule. In practice, this may distort valuations
obtained from such studies, leading to both over and underestimation.
Finally, the results reported from these studies do not take into
account changes in consumers' preferences for a particular product or
product attribute over time.
As was the case in the interim final rule for fish and shellfish, a
few commenters suggested that mandatory COOL would provide food safety
benefits to consumers. As discussed in the IRIA, mandatory COOL does
not address food safety issues. Appropriate preventative measures and
effective mechanisms to recall products in the event of contamination
incidents are the means used to protect the health of the consuming
public regardless of the form in which a product is consumed or where
it is purchased. In addition, foods imported into the United States
must meet food safety standards equivalent to those required of
products produced domestically.
Costs: To estimate the costs of this rule, a two-pronged approach
was employed. First, implementation costs for firms in the industries
directly affected by the rule were estimated. The implementation costs
on directly affected firms represent increases in capital, labor, and
other input costs that firms will incur to comply with the requirements
of the rule. These costs are expenses that these particular firms must
incur, and thus represent the opportunity costs of the rulemaking.
These costs, however, are not necessarily dead weight losses to the
United States economy, as measured by the value of goods and services
that are produced. This is simply because increases in capital, labor,
and other inputs necessary to comply with the rule will benefit the
providers of such inputs. In order to estimate the net decrease in
economic activity as a result of this rulemaking, the implementation
cost estimates were applied to a general equilibrium model to estimate
overall impacts on the United States economy after a 10-year period of
economic adjustment. The general equilibrium model provides a means to
estimate the change in overall consumer purchasing power after the
economy has adjusted to the requirements of the rule. In addition,
since the Department has not identified a market failure associated
with this rulemaking and therefore does not believe the rule would have
measurable economic benefits, we believe this net decrease in economic
activity can be considered the overall net costs (benefits minus costs)
of this rulemaking.
Details of the data, sources, and methods underlying the cost
estimates are provided in the IRIA and the previous PRIA's. This
section provides the revised cost estimates and describes revisions
made to the IRIA for this final analysis.
First-year incremental costs for directly affected firms are
estimated at $2.6 billion, an increase of $0.1 billion over the IRIA
due to the inclusion of fish and shellfish. Costs per firm are
estimated at $370 for producers, $48,219 for intermediaries (such as
handlers, importers, processors, and wholesalers), and $254,685 for
retailers.
To assess the overall net impacts of the higher costs of production
resulting from the rule, a computational general equilibrium (CGE)
model of the model of the United States economy developed by USDA's
Economic Research Service (ERS) (Ref 4) was used. The model was
adjusted by imposing the estimated implementation costs on the directly
impacted segments of the economy. That is, the costs of production for
directly affected firms increase due to the costs of implementing the
COOL program. These increased costs of production were imposed on the
CGE model. The model estimates changes in prices, production, exports,
and imports as the directly impacted industries adjust to higher costs
of production over the longer run (10 years). The CGE model covers the
whole United States economy, and estimates how other segments of the
economy adjust to changes emanating from the directly affected segments
and the resulting change in overall productivity of the economy.
Overall net costs to the United States economy in terms of reduced
purchasing power resulting from a loss in productivity after a 10-year
period of adjustment are estimated at $211.9 million in the tenth year.
Domestic production for all of the covered commodities at the producer
and retail levels is estimated to be lower, and prices are estimated to
be higher, compared to the absence of this rulemaking. In addition,
United States exports are estimated to decrease for all covered
commodities. Compared to the baseline of no mandatory COOL, United
States imports are estimated to increase for fruits and vegetables,
cattle and sheep, hogs, chicken, and fish. United States imports of
broilers, beef and veal, and pork are estimated to decrease.
The findings indicate that, consistent with standard economic
theory, directly affected industries recover the higher costs imposed
by the rule through slightly higher prices for their products. With
higher prices, the quantities of their products demanded also decline.
Consumers pay slightly more for the
[[Page 2684]]
products and purchase less of the covered commodities. Overall, the
model indicates that the net loss to society, or ``deadweight'' burden
of the rule, is considerably smaller than the incremental opportunity
costs to directly affected firms that were imposed on the model. The
remainder of this section describes in greater detail how the estimated
direct, incremental costs and the overall costs to the United States
economy are developed.
Cost assumptions: This rule directly regulates the activities of
retailers (as defined by the law) and their suppliers. Retailers are
required by the rule to provide country of origin information for the
covered commodities that they sell, and firms that supply covered
commodities to these retailers must provide them with this information.
In addition, virtually all other firms in the supply chain for the
covered commodities are potentially affected by the rule because
country of origin information will need to be maintained and
transferred along the entire supply chain.
Number of firms and number of establishments affected: This rule is
estimated to directly or indirectly affect approximately 1,333,000
establishments owned by approximately 1,299,000 firms. Table 1 provides
estimates of the affected firms and establishments.
Table 1--Estimated Number of Affected Entities
------------------------------------------------------------------------
Type Firms Establishments
------------------------------------------------------------------------
Beef, Lamb, Pork, and Goat
Cattle and Calves............. 971,400 971,400
Sheep and Lambs............... 69,090 69,090
Hogs and Pigs................. 65,540 65,540
Goats......................... 9,146 9,146
Stockyards, Dealers & Market 6,807 6,807
Agencies.....................
Livestock Processing & 2,943 3,207
Slaughtering.................
Meat & Product Wholesale...... 2,509 2,706
Chicken
Chicken Producer and Processor 38 168
Chicken Wholesaler/Distributor 510 564
Fish
Farm-Raised Fish and Shellfish 3,752 3,752
Fishing....................... 71,128 71,142
Fresh & Frozen Seafood 516 590
Processing...................
Fish & Seafood Wholesale...... 2,254 2,330
Perishable Agricultural
Commodities
Fruits & Vegetables........... 79,800 79,800
Ginseng Farms................. 190 190
Ginseng Dealers............... 46 46
Frozen fruit, juice & 155 247
vegetable mfg................
Fresh fruit & vegetable 4,654 5,016
wholesale....................
Peanuts, Pecans, & Macadamia Nuts
Peanut Farming................ 650 650
Macadamia Farming............. 53 53
Pecan Farming................. 1,119 1,119
Roasted nuts & peanut butter 8 9
mfg..........................
Peanut, Pecan, & Macadamia 5 5
Wholesalers..................
General line grocery wholesalers.. 3,037 3,436
Retailers......................... 4,040 36,392
-------------------------------------
Totals:
Producers................. 1,271,906 1,272,050
Handlers, Processors, & 23,444 24,963
Wholesalers..............
Retailers................. 4,040 36,392
-------------------------------------
Grand Total........... 1,299,390 1,333,405
------------------------------------------------------------------------
It is assumed that all firms and establishments identified in Table
1 will be affected by the rule, although some may not produce or sell
products ultimately within the scope of the rule. While this assumption
likely overstates the number of affected firms and establishments, it
is believed that the assumption is reasonable. Detailed data are not
available on the number of entities categorized by the marketing
channels in which they operate and the specific products that they
sell.
Source of cost estimates: To develop estimates of the cost of
implementing this rule, comments on the interim final rule for beef,
pork, lamb, chicken, goat meat, perishable agricultural commodities,
peanuts, pecans, ginseng, and macadamia nuts as well as the interim
final rule for fish and shellfish were reviewed and available economic
studies were also examined. No single source of information, however,
provided comprehensive coverage of all economic benefits and costs
associated with mandatory COOL for all of the covered commodities.
Available information and knowledge about the operation of the supply
chains for the covered commodities were used to synthesize the findings
of the available studies about the rule's potential costs.
Cost drivers: This rule is a retail labeling requirement. Retail
stores subject to this rule will be required to inform consumers as to
the country of origin of the covered commodities that they sell. To
accomplish this task, individual package labels or other point-of-sale
materials will be required. If products are not already labeled by
suppliers, the retailer will be responsible for labeling the items or
providing the country of origin and, as applicable, method of
production information through other point-of-sale
[[Page 2685]]
materials. This may require additional retail labor and personnel
training. Modification of existing recordkeeping systems will likely be
required to ensure that products are labeled accurately and to permit
compliance and enforcement reviews. For most retail firms of the size
defined by the statute (i.e., those retailing fresh and frozen fruits
and vegetables with an invoice value of at least $230,000 annually), it
is assumed that recordkeeping will be accomplished primarily by
electronic means. Modifications to recordkeeping systems will require
software programming and may entail additional computer hardware.
Retail stores are also expected to undertake efforts to ensure that
their operations are in compliance with the rule.
Prior to reaching retailers, most covered commodities move through
distribution centers or warehouses. Direct store deliveries (such as
when a local truck farmer delivers fresh produce directly to a retail
store) are an exception. Distribution centers will be required to
provide retailers with country of origin and, as applicable, method of
production information. This 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. Additional labor and
training may be required to accommodate new processes and procedures
needed to maintain the flow of country of origin and, as applicable,
method of production information through the distribution system. There
may be a need to further separate products within the warehouse, add
storage slots, and alter product stocking, sorting, and picking
procedures.
Packers and processors of covered commodities will also need to
inform retailers and wholesalers as to the country of origin and, as
applicable, method of production (wild and/or farm-raised) of the
products that they sell. To do so, their suppliers will need to provide
documentation regarding the country of origin and, as applicable,
method of production of the products that they sell. The efficiency of
operations may be affected as products move through the receiving,
storage, processing, and shipping operations. For packers and
processors handling products from multiple origins and/or methods of
production, there may also be a need to separate shifts for processing
products from different origins, or to split processing within shifts,
or to alter labels to correctly identify the country or countries of
origin and method or methods of production, as applicable. However, in
the case of meat covered commodities, there is flexibility in labeling
covered commodities of multiple origins under this final rule. In the
case where products of different origins are segregated, our analysis
indicates costs are likely to increase. The rule requires that records
be maintained to ensure that accurate country of origin information is
retained throughout the process and available to permit compliance and
enforcement reviews.
Processors handling only domestic origin products or products from
a single country of origin may have lower implementation costs compared
with processors handling products from multiple origins, although such
costs would likely be mitigated in those cases where firms are only
using covered commodities which are multiple-origin labeled.
Procurement costs also may be unaffected in this case, if the processor
is able to continue sourcing products from the same suppliers.
Alternatively it is possible that a processor currently sourcing
products from multiple countries may choose to limit its source to
fewer countries. In this case, such cost avoidance may be partially
offset by additional procurement costs to source supplies from a
narrower country of origin. Additional procurement costs of a narrower
supply chain may include higher transportation costs due to longer
shipping distances and higher acquisition costs due to supply and
demand conditions for products from a particular country of origin,
whether domestic or foreign.
At the production level, agricultural producers and fish and
shellfish harvesters need to maintain records to establish country of
origin and, as applicable, method of production information for the
products they produce and sell. Country of origin and, as applicable,
method of production information will need to be transferred to the
first handler of their products, and records sufficient to allow the
source of the product to be traced back will need to be maintained as
the products move through the supply chains. For all covered
commodities, producer affidavits shall be considered acceptable records
on which suppliers may rely to initiate country of origin and, as
applicable, method of production claims. In general, additional
producer costs include the cost of modifying and maintaining a
recordkeeping system for country of origin information, animal or
product identification, and labor and training.
Incremental cost impacts on affected entities: To estimate the
direct costs of this rule, the focus is on those units of production
that are affected (Table 2).
Table 2--Estimated Annual Units of Production Affected by Mandatory Country of Origin Labeling
--------------------------------------------------------------------------------------------------------------------------------------------------------
Peanuts,
Lamb and Fruit, pecans, and
Beef Pork goat Chicken Fish vegetable, macadamia
and ginseng nuts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Million head
Million pounds
--------------------------------------------------------------------------------------------------------------------------------------------------------
Producer..................................................... 33.9 104.8 2.9 45,012.9 7,808.0 120,388.5 212.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Million pounds
--------------------------------------------------------------------------------------------------------------------------------------------------------
Intermediary................................................. 24,890 6,721 354 27,710 3,024 99,449 11
--------------------------------------------------------------------------------------------------------------------------------------------------------
Retailer..................................................... 8,193 2,330 133 17,645 1,104 47,078 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
For livestock, the relevant unit of production is an animal because
there will be costs associated with maintaining country of origin
information on each animal. These costs may include recordkeeping, ear
tagging, and other related means of identification on either an
individual animal or lot basis. Annual domestic slaughter numbers are
used to estimate the flow of animals through the live
[[Page 2686]]
animal production segment of the supply chain.
For fish and chicken producers, production is measured by round
weight (live weight) pounds, except mollusks, which excludes the weight
of the shell. Wild caught fish and shellfish production is measured by
United States domestic landings for fresh and frozen human food. It is
assumed that fish harvesters generally know whether their catch is
destined for fresh and frozen markets, canning, or industrial use. Fish
production also includes farm-raised fish. Fish production has been
updated with 2006 data from the regulatory analysis contained in the
interim final rule for fish and shellfish.
For fruits and vegetables, it is assumed that essentially all
production is predestined for either fresh or processing use. That is,
growers know before the crop is produced whether it will be sold for
fresh consumption or for processing. However, producers do not know
whether their products ultimately will be sold to retailers,
foodservice firms, or exporters. Therefore, it is assumed that all
fresh fruit and vegetable production and production destined for frozen
processors at the producer level will be affected by this rule. Ginseng
production has been included with the fruit and vegetable production.
As previously discussed, only green and raw peanuts, macadamia
nuts, and pecans sold at retail are subject to the requirements of this
rule. Green and raw peanuts are specialty items typically sold at
roadside stands, through mail order, and at specialty shops. These
items frequently are not carried by many of the retailers subject to
this rule. Statistics on the size of this niche market are not readily
available. It is assumed that no more than 5 percent of the sales of
peanuts at subject retailers are sold as green or raw peanuts.
Macadamia nuts and pecans have been included with peanuts.
It is assumed that all sales by intermediaries such as handlers,
packers, processors, wholesalers, and importers will be affected by the
rule. Although some product is destined exclusively for foodservice or
other channels of distribution not subject to the rule, it is assumed
that these intermediaries will seek to keep their marketing options
open for possible sales to subject retailers.
Fish production at the intermediary level is increased by 505
million pounds from the RIA estimate of 2004 in the interim final rule
for fish and shellfish due to more recently available data.
Information and data on ginseng is limited. However, the Wisconsin
Department of Agriculture reports the number of growers at 190, the
number of dealers at 46, and grower sales at 282,055 dry root pounds
for 2006 (Ref. 5). While some other regions in the country likely
produce ginseng, information could not be found and it is believed that
Wisconsin is the largest producing state. The information from
Wisconsin likely underestimates the total number of farms, dealers, and
production of ginseng. However, it is believed that Wisconsin
represents most of the ginseng production and therefore, this
information is used for this rule. Since the number of entities and
production are likely underestimated and the production is relatively
small as compared to other covered commodities, the production was not
adjusted for retail consumption.
The Census of Agriculture provides an estimate of the number of
macadamia nut farming operations. The total number of macadamia farms
is estimated at 1,059 [Ref. 6]. Businesses that husk and crack
macadamia nuts are unofficially estimated by the Hawaii Field Office of
the National Agricultural Statistical Service (NASS) at 8 firms and
establishments. Businesses that wholesale macadamia nuts are estimated
by the Hawaii Department of Agriculture at 21 firms and establishments.
Similar to peanuts, the rule exempts most product forms of macadamia
nuts sold at retail. While data on macadamia nuts sold at retail that
are covered by this rule are not available, the volume of sales is
certainly very small. For purposes of estimation, the number of
affected entities at each level of the macadamia nut sector has been
reduced to 5 percent of the total estimated. The number of farms has
been reduced from 1059 to 53 and the number of wholesalers has been
reduced from 21 to 1.
The Census of Agriculture provides an estimate of 22,371 pecan
farming operations [Ref. 7]. Similar to peanuts and macadamia nuts, the
rule exempts most product forms of pecans sold at retail. For purposes
of estimation, the number of affected entities at each level of the
pecan sector has been reduced to 5 percent of the total 22,371 to 1,119
farms.
As with peanut, macadamia nut, and pecan production at the producer
level, peanut, macadamia nut, and pecan production at the intermediary
level is also reduced by 95 percent. The estimate of peanut, macadamia
nut, and pecan production is intended to include only green and raw
peanuts, macadamia nuts, and pecans.
For retailers, food disappearance figures are adjusted to estimate
consumption through retailers as defined by the statute. For each
covered commodity, disappearance figures are multiplied by 0.470, which
represents the estimated share of production sold through retailers
covered by this rule. To derive this share, the factor of 0.622 is used
to remove the 37.8 percent food service quantity share of total food in
2006 (Ref. 8). This factor is then multiplied by 0.756, which was the
share of sales by supermarkets, warehouse clubs and superstores of food
for home consumption in 2006 (Ref. 9). In other words, supermarkets,
warehouse clubs and superstores represent the retailers as defined by
PACA, and these retailers are estimated to account for 75.6 percent of
retail sales of the covered commodities.
Table 3 summarizes the direct, incremental costs that firms will
incur during the first year as a result of this rule. These estimates
are derived primarily from the available studies that addressed cost
impacts of mandatory COOL.
Table 3--Estimates of First-Year Implementation Costs per Affected Industry Segment
[Million dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Peanuts,
Fruit, pecans, &
Beef Pork Lamb & goat Chicken Fish vegetable, macadamia Total
and ginseng nuts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Producer........................................ 305 105 10 0 20 30 0 470
Intermediary.................................... 373 101 5 139 15 497 0 1,130
Retailer........................................ 574 93 5 44 77 235 0 1,029
-------------------------------------------------------------------------------------------------------
Total....................................... 1,252 299 21 183 112 763 0 2,629
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 2687]]
Assumptions and procedures underlying the cost estimates are
described fully in the discussion of the estimates presented in the
PRIA and the IRIA.
Considering all producer segments together, we have estimated a $9
per head cost to cattle producers to implement the rule. This estimate
reflects the expectation of relatively small implementation costs at
the cow-calf level of production, but relatively higher costs each time
cattle are resold. Typically, fed steers and heifers change hands two,
three, or more times from birth to slaughter, and each exchange will
require the transfer of country of origin information. Thus, total
costs for beef producers are estimated at $305 million.
It is expected that intermediaries will face increased costs
associated with tracking cattle and the covered beef commodities
produced from these animals and then providing this information to
subsequent purchasers, which may be other intermediaries or covered
retailers. Incremental costs for beef packers may include additional
capital and labor expenditures to enable cattle from different origins
to be tracked for slaughter, fabrication, and processing. As previously
discussed, under this final rule, there is greater flexibility for
labeling muscle cut covered commodities. In addition, the rule also
provides for flexibility in labeling ground products by allowing the
notice of country of origin to include a list of countries contained
therein or that may reasonably be contained therein. Considering the
costs likely to be faced by intermediaries in the beef sector, $0.015
per pound is adopted as an estimate of costs, which is consistent with
estimates from the available studies. Total costs are thus estimated at
$373 million.
The implementation costs are estimated at $0.07 per pound for beef
retailers, for a total of $574 million. This figure reflects the costs
for individual package labels, meat case segmentation, record keeping
and information technology changes, labor, training, and auditing. In
addition, there likely will be increased costs for in-store butcher
department operations related to cutting, repackaging, and grinding
operations.
Total costs for affected entities in the beef sector are thus
estimated at $1,252 million.
Costs for pork producers are estimated at $1.00 per head. With
annual slaughter of 104.8 million head, total costs for producers are
estimated at $105 million.
Costs for all pork sector intermediaries (including handlers,
processors, and wholesalers) should be similar to costs for beef sector
intermediaries. These estimated costs for pork industry intermediaries
are $0.015 per pound, for a total of $101 million.
Costs for retailers of pork are estimated to be $0.04 per pound.
The per-pound cost estimate for pork is lower than for beef primarily
to reflect the higher costs incurred by in-store grinding operations to
produce ground beef. Although ground pork may also be produced in-
store, most ground pork is processed into sausage and other products
not covered by the rule. Total estimated costs for pork retailers are
$93 million. Total costs for the pork sector are estimated at $299
million.
Costs per head for lamb and goat producers are estimated at $3.50
per head. Total costs for lamb and goat producers are estimated at $10
million.
Intermediaries in the lamb and goat sector will likely face per-
pound costs similar to costs faced by beef and pork sector
intermediaries, which are estimated at $0.015 per pound. Total costs
for lamb and goat sector intermediaries are thus estimated at $5
million.
Costs to retailers for lamb and goat should be similar to costs
borne for pork, which was estimated at $0.04 per pound. Total costs for
retailers of lamb and goat are estimated at $5 million.
Total costs for producers, intermediaries, and retailers in the
lamb and goat industries are estimated costs at $21 million.
Costs for chicken producers who grow-out chicken for an integrator
(the firm that will slaughter and possibly further process the
chickens) is $0.00 because these individuals do not own or control the
movement of the chickens they are raising. All chickens produced are
owned by the integrator which is the main intermediary in the chicken
supply chain. We do not expect that producers will need change any
current practices and thus will not incur any additional costs due to
this rule.
Costs for the intermediaries in the chicken supply chain are
estimated to be $0.005 per pound. Since the integrators own their
chickens from the time they hatch to time they are sold to a retailer
or distributor, there is no need to ``collect'' country of origin
information. Costs to the integrator are mainly due to system changes
to incorporate COOL information, recordkeeping, and supplying required
information to the retailers and food distributors. Approximately 69
percent of chicken covered by COOL is supplied directly to the retailer
from the integrator. The vast majority, if not all, of the chicken
supplied by the integrator is pre-labeled. The bulk of the rest is
supplied by the distributors whose costs will be slightly higher since
they are receiving product from integrators and selling product to
retailers. Total costs for intermediaries are estimated at $139
million.
Costs for retailers are estimated to be $0.0025 per pound. As noted
above most chicken is purchased directly from integrators and will have
been pre-labeled. This will significantly lower the retailers' cost in
terms of meeting COOL requirements. Most of the costs retailers will
bear will be from distributors. Total cost for retailers are estimated
at $44 million.
Total estimated costs for chicken producers, intermediaries, and
retailers are $183 million.
The estimated costs to fish and seafood producers are $0.0025 per
pound. Total costs for fish and seafood producers are thus estimated at
$20 million, $1 million more than the RIA in the interim final rule for
fish and shellfish.
Costs for intermediaries are estimated at $0.005 per pound in the
fish and seafood sector. Processors need to collect country of origin
and method of production information from producers, maintain this
information, and supply this information to other intermediaries or
directly to retailers. There are also labeling costs associated with
providing country of origin and method of production information on
consumer-ready packs of frozen and fresh fish that are labeled by
processors. Total costs for fish and seafood intermediaries are thus
estimated at $15 million, an increase of $2 million from the RIA in the
interim final rule for fish and shellfish. The increase is attributable
to using the most recently available data, which reflects a higher
demand for fresh fish and shellfish.
Retailer costs are estimated at $0.07 per pound for fish and
seafood. This estimate results in total costs of $77 million for
retailers of fish and seafood, an increase of $20 million from the RIA
in the interim final rule for fish and shellfish.
Total costs for fish and seafood are estimated at $112 million, an
increase of $23 million from the RIA in the interim final rule for fish
and shellfish.
Although fruit, vegetable, and ginseng producers maintain the types
of records that will be required to substantiate origin claims, it is
believed that this information is not universally transferred by
producers to purchasers of their products. Producers will have to
supply this type of information in a format that allows handlers and
[[Page 2688]]
processors to maintain country of origin information so that it can be
accurately transferred to retailers. For fruit, vegetable, and ginseng
producers, costs are estimated at $0.00025 per pound to make and
substantiate COOL claims, which equates to $0.01 for a 40 pound
container. Because fruits and vegetables only have a single point of
origin, which is where they are grown, substantiating country of origin
claims is substantially simpler for fruit and vegetable producers than
for livestock producers. Total costs for fruit, vegetable, and ginseng
producers are estimated at $30 million.
Fruit, vegetable, and ginseng intermediaries will shoulder a
sizeable portion of the burden of tracking and substantiating country
of origin information. Intermediaries will need to obtain information
to substantiate COOL claims by producers and suppliers; maintain COOL
identity throughout handling, processing, and distribution; and supply
retailers with COOL information through product labels and records. The
estimated cost for these activities for fruit and vegetable sector
intermediaries is $0.005 per pound, resulting in total estimated costs
of $497 million.
Because intermediaries will bear a large portion of the burden of
COOL tracking and labeling, implementation costs for retailers will be
reduced. It is believed that virtually all frozen fruits and vegetables
will be labeled by suppliers, thus imposing minimal incremental costs
for retailers. In addition, over 60 percent of fresh fruits and
vegetables arrive at retail with labels or stickers that may be used to
provide COOL information. It is believed that fresh fruit and vegetable
suppliers will provide COOL information on these labels and stickers,
again imposing minimal incremental costs for retailers. Costs for
retailers are estimated at $0.005 per pound of fresh and frozen fruits
and vegetables. For pre-labeled products, the label itself is
sufficient evidence on which the retailer may rely to establish a
product's country of origin. For these pre-labeled products, the
product label or sticker carries the required country of origin
information, while the recordkeeping system maintains the information
necessary to track the product back through the supply chain. Total
costs for retailers of fruits, vegetables, and ginseng are estimated at
$235 million.
Total costs for producers, intermediaries, and retailers of fruit,
vegetable, and ginseng products are estimated at $763 million.
Costs per pound for each segment of the peanut, macadamia nut, and
pecan industries is estimated at $0.00025 for producers, $0.005 for
intermediaries and $0.015 for retailers. As a result, costs for the
peanut, macadamia nut, and pecan industries are estimated at about
$400,000, with negligible costs for producers and costs of less than
$200,000 at the intermediary and retailer levels.
Total incremental costs are estimated for this rule at $470 million
for producers, $1,130 million for intermediaries and $1,029 million for
retailers for the first year. Total incremental costs for all supply
chain participants are estimated at $2,629 million for the first year,
an increase of $112 million from the IRIA due to the inclusion of and
updating of data for the fish and shellfish industries.
There are wide differences in average estimated implementation
costs for individual entities in different segments of the supply chain
(Table 4). With the exception of a small number of fishing operations
and chicken producers, producer operations are single-establishment
firms. Thus, average estimated costs per firm and per establishment are
somewhat similar. Retailers subject to the rule operate an average of
just over nine establishments per firm. As a result, average estimated
costs per retail firm also are just over nine times larger than average
costs per establishment.
Table 4--Estimated Implementation Costs Per Firm and Establishment
------------------------------------------------------------------------
Cost estimates per
---------------------------------
Firm Establishment
------------------------------------------------------------------------
Producer.............................. $370 $369
Intermediary.......................... 48,219 45,285
Retailer.............................. 254,685 28,273
------------------------------------------------------------------------
Average estimated implementation costs per producer are relatively
small at $370 and slightly less than from the IRIA due to the inclusion
of fish and shellfish producers. The slight difference between the cost
per producers for firms and establishments is due to the inclusion of
fish and shellfish and that there are more fishing establishments than
firms. Estimated costs for intermediaries are substantially larger,
averaging $48,219 per firm and $45,285 per establishment. The average
cost per firm is $5,729 less than the IRIA estimated cost, with the
lower cost attributable to the inclusion of fish and shellfish.
Similarly, the average cost per intermediary establishment is $5,313
lower than IRIA estimate due to the inclusion of fish and shellfish. At
an average of $254,685 per firm, retailers have the highest average
estimated costs per firm. This is $19,134 higher than the IRIA
estimate. The higher estimated cost per retailer is attributable to the
inclusion of fish and shellfish. Retailers' average estimated costs per
establishment are $28,273. This amount is $2,124 higher than the IRIA
estimate.
The costs per firm and per establishment represent industry
averages for aggregated segments of the supply chain. Large firms and
establishments likely will incur higher costs relative to small
operations due to the volume of commodities that they handle and the
increased complexity of their operations. In addition, different types
of businesses within each segment are likely to face different costs.
Thus, the range of costs incurred by individual businesses within each
segment is expected to be large, with some firms incurring only a
fraction of the average costs and other firms incurring costs many
times larger than the average.
Average costs per producer operation can be calculated according to
the commodities that they produce (Table 5). Average estimated costs
are lowest for lamb and goat producers ($128) and highest for hog
operations ($1,599). Again, chicken ``producers'' do not own or control
the movement of the birds they are growing-out. We do not expect that
the rule will result in any changes in their current production
practices, and thus their average cost is zero. Because average
production volume per hog operation is large relative to other types of
producer
[[Page 2689]]
Table 5--Estimated First-Year Implementation Costs Per Producer
Operation
------------------------------------------------------------------------
Producer Average
------------------------------------------------------------------------
Beef.......................................................... $314
Lamb & Goats.................................................. 128
Pork.......................................................... 1,599
Chicken....................................................... 0
Fish.......................................................... 261
Fruits, Vegetables, & Ginseng................................. 376
Peanuts, Pecans, & Macadamia Nuts............................. 258
All....................................................... 369
------------------------------------------------------------------------
operations, estimated costs per hog operation are large relative to
other producer operations. These costs are unchanged from the IRIA
estimates except for fish which used more up-to-date information.
It is believed that the major cost drivers for the rule occur when
livestock or other covered commodities are transferred from one firm to
another, when livestock or other covered commodities are segregated in
the production or marketing process when firms are not using a
multiple-origin label, and when products are assembled and then
redistributed to retail stores. In part, some requirements of the rule
will be accomplished by firms using essentially the same processes and
practices as are currently used, but with information on country of
origin claims added to the processes. This adaptation generally would
require relatively small marginal costs for recordkeeping and
identification systems. In other cases, however, firms may need to
revamp current operating processes to implement the rule. For example,
a processing or packing plant may need to sort incoming products by
country of origin and, if applicable, method of production, in addition
to weight, grade, color, or other quality factors. This may require
adjustments to plant operations, line processing, product handling, and
storage. Ultimately, it is anticipated that a mix of solutions will be
implemented by industry participants to effectively meet the
requirements of the rule. Therefore, it is anticipated that direct,
incremental costs for the rule likely will fall within a reasonable
range of the estimated total of $2.6 billion.
In the IRIA, one regulatory alternative considered by AMS would be
to narrow the definition of a processed food item, thereby increasing
the scope of commodities covered by the rule. This alternative is not
adopted in this final rule. An increase in the number of commodities
that would require COOL would increase implementation costs of the rule
with little expected economic benefit. Additional labeling requirements
may also slow some of the innovation that is occurring with various
types of value-added, further processed products.
A different regulatory alternative would be to broaden the
definition of a processed food item, thereby decreasing the scope of
commodities covered by the rule. Accordingly, such an alternative would
decrease implementation costs for the rule. At the retail level and to
a lesser extent at the intermediary level, cost reductions would be at
least partly proportional to the reduction in the volume of production
requiring retail labeling, although if the broader definition excluded
products for which incremental costs are relatively high, the impact
could be more than proportional. Start-up costs for retailers and many
intermediaries likely would be little changed by a narrowing of the
scope of commodities requiring labeling because firms would still need
to modify their recordkeeping, production, warehousing, distribution,
and sales systems to accommodate the requirements of the rule for those
commodities that would require labeling. Ongoing maintenance and
operational costs, however, likely would decrease in some proportion to
a decrease in the number of items covered by the rule. On the other
hand, implementation costs for the vast majority of agricultural
producers would not be affected by a change in the definition of a
processed food item. This is because it is assumed that virtually all
affected producers would seek to retain the option of selling their
products through supply channels for retailers subject to the rule.
Agricultural producers generally would have little influence on the
ultimate product form in which their products are sold at retail, and
thus would be little affected by changes in the definition of a
processed food item.
The definition of a processed food item developed for this rule has
taken into account comments from affected entities and has resulted in
excluding products that would be more costly and troublesome for
retailers and suppliers to provide country of origin information.
Net Effects on the economy: The previous section estimated the
direct, incremental costs of the rule to the affected firms in the
supply chains for the covered commodities. While these costs are
important to those directly involved in the production, distribution,
and marketing of covered commodities, they do not represent net costs
to the United States economy or net costs to the affected entities for
that matter.
With respect to assessing the effect of this rule on the economy as
a whole, it is important to understand that a significant portion of
the costs directly incurred by the affected entities take the form of
expenditures for additional production inputs, such as payments to
others whether for increased hours worked or for products and services
provided. As such, these direct, incremental costs to affected entities
represent opportunity costs of the rule, but they do not represent
losses to the economy. As a result, the direct costs incurred by the
participants in the supply chains for the covered commodities do not
measure the net impact of this rule on the economy as a whole. Instead,
the relevant measure is the extent to which the rule reduces the amount
of goods and services that can be produced throughout the United States
economy from the available supply of inputs and resources.
Even from the perspective of the directly affected entities, the
direct, incremental costs do not present the whole picture. Initially,
the affected entities will have to incur the operation adjustments and
expenses necessary to implement the rule. However, over time as the
economy adjusts to the requirements of the rule, the burden facing
suppliers will be reduced as their production level and the prices they
receive change. What is critical in assessing the net effect of this
rule on the affected entities over the longer run is to determine the
extent to which the entities are able to pass these costs on to others
and consequently how the demand for their commodities is affected.
Conceptually, suppose that all the increases in costs from the rule
were passed on to consumers in the form of higher prices and that
consumers continued to purchase the same quantity of the affected
commodities from the same marketing channels. Under these conditions,
the suppliers of these commodities would not suffer any net loss from
the rule even if the increases in their operating costs were quite
substantial. However, other industries might face losses as consumers
may spend less on other commodities. It is unlikely, however, absent
the rule leading to changes in consumers' preferences for the covered
commodities that consumers will maintain their consumption of the
covered commodities in the face of increased prices. Rather, many or
most consumers will likely reduce their consumption of the covered
commodities. The resulting changes in consumption patterns will in turn
lead to changes in production patterns and
[[Page 2690]]
the allocation of inputs and resources throughout the economy. The net
result, once all these changes have occurred, is that the total amount
of goods and services produced by the United States economy will be
less than before.
To analyze the effect of the changes resulting from the rule on the
total amount of goods and services produced throughout the United
States economy in a global context, a computable general equilibrium
(CGE) model developed by Economic Research Service (ERS) is utilized
(Ref. 4). The ERS CGE model includes all the covered commodities and
the products from which they are derived, as well as non-covered
commodities that will be indirectly affected by the rule, such as feed
grains. Even though COOL for fish was implemented in 2004, the costs
for fish and shellfish are included to account for the cross-commodity
effects between covered commodities. Peanuts, however, are aggregated
with oilseeds in the model, and there is no meaningful way to modify
the model to account for the impacts of the rule on peanut production,
processing, and consumption. Given the definition of a processed food
item, almost all peanut products are exempt from this rule. As a
consequence, the peanut sector accounts for only a negligible fraction
of the total estimated incremental costs for all directly affected
entities. Thus, omitting the small direct costs on the peanut sector is
expected to have negligible impacts with respect to estimated impacts
on the overall United States economy.
The ERS CGE model traces the impacts from an economic ``shock,'' in
this case an incremental increase in costs of production, through the
U.S agricultural sector and the U.S economy to the rest of the world
and back through the inter-linking of economic sectors. By taking into
account the linkages among the various sectors of the United States and
world economies, a comprehensive assessment can be made of the economic
impact on the United States economy of the rule implementing COOL. The
model reports economic changes resulting after a ten-year period of
adjustment.
The results of this analysis indicate that the rule implementing
COOL after the economy has had a period of ten years to adjust will
have a smaller net impact on the overall United States economy than the
incremental costs for directly affected entities for the first year.
Under the assumption that COOL will not change consumers' preferences
for the covered commodities, it is estimated that the overall costs to
the United States economy due to the rule, in terms of a reduction in
consumers' purchasing power, will be $211.9 million. This represents
the cost to the United States economy after all transfers and
adjustments in consumption and production patterns have occurred.
As noted above, the overall net costs to the United States economy
after a decade of adjustment are significantly smaller than the
implementation costs to directly affected firms. This result does not
imply that the implementation costs for directly affected firms have
been substantially reduced from the initial estimates. While some of
the increase in their costs will be offset by reduced production and
higher prices over the longer term, the suppliers of the covered
commodities will still bear direct implementation costs.
The estimates of the overall costs to the United States economy are
based on the estimates of the incremental increases in operating costs
to the affected firms. The model does not permit supply channels for
covered commodities that require country of origin information to be
separated from supply channels for the same commodities that do not
require COOL. Thus, the direct cost impacts must be adjusted to
accurately reflect changes in operating costs for all firms supplying
covered commodities. Table 6 reports these adjusted estimates in terms
of their percentage of total operating costs for each of the directly
affected sectors. The percentages used are based on the estimate of the
percentage change in operating costs for the entire supply channel and
are adjusted between the various segments of each covered commodity's''
supply chain (producers, processors, importers, and retailers) based on
the estimate of how the costs of the regulation will be distributed
among them. As a result, the cost changes shown in Table 6 only
approximate the direct cost estimates previously described.
Table 6--Estimated Increases in Operating Costs by Supply Chain Segment and Industry
--------------------------------------------------------------------------------------------------------------------------------------------------------
Beef, Lamb, &
Goat Pork Chicken Fish Fresh produce
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent change
--------------------------------------------------------------------------------------------------------------------------------------------------------
Farm Supply.............................. Domestic..................... 1.30 1.30 0.00 0.60 0.10
Imported..................... 1.30 1.30 1.00 0.60 0.10
Processing............................... Domestic..................... 2.10 1.00 1.10 n.a. n.a.
Imported..................... 2.10 1.00 1.10 n.a. n.a.
Retail................................... Domestic..................... 2.20 0.40 0.60 0.40 0.60
Imported..................... 2.20 0.40 0.60 0.40 0.60
--------------------------------------------------------------------------------------------------------------------------------------------------------
n.a.--Not Applicable.
In addition, it is assumed that domestic and foreign suppliers of
the covered commodities located at the same level or segment of the
supply chain face the same percentage increases in their operating
costs. In reality, the incremental costs for some imported covered
commodities may be lower, as a portion of those products already enter
the United States with country of origin labels.
As discussed above, consumption and production patterns will change
as the incremental increases in operating costs are passed on, at least
partially, to consumers in the form of higher prices by the affected
firms. The increases in the prices of the covered commodities will in
turn cause exports and domestic consumption and ultimately domestic
production to fall. The results of our analysis indicate that United
States production of all the covered commodities combined will decline
0.02 percent and that the overall price level for these commodities (a
weighted average index of the prices received by suppliers for their
commodities) will increase by 0.02 percent.
The structure of the model does not enable changes in net revenues
to suppliers of the covered commodities to be determined. Likewise, the
model cannot be used to determine the extent to which the reductions in
production
[[Page 2691]]
arise from some firms going out of business or all firms cutting back
on their production. To provide an indication of what effect this will
have on the suppliers of the covered commodities, changes in revenues
using the model results are estimated. The result of this calculation
shows that revenues to suppliers of the covered commodities will
decrease by $461 million. This decrease in revenue is due to the
decrease in estimated revenues in all covered commodities; all affected
sectors show a small revenue decrease due to the increased costs of the
rule.
The costs of the rule will not be shared equally by all suppliers
of the covered commodities. The distribution of the costs of the rule
will be determined by several factors in addition to the direct costs
of complying with the rule. These are the availability of substitute
products not covered by the rule and the relative competitiveness of
the affected suppliers with respect to other sectors of the United
States and world economies.
Although the increases in operating costs are the initial drivers
behind the changes in consumption and production patterns resulting
from this rule, they do not, as can be seen by examining Table 7,
determine which commodity sector will be most affected. Table 7
contains the percentage changes in prices, production, exports, and
imports for the three main segments of the marketing chain by covered
commodities. The estimated increases in operating costs reflect
anticipated adjustments by industry as a result of the rule and provide
the basis for the CGE analysis. However, the analysis does not reflect
dynamic adjustments that industry will undertake to comply with the
requirements of the rule, such as the flexibilities afforded by the use
of multiple-origin labels.
Table 7--Estimated Impact of Rule on U.S. Production, Prices and Trade of Impacted Sectors
----------------------------------------------------------------------------------------------------------------
Exports Imports
Commodity Price Production (volume) (volume)
----------------------------------------------------------------------------------------------------------------
Percent change from base year
---------------------------------------------------------------
Fruits and Vegetables........................... 0.21 -0.20 -0.39 0.04
Cattle and Sheep................................ 0.52 -0.94 -1.18 0.25
Broilers........................................ 0.03 -0.57 -0.36 -0.03
Hogs............................................ 0.26 -0.46 -0.60 0.16
Beef and Veal................................... 0.99 -1.09 -1.93 -2.32
Chicken......................................... 0.82 -0.90 -1.54 0.29
Pork............................................ 0.68 -0.81 -1.37 -0.86
Fish............................................ 0.50 -0.68 -0.06 0.04
----------------------------------------------------------------------------------------------------------------
As mentioned previously, peanuts, macadamia nuts, and pecans are
included with oilseed products in the ERS CGE model. As a result they
are not included in this analysis.
The rule increases operating costs for the supply chains of the
covered commodities. As shown in Table 7, the increased costs result in
higher prices for these products. The quantity demanded at these higher
prices falls, with the result that the production of all of the covered
commodities decreases.
Imports of fruits, vegetables, cattle, sheep, chicken, fish, and
hogs increase because the model assumes United States domestic
suppliers of these products respond more to changes in their operating
costs than do foreign suppliers. The resulting gap between the supply
response of United States and foreign producers provides foreign
suppliers with a cost advantage in United States markets that enables
them to increase their exports to the United States even though they
face similar increases in operating costs.
To put these impacts in more meaningful terms, the percentage
changes reported in Table 7 were converted into changes in current
prices and quantities produced, imported, and exported (Table 8). The
base values in Table 8 vary from those reported in Table 2 above
because they are derived from projected levels reported in the USDA
Agricultural Baseline for 2006 (Ref. 10), while values in Table 2
represent actual reported values for 2006 as compiled by USDA's NASS.
Baseline values were used to accommodate the structure of the model.
Increases in prices for all covered commodities are small, less
than one cent per pound. Production changes are similarly small, less
than 100 million pounds for all covered commodities. The declines in
the production of beef, chicken, and pork mirrors the decline in the
production of beef, broilers, and hogs.
Table 8--Estimated Changes in U.S. Production Prices, and Trade for Affected Commodities
----------------------------------------------------------------------------------------------------------------
Change from
Indicator Units Base base
----------------------------------------------------------------------------------------------------------------
U.S. Production:
Veg. & Fruits............................. Mil. Lbs. Thous................. 191,523 -383
Cattle.................................... Hd.............................. 32,229 -303
Broilers.................................. Mil. Hd......................... 6,503 -36
Hogs...................................... Thous. Hd....................... 103,015 -474
Beef...................................... Mil. Lbs........................ 24,784 -270
Chicken................................... Mil. Lbs........................ 35,733 -322
Pork...................................... Mil. Lbs........................ 20,706 -168
Fish...................................... Mil. Lbs........................ 7,997 -54
U.S. Price:
Veg. & Fruits............................. $/Lb............................ 0.25 0.0005
Cattle and sheep.......................... $/Cwt........................... 89.55 0.4657
Broilers.................................. $/Lb............................ 0.43 0.0001
[[Page 2692]]
Hogs...................................... $/Cwt........................... 49.62 0.1290
Beef and veal............................. $/Lb............................ 4.09 0.0405
Chicken................................... $/Lb............................ 1.74 0.0143
Pork...................................... $/Lb............................ 2.83 0.0192
Fish...................................... $/Lb............................ 0.93 0.0047
U.S. Exports (volume):
Fruits & Vegetables....................... Mil Lbs......................... 19,990 -78
Beef...................................... Mil Lbs......................... 697 -13
Chicken................................... Mil Lbs......................... 5,203 -80
Pork...................................... Mil Lbs......................... 2,498 -34
Fish...................................... Mil Lbs......................... 6,384 -4
U.S. Imports (volume):
Fruits & Vegetables....................... Mil. Lbs. Thous................. 37,573 15
Beef...................................... Hd.............................. 2,502 -58
Chicken................................... Mil. Hd. Thous.................. 0 0
Pork...................................... Hd.............................. 5,741 -49
Fish...................................... Mil. Lbs........................ 10,158 4
----------------------------------------------------------------------------------------------------------------
Sources: Base values for meat and fruits and vegetables come from USDA Agricultural Baseline Projections to
2016, Staff Report WAOB-2007-1. USDA, Office of the Chief Economist, 2007. Changes are derived from applying
percentage changes obtained from the ERS CGE model to the base values. \a\ Live animal estimates derived from
baseline values for meat product using 2005 average dress weight for cattle, hogs and broilers. \b\ Base
values for fish come from Fisheries of the United States, 2005. National Marine Fisheries Service, National
Oceanic and Atmospheric Administration, U.S. Department of Commerce, 2006. \c\ Fruit and vegetable price
derived by dividing the total value of fruit and vegetable production by total quantity of fruit and
vegetables produced as reported in USDA baseline for 2005. \d\ Fish price derived by dividing total value of
commercial and aquaculture production, excluding other, by total commercial and aquaculture production.
The estimated changes in prices and production cause revenues for
the fruit and vegetable industry to increase an estimated $5 million.
The small revenue increase in the fruit and vegetable industry is
attributed to the fact that the price increase just offsets the
production decrease. The estimated changes in production and prices
result in revenues decreasing by $94 million for beef cattle producers
while revenues from production and sale of beef decrease by an
estimated $112 million dollars. Revenues for broiler production
declines by $91 million and revenues for the production and sale of
chicken decrease by $54 million. In addition, revenues for hog
production decrease by $21 million and revenues from production and
sale of pork decrease by $79 million. Finally, revenues to the fish
industry fall by nearly $14 million.
The increase in the prices of all covered commodities causes
exports to decline (Table 8). These declines are small; they are for
the most part smaller than the declines in United States production of
these commodities.
The ERS CGE model assumes that firms behave as though they have no
influence on either their input or output prices. On the other hand, a
model that assumed that processors could influence their input and
output prices could find that prices received by agricultural producers
decreased because processors passed their cost increases down to their
suppliers rather than increase the price they charged their customers.
The estimates of the economic impact of the rule on the United
States are based on the assumption that country of origin labeling does
not shift consumer demand toward the covered commodities of United
States origin. This assumption is based on the earlier finding that
there was no compelling evidence to support the view that mandatory
COOL will increase the demand for United States products. Despite this
lack of evidence, it is examined how much of a shift or increase in
demand for commodities of United States origin would need to occur to
offset the costs imposed on the economy by the rule. Consumer demand
for the covered commodities would have to increase 0.90 percent to
offset the costs to the economy of COOL as outlined in the rule.
The hypothetical 0.90 percent increase in demand for covered
commodities represents the overall increase (shift) in demand from all
outlets. If there were such a demand increase for domestically produced
covered commodities, however, it would presumably occur at those
retailers required to provide country of origin information. As
previously discussed, the percentage share of covered commodities sold
by retailers subject to this rule is estimated at 47.0 percent of total
consumption. This suggests that demand at covered retailers actually
would have to increase by 1.9 percent for purposes of this hypothetical
exercise, assuming no change in demand at other domestic outlets or in
export demand.
As previously mentioned, the estimates of the overall economic
effects of the rule are derived from a CGE model developed by ERS. The
results from this model show the changes in production and consumption
patterns after the economy has adjusted to the incremental increase in
costs (medium run results). Such changes occur over time and the
economy does not adjust instantaneously.
The results of this analysis describe and compare the old
production and consumption patterns to the new ones, but do not reflect
any particular adjustment process. The purpose of using the ERS CGE
model is not to forecast what prices and production will be over any
particular time frame, but to explore the implications of COOL on the
United States economy and capture the direction of the changes.
The ERS CGE model is global in the sense that all regions in the
world are covered. Production and consumption decisions in each region
are determined within the model following behavior that is consistent
with economic theory. Multilateral trade flows and prices are
determined simultaneously by world market clearing conditions. This
permits prices to adjust to ensure that total demand equals total
supply for each commodity in the world.
The general equilibrium feature of the model means that all
economic sectors--agricultural and non-agricultural--are included.
Hence,
[[Page 2693]]
resources can move among sectors, thereby ensuring that adjustments in
the feed grains and livestock sectors, for example, are consistent with
adjustments in the processed sectors.
The model is static and this implies that possible gains (or
losses) from stimulating (or inhibiting) investment and productivity
growth are not captured. The model allows the existing resources to
move among sectors, thereby capturing the effects of re-allocation of
resources that are the result of policy changes. However, because the
model fixes total available resources, it underestimates the long-run
effects of policies on aggregate output. For example, the 10-year
average real growth of GDP between 1997 and 2007 was approximately 3.1
percent (Ref. 11). If applied to the next 10 years this implies an
economy approximately 36 percent larger at the end of this analysis
than at the beginning of this analysis.
The ERS CGE model uses data from the Global Trade Analysis Project
(GTAP database, version 7.2). The database represents the world as of
2004 and includes information on macroeconomic variables, production,
consumption, trade, demand and supply elasticities, and policy
measures. The GTAP database includes 57 commodities and 101 countries/
regions. For this analysis, the regions were represented by the
following country/regions: the United States, Canada, Mexico, the
European Union-25 (EU), Oceania, China, Other East Asian Countries,
India, Other South Asian Countries, Brazil, South America (including
Central America), OPEC Countries, Russia, Africa and the Rest of the
World. The agricultural sector is subdivided into the following 7
commodity aggregations: rice, wheat, corn, other feed grains (barley,
sorghum), soybeans, sugar (cane and beets), vegetables and fresh
fruits, other crops (cotton, peanuts), cattle and sheep, hogs and
goats, poultry, and fish. The food processing sectors are subdivided
into the following 6 commodity aggregations, bovine cattle and sheep
meat, pork meat, chicken meat, vegetable oils and fats, other processed
food products, beverages and tobacco, and fish. The remaining sectors
in the database were represented by 18 aggregated non-agricultural
sectors.
Regulatory Flexibility Analysis
This rule has been reviewed under the requirements of the
Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.). The purpose of
RFA is to consider the economic impact of a rule on small businesses
and evaluate alternatives that would accomplish the objectives of the
rule without unduly burdening small entities or erecting barriers that
would restrict their ability to compete in the marketplace. The Agency
believes that this rule will have a significant economic impact on a
substantial number of small entities. As such, the Agency has prepared
the following final regulatory flexibility analysis of the rule's
likely economic impact on small businesses pursuant to section 604 of
the Regulatory Flexibility Act. Section 604 of the RFA requires the
Agency to provide a summary of the significant issues raised by public
comments in response to the initial regulatory flexibility analysis.
The Comments and Responses section includes the comments received on
the interim final RFA and provides the Agency's responses to the
comments.
The rule is the direct result of statutory obligations to implement
the COOL provisions of the 2002 and 2008 Farm Bills. The intent of this
law is to provide consumers with additional information on which to
base their purchasing decisions. Specifically, the law imposes
additional Federal labeling requirements for covered commodities sold
by retailers subject to the law. Covered commodities include muscle
cuts of beef (including veal), lamb, pork, goat; ground beef, ground
lamb, ground pork, ground goat, and ground chicken; farm-raised fish
and shellfish; wild fish and shellfish; chicken; perishable
agricultural commodities; ginseng; peanuts; macadamia nuts; and pecans.
The implementation date for mandatory COOL for the fish and shellfish
covered commodities was September 30, 2004. The implementation date for
the other covered commodities was September 30, 2008.
Under preexisting Federal laws and regulations, COOL is not
universally required for the commodities covered by this rule. In
particular, labeling of United States origin is not mandatory, and
labeling of imported products at the consumer level is required only in
certain circumstances. Thus, the Agency has not identified any Federal
rules that would duplicate or overlap with this rule.
Many aspects of the mandatory COOL provisions are prescriptive and
provide little regulatory discretion in rulemaking. The law requires a
statutorily defined set of food retailers to label the country of
origin and, if applicable, method of production (wild and/or farm-
raised) of covered commodities. The law also prohibits USDA from using
a mandatory identification system to verify the country of origin of
covered commodities. However, the rule provides flexibility in allowing
market participants to decide how best to implement mandatory COOL in
their operations. Market participants other than those retailers
defined by the statute may decide to sell products through marketing
channels not subject to the rule. A complete discussion of the
information collection and recordkeeping requirements and associated
burdens appears in the Paperwork Reduction Act section.
The objective of the rule is to regulate the activities of
retailers (as defined by the law) and their suppliers so that retailers
will be able to fulfill their statutory obligations. The rule requires
retailers to provide country of origin information for all of the
covered commodities that they sell. It also requires all firms that
supply covered commodities to these retailers to provide the retailers
with the information needed to correctly label the covered commodities.
In addition, all other firms in the supply chain for the covered
commodities are potentially affected by the rule because country of
origin information will need to be maintained and transferred along the
entire supply chain. In general, the supply chains for the covered
commodities consist of farms, fishing operations, processors,
wholesalers, and retailers. Section 604 of the RFA requires the Agency
to provide an estimate of the number of small entities to which the
rule will apply. A listing of the number of entities in the supply
chains for each of the covered commodities can be found in Table 1.
Retailers covered by this rule must meet the definition of a
retailer as defined by Perishable Agricultural Commodities Act of 1930
(PACA). The PACA definition includes only those retailers handling
fresh and frozen fruits and vegetables with an invoice value of at
least $230,000 annually. By utilizing an existing regulatory definition
for a retailer, Congress provided a simple and straightforward approach
to determine which retailers are subject to the COOL program. In
utilizing this definition, the number of retailers affected by this
rule is considerably smaller than the total number of retailers
nationwide. In addition, there is no requirement that firms in the
supply chain must supply their products to retailers subject to the
rule.
Because country of origin and, if applicable, method of production
information will have to be passed along the supply chain and made
available to consumers at the retail level, it is assumed that each
participant in the supply chain as identified in Table 1 will likely
encounter recordkeeping
[[Page 2694]]
costs as well as changes or modifications to their business practices.
Absent more detailed information about each of the entities within each
of the marketing channels, it is assumed that all such entities will be
affected to some extent even though some producers and suppliers may
choose to market their products through channels not subject to the
requirements of this rule. Therefore, it is estimated that
approximately 1,333,000 establishments owned by approximately 1,299,000
firms will be either directly or indirectly affected by this rule. The
only change from the Interim Regulatory Impact Analysis contained in
the August 1, 2008, interim final rule is the inclusion of affected
firms and establishments in the fish and shellfish sector in this final
rule. These changes and the use of more up-to-date information resulted
in the number of establishments and firms increasing from the IRIA.
This rule potentially will have an impact on all participants in
the supply chain, although the nature and extent of the impact will
depend on the participant's function within the marketing chain. The
rule likely will have the greatest impact on retailers and
intermediaries (handlers, processors, wholesalers, and importers),
while the impact on individual producers is likely to be relatively
small.
The direct incremental costs are estimated for the rule at
approximately $2,629 million as noted in Table 3. The increase in the
direct incremental cost in the rule as compared to the IRIA is mainly
the result of including fish and shellfish in this final rule.
There are two measures used by the Small Business Administration
(SBA) to identify businesses as small: sales receipts or number of
employees. In terms of sales, SBA classifies as small those grocery
stores with less than $25 million in annual sales and specialty food
stores with less than $6.5 million in annual sales (13 CFR 121.201).
Warehouse clubs and superstores with less than $25 million in annual
sales are also defined as small. SBA defines as small those
agricultural producers with less than $750,000 in annual sales and
fishing operations with less than $3.5 million in annual sales. Of the
other businesses potentially affected by the rule, SBA classifies as
small those manufacturing firms with less than 500 employees and
wholesalers with less than 100 employees.
Retailers: While there are many potential retail outlets for the
covered commodities, food stores, warehouse clubs, and superstores are
the primary retail outlets for food consumed at home. In fact, food
stores, warehouse clubs, and superstores account for 75.6 percent of
all food consumed at home (Ref. 8). Therefore, the number of these
stores provides an indicator of the number of entities potentially
affected by this rule. The 2002 Economic Census (Ref. 9) shows there
were 42,318 food stores, warehouse clubs, and superstore firms operated
for the entire year. Most of these firms, however, would not be subject
to the requirements of this rule.
The law defines the term retailer as that described in section 1(b)
of the Perishable Agricultural Commodities Act of 1930 (PACA) Thus,
under this final rule, a retailer is defined as any person licensed as
a retailer under PACA. The number of such businesses is estimated from
PACA data (Ref. 12). The PACA definition of a retailer includes only
those retailers handling fresh and frozen fruits and vegetables with an
invoice value of at least $230,000 annually. Therefore, the number of
retailers affected by this rule is considerably smaller than the number
of food retailers nationwide. USDA data indicate that there are 4,040
retail firms as defined by PACA that would thus be subject to the rule.
As explained below, most small food store firms have been excluded from
mandatory COOL based on the PACA definition of a retailer.
The 2002 Economic Census data provide information on the number of
food store firms by sales categories. Of the 42,318 food store,
warehouse club, and superstore firms, an estimated 41,629 firms had
annual sales meeting the SBA definition of a small firm plus 689 other
firms that would be classified as above the $25 million threshold. USDA
has no information on the identities of these firms, and the PACA
database does not identify firms by North American Industry
Classification System code that would enable matching with Economic
Census data. USDA assumes, however, that all or nearly all of the 689
large firms would meet the definition of a PACA retailer because most
of these larger food retailers likely would handle fresh and frozen
fruits and vegetables with an invoice value of at least $230,000
annually. Thus, an estimated 83 percent (3,351 out of 4,040) of the
retailers subject to the rule are small. However, this is only 8.0
percent of the estimated total number of small food store retailers. In
other words, an estimated 92.0 percent of small food store retailers
would not be subject to the requirements of the rule.
Retailer costs under the rule are estimated at $1,029 million.
Costs are estimated at $254,685 per retail firm and $28,273 per retail
establishment. Retailers will face recordkeeping costs, costs
associated with supplying country of origin and, if applicable, method
of production information to consumers and possibly additional handling
costs. These cost increases may result in changes to retailer business
practices. The rule does not specify the systems that affected
retailers must put in place to implement mandatory COOL. Instead,
retailers will be given flexibility to develop or modify their own
systems to comply with the rule. There are many ways in which the
rule's requirements may be met and firms will likely choose the least
cost method in their particular situation to comply with the rule.
Wholesalers: Any establishment that supplies retailers with one or
more of the covered commodities will be required by retailers to
provide country of origin and, if applicable, method of production
information so that retailers can accurately supply that information to
consumers. Of wholesalers potentially affected by the rule, SBA defines
those having less than 100 employees as small. Importers of covered
commodities will also be affected by the rule and are categorized as
wholesalers in the data.
The 2004 Statistics of United States Businesses (Ref. 13) provides
information on wholesalers by employment size. For meat and meat
products wholesalers there is a total of 2,509 firms. Of these, 2,401
firms have less than 100 employees. This indicates that approximately
96 percent of meat wholesalers are considered as small firms using the
SBA definition.
For fish and seafood wholesalers there are a total of 2,254 firms.
Of these, 2,199 firms have less than 100 employees. Therefore,
approximately 98 percent of the fish and seafood wholesalers could be
considered as small firms.
There are 510 chicken wholesaler/distributor firms operating 564
facilities. Of these, there are 332 firms which have less than 100
employees, resulting in approximately 65 percent of the chicken
wholesalers/distributors being classified as small businesses.
For fresh fruit and vegetable wholesalers there are a total of
4,654 firms. Of these, 4,418 firms have less than 100 employees,
resulting in approximately 95 percent of the fresh fruit and vegetable
wholesalers being classified as small businesses.
While information on ginseng wholesalers is not available, 46
dealers have been identified and they would all be considered as small
businesses.
In addition to specialty wholesalers that primarily handle a single
covered commodity, there are also general-line wholesalers that handle
a wide range of
[[Page 2695]]
products. It is assumed that these general-line wholesalers likely
handle at least one and possibly all of the covered commodities.
Therefore, the number of general-line wholesale businesses is included
among entities affected by the rule.
The 2004 Statistics of United States Businesses provides
information on general-line grocery wholesalers by employment size.
There were 3,037 firms in total, and 2,858 firms had less than 100
employees. This results in approximately 94 percent of the general-line
grocery wholesalers being classified as small businesses.
In general, over 94 percent of the wholesalers are classified as
small businesses. This indicates that most of the wholesalers affected
by mandatory COOL may be considered as small entities as defined by
SBA.
It is estimated that intermediaries (importers and domestic
wholesalers, handlers, and processors) will incur costs under the rule
of approximately $1,130 million. Costs are estimated at $48,219 per
intermediary firm and $45,285 per establishment.
Wholesalers will encounter increased costs in complying with
mandatory COOL. Wholesalers will likely face increased recordkeeping
costs, costs associated with supplying country of origin and, if
applicable, method of production information to retailers, possibly
costs associated with segmenting products by country of origin and, if
applicable, method of production and possibly additional handling
costs. Some of the comments received on the proposed rule from
wholesalers and retailers have indicated that retailers may choose to
source covered commodities from a single supplier that procures the
covered commodity from only one country in an attempt to minimize the
costs associated with complying with mandatory COOL. These changes in
business practices could lead to the further consolidation of firms in
the wholesaling sector. The rule does not specify the systems that
affected wholesalers must put in place to implement mandatory COOL.
Instead, wholesalers will be given flexibility to develop their own
systems to comply with the rule. There are many ways in which the
rule's requirements may be met. In addition, wholesalers have the
option of supplying covered commodities to retailers or other suppliers
that are not covered by the rule.
Manufacturers: Any manufacturer that supplies retailers or
wholesalers with a covered commodity will be required to provide
country of origin information to retailers so that the information can
be accurately supplied to consumers. Most manufacturers of covered
commodities will likely print country of origin and, if applicable,
method of production information on retail packages supplied to
retailers. Of the manufacturers potentially affected by the rule, SBA
defines those having less than 500 employees as small.
The 2004 Statistics of United States Businesses (Ref. 13) provides
information on manufacturers by employment size. For livestock
processing and slaughtering there is a total of 2,943 firms. Of these,
2,834 firms have less than 500 employees. This suggests that 96 percent
of livestock processing and slaughtering operations would be considered
as small firms using the SBA definition.
For chicken processing there are a total of 38 firms, only two of
which are classified as small. Thus, only 5 percent of the chicken
processors are small businesses.
For fresh and frozen seafood processing there is a total of 516
firms. Of these, 492 have less than 500 employees and thus, 95 percent
are considered to be small firms.
For frozen fruit, juice, and vegetable manufacturers there is a
total of 155 firms. There are 132 of these firms that are considered to
be small. This suggests that 85 percent of the frozen fruit, juice, and
vegetable manufacturers would be considered as small using the SBA
definition.
There are a total of 161 roasted nuts and peanut butter
manufacturers, which includes firms that do drying. Because only green
and raw peanuts, macadamia nuts, and pecans will require retail country
of origin labeling under this rule, it is estimated that no more than 5
percent of peanut, macadamia nut, and pecan manufacturing firms will be
affected. Therefore, 8 peanut, macadamia nut, and pecan manufacturers
are estimated to be affected, most if not all of which likely could be
considered as small.
In general, approximately 95 percent of the manufacturers are
classified as small businesses. This indicates that most of the
manufacturers of covered commodities impacted by the rule would be
considered as small entities as defined by SBA.
Manufacturers are included as intermediaries and additional costs
for these firms are discussed in the previous section addressing
wholesalers. Manufacturers of covered commodities will encounter
increased costs in complying with mandatory COOL. Manufacturers like
wholesalers will likely face increased recordkeeping costs, costs
associated with supplying country of origin and, if applicable, method
of production information to retailers, possibly costs associated with
segmenting products by country of origin and, if applicable, method of
production and possibly additional handling costs. Some of the comments
received on the interim final rule from manufacturers have indicated
that they may limit the number of sources from which they procure raw
products. These changes in business practices could lead to the further
consolidation of firms in the manufacturing sector. The rule does not
specify the systems that affected manufacturers must put in place to
implement mandatory COOL. Instead, manufacturers will be given
flexibility to develop their own systems to comply with the rule. There
are many ways in which the rule's requirements may be met.
Producers: Producers of fish, perishable agricultural commodities,
peanuts, macadamia nuts, pecans, and ginseng are directly affected by
mandatory COOL. Producers of cattle, hogs, sheep, and goats while not
directly covered by this rule, will nevertheless be affected because
covered meat commodities are produced from livestock. Whether directly
or indirectly affected, these producers will more than likely be
required by handlers and wholesalers to create and maintain country of
origin and, if applicable, method of production information and
transfer it to them so that they can readily transfer this information
to retailers. Individuals who grow-out chickens for an integrator are
not expected to be affected by this rule.
SBA defines a small agricultural producer as having annual receipts
less than $750,000. The 2002 United States Census of Agriculture (Ref.
7) shows there are 1,018,359 farms that raise beef cows, and 2,458 are
estimated to have annual receipts greater than $750,000. Thus, at least
99 percent of these beef cattle farms would be classified as small
businesses according to the SBA definition. Similarly, an estimated 82
percent of hog farms would be considered as small and an estimated 99
percent of sheep, lamb, and goat farms would be considered as small.
Based on 2002 United States Census of Agriculture information, 92
percent of vegetable farms, 94 percent of fruit, nut, and berry farms,
and 91 percent of peanut, macadamia nut, and pecan farms could be
classified as small.
Based on 2005 Census of Aquaculture data (Ref. 14), it is estimated
that at least 95 percent of fish and shellfish farming operations are
small. Similar information on fishing operations is not
[[Page 2696]]
known to exist. However, it is assumed that the majority of these
producers would be considered small businesses.
At the production level, agricultural producers will need to
maintain records to establish country of origin and, if applicable,
method of production information for the products they sell. This
information will need to be conveyed as the products move through the
supply chains. In general, additional producer costs include the cost
of establishing and maintaining a recordkeeping system for the country
of origin and, if applicable, method of production information, animal
or product identification, and labor and training. Based on our
knowledge of the affected industries as well as comments received on
the interim final rules, the proposed rule, and the voluntary
guidelines, it is believed that producers already have much of the
information available that could be used to substantiate country of
origin and, if applicable, method of production claims. Cattle, hog,
lamb, sheep, chicken, and goat producers may have a slightly larger
burden for recordkeeping than fruit, vegetable, ginseng, peanut,
macadamia nut, and pecan producers because animals can be born in one
country and fed and slaughtered in another country. However, this rule
provides flexibility in labeling meat covered commodities of multiple
origins.
The costs for producers are expected to be relatively limited and
should not have a larger impact on small producers than large
producers. Producer costs are estimated at $470 million, or an
estimated $370 per firm.
Economic impact on small entities: Information on sales or
employment is not available for all firms or establishments shown in
Table 1. However, it is reasonable to expect that this rule will have a
substantial impact on a number of small businesses. At the wholesale
and retail levels of the supply chain, the efficiency of these
operations may be affected. For packers and processors handling
products sourced from multiple countries, there may also be a desire to
operate separate shifts for processing products from different origins,
or to split processing within shifts. In either case, costs are likely
to increase. Records will need to be maintained to ensure that accurate
country of origin and, if applicable, method of production information
is retained throughout the process and to permit compliance and
enforcement reviews.
Even if only domestic origin products or products from a single
country of origin are handled, there may be additional procurement
costs to source supplies from a single country of origin. Additional
procurement costs may include higher transportation costs due to longer
shipping distances and higher acquisition costs due to supply and
demand conditions for products from a particular country of origin,
whether domestic or foreign.
These additional costs may result in consolidations within the
processor, manufacturer, and wholesaler sectors for these covered
commodities. Also, to comply with the rule, retailers may seek to limit
the number of entities from which they purchase covered commodities.
Additional alternatives considered: Section 604 of the RFA requires
the Agency to describe the steps taken to minimize the significant
economic impact on small entities including a discussion of
alternatives considered. As previously mentioned, the COOL provisions
of the Act leave little regulatory discretion in defining who is
directly covered by this rule. The law explicitly identifies those
retailers required to provide their customers with country of origin
and, if applicable, method of production information for covered
commodities (namely, retailers as defined by PACA).
The law also requires that any person supplying a covered commodity
to a retailer provide information to the retailer indicating the
country of origin and, if applicable, method of production of the
covered commodity. Again, the law provides no discretion regarding this
requirement for suppliers of covered commodities to provide information
to retailers.
The rule has no mandatory requirement, however, for any firm other
than statutorily defined retailers to make country of origin and, if
applicable, method of production claims. In other words, no producer,
processor, wholesaler, or other supplier is required to make and
substantiate a country of origin and, if applicable, method of
production claim provided that the commodity is not ultimately sold in
the form of a covered commodity at the establishment of a retailer
subject to the rule. Thus, for example, a processor and its suppliers
may elect not to maintain country of origin and, if applicable, method
of production information nor to make country of origin and, if
applicable, method of production claims, but instead sell products
through marketing channels not subject to the rule. Such marketing
alternatives include foodservice, export, and retailers not subject to
the rule. It is estimated that 47.0 percent of United States food sales
occur through retailers subject to the rule, with the remaining 53.0
percent sold by retailers not subject to the rule or sold as food away
from home. Additionally, food product sales into export markets provide
marketing opportunities for producers and intermediaries that are not
subject to the provisions of the rule. The majority of product sales
are not subject to the rule, and there are many current examples of
companies specializing in production of commodities for foodservice,
export markets, and other channels of distribution that would not be
directly affected by the rule.
The rule does not dictate systems that firms will need to put in
place to implement the requirements. Thus, different segments of the
affected industries will be able to develop their own least-cost
systems to implement COOL requirements. For example, one firm may
depend primarily on manual identification and paper recordkeeping
systems, while another may adopt automated identification and
electronic recordkeeping systems.
The rule has no requirements for firms to report to USDA.
Compliance audits will be conducted at firms' places of business. As
stated previously, required records may be kept by firms in the manner
most suitable to their operations and may be hardcopy documents,
electronic records, or a combination of both. In addition, the rule
provides flexibility regarding where records may be kept. If the
product is pre-labeled with the necessary country of origin and, if
applicable, method of production information, records documenting once-
forward and once-back chain of custody information are sufficient as
long as the source of the claim can be tracked and verified. Such
flexibility should reduce costs for small entities to comply with the
rule.
The rule requires that covered commodities at subject retailers be
labeled with country of origin and, as applicable, method of production
information, that suppliers of covered commodities provide such
information to retailers, and that retailers and their suppliers
maintain records and information sufficient to verify all country of
origin and method of production claims. The rule provides flexibility
regarding the manner in which the required information may be provided
by retailers to consumers. The rule provides flexibility in the manner
in which required country of origin information is provided by
suppliers to retailers, and in the manner in which records and
information are maintained to substantiate country of origin claims.
Thus, the rule provides the maximum flexibility practicable to enable
small
[[Page 2697]]
entities to minimize the costs of the rule on their operations.
Paperwork Reduction Act
Pursuant to the Paperwork Reduction Act (PRA) (44 U.S.C 3501-3520)
the information collection provisions contained in this rule have been
approved by OMB and have been assigned OMB Control Number 0581-0250.
This revision reflects a 155,464 increase in the number of annual
responses and an 861,282 increase in the number of annual burden hours
from the August 1, 2008, interim final rule due to the inclusion of
fish and shellfish data. The Comments and Responses section includes
the relevant comments received and provides the Agency's responses to
the comments. A description of these provisions is given below with an
estimate of the annual recordkeeping burden.
Title: Mandatory Country of Origin Labeling of Covered Commodities.
OMB Number: 0581-0250.
Type of Request: Revision of a previously approved collection.
Expiration Date: November 30, 2011.
Abstract: The COOL provision in the 2002 and 2008 Farm Bills
requires that specified retailers inform consumers as to the country of
origin and, if applicable, method of production (wild and/or farm-
raised) of covered commodities. Covered commodities included in this
rulemaking are: Muscle cuts of beef, lamb, goat, pork, and chicken;
ground beef, ground lamb, ground pork, ground goat, and ground chicken;
wild and farm-raised fish and shellfish; perishable agricultural
commodities; ginseng; peanuts; macadamia nuts; and pecans. Upon request
by USDA representatives, suppliers and retailers subject to this
subpart shall make available records maintained in the normal course of
business that verify an origin claim. Such records shall be provided
within 5 business days of the request and may be maintained in any
location. Any person engaged in the business of supplying a covered
commodity to a retailer (i.e., including but not limited to growers,
distributors, handlers, packers, and processors), whether directly or
indirectly, must make country of origin and, if applicable, method of
production information available to the retailer and must maintain
records to establish and identify the immediate previous source and
immediate subsequent recipient of a covered commodity for a period of 1
year from the date of the transaction. In addition, the supplier of a
covered commodity that is responsible for initiating a country(ies) of
origin claim, which in the case of beef, lamb, chicken goat, and pork
is the slaughter facility, must possess records that are necessary to
substantiate that claim for a period of 1 year from the date of the
transaction. In the case of all covered commodities, producer
affidavits shall also be considered acceptable records that suppliers
may utilize to initiate origin claims, provided it is made by someone
having first-hand knowledge of the origin of the covered commodity and
identifies the covered commodity unique to the transaction.
For an imported covered commodity, the importer of record must
ensure that records provide clear product tracking from the port of
entry into the United States to the immediate subsequent recipient. In
addition, the records must accurately reflect the country of origin in
relevant United States Customs and Border Protection entry documents
and information systems and must be maintained for a period of 1 year
from the date of the transaction.
As previously mentioned, upon request by USDA representatives,
suppliers and retailers subject to this subpart shall make available to
USDA representatives, records maintained in the normal course of
business that verify an origin claim. Such records shall be provided
within 5 business days of the request and may be maintained in any
location.
Description of Recordkeepers: Individuals who supply covered
commodities, whether directly to retailers or indirectly through other
participants in the marketing chain, are required to establish and
maintain country of origin and, if applicable, method of production
information for the covered commodities and supply this information to
retailers. As a result, producers, handlers, manufacturers,
wholesalers, importers, and retailers of covered commodities will be
affected by this rule.
Burden: Approximately 1,333,000 establishments owned by
approximately 1,299,000 firms are estimated to be either directly or
indirectly affected by this rule. The only changes from the IRIA are
increases in the numbers of affected firms and establishments due to
including and updating fish and shellfish information.
In general, the supply chain for each of the covered commodities
includes agricultural producers or fish harvesters, processors,
wholesalers, importers, and retailers. Imported products may be
introduced at any level of the supply chain. Other intermediaries, such
as auction markets, may be involved in transferring products from one
stage of production to the next. The rule's paperwork burden will be
incurred by the number and types of firms and establishments listed in
Table 9, which follows.
Table 9--Costs Associated With Paperwork Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
Maintenance
Type Firms Initial costs Establishments costs Total costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Producers:
Cattle & Calves........................................... 971,400 75,699,259 971,400 145,651,716 221,350,975
Sheep & Lambs............................................. 69,090 5,384,046 69,090 10,359,355 15,743,400
Hogs & Pigs............................................... 65,540 5,107,401 65,540 9,827,068 14,934,469
Goats..................................................... 9,146 712,745 9,146 1,371,381 2,084,126
Chicken Producer and Processor............................ 38 2,961 168 25,190 28,151
Farm-Raised Fish & Shellfish.............................. 3,752 292,386 3,752 562,575 854,961
Fishing................................................... 71,128 5,542,863 71,142 3,555,677 9,098,540
Fruits & Vegetables....................................... 79,800 6,218,654 79,800 3,788,984 10,007,638
Ginseng................................................... 190 14,806 190 9,021 23,828
Peanuts................................................... 650 50,653 650 30,863 81,516
Pecans.................................................... 1,119 87,192 1,119 53,130 140,323
Macadamia................................................. 53 4,130 53 2,516 6,647
Handlers, Processors, & Wholesalers:
Stockyards, Dealers & Market Agencies..................... 6,807 8,910,363 6,807 6,589,040 15,499,403
Livestock Processing & Slaughtering....................... 2,943 3,582,387 3,207 62,086,237 65,938,624
Meat & Meat Product Wholesale............................. 2,509 3,284,281 2,706 2,619,354 5,903,635
[[Page 2698]]
Chicken Processor and Wholesaler.......................... 510 667,590 564 545,941 1,213,531
Fresh & Frozen Seafood Processing......................... 516 675,444 590 571,108 1,246,552
Fish & Seafood Wholesale.................................. 2,254 2,950,486 2,330 2,255,393 5,205,879
Frozen Fruit, Juice & Vegetable Mfg....................... 155 202,895 247 239,091 441,986
Fresh Fruit & Vegetable Wholesale......................... 4,654 6,092,086 5,016 4,855,388 10,947,474
Ginseng Dealers........................................... 46 60,214 46 44,527 104,741
Roasted Nuts & Peanut Butter Mfg.......................... 8 10,472 9 8,712 19,184
Peanut, Pecans, & Macadamia Nut Wholesalers............... 5 6,545 5 4,840 11,385
General Line Grocery Wholesalers.......................... 3,037 3,975,433 3,436 3,325,979 7,301,412
Retailers..................................................... 4,040 5,288,360 36,392 247,264,534 252,552,894
Totals
Producers......................................... 1,271,906 99,117,097 1,262,050 175,237,476 274,354,573
Handlers, Processors, & Wholesalers............... 23,444 30,688,196 24,963 83,145,610 113,833,806
Retailers......................................... 4,040 5,288,360 36,392 247,264,534 252,552,894
-----------------------------------------------------------------------------------------
Grand Total................................... 1,299,390 135,093,653 1,333,405 505,647,620 640,741,274
--------------------------------------------------------------------------------------------------------------------------------------------------------
The affected firms and establishments will broadly incur two types
of costs. First, firms will incur initial or start-up costs to comply
with the rule. Initial costs will be borne by each firm, even though a
single firm may operate more than one establishment. Second,
enterprises will incur additional recordkeeping costs associated with
storing and maintaining records on an ongoing basis. These activities
will take place in each establishment operated by each affected
business.
With respect to initial recordkeeping costs, it is believed that
most producers currently maintain many of the types of records that
would be needed to substantiate country of origin and, if applicable,
method of production claims. However, producers do not typically record
or pass along country of origin and, if applicable, method of
production information to subsequent purchasers. Therefore, producers
will incur some additional incremental costs to record, maintain, and
transfer country of origin and, if applicable, method of production
information to substantiate required claims made at retail. Because
much of the necessary recordkeeping has already been developed during
typical farm, ranch, and fishing operations, it is estimated that the
incremental costs for producers to supplement existing records with
country of origin and, if applicable, method of production information
will be relatively small per firm. Examples of initial or start-up
costs would be any additional recordkeeping burden needed to record the
required country of origin and, if applicable, method of production
information and transfer this information to handlers, processors,
wholesalers, or retailers via records used in the normal course of
business.
Producers will need an estimated 4 hours to modify an established
system for organizing records to carry out the purposes of this
regulation. This additional time would be required to modify existing
recordkeeping systems to incorporate any added information needed to
substantiate country of origin claims. Although not all farm products
ultimately will be sold at retail establishments covered by this rule,
it is assumed that virtually all producers will wish to keep their
marketing options as flexible as possible. Thus, all producers of
covered commodities or livestock (in the case of the covered meat
commodities) will establish recordkeeping systems sufficient to
substantiate country of origin claims. It is also recognized that some
operations will require substantially more than 4 hours modifying their
recordkeeping systems. In particular, it is believed that livestock
backgrounders, stockers, and feeders will face a greater burden in
establishing recordkeeping systems. These types of operations will need
to track country of origin information for animals brought into the
operation as well as for animals sold from the operation via records
used in the normal course of business, increasing the burden of
substantiating country of origin claims. Conversely, operations such as
fruit and vegetable farms that produce only United States products
likely will require little if any change to their existing
recordkeeping systems in order to substantiate country of origin
claims. Overall, it is believed that 4 hours represents a reasonable
estimate of the average additional time that will be required per year
across all types of producers.
In estimating initial recordkeeping costs, 2006 wage rates and
benefits published by the Bureau of Labor statistics from the National
Compensation Survey are used.
For producers, it is assumed that the added work needed to
initially adapt an existing recordkeeping system for country of origin
and, if applicable, method of production information is primarily a
bookkeeping task. This task may be performed by independent
bookkeepers, or in the case of operations that perform their own
bookkeeping, an individual with equivalent skills. The Bureau of Labor
Statistics (BLS) publishes wage rates for bookkeepers, accounting, and
auditing clerks (Ref. 15). It is assumed that this wage rate represents
the cost for producers to hire an independent bookkeeper. In the case
of producers who currently perform their own bookkeeping, it is assumed
that this wage rate represents the opportunity cost of the producers'
time for performing these tasks. The May 2006 wage rate is estimated at
$15.28 per hour. For this analysis, an additional 27.5 percent is added
to the wage rate to account for total benefits which includes social
security, unemployment insurance, workers compensation, etc. The
estimate of this additional cost to employers is published by the BLS
(Ref. 15). At 4 hours per firm and a cost of $19.48 per hour, initial
recordkeeping costs to producers are estimated at approximately $135.1
million to modify existing recordkeeping systems in order to
substantiate country of origin and, if applicable, method of production
claims.
[[Page 2699]]
The recordkeeping burden on handlers, processors, wholesalers, and
retailers is expected to be more complex than the burden most producers
face. These operations will need to maintain country of origin and, if
applicable, methods of production information on the covered
commodities purchased and subsequently furnish that information to the
next participant in the supply chain. This will require adding
additional information to a firm's bills of lading, invoices, or other
records associated with movement of covered commodities from purchase
to sale. Similar to producers, however, it is believed that most of
these operations already maintain many of the types of necessary
records in their existing systems. Thus, it is assumed that country of
origin and, if applicable, method of production information will
require only modification of existing recordkeeping systems rather than
development of entirely new systems.
The Label Cost Model Developed for FDA by RTI International (Ref.
16; Ref. 17) is used to estimate the cost of including additional
country of origin and, if applicable, method of production information
to an operation's records. It is assumed that a limited information,
one-color redesign of a paper document will be sufficient to comply
with the rule's recordkeeping requirements. The number of hours
required to complete the redesign is estimated to be 29 with an
estimated cost at $1,309 per firm. While the cost will be much higher
for some firms and lower for others, it is believed that $1,309
represents a reasonable estimate of average cost for all firms. Based
on this, it is estimated that the initial recordkeeping costs to
intermediaries such as handlers, processors, and wholesalers (importers
are included with wholesalers) will be approximately $31 million, and
initial recordkeeping costs at retail will be approximately $5 million.
The recordkeeping cost to producers increases due to the inclusion of
fish and shellfish.
The total initial recordkeeping costs for all firms are thus
estimated at approximately $135 million. This increase in the
recordkeeping cost as compared to the recordkeeping costs in the
interim final rule is due to the inclusion of fish and shellfish.
In addition to these one-time costs to modify recordkeeping
systems, enterprises will incur additional recordkeeping costs
associated with storing and maintaining records. These costs are
referred to as maintenance costs in Table 9. Again, the marginal cost
for producers to maintain and store any additional information needed
to substantiate country of origin and, if applicable, method of
production claims is expected to be relatively small.
For wild fish harvesters, fruit, vegetable, and ginseng producers,
and peanut, macadamia nut, and pecan producers, country of origin and,
if applicable, method of production generally is established at the
time that the product is harvested, and thus there is no need to track
country of origin and, if applicable, method of production information
throughout the production lifecycle of the product. Likewise, this is
also the case for chicken as the vast majority of chicken products sold
by covered retailers are from chickens that are produced in a
controlled environment in the United States. This group of producers is
estimated to require an additional 4 hours a year, or 1 hour per
quarter, to maintain country of origin and, if applicable, method of
production information.
Compared to wild fish harvesters, chicken, fruit, vegetable,
ginseng, peanut, macadamia nut, and pecan producers, it is expected
that fish farmers and livestock producers will incur higher costs to
maintain country of origin and, if applicable, method of production
information. Wild fish, chicken, fruits, vegetables, ginseng, peanuts,
and macadamia nuts are generally harvested once and then shipped by the
producer to the first handler. In contrast, farm-raised fish and
livestock can and often do move through several geographically
dispersed operations prior to sale for processing or slaughter. Cattle,
for example, typically change ownership between 2 to 3 times before
they are slaughtered and processed. Fish and livestock may be acquired
from other countries by United States producers, which may complicate
the task of tracking country of origin and, if applicable, method of
production information. Because animals are frequently sorted and
regrouped at various stages of production and may change ownership
several times prior to slaughter, country of origin information will
need to be maintained on animals as they move through their lifecycle.
Thus, it is expected that the recordkeeping burden for fish farmers and
livestock producers will be higher than it will be for producers of
other covered commodities. It is estimated that these producers will
require an additional 12 hours a year, or 1 hour per month, to maintain
country of origin and, if applicable, method of production records.
Again, this is an average for all enterprises.
It is assumed that farm labor will primarily be responsible for
maintaining country of origin information at producers' enterprises.
NASS data (Ref. 18) are used to estimate average farm wage rates--$9.80
per hour for livestock workers and $9.31 per hour for other crops
workers. Applying the rate of 27.5 percent to account for benefits,
this results in an hourly rate of $12.50 for livestock workers and
$11.87 for other crops workers. Wage rates for fish workers were
unavailable, so the average wage rate for livestock workers is used.
Assuming 12 hours of labor per year for livestock and farmed fish
operations and 4 hours per year for all other operations, the estimated
total annual maintenance costs to producers is $175 million which is
higher than the initial maintenance costs in the interim final rule.
The increase in the estimated maintenance cost is due to the inclusion
of fish and shellfish in this final rule.
It is expected that intermediaries such as handlers, processors,
and wholesalers will face higher costs per enterprise to maintain
country of origin and, if applicable, method of production information
compared to costs faced by producers. Much of the added cost is
attributed to the larger average size of these enterprises compared to
the average producer enterprise. In addition, these intermediaries will
need to track products both coming into and going out of their
businesses.
With the exception of livestock processing and slaughtering
establishments, the maintenance burden hours for country of origin and,
if applicable, method of production recordkeeping is estimated to be 52
hours per year per establishment. For this part of the supply chain,
the recordkeeping activities are ongoing and are estimated to require
an additional hour a week. It is expected, however, that livestock
processing and slaughtering enterprises will experience a more
intensive recordkeeping burden. These enterprises disassemble carcasses
into many individual cuts, each of which must maintain its country of
origin identity. In addition, businesses that produce ground beef,
lamb, goat, and pork products may commingle product from multiple
origins, which will require some monitoring and recordkeeping to ensure
accurate labeling and to substantiate the country of origin information
provided to retailers. Maintenance of the recordkeeping system at these
establishments is estimated to total 1,040 hours per establishment, or
20 hours per week.
Maintenance activities will include inputting, tracking, and
storing country of origin and, if applicable, method of production
information for each covered
[[Page 2700]]
commodity. Since this is mostly an administrative task, the cost is
estimated by using the May 2006 BLS wage rate from the National
Compensation Survey for administrative support occupations ($14.60 per
hour with an additional 27.5 percent added to cover benefit costs for a
total of $18.62 per hour). This occupation category includes stock and
inventory clerks and record clerks. Coupled with the assumed hours per
establishment, the resulting total annual maintenance costs to
handlers, processors, and wholesalers and other intermediaries are
estimated at approximately $83 million.
Retailers will need to supply country of origin and, if applicable,
method of production information for each covered commodity sold at
each store. Therefore, additional recordkeeping maintenance costs are
believed to affect each establishment. Because tracking of the covered
commodities will be done daily, it is believed that an additional hour
of recordkeeping activities for country of origin and, if applicable,
method of production information will be incurred daily at each retail
establishment. These additional activities result in an estimated 365
additional hours per year per establishment. Using the BLS wage rate
for administrative support occupations ($14.60 per hour with an
additional 27.5 percent added to cover benefit costs for a total of
$18.62 per hour) results in total estimated annual maintenance costs to
retailers of $247 million.
The total maintenance recordkeeping costs for all enterprises are
thus estimated at approximately $506 million. The increase in the total
maintenance cost over the maintenance cost estimate in the interim
final rule is due to the inclusion of fish and shellfish in this final
rule.
The total first-year recordkeeping burden is calculated by summing
the initial and maintenance costs. The total recordkeeping costs are
estimated for producers at approximately $274 million; for handlers,
processors, and wholesalers at approximately $114 million; and for
retailers at approximately $253 million. The total recordkeeping cost
for all participants in the supply chain for covered commodities is
estimated at $641 million for the first year, with subsequent
maintenance costs of $506 million per year.
Annual Reporting and Recordkeeping Burden for the First Year
(Initial): Public reporting burden for establishing this initial
recordkeeping is estimated to average 4.5 hours per year per individual
recordkeeper.
Estimated Number of Firms Recordkeepers: 1,299,390.
Estimated Total Annual Burden: 5,884,661 hours.
Annual Reporting and Recordkeeping Burden (Maintenance): Public
reporting burden for recordkeeping storage and maintenance is estimated
to average 23.8 hours per year per individual recordkeeper.
Estimated Number of Establishments Recordkeepers: 1,333,405.
Estimated Total Annual Burden: 31,790,642 hours.
To the extent possible, the Agency complies with the e-Government
Act, which requires Government agencies in general to provide the
public the option of submitting information or transacting business
electronically to the maximum extent possible. This information
collection has no forms and is only for recordkeeping purposes.
Therefore, the provisions of an electronic submission alternative are
not required.
References
1. Dinopoulos, Elias, Grigorios Livanis, and Carol West. ``How Cool
is C.O.O.L.?'' Working Paper WPTC 05-11, University of Florida,
International Agricultural Trade and Policy Center, 2005.
2. Plastina, Alejandro and Konstantinos Giannakas. ``Market and
Welfare Effects of Mandatory Country-of-Origin Labeling in the US
Specialty Crops Sector.'' Selected Paper American Agricultural
Economics Association Annual Meeting, Portland, Oregon, July 2007.
3. Mabiso, Athur, James Sterns, Lisa House, and Allen Wysocki.
``Estimating Consumers'' Willingness-To-Pay for Country-Of-Origin
Labels in Fresh Apples and Tomatoes: A Double-Hurdle Probit Analysis
of American Data Using Factor Scores.'' American Agricultural
Economics Association Annual Meeting, Providence, Rhode Island, July
2005.
4. Krissoff, Barry, Fred Kuchler, Kenneth Nelson, Janet Perry, and
Agapi Somwaru. ``Country of Origin Labeling: Theory and Observation.
USDA, ERS, WRS-04-02, January 2004.
5. NASS, USDA, Wisconsin Department of Agriculture. Wisconsin 2007
Agricultural Statistics. http://www.nass.usda.gov/Statistics_by_
State/Wisconsin/
6. NASS, USDA, Hawaii Department of Agriculture. Hawaii 2007
Agricultural Statistics. http://www.nass.usda.gov/hi/stats/t_of_
c.htm
7. NASS, USDA. 2002 Census of Agriculture.
8. ERS, USDA. Food CPI, Prices and Expenditures: Sales of Food at
Home by Type of Outlet. http://www.ers.usda.gov/Briefing/
CPIFoodAndExpenditures/Data/table16.htm
9. U.S. Census Bureau. 2002 Economic Census. Retail Trade Subject
Series. Establishment and Firm Size. EC97R44S-SZ. Issued September
2004.
10. Office of the Chief Economist, USDA. USDA Agricultural Baseline
Projections to 2016, Staff Report WAOB-2007-1. February 2007.
11. Bureau of Economic Analysis. http://www.bea.gov/national/
index.htm#gdp.
12. AMS, USDA. Perishable Agricultural Commodities Act database.
13. U.S. Census Bureau. 2004 Statistics of U.S. Businesses.
14. NASS, USDA. 2005 Census of Aquaculture.
15. Bureau of Labor Statistics, Department of Labor, National
Compensation Survey, May 2006, Employer Cost for Employee
Compensation.
16. Food and Drug Administration. ``Establishment and Maintenance of
Records Under the Public Health Security and Bioterrorism
Preparedness and Response Act of 2002,'' proposed rule. May 9, 2003.
17. RTI, International 2000. FDA Labeling Cost Model: Final Report.
Revised April 2002.
18. NASS, USDA. Farm Labor, August 17, 2007.
Executive Order 12988
The contents of this rule were reviewed under Executive Order
12988, Civil Justice Reform. This rule is not intended to have a
retroactive effect. States and local jurisdictions are preempted from
creating or operating country of origin labeling programs for the
commodities specified in the Act and these regulations. With regard to
other Federal statutes, all labeling claims made in conjunction with
this regulation must be consistent with other applicable Federal
requirements. There are no administrative procedures that must be
exhausted prior to any judicial challenge to the provisions of this
rule.
Civil Rights Review
AMS considered the potential civil rights implications of this rule
on minorities, women, or persons with disabilities to ensure that no
person or group shall be discriminated against on the basis of race,
color, national origin, gender, religion, age, disability, sexual
orientation, marital or family status, political beliefs, parental
status, or protected genetic information. This review included persons
that are employees of the entities that are subject to these
regulations. This final rule does not require affected entities to
relocate or alter their operations in ways that could adversely affect
such persons or groups. Further, this rule will not deny any persons or
groups the benefits of the program or subject any persons or groups to
discrimination.
Executive Order 13132
This rule has been reviewed under Executive Order 13132,
Federalism. This Order directs agencies to construe, in regulations and
otherwise, a Federal statute to preempt State law only where
[[Page 2701]]
the statute contains an express preemption provision or there is some
other clear evidence to conclude that the Congress intended preemption
of State law, or where the exercise of State authority conflicts with
the exercise of Federal authority under the Federal statute. This rule
is required by the 2002 Farm Bill, as amended by the 2008 Farm Bill.
While this statute does not contain an express preemption
provision, it is clear from the language in the statute that Congress
intended preemption of State law. The law assigns enforcement
responsibilities to the Secretary and encourages the Secretary to enter
into partnerships with States with enforcement infrastructure to assist
in the administration of the program. The law provides for a 30-day
period in which retailers and suppliers may take the necessary
corrective action after receiving notice of a nonconformance. The
Secretary can impose a civil penalty only if the retailer or supplier
has not made a good faith effort to comply and only after the Secretary
provides notice and an opportunity for a hearing. Allowing private
rights of actions would frustrate the purpose of this comprehensive
enforcement system in which Congress struck a delicate balance of
imposing a requirement, but ensuring that the agency had wide latitude
in enforcement discretion. Thus, it is clear that State laws and other
actions were intended to be preempted.
Several States have implemented mandatory programs for country of
origin labeling of certain commodities. For example, Alabama, Arkansas,
Mississippi, and Louisiana have origin labeling requirements for
certain seafood products. Other States including Wyoming, Idaho, North
Dakota, South Dakota, Louisiana, Kansas, and Mississippi have origin
labeling requirements for certain meat products. In addition, the State
of Florida and the State of Maine have origin labeling requirements for
fresh produce items.
To the extent that these State country of origin labeling programs
encompass commodities that are not governed by this regulation, the
States may continue to operate them. For those State country of origin
labeling programs that encompass commodities that are governed by this
regulation, these programs are preempted. In most cases, the
requirements contained within this rule are more stringent and
prescriptive than the requirements of the State programs. With regard
to consultation with States, as directed by the Executive Order 13132,
AMS has consulted with the States that have country of origin labeling
programs.
The effective date of this regulation is March 16, 2009. In the
August 1, 2008, interim final rule for the remaining covered
commodities, the Agency indicated that during the six month period
following the effective date of that regulation, AMS would conduct an
industry education and outreach program concerning the provisions and
requirements of that rule. AMS will continue this period of informed
compliance for this regulation through March 2009.
List of Subjects
7 CFR Part 60
Agricultural commodities, Fish, Food labeling, Reporting and
recordkeeping requirements.
7 CFR Part 65
Agricultural commodities, Food labeling, Meat and meat products,
Macadamia nuts, Peanuts, Pecans, Reporting and recordkeeping
requirements.
0
For the reasons set forth in the preamble, 7 CFR chapter I is amended
as follows:
0
1. Part 60 is revised to read as follows:
PART 60--COUNTRY OF ORIGIN LABELING FOR FISH AND SHELLFISH
Subpart A--General Provisions
Definitions
Sec.
60.101 Act.
60.102 AMS.
60.103 Commingled covered commodities.
60.104 Consumer package.
60.105 Covered commodity.
60.106 Farm-raised fish.
60.107 Food service establishment.
60.108-60.110 [Reserved]
60.111 Hatched.
60.112 Ingredient.
60.113 [Reserved]
60.114 Legibly.
60.115 [Reserved]
60.116 Person.
60.117 [Reserved]
60.118 Pre-labeled.
60.119 Processed food item.
60.120 [Reserved]
60.121 [Reserved]
60.122 Production step.
60.123 Raised.
60.124 Retailer.
60.125 Secretary.
60.126 [Reserved]
60.127 United States.
60.128 United States country of origin.
60.129 USDA.
60.130 U.S. flagged vessel.
60.131 Vessel flag.
60.132 Waters of the United States.
60.133 Wild fish and shellfish.
Country of Origin Notification
60.200 Country of origin notification.
60.300 Labeling.
Recordkeeping
60.400 Recordkeeping requirements.
Appendix A to Subpart A-Exclusive Economic Zone and Maritime
Boundaries; Notice of Limits
Authority: 7 U.S.C. 1621 et seq.
Subpart A--General Provisions
Definitions
Sec. 60.101 Act.
Act means the Agricultural Marketing Act of 1946 (7 U.S.C. 1621 et
seq.).
Sec. 60.102 AMS.
AMS means the Agricultural Marketing Service, United States
Department of Agriculture.
Sec. 60.103 Commingled covered commodities.
Commingled covered commodities means 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.
Sec. 60.104 Consumer package.
Consumer package means any container or wrapping in which a covered
commodity is enclosed for the delivery and/or display of such commodity
to retail purchasers.
Sec. 60.105 Covered commodity.
(a) Covered commodity means:
(1) [Reserved]
(2) [Reserved]
(3) Farm-raised fish and shellfish (including fillets, steaks,
nuggets, and any other flesh);
(4) Wild fish and shellfish (including fillets, steaks, nuggets,
and any other flesh);
(5) [Reserved]
(6) [Reserved]
(b) Covered commodities are excluded from this part if the
commodity is an ingredient in a processed food item as defined in Sec.
60.119.
Sec. 60.106 Farm-raised fish.
Farm-raised fish means fish or shellfish that have been harvested
in controlled environments, including ocean-ranched (e.g., penned) fish
and including shellfish harvested from leased beds that have been
subjected to production enhancements such as providing protection from
predators, the addition of artificial structures, or providing
nutrients; and fillets, steaks, nuggets, and any other flesh from a
farm-raised fish or shellfish.
[[Page 2702]]
Sec. 60.107 Food service establishment.
Food service establishment means 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. Similar 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.
Sec. 60.108-60.110 [Reserved]
Sec. 60.111 Hatched.
Hatched means emerged from the egg.
Sec. 60.112 Ingredient.
Ingredient means a component either in part or in full, of a
finished retail food product.
Sec. 60.113 [Reserved]
Sec. 60.114 Legible.
Legible means text that can be easily read.
Sec. 60.115 [Reserved]
Sec. 60.116 Person.
Person means any individual, partnership, corporation, association,
or other legal entity.
Sec. 60.117 [Reserved]
Sec. 60.118 Pre-labeled.
Pre-labeled means a covered commodity that has the commodity's
country of origin and method of production and the name and place of
business of the manufacturer, packer, or distributor on the covered
commodity itself, on the package in which it is sold to the consumer,
or on the master shipping container. The place of business information
must include at a minimum the city and state or other acceptable locale
designation.
Sec. 60.119 Processed food item.
Processed food item means a retail item derived from fish or
shellfish 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 (e.g., breading, tomato sauce), except that the addition of a
component (such as water, salt, or sugar) that enhances or represents a
further step in the preparation of the product for consumption, would
not in itself result in a processed food item. Specific processing that
results in a change in the character of the covered commodity includes
cooking (e.g., frying, broiling, grilling, boiling, steaming, baking,
roasting), curing (e.g., salt curing, sugar curing, drying), smoking
(hot or cold), and restructuring (e.g., emulsifying and extruding,
compressing into blocks and cutting into portions). Examples of items
excluded include fish sticks, surimi, mussels in tomato sauce, seafood
medley, coconut shrimp, soups, stews, and chowders, sauces, pates,
smoked salmon, marinated fish fillets, canned tuna, canned sardines,
canned salmon, crab salad, shrimp cocktail, gefilte fish, sushi, and
breaded shrimp.
Sec. 60.120 [Reserved]
Sec. 60.121 [Reserved]
Sec. 60.122 Production step.
Production step means in the case of:
(a) [Reserved]
(b) Farm-raised Fish and Shellfish: Hatched, raised, harvested, and
processed.
(c) Wild Fish and Shellfish: Harvested and processed.
Sec. 60.123 Raised.
Raised means in the case of:
(a) [Reserved]
(b) Farm-raised fish and shellfish as it relates to the production
steps defined in Sec. 60.122: The period of time from hatched to
harvested.
Sec. 60.124 Retailer.
Retailer means any person licensed as a retailer under the
Perishable Agricultural Commodities Act of 1930 (7 U.S.C. 499a(b)).
Sec. 60.125 Secretary.
Secretary means the Secretary of Agriculture of the United States
or any person to whom the Secretary's authority has been delegated.
Sec. 60.126 [Reserved]
Sec. 60.127 United States.
United States means the 50 States, the District of Columbia, the
Commonwealth of Puerto Rico, the U.S. Virgin Islands, American Samoa,
Guam, the Northern Mariana Islands, and any other Commonwealth,
territory, or possession of the United States, and the waters of the
United States as defined in Sec. 60.132.
Sec. 60.128 United States country of origin.
United States country of origin means in the case of:
(a) [Reserved]
(b) [Reserved]
(c) Farm-raised Fish and Shellfish: From fish or shellfish hatched,
raised, harvested, and processed in the United States, and that has not
undergone a substantial transformation (as established by U.S. Customs
and Border Protection) outside of the United States.
(d) Wild-fish and Shellfish: From fish or shellfish harvested in
the waters of the United States or by a U.S. flagged vessel and
processed in the United States or aboard a U.S. flagged vessel, and
that has not undergone a substantial transformation (as established by
U.S. Customs and Border Protection) outside of the United States.
(e) [Reserved]
(f) [Reserved]
Sec. 60.129 USDA.
USDA means the United States Department of Agriculture.
Sec. 60.130 U.S. flagged vessel.
U.S. flagged vessel means:
(a) Any vessel documented under chapter 121 of title 46, United
States Code; or
(b) Any vessel numbered in accordance with chapter 123 of title 46,
United States Code.
Sec. 60.131 Vessel flag.
Vessel flag means the country of registry for a vessel, ship, or
boat.
Sec. 60.132 Waters of the United States.
Waters of the United States means those fresh and ocean waters
contained within the outer limit of the Exclusive Economic Zone (EEZ)
of the United States as described by the Department of State Public
Notice 2237 published in the Federal Register volume 60, No. 163,
August 23, 1995, pages 43825-43829. The Department of State notice is
republished in Appendix A to this subpart.
Sec. 60.133 Wild fish and shellfish.
Wild fish and shellfish means naturally-born or hatchery-originated
fish or shellfish released in the wild, and caught, taken, or harvested
from non-controlled waters or beds; and fillets, steaks, nuggets, and
any other flesh from a wild fish or shellfish.
Country of Origin Notification
Sec. 60.200 Country of origin notification.
In providing notice of the country of origin as required by the
Act, the following requirements shall be followed by retailers:
(a) General. Labeling of covered commodities offered for sale
whether individually, in a bulk bin, display case, carton, crate,
barrel, cluster, or consumer package must contain country of origin and
method of production information (wild and/or farm-raised) as set forth
in this regulation.
(b) Exemptions. Food service establishments as defined in Sec.
60.107
[[Page 2703]]
are exempt from labeling under this subpart.
(c) Exclusions. A covered commodity is excluded from this subpart
if it is an ingredient in a processed food item as defined in Sec.
60.119.
(d) Designation of Method of Production (Wild and/or Farm-Raised).
Fish and shellfish covered commodities shall also be labeled to
indicate whether they are wild and/or farm-raised as those terms are
defined in this regulation.
(e) Labeling Covered Commodities of United States Origin. A covered
commodity may only bear the declaration of ``Product of the U.S.'' at
retail if it meets the definition of United States Country of Origin as
defined in Sec. 60.128.
(f) Labeling Imported Products That Have Not Undergone Substantial
Transformation in the United States. An imported covered commodity
shall retain its origin as declared to U.S. Customs and Border
Protection at the time the product entered the United States, through
retail sale, provided that it has not undergone a substantial
transformation (as established by U.S. Customs and Border Protection)
in the United States.
(g) Labeling Imported Products That Have Subsequently Been
Substantially Transformed in the United States.
(1) [Reserved]
(2) Wild and Farm-Raised Fish and Shellfish: If a covered commodity
was imported from country X and subsequently substantially transformed
(as established by U.S. Customs and Border Protection) in the United
States or aboard a U.S. flagged vessel, such product shall be labeled
at retail as ``From country X, processed in the United States.''
Alternatively, the product may be labeled as ``Product of country X and
the United States''.
(h) Labeling Commingled Covered Commodities. (1) For imported
covered commodities that have not subsequently been substantially
transformed in the United States that are commingled with other
imported covered commodities that have not been substantially
transformed in the United States, and/or covered commodities of U.S.
origin and/or covered commodities as described in Sec. 60.200(g), the
declaration shall indicate the countries of origin for covered
commodities in accordance with existing Federal legal requirements.
(2) For imported covered commodities that have subsequently
undergone substantial transformation in the United States that are
commingled with other imported covered commodities that have
subsequently undergone substantial transformation in the United States
(either prior to or following substantial transformation in the United
States) and/or U.S. origin covered commodities, the declaration shall
indicate the countries of origin contained therein or that may be
contained therein.
(i) Remotely Purchased Products. For sales of a covered commodity
in which the customer purchases a covered commodity prior to having an
opportunity to observe the final package (e.g., Internet sales, home
delivery sales, etc.), the retailer may provide the country of origin
notification and method of production (wild and/or farm-raised)
designation either on the sales vehicle or at the time the product is
delivered to the consumer.
Sec. 60.300 Labeling.
(a) Country of origin declarations and method of production (wild
and/or farm-raised) designations can either be in the form of a
placard, sign, label, sticker, band, twist tie, pin tag, or other
format that provides country of origin and method of production
information. The country of origin declaration and method of production
(wild and/or farm-raised) designation may be combined or made
separately. Except as provided in Sec. 60.200(g) and 60.200(h) of this
regulation, the declaration of the country(ies) of origin of a product
shall be listed according to applicable Federal legal requirements.
Country of origin declarations may be in the form of a check box
provided it is in conformance with other Federal legal requirements.
Various forms of the production designation are acceptable, including
``wild caught'', ``wild'', ``farm-raised'', ``farmed'', or a
combination of these terms for blended products that contain both wild
and farm-raised fish or shellfish, provided it can be readily
understood by the consumer and is in conformance with other Federal
labeling laws. Designations such as ``ocean caught'', ``caught at
sea'', ``line caught'', ``cultivated'', or ``cultured'' are not
acceptable substitutes. Alternatively, method of production (wild and/
or farm-raised) designations may be in the form of a check box.
(b) The declaration of the country(ies) of origin and method(s) of
production (wild and/or farm-raised) (e.g., placard, sign, label,
sticker, band, twist tie, pin tag, or other display) must be placed in
a conspicuous location, so as to render it likely to be read and
understood by a customer under normal conditions of purchase.
(c) The declaration of the country(ies) of origin and the method(s)
of production (wild and/or farm-raised) may be typed, printed, or
handwritten provided it is in conformance with other Federal labeling
laws and does not obscure other labeling information required by other
Federal regulations.
(d) A bulk container (e.g., display case, shipper, bin, carton, and
barrel), used at the retail level to present product to consumers, may
contain a covered commodity from more than one country of origin and/or
more than one method of production (wild and farm-raised) provided all
possible origins and/or methods of production are listed.
(e) In general, country abbreviations are not acceptable. Only
those abbreviations approved for use under CBP rules, regulations, and
policies, such as ``U.K.'' for ``The United Kingdom of Great Britain
and Northern Ireland'', ``Luxemb'' for Luxembourg, and ``U.S. or USA''
for the ``United States'' are acceptable. The adjectival form of the
name of a country may be used as proper notification of the
country(ies) of origin of imported commodities provided the adjectival
form of the name does not appear with other words so as to refer to a
kind or species of product. Symbols or flags alone may not be used to
denote country of origin.
(f) State or regional label designations are not acceptable in lieu
of country of origin labeling.
Recordkeeping
Sec. 60.400 Recordkeeping requirements.
(a) General. (1) All records must be legible and may be maintained
in either electronic or hard copy formats. Due to the variation in
inventory and accounting documentary systems, various forms of
documentation and records will be acceptable.
(2) Upon request by USDA representatives, suppliers and retailers
subject to this subpart shall make available to USDA representatives,
records maintained in the normal course of business that verify an
origin claim and method of production (wild and/or farm-raised). Such
records shall be provided within 5 business days of the request and may
be maintained in any location.
(b) Responsibilities of suppliers. (1) Any person engaged in the
business of supplying a covered commodity to a retailer, whether
directly or indirectly, must make available information to the buyer
about the country(ies) of origin and method(s) of production (wild and/
or farm-raised), of the covered commodity. This information may be
provided either on the product itself, on the master shipping
container, or in a document that accompanies the product
[[Page 2704]]
through retail sale provided that it identifies the product and its
country(ies) of origin and method(s) of production. In addition, the
supplier of a covered commodity that is responsible for initiating a
country(ies) of origin and method(s) of production (wild and/or farm-
raised) claim must possess records that are necessary to substantiate
that claim for a period of 1 year from the date of the transaction.
Producer affidavits shall also be considered acceptable records that
suppliers may utilize to initiate origin claims, provided it is made by
someone having first-hand knowledge of the origin of the covered
commodity and identifies the covered commodity unique to the
transaction.
(2) Any intermediary supplier handling a covered commodity that is
found to be designated incorrectly as to the country of origin and/or
method of production (wild and/or farm-raised) shall not be held liable
for a violation of the Act by reason of the conduct of another if the
intermediary supplier relied on the designation provided by the
initiating supplier or other intermediary supplier, unless the
intermediary supplier willfully disregarded information establishing
that the country of origin and/or method of production (wild and/or
farm-raised) declaration was false.
(3) Any person engaged in the business of supplying a covered
commodity to a retailer, whether directly or indirectly (i.e.,
including but not limited to harvesters, producers, distributors,
handlers, and processors), 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.
(4) For an imported covered commodity (as defined in Sec.
60.200(f)), the importer of record as determined by U.S. Customs and
Border Protection, must ensure that records: provide clear product
tracking from the port of entry into the United States to the immediate
subsequent recipient and accurately reflect the country of origin and
method of production (wild and/or farm-raised) of the item as
identified in relevant CBP entry documents and information systems; and
must maintain such records for a period of 1 year from the date of the
transaction.
(c) Responsibilities of retailers. (1) In providing the country of
origin and method of production (wild and/or farm-raised) notification
for a covered commodity, in general, retailers are to convey the origin
and method of production information provided to them by their
suppliers. Only if the retailer physically commingles a covered
commodity of different origins and/or methods of production in
preparation for retail sale, whether in a consumer-ready package or in
a bulk display (and not discretely packaged) (i.e., full service fish
case), can the retailer initiate a multiple country of origin and/or
method of production designation that reflects the actual countries of
origin and method of production for the resulting covered commodity.
(2) Records and other documentary evidence relied upon at the point
of sale to establish a covered commodity's country(ies) of origin and
designation of wild and/or farm-raised must either be maintained at the
retail facility or at another location for as long as the product is on
hand and provided to any duly authorized representative of USDA in
accordance with Sec. 60.400(a)(2). For pre-labeled products, the label
itself is sufficient information on which the retailer may rely to
establish the product's origin and method(s) of production (wild and/or
farm-raised) and no additional records documenting origin and method of
production information are necessary.
(3) Records that identify the covered commodity, the retail
supplier, and for products that are not pre-labeled, the country of
origin information and the method(s) of production (wild and/or farm-
raised) must be maintained for a period of 1 year from the date the
declaration is made at retail.
(4) Any retailer handling a covered commodity that is found to be
designated incorrectly as to the country of origin and/or the method of
production (wild and/or farm-raised) shall not be held liable for a
violation of the Act by reason of the conduct of another if the
retailer relied on the designation provided by the supplier, unless the
retailer willfully disregarded information establishing that the
country of origin and/or method of production declaration was false.
Subpart B--[Reserved]
0
2. Part 65 is revised to read as follows:
PART 65--COUNTRY OF ORIGIN LABELING OF BEEF, PORK, LAMB, CHICKEN,
GOAT MEAT, PERISHABLE AGRICULTURAL COMMODITIES, MACADAMIA NUTS,
PECANS, PEANUTS, AND GINSENG
Subpart A--General Provisions
Definitions
65.100 Act.
65.105 AMS.
65.110 Beef.
65.115 Born.
65.120 Chicken.
65.125 Commingled covered commodities.
65.130 Consumer package.
65.135 Covered commodity.
65.140 Food service establishment.
65.145 Ginseng.
65.150 Goat.
65.155 Ground beef.
65.160 Ground chicken.
65.165 Ground goat.
65.170 Ground lamb.
65.175 Ground pork.
65.180 Imported for immediate slaughter.
65.185 Ingredient.
65.190 Lamb.
65.195 Legibly.
65.205 Perishable agricultural commodity.
65.210 Person.
65.215 Pork.
65.218 Pre-labeled.
65.220 Processed food item.
65.225 Produced.
65.230 Production step.
65.235 Raised.
65.240 Retailer.
65.245 Secretary.
65.250 Slaughter.
65.255 United States.
65.260 United States country of origin.
65.265 USDA.
Country of Origin Notification
65.300 Country of origin notification.
65.400 Labeling.
Recordkeeping
65.500 Recordkeeping requirements.
Subpart B--[Reserved]
Authority: 7 U.S.C. 1621 et seq.
Subpart A--General Provisions
Definitions
Sec. 65.100 Act.
Act means the Agricultural Marketing Act of 1946, (7 U.S.C. 1621 et
seq.).
Sec. 65.105 AMS.
AMS means the Agricultural Marketing Service, United States
Department of Agriculture.
Sec. 65.110 Beef.
Beef means meat produced from cattle, including veal.
Sec. 65.115 Born.
Born in the case of chicken means hatched from the egg.
Sec. 65.120 Chicken.
Chicken has the meaning given the term in 9 CFR 381.170(a)(1).
Sec. 65.125 Commingled covered commodities.
Commingled covered commodities means 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.
[[Page 2705]]
Sec. 65.130 Consumer package.
Consumer package means any container or wrapping in which a covered
commodity is enclosed for the delivery and/or display of such commodity
to retail purchasers.
Sec. 65.135 Covered commodity.
(a) Covered commodity means:
(1) Muscle cuts of beef, lamb, chicken, goat, and pork;
(2) Ground beef, ground lamb, ground chicken, ground goat, and
ground pork;
(3) Perishable agricultural commodities;
(4) Peanuts;
(5) Macadamia nuts;
(6) Pecans; and
(7) Ginseng.
(b) Covered commodities are excluded from this part if the
commodity is an ingredient in a processed food item as defined in Sec.
65.220.
Sec. 65.140 Food service establishment.
Food service establishment means 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. Similar 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.
Sec. 65.145 Ginseng.
Ginseng means ginseng root of the genus Panax.
Sec. 65.150 Goat.
Goat means meat produced from goats.
Sec. 65.155 Ground beef.
Ground beef has the meaning given that term in 9 CFR 319.15(a),
i.e., chopped fresh and/or frozen beef with or without seasoning and
without the addition of beef fat as such, and containing no more than
30 percent fat, and containing no added water, phosphates, binders, or
extenders, and also includes products defined by the term ``hamburger''
in 9 CFR 319.15(b).
Sec. 65.160 Ground chicken.
Ground chicken means comminuted chicken of skeletal origin that is
produced in conformance with all applicable Food Safety and Inspection
Service labeling guidelines.
Sec. 65.165 Ground goat.
Ground goat means comminuted goat of skeletal origin that is
produced in conformance with all applicable Food Safety and Inspection
Service labeling guidelines.
Sec. 65.170 Ground lamb.
Ground lamb means comminuted lamb of skeletal origin that is
produced in conformance with all applicable Food Safety and Inspection
Service labeling guidelines.
Sec. 65.175 Ground pork.
Ground pork means comminuted pork of skeletal origin that is
produced in conformance with all applicable Food Safety and Inspection
Service labeling guidelines.
Sec. 65.180 Imported for immediate slaughter.
Imported for immediate slaughter means imported into the United
States for ``immediate slaughter'' as that term is defined in 9 CFR
93.400, i.e., consignment directly from the port of entry to a
recognized slaughtering establishment and slaughtered within 2 weeks
from the date of entry.
Sec. 65.185 Ingredient.
Ingredient means a component either in part or in full, of a
finished retail food product.
Sec. 65.190 Lamb.
Lamb means meat produced from sheep.
Sec. 65.195 Legible.
Legible means text that can be easily read.
Sec. 65.205 Perishable agricultural commodity.
Perishable agricultural commodity means fresh and frozen fruits and
vegetables of every kind and character that have not been manufactured
into articles of a different kind or character and includes cherries in
brine as defined by the Secretary in accordance with trade usages.
Sec. 65.210 Person.
Person means any individual, partnership, corporation, association,
or other legal entity.
Sec. 65.215 Pork.
Pork means meat produced from hogs.
Sec. 65.218 Pre-labeled.
Pre-labeled means a covered commodity that has the commodity's
country of origin and the name and place of business of the
manufacturer, packer, or distributor on the covered commodity itself,
on the package in which it is sold to the consumer, or on the master
shipping container. The place of business information must include at a
minimum the city and state or other acceptable locale designation.
Sec. 65.220 Processed food item.
Processed food item means 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 (e.g., chocolate, breading, tomato sauce), except that the
addition of a component (such as water, salt, or sugar) that enhances
or represents a further step in the preparation of the product for
consumption, would not in itself result in a processed food item.
Specific processing that results in a change in the character of the
covered commodity includes cooking (e.g., frying, broiling, grilling,
boiling, steaming, baking, roasting), curing (e.g., salt curing, sugar
curing, drying), smoking (hot or cold), and restructuring (e.g.,
emulsifying and extruding). Examples of items excluded include teriyaki
flavored pork loin, roasted peanuts, breaded chicken tenders, and fruit
medley.
Sec. 65.225 Produced.
Produced in the case of a perishable agricultural commodity,
peanuts, ginseng, pecans, and macadamia nuts means harvested.
Sec. 65.230 Production step.
Production step means, in the case of beef, pork, goat, chicken,
and lamb, born, raised, or slaughtered.
Sec. 65.235 Raised.
Raised means, in the case of beef, pork, chicken, goat, and lamb,
the period of time from birth until slaughter or in the case of animals
imported for immediate slaughter as defined in Sec. 65.180, the period
of time from birth until date of entry into the United States.
Sec. 65.240 Retailer.
Retailer means any person licensed as a retailer under the
Perishable Agricultural Commodities Act of 1930 (7 U.S.C. 499a(b)).
Sec. 65.245 Secretary.
Secretary means the Secretary of Agriculture of the United States
or any person to whom the Secretary's authority has been delegated.
Sec. 65.250 Slaughter.
Slaughter means the point in which a livestock animal (including
chicken) is prepared into meat products (covered commodities) for human
consumption. For purposes of labeling under this part, the word
harvested may be used in lieu of slaughtered.
[[Page 2706]]
Sec. 65.255 United States.
United States means the 50 States, the District of Columbia, the
Commonwealth of Puerto Rico, the U.S. Virgin Islands, American Samoa,
Guam, the Northern Mariana Islands, and any other Commonwealth,
territory, or possession of the United States.
Sec. 65.260 United States country of origin.
United States country of origin means in the case of:
(a) Beef, pork, lamb, chicken, and goat:
(1) From animals exclusively born, raised, and slaughtered in the
United States;
(2) From animals born and raised in Alaska or Hawaii and
transported for a period of not more than 60 days through Canada to the
United States and slaughtered in the United States; or
(3) From animals present in the United States on or before July 15,
2008, and once present in the United States, remained continuously in
the United States.
(b) Perishable agricultural commodities, peanuts, ginseng, pecans,
and macadamia nuts: from products produced in the United States.
Sec. 65.265 USDA.
USDA means the United States Department of Agriculture.
Country of Origin Notification
Sec. 65.300 Country of origin notification.
In providing notice of the country of origin as required by the
Act, the following requirements shall be followed by retailers:
(a) General. Labeling of covered commodities offered for sale
whether individually, in a bulk bin, carton, crate, barrel, cluster, or
consumer package must contain country of origin as set forth in this
regulation.
(b) Exemptions. Food service establishments as defined in Sec.
65.135 are exempt from labeling under this subpart.
(c) Exclusions. A covered commodity is excluded from this subpart
if it is an ingredient in a processed food item as defined in Sec.
65.220.
(d) Labeling Covered Commodities of United States Origin. 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 Sec. 65.260.
(e) Labeling Muscle Cut Covered Commodities of Multiple Countries
of Origin that include the United States. (1) 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 Sec. 65.180, the origin may be designated as Product of the
United States, Country X, and (as applicable) Country Y.
(2) For muscle cut covered commodities derived from animals born,
raised, and slaughtered in the U.S. that are commingled during a
production day with muscle cut covered commodities described in Sec.
65.300(e)(1), the origin may be designated as Product of the United
States, Country X, and (as applicable) Country Y.
(3) If an animal was imported into the United States for immediate
slaughter as defined in Sec. 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.
(4) For muscle cut covered commodities derived from animals that
are born in Country X or Country Y, raised and slaughtered in the
United States, that are commingled during a production day with muscle
cut covered commodities that are derived from animals that are imported
into the United States for immediate slaughter as defined in Sec.
65.180, the origin may be designated as Product of the United States,
Country X, and (as applicable) Country Y. In each case of paragraphs
(e)(1), (e)(2), and (e)(4) of this section, the countries may be listed
in any order. In addition, the origin declaration may include more
specific information related to production steps provided records to
substantiate the claims are maintained and the claim is consistent with
other applicable Federal legal requirements.
(f) Labeling Imported Covered Commodities. 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.
(g) Labeling Commingled Covered Commodities. In the case of
perishable agricultural commodities; peanuts; pecans; ginseng; and
macadamia nuts: For imported covered commodities that have not
subsequently been substantially transformed in the United States that
are commingled with covered commodities sourced from a different origin
that have not been substantially transformed (as established by CBP) in
the United States, and/or covered commodities of United States origin,
the declaration shall indicate the countries of origin in accordance
with existing Federal legal requirements.
(h) Labeling Ground Beef, Ground Pork, Ground Lamb, Ground Goat,
and Ground Chicken. The declaration for ground beef, ground pork,
ground lamb, ground goat, and ground chicken covered commodities shall
list all countries of origin contained therein or that may be
reasonably contained therein. In determining what is considered
reasonable, 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.
(i) Remotely Purchased Products. For sales of a covered commodity
in which the customer purchases a covered commodity prior to having an
opportunity to observe the final package (e.g., Internet sales, home
delivery sales, etc.), the retailer may provide the country of origin
notification either on the sales vehicle or at the time the product is
delivered to the consumer.
Sec. 65.400 Labeling.
(a) Country 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. The
declaration of the country of origin of a product may be in the form of
a statement such as ``Product of USA,'' ``Produce of the USA'', or
``Grown in Mexico,'' may only contain the name of the country such as
``USA'' or ``Mexico,'' or may be in the form of a check box provided it
is in conformance with other Federal labeling laws.
(b) The declaration of the country of origin (e.g., placard, sign,
label, sticker, band, twist tie, pin tag, or other display) 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.
(c) The declaration of country of origin may be typed, printed, or
handwritten provided it is in conformance with other Federal labeling
laws and does not obscure other labeling information required by other
Federal regulations.
(d) A bulk container (e.g., display case, shipper, bin, carton, and
barrel) used at the retail level to present product to consumers, may
contain a covered commodity from more than one country of origin
provided all possible origins are listed.
(e) In general, country abbreviations are not acceptable. Only
those
[[Page 2707]]
abbreviations approved for use under Customs and Border Protection
rules, regulations, and policies, such as ``U.K.'' for ``The United
Kingdom of Great Britain and Northern Ireland'', ``Luxemb'' for
Luxembourg, and ``U.S. or USA'' for the ``United States of America''
are acceptable. The adjectival form of the name of a country may be
used as proper notification of the country of origin of imported
commodities provided the adjectival form of the name does not appear
with other words so as to refer to a kind or species of product.
Symbols or flags alone may not be used to denote country of origin.
(f) Domestic and imported perishable agricultural commodities,
peanuts, pecans, macadamia nuts, and ginseng may use State, regional,
or locality label designations in lieu of country of origin labeling.
Abbreviations may be used for state, regional, or locality label
designations for these commodities whether domestically harvested or
imported using official United States Postal Service abbreviations or
other abbreviations approved by CBP.
Recordkeeping
Sec. 65.500 Recordkeeping requirements.
(a) General. (1) All records must be legible and may be maintained
in either electronic or hard copy formats. Due to the variation in
inventory and accounting documentary systems, various forms of
documentation and records will be acceptable.
(2) Upon request by USDA representatives, suppliers and retailers
subject to this subpart shall make available to USDA representatives,
records maintained in the normal course of business that verify an
origin claim. Such records shall be provided within 5 business days of
the request and may be maintained in any location.
(b) Responsibilities of suppliers. (1) Any person engaged in the
business of supplying a covered commodity to a retailer, whether
directly or indirectly, must make available information to the buyer
about the country(ies) of origin of the covered commodity. This
information may be provided either on the product itself, on the master
shipping container, or in a document that accompanies the product
through retail sale. In addition, the supplier of a covered commodity
that is responsible for initiating a country(ies) of origin claim,
which in the case of beef, lamb, chicken, goat, and pork is the
slaughter facility, must possess records that are necessary to
substantiate that claim for a period of 1 year from the date of the
transaction. For that purpose, packers that slaughter animals that are
tagged with an 840 Animal Identification Number device without the
presence of any additional accompanying marking (i.e., ``CAN'' or
``M'') may use that information as a basis for a U.S. origin claim.
Packers that slaughter animals that are part of another country's
recognized official system (e.g., Canadian official system, Mexico
official system) may also rely on the presence of an official ear tag
or other approved device on which to base their origin claims. Producer
affidavits shall also be considered acceptable records that suppliers
may utilize to initiate origin claims, provided it is made by someone
having first-hand knowledge of the origin of the covered commodity and
identifies the covered commodity unique to the transaction. In the case
of cattle, producer affidavits may be based on a visual inspection of
the animal to verify its origin. If no markings are found that would
indicate that the animal is of foreign origin (i.e., ``CAN'' or ``M''),
the animal may be considered to be of U.S. origin.
(2) Any intermediary supplier handling a covered commodity that is
found to be designated incorrectly as to the country of origin shall
not be held liable for a violation of the Act by reason of the conduct
of another if the intermediary supplier relied on the designation
provided by the initiating supplier or other intermediary supplier,
unless the intermediary supplier willfully disregarded information
establishing that the country of origin declaration was false.
(3) Any person engaged in the business of supplying a covered
commodity to a retailer, whether directly or indirectly (i.e.,
including but not limited to growers, distributors, handlers, packers,
and processors), 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.
(4) For an imported covered commodity (as defined in Sec.
65.300(f)), the importer of record as determined by CBP, must ensure
that records: provide clear product tracking from the port of entry
into the United States to the immediate subsequent recipient and
accurately reflect the country of origin of the item as identified in
relevant CBP entry documents and information systems; and must maintain
such records for a period of 1 year from the date of the transaction.
(c) Responsibilities of retailers. (1) In providing the country of
origin notification for a covered commodity, in general, retailers are
to convey the origin information provided by their suppliers. Only if
the retailer physically commingles a covered commodity of different
origins in preparation for retail sale, whether in a consumer-ready
package or in a bulk display (and not discretely packaged) (i.e., full
service meat case), can the retailer initiate a multiple country of
origin designation that reflects the actual countries of origin for the
resulting covered commodity.
(2) Records and other documentary evidence relied upon at the point
of sale to establish a covered commodity's country(ies) of origin must
either be maintained at the retail facility or at another location for
as long as the product is on hand and provided to any duly authorized
representative of USDA in accordance with Sec. 65.500(a)(2). For pre-
labeled products, the label itself is sufficient information on which
the retailer may rely to establish the product's origin and no
additional records documenting origin information are necessary.
(3) Any retailer handling a covered commodity that is found to be
designated incorrectly as to the country of origin shall not be held
liable for a violation of the Act by reason of the conduct of another
if the retailer relied on the designation provided by the supplier,
unless the retailer willfully disregarded information establishing that
the country of origin declaration was false.
(4) Records that identify the covered commodity, the retail
supplier, and for products that are not pre-labeled, the country of
origin information must be maintained for a period of 1 year from the
date the origin declaration is made at retail.
Subpart B--[Reserved]
Dated: January 9, 2009.
James E. Link,
Administrator, Agricultural Marketing Service.
[FR Doc. E9-600 Filed 1-12-09; 11:15 am]
BILLING CODE 3410-02-P