[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
                            SUBCOMMITTEE ON 
                       REGULATIONS AND HEALTHCARE 
                          HEARING ON IMPACT OF 
                    FOOD RECALLS ON SMALL BUSINESSES 

=======================================================================

                                HEARING

                               before the


                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                             MARCH 11, 2009

                               __________

                    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
                               

            Small Business Committee Document Number 111-008
Available via the GPO Website: http://www.access.gpo.gov/congress/house

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman

                          DENNIS MOORE, Kansas

                      HEATH SHULER, North Carolina

                     KATHY DAHLKEMPER, Pennsylvania

                         KURT SCHRADER, Oregon

                        ANN KIRKPATRICK, Arizona

                          GLENN NYE, Virginia

                         MICHAEL MICHAUD, Maine

                         MELISSA BEAN, Illinois

                         DAN LIPINSKI, Illinois

                      JASON ALTMIRE, Pennsylvania

                        YVETTE CLARKE, New York

                        BRAD ELLSWORTH, Indiana

                        JOE SESTAK, Pennsylvania

                         BOBBY BRIGHT, Alabama

                        PARKER GRIFFITH, Alabama

                      DEBORAH HALVORSON, Illinois

                  SAM GRAVES, Missouri, Ranking Member

                      ROSCOE G. BARTLETT, Maryland

                         W. TODD AKIN, Missouri

                            STEVE KING, Iowa

                     LYNN A. WESTMORELAND, Georgia

                          LOUIE GOHMERT, Texas

                         MARY FALLIN, Oklahoma

                         VERN BUCHANAN, Florida

                      BLAINE LUETKEMEYER, Missouri

                         AARON SCHOCK, Illinois

                      GLENN THOMPSON, Pennsylvania

                         MIKE COFFMAN, Colorado

                  Michael Day, Majority Staff Director

                 Adam Minehardt, Deputy Staff Director

                      Tim Slattery, Chief Counsel

                  Karen Haas, Minority Staff Director

        .........................................................

                                  (ii)


               Subcommittee on Regulations and Healthcare

               KATHY DAHLKEMPER, Pennsylvania, Chairwoman


DAN LIPINSKI, Illinois               LYNN WESTMORELAND, Georgia, 
PARKER GRIFFITH, Alabama             Ranking
MELISSA BEAN, Illinois               STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania          VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania             GLENN THOMPSON, Pennsylvania
BOBBY BRIGHT, Alabama                MIKE COFFMAN, Colorado

                                 ______


                                 (iii)

  



















                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Dahlkemper, Hon. Kathy...........................................     1
Westmoreland, Hon. Lynn..........................................     2

                               WITNESSES

Petersen, Dr. Ken, Assistant Administrator, Office of Field 
  Operations, Food Safety and Inspection Service, Department of 
  Agriculture....................................................     4
Solomon, Dr. Steven, Assistant Commissioner for Compliance 
  Policy, Office of Regulatory Affairs, Food and Drug 
  Administration.................................................     6
Austin, Ms. Diane, Vice President, Perry's Ice Cream, Co., Inc., 
  On behalf of The International Dairy Foods Association.........    20
Ambrosio, Mr. Mike, Vice President, Quality Assurance, Wakefern 
  Food Corporation, On behalf of The Food Marketing Institute....    22
Conrad, Mr. Ken, President, Libby Hill Seafood Restaurants, Inc., 
  Greensboro, NC On behalf of The National Restaurant Association    24
Koehler,Mr. Don, Executive Director, Georgia Peanut Commission, 
  Tifton, GA.....................................................    26
Vanco, Ms. Sheryl, Dairy Farmer, Bear Lake, PA, On Behalf Of The 
  National Farmers Union.........................................    28

                                APPENDIX


Prepared Statements:
Dahlkemper, Hon. Kathy...........................................    38
Petersen, Dr. Ken, Assistant Administrator, Office of Field 
  Operations, Food Safety and Inspection Service, Department of 
  Agriculture....................................................    40
Solomon, Dr. Steven, Assistant Commissioner for Compliance 
  Policy, Office of Regulatory Affairs, Food and Drug 
  Administration.................................................    50
Austin, Ms. Diane, Vice President, Perry's Ice Cream, Co., Inc., 
  On behalf of The International Dairy Foods Association.........    63
Ambrosio, Mr. Mike, Vice President, Quality Assurance, Wakefern 
  Food Corporation, On behalf of The Food Marketing Institute....    71
Conrad, Mr. Ken, President, Libby Hill Seafood Restaurants, Inc., 
  Greensboro, NC On behalf of The National Restaurant Association    78
Koehler,Mr. Don, Executive Director, Georgia Peanut Commission, 
  Tifton, GA.....................................................    83
Vanco, Ms. Sheryl, Dairy Farmer, Bear Lake, PA, On Behalf Of The 
  National Farmers Union.........................................    87

Statements for the Record:
Bright, Hon. Bobby...............................................    95
Murray, Mr. Taz, CEO, Dynamic Confections........................    96

                                  (v)

  


         SUBCOMMITTEE ON REGULATIONS AND HEALTHCARE HEARING ON
               IMPACT OF FOOD RECALLS ON SMALL BUSINESSES

                              ----------                              


                       Wednesday, March 11, 2009

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2360 Rayburn House Office Building, Hon. Kathy Dahlkemper 
[chairwoman of the Subcommittee] presiding.
    Present: Representatives Dahlkemper, Westmoreland, King, 
Buchanan, and Thompson.
    Also Present: Representative Graves.
    Chairwoman Dahlkemper. This hearing of the impact of food 
recalls on small businesses is now called to order. From the 
dinner table to the grocery store, most Americans take the 
safety of their food for granted. But what happens when that 
food is jeopardized?
    Recent outbreaks of Salmonella and E. Coli have shown that, 
as much as we would like to believe otherwise, we cannot always 
assume the food our families are eating is safe. This past 
January, a Salmonella outbreak in peanut butter tainted a wide 
range of products, from crackers to candy bars. The epidemic 
killed 9 people, sickened hundreds, and kicked off one of the 
largest food recalls in U.S. history.
    The men and women on the front lines getting products off 
the shelves and educating consumers about which foods are safe 
to eat were small business owners. They did this not because 
they had to--after all, they weren't the ones who created the 
problem--but because they felt the responsibility towards their 
customers. But for all the good that these entrepreneurs did 
for customers, there is a very real economic side to this 
stepping in to do the right thing.
    Now that the Peanut Corporation of America has declared 
bankruptcy, small businesses are the ones left holding the bag. 
In today's hearing, we will examine the effects of a food 
safety crisis on entrepreneurs. More importantly, we will look 
for solutions moving forward.
    For small firms, managing a food safety crisis is an 
enormous financial burden. They not only have the 
responsibility of tracking down and destroying tainted 
products, but they often have to dispatch costly damage control 
campaigns; whereas, large firms can often afford to retain 
public relations firms. Most entrepreneurs cannot. This can be 
especially damaging considering the stigma attached to tainted 
products.
    Even foods not directly affected have been stigmatized. In 
the case of the Salmonella outbreak, jarred peanut butter sales 
plummeted 22 percent. Peanut butter cookies also stayed on the 
shelves, with purchases own 14.6 percent. These drop-offs have 
been devastating for the broad range of small businesses that 
sell peanut butter products, from 7-11 franchises to boutique 
bakeries.
    Food safety crises are particularly hard on small 
businesses. Because many of these firms operate on tight profit 
margins, generally between 2 and 5 percent, large recalls can 
mean bankruptcy. This is especially true for small firms that 
cannot afford recall insurance.
    Even companies that do have these policies are struggling 
to recoup their costs. Many insurance providers are now 
refusing to fill peanut butter-related claims, arguing that 
they are the PCA's responsibility.
    Perhaps the most frustrating aspect of the Salmonella 
epidemic is the fact that it could have been avoided. To begin, 
the regulatory process is fragmented with different foodstuffs 
falling under different agency jurisdictions. These divisions 
prevent authority from properly responding to outbreaks. On top 
of that, agencies like the FDA are often understaffed and 
overwhelmed.
    In response to the spotty inspection system, many large 
businesses have taken food safety into their own hands. In 
fact, some large firms have gone so far as to hire their own 
private inspectors. Yet, this is not likely the best response 
to this issue.
    From the fields to the processing plant to the grocery 
store to the dinner table, small businesses are an integral 
part of our food supply chain. But recent recalls have made us 
question the safety of our food. And they have not only 
jeopardized the health of our families. They have put an 
important part of the small business community at risk.
    I would like to thank all of today's witnesses in advance 
for their testimony and, with that, yield to the Ranking Member 
for his opening statement.
    Mr. Westmoreland. Thank you, Madam Chairwoman, for holding 
this hearing today and for your comments. I would also like to 
thank all of the witnesses for their participation today in 
coming up to D.C. to inform us of some of the situations and 
some of the solutions that our government is looking at.
    I would also like to thank you for having such a great 
topic as our first hearing. And so I know that we will have 
many more that are going to give us an opportunity to work 
together on some of the problems that small business faces 
today in our country.
    We are here today to discuss the impact food recalls have 
on small businesses, but I want to start off by saying how 
sorry I am to those who are harmed by the recent string of food 
contamination. It is a frightening situation. And I can't 
imagine what it would have been like if it had happened to me 
or someone, one of my loved ones.
    Unfortunately, the origin of the contaminated peanuts 
happened in my home State. Madam Chairwoman, I am here to tell 
you today that I am very disappointed that one bad actor could 
have caused such a devastating effect on so many others, but I 
am also here to tell you that we have some of the greatest, 
best, most dedicated farmers in the United States, if not the 
world. And so it was certainly not the intention of any crop 
that they had grown to get into the situation that we are in 
today.
    The Peanut Corporation of America's lack of integrity has 
punished small businesses in Georgia and nationwide. Georgia's 
peanut industry has taken a huge blow. And farmers and small 
businesses have felt the serious economic impact of this 
recall.
    Let me remind you farmers do business with other small 
businesses. And because of this, I believe we have yet to see 
the worst of the food recall.
    In these tough economic times, our small businesses cannot 
afford the domino effect that occurred because of bad players 
or because of burdensome regulation. I hope we can all learn 
from this situation and maybe reach some solutions to the 
problems we face.
    The safety of our nation's food supply is a pressing issue, 
but it is important to address how government agencies work to 
assist those indirectly affected by food recalls. Government's 
bureaucratic web, combined with the lack of resources, can 
often contribute to the regulatory burdens working against 
small businesses. And, as I have experienced in my 5 years in 
Congress, sometimes this is a knee-jerk reaction group up here, 
rather than proactive.
    I do not agree that placing more regulatory Band-Aids on a 
wound is the right answer. Rather, having a reactive government 
that should rely on science-based information and utilize the 
resources that we have for prevention.
    If Congress decides to authorize more power and money to 
our agencies, I hope to see the measures that streamline 
policies and encourage agencies to work closely with the state 
and local entities when recalls occur.
    The FDA and the USDA have an obligation to the public to 
address a food recall situation, reveal the source, and inform 
the public as quickly and as accurately as possible. I am 
looking forward to examining the ways that USDA and the FDA can 
assist small businesses who are adversely affected by these 
food recalls.
    Our country has been a worldwide leader in food safety 
measures imposed by a strict regulatory structure leading to 
the safest food supply in the world. However, accidents do 
occur. And our job on this Committee is to examine how these 
situations affect our nation's small businesses and the public.
    I hope this hearing provides insight on the serious impact 
food recalls have on some of these small businesses and 
especially the farmers that grow the product.
    This Congress faces a great challenge as it tries to help 
small businesses survive in this recession. The timing of this 
recall could have not been worse, but I am hopeful that the 
work of this Subcommittee will do its part in answering this 
challenge. I welcome this distinguished panel and thank you all 
for your willingness to testify.
    With that, Madam Chair, I yield back.
    Chairwoman Dahlkemper. Thank you, Mr. Westmoreland.
    We will now move to the testimony from our first panel of 
witnesses. Witnesses will have 5 minutes to deliver their 
prepared statements. The timer begins when the green light is 
illuminated. When one minute of time remains, the light will 
turn yellow. And the red light will come on when your time is 
up.
    Our first witness is Dr. Ken Petersen. Dr. Petersen is the 
Assistant Administrator of the Office of Field Operations for 
the Food Safety and Inspection Service of the Department of 
Agriculture. FSIS is the public health agency within USDA 
responsible for ensuring that the nation's commercial supply of 
meet, poultry, and egg products are safe.
    Thank you, Dr. Petersen.

                   STATEMENT OF KEN PETERSEN

    Mr. Petersen. Good morning, Madam Chairwoman and members of 
the Committee. I want to thank you for inviting me to appear 
before you today to address the Food Safety and Inspection 
Service's recall procedures and outreach to small businesses.
    I am Dr. Kenneth Petersen, Assistant Administrator for the 
Office of Field Operations with the Food Safety and Inspection 
Service, U.S. Department of Agriculture.
    FSIS is the public health regulatory agency within the 
USDA. We are responsible for ensuring that the nation's 
commercial supply of meat, poultry, and processed egg products 
is safe, secure, wholesome, accurately labeled and packaged, 
whether the products are domestic or imported.
    Industry is responsible for the production of safe food 
while FSIS continuously inspects each livestock and poultry 
carcass at slaughter and visits processing establishments at 
least once per shift per day.
    Regarding recalls, the purpose of a recall is to remove 
meat and poultry from commerce as quickly as possible when FSIS 
has reason to believe it is adulterated or misbranded. Recalls 
are voluntary actions taken by industry at the request of the 
Agency. This is a rapid and efficient way to determine where 
affected product has been distributed because companies are 
familiar with who their customers are and can notify them much 
more quickly than the Federal government could. Should a firm 
deny FSIS' request for voluntary recall, the Agency has the 
authority to detain and, if necessary, seize product in 
commerce.
    FSIS may become aware of adulterated or misbranded product 
in commerce in several ways. We may be alerted to a potential 
recall situation by the company that manufactures or 
distributes the product, by test results from our own sampling 
programs, observations or information gathered by our 
inspectors, consumer complaints, or epidemiological or 
laboratory data submitted by State or local departments, other 
USDA or Federal agencies.
    FSIS is able to convene a recall committee in a matter of 
hours 24/7. After recall occurs, FSIS conducts effectiveness 
checks to ensure that the consignees have received notice of 
the recall and are making appropriate efforts to retrieve and 
destroy the product or return it to the recalling firm.
    This past August 18th, 2008, in order to improve the 
effectiveness of a recall, FSIS began making available to the 
public a list of retail customers that are likely to have 
received products subject to a recall. We believe this 
information helps consumers lower their risk of foodborne 
illness by providing more information that may assist them in 
identifying recalled products.
    FSIS' food safety system is preventative. It is our goal to 
eliminate the need for recalls altogether. One way we do this 
is through education and outreach. By educating producers and 
manufacturers of FSIS-regulated products, we continually seek 
to protect public health and, accordingly, the need for recalls 
at all.
    Some of the most important groups that FSIS works with are 
the small and very small plants. The businesses that fall into 
this category have a particular need for current and frequent 
food safety information because they often lack the resources 
to monitor food safety developments from the Agency, academia, 
or trade associations. To address the challenges that these 
companies face and to further the Agency goals of minimizing 
the need for recalls, FSIS has initiated several efforts to 
work with small and very small plants.
    We have an action plan to deliver outreach assistance to 
promote food safety and food defense systems for small and very 
small plants. Last year, as part of that plan, FSIS established 
a new program office, the Office of Outreach, Employee 
Education and Training, to provide comprehensive one-stop 
assistance to owners and operators of small and very small 
plants.
    This office provides consolidated access, resources, and 
technical support for small and very small plants. Over the 
past two years, FSIS has held a series of regulatory education 
sessions around the country to deliver various topics of 
interest to small business. We intend to continue this 
successful effort.
    In January 2009, FSIS began holding a series of ``how to'' 
workshops to provide practical tools and methods for the proper 
application of and compliance with various regulatory 
requirements. These workshops are designed so that the small 
and very small plant operators can walk away from the workshop 
with a plan that they can immediately implement, such as a 
recall plan.
    FSIS has a variety of resources available through the FSIS 
Web site, including podcasts and access to educational Web 
seminars. It also includes access to FSIS compliance guidance 
that helps small and very small plants apply public health 
regulations in their working environment.
    In conclusion, FSIS' system for achieving food safety is 
strong. We continually seek to protect public health. And we 
take this responsibility very seriously. We focus on preventing 
recalls at the plant level through inspection and outreach to 
producers and manufacturers of FSIS-regulated product. FSIS 
will work to ensure that small and very small businesses 
continue to meet their food safety requirements.
    Thank you for this opportunity to appear before you today. 
I am happy to take any questions at the appropriate time.[The 
prepared statement of Ken Petersen is included in the appendix 
at page 40.]
    Chairwoman Dahlkemper. Thank you, Dr. Petersen.
    We would like now to hear from Dr. Steven Solomon from the 
FDA. Dr. Steven Solomon is the Deputy Associate Commissioner 
for Compliance Policy at the Food and Drug Administration.
    The FDA regulates almost 124,000 business establishments 
that annually produce, warehouse, import, and transport $1 
trillion worth of consumer goods. Among other things, the FDA 
is responsible for protecting the public health by assuring the 
safety of our nation's food supply.
    Thank you, Dr. Solomon.

                  STATEMENT OF STEVEN SOLOMON

    Mr. Solomon. Good morning, Madam Chairman and members of 
the Subcommittee. I am Dr. Steven Solomon, Assistant 
Commissioner for Compliance Policy in the Office of Regulatory 
Affairs at the U.S. Food and Drug Administration, which is part 
of the Department of Health and Human Services.
    We appreciate the opportunity to provide you with 
information about how we manage the recall of FDA-regulated 
products that can harm consumers, including the ongoing recalls 
related to peanut products made by the Peanut Corporation of 
America, or PCA. As you know, these products have been the 
source of a foodborne illness outbreak caused by Salmonella 
Typhimurium, which as of March 8th has infected 683 people in 
46 states and may have contributed to 9 deaths.
    One of the key messages that FDA has been emphasizing over 
the last few years is that all food companies, both large and 
small, should establish strong food safety programs. It is 
critically important for these companies to understand the 
supply chain for the ingredients they use in their products and 
to have accurate information about the safety and quality of 
their ingredients. In a complex, global market, this may 
require close interaction with many critical components 
throughout the food supply chain, including growers, 
manufacturers, distributors, retailers, food service providers, 
and importers.
    When a marketed product presents a public health hazard, 
promptly recalling that product is the most effective means of 
protecting the public. For food products, with the exception of 
infant formula, FDA does not have the authority to order the 
recall of a food or dietary supplement. In most cases, 
companies recall their products voluntarily. FDA believes that 
the prompt removal of volatile products from the marketplace is 
in the industry's and the public's best interest.
    As illustrated by the recent events, a recall initiated by 
one company can sometimes have repercussions for a very large 
number of businesses that receive those products or 
ingredients.
    In most cases, the recalling firm and FDA work 
collaboratively to develop a recall strategy. Early 
communication helps to ensure that violative products are 
removed from the market quickly, which can help to minimize the 
adverse impact on affected businesses. It also allows FDA to 
determine the steps needed to address specific circumstances, 
which may include making certain that all products that need to 
be recalled are, in fact, recalled; locating the product 
subject to the recall; identifying the cause of the problem; 
and checking similar firms or products to determine if the 
problem is more widespread. Rest assured that FDA is sensitive 
to the impact on small businesses caught in a recall scenario.
    FDA is committed to working recalling firms to effectively 
and promptly remove volatile products from the marketplace. And 
we have a variety of mechanisms in place to achieve this goal. 
For example, FDA has field recall coordinators located 
throughout the country who act as the point of contact for 
recalling firms and works closely with them throughout the 
process.
    Recall coordinators help firms develop an effective recall 
strategy, review a firm's letter to customers affected by the 
recall, and coordinate the destruction, reconditioning, and 
disposition of recalled product.
    FDA has also developed model press releases that firms can 
use to inform the public about a recall. These model press 
releases help ensure that critical information about the 
recalled product is accurately and appropriately conveyed to 
the public.
    For recalls of widely distributed products, FDA recently 
developed a searchable database for its Web site to help the 
public and recalling firms identify recalled products. The 
database can be updated daily with important information, 
including brand name, recalling firm, UPC code, size, and 
product description.
    In the recent peanut outbreak, there have been over 3 
million hits to date on the site. In this outbreak, we learned 
of at least one small business that used the searchable 
database to identify a recalled peanut ingredient product that 
the business had used in its finished product. The firm 
initiated a recall of its own products, even before receiving 
notification from its supplier.
    As discussed in more detail in my written testimony, the 
agency's investigation of the Salmonella Typhimurium outbreak 
associated with PCA's peanut products resulted in a series of 
recalls that began on January 20th with products made in the 
Blakely, Georgia facility. Since then the scope has expanded as 
we identify companies that use PCA's products as ingredients in 
their own products.
    On February 12th, the State of Texas issued an emergency 
order directing PCA to cease the manufacture and distribution 
of all food products at the Plainview, Texas facility and 
issued a mandatory recall order for all products manufactured 
at that plant.
    On February 20th, PCA issued a statement that it had filed 
for chapter 7 bankruptcy and would no longer able to 
communicate with their customers about recalled product. As a 
result, FDA is coordinating with Texas officials to notify 
customers that received product from the Texas facility and 
follow up with these companies as needed.
    Many companies that received recalled product from PCA 
have, in turn, conducted voluntary recalls themselves. These 
companies use recalled PCA products as ingredients in their own 
products, exponentially increasing the scope of the recall.
    FDA continues to work to identify products that may be 
affected and to track the ingredient supply chain of these 
products. The facts of this outbreak as well as our experience 
with other outbreaks highlights the need to enhance FDA's 
statutory authority to protect consumers from foodborne 
outbreaks.
    We are currently reviewing with the Department of Health 
and Human Services the agency's prior legislative requests to 
strengthen our ability to protect Americans from foodborne 
illness.
    Food safety is a priority for the new administration. One 
of the areas under discussion is mandatory recall authority, 
which would be a useful tool in some circumstances to 
effectuate removal of implicated product from Commerce. We are 
also discussing the need for new or enhanced authority for FDA 
to require preventative controls, exercise enhanced access to 
food records during routine inspections, and require food 
facilities to renew their registrations more frequently and 
modify the registration categories.
    Thank you for the opportunity to discuss FDA's recall 
process. And I would be happy to answer any questions you may 
have.[The prepared statement of Steven Solomon is included in 
the appendix at page 50.]
    Chairwoman Dahlkemper. Thank you, Dr. Solomon.
    I would like to stay on the subject that you just finished 
discussing, the actual recent contaminated peanut product 
recall. Let's go back to the beginning because I think we all 
know that if we can stop a contaminated product from even 
leaving or even being produced, we're going to save a lot of 
money and we're going to save a lot of small businesses a lot 
of financial burden, a lot of headaches.
    So as we look at this entire scenario of what happened at 
the Peanut Corporation of America, what regulatory failures led 
to this incident? Can you give me some specifics about exactly 
what could have been done to prevent the scenario from 
happening?
    Mr. Solomon. Thank you for the question. So this facility 
at PCA we have now uncovered through the subsequent inspections 
that they knew about some problems associated with Salmonella 
in this facility.
    FDA does not have routine access to those type records. In 
fact, we had to issue some authorities we have under the 
Bioterrorism Act that Congress passed previously a request to 
actually get all of the records from the firm. In order for us 
to get those type records, we need to be in a situation where 
there is a significant consequence or adverse health effects, 
so a very severe outbreak situation in order for FDA to have 
access to those type records. So that is one of the requests 
when I just mentioned some of the authorities we are looking at 
is routine access to such records is one of the aspects that we 
think would be important.
    The other issues relate to our request. FDA issued a food 
protection plan last year and is looking for greater 
preventative controls. We all recognize that recalls are a 
reactive piece. And we all want to get into the preventive 
controls aspect.
    So right now there are GMPs that apply, but trying to 
analyze what the hazards are in different type facilities and 
then how you control those hazards is not one of the controls 
that are currently done in this type facility. We do do those 
types of controls in the area of seafood and juice controls. So 
one of the other areas is greater preventive controls we are 
looking for.
    Chairwoman Dahlkemper. So no physical? A lot of the 
inspection is visual when you go into these plants at this 
point?
    Mr. Solomon. It is records. It is a visual examination. And 
it is a sampling.
    Chairwoman Dahlkemper. Okay. So you do do sampling?
    Mr. Solomon. We do do sampling. What we have learned from 
these is that traditionally a product like a peanut butter 
manufacturer is a plant that has a very dry environment. And 
dry environments don't allow, really, for the growth of 
bacteria, like Salmonella, traditionally.
    We have learned through the previous ConAgra and this 
recent one that the introduction of moisture into a dry plant 
allows for the opportunity of these bacteria to grow. So that 
has changed our inspectional approach.
    And what we would like firms to be doing is doing a lot of 
environmental testing because testing finished product does not 
give you the entire answer because the bacteria only 
periodically develops into finished products. So extensive 
controlling of your environment, making sure that it stays in a 
dry environment in the case of a plant like this, are critical 
to try and control those hazards. That is part of the kind of 
preventive controls we are looking for.
    Chairwoman Dahlkemper. Because I am just trying to 
understand. You know, I have a background. I was a dietician 
for over 25 years. So I have been in lots of facilities where 
food has been produced or food has been served. And knowing 
that visually you have to do physical testing to be able to 
really see if there is some--you can look at a doorknob and it 
looks fine, but we all know what could be on a doorknob.
    So that is what I guess I am getting at. You know, what 
kind of physical testing is being--there is really no mandatory 
physical testing at this point or--
    Mr. Solomon. There are no controls required on the farms to 
do that type testing. That would be part of a more elaborate 
preventive control program.
    FDA's inspectional approaches do include environmental 
testing. So when you go into such facility--and we did it 
during the recent inspection of PCA--taking several hundred 
environmental samples to try and understand what type of 
bacteria pathogens may be in such a facility, in addition to 
looking at testing some of the finished products, but to--
    Chairwoman Dahlkemper. And that was after the fact?
    Mr. Solomon. That was after the fact.
    Chairwoman Dahlkemper. Okay. So prior to that, I am just 
trying to get down to the basics on any food production 
company. It is all really up to them in terms of what they do 
in terms of physical testing. And FDA comes in and does mostly 
visual testing, looks at records?
    Mr. Solomon. We have changed our procedures into doing more 
and more environmental testing when we learn the unique 
conditions, such as a plant. So we are now going through all 
other plants similar to PCA and having an inspectional approach 
to do fairly extensive environmental testing, finished product 
testing, in addition to records and the observations.
    Chairwoman Dahlkemper. Okay. Thank you.
    Dr. Petersen, last year we had the contaminated beef 
recall, which also had a crippling effect, I think, on many 
small firms. In this particular case, it was the humane 
society, not FSIS, that alerted the public to the violations, 
which led to the recall.
    How did FSIS miss these violations? And what specific steps 
have you taken to ensure that this does not happen again?
    Mr. Petersen. Okay. Thank you.
    Well, the situation that you mentioned is at the Hallmark 
facility in Chino, California, where we saw a video of just 
outrageous treatment of cattle at a slaughter plant. It was 
quite troubling, certainly for me, that that occurred at a 
federally inspected slaughter plant, certainly was troubling to 
Congress, and obviously the public.
    And you asked the right question, how did this happen? I 
thought you were there every single day. We have done some 
investigation. The Office of Inspector General actually did a 
follow-up investigation. And they had a couple of observations.
    One was that there were deliberate actions by that firm to 
bypass inspection. And that is still the subject of some 
investigation. They also found that there was some 
noncompliance by my inspectors with them executing their 
required inspection procedures.
    We thought at the time and we had no reason to believe at 
the time that that was anything other than an isolated event. 
And the OIG report from this past November did say and 
basically quoting, that the events at the Hallmark facility 
were not evidence of a systematic failure of the inspection 
procedures. It was a constellation of very, very bad events 
that occurred in that particular facility.
    We have implemented several things, actually, quite a few 
things, some of which from OIG and some of which we initiated 
in advance of their report.
    We looked at, how did my supervisory structure allow some 
of my inspection behaviors to occur? They should have been 
tracking these employees on a more close basis, particularly my 
veterinarian in that particular plant. That veterinarian 
supervisor should have had a better understanding of what they 
were doing.
    So we introduced a new layer of--not a new layer but a new 
level of structure, organization, to how they assess the 
performance of those veterinarians and inspectors on an ongoing 
basis, structure where it is documented and other people in the 
supervisory chain, including myself, can follow up and see what 
is happening. That is all populated in a management control 
system.
    Then we looked at training, training of the workforce. Had 
we really trained the workforce to identify some of the low-
level behaviors at the Chino plant, I think if they had 
identified some of those behaviors by the plant early on, then 
they would not have gotten to this egregious activity, you 
know.
    And if we introduce the regulatory sanctions earlier, then 
obviously the point of that is to deter behavior. And so we 
have reinforced our training, pushed that out, as well as 
reinforced the accountability for enforcing inhumane activity 
at slaughter plants. And last year we did quite rigorously 
enforce inhumane handling at a variety of slaughter plants 
across the country.
    That plant I think is not typical of the industry. And we 
recognize that. But it is typical of a very, very significant 
problem.
    The recall was massive, as you suggested. It is the largest 
recall we have ever had. It was really not a safety-related 
recall. It was that, as I mentioned, proper inspections were 
not done because the plant had found a way to bypass those 
inspections. So the food was recalled because of a regulatory 
violation. The product has to be inspected. And in that case, 
on certain days, it was not.
    That recall went all the way down the food chain, including 
to a variety of school lunch programs. And many small 
businesses were affected. It is surprising how product coming 
out of one plant can touch many, many businesses. But it was 
important, we felt.
    And obviously we looked at the scope of the recall and 
looked at, were there ways to mitigate it. We, at the end of 
the day, did feel that the scope of that recall, as massive as 
it was, was the right thing to do for the public, in spite of 
the consequences.
    And so we did get a lot of that product back, but it did 
have a significant impact on a variety of retailers, small 
firms, school lunch programs. And my goal is, with these new 
measures we put in place, that we will not see anything nearly 
as sweeping as that in the future.
    Chairwoman Dahlkemper. Any idea what the cost of that 
recall was?
    Mr. Petersen. Well, the cause--
    Chairwoman Dahlkemper. No. Cost.
    Mr. Petersen. Oh, the cost. No. But it is 143 million 
pounds. That dwarfs any other recall we have ever done. Well 
over 10,000 businesses and stores were affected. I don't have a 
cost on it, no.
    Chairwoman Dahlkemper. I don't think any of us ever will, 
but I think the issue we are trying to look at here today is 
how can we prevent these massive recalls from happening. I 
think we are always going to have some incidence of a recall, 
but how can we prevent these massive recalls.
    So what you have in place right now you think will help to 
prevent this kind of a massive recall?
    Mr. Petersen. Well, we are not going to stand still. We 
think what we put in place mitigates and goes a little bit 
beyond what occurred. And obviously we are transposing that to 
all of the other facilities that we regulate and then following 
up in a more timely manner with folks to make sure that they 
are doing what you and others expect them to be doing.
    Chairwoman Dahlkemper. Okay. Thank you.
    I wanted to ask you both a little bit about private 
inspections versus government inspections because there has 
been kind of a movement towards industry hiring their own 
inspectors. And, as we look at that, maybe if you could address 
that and what you see as the role of a private inspector versus 
a government inspector.
    Mr. Solomon. During my testimony, I talked about trying to 
understand the supply chain. That is really critical. And as 
the globalization of our food is changed, it is important for 
firms to be able to try and understand that supply chain. I 
think a response is many of them do hire various private 
auditors to go help them inspect that.
    I don't see that as a substitute for government oversight 
and regulation. I think that needs to happen, too. But I think 
some companies put in additional requirements. And some of 
these auditors are looking at those.
    FDA is conducting a pilot right now of looking at third 
party inspections and the value of that. We are actually 
looking at it more for imported products. But it needs to be 
very closely structured. There need to be very clear standards 
established for any third parties that we need to be controls 
for conflict of interest. There needs to be auditing of it.
    So we are very carefully running a pilot right now to 
evaluate the value of third parties, particularly in the import 
environment.
    Chairwoman Dahlkemper. Dr. Petersen?
    Mr. Petersen. For the laws that USDA implements, here 
basically the Federal Meat Inspection Act, Poultry Products 
Inspection Act, and the Egg Products Inspection Act, inspection 
shall be done by government employees. And so our role, in 
fact, our legal obligation, which is a little different than 
FDA's, is to find the product acceptable before it leaves the 
plant. And so that is a big resource issue.
    Now, private businesses have a variety of third party 
auditors, as Dr. Solomon mentioned, that can assess quality 
factors, food safety factors. And sometimes, of course, a lot 
of the times, they assess customer specifications.
    If those third party audits involve food safety decisions, 
then we can have access to those records. And we do that. We do 
assess some of their findings and, if necessary, marry them up 
with our findings.
    But for us the Federal role to find a product safe in the 
meat, poultry, and egg product sector, that is our primary 
role. And I don't see a role without some legislative change, 
which we are not pursuing for other inspection people.
    Now, certainly we partner with our State partners, local 
partners, who are authorized to do some of these inspections, 
but a private entity we don't see that on the board.
    Chairwoman Dahlkemper. Thank you.
    Dr. Solomon and Dr. Petersen, the Regulatory Flexibility 
Act requires Federal agencies to consider the impact of 
regulations on small firms. In crafting effective policies, it 
is critical that we do not forget the needs of entrepreneurs.
    How do your agencies collaborate with small businesses? And 
can you give me an example of a specific rule that was 
influenced by the input of entrepreneurs?
    Mr. Solomon. As you note, on every regulation, there needs 
to be a regulatory assessment that takes place, economic 
analysis of what that is. I can't give you off--many of these 
regulations have had various input from--when we go through the 
notice and comment rulemaking process, we accept a lot of input 
from small businesses as well as large businesses. And that 
influences how those final rules come out.
    And there are a number of rules--we can come back to you 
with specifics--where there have been various exceptions, 
either an implementation of the regulations or some exceptions 
for small businesses on some of those regulations.
    Mr. Petersen. Of course, our key interest is food safety, 
and so if there are food safety lapses in a very small plant, 
those lapses can obviously make a consumer as sick as any lapse 
in a large plant. So our starting point is food safety, making 
sure that they meet the regulatory obligations.
    But we recognize the impact of regulations can certainly 
disproportionately impact small and very small firms. And, as I 
indicated in my testimony, we have a rather aggressive outreach 
to really communicate with our small and very small plants that 
we regulate, find ways to get them the information that they 
need but get it in a way that is useful to them. But at the end 
of the day, they do have to meet their food safety obligations.
    We have and, as Dr. Solomon mentioned, any regulation that 
is proposed and finalized under the Administrative Procedures 
Act would require us to consider the economic impacts of that 
rule.
    The best example I think I could give was about 10 years 
ago we implemented one of our most significant regulatory 
changes, what is called HACCP, Hazard Analysis Critical Control 
Points, a preventive approach to food safety. That had a 3-year 
implementation plan, where the largest plants started first; 
then small plants, which we consider 10 to 500 employees; and 
the very small plants, which are less than 10 employees, plant 
employees, implemented last. And so there was a kind of 
sequential way so they could get the information, make any 
adjustments they needed, but then at the end of the day, they 
did have to implement their responsibilities.
    Chairwoman Dahlkemper. Thank you.
    I will now yield to Mr. Westmoreland, but before that, I 
would like to recognize that we have been joined by 
Representative Buchanan and Representative Thompson. Thank you.
    Mr. Westmoreland. Thank you, Madam Chair.
    I would like to ask Dr. Petersen, have you ever had an 
inspector in the PCA plant in Blakely?
    Mr. Petersen. The Department has, but it is important, I 
think, to kind of distinguish inspectors, which, of course, is 
what we think of in the Food Safety and Inspection Service, 
with contracting procurement verification. So I wouldn't say 
there was so much an inspector from the Department, but there 
was somebody in the plant yearly.
    The last time was in September of 2007, really verifying 
their contractual specifications, a more systems assessment, 
rather than being on the floor and looking for whatever was 
going on in that plant.
    Mr. Westmoreland. Was everything in order while your 
inspector or compliance officer or whatever you want to call 
them at the plant, was everything in order then?
    Mr. Petersen. In the September '07 visit, yes. There were 
no aberrant findings that we are aware of. Earlier in the 2001, 
I think, 2002, there were some minor findings. And they were 
shared with the appropriate regulatory bodies.
    But in the recent past, there was nothing. This is folks 
involved with what is called our Farm Services Agency, who is 
the procurement body, did not find anything as of September 
2007, which is the last time they were in there.
    Mr. Westmoreland. So they don't really get there once a 
year if that was the last time they were there, of course. So 
it's not a yearly visit. How often is it?
    Mr. Petersen. Well, their obligations for their frequencies 
I am not personally aware of. We can certainly get you that. I 
do know that going back to 2001, they were in the plant about 
10 times and a handful of times, certainly less than half of 
those times, did they find minor sanctions, such as some 
insects that had to be controlled and that kind of thing.
    Mr. Westmoreland. We are trying to get a little comfort 
here from the Food Safety and Inspection Service about the 
reliability. I mean, listening to your testimony, we are 
supposed to think that you are providing us some type of 
protection.
    If you are telling me that they were there in '07, nothing 
was wrong, and now we have had this major recall and you 
weren't there in over a year, how comfortable are we to fill 
this number of employees that you have and evidently this small 
plant program that you were touting, I guess? I mean, is this 
something that we are working on?
    I mean, this plant and the plants of PCA, all 3 plants, 
provide less than 2 and a half percent of the peanut butter or 
products that are used in this country. So to me, it is a 
relatively small thing. So how much protection are we getting 
there?
    Mr. Petersen. I will say for the commodities that we are 
directly responsible for regulating through our statutory 
authorities, meat, poultry, and egg products, you should have 
and you should expect a very high level of comfort with the 
mission that we are executing with the resources that we have 
in those facilities.
    We do not have jurisdiction. We have no legislative 
authority--that is an FDA responsibility, and I know they 
embrace it--for other commodities, such as in this case 
peanuts.
    Now, we are looking at--I mentioned the procurement people. 
Some government person is going in there. Should they have 
other training or whatnot to--
    Mr. Westmoreland. Who would that have been from the 
government that should have been in that plant?
    Mr. Petersen. Well, for us, for USDA, as I indicated, it 
would be our contracting official who was looking at the 
contract obligations. And through the investigation, of course, 
they found some of the attestations by that firm were not what 
they were claimed to be.
    Mr. Westmoreland. When was the last time a USDA inspector 
was in there or somebody stationed there?
    Mr. Petersen. Nobody was stationed there. Again, the last 
time a contracting person would have been there--but they are 
obligated to make sure they are following their contract. The 
last time a USDA person was in there looking at their contract 
was in September of 2007.
    Mr. Westmoreland. So do they look at what is going on there 
through mail that they receive in their office, wherever that 
might be?
    Mr. Petersen. The details of how they verify the contract I 
don't know, but we will certainly get you--
    Mr. Westmoreland. I will certainly look into it because it 
sounds like somebody may have missed something. The other thing 
I wanted to ask you about, the recall and how it goes about, 
well, I will ask Dr. Solomon this because you were talking 
about the recall and I guess you have a Web page and you put 
something out on the recall.
    Rite Aid just had a recall, I think, last week of some of 
these peanut products. Rite Aid is a pharmacy that I do 
business with in Hogansville, Georgia. Why would they have 
waited so long to do a recall?
    And I think that either you or Dr. Petersen mentioned that 
you know who has bought these products and who is using it and 
who is using it in their food processing, I guess. Why would it 
take so long to do the recall? Because as these recalls are 
stretched out, it makes it more severe to small business, I 
mean, if it was a one-time operation.
    Second point is from the FDA, I think you all had issued a 
statement that it was very unlikely or not likely at all that 
this was in I guess Jif or Peter Pan or the jarred peanut 
butter. Now, is that true or not true?
    And you can answer in any other you want.
    Mr. Solomon. Thank you for the questions. I will take the 
second one first. The name brand peanut butters, there has been 
no contamination. They didn't purchase any of the products from 
PCA. And so we have made that statement, put that out on the 
Web.
    Mr. Westmoreland. Okay. Let me point this out. Madam Chair, 
I think this is important from a small business standpoint 
especially. You spend as much time and effort putting that out 
as you do the other stuff because I think that is important 
because some people just see that there is peanut butter 
contaminated and they quit buying peanut butter. I think if you 
would spend as much time and effort saying, ``Look, these 
products did not buy any of the stuff. These are okay,'' you 
know, especially with some of your major brands, that would be 
something that you might want to look at.
    But go ahead. I am sorry to interrupt you.
    Mr. Solomon. Well, we did do many, many media calls and 
post on our Web information. And we do agree our responsibility 
is to make sure that contaminated product is taken off, but we 
also know that peanut butter and other products we regulate are 
nutritious and valuable commodities. So we also do try and 
assure people in the safety of products where we know they are 
safe.
    Related to--your first question again--I'm sorry--related 
to?
    Mr. Westmoreland. Well, I guess when did you have an 
inspector out there? I mean, does the FDA have any type of 
inspection into some of this food safety that goes on in the 
plants?
    Mr. Solomon. We do. FDA had an inspector in this plant back 
in 2001. And then we have had contract arrangements with the 
State of Georgia that does work on our behalf. And they had 
inspectors in that plant in 2006 and 2007 doing the work for 
FDA.
    And then the State of Georgia also conducts inspections in 
this plant. And I believe they have had an inspector in this 
plant around 7 times in the last 2 years or so.
    Mr. Westmoreland. So who you are contracting with is not 
necessarily an independent or a private contractor but could be 
a state or a local agency?
    Mr. Solomon. That is correct. We have contracts with 43 
states. We provide training to those states. And they follow 
the same protocols and procedures that FDA uses. And the State 
of Georgia did conduct inspections for us in this PCA facility.
    Mr. Westmoreland. And one last question, Madam Chair, to 
Dr. Solomon. These testing facilities because, if I understand 
it correctly, some of this paste was sent to different testing 
facilities and that some of it had come back with a Salmonella 
as positive. But the test kept going forward until somebody 
said, ``No. There's no Salmonella.''
    Now, what type of oversight do you all have over these 
testing facilities? And what type of responsibility do you have 
or safeguard to make sure that those tests are correct? And 
what type of authority do you have to punish some of these 
people that may give some false tests or evidently in this case 
a bad test?
    Mr. Solomon. FDA doesn't have authority over private 
laboratories. These laboratories had a contractual relationship 
with PCA. They sent them samples. We have no information that 
any of the tests done by the private laboratories had any 
problems with it. We have reviewed those tests and their 
testing assessment, testing protocols seem to be valid that we 
are using.
    That information goes back to PCA. And, as I mentioned 
before, the issue there becomes we are requesting additional 
access to records so that when we did an inspection, we could 
actually have access to those records of test results they got 
back from these laboratories.
    Mr. Westmoreland. Thank you.
    Madam Chair, that is all I have.
    Chairwoman Dahlkemper. The Chair now recognizes Mr. 
Buchanan for 5 minutes of questioning.
    Mr. Buchanan. Thank you, Madam Chair.
    I wanted to switch from peanut butter to tomatoes. I 
represent a part of Florida, Manatee County, which has 40 
percent of the tomatoes grown in that county. Dr. Solomon, let 
me ask you. Last year the FDA devastated our growers in my 
district by issuing an alert only to find out later that the 
problem was associated with peppers, not tomatoes.
    What guidelines are in place to alert the public regarding 
legitimate safety concerns without needlessly hurting growers?
    Mr. Solomon. Thank you for that question. The outbreak that 
you are talking about, we need to understand how the current 
safety system works. When people get sick, they generally go to 
a doctor. That information then, they may get cultured that 
they have a Salmonella. In this case I think it was Salmonella 
St. Paul was the outbreak.
    Mr. Buchanan. Yes.
    Mr. Solomon. That information goes to a state public health 
laboratory. That information then goes to the CDC and is put 
into a database called PulseNet. Then CDC when they see a 
cluster of these, that there seems to be something unique going 
on in the nation, works with the state and local public health 
agencies to try and get a food history, to try and determine 
what product may have caused this outbreak.
    The assessment from CDC and the states from the initial 
part of this outbreak is that the implicated products were 
tomatoes. And so they alerted FDA to that concern that appears 
to be a rise in the Salmonella St. Paul, several different 
states, an outbreak. These are all matching. And the people all 
report a common source as tomatoes as one of the source.
    Now, when you think about it, obviously going through that 
process of several weeks of testing, going to the doctor, 
having those tests analyzed, getting into a system, and then 
going back and having CDC or the state try and determine the 
product is a difficult recollection issue for folks. So they 
try and add additional case control studies to try and match up 
and get statistical evidence about what product was implicated.
    The initial case control studies also showed that tomatoes 
appeared to be the most likely vehicle. At that point in time, 
the decision was made to issue alerts from areas that we knew 
that tomatoes were being harvested at that period in time.
    Mr. Buchanan. Just in our case, it cost our growers 
millions of dollars and a lot of jobs in our local economy, 
which leads me to the next question, Dr. Petersen. Under what 
circumstance is it appropriate for the Federal government to 
reimburse growers for losses associated with false alerts?
    Mr. Petersen. At least on the meat, poultry, and egg side, 
if we execute a recall, meaning the plant agrees to do a 
voluntary recall in lieu of me containing and seizing their 
product, on the meat and poultry side, there is no provision 
for reimbursing them for executing that recall.
    Our focus is on at that point there is problematic product 
in the marketplace. It could be product that can make people 
sick. And we need to get it back.
    This did come up in the Hallmark situation. And we looked 
at any provisions or other reimbursement provisions. And for 
the packers, for the processors, there are no provisions.
    For farmers, at least on the livestock side, there could be 
provisions. And we looked at this several years ago in what was 
then the melamine issue.
    Mr. Buchanan. I am looking for tomato growers.
    Mr. Petersen. Yes. As far as reimbursing tomato growers, I 
would have to ask Dr. Solomon. That is under his purview.
    Mr. Buchanan. Okay.
    Mr. Solomon. FDA does not have any authorities in relation 
to reimbursement for products.
    Mr. Buchanan. But it does appear if it's something that 
egregious there should be some consideration because in our 
case, I know personally. I have been through these packing 
facilities and talked to these farmers. And they're talking 
millions of dollars because of these early alerts basically 
lost most of their crop an opportunity for that reason, which, 
you know, many of them live from week to week or month to 
month. So it was a huge economic impact in our area.
    And I think there should be some consideration. I don't 
know if this crosses a line. I think it does but in a case 
where the federal government makes a mistake or potentially a 
mistake.
    Mr. Solomon. We have understood that. And Congress has held 
previous hearings on that subject before.
    Mr. Buchanan. Thank you, gentlemen.
    Chairwoman Dahlkemper. The Chair now recognizes Mr. 
Thompson for 5 minutes.
    Mr. Thompson. Thank you, Madam Chairwoman.
    This maybe was answered at some point, but in terms of the 
trend line, just from food recall incidents, are we on a level 
play, decreased, increased level of incidence?
    Mr. Solomon. For FDA, it has been probably relatively level 
for what we call a class I recall. We have been running around 
350 class I recalls for the past several years. Obviously this 
recall when we look at '09 statistics will have a tremendous 
increase.
    Mr. Petersen. On the meat and poultry side, they have 
really leveled off the last couple of years. Our high-water 
mark, which is really a low-water mark, was back in 2002. We 
were at about 120 recalls. There were some major E. coli-
related recalls, Listeria-related recalls that year.
    Through working with plants, having them understand what 
happens when we take a test, that they have the opportunity to 
hold the product when we do that so there is not a recall, the 
numbers now have been flat for the last couple of years, in the 
mid 50s, 55 or so, every year.
    Mr. Thompson. Okay. Dr. Petersen, you mentioned with the 
meat and meat-processing facilities, the FSIS, have they taken 
steps to update the requirements for the meat-processing 
facilities, specific hazards analysis, critical control point 
plans?
    Mr. Petersen. They raise, well, several things. As I 
mentioned in the opening, the plans are required for meeting 
their regulatory obligations. But for the small and very small 
plants, we think we are a good vehicle for them to provide them 
some information, provide them avenues for information. And so 
we have a lot of outreach activity where we go to them, provide 
them materials that we think can help them update their plans.
    Sometimes when there are true changes in the system, such 
as a spike in E. coli that has happened in the last, really, 
beginning of 2007, the plants are obligated to reassess what 
they are doing. Do they still have the right controls? Are they 
working? And are they tracking them correctly?
    And they do that, but we work with particularly the small 
and very small plants because of their resource limitations, 
give them the information to be successful, but at the end of 
the day, it is their obligation to be successful.
    Mr. Thompson. Thank you.
    Madam Chair, I yield back my time.
    Chairwoman Dahlkemper. I just have one other question for 
you before we finish up this panel. And that is regarding 
looking at all of our federal agencies which administer at 
least 30 different laws related to food safety, 15 agencies.
    Often people refer to this as a very fragmented, 
inconsistent, ineffective, and inefficient way to look at food 
safety. And I truly believe that this is one role of 
government: to ensure the safety of the citizens.
    So would it ultimately be more effective--and you can both 
answer this--to create a single food safety agency?
    Mr. Solomon. Obviously the new administration has not had 
an opportunity to weigh into that discussion. I will say we 
work very closely with the other agencies. Dr. Petersen and I 
have worked together for many, many years. We have MOUs with 
each other. We have notified each other, for example, in this 
particular incident, about recalls, about peanut products that 
may have affected USDA-regulated products.
    We exchange information. When we go into a facility that 
may have a USDA-regulated product that we have sampled, we 
notify them. Similarly, they do the same. We conduct some joint 
operations. We work closely on food defense issues.
    So I know the administration has got this under 
consideration.
    Mr. Petersen. I will echo the information sharing, the 
collaboration. Now much of that is on a personal level. I know 
Steve and I have talked over holidays and when there is 
something that needs to be resolved. And so those discussions 
do occur.
    There is a variety of, as you are no doubt aware, some 
legislative proposals. We are certainly interested in those. 
Our new Secretary Vilsack has expressed an interest in looking 
at that very issue. And so we are going to certainly give him 
the information he needs.
    But as far as a recommendation, a position, frankly, for 
us, it would be a little preliminary. But I understand the 
concern, where the way it is implemented, does it make sense to 
have all of these different players, particularly to the extent 
that there are any overlapping authorities in today's climate? 
That may not make the most sense.
    Chairwoman Dahlkemper. You two have known each other for a 
long time. You talk back and forth. But what about when one of 
you leaves?
    Mr. Petersen. Yes.
    Chairwoman Dahlkemper. You know, just a thought there.
    Mr. Westmoreland. I have just got one last question for 
both of you. I am assuming both agencies have looked this meat 
recall, the tomato recall, the peanut recall. Have you all 
changed any of your policies? And has anybody with either one 
of your agencies been disciplined or reprimanded over not 
following some existing policies that you had that could have 
led to some of this being a little loose, so to speak?
    Mr. Solomon. We look at every foodborne outbreak. And we 
try and learn lessons from it. And we do learn lessons. And we 
consistently improve the process. So I think we have learned 
lessons from the tomato outbreaks, spinach outbreaks, peanut 
butter outbreaks. And we incorporate those new pieces.
    So when I was speaking earlier about basically the new 
science, about understanding how Salmonella can live in a 
facility in a dry plant. It is some of that new science that 
needs to be integrated. And we do integrate that into new 
inspectional approaches, so the environmental pieces.
    There has been no disciplinary action related to any of the 
FDA outbreaks.
    Mr. Petersen. Well, I mean, you haven't said it here, but 
every recall for us is a failure. We have put product in the 
marketplace that we have said was okay, and we have to bring it 
back. And many recalls look alike, but there are many things we 
do learn from every single one.
    And we do our best to communicate those flaws, whether it 
be a plant flaw or some other activity, so other people know so 
they don't repeat the same mistake. And that is for recalls. 
That is for outbreaks.
    So we try to communicate ``Here is what didn't work,'' 
``Here is how they got into trouble.'' Obviously we have to 
kind of protect their proprietary interests, but there are some 
lessons learned that we do get out.
    Some of the outbreaks that we have had as far as 
interagency from our perspective, we have learned from those 
certain regulatory approaches, legal authorities that we can 
work together on. So we have taken those lessons.
    As far as employee actions, I guess I can tell you in 
certain outbreaks, the appropriate personnel actions have been 
taken.
    Mr. Westmoreland. Thank you.
    Chairwoman Dahlkemper. I want to thank both Dr. Solomon and 
Dr. Petersen for being with us here today. You are now excused, 
and I would like to call up the second panel. Thank you very 
much for joining us, gentlemen.
    Good morning. I want to thank the second panel here for 
joining us today. Witnesses again will have 5 minutes to 
deliver their prepared statements. The timer begins when the 
green light is illuminated. When one minute of time remains, 
the light will turn yellow. And the red light will come on when 
the time is up.
    Our first witness today is Ms. Diane Austin. Ms. Austin is 
Vice President of Perry's Ice Cream in Akron, New York. Perry's 
Ice Cream is a family-owned business that was founded in 1918.
    Ms. Austin is testifying on behalf of the International 
Dairy Foods Association. The association's members represent 
more than 85 percent of the milk cultured products, cheese, and 
frozen desserts produced and marketed in the United States.
    Thank you, Ms. Austin.

                   STATEMENT OF DIANE AUSTIN

    Ms. Austin. My name is Diane Austin. I am the Vice 
President of Perry's Ice Cream Company in Akron, New York. I 
would like to thank you for the opportunity to discuss the 
impact of food recalls on small food manufacturers.
    Chairwoman Dahlkemper. Thank you.
    Ms. Austin. I have 3 points to make today. First, remember, 
American dairy products are among the safest in the world. 
Second, product recalls of ingredients have had devastating 
impacts on small food manufacturers. And, third, Congress 
should consider financial assistance for small businesses that 
have been impacted by these recalls.
    Perry's Ice Cream is a small family-run business that has 
been making great tasting ice cream for 4 generations. We 
manufacture 550 different ice cream products at our facility in 
Akron. And we employ nearly 300 team members. We make ice cream 
for grocery stores, convenience stores, mom and pop ice cream 
stands, schools, nursing homes, and many food service venues.
    We recently received the 2008 INNOVATE award in the 
agribusiness category by the Buffalo Niagara Partnership for 
growth, innovation, and investment in our regional economy. Our 
90-year commitment to product quality and consumer safety is a 
key reason for our success.
    I am here today with the International Dairy Foods 
Association, which represents our nation's dairy manufacturing 
companies and their suppliers. More than half of IDFA member 
companies are small businesses.
    To begin, I would like to remind the Committee that the 
American dairy products are among the safest in the world. 
Dairy manufacturing plants must meet stringent federal, state, 
and local regulations, including those developed by the U.S. 
Food and Drug Administration as well as state regulatory 
agencies.
    As is typical in our industry, Perry's has a plant-wide 
HACCP, or Hazard Analysis and Critical Control Point, plan, 
which includes good manufacturing practices, preventative 
maintenance programs, and other food safety and quality 
programs. Our good manufacturing practices are based on FDA's 
requirements for food processing plants. In 2008, Perry's 
delivered over 1,700 hours of training to our team members in 
the area of food safety and quality alone.
    Previous to the peanut recall, Perry's had only 2 limited 
product recalls in the past 10 years. Simply put, it is never 
in our best interest to cut corners or risk delivering unsafe 
products to our customers.
    Until January, Perry's had used PCA ingredients in some of 
our product lines. Because these ingredients are added after 
pasteurization, we require documentation that they meet our 
safety standard. And, in spite of our best efforts, we were 
significantly impacted by the events at PCA.
    Perry's issued 3 separate recall notices, impacting 44 
different products. We traced distribution to 6,534 individual 
locations. We have conducted audits at more than 900 locations 
to ensure that the product had, in fact, been removed for sale. 
To the best of our knowledge, no consumer illnesses were 
related to any of our ice cream.
    We destroyed more than 170 tons of product, spent more than 
2,100 employee hours, placed recall notices on our Web site, 
and responded to nearly 1,000 consumer and customer contacts. 
These efforts continue as we communicate with our customers and 
consumers and begin the resupply process.
    In addition to these mounting expenses, we are financially 
responsible to make sure that our customers are whole. Perry's 
is now crediting our customers for recalled product that they 
purchased, paying our suppliers for ingredients that were used 
in the recalled products, incurring costs for dumping product, 
legal fees, and other recall-related expenses, all this while 
we begin to try to reestablish a pipeline of product that has 
been dry for nearly 8 weeks.
    At the same time, we are trying to build inventories for 
the peak summer demand season, which is absolutely a make or 
break season for our industry.
    While we do not yet have a complete accounting of the 
losses, they are likely to be in the hundreds of thousands of 
dollars, if not more. And we are just one of nearly 300 
companies that purchased product from PCA.
    In spite of the significant investments that we have made 
over the years, to meet or exceed industry best practices in 
the areas of quality and food safety, we have incurred a 
considerable financial loss through no fault of our own.
    There was little hope that we will recover any of these 
costs from PCA. And with over 3,000 products now on the FDA 
recall list, there can be no doubt that other small businesses 
encounter the same problem.
    Small businesses are dependent on cash flow for operations. 
And those affected by the PCA recall must make difficult and 
immediate choices about which bills will be paid, whether 
people can be hired, and which products can now be produced. We 
fear that before this is all over, many small business 
manufacturers or small food manufacturers will go under.
    This Committee and Congress should consider providing 
financial assistance, preferably in the form of grants or loan 
guarantees, to help small businesses that have suffered 
significant financial losses as a result of a recall prompted 
through no fault of their own. As a small business, we would 
ask Congress to carefully balance business responsibility and 
government regulation to ensure a safe food supply but to be 
careful before assuming that more regulation is always the 
answer.
    On behalf of Perry's Ice Cream and the 530 members of the 
IDFA, I would like to thank you for the opportunity for us to 
voice our views this morning. Thank you.[The prepared statement 
of Diane Austin is included in the appendix at page 63.]
    Chairwoman Dahlkemper. Thank you.
    Our next witness is Mr. Mike Ambrosio. Mr. Ambrosio is Vice 
President of Quality Assurance at the Wakefern Food Corporation 
in Elizabeth, New Jersey. The Wakefern Corporation is a 
retailer-owned cooperative comprised of entrepreneurs that own 
and operate supermarkets.
    Mr. Ambrosio is testifying on behalf of the Food Marketing 
Institute, which develops and promotes policies supporting food 
retailers and wholesalers.
    Welcome.
    Mr. Ambrosio. Thank you.

                   STATEMENT OF MIKE AMBROSIO

    Mr. Ambrosio. Thank you. Chairwoman Dahlkemper, Ranking 
Member Westmoreland, and members of the Regulation and Health 
Subcommittee, I am Mike Ambrosio, Vice President of Quality 
Assurance for Wakefern Food Corporation. And I have been in 
charge of food safety programs at Wakefern for 29 years.
    I am honored to appear before you today to testify on 
behalf of my company and our members but also FMI, Food 
Marketing Institute, our trade association, representing over 
1,500 retail members.
    Founded in 1946, Wakefern Food Corporation has grown from a 
small, struggling cooperative into a strong regional player. 
Headquartered in Keasbey, New Jersey, Wakefern is comprised of 
45 members, who independently own and operate supermarkets 
under the ShopRite banner in New Jersey, New York, Connecticut, 
Pennsylvania, Delaware.
    While we are the largest retailer-owned cooperative in the 
nation, the majority of our members own 1 or 2 stores and 
understand the challenges that businesses face. Only owners 
that understand these needs of their customers and community 
are able to survive and prosper.
    As a result of our members' dedication to their customers 
and communities, ShopRite has been named the New Jersey 
Corporate Philanthropist of the Year by the Community 
Foundation of New Jersey. And America's Second Harvest Food 
Bank Network has also recognized ShopRite as a Grocery 
Distributor of the Year for its ShopRite Partners in Caring 
Program, a year-round initiative dedicated to fighting hunger.
    As part of our dedication to the consumer, our most 
important goal is to ensure that the food resale is safe. our 
store has many prevention programs in place to protect our 
customers, such as consumer education campaigns, employee food 
safety training, extensive sanitation programs, and food safety 
management systems. But all of these prevention programs at 
retail level cannot ensure that we deliver safe food to our 
customers if the food coming into our stores isn't already 
produced and processed to the highest standards.
    When we do receive notification that a product is 
adulterated, we take a variety of vital steps to ensure that 
the effective product has been removed from our shelves as 
quickly as possible and also to notify our customers in certain 
instances. However, this process is often challenging, time-
consuming, and expensive due to the loss of man-hours and the 
loss of sales created not only by not having the product taken 
off the shelves but also due to a recall impact on consumer 
confidence.
    I would like to provide the Committee a snapshot of what 
steps we take when we are notified that a product has been 
recalled. The notification process, when we receive 
notification a product has been recalled through a variety of 
different means, we use third party services that we subscribe 
to, direct contact by the vendor through monitoring government 
Web sites, such as the FDA and USDA, or through a variety of 
media outlets.
    With any notification method, it is vital that we receive 
the necessary information, such as product name, correct UPC 
codes, product size, and sell-by dates to ensure we know 
exactly what product is being recalled.
    The average size grocery store has over 45,000 items on 
their shelves every day. In the case of the high-profile Peanut 
Corporation of America recalls, the FDA as of March 9th had 
over 3,200 listed products on their Web site.
    The actions we take once we receive the necessary 
information in the Quality Assurance Department, we notify 
Consumer Affairs. While comparing the affected UPC codes to our 
current inventory, all identified products are embargoed and 
segregated to a designated holding area. In addition, recalled 
UPC codes are locked out of our point-of-sale system. So 
product cannot be scanned for sale at our registers or sold 
through the front end.
    Our bulletin is sent to our store owners and applicable in-
store divisions and management staff. The information is posted 
on our internal Web site, also an external Web site if you log 
onto the shoprite.com.
    Class I recalls triggers automatically phone calls to 
notify our store owners, management staff directly to reinforce 
the bulletin. We also have a third party private visit to the 
stores to ensure that the class I product has been removed from 
the shelves.
    At the same time we are removing products at store level, 
our Consumer Affairs Department is creating signage for display 
at point of sale and sending releases directly to the media. 
That's a vital piece of this because consumer education when it 
comes to recalled product is key.
    Depending on the type of recall, they also search for data 
from our loyalty card program. That allows us to notify our 
customers directly through phone calls and about product they 
had purchased. It is important that grocers are able to employ 
a variety of different methods to notify consumers.
    I am proud of the actions we take as a company to remove 
adulterated product. As a matter of fact, last fiscal year we 
had 214 recalls, 27 class I, 43 pharmacy recalls. That accounts 
for 238 UPC codes that were blocked out at the front end as 
well as the time dedicated to that. Over 2,140 hours are 
dedicated to that, 305 working days if you want to break that 
down. And these don't even include the numbers with PCA.
    Our trade association, FMI, is working with Wakefern and 
other members of all sizes dedicated to continually improving 
food safety. And we also support the FDA and the USDA with 
regard to mandatory recall authority that they have.
    We also believe that suppliers should be--[The prepared 
statement of Mike Ambrosio is included in the appendix at page 
71.]
    Chairwoman Dahlkemper. Thank you, Mr. Ambrosio.
    Mr. Ambrosio. Okay.
    Chairwoman Dahlkemper. We will cover more this in the 
questions. Thank you.
    Mr. Conrad is next. Mr. Conrad, Ken Conrad, is President of 
Libby Hill Seafood Restaurants in Greensboro, North Carolina. 
Libby Hill Seafood was founded in 1943 by Mr. Conrad's father. 
It operates restaurants in North Carolina and Virginia.
    He is testifying on behalf of the National Restaurant 
Association, which represents more than 380,000 restaurant 
establishments.
    Welcome, Mr. Conrad.

                    STATEMENT OF KEN CONRAD

    Mr. Conrad. Chairwoman Dahlkemper, Ranking Member 
Westmoreland, and members of the Subcommittee on Regulations 
and Healthcare, on behalf of the National Restaurant 
Association, thank you for the opportunity to testify before 
you today regarding the impact of food product recalls on 
restaurants.
    My name is Ken Conrad. I am the Chairman of the Board of 
Libby Hill Restaurants. For the past 5 years, I have had the 
privilege of serving as the North Carolina delegate to the 
National Restaurant Association. I also serve as Chair of the 
North Carolina Restaurant and Lodging Association. And by 
operating a chain of seafood restaurants, it has kept me very 
active in the seafood industry. I currently serve as Vice Chair 
of the National Fisheries Institute.
    My family continues to own and operate Libby Hill 
Restaurants, and I am proud to say that my son today is the 
third generation to run the business. Three weeks from today, 
we will begin our 57th year of serving seafood in a family-
friendly atmosphere. We currently operate 12 units scattered 
across western North Carolina and southwest Virginia.
    The restaurant industry is comprised of 945,000 food 
service locations, 13 million employees nationwide. We serve 
130 million guests every day, and every $1 million of revenue 
in our industry creates 33 new jobs for the economy. Seven out 
of 10 restaurants are single-unit operators, with 91 percent of 
eating-and-drinking places having 50 or fewer employees. We are 
truly an industry of small businesses.
    Food safety is of the utmost importance for restaurants. 
Restaurants have taken the lead in ensuring food safety within 
our 4 walls with the National Restaurant Association and its 
members making a multi billion-dollar investment to 
continuously improve food safety programs and develop state-of-
the-art food safety education.
    We are proud of ServSafe, the food safety education program 
that sets the standard for the industry. Foodborne illness 
outbreaks and the recalls that follow have greatly impacted our 
industry. Lapses in management in the food supply chain can 
create negative consequences to consumer confidence, as recent 
outbreaks and recalls have shown.
    Most recalls are due to mislabeling mistakes, but very 
large outbreaks and recalls due to adulteration or 
contamination indicate more could be done in both the supply 
chain and with improvements in the federal and state regulatory 
approach.
    Since 2006, the United States has dealt with the impact of 
foodborne illness outbreaks and recalls resulting in the 
contamination of tomatoes, serrano peppers, chicken and turkey 
pot pies, ground beef, chili sauce, lettuce, spinach, and 
peanut butter.
    Currently, the industry continues to cope with peanut 
butter recalls resulting from a Salmonellosis outbreak 
involving thousands. It is likely this outbreak will become one 
of the most infamous outbreaks of foodborne disease.
    When a foodborne illness outbreak occurs, the first 
priority is to identify the affected product and immediately 
remove it from the food supply. Restaurants often use an 
abundance of caution when learning of an outbreak and may just 
simply choose to remove that item from the menu until the dust 
clears and it has gone away.
    Trace-back investigations to determine the source of 
outbreaks can require extensive resources and may result in 
irreparable damage to a food service establishment. Therefore, 
it is critical that each piece of the investigation be 
thorough, complete, and accurate. We must remember that trace-
back investigation recalls are reactive measures. We should not 
neglect the importance of preventing contamination to ensure 
safety to reduce or mitigate the need to recall product.
    Adequate funding to food safety agencies at both the state 
and federal levels to ensure appropriate staffing and expertise 
is mandatory, improved collaboration and communication between 
government and industry during the investigation of a complex 
outbreak, communication and education strategies to effectively 
inform consumers in the event of an outbreak or recall. We need 
stronger standards and practices for fresh produce and 
additional tools such as recall authority, traceability, and 
improved epidemiological investigation.
    In conclusion, the safety of the food supply must and will 
continue to be the top priority for the restaurant industry. We 
stand by and are ready to work with Congress, the 
administration, and our food chain partners to improve food 
safety and the needed reforms. Thank you for the opportunity to 
testify. And I will be happy to answer questions at the 
appropriate time.[The prepared statement of Ken Conrad is 
included in the appendix at page 78.]
    Chairwoman Dahlkemper. Thank you.
    Mr. Westmoreland will introduce our next witness.
    Mr. Westmoreland. Thank you, Madam Chairwoman.
    It is my pleasure to introduce a friend of mine and fellow 
Georgian, Mr. Don Koehler. Mr. Koehler is the Executive 
Director of the Georgia Peanut Commission.
    Mr. Koehler and his family reside in Tifton, Georgia, where 
he has lived for 25 years. He is a native of Alberta, Alabama 
and received a B. S. in agricultural science from Auburn 
University in 1979.
    In 1986, he became the Executive Director of the Georgia 
Peanut Commission. In that position, he has served in numerous 
positions of leadership within the peanut industry. He oversees 
the Commission's programs in the areas of research, education, 
and promotion, including advocacy for the farmers in Atlanta, 
Washington, and on international issues.
    He currently serves on the Agricultural Technical Advisory 
Committee on trade for cotton, tobacco, peanuts, and planting 
seeds. He also serves on the management team of the Southern 
Peanut Farmers Federation, which represents peanut farmers in 
Alabama, Florida, Georgia, and Mississippi.
    I want to thank Don for being here today to share his 
perspective on behalf of the Georgia Peanut Commission. And I 
know we all look forward to hearing your testimony, Don. Thank 
you.
    Mr. Koehler. Thank you, Congressman.

                    STATEMENT OF DON KOEHLER

    Mr. Koehler. Good morning, Chairwoman Dahlkemper, Ranking 
Member Westmoreland, and members of the Committee. I am Don 
Koehler, the Executive Director of the Georgia Peanut 
Commission. On February 1st of this year, I celebrated 22 and a 
half years in that position.
    The current outbreak and recall attributed to the Peanut 
Corporation of America is the most devastating issue to ever 
face our industry in my time there. We currently have 4,535 
peanut farmers in Georgia. That number has the potential to 
decline in 2009.
    An inscription over the entrance to Washington's Union 
Station reads, ``the farm, best home of family, source of our 
national wealth, the natural providence.'' That is true even 
today. Farmers provide more to the economic health of our 
economy than at any time in history.
    On January 10th, the U.S. Food and drug Administration 
issued a voluntary recall notice on peanut butter processed at 
a plant owned by the Peanut Corporation of America. The initial 
recall was expanded to roasted peanuts and later to include all 
product ever produced at a PCA plant in Texas.
    PCA was a supplier of peanut butter to the food service 
industry and a supplier of ingredients to food manufacturers. 
They had a broad reach for a small processor.
    The recall has been ongoing for 2 months and has rippled 
throughout the peanut industry. We are dealing with a situation 
of historic proportions. The full impact will not fully be 
known for some time. Rebuilding cannot fully begin until the 
outbreak is over and the recall complete.
    The 2008 peanut crop was a record crop, and we were faced 
with managing a surplus. USDA has been slow to react to the 
current market conditions in setting the weekly posted price, 
which has complicated this issue. Peanut sales are nonexistent 
for farmers who have uncontracted peanuts. Yet, USDA has not 
sufficiently reduced the posted price.
    After the recall, sales of peanut products tumbled. General 
agreement is that peanut butter consumption is off as much as 
20 percent. Peanut butter processing accounts for about 70 
percent of the Southeastern peanut market.
    Due to uncertainty, no contracts are being offered to 
farmers. This is critical because farmers need a contract to 
get financing and to make planting decisions. In 2 Georgia 
towns, groups of farmers built modern shelling facilities to 
add value to their peanuts. Each has fewer than 50 employees, 
and they will be impacted.
    Peanut buying points are paid on the volume that they 
handle. And then there is the impact on our farmers. The market 
has collapsed. So the best case scenario seems to be $355 per 
ton, which is the loan rate.
    Using projections for only variable costs, excluding land 
rent, farmers would need irrigated yields of 4,700 pounds per 
acre and non-irrigated yields of 3,500 pounds to achieve a zero 
cash flow. Typically, the yield in the Southeast would be less 
than 3,800 pounds irrigated and about 2,800 pounds for non-
irrigated. There is little to no likelihood of farmers' cash 
flowing this year.
    The National Center for Peanut Competitiveness took a 5-
year Olympic average of U.S. peanut production and used USDA's 
posted price for peanuts and came up with an average price of 
$408-plus a ton. The difference of that price and the loan rate 
include factors showing a loss that ranges from about $114 to 
$121 million.
    If you take into account a loss of production, these 
numbers grow. Growers anticipate a reduction of acres of at 
least a third. The NCPC indicates that that reduction could be 
40 to 60 percent based on their representative farm. This is a 
loss of $225 to $450 million just at the farm gate. If you use 
a conservative multiplier of 2, which is very conservative, we 
are looking at potential for a billion-dollar impact in the 
peanut industry in this country.
    What can be done to help us? The formula that USDA uses to 
set the national posted price is a farce. Congress should ask 
USDA to review this formula and report back in a firm time and 
come up with something that is realistic.
    Peanut butter has been a staple for U.S. and international 
feeding programs. It is good, and it is good for you. And we 
need USDA to look at this and to really come to the table now. 
We need them to buy peanuts and peanut butter now more than 
ever.
    Peanut butter is 25 percent protein and about $2 a pound. 
So the only thing that even beats that is whole chickens and 
chicken legs with the or bone in.
    Farmers have felt the impact of this recall, but the thing 
that I will tell you is that the growers in Southeastern United 
States, peanut farmers, are here to work with Congress to find 
ways to make sure that this can never happen again.[The 
prepared statement of Don Koehler is included in the appendix 
at page 83.]
    Chairwoman Dahlkemper. Thank you, Mr. Koehler.
    Our next witness is Ms. Sheryl Vanco, who is from my 
district. She is a dairy farmer from Bear Lake, Pennsylvania. 
In addition to being a Pennsylvania Farm Union member, Ms. 
Vanco is also active with the Farmers Union Milk Producers 
Association and serves on the Pennsylvania Animal Health 
Commission.
    She is here to testify on behalf of the National Farmers 
Union. The National Farmers Union represents 250,000 farm and 
ranch families.
    Welcome, Ms. Vanco.

                   STATEMENT OF SHERYL VANCO

    Ms. Vanco. Thank you, Madam Chairman Dahlkemper, Ranking 
Member Westmoreland, and members of the Subcommittee. We thank 
you for the opportunity to testify today.
    My name is Sheryl Vanco. My husband and I have and operate 
a 95-cow dairy in northwestern Pennsylvania. We hire 2 full-
time workers. One of them is an Amish man. My husband and I 
both work full-time on the farm. It is a lifestyle that we 
chose and that we love.
    As a member of the Animal Health Commission, I help to 
oversee all of the animal health rules and regulations in the 
State of Pennsylvania. And we have 3 animal health diagnostic 
labs that we oversee.
    We are proud of our industry and the dairy industry. We 
produce a quality product, and we produce quality meat 
products. We work hard every day to ensure that they are 
wholesome when they meet the market.
    Our farm facilities are inspected by state and federal 
inspections. And annually our milk is tested for Brucellosis. 
There is mandatory monthly testing for bacteria. Weekly our 
milk is tested for somatic cell counts, which indicate the 
health of the cow's udder.
    Every drop of milk that we ship to market is tested for 
antibiotic residues. It is very costly if a farmer has a load 
of antibiotic milk. He loses not only the value of the milk of 
his on the truck, but he is responsible for paying the value of 
all of the other milk. Typically there is $10,000 worth of milk 
on the truck.
    We routinely vaccinate our cows to prevent diseases and 
take very good care of them if they need prompt health with any 
of the medical emergencies that they encounter. Veterinarians 
are in very short supply for large animals in this country now. 
So most of the farmers and herdsmen do a lot of the veterinary 
work themselves. We have nutritionists who advise us on the 
diet for the cows to keep them healthy.
    Cows have a very high value. And they are the heart of the 
dairy business. We work very hard to take very good care of our 
cows. We appreciate them both for their value and the emotional 
attachment that we have with them when we work with them every 
day.
    When the cow's productive life is over, it joins the beef 
cattle in the market. The animal is visually inspected before 
and after slaughter. Unhealthy cattle, whether they are downers 
or not, do not enter the food chain. Our domestic meat and milk 
products are highly regulated for quality and safety on the 
farm level.
    Dairy is one of the most highly inspected and regulated 
industries in the food industry. When there is a problem that 
leads to a dairy or beef recall, the contamination is usually 
found to have been after it has left the farm.
    Not only does the product recall of hamburger affect the 
financial loss of the processing facility, but it leads back to 
a reduced consumption by consumer, which leads to lower prices 
for the farmers. This works the same way in milk products. As 
soon as people back off from purchasing them, it ultimately 
leads back to us receiving less money for our milk or our meat 
that we are selling.
    My own milk coop processes their milk in a cheese plant in 
Ohio. We sell it to the Ohio plant. If there were to be a 
product recall for dairy in the country, we are faced with 
financial loss because of the loss of consumption. But if we 
had a recall of the product from the plant that we ship our 
milk to, it would be much more devastating to us.
    If it was a large enough recall to require the shutdown of 
the plant or to lead to bankruptcy of the plant, then we would 
be looking for another market out of the milk marketing 
generally. And we at this time have way too much milk on that 
market. So we would have very, very little financial ability to 
sell that milk. It would lead to devastation to the farms that 
have this supply on the milk.
    We are very highly regulated on the farms, but we think 
that imports pose a greater threat to the health value in the 
United States than the farm-produced milk in this country. Only 
a minimal amount of that milk is inspected. And we think that 
it should all meet the same health requirements that we meet.
    The recent melamine scare should wake everyone up to the 
fact that we need to regulate these imports. That melamine came 
in in powder into this country, could have very easily been in 
food bags that produced the cheese that we ate. We are very, 
very lucky that it was just showing up in a couple of candy 
products. It could have been far more reaching in this country, 
and we could have been facing the health problems that the 
Chinese have faced.
    It comes into this country under the guise of MPCs, which 
is multiple protein components. It was missed in the last trade 
rounds. So it is not regulated. It does not really have a 
standard of identify to inspect it. And it is both economically 
devastating to this country and poses a health risk to the 
products that we have worked very hard to produce for you.
    The impact food recalls would have, especially negative 
impact, on family farmers' and ranchers' recent contamination 
events have demonstrated in animal and non-animal foods, the 
current U.S. laws and their enforcement are not sufficient. We 
need more inspectors for the imports. And we need to highly 
regulate and keep on top of these.
    We think we have in the dairy industry enough regulations 
in process, but we need more enforcement.[The prepared 
statement of Sheryl Vanco is included in the appendix at page 
85.]
    Chairwoman Dahlkemper. Thank you.
    I just want to let you know that we may be called out for a 
vote. So we will try to get through some questions here 
quickly.
    I would just like to ask the panel. And any of you or all 
of you could address this. Obviously each one of your 
industries is affected by recalls in different ways, but each 
one of your industries, which is consisting of small 
businesses, entrepreneurs, is affected, sometimes in a 
devastating way, with these recalls.
    So as we look forward, we certainly don't want to impose 
undue regulations on struggling small businesses, whether that 
be the farmers, whether that be restaurants, whether that be 
the producers.
    We have got 15 agencies already working on this issue. How 
can we who are looking at policy work in collaboration with 
small businesses in whichever industry we are talking about 
here in terms of the food supply to help you produce what you 
want to produce? And that is safe food for the people of this 
nation. I mean, that is kind of the crux of it here. How can we 
work better collaboratively with you through the agencies that 
we currently have?
    I asked the question of the previous panel. Do we need to 
look at one agency. Do you have some thoughts on that from your 
perspective on the ground?
    Ms. Austin. I will start that. I am sure some of my other 
panel members probably have some thoughts on that as well.
    One of the things that we would like to see is a generally 
accepted overview of the Global Food Safety Initiative, GFSI. 
There are a lot of activities underway regarding third party 
certification for imports. And some of those same practices 
could be applied domestically so that as an auditing body or 
anyone who is looking at a facility has got commonly accepted 
practices that are applied routinely.
    So that, for instance, in our facility, New York State Ag 
Markets is in. We are an organic-certified facility. We have an 
auditor for that. The military comes in and audits. We have New 
York State Ag Markets come in routinely for other things as 
well.
    We have customers who require third party audits. Everyone 
has a certain kind of oversight that they would like to see. If 
there was one standard generally recognized, we could 
streamline a lot of those activities and the burdens that that 
places on a small business so that there could be consistent 
application of practices. It will make it easier for us to 
train our people and increase the opportunity for small 
businesses to improve their food safety without taking on 
additional responsibilities.
    Chairwoman Dahlkemper. Mr. Ambrosio?
    Mr. Ambrosio. There is a difference between what Diane is 
speaking about and inspections. Inspections is a snapshot at 
the time when you go into a facility. And you spoke about that 
earlier with the government panel.
    I think what is important to capitalize and what you are 
saying is GFSI, the Global Food Safety Initiative, it's 
recognizing food management systems. It is a cultural change, I 
think. And that is what we need to look at in this country. We 
need to have a cultural change on how we go about doing 
business. We have gotten away from actually having management 
and everybody else buy into the fact that you have to produce 
food in a safe manner before it leaves the facility.
    And if we are going to go about just having inspections, 
inspections, inspections, I could tell you that I have been 
doing this a long time. You can't inspect quality or food 
safety into any system. You have to have a culture. And when 
you embrace an SQF model or an IFSS or a VRC that are all 
members of GFSI, you have a foundation of a management system 
that is going to be working in a good way. And I think they 
alluded on it a little bit about third party inspections. I 
think that is important.
    It is a good adjunct to what the government is doing right 
now. It can't replace government oversight. I think it is a 
good adjunct to what they have.
    Chairwoman Dahlkemper. Does anyone else want to comment on 
this?
    Mr. Koehler. Again I want to go back to the whole issue of 
culture within a business. And what we were dealing with in the 
peanut recall is very evident now when you look at 2 factories 
with the conditions that they had, it is very evident that it 
was a culture within that business.
    Certainly the thing that needs to be there is a major 
amount of accountability for these people in the food business, 
for the food production business. They have got to be 
accountable for what they do. And though it has put this 
business out of business, there needs to be a lot of 
accountability that even losing the business might not be all 
that you have.
    Our organization wants to be sure we work with Congress on 
everything that is going on. And so we have not talked about 
issues on mandatory recall, any of those kinds of things right 
now, though they are there, because we want to look at 
everything there and find the best result that comes out of the 
United States Congress for the food-processing industry.
    We are not terribly negative toward mandatory recalls, but 
they come with a great deal of responsibility. I want to use a 
personal example to tell you how that is.
    I have a farmer friend who grows peanuts, but the other 
thing he grows is tomatoes. In the just advisory that happened 
last year, he had beautiful table-stock tomatoes. I ended up 
going to his farm, and we bought 5-gallon buckets full of these 
tomatoes that we picked ourselves for $5 for a 5-gallon bucket 
and canned those tomatoes. These were table-stock tomatoes.
    And then they find out that it was a problem not on 
tomatoes but on peppers. So anything we do has to make a good 
system better. And it has to be based, too, on the science that 
we can say, ``Hey, there is a reason that we did it.''
    Mr. Conrad. There is currently a bill in Congress that I 
had worked with Senator Burr in North Carolina about and 
Senator Durbin and Gregg have cosponsored in regard to food 
safety. It does have some things that restaurants are certainly 
looking at. And certainly it seems to be a path that we may 
want to go down.
    Two things have happened in the last several years that we 
would like strengthened: the requirements on produce safety and 
mandatory recall. We think that both of these probably need to 
happen.
    Chairwoman Dahlkemper. Ms. Vanco, do you have any comment 
on this?
    Ms. Vanco. The only comment that I have is when they did 
the Homeland Security, they moved some of the testing to 
Homeland Security from USDA. I think it would be a good idea to 
put it back with USDA, consolidate that back into one entity 
again.
    Chairwoman Dahlkemper. Okay. I'm going to yield to Mr. 
Westmoreland at this point so he can get his question before we 
might be called away.
    Mr. Westmoreland. Thank you, Madam Chairman.
    Ms. Austin, you were talking about the products that you 
had made that you had to take off the shelves. Just curious, is 
there any type of testing that you do after these ingredients 
are added and then all put together? Do you do any type of 
testing on that? I mean, I am just curious.
    Ms. Austin. We would require in this particular case a COA, 
or certificate of analysis, for the incoming ingredients before 
we would bring them into the facility. So that if there were a 
potential that there was something harmful included, we would 
not bring them into the facility, number one.
    The testing after the fact is unlikely to find things. You 
really want to test it proactively. So we did have certificate 
of analysis on the incoming PCA ingredients that indicated that 
they tested negative for Salmonella. Otherwise we never would 
have used them.
    Mr. Westmoreland. In this testing, I am assuming you all 
have turned over that information to whoever is investigating 
this, that certificate?
    Ms. Austin. No, we have not. I don't think they have gotten 
into our facility to look at that. I think they looked at the 
documentation in Blakely. But we did.
    Mr. Westmoreland. But you got a certificate.
    Ms. Austin. Yes.
    Mr. Westmoreland. Right?
    Ms. Austin. Yes.
    Mr. Westmoreland. That's interesting that they haven't 
contacted some of those, looking for some of those 
certificates.
    Ms. Austin. I think it was alluded to as well. Testing, 
particularly in this case, if you have an intermittent problem, 
you are not going to necessarily find everything by testing.
    Mr. Westmoreland. Right.
    Ms. Austin. It goes back to practices.
    Mr. Westmoreland. Yes.
    Ms. Austin. It goes back to culture. And that's what we 
rely on. There has to be some degree of trust throughout the 
supply chain. And there is a certain amount of trust that you 
put in your vendors and suppliers. And those are the same kinds 
of trust that they need to have of us.
    Mr. Westmoreland. How long had you been doing business with 
PCA?
    Ms. Austin. Probably no more than two years.
    Mr. Westmoreland. Mr. Koehler, let me ask you. The peanut 
industry is very supportive of food safety, right?
    Mr. Koehler. Absolutely. You know, what we had was a bad 
actor that took a very short-term view. But, you know, we have 
got a product that we can go out, and we can tell folks that it 
is good and good for you.
    And it is a long-term proposition for us. And the only way 
that we can have long-term health as an industry is to be sure 
that what we put out there, the mother that feeds that to a 
child or in my case the grandfather that feeds it to his 
grandsons knows that that product is safe and that it is good 
and that it is the best that it can be.
    Mr. Westmoreland. And is it not true that whether you are a 
peanut farmer or a tomato farmer, that your job is to grow the 
crop and to make sure that you know it is the best product that 
it can be and then you take it to the processing plant and, 
from there, it is up to them and that you certainly have the 
interest of the consumer at heart and want to make sure that 
that is the best product that can come out of what you produce? 
Is that true?
    Mr. Koehler. Even though the farmer sells to a buying point 
that sells to a peanut sheller that then sells to a company 
like PCA or a major processor, you know, we are four spaces 
removed. But if the consumer won't each that product, then it 
impacts us, too.
    And it doesn't matter whether it is peanut farmers or 
whatever. Food safety is all of our issue in the agricultural 
system in this country.
    Mr. Westmoreland. And you mentioned that this could be up 
to a billion dollars on the peanut industry. Is that just 
dealing with the growers or is that the total industry?
    Mr. Koehler. What the multiplier number looks at is the 
total economic impact but on growers, almost $500 million right 
there.
    Mr. Westmoreland. Ms. Vanco, I want to thank you for what 
you do. I have had an opportunity to both work on a dairy farm 
and to go out and visit them. You earn your money. And I want 
to thank you for doing that because that is a very worthwhile 
way of life, and I want to thank you and your family for doing 
that.
    So, with that, I will yield back.
    Chairwoman Dahlkemper. I would like to recognize Mr. King 
for 5 minutes.
    Mr. King. Thank you, Madam Chair. I want to thank all of 
the witnesses for your testimony. Now I understand something 
about what is good about Mr. Westmoreland since he worked on a 
dairy farm.
    A lot of your testimony had remarks in there about--I would 
synthesize it down to this, the best place in the world to 
raise a family is right there on the land. I just came from the 
Ag Committee, by the way, why I was late. But your testimony 
does empt me as I can reference that in our corn region.
    I want to assure you, Mr. Koehler, if your peanut producers 
decide they want to raise corn down there--and I know they have 
got to make up their mind pretty quick--that I am not looking 
at this in any parochial way. You've got to get all you can out 
of the land. And one of the things we have tried to do is more 
dollars per acre. That solves, really, our agricultural 
problems throughout time.
    I am curious about this. Before I ask my question, I want 
to comment also. Mr. Ambrosio's comment I think was the most 
significant in that you can't inspect safety into a system. You 
have to have a culture and reiterated by Mr. Koehler, if I 
remember correctly, and agreed I think by the rest of you.
    I think that is a very significant point. I think that food 
inspection needs to be the inspection of the culture. And if 
the culture doesn't reflect the kind of food safety that is 
necessary, then that should bring more scrutiny in the food 
safety until such time as the culture is created or the place 
is shut down.
    And I reflect back on having gone to a pharmaceutical 
manufacturing company and visited that. And they had great vats 
of white powder and people walking around in white frock coats. 
And they had a laboratory to evaluate quality control. And I 
asked, ``Where is my FDA inspector?''
    ``Well, there is none here.''
    ``When was the last time he was here?''
    ``Well, I think he was here late last year, maybe 6 or 7 
months ago.''
    ``You mean you don't have anybody on site like a USDA meat 
inspector watching all of the pharmaceuticals?''
    The answer is no. Their quality control is in the quality 
of the pharmaceuticals that they produce in bulk that are 
packaged up in little capsules and sold to people and in the 
liability that trails that clear back to them. They create that 
culture because there are incentives in place for a good, 
solid, clean food culture. And I don't think that is what we 
have to do.
    I wanted to pose this question this way. How many people 
have died in America because of lack of food safety in the last 
10 years, the last 50 years, any increment anybody would like 
to take a stab at?
    Myself I have a hard time coming up with numbers that I 
think would impact in comparison to many of the other hazards 
we face in life. Does anybody want to take a stab at that?
    [No response.]
    Mr. King. I understand. Then I take you back to Alar, which 
seemed to be the precursor for the modern reaction to the lack 
of food safety. And it destroyed the apple market. Of course, 
it didn't affect my region again either, but it set the 
parameter that a scare of food safety chases the market away. 
It took a lot of apple producers out of business.
    We had the BSE issue, which was mentioned. That hurt the 
beef industry dramatically. Now here we are with the impact on 
the peanut industry. Sitting there having to make a decision, 
if you don't get some answers, Mr. Koehler, can you tell us 
what you might do?
    Mr. Koehler. Well, I represent farmers because that is my 
job, but I can tell you what farmers are telling me. They are 
struggling now to know what to do because our primary rotation 
is peanut and cotton with some corn. And we can't grow corn 
like you guys can there in the Midwest. We have to work pretty 
hard at it.
    And it's pretty costly for us to do that. We have to 
irritate. The choices just aren't there. With 42-cent cotton, 
there is no cash flow there; with peanuts now below our cost 
production, nothing there to cash flow.
    And I am not sure I know what farmers are going to do 
because sometimes they make a decision based on a motion, 
rather than on what their pocketbook is.
    The National Center for Peanut Competitiveness has run 
every representative farm they have in this country. And they 
have found that farmers would lose more money if they would go 
fishing all year and not farm.
    Mr. King. I am looking at the projected gross receipts that 
you need to make your land cash flow. And I come up with $621 
an acre for dry land, $834 an acre for irrigated land. What has 
happened to your land values, your asset values, that uphold 
your continuing operation?
    Mr. Koehler. Farming-wise land values have kind of held 
where they are because of one thing. But it has changed a whole 
lot in the last few years. Our land values aren't continuing to 
escalate because we don't have the migration from Florida 
coming back up to buy 100 acres and a horse--it used to be 40 
acres and a mule, but it's 100 acres and a horse right now--
because of the situation in the economy.
    So certainly land values aren't going back up. And the 
question is, at what point do they start falling, then, in 
value?
    Mr. King. I just thank all of the witnesses. And we will 
keep sending you corn because we don't know how to make grits.
    [Laughter.]
    Chairwoman Dahlkemper. I just have one last question, I 
think, for all of you. As we look forward, obviously we want to 
prevent recalls is really the issue here. You have talked a 
lot, Mr. Koehler, about the cost of what this particular recall 
has cost your industry.
    I don't know if any of you could address this. This is just 
kind of looking in the past. In terms of your industries and 
the recalls, whether we're talking about beef, whether we're 
talking about tomatoes, spinach, peanuts currently, the cost, 
do you have any idea what the cost is to your individuals 
within your industries? You know, what kind of costs have they 
been dealing with?
    Mr. Ambrosio. I know in the supermarket industry, it is in 
the millions of dollars every time we go through this because 
it is not only do you lose product, there is product liability. 
Plus, there is loss of product. Once you pay for that product, 
you throw it out. And a lot of those companies, they go out of 
business and then stand in line with everybody else trying to 
recoup your money.
    Chairwoman Dahlkemper. Do any of them or whatever 
percentage have recall insurance?
    Mr. Ambrosio. I think not too many. Recall insurance is a 
tricky one. It covers, it could cover, a variety of different 
things on the liability side, but we are looking also from the 
product loss side because if you are purchasing a million 
dollars worth of inventory and that million dollars worth of 
inventory has to be thrown out, then that is a tough pill to 
swallow.
    Chairwoman Dahlkemper. Anyone else address that within your 
industry?
    Mr. Conrad. Recalls at the retail level are catastrophic if 
there is an event, an event such as the Jack in the Box chain 
or Taco Bell in the salad or in Cheyenne, Wyoming Taco John's. 
You know, those events were catastrophic for those companies 
because people got sick.
    Chairwoman Dahlkemper. And how about your individual 
restaurants? Because you represent a lot of the small 
entrepreneurs, rather than the chains, correct?
    Mr. Conrad. That's correct. The small entrepreneur just 
pitches it more often than not. He takes his case of spinach. 
He takes spinach off the menu. And he doesn't put spinach back 
on the menu until such time as it goes away.
    Chairwoman Dahlkemper. Ms. Austin?
    Ms. Austin. Well, I spoke to the potential losses for our 
individual company. And if you multiply those by even IDFA, the 
530-member, it is in the millions. There is the out-of-pocket 
cost. There is also the disruption and the distraction from 
day-to-day, business growth opportunities, and reintroducing 
product in the market. And, again, until people are comfortable 
buying those products, your sales suffer.
    So it definitely has a huge ripple effect. Until we get 
through it, we are not sure how long that will last? But if in 
the case of dairy, because it is a very seasonal business, if 
companies right now are in a position where they can't buy 
ingredients to make ice cream for the season and they don't 
have ice cream to sell, they may suffer when they get to July 
and August and they don't have product to sell and their 
bankruptcy or going out of business would really not look like 
it is related to the recall, but it has an awful lot to do with 
how they position themselves and set themselves up for success.
    Chairwoman Dahlkemper. Have any within your industry gotten 
to that point?
    Ms. Austin. Well, we haven't approached the season yet, but 
I can tell you from our perspective cash flow is huge. And the 
immediate impacts for us because we have product that we are 
not getting paid for, in the case of ice cream, we figure the 
PCA inclusions represent only about one-tenth of the product 
cost. So the product cost to us multiples substantially.
    We have to pay our cream and dairy suppliers. We have to 
pay for sugar. We have to pay for packaging. And then we throw 
all of that out. And to resupply, we have got to buy it all 
again.
    And so it is really a double hit. We don't have cash coming 
in, and we have a lot of cash going out. And we are at a 
critical season where we need to be building our inventory 
because we don't have the infrastructure to manufacture the 
peak demand.
    So if we are not able to make enough in July and August, 
then our sales will suffer as a result of that.
    Chairwoman Dahlkemper. Last, Ms. Vanco?
    Ms. Vanco. At the farm level, it is very, very difficult to 
measure the impact of a recall because those are products that 
have been produced after they have left our farms. We just sell 
the bare product to you. And so the trace-back is very hard to 
measure.
    I do know that the BSE cost the whole country in the 
millions of dollars when that cattle lost their market. On our 
particular farm, it would have been in the thousands. But it is 
very, very difficult to measure because everything that we sell 
fluctuates daily on the prices that we get. It is really hard 
to measure what the total effect is from a specific thing that 
is making those prices go up and down.
    It does cost us thousands of dollars, I know, on a beef 
recall, but I can't tell you how many.
    Chairwoman Dahlkemper. Well, I want to thank everyone on 
the panel today. This was very timely and informative testimony 
that you gave. And I appreciate you all taking the time to be 
down here with us to discuss this topic.
    And, with unanimous consent, the members will have 5 days 
to submit statements and suppurating materials for the record. 
If I have unanimous consent, without objection, this hearing is 
now adjourned.
    [Whereupon, at 12:00 p.m., the Subcommittee was adjourned.]

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