[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
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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
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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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