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


 
                    HEARING TO REVIEW LIVESTOCK AND 
                      RELATED PROGRAMS AT USDA IN 
                     ADVANCE OF THE 2012 FARM BILL 

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                     LIVESTOCK, DAIRY, AND POULTRY

                                 OF THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 20, 2010

                               __________

                           Serial No. 111-56


          Printed for the use of the Committee on Agriculture
                         agriculture.house.gov

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                        COMMITTEE ON AGRICULTURE

                COLLIN C. PETERSON, Minnesota, Chairman

TIM HOLDEN, Pennsylvania,            FRANK D. LUCAS, Oklahoma, Ranking 
    Vice Chairman                    Minority Member
MIKE McINTYRE, North Carolina        BOB GOODLATTE, Virginia
LEONARD L. BOSWELL, Iowa             JERRY MORAN, Kansas
JOE BACA, California                 TIMOTHY V. JOHNSON, Illinois
DENNIS A. CARDOZA, California        SAM GRAVES, Missouri
DAVID SCOTT, Georgia                 MIKE ROGERS, Alabama
JIM MARSHALL, Georgia                STEVE KING, Iowa
STEPHANIE HERSETH SANDLIN, South     RANDY NEUGEBAUER, Texas
Dakota                               K. MICHAEL CONAWAY, Texas
HENRY CUELLAR, Texas                 JEFF FORTENBERRY, Nebraska
JIM COSTA, California                JEAN SCHMIDT, Ohio
BRAD ELLSWORTH, Indiana              ADRIAN SMITH, Nebraska
TIMOTHY J. WALZ, Minnesota           DAVID P. ROE, Tennessee
STEVE KAGEN, Wisconsin               BLAINE LUETKEMEYER, Missouri
KURT SCHRADER, Oregon                GLENN THOMPSON, Pennsylvania
DEBORAH L. HALVORSON, Illinois       BILL CASSIDY, Louisiana
KATHLEEN A. DAHLKEMPER,              CYNTHIA M. LUMMIS, Wyoming
Pennsylvania                         THOMAS J. ROONEY, Florida
BOBBY BRIGHT, Alabama
BETSY MARKEY, Colorado
FRANK KRATOVIL, Jr., Maryland
MARK H. SCHAUER, Michigan
LARRY KISSELL, North Carolina
JOHN A. BOCCIERI, Ohio
SCOTT MURPHY, New York
WILLIAM L. OWENS, New York
EARL POMEROY, North Dakota
TRAVIS W. CHILDERS, Mississippi
WALT MINNICK, Idaho

                                 ______

                           Professional Staff

                    Robert L. Larew, Chief of Staff

                     Andrew W. Baker, Chief Counsel

                 April Slayton, Communications Director

                 Nicole Scott, Minority Staff Director

                                 ______

             Subcommittee on Livestock, Dairy, and Poultry

                     DAVID SCOTT, Georgia, Chairman

JIM COSTA, California                RANDY NEUGEBAUER, Texas,  Ranking 
STEVE KAGEN, Wisconsin               Minority Member
FRANK KRATOVIL, Jr., Maryland        BOB GOODLATTE, Virginia
TIM HOLDEN, Pennsylvania             MIKE ROGERS, Alabama
LEONARD L. BOSWELL, Iowa             STEVE KING, Iowa
JOE BACA, California                 K. MICHAEL CONAWAY, Texas
DENNIS A. CARDOZA, California        ADRIAN SMITH, Nebraska
BETSY MARKEY, Colorado               DAVID P. ROE, Tennessee
SCOTT MURPHY, New York
WALT MINNICK, Idaho

               Dean Goeldner, Subcommittee Staff Director

                                  (ii)

















                             C O N T E N T S

                              ----------                              
                                                                   Page
Boswell, Hon. Leonard L., a Representative in Congress from Iowa, 
  submitted article..............................................    59
Costa, Hon. Jim, a Representative in Congress from California, 
  submitted letter...............................................    59
Neugebauer, Hon. Randy, a Representative in Congress from Texas, 
  opening statement..............................................     4
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, prepared statement..................................     5
Scott, Hon. David, a Representative in Congress from Georgia, 
  opening statement..............................................     1
    Prepared statement...........................................     3

                                Witness

Avalos, Hon. Edward M., Under Secretary for Marketing and 
  Regulatory Programs, U.S. Department of Agriculture, 
  Washington, D.C.; accompanied by Cindy Smith, Administrator, 
  Animal and Plant Health Inspection Service, USDA; Rayne Pegg, 
  Administrator, Agricultural Marketing Service, USDA; and J. 
  Dudley Butler, Administrator, Grain Inspection, Packers, and 
  Stockyards Administration, USDA................................     6
    Prepared statement...........................................    10
    Submitted questions..........................................    65

                           Submitted Material

Boyle, J. Patrick, President and CEO, American Meat Institute, 
  submitted letter...............................................    60


                    HEARING TO REVIEW LIVESTOCK AND
                      RELATED PROGRAMS AT USDA IN
                     ADVANCE OF THE 2012 FARM BILL

                              ----------                              


                         TUESDAY, JULY 20, 2010

                  House of Representatives,
     Subcommittee on Livestock, Dairy, and Poultry,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 1:00 p.m., in 
Room 1300, Longworth House Office Building, Hon. David Scott 
[Chairman of the Subcommittee] presiding.
    Members present: Representatives Scott, Costa, Kagen, 
Holden, Boswell, Baca, Markey, Murphy, Minnick, Peterson (ex 
officio), Neugebauer, Goodlatte, King, Conaway, Smith, and Roe.
    Staff Present: Claiborn Crain, Nathan Fretz, Liz 
Friedlander, Dean Goeldner, Alejandra Gonzalez-Arias, John 
Konya, Clark Ogilvie, James Ryder, Rebekah Solem, Patricia 
Barr, John Goldberg, Tamara Hinton, Pete Thomson, Jamie 
Mitchell, and Sangina Wright.

  OPENING STATEMENT OF HON. DAVID SCOTT, A REPRESENTATIVE IN 
                     CONGRESS FROM GEORGIA

    The Chairman. This hearing of the Subcommittee on 
Livestock, Dairy, and Poultry to review livestock and related 
programs at the U.S. Department of Agriculture in advance of 
the 2012 Farm Bill will come to order.
    I want to thank everybody for coming. This is indeed a very 
important hearing. We have a broad range of subjects to cover 
today. We have animal identification and disease tracking 
system, as well as country of origin labeling to discuss. And 
we have the proposed GIPSA rules and the competition workshops 
held by the Department of Agriculture, the Department of 
Justice, and the Veterinary Services. And we have the 2015 
Vision Initiative's implications for disease control program.
    So, needless to say, the Subcommittee's agenda today is 
very substantial. It covers a broad array of subjects and is, 
indeed, very important to the future of agriculture in our 
country and the world.
    Globalization has had a profound impact on the economic 
futures of American companies, workers, and their families, 
making the United States economy more productive overall. 
However, in this ever-more globalized society, the potential 
for devastating economic impacts in the event of a widespread 
animal disease epidemic is even more apparent today.
    Should an outbreak occur, other countries will certainly 
close their borders to United States animals. By not having an 
animal identification system fully in place, we are indeed 
jeopardizing critical trade avenues. This program serves a 
vital role in protecting our food supply and our economic well-
being. Thus, it is imperative that we focus our attention on 
improving participation in our animal ID system as quickly and 
as effectively as possible.
    Today's hearing is a timely opportunity to hear about the 
progress of this program from our Agriculture Department, and 
the new approach proposed by Secretary Vilsack to increase 
participation, particularly amongst cattle producers. We are 
long overdue for this system to be fully up and running.
    In that same light, we all are very interested in hearing 
about the overall implementation of, and compliance with, 
country of origin labeling. We all have worked on this program 
diligently during the last farm bill to empower the consumer 
with knowledge of where their food comes from and, in turn, 
strengthen the demand and price for the goods of American 
farmers. It is imperative that we continue our progress in 
country of origin labeling to further give the consumer what 
they have the right to know, which is information about where 
their food is coming from.
    Regarding the Veterinary Services program for 2015, I know, 
in the face of decreasing Federal budget and diminishing 
returns, changes have been necessary to the traditional animal 
disease eradication approach in order to utilize these limited 
resources efficiently and appropriately. This will be an 
excellent opportunity to explore the program's new focus on 
prevention, preparedness, detection, and early response. I am 
interested to know how these changes will affect disease 
program activities for the states and tribes.
    The United States Department of Agriculture and the 
Department of Justice have been holding competition workshops 
to address the dynamics of competition in agricultural markets. 
And although I applaud this opportunity for producers, 
processors, and consumer groups to share their perspective 
across the country, I do question the ultimate purpose and goal 
of these hearings. It is my goal today to gain a clearer 
picture on the expected outcome of those workshops, and to hear 
what has come to light already at these joint workshops so far.
    And I am also very eager to discuss the new proposed GIPSA 
regulations regarding fairness in contracting. Many of my 
constituents, and the constituents of many on this Committee, 
have expressed deep concerns over these proposed rules, and 
they fear that they have stepped too far.
    A number of these provisions had previously been rejected, 
their amendments on the floor, in the Senate process, and 
certainly in the farm bill. They were rejected strongly during 
the last farm bill deliberations. So the question is, why are 
they here? Is this an end-run around Congress?
    And I worry that these rules need to be further examined to 
understand how they will affect our country's agricultural 
competition in a global market. So it is very important that we 
examine these rules today to illuminate any unforeseen 
consequences and scrutinize their potential effect on our 
agriculture sector.
    This proposed rule goes well beyond--well beyond--what 
Congress intended. It eliminates the required showing of 
competitive injury to determine violations of the Act. You are 
given only 60 days for review and comment, which is clearly an 
inadequate amount of time. These are the most sweeping changes 
to the Packers and Stockyards Act in nearly 100 years, and 
GIPSA did little or nothing to get the input from the livestock 
and poultry industry. Clearly, this is a misstep. And we need 
to get this illuminated today and cleared up to give our 
livestock and our poultry industry a clear path and an 
understanding.
    And it is my feeling that one of the things we need to do 
with this rule, the least we can do is certainly not have a 60 
day limit for comment, but at least a 120 day limit for 
comment. This is critically important because, as I said, it 
definitely goes beyond what the 2008 Farm Bill intended for it 
to do.
    And so, these are some very important issues. I look 
forward to the discussion on these issues. Again, I want to 
welcome everyone.
    [The prepared statement of Mr. Scott follows:]

 Prepared Statement of Hon. David Scott, a Representative in Congress 
                              from Georgia
    I would like to welcome everybody once again to the Livestock, 
Dairy, and Poultry Subcommittee. I appreciate you all being here. We 
have a broad range of subjects to cover today; the animal 
identification and disease tracking system as well as country of origin 
labeling (COOL), the proposed GIPSA rules and the competition workshops 
held by the USDA and Department of Justice, and the Veterinary Services 
2015 Vision Initiative's implications for disease control programs. 
Needless to say, the Subcommittee's agenda today is substantial and 
covers a broad array of subjects.
    Globalization has had a profound impact on the economic futures of 
American companies, workers and families; making the U.S. economy more 
productive overall. However, in this ever more globalized society, the 
potential for devastating economic impacts in the event of a widespread 
animal disease epidemic is ever more apparent. Should an outbreak 
occur, other countries will certainly close their borders to U.S. 
animals. By not having an animal identification system fully in place, 
we are jeopardizing critical trade avenues. This program serves a vital 
role in protecting our food supply and economic well-being. Thus it is 
imperative that we focus our attention on improving participation in 
our animal identification system as quickly and effectively as 
possible. Today's hearing is a timely opportunity to hear about the 
progress of this program and the new approach proposed by Secretary 
Vilsack to increase participation, particularly among cattle producers. 
We are long overdue for this system to be fully up and running.
    In the same light, I am interested in hearing about the overall 
implementation of and compliance with country of origin labeling. We 
worked on this program diligently during the last farm bill to empower 
the consumer with knowledge of where their food comes from and, in 
turn, strengthen the demand and price for the goods of American 
farmers. It is imperative we continue our progress in country of origin 
labeling to further give the consumers what they have the right to 
know; which is information about where there food is coming from.
    Regarding the Veterinary Services program for 2015; I know in the 
face of a decreasing Federal budget and diminishing returns, changes 
have been necessary to the traditional animal disease eradication 
approach in order utilize these limited resources efficiently and 
appropriately. This will be an excellent opportunity to explore the 
program's new focus on prevention, preparedness, detection and early 
response. I am interested to know how these changes will affect disease 
program activities for the states and tribes.
    The USDA and Department of Justice have been holding competition 
workshops to address the dynamics of competition in agricultural 
markets. Although, I laud this opportunity for producers, processors 
and consumer groups to share their perspective across the country, I do 
question the ultimate purpose and goal of these hearings. It is my goal 
today to gain a clearer picture on the expected outcome of these 
workshops and to hear what has come to light already at these joint 
workshops so far.
    I am also eager to discuss the new proposed GIPSA regulations 
regarding fairness in contracting. Many of my constituents have 
expressed concern over these proposed rules and fear that they may step 
too far. A number of these provisions had previously been rejected 
during the last farm bill deliberations and I worry that these rules 
need to be further examined to understand how they will affect our 
country's agricultural competitiveness in a global market. It is 
important we examine these rules today to illuminate any unforeseen 
consequences and scrutinize their potential effect on our agriculture 
sector.
    So I look forward to our discussion today of these issues and would 
like to again welcome everyone. With that, it is my pleasure to 
recognize the Ranking Member of the Committee, Mr. Neugebauer, for any 
comments he may wish to make.

    The Chairman. And, with that, it is my pleasure to 
recognize the Ranking Member of the Committee, Mr. Neugebauer, 
for any comments he wishes to make.

OPENING STATEMENT OF HON. RANDY NEUGEBAUER, A REPRESENTATIVE IN 
                      CONGRESS FROM TEXAS

    Mr. Neugebauer. Well, Mr. Chairman, thank you for calling 
this hearing. And let me say, a number of the things that you 
just said that I think a number of us on this panel are in 
total agreement with. I think this hearing is extremely timely.
    You know, there are numerous threats to animal agriculture 
posed by Federal regulations, environmental and animal 
activists, even Congress. Producers in my district in west 
Texas are very concerned with the uncertainty surrounding their 
business models, and are finding it very difficult to make 
long-term planning decisions.
    This is why I am very pleased we are holding this hearing 
today to begin discussing some of the programs this 
Subcommittee has jurisdiction over, and how we can work with 
the producers as we start thinking about the 2012 Farm Bill.
    The three agencies represented here today have jurisdiction 
over a broad array of important topics, from country of origin 
labeling to mandatory price reporting, animal welfare to 
organic labeling, antibiotics in animal agriculture to check-
off programs, animal ID, traceability, and recently proposed 
packers and stockyard rules.
    While these are just a few of the issues that will come up 
today, I think it is safe to say that the lion's share of our 
discussion will be about the recently proposed GIPSA rule.
    Mr. Chairman, make no mistake, I believe that fair and 
transparent markets are necessary for orderly commerce between 
producers, packers, processors, retailers, and consumers. It is 
vital that the law in this matter be strictly enforced. At the 
same time, we owe it to our constituents to ensure that the 
policy process is fair and transparent, so that a path of good 
intentions does not lead to the land of unintended 
consequences.
    For my part, I am a bit dismayed by the particular proposed 
rule at this particular time. I am dismayed that it comes in 
the middle of a series of workshops that were represented as an 
effort to learn about the nature of potential problems in 
livestock marketing. It is bad enough that we have been told 
that the Administration has stacked the deck at these workshops 
in favor of their own regulatory agenda. But, now that the 
proposed rule is published, many are concerned that the 
Administration will hide behind the Administrative Procedures 
Act when asked questions by Congress or the constituents.
    I am dismayed that this far-reaching proposal contains very 
thin economic analysis to justify its purpose and help us 
evaluate its impact. I am also dismayed that it is sold in part 
on the effort to correct what the Administration believes to be 
the court's misinterpretation of the current law, yet it does 
not come in the form of a legislative proposal.
    Mostly I am dismayed that the agency believes that 
interested parties, especially producers, can respond to this 
significant proposal in a mere 60 days. Despite a recent letter 
from the Administrator of GIPSA saying that no extensions of 
the comment period would be granted, it is my understanding 
that the Secretary has not made his final decision. And for 
this reason, 21 of my colleagues, from both sides of the aisle, 
joined with me in requesting that the comment period be 
extended to 120 days so that the USDA and Department of Justice 
workshops can be completed and a thorough analysis can be 
conducted by everyone wishing to comment on this rule.
    Mr. Chairman, I notice that you had mentioned that very 
same thing.
    I think one of the things that concerns a lot of us is 
that, at a time in this country where there is great economic 
uncertainty and difficulty for small businesses, large 
businesses--and people in agriculture represent a substantial 
part of our economy--that we are creating even more uncertainty 
by some of the proposals that we have on the table here. 
Sometimes when the government tries to be the overall protector 
of everyone, what ends up happening is the markets are 
distorted and the normal market process is not allowed to work 
in an appropriate way.
    So I look forward to this hearing today and to hearing from 
the witnesses, and also giving my colleagues an opportunity to 
ask what I think are very important questions about where the 
Administration is heading at this time.
    So, Mr. Chairman, thank you for calling this hearing.
    The Chairman. Thank you, Ranking Member Neugebauer. And I 
really appreciate your comments, as well, on this. They are 
very well stated.
    For other Members, the chair is going to request that other 
Members submit their opening statements for the record so that 
we can get right to the witnesses and they can begin their 
testimony. And we will certainly ensure that we have ample time 
to ask all of your questions on this.
    [The prepared statement of Mr. Peterson follows:]

  Prepared Statement of Hon. Collin C. Peterson, a Representative in 
                        Congress from Minnesota
    Good afternoon and thank you, Mr. Scott, for holding today's 
hearing of the Subcommittee on Livestock, Dairy, and Poultry.
    Today's hearing focuses on livestock and related programs at the 
U.S. Department of Agriculture (USDA) in advance of the 2012 Farm Bill.
    There is a lot of ground to cover today. USDA's Grain Inspection, 
Packers, and Stockyards Administration recently announced a proposed 
rule to address competition in the marketing of livestock and poultry. 
This is something that we directed the Department to do as part of the 
2008 Farm Bill, but there are legitimate concerns about what they have 
done and how far they took their authority. Since USDA announced this 
rule just over a month ago I've heard from both sides of the issue--
some groups are supportive while others have some pretty significant 
concerns. Today's hearing is an opportunity for our witnesses to 
address this issue.
    I am also glad to see the rollout of the cattle dashboard, an 
online tool that will allow Internet users to easily access and 
understand a variety of data related to the sales of live cattle. An 
enhanced, easy to understand system of electronic reporting was also 
something we included in the 2008 Farm Bill. I am committed to seeing 
as much transparency and timeliness in price reporting as possible. 
Since seeing a prototype of the cattle dashboard a few months ago, I 
have been hopeful that it will give producers better information on 
which to base their management decisions and I am pleased that it is 
being implemented.
    Implementing a functional, comprehensive National Animal 
Identification System (NAIS) in the United States is a high priority 
for this Committee. However, I think I speak for many of us when I say 
it has been disappointing and frustrating that, despite having the 
Federal funding to do so, USDA has not been able to implement such a 
system. The Agriculture Appropriations Subcommittee obviously shares 
these feelings, recently cutting funding for the program. I hope our 
witnesses today can shed some light on the current status of this 
program.
    Today's hearing is another step in writing the next farm bill. A 
bill this large and that covers so many important issues takes a lot of 
time and effort to get it right, and I am committed to a process that 
is open, transparent and bipartisan. I look forward to working with my 
colleagues on both sides of the aisle and from all regions of the 
country to be sure that we put together a bill that supports the food, 
fiber, conservation, energy and rural development needs of this 
country.
    I look forward to hearing from today's witnesses and again thank 
the Chairman for holding today's hearing.

    The Chairman. Now I would like to welcome our witnesses and 
recognize them at this time.
    We have the Honorable Edward Avalos, the Under Secretary 
for Marketing and Regulatory Programs with the United States 
Department of Agriculture.
    Welcome.
    He is accompanied by Ms. Cindy Smith, the Administrator of 
Animal and Plant Health Inspection Service for the U.S. 
Department of Agriculture.
    We have Ms. Rayne Pegg, Administrator of the Agricultural 
Marketing Service for the United States Department of 
Agriculture.
    And we have Mr. J. Dudley Butler, the Administrator for 
Grain Inspection, Packers, and Stockyards Administration for 
the U.S. Department of Agriculture.
    Under Secretary Avalos, you may begin.

         STATEMENT OF THE HON. EDWARD M. AVALOS, UNDER
             SECRETARY FOR MARKETING AND REGULATORY
           PROGRAMS, U.S. DEPARTMENT OF AGRICULTURE,
         WASHINGTON, D.C.; ACCOMPANIED BY CINDY SMITH,
  ADMINISTRATOR, ANIMAL AND PLANT HEALTH INSPECTION SERVICE, 
                USDA; RAYNE PEGG, ADMINISTRATOR,
          AGRICULTURAL MARKETING SERVICE, USDA; AND J.
 DUDLEY BUTLER, ADMINISTRATOR, GRAIN INSPECTION, PACKERS, AND 
                STOCKYARDS ADMINISTRATION, USDA

    Mr. Avalos. Mr. Chairman, Ranking Member, Members of the 
Subcommittee, thank you for the opportunity to appear here 
today to discuss implementation of the livestock title of the 
Food, Conservation, and Energy Act of 2008.
    The three agencies I oversee--Agricultural Marketing 
Service; Animal and Plant Health Inspection Service; and the 
Grain Inspection, Packers, and Stockyards Administration--are 
the primary agencies with responsibility for implementing Title 
XI, the livestock title, of the farm bill.
    Joining me today: AMS Administrator Rayne Pegg, APHIS 
Administrator Cindy Smith, and GIPSA Administrator Dudley 
Butler.
    At MRP, we protect producers from unfair competition and 
unfair business practices. We also protect the U.S. livestock 
sector from animal health threats and ensure the humane care 
and treatment of certain animals. In addition, we facilitate 
and expand the domestic and international marketing of U.S. 
livestock products, providing information and marketing tools.
    I am pleased to have the opportunity to describe what MRP 
has accomplished in implementing provisions of the 2008 Farm 
Bill. And I am looking forward to working with you as you work 
towards reauthorizing it in 2012.
    Grain Inspection, Packers, and Stockyards Administration: I 
know that the issue on the forefront, right now, is GIPSA. 
Congress took action in the 2008 Farm Bill to address fairness 
in certain aspects of the livestock and poultry industry, 
particularly in regards to contracts and enforcement of the 
Packers and Stockyards Act under the jurisdiction of GIPSA.
    On June 22, 2010, GIPSA published a proposed rule in the 
Federal Register that implements Sections 1105 and 1106 of the 
farm bill, which directs USDA to carry out certain rulemaking 
to improve fairness in the marketing of livestock and poultry, 
and addresses concerns raised by increasingly consolidated 
markets. The proposed rule seeks to provide significant new 
protections for producers against unfair, fraudulent, 
discriminatory, and retaliatory practices.
    We did not come up with these rules on our own; rather, we 
have heard from producers across the country. As part of 
President Obama's Administration's rural tour, Secretary 
Vilsack visited dozens of communities in 20 states in an effort 
to engage in a more robust dialogue with folks living in rural 
areas.
    Secretary Vilsack also joined Attorney General Eric Holder 
of the Department of Justice to hold agricultural competition 
workshops around the country to hear from livestock and poultry 
producers and industry experts, to learn from what they see on 
a daily basis, in an open and transparent way.
    Preparing for the rule, GIPSA also held listening sessions 
in 2008. Many of these producers have raised concerns about 
what they are seeing, specifically about a lack of fairness, 
transparency, and market access.
    I share Secretary Vilsack's concern about the depopulation 
of rural America. In the past 40 years, the United States has 
lost 800,000 farmers and ranchers. And for those living and 
working in rural America, the average income is a little over 
$28,000, compared to over $40,000 for the city folks. Our 
remaining farmers are aging. The average age of a farmer today 
is 58 years.
    The overall loss in farmers and ranchers has impacted the 
number of livestock farms, as well. In 1980, there were over 
666,000 hog farms in the country. Today, it is roughly 71,000. 
The same situation exists in the cattle industry. In 1980, 
there were over 1.6 million farms. Today, there are roughly 
950,000 cattle farms.
    I realize the reasons for the decline in farmers is 
complex, but we must also recognize that this mass exodus of 
producers has happened with the status quo. Farmers that want 
to stay in agriculture, and young people that want to get into 
agriculture, need a fair and transparent market. And that is 
why we seek to better restore fairness and transparency with 
the proposed GIPSA rule.
    The public comment period closes August 23rd. We are 
currently receiving feedback from individuals and groups. Some 
Members of this Subcommittee asked that we either maintain the 
current comment deadline or that we extend it. We take all 
these views very, very seriously, and USDA plans to make a 
decision as soon as possible as to whether to extend the 
comment period.
    Animal and Plant Health Inspection Service: APHIS has 
worked to implement a number of programs in the farm bill that 
address specific animal disease threats that U.S. producers 
face, taking into account the evolving animal health landscape. 
I would like to briefly mention a couple of these 
accomplishments, then update you on two key animal health 
initiatives at USDA.
    APHIS drafted revisions to its 5 year Cattle Fever Tick 
National Strategic Plan, and also developed a business plan for 
the program to include new and previously proposed initiatives. 
While the divisions to the National Strategic Plan are still 
being finalized, APHIS has moved forward and funded a number of 
new initiatives with increased appropriated funding of $2 
million in Fiscal Year 2009, $3 million in Fiscal Year 2010, 
making important and innovative strides in addressing this 
serious disease threat.
    APHIS moved quickly to publish its final rule establishing 
a voluntary trichinae certification programs for U.S. pork. As 
outlined in the 2008 Farm Bill, the final rule was published in 
the fall of 2008. To jump-start the program, APHIS paid for on-
farm audits and waived the program user fee for Fiscal Year 
2009. In 2010, APHIS carried out outreach and promotion 
activities for the new program and funded farms as they moved 
from pilot programs into the official program.
    I would also like to update you on the progress moving 
forward with our new flexible framework for animal disease 
traceability in the United States, a critical component of a 
quick and successful disease response. Our goal is to create a 
flexible framework that embraces the strengths of states, of 
tribal nations, and producers, and allows them to find the 
animal disease traceability approaches that work best for them. 
We are moving forward with a very cooperative effort, turning 
this framework into a flexible, coordinated approach to 
traceability. We anticipate publishing a proposed rule in 
spring of 2011.
    To position APHIS to better meet the animal health needs of 
the 21st century, we have developed a strategic vision for our 
Veterinary Services program by the year 2015, known as VS 2015. 
APHIS announced the strategic vision to the states and industry 
in 2008, and is now developing the plan to achieve this vision. 
We anticipate a comprehensive yet focused strategic plan to 
guide our efforts by the end of calendar year 2010.
    Agricultural Marketing Service: Four sections in Title XI 
of the 2008 Farm Bill contain provisions that fell under the 
jurisdiction of the Agricultural Marketing Service. More 
details are included in my written testimony, but I would like 
to provide just a few comments.
    USDA was directed to implement an enhanced system of 
electronic reporting and to carry out a market news education 
program. AMS has been developing a proof-of-concept ``Cattle 
Dashboard'' that will add an improved user interface, including 
tools for data visualization, to its primary system 
disseminating Livestock Mandatory Reporting information through 
the Web.
    I would like to provide the Subcommittee with a brief 
demonstration of what the new ``dashboard'' would look like. 
Mr. Chairman, I am pretty excited about this. Where is it?
    The Chairman. Yes, go ahead, proceed. There it is.
    Mr. Avalos. Okay.
    It allows us to see weekly volume and price information. 
Viewers can select four different views: head count, weighted 
average price, all purchase types, and for negotiated cash 
transactions only. The ticket display provides the latest daily 
negotiated cash market information. Users can customize the 
display information by region, date range, and other specific 
information. Charts display 3 months of historical information. 
Current information is compared with prior periods. Viewers can 
look at price and information specific to their part of the 
country. After selecting the region, you can determine a time 
period to view the data.
    This will be available on the AMS website tomorrow through 
our Market News Portal. In addition, AMS staff would be happy 
to provide a more detailed presentation of the Cattle Dashboard 
to this Subcommittee at a later date.
    The farm bill also required country of origin labeling for 
certain products. The final regulation was published on January 
15, 2009, in the Federal Register and became effective March 
16, 2009. AMS education and outreach programs assist industry 
in achieving compliance with the provisions and requirements of 
the agency's rules, and these efforts are ongoing.
    The livestock title also provided for reestablishing the 
National Sheep Industry Improvement Center to promote the 
strategic development activities and collaborative efforts to 
strengthen and enhance the production and marketing of sheep 
and goat products in the United States. AMS has drafted an 
interim rule, which we plan to publish very, very soon.
    Finally, I would like to share information with you on 
another very important issue that we are working on in part of 
USDA. As you may know, there has been an escalation of violence 
along the U.S.-Mexico border related to drug cartel activity. 
Due to the violence in northern Mexico, and based on advice 
from security experts in parts of the U.S. Government, USDA 
temporarily suspended livestock import activities in two ports 
along the U.S.-Mexico border in late March and another port in 
late June. The safety of employees is paramount.
    However, we also understand how important the services we 
provide are to the livestock community. In this regard, we have 
implemented short-term fixes, we have opened temporary 
inspection facilities on the U.S. side of the border, and we 
are diverting cattle to other ports. We are working with U.S. 
producers, affected state officials, and our Mexican 
counterparts as quickly as possible to identify long-term 
solutions that will meet the needs of both the United States 
and Mexico.
    In conclusion, thank you for the opportunity to describe 
our successes and our challenges in implementing Title XI of 
the farm bill. I look forward to working with Members of this 
Committee and providing assistance as we work towards 
developing the next farm bill.
    Thank you.
    [The prepared statement of Mr. Avalos follows:]

    Prepared Statement of Hon. Edward M. Avalos, Under Secretary for
  Marketing and Regulatory Programs, U.S. Department of Agriculture, 
                            Washington, D.C.
    Mr. Chairman, Ranking Member, and Members of the Subcommittee, 
thank you for the opportunity to appear here today to discuss the 
implementation of the livestock title of the Food, Conservation and 
Energy Act of 2008. This hearing provides us with a chance to review 
this critical title of the 2008 Farm Bill in advance of the 2012 Farm 
Bill. I look forward to working with Members of this Committee, and 
other Members of the House and Senate, as you work to develop future 
policies, programs, and initiatives.
    Let me start by acknowledging the hard work of the Members of this 
Committee and your staff. Having worked closely with my own staff 
across the country on a number of livestock programs over the past 10 
months since being sworn in as Under Secretary for Marketing and 
Regulatory Programs (MRP), I appreciate the hard work that went into 
crafting this important title in the legislation. You are all to be 
commended for the strong bipartisan effort that produced a number of 
very important provisions for our producers and others who rely on this 
nation's livestock industry.
    The three USDA agencies I oversee--the Agricultural Marketing 
Service (AMS), the Animal and Plant Health Inspection Service (APHIS), 
and the Grain Inspection, Packers and Stockyards Administration 
(GIPSA)--are the primary agencies with responsibility for implementing 
Title XI, the livestock title of the farm bill.
    Joining me today are AMS Administrator Rayne Pegg, APHIS 
Administrator Cindy Smith, and GIPSA Administrator Dudley Butler.
    I can assure the Subcommittee that one of Secretary Vilsack's top 
priorities is ensuring that the 2008 Farm Bill is implemented as 
quickly as possible. This Administration is committed to supporting 
rural America and the thousands of people across the country involved 
in farming, ranching, and related industries and endeavors.
    In MRP, we work towards this goal by providing oversight to protect 
producers from unfair competition and unfair business practices. We 
also protect the U.S. livestock sector from animal health threats and 
ensure the humane care and treatment of certain animals. In addition, 
we facilitate and expand the domestic and international marketing of 
U.S. livestock products by providing information and marketing tools.
     I am pleased to have the opportunity to describe what MRP has 
accomplished in implementing livestock provisions of the 2008 Farm Bill 
and am looking forward to working with you as you work towards its 
reauthorization in 2012.
Animal and Plant Health Inspection Service
    APHIS has worked to implement a number of programs in the farm bill 
that address specific animal disease threats that U.S. producers face, 
taking into account the evolving animal health landscape. I would like 
to briefly mention a couple of these accomplishments and then update 
you on two other key animal health initiatives at USDA.
    APHIS has drafted revisions to its 5 year Cattle Fever Tick 
National Strategic Plan and also developed a business plan for the 
program to include new and previously proposed initiatives. These 
include the evaluation of anti-tick vaccines and new tick control 
technologies, widespread use of efficient and enhanced tick control 
measures for deer that carry ticks, and the development of surveillance 
herd plans for any premises currently under quarantine due to the 
presence or exposure to fever ticks, among other things. While the 
revisions to the National Strategic Plan are still being finalized, 
APHIS has moved forward and funded a number of the new initiatives with 
increased appropriated funding of $2 million in Fiscal Year (FY) 2009 
and another $3 million in FY 2010, making important and innovative 
strides in addressing this disease threat.
    APHIS moved quickly to publish its final rule establishing a 
voluntary trichinae certification program for U.S. pork, as outlined in 
the 2008 Farm Bill. The final rule was published in fall 2008. To help 
jump start the program, APHIS paid for on-farm audits and waived the 
program user fee in FY 2009. In FY 2010, APHIS carried out outreach and 
promotion activities for the new program, and funded farms as they 
moved from the pilot program into the official program. However, 
despite Agency and industry efforts, demand for the program has been 
low because none of our trading partners currently recognize this 
program to be used for fresh pork export assurances with regard to 
Trichinella at this time. We recognize the importance of this issue, 
and will be working with industry to address this issue through the 
World Organization for Animal Health (OIE) once key data is obtained to 
support such an effort.
    I would also like to update you on our progress moving forward with 
our new, flexible framework for animal disease traceability in the 
United States--a critical component of quick and successful disease 
response. APHIS is actively partnering with states, Tribal Nations, and 
industry, holding state and Tribal fora and public meetings to discuss 
ways of improving animal disease traceability, sharing the approaches 
under discussion, and continuing the dialogue with stakeholders.
    As you know, last year USDA held 15 listening sessions across the 
country, and we heard from thousands of interested parties. We then 
incorporated that feedback to create a flexible framework that embraces 
the strengths of states, Tribal Nations, and producers, and allows them 
to find the animal disease traceability approaches that work best for 
them. In short, the new traceability approach:

   Will give us the ability to respond to animal disease 
        outbreaks without overly burdening producers;

   Will apply only to animals moving interstate; and

   Will complement and intersect with existing disease 
        programs, incorporating identification requirements for those 
        programs, and encouraging the use of lower-cost technology.

    The new traceability approach will be led and administered by the 
states and tribes, with Federal support focused entirely on disease 
traceability. This will allow states, producers, and industry to work 
together to find identification solutions that meet their needs. The 
new approach will also incorporate strengthening protections against 
the entry and spread of disease, more strictly enforcing existing 
disease control regulations, and finding ways to provide more resources 
to the states to combat diseases when they emerge.
    We are moving forward with a very collaborative effort to turning 
this framework into a flexible, coordinated approach to traceability. 
Our ultimate goal will be to publish in the Code of Federal Regulations 
a new animal disease traceability section in straightforward, 
understandable language, allowing for full transparency and public 
comment. We anticipate publishing a proposed rule in spring 2011.
    It is important that you know our commitment to developing a plan 
that most effectively protects the health of animals and allows for a 
rapid response when animal disease events take place. While APHIS has a 
long history of working effectively with livestock industries, state 
regulatory agencies, and accredited veterinarians to control and 
eradicate livestock diseases, the animal health landscape is changing, 
and as a result, we must adapt to that change. Numerous factors are 
affecting this change. These include, but are not limited to:

   Evolving needs of animal agriculture industry, in part 
        because of changes in industry structure and the increase in 
        the number of large-scale farm operations;

   Advances in technology such as diagnostics, vaccines, and 
        novel treatment technologies;

   Emerging diseases, including an increasing number of them 
        with zoonotic potential; and,

   Increasing global travel and trade, and the increasingly 
        complex issues presented by U.S. involvement in global 
        agricultural business and trade--with regard to imports as well 
        as exports.

    I mention just a few examples of the changing animal health 
landscape, but they all present opportunities for APHIS to take a step 
back, evaluate our mission, and determine how we must adapt to continue 
to meet animal health challenges.
    To position APHIS to better meet the animal health needs of the 
21st century, we have developed a strategic vision for our Veterinary 
Services program by the year 2015, known as VS 2015. We identified 
three key changes as essential for the VS organization:

   Greater emphasis on disease prevention, preparedness, 
        detection, and early response activities;

   An expanded veterinary health mission that is responsive not 
        only to issues that impact animal agriculture, but also public 
        health concerns connected to animal populations of any kind; 
        and

   An expanded portfolio of interstate and international 
        certification services that meet the increasing expectations of 
        global customers.

    APHIS announced this strategic vision to the states and industry in 
2008 and is now developing a strategic plan to achieve this vision. We 
anticipate that our four working groups will develop a comprehensive, 
yet focused strategic plan to guide our efforts by the end of calendar 
year 2010. While the strategic plan is being developed, APHIS has 
already begun revising several animal health programs to align them 
with the VS 2015 initiative, including our bovine tuberculosis, 
brucellosis, and animal traceability programs.
    APHIS' ultimate goal with the VS 2015 program is to promote the 
continuing health of the nation's animal agriculture and to maximize 
VS' effectiveness in meeting emerging animal health challenges. As we 
further develop our strategic plan and identify any needed changes to 
our authorities, I look forward to having additional dialogue with the 
Committee as we move forward with these initiatives.
    As you know, Secretary Vilsack announced in May that USDA is 
strengthening its enforcement of the Animal Welfare Act (AWA). The 
Administration is committed to fully enforcing the AWA and ensuring the 
humane treatment of regulated animals. This is consistent with several 
provisions from the 2008 Farm Bill, which APHIS has moved quickly to 
carry out. For example, APHIS is working closely with our counterparts 
at the Centers for Disease Control and Prevention, U.S. Customs and 
Border Protection, and the Department of Commerce to draft regulations 
to implement the provision on the importation of dogs. We anticipate 
publication of a proposed rule this fall to prohibit the air transport 
of dogs under 6 months of age and outline exemptions provided for in 
the farm bill.
    I also thank the Committee for its effort to increase the maximum 
civil penalty for violations of the AWA to $10,000, providing APHIS 
with a stronger tool to enforce the Act.
Agricultural Marketing Service
    Four sections in Title XI of the 2008 Farm Bill contained 
provisions that fell under the jurisdiction of the Agricultural 
Marketing Service.
    A number of amendments were made to the Livestock Mandatory 
Reporting Act, including the requirement that AMS undertake a study on 
the effects of requiring packers to report information on wholesale 
pork cuts. AMS entered into a cooperative agreement with a team of 
university researchers identified by the Livestock Marketing 
Information Center to complete the study of pork reporting. The final 
report was transmitted to the House and Senate Agriculture Committees 
on March 22, 2010.
    USDA was also directed to implement an enhanced system of 
electronic reporting and to carry out a market news education program. 
AMS has been developing a proof-of-concept ``Cattle Dashboard'' that 
will add an improved user interface, including tools for data 
visualization, to its primary system for disseminating Livestock 
Mandatory Reporting information through the Web.
    AMS is pleased to report that the ``dashboard'' feature will be 
added to the AMS website this week.
    I would like to provide the Subcommittee with a brief demonstration 
of what the new ``dashboard'' will look like, see Attachment 1.
    The farm bill also required country of origin labeling (COOL) for 
muscle cuts and ground beef (including veal), pork, lamb, goat, and 
chicken; wild and farm-raised fish and shellfish; fresh and frozen 
fruits and vegetables; peanuts, pecans, macadamia nuts, and ginseng 
sold by designated retailers. The final regulation was published in the 
January 15, 2009 Federal Register and became effective on March 16, 
2009. AMS' education and outreach program assists industry in achieving 
compliance with the provisions and requirements of the agencies' rules.
    Approximately 37,000 retail establishments are covered by COOL. 
USDA trained employees of state agencies who are cooperating with USDA 
by carrying out compliance activities through conducting in-store 
retail reviews.
    In calendar year 2009, COOL reviews were performed in approximately 
5,000 retail stores where approximately 1.16 million item types (for 
example, U.S. Choice Strip Steak, company branded strip steak, bin of 
tomatoes, package of carrots, Tilapia fillet, etc.) were evaluated. Out 
of the 1.16 million item types reviewed at retail from June 2009 
through December 2009, greater than 96% were properly labeled. USDA 
plans to review 12,741 covered retailers by the end of the first full 
year of enforcement, which ends September 30, 2010.
    The Livestock Title also provided for the re-establishment of the 
National Sheep Industry Improvement Center to promote the strategic 
development activities and collaborative efforts that strengthen and 
enhance the production and marketing of sheep or goat products in the 
United States. The authorization provided $1 million in mandatory 
spending for Fiscal Year 2008 to remain available until expended. AMS 
is drafting an Interim Rule which it plans to publish very soon.
    Also included in this Title is the establishment of an inspection 
program for domestic and imported catfish as well as the implementation 
a voluntary fee based grading program for catfish. AMS is responsible 
for establishing the grading system. AMS has conducted several meetings 
with representatives of the catfish industry, the National Marine 
Fisheries Service officials, and Food Safety and Inspection Service 
(FSIS) officials to discuss grading and inspection services. AMS is in 
the process of drafting proposed standards for this grading system, to 
be published in the Federal Register.
Grain Inspection, Packers, and Stockyards Administration
    Congress took action in the 2008 Farm Bill to address fairness in 
certain aspects of the livestock and poultry industry, particularly in 
regards to contracts and enforcement of the Packers and Stockyards 
(P&S) Act, under the jurisdiction of GIPSA.
    On June 22, 2010, GIPSA published a proposed rule in the Federal 
Register that implements Sections 11005 and 11006 of the farm bill, 
which directs USDA to carry out certain rulemaking to improve fairness 
in the marketing of livestock and poultry, and addresses concerns 
raised by increasingly consolidated markets. The proposed rule seeks to 
provide significant new protections for producers against unfair, 
fraudulent, discriminatory, and retaliatory practices.
    The public comment period closes on August 23, 2010. We are 
currently receiving feedback from individuals and groups asking that we 
either maintain the current comment deadline, or extend it. We take all 
of these views very seriously and USDA plans to make a decision as soon 
as possible on whether to extend the comment period. GIPSA strongly 
encourages all interested parties to comment on the proposed rule. All 
viewpoints are needed to ensure we end up with a strong and workable 
rule.
    On January 4, 2010, in a separate rulemaking action, a GIPSA final 
rule on poultry contracting became effective. GIPSA published this 
final rule to address certain standards of fairness in contracting in 
the poultry industry. The rule sets out the information that live 
poultry dealers must furnish poultry growers to improve transparency 
and requires adequate notice of when a contract will be terminated.
    To explore competition issues affecting the agriculture and 
appropriate antitrust and regulatory enforcement, USDA and the 
Department of Justice (DOJ) are holding joint Workshops on Competition 
in Agriculture. These first-ever collaborative workshops afford 
farmers, ranchers, consumers groups, agribusinesses, and the Federal 
Government a forum to openly discuss legal and economic issues 
associated with competition in the agriculture industry. These 
workshops are aimed at creating a dialogue on these complex issues and 
a better understanding of what issues are most important to producers.
    The first workshop was held on March 12, 2010, in Ankeny, Iowa, and 
focused on issues facing row crop and hog farmers. The May 21, 2010, 
workshop in Normal, Alabama, addressed contracts in the poultry 
industry, concentration, and buyer power. On June 25, 2010, we held a 
workshop in Madison, Wisconsin, that looked at concentration, 
marketplace transparency, and vertical integration in the dairy 
industry. Subsequent sessions will be held on August 27, 2010, in Fort 
Collins, Colorado, with a focus on beef, hog and other animal sectors, 
market concentration, and enforcement of the Packers and Stockyards 
Act; and, December 8, 2010, in Washington, D.C., with a focus on the 
discrepancies between the prices received by farmers and the prices 
paid by consumers.
    Finally, I want to share information with you on one other 
important issue we are working on in our part of USDA. As you may know, 
there has been an escalation in violence along the U.S.-Mexico border 
related to drug cartel activity. Due to the violence in northern Mexico 
and based on advice from security experts in other parts of the U.S. 
Government, USDA temporarily suspended livestock import activities at 
two ports along the U.S.-Mexico border in late March, and another port 
in late June. The safety of our employees is paramount. However, we 
also understand how important the services we provide are to the 
livestock community. In this regard, we have implemented short-term 
fixes--opening temporary inspection facilities on the U.S. side of the 
border and diverting cattle to other ports--and we are working with 
U.S. producers, affected state officials, and our Mexican counterparts 
as quickly as possible to identify long-term solutions that will meet 
the needs of both the United States and Mexico.
    In conclusion, thank you for the opportunity to describe our 
successes and challenges in implementing Title XI of the farm bill, as 
well as some of the related initiatives being undertaken by USDA. I 
look forward to working with Members of this Committee and providing 
assistance as you work towards developing the next farm bill. The 
Administrators and I will be happy to answer any questions that you may 
have.
                              Attachment 1

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

     Thank you, Under Secretary.Is there anyone else before we get some 
questions here?
    Mr. Avalos. No.
    The Chairman. They are just there to add to it? All right. Thank 
you very much.
    Let me start with a question, and then we will go around the horn 
here, with our Chairman as well. But let's start with the GIPSA deal.
    The title of the proposed rule that was published on June 22, 2010, 
states that it is the implementation of regulations required under 
Title XI of the 2008 Farm Bill. But, in fact, the very language of this 
proposed rule goes far beyond the directives of the 2008 Farm Bill and, 
as a matter of fact, includes a number of provisions that were 
discussed and voted down and not adopted as part of the farm bill.
    Now, why did GIPSA choose to go beyond what Congress directed and 
intended? And what is GIPSA's authority for going around Congress's 
intent, Mr. Under Secretary?
    Mr. Avalos. Mr. Chairman, the proposed rule seeks to improve 
fairness and transparency in marketing of livestock and poultry. GIPSA 
does have the authority. What is driving the need to use this authority 
under the Packers and Stockyard Act is our concern about the loss of 
farmers, and the depopulation of rural America.
    If we are serious, Mr. Chairman, about keeping farmers in business, 
if we are serious about making sure that young farmers can get into the 
business and stay in business, then we really need to get serious about 
creating a market that is transparent and fair.
    The Chairman. But, Mr. Under Secretary, isn't it the function of 
the Congress of the United States to legislate, and then isn't it the 
function of the Executive Branch to carry out the intent and the 
meaning of the legislation and not rewrite the farm bill, not violate 
what Congress has already disapproved and voted down and you all put 
back in? That, to me, is a clear violation.
    Mr. Avalos. Mr. Chairman, under the Packers and Stockyards Act, we 
do have the authority to implement the changes that we did. But I just 
wanted to say that, for years, for years, we have worked under the 
status quo. Unfortunately, one of the results has been the loss of 
thousands of farmers throughout rural America, particularly livestock 
producers.
    Secretary Vilsack has traveled all over rural America, and he has 
heard a common theme: People are concerned the market is not treating 
them fairly. People are concerned about the continued increase in the 
consolidated market. People are concerned----
    The Chairman. Mr. Under Secretary, I don't want to hog the time 
here, but I do want to get to the bone of contention that we have here. 
And it is clear to me that we are going to have to backtrack on this if 
we are going to maintain the value of the legislative process here. 
That is what I am getting at.
    And the other point is that there have been great concerns raised 
for this from the livestock community--the National Cattlemen's Beef 
Association, the National Pork Producers Council, the National Chicken 
Council, the National Turkey Federation, the entire industry--that you 
have made this rule, have felt not only that it violates the farm 
bill's intent, what Congress laid in, but there was not any input, not 
adequate input for this.
    And the other point is that, clearly, the least of which should 
come out of this is that this comment period must be extended. In the 
view of what we are trying to do in the final analysis, it is to make 
it work for the producers, for the people out there that have to carry 
this on.
    So could you just briefly answer on the input? Why wasn't there 
input from the very producers that have to execute this?
    Mr. Avalos. Mr. Chairman, we know that the proposed rule has issues 
that are very complex. That is why we started out with a proposed rule. 
And we are encouraging feedback from producers, from industry groups, 
from all stakeholders, to ensure that we have factored in all possible 
aspects when drafting the final rule.
    Mr. Chairman, this is really about rural America. This is really 
about keeping the farmer on the farm and stimulating rural economies. 
Again, I want to emphasize that there is a proposed rule and there is a 
comment period, and we really want comments and input.
    Now, I also want to address the comment period. It is customary for 
a 60 day period. And I want to emphasize that we have received letters 
requesting an extension; we have received letters requesting that we 
not grant an extension. And we take these requests very, very 
seriously.
    The Chairman. May I ask you this, please? Where are the letters 
coming from requesting the extension, and where are the letters coming 
from that are not wanting the extension? You don't have to name the 
names of the person, but I just need to know what sector, where they 
are coming from. Are they----
    Mr. Avalos. Mr. Chairman, I know they are coming from trade 
organizations from all over the country. I am going to ask 
Administrator Dudley Butler to tell you. I don't know all the 
organizations, but maybe he can help answer your question.
    Mr. Butler. Mr. Chairman, we have letters from industry 
organizations such as AMI and NCBA, the National Turkey Federation, 
wishing that the comment period be extended. We have gotten letters 
from numerous producers, and numerous producer groups--I received a 
letter just yesterday that was signed by 57 different producer groups 
all over the country--that do not want us to extend it.
    So we take these comments very seriously. We are looking at the 
situation and trying to make a determination of what to do.
    The Chairman. I see my time is well over. I may come back to that, 
but I don't want to hog the show as much. I am going to turn it to you, 
Ranking Member, and then we will go to the Chairman.
    Mr. Neugebauer. Thank you, Mr. Chairman.
    I want to go back to--you said you are receiving some letters from 
producer groups. But there are also producer groups, aren't there, Mr. 
Butler, that are requesting that the extension be made longer, is that 
correct?
    Mr. Butler. That is correct. NCBA, in particular, is a producer 
group that asked that it be extended. NPPC is a producer group that 
asked that it be extended.
    Mr. Neugebauer. So, it is fair to say that people on both sides of 
the equation have sent you letters requesting that the time period be 
extended. Would you say that is a fair assessment?
    Mr. Butler. I would say that the fair assessment would be that 
there were producers on both sides that have asked both ways. And so we 
find ourselves trying to deliberate and make a determination of what a 
fair comment period would be for all parties.
    Mr. Neugebauer. Now, what I found was interesting was that the 
comment period that you proposed closes 4 days before the final 
workshop. So I guess the workshops were for show, or were they to 
gather information?
    Mr. Butler. No, sir, they were not for show. The workshops are a 
collaboration between DOJ and USDA, and they are set up to try to get 
more information about the concentrated marketplace and consolidation. 
They were set up to be separate and distinct from the writing of the 
GIPSA rule.
    Mr. Neugebauer. Now, would you say that the GIPSA rules are trying 
to address what many of these workshops are discussing?
    Mr. Butler. I would say there would be some areas that would come 
up within the workshops, and have come up within the workshops, that 
are addressed in the GIPSA rule, yes.
    Mr. Neugebauer. Well, I am from west Texas and maybe I am a little 
bit slow here. But when you go out and ask for somebody's opinion, you 
don't go ahead and give them the answer. I think that is kind of what 
it looks like here. We went down the road to have these workshops to 
get information; then meanwhile, while we were doing all that, we were 
just writing this rule and we published this rule. And now the rule has 
come out and the comment period on it closes 4 days before the final 
workshops.
    I think this is one of the things that the American people are 
getting a little tired of, is they don't think that the government is 
listening to them. And what we do--we have all these ``big government'' 
solutions where the government is going to come in here and save 
everybody.
    Now, I have been in the free market system, and I believe in a very 
open and transparent market system here. But when I look at these 
rules, when you say we are trying to protect rural America, these very 
rules, in many ways, if some of the things happen, would be more 
detrimental to some of the producers than helpful.
    And so, one of the things that I think is very reasonable--and 
Chairman Scott made a very good point--is that you all have gone way 
beyond the legislative intent. In fact, we had a lot of discussions 
about many of these issues. But I would find it extremely troubling if 
the Administration doesn't extend the time period here on something as 
important to producers in the whole animal agriculture as these rules. 
These aren't just little tweaks here; these are far-reaching 
regulations here that have some fairly major ramifications.
    And so I hope--and, certainly, a number of us are going to be 
watching very closely--that the Administration takes this seriously. 
Because we are getting contacted by both groups, and they are thinking 
this process is being fast-tracked, and they have a lot of questions 
about whether this is going to be effective or not.
    And, Mr. Under Secretary, I want to say this: Rural America isn't 
shrinking because of marketing activities. Rural America is shrinking 
for a number of reasons, and one is productivity. My wife was raised on 
a cotton farm in west Texas, and back then you could make a living off 
a quarter section. Today, to make a living off of growing cotton in 
this country, you have to farm 3,000 or 5,000 acres.
    All through every area of agriculture, the productivity and the 
scale that operators have to get to to be profitable, and to be 
competitive, have increased. And it is unfortunate that that has caused 
a shrinking of our rural population. But to come in and say that the 
reason that rural America is shrinking is because of the marketing 
activities is a real stretch and is really not, quite honestly, the 
truth.
    So I will close with saying I am deeply concerned with these rules, 
but I am more deeply concerned with the process that is unfolding 
before American agriculture. I think they are concerned, as well.
    Mr. Avalos. Mr. Chairman, Congressman, can I respond?
    The Chairman. Yes, please.
    Mr. Avalos. Okay.
    On the extension, I also need to point out that there are a lot of 
groups even in this room--there are a lot of cowboys in the room that 
don't want an extension. There are also a lot of cowboys in the room 
that do want the extension. And we recognize that, and we take that 
real serious. And we are going to make a decision very soon.
    Now, on the workshops, it is very important to clarify that the 
GIPSA rule is separate from the workshops. First of all, there are 
still two workshops left, and it would be premature to prejudge what 
the outcomes are going to be. We should have the benefit of receiving 
all of the information from the workshops before coming up with any 
kind of a conclusion, or determining what the outcome is, or determine 
if there is a problem or not a problem.
    So I just want to emphasize, Congressman, they are separate.
    Mr. Neugebauer. And I understand that. And I would say to the 
groups that are on both sides of that that extending the comment 
period--it may be there is overwhelming support for this. I don't know. 
I don't think so. I think there is going to be support for pieces of 
it.
    Giving more time for people to digest this, to be able to think 
through this and to have some dialogue with you and trying to get a 
better understanding of why and where you are coming from, for whatever 
side you are on, giving more time for input and study is in everybody's 
benefit, no matter what side of this issue you are going to be on.
    Mr. Avalos. Congressman, I acknowledge your input.
    The Chairman. And that is especially so because these are the most 
significant changes in nearly 100 years.
    Mr. Avalos. Yes, sir, Mr. Chairman.
    The Chairman. With that, I am going to turn to the gentleman from 
Iowa, Mr. Boswell, for his comments.
    Mr. Boswell. Well, thank you, Mr. Chairman.
    It has been an interesting discussion so far. And I share some of 
your concerns, but I also should say, having been in your position when 
we did the farm bill, that I believe it is fair to say to our panel 
that, when we look back at the Packers and Stockyards Act, that you 
have operated within your authority. I think I should say that.
    I have a deep concern. I make no bones about it, I am the producer 
guy, and I am going to be that way. And I have just been thinking over 
this discussion going on. On the road from the village out to the farm 
that I still operate, a cow-calf operation--and it is not a long trail, 
it is about 3 miles--there are seven less farmsteads than what there 
were when I was a young man on that same trip. That kinds of verifies 
what you are saying about the loss of farms. Now, things change, and we 
know that, and that is going to continue to happen.
    When this question about animal antibiotics came up in the Rules 
Committee--and that is all part of the record--I went over and visited 
about that. I managed to become a witness on that panel about the 
Danish question and all that business, and I won't take time to discuss 
that here. But it has been an interesting road since then, including 
some of us going to Denmark, and then lots and lots of meetings since 
then.
    Several months ago, I had the occasion with Dr. Apley from Kansas 
State University, formerly at Iowa State, a veterinarian, scientist, 
academian, practitioner, and all around type of guy. And he was out 
here for the cattlemen to do something, and we got word, and we got a 
chance to have him go and meet with the Chairwoman of the Rules 
Committee, which she was very gracious to do. And I compliment her for 
that.
    And when we got over there the next day, why, the witnesses that 
were at her hearing that were pro what was going on in Denmark were 
also there. It was a kind of an interesting little discussion. But it 
turned out very positive, in this sense: that these scientists, if you 
will, as they got into discussion, and the conclusion Dr. Apley made 
said--and something that I feel very strongly about--there is no 
producer that I know of out there that wants to put an afflicted animal 
of any kind on the market. We don't want to do that. It is wrong. It 
would be costly, too. Just don't do that.
    And I could spend the rest of my time telling you about my own 
experience when I was in the military for 20+ years and came back and 
restarted, if you will. So a lot of effort goes on. And you look at how 
medication goes through the process of 8 or 10 years and the cost and 
everything. So this needs to be really looked at.
    And in that discussion with these, sort of, opposing scientists, if 
you will, the conclusion was that, if true--T-R-U-E--if true science is 
applied, we all want that. I think that is pretty simple, 
straightforward, the way we all feel. That is what we want. And with 
anything less than that, then let's walk very, very slowly and not 
create a market problem or an implied problem or whatever.
    I have talked to several physicians, one not too long ago, and 
probably some of the rest of you, too. And their concern for the 
overuse of antibiotics and the implication of that to humans and pets, 
there is reason to believe it far exceeds what we are doing for animals 
we raise for the food resource.
    So, this is something that needs to go on for a while. We need to 
look at it carefully and apply true science. I think that is what you 
are trying to do. So it is difficult. It is a hard row.
    Now, with that discussion the Chairman and the Ranking Member had 
already, it indicates that to me, and I understand that. But, we need 
to go down that road. Maybe a compromise on the rule-making, maybe you 
could give it an extension of some amount. I don't know. That is a 
decision that you will have to make. But that might be a possibility, 
to maybe extend it for a few days. I don't know.
    But I don't want us to be discouraged that we have this to do, and 
it has been laying out there for a while. And when we go back to some 
of the other issues--or maybe we will have another round, if I can 
stay--we would like to talk about some of the things we went through on 
the mandatory arbitration. Some of those things, if you remember that, 
some of you were in on that, and it was tough. I think that we tried 
very hard for a number of producers to represent their situation and 
make progress.
    So, with that, I will stop and yield back. And, again, Mr. 
Chairman, I appreciate having this hearing. And if we get everything 
out, keep it out in the daylight so we can see what is going on. Thank 
you. I yield back.
    Mr. Avalos. Congressman, may I respond a little bit on your 
remarks?
    The Chairman. Yes, you may.
    Mr. Avalos. Congressman, I appreciate your comments. I really do.
    I grew up on a small farm in southern New Mexico, and I have worked 
with livestock producers all my life. In fact, I was just down in south 
Texas, in Laredo and Eagle Pass, working with livestock producers all 
weekend.
    I understand the importance of antibiotics in the production 
program. And, Congressman, I sincerely feel that most livestock 
producers in this country are really good stewards, and they want to do 
the right thing. They want to use antibiotics only when it is 
absolutely necessary. And it costs money--so they are not going to use 
them just to use them, I know that.
    Unfortunately, overall, antibiotic use does increase the risk of 
resistance, regardless of how careful we are. And this applies to 
animals and humans.
    At USDA, we are very sensitive and very committed to revitalizing 
rural communities and keeping farmers in business. We don't want to 
create another hardship, and we don't want to create another burden on 
producers. We want them to be around in the future, and we want 
antibiotics to be around in the future for them to use.
    That is why we are committed, Congressman, to using science-based 
decisions.
    Mr. Boswell. If the Secretary would yield just for 30 seconds here, 
Mr. Chairman?
    The Chairman. Go right ahead.
    Mr. Boswell. In my statement of fairness in what I have just said, 
there was an article that was published in the Des Moines Register by 
Mr. Brasher that pretty much says what you said, Mr. Secretary.
    You know, in fairness, I would like to ask that it be put into the 
record, Mr. Chairman. I don't necessarily agree with everything that is 
said here, but, again, I propose what I think you are saying, Mr. 
Secretary. Let's keep daylight on this, keep it out in the open, and so 
on.
    So, with your permission, I would like to submit this for the 
record.
    The Chairman. That is done.
    [The document referred to is located on p. 59.]
    The Chairman. Now the gentleman from Virginia, Mr. Goodlatte.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    Mr. Avalos, you indicated that you had heard from producers on both 
sides of this issue about the extension. Have you heard from processors 
or packers on both sides of the issue?
    Mr. Avalos. Congressman, I will have to defer to my Administrator, 
because I don't have an answer for you.
    Mr. Butler. Yes, sir. As I said before, Congressman, we received 
letters also from processors, packers, live poultry dealers, and 
organizations that they are members of.
    Mr. Goodlatte. That support this?
    Mr. Butler. That supports the--they support an extension. The other 
groups did not----
    Mr. Goodlatte. Yes, the point being that Mr. Avalos said earlier 
that there were, as he said, ``cowboys in the room'' who wanted an 
extension and those who didn't.
    My question is, well, this doesn't just apply to them, does it? It 
also it applies to the folks who process what they produce, the 
slaughter facilities. They market the product. They have tens of 
thousands of employees who are dependent upon their jobs.
    These processors and packers, they will make decisions based upon 
the implementation of this, if indeed it does get that far, that will 
affect the jobs of their employees, that will affect these producers 
that Mr. Avalos is concerned about having more of in rural America--and 
we certainly all support that.
    But producers and processors can purchase these products from 
anywhere in the world. And if you make the rules so that it doesn't 
make sense for them to do it here, then you are going to harm those 
producers, you are not going to help them.
    So my question is, what kind of input did you solicit from them 
before you wrote this rule? Either one of you would be fine.
    Mr. Avalos. I am going to go ahead and let Mr. Butler continue.
    Mr. Butler. There were many different meetings in the past before I 
got here. And the Secretary has also gone around on a rural tour----
    Mr. Goodlatte. When did you get involved, Mr. Butler?
    Mr. Butler. I arrived on May the 10th----
    Mr. Goodlatte. May the 10th----
    Mr. Butler.--of 2009.
    Mr. Goodlatte.--of 2009.
    Mr. Butler. Right.
    Mr. Goodlatte. So you have been involved with it for over a year.
    Mr. Butler. Correct.
    Mr. Goodlatte. What kind of outreach did you make to the processing 
industry and the packers to solicit their input and to work with them, 
if you will, in writing this rule?
    Mr. Butler. I had an open-door policy when I got here. I can't 
think of too many packers, packer organizations, or live poultry dealer 
organizations that I have not met with in dealing with this rule. I 
have tried to meet with everybody. I didn't just try to meet with 
producers.
    Because this is an industry rule, this rule is being prepared for 
clarity. It is going to deal with the marketing of livestock and 
poultry. And we are designing this rule to where the marketplace will 
be fair, transparent, but it also will not have fraudulent, deceptive, 
or retaliatory practice as a part of the marketplace.
    So we are looking at it from a broad spectrum. That is the reason 
we have a proposed rule----
    Mr. Goodlatte. Mr. Butler, if you are looking at it from a broad 
perspective, then it would seem to me that if you have division amongst 
the producers as to whether or not we should have more time to look at 
this, and you have unanimity on the part of the processors that you 
need more time to look at this, it would seem to me that you need more 
time to look at this.
    Mr. Butler. Well, I think that is what we have just discussed. And 
Under Secretary----
    Mr. Goodlatte. When will you make that decision?
    Mr. Avalos. Congressman, you are right in your comments. It is not 
only about the cowboys, it is not only about the hog producers, it is 
not only about the poultry growers. It is about the packer, the 
processor, even the wholesaler and the retailer, and even the consumer. 
I understand that.
    To answer your question on when we are going to make a decision 
whether or not to extend the comment period, I can't tell you when, but 
I know it is going to be as soon as possible.
    Mr. Goodlatte. All right.
    You know, both the current Chairman of the Committee, Mr. Scott, 
and the previous Chairman of the Committee, Mr. Boswell, acknowledged 
that this was a pretty heated issue in this Committee when we wrote the 
farm bill over 2 years ago. Now, a lot of the things that you have 
addressed were rejected by the Committee, by the Senate, and 
collectively by, ultimately, the entire Congress.
    Why did you ignore that, whether or not you have the authority--and 
I know the lawyers will fight that out. I know there are some circuit 
court cases that some have claimed you have violated in these proposed 
rules. So I am sure that this is going to be a field day for the 
lawyers. Whether they are in rural America or urban America, they are 
going to get a lot of employment out of this.
    But I want to know why, when the Congress spent a lot of time on 
this issue, you ignored what we resolved and what we asked to you do 
and went light-years beyond that, in terms of what you wrote here?
    I know what you want to do, and I know what you told me were your 
concerns. But why did you simply ignore the work of this Committee in 
doing so? I mean, doesn't that invite the kind of confrontation that we 
would like to avoid here?
    We want to make sure that we have good, transparent rules that work 
for our producers and our processors. But the fact of the matter is, 
that is why we have elected officials. That is why we have debates 
within the Congress. That is why we have these hard-fought discussions 
amongst the people who are actually elected to make these decisions. 
And then you turn around and you completely ignore those decisions and 
come forward with something that is to the contrary.
    I mean, the Congress is faced with the problem of, if we think this 
process is unfair, and if we think this process is contrary to what the 
elected representatives of the people ask us to do, we are faced with, 
what, cutting off the funds for the implementation of that in the 
future? That is hardly a desirable way to go here.
    Did you take all of that into consideration before you went ahead 
and moved in the direction you did?
    Mr. Avalos. Congressman, the proposed rule--and I emphasize, is a 
proposed rule--the proposed rule is a result of the Secretary traveling 
all over the country, traveling all over rural America, and hearing 
from producers, hearing from industry groups all over the country.
    Mr. Goodlatte. This Committee is composed of nearly 50 Members of 
Congress from all over the country. We don't have to travel to hear 
from our constituents. We are there. We hear from them all the time. 
And I know, I hear from some constituents who are in favor of what you 
are doing; I hear from some who are opposed to what you are doing, both 
producers on one side. I haven't heard from any processors that are in 
favor of what you are doing.
    But be that as it may, we are the elected representatives of the 
people. We made a decision about how far we thought you should go based 
upon what we put in the last farm bill. And now you and apparently the 
Secretary have ignored that, and we want to know why. And that is not a 
partisan why; that is obviously a bipartisan why.
    Mr. Avalos. Congressman, again, we are not trying to ignore the 
Committee. We are not trying to ignore the voices of the Committee. By 
the same token, we are not wanting to ignore the voices of producers 
and stakeholders out in the countryside.
    Mr. Goodlatte. Did they elect you to make those decisions?
    Mr. Avalos. No, sir, they did not.
    Mr. Goodlatte. Mr. Chairman, my time has expired.
    And, Mr. Avalos, I think you would be well-advised to give more 
time to this process.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much, Mr. Goodlatte.
    Now we will turn to the gentleman from California, Mr. Costa.
    Mr. Costa. Thank you very much, Mr. Chairman. I want to thank you 
for holding this hearing. I think it is very important.
    And I would like to echo the statements of some of my colleagues on 
this proposed rule as it affects both beef processors and poultry 
processors, as well as the producers that I represent in the San 
Joaquin Valley of California.
    And, first, as it relates to the proposed rule, let me weigh in. I 
would strongly suggest that you provide the extension. And I will make 
those views known to this Administration. Because I would suggest to 
you that if you don't, you are opening a can of worms, and you are 
creating a series of conditions which this Administration will wish 
they had not stepped in.
    Let me also suggest to you that I think it is very clear, after 
having been a part of the 2008 Farm Bill, and the discussions that my 
colleagues and I just went over, that a host of elements in this 
proposed rule were rejected both in the form of amendments in the 
Senate and here in the House. So all I can deduce from looking at this 
proposed rule is that you are attempting to circumvent the will of 
those duly elected officials both in the House and the Senate when we 
put the 2008 Farm Bill together. These issues are not new, they were 
discussed during the 2008 Farm Bill.
    Mr. Chairman, I would like to submit for the record a letter 
addressed to Mr. Butler and relates to a conference call that he had 
last week from Ms. Rosemary Mucklow, Director Emeritus of the National 
Meat Association. She, like many of my constituents, have made repeated 
requests to GIPSA to provide the public a list of comments and concerns 
that have been referenced as the basis for a ban on packer-to-packer 
sales. Mr. Chairman, without objection?
    The Chairman. Without objection.
    [The document referred to is located on p. 59.]
    Mr. Costa. Thank you. Mr. Butler, is GIPSA planning to provide 
documentation to the Committee, and our constituents, as to the request 
that was made last week in your conference call?
    Mr. Butler. Yes, sir. I can provide that.
    Mr. Costa. Well, we would like it. The Committee, the Subcommittee 
would like it, I would like it, and certainly the request that was made 
to you in written form would like to be honored. Mr. Butler, I assume 
because this is your area, but Mr. Avalos, obviously, if you would like 
to respond, or Ms. Pegg, please weigh in.
    If the packer-to-packer sales creates concerns about market price 
manipulation, doesn't GIPSA already have the tools to investigate and 
prosecute such manipulation?
    Mr. Avalos, do you wish to respond? Do you have the tools or not, 
already?
    Mr. Avalos. I a going to go ahead and defer to----
    Mr. Costa. Mr. Butler, do you have the tools or not, already? My 
time is going. You dealt with this in a previous life a lot, so you 
have a view, a point of view, certainly, that would suggest whether or 
not they have the tools or not.
    Mr. Butler. If I might, Congressman, if you are speaking of section 
202(a) or (b) there are, generally, tools to bring certain action----
    Mr. Costa. Let's go to the next question. In the last several 
years, how many investigations has GIPSA conducted in price 
manipulations through packer-to-packer sales since you have been here 
since May 9th of last year, 2009? And what have the investigations 
produced on those packer-to-packer sales?
    Mr. Butler. I would have to get you that information, Congressman. 
I don't have it off the top of my head.
    Mr. Costa. You know, you are proposing a rule on this, and it has 
to be based upon a series of facts and investigations. It would seem to 
me, especially since you are taking on an added effort that was 
rejected in the form of amendments when this was heard in 2008, so I 
would expect, and everybody else would expect, that you provide that 
information on the investigations and the totality.
    Mr. Avalos, why is the ban on packer-to-packer sales necessary in 
your view?
    Mr. Avalos. First of all, Congressman, the USDA does have the 
authority and responsibility to prevent practices that could harm the 
market.
    Mr. Costa. No, I understand that. But you are assuming that every 
packer-to-packer sale is fraught with fraud?
    Mr. Avalos. We are concerned that packers----
    Mr. Costa. No, I mean answer my question.
    Mr. Avalos. No.
    Mr. Costa. Of course not.
    Mr. Avalos. Of course not.
    Mr. Costa. So then why would you ban it? Why wouldn't you just take 
the bad actors, because you have the tools to investigate, instead of 
banning it outright?
    Mr. Avalos. Well, well----
    Mr. Costa. I mean, many packers own types of livestock beyond those 
that they slaughter. Isn't it possible that the rules would result in 
less competition as larger packers expand their operations to the 
process by adding livestock, and small packers who can't afford to 
expand being forced to narrow their herds? Isn't it the opposite of the 
intention of the rule?
    Mr. Avalos. Congressman, the rule is about helping these folks.
    Mr. Costa. I am telling you I am thinking the rule is going to go 
in the opposite direction.
    Mr. Avalos. For years, Congressman, we have operated under the 
status quo. Unfortunately, we continue to lose farmers. We continue to 
hurt rural America. We continue to lose a lot of livestock----
    Mr. Costa. Mr. Avalos, for the record let me stipulate, my family 
has been farming for three generations. I have family both in the 
cattle business, in the dairy business, and I farm almonds. And I 
represent two of the highest-income agricultural counties in the 
nation: Fresno County and Kern County--and Kings is number ten. So I 
appreciate your passion, growing up in New Mexico in a small family 
farm for farmers. We all share this passion in this Committee. Most of 
us have similar farm backgrounds. When I am done here I am going back 
to the farm. So I am sympatico with you on that one.
    There are a lot of factors that are hurting rural America and U.S. 
agriculture. I don't think the packer-to-packer ban on sales is the 
contributing cause, in my view. I think a surgical approach would be 
far more beneficial than simply outlining the ban.
    Now, Mr. Chairman, I have gone beyond my time, but I really want to 
get into the area in the second round if you would oblige us, because I 
know other Members have questions to ask about the issue of unfair, 
unjust, discriminatory, and deceptive practices and paying for--or 
applying the premium discount. And I also want to talk about how the 
unfair practices would be applied in this proposed rule. And I also 
want to talk about the issue on demonstrating harm based upon the legal 
threshold; because, boy, if this proposed rule is implemented the way I 
read it--and I am one of the non-lawyers here--I think it becomes a 
lawyers' field day to sue with little provocation for cause. And I 
don't think that is what we want in the proposed rule. Hopefully we 
will have a second round of questions.
    The Chairman. We will definitely have a second round of questions.
    Mr. Avalos. Can I respond?
    The Chairman. Very briefly. We will have a second round, so I want 
to get to each Member here first, because some may have to leave. We 
will have a second round. We want to make sure everybody gets a shot.
    The gentleman from Texas, Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman.
    Mr. Avalos, I am particularly unpersuaded with this grandiose 
statement that you want to repopulate rural America as a result of 
implementation of this rule. That is incredulous, actually, that you 
would come to us and tell us that you want to circumvent the 
legislative intent that is clear; that you want to circumvent seven 
courts of appeals who have come down on the other side of this issue, 
in which the USDA participated in those court cases and you lost; that 
you would wave that flag of repopulated rural America as your basis for 
this rule.
    You know, to have the Secretary travel the countryside and listen 
to anecdotal evidence is wonderful, but something this widespread and 
this sweeping--you ought to have something a little more substantive as 
to why it works, why it does work, what impact it will have on this 
industry in order to justify it. To just simply relay the blame for 
things that happened in rural America naturally, it is happened in 
every country in the world where folks who have moved off the farm to 
better opportunities in the city, to lay that whole issue at the feet 
of this deal seems to me a bit incredulous.
    Also you have not yet laid the reasons why delaying this rulemaking 
process--where is the down side risk to that? Where is the immediacy of 
having to get this implemented? I am sure folks who want this rule in 
place see it as giving them some sort of an advantage in the 
marketplace, and we probably ought to try to understand advantages 
there. This is a classic ``Ready, Fire, Aim'' circumstance that we 
have.
    So the question I would have by background, Mr. Avalos, typically 
we get a resume of our witnesses and there is not one in there. Could 
you give me a couple of seconds or minutes on what your professional 
background is when you came to this job.
    Mr. Avalos. Congressman, I grew up on a small farm in southern New 
Mexico. I have been in agriculture all my life, graduated from Mexico 
State University, went to work for the Texas Department of Agriculture 
in Amarillo, Texas. Went to work for the New Mexico Department of 
Agriculture, spent 30 years, and I worked with an emphasis on 
marketing, domestic and international marketing. I worked everywhere 
from production, livestock and agricultural farm.
    Mr. Conaway. That is helpful, trying to figure out how we get to 
where we are. But the fact that we have a circumstance where we have 
this proposed rule that is offensive to some of us up here on the panel 
as to how it has come about. But, I do think you need to lay the 
predicate, lay the basis for why a delay when the world stops turning 
if you don't grant this extension.
    Mr. Avalos. Congressman, on the extension request----
    Mr. Conaway. Beat it to death.
    Mr. Avalos. We have to take all requests----
    Mr. Conaway. Okay. Give us, since you have been reading letters 
individually yourself, the folks who want it done by the 27th or 23rd, 
whatever the date is, what is their rationale for the immediacy of 
getting it done?
    Mr. Avalos. I couldn't answer that.
    Mr. Conaway. Really? But just the fact that----
    Mr. Avalos. I don't know why they are----
    Mr. Conaway. So how do you make these decisions? You stack these 
letters up and whichever stack has the highest one wins? How does the 
process work?
    Mr. Avalos. There is input from several people at the USDA and----
    Mr. Conaway. You have done a great job of sticking to the talking 
points, but you have not been real persuasive. You have also mentioned 
earlier that a conclusion has been reached. Does that mean that input 
between now and even the abbreviated 60 day period is not relevant to 
the decision-making process?
    Mr. Avalos. I didn't understand----
    Mr. Conaway. Earlier in your conversation----
    Mr. Avalos. A conclusion had been reached?
    Mr. Conaway. A conclusion had been reached on this issue, not on 
the extension but on the rule itself. Maybe I misunderstood what you 
said, but you seem to say that you came to this rule, you've reached a 
conclusion on it, and so it is mandatory we have 60 days before you 
implement it or----
    Mr. Avalos. That is not correct.
    Mr. Conaway. So you are open to changing this rule from what is 
proposed, that would reflect the legislative intent that is clear, that 
would reflect the seven courts of appeal that are out there, that we 
could anticipate based on this hearing and others that the Department 
of Agriculture may decide they can't do by Executive fiat what ought to 
be done by elected officials, starting with the folks in this 
Committee; is that an option?
    Mr. Avalos. Well, Congressman, let me say this. Issues in this 
proposal are very complex, I won't argue that with anyone in this room. 
Now, I want to emphasize it is a proposed rule, and we are strongly 
encouraging input and feedback on the rule, not only from producers, 
but from all stakeholders.
    Mr. Conaway. Let me flesh out one last thing. Maybe it has to do 
with this packer ban that Mr. Costa--if I own a pork processing 
facility in one state and I own pigs in another state, am I prevented 
under your proposed rule from selling those pigs to a closer facility 
than the one I own three states away? Do I have to ship the pigs past 
other processing plants under this rule?
    Mr. Avalos. I am going to defer to the Administrator, Mr. Butler.
    Mr. Butler. I didn't hear that whole question. I think I heard that 
you said you owned a facility in one state and there was another 
state----
    Mr. Conaway. That had pigs.
    Mr. Butler. Another facility three states away.
    Mr. Conaway. Do I have to ship those pigs, three states over to 
process them in my own plant, or can I sell them to some other packer?
    Mr. Butler. Under the proposed rule you could not sell them to 
another packer.
    Mr. Conaway. So let me make sure--I know I am over the time, Mr. 
Chairman--but to flesh this out, in order to process my pigs on the 
ground, you have taken value away from those pigs where they are 
forcing me to ship them some number of miles past a closer processing 
facility in order to sell those pigs. So that makes the system more 
competitive, that makes rural--that in and of itself will repopulate 
rural America by that harsh a rule?
    Mr. Butler. I think in all fairness, that is a little bit out of 
context.
    Mr. Conaway. What----
    Mr. Butler. Could I answer?
    Mr. Conaway. Sure.
    Mr. Butler. What the purpose of the packer-to-packer sales ban--
this is not a packer ban of ownership, this is packer-to-packer sales.
    Mr. Conaway. So you would argue that your stepping into the market 
in that regard by banning packer-to-packer sales, you have stepped into 
the market punitively.
    Mr. Butler. The underlying reason for the packer-to-packer sales 
ban is because of the large concentration in the marketplace, it leads 
to a probability, if not a possibility, of price sharing. The price 
sharing affects many producers if their marketing agreement is based on 
that sale.
    Mr. Conaway. So, you have evidence to this? You are saying 
probable, and possible, and maybe. You have empirical evidence where 
that is happening and you don't already have the authority to step into 
that?
    Mr. Butler. Congressman, we have evidence, as Mr. Avalos said, 
there has just been degradation in rural America on--and that is the--
--
    Mr. Conaway. And your evidence that fewer people living in America 
is directly tied to this issue, period? Where is the evidence to that?
    Mr. Butler. I think that is partially true. I am not saying it is 
only----
    Mr. Conaway. No, you come in here with a wide, sweeping change and 
you are waving this flag about repopulating rural America as your 
rationale for doing this. Is there----
    The Chairman. We are going to give another round so all the 
Committee Members will get a round. I have been very, very fair and 
very generous here, and I want to be because it is so important. But I 
am also reminding Committee Members that we will have a second round. 
But there are Members who have been here for a period of time and 
haven't had a chance, so let's be mindful of them.
    Right now we are going to go to our Chairman, Chairman Peterson, 
from Minnesota.
    Mr. Peterson. I thank the gentleman and I apologize, I had to go 
out and meet with some constituents, so it sounds like you have spent 
quite a bit of time on the GIPSA situation. So maybe I will shift gears 
here a little bit.
    I don't know who wants to answer this, but regarding the animal ID 
issue, we have been up and down through this voluntary/mandatory, and 
now we are off on this new state initiative.
    And so I don't know who wants to answer this, but why does USDA 
believe that this new traceability framework approach will be better 
received or any more successful than past efforts? Do you have some 
indication that that is the case? And what kind of responses have you 
received from the industry in states and tribes on this new approach?
    Mr. Avalos. Well, Congressman, first I want to state that it is a 
responsibility of USDA in the case of a disease outbreak to identify 
the source, to put in place safeguards and to contain and prevent the 
spread of disease. This is important to us and very, very important to 
the livestock industry.
    Now, I also want to state that in this country we are very, very 
lucky that we have the largest and most diverse livestock industry in 
the world. We have family farms, we have corporate farms, we have small 
producers, large producers, organic, conventional, a very complex 
industry.
    The new approach that we have taken partners us with the states and 
tribes. This is very, very important because it is no longer a top-down 
request, mandate from the government. This is a request where we reach 
out to our states, reach out to our Tribal Nations, and we are going to 
develop standards that the whole country has to meet, but we are going 
to allow the states and tribes to meet those standards in a way that 
works best for them.
    Also, we are not pushing high-dollar technology. We have gone back 
to basics. We are using simple identification that we have used for 
years in disease programs at USDA. These are programs that will give us 
better buy-in from the industry.
    Now, to answer your question on where we are today and what kind of 
response we have received, overall the response has been positive. We 
have had workshops and forums all over the country. We have focused on 
state veterinarians, producers, and leaders of the Tribal Nations. We 
still have a ways to go. We have a lot of dialogue to continue with the 
industry. We still have to do quite a bit of tribal consultation, but 
we are making progress. And I feel comfortable that once we establish 
the standards that everyone has to meet, we are going to have buy-in 
from the industry and we are going to have buy-in from the cattle 
people.
    Mr. Peterson. Thank you. I guess I will--on the GIPSA. We have had 
a lot of different folks from this country, including different size 
entities, develop branded and value-added products. And it has 
returned--one of the problems we have in agriculture is that we have 
farmers and ranchers more interested in producing livestock and the ag 
products, but they haven't really paid much attention to marketing, and 
that has cost us. We have ceded a lot of the profit to other people 
because we haven't wanted to do the marketing.
    Well, now we have stepped in. I have small producers that have 
developed branded products, even at the local food level, that are 
making significant money. One of the concerns that I am getting from 
big producers, little producers, and processors is that this proposed 
rule could put at risk what they have put together here in terms of 
these branded premium products, you know. And I don't know how much 
attention you paid to that when you were putting this rule together, 
but, there is a concern out there from a number of my producers. As I 
said, some of them are very small co-ops that have been put together 
that are concerned about the way this thing has been put forward.
    I don't know exactly what you are trying to get at, if you are 
trying to make sure that the big producers and the small producers, if 
they are producing the same quality, get the same price. Is that what 
you are trying to do? Or are you trying to eliminate branded products? 
Is that what you are trying to do? I don't know.
    Mr. Avalos. Congressman, no, we are not trying to eliminate value-
added or branded products. The proposed rule does not impact on value-
added products. The proposed rule does not prevent the use of marketing 
agreements, it doesn't prevent the payment of premiums. It doesn't 
require any purchases on the spot market.
    What the rule does do, it does create transparency and exposes 
discrimination or retaliation when there is no reason for disparity in 
contract terms, in contract conditions, prices paid, or the treatment 
of the producer.
    Now, I also want to emphasize that the proposed rule doesn't 
protect poor performance. Producers that aren't satisfying their 
contract and not doing their job as they are supposed to, are not 
protected.
    Mr. Peterson. Well, from what I have heard from people, you haven't 
convinced a lot of folks of that fact, if it is a fact. And you have 
some work to do. So I would hope that you will focus on this. We don't 
want to lose this market that we have developed, and this added value 
that we have been able to bring back to rural America. I don't think 
any of us want to do that. And so I would hope that we can get 
everybody on the same page here.
    And as I told the Secretary, I had breakfast with him last week, 
that I really think this comment period should be extended some. I 
understand you are probably not going to extend it 120 days like some 
people want. But given the amount of interest in this, it just seems to 
me to be sensible to take a little more time and make sure that 
everybody is heard, and that you have time to sift through all of this 
so that you get the right outcome at the end of the day.
    Mr. Avalos. Thank you, Congressman. I just want to emphasize that 
it is a proposed rule and we really want input, we want some comments. 
That is important. That is really important for us to move forward.
    The Chairman. All right, thank you. Thank you, Mr. Chairman. Now 
the gentleman from Nebraska, Mr. Smith.
    Mr. Smith. Thank you, Mr. Chairman, and thank you to our witnesses 
here today. I appreciate your feedback and engagement here.
    Obviously, I have gotten a great bit of correspondence, input, and 
so forth and concerns from producers themselves. And one of those 
concerns is their personal information. And I appreciate your efforts 
towards transparency. I think that is what could and should ensure a 
competitive environment so that producers themselves can engage on a 
competitive basis, making sure that there is a level playing field and 
adequate opportunity to pursue new ways of doing things perhaps. I know 
that there is a concern about the privacy of business transactions.
    Can you elaborate on how their privacy can be insured throughout 
this new rule and application of the new rule?
    Mr. Avalos. Congressman, probably the best way to answer your 
question would be to explain that is why it is a proposed rule, that is 
why we want input and comments to address these type of concerns. That 
is why it is very, very important. We don't know everything at USDA, of 
course. We need stakeholders to comment, to provide input.
    Mr. Smith. Do you think that that can be accomplished in 1 month's 
time from now?
    Mr. Avalos. I don't know.
    Mr. Smith. Okay. I did want to also echo the full Committee 
Chairman's point of view or concern. I certainly can't speak for him, 
but it seems like some concern about a premium being paid for a 
product. It always surprises me how sophisticated some of these smaller 
operations are in answering the marketplace and dialoguing ultimately 
with the consumer, and now there would be some processors involved and 
so forth. It is always interesting to me that there are opportunities 
out there. There is some concern out there, however, among producers 
that there would not be the opportunity to charge a premium for their 
product. And I heard you say that is an unfounded concern, perhaps. But 
I do want to emphasize the fact that there is still concern out there. 
And I would be very surprised if 1 month's time could iron out all of 
those concerns. I think there is a lot at stake here. I believe it is 
our objective, speaking for myself, that we want to ensure 
opportunities for the future rather than that the government knows best 
with this kind of approach.
    Mr. Avalos. Congressman, there is a lot at stake here and I agree. 
Once again, I want to emphasize how important it is for USDA to receive 
input and comments. This is really, really important to, going forward, 
to the final vote.
    I wanted to comment about--you made a comment about how government 
knows best. Before I came here--I have been here 10 months--before I 
came to the USDA, I was one of the guys who wasn't real happy with the 
government. A lot of times I felt the government moved too slow, I felt 
the government was such a bureaucracy that they never got down to 
understanding the needs of the people in the countryside. But now that 
I have been here 10 months, I understand a lot more. I understand, yes, 
we are a huge bureaucracy. We also have a lot of people who care and 
want to do the right thing.
    I think that the comments, I can't emphasize that enough, comments 
and input are critical to moving forward with this proposed rule.
    Mr. Smith. While you are touching on that, I hear what you are 
saying. There is only one thing worse than a government that moves too 
slowly and that is government who moves too quickly. So please keep 
that in mind.
    Also, I know the producers have shared concerns about the 
litigation that this would probably bring about. Can you perhaps calm 
the fears of some producers that this would invite more litigation?
    Mr. Avalos. Congressman, I think it would be the opposite. The 
proposed rule is there for clarity. It clarifies the law. It lets the 
producer, it lets everyone know the rules of the game. And when there 
is clarity, there is probably less chance of expensive litigation. We 
are hoping that the clarity will eliminate the need for litigation.
    Mr. Smith. I appreciate that.
    I would go back to the fact, though, that we have a situation here 
where producers see it a different way than apparently USDA does.
    Can you tell me how you plan to go about ironing things out, and 
especially if there is only 1 month to do that?
    Mr. Avalos. Once again, we want the comments to come in about the 
comment period. I know you are asking, ``How are you going to get this 
done in the time that is left?'' Like I said, after reviewing the 
letters and requests that came in, we are taking both sides serious. We 
are going to make a decision quickly.
    Mr. Smith. You are going to make a decision quickly as to whether 
or not to extend; or what decision do you plan to make quickly?
    Mr. Avalos. Whether or not to grant an extension on the comment 
period.
    Mr. Smith. All right. Thank you, Mr. Chairman.
    The Chairman. It is my hope that this Committee carries 
considerable weight in making that decision. The chair will turn to the 
gentleman from Idaho, Mr. Minnick.
    Mr. Minnick. Mr. Butler, following up on questions from Mr. Costa 
and Mr. Conaway earlier, I have a producer headquartered in my State of 
Idaho who has a processing operation in the State of Washington and a 
very large feedlot in Kansas. Is it correct that under your proposed 
rule that he will have to ship all of those cattle 1,700 miles across 
the Rocky Mountains from his feedlot in Kansas to his processing plant 
in Washington, because he will not be allowed to sell to other packing 
plants in Kansas or his immediate vicinity?
    Mr. Butler. Congressman, the proposed rule deals with packer-to-
packer sales.
    Mr. Minnick. This firm is a packer, also has a feedlot; the feedlot 
is in Kansas. The processing facility is in Washington. Is that packer 
going to have to ship the cattle from its feedlot in Kansas to its 
facility in Washington under your rule? Or can he sell to other packers 
in Kansas, next door or 10 miles away?
    Mr. Butler. Quite honestly, I think it would have to be decided on 
what type of legal relationship there is between the feedlot and the 
packer the way the rule is proposed now.
    Mr. Minnick. Well, you are the author of the rule. Tell me, give me 
the answer. My packer wants to know, because if he has to ship his 
cattle 1,700 miles in a railcar to Washington, he is going to go out of 
business. I want to know, does he have to do that and is he going to be 
in business once your rule goes into effect?
    Mr. Avalos. Congressman, if I could answer.
    Mr. Minnick. Yes.
    Mr. Avalos. That is a very, very good comment, very good example 
that you gave. That is why it is so important to have input and 
comments to the proposed----
    Mr. Minnick. I am not interested in comments. I want to know what 
this silly rule is going to do that you are proposing, that my packers 
and my industry have to live with. You are going to comment on it, all 
right. We are commenting on it to you today, and we are sure as heck 
going to comment to you on it later if you put it into effect. In fact, 
I don't think you are going to like either the comments or what the 
Committee is going to do about that rule.
    I want to know whether you are going to promulgate it in the first 
place, or you are going to change it to something sensible. Are you 
going to go ahead with this silly rule, Mr. Secretary?
    Mr. Avalos. Again, it is a proposed----
    Mr. Minnick. Are you going to propose it in 30 days? Is this 
provision going to be in the rule that you are going to propose for 
comment? Just a yes or no answer, Mr. Secretary?
    Mr. Avalos. Well, I need to understand your question. Are you 
asking about the extension of the comment period?
    Mr. Minnick. I am asking, is this rule going to be proposed for 
comment, or are you going to change it in a way which would allow my 
constituent to stay in business?
    Mr. Avalos. Well, the proposed rule is already out there. So we 
want comments on the proposed rule.
    Mr. Minnick. Let me ask you this, then. Based on the information 
you have gotten, are you going to change that proposed rule in a 
fashion which will allow my packer to stay in business?
    Mr. Avalos. I can't answer that right now, because we haven't 
reviewed all the comments, and we are still waiting for more comments 
to come in. That is why I emphasized how important----
    Mr. Minnick. This is one of the reasons why people like yourself 
are frustrated with government. You have an opportunity to answer the 
question in a way which will result in a sensible outcome for my 
constituent. Now, if you say you can't answer it, you think that is 
going to create a lot of confidence in your ability to come up with a 
sensible rule and implement something that really is going to foster 
competition, or is it going to be viewed as another bureaucrat stalling 
on something that is obvious when there is a sensible solution? Come up 
with a rule that is sensible and allow my packer and other packers like 
him to continue to do business in a sensible and competitive fashion.
    Mr. Avalos. Again, Congressman, what I am trying to tell you is 
that it is a proposed rule. There is nothing final here, we want 
comments. This is a very good point that you made; it is going to hurt 
a packer where he has to ship 1,700 miles to market his cattle. Anybody 
will tell you that is wrong.
    Mr. Minnick. Thank you.
    The Chairman. Thank you. We will get another round and you will get 
another shot.
    The gentleman from Tennessee, Mr. Poe.
    Mr. Poe. Thank you, Mr. Chairman. And just to go ahead with what 
Mr. Minnick was saying, why in the world would you have a rule that 
would--if it is just one packer like this, there have to be multiple 
other ones. Why in the world would you ever even think about proposing 
a rule that would do what he just described? Why would you do that? It 
is not repopulating rural America, it is not transparency. That is just 
stupidity right there. Why would you do that?
    A rule that would put somebody out of business, you heard what he 
just said, and it seems to me like--I don't understand that at all. I 
don't believe anybody in the country could have--obviously, you can't 
explain it, so why would you even think about proposing something if it 
does that?
    Mr. Avalos. First of all, Congressman, like I told the other 
Congressman, it is a proposed rule. We----
    Mr. Poe. I think you heard the comments, I certainly have heard a 
lot of the comments. But my question is: Why would you even think about 
having a rule? If you were in his shoes right there, his producer, you 
would be banging your shoe on the table if you thought you were going 
out of business. I have heard, and it hasn't made any sense to me yet, 
I live in rural America, I live in about as rural a place as you can 
live in in Tennessee. And I can't for the life of me figure out what 
this is going to do to keep anybody in my district on a farm, this 
rule.
    Mr. Avalos. The only way I can answer your question is that we feel 
that this rule is about failures and transparency in the marketplace. 
We felt that this was critical to keeping farmers in business. It 
doesn't apply----
    Mr. Poe. We just got through saying it will put him out of 
business, so it can't keep him in business if he looked at the way it 
is proposed.
    Mr. Avalos. Your question was, why did we come up with a silly 
rule?
    Mr. Poe. Yes, sir.
    Mr. Avalos. It is all about transparency, it is all about fairness, 
and it is all about keeping producers in operation in rural 
communities. That is why it is a proposed rule, that is why we want 
input. This was a very good example that he gave. I don't think anyone 
in the room would argue with that.
    Mr. Poe. I think the Chairman, the full Chairman--of course, Mr. 
Scott has brought it up too. I am not sure another 30 days is going to 
clarify this.
    Just another quick question. Have there been provisions in this 
proposed rule struck down by the court system; and if they have, then 
why would you propose them again?
    Mr. Avalos. You are talking about----
    Mr. Poe. Competitive injury. Yes, sir.
    Mr. Avalos. Okay. Let me try to put it in simpler terms because I 
am not an attorney. It is true several courts throughout the country 
have stated an opinion that an unfair practice was only unfair when you 
could show that there was going to be harm or committed harm to 
competition. So stop and think about that. They are saying it is only 
unfair if you harm competition, or you are likely to harm competition. 
So if my house catches on fire and I call the fire department, they are 
going to tell me, ``We can't put out your fire until you can prove to 
us that you are going to harm all your neighbors.'' It doesn't make 
sense, it is not right, it is not fair.
    I will give you some examples, Congressman. In many cases it is not 
necessary to show that you are harming competition. Let me give you an 
example. What happens when you are selling your animals over a scale 
that is required by the company you sell to, and the scales are 
manipulated----
    Mr. Poe. You have rules already. You know you just described a 
crook. I mean if somebody is manipulating scales, there are already 
rules out there to prosecute a crook. This is not going to change that. 
If you are manipulating scales, you are dishonest and you should be 
prosecuted and there are rules now that allow you to do that.
    Mr. Avalos. There are other examples. What happens when the company 
you are working for gives you inferior birds, they give you inferior 
feed, and they tell you to take it or leave it----
    Mr. Poe. I do that every time I buy a car. It is take it or leave 
it. And so you are describing the marketplace.
    I don't have much time, but let me just ask one other question. And 
Mr. Scott, our Chairman, brought this up. Why was it necessary to 
impose regulations that have already been defeated by the Congress and 
the court system? I heard it around this entire dais about that. Why is 
that necessary, to bring up something that the Congress clearly didn't 
want or doesn't want?
    Mr. Avalos. I am going to ask Mr. Butler to help me out with this 
one.
    Mr. Butler. As far as the court is concerned, I am going to do my 
best to answer this. When a court rules in some of these cases dealing 
with harm to competition, or the likelihood of harm to competition, 
they did so without much guidance in the past from USDA. Several courts 
spoke to that and said that USDA had not addressed these areas in 
certain sections of the Act, and that there was somewhat of a void.
    Part of the reason that we looked at some of these areas is because 
of what the court had said. We tried to carry out the directive of 
Congress, as well as address some of the areas that the court had 
spoken about and tried to create a rule, a proposed rule, that we felt 
was fair, equitable, and concise enough that we could get comments on 
and try to make educated decisions, if you will, based on those 
comments from all over the industry, to determine what the final rule 
should be.
    Mr. Poe. Thank you, Mr. Chairman, for indulging me.
    The Chairman. Thank you, Mr. Poe. We have Mr. King from Iowa.
    Mr. King. Thank the Chairman, I thank the witnesses for your 
testimony.
    Maybe I will start out someplace easy here and direct my question 
to Administrator Smith. If I were to name a bill number, H.R. 1549, 
does that ring a bill with you?
    Ms. Smith. Yes, sir.
    Mr. King. I am inferring a little bit from what positions I can 
gather about USDA position on that, but can you state today whether you 
support or oppose H.R. 1549, the ban on non-therapeutic antibiotics and 
use of livestock?
    Ms. Smith. I think what I can state is that we would have concerns 
about any sweeping actions that would be taken to eliminate broad 
classes of antibiotics for agricultural purposes. If any restrictions 
are unjustified and not based on science, it could have a detrimental 
impact on agriculture.
    Mr. King. Are you aware of a definitive science that I would say 
would be adequate to justify changing a policy that would transfer the 
antibiotics through--from either use on animals and to humans who would 
consume them? Are you aware of any science that would confirm that 
particular hypotheses?
    Ms. Smith. The hypothesis of the movement of----
    Mr. King. Antibiotics. In fact, I should say non-therapeutic 
antibiotics through meat into humans that would cause a resistance in 
humans and make it more difficult to cure diseases in humans?
    Ms. Smith. I think there is some science that shows that the 
overuse of antibiotics for either animal purposes or human purposes can 
create resistance.
    Mr. King. And if you were to weigh that up against a body of 
evidence that is out there to the contrary, how would you characterize 
that sum science as a percentage of the whole?
    Ms. Smith. I don't think I could give you a summary of the science. 
What I could emphasize is that at USDA we think it is very important to 
support the judicious use of antibiotics for medical treatment to----
    Mr. King. If I were to say to you that I believe that there are a 
couple of small studies out there that may or may not be politically 
motivated, that would make that argument in opposition to a massive 
amount of scientific evidence that is nonconclusive at best, would you 
disagree with that?
    Ms. Smith. I think you can often have science that can have some 
motivations behind it.
    Mr. King. I am having a hard time getting you to say that you 
probably think what I do, then.
    Ms. Smith. Well, I think my message to you is that we stand behind 
using sound science as the basis for all types of decisions.
    Mr. King. Should there be some that is compelling, then we would 
join together and call for that kind of ban on non-therapeutic 
antibiotics and livestock. Could we agree on that?
    Ms. Smith. Could we agree that----
    Mr. King. Could there be that kind of compelling evidence and we 
would join together and make that request, rather than support H.R. 
1549 based upon the evidence that happens to be out there today.
    Ms. Smith. You are asking if there was compelling evidence that 
said that there was a connection?
    Mr. King. Yes. In the absence of compelling evidence, the status 
quo is okay with you?
    Ms. Smith. Let me just emphasize again that it is important for us 
to make the decisions based on sound science. And I personally don't 
have an understanding of all of the studies that are out there. But it 
is important that we don't eliminate the use of broad groups of 
antibiotics for the purpose of agriculture if there is not sound 
science to support that.
    Mr. King. I appreciate your thorough understanding of the political 
nature of the scientific question, and I will not press that point any 
further. I would turn then--and thank you.
    I would turn my attention to Secretary Avalos and ask you, as you 
were gathering data in preparation for the rule, and particularly with 
the contracts between producers and processors, the producers and 
packers, did you have a conversation with both sides of that equation, 
Mr. Avalos? Did you have discussions and meetings with packers and also 
with producers?
    Mr. Avalos. Congressman, I am going to defer to Mr. Butler.
    Mr. King. You can't answer whether you have had those conversations 
or not? How would he know what conversations you had?
    Mr. Avalos. Because I didn't have conversations personally.
    Mr. King. Okay, you didn't have conversations with them.
    I would turn to Mr. Butler and ask the same question of Mr. Butler.
    Mr. Butler. Yes, sir. We had conversations with both sides, and 
there were meetings in the countryside before I got here, and I was 
cognizant of those after I arrived. I was told by the staff at GIPSA.
    Mr. King. Can you give me an estimate of how many producers versus 
how many different packers you might have had discussion with?
    Mr. Butler. I can't give you an estimate on the countryside 
meetings, because I wasn't a part of them. But, I have met with just 
about every producer organization and packer organization, I tried to 
have an open door policy.
    Mr. King. Do you have notes on those meetings and a schedule that 
might give a better snapshot of the analysis that went into this?
    Mr. Butler. No, sir. I didn't take notes during the meeting.
    Mr. King. Do you have a schedule that shows the timing that you met 
with those producers?
    Mr. Butler. I should have that. Yes, sir.
    Mr. King. Would you be willing to make that available to this 
Committee?
    Mr. Butler. I don't see why not. I don't have anything to hide from 
it, we had the meetings.
    Mr. King. Well, thank you, I would make that a formal request. And 
included in my request, the clock has ticked down, Mr. Chairman, a 
slight deference in conclusion here. There has been a consistent call 
here around this panel for an extension of the comment period, that 
this window closing as quickly as it does, if it were--if the shoe were 
on the other foot, and you had to produce records, and if you had to 
produce an economic analysis, which seems to be a general analysis 
without notes, that have gone into this rule, people out here that want 
to get comment in, they can't get mobilized in time. They can't do an 
economic analysis in time. The producers can't calculate the impact of 
this rule on their business. In fact, I don't think they actually can 
calculate it, because there are so many implications to the change in 
the rules.
    And so some have talked about a 30 day extension. I am talking 
about a 120 day extension. I want to directly ask that that extension 
period be offered and allowed, especially for our producers whose lives 
are wrapped up in this. They don't get to change their business on a 
dime.
    And so when I hear comments like it is all about transparency and 
fairness, if it is about transparency, then the public ought to know 
the discussions that took place. And you have no reservations about 
that, I recognize and appreciate that.
    But fairness is a very hard word to define. In fact, I will say it 
is impossible. Anyone who has raised two or more children knows there 
is no such thing as fair. It is in the eyes of the beholder, the one 
that got the short half of the candy bar, so to speak.
    And I will suggest that our producers in particular are getting the 
dirty end of this stick right now, and they need 120 days, at a 
minimum, to weigh in. And then we need to step back and really be 
objective and think about how we change this dynamic here.
    I want our producers to have a market, and I want our consumers to 
have a good product. We can do that and there is not an urgency 
involved here. This is my strongest recommendation, is to extend this 
out 120 days. Give them an opportunity to weigh in.
    Thank you, Mr. Chairman. I thank the witnesses. Mr. Chairman, I 
yield back.
    The Chairman. Thank you, Mr. Chairman. We are going have, for those 
of you who would like to stay, we have some more questions. We are 
going have a second round. So we will be delighted. Some of you have 
requested that, to get back at this.
    I want to go to a couple of other items to mention to get your 
response to, in addition to the GIPSA rule. And the first one, Mr. 
Under Secretary, is on animal welfare. You mention in your testimony 
the need for strengthening the enforcement of the animal welfare. I am 
particularly concerned about the problematic dealers that are producing 
serious problems, especially dog dealers. And the fact that I believe 
that your group is proposing to regulate the sale of dogs over the 
Internet.
    Can you get into this a little bit for us and explain to us what 
the situation is in the Animal Welfare Act and strengthening it, as it 
relates to these problematic dealers?
    Mr. Avalos. Mr. Chairman, I am going to ask our Administrator, 
Cindy Smith, to talk about this a little bit. But first I just want to 
emphasize to you and to the Committee, Secretary Vilsack and I are 
fully committed to enforcing the Animal Welfare Act and ensuring there 
is humane treatment for all the animals for which we regulate.
    Ms. Smith. Thank you. I appreciate the opportunity to augment the 
Under Secretary's remarks and speak to this issue.
    The Office of Inspector General, in this audit that you raised, 
recommended a legislative change around this issue of the sale of 
puppies through--the sale of animals through the Internet. The 
Secretary asked Congressman Farr and Senator Durbin to address this 
loophole in the puppy legislation that they were drafting.
    We knew this legislation was coming out so we wanted to take 
advantage of this avenue. However, when we looked at the legislation 
more carefully, we recognized that this would only address the impact 
in terms of dogs.
    And so what we now believe we can do to address this, is end that 
loophole in terms of sale over the Internet of these animals through a 
regulatory change. We have just in the last 2 weeks initiated the work 
on a work plan to make a regulatory change in order to address this 
issue.
    The Chairman. All right, thank you.
    Now let me ask you about country of origin labeling. Can you give 
us an idea of problem areas that may have come about in terms of the 
implementation of COOL. And if so, what are these problems and how are 
they being resolved?
    Mr. Avalos. Mr. Chairman, I just want to say that at USDA we work 
in cooperation with the states to implement and to enforce COOL. USDA 
has worked hard to train state employees on agreements for the states 
to carry out compliance for historical use.
    Today we have already done over 5,000 retail store reviews. Ninety-
six percent of the items are being properly labeled. We plan to review 
up to 13,000 retail stores by September. And our focus has been on 
enforcement of the law and good compliance.
    Now at this time I am going to ask our Administrator, Rayne Pegg, 
to expand on my answer.
    Ms. Pegg. I think what the Under Secretary raises is very 
important. The retail reviews are giving us a landscape of what is 
going on in the marketplace. We are taking that information and 
developing a compliance program to follow up on the state audits that 
are taking place. We are also doing more training and outreach to our 
states and our cooperative agreements to ensure that they are auditing 
stores correctly and following up on the audits that they are 
conducting.
    So right now, the reviews are really providing valuable information 
in looking at the landscape and looking at what is occurring in the 
marketplace. We can use that information to do more outreach and 
education to both stores, as well as producers and processors.
    The Chairman. Okay. Thank you. Now I will turn to the Ranking 
Member for a second round.
    Mr. Neugebauer. Secretary, I hope that you have heard today that I 
think there is unanimity, both on the Republican side and the 
Democratic side, that this GIPSA thing needs some work; that there are 
a lot of unanswered questions, and that is the reason that that 
extension to the comment period is extremely importantly.
    I want to move to a different subject. I want to move to COOL. You 
know a lot of the proponents of mandatory country of origin labeling 
have said really it is a program that won't cost the producers 
anything, that the benefits of having COOL will outweigh the additional 
costs of doing that.
    So I guess the question is: Has the Department been monitoring the 
benefits and costs associated with COOL and has this proven to be 
correct?
    Mr. Avalos. Congressman, I don't know if I can answer your question 
the way you want it answered, but I am going to try and then turn it 
over to our Administrator.
    Today we have been primarily in an education and outreach phase. We 
just started compliance enforcement and we are finding that we are 
doing a pretty good job. Our contractors have copies of agreements with 
states. We are doing a good job of enforcing the COOL regulation. Like 
I said earlier, 96 percent of items are being properly labeled. Tying 
that back into costs and cost-benefit, I can't answer that. Maybe an 
Administrator can help me.
    Ms. Pegg. I think what the Chairman brought up earlier is very 
important; that this provides information to consumers about where 
products come from, which is a very valuable tool in the marketplace. 
Clearly the directive Congress gave us to do was to carry out this 
program. We don't have any direct information in terms of the cost-
benefit analysis in regards to producers or packers. We are primarily 
in the first year of implementation, so we don't have that information 
available to us at this time.
    Mr. Neugebauer. Was the issue--remember, the program was sold that 
domestic producers would benefit from that and that there would be 
increased sales for domestic products. I guess the question is: Has it 
increased the sales for domestic products by having country of origin 
labeling?
    Ms. Pegg. AMS has not conducted that analysis, so I am not aware of 
the answer. I do not have the answer for you at this time. We can see 
if others have done an analysis of it.
    Mr. Neugebauer. So you are not monitoring the marketing piece of 
this, only whether people are labeling it correctly? Is that----
    Ms. Pegg. Correct. Our directive was for the enforcement of the law 
and regulations. And that is for proper labeling of products under 
COOL.
    Mr. Neugebauer. And so what is involved in your--where is the 
analysis taking place? In other words, are you looking at compliance in 
the grocery stores, at the producer level, the processing? I mean, what 
stages are you reviewing that?
    Ms. Pegg. So, right now, we have cooperative agreements with all 
the states. And with those cooperative agreements, we are going into 
retail establishments, outlets, and looking at the items that are 
covered under COOL, and ensuring that they are labeled or not.
    If they are not in compliance and they are notified, they have to 
provide corrective action to us within 30 days. If they don't, again, 
they have an additional 15 days, and then we can take action against 
them.
    So that is our primary focus at this time. It is providing us with 
good information about possible areas where there is either mislabeling 
or covered products that are not being labeled at all.
    Overall, we are seeing a 96 percent compliance rate. But, if there 
is an issue in the produce sector or the meat sector, then we can 
identify that and reach out, do some more education and outreach 
appropriately. And that is the important component of this retail 
survey process that we are going through right now.
    Mr. Neugebauer. Mr. Secretary, did you want to add anything?
    Mr. Avalos. Congressman, if I could expand a little bit on that 
comment, I just wanted to state that, before I came to USDA, I was in 
New Mexico, and we worked quite a bit on New Mexico chili pepper 
promotions. And one thing about COOL, at the retail level they had to 
identify where the product comes from.
    I will give you an example. New Mexico chili producers face 
tremendous competition from Mexico and Peru, but the retailer and the 
consumer preferred the American pepper ten times to the foreign 
competition. And when the consumer sees a sign, ``New Mexico green 
chili,'' and right next to it you have ``chili from Peru'' or ``chili 
from Mexico,'' the U.S. product sells 10:1.
    Mr. Neugebauer. Can you quantify that? I mean, has somebody put 
some data together that substantiates that? Or is that just an 
observation?
    Mr. Avalos. That is an observation, Congressman, because, before I 
came here, I worked for the Department of Agriculture in New Mexico, 
and we had promotions all over the country with retailers. And we would 
promote the green chili peppers. And it was so obvious, we would have 
maybe, I don't know, 50 percent of the space that was allowed for all 
peppers, and then the Mexican competition would have maybe a little 
small space. The consumer would not buy the Mexican pepper when the 
American pepper was available.
    But I don't have data to quantify that, other than just referring 
you to retailers.
    Mr. Neugebauer. If the Chairman would indulge me in just one quick 
follow-up here.
    The Chairman. Yes.
    Mr. Neugebauer. I want to go back to Ms. Pegg.
    Now, so you go in the grocery store and it says, this is a New 
Mexico pepper--okay?
    Ms. Pegg. Yes.
    Mr. Neugebauer. And so, what do you do to verify that--I mean, it 
has a label on it, and the label looks like it meets the criteria. But 
what do you do to determine that that is a New Mexico pepper?
    Ms. Pegg. I will look at the retail documentation that is available 
and required, in order to look at whether or not it is really what it 
is claiming to be.
    Mr. Neugebauer. So, okay, the person that sold me the peppers said 
they were New Mexico peppers. I mean, how do you know that that pepper 
in that grocery store came from a New Mexico grower when you go in the 
grocery store?
    Ms. Pegg. Well, that is what the documentation is supposed to 
support, when we go back and look at that. If we do find that there is 
an issue, then, of course, we will take action. What we sometimes find 
will happen is there will be New Mexico peppers in the bin, but the 
sign above will say something different.
    Mr. Neugebauer. But, I mean, do you do an audit all the way back 
to--in other words, if you went in a store just to see if there is 
integrity in the system, you go say, ``I am going to trace this pepper 
all the way back to Randy's farm?''
    Ms. Pegg. We do traceback based on the documentation that is 
required.
    Mr. Neugebauer. Mr. Chairman, I am done.
    The Chairman. All right. The gentleman from California, Mr. Costa.
    Mr. Costa. Thank you very much, Mr. Chairman, for your due 
diligence on this very important rule and the oversight, which is one 
of the important things that Members of Congress should do and that we 
don't always do well. But we are having a good oversight hearing this 
afternoon as a result of your leadership.
    Mr. Under Secretary, when you go home--not home, but when you go 
back to the shop at the USDA this afternoon, and if the Secretary 
happens to call you or look into your office and say, ``How did it go, 
the hearing this afternoon,'' what would be your response?
    Mr. Avalos. Congressman, that is an easy answer. I would say, ``Mr. 
Secretary, it was a tremendous lesson for me. Mr. Secretary, we need to 
continue and encourage comments and input on the proposed GIPSA rule.''
    Mr. Costa. Well, good. That is a start. Because you have said a 
number of times, at least almost countless to me, that this is a 
proposed rule. And I will tell you that I am going to request a meeting 
with the Secretary on this proposed rule, and I intend to bring my 
concerns to the White House as well. Because if you don't provide the 
extension of time, and if you implement the rule as it is proposed, you 
will be making, in my view, a serious, serious mistake to the U.S. 
poultry, beef industries that this rule is intended to address.
    Now, let me talk about one of the parts that I think are the most 
significant distressing changes. You understand because of your farm 
background, as with my farm background, the whole concept of value-
added. Farmers, as we all know--and that is part of the reason for this 
rule--are price-takers, not price-makers. And, therefore, to have an 
advantage in that marketplace, as opposed to saying what in fact they 
would like to get for that, they have to increase the value, the 
premium, just as Chairman Peterson was talking about in his area.
    The area of Section 201, the proposed regulation that contains a 
list of unfair, unjustly, discriminatory, and deceptive practices which 
is proposed in this rule, one of which would therefore, under this 
definition, under this proposal, be paying a premium or applying a 
discount on the purchase price received by a livestock producer without 
documenting the reasons and substantiating the revenue and cost 
justification associated with the premium or discount--we are trying to 
upgrade and incentivize producers for growing, in this case, higher-
grade beef, and therefore pay a premium for it.
    Under this proposal, under this section, that becomes a claim for 
an unfair, unjust, discriminatory, and deceptive practice. Do you 
agree?
    Mr. Avalos. Congressman, I am----
    Mr. Costa. Well, no, I mean, it is a simple ``yes'' or ``no,'' ``I 
agree'' or ``I don't agree.''
    Mr. Avalos. I agree.
    Mr. Costa. Okay. That is a problem.
    We have constituents around the country that are known for their 
high-quality beef products. They have contracts with constituent cattle 
producers in my district. They pay them a premium.
    What kind of documentation would a packer need to be maintained to 
be sufficient to both stand up to the Packers and Stockyards audit, and 
to fully protect the packer if the transactions became a target of a 
private lawsuit?
    Mr. Butler probably wants to answer that question because of his 
previous background and experience and expertise. Quickly.
    Mr. Butler. Well, first of all, Congressman, I am also a farmer and 
a rancher, and I have raised value-based products. But to answer your--
--
    Mr. Costa. Okay, that is fine. So you support the concept of value-
based products?
    Mr. Butler. To answer your question, that would be very simply 
done. All you would have to show is--let's just say you had a product 
that you didn't use antibiotics, or you didn't use steroids on. That 
would be a value-added product.
    Mr. Costa. Who would determine whether the same quality of product 
standards can be met, and how would that be done?
    Mr. Butler. It would be done through the records that are kept in 
the normal course of business by the packer. And if there was a 
complaint that was filed with GIPSA by another producer, then we would 
look at those records. That would be it.
    Mr. Costa. Okay.
    Mr. Secretary, let me switch over to the area that I am very 
concerned about. There were eight circuit courts of appeals that have 
rendered decisions from 1921 to as recently as last month rejecting 
GIPSA's interpretation of Sections 202(a) and (b) of the Packers and 
Stockyards Act that do not require proof of injury to competition. In 
each of those cases, GIPSA argued its position and the need to show 
injury to competition, either as a party, or in a case's amicus brief.
    Do you believe that the courts will now render a different decision 
just because of GIPSA's interpretation of the embodied regulation?
    Mr. Avalos. Congressman, the purpose of this proposed rule is to 
clarify the law. The proposed rule is clarifying the law. It is 
informing all of the parties that are involved of what rules they must 
play under.
    So, in other words, this is about clarity. This is about having all 
the players understand----
    Mr. Costa. No, I understand what you are trying to get to. The 
point I am trying to make is, I think you have overstepped the point of 
clarity, and you have now put yourself in a situation in which, maybe 
not the United States Department of Agriculture, but any lawyer out 
there will have any basis under which to show--because they don't have 
to show injury or harm in essence, as I read this proposed regulation, 
to sue.
    And so, what you are doing is making it very difficult for the 
transparency that you are trying to protect. I understand what you are 
telling me, but it flies in the face of it, in my opinion. And this is 
one of the areas that I think we have to work on, and why we need the 
extension of time.
    Let me, finally, focus on--because my time has expired, but I want 
to get--the poultry industry in my area is very concerned about the 
plan to define a situated grower under the proposed rule. The situated 
grower is a term that seems to drive a lot of undue competition 
criteria, is it the size, is it the number of the birds, or what value-
added products does it take to change whose business is compared to 
whose and which region of the country?
    I don't know how you are going to define this with a poultry 
industry that is so diverse, spread throughout the country.
    Mr. Avalos. Congressman, I am going to defer to Mr. Butler.
    Mr. Costa. Mr. Butler?
    Mr. Butler. And I am not so sure I understand the question. I am 
sorry. Are you talking about the tournament system, ranking different 
birds and different type houses?
    Mr. Costa. Yes. That is one of them.
    Mr. Butler. Okay. The thought process behind this is if you had 
different type houses, then it is hard to have apples against apples, 
or oranges against oranges. You should rank the growers, we feel, based 
on their input, not input that they don't have any control over.
    Mr. Costa. So does that impact by size or number of birds?
    I mean, I have situations where I have 60,000 square feet of space 
for some of my poultry operators and some as large as a million square 
feet. It seems to me here that you are going to incentivize larger 
operations at the cost of smaller operators.
    I mean, and then what about value-added products? I mean, the 
poultry industry, just like the beef industry, is very focused on 
trying to increase the value added to the products, fresh poultry as 
opposed to fresh-frozen and the like.
    Mr. Butler. Well, I think that is a point that needs to be made in 
the comments. That is the reason we are asking--it is a proposed rule--
--
    Mr. Costa. I got the part that these are proposed rules and that 
these are good suggestions. That is why we are having the oversight.
    Finally, with respect to contracts, the proposed regulation 
requires an 80 percent recovery of cost of capital investment. Can you 
explain to me--I mean, again, farmers are price-takers, not price-
makers. How we are going to make that work, in terms of its 
implementation--I mean, if you have a slump in the market, as we have 
had the last 2, 3 years in the poultry industry?
    Mr. Avalos. Congressman, the proposed rule, it is not guaranteeing 
the grower a recovery on its investment. What it does propose is that 
agreements be for a long enough period of time to give the producer an 
opportunity to recoup up to 80 percent of his investment.
    For example, if you have a grower who is required by his buyer to 
put a million dollars' worth of improvements to his facilities and he 
does so, but then only receives a 6 week agreement, this isn't fair.
    Mr. Costa. But the regulation requires an 80 percent recovery of 
the cost of a capital investment.
    Mr. Avalos. It just requires an opportunity. It is not----
    Mr. Costa. That is not the way I read it. And that is one of the 
reasons why you better provide the extension of time.
    Thank you.
    Mr. Avalos. Thank you, Congressman.
    The Chairman. Thank you.
    And thank you all for your attendance.
    In conclusion, let me just make these few closing remarks, if I 
may, and I think are appropriate after this very, very important 
hearing.
    Mr. Under Secretary, I think what you have witnessed with this 
Committee today is a very passionate outpouring of very serious concern 
that the Agriculture Department, in proposing this new rule, has very 
seriously--seriously--overstepped their boundaries.
    This is especially true given the fact that parts of this new law's 
provisions were soundly rejected through the legislative process, every 
step--through the Committee, through the Senate, the House, and the 
farm bill considerations itself. And for you and the Department to 
arbitrarily go against the wishes and the intent of Congress is 
serious. It is what Shakespeare referred to when he said, ``Et tu, 
Brutus, yours was the meanest cut of all.'' That is what this has done. 
That is why you heard the passion, the disappointment that was 
registered by both sides of the aisle against this proposed rule.
    And I am suggesting that the least--the least--you can do is to 
extend the comment period another 60 days to 120 days. We know that 
there is some discussion within the industry itself. It is obvious. You 
received letters from both sides. Even the wisest person in the world--
Solomon would say that it is time for us to take the time, take another 
60 days, to find out what is going on inside the industry. Some want 
it, some don't. You have the letters. The comment period is too short.
    And just as a way of showing some respect back to us in Congress, 
who rejected these proposals through the legislative process that you 
are instituting, to say, the least we can do, let's extend this to 120 
days, let's get our hands around this problem, let's get the industry 
together.
    Because a house divided against itself shall surely fall. This 
industry is divided. To move ahead would be the worst thing we could do 
for the industry and the people of America.
    Mr. Costa. Mr. Chairman, I thank you again for holding this 
Subcommittee hearing. And I want to reserve the right, as all 
Subcommittee Members, to submit questions to the witnesses, and thank 
them for their testimony this afternoon.
    The Chairman. Absolutely. And under the rules of the Committee, the 
record of today's hearing will remain open for 10 calendar days to 
receive additional material and supplemental written responses from the 
witnesses to any questions posed by a Member to the panel.
    The hearing of this Subcommittee on Livestock, Dairy, and Poultry 
is adjourned.
    [Whereupon, at 3:20 p.m., the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
   Submitted Article by Hon. Leonard L. Boswell, a Representative in 
                           Congress from Iowa
Des Moines Register
July 15, 2010
Antibiotics in livestock affect humans, USDA testifies
By Philip Brasher
    There is a clear link between the use of antibiotics in livestock 
and drug resistance in humans, President Barack Obama's administration 
says, a position sharply at odds with agribusiness interests.
    In testimony to a House Committee on Wednesday, even the 
Agriculture Department, which livestock producers have traditionally 
relied on to advocate for their interests, backed the idea of a link 
between animal use of antibiotics and human health.
    The Agriculture Department ``believes that it is likely that the 
use of antimicrobials in animal agriculture does lead to some cases of 
antimicrobial resistance among humans and in animals themselves,'' said 
John Clifford, the USDA Chief Veterinarian.
    The Food and Drug Administration, which regulates antibiotics in 
animals and humans, has recently proposed to end the use of many drugs 
as growth promoters in hogs and other livestock. Only antibiotics such 
as ionophores that have no human use would be permitted to speed 
animals' growth. The FDA has set a schedule for phasing out the drugs' 
use or proposed specific restrictions.
    Officials said the ban is needed to ensure that the drugs remain 
useful in human medicine.
    Clifford was joined by officials from the FDA and the Centers for 
Disease Control and Prevention in telling a House Energy and Commerce 
subcommittee that there was evidence of a link between animal uses of 
antimicrobials and human health.
    At an earlier hearing, government health experts said U.S. data on 
the linkage was lacking. But Wednesday, Administration officials tried 
to make a closer connection. Studies of Salmonella, for example, have 
shown that giving antibiotics to livestock causes bacteria in the 
animals to develop resistance and that resistant bacteria in food can 
be transmitted to people, said Ali Khan, the Assistant Surgeon General.
    Agribusiness representatives and their allies on the committee said 
more research is needed.
    ``So far there's nothing that links use in animals to a buildup of 
resistance in humans,'' said Rep. John Shimkus, R-Ill.
    A representative of the drug makers, Richard Carnevale of the 
Animal Health Institute, said there is ``no unequivocal evidence'' of a 
connection.
    A Committee Member, Rep. Bruce Braley, D-Ia., said there were 
``very real production concerns'' with restricting the drugs. He said 
``this is an issue that demands thoughtful careful consideration of all 
points of view.''
                                 ______
                                 
 Submitted Letter by Hon. Jim Costa, a Representative in Congress from 
                               California
June 18, 2010

J. Dudley Butler,
Administrator,
Grain Inspection, Packers & Stockyards Administration,
United States Department of Agriculture,
Washington, D.C.

    Dear Mr. Butler:

    During your industry teleconference this morning outlining the 
proposed changes to P&SA regulations that will be published next week, 
I asked a follow-up question in response to the statement by GIPSA that 
``. . . GIPSA has received complaints from market participants that 
packer-to-packer sales may have the intended or unintended effect of 
manipulating market prices.'' My question requested information about 
the complaints that GIPSA has received. These complaints are being used 
to justify and drive this arbitrary proposed change to ban packer-to-
packer transactions, but they have not been delineated or substantiated 
in any way in the documents made public so far. Nor were you able to 
provide them to me during the call. After a secondary question, you 
responded that you would look into the issue and get back to me.
    We appreciate your commitment to transparency in market conditions. 
I look forward to receiving the information I request, and which must 
clearly have been documented in order for you to develop this proposal. 
As I pointed out, all these packer transactions are reported through 
the Mandatory Price Reporting system run by USDA.
    Thank you very much.
            Sincerely,

Rosemary Mucklow,
Director Emeritus,
National Meat Association.
                                 ______
                                 
Submitted Letter by J. Patrick Boyle, President and CEO, American Meat 
                               Institute
July 28, 2010

Hon. Thomas J. Vilsack,
Secretary,
U.S. Department of Agriculture,
Washington, D.C.

    Dear Mr. Secretary:

    The decision to extend the comment period for the Grain Inspection, 
Packers and Stockyards Administration's (GIPSA) proposed rule regarding 
the 2008 Farm Bill is appreciated, especially since the American Meat 
Institute's (AMI) original request for an extension was denied in a 
July letter from GIPSA Administrator J. Dudley Butler.
    In conjunction with the announcement of a 90 day extension, the 
department released a ``Misconception and Explanation'' document 
regarding the GIPSA proposed rule--a somewhat unprecedented step in the 
midst of a notice and comment rulemaking procedure. In reality, that 
document does little to address the many concerns that have been 
created by the proposed rule.
    In some ``Misconceptions'' the department fails to characterize 
accurately the nature of significant concerns raised by the proposal. 
Moreover, in a seeming attempt to mollify critics and minimize adverse 
impacts, some ``USDA Explanations'' actually contradict the plain 
language of the proposed rule.
    For your information, I am attaching an analysis which recites 
verbatim from the document the department's ``Misconceptions'' and 
``Explanations'' followed by a ``Response'' which details the errors 
and misrepresentations in the department's document. I hope that it 
proves helpful as the Department continues to seek comments and 
information through the USDA/DOJ Workshops and the proposed rule's 
extended comment period.
            Sincerely,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
President and CEO,
American Meat Institute.

Attachment

CC:

Hon. Edward M. Avalos;
Hon. J. Dudley Butler.
                               attachment
Alleged Misconception
    The provision on competitive injury would allow producers to sue 
companies without having to show competitive injury.
USDA Explanation
    The proposed rule will bring clarity to an issue that caused 
problems for growers, packers and industry because key terms have been 
incompletely defined. To fully understand this issue, it is important 
to first be clear as to what competitive harm and the likelihood of 
competitive harm mean and how they impact. The proposed rule defines 
competitive injury and likelihood of competitive injury. Competitive 
injury occurs when an act or practice distorts competition in the 
market channel or marketplace. How a competitive injury manifests 
itself depends critically on whether the target of the act or practice 
is a competitor (e.g., a packer harms other packers), or operates at a 
different level of the livestock or poultry production process (e.g., a 
packer harms a producer).
    The likelihood of competitive injury occurs when an act or practice 
raises rivals' costs, improperly forecloses competition in a large 
share of the market through exclusive dealing, restrains competition 
among packers, live poultry dealers or swine contractors or otherwise 
represents a misuse of market power to distort competition. The 
likelihood of competitive injury also occurs when a packer, swine 
contractor, or live poultry dealer wrongfully depresses prices paid to 
a producer or grower below market value or impairs the producer or 
grower's ability to compete with other producers or growers or to 
impair a producer's or grower's ability to receive the reasonable 
expected full economic value from a transaction in the market channel 
or marketplace.
    The proposed rule embraces the concepts of competitive harm and 
likelihood of competitive harm in certain instances; the proposed rule 
states that whether proof of harm or the likelihood of harm to 
competition is necessary depends on the nature and circumstances of the 
challenged conduct.
    If a producer filed a claim on matters dealing with practices that 
could cause competitive harm, such as manipulation of prices, the 
producer would need to show harm or the likelihood of harm to 
competition. But some unfair practices do not have any implication on 
competition for a marketing region. If a producer filed a claim on 
matters that do not involve competitive harm, such as retaliatory 
conduct, using inaccurate scales, or providing a grower sick birds, 
proof of competitive injury or the likelihood of competitive injury 
would not apply. Such a requirement would be like having a car stolen, 
but before the police act, one would need to prove how the theft of the 
car impacts all of the neighbors. As detailed in the proposed rule, 
USDA feels this standard thwarts the purposes of the Act.
Response
    The Explanation simply ignores the plain language in the proposed 
rule. Proposed subsection 201.3(c) provides that ``A finding that the 
challenged act or practice adversely affects or is likely to adversely 
affect competition is not necessary in all cases. Conduct can be found 
to violate section 202(a) and/or (b) without a finding of harm or 
likely harm to competition.'' 75 Fed. Reg. 35351 (June 22, 2010) 
(Emphasis added). The very vague definitions of ``competitive injury'' 
and ``creates a likelihood of competitive injury'' are much broader 
than proving harm to competition, and if proven are deemed by the 
regulations to be unfair.
    However, USDA's explanation above acknowledges that in some cases 
producers will not have to show injury to competition. Missing from the 
proposed rule, the preamble, and the Explanation above is any 
discussion or guidance regarding when that requirement would not apply 
or is waived. In virtually every case brought, a trial lawyer 
representing a plaintiff in a Packers and Stockyards Act case will 
argue that there is no need for the plaintiff to show injury to 
competition. (See discussion regarding the following Alleged 
Misconceptions as to the impact this proposal would have.)
    The clarification offered in the Explanation is nothing more than a 
statement that a producer or grower would have to prove competitive 
injury or likelihood of competitive injury in cases were there could be 
competitive injury and likewise would not have to prove competitive 
injury when there is no competitive injury. Not only is this position 
contrary to the law in eight Federal appellate circuits, it would 
always stack the deck in favor of a plaintiff by only requiring proof 
of competitive injury when the plaintiff can meet that burden. This 
certainly will result in an increase in litigation by private 
litigants.
Alleged Misconception
    The proposed rule will cause increased litigation due to the 
provision on competitive injury or harm.
USDA Explanation
    The lack of clarity on the issue of competitive injury currently 
causes litigation. The proposed rule seeks to clarify the issue and is 
intended to reduce litigation.
    One of the reasons the courts in recent years have ruled that proof 
of competitive injury or harm is necessary is because the Department 
has not articulated its position in regulation.
    Out of the twelve Circuit Courts of Appeal, seven circuits have not 
made clear rulings that affirmatively require a finding of harm to 
competition or likely harm to competition for a violation of the Act. 
Also, several district courts have held that an anticompetitive effect 
is not necessary to establish a claim for a violation of the Act.
Response
    The issue is and has been clear for many years--just not in a 
manner satisfactory to USDA. The most recent interpretation of the 
Packers and Stockyards Act (PSA), this time from the United States 
Court of Appeals for the Sixth Circuit in Terry v. Tyson Farms, Inc. 
No. 08-5577, raises to eight the number of separate federal appellate 
courts that have considered the key issue of whether demonstrating harm 
or likely harm to competition is a necessary element of a PSA claim.\1\ 
In Terry the Sixth Circuit said the following:
---------------------------------------------------------------------------
    \1\ Terry v. Tyson Farms, Inc. No. 08-5577, United States Court of 
Appeals for the Sixth Circuit (May 10, 2010) p. 7.

        ``The tide has now become a tidal wave, with the recent 
        issuance of the Fifth Circuit Court of Appeals' en banc 
        decision in Wheeler v. Pilgrim's Pride Corp., 591 F.3d 355 (5th 
        Cir. 2009) (en banc), in which that court joined the ranks of 
        all other federal appellate courts that have addressed this 
        precise issue when it held that `the purpose of the Packers and 
        Stockyards Act of 1921 is to protect competition and, 
        therefore, only those practices that will likely affect 
        competition adversely violate the Act.' Wheeler, 591 F.3d at 
        357. All told, seven circuits--the Fourth, Fifth, Seventh, 
        Eighth, Ninth, Tenth, and Eleventh Circuits--have now weighed 
        in on this issue, with unanimous results. See Wheeler, 591 F.3d 
        355; Been v. O.K. Indus., Inc., 495 F.3d 1217, 1230 (10th Cir. 
        2007); Pickett v. Tyson Fresh Meats, Inc., 420 F.3d 1272, 1280 
        (11th Cir. 2005), cert. denied, 547 U.S. 1040 (2006); London v. 
        Fieldale Farms Corp., 410 F.3d 1295, 1303 (11th Cir. 2005), 
        cert. denied, 546 U.S. 1034 (2005); IBP, Inc. v. Glickman, 187 
        F.3d 974, 977 (8th Cir. 1999); Philson v. Goldsboro Milling 
        Co., Nos. 96-2542, 96-2631, 164 F.3d 625, 1998 WL 709324, at 
        *4-5 (4th Cir. Oct. 5, 1998) (unpublished table decision); 
        Jackson v. Swift Eckrich, Inc., 53 F.3d 1452, 1458 (8th Cir. 
        1995); Farrow v. United States Dep't of Agric., 760 F.2d 211, 
        215 (8th Cir. 1985); DeJong Packing Co. v. United States Dep't 
        of Agric., 618 F.2d 1329, 1336-37 (9th Cir. 1980), cert. 
        denied, 449 U.S. 1061 (1980); and Pac. Trading Co. v. Wilson & 
---------------------------------------------------------------------------
        Co., 547 F.2d 367, 369-70 (7th Cir. 1976).''

    An interesting, and perhaps telling, indicator of the agency's 
stubborn refusal to abide by the repeated court rulings against the 
position GIPSA articulated in proposed subsection 201.3(c) is the fact 
that in footnote 31 in the preamble to the proposed rule GIPSA does not 
even acknowledge the Terry holding, referencing only that the case was 
argued in March 2010. Terry, however, was decided on May 10, 2010--6 
weeks before the proposal published on June 22. In short, USDA's 
Explanation conflicts with the recent ruling above from the Sixth 
Circuit, as well as a December 2009 decision from the 5th Circuit, 
Wheeler v. Pilgrim's Pride Corp. with its lengthy recital of the 
various appellate court holdings contrary to GIPSA's position.
    USDA states in the Explanation that ``one of the reasons the courts 
in recent years have ruled that proof of competitive injury or harm is 
necessary is because the Department has not articulated its position in 
regulation.'' This assertion conveniently ignores the fact that USDA 
has argued its position on a number of occasions to these Courts 
through amicus (friend of the court) briefs, and still the Court's have 
not agreed with the USDA position.
Alleged Misconception
    The provision on packer to packer sales will eliminate marketing 
agreements or other value added activities and take away the incentive 
to produce meat products that consumers prefer.
USDA Explanation
    The proposed rule seeks to prevent collusion and price manipulation 
caused by the sharing of pricing information between packers. It does 
not ban packers from owning their own livestock. When a packer sells 
livestock to another packer, the information signals important market 
information about price and supply levels. With high levels of 
consolidation and vertical integration, firms may be able to affect the 
prices of sales on the open market. In recent years, the open market 
has become thinner and more volatile. This open market helps determine 
the price of most formula contracts.
    There is nothing in this provision that limits or eliminates 
marketing agreements. Instead, the proposed rule would provide 
integrity in the market to prevent manipulation of prices on the open 
market and in marketing agreements.
Response
    The Alleged Misconception exposes a fundamental misunderstanding on 
the part of USDA about the intended and unintended consequences of the 
proposal. The above Alleged Misconception inappropriately and 
confusingly mixes concerns about the packer-to-packer sale prohibition 
(see next Alleged Misconception) and the very real danger to the use of 
marketing agreements caused by the threat of litigation created by 
proposed subsection 201.3(c) and its elimination of a plaintiff's 
obligation to show injury to competition in a lawsuit. The threat of 
litigation will be presented by disgruntled plaintiffs who are not 
offered the opportunity for a marketing agreement for legitimate 
business reasons. There also will be a threat of litigation from 
plaintiffs who sell livestock in the cash market, do not want to use 
marketing agreements but who will contend that the very existence and 
use of marketing agreements between packers and other producers 
distorts the markets and prevents a cash seller from realizing a 
``reasonable expected full economic value from a transaction.'' (See 
the definition of ``likelihood of competitive injury.'') This concern 
is not hypothetical as the latter scenario was the basis for Pickett v. 
Tyson Fresh Meats, Inc., 432 F.3rd 1272 (11th Cir. 2005).
    In addition, the Explanation asserts that the packer-to-packer 
sales ban is needed to prevent collusion and price manipulation cased 
by sharing pricing information between packers but neither the 
Explanation nor the preamble that accompanied the proposal provide even 
a scintilla of evidence that this type of behavior has, in fact, 
happened. To the contrary, the absence of cases brought by USDA 
suggests strongly that no such behavior has occurred.
Alleged Misconception
    The packer to packer provision will now require packers to sell 
livestock across the country to other packers willing to buy livestock.
USDA Explanation
    The proposed rule prohibits only direct sales of livestock between 
packers. A packer could sell to individuals, market agencies, dealers 
or other buyers.
Response
    Unfortunately, in characterizing the purported misconception USDA 
does not grasp the nature of the very legitimate concern posed by the 
packer to packer livestock sale prohibition. Proposed subsection 
201.212(c) provides that ``A packer shall not purchase, acquire, or 
receive livestock from another packer or another packer's affiliated 
companies, including but not limited to, the other packer's parent 
company and wholly owned subsidiaries of the packer or its parent 
company.'' In a real life example that is not all that unique, a beef 
packer with its only packing plant in Washington State and who owns 
cattle in Kansas feedlots will be precluded from selling those cattle 
to a number of packers with plants in Kansas or Nebraska as it has done 
historically. Instead, that packer will be forced to do one of two 
things with the Kansas cattle: (1) transport those cattle a distance of 
more than 1,500 miles, over the Rocky Mountains to the Washington plant 
or (2) sell them to the various individuals, market agencies, etc. 
cited by USDA in its Explanation. The first option is cost prohibitive 
and even if it were not a trip of that length would endanger the 
cattle. The second option introduces unnecessary costs and 
inefficiencies into the market. In essence, the packer would sell the 
cattle to a dealer who in turn would sell them to the very same packers 
in Nebraska and Kansas only with added costs involved caused by 
additional and unnecessary transactions. USDA's rationale for this 
prohibition ignores the fact that packer to packer transactions are all 
reported to USDA through the mandatory price reporting program and if 
USDA believes some illegal activity is occurring it today has the power 
to take enforcement action. Yet, it has not done so in the past or in 
this current Administration.
Alleged Misconception
    Poultry Growers and Swine Production Contract Growers would be 
guaranteed a return of 80 percent with their production contracts.
Explanation
    Under the proposed rule, producers are to be offered production 
contracts with a sufficient period of time that provide the opportunity 
to recoup up to 80 percent of the cost of their capital investment. 
Producers would not be guaranteed an 80 percent return on investment. 
This rule would not affect provisions in production contracts to deal 
with poor performers such as termination for cause.
Response
    Again, the plain language of the proposal contradicts the 
Explanation. Proposed subsection 201.217(a) provides that ``Any 
requirement that a poultry grower or swine production contract grower 
make initial or additional capital investments as a condition to enter 
into or continue a growing arrangement or production contract must be 
accompanied by a contract duration of a sufficient period of time for 
the poultry grower or swine production contract grower to recoup 80 
percent of the cost of the required capital investment.'' 75 Fed. Reg. 
35353 (June 22, 2010) (Emphasis added) Conspicuous in its absence in 
the plain language of the proposed rule is the word ``opportunity'' 
with respect to recouping 80 percent of an investment.
Alleged Misconception
    Companies will no longer be allowed to provide premiums to 
producers.
Explanation
    There is no provision in the proposed rule that would limit or 
eliminate the ability of companies to provide premiums to reward 
producers for providing certain quantity or quality of livestock.
    The proposed rule simply requires that if differential pricing is 
offered, the packer, swine contractor, or live poultry dealer must 
maintain records to document the business justification for that 
pricing arrangement. The documents that would be required by this 
provision are those documents containing information typically used by 
the regulated entity.
Response
    USDA's Explanation again mischaracterizes the concern regarding the 
proposed rule. Proposed subsection 201.94(b) would require packers, 
swine contractors, and live poultry dealers to maintain written records 
that provide ``justification for differential pricing or any deviation 
from standard price or contract terms offered to poultry growers, swine 
production contract growers, or livestock producers.'' There is, 
however, no guidance in the proposed rule, the preamble, or in the 
Explanation above regarding what is meant by standard price or contract 
terms.
    In addition, proposed subsection 201.210(a)(5) would make it an 
unfair practice to engage in ``paying a premium or applying a discount 
on the swine production contract grower's payment or the purchase price 
received by the livestock producer from the sale of livestock without 
documenting the reason(s) and substantiating the revenue and cost 
justification associated with the premium or discount . . .'' 75 Fed. 
Reg. 35351 (June 22, 2010). Although this language does not prohibit 
packers from providing premiums to producers, it provides a strong 
incentive not to do so. In that regard, it would be virtually 
impossible for packers to know whether they are maintaining the 
necessary documentation in order to comply and to prevail in potential 
lawsuits alleging unfair pricing. Moreover, there is little to no 
discussion in the proposed rule, the preamble, or the Explanation on 
what type of ``revenue or cost'' documentation is required to be 
maintained. Furthermore, the reason for providing a premium or discount 
may not be cost justifiable to the penny even though there are other 
good business reasons for a premium or discount and documents showing 
the detail required are not kept in the information typically used by 
packers.
    In short, the requirement that every transaction be documented with 
``revenue or cost'' justification for a premium or discount is a heavy 
burden, particularly given the number of transaction that occurs 
annually. A livestock purchaser might well choose not to carry such a 
burden and can avoid doing so, and thereby avoid the possibility of 
being out of compliance, simply by buying all livestock on the average.
Alleged Misconception
    The proposed rule takes away producers' ability to maintain the 
privacy of business transactions because all transactions will have to 
be reviewed by GIPSA and then posted on a government website open to 
public access.
Explanation
    There is nothing in the proposed rule that suggests GIPSA would 
review all business transactions, nor require that all these 
transactions be made available on its website.
    To increase transparency, GIPSA is proposing that packers, swine 
contractors, and live poultry dealers provide sample contracts and 
poultry growing arrangements to GIPSA. In return, GIPSA will make these 
sample contracts available on its website. The proposal requires the 
submission of sample contracts, not every transaction.
    Any trade secrets, confidential business information and personally 
identifiable information submitted would be removed and not made 
available on GIPSA's website.
Response
    Proposed subsection 201213(a) provides that ``Packers and swine 
contractors purchasing livestock under a marketing arrangement 
including, but not limited to, forward contracts, formula contracts, 
production contracts or other marketing agreements, and live poultry 
dealers obtaining poultry by purchase or under a poultry growing 
arrangement must submit a sample copy of each unique type of contract 
or agreement to GIPSA.'' 75 Fed. Reg. 35352 (June 22, 2010) (Emphasis 
added). The concern not addressed by the proposed rule, and the 
Explanation above, is that in many cases producers have unique 
agreements with their packer/customers, which means each of those 
agreements would be posted on the GIPSA website. In addition, the 
proposed rule seems to exclude producer input as to what constitutes 
confidential information in that the proposed rule provides that 
``[P]ackers, swine contractors and live poultry dealers must identify 
confidential business information when submitting contracts to GIPSA.'' 
Id.
                                 ______
                                 
                          Submitted Questions
Questions Submitted by Hon. David Scott, a Representative in Congress 
        from Georgia
Response from Hon. Edward M. Avalos, Under Secretary for Marketing and 
        Regulatory Programs, U.S. Department of Agriculture
Animal and Plant Health Inspection Service, U.S. Department of 
        Agriculture
Animal Identification/Animal Disease Traceability
    Question 1. A mandatory Federal animal identification system would 
still seem to be the most logical way to assure rapid and accurate 
tracing in the face of a disease outbreak. Is such a system really out 
of the question? If so, why?
    Answer. We believe that the only way for an animal disease 
traceability system that imposes mandatory requirements to move forward 
is to have significant buy-in from all sectors in agriculture and all 
our partners. The National Animal Identification System (NAIS) did not 
have strong support from many of our partners, who perceived it as a 
top-down, one-size-fits-all approach. We simply were not achieving the 
levels of participation needed for a fully successful program.
    Our goal with the new animal disease traceability framework is to 
develop a system that allows us to quickly and effectively track and 
trace livestock when needed to prevent the spread of animal disease in 
a way that imposes the least burden on producers, and that leverages 
the strengths and expertise of states, Tribal Nations, and producers to 
empower them to find and use the approaches that work best for them. 
The flexibility of this approach, we believe, as well as our outreach 
efforts and coordination with many stakeholders will give us a broader 
frame of support to be able to have an effective national traceability 
program.

    Question 2. If foot and mouth disease (FMD) were detected in the 
United States today, what mechanisms are in place to trace infected and 
exposed animals? How would such traceability differ or be improved 
under the proposed framework?
    Answer. If there were a foot-and-mouth disease (FMD) outbreak in 
the United States, the first step would be to stop animal movements to 
prevent the further spread of disease, and to allow us to assess the 
scope of the problem. We would rapidly deploy the Incident Command 
System (ICS) to ensure the appropriate quarantine of affected herds, as 
well as movement controls to minimize the spread of the disease. The 
ICS would coordinate investigations and would focus on the task of 
gathering pertinent records from multiple available sources, such as 
health certificates, permits, farm records, ports of entry records, and 
auction market records, all in an effort to find basic information to 
properly trace affected animals.
    The main advantage of the proposed animal disease traceability 
framework would be the speed with which we could obtain this 
information. The tracing methods and information sources would likely 
stay the same, but because we would have a system in place to determine 
where animals are and where they have been, we would be able to more 
effectively and rapidly target those animals affected for whatever 
actions the incident would warrant.

    Question 3. If the states and tribes are to lead and administer the 
new traceability approach, how does APHIS intend to coordinate these 
various efforts?
    Answer. First, in terms of coordination, APHIS convened a 2 day 
forum with state and Tribal animal health officials in March to begin 
developing a framework for the new approach to animal disease 
traceability. We followed up this successful effort by convening a 
group of state animal health officials to provide the Agency with 
continued input into the development of performance standards being 
drafted as part of the proposed regulation for the program. APHIS has 
also held a series of listening sessions across the country to update 
producers and others on progress being made in the development of the 
proposed regulation, answer questions, and obtain feedback.
    Under the regulatory framework for traceability we currently 
envision, APHIS' primary role in terms of coordination will be to 
establish clear, uniform, Federal standards for interstate movement of 
animals. That way, states, tribes, and territories know what their 
traceability systems must achieve for their livestock and poultry to 
move interstate. Performance measures included in the traceability 
regulation will help to ensure that states and Tribal Nations are 
meeting the requirements and contributing to successful animal health 
traceability in the United States.

    Question 4. If the new traceability framework will only apply to 
animals moving interstate, will APHIS be able to trace animals to their 
herd of origin or only to their state of origin? If the latter, how 
will herds or origin be identified and handled?
    Answer. Under the proposed framework for animal disease 
traceability, APHIS will rely on states and Tribal Nations to determine 
whether to trace animals to their herd of origin or only to the state 
or Tribal Nation level. The proposed framework would only require 
tracing back to the state level. There will be strong incentives for 
states and Tribal Nations to develop a system that traces smaller units 
because failure to do so may result in an initial quarantine of the 
state or Tribal Nation until APHIS has information that allows APHIS to 
more finely define the scope of an outbreak. The APHIS Administrator 
would use epidemiologic information from these smaller traceability 
units to avoid a quarantine of the entire state.

    Question 5. Will APHIS develop minimum standards for traceability 
that all industries, producers, states and tribes can follow? Will 
APHIS develop implementation benchmarks and timelines for state and 
Tribal compliance? Will the program meet and conform with international 
animal health and disease traceability and reporting standards?
    Answer. Yes. APHIS is currently developing standards that would 
provide clarity for states and Tribal Nations. These would include 
items such as common data standards, and standards covering official 
identification requirements and interstate certificates of veterinary 
inspection. APHIS is preparing to publish a proposed regulation, which 
will lay out proposed performance standards, program requirements, and 
the timeline for implementation of specific animals for states and 
Tribal Nations.
    With respect to the framework's conformance with international 
standards, it adheres to most of the recommendations of the October 
2008 World Organization for Animal Health (OIE) Terrestrial Animal 
Health Standards Commission draft document, ``Design and Implementation 
Systems to Achieve Animal Traceability.'' USDA's animal disease 
traceability framework is tailored to the American agricultural 
production system, so in a small number of instances, the OIE 
recommendations would be voluntary under USDA's system rather than 
mandatory--for example premises registration.

    Question 6. Continued funding for this program is very uncertain. 
How does APHIS intend to support the traceability efforts of the states 
and tribes?
    Answer. One of our main goals with the new animal disease 
traceability framework is to develop a system that is flexible enough 
to meet the needs of states, Tribal Nations, and their producers. As 
part of that, we have placed an emphasis on the ability for states and 
tribes to use low-cost technology if they believe that this will meet 
their traceability needs. For example, we have discussed the 
possibility of branding meeting the needs for traceback, as well as the 
use of low-cost ear tags. On the other hand, the flexibility of our 
approach will allow for the use of advancing technology. That is, 
producers wishing to use radio frequency identification (RFID) for 
official identification will continue to have that option.
    Under the framework, funding would be provided through annual 
cooperative agreements that detail implementation strategies supporting 
the cooperator's traceability plan. Funding levels would be 
proportionate with the projected costs of the activities defined in the 
cooperative agreement.
VS 2015
    Question 7. Millions of dollars have been expended over several 
decades trying to eradicate diseases like bovine tuberculosis, 
brucellosis in cattle and swine, and more recently, scrapie in sheep 
and goats.
    If the new emphasis will be on prevention, preparedness, detection 
and early response activities, what will become of these traditional 
disease eradication programs?
    Answer. Traditional disease eradication programs will continue as 
long as there is a need. These programs are an avenue for APHIS to 
support producers and ensure that program diseases continue to decline. 
Nevertheless, APHIS is in the process of revising these disease 
eradication programs to incorporate new scientific knowledge and 
accommodate changes in the agriculture industry, as many of these 
programs were created decades ago. Thus, the programs will continue to 
evolve.

    Question 7a. What will be the Federal role and response when 
infected herds are detected?
    Answer. Although VS2015 is focused primarily on additional efforts 
for prevention and preparedness, APHIS will continue to respond 
effectively when needed. APHIS will work with its partners to develop a 
clear understanding of roles and responsibilities. The Agency will 
continually evaluate the robustness of response plans for diseases and 
other events of concern and the availability of vaccines, diagnostics, 
stockpiles of materials, laboratory capacity, and disease simulation 
models. We will maintain readiness through ongoing preparation, 
training, and practice. When needed, APHIS will extend its prevention 
and early response efforts to address animal health issues occurring 
outside of the United States. APHIS will identify, prioritize, plan, 
and direct APHIS-funded animal health surveillance and disease control 
or eradication programs carried out overseas--as well as assisting 
other countries as they develop their animal health capacities.

    Question 7b. Will depopulation of infected herds with Federal 
indemnity still be utilized? If so, under what circumstances? What 
criteria will be used to make these decisions?
    Answer. For its Bovine Tuberculosis and Brucellosis programs, APHIS 
has traditionally encouraged producers to depopulate entire affected 
herds. This approach provided an effective and efficient way of 
eradicating this disease when herds of relatively small sizes included 
a high percentage of infected animals. However, as herd sizes increase 
and funding levels decrease, APHIS cannot always justify depopulating 
herds that often exceed 1,000 animals when only one or two animals in 
the herds are diagnosed with a disease. APHIS believes that a science-
based approach can evaluate the circumstances with each herd to 
minimize the need for full-herd depopulation without impairing animal 
health.
    Therefore, APHIS no longer recommends using Federal funds to 
depopulate entire affected herds and indemnify herd owners as the 
primary management option. Rather, whole-herd depopulation will be 
implemented when the data indicate that other options will not mitigate 
disease spread, an imminent public or animal health risk exists, or it 
is cost beneficial to do so. We are using an epidemiological model to 
guide decisions regarding herd depopulation and to evaluate whether 
other management options are more appropriate. This allows APHIS to use 
a science-based approach that evaluates the circumstances and risk 
surrounding each herd while being fiscally responsible with limited 
indemnity funds.

    Question 8. Will states be expected to take on more responsibility 
for these established disease control and eradication programs? What 
Federal resources and support will be available to assist the states?
    Answer. APHIS is continuing to explore all its options with respect 
to VS2015, particularly with how we assess the strengths and weaknesses 
of our various programs. Until these discussions and planning are 
complete, we do not have an answer to what the state role will 
ultimately be. Yet, cooperation between the Federal Government and 
states has long been a key component of animal disease programs, and it 
will continue to be a key as we move ahead with any changes. APHIS is 
examining regulations for traditional disease programs that are more 
performance-based. That will allow states to leverage resources and 
achieve performance standards in ways that work best for them, and 
their unique circumstances. At the same time, APHIS will continue to 
partner with and provide support to states through program managers and 
our extensive field staff. APHIS will evaluate the needs of the states 
and available resources to provide funding in the form of cooperative 
agreements to help them meet their animal health needs.

    Question 9. Can you elaborate more on the expanded certification 
services you envision to facilitate interstate and international trade?
    Answer. The animal health permitting requirements from importing 
countries are becoming increasingly complex. With the Administration's 
goal of doubling trade exports over the next 5 years--and with 
agricultural products expected to be a large part of that--the demand 
for certifications is likely to increase.
    As part of VS 2015, we are considering offering a range of 
additional certifications to meet needs of producers and facilitate 
trade. We are currently analyzing potential opportunities that will 
address this goal, meeting the needs of trading partners and industry.
Antibiotics
    Question 10. What are APHIS's authorities with regard to the use of 
antimicrobials in food-producing animals? How is APHIS coordinating 
with other Federal agencies on this issue?
    Answer. APHIS has no regulatory authority over the use of 
antimicrobials in food-producing animals. We are committed, however, to 
playing an active role in scientific and inter-Agency dialogue on the 
issue, ensuring that policy makers have the information and the data 
they need to make sound scientific- and data-based decisions on these 
critical policies.
    APHIS partners with many agencies within USDA, and throughout the 
Federal Government. Also key to our efforts to address antimicrobial 
resistance is the National Antimicrobial Resistance Monitoring System 
(NARMS). NARMS was established in 1996 as a partnership of the 
Department of Health and Human Services' Food and Drug Administration 
(FDA) and Centers for Disease control and Prevention (CDC), as well as 
USDA's Agricultural Research Service (ARS), Food Safety and Inspection 
Service (FSIS), and APHIS. The NARMS program monitors changes in 
antimicrobial drug susceptibilities of selected enteric bacterial 
organisms in humans, animals, and retail meats. The system is intended 
to provide meaningful data to help identify antimicrobial drug 
resistance in humans and animals, and to provide timely updates to 
veterinarians and physicians on patterns of resistance. It is part of 
the overall Federal strategy to combat antimicrobial resistance that 
fulfills the need for a national surveillance program to monitor 
resistance among foodborne pathogens in humans and animals.
    In addition to these efforts, APHIS has been collecting an 
increasing amount of data on production practices and samples 
containing bacteria that have been used to evaluate levels and impacts 
of antimicrobial use on livestock operations throughout the United 
States. This data and the samples are collected through the National 
Animal Health Monitoring System (NAHMS), which conducts national 
studies on the health and health management of domestic livestock and 
poultry populations. Bacterial isolates gathered via NAHMS had been 
tested for antibiotic resistance and included in NARMS. The data 
collected yielded information on, among other things, the types of 
antimicrobials used to treat various common diseases in animal 
populations, how producers decide to treat and what to treat with, how 
antimicrobial drugs are delivered to the animals (via feed, water, or 
parenterally), and primary influencers on the antimicrobial drug 
decision-making process. All of these factors are critical to 
understanding how to optimize antimicrobial drug use in animal 
populations.

    Question 11. What conclusions, if any, has APHIS drawn regarding 
antimicrobial resistance in animals based on data collected in the 
National Antimicrobial Resistance Monitoring System, or ``NARMS''?
    Answer. The NARMS program has been a useful tool for bettering our 
understanding of antimicrobial resistance, and it has also helped us 
uncover additional questions that require further study. For example, 
we have found that there are episodic increases and decreases in the 
occurrence of some Salmonella serotypes, and that these changes in 
serotypes are often accompanied by different levels of, and types of 
resistance problems. We know we must better understand these changes, 
particularly the controls and influences on why certain serotypes 
increase in prevalence before fading away. NARMS has also allowed us to 
better understand the effects of certain types of drugs. For example, 
we learned that resistance to ciprofloxacin, an important drug for 
treatment of Salmonella infections in humans, remains low to 
nonexistent in isolates from most animals. On the other hand, NARMS 
data indicate that resistance to ceftriaxone, another drug used for 
treatment of Salmonella infections in humans has begun to appear at 
very low levels. For this reason, focused efforts are needed to 
continue to monitor drug resistance and understand why and how it 
emerges.
Animal Welfare Act (AWA)
    Question 12. Your testimony references strengthening enforcement of 
the AWA. The May 2010 report from the Office of Inspector General on 
the Inspections of Problematic Dealers reveals serious problems, not 
only in the inspections of these dog dealers but also in the 
investigation and enforcement of violations. Clearly the 
``educational'' approach has not worked.
    How will the reallocated resources be utilized?
    Answer. An additional $4 million has been made available for APHIS 
to ramp up enforcement activities in FY 2010.
    The additional funding in FY 2010 will allow us to hire up to 60 
additional employees. These employees would include inspectors, 
investigators, and compliance specialists. We will target these staff 
to help conduct investigations in areas where there is an intensive 
workload. This will reduce the current ratio of inspectors to 
facilities, allowing for a greater focus on problematic dealers. Just 
as important, this would include funding for additional training, 
policy, and program support personnel, all of which are critical to 
ensuring a strong enforcement program. Training is a critical part of 
our Enhanced Animal Welfare Action Plan, and we have already trained 
all of our inspectors and supervisors to strengthen their ability to 
identify direct and repeat non-compliant items, adequately describe 
non-compliant items, and to identify common medical conditions seen at 
commercial kennels, among other things.
    For FY 2011, the President's 2011 budget requests an additional 
$5.3 million so APHIS can continue and expand these enhanced 
activities.

    Question 12a. How is coordination with state and local authorities 
being improved?
    Answer. Coordination with state and local authorities is an 
important priority for APHIS. In particular, these partnerships could 
be beneficial to improve enforcement. APHIS will continue to refer 
issues of mutual interest to states through local humane officers who 
enforce state laws and by sharing inspection reports and enforcement 
actions with several states that have state-level enforcement 
capability such as Colorado, Iowa, Kansas, Missouri, and Pennsylvania. 
Additionally, APHIS intends to develop formal procedures to refer 
suspected animal cruelty incidents to state governments that have 
felony laws for animal cruelty.

    Question 12c. Has a new table of increased penalties been finalized 
and implemented?
    Answer. APHIS continues to work on the development of the penalty 
worksheet. It will be published as soon as the review is completed.

    Question 13. APHIS is also proposing to regulate the sales of dogs 
on the Internet. This will add several thousand facilities that will 
require inspection.
    Given the poor record of performance to date with the existing 
problematic dealers, how does APHIS intend to accommodate this 
additional inspection, investigation and enforcement burden?
    Answer. APHIS developed and is carrying out an Enhanced Animal 
Welfare Action Plan that lays out a series of immediate, intermediate, 
and long-term actions that we believe will allow us to meet the demands 
upon the Animal Care program. These actions include the eventual 
development of regulations on Internet sales.
    As a first step APHIS is conducting an internal needs analysis to 
determine what resources are needed to effectively accommodate the 
additional inspection, investigation and enforcement burden that would 
derive from regulating the sales of dogs on the internet. Once that 
analysis is complete, APHIS will have a better understanding of the 
full requirements needed for enforcement of this proposed regulation, 
and how we could align resources to match those needs.

    Question 13a. Is APHIS prepared to allocate sufficient resources to 
its AWA program activities to effectively implement a full range of 
robust enforcement actions?
    Answer. During FY 2010, an additional $4 million was made available 
to address recent findings of an Office of Inspector General (OIG) 
audit related to APHIS' enforcement of Animal Welfare Act (AWA) 
inspections of problematic dog dealers. The additional funding in FY 
2010 will allow us to hire up to 60 additional employees. These 
employees would include inspectors, investigators, and compliance 
specialists. Just as important, this would include funding for 
additional training, policy, and program support personnel, all of 
which are critical to ensuring a strong enforcement program. We will 
target these staff to help conduct investigations in areas where is an 
intensive workload. We have also requested an additional $5.3 million 
for AWA program efforts in FY 2011 that, if approved, will allow us to 
continue and expand our inspection and enforcement activities.
    At the same time, we are conducting an internal needs analysis on 
what resources would be needed to effectively accommodate the increased 
activities related to the regulation of sales of dogs on the internet. 
This analysis will help us align resources in a way that will enable 
APHIS to effectively undertake the full range of enforcement actions.
Agricultural Marketing Service, U.S. Department of Agriculture
Electronic Livestock Price Reporting
    Question 1. The Cattle Dashboard you previewed for us today appears 
to be a promising tool to assist producers and all segments of the 
cattle industry in evaluating price reporting data for live cattle. The 
2008 Farm Bill also directs a marketing news education program to 
educate the public on the usage and understanding of this system. What 
sorts of educational efforts does AMS have planned?
    Answer. AMS has actively reached out to users of the Cattle 
Dashboard to demonstrate its capabilities and plans to continue these 
efforts. Soon after its launch, AMS gave a presentation to NCBA's Live 
Cattle Marketing Committee; featured the dashboard at state fairs, farm 
shows, and smaller venues across the country; and published a user-
friendly guide on the dashboard to help users customize data. AMS plans 
to promote the Cattle Dashboard at upcoming events and industry 
meetings, and is leveraging relationships with academic groups--such as 
the Livestock Marketing Information Center--to reach broader audiences. 
Also, AMS is currently developing a glossary of terms that will be 
prominently featured on the AMS Market News portal.

    Question 2. Mandatory price reporting is also currently in place 
for boxed beef cuts and live hogs. Are similar tools being developed 
for those sectors? What are the timelines? Does AMS have the resources 
to develop and implement these additional tools?
    Answer. The Cattle Dashboard was developed with existing funds as a 
proof of concept. Additional funds would be needed to develop other 
dashboards.
Country of Origin Labeling (COOL)
    Question 3. Have there been problems in the implementation of COOL? 
If so, what are they and how have they been resolved?
    Answer. In general, there have not been any widespread problems 
associated with implementing the country of origin labeling (COOL) 
program. As it might be expected with the large scope of this new 
program and the volume of covered commodities that require labeling, 
retailers and suppliers continue to work at improving their processes 
to ensure that all covered commodities are accurately labeled with 
origin information.
    To assist regulated entities in complying with the final rule, AMS 
has posted several guidance documents on the COOL website, created a 
pod cast in collaboration with the Food Safety and Inspection Service, 
created a You Tube video clip describing the program, and participated 
in numerous government and industry-led events to educate the industry 
and consumers. AMS also continues to work with state cooperators to 
ensure that all retail reviews are being conducted in accordance with 
established procedures. Additionally, AMS has systems in place to 
respond to direct inquiries from retailers, suppliers and consumers by 
telephone and electronic mail in a timely manner.
    AMS has also experienced some challenges in manually processing the 
large number of store reviews that have been submitted by state 
personnel. Currently, the process of reviewing state submissions, 
issuing compliance letters to retailers and suppliers, and tracking 
compliance is manual and time consuming. To make this process more 
efficient and to enhance compliance analysis and reporting 
capabilities, AMS is working with an outside firm to create a database 
management system, which is anticipated to be functional in spring 
2011.

    Question 4. It sounds like state agencies are largely carrying out 
the compliance activities under COOL. How is AMS coordinating with the 
state agencies in this effort? Are the combined state and Federal 
efforts adequate to assure compliance?
    Answer. Various agencies from all 50 states have entered into 
cooperative agreements with AMS to perform COOL reviews in retail 
stores. state agency personnel have been trained in the regulatory 
requirements and in retail surveillance procedures, and also have been 
certified to conduct retail store inspections. In addition, Federal 
employees from AMS' Livestock and Seed Program have been trained to 
serve as a backup to state agencies that are unable to complete 
assignments and to also serve as follow-up reviewers to determine the 
integrity of tasks performed by cooperating partners.
    AMS distributes COOL retail assignment information to the state 
partners that sets forth the actual stores to be reviewed in each state 
by street address. During fiscal year (FY) 2009, 5,000 retails reviews 
were conducted across the country. In FY 2010, over 7,700 retail 
reviews are scheduled nationwide. Plans for FY 2011 are to assign 
approximately 7,500 retail reviews to state agencies. There are 
approximately 37,000 covered retail stores in the country, so within a 
3 year time period, over half of all U.S. stores will be reviewed for 
COOL compliance.

    Question 5. When COOL violations are found, how is compliance 
enforced? Is it working?
    Answer. State employees submit detailed reports of all retail 
reviews to AMS where the reports are further reviewed by COOL 
Specialists. Official determinations of compliance are made by the AMS 
COOL Program staff. In the event a retail store is citied for COOL 
violations, in accordance with the COOL statute, letters are sent to 
the retailer requiring them to submit written corrective actions and 
preventative measures within 30 days. The majority of retail stores 
provide adequate responses addressing violations within 30 days. 
Follow-up protocols are in place to address those retailers who do not 
respond to compliance violations as directed. To date, all retailers 
have satisfactorily responded by the conclusion of the notification 
process.
Catfish
    Question 6. There is growing concern about the length of time it is 
taking for the rules on both the grading and the inspection of catfish 
to be promulgated. What is causing the delay? When can we expect these 
proposed standards to be published?
    Answer. AMS is responsible for developing and publishing catfish 
grade standards and implementing a grading program. A draft of the U.S. 
Standards for Grades of Freshwater Catfish and Derivative Products is 
being developed. AMS expects the draft standard to be published this 
fall in a Federal Register notice with a request for public comment.
    The Food Safety and Inspection Service (FSIS) is responsible for 
developing and publishing a catfish inspection program. FSIS has 
developed a rule and it is under review by the Office of Management and 
Budget.
Negotiated Rulemaking
    Question 7. What is USDA's experience with negotiated rulemaking? 
How often has it been used? In what situations? What have been the 
outcomes?
    Answer. USDA has limited experience with negotiated rulemaking. 
USDA's Animal and Plant Health Inspection Service successfully engaged 
in negotiated rulemaking in the mid 1990s for changes to the care, 
handling, treatment, and transportation of marine mammals in captivity. 
The process took approximately 3 years from conception to publication 
of a proposed rule in the Federal Register for public comment.
Grain Inspection, Packers, and Stockyards Administration, U.S. 
        Department of Agriculture
Proposed Rule on Fairness in Marketing of Livestock and Poultry
    Question 1. Branded, value-added products often require animals 
that meet very specific criteria for size, weight, genetics, feeding 
practices, etc. Packers and processors are willing to pay producers a 
premium to supply such animals in a timely manner.
    Please explain how the proposed rule as currently written would 
allow packers and processors to continue to pay such premiums without 
the risk of liability for undue preferences?
    Answer. The proposed regulations would allow packers and processors 
to continue to pay premiums, so long as the offer of those premiums is 
not unduly discriminatory. The Packers and Stockyards Act currently 
prohibits an unreasonable preference or unjust discrimination and 
courts have allowed a reasonable legitimate business justification to 
be used to justify differential treatment. The proposed rule provides 
clarification and requires documentation be made available for review 
by the Grain Inspection, Packers and Stockyards Administration (GIPSA).

    Question 1a. What justifications would be considered adequate to 
eliminate the concerns about such liability?
    Answer. Justifications for premiums would not need to be extensive 
but should be sufficient to identify the benefit-cost basis of any 
pricing differential received or paid. The legitimate business 
justifications, along with the facts and circumstances of each case, 
would be considered in determining if a premium constitutes an undue or 
unreasonable preference.

    Question 2. If implementation of this rule results in a decrease in 
the number of branded, value-added products, won't that have a negative 
impact on our international trade, which relies heavily on such 
products?
    Answer. GIPSA invites comments on the potential impacts of the 
proposed rule on international trade and value-added products. We will 
consider all comments on this issue in drafting the final rule.

    Question 3. GIPSA's proposed definition of ``likelihood of 
competitive injury'' includes a situation that ``impairs a producer's 
or grower's ability to compete with other producers or growers . . .'' 
How would you enforce such a broad definition? If a producer is not 
offered a contract from a packer that has a premium product, would that 
producer be in a position to claim that their ability to compete has 
been impaired?
    Answer. Producers not in the position to fulfill the terms of a 
contract would not be able to claim that their ability to compete has 
been impaired. The proposed definition is an example of a situation 
that we feel is likely to result in competitive injury. The definition 
is intended to provide transparency regarding the types of situations 
that we believe may be considered a violation of the P&S Act. As is our 
long-standing practice, the facts and specific circumstances of each 
situation will be carefully considered in determining when and if 
enforcement action is appropriate.

    Question 4. One of the criteria for the Secretary to consider in 
determining if an undue or unreasonable preference or advantage has 
occurred is whether premiums paid based on product quality are offered 
in a nondiscriminatory manner to other producers that can meet the same 
standards.
    Who will determine whether the same product quality standards can 
be met, and how will that be done?
    Answer. The criteria included in the proposed rule are among those 
that would be considered by GIPSA in determining whether a particular 
practice grants an undue or unreasonable preference or advantage. 
GIPSA, using its experience and expertise, would conduct investigations 
of the use of premiums paid based on product quality to determine if a 
violation of the P&S Act has occurred.

    Question 4a. What does a packer or processor need to do in order to 
offer the premium to one producer in a manner that does not 
discriminate against another producer
    Answer. The law currently requires that packers and processors have 
legitimate business justifications for differential treatment. The 
proposed rule would require packers and processors to maintain records 
documenting those legitimate business justifications.

    Question 5. In GIPSA's proposed rule, one criterion for the 
Secretary to consider in determining if an undue or unreasonable 
preference or advantage has occurred is ``whether information regarding 
acquiring, handling, processing, and quality of livestock is disclosed 
to all producers when it is disclosed to one or more producers.''
    How does GIPSA anticipate that packers and processors can insure 
that this information is disclosed to all producers?
    Answer. In the proposed rule, GIPSA has included consideration of 
the dissemination of this information as one factor in determining 
whether undue or unreasonable preference or advantage has occurred. 
This proposed criterion is intended to address selective disclosure or 
disclosure to some to the exclusion of others. Comments on disclosure 
of information to producers are welcome.

    Question 5a. Is it possible that requirements regarding the 
``quality'' of livestock constitute proprietary business information, 
such as genetics?
    Answer. In some cases it is possible that the requirements could 
include some aspects of proprietary information. The proposed rule does 
not require firms to release such proprietary information.

    Question 6. Is it possible that concerns about liability will 
actually increase vertical integration as large corporations seek to 
control more parts of the process in order to avoid potential liability 
over perceived undue preferences regarding premiums paid to producers?
    Answer. GIPSA invites comments on this issue and will consider them 
in drafting the final rule.

    Question 7. The definition of unfair, unjustly discriminatory and 
deceptive practices includes paying a premium for a product without 
substantiating the revenue and cost justification associated with the 
premium. What documentation does a packer or processor need in order to 
fulfill this requirement?
    Answer. Packers and processors, as a matter of course, determine 
and document value differences of products of varying quality to 
justify premiums they offer. The proposed rule would require them to 
retain that documentation and provide the criteria on which they base 
their decisions.

    Question 8. If packer-to-packer sales create concerns about market 
price manipulation, doesn't GIPSA already have the tools to investigate 
and prosecute such manipulation?
    Answer. GIPSA has the authority to address alleged violations of 
the Packers and Stockyards Act through adjudication or rulemaking. We 
believe that the increased use of packer-to-packer sales in the current 
environment of high concentration of packers and the thinning of 
negotiated markets creates a market-wide problem that is appropriately 
addressed through notice-and-comment rulemaking.

    Question 8a. In the past several years, how many investigations has 
GIPSA conducted into price manipulation through packer-to-packer sales? 
What have any such investigations found?
    Answer. We have conducted three (3) investigations related to 
packer-to-packer sales, one that is complete and two (2) ongoing. The 
completed investigation indicated that packer-to-packer sales affect 
the market price.

    Question 8b. Why is a total ban on packer-to-packer sales 
necessary?
    Answer. Based on the observed price effects from investigative 
cases, the thin spot market, GIPSA believes the practice of packer-to-
packer sales carries a sufficiently high risk of potential anti-
competitive and manipulative behavior that it should only be permitted 
only in emergency situations such as catastrophe or a natural disaster, 
e.g., if a packer's plant has become inoperative and the packer is 
unable to process previously purchased livestock.

    Question 9. Under this proposed rule, if a cooperative group of 
producers owns a packing plant, would they be able to sell animals of a 
type not slaughtered in that plant directly to other packers or would 
they have to go through a dealer?
    Answer. GIPSA invites comments on this aspect of the proposed rule, 
especially the use and definition of the terms ``affiliate'' and 
``affiliated companies,'' and will assess the need for refinements in 
drafting the final rule.
USDA/DOJ Competition Workshops
    Question 10. What has USDA learned from the workshops held to date? 
How will the proceedings of these workshops be evaluated?
    Answer. The workshops are still in progress. Participants have 
provided information on a broad range of topics related to competition 
in agriculture. USDA understands that having a fair and competitive 
marketplace is important to farmers and consumers. That is why having 
an open and transparent dialogue with farmers and experts is important. 
The goal is to have a dialogue on these complex issues and better 
understand what issues are most important to farmers. So far, there has 
been a very thoughtful dialogue on very complex agricultural 
competition issues from a diverse set of constituencies.

    Question 11. How will the outcomes of these workshops affect USDA's 
approach to policies and regulations around competition issues?
    Answer. USDA gives full consideration to all available, relevant 
information in making policy determinations. In this case, the 
workshops will provide some of that relevant information.

    Question 12. Based on USDA's collaboration with the Department of 
Justice, what is your sense of how DOJ's enforcement of antitrust laws 
within agriculture might change as a result of these workshops?
    Answer. Congress delegated to USDA the responsibility for 
enforcement of the Packers and Stockyards Act; DOJ and the Federal 
Trade Commission have been assigned separate responsibility for 
enforcement of certain other legislation commonly grouped under the 
heading of ``antitrust laws.'' GIPSA and DOJ work together in a way so 
that each may carry out its statutory responsibilities. We expect that 
these workshops will add to DOJ's understanding of the U.S. agriculture 
and agricultural markets.

    Question 13. In your opinion, what effect will these workshops and 
their outcomes have on the finalization of the proposed rule on 
fairness in the marketing of livestock and poultry that is currently 
out for comment?
    Answer. The workshops were conceived, designed, and implemented 
independently of the promulgation of the rule. However, as a result of 
the timing of the workshops and the extension of the comment period, 
they will complement the rulemaking process by adding to the body of 
information available for consideration as we finalize the rule.

    Question 14. In the USDA/DOJ competition workshops held around the 
country, farmers, ranchers and growers have been complimentary of both 
agencies for their work on the issue of anti-competitive behavior; 
however, some have been reluctant to testify. According to producers, 
processors and integrators threatened independent farmers and ranchers 
to the point that they are afraid of airing their concerns. Do you have 
any examples of producer intimidation? In your opinion, are there 
legislative or regulatory actions that could be taken to better ensure 
producer protections from abusive processors and integrators?
    Answer. We have heard of such intimidation on numerous occasions. 
The following remarks were offered at the May 2010 poultry competition 
workshop:

        [N]umerous growers are not attending these workshops because of 
        being afraid of retaliation on them by their integrator. A 
        grower this morning has already been threatened by his service 
        person if he attends and speaks at this forum. All the 
        integrator has to do is make sure that particular grower 
        receives inferior chicks to start a grow out with and maybe 
        short his feed delivery, which can lead to a higher feed 
        conversion rate. This happens, really it does. (Poultry grower, 
        USDA DOJ Workshop, May 21, 2010)

        I've spoken to numerous growers about attending this meeting, 
        but most of them were afraid to come for fear of retribution 
        from their poultry company. You have to do as you are told or 
        you could be refused placement of birds or could face a drop in 
        the number of birds placed or worse. (Poultry grower, USDA DOJ 
        Workshop, May 21, 2010)

        I cannot reveal my identity for fear of severe consequences, 
        like no more chickens. There is, incidentally, a blacklist 
        among integrators so any grower cut off will not be picked up 
        by another integrator. (Poultry grower, USDA DOJ Workshop, May 
        21, 2010)

        And although I came here on my own today, it's not without a 
        lot of worry when I leave that I'll have some retaliation. 
        (Poultry grower, USDA DOJ Workshop, May 21, 2010)

    The proposed rules would provide GIPSA improved tools to enforce 
the Packers and Stockyards Act.

    Question 15. There are ever fewer options for farmers, ranchers and 
growers to choose from when it comes to processing. What impacts does 
this have on the nation's food supply? How would a wider variety in the 
scale and ownership of processing facilities affect this picture?
    Answer. The structure of American agriculture production, exchange, 
and distribution has been evolving for decades. To provide a brief 
summary of some of the key aspects, it is reasonable to conclude that 
the development of alternative marketing and procurement arrangements 
in agriculture have to a large extent reflected that economy's move to 
a service-based economy with a premium placed on differentiation and 
value rather than production of a lesser number of uniform, highly 
standardized commodities. GIPSA believes available evidence suggests 
that this development has enhanced the variety, volume, and quality of 
the nation's food supply, and believes there remain opportunities for 
producers who are able and willing to provide the kinds of services 
that consumers have come to expect. Simultaneous with a shift from 
commodity to service centered production there has been a shift from 
negotiated markets to contract markets and the proposed regulation 
seeks to address the hazards for producers that are emerging in those 
contract markets and unfair practices that can occur when there are 
fewer buyers.
Questions Submitted by Hon. Randy Neugebauer, a Representative in 
        Congress from Texas
Response from Hon. Edward M. Avalos, Under Secretary for Marketing and 
        Regulatory Programs, U.S. Department of Agriculture
Grain Inspection, Packers, and Stockyards Administration, U.S. 
        Department of Agriculture
Proposed GIPSA Rule
    Question 1. Please provide a copy of the economic analysis 
conducted by USDA's Office of Chief Economist, both in making a case 
for the need for the proposed rule and in establishing that the 
proposed rule would effectively address the issues in the livestock 
markets by providing benefits that outweighed costs.
    Answer. The cost-benefit analysis was prepared by GIPSA and can be 
found on pages 35345 to 35349 of the Federal Register notice of the 
proposed rule posted at GIPSA web address http://
archive.gipsa.usda.gov/rulemaking/fr10/06-22-10.pdf. The cost-benefit 
analysis was prepared by GIPSA and reviewed within the Department and 
by the Office of Management and Budget prior to the publication of the 
proposed rule. GIPSA invites comments on the economic analysis as set 
forth in the proposed rule.

    Question 2. Please provide for the Committee record a complete 
accounting of all meetings or formal communications, including 
interagency & interdepartmental, undertaken by the Administrator of 
GIPSA from May 10, 2009 to June 20, 2010 associated with the 
development of this proposed rule. In addition to the dates, such 
information should include a listing of the organizations and 
individuals that participated in each communication and the specific 
topics discussed.
    Answer. GIPSA's Administrator has maintained an open door policy to 
all organizations. Additionally, GIPSA's Administrator and his staff 
have been involved in interagency and interdepartmental meetings that 
would be normally conducted in the development of a proposed rule. 
Listed below are the dates and organizations the GIPSA Administrator 
met with to listen to general industry concerns that organizations 
expressed to GIPSA. Organizations could have raised questions in regard 
to the rule during this time, but the purpose of the meetings was an 
opportunity for organizations to inform or discuss their respective 
industries. In most these meetings, the Administrator encouraged 
comments on the proposed rule once it was published.
    The date and organizations the GIPSA Administrator met with are 
below.
      1.      Consolidated Beef Producers    May 21, 2009
     2.      Coalition for Prosperous       May 26, 2009
              America
     3.      National Pork Producers        June 2-5, 2009
              Council at the World Pork
              Expo
     4.      R-CALF via teleconference      June 2, 2009
     5.      National Pork Expo             June 5, 2009
     6.      Young Cattlemen Beef           June 4, 2009
              Association
     7.      Tyson Foods, Inc.              June 8, 2009
     8.      Livestock Marketing            June 11, 2009
              Association Meeting
     9.      Farmers Legal Action Group     June 26, 2009
    10.      Campaign for Contract          June 29, 2009
              Agriculture Reform, Pilgrims
              Pride and Perdue
    11.      National Cattlemen Beef        July 14, 2009
              Assoc. Conference
    12.      R-CALF USA                     July 30, 2009
    13.      National Meat Association      August 4, 2009
    14.      American Meat Institute        August 5, 2009
    15.      Organization for Competitive   August 8, 2009
              Markets Annual Convention
    16.      National Chicken Council       August 25, 2009
    17.      South Dakota Stockgrowers      September 10, 2009
              Association Convention
    18.      Teleconference Call w/NCBA     September 15, 2009
    19.      Teleconference Call with       September 15, 2009
              National Pork Producers
    20.      Ag Work Solutions              September 22, 2009
    21.      Mountain States Lamb           September 25, 2009
              Cooperative
    22.      Colorado Farm Bureau           September 29, 2009
    23.      Canadian Cattlemen's           October 1, 2009
              Association
    24.      Visit Sheep Facilities in      October 2, 2009
              Denver Area
    25.      Independent Cattlemen of       October 1-3, 2009
              Nebraska
    26.      Mississippi Order Buyers       October 13, 2009
    27.      East Mississippi Livestock     October 13, 2009
              and Peco Foods
    28.      Agribeef                       October 30, 2009
    29.      U.S. Cattlemen's Association   November 3, 2009
    30.      R-CALF                         December 17, 2009
    31.      Lebanon Auction Yard           January 6, 2010
    32.      Visit Agri Beef Plant          January 8, 2010
    33.      American Farm Bureau           January 10, 2010
              Federation
    34.      Tour Mobile Slaughter Unit at  January 13, 2010
              Linda Neunzig Farm
    35.      2010 R-CALF USA 11th Annual    January 22, 2010
              Convention
    36.      2010 Cattle Industry Annual    January 28-29, 2010
              Convention & NCBA
    37.      Mississippi Cattlemen          February 11-12, 2010
              Conference
    38.      Amend Packing Company          March 11, 2010
    39.      USDA/DOJ Issues of Concern to  March 12, 2010
              Farmers
    40.      Briefing for CA Farm Bureau    March 15, 2010
              Federation
    41.      Livestock Marketing            March 17, 2010
              Association
    42.      Western Organization of        April 14, 2010
              Resources Council Staff
              Directors
    43.      Consolidated Beef Producers    April 19-20, 2010
              Annual Meeting
    44.      National Meat Association and  April 22, 2010
              Southwest Meat Association
    45.      USDA/DOJ Poultry Workshop      May 18-21, 2010
    46.      Agribeef                       June 3, 2010

    Question 3. Please provide for the Committee a copy of each of the 
letters sent to packers or other since the proposed rule was published 
requesting Answers to questions about cattle procurement practices to 
be given under oath. Please explain if this information was demanded 
for purposes of an investigation or further the knowledge of the Agency 
about typical industry practices.
    Answer. The letters the Committee refers to were sent to specific 
packers during the course of an investigation that began in June 2009 
and remains ongoing. Since the investigation is still active, release 
of this information including the identity of the recipients and the 
investigative questions could have an adverse impact on the case.

    Question 4. In the background case for the proposed rule, the 
Agency argues that it is necessary because the Courts have failed to 
agree with the Agency's reading of the law. If this is true, why didn't 
the Administration propose a legislative solution to this problem so 
that Congress, working with our constituents, could address this issue?
    Answer. GIPSA believes that current statutory authority in this 
instance is sufficient, given proper clarification as would be 
accomplished by the proposed rule. The rule will facilitate adequate 
enforcement while affording the necessary flexibility to adjust to 
changing conditions and practices in the industry. GIPSA invites 
comments on all aspects of the rule.

    Question 5. In the proposed rule, it is stated that USDA conducted 
three public meetings associated with the proposed rule. However, when 
the Secretary announced the ongoing USDA/DOJ Workshops, the press 
release stated the ``goals of the workshops are to promote dialogue 
among interested parties and foster learning with respect to the 
appropriate legal and economic analyses of these issues, as well as to 
listen to and learn from parties with experience in the agriculture 
sector.'' Why didn't the Administration complete the process of 
listening to people before it published this proposed rule?
    Answer. The workshops were conceived, designed, and implemented 
independently of the procedures for promulgation of the rule. The 
timeline for the proposed rule was largely determined by the need to 
introduce new regulations in conformance to the 2008 Farm Bill. As a 
result of the timing and subject matter of the workshops, they clearly 
have complemented the rulemaking process by adding to the body of 
information available to consider as the rule is finalized.

    Question 6. Many have criticized the proposed rule, stating that it 
will have a chilling effect on agriculture marketing arrangements in 
the livestock sector. Since producers and packers are the two parties 
to these agreements--and both producer groups and packer interests have 
raised concerns--how can the proposal be in the best interest of the 
animal agriculture community?
    Answer. GIPSA has issued a proposed rule for the consideration of 
the public. The comment period on the proposed rule closes on November 
22, 2010. GIPSA will then analyze all comments received in drafting the 
language of the final rule. GIPSA encourages comments on the proposed 
rule that may be considered in that process.

    Question 7. When the Livestock, Dairy, and Poultry Subcommittee 
conducted a hearing in October of 2009 on the challenging economic 
conditions faced by the pork community, a witness representing the 
credit sector stressed the vital role of agricultural marketing 
arrangements in securing lending. Many believe the proposed rule will 
have a chilling effect on these marketing arrangements. What steps were 
taken to address these concerns in the proposed rule?
    Answer. GIPSA has issued a proposed rule for the consideration of 
the public. The comment period on the proposed rule closes on November 
22, 2010. GIPSA will then analyze all comments received in drafting the 
language of the final rule. GIPSA encourages all those who have 
comments in terms of its affect on credit to comment on the proposed 
rule so that their views and concerns can be considered in that 
process.

    Question 8. Contract growing is only one way integrators can secure 
poultry. They could lease houses, or purchase their own houses, or 
raise poultry outside the United States. What steps does the Department 
anticipate taking if the combined weight of this proposed rule causes 
integrators to move to these options?
    Answer. GIPSA has issued a proposed rule for the consideration of 
the public. The comment period on the proposed rule closes on November 
22, 2010. GIPSA will then analyze all comments received in drafting the 
language of the final rule. GIPSA encourages integrators to comment on 
the proposed rule so that their views and concerns can be considered in 
that process.
Agricultural Marketing Service, U.S. Department of Agriculture
COOL Implementation
    Question 1. Please take a moment to describe what is involved in a 
typical COOL review in a retail store. What methodologies are used by 
the reviewer to ensure that the claims being made in the store about a 
particular product are indeed accurate? What steps are taken in cases 
where a product is found to be improperly labeled?
    Answer. A typical COOL retail store review is estimated to take 3 
to 4 hours from arrival of the reviewer to the closing meeting with 
store management. The reviewer conducts an opening meeting with store 
representatives to provide information on the COOL program and to 
describe the review process at the facility. Store representatives are 
invited to accompany the COOL reviewer. Each section of the store is 
examined for covered commodities and each covered commodity is reviewed 
for the presence, accuracy, and overall visibility of country of origin 
declarations. In addition, reviewers request records for five category-
specific random items (e.g., a fresh fruit, a frozen vegetable, a fresh 
fillet of fish, a muscle cut of pork, and ground chicken), to verify 
that the retailer is maintaining records containing country of origin 
information and supplier information, and that the country of origin 
claims made at the point of sale are accurate. Upon completing the 
inspection of all areas of the retail store where covered commodities 
are sold, the reviewer has a closing meeting with store representatives 
to answer any questions and to provide them with a checklist describing 
any items found to be non-compliant. Reviewers inform store 
representatives that findings are not official until processed by AMS 
COOL Specialists.
    State employees submit detailed reports of all retail reviews to 
AMS where the reports are further reviewed by COOL Specialists. 
Official determinations of compliance are made by the AMS COOL Program 
staff. In the event a retail store is cited for COOL violations, in 
accordance with the COOL statute, letters are sent to the retailer 
requiring them to submit written corrective actions and preventative 
measures within 30 days. The majority of retail stores provide adequate 
responses addressing violations within 30 days. Follow-up protocols are 
in place to addresses those retailers who do not respond to compliance 
violations in as directed. To date, all retailers have satisfactorily 
responded by the conclusion of the notification process.
    In addition to conducting COOL reviews at retail stores, the 
program also audits the supply chain from the initiator of the claim to 
the retailer. Products that were chosen for records review (from the 
five category-specific random items) at the retail level are randomly 
selected for supplier traceback audits. In 2009, 200 products were 
selected for supplier traceback audits. The auditors begin with the 
retailer supplier information listed in the retail review and work 
backwards through the chain of commerce to the initiator of the claim 
to ensure that country of origin information is accurate and conveyed 
correctly from one entity to another.

    Question 2. Proponents of mandatory country of origin labeling 
argued that the increased costs associated with the program would be 
more than offset by economic benefits to producers. Has the Department 
conducted any analysis to prove that domestic producers have enjoyed 
either increased sales or higher prices as a result of mandatory 
labeling?
    Answer. USDA has not conducted an analysis of the overall costs or 
benefits of the mandatory COOL program outside of those conducted 
during the rulemaking process.
Animal and Plant Health Inspection Service, U.S. Department of 
        Agriculture
Animal ID/New Animal Disease Traceability Framework
    Question 1. Will compliance with the New Animal Disease 
Traceability Framework be mandatory? Will the Federal Government be 
providing any resources--in other words, money--for the program?
    Answer. APHIS currently plans to propose a rule that would require 
that livestock moved interstate be officially identified and be 
accompanied by an interstate certificate of veterinary inspection 
(ICVI) or other official documentation, with some exemptions when 
appropriate. The proposed plan would specify the authorized methods of 
official identification for each species that must be accepted by all 
states and tribes, thereby ensuring national uniformity. Although 
states and tribes would have to meet the standards, they would have the 
flexibility to use the approach that works best for their needs.
    The FY 2011 budget plan calls for $14,241,000 to support the first 
full year's transition to the new traceability framework. Of this 
amount, $4,629,400 will support program administration and system 
funding while $9,611,600 will support direct field implementation 
including cooperative agreements with states and tribes to implement 
the new traceability plan, identification tags, outreach and APHIS 
field activities.

    Question 2. The failed National Animal Identification System (NAIS) 
was the subject of a government-funded cost-benefit report. Are there 
any plans to conduct such an analysis of the New Animal Disease 
Traceability Framework?
    Answer. USDA does not have any current plans to produce a similar 
cost-benefit report but is currently working on a cost analysis and 
will provide it to Congress when it is completed. As part of the 
rulemaking process, APHIS will also perform an assessment of the 
benefits and costs of the planned proposed rule as required by E.O. 
12866.

                                  
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