[Federal Register Volume 63, Number 176 (Friday, September 11, 1998)]
[Proposed Rules]
[Pages 48961-48981]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-24309]



  Federal Register / Vol. 63, No. 176 / Friday, September 11, 1998 / 
Proposed Rules  

[[Page 48961]]


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DEPARTMENT OF AGRICULTURE

Food Safety and Inspection Service

9 CFR Parts 381 and 441

[Docket No. 97-054P]
RIN 0583-AC26


Retained Water in Raw Meat and Poultry Products; Poultry Chilling 
Performance Standards

AGENCY: Food Safety and Inspection Service, USDA.
ACTION: Proposed rule.

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SUMMARY: The Food Safety and Inspection Service (FSIS) is proposing 
regulations to limit the amount of water retained by raw, single-
ingredient, meat and poultry products as a result of post-evisceration 
processing, such as carcass washing and chilling. Meat and poultry 
carcasses and parts would not be permitted to contain water resulting 
from post-evisceration processing unless the establishment demonstrates 
that water retention is necessary to meet applicable food safety 
requirements. In addition, the establishment would be required to 
disclose on the label the maximum percentage of retained water in the 
product. The proposed labeling statement would provide information to 
consumers of raw meat and poultry products that would help them to make 
purchasing decisions. Establishments having data demonstrating that 
there is no retained water in their products could choose not to label 
the products with the retained-water statement or to make a no-
retained-water claim on the product label.
    FSIS is also proposing to revise the poultry chilling regulations 
to improve consistency with the Pathogen Reduction/Hazard Analysis and 
Critical Control Points (PR/HACCP) regulations, eliminate ``command-
and-control'' features, and reflect current technological capabilities 
and good manufacturing practices.

DATES: Comments must be received on or before December 10, 1998.

ADDRESSES: Submit one original and two copies of written comments to 
Docket Clerk, U.S. Department of Agriculture, Food Safety and 
Inspection Service, Room 102, 300 12th Street, SW., Washington, DC 
20250-3700. Please refer to docket number 97-054P in your comments. All 
comments submitted in response to this proposal, as well as research 
and background information used by FSIS in developing this document, 
will be available for public inspection in the Docket Clerk's Office 
between 8:30 a.m. and 4:30 p.m., Monday through Friday.

FOR FURTHER INFORMATION CONTACT: Patricia F. Stolfa, Assistant Deputy 
Administrator, Office of Policy, Program Development, and Evaluation, 
Food Safety and Inspection Service, U.S. Department of Agriculture, 
Washington, DC 20250-3700; (202) 205-0699.

SUPPLEMENTARY INFORMATION:

Background

    FSIS carries out the mandates of the Federal Meat Inspection Act 
(FMIA; 21 U.S.C. 601 et seq.), the Poultry Products Inspection Act 
(PPIA; 21 U.S.C. 451 et seq.), and the Egg Products Inspection Act (21 
U.S.C. 1031 to 1056) to ensure that meat, meat food, poultry, and egg 
products in interstate and foreign commerce are wholesome, not 
adulterated, and properly marked, labeled, and packaged. The Agency 
maintains continuous inspection oversight of operations in meat and 
poultry slaughtering and processing establishments and in egg product 
processing plants. Among the requirements enforced by the Agency are 
those having to do with the post-evisceration handling and storage of 
carcasses and parts.
    Meat and poultry carcasses are handled in a manner intended to 
yield wholesome, unadulterated products. After evisceration, raw meat 
and poultry carcasses are subject to various processes, including 
washing and chilling, to preserve the safety of the products. The 
Agency is concerned about the potential for water absorption and 
retention in the stages of processing after livestock and poultry 
carcasses are eviscerated and trimmed. Because an eviscerated carcass 
is open and exposed to water through the washing, chilling, and 
spraying processes, it is likely to absorb and retain water under the 
skin and in muscle tissue. There is a potential for product 
adulteration due to excess water absorption and retention.
    In livestock slaughtering establishments, carcasses undergo a final 
wash after slaughter and dressing to remove any adhering foreign matter 
before being placed in the cooler. Historically, meat carcasses have 
been air-chilled. Since the late 1970's, FSIS has permitted air 
chilling in combination with a water spray to minimize carcass 
shrinkage and promote rapid heat loss.
    Air chilling results in carcass weight loss from evaporation of the 
natural water in the carcass during evaporative cooling. Spraying water 
on livestock carcasses during air chilling either replaces the water 
that would have evaporated during air chilling or prevents the water in 
the carcass from evaporating. The result is that livestock carcasses 
subjected to a water spray retain water, and consequently, weight, 
which would have been lost as a result of air chilling. Water spray 
systems must be operated in a manner that does not result in a shift's 
production of meat carcasses from weighing, on average, more than their 
pre-chilled weight. (FSIS Directive 6330.1) This directive recognizes 
that it is technologically feasible and commercially practical to chill 
livestock carcasses in a manner that, on average, does not result in an 
increase in the carcass weight above the pre-chilled weight.
    Although livestock slaughter establishments are not prohibited from 
using water immersion chilling methods, federally inspected 
establishments in the United States do not use immersion chilling for 
livestock carcasses. Immersion chilling is impractical because of the 
size of livestock carcasses and the associated costs of equipment and 
other resources.
    Processing and chilling methods used for some edible meat 
byproducts and organ meats may result in water retention. For example, 
cheek meat, meat from ears and tails, and organ meats are washed, 
cleaned and chilled to preserve safety and wholesomeness before being 
shipped. Tripe is bleached and scalded before being shipped. 
Chitterlings (swine intestines) are washed and chilled before shipment 
and are packaged with water. A few establishments chill beef cheek 
meats in water, a process that may result in the absorption of water. 
The product is labeled to indicate the maximum percentage added water 
it may contain to alert buyers to the fact that the product may weigh 
more because of the chilling process.
    Unlike livestock establishments, poultry processors have 
traditionally chilled poultry using the water immersion chilling 
method. Although air chilling is permitted, immersion chilling is more 
rapid and cost efficient. The use of water immersion chilling is 
limited to whole poultry carcasses or major carcass portions. Poultry 
establishments are required to reduce the internal temperature of 
water-chilled poultry carcasses to 40 degrees F. or less within 4 to 8 
hours after slaughter, depending on the size of the carcass (9 CFR 
381.66(b)).
    Water-immersion chilling is the preferred poultry chilling method 
in the United States for several reasons. First, water is the most 
effective and efficient conducting medium for removing animal heat.

[[Page 48962]]

    Before the 1960's, poultry was chilled in layers of ice or immersed 
in small tanks of ice water. The poultry was chilled using these 
methods for a sufficient amount of time to reduce the temperature of 
the poultry to 40 degrees F. or below, after which the tanks were 
emptied. The use of small individual single-use tanks required 
significant resources, including space, employees, and water or ice. 
Because of these disadvantages, continuous immersion chillers were 
developed. Continuous immersion chillers consist of one or more large 
tanks where chilled water is continually replenished and poultry 
carcasses continuously enter and exit. Modern chillers are equipped 
with refrigeration units and systems for controlling water volume, 
direction, and agitation. They are efficient, rapid, and economical.
    Chilling poultry carcasses in water-immersion chillers always 
results in some absorption and retention of water, primarily in the 
skin and the tissue immediately under the skin. Also, some water 
becomes bound to the muscle tissue.
    FSIS has consistently required that the retention of water in meat 
and in poultry products be minimized. FSIS is mandated to prevent the 
distribution in commerce of meat and poultry products that are 
adulterated or misbranded. A product is adulterated if, among other 
circumstances, ``a substance has been added to or mixed with the 
product to increase its bulk or weight or make it appear of greater 
value than it is.'' (21 U.S.C. 601(m)(8), 453(g)(8)). Thus, a product 
containing excessive water may be considered adulterated. Likewise, a 
product containing excessive water may be considered misbranded. A 
product is misbranded if, among other circumstances, its label is false 
or misleading in any particular. (21 U.S.C. 601(n)(1), 453(h)(1)). 
Immersion chilling of poultry could result in a product's becoming 
misbranded or economically adulterated through the retention of 
absorbed water. However, because immersion chilling is the most 
efficient way to control bacterial growth in poultry products and to 
ensure that establishments consistently meet applicable chilling time 
and temperature requirements, FSIS has permitted the retention of some 
water in poultry.
    FSIS has limited water retention to amounts that are considered 
unavoidable while achieving applicable food safety requirements. The 
regulations generally require water absorption and retention in poultry 
products to be minimized (9 CFR 381.66(d)(1)). FSIS promulgated 
regulations defining maximum water retention levels for classes of 
poultry in 1959, 1960, and 1971 (24 FR 9566 (12/1/59); 26 FR 6471 (7/
19/61); and 35 FR 739 (10/7/70)). Poultry products containing water in 
excess of the regulatory limits are considered adulterated.
    To ensure that poultry products do not exceed maximum water 
retention levels, inspectors sample carcasses each day from each 
chilling system at a point before the poultry is washed and again 
shortly after the poultry exits the chiller. If the water limits are 
exceeded, the poultry is retained until enough water has drained to 
bring the poultry into compliance with the limits. As a practical 
matter, establishments maintain overall water absorption averages below 
the maximum limitation to consistently comply with the regulatory 
limits. However, some firms equip and operate their processing lines in 
a manner that will enable them to control retained water to a level as 
close as possible to the regulatory limits. Sometimes the regulatory 
limits are exceeded. The poultry may then be held at the plant for a 
longer time to permit excess water to drain, or it may be diverted to 
operations, such as boning and cut-up, or other processing operations 
in which excess water is lost.

Concerns About Differences Between the Meat and the Poultry Regulations

    Early in 1996, FSIS received a petition from several national 
livestock industry associations concerning perceived inequities between 
the meat and poultry regulations. The petitioners argued that the 
restriction on water absorption in meat carcasses is inequitable in 
comparison to the absorption allowance for poultry and that, moreover, 
poultry carcasses with weight added through water absorption are 
economically adulterated. The petitioners requested that FSIS prohibit 
the retention of any water absorbed by poultry carcasses during 
immersion chilling. This request was among those the petitioners 
reiterated in a February 7, 1997, letter to the Department. FSIS plans 
to address elements of the petitioners' requests other than the 
absorbed-water issue in future rulemaking documents.
    In 1994, a group of poultry consumers and red meat producers 
brought an action against the Department in the United States District 
Court for the Southern District of Iowa challenging several differences 
in the regulatory requirements for meat and poultry, including the 
contaminant removal methods, standards of identity, and water-
retention. (Kenney, et al. v. Glickman.)
    Plaintiffs alleged that poultry products containing absorbed water 
were both economically adulterated and misbranded within the meaning of 
the PPIA. They also alleged that the regulations establishing maximum 
levels for water retention violated the Administrative Procedure Act 
because they were arbitrary and capricious when compared to the 
regulatory prohibition on absorbed water in meat carcasses. The Court 
found that poultry containing absorbed water was not economically 
adulterated or misbranded under the PPIA. However, the Court also found 
that the regulation specifying water absorption and retention limits 
for ready-to-cook poultry that is to be frozen, cooked, or consumer-
packaged as whole poultry (9 CFR 381.66(d)(2)) was arbitrary and 
capricious because the Secretary did not explain in the rulemaking 
record how he determined the particular water retention levels, why 
water retention cannot be reduced below current levels, or why meat and 
poultry should be treated differently.
    The Court left in place the general requirement at 9 CFR 
381.66(d)(1) for establishments to minimize water absorption and 
retention in poultry at the time of packaging. The Court also left 
standing the regulations at 9 CFR 381.66(d)(3)-(6) controlling the 
amount of retained water in chickens and turkeys that are to be cut up 
or ice-packed.
    The American Meat Institute (AMI), a trade association representing 
meat and poultry slaughtering and processing establishments, petitioned 
the Department on October 2, 1997, to amend the regulations governing 
water absorption and retention in certain raw meat and poultry 
products. This petitioner requested five specific changes:
     Repealing regulations requiring poultry carcasses to be 
chilled below 40  deg.F within a specified time
     Requiring water retention in meat and poultry products to 
have been minimized at the time of packaging
     Allowing meat and poultry carcasses to absorb and retain 
water that is incidental and unavoidable in chilling practices designed 
to improve food protection
     Measuring weight gain from water retention as the 
difference between the hot carcass weight and the weight of packaged, 
finished products
     Requiring labeling of raw meat and poultry with retained 
water above certain minimum absorption and retention levels FSIS 
considered the petitioner's requests in developing this proposal.

[[Page 48963]]

Purpose for New Regulation

    In proposing new regulations governing water retention in raw meat 
and poultry products, FSIS intends: (1) to provide consumers with 
additional information to help them in making purchasing decisions; (2) 
to eliminate certain differences between the meat and the poultry 
inspection regulations; (3) to establish regulations that are 
consistent with the objectives of regulatory reform and with the 
Agency's ``Pathogen Reduction; Hazard Analysis and Critical Control 
Points Systems (PR/HACCP)'' regulations (61 FR 38806; July 25, 1996); 
and (4) to streamline the regulations.
    This proposal would respond to the District Court's findings that 
the regulations the Court set aside were ``arbitrary and capricious'' 
by providing: (1) that any water retention limits be established on the 
basis of sound data; (2) that such limits be as low as technically 
feasible in meeting food safety requirements; and (3) that, to the 
extent possible, the same criteria for establishing water retention 
limits apply both to meat and to poultry products.
    FSIS currently lacks information on which to base any water 
retention limit, or to determine whether any limit currently in use can 
be further reduced. The proposal would be intended, in part, to ensure 
the availability of data demonstrating that water retention in affected 
products is unavoidable and that any water retention limits the Agency 
sets are the minimum feasible. The soundness of the data would be 
ensured in large measure by its having been collected under protocols 
approved by FSIS (see below).
    This proposal would respond, at least in part, to four of the five 
requests in AMI's petition. It concerns water absorbed and retained in 
product as a result of post-evisceration processing and, hence, the 
difference between ``hot carcass'' and finished product weight. It 
would require that water retention be minimized, that the processing 
that resulted in water absorption have a food-safety purpose, and that 
the amount of water retained be indicated on labels of affected 
products.
    This proposal does not address the time and temperature 
requirements for chilling poultry carcasses. FSIS intends to undertake 
a separate rulemaking on this subject.

Proposed Provisions To Limit Retained Water in Meat and Poultry

    FSIS is proposing new requirements in new Part 441 to address water 
retention in single-ingredient raw meat and ready-to-cook poultry 
products as a result of post-evisceration processing. The proposed 
requirements would replace those set forth in 9 CFR Sec. 381.66(d)(3)-
(8) as well as those in Sec. 381.66(d)(2). The intention is to 
restrict, as much as feasible, the amount of water absorbed and 
retained in meat and poultry products. The Agency would also require 
product labels to state the maximum percentage of retained water the 
products may contain.
    Some quantitative limit or measure is necessary to determine 
whether water retention has been minimized. Until the decision in 
Kenney v. Glickman, FSIS used the limits specified in Sec. 381.66(d)(2) 
to determine whether poultry establishments were meeting the 
requirement to minimize water absorption and retention in whole birds.
    The only currently available quantitative limit for determining 
whether water retention in raw products has been minimized (other than 
the limits for cut-up or ice-pack poultry in 9 CFR 381.66(d)(3)-(6)) is 
zero percent. FSIS is aware that it may be difficult to eliminate water 
retention for poultry and some meat products while continuing to meet 
applicable food safety requirements. FSIS is therefore proposing an 
alternative to a zero-percent retained-water requirement. 
Establishments would be required to collect data, in accordance with a 
protocol approved by FSIS, and demonstrate that water retention is an 
unavoidable consequence of the process used to meet a food safety 
requirement, such as the Salmonella performance standards or time/
temperature chilling requirements. FSIS expects that, to determine that 
any unavoidable water retention is the minimum feasible, the protocol 
would provide for testing the process under alternative equipment 
settings or other variables.
    FSIS would accept data generated from an approved protocol to 
support water retention levels for multiple establishments using 
similar post-evisceration processing techniques and equipment. 
Depending on the design of the protocol and the adequacy of the data 
collected under it, the data could be used to justify an industry-wide 
water-retention limit, a limit applying to poultry products processed 
by several establishments, or a limit applying only to a single 
establishment's product. Establishments using an industry-wide or 
multi-establishment limit would have to be able to demonstrate that the 
conditions under which their products are processed match those assumed 
or specified in the protocol used to justify the limit.
    FSIS requests comment on the advisability of accepting, during the 
comment period on this proposed rule, protocols for gathering data that 
would justify industry-wide or process-specific water retention limits. 
FSIS also requests comment on whether the Agency should accept 
protocols submitted by industry groups for individual establishments.
    In a recent Federal Register notice (62 FR 64767; December 9, 
1997), FSIS requested comments on specifications for protocols to be 
used for collecting data on chilled, ready-to-cook poultry products. 
The suggested specifications for such a protocol included: a statement 
of purpose; the type of washing or chilling system; a description of 
the chiller system process, components, equipment, modifications, and 
steps in the chilling process; the number of chillers in a series and 
arrangements of components; the number of evisceration lines feeding 
into a chiller; any pre-chilling steps; anti-microbial treatments, if 
any; the length and velocity of dripping lines; any special apparatus 
or procedure for removing excess water from birds; and a description of 
chilling system factors affecting water absorption and retention, such 
as the time of the birds in the chiller, the water temperature, and the 
amount of chill water agitation.
    To date, FSIS has received two comments on the notice. Three 
livestock producer associations submitted a comment stating that they 
were not in a position to provide information regarding protocols or 
specifications for protocols to collect water retention data. They 
maintained that the poultry industry would be supplying most, if not 
all, the data needed to support any added-water limitations. They also 
expressed the suspicion that data collected by the poultry industry 
would reflect a ``push'' in the direction of maximum retention rather 
than the true capability of technology and processing procedures to 
minimize water retention.
    The other comment was submitted by a trade association representing 
turkey and other poultry producers and processors. The association 
listed two principles and attendant considerations that, in its view, 
should be observed in developing protocols. The first principle was 
food safety: Considerations in achieving safety were rapid chilling of 
carcasses and the efficiency of immersion chilling. The second 
principle was product wholesomeness and quality. Attendant 
considerations were restricting water absorption to the amount 
necessary to achieve food safety, calculating water absorption from the 
point of entry of carcasses into

[[Page 48964]]

the chilling medium, and recognizing that it is a documented fact that 
water absorption is unavoidable in all poultry species. Additional 
considerations presented in the comment were that water absorption is 
not a food safety issue, and that water loss occurs during further 
processing of carcasses.
    FSIS has considered these comments and will be interested in 
further discussion of water-data protocols in the context of this 
proposal. Regarding the livestock producer associations' comment on 
possible bias in data submitted by the poultry industry, FSIS notes 
that any data submitted would have to have been collected under 
scientifically designed protocols approved by the Agency. FSIS now 
expects protocols it will approve to be composed of the elements listed 
in Appendix A of this document. Further, any water retention in a 
single-ingredient, raw meat or poultry product would have to be 
reflected on the product label. The discipline of the marketplace as 
well as FSIS regulatory oversight would help ensure the accuracy of 
label statements.
    Under proposed Sec. 441.10(a), meat or poultry products would have 
to bear a label statement of the maximum percentage of water absorbed 
and retained as a result of post-evisceration processes. A qualifying 
statement accompanying the product name could read, ``may contain up to 
__ percent absorbed water.'' The percentage would reflect the maximum 
percentage of water that may be retained in the product. Alternatively, 
the label could bear an accurate statement of the percentage of 
retained water in the product. Establishments having data or 
information to demonstrate that their products do not contain retained 
water would not have to label the products and could include a no-
retained-water claim on the product label. The labels would be 
generically approved pursuant to 9 CFR 317.5(b)(2) or 381.133(b)(2).
    This proposed requirement, which is responsive, in part, to the AMI 
petition discussed above, would ensure that accurate information 
concerning the product is conveyed to the consumer in accordance with 
the anti-misbranding provisions of the FMIA and the PPIA (especially 21 
U.S.C. 601(n)(1), (6); 453(h)(1), (6)). It would ensure that the 
product labeling is not misleading with respect to water retention in 
the product. The placement of the required information on the label 
would ensure that the information would be likely to be read and 
understood by the ordinary individual under customary conditions of 
purchase and use.
    The information to be required would be analogous to the 
information conveyed to consumers on the labels of ``ham--water added'' 
or fruit beverages labeled to indicate the actual percentage of juice 
in the product. As a result, consumers would be able to determine 
before they buy packaged raw meat or poultry products whether or not 
the value of products with retained water was commensurate with prices 
of alternatives in the meat case. The market will provide significant 
incentives to plants to adopt new cost-effective technologies for 
reducing retained water. FSIS requests comment on the usefulness to 
consumers of the proposed labeling requirement.
    The proposed requirements would affect only single-ingredient, raw, 
whole, cut-up, or ground meat and poultry carcasses and parts, 
including edible organs and other edible meat and poultry byproducts. 
It would not affect raw products that now bear complete labeling or 
nutrition labeling, such as pre-basted frozen turkeys, or further 
processed products, such as deli meats. This proposal also would not 
cover cooked and cured pork products, such as those currently subject 
to protein-fat-free requirements (9 CFR 318.19(a)(5), 319.104-.105, 
327.23).
    FSIS personnel would verify an establishment's control of water 
retention by checking the establishment records or by conducting in-
plant or in-distribution tests of products by methods that the Agency 
would develop. FSIS would also conduct independent tests of the 
establishment's absorbed-water control as part of investigations if a 
problem were suspected or in the course of special studies.

Proposed Changes in Poultry Chilling Regulations

    FSIS is proposing to amend the chilling requirements for poultry. 
Various prescriptive requirements and specifications, such as the 
minimum amount of fresh water intake by continuous chillers for each 
poultry carcass, would be removed. Establishments would be given the 
flexibility to take advantage of the latest technologies and 
procedures.
    This proposal would amend 9 CFR 381.65, which concerns general 
operating procedures, by removing provisions that are redundant, 
excessively detailed, or inconsistent with the PR/HACCP final rule. The 
proposal would eliminate current paragraph (b), the prohibition on 
handling and storing materials that could cause adulteration of poultry 
products in any room where poultry products are processed, handled, or 
stored. This provision will be unnecessary when HACCP plans are 
implemented because each HACCP plan will specify the measures to be 
taken to protect poultry products from physical, chemical, or 
biological contamination. The requirements in current paragraphs (a) 
and (c) of 9 CFR 381.65 would be retained as paragraphs (a) and (b) 
because they set out general principles of good sanitation and 
commercial practice that all establishments must observe.
    The requirements in paragraphs (h) and (j) of 9 CFR 381.65, 
relating to poultry thawing and dressing techniques, would be replaced 
with two performance standards. The first would require simply that 
establishments use thawing procedures that will prevent adulteration 
of, or net weight gain by, the product. The second would require that 
water used in thawing be permitted to drain freely from the carcass. 
Proposed paragraph (c)(1), which would replace paragraph (h), would 
require that frozen poultry be thawed for further processing in a 
manner that will prevent product adulteration but would not require 
that any specific thawing method be used.
    The current thawing regulation does not prevent practices that may 
constitute hazards to food safety. For example, it does not prevent re-
exposure of thawed, or partially thawed, product to a thawing medium 
that may have become contaminated by previous use and that may be too 
warm to prevent microbial growth. The current paragraph (h)(1)(i) 
specifies a maximum permitted thawing medium temperature of 70  deg.F., 
which is too high to prevent microbial growth in product that is re-
exposed to or held in the medium. The regulation conflicts with HACCP 
because establishments should assess thawing processes when conducting 
their hazard analysis. Establishments must be given the responsibility 
and flexibility to choose thawing measures that are effective and do 
not create food safety hazards.
    Proposed paragraph (c)(2) would replace the current paragraph (j), 
which specifies the manner in which carcass wash water is to be 
drained, with a performance standard requiring simply that the wash 
water be permitted to drain freely from the carcass.
    Current paragraph (d), which contains a requirement to remove 
kidneys from mature chickens and turkeys, would be eliminated. The 
kidneys of mature chickens and turkeys are a source of cadmium, which 
can accumulate in the human liver and kidneys and cause acute or 
chronic health problems.

[[Page 48965]]

Kidneys with excess cadmium are a ``food safety hazard reasonably 
likely to occur'' that establishments will identify in their hazard 
analyses and control through their HACCP systems. Thus, current 
paragraph (d) is redundant with the HACCP regulations. The requirement 
to remove kidneys is referenced in the definition of ``ready-to-cook 
poultry'' at Sec. 381.1(b)(44). Therefore, the Agency is proposing to 
amend that definition. Commenters on this proposal may wish to address 
the need for regulatory food safety performance standards to control 
heavy metal residues in organ meats, given the fact that establishments 
will be operating HACCP systems.
    Current paragraph (i), which specifies how poultry carcasses are to 
be cut open for evisceration, would be removed. The regulation is 
outdated, prescriptive, and may be an obstacle to improved product 
safety. The current regulation is intended to ensure that opening cuts 
are made without cutting the intestinal tract and without contaminating 
the carcass. Unnecessary cuts are prohibited because they may result in 
carcass contamination during evisceration or excessive water absorption 
during chilling. The regulation is also intended to maximize the 
viewing of the interior and viscera of the carcass by the postmortem 
inspector.
    In recent years, the poultry industry has developed new methods of 
poultry evisceration that do not result in adulteration. For example, 
ultrasound techniques are available for use as a diagnostic aid to 
detect malformities or other defects before the carcasses are opened. 
Also, equipment is available that can remove the viscera intact, using 
vacuum suction, without breakage or spillage of intestinal contents, 
and other available evisceration systems require that the carcass be 
opened by a longitudinal cut. The current regulation generally limits 
the opening cut to the area around the vent (cloaca) to prevent birds 
from carrying excess water under the skin that could cause water-
control test failures. The new technologies can potentially improve 
efficiency and product wholesomeness but are not likely to be 
implemented unless the regulation is amended. The Agency believes that 
establishments should have the flexibility to innovate and to implement 
promising new technologies, consistent with their HACCP plans.
    The requirement in current paragraph (k) to adequately drain ready-
to-cook poultry after chilling to remove ice and water before packaging 
would be retained and the paragraph would be redesignated as paragraph 
(d).
    Current paragraphs (l) through (p) would be removed. These 
paragraphs include requirements concerning the chilling of poultry 
parts, the removal from establishments of offal resulting from 
evisceration, the cleanliness of containers, the sturdiness of 
packaging materials, and the use of protective coverings. These are all 
matters to be addressed by establishments in their HACCP plans.
    Finally, current paragraph (q), concerning the harvesting of 
detached ova for human food, would be redesignated as paragraph (e) and 
would be slightly revised to eliminate a command-and-control 
requirement that the ova be identified past the point of inspection. 
The requirement that ova may leave the official establishment only for 
shipment to an egg products processing plant would remain.
    In 9 CFR 381.66, paragraph (a) would be revised. This paragraph 
requires that poultry be chilled or frozen in a manner that promptly 
removes animal heat from the carcasses and does not adulterate the 
product. The second sentence of the current paragraph, a command-and-
control requirement to file a description of the chilling or freezing 
procedures with the inspector in charge, would be removed.
    The general chilling requirements for poultry, paragraph (b), would 
remain the same. FSIS regards the chilling of poultry to a safe 
internal temperature within a minimum number of hours as a useful food-
safety precaution. However, as mentioned above, the Agency intends to 
undertake rulemaking on this matter. The table of maximum times and 
temperatures in paragraph (b) is based on the duration of the lag phase 
of bacterial growth on the surfaces of dressed, ready-to-cook poultry 
carcasses under plant conditions. Although interested persons are 
encouraged to submit data that would justify a change in this 
provision, amending the paragraph is outside the scope of the present 
rulemaking.
    The numerous detailed, prescriptive, command-and-control 
requirements in paragraph (c) would be removed. For example, proposed 
paragraph (c)(2)(i) does not specify chilling media temperatures and 
the use of recording thermometers, as does the current paragraph 
(c)(2)(i). Proposed paragraph (c)(1) would continue to require the use 
of potable water, and proposed paragraph (c)(2)(i) would continue to 
require sufficient water for a continuous overflow from chilling system 
sections. However, specific requirements (paragraphs (c)(2)(ii)-(iii) 
and (c)(2)(v)) concerning the operation of continuous chilling systems, 
including the minimum amount of fresh water intake per bird, would be 
removed.
    Current paragraph (c)(2)(iv) would be redesignated as (c)(2)(ii). 
This paragraph, which concerns the chilling of major portions of 
poultry carcasses, is the subject of a final rule (proposed at 62 FR 
31017; June 6, 1997) that appears elsewhere in this issue of the 
Federal Register.
    Current paragraph (c)(2)(vi), the highly detailed and prescriptive 
requirements concerning water reconditioning systems for poultry 
chillers, including the requirement for prior approval of such systems 
by FSIS, would be removed. Establishments subject to the poultry 
products inspection regulations are not using these systems because 
none have proven feasible in commercial operations.
    The requirements in paragraphs (c)(4)(i) and (c)(4)(ii), concerning 
the holding of poultry in chilling tanks, would be removed, and in 
paragraph (c)(5), the highly specific requirements concerning the use 
of continuous chillers to chill giblets would be removed. 
Establishments will address the food safety hazards associated with 
these procedures in their HACCP plans. However, the requirement to 
chill giblets to less than 40  deg.F. in under 2 hours would remain.
    Paragraph (d) of section 381.66 would be completely revised. The 
general requirement to minimize water absorption by raw poultry, and 
the requirement to furnish equipment necessary for water tests, would 
remain. The tables setting water absorption and retention limits for 
the various kinds and weight classes of poultry would be eliminated, as 
would the requirements for daily water testing by FSIS inspectors. The 
requirement to notify FSIS of any adjustments in washing, chilling, and 
draining methods would be also be removed.
    FSIS is proposing to remove current paragraph (d)(10), which 
specifies how poultry may be ice-packed in barrels and requires FSIS 
approval for the use of alternative types of containers. Establishments 
will address any food safety hazards associated with containers in 
their HACCP plans.
    The Agency is likewise proposing to remove paragraph (d)(11), which 
requires establishments to prevent free water from being included in 
giblet packages. Among other things, the current regulation requires 
use of a specific type of giblet wrapping material and incorporates by 
reference the testing standards that must be met in evaluating the 
material. This kind of detailed specification is no longer necessary 
under the Agency's new regulatory

[[Page 48966]]

approach. Also, establishments must comply with the regulations on net 
quantity of contents and net weight (9 CFR 317.18-.19, 381.121-121b). 
This proposal would give establishments greater responsibility and 
flexibility in choosing appropriate giblet packaging materials. By 
complying with the proposed retained-water limitation requirements 
(discussed below) and by appropriately labeling product, establishments 
would be ensuring that water absorption is controlled and that 
consumers are informed.
    Finally, paragraph (e), on air chilling, and paragraph (f), 
governing the freezing of poultry, would be retained substantially in 
their present form. Paragraph (f)(6), concerning immersion or spray 
freezing compounds and equipment, would be removed because it is a 
prior-approval requirement inconsistent with the HACCP regulations and 
is duplicative of other inspection regulations.
    The removal of the current poultry chilling regulations would 
eliminate prescriptive, command-and-control procedures for determining 
product compliance and would encourage processors to use the most 
efficient and effective methods of controlling microorganisms.

Executive Order 12866 and Regulatory Flexibility Act

    This proposed rule has been determined to be economically 
significant and was reviewed by the Office of Management and Budget 
under Executive Order 12866. The full text of the PRIA is published as 
Appendix B of this document.

Summary: Preliminary Regulatory Impact Analysis

    The proposed rule resulted from an analysis of six alternative 
regulatory approaches for addressing retained water in raw meat and 
poultry products. The six alternatives include: (1) no limit on 
retained water but mandatory labeling that identifies the percentage of 
retained water in the product; (2) a requirement that all 
establishments meet a water limit based on best available technology, 
with mandatory labeling to indicate any retained water; (3) a moisture 
limit based on best performance with existing equipment, with mandatory 
labeling to show any retained water; (4) a standard of zero retained 
moisture; (5) a requirement that no retained water could be included in 
net weight; and (6) a requirement of zero retained water unless the 
water retention is unavoidable in processes necessary to meet food 
safety requirements, e.g., to reduce pathogens, with product labeling 
to indicate the presence of retained moisture, where applicable. For 
all alternatives where a limit on retained water is established, the 
analysis assumed that the limits would be established by the regulated 
industry associations or other groups.
    FSIS chose the last alternative. The selected option would not 
allow retained water in an affected product unless it is an inevitable 
consequence of the process or processes used to meet applicable food-
safety requirements. Levels of unavoidable retained water would be 
established by inspected establishments, associations, or other groups, 
using acceptable protocols. Also, the maximum amount of retained water 
that could be present would have to be indicated on the product label. 
FSIS found that this option provides more benefits and fewer costs than 
other options allowing retained water. By ``inevitable consequence'' 
the Agency means an unavoidable and irreducible side effect. A food-
safety requirement could be a regulatory prescription, such as the 
temperature to which a product must be chilled and held. It could also 
be a preventive measure taken at a CCP or a critical limit in the 
establishment's HACCP plan. Given a food-safety requirement, an 
establishment must choose a method for satisfying the requirement.
    FSIS understands that the choice of method is based on a judgment 
of technical and economic feasibility. FSIS understands that product 
quality and product acceptability to the consumer are also important 
factors. The Agency requests comment on these matters.
    The method selected for meeting food safety requirements could have 
side effects that cannot be eliminated. A side effect of an 
antimicrobial treatment of carcasses or a carcass chilling method could 
be an increase in the water content of carcasses and parts. FSIS is 
proposing to require that the amount of water that might be retained in 
carcasses and parts as a result of using such an antimicrobial or 
chilling method be an unavoidable and irreducible side effect of using 
that method.
    To be applicable to the raw products of an inspected establishment, 
a non-zero retained-water limit would have to be based on supporting 
data collected in accordance with an FSIS-approved protocol. The 
proposal would allow a protocol to be developed and data-generating 
studies following the protocol to be carried out by an individual 
establishment, an industry trade association, or other group using the 
same or similar processing techniques and equipment. Depending on the 
design of the protocol, the data gathered could justify water-retention 
limits for a single establishment, a group of establishments with 
similar equipment processing similar classes of raw product, or all 
such establishments in an industry. To establish a non-zero retained 
water limit, an inspected establishment, industry trade association, or 
other group would have to generate the necessary supporting data. The 
labels of products would have to indicate the presence of retained 
water in the products.
    This requirement would not appear to have a significant impact on 
the meat industry because the meat industry is already achieving zero-
percent retained water. This proposal would, however, provide an 
alternative for establishments that are having or will have trouble 
meeting the Salmonella performance standards. These establishments 
could use a full range of antimicrobial rinses or hot-water rinses 
without having to worry about meeting zero-percent retained water. If 
they can demonstrate that they need a non-zero limit to meet the 
Salmonella standards, they can use the flexibility provided by the 
proposed rule and establish a new water limit as long as they state the 
maximum percentage of water absorbed and retained on product labels.
    Immersion chilling is the process used by most poultry 
establishments to meet the existing chilling requirements for poultry, 
e.g., 9 CFR 381.66(b)(2) requires that poultry carcasses under 4 pounds 
shall be chilled to 40  deg.F within 4 hours following evisceration. It 
follows that, for most poultry establishments, the inevitable retained 
water amount is the ``minimum'' level that can be reached with existing 
immersion chiller equipment while still meeting the chilling 
requirement. FSIS recognizes that this ``minimum'' must be established 
within practical limits for operating parameters such as drip time and 
chiller water temperature. The Agency believes that the industry 
already has information concerning the chiller variable settings that 
minimize water retention. FSIS, therefore, believes the poultry 
industry can establish water retention limits for various chiller 
systems with minimal costs. FSIS also recognizes that some poultry 
establishments may require higher levels of retained water to meet the 
Salmonella standards than they do to meet the existing chilling 
requirements.
    The proposal does not provide specific guidance on options 
available for poultry processors that are already operating far below 
the existing standards for Salmonella, such as by permitting higher 
retained water levels

[[Page 48967]]

if data showed further pathogen reductions would be achieved.
    The analysis estimates a range of costs the industry will incur to 
meet this new regulatory requirement. If establishments are able to 
demonstrate that current levels of retained water are necessary to 
achieve applicable food safety standards, establishments would not 
incur costs for reducing retained water. These establishments would 
only incur costs for establishing limits and costs for labeling the 
product. The costs of establishing limits for the poultry industry are 
estimated to be $1.5 million. This estimate is based on each 
establishment's conducting its own tests. The cost should be lower if 
associations or other groups establish limits for different types of 
chiller systems. Labeling costs are estimated to be $18.4 million if 
all raw, single-ingredient poultry continues to retain water.
    To the extent that establishments cannot demonstrate that current 
retained water levels are necessary for achieving applicable food 
safety standards, significant costs could be incurred as establishments 
modify processes to minimize retained water levels. Reducing retained 
water could entail a wide range of processing modifications, depending 
on the type of chilling equipment currently used and amount of retained 
water that would have to be removed. The PRIA estimates that the cost 
of removing a substantial portion of the existing retained water could 
easily approach $100 million. The PRIA estimates that the average 
retained water for chicken as a percentage of net weight is currently 
in the 5.0 to 6.5 percent range. The corresponding level for turkey is 
4.0 to 4.5 percent.
    The proposed rule should not have a significant impact on a large 
number of small businesses. Almost half of all federally inspected 
poultry slaughter establishments are large, based on the Small Business 
Administration criterion of more than 500 employees. There are from 50 
to 60 establishments that process under a million birds annually. Many 
of these smaller operations do not use continuous immersion chillers. 
They use ice or slush to meet the existing chilling requirements. Few, 
if any, would have to reduce the current level of retained water. The 
establishments most affected by this proposal are the firms operating 
immersion chillers in a manner so as to target the maximum allowable 
retained water.
    Because of the Court's decision, FSIS needs to develop new 
regulatory requirements to carry out its responsibilities for 
protecting the public from economic adulteration. Preventing economic 
adulteration provides a consumer benefit. Consumers would also benefit 
from the additional information that would be provided by the labeling 
requirement. The information on retained water should lead to more 
informed purchasing decisions. The proposal would also provide all 
affected establishments with the flexibility and market incentives to 
implement new procedures for meeting pathogen reduction performance 
standards. In addition, by replacing command-and-control requirements 
with HACCP-consistent performance standards, the proposal would 
eliminate some recordkeeping and reporting burdens, provide for 
increased flexibility and reduce the costs of HACCP implementation.

Executive Order 12988

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. States and local jurisdictions are preempted by 
the Federal Meat Inspection Act (FMIA) and the Poultry Products 
Inspection Act (PPIA) from imposing any marking or packaging 
requirements on federally inspected meat or poultry products that are 
in addition to, or different than, those imposed under the FMIA and 
PPIA. States and local jurisdictions may, however, exercise concurrent 
jurisdiction over meat and poultry products that are outside official 
establishments for the purpose of preventing the distribution of meat 
or poultry products that are misbranded or adulterated under the FMIA 
or PPIA, or, in the case of imported articles, which are not at such an 
establishment, after their entry into the United States.
    This proposed rule is not intended to have retroactive effect.
    There are no applicable administrative procedures that must be 
exhausted prior to any judicial challenge to the provisions of this 
proposed rule. However, the administrative procedures specified in 9 
CFR 381.35 must be exhausted prior to any judicial challenge of the 
application of the provisions of this proposed rule, if the challenge 
involves any decision of an FSIS employee relating to inspection 
services provided under the FMIA or PPIA.

Executive Order 12898

    Pursuant to Executive Order 12898 (59 FR 7629; February 16, 1994), 
``Federal Actions to Address Environmental Justice in Minority and Low-
Income Populations,'' FSIS has considered potential impacts of this 
proposed rule on environmental and health conditions in low-income and 
minority communities.
    This proposed rule would provide new, uniform regulations limiting 
the amount of water retained by raw, single-ingredient, meat and 
poultry products as a result of post-evisceration processing, such as 
carcass chilling, considered necessary to minimize pathogen growth on 
the products. As explained in the economic impact analysis above, the 
proposed regulations should generally benefit consumers of meat and 
poultry products. The proposed regulations would not require or compel 
meat or poultry establishments to relocate or alter their operations in 
ways that could adversely affect the public health or environment in 
low-income and minority communities. Further, this proposed rule would 
not exclude any persons or populations from participation in FSIS 
programs, deny any persons or populations the benefits of FSIS 
programs, or subject any persons or populations to discrimination 
because of their race, color, or national origin.

Paperwork Requirements

    Title: Retained Water in Raw Meat and Poultry Products; Poultry 
Chilling Performance Standards.
    Type of Collection: Labels and labeling records; data or 
information supporting labeling statements.
    Abstract: Changes to product labels would be generically approved. 
The paperwork and recordkeeping associated with such label approval is 
approved under OMB control number 0583-0092. Slaughtering 
establishments would have to have data to support percent-absorbed-
water statements on product labels and to demonstrate that the amount 
of absorbed water in the product is unavoidable under the 
establishments' HACCP plans. The data would have to have been collected 
under FSIS-approved protocols.
    This proposed rule would require an estimated 210,000 hours to 
develop the data to support retained water levels above zero. All 300 
federally inspected poultry establishments would need to conduct 
studies to establish minimum retained water levels. The PRIA assumed 
that the average establishment would conduct studies for two product 
categories. The PRIA assumed that a reasonable study would examine 10 
alternative chiller settings with four 50-bird water tests conducted 
for each setting. Each test would require 2.5 hours. Thus, it would 
take an estimated 200 hours for each of 300 poultry establishments, or 
more than 30,000 hours.

[[Page 48968]]

    The PRIA assumes that at most 500 meat establishments need to 
develop non-zero water levels to meet the existing pathogen-reduction 
performance standards. With larger carcasses, the recording time is 
doubled to 200 hours per establishment. These 500 meat establishments 
would also require 100 hours to collect microbial samples. Thus, the 
information collection would be 300 hours for each of 500 
establishments, or 150,000 hours.
    All 800 establishments with non-zero levels would also have to 
develop new, generically approved labels.
    Estimate of Burden: Protocols for determining minimum feasible 
water retention in product classes (3,000 hours); data supporting 
absorbed-water label statements or the lack thereof (210,000 hours).
    Respondents: Meat and poultry product establishments or trade 
associations.
    Estimated Number of Respondents: 800.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: 213,000 hours.
    Copies of this information collection assessment can be obtained 
from Lee Puricelli, Paperwork Specialist, Food Safety and Inspection 
Service, USDA, Cotton Annex Building, Room 107, Washington, DC 20250.
    Comments are invited on: (a) whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the Agency, including whether the information will have practical 
utility; (b) the accuracy of the Agency's estimate of the burden of the 
proposed collection of information including the validity of the 
methodology and assumptions used; (c) ways to enhance the quality, 
utility, and clarity of the information to be collected; and (d) ways 
to minimize the burden of the collection of information on those who 
are to respond, including the use of appropriate automated, electronic, 
mechanical, or other technological collection techniques or other forms 
of information technology. Comments may be sent to Lee Puricelli, 
Paperwork Specialist, see address above, and Desk Officer for 
Agriculture, Office of Information and Regulatory Affairs, Office of 
Management and Budget, Washington, DC 20253.
    Comments are requested by December 10, 1998. To be most effective, 
comments should be sent to OMB within 30 days of the publication date 
of this proposed rule.

List of Subjects

9 CFR Part 381

    Food labeling, Poultry and poultry products.

9 CFR Part 441

    Consumer protection, Meat and meat products, Poultry and poultry 
products.

    For the reasons discussed in the preamble, FSIS is proposing to 
amend 9 CFR Chapter III, as follows:

PART 381--POULTRY PRODUCTS INSPECTION REGULATIONS

    1. The authority citation for part 381 would continue to read as 
follows:

    Authority: 7 U.S.C. 138f; 7 U.S.C. 450; 21 U.S.C. 451-470; 7 CFR 
2.18, 2.53.

    2. Paragraph (b)(44) of Sec. 381.1 would be revised to read as 
follows:


Sec. 381.1  Definitions.

* * * * *
    (b) * * *
    (44) Ready-to-cook poultry. ``Ready-to-cook poultry'' means any 
slaughtered poultry free from protruding pinfeathers, vestigial 
feathers (hair or down), and from which the head, feet, crop, oil 
gland, trachea, esophagus, feet, crop, oil gland, reproductive organs, 
and lungs have been removed, and mature poultry from which the kidneys 
have been removed, and with or without the giblets, and which is 
suitable for cooking without need of further processing. Ready-to-cook 
poultry also means any cut-up or disjointed portion of poultry or other 
parts of poultry, such as reproductive organs, head, or feet that are 
suitable for cooking without need of further processing.
* * * * *
    3. Section 381.65 would be revised to read as follows:


Sec. 381.65  Operations and procedures, generally.

    (a) Operations and procedures involving the processing, other 
handling, or storing of any poultry product shall be strictly in accord 
with clean and sanitary practices and shall be conducted in such a 
manner that will result in sanitary processing, proper inspection, and 
the production of poultry and poultry products that are not 
adulterated.
    (b) Poultry shall be slaughtered in accordance with good commercial 
practices in a manner that will result in thorough bleeding of the 
carcasses and assure that breathing has stopped prior to scalding. 
Blood from the killing operation shall be confined to a relatively 
small area.
    (c)(1) When thawing frozen ready-to-cook poultry in water, the 
establishment shall use methods that prevent adulteration of, or net 
weight gain by, the poultry.
    (2) The water used in washing the poultry shall be permitted to 
drain freely from the body cavity.
    (d) Ready-to-cook poultry shall be adequately drained after 
chilling, to remove ice and water before the poultry is packaged or 
packed for shipping.
    (e)(1) Detached ova may be collected for human food in the official 
establishment provided the collection is sanitary. Ova from condemned 
carcasses shall be condemned and treated as required in Sec. 381.95. 
Ova for human food must be cooled, packaged, and handled so as to be 
fit for human food.
    (2) Detached ova harvested for human food may leave the official 
establishment only for movement to an egg products processing plant for 
processing as allowed in Sec. 59.440 of the regulations (7 CFR 59.440) 
under the Egg Products Inspection Act, and when moved from the official 
establishment shall bear labeling which indicates that the ova were 
harvested under sanitary supervision of the Inspection Service.
    4. Section 381.66 would be amended by revising paragraphs (a), (c), 
and (d) and removing paragraph (f)(6), to read as follows:


Sec. 381.66  Temperatures and chilling and freezing procedures.

    (a) General. Temperatures and procedures which are necessary for 
chilling and freezing ready-to-cook poultry, including all edible 
portions thereof, shall be in accordance with operating procedures 
which ensure the prompt removal of the animal heat and will preserve 
the condition and wholesomeness of the poultry and assure that the 
products are not adulterated.
    (b) * * *
    (c) Ice and water chilling. (1) Only ice produced from potable 
water may be used for ice and water chilling. The ice shall be handled 
and stored in a sanitary manner.
    (2)(i) Chillers must contain sufficient water or ice, or both, to 
keep the chilling media clean and provide a continuous overflow from 
each section of the chilling system. If there is no loss of water 
between sections, multiple section chilling systems may be connected so 
the overflow from subsequent sections serves as water intake for the 
first section.
    (ii) Partial trimming and salvage of parts of poultry carcasses 
often result in parts of major size, either front or rear portions, 
wherein the major portion of

[[Page 48969]]

the poultry carcass remains intact. These portions may be chilled in 
water and ice, including chilling in continuous chillers. Individual 
parts from salvage operations, including but not limited to drumsticks, 
thighs, split carcasses, and split breasts, shall not be cooled in 
water and ice but may be cooled in the air, or ice, or under a spray of 
water with continuous drainage.
    (3) Previously chilled poultry carcasses and major portions shall 
be maintained constantly at 40  deg.F. or below until removed from the 
vats or tanks prior to being cooled to 40  deg.F. or below, for 
freezing or cooling in the official establishment. Such products shall 
not be packed until after they have been chilled to 40  deg.F. or 
below, except when the packaging will be followed immediately by 
freezing at the official establishment.
    (4) Giblets shall be chilled to 40  deg.F. or below within 2 hours 
from the time they are removed from the inedible viscera, except that 
when they are cooled with the carcass, the requirements of paragraph 
(b)(2) of this section shall apply. Any of the acceptable methods of 
chilling the poultry carcass may be followed in cooling giblets.
    (d) Water absorption and retention. (1) Poultry washing, chilling, 
and draining practices and procedures shall be such as will minimize 
water absorption and retention at time of packaging.
    (2) The establishment shall provide scales, weights, identification 
devices, and other supplies necessary to conduct water tests.
* * * * *
    5. A new Part 441 would be added to subchapter E to read as 
follows:

PART 441--CONSUMER PROTECTION STANDARDS: RAW PRODUCTS

    Authority: 7 U.S.C. 450, 1901-1906; 21 U.S.C. 451-470, 601-695; 
7 CFR 2.18, 2.53.


Sec. 441.10  Retained water.

    Raw meat and poultry carcasses and parts shall not contain water 
resulting from post-evisceration processing unless the establishment 
preparing them demonstrates to the Administrator, with data collected 
in accordance with an FSIS-approved protocol, that any water retained 
is an inevitable consequence of the process used to meet applicable 
food safety requirements. Raw meat and poultry carcasses and parts that 
retain water must bear a statement on the label in prominent letters 
and contiguous to the product name indicating the maximum percentage of 
water that may be retained. Raw meat and poultry carcasses and parts 
that retain no water may bear a statement indicating that no water is 
retained.

    Done at Washington, DC on September 3, 1998.
Thomas J. Billy,
Administrator.

Appendix A--Expected Elements of a Protocol for Gathering Water 
Retention Data

    Purpose statement. The primary purpose of the protocol should be 
to determine the amount or percentage of water absorption and 
retention that is inevitable using a particular chilling system 
while achieving the regulatory pathogen reduction performance 
standard for Salmonella as set forth in the PR/HACCP regulations (9 
CFR 310.25(b), 381.94(b)) and the time/temperature requirements set 
forth in 9 CFR 381.66. Additional purposes that could be included 
are determining chilling system efficiency and evaluating product 
quality.
    Type of washing and chilling system used by the establishment. 
Any post-evisceration washing or chilling processes that affect 
water retention levels in and microbial loads on raw product should 
be described. For poultry establishments, the main chiller types, 
identified by the mechanism used to transport the birds through the 
chiller or to agitate the water in the chiller, are the drag-
through, the screw type, and the rocker-arm type.
    Configuration and any modifications of the chiller system 
components. A description of chiller-system configurations and 
modifications should be provided. The description should include the 
number and type of chillers in a series and arrangements of chilling 
system components, and the number of evisceration lines feeding into 
a chiller system. If there is a pre-chilling step in the process, 
its purpose and the type of equipment used should be accurately 
described. Any mechanical or design changes made to the chilling 
equipment should be described.
    Special features in the chilling process. Any special features 
in the chilling process, such as antimicrobial treatments, should be 
described. Also, the length and velocity of the dripping line should 
be described, as well as the total time allowed for dripping. Any 
special apparatus, such as a mechanism for squeezing excessive water 
from chilled birds, should be explained.
    Description of variable factors in the chilling system. The 
protocol should describe variable factors that affect water 
absorption and retention. In poultry processing, such factors are 
typically considered to be the time in chiller water, the water 
temperature, and agitation. The protocol should consider air 
agitation, where applicable.
    Additional factors that may affect water-absorption and 
retention are scalding temperature and the pressure or amount of 
buffeting applied to birds by feather removal machinery, and the 
resultant loosening of the skin. Another factor that should be 
considered is the method used to open the bird for evisceration.
    Standards to be met by the chilling system. For example, the 
chilling system may be designed simply to achieve a reduction in 
temperature of ready-to-cook poultry to less than 40  deg.F. within 
the time limit specified by the regulations, or in less time. As to 
the standard for pathogen minimization, the Salmonella pathogen 
reduction standards, as set forth in the PR/HACCP final rule, have 
been suggested. Although there is not yet an applicable Salmonella 
standard for turkeys, commenters are free to suggest a practicable 
standard for use in gathering data on turkeys under the protocols 
here suggested. Additional microbiological targets, such as E. coli 
or Campylobacter levels, or reductions in numbers of other 
microorganisms, may also be used.
    Testing methods to be employed. The protocol should detail the 
testing methods to be used both for measuring water absorption and 
retention and for sampling and testing product for pathogen 
reductions. The protocol should call for water retention and 
pathogen reduction tests at various chilling equipment settings and 
chilling time-and-temperature combinations. The method to be used in 
calculating water absorption and retention should be reproducible 
and statistically verifiable.
    With respect to the pathogen-reduction aspect of the testing, 
FSIS recommends the methods used for E. coli and Salmonella testing 
under the PR/HACCP regulations. The number of samples, the type of 
samples, the sampling time period, and the type of testing or 
measurement should be included in the protocol.
    Reporting of data evaluation of results. The protocol should 
explain how data obtained are to be reported and summarized. The 
criteria for evaluating the results and the basis for conclusions to 
be drawn should be explained.
    Conclusions. The protocol should provide for a statement of what 
the data obtained demonstrate and what conclusions were reached.

Appendix B--Preliminary Regulatory Impact Analysis--Retained Water 
in Meat and Poultry Products

August 1998--U.S. Department of Agriculture, Food Safety and Inspection 
Service

Table of Contents

Executive Summary
I. Introduction
II. Need for Regulatory Action
III. Background
IV. Description of Proposed Rule
V. Analysis of Existing Data on Retained Water
VI. Retained Water in Net Weight
VII. Economic Analysis of Retained Water in Meat and Poultry
VIII. Options Identified
IX. Analysis of Options
X. Cost of Proposed Rule
XI. Benefits of Proposed Rule
XII. Effect on Product Quality
XIII. Aggregate Market Effects

Executive Summary

    This analysis was conducted to meet the requirements of 
Executive Order 12866 and

[[Page 48970]]

the Regulatory Flexibility Act. The proposed rule has been 
designated economically significant because there is a potential 
impact of $100 million or more. This Preliminary Regulatory Impact 
Analysis (PRIA) shows that the rule could lead to a substantial 
reduction in the amount of retained water in poultry which could 
have a significant economic impact on the poultry industry. Under 
the proposed rule, raw, single-ingredient meat and poultry products 
would not be permitted to contain water resulting from post-
evisceration processing unless the establishment demonstrates that 
water retention is an inevitable consequence of the process or 
processes used to meet applicable food safety requirements. There 
are three types of costs associated with this proposed rule. There 
are costs for conducting the tests necessary to establish retained 
water levels. There are also costs associated with reducing retained 
water to such levels. Finally, there are costs for revising product 
labels to indicate the presence of retained water. Product labels 
would indicate the percentage of net weight represented by retained 
water. This information could be used by consumers in making product 
choices. The market could provide incentives to firms to invest in 
new technologies that would reduce retained water.
    Most of the cost of this proposed rule would be experienced by 
the poultry industry. Most, if not all, raw poultry products now 
contain retained water whereas only a few meat byproducts or organ 
meats may now contain retained water. Most costs experienced by the 
meat industry would be associated with voluntary decisions to use 
new or different processes to meet food safety requirements that 
would result in some level of unavoidable retained water.
    This analysis estimates a range of costs the poultry industry 
would incur to meet this new regulatory requirement. If 
establishments are able to demonstrate that current levels of 
retained water levels are an inevitable consequence of the processes 
used to meet applicable food safety standards, establishments would 
not incur costs for reducing retained water. These establishments 
would incur costs for justifying existing retained water levels and 
costs for revising product labels. The costs of establishing limits 
for the poultry industry are estimated to be $1.5 million. Label 
revision costs are estimated to be $18.4 million if all raw, single-
ingredient poultry continues to contain retained water.
    To the extent that poultry establishments cannot demonstrate 
that current retained water levels are necessary for achieving 
applicable food safety standards, significant costs could be 
incurred as establishments modify processes to reduce retained water 
levels. Reducing retained water could entail a wide range of 
processing modifications, depending on the type of chilling 
equipment currently used and the amount of retained water that would 
have to be removed. The analysis estimates that the average retained 
water for chicken as a percentage of net weight is probably in the 
5.0 to 6.5 percent range. The average retained water for turkey as a 
percentage of net weight is probably in the 4.0 to 4.5 percent 
range.
    If this proposed rule would require removing a substantial 
portion of the existing retained water, then the costs to the 
poultry industry could exceed $100 million. FSIS' retained water 
tests on whole broilers show that retained water varies considerably 
from establishment to establishment. For 13 establishments operating 
under the 8 percent regulatory limit for whole broilers, the average 
retained water at the end of the drip line ranged from 4.72 to 7.32 
percent. FSIS believes that the establishments operating at the 
higher end of this spectrum are targeting the regulatory limit and 
establishments operating at the lower end of this spectrum are, most 
likely, operating at or near the minimum necessary to meet existing 
chilling requirements which are food safety standards. For this 
reason, FSIS does not expect to see costs approaching the $100 
million level. However, FSIS also recognizes that the retained water 
levels at the lower end of the spectrum could be tied to purchase 
specifications or other factors and may not be true minimum levels. 
Therefore, this analysis has estimated the cost of removing a 
substantial portion of the current levels of retained water from all 
poultry establishments.
    This PRIA estimates that using additional drain time to reduce 
retained water in poultry by 4 to 5 percentage points in all 
establishments could cost up to $94 million in one-time fixed costs. 
Annual recurring costs are estimated at $10 million. These cost 
estimates are based on situations where inspected establishments 
were required to drain retained water that exceeded regulatory 
limits. FSIS program personnel do not believe it is feasible to 
eliminate all retained water from immersion-chilled poultry. Thus, 
if establishments must eliminate a substantial portion of retained 
water, they would incur the costs of minimizing the water plus the 
costs of establishing the minimum or minimums and labeling costs. 
The costs of the proposed rule, however, are highly dependent on the 
level of retained water that is necessary to meet existing food 
safety requirements. That level will remain unknown until 
established by well-designed studies. However, as discussed above, 
FSIS predicts that only those poultry establishments operating at 
the higher end of the retained water spectrum would have to 
substantially reduce their retained water levels. This prediction is 
based on data showing that establishments can control retained water 
and data showing that some are controlling retained water so as to 
be at or near the applicable regulatory limit.
    This proposal fills a regulatory void created by the U.S. 
District Court decision to set aside the water retention limits for 
whole birds. The regulatory limits that the Court set aside were not 
based on adequate analytical support. Regulatory limits are 
necessary to protect the public from economic adulteration. 
Preventing economic adulteration provides a consumer benefit. 
Consumers would also benefit from the additional information that 
would be provided by the labeling requirement. The information on 
retained water should lead to more informed purchasing decisions.
    The proposal would also provide affected establishments with the 
flexibility they need to choose the most appropriate means for 
implementing HACCP plans for assuring the safety of raw product. For 
example, under the proposed rule, both meat and poultry carcasses 
would be allowed to retain absorbed water if data showed that such 
water was unavoidable in order to assure compliance with the 
pathogen reduction performance standards for Salmonella. In 
addition, by replacing certain existing command-and-control 
requirements with HACCP-consistent performance standards, the 
proposal would allow increased flexibility which should reduce the 
costs for HACCP implementation. This analysis does not attempt to 
quantify the benefits of the increased flexibility that results from 
eliminating command-and-control requirements. The proposal would 
also remove certain recordkeeping and reporting requirements.
    In terms of aggregate market effects, the analysis concludes 
that, when compared to the present situation, the proposed rule 
could result in higher prices for both poultry and meat, with less 
poultry consumed and more meat consumed. However, when estimated 
costs are compared with aggregate consumer expenditures, the 
analysis shows that costs are very small compared with current 
expenditures. Maximum first year cost estimates for the poultry 
industry represent 0.36 percent of aggregate consumer expenditures 
on poultry. Recurring costs to the poultry industry represent only 
0.03 percent of consumer expenditures and 0.04 cents per pound.

I. Introduction

    FSIS is proposing regulations limiting the amount of retained 
water raw meat and poultry products may contain. The proposed 
rulemaking would, among other things, amend the meat and poultry 
inspection regulations governing water retained by carcasses and 
parts of carcasses as a result of post-evisceration washing and 
chilling necessary to ensure product safety and wholesomeness. The 
amended regulations would apply the same retained-water standard to 
both red meat and poultry. Meat and poultry carcasses and parts 
would not be permitted to contain water resulting from post-
evisceration processing unless the establishment demonstrates that 
water retention is an unavoidable consequence of the processing used 
to meet existing food safety requirements. Under the proposal, raw 
meat and poultry products that retain water would have to be labeled 
indicating the maximum amount of retained water that may be present 
as a percentage of product weight.
    In addition to revising the regulations controlling retained 
water, FSIS is also proposing to revise the poultry regulations 
covering thawing procedures, water use and reconditioning, and 
certain other operating procedures. These other regulations are 
being revised to improve consistency with the Pathogen Reduction/
Hazard Analysis and Critical Control Points (PR/HACCP) regulations, 
eliminate ``command-and-control'' features, and reflect current 
technological capabilities and good manufacturing practices. By 
replacing command-and-control requirements with

[[Page 48971]]

HACCP-consistent performance standards, the proposal would allow 
increased flexibility and should reduce costs for HACCP 
implementation. Removing some command-and-control regulations would 
also eliminate some existing recordkeeping and reporting burdens. 
This analysis does not attempt to quantify the benefits of the 
increased flexibility that results from eliminating command-and-
control requirements.

II. Need for Regulatory Action

Respond to Court Decision

    The regulations controlling retained water in poultry carcasses 
have consisted of three major components: (1) a performance standard 
requiring washing, chilling, and draining practices that will 
minimize water absorption and retention at time of packaging, (2) 
limits for maximum retained water in birds that will be packaged as 
whole carcasses, and (3) limits for maximum retained water in birds 
that will be ice-packed or cut up prior to packaging. The 
performance standard is interpreted as minimizing the water that is 
absorbed and subsequently retained, i.e., it is not interpreted as 
requiring minimization of both water absorption and water retention. 
In implementing the standard, FSIS concludes that the performance 
standard is met when retained water is under the maximum limits.
    Until the Court case referred to below, the maximum retained 
water for most whole chickens (those 4.25 pounds or under) was 8 
percent. The maximum retained water for chicken that will be ice-
packed or subsequently cut up into parts is 12 percent. The 12 
percent limit is based on the premise that chicken parts from whole 
birds with water levels between 8 and 12 percent will reach the 8 
percent level by the time the parts are packaged. The analogous 
limits for turkey are similar but include unique limits for 12 
different carcass weight categories. The maximum retained water 
limits for whole turkey range from 4.3 to 8.0 percent depending on 
weight. The corresponding limits for cut-up turkey range from 5.3 to 
9.0 percent. The maximum retained water for whole ducks, geese and 
guineas was 6 percent, the same limit that applied to chickens over 
4.25 pounds.
    The U.S. District Court, in the matter of Kenney v. Glickman, 
set aside the water retention limits for whole birds. The Court 
found that the analytical support for the existing limits was 
insufficient. Thus, there are currently no regulatory criteria to 
determine whether retained water has been minimized in chilled or 
frozen whole birds. FSIS is mandated to prevent the distribution in 
commerce of meat or poultry products that are adulterated or 
misbranded. Under the meat and poultry statutes, a product is 
adulterated if, among other circumstances, a substance has been 
added to or mixed with the product to increase its bulk or weight or 
make it appear of greater value than it is. Thus, if water has not 
been minimized, the product may be considered adulterated. Such 
product may also be considered misbranded. Without limits on 
retained water, FSIS cannot adequately protect consumers from 
adulteration and misbranding due to excessive retained water in 
whole birds.

Eliminate Inconsistency

    In addition to the situation created by the July 1997 Court 
decision, FSIS sees additional need for regulatory action. With 
respect to the regulation of retained water, there are differences 
or inconsistencies both between the livestock and poultry industries 
and within the existing regulatory framework for poultry. FSIS 
allows poultry to retain water absorbed during processing as an 
unavoidable result of traditional chilling practices. There is no 
comparable allowance for meat. The regulatory definitions for 
economic adulteration ``by substances added so as to increase bulk 
or weight or make a product appear better or of greater value than 
it is'' are identical for meat and poultry. Although the Secretary 
of Agriculture has the authority to apply the adulteration 
provisions differently, FSIS believes there can be more consistency 
between the livestock and poultry industries in how the adulteration 
provisions are applied to retained water in raw products. The 
traditional differences in chilling practices have led to a 
situation where the weight of a meat carcass usually decreases 
during chilling while the weight of a poultry carcass increases.
    The Department promulgated regulations limiting water absorption 
in poultry in 1959, 1961, and 1970 (December 1, 1959, 24 FR 9566; 
July 19, 1961, 26 FR 6471; October 7, 1970, 35 FR 739). The existing 
regulations contain a standard of performance that calls for 
minimization and maximum retained water limits for poultry carcasses 
based on carcass weight and intended use. Under the existing 
regulatory enforcement framework, a poultry establishment is 
``minimizing'' retained water when it is operating within the 
existing limits. FSIS is aware that not all establishments are 
really minimizing retained water. Data analyzed for this PRIA show 
that some poultry establishments have been controlling their 
processes to retain the maximum allowed water. While this is 
considered acceptable in the sense that product is not adulterated, 
it is not consistent with a regulatory intent to minimize. However, 
it may be consistent with food safety objectives to reduce 
pathogens.
    The existence of the 12 percent limit for cut-up chicken is in 
itself inconsistent with the concept of minimization. Many 
establishments pack both whole and cut-up chicken. In meeting the 8 
percent limit for whole birds, they demonstrate that their minimum 
is below 8 percent. The 12 percent limit serves as an opportunity to 
maintain water levels in cut-up poultry. The 12 percent limit is 
also available as default when the 8 percent limit is not achieved. 
An establishment can divert birds to cut-up operations when they 
fail the whole bird limit.

III. Background

    There are no existing meat regulations that address retained 
water in raw meat products. Without any regulatory limits, FSIS has 
enforced the adulteration provision of the FMIA to mean that any 
level of retained water is adulteration. FSIS has allowed cold water 
spray chilling systems as a supplement to air chilling of beef and 
hog carcasses under the conditions outlined in FSIS Directive 
6330.1. That document requires that establishments develop quality 
control systems and inspectors monitor these quality control 
programs to make sure that the total weight of a group of spray-
chilled carcasses is not greater than the total pre-wash weight of 
the same carcasses. Thus, while an individual carcass may show a 
weight gain, FSIS enforces a standard of zero-retained water for 
groups of beef or pork carcasses for spray chilling systems. In 
contrast, FSIS has not required establishments to closely monitor 
water when using pathogen reduction methods on the kill floor, such 
as pre-evisceration carcass sprays or steam vacuum processes.
    FSIS implements an extensive program to assure compliance with 
existing limits for retained water in poultry. Retained water can 
result from both carcass washing and carcass chilling, i.e., the 
post-evisceration washing and chilling processes. The existing 
procedures for conducting retained water tests for poultry are 
outlined in Part 10 of the Meat and Poultry Inspection Manual. The 
standard procedures instruct the inspector to tag and weigh a sample 
of 10 birds from the eviscerating line before the final carcass 
wash. The final carcass wash occurs before birds enter the chiller. 
The same 10 birds are then weighed after the chiller at a point 
specified in the establishment's water control procedures as 
outlined on FSIS Form 528. The most common point is the end of the 
drip line or the last accessible point on the drip line. The test 
procedures are the same regardless of whether the whole bird or cut-
up limits apply.
    Under standard procedures, inspectors conduct one test each 
shift. Today, many establishments are tested once each week based on 
history of compliance. The standard procedures state that test birds 
must not be allowed extra draining, i.e., they must reflect the 
production lot. The standard water procedures may specify that the 
test birds are drained for a specific time if production is all 
drained for the same time. For example, one establishment specifies 
that test birds are to be drained four (4) hours before being 
weighed. When water limits are exceeded, product is retained.
    Violations do occasionally occur and appear to be a function of 
how close to the regulatory limit an establishment is operating. 
Existing data indicate that some establishments control their 
process way below the limits and never come close to a violation. 
Based on the data reviewed for this analysis, most establishments do 
not have water violations or rarely exceed existing limits. A few, 
however, appear to target the limit and frequently experience 
retained product as an extra operating expense. In the data examined 
for this analysis, retained product required additional drain times 
ranging from 3 minutes to 12 hours.
    FSIS' existing retained water control program is a relatively 
resource intensive effort. In a poultry establishment with two 
shifts and two chiller systems, FSIS may be conducting four 10-bird 
tests each day. Each test takes from 40 to 60 minutes for selecting, 
tagging, and weighing birds and then recording results and making 
necessary calculations. Even with reduced testing in

[[Page 48972]]

many establishments, it appears reasonable to estimate that FSIS 
conducts between 300 and 400 retained water tests each day. Assuming 
a 260-day work year, FSIS conducts from 78,000 to 104,000 tests 
annually. At 40 to 60 minutes each, the annual testing represents 
from 25 to 50 staff years of 2,080 hours each. The Agency also 
expends an estimated 560 staff-hours each year reviewing changes in 
establishment washing, chilling, and draining procedures. These 
estimates do not include the cost of addressing violations.
    FSIS intends to pursue a new water control program that can 
incorporate wholesale or retail sampling to identify establishments 
that may be exceeding water limits and then target resources to 
conduct follow-up testing to confirm compliance or noncompliance. 
FSIS is aware of a retail testing method that has been developed and 
used in European Union member States. The method involves measuring 
drippage from sampled products against what is considered the 
natural water content of the product.
    In its 1980 net weight proposal, FSIS considered a ``building-
block'' approach to net weight compliance that was then being 
reviewed by the Codex Alimentarius Commission. This approach, as 
described in the 1980 notice, ``would be modeled on a statistical 
limits of variance technique developed by Switzerland for 
application to imported, prepackaged foods. Inspectors would make 
limited inspections for compliance at retail. If the sampling 
technique indicates a noncompliance problem, additional inspection 
of the same product would be made at retail and further back in the 
marketing chain, including at processing plants. If the problem 
continues following notification of the producers, a more precise 
enforcement test would be applied.'' An alternative that lends 
itself to this type of approach will rate high on the criterion for 
an efficient, equitable enforcement system.

IV. Description of Proposed Rule

    The proposed rule would establish a single retained water 
standard for all raw, single ingredient meat and poultry products. 
This standard would allow retained water only if that water was an 
inevitable consequence of the process or processes used to assure 
compliance with existing food safety requirements. The presence of 
any retained water would, however, have to be identified on product 
labeling.
    The proposed requirements would affect only single-ingredient, 
raw, whole, cut-up, or ground meat and poultry carcasses and parts, 
including edible organs and other edible meat and poultry 
byproducts. It would not affect raw products with labeling that 
includes a list of ingredients or nutrition labeling, such as pre-
basted frozen turkeys or individually quick frozen (IQF) poultry 
parts labeled to indicate the addition of basting solutions.
    The proposal would also modify other existing regulations 
related to water use and chilling requirements. For example, the 
proposal would remove a requirement that establishments must file a 
description of chilling and freezing procedures with the inspector-
in-charge (IIC). At the same time, the proposal would remove the 
requirements that the establishment submit written notice of any 
adjustments to washing, chilling, and draining methods before any 
changes are made and provide FSIS data showing the adjustments are 
effective in meeting existing water limits. These modifications 
would reduce recordkeeping and reporting burdens.
    The proposal would also remove specific requirements concerning 
the amount of fresh water intake required in the first section of a 
continuous chilling system. The existing regulations require a 
minimum of one-half gallon per frying chicken and proportionately 
more for other classes of poultry, including not less than one 
gallon per turkey. The potential for lowering water costs is 
unknown. The general requirements for using potable water and 
continuous overflow from one section of the chiller to the next will 
remain. The requirement for continuous overflow would appear to 
limit the opportunity for reduced water usage.
    The regulations concerning water intake were established at a 
time when FSIS assumed responsibility for controlling pathogen 
levels and frequently did so with design requirements. In 1978, the 
Department published a proposal (43 FR 14043, April 4, 1978) that 
would reduce water intake requirements by 50 percent when chlorine 
levels in the incoming water were at least 20 parts per million. The 
proposal was subsequently withdrawn. Of concern during the 
rulemaking were studies by USDA and the Virginia Polytechnic 
Institute and State University (VPI) that showed that bacteria 
levels increased as intake water was reduced. While the relationship 
of water intake and pathogen levels remains a public health concern, 
FSIS is no longer attempting to design protection using command and 
control regulations. Under the Pathogen Reduction/HACCP final rule, 
establishments are required to meet pathogen reduction performance 
standards. This current proposal is a performance-based standard 
that will lead to retained water levels that are necessary to meet 
pathogen reduction requirements and other food safety standards. The 
current proposal is consistent with FSIS objectives of setting 
performance standards and moving away from design requirements, such 
as the minimum of one-half gallon of fresh water intake per chicken. 
It is now industry's responsibility to establish how water intake 
relates to both retained water and pathogen levels.
    The proposal would also remove prescriptive requirements for 
water reconditioning systems for poultry chillers. This change would 
not have an impact because reconditioning systems have not proven 
feasible in commercial operations.
    FSIS intends to retain the existing requirements mandating that 
the internal temperature of poultry carcasses be lowered to 40 
deg.F. or less within a specified time. The Agency also will 
continue to require that each establishment provide scales, weights, 
identification devices, and other supplies necessary to conduct 
water tests. While the Agency envisions a compliance-sampling 
program using the deviation from an expected level of total water 
content as a screening system, the Agency will still use the 
existing sampling system to confirm potential compliance problems.
    The poultry regulations discussed above concerning water use, 
chilling requirements and water retention are all contained in 9 CFR 
381.66 (Temperatures and chilling and freezing procedures). This 
proposal would also remove several existing regulations from 9 CFR 
381.65 that now address general operating procedures, many of which 
are not related to water use or chilling procedures. Operating 
procedure requirements that would be removed or revised under this 
proposal include the following:
     Specific requirements that prescribe the nature of 
opening cuts for evisceration,
     The requirement to remove kidneys from mature poultry,
     Requirements pertaining to the handling and storage of 
materials that could adulterate product,
     Requirements for containers, packaging, and covering 
materials,
     Requirements on removing offal from establishments,
     Requirements prescribing how to thaw frozen poultry and 
drain ready-to-cook poultry,
     Requirements on how establishments can chill parts of 
carcasses, and
     Requirements related to harvesting detached ova.
    The regulations that would be eliminated are either regulations 
that are overly prescriptive command and control regulations, such 
as those defining opening cuts or regulations that are now redundant 
with HACCP, e.g., the removal of kidneys. The reason for removing 
the kidneys of mature chickens and turkeys is that they are a source 
of cadmium, which can accumulate in the human liver and kidneys and 
cause acute or chronic health problems. This is a ``food safety 
hazard reasonably likely to occur'' that establishments will 
identify in their hazard analyses and control through their HACCP 
systems. Thus, a regulatory requirement for their removal would be 
redundant with the HACCP regulations.

V. Analysis of Existing Data on Retained Water

    As discussed above, most raw, single-ingredient meat products 
are not currently allowed to contain any retained water. This 
analysis assumes that these meat products will continue to be 
produced without retained water. Products that are packed in water 
or may retain water are already labeled to indicate such 
information. Chitterlings (swine intestines) are washed and chilled 
before shipment and are packaged with water. Certain organ meats and 
meat from ears and tails are also washed and chilled using water. A 
few establishments chill beef cheek meats in water, a process that 
may result in the absorption of water. The product is labeled to 
indicate the maximum percentage added water it may contain to alert 
buyers to the fact that the product may weigh more because of the 
chilling process. The Agency does not have data on the volume of 
meat products with retained water or data on the current levels of 
retained water. These products do not, however,

[[Page 48973]]

represent a major portion of the meat industry.
    In order to estimate the current level of retained water, in 
early 1997, the Agency's headquarters staff informally requested 
field offices to forward readily available water data from poultry 
plants. The material assembled varied from region-to-region and 
plant-to-plant. The field offices did not use a standard method to 
summarize available data. In some cases, the individual 
establishments were identified; in other instances, all plant 
identification was removed. The allowable water, i.e., the 
applicable regulatory limit, was not always readily discernible. The 
data covered the period of January through May 1997. Most of the 
data was included on the Daily Moisture Records (FSIS Form 549 or 
its replacement Form 6310-1). These records record the pre-wash and 
post-chill weight of each individual bird for each 10-bird test. 
Five 10-bird tests are recorded on each record.
    While the data assembled was not systematically collected, it 
has a degree of randomness and provides a preliminary estimate of 
the amount of water currently absorbed and retained during the 
washing and chilling process as measured by existing FSIS water test 
procedures. An analysis was conducted using all the data that met 
the following criteria for establishments slaughtering young 
chickens.

{time}  Minimum of twenty 10-bird tests (200 birds).
{time}  Existing regulatory limit available.
{time}  All available test data collected under a single applicable 
limit.
{time}  All results clearly legible.
{time}  Establishment identified (to connect water data with 
production).

    The data from 33 establishments slaughtering young chickens met 
the above criteria. These 33 establishments represented 17.5 percent 
of FY 1996 production. Within the 33, 19 establishments were 
operating under the 12 percent water limit that was applicable to 
cut-up and ice-pack poultry. These 19 establishments accounted for 
9.11 percent of the total FY 1996 production and 52 percent of the 
production within the 33 establishments.
    Thirteen establishments were operating under an 8 percent water 
absorption limit during the period the data was collected. The 8 
percent limit applies to whole carcass pack chickens or frozen 
chickens that are 4.25 pounds or less. The 13 establishments 
represented 7.95 percent of FY 1996 production. One establishment 
was operating under the 6 percent limit for whole chickens over 4.25 
pounds.
    Among the 33 establishments, 48 percent of the young chickens 
were being processed under the water limits for whole birds. Today, 
the National Broiler Council estimates that only 10 percent of 
broilers are ``marketed'' as whole birds. Two factors explain this 
difference. First, if any birds in a production shift are to be 
shipped whole, the entire shift is subject to the whole bird limit. 
Second, some birds are shipped whole and then cut up in a second 
establishment conducting further processing. The 10 percent 
``marketed'' as whole birds refers to retail and food service 
destinations.
    The 13 establishments operating under the 8 percent limit had an 
average absorbed water level of 5.81 percent and a production based 
weighted average of 5.68 percent. Individual establishment averages 
ranged from 4.72 to 7.32 percent. These percentages represent 
percentage gain relative to the carcass weight prior to the final 
carcass wash. The individual plant averages were calculated by 
combining all available water tests from all shifts and all washer/
chiller systems. Averaging all water test results in this manner 
assumes that each test represents an equal amount of production. 
Many plants have more than one chiller system and multiple shifts. 
Production may not be equally distributed across all shift-chiller 
combinations.
    The 19 establishments operating under the 12 percent limit had 
an average absorbed water level of 9.11 and a weighted average of 
9.02 percent. As above, these percentages represent percentage gain 
relative to the carcass weight prior to the final carcass wash. 
While 18 of these establishments had absorbed water levels close to 
8 percent or above, one establishment had an average water level of 
5.37 based on sixty 10-bird tests (600 birds) conducted from January 
through April 1997. The establishment operates two systems, one 
averaged 5.61 percent, the other 5.14. All the daily records were 
checked to indicate the establishment was producing cut-up poultry.
    In addition to the data analyzed above (33 establishments), the 
1997 data included water tests from three young chicken 
establishments that processed both whole birds under the 8 percent 
limit and cut-up chickens under the 12 percent limit. For these 3 
plants, there were at least 20 tests at each level.
    The results are shown in the following table:

------------------------------------------------------------------------
                                    8 percent    12 percent             
          Establishment               limit        Limit      Difference
------------------------------------------------------------------------
A................................         6.42         7.67         1.25
B................................         5.26         6.15         0.89
C................................         5.94         7.30         1.36
------------------------------------------------------------------------

An analysis of variance procedure indicated that, after accounting 
for variability between plants, there is a statistically significant 
difference (confidence greater than 99%) between the percentages of 
water gain at the two regulatory limits. It follows that these 
establishments are not really minimizing retained water when 
operating under the 12 percent limit because they have lower 
retained water when processing whole birds. The difference does not, 
however, approach 4 percent.

    Because there are 12 different water limits for different sizes 
of turkeys, the approach to analyzing existing data had to be 
different. It's common to see three different water limits for a 
five-test series recorded on the Daily Moisture Records. The data 
from turkey establishments was sorted using the following two 
criteria:
     Minimum of ten 10-bird tests conducted under limits 
applicable to turkeys packaged as whole birds.
     Establishment identified.
    A review of the existing data identified six establishments that 
were operating under the limits for whole carcass packing 
procedures. These six establishments represented 12.7 percent of 
federally inspected turkeys in FY 1966. An estimated 40 percent of 
all turkeys are marketed as whole birds. Because of the 12 different 
limits for whole turkeys depending on weight, this analysis did not 
attempt to estimate absorbed water for different sizes of birds.
    The six turkey plants had an average absorbed water level of 
4.39 percent and a weighted average of 4.74 percent. Individual 
plant averages ranged from 1.91 to 5.53 percent. This analysis did 
not attempt to estimate water levels for cut-up or ice-packed 
turkeys.
    The review of Daily Moisture Records identified a couple of 
potential issues that should be addressed by comments. First, some 
of the highest water results occurred when line speeds were running 
too slow for the established water control procedures. Since slowing 
line speeds may be a response to higher pathogen levels there is 
some indication that water pick up and pathogen levels may be 
inversely related under some conditions. In one case, a company 
conceded that it could not pass the 8 percent whole bird water 
limits at certain lower speeds and agreed to divert birds to cut-up 
operations when the line speed dropped to a certain level. By 
diverting the birds to cut-up, the establishment avoided the process 
of conducting a 50-bird test to establish the necessary drain time 
to meet the 8 percent limit. Another plant noted that slower speeds 
resulted in insufficient numbers of birds for proper travel through 
their chiller system with rocker arms.
    As a second issue, the data indicate that more problems arise 
with very small birds, i.e., broilers in the 2\1/2\ to 3-pound 
range. Individual birds would show water pick-up in the 20 to 24 
percent ranges. FSIS staff notes that eviscerating equipment 
sometimes causes extra large openings on small carcasses that lead 
to pockets of water under the skin. These birds are informally 
referred to as ``water bags.'' The water test is rather meaningless 
for these birds if they are headed to cut-up operations because the 
water in

[[Page 48974]]

these pockets drains quickly and easily at the cut-up operation.

VI. Retained Water in Net Weight

    The proposed rule would require that product labels indicate the 
percentage of net weight represented by retained water. All the data 
presented in the previous section refers to retained water as a 
percentage gain from the carcass weight prior to the final carcass 
wash. The same volume of retained water expressed as a percentage of 
net weight will be somewhat lower because net weight includes the 
pre-wash carcass weight plus any absorbed water.
    A second difference occurs because FSIS water tests normally 
occur at the end of the drip line. The exact relationship between 
the volume of retained water as recorded by FSIS tests and the 
volume of retained water in finished packaged product is unknown. 
Retained water in finished packaged product will be lower for 
several reasons. First, an establishment's handling procedures will 
lead to some water loss before the product is packaged and weighed. 
Today, only 10 percent of broilers are ``marketed'' as whole birds. 
Thus, a lot of broilers produced under whole bird limits are being 
cut up in the originating establishment or in a subsequent 
establishment before being packed as finished product. Second, any 
product that exceeds existing limits is required to drain for a 
specific time as determined by program personnel. Third, the 
establishment may implement draining procedures to meet a customer's 
purchase specifications. In these cases, the retained water included 
in net weight could be far less than the retained water measured by 
FSIS tests.
    It is also difficult to compare the water data for whole birds 
with the data on cut-up poultry. As discussed above, available data 
showed whole young chickens to average 5.68 percent while cut-up 
young chickens averaged 9.02 percent on a production-based weighted 
average. The 12 percent limit on cut-up chickens was based on a 
premise that if poultry for cut-up averages less than 12 percent at 
the time of water test, it would drain to less than 8 percent during 
the remaining handling prior to final packaging. This does not mean 
that poultry destined for cut-up will drain 4 percent. It seems 
reasonable to assume, however, that the level of 9.02 percent will 
approach the whole bird level of 5.68 percent, probably ending up 
somewhere between 6.0 and 7.0 percent.
    Allowing for some drain in the whole bird packaging process and 
considering the conversion to percentage of net weight, it seems 
likely that the average retained water for chicken as a percentage 
of net weight is probably in the 5.0 to 6.5 percent range. This 
estimate is consistent with findings published in a study \1\ 
conducted in 1979 by the Economics, Statistics, and Cooperatives 
Service (ESCS (now ERS)). That study, hereafter referred to as the 
1979 ERS study, estimated that average water pickup for six 
processors at the time of packaging was 5 to 6 percent. Because some 
product undergoes further cut-up and packaging in other 
establishments, the average water level leaving originating 
establishments is not the same as the level in customer packages.
---------------------------------------------------------------------------

    \1\ Assessment of Proposed Net Weight Labeling Regulations, 
Staff Report, Prepared by the Economics, Statistics, and 
Cooperatives Service for the Food Safety and Quality Service, USDA, 
August 1979.
---------------------------------------------------------------------------

    The whole bird data on turkeys, i.e., 4.74 percent retained 
water, is a better estimate for packaged turkey since 40 percent are 
marketed as whole birds. One would expect some additional drainage 
before the birds are packaged. The average retained water level for 
turkey as a percentage of net weight is probably somewhere in the 
range of 4 to 4.5 percent.

VII. Economic Analysis of Retained Water in Meat and Poultry

    This chapter examines the economic issues associated with 
retained water in poultry. For analytical purposes, this chapter 
assumes that the average retained water for all chicken is 5 percent 
of net weight and the average for turkeys is 4 percent of net 
weight. The analysis in Sections 4 and 5 concluded that the averaged 
retained water for chicken is probably between 5.0 and 6.5 percent 
and the average retained water for turkey is probably between 4.0 
and 4.5 percent.
    In FY 96, there were 7.67 billion chickens slaughtered under 
Federal inspection. Based on an estimated average carcass weight of 
3.36 pounds, the total weight of ready-to-cook chicken was 25.8 
billion pounds. If the average retained water was 5 percent, then 
one can view the total as 24.5 billion pounds of chicken and 1.3 
billion pounds of retained water. Since the wholesale price of whole 
broilers was $.6124 per pound,\2\ the chicken had an estimated whole 
bird, wholesale value of $15.8 billion.
---------------------------------------------------------------------------

    \2\ Livestock, Diary and Poultry Situation and Outlook, LDP-M-
44, ERS, USDA, August 15, 1997.
---------------------------------------------------------------------------

    In FY 96, there were 289.6 million turkeys slaughtered under 
Federal inspection. Using an average carcass weight of 17.9 pounds, 
the production was 5.18 billion pounds. The average FY 1996 
wholesale price was $.665 per pound resulting in a total wholesale 
value of $3.4 billion. Using an estimated average retained water 
level of 4 percent, one could view the production as 4.97 billion 
pounds of turkey and 0.21 billion pounds of retained water.
    There are two ways of looking at the current situation. One is 
the perspective that customers are paying $15.0 billion for the 
chicken and $789.4 million for the retained water and $3.3 billion 
for turkey and $136 million for retained water. The other is that 
the water has no effect on the value of the poultry. In this case, 
the value of the chicken is $15.8 billion and the value of the 
turkey is $3.4 billion. The customer is simply not being informed 
that the true wholesale price of the chicken on a ``zero added 
water'' basis is $.6446 per pound and not $.6124. Similarly, the 
customer is not being informed that the true wholesale value of 
turkey is $.684 per pound and not $.665.
    While the 1979 ERS study was focused on analyzing alternative 
net weight regulations, the study addressed essentially the same 
issue as retained water when it considered drained weight labeling. 
The ERS study used an ``added water in chicken'' example to 
illustrate the retail price effects of dry tare versus drained 
weight labeling of packaged chicken. The example was a package of 
chicken breasts selling for $1.20 per pound with a labeled weight of 
3 pounds using a dry tare system. The tare is the weight of any 
container, or wrapper, or other material not included in the stated 
weight of a package. This package would cost the consumer $3.60. If 
this package undergoes a water loss of 4 percent, and assuming the 
net weight was exact under the dry tare system, the consumer 
selecting this package would be receiving 2.88 pounds of drained 
weight chicken and the real price per pound of chicken is $1.25 
($3.602.88 pounds).
    Under a drained weight system, assuming exact measurements, the 
package would show a net weight of 2.88 pounds and a price per pound 
of $1.25. The cost of the package would remain $3.60. The ERS study 
used this example to illustrate that changing net weight 
methodology, by itself, only changes the information a consumer 
receives but not the real cost of the product. After analyzing the 
``water in chicken'' issue, the 1979 ERS study concluded:

Whether consumers pay chicken prices for water is not clear simply 
because a dry tare labeling weight is allowed. If $3.60 is the 
competitive cost for a package of chicken breasts of that quality, 
then the consumer is not paying $1.20/lb. for 0.12 lb. of water and 
juices. The consumer is simply not being informed that the true 
price of chicken at the retail level on a drained weight basis is 
$1.25/lb. not $1.20. Consumers may well be paying more for chicken 
or other meat and poultry products than can be justified. But to 
verify such an assertion would require an extensive study of the 
industrial organization of the industry and data on firm costs, 
revenues, and profits. Answering that question is beyond the scope 
of this study.

    The economic issue raised by the retained water issue is whether 
labels reflecting the price of poultry on a ``green weight'' basis 
would have enough of an effect on the demand for poultry that 
consumers would purchase less poultry and more product that competes 
with poultry. This analysis, like the earlier ERS study, has not 
attempted to predict the shifts in supply and demand that might 
occur if product labels included the ``true'' price of poultry. The 
marketplace issues are more complex than just pounds and cents. 
Discussions with retail industry personnel indicate that they 
believe many consumers object to free liquid in packages and that 
``dry'' looking packages would have a positive impact on demand. 
They also noted that labeling of water is not necessarily a 
detraction. They point to the rapidly growing market for 
Individually Quick Frozen (IQF) Ice-Glazed poultry. This product 
sometimes includes labeling indicating the addition of basting 
solutions to enhance flavor and juiciness. IQF Ice-Glazed and 
marinated products are marketed based on convenience.

VIII. Options Identified

    FSIS identified six options for regulating retained water in raw 
meat and poultry products. These six options are:

[[Page 48975]]

     No limits on retained water as long as the product 
label indicated the amount of retained water.
     A standard requiring zero retained water for all raw, 
single-ingredient products.
     A requirement that there could be no retained water in 
the stated weight of the product.
     A standard that would set limits for retained water 
based on best available technology within traditional production 
practices. This option would also require that retained water be 
identified on product labels.
     A standard that would set limits for retained water 
based on optimum use of existing equipment. This option would also 
require that retained water be identified on product labels.
     A standard that would require an establishment to 
demonstrate that any retained water is an inevitable consequence of 
the process used to meet applicable food safety requirements. This 
option would also require that retained water be identified on 
product labels.

IX. Analysis of Options

    This section provides an assessment of the six regulatory 
options identified. The six options fit into three categories. The 
first category is represented by Option 1 and can be characterized 
as the option where there would be no limits on retained water for 
any raw product as long as the label indicated the presence of that 
water. The second category covers options where no retained water 
would be allowed. This analysis discusses two variations, one 
(Option 2) where no retained water would be allowed in the product 
and another (Option 3) where no retained water could be included in 
the product weight. Options 4, 5, and 6 are all similar in that they 
would permit limited water retention and they would require that any 
retained water be identified on product labels. These last three 
options differ in the basis for establishing the limits for water 
retention. The three options consider limits based on best available 
technology, limits based on best performance with existing 
equipment, and limits based on the retained water necessary to meet 
existing food safety requirements. Setting new limits based on any 
of these three criteria would have to meet the Court's requirement 
that the rulemaking record explain how particular water retention 
levels are set.
    All six options provide consumers with improved information on 
the ``true'' price of poultry. Improved information results from 
either labeling the level of retained water, eliminating all 
retained water, or a combination of labeling and limiting the amount 
of retained water. Improved information provides a consumer benefit 
in that it allows consumers to make more informed purchasing 
decisions. The analysis that follows does not quantify the consumer 
benefits of each option. FSIS recognizes that removing all retained 
water informs consumers of the ``true'' price of poultry; no further 
calculation balancing water content and label price would be 
necessary. A combination of labeling with a limit on retained water 
may have greater consumer benefits than labeling alone because the 
labeled product price would provide improved information to those 
consumers that would not use the retained water information.

Option 1--Labeling of Percentage Retained Water

    Under this option, there would be no limit on retained water as 
long as the amount, i.e., percentage of product weight, was 
indicated on the product label. The same requirement would apply to 
both meat and poultry products. To assure prominent notification, 
the product name on the labeling of an affected product would be 
accompanied by a statement, such as ``may contain up to __ percent 
retained water'' or ``contains __ percent retained water.''
    After identifying this option, the department concluded that 
this regulatory option would not be consistent with the existing 
adulteration provisions discussed earlier. In other words, unlimited 
retained water would constitute economic adulteration, even if 
identified through labeling. While this conclusion eliminates this 
option, this analysis uses the option as a vehicle to discuss the 
costs and benefits of using labels to inform consumers about 
retained water.
    The cost analysis presented later in Section X concludes that 
all poultry labels could be revised at a cost of $18.4 million. This 
cost would be an up-front, nonrecurring cost. The label revision 
costs of $18.4 million are an estimate for the cost of revising 
labels for raw poultry shipped from federally inspected poultry 
establishments that both slaughter and further process raw poultry. 
The estimate of $18.4 million does not include potential label 
revision costs for product that is produced in one of the slaughter/
processing establishments and then further processed in a second 
inspected establishment that does not slaughter poultry. To 
illustrate, there are inspected establishments that purchase whole 
birds and further process these carcasses into parts of carcasses 
and other establishments that purchase parts of carcasses and 
further process these parts. The inspected establishments purchasing 
product that has ``percentage retained water labeling'' would have 
to label their further processed, single-ingredient, raw products 
unless they had data showing that the further processing they 
conduct removes all the retained water. Presumably, the percentage 
of retained water would decrease during further processing. The 
further processing establishments would have to label their products 
to indicate the presence of any remaining retained water. FSIS does 
not have information on the number of establishments or labels that 
could potentially be affected.
    There are two other situations where revised labels could be 
required. While most raw poultry sold in retail stores is packaged 
and labeled in federally inspected establishments, some raw product 
is repackaged and labeled at the retail level. Retail stores would 
have to label their single-ingredient, raw products unless they had 
data showing that the processing and repackaging they conduct 
removes all retained water. Thus, there would be some cost for 
labeling retained water at the retail level. Finally, there may also 
be a few meat labels that need to be revised since some byproducts 
and organ meats are now washed in water before being shipped.
    There would also be the cost of establishing the level of 
retained water. As discussed earlier, FSIS now employs from 25 to 50 
staff years measuring retained water. Inspected establishments could 
utilize FSIS test results or conduct there own retained water tests. 
If such tests are conducted by Quality Control (QC) technicians 
making $35,000 annually, the cost of 25 to 50 staff years represents 
from $875,000 to $1.75 million, annually. This option would not 
require any reduction in the current levels of retained water. Thus, 
there would be no costs for modifying production practices. The cost 
analysis in Section X addresses the cost of establishing a minimum 
which is a different task than establishing the level.
    The labeling of product to identify retained water benefits 
consumers. The information provided has value because it allows 
consumers to make better decisions. In the terminology of the 1979 
ERS study, the labeling of retained water would help consumers 
establish the ``true'' price of poultry.
    The extent of the labeling benefit, i.e., the value of labeling 
information to consumers, is affected by several factors. These 
include the type of label that will eventually be required, the 
number of different labels present in the marketplace and the 
variation in retained water within a specific production lot. The 
first factor affecting the value of the labeling information is the 
type of label statement. If the label statement indicates ``up to 
____ percent retained water,'' the consumer cannot use the 
information to calculate a true price per pound because the label 
would not specify the actual amount of retained water. The ``up to 
____ percent'' type of label would provide consumers with general 
information indicating that some level of added water was present. 
This type of label does not provide the same incentive to minimize 
added water as a label indicating a specific percentage, i.e., 
``contains ____ percent added water.''
    The second factor affecting the value of labeling is the number 
of different labels present in the marketplace. If different 
establishments have different labels for different levels of 
retained water, consumers could be faced with a multitude of 
different labels making price comparisons very difficult. It is not 
unusual for a large supermarket to stock raw poultry from more than 
10 different federally inspected establishments. While it appears 
reasonable to assume that a company or an establishment would prefer 
to use a single retained water statement for all raw product labels, 
it is possible that some establishments would develop alternative 
labels for each product, each indicating a different level of 
retained water. Added water content could be established on a day-
to-day or production-shift basis.
    A third factor affecting the value of labeling is the variation 
in retained water within a specific production lot. Natural

[[Page 48976]]

variation is a component of all food attribute labeling. Variation 
does appear, however, to present a greater than usual concern with 
retained water. Based on the 10-bird tests conducted by FSIS, the 
package-to-package variation could be relatively high for whole 
birds. In a randomly selected 10-bird test for whole broilers 
(average ``green weight'', i.e., carcass weight prior to any water 
absorption, was 3.6 pounds), the average retained water was 6.57 
percent. The range was from less than 1.0 percent (0.95) to 14.6 
percent. Only five birds were within 2.0 percent of the 
average 6.57 percent. Two individual birds exceeded the 8.0 percent 
limit. In a second 10-bird test of 3.2-pound broilers averaging 6.92 
percent retained water, 6 of 10 were within  2.0 
percent. Three individual birds exceeded the 8.0 percent limit. This 
data raises an issue concerning how a percentage labeling option 
would be implemented, i.e., what level would be required to appear 
on product labels? Would it be the average or would it be a level 
that included 90 or 95 percent of the individual birds?
    The amount of retained water appears to vary less for turkeys. 
In one randomly selected 10-bird test of smaller turkeys (regulatory 
limit of 6.0 percent), 9 of 10 were within 1.0 percent 
of an average retained water level of 5.45 percent. In a 10-bird 
test of larger birds (regulatory limit 5.3 percent), 7 of 10 were 
within 1.0 percent. One bird exceeded the regulatory 
limit.
    While the variation rate affects the value of the labeling 
benefit, it does not eliminate the benefit. For an individual 
purchase, purchasing a product labeled ``2% retained water'' does 
not guarantee more useable product than purchasing a product labeled 
``4% retained water.'' When averaged over several purchases, 
however, the product labeled to indicate less retained water should 
result in more useable product. In addition, a large portion of raw 
poultry is now marketed as packages of thighs, wings, breast 
quarters, leg quarters, and boneless, skinless breast meat, etc. For 
these types of packages, the bird-to-bird variation is less of a 
concern.

Option 2--Zero Retained Water

    The Agency could establish a standard of zero retained water for 
all raw, single-ingredient meat and poultry products. In theory, 
given sufficient drip time or drain time or drying time, all raw, 
single-ingredient products can be returned to a ``green weight.'' 
However, available data suggests that returning immersion-chilled 
poultry to ``green weight'' may not be feasible. The 1979 ERS study 
included data that supports the conclusion that water retained 
during washing and chilling does not completely drain from poultry 
by the time the product reaches the consumer. For the study, ERS, in 
conjunction with ten local weights and measures agencies, measured 
the percent drain in 297 retail packages of chicken from five 
poultry processors. All packages were whole cut-up chicken packed at 
establishments using immersion chilling. All brands had an average 
water pickup of 5 to 6 percent at the time of packaging. For the 297 
packages the average drain as a percentage of labeled net weight was 
3.42 percent. Assuming the product started at an average of 5.5 
percent, the product was still retaining approximately 2.0 percent 
absorbed water when sampled at retail. The study did not indicate 
how many days the product had been in distribution. One processor 
was shipping to retail stores on both the east and west coast. Thus, 
in some cases, there was considerable transportation time involved.
    There was a second \3\ study that showed that the water loss 
that occurs in the plant from the time the poultry is placed in the 
package to the time it leaves the plant is substantially less than 
total retained water. During the development of the 1989 Net Weight 
Proposal (54 FR 9370, March 6, 1989), FSIS, in cooperation with the 
National Broiler Council and the National Conference on Weights and 
Measures, conducted a study on water loss. Data collected from ten 
chicken processors showed that the average water loss occurring in 
the plant after packaging was 1.8 percent. The study did not, 
however, include data on the length of time the product stayed in 
the plant after initial packing.
---------------------------------------------------------------------------

    \3\ U.S. Department of Commerce, National Institute of Standards 
and Technology (NIST), Report of the 73rd National Conference on 
Weights and Measures, NIST Special Publication 750, 1988.
---------------------------------------------------------------------------

    FSIS technical personnel believe that a zero standard would 
require the poultry industry to abandon immersion chilling because 
attaining zero-retained water with immersion chilling is not 
technically feasible. Installing air chilling or air chilling/spray 
systems would require major reconstruction costs for the poultry 
industry. There is also a potential cost associated with possible 
increases in pathogen levels. Studies have shown that immersion 
chilling reduces overall pathogen levels on poultry. If this option 
would force the poultry industry to abandon immersion chilling and 
pathogen levels increased, then there could be additional social 
costs associated with increases in foodborne illness. With this 
option there would be no need to revise product labels.
    Under this option, consumers would benefit by being fully 
informed as to the ``true'' price of both meat and poultry products. 
No balancing of water content and label price would be necessary. 
However, because the benefits of better informed consumers from a 
zero-retained water standard are unlikely to surpass the costs, this 
option was eliminated.

Option 3--``Green Weight'' Labeling

    A variation on the concept of zero-retained water is the option 
where there could be no retained water in the stated weight of the 
product. Establishments would be required to establish a retained 
water level for each ``lot'' or shift. Scales would then have to be 
adjusted to account for retained water. The weight indicated on 
product labels would be an estimate of the ``green weight'' prior to 
the final carcass wash.
    The only direct cost is the cost of establishing the amount of 
retained water in order to adjust scales. There would be no need to 
revise product labels or modify chilling practices. The major impact 
would be a reduction in the labeled volume of poultry production by 
an estimated 1.5 billion pounds. To maintain the current level of 
sales in dollars, the poultry industry would have to raise the 
wholesale price per pound by an average of 5.1 percent. Retail 
prices would also increase. Consumers would, most likely, perceive 
an increase in poultry prices. As the 1979 ERS study noted, however, 
changing net weight methodology, by itself, only changes that 
information a consumer receives but not the real cost of the 
product. Consumers would, however, be fully informed as to the 
``true'' price of poultry.
    A disadvantage of this option would be that the labeled weight 
would only be an estimate of the ``green weight.'' The package-to-
package variation would now be an issue for the accuracy of the net 
weight statement rather than the accuracy of a qualifying statement. 
There could also be considerable differences between labeled weight 
and packaged weight. This option would require the Agency to revise 
the overall system for regulating net weight accuracy.
    If this option were selected, FSIS would have to reopen the net 
weight regulations. In 1990, after four proposals and almost two 
decades, FSIS published final rules for net weight labeling of meat 
and poultry products (55 FR 49826, November 30, 1990). In the final 
net weight rule, FSIS established a regulatory framework that for 
all compliance testing in federally inspected establishments, the 
net weight of raw chicken would be established using a dry tare 
system. In a dry tare system, both free liquid and liquid absorbed 
by packaging material would be included in the net weight of the 
product. At the same time, the rule recognized that a few State and 
local weights and measures authorities still prefer to conduct wet-
tare compliance testing. Under a wet-tare system, the free liquid 
and liquid absorbed by packaging material are not counted in 
measuring the product weight. The final rule established a 3 percent 
``gray area'' where if fresh poultry minus any liquids (free liquid 
plus liquid absorbed by any packaging material) is within 3 percent 
of the labeled weight, further information is sought before any 
determination is made. The 3 percent ``gray area'' applies only in 
localities using wet-tare testing. The task force that recommended 
the 3 percent gray area for raw poultry noted \4\ that the 
recommended level would require over pack by manufacturers supplying 
wet-tare localities to compensate for water lost.
---------------------------------------------------------------------------

    \4\ U.S. Department of Commerce, National Institute of Standards 
and Technology (NIST), Report of the 73rd National Conference on 
Weights and Measures, NIST Special Publication 750, 1988.
---------------------------------------------------------------------------

    Enforcement of net weight requirements is an area where Federal, 
State, and local authorities share responsibility and must 
cooperate. The enforcement procedures, as adopted by the National 
Conference on Weights and Measures, are published in NIST Handbook 
133, Third Edition, Supplement, ``Checking the Net Contents of 
Packaged Goods.'' FSIS' net weight regulations incorporate Handbook 
133 by reference. The National Institute of Standards and Technology 
(NIST) has a statutory responsibility for ``cooperation with the

[[Page 48977]]

States in securing uniformity of weights and measures laws and 
methods of inspection.'' At the same time, the FMIA and PPIA do not 
allow State and local jurisdictions to impose any standards that 
differ from those published by FSIS. In publishing the final net 
weight regulations in 1990, FSIS stated that the ``rule is designed 
to enhance the ability of Federal, State, and local agencies to 
enhance the industry-wide use of strict net weight standards at the 
packing, warehouse and retail level.'' Although this option would 
enable FSIS to address economic adulteration, it was eliminated 
because (1) the benefits in the form of consumer information do not 
appear to outweigh the costs of adjusting scales and labels to show 
green weight, and (2) because of the need to maintain uniformity in 
weights and measures laws and methods of inspection.

Option 4--Retained Water Limits Based on Best Available Technology 
Within Traditional Production Practices

    Under this option, FSIS would require all establishments to meet 
water limits based on the lowest levels that are currently being 
achieved by those establishments using the best available water-
immersion chilling technology. The limit for retained water in 
carcass beef, pork, lamb, and goat would remain at zero. There might 
be some costs associated with establishing limits for the byproducts 
and organ meats that are now processed separately from carcasses.
    FSIS recognizes that, for the poultry industry, the concept of a 
``minimum'' cannot be separated from some definition of standard 
manufacturing practices that would include a reasonable drip or 
drain time and some reasonable minimum temperature for chiller 
water. Longer drip lines and lower chiller water temperatures are 
both factors that would increase the cost of chilling poultry.
    Under this option, it is envisioned that the new limits would be 
established based on data from the establishments using the best 
technology. There would be costs for collecting and analyzing the 
data and costs from modifying processes to reduce water retention. 
This option could impose considerable costs on those establishments 
that do not currently have the best available technology.
    The maximum allowed water level could actually be a series of 
levels for different types and weights of meat and poultry products. 
Under this option, products could not contain more than the 
established limits and all products containing retained water would 
have to be labeled indicating the presence of retained water. The 
costs of labeling the percentage retained water would be similar to 
those described under Option 1. The factors affecting the value of 
labeling information would still exist, but there should be fewer 
different labels because the range of permissible retained water 
levels would be reduced.
    Operating the best technology so as to minimize retained water 
may not be consistent with minimizing pathogens. Thus, there is a 
potential cost associated with increased pathogen levels and 
increased foodborne illness.
    This option would enable FSIS to effectively address economic 
adulteration and would provide consumers information. However, 
because the costs to industry to acquire the best available 
technology would be large and would outweigh consumer benefits, this 
option was eliminated. Furthermore, the option has the effect of a 
design standard.

Option 5--Water Limits Based on Existing Equipment

    This option would require all establishments to operate their 
existing equipment so as to minimize retained water. As discussed in 
the previous option, minimums would have to be based on some 
reasonable limits for operating parameters. The retained water 
requirement for carcass meat would remain at zero since meat 
establishments are already operating at zero.
    As with the previous option, new retained water limits are 
required for this option. Data would have to be collected and 
analyzed to establish minimum water levels for different types of 
equipment. There would be costs for collecting and analyzing this 
data, most likely greater than for the previous option. However, no 
establishment would have to replace equipment, as all minimums would 
be based on existing equipment. This option would presumably lead to 
a larger number of retained water requirements. FSIS technical 
staffs believe retained water is related to variables such as type 
of chiller, water temperature, time in chiller and type and level of 
agitation.
    Retained water would have to be identified on product labels. 
The costs of labeling retained water would be similar to those under 
Options 1 and 4. The factors affecting the value of labeling would 
still exist. Having different minimums for different equipment would 
probably lead to a greater number of labeling variations.
    Minimizing retained water may not be consistent with processes 
that minimize pathogens. Thus, there is a potential cost associated 
with increased pathogen levels and increased foodborne illness.
    Option 5 is superior to Option 4 in that no establishment would 
have to replace existing equipment or processes. This factor 
outweighs the potentially higher cost of establishing limits and the 
potential decrease in the value of labeling information due to a 
greater number of labeling variations. Option 5 is deemed inferior 
to the preferred option which follows because it does not provide 
flexibility to the meat industry and does not integrate food safety 
requirements. Options 4 and 5 may lead to increased pathogen levels 
and increased costs of foodborne illness.

Option 6--Retained Water Limits Established by Processes Necessary 
To Meet Food Safety Requirements

    Under this option, all establishments would be expected to meet 
a zero-retained water standard (i.e., Option 2) unless data 
demonstrate that another level is necessary to meet existing food 
safety standards using existing washing, chilling, and draining 
systems (i.e., by introducing food safety objectives to Options 4 
and 5). FSIS envisions that such data could be established on an 
industry-wide basis, for a specific industry sector using similar 
processes, or on an establishment-by-establishment basis. The data 
could be collected and analyzed by individual establishments or by 
trade associations or other groups.
    There would be costs for collecting and analyzing data. For the 
previous option, the data would be collected to establish a minimum. 
For this option, the data would be collected to establish a minimum 
while still meeting the existing chilling requirements. Thus, the 
poultry industry costs for establishing the limits should be 
essentially the same as the costs for the previous option. The meat 
industry would establish limits for retained water only if they 
viewed it as a new lower cost option for meeting pathogen reduction 
performance standards. Any retained water would have to be 
identified on product labels. The limits on retained water would, 
most likely, be a series of levels for different types and weights 
of meat and poultry products. The costs of labeling retained water 
would be similar to those under Options 1, 4 and 5. The value or 
usefulness of the labeling will depend on the number of different 
limits and whether those limits are established on an industry-wide 
basis or on an establishment-by-establishment basis.
    The actual retained water limits for this option would be based 
on the inevitable consequence of meeting food safety requirements 
with existing processes. The necessity of meeting food safety 
requirements would lead to equal or higher retained water levels 
than those based on best available technology (Option 4) or best use 
of existing equipment (Option 5). Since the costs of modifying 
production processes decrease as the level of allowed retained water 
increases, costs are the same or lower for this option than those 
for Options 4 and 5. The costs for establishing the retained water 
limits should be similar to those for Options 4 and 5. The labeling 
costs are essentially the same. For this option, there are no 
potential costs associated with increases in pathogen levels and 
foodborne illness. Thus, since the labeling benefits are essentially 
the same, this option is expected to have the greatest net benefits 
of the three options that permit limited retained water. This option 
was selected as the proposed rule.

X. Cost of Proposed Rule

    The purpose of this section is to estimate the costs of proposed 
rule. The proposed rule would create three types of costs: (1) the 
costs for establishing water levels necessary to meet food safety 
requirements, (2) the costs associated with reducing retained water 
to such levels, and (3) the costs of revising product labels to 
indicate the presence of retained water. Most of the potential cost 
impact falls on the poultry establishments using water-immersion 
chiller systems. There are approximately 300 federally inspected and 
an estimated 65 State-inspected poultry slaughter establishments. 
There will also be some impact on livestock slaughter establishments 
and on retail stores that re-pack and re-label raw, single 
ingredient meat and poultry products.

[[Page 48978]]

Cost of Establishing Water Limits

    The proposed rule would prohibit retained water in raw meat and 
poultry products unless the water is an inevitable consequence of 
the process or processes used to meet applicable food safety 
requirements. To establish a non-zero retained water limit, an 
inspected establishment or trade association or other group would 
have to generate supporting data. The proposal would allow such data 
generating studies to be conducted for an individual establishment 
or for an industry sector using the same or similar processing 
techniques and equipment.
    This requirement would not appear to have a significant impact 
on the meat industry because the meat industry is already achieving 
zero retained water. This proposal would, however, provide an 
alternative for establishments that are having or will have trouble 
meeting the Salmonella performance standards. These establishments 
could utilize a full range of approved antimicrobial rinses or hot 
water rinses without having to worry about achieving zero retained 
water. If establishments can demonstrate that they need a non-zero 
limit to meet the Salmonella standards, they can utilize the 
flexibility provided by this rule and establish a new retained water 
limit as long as they indicate the presence of retained water on 
product labels.
    It is assumed that 500 meat establishments (10% of the 5,000 
affected meat establishments) would conclude that they cannot meet 
the new pathogen reduction standards without using a process that 
results in some level of retained water. The 10% estimate is from 
the Final RIA published with the final PR/HACCP rule (see Federal 
Register Vol. 61, No. 144, July 25, 1966, pages 38976-38977). In 
that analysis, FSIS referred to historical data showing control 
problems in from 5 to 10 percent of inspected establishments. The 
estimated 500 establishments having difficulty meeting pathogen 
reduction standards would be required to conduct water tests to 
establish unavoidable levels and possibly some additional Salmonella 
tests. The analysis assumes 200 hours per establishment for water 
tests and 100 hours to collect a sample set for Salmonella. The 
total cost would be 150,000 hours or $3.75 million for labor and 
another $1.2 million for 35,000 sample analyses. These estimates are 
based on cost factors from the FRIA for the PR/HACCP rule, i.e., $25 
an hour for a quality control manager and $34 for a laboratory 
analysis for Salmonella. The average sample set for meat is 
approximately 70 samples considering 82 for steer or heifer 
carcasses and 55 for swine carcasses. The total cost for the meat 
establishments would be an estimated $5 million. The costs for 
Salmonella testing and the costs of using alternative processes such 
as carcass washing systems have already been addressed in the FRIA 
for the PR/HACCP rule in the discussion of compliance costs for 
meeting the Salmonella standards (Federal Register reference noted 
above). The cost of establishing water limits (100,000 hours or $2.5 
million) would be additional costs. In return, this rule provides an 
alternative that doesn't currently exist.
    FSIS does not consider air chilling an economically feasible 
alternative for chilling poultry. Thus, it seems reasonable to 
assume that the poultry industry would conclude that immersion 
chilling is necessary to meet the existing chilling requirements for 
poultry, e.g., 9 CFR 381.66(b)(2) requires that poultry carcasses 
under 4 pounds shall be chilled to 40 deg. F. within 4 hours 
following evisceration. It follows that the retained water necessary 
to meet food safety requirements is the minimum level that can be 
reached with existing equipment and still be in compliance with 
chilling requirements. There is also the possibility that the 
retained water necessary to meet the pathogen reduction performance 
standards for Salmonella would be higher than the level necessary to 
meet chilling requirements. The following discussion, however, 
assumes that the unavoidable retained water levels are driven by the 
chilling requirements.
    The Agency believes that the industry already has considerable 
information concerning the chiller variable settings that minimize 
water retention. The variables of concern are chiller water 
temperature, water intake, total time in chiller and level of 
agitation. FSIS, therefore, believes the poultry industry can 
establish water limits for various chiller systems with minimal 
costs. Under current regulations (9 CFR 381.66(d)), establishments 
must conduct a 50-bird test to demonstrate that any change in 
chilling procedures does not affect compliance with existing 
requirements. This analysis assumes that poultry establishments 
could establish minimum retained water levels by conducting four 10-
bird tests at ten different chiller settings for each product 
category. It is assumed that the average establishments would have 
two product categories, e.g., light hens versus heavy toms. Each 
test would take an estimated 2.5 hours to select birds, tag and 
weigh birds, and reweigh birds after chilling. (The FSIS 10-bird 
test takes from 40 to 60 minutes.) Time required between tests would 
not be considered a cost. Thus, testing would cost each plant 200 
hours or $5,000 using a quality control manager making $25 per hour. 
The cost to 300 inspected establishments would be 60,000 hours or 
$1.5 million. Some smaller federally inspected establishments and 
presumably more State inspected establishments do not use immersion 
chilling. They chill using ice and slush on processing tables/
counters and have retained water levels below 2 percent. In the data 
collected from the field, two chicken establishments with annual 
production under 200,000 birds had retained water levels of 1.58% 
and 1.7%. It is assumed these smaller establishments are at a 
minimum level and would incur no additional cost to establish a 
minimum. These establishments do not appear to have any variables 
that could be studied during a water test.
    The proposal doesn't provide specific guidance on options 
available for poultry processors that are already operating far 
below the existing standards for Salmonella. As an illustrative 
example, consider what options are available for a broiler slaughter 
establishment that has an unavoidable retained water level of 5 
percent (due to immersion chilling for time/temperature) and is 
consistently achieving Salmonella positive levels of around 10 
percent, well below the existing standard of 20 percent. Should this 
establishment be able to operate at a higher retained water level if 
data showed that the establishment could then achieve an even lower 
level of Salmonella? Should the Agency's food safety objectives lead 
to a solution where any level of water would be allowed if data 
demonstrated a reduction in pathogens? While the current proposal 
does not allow such flexibility, the Agency is requesting comment on 
this aspect of the proposal. Under the current proposal, if FSIS 
lowers the pathogen reduction standards as stated in the preamble to 
the PR/HACCP rule, inspected establishments would have the option of 
increasing retained water if appropriate tests showed that such 
increases were unavoidable in meeting revised food safety standards.

Costs of Reducing Retained Water

    If establishments are able to demonstrate that current levels of 
retained water are necessary to meet food safety standards, 
establishments would not incur costs for reducing retained water. 
However, to the extent that establishments cannot demonstrate that 
current retained water levels are necessary for meeting applicable 
food safety standards, significant costs could be incurred as 
establishments modify processes to minimize retained water levels. 
Reducing retained water could entail a wide range of processing 
modifications, depending on the type of chilling equipment currently 
used and amount of retained water that would have to be removed.
    The Economic Research Service (ERS) conducted some preliminary 
analyses to begin to establish estimates of what it might cost to 
significantly reduce the amount of retained water in raw poultry. 
There are three ways to reduce retained water. The first involves 
holding poultry in refrigerated rooms until excess water has drained 
off the birds. The second involves making adjustments in the 
chilling process to reduce water absorption. The third involves a 
change in the chilling system, i.e., a move to air chilling or air 
chilling in combination with a water spray. As noted elsewhere in 
this PRIA, FSIS does not consider requirements that would mandate 
air chilling to be economically feasible. The existing regulations 
for air chilling (9 CFR 381.66(e)) require the internal temperature 
of the carcass to be reduced to 40  deg.F or less within 16 hours. 
There are limited data on costs of air chilling. Both reconstruction 
costs and operating costs would be high. The 1979 ERS study included 
an estimate from an industry source that air chilling uses more 
energy and costs about 4 cents per pound more than immersion 
chilling. The ERS study noted that there was only one major U.S. 
poultry processor using air chilling in 1979. A draft Impact 
Analysis Statement conducted for the 1978 proposal to reduce water 
use requirements for chilling stated that retail prices for air 
chilled birds were running approximately 20 percent higher than 
water chilled birds. That analysis attributed the higher retail 
prices to the higher capital cost and higher operating expenses.

[[Page 48979]]

    The simplest way of viewing the cost of reducing retained water 
is to consider the incremental operating costs under the conditions, 
e.g., chiller temperature, that established the minimum unavoidable 
water. Such conditions could also involve optimizing water 
temperature and flow through the chillers, reducing the amount of 
agitation of the chilling medium, and reducing the ``dwell time'' of 
poultry in the chillers. If, as some believe, lower water 
temperature reduces water absorption, the response to tighter 
retained water requirements will be the installation of new or 
heavier compressors to lower the temperature in the chiller units. 
An installed additional compressor would cost an estimated $150,000 
per establishment, or an estimated $45 million for all 300 federally 
inspected establishments.
    FSIS does not have a method for estimating a cost for operating 
at conditions that establish a non-zero level of retained water 
necessary to meet food safety requirements. As an alternative, this 
PRIA estimates the cost of removing a substantial portion of the 
existing water using an extended draining or dripping process. One 
can view the estimated draining costs as an upper bound on the cost 
of removing water. An establishment would only use draining under 
conditions where the cost of draining was less than the incremental 
operating costs.
    To extend draining or dripping time, many establishments would 
have to add refrigerated facilities, purchase vats for storing birds 
being drained, hire additional personnel, and purchase additional 
stock handling equipment. There would be inventory costs due to 
holding birds off the market for a longer time before shipment. 
Holding birds at inspected establishments would also reduce the 
corresponding retail shelf life.
    The ERS staff developed some cost estimates for holding poultry 
based on the following industry input:
     One common method of draining uses stainless steel vats 
at a cost of $1,000 each.
     Vats hold approximately 500 chickens or 100 turkeys.
     Cooler space costs $125 per square foot.
     Vats can be stacked two high.
     Stacked vats with aisles require 12 square feet of 
space per vat.
     Forklifts to move vats cost $24,000 each.

With the above factors in mind, one can address the questions of: 
``What are the fixed costs of draining a substantial amount of 
absorbed water from poultry?''

    The Daily Moisture Records sometime include a record of the 
additional drain time required. The time varies considerably 
probably depending on the initial water level, the drain 
configuration, and the location of the excess water, i.e., under 
skin versus between muscle tissue or within muscle tissue. The 
available data, for cases where young chickens were more than 1 
percent over the limit, indicates that it can take from \1/2\ to 
3\1/2\ hours to drain one percent. In two cases where broilers 
exceeded the 12 percent regulatory limit by more than 4 percent, the 
required drain time was approximately 12 hours. Program personnel 
estimate that the drain time per percent increases as the birds 
approach ``green weight,'' i.e., it takes longer to drain from 8 to 
4 percent than it does from 12 to 8 percent. Thus, it seems 
reasonable to conclude that a 12-hour drain would be the minimum 
time required to remove most of the retained water from chickens.
    Most of the drain times for turkeys ranged from \1/2\ to 1 hour 
on an ``hour per percentage reduction'' basis. However, two cases 
showed drain times in the 10 to 11 hours per percentage reduction 
range. All of the turkey violations noted were less than 1 percent 
above the existing limit whereas some of the chickens started at 
water levels 4 to 5 percentage points above existing limits.
    The existing data from water control efforts indicates that it 
could take at least 12 hours to remove a substantial portion of the 
retained water in chickens. The 12-hour estimate is based on 
starting at a relatively high percentage and lowering the level by 4 
to 5 percentage points. Thus, a 12-hour drain would reduce the 
existing level from 5 to 6.5 percent by an amount less than 4 to 5 
percentage points. To drain chickens for 12 hours is somewhat 
equivalent to saying the industry would need to add the extra 
capacity to drain half a day's production, since most chicken is 
processed in establishments running two shifts.
    Since average chicken production is 29.5 million birds per day 
(assuming a 260-day work year), half a day's production is 14.75 
million birds. Using the above factors, this would require 29,510 
vats at $29.5 million; 354,120 square feet of cooler space at $44.3 
million; and $4.8 million of forklifts assuming the largest 200 
chicken establishments would each require an additional forklift. In 
this 12-hour case, the total fixed costs would be $78.6 million.
    Similarly, half a day's production for turkeys is 557,000 birds 
requiring 5,570 vats at a cost of $5.57 million and cooler space at 
a cost of $8.36 million. Assuming that the largest 70 turkey 
establishments would require an additional forklift at a total cost 
of $1.68 million, the total fixed costs for draining all turkeys for 
12 hours would be $15.6 million. Thus, total fixed costs for a 12-
hour drain for chickens and turkeys are estimated at $94.3 million.
    One can argue that large plants already have the capacity to 
store a shift's production. This occurs today when limits are 
exceeded. The MPI Manual provides, as an alternative to calculated 
drain time, a 24-hour continuous drain at 40 deg. F. or below before 
shipping. The data reviewed for this analysis included two such 
cases. Today's excess capacity can also be viewed as a contingency 
capacity that would still be required over and above any additional 
capacity needed to achieve an overall water reduction.
    This analysis has not attempted to estimate the complete 
variable costs of holding poultry to drain. Variable costs would 
include increased labor costs, increased utility costs, increased 
overhead, and the cost of carrying additional inventory. Holding 
half a day's production is equivalent to continually storing a 
wholesale value of $37 million in poultry ($19.2 billion divided by 
520 shifts). At a 10 percent interest rate, the annual cost of 
draining poultry for 12 hours would be $3.7 million.
    It would also seem reasonable to assume a minimum average of one 
additional employee per establishment. Three hundred employees at 
$21,500 per year (average wage in chicken slaughter establishments 
of $10.34 per hour) would result in an annual operating cost of $6.4 
million. Thus, FSIS estimates the minimum variable costs at $10.1 
million ($3.7 million plus $6.4 million) per year if the response is 
to drain poultry.
    The above analysis has provided an estimate of the cost of 
reducing retained water by a ``substantial'' amount, i.e., an amount 
that can be equaled to a 12-hour drain. Available data indicates 
that a 12-hour drain could reduce overall water by an amount 
somewhat less than 4 to 5 percentage points at an estimated first 
year cost of $104.3 million ($94.2 plus $10.1 million) and recurring 
annual costs of at least $10.1 million.

Cost of Revising Labels

    The cost of revising labels is a relatively easy cost to 
quantify. For previous rulemakings, FSIS has collected survey data 
on the costs of label revisions. Labeling changes have been the 
subject of several rulemakings in recent years.
    The proposed rule would entail a one-time change in affected raw 
meat and poultry product labels to add a statement of the percentage 
of retained water in the product next to the product name. 
Establishments would have to prepare or order new product labels to 
comply with this requirement. FSIS would allow establishments to run 
out their stocks of existing product labels before the proposed 
labeling requirements would take effect. The establishments would, 
therefore, not incur costs of discarding existing label inventories.
    The cost of revising a label varies widely depending on the type 
of label, the number of colors affected, and the printing process 
used. Adding a water content statement is the lowest cost type of 
modification because it involves single color printing and no 
graphic art. The cost of revising labels is an up-front, 
nonrecurring cost. This analysis uses an average cost of $1,000 for 
each product label that must be modified. The cost can vary widely, 
however. Discussions with turkey industry personnel indicate that it 
can cost from $1,500 to $2,000 to change a label for one of the 
opaque plastic bags used to package whole turkeys. In contrast, a 
1992 survey conducted in conjunction with nutrition labeling 
regulations found that many small firms use simplified labels that 
can be revised for less than $200 per label.
    The primary impact will be on the approximately 300 federally 
inspected and 65 State inspected establishments that slaughter and 
pack raw poultry. Currently, 135 of the federally inspected 
establishments are considered large entities, according to Small 
Business Administration (SBA) criteria (establishments having more 
than 500 employees). The cost to these ``large'' establishments of 
changing labels is estimated at approximately $12.5 million. There 
are another 168 federally inspected poultry establishments that 
slaughter and

[[Page 48980]]

pack raw poultry. The estimated labeling cost for these 
establishments is $5.9 million. The method for estimating these 
costs is illustrated in Table 2.

  Table 2.--Costs of Revising Product Labels for Poultry Establishments 
------------------------------------------------------------------------
                                                               Cost at  
                                   Number of      Average     $1,000 per
    Establishment category      establishments   number of      label   
                                                   labels       ($000)  
------------------------------------------------------------------------
Large Chicken.................            115         a 100      $11,500
Large Turkey..................             20            50        1,000
Small Poultry.................            168            35        5,880
                               -----------------------------------------
    Total.....................            303   ...........       18,380
------------------------------------------------------------------------
a Available information indicates large chicken plants have more unique 
  labels, but many are modified by changing a retail chain specific     
  sticker on a base label. A single modification to a base label in     
  effect revises many labels.                                           

    There may be some labeling costs to the meat industry. Some 
edible meat byproducts and organ meats are washed and cleaned before 
being shipped in commerce and may be chilled or packed in water to 
preserve their safety and wholesomeness. Tripe, for example, is 
bleached and scalded before being shipped. Some organ meats, such as 
chitterlings (swine intestines), are chilled and packed in water. 
The Agency does not have any data to estimate the number of 
establishments or number of labels affected. Similarly, the analysis 
has not accounted for separate packaging of poultry giblets. Poultry 
giblets, including livers, hearts, and gizzards (and necks, though 
strictly speaking, necks are not giblets) are washed and chilled in 
water before being packaged and shipped.
    There will also be some labeling cost to retail stores that 
repackage raw products. They would have to apply some form of label, 
most likely a sticker, to store packaged product that has retained 
water. Today, most raw poultry sold from retail meat counters is 
packaged under Federal inspection. Thus, the overall retail impact 
should be minimal. Many large supermarkets also prepare fried 
chicken or rotisserie chicken that is marketed through their deli 
departments. Obviously, if they prepare the product as ready-to-eat 
product, it would no longer have to be labeled. The same would be 
true for products that are marinated or otherwise seasoned and 
marketed as convenience ready-to-cook products.

XI. Benefits of Proposed Rule

    The proposed rule provides FSIS with the necessary regulatory 
limits to prevent economic adulteration and misbranding due to 
excessive retained water. Preventing economic adulteration provides 
a consumer benefit. Quantifying that benefit is beyond the scope of 
this analysis. Another consumer benefit results from the additional 
labeling information that would be available to household consumers 
and other customers to help them in their purchasing decisions. As 
noted in Section VII, customers are currently not being informed as 
to the true price of poultry. Customers would benefit from having 
improved knowledge of product quality, in terms of meat or poultry 
meat content.
    The proposed rule would provide the meat industry with 
additional flexibility for meeting pathogen reduction performance 
standards. Meat processors would be able to utilize pathogen 
reduction techniques without having to be concerned about meeting 
the existing zero retained water requirement.
    This proposed rule would also provide affected establishments 
with increased flexibility to choose the most appropriate means for 
implementing HACCP plans for protecting the safety of raw product 
while minimizing the potential for economic adulteration. By 
removing certain command-and-control requirements and providing 
increased flexibility for HACCP implementation, this proposal could 
reduce HACCP implementation costs.
    As discussed in the background section, this proposal would 
eliminate many requirements, including the following:
     The requirement that poultry establishments must 
provide FSIS with a description of all chilling and freezing 
procedures.
     The requirement that poultry establishments must notify 
FSIS before any changes in chilling procedures are implemented and 
provide FSIS with test results demonstrating the effectiveness of 
any such changes.
     The existing requirements that meat carcasses cannot 
show any weight gain resulting from the use of carcass spray 
systems.
     The existing water intake requirements.

Retail stores could benefit from reduced water. While discussions 
with retailers indicate a primary concern with packaging that 
doesn't leak, reduced water should help prevent leakage which leads 
to costs of cleaning retail counters.

XII. Effect on Product Quality

    FSIS is aware that a substantial change in retained water could 
have an effect on product quality and performance. Certainly, 
consumers have become accustomed to purchasing fresh poultry that is 
very moist and presumably could have a lot less retained water and 
still have a moist surface. FSIS is not aware of any studies 
concerning how water level affects cooking properties, flavor, shelf 
life, or visual attributes. Discussions with officials in the retail 
industry indicate that they do frequently hear consumer complaints 
concerning excess water in packages. FSIS is interested in comments 
providing any information as to whether poultry without retained 
water would be too dry after cooking or whether consumers would 
select packages if the product appeared less moist or if lower water 
would be perceived as being less fresh. Since most meat products do 
not currently have retained water, FSIS assumes that industry would 
conduct marketing studies that would demonstrate the viability of 
product with added water before any production practices were 
changed.

XIII. Aggregate Market Effects

    Comparative statics analysis provides insight into the 
qualitative impacts of the proposed rule on the poultry and meat 
markets. Focusing first on the unambiguous effects on costs of 
production it is assumed that for the moment the rule has no direct 
effect on consumer demand. The analysis also assumes that there will 
be no direct effect on the meat market. The rule will increase the 
cost of production for poultry. At a minimum there will be cost 
increases resulting from developing and conducting the protocols and 
from adding information on water levels to the product label. Costs 
of production will increase more if poultry plants have to undertake 
steps to reduce water by adding new equipment, constructing 
facilities to drain poultry or operating existing equipment at 
higher costs. In a comparative statics analysis, higher costs of 
production would be represented by a decrease in the supply of 
poultry. The result in the poultry market would be a new equilibrium 
price that would be higher and a new equilibrium quantity that would 
be lower. There would be an effect on the meat market because meat 
is a substitute for poultry. Higher poultry prices would lead to an 
increased demand for meat with the result that both the new 
equilibrium price and equilibrium quantity consumed of meat would be 
higher. Thus, compared to the present situation, the proposed rule 
would result in higher prices for both poultry and meat, with less 
poultry consumed and more meat consumed.
    Consider now the direct effect of the proposed rule on demand 
for poultry. There are two effects which may affect demand for 
poultry. First, the rule is expected to result in drier poultry 
being sold, that is, on average, the retained water in poultry will 
be lower. Second, labels on retail packages of poultry will inform 
consumers as to the

[[Page 48981]]

maximum retained water permitted in the plant from which the poultry 
in a retail package was shipped. If consumers consider drier poultry 
a desirable product quality, this would increase the demand for 
poultry. This would lead to a higher equilibrium price for poultry. 
However, the new equilibrium quantity consumed would be 
indeterminate because of the simultaneous decrease in supply 
described earlier. Again, the expected higher equilibrium price for 
poultry will lead to new higher equilibrium price and quantity 
consumed in the meat market.
    The effect of label information on consumer demand for poultry 
is unclear. Consumers could react to label information showing the 
percentage retained water by reducing demand for poultry. The 
reasoning being that consumers will perceive the product as less 
desirable. If this is the consumer reaction, it would work against 
the demand increasing effect of drier poultry. In such cases 
comparative statics analysis cannot predict unambiguously the new 
equilibrium price and quantity consumed of poultry nor the effect on 
the meat market. However, consumers might react to label information 
by increasing poultry demand. An argument for this reaction is that 
consumers have greater assurance that the package of poultry they 
purchase is of an acceptable water level. Currently, unless 
consumers are aware of FSIS water regulations, they have no 
objective measure of the amount of retained water. For example, 
consumers who perceived poultry as high in water say, 12 percent, 
might react favorably to label information reporting a 6 percent 
maximum and increase demand for poultry. It seems likely that 
consumers will use label information to select among poultry 
supplied from plants with different water limits.
    The analysis of costs considered the possibility that some meat 
plants would not be able to meet the new pathogen reduction 
standards without using a process that results in some level of 
retained water. A comparative statics analysis of the meat market 
would parallel what has been presented for poultry.
    Comparative statics analysis can provide insights into the 
qualitative effects of changes that affect supply and demand. 
Insights into the magnitude of these effects would require 
quantitative specifications of supply and demand relationships that 
incorporate the variables of interest. FSIS is not aware of 
empirical specifications that would be applicable to analyzing this 
rule.
    Data on the aggregate supply and use can provide additional 
insight into the effects of this rule on the poultry and meat 
markets. It was estimated that the cost of the proposed rule for 
poultry was $1.5 million for establishing water limits, $104.3 
million if plants had to reduce water, and $18.4 million for 
revising labels. Total first year cost could be as high as $124.2 
million. This compares to an estimated $34.5 billion spent by U.S. 
consumers on poultry in 1997. In percentage terms, first year costs 
would represent 0.36 percent of aggregate consumer expenditures on 
poultry or about one half cent per pound of retail weight. In 
subsequent years, recurring costs are $10.1 million, corresponding 
to 0.03 percent of consumer expenditures and 0.04 cents per pound.
    Estimated costs of the rule for meat were $2.5 million for 
establishing water levels. No quantitative estimates are provided 
for reducing water or for labeling but these are expected to be 
quite small. Aggregate consumer expenditures on meat are estimated 
at $80.3 billion dollars in 1997. The quantity consumed on a retail 
weight basis was about 30.8 billion pounds.
    The proposal is not expected to have significant impacts on 
international trade. Like consumers, trading partners would benefit 
from additional information that would facilitate purchasing 
decisions. Countries exporting poultry to the United States would 
have to have equivalent systems. Currently, annual poultry imports 
are about 5 million pounds. Any imports containing retained water 
would have to have product labeling indicating the presence of that 
water.
    Foreign buyers can develop their own purchase specifications in 
the area of retained water. FSIS is aware that one large domestic 
customer requires that product weight be adjusted downward based on 
the results of a 48 hour drain. In other words, if a sample of birds 
drains ``x'' percent in 48 hours, the product weight must be reduced 
by ``x'' percent.

[FR Doc. 98-24309 Filed 9-8-98; 12:22 pm]
BILLING CODE 3410-DM-P