[Federal Register Volume 64, Number 143 (Tuesday, July 27, 1999)]
[Proposed Rules]
[Pages 40522-40525]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19093]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 64, No. 143 / Tuesday, July 27, 1999 / 
Proposed Rules  

[[Page 40522]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 56

[Docket No. PY-98-006]
RIN 0581-AB56


Eligibility Requirements for USDA Graded Shell Eggs

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Agricultural Marketing Service (AMS) proposes to amend the 
regulations governing the voluntary shell egg grading program. Media 
reports in April 1998 raised concerns about the practice of repackaging 
eggs. The proposed revisions would provide that in order to be 
officially identified with a USDA consumer grademark, shell eggs must 
not have been previously shipped for retail sale. The proposal would 
also amend the definition of the term ``eggs of current production'' 
(currently eggs no older than 30 days) thereby making eggs that were 
laid more than 15 days before the date of packing ineligible for 
official grading. However, interested parties are invited to submit 
comments proposing other periods of time that are viewed as being more 
appropriate. AMS is particularly interested in receiving comments 
regarding the period of between 15 to 30 days. In addition, a 
definition of the term ``shipped for retail sale'' would be added to 
the regulations. These revisions would strengthen the integrity of the 
USDA grade shield by making ineligible for grading certain types of 
eggs.

DATES: Comments must be received on or before September 27, 1999.

ADDRESSES: Send written comments to Douglas C. Bailey, Chief, 
Standardization Branch, Poultry Programs, Agricultural Marketing 
Service, U.S. Department of Agriculture, STOP 0259, 1400 Independence 
Avenue, SW, Washington, D.C. 20250-0259. Comments may be faxed to 202/
690-0941.
    State that your comments refer to Docket No. PY-98-006 and note the 
date and page number of this issue of the Federal Register.
    Comments received may be inspected at the above location between 
8:00 a.m. and 4:30 p.m., Eastern Time, Monday through Friday, except 
holidays.

FOR FURTHER INFORMATION CONTACT: Rex A. Barnes, Chief, Grading Branch, 
202/720-3271.

SUPPLEMENTARY INFORMATION:

Background

    AMS administers a voluntary grading program for shell eggs under 
the Agricultural Marketing Act of 1946, as amended (7 U.S.C. 1621 et 
seq.). Any interested person, commercial firm, or government agency 
that applies for service must comply with the terms and conditions of 
the regulations and must pay for the services rendered. AMS graders 
monitor processing operations and verify the grade and size of eggs 
packaged into packages bearing the USDA grade shield. Plants in which 
these grading services are performed are called official plants. 
Currently in the United States, about one-third of the eggs marketed in 
shell form for human consumption are processed under the voluntary 
grading program.
    Shell egg producers either pack their eggs at the site where the 
eggs are produced (an ``in-line'' operation), or ship their eggs to a 
processing facility or egg processor located elsewhere (an ``off-line'' 
operation). Egg processors also sell and ship eggs among themselves to 
accommodate local imbalances in supply. Once eggs are washed, sized, 
and packaged for retail sale, they are shipped to retailers for 
distribution to the ultimate consumer.
    Occasionally a retail store may have an excess inventory of eggs. 
They may have overstocked for a seasonal promotion (e.g., Easter or 
Christmas) or the expiration date printed on the cartons may be 
approaching. Retailers either dispose of these eggs, give the eggs to 
local charitable feeding operations before the expiration date, or 
return the eggs to the processor. The processor may, in turn, repackage 
the eggs or process them into liquid, frozen, or dried egg products. If 
repackaged, the eggs are removed from their original package, such as a 
carton or open tray (known as a ``flat''), and placed into a new 
package which bears a pack date that is the same or different than on 
the original package. Eggs are usually, but not always, intermixed with 
other unprocessed eggs, rewashed, and regraded before repacking. The 
option of repackaging eggs has always been available to egg processors; 
there are no Federal regulations addressing the practice and Agency 
personnel have observed very little of it in official plants.
    On April 7, 1998, a report was televised about an egg processor's 
practice of repackaging eggs. This report questioned the food safety 
and quality implications of this practice. This rule addresses the 
quality issues.
    On April 17, 1998, USDA issued a written notice to the industry 
announcing suspension of the repackaging of eggs packed under the 
voluntary grading program while the Department reviewed its policies on 
egg repackaging. The suspension, effective April 27, ensured that eggs 
shipped for retail sale and returned were specifically ineligible for 
USDA-grade identification.
    This proposed rule is the result of the Department's review of the 
repackaging issue. It would prohibit the USDA grade identification of 
eggs previously shipped for retail sale or eggs laid more than 15 days 
before date of packing. AMS is also requesting comments on alternate 
periods, particularly those between 15 and 30 days, that are viewed as 
being a more appropriate limit.
    Eggs are at their peak of quality when they are laid and, over 
time, quality will decline. The rate of decline varies according to a 
variety of factors, with the most important being elapsed time since 
lay, storage temperature, and storage humidity. To maintain the 
integrity of the quality standards and the grade shield, only ``eggs of 
current production'' may be officially graded. AMS has defined those 
eggs to be shell eggs which have moved through usual marketing channels 
since the time they were laid and have not been held in refrigerated 
storage in excess of 30 days. In practice, AMS requires eggs being 
officially identified to be no older than 30 days on the day of 
packaging.
    The first definition for ``eggs of current production'' was added 
to the regulations March 1, 1955, and included a 60-day requirement, 
which was

[[Page 40523]]

reduced to 30 days August 1, 1963. This definition allowed buyers and 
sellers to differentiate between relatively fresh eggs and cold storage 
or storage eggs. Commercial cold storage of eggs began in the U.S. 
around 1890, when egg production was seasonal. Until the 1950s, it was 
common for eggs to be held in refrigerated storage for up to 6 months. 
Cold storage could hold the spring and summer production surplus (about 
50 percent of the annual production) for release during periods of 
relative scarcity in autumn and winter, thus avoiding drastic supply 
and price fluctuation. Modern breeding and flock management practices 
have virtually eliminated seasonal differences in egg production, so 
cold storage is no longer necessary or even practical. In addition, 
technological advances in the handling and marketing of shell eggs have 
reduced the time it takes for eggs to move through normal marketing 
channels and provide optimum conditions for maintaining egg quality.
    Four dates are associated with the marketing of shell eggs. These, 
in order of occurrence, are the date of lay, the date of packaging, the 
expiration date, also known as the ``Sell By'' date, and the ``Use By'' 
date. The ``Use By'' date suggests the date after which product quality 
would likely be significantly diminished. Federal law does not require 
any of these dates to be present on shell egg packaging materials such 
as egg cartons. However, under the USDA grading program, the date of 
packaging is required, and if the expiration date is present, it can be 
no more than 30 days after the packaging date.
    AMS believes that current shell egg marketing practices readily 
allow all processors to package shell eggs within 15 days of lay. 
However, as currently permitted by regulation, processors may on 
occasion repackage product returned from retail marketing channels or 
product stored in the processor's cooler that is approaching the 
current 30-day limit. In this way, processors can extend the number of 
days available to market the product by establishing a new, later 
expiration date. An April 1998 media story reported this practice and 
raised consumer awareness and concern about its food safety and quality 
implications.
    This proposed rule responds to consumer concerns about product 
quality by proposing to make retail-returned eggs ineligible for 
official identification and proposing a shorter time limit for 
packaging shell eggs under the USDA grading program. This rule would 
not add or change any program requirements regarding the expiration 
date or the ``Use By'' date. By prohibiting retail-returned eggs and 
eggs older than 15 days from being officially graded and packaged, AMS 
believes that consumers who purchase officially graded product will 
receive product that is free of unwanted variation in egg quality that 
may be caused by the occasional blending of older, lower quality eggs 
with more recently laid, higher quality eggs.
    AMS has tentatively concluded that reducing the time between date 
of lay and date of packaging will enhance the quality of USDA consumer 
graded eggs. Differences in the internal quality of eggs are expressed 
in Haugh units, a standardized quality scale determined primarily by 
the height of the albumen, or ``white'', of a broken-out egg under 
laboratory conditions. In one case study, AMS found that, under proper 
storage conditions, the Haugh unit average for eggs approximately 15 
days old was 72, whereas the Haugh unit average for eggs approximately 
30 days old was 68. These findings are consistent with the loss of 
quality normally associated with eggs of increasing age.
    AMS has also tentatively concluded that industry practice readily 
allows eggs to be packaged within a period shorter than the current 30 
days from date of lay. Discussions with industry members and Agency 
personnel familiar with current industry practice suggest that a 15-day 
limit would allow sufficient time for both in-line and off-line 
processors to trade, ship, process, and package eggs. In order to 
provide consumers with high quality shell eggs, AMS identifies best 
operational practices for processors that pack officially identified 
eggs. Accordingly, AMS is proposing to require that all eggs graded by 
USDA be no older than 15 days on the day of packaging by amending the 
definition of current production to mean shell eggs that are no more 
than 15 days old.
    However, while formulating this proposal, AMS understood from some 
in the industry that a 15-day period may be an undue burden in certain 
situations. For example, smaller size eggs are sometimes stored to 
accumulate sufficient volumes for processing, and heavy demand for 
processing during holiday periods may extend the time between the date 
of lay and date of packaging. Therefore, although AMS still believes 
that a 15-day limit between the date of lay and date of packaging would 
generally allow sufficient time for processors to trade, ship, process, 
and package eggs, we are inviting interested persons to submit comments 
proposing other periods of time that are viewed as being more 
appropriate. AMS is especially interested in receiving comments 
regarding other limits between 15 to 30 days, for example a 21-day 
limit.
    On May 19, 1998, the Food Safety and Inspection Service (FSIS) and 
the Food and Drug Administration (FDA) jointly published an advance 
notice of proposed rulemaking that set forth a farm-to-table strategy 
that may decrease the food safety risks associated with Salmonella 
enteritidis in shell eggs (63 FR 27502). The comment period closed 
August 17, 1998. The actions proposed by the two agencies included 
reviews of potential food safety risks associated with the practices of 
rewashing and repackaging shell eggs and of expiration dating practices 
that might mislead consumers. Future regulatory actions taken by FSIS 
and FDA would apply to all packaged shell eggs, including those 
packaged under USDA's voluntary grading program, which addresses 
quality.

Proposed changes

    This proposed rule would further restrict the eligibility 
requirements for shell eggs packed under the voluntary AMS quality 
grading program.
    The proposal would change the definition for Eggs of current 
production (Sec. 56.1) by specifying that the term denotes eggs that 
are no more than 15 days old. This definition would require eggs being 
officially identified to be no older than 15 days on the day of 
packaging instead of the present 30-day limit. Additionally, reference 
to the term ``Refrigerator or storage eggs'' that is used to define 
eggs held in excess of 30 days is removed because it is obsolete. It is 
a term that once referred to eggs which had been put into cold storage 
during periods of high production to be released during periods of 
relative scarcity. This is no longer industry practice and therefore 
the term is no longer needed.
    The proposal adds a definition for the term Shipped for retail sale 
(Sec. 56.1). This term would mean shell eggs that are forwarded from 
the processing facility for distribution to the ultimate consumer. This 
includes eggs forwarded for sale to wholesalers, brokers, retailer 
warehouses, retailer stores, or other distribution points in the 
marketing chain.
    Finally, the proposal revises the requirements of shell eggs to be 
identified with consumer grademarks (Sec. 56.40). Eggs ``shipped for 
retail sale'' that are returned to an egg processor would be ineligible 
for USDA consumer grade identification, even if they are eggs of 
current production.

[[Page 40524]]

Executive Order 12866 and Effect on Small Entities

    This proposed rule has been determined to be significant for 
purposes of Executive Order 12866 and, therefore, has been reviewed by 
the Office of Management and Budget (OMB). In addition, pursuant to 
requirements set forth in the Regulatory Flexibility Act (RFA) (5 
U.S.C. 601 et seq.), the AMS has considered the economic impact of this 
proposed rule on small entities and has determined that its provisions 
would not have a significant economic impact on a substantial number of 
small entities.
    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. The Small Business 
Administration defines small entities that produce and process chicken 
eggs as those whose annual receipts are less than $9,000,000 (13 CFR 
121.201). Approximately 550,000 egg laying hens are needed to produce 
enough eggs to gross $9,000,000.
    Currently, the Agricultural Marketing Act of 1946, as amended (7 
U.S.C. 1621 et seq.) authorizes a voluntary grading program for shell 
eggs. Shell egg processors that apply for service must pay for the 
services rendered. These user fees are proportional to the volume of 
shell eggs graded, so that costs are shared by all users. Shell egg 
processors are entitled to pack their eggs in packages bearing the USDA 
grade shield when AMS graders are present to certify that the eggs meet 
the grade requirements as labeled. Plants in which these grading 
services are performed are called official plants. Shell egg processors 
who do not use USDA's grading service may not use the USDA grade 
shield. There are about 700 shell egg processors registered with the 
Department that have 3,000 or more laying hens. Of these, 130 are 
official plants that use USDA's grading service and would be subject to 
this proposed rule. Of these 130 official plants, 14 meet the small 
business definition.
    Repackaging is the practice of removing eggs from their original 
package and repacking them into a new package, with a pack date that is 
the same or different than on the original package. Eggs are at their 
peak of quality when they are laid and, over time, quality will 
decline. The repackaging of retail-returned eggs extends the time 
before those eggs reach the ultimate consumer. Since August 1, 1963, 
AMS has required eggs being officially identified to be no older than 
30 days on the day of packaging.
    In April 1998, the Agency surveyed its graders in the 130 official 
plants to determine the repackaging practices of those plants. Results 
of the survey indicated that 4 of the 130 plants had infrequently 
repackaged retail-returned eggs into shielded cartons during the 
previous year, usually during the holidays. No official plants that 
meet the definition for small businesses repackaged retail-returned 
eggs into shielded cartons.
    On April 27, 1998, AMS suspended by written notice to the industry 
the repackaging of eggs into packages bearing the USDA grade shield 
when retailers had returned those eggs to the processor. The proposed 
revisions would provide that in order to be officially identified with 
a USDA consumer grademark, shell eggs must not have been previously 
shipped for retail sale.
    This proposal would also amend the definition of the term ``eggs of 
current production,'' thereby making eggs that were laid more than 15 
days before the date of packing ineligible for grading. AMS is also 
requesting comments on alternate periods, particularly those between 15 
and 30 days, that are viewed as being a more appropriate limit. In 
addition, a definition of the term ``shipped for retail sale'' would be 
added to the regulations.
    No adverse industry-wide impact has been observed since AMS 
suspended the repackaging of eggs returned by retailers, primarily 
because of the infrequent use of egg repackaging by official plants. 
Additionally, AMS believes that the proposed 15-day limit from date of 
lay to date of packaging for eggs officially identified with a USDA 
consumer grademark minimizes unwanted variations in egg quality while 
allowing sufficient time for the normal wholesale trading and shipping 
of shell eggs to be completed. AMS expects this limit to have little or 
no economic impact on shell egg producers or processors, including 
those that may be small businesses. Shell egg processors can market 
eggs that are not of current production by packaging them without USDA 
grade identification. Since the difference in economic return to 
processors between USDA graded versus non-USDA graded eggs is about one 
cent per dozen, the economic impact is minimal for official plants and 
non-official plants that may later elect to use the grading service. 
Optionally, processors may divert eggs to the production of liquid, 
frozen, and dried egg products. By doing so, they can recoup 
approximately 50 percent of the products' original value.
    AMS considered leaving the 30-day requirement unchanged. However, 
AMS believes industry advances now allow wholesale trading and shipping 
to be completed in time to allow shell eggs to be packaged by 
processors within 15 days of lay. By proposing to change the 
requirement to a shorter period, AMS and the industry can better ensure 
the quality of officially identified consumer grade eggs.
    While formulating this proposal, AMS understood from some in the 
industry that a 15-day period may impose an undue burden in certain 
situations. For example, smaller size eggs are sometimes stored to 
accumulate sufficient volumes for processing, and heavy demand for 
processing during holiday periods may extend the time between the date 
of lay and date of packaging. Therefore, although AMS believes that a 
15-day limit between the date of lay and date of packaging would 
generally allow sufficient time for processors to trade, ship, process, 
and package eggs, AMS is seeking comments about the impact of the 
proposed 15-day limit, particularly on small businesses. AMS is also 
interested in receiving comments regarding other limits between 15 to 
30 days, for example a 21-day limit.

Executive Orders 12988 and 12898

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. It is not intended to have retroactive effect. 
This rule will not preempt any State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule. There are no administrative procedures that must be exhausted 
prior to any judicial challenge to the provisions of this rule.
    Pursuant to Executive Order 12898, ``Federal Actions to Address 
Environmental Justice in Minority Populations and Low Income 
Populations,'' AMS has considered the potential civil rights 
implications of this proposed rule on minorities, women, or persons 
with disabilities to ensure that no person or group shall be 
discriminated against on the basis of race, color, sex, national 
origin, religion, age, disability, or marital or familial status. This 
included those persons who are employees, program beneficiaries, or 
applicants for employment or program benefits in the voluntary shell 
egg grading program. Adoption of the proposed rule would not require 
official plants to relocate or alter their operations in ways that 
could adversely affect such persons or groups. Nor

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would it exclude any persons or groups from participation in the 
voluntary shell egg grading program, deny any persons or groups the 
benefits of the grading program, or subject any persons or groups to 
discrimination.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501 et seq.), the Office of Management and Budget (OMB) has approved 
the information collection and recordkeeping requirements included in 
this rule, and there are no new requirements. The assigned OMB control 
number is 0581-0128.

List of Subjects in 7 CFR Part 56

    Eggs and egg products, Food grades and standards, Food labeling, 
Reporting and recordkeeping requirements.
    For reasons set forth in the preamble, it is proposed that 7 CFR 
part 56 be amended as follows:

PART 56--VOLUNTARY GRADING OF SHELL EGGS

    1. The authority citation for part 56 continues to read as follows:

    Authority: 7 U.S.C. 1621-1627.

    2. Amend Sec. 56.1 by revising the term Eggs of current production 
and adding a definition for the term Shipped for retail sale to read as 
follows:


Sec. 56.1  Meaning of words and terms defined.

* * * * *
    Eggs of current production means shell eggs that are no more than 
15 days old.
* * * * *
    Shipped for retail sale means shell eggs that are forwarded from 
the processing facility for distribution to the ultimate consumer.
* * * * *
     In Sec. 56.40 paragraph (c) is revised to read as follows:


Sec. 56.40  Grading requirements of shell eggs identified with consumer 
grademarks.

    (a) * * *
* * * * *
    (c) In order to be officially identified with a USDA consumer 
grademark, shell eggs shall:
    (1) Be eggs of current production;
    (2) Not possess any undesirable odors or flavors; and
    (3) Not have previously been shipped for retail sale.

    Dated: July 22, 1999.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 99-19093 Filed 7-26-99; 8:45 am]
BILLING CODE 3410-02-P