[Federal Register Volume 68, Number 147 (Thursday, July 31, 2003)]
[Rules and Regulations]
[Pages 44859-44870]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-19505]


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DEPARTMENT OF AGRICULTURE

Food Safety and Inspection Service

9 CFR Part 319

[Docket No. 01-018F]


Definitions and Standards of Identity or Composition: Elimination 
of the Pizza with Meat or Sausage Standards

AGENCY: Food Safety and Inspection Service, USDA.

ACTION: Final rule.

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SUMMARY: The Food Safety and Inspection Service (FSIS) is rescinding 
the regulatory standards of identity for ``pizza with meat'' and 
``pizza with sausage.'' FSIS has determined that the standards no 
longer serve their original purpose of protecting the public from 
economic deception. Furthermore, FSIS believes that the standards may 
be

[[Page 44860]]

inhibiting manufacturers of federally inspected pizzas from producing 
and marketing the styles of pizzas that today's consumers demand. Once 
this rule becomes effective, products may be identified with a common 
or usual name that includes the term ``pizza;'' identifies the meat or 
poultry component, e.g., ``pepperoni;'' and declares other components 
as a feature that distinguishes them from the other pizza product, e.g. 
``pizza--garlic sauce, tomatoes, reduced-fat cheese, and seasoned beef 
strips on a crust.''
    FSIS is also amending the meat and poultry products inspection 
regulations to require, for a limited time, that the labels of products 
identified as meat or poultry pizzas in their common or usual names 
include the percent of meat or poultry in the product in a 
parenthetical statement that is contiguous to the ingredients 
statement. This labeling requirement will expire after three years. 
FSIS is adopting this requirement because, based on comments received 
in response to the proposed rule, the Agency has concluded that some 
consumers still rely on the standards to ensure that a product 
identified as a meat or poultry ``pizza'' contains a certain amount of 
meat or poultry. FSIS will allow pizza manufacturers to exhaust their 
remaining packaging inventory before they will be required to comply 
with the new labeling requirement. Requiring percent labeling of the 
meat or poultry content of non-standardized pizzas for a limited time 
is a transitional step to allow these consumers to understand the 
nature of the food.

DATES: This rule is effective October 22, 2003. Sections 317.8(b)(40) 
and 381.129(f) shall expire October 24, 2006.

FOR FURTHER INFORMATION CONTACT: Robert C. Post, Ph.D., Director, 
Labeling and Consumer Protection Staff, Food Safety and Inspection 
Service, U.S. Department of Agriculture, Washington, DC 20250-3700; 
(202) 205-0279.

SUPPLEMENTARY INFORMATION:

Background

    On November 2, 2001, FSIS published a proposed rule in the Federal 
Register to amend part 319 of the Federal meat inspection regulations 
to rescind the standards of identity for ``pizza with meat'' and 
``pizza with sausage'' (66 FR 55601). The proposed rule was in response 
to a petition submitted on February 4, 1999, by the National Frozen 
Pizza Institute (NFPI). In support of its petition, NFPI submitted data 
to demonstrate that the pizza standards are restricting the development 
of new products by the frozen pizza industry, including pizzas with 
reductions in constituents that are of health concern to some people, 
such as fat and cholesterol. NFPI also presented evidence that, due to 
product innovation in the food service industry, consumers' 
expectations of what is meant by the term ``pizza'' are broader that 
what is prescribed by the current standards.
    Once this final rule becomes effective, products identified as meat 
or sausage pizzas will no longer be required to contain tomato sauce, 
cheese, and a bread-based crust, as prescribed by the standards under 9 
CFR 319.600. In addition, manufacturers of pizza products will be 
permitted to reduce the minimum meat content from 12 percent cooked or 
15 percent raw to 2 percent cooked or 3 percent raw, the level of meat 
required for a product to be considered a meat food product subject to 
USDA jurisdiction.
    In the preamble to the proposed rule, FSIS mentioned that although 
the regulations do not contain a standard of identity for pizza 
products that contain poultry, FSIS has treated these products as 
``like products'' to pizza with meat or sausage. The Agency's policy 
has been that these products must contain at least 12 percent cooked 
poultry meat. Once this final rule becomes effective, the policy that 
pizzas that contain poultry must have a minimum poultry content will 
also be revoked.
    As discussed in the preamble to the proposed rule, rescinding the 
meat and sausage pizza standards of identity does not mean that the 
names for products identified as ''pizzas'' will be unregulated. Under 
9 CFR 317.2(c)(1) and 381.117(a), non-standardized meat and poultry 
products must be identified by the common or usual name of the product, 
or if the product has no common or usual name, a truthful, descriptive 
designation. FSIS has determined that, in the absence of a regulatory 
standard of identity, the term ``pizza'' represents the appropriate 
common or usual name for the class of products that have been 
traditionally formulated with the components stipulated in the 
regulatory standard prescribed by 9 CFR 319.600, i.e., tomato sauce, 
cheese, and meat topping on a bread-based crust. Products that contain 
these ingredients may be identified by a common or usual name that 
includes the term ``pizza;'' identifies the meat or poultry component, 
e.g., pepperoni; and declares any other components or features that 
distinguish it from traditional pizzas, e.g., ``pizza--garlic sauce, 
tomatoes, reduced-fat cheese, and seasoned beef strips on a crust.''
    In the preamble to the proposed rule, FSIS requested comments on 
whether the product names of non-standardized pizzas should be required 
to include the percent of meat or poultry. Based on the comments 
received in response to this question, FSIS has concluded that some 
consumers still rely on the standards to ensure that a meat or poultry 
product identified as a ``pizza'' contains a certain amount of meat or 
poultry. To prevent these consumers from being misled about the meat or 
poultry content of non-standardized pizzas, the Agency is requiring 
that the labeling of products that are identified in their common or 
usual names as pizzas that contain a meat or poultry component (e.g. 
``pizza with meat,'' ``sausage, green pepper, and mushroom pizza,'' 
``Thai pizza--chicken, peanut sauce, and vegetables on a crust'') 
include a parenthetical statement of the percent of meat or poultry in 
the product that is contiguous to the ingredients statement. This 
labeling requirement will be effective for three years to allow 
consumers to become familiar with variations in the meat or poultry 
content that will be permitted in pizzas as non-standardized foods. 
FSIS will allow manufacturers of meat and poultry pizzas to exhaust 
their remaining packaging inventory before they will be required to 
comply with the new labeling requirement.

Comments and Responses

    The comment period for the proposed rule closed on January 2, 2002. 
However, in response to comments requesting that FSIS extend the 
comment period, on March 14, 2002, the Agency reopened and extended 
that comment period for an additional 30 days. Thus, the comment period 
closed on April 15, 2002.
    FSIS received 36 comments in response to the proposed rule from 
consumers, consumer advocacy organizations, members of the frozen pizza 
industry, academia, industry consultants, and trade and professional 
associations representing livestock producers, meat processors, food 
processors, seasoning manufacturers, soy product producers, and 
dietitians. Most of the commenters supported eliminating the standards 
of identity for meat and sausage pizzas. In general, the supporters 
agreed that the standards are restricting the development of new 
products by the frozen pizza industry, and that consumers, expectations 
of what is meant by the term ``pizza'' are broader that what is 
prescribed by the current standards. Eight commenters opposed the 
proposed rule, mainly because they believe that the current

[[Page 44861]]

standards still serve their intended purpose of protecting consumers 
from economic deception, particularly with regard to the meat content 
of products identified as meat or sausage pizzas. Three commenters, a 
trade association representing the frozen foods industry, a trade 
association representing meat processors, and a large company that 
manufactures a variety of food products, including frozen pizzas, took 
no position on whether FSIS should eliminate the existing pizza 
standards but submitted comments on certain aspects of the proposed 
rule. Summaries of issues raised by commenters and Agency responses 
follow.
    Comment: As mentioned above, in the preamble to the proposed rule, 
FSIS stated that, if it were to rescind the pizza standards, it had 
tentatively determined that required labeling features, such as the 
product name, ingredients statement, and nutrition facts panel, will 
provide adequate information for consumers to make informed choices 
when purchasing federally inspected pizza products (66 FR 55601, 
55602). In particular, the Agency concluded that the product name would 
become a descriptive feature to convey to the consumer the components 
of the product. The Agency went on to request comments on whether the 
product name of non-standardized pizzas should be required to include 
the percent of meat or poultry in the product. Almost all commenters 
that supported eliminating the pizza standards opposed this proposed 
requirement. Following is a summary of the reasons for their 
opposition.
    [sbull] The product names of pizzas sold by restaurants and 
delivery services would not be required to contain the percent of meat 
or poultry in the product, thereby re-establishing different regulatory 
treatment for the retail and frozen pizza industries.
    [sbull] Percentage labeling of a specific ingredient is not 
required for other products regulated by FSIS or the Food and Drug 
Administration (FDA).
    [sbull] If the product name for non-standardized pizzas must 
include the percent of meat or poultry in the product, then it should 
also be required to include the percent of other characterizing 
ingredients, such as mushrooms or seasonings, as well.
    [sbull] Requiring that the percent of meat or poultry in a non-
standardized pizza product be included as part of the product name is 
not necessary because existing required labeling features, including 
mandatory ingredient and nutrition information, already provide 
sufficient information about a product's meat or poultry content.
    [sbull] Requiring percent labeling of the meat content implies that 
meat is the most valuable ingredient in the product. The amount of meat 
topping is not the determining characteristic of the product. Consumers 
also look at overall cost and quality of ingredients used.
    [sbull] Unlike some other products, the meat content of a pizza is 
readily apparent with even a superficial visual exam, which allows 
consumers to assess the value of the product for the price.
    [sbull] Such information would have little meaning to consumers and 
could lead to counter productive competitive labeling contests, which 
would not serve consumers' best interests.
    [sbull] Percent meat content labeling assumes that all meat 
toppings are equivalent in cost, which is not an accurate assumption.
    [sbull] Pizzas subject to FDA and FSIS jurisdiction should be 
marketed and regulated similarly. FDA has no such specific requirement 
or any standards for pizzas subject to FDA's jurisdiction.
    [sbull] Few consumers have a working knowledge of the current 
standards. Therefore, it is not relevant to require the labeling to 
include the percentage of meat or poultry in the pizza.
    [sbull] Requiring percent labeling of the meat or poultry content 
would require manufacturers to disclose proprietary information, 
including trademark recipes. Manufacturers who wish to provide this 
information voluntarily could do so if they believed that communicating 
the percent of meat in the product provided them an advantage.
    [sbull] Percent ingredient labeling, including a requirement for 
meat or poultry percent ingredient labeling, is not in keeping with 
historical U.S. government policy regarding standards that suggest 
percentage ingredient labeling of foods in international trade. For a 
number of years, the U.S. delegation to the Codex Committee on Food 
Labeling opposed a European Union (EU) proposal to require labeling of 
percent fish core in fish sticks. Importantly, unlike frozen pizza, 
fish sticks do have one characterizing ingredient.
    One commenter, a representative of a consumer advocacy 
organization, stated that requiring that the product names of non-
standardized pizzas include the percent of meat or poultry in the 
product, although well intentioned, seems clumsy and extreme. A better 
solution, suggested the commenter, is to identify the percent of meat 
or poultry in a product somewhere outside the ingredients statement, 
but not as part of the product name.
    Another commenter, a trade association representing meat 
processors, noted that if the meat and sausage pizza standards are 
rescinded, it is important that FSIS give consideration to alternative 
ways to provide truthful information about the meat or sausage 
component of products identified as ``pizza.''
    Response: The Agency was not persuaded by the comments that opposed 
percent labeling of the meat or poultry content of non-standardized 
pizzas because many of these comments are misleading or inaccurate. 
Requiring percent labeling of the meat or poultry content for packaged 
pizzas will not re-establish different regulatory requirements for 
retail and frozen pizza industries, as suggested by the comments. Even 
with the elimination of the pizza standards, restaurant pizzas and 
packaged pizzas will still be subject to different regulatory 
requirements. For example, nutrition labeling is required for packaged 
pizzas but not for restaurant pizzas.
    The statement that percent labeling of a specific ingredient is not 
required for any other products regulated by FSIS and FDA also is not 
accurate. FDA regulations require that the common or usual name of a 
food contain the percentage of any characterizing ingredients when the 
proportion of such ingredients in the food has a material bearing on 
price or consumer acceptance, or when the labeling or appearance of the 
food may create the erroneous impression that the ingredient is present 
in an amount greater than is actually the case (21 CFR 102.5(b)). Thus, 
contrary to what was suggested in the comments, requiring percent 
labeling of the meat or poultry component of a meat or poultry pizza 
with a common or usual name is consistent with FDA regulations.
    Although it is true that the meat content of pizza is readily 
apparent when examining the pizza itself, the meat content is not 
readily apparent if there is a solid cover on the package. Furthermore, 
FSIS disagrees that percent meat content labeling promotes unproductive 
labeling contests. The Agency believes that it could promote consumer 
choice and fair competition.
    Upon further consideration of the issue, FSIS has determined that 
required labeling features, such as the nutrition facts panel and 
ingredients statement, do not provide sufficient information about the 
meat or poultry content of products identified as ``pizza.'' Although 
ingredients must be listed in order of predominance, there could be 
such a wide range of ingredients in a pizza that such a listing does 
not

[[Page 44862]]

effectively convey the proportion of meat or poultry in the product. 
FSIS agrees with the comment that, once the standards are rescinded, 
the Agency should consider alternative ways to provide truthful 
information about the meat or poultry content of products identified as 
``pizza.'' It also agrees that the percent of meat or poultry in 
products identified as ``pizza'' need not appear as part of the product 
name and can be conveyed somewhere else on the product label.
    Therefore, FSIS has decided to require, for three years from the 
effective date of this final rule, that products that are identified as 
``pizza'' and whose common or usual name identify a meat or poultry 
component state the percent of meat or poultry in the product in a 
parenthetical statement contiguous to the ingredients statement. If 
consumers find this information useful, and believe that it should 
appear on the product labeling permanently, they may petition the 
Agency to rescind the expiration date of this part of the regulation.
    Comment: Most of the commenters who opposed eliminating the meat 
and sausage pizza standards did so because, as previously mentioned, 
without the standards a product identified as a ``meat pizza'' or a 
``sausage pizza'' would be permitted to contain as little as 2 percent 
cooked or 3 percent raw meat instead of the 12 percent cooked or 15 
percent raw meat prescribed by the standards. These commenters noted 
that meat is the most expensive ingredient in a meat pizza, and that 
without standards, manufacturers would be able to significantly reduce 
the meat content of meat pizzas without consumers' knowledge. They also 
asserted that descriptors of meat or sausage imply that a product 
contains some minimum amount of these ingredients, and that consumers' 
expectations are that this amount is greater than two percent. Thus, 
the commenters argued, removing the meat and sausage pizza standards 
would lead to economic deception of consumers that purchase non-
standardized pizzas.
    Response: As discussed above, FSIS believes that these comments 
demonstrate that some consumers rely on the pizza standards of identity 
to ensure that a product identified as a meat or poultry pizza contains 
a certain amount of meat. However, the Agency does not believe that 
retaining the regulatory pizza standards of identity is necessary to 
address the concerns expressed by these comments. As discussed above, 
to address concerns that consumers could be misled about the meat 
content of non-standardized pizzas, the Agency is requiring temporary 
supplemental labeling of the meat or poultry content for products that 
are identified as ``pizzas'' and whose product name includes a meat or 
poultry component.
    Furthermore, FSIS does not agree that rescinding the meat and 
sausage pizza standards will lead to economic deception of consumers 
that purchase non-standardized pizzas. FSIS has determined that over 
the years consumer expectations, industry creativity, and technological 
innovation have created new types of pizza products that fall outside 
the realm of the traditional or standardized pizza of several decades 
ago. The existing pizza standards inhibit the production and marketing 
by Federal establishments of new pizza products. Examples of new pizza 
products found at retail and food service establishments include: 
``deep dish pizzas'' that provide a smaller surface area for toppings, 
``white pizzas'' that do not have a traditional tomato-based sauce, and 
ethnic-oriented pizzas that often reduce the meat component to permit a 
greater amount of vegetable toppings. The current standards for meat 
and sausage pizzas require that the products contain tomato sauce, 
cheese, and a bread-based crust, in addition to a minimum percentage of 
meat or poultry. Thus, the current standards impede the development and 
marketing of these new and innovative products.
    Comment: Many commenters that opposed the proposed rule stated that 
eliminating the meat and sausage pizza standards of identity is not 
necessary for companies to produce pizzas with nutritional profiles 
more consistent with nutritional guidance (e.g., lower in fat). They 
stated that nutritionally improved products can and should be achieved 
by using lower fat ingredients, not less of fat-containing ingredients, 
such as meat and cheese. One commenter, an individual consumer, stated 
that even if the pizza standards were eliminated, it would not likely 
result in more lower-fat frozen meat or sausage pizzas. To support his 
argument, the commenter noted that of all the restaurant menus that 
NFPI presented in support of its petition, not one contained a meat or 
sausage pizza advertised as being a healthier or lower fat product.
    Supporters of the proposal felt that the current standards are 
obstructing producers' ability to create meat pizzas lower in fat, 
saturated fat, and cholesterol in response to changing consumer tastes. 
They stated that eliminating the standards will give manufacturers the 
flexibility to offer pizzas with less meat, sausage, and fat, and will 
permit the production of frozen pizzas with reduced-fat cheese or no 
cheese, provided there is disclosure on the product's label. One 
commenter noted that it is not always economical to use leaner meats, 
which are more expensive on a per pound basis, when a manufacturer has 
to comply with a percentage minimum weight.
    Response: FSIS does not disagree that once this final rule is 
effective, many pizza manufacturers will continue to market the 
traditional pizza products that are available to consumers today. 
However, these manufacturers will also have greater flexibility to 
produce meat and poultry pizzas with reductions in constituents that 
are of health concern to some people, such as calories and fat. While 
it is true, as noted in some of the comments, that the standards permit 
the production of pizzas with improved nutritional profiles through the 
use of lower fat ingredients, removing the standards will give pizza 
manufacturers additional flexibility to produce and market 
nutritionally improved packaged pizzas.
    Removal of the pizza standards will not only permit greater use of 
lower fat ingredients in meat pizza products, such as vegetables and 
soy-based and other reduced-fat cheeses, it will also permit reductions 
in the amount of fat-containing ingredients, such as meat and cheese, 
which will result in a wider selection of pizza products that meet 
nutrient content claims such as ``lower fat,'' ``healthy,'' and 
``lean.'' As noted by one commenter, using leaner meats to reduce the 
fat content of a pizza product that must comply with a minimum meat 
content is not always economical because leaner meats are more 
expensive on a per pound basis. Thus, eliminating the standard will 
permit pizza manufacturers to provide packaged pizza products with 
improved nutritional profiles at a variety of pricing levels.
    Comments: Some of the commenters that opposed eliminating the pizza 
standards asserted that changes in standards should be based on 
consumer research. They pointed out that, while NFPI presented 
restaurant menu data to support its petition, it did not provide 
research to indicate that consumers liked the new styles of pizzas 
presented on the menus. One commenter noted that neither FSIS nor the 
petitioner presented strong evidence of consumer confusion or 
dissatisfaction with the current standards.
    A few commenters presented their own consumer research that they 
contended provides evidence that consumers are satisfied with the pizza 
standards. Two commenters, trade

[[Page 44863]]

associations representing livestock producers, submitted a consumer 
research report from a consumer focus group study on the meaning of 
food names and the assumptions underlying them. The report concluded, 
among other things, that the identities of certain foods, such as 
bologna and beef stew, are so distinct to consumers, and consumers are 
so used to the products being labeled as such, that consumers have 
difficulty grasping the concept of a simulated change to the names or 
composition of the product. The research report also concluded that 
changing the composition of a commonly named food product is equivalent 
to changing the meaning of the name itself. These findings, the 
commenters asserted, are evidence that consumers rely on product 
standards to ensure product integrity and prevent economic 
adulteration.
    Another commenter, a manufacturer and distributor of frozen 
prepared food products that supported removal of the portion of the 
pizza standards that prescribes the four basic components (meat, 
cheese, tomato sauce and bread based crust) but opposed elimination of 
the minimum meat content requirement, submitted a consumer survey that 
questioned consumers about the meat content of specific meat pizza 
products produced by the commenter's company. A majority of the 
consumers surveyed felt that the meat content of each product involved 
in the survey was ``just about right.'' The commenter stated that these 
results indicate that consumers are satisfied with the meat content 
requirements imposed by the current standards and that the standards 
still ``promote honesty and fair dealing in the interest of the 
consumer.''
    Another commenter, a multinational manufacturer and marketer of 
consumer branded meat and food products, submitted the results of a 
survey conducted after publication of the proposed rule in which the 
company contacted over 1,000 consumers by telephone. The survey asked 
consumers how they felt about the U.S. Government's proposal ``to 
change the minimum amount of meat for frozen meat pizza to two percent 
of the cooked weight or three percent of the raw weight.'' The 
commenter's survey found that consumers' were overwhelmingly against 
the proposed change.
    Response: The restaurant menu data submitted by NFPI in support of 
its petition demonstrate that many products identified as ``pizza'' 
that are purchased by consumers in restaurants do not meet the Agency's 
standards. Thus, even without consumer survey data, it is no longer 
reasonable to assume that consumer expectations with regard to what 
constitutes a pizza mirror the standards for FSIS-inspected products. 
Restaurants would not be offering such a variety of pizza products if 
consumers were not interested in purchasing such products.
    Although FSIS does not dispute the findings of the consumer studies 
submitted by the commenters, the Agency disagrees that these findings 
demonstrate a need to retain the meat and sausage pizza standards of 
identity. The consumer focus group study that examined the meaning of 
common names for meat products submitted by the two trade associations 
questioned consumers about their expectations regarding the composition 
of a variety of products that have regulatory standards of identity, 
including bacon and bologna. However, it did not question consumers 
about their expectations regarding the composition of products 
identified as ``pizza.''
    The data submitted by NFPI in support of its petition indicate 
that, unlike consumer perceptions of products that were the subject of 
the consumer focus group studies, such as bacon or bologna, consumer 
perceptions of what a product identified as a ``pizza'' is have changed 
dramatically in recent years to include a wide variety of non-
traditional, non-standard versions of pizzas. Thus, it is unlikely that 
changing the composition of a product identified as a ``pizza'' will 
result in consumer confusion as to the characteristics of the product. 
FSIS does not completely disagree with the commenters' conclusion that 
the study results support the notion that consumers rely on product 
standards to ensure product integrity and prevent economic 
adulteration. However, when a product standard no longer reflects 
consumer expectations about the composition of the product, the 
standard is not serving its purpose and should be rescinded.
    The survey conducted by the frozen foods manufacturer that found 
that a majority of the consumers surveyed felt that the meat content of 
a variety of meat pizza products was ``just about right,'' and the 
survey conducted by the multinational manufacturer of meat products 
that asked consumers how they felt about the U.S. Government's proposal 
``to change the minimum amount of meat for frozen meat pizza to two 
percent of the cooked weight or three percent of the raw weight,'' both 
imply that the sole effect of eliminating the pizza standards would be 
a reduction in the minimum meat content and that once the standards are 
rescinded every pizza manufacturer will reduce the meat content of 
frozen pizzas to 2 percent cooked or 3 percent raw meat.
    Rescinding the pizza standards involves more that permitting a 
reduction in the minimum meat content requirement for meat food 
products identified as ``pizza.'' It also involves permitting the use 
of sauces other than tomato-based sauces, crusts other than bread-based 
crusts, and components other than standardized cheese and cheese food 
products in federally inspected pizzas. Thus, in addition to permitting 
a reduction in the meat content of a meat or sausage pizza, eliminating 
the pizza standards provides the opportunity for the development and 
marketing of non-traditional pizza products, such as pizza with no 
sauce or cheese component. None of the consumer research studies 
submitted by the commenters questioned consumers on how they felt about 
this aspect of eliminating the pizza standards.
    Furthermore, the fact that consumers state that they are satisfied 
with the meat content of certain products does not necessarily mean 
that that meat content must be prescribed by regulation. As discussed 
above, to allow consumer to become familiar with the variations that 
will be permitted in the meat content of non-standardized pizzas, the 
Agency is requiring that products identified as ``pizza'' that include 
a meat or poultry component as part of the product name bear temporary 
supplemental labeling that conveys the percent of meat or poultry in 
the products. Furthermore, in the absence of a prescribed meat content 
requirement, companies are likely to continue to manufacture pizzas 
with an amount of meat that consumers desire because if they do not 
they will lose their market share to companies that do.
    As demonstrated by the studies discussed above, consumer research 
can be greatly affected by the manner in which questions are posed to 
consumers. Thus, the results of the consumer surveys submitted in 
response to the proposed rule have not persuaded FSIS to retain the 
pizza standards of identity.
    Comment: One commenter stated that policy interpretations on the 
regulations made by FSIS over the years provide frozen pizza 
manufacturers with sufficient flexibility to produce and market ``non-
traditional'' meat pizzas, and therefore, there is no need to eliminate 
the pizza standards. The commenter cited FSIS's interpretive policies 
related to the pizza standards, including the policy that permits 
certain products to be identified as ``white

[[Page 44864]]

pizza,'' the policy that defines ``tomato sauce'' as any sauce that 
contains two percent tomatoes, the policy that liberally interprets 
``bread-based crust'' to include most every kind of flour-based 
component, and the policy that allows for percentage meat labeling on 
pizza products that do not otherwise comply with the minimum meat 
content prescribed by the standards.
    Response: In addition to allowing pizza manufacturers to produce 
the ``non-traditional'' products that are currently described in FSIS 
policy documents, rescinding the standards of identity for meat and 
sausage pizza will provide pizza manufacturers with the flexibility to 
create new and novel styles of pizza products without having to 
approach FSIS for new policy interpretations or regulatory changes.
    Comment: Several commenters requested that FSIS clarify whether it 
will permit generic label approval for meat and poultry pizza products 
once the pizza standards are rescinded.
    Response: Modifications made to incorporate the percent meat or 
poultry content declaration prescribed by this final rule into the 
labels of existing meat or poultry pizza products will be generically 
approved pursuant to 9 CFR 317.5(b)(1) and 9 CFR 381.133(b)(1). These 
provisions of the FSIS regulations allow generic approval of the 
labeling for products that have product standards as specified in the 
meat and poultry inspection regulations or in the FSIS Standards and 
Labeling Policy Book (the Policy Book). In addition to those products 
produced in accordance with the regulatory pizza standards in 9 CFR 
319.600, many of the meat and poultry pizza products on the market 
today qualify for generic label approval because they are produced 
under informal standards described in the Policy Book.
    Although meat and poultry pizza products will not be subject to 
prescribed product standards once this final rule becomes effective, 
for labeling approval purposes, FSIS will consider existing meat or 
poultry pizza products whose labels were generically approved prior to 
the effective date of this final rule as products that qualify for 
generic label approval under 9 CFR 317.5(b)(1) and 9 CFR 381.133(b)(1).
    New meat and poultry pizza products that are developed and marketed 
after the effective date of this final rule will not qualify for 
generic label approval under 9 CFR 317.5(b)(1) and 9 CFR 381.133(b)(1) 
because these products are not subject to a product standard. Thus, 
unless they qualify for generic label approval under a provision other 
than 9 CFR 317.5(b)(1) or 9 CFR 381.133(b)(1), the labels of such 
products must be submitted for formal approval from FSIS.
    Once the labels of non-standardized pizza products have been 
approved as sketch labeling, certain modifications made to the final 
labeling may be generically approved pursuant to 9 CFR 317.5(b)(9) and 
381.133(b)(9). For example, under 9 CFR 317.5(b)(9)(vii) and 9 CFR 
381.133(b)(9)(vii), changes made to the percent meat or poultry 
declaration statement may qualify for generic approval if the 
modification reflects a change in the quantity of the meat or poultry 
ingredient shown in the formula without a change in the order of 
predominance shown on the label. Also, once the three-year effective 
date for the meat or poultry content labeling requirement has expired, 
the meat or poultry content declaration will become a non-mandatory 
feature. Deletions of non-mandatory features qualify for generic 
labeling approval under 9 CFR 317.5(b)(9)(xxiii) and 9 CFR 
381.133(b)(9)(xxiii).
    Comment: Several commenters requested that, in conjunction with 
this rulemaking, FSIS modify the policies contained in the Food 
Standards and Labeling Policy book and in the FSIS Policy Memoranda 
that are associated with the regulatory pizza standards of identity. 
Most of the requested modifications were to eliminate the references to 
9 CFR 319.600 in these policies.
    Response: Most of the FSIS policies for products identified as 
``pizza'' require that these products comply with the minimum meat 
content requirement prescribed by 9 CFR 319.600. Once this final rule 
becomes effective, products with standards specified in the Policy Book 
will no longer be subject to this requirement. However, like all 
products identified as ``pizza'' with a meat or poultry component as 
part of the product name, the labels of pizza products that had been 
subject to standards specified in the Policy Book will be required to 
bear a statement contiguous to the ingredients statement that conveys 
the percent of meat of poultry in the product.
    Comment: Several commenters requested that, in the preamble to the 
final rule, FSIS provide clarification as to what it considers to be 
appropriate descriptive names for non-standardized pizza products. 
These commenters agreed with the Agency's statements in the preamble to 
the proposed rule that products with the four ``traditional'' pizza 
ingredients should be identified by the term ``pizza'' with a 
designation of the meat component (e.g. ``pizza with sausage''). These 
commenters also agreed that the labeling of products that vary in terms 
of the four traditional components should bear a descriptive qualifier 
following ``pizza'' that specifies the principal components (e.g., 
``pizza with sausage and pesto sauce''). However, the commenters 
believed that the descriptive qualifier for products with ``non-
traditional'' components should not list the ingredients in order of 
predominance but in the order that best characterizes the non-
traditional product. These commenters also suggested that a description 
of the crust not be required to be included in the descriptive 
qualifier unless the crust is different from the traditional dough-
based crust.
    Response: An appropriate descriptive name for a non-standardized 
pizza product that contains components that differ from those 
stipulated in the regulatory standard prescribed by 9 CFR 319.600 
(i.e., tomato sauce, cheese, and meat topping on a bread-based crust) 
would be a listing of the components used at levels that characterize 
the product. Historically, the Agency has considered food and 
ingredient components used at levels above two percent of product 
formulation to be ``characterizing.'' While all characterizing 
components must be listed in the descriptive product name, they need 
not be listed in order of predominance. As suggested by the commenter, 
they may be listed in an order that best characterizes the non-
traditional product. The descriptive name should list all 
characterizing components of the non-standardized pizza product, 
including crust even if the crust is a traditional dough-based crust. 
This is consistent with descriptive labeling requirements for other 
non-standardized products such as stuffed sandwiches or meat fillings 
wrapped in dough.
    Comment: One commenter felt that the examples of acceptable 
descriptive names for products that do not comply with the traditional 
standards but that purport to be pizzas provided by FSIS in the 
preamble to the proposed rule are unwieldy, cumbersome, and in direct 
contradiction to the goals of the proposed rule. The commenter stated 
that listing names of ingredients in the name of the pizza, as 
suggested by the Agency, duplicates the information listed in the 
ingredients statement.
    Response: The examples of descriptive names for non-standardized 
pizzas provided by FSIS in the preamble to the proposed rule list all 
characterizing components of the non-standardized pizza product. This 
is consistent with descriptive labeling

[[Page 44865]]

requirements for other non-standardized meat and poultry products.
    Comment: One commenter suggested that rather than rescind the pizza 
standards, FSIS should decline jurisdiction over pizzas made with 
processed meat products. The commenter felt that inspection of these 
products is a waste of resources that could be better directed to 
overseeing the slaughter of animals and preparation of raw meat 
products. The commenter stated that legally FSIS could declare that 
food products that contain less than 50 percent cooked meat are not 
considered ``meat food products'' and therefore, are not subject to 
FSIS jurisdiction.
    Response: Under section 1(j) of the FMIA, the Secretary of 
Agriculture, and FSIS by delegation, may exempt from the definition of 
``meat food products'' those products that contain meat only in 
relatively small proportions or that have not been considered by 
consumers as products of the meat food industry (21 U.S.C. 601(j)). 
FSIS does not believe that products that consist of up to 49 percent 
cooked meat contain meat in relatively small proportions as 
contemplated by the FMIA. Furthermore, FSIS is not aware of any 
evidence to indicate that consumers do not consider meat pizzas as 
products of the meat food industry. Therefore, FSIS disagrees that it 
should decline jurisdiction over meat pizzas and other products that 
contain less than 50 percent cooked meat.
    Comment: One commenter suggested that in addition to eliminating 
the pizza standards, FSIS should examine the wisdom of its remaining 
regulatory standards. Another commenter stated that standards reform 
should not be delayed. This commenter felt that continued adherence to 
the standards by FSIS impedes product innovation to the detriment of 
consumers and food industry alike. Another commenter stated that rather 
than eliminating regulatory standards of identity for meat and poultry 
products, FSIS should implement them in a more harmonious way. The 
commenter stated that the regulatory standards governing the amount of 
poultry in processed food products that contain poultry are 
substantially different from those governing the meat content of 
similar processed products that contain meat.
    Response: FSIS and FDA are jointly developing a proposed rule whose 
goal is to establish ``general principles'' that outside parties can 
apply in requesting changes to food standards. The proposed rule, 
``Food Standards; General Principles and Standards Modernization'' (the 
``General Principles'' proposal) will address all Federal food 
standards of identity, whether under FSIS jurisdiction or that of the 
FDA. Following the conclusion of this rulemaking, parties interested in 
pursuing changes to the regulatory standards of identity may petition 
the Agency to initiate rulemaking to make the requested changes.
    Comment: One commenter noted that in the preamble to the proposed 
rule, FSIS stated that consumers'' understand the term ``pizza'' to 
mean ``an open-faced crust with one or more of a variety of 
ingredients'' (66 FR 55601). The commenter noted that it produces pizza 
stuffed sandwiches that are required to comply with the pizza standards 
and requested that FSIS recognize that the term ``pizza'' is not 
limited to products with open-faced crusts.
    Response: Products such as ``pizza rolls'' or ``pizza pockets'' are 
non-standardized products that must be identified by descriptive names. 
Those products that were required to comply with the minimum meat 
content prescribed by the standards will no longer be required to do so 
once the standards are eliminated. However, any product identified as 
``pizza'' product that lists a meat or poultry component as part of the 
product name, including a product identified as a ``meat pizza roll,'' 
must comply with the meat or poultry content labeling requirement 
prescribed by this final rule.
    Comment: One commenter stated that in the proposed rule's analysis 
under the Regulatory Flexibility Act, FSIS failed to discuss the impact 
that elimination of the pizza standards will have on small businesses 
that make meat toppings for pizzas.
    Response: The four companies that supply most of the meat toppings, 
such as pepperoni, sausage, and chopped meat, to both major and 
contract pizza manufacturers are large businesses. There are some small 
regional companies that supply meat toppings to regional manufacturers. 
However, this final rule is not likely to have a significant economic 
impact on these small businesses. Once the standards are rescinded, 
FSIS has no information to indicate that in the absence of the minimum 
meat content requirement prescribed by the standards companies will 
significantly reduce the amount of meat or poultry in products 
identified as ``pizza''. As discussed above, companies are likely to 
continue to manufacture pizzas with an amount of meat that consumers 
desire because if they do not they will lose their market share to 
companies that do. Therefore, FSIS does not believe that this final 
rule will have an adverse impact on the small businesses that supply 
meat toppings for packaged pizza products.

The Final Rule

    As proposed, FSIS is rescinding the regulatory standards of 
identity for pizza by removing 9 CFR 319.600 from the federal meat 
inspection regulations. In addition, the Agency is amending 9 CFR 317.8 
and 9 CFR 381.129 by adding new paragraphs (b)(40) and (f), 
respectively, to require that the labeling of meat or poultry products 
identified as ``pizza'' that contain a meat or poultry component as 
part of the product name convey the percent of the meat or poultry in 
the product in a parenthetical statement contiguous to the ingredients 
statement. The percentage of meat or poultry in the product must be 
calculated on the weight of the cooked, dried, or cured meat or poultry 
in the product (as opposed to the weight of the raw meat or poultry) in 
relation to all components of the product. This labeling requirement 
will expire three years after the effective date of this rule. Pizza 
manufacturers are permitted to exhaust their remaining packaging 
inventory before they will be required to comply with the new labeling 
requirement.

Executive Order 12866 and Unfunded Mandates Reform Act

I. Executive Order 12866: Cost-benefit Analysis

    This action has been reviewed for compliance with Executive Order 
(EO) 12866. EO 12866 directs agencies to assess all costs and benefits 
of available regulatory alternatives and, when a regulation is 
necessary, to select the regulatory approach that maximizes net 
benefits (including potential economic, environmental, public health 
and safety, and other advantages, distributive impacts, and equity). We 
have determined that this final rule maximizes net benefits to 
consumers by removing the standard of identity for ``pizza with meat'' 
and ``pizza with sausage.''
    EO 12866 classifies a rule as significant if it meets any one of a 
number of specified conditions, including: having an annual effect on 
the economy of $100 million, adversely affecting a sector of the 
economy in a material way, adversely affecting competition, or 
adversely affecting jobs. A regulation is also considered a significant 
regulatory action if it raises novel legal or policy issues. This final 
rule has been designated as non-significant as defined by EO 12866 and 
therefore has not been reviewed by the Office of Management and Budget.

[[Page 44866]]

II. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (Public Law 104-4), 
requiring cost-benefit and other analyses, in section 1531 (a) defines 
a significant rule as ``a Federal mandate that may result in the 
expenditure by State, local, and tribal governments in the aggregate, 
or by the private sector, of $100,000,000 (adjusted annually for 
inflation) in any 1 year.'' This final rule is not a significant rule 
under the Unfunded Mandates Reform Act.

III. Industry Profile

    The meat and poultry pizza industry affected by this final rule 
consists of manufacturers who produce refrigerated pizzas, frozen 
pizzas, pizza kits, and mixes. Because frozen pizzas are the dominant 
products of this industry, making up 99 percent of the affected market, 
FSIS is focusing on this segment of the industry in this analysis.
    It is estimated that there are about 155 manufacturers of frozen 
pizzas \1\ (manufacturers of both brand and private label frozen 
pizzas) and these consist of 6 major manufacturers, 20 private-label 
manufacturers, and approximately one hundred twenty nine regional 
contract manufacturers.\2\ The major manufacturers produce brand-named 
frozen pizzas on a national basis and the contract manufacturers 
produce brand-named frozen pizzas on a regional basis. Some restaurants 
make pizzas, freeze them, and then sell them to the local grocery 
stores on a contractual basis. Finally, there are several companies, 
like chain supermarkets, warehouse clubs, restaurants, and franchises, 
that contract out the production of frozen meat pizzas to approximately 
20 private label manufacturers and regional contract manufacturers.
---------------------------------------------------------------------------

    \1\ Final rule affects all meat and poultry pizzas produced in 
federally inspected establishments.
    \2\ The exact number of regional contract manufacturers is 
unknown.
---------------------------------------------------------------------------

    Four major suppliers to pizza manufacturers supply meat toppings, 
such as pepperoni, sausage, and chopped meat, to both major and 
contract pizza manufacturers. There are also some small regional 
companies that supply meat toppings to regional manufacturers. FSIS has 
determined that the suppliers of meat pizza toppings will most likely 
not be adversely affected by the final rule because even though pizza 
manufacturers may reduce the amount of meat toppings on pizzas, these 
suppliers can still supply other markets with their meat toppings, e.g. 
deli, frozen dinners, etc. In addition, these suppliers offer several 
product lines of pizza toppings other than meat, and they may 
experience an increase in demand for these other toppings. The agency 
believes, however, that as a direct result of the final rule, the 
overall demand for frozen pizzas will increase, and therefore the total 
demand for pizzas with meat toppings will also increase.

IV. Benefits

    The final rule removes the standard of identity for meat and 
sausage pizza and requires that for a 3-year period, the labeling of 
products identified as pizza that lists a meat or poultry component as 
part of the product name will bear a statement that conveys the percent 
of meat or poultry in the product. The percentage statement must appear 
contiguous to the ingredients statement.
    The following sections contain qualitative descriptions of consumer 
and manufacturer benefits that will ensue from eliminating the meat and 
sausage pizza standards of identity.
A. Consumer Benefits
    The final rule will allow consumers to choose from a greater 
variety of meat and poultry pizzas, some of which may have improved 
nutritional profiles. Consumers will have a greater opportunity to 
improve their diets, should they desire to do so, because manufacturers 
will now be able to market meat and poultry pizzas that contain less 
meat or poultry and may contain non-meat toppings such as soy-based 
toppings,\3\ and other innovative toppings that contain a lesser amount 
of meat than the amount of meat (12% cooked or 15% raw) that they are 
currently required to contain.
---------------------------------------------------------------------------

    \3\ One large manufacturer has begun producing Smart Pizza for 
the school lunch program. Smart Pizza is the first of its kind to 
utilize soy protein. By utilizing soy in the pizzas, sodium is 
reduced by up to 22 percent and total fat is lowered by as much as 
35 percent.
---------------------------------------------------------------------------

    Consumers may also benefit because they may be able to purchase 
less costly meat and poultry pizzas. In addition, some consumers may be 
willing to pay more for some pizzas if they perceive that these meat 
and poultry pizzas are healthier than other pizzas. In either case, 
consumers will benefit because both the low and high end of the market 
can be expanded.
    Under the final rule, consumers will also be protected from any 
misrepresentations of the amount of meat or poultry contained in 
pizzas. Percentage labeling of meat and poultry in pizzas, which is 
required for the next three years, will benefit those consumers who 
have come to expect a certain amount of meat or poultry on pizzas 
(i.e., consumers who rely on standards) by allowing them to become 
familiar with and accustomed to a variation in meat or poultry amount 
on pizzas. Percentage labeling will also help reduce any confusion 
consumers may experience when they are comparing the amounts of meat or 
poultry in pizzas. During the 3-year period, consumers will be able to 
reduce their search costs when comparing pizzas because when selecting 
meat or poultry pizzas, they will be able to readily ascertain the 
amount of meat or poultry in different products. Consumers will be able 
to make choices consistent with their desire to have more or less meat 
or poultry on pizzas, and the percentage labeling will help them make 
accurate selections.
    Finally, consumers, who live in areas where there are very few 
restaurants, or in areas where the restaurants do not sell pizzas, or 
in areas where pizza delivery is limited, will benefit because they 
will have access to a greater variety of non-traditional pizzas in 
their local supermarkets.
B. Manufacturer Benefits
    Manufacturers of pizzas containing meat or poultry will benefit 
from the final rule because the elimination of the traditional FSIS 
pizza standards of identity will make them more competitive with non-
meat and non-poultry containing pizza producers and retail outlets. 
Currently, manufacturers of FDA-regulated pizzas and pizzas sold by 
restaurants and carry out/delivery services, whether frozen or fresh, 
are able to experiment with innovative recipes and ingredient profiles, 
in offering consumers new products. These innovative pizzas that are 
sold in retail stores need not contain cheese or tomato sauce, as FSIS 
requires.
    Manufacturers of non-traditional pizzas will potentially experience 
an increase in sales and therefore revenues, when they achieve 
economies of scale while producing a large variety of these pizzas. 
Since the manufacturers will not be restricted to manufacturing a 
prescribed recipe pizza, they can become more innovative and create new 
markets by offering new products and mass producing them. Also, these 
manufacturers can use less costly ingredients and eliminate or reduce 
certain ingredients, thereby offering more economically priced meat and 
poultry pizzas. For some manufacturers, this may increase their market 
share and revenues.

[[Page 44867]]

V. Costs

A. Pre-printed Package Labels
    This final rule does not mandate changes in the way meat or poultry 
products are produced. However, it does impose a new labeling 
requirement, for a limited time, on firms that manufacture and market 
products identified as pizzas that list meat or poultry components as 
part of the product name. When this rule becomes effective, all 
companies that produce products identified as pizzas that list a meat 
or poultry component as part of the product name will be required to 
modify their product labels by adding a statement contiguous to the 
ingredients statement that states the percent of meat or poultry in the 
product. Companies must consequently redesign their product labels by 
adding the required information to their existing label designs, or by 
applying a separate sticker with the required information to their 
existing labels. FSIS will permit companies to use their remaining 
packaging inventory before they will be required to comply with the new 
labeling requirement so that they will not have to discard any unused 
packaging.
    Manufacturing of pre-printed packaging is generally contracted out 
to third-party firms. Costs to redesign product labels or add 
information to existing label designs are one-time costs and include 
costs associated with internal administrative activities, assessing the 
meat or poultry amounts, altering the graphic design, conducting 
prepress activities, and changing engraving plates or cylinders.\4\
---------------------------------------------------------------------------

    \4\ In this analysis, there will be no costs associated with 
assessing the meat or poultry contents of pizzas because companies 
will be producing meat and poultry pizzas based on a formula. The 
final rule requires companies to calculate the weight of the meat or 
poultry toppings in relation to all components of the pizzas, which 
FSIS believes will result in no new incremental costs. There will 
not be any prepress activities and changing the engraving plates 
costs because these costs will be incurred during their normal 
business cycle.
---------------------------------------------------------------------------

1. One-Time Costs
    FDA's Labeling Cost Model was originally developed by researchers 
at RTI International for various consumer food products and was adapted 
for egg products, which are primarily shipped to foodservice and 
further food manufacturers. RTI adapted the model to determine the cost 
of the new regulation of placing the statements ``keep refrigerated'' 
or ``keep frozen'' on all egg products that require special handling to 
maintain their wholesome condition. Additionally such statements had to 
be printed on the principal display panel of the product. In 
determining the cost of the proposed egg products rule, the model was 
used to determine the cost of placing refrigeration labels, the cost of 
the labels, and the cost of the labeling equipment needed and the 
average size of the containers requiring the labels. FSIS believes that 
this is a reasonable and valid model to use to estimate the cost of the 
final rule for changing the labels on frozen meat and poultry pizzas.
    Using the FDA Labeling Cost Model, the following table provides the 
costs associated with changing labeling information for frozen and 
refrigerated pizzas packaging using the offset lithography printing 
method \5\ for each universal product code (UPC) that needs to be 
changed. A UPC is a unique code assigned to every consumer package good 
and is read by a scanner when purchased.\6\
---------------------------------------------------------------------------

    \5\ The FDA Labeling Cost Model assumes that either the offset 
lithography or flexography printing method will be used. In this 
analysis the offset lithography printing method is assumed to be 
used because of its relative advantages in quality, simplicity, and 
cost. The complexity of the label change determines the level of 
effort for artwork, stripping or image assembly, and engraving. It 
also determines the number of plates or cylinders that must be 
modified or replaced. Typically, when companies use offset 
lithography printing, many companies engrave new lettering onto an 
existing printing plate to save time and resources. Other companies, 
however, order new printing plates regardless of how minor the line 
copy change may be.
    \6\ UPC is a 10 digit code where the first five digits are 
assigned to the vendor and the last 5 digits are specific to the 
item.

  Table 1.--One-Time Costs To Change Labels for Frozen and Refrigerated
    Pizzas, Kits, and Mixes Using Off-set Lithography Printing Method
------------------------------------------------------------------------
                                                      Per UPC Costs
                   Cost Type                   -------------------------
                                                  Low    Medium    High
------------------------------------------------------------------------
Administrative................................    $132      $308    $484
Graphic Design................................     330       495     660
                                               ---------
    Total.....................................     462       803  1,144
------------------------------------------------------------------------
Source: FDA Labeling Cost Model (Muth, Gledhill, and Karns, 2001).
\1\ Estimated for 2001.

    It is estimated that the cost per UPC will range from a low of $462 
to a high of $1,144, with the more likely cost being $803 \7\ as 
depicted in the above table.
---------------------------------------------------------------------------

    \7\ For each component of cost in this model, RTI obtained a 
range of estimates for each printing method. The lowest of these 
estimates is considered the limit of the low range, and the highest 
of the estimates is considered the limit of the high range. The low 
and high range of total cost is calculated by adding together all of 
the low and high range estimates of each component cost, so the low 
and high range estimates of this model are unlikely.
---------------------------------------------------------------------------

    In 2001, there were 1,603 UPC's associated with refrigerated and 
frozen pizzas including a small percentage of pizza kits and mixes, of 
which 1,042 were from brand name labels and 561 were from private 
labels. When all these costs are considered, the estimated one-time 
cost to modify pre-printed pizza packaging labels for 1,603 UPC, as 
shown in the table below is $741 thousand ($462 x 1,603 UPCs) to $1.8 
million ($1,144 x 1,603 UPC),\8\ with the more likely cost being $1.3 
million ($803 x 1,603 UPCs).
---------------------------------------------------------------------------

    \8\ Source: Muth, M.K., E.C. Gledhill, and S.A. Karns. 2001. 
``FDA Labeling Cost Model.'' Prepared for the U.S. Department of 
Health and Human Services. Research Triangle Park, NC: RTI.

  Table 2.--One-Time Costs, Frozen and Refrigerated Pizzas, Kits, and Mixes for Estimated 1,603 UPC Changes \1\
----------------------------------------------------------------------------------------------------------------
                                                                          For Estimated 1,603 UPC Changes
                            Cost Type                            -----------------------------------------------
                                                                        Low           Medium           High
----------------------------------------------------------------------------------------------------------------
Administrative..................................................        $211,636        $493,636        $775,997
Graphic Design..................................................         529,089         793,634       1,058,178
                                                                 -----------------
    Total.......................................................         740,725       1,287,270      1,834,175
----------------------------------------------------------------------------------------------------------------
Source: FDA Labeling Cost Model (Muth, Gledhill, and Karns, 2001).
\1\ Estimated for 2001


[[Page 44868]]

2. Annual Costs
    a. Administrative.
    The total cost of administrative activities is the dollar value of 
the incremental effort expended in order to comply with the final rule. 
Administrative costs consist of activities such as interpreting the 
rule in relation to the firm's products, determining the scope and 
coverage related to product labels, establishing a corporate position, 
formulating a method for compliance, and managing the compliance 
method.

                                    Table 3.--Total Annual Costs of Frozen, Refrigerated Pizzas, Kits, and Mixes \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Graphic design                                    Total disc
                          Year                              Cost level      Admin cost         cost         Total cost    Disc factor 7%       cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................             Low        $211,636        $529,089        $740,725            0.93        $688,874
                                                                  Medium         493,816         793,634       1,287,450  ..............       1,197,329
                                                                    High         775,997       1,058,178       1,834,175  ..............       1,705,783
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Costs are over a three year period, even though the industry does not incur costs during the second and third year.

    FSIS estimates that the administrative costs over the three-year 
period of compliance for the industry will range between $212 thousand 
and $776 thousand, ($197 thousand and $722 thousand, discounted at the 
7% rate) \9\ as depicted in Table 3, with the mid-point being at $494 
thousand and the per company cost being $3,186 at the mid-point 
($493,816/155 firms). These administrative costs of changing labels for 
pre-printed packages will only be incurred in the first year of the 
rule.
---------------------------------------------------------------------------

    \9\ The discount factor of 7 percent is used to calculate the 
present worth of a future value at the end of a 3 year period.
---------------------------------------------------------------------------

b. Graphic Design

    The graphic design costs are being counted as a direct cost of the 
final rule, range from $529 thousand to $1.1 million, with the mid-
point being at $794 thousand, as depicted in Table 3, and the per 
company cost is $5,120 at the mid-point ($793, 634/155 firms). The cost 
depends upon the type of printing processes used, the complexity of the 
label change, and the length of the compliance period. The graphic 
design costs will be incurred in the first year only, and no additional 
costs are expected because companies will need to print labels 
regardless of whether this rule is promulgated.

c. Stickers

    Companies will also have the option of supplying the required 
information by applying a separate sticker to existing product labels. 
It should be noted that the meat and poultry pizza manufacturers of 
brand-name and private-label pizzas who regularly use stickers to 
convey product information already incur these costs. Thus, these costs 
are not expected to be a direct effect of the final rule for all meat 
and poultry pizza manufacturers. Table 4 depicts the costs of changing 
and applying stickers to pizza packages for 2,068 UPC,\10\ ranging from 
a low of $6.9 million to a high of $18 million, with the mid-point 
being at $12.6 million.
---------------------------------------------------------------------------

    \10\ The number of UPCs increased from 1,603 for pre-printed 
packages to 2,068 for stickers because the FDA Labeling Cost Model 
assumes that the companies which use stickers will have six months 
to comply. In those six months, the companies will print the 
stickers until they are set up to print their packages. Therefore 
the number of UPCs will increase.

     Table 4.--Total Industry Costs Associated With Using Individual Stickers To Modify Product Labeling\1\
----------------------------------------------------------------------------------------------------------------
                            Cost type                                   Low           Medium           High
----------------------------------------------------------------------------------------------------------------
Administrative..................................................        $273,009        $637,021      $1,001,033
Graphic Design..................................................        $682,523      $1,023,784      $1,365,045
Stickers........................................................      $5,926,137     $10,981,288     $15,654,141
                                                                 =================
    Total.......................................................      $6,881,669     $12,642,093    $18,020,219
----------------------------------------------------------------------------------------------------------------
 Source: FDA Labeling Cost Model (Muth, Gledhill, and Karns, 2001).
\1\ Estimated for 2001.

    The use of pre-printed stickers to modify the product labels also 
has recurring labor costs, assuming that the stickers are manually 
applied. Estimated sticker application costs range from $0.014 to 
$0.034 per package\11\, which is included in the cost for stickers 
given in Table 4, ranging from $6 million to $16 million, with the mid-
point being $11 million. Stickers' application costs comprised 87 
percent of the total costs for stickers.
---------------------------------------------------------------------------

    \11\ Muth, Gledhill, and Karns, 2001.
---------------------------------------------------------------------------

    In most cases, FSIS believes that it will not be practical for meat 
and poultry pizza manufacturers to use these stickers to incorporate 
the required information on the product label because they are small 
and difficult to apply. Moreover, FSIS believes that the cost of using 
stickers for longer than six month is unrealistic because the costs 
associated with stickers are expected to be higher than the alternative 
of printing packages. For example, the FDA Labeling Cost Model shows 
that the total cost of applying stickers to frozen and refrigerated 
pizzas as depicted in the Table 5 below is over 8 times higher than the 
costs of changing the labels on packages. The total costs depicted for 
printing stickers in the table include both labor and the one-time 
redesign cost.

[[Page 44869]]



    Table 5.--Frozen and Refrigerated Pizzas: Comparison of Total Costs of Printing Stickers and Packages\1\
                                                 [In thousands]
----------------------------------------------------------------------------------------------------------------
                                                   Packages                               Stickers
                                   -----------------------------------------------------------------------------
         Product category                         Cost level                             Cost level
                                   -----------------------------------------------------------------------------
                                        Low         Medium        High         Low         Medium        High
----------------------------------------------------------------------------------------------------------------
Frozen & refrigerated pizzas......          740        1,287        1,834        6,880       12,642      17,940
----------------------------------------------------------------------------------------------------------------
 Source: RTI Labeling Cost Model (Muth, Gledhill, and Karns, 2001).
\1\ Estimated for 2001.

d. Labeling Approval

    FSIS will generically approve the necessary modifications made to 
labels of existing pizza products needed to make these products 
compliant with the new labeling requirement. Thus, for existing pizza 
products, there will be no additional costs associated with the 
submission of labels for approval from FSIS. Also, once the three-year 
effective date for the labeling requirement has expired, manufacturers 
will be able to remove the meat or poultry content statement because 
the statement will be a non-mandatory feature. Therefore, there will be 
no incremental cost attributed to the final rule.
3. Other Costs
    Other costs associated with the rule are voluntary. Companies that 
chose to develop and market new styles of pizza will incur the normal 
costs of production, labeling, and marketing as before. Labels for new 
pizza products may require formal approval from FSIS if they do not 
qualify for generic approval. Thus, manufacturers of new pizza products 
may incur costs to obtain formal label approval from FSIS. Companies 
that chose to identify products with a descriptive name rather than as 
a ``pizza'', e.g., ``sausage, cheese, and sauce on a crust,'' will not 
be subject to the meat or poultry content labeling requirement.
    Additionally, when the three-year effective date for the final rule 
has elapsed, companies that chose to remove the percent meat or poultry 
statement from their product labels will incur similar administrative 
and graphic design costs to modify their labels should they choose to 
remove this statement. However, companies will remove the percent meat 
or poultry statement from their product labels, if they believe that 
the benefits exceed the costs of removing the statement. FSIS does not 
believe that this is a cost of the final rule.
4. Total Costs
    The total cost associated with the requirement that the percent of 
meat or poultry be conveyed on the labeling of meat or poultry pizzas 
is estimated at the mid-range point of $1,287,270 industry-wide or 
$8,305 (administrative cost--$3,185 and graphic design costs--$5,120) 
per firm for the three-year period. The actual costs will be lower than 
the estimated total costs because the analysis included the cost of 
changing the labels for all pizzas including cheese and vegetable and 
cheese pizzas that are not affected by the final rule. The final rule 
will be cost-beneficial because FSIS believes that the non-quantifiable 
benefits of providing consumers a greater variety of meat pizzas that 
have varied and potentially improved nutritional profiles and 
protecting consumers from any potential misrepresentation of the amount 
of meat and poultry content of pizzas justifies the cost to companies 
of providing the percent label of meat and poultry content on pizzas.

VI. Effect on Small Entities

    FSIS has examined the economic implications of the final rule as 
required by the Regulatory Flexibility Act (5 U.S.C. 601-612). If a 
rule has a significant economic impact on a substantial number of small 
entities, the Regulatory Flexibility Act requires that the regulatory 
options that would lessen the economic effect of the rule on small 
entities be analyzed. FSIS has determined that the final rule will not 
have a significant impact on a substantial number of small entities.
    FSIS has estimated the annualized cost impact on 149 small entities 
potentially affected by the final rule. The annualized costs to small 
meat and poultry pizza manufacturers are estimated to be approximately 
$8,640 over three years, or $2,880 annualized. The annualized cost of 
this final rule does not exceed $6,711 which equates to 1 percent of 
the average small entity annual revenue, and therefore the impact of 
the final rule is considered not significant.
    In addition, the cost of modifying the label is offset by the fact 
that manufacturers will be permitted to exhaust their current inventory 
of pre-printed packages and therefore will not experience any 
additional cost of retiring unused packages.

Executive Order 12988

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This final rule: (1) Preempts State and local 
laws and regulations that are inconsistent with this rule; (2) has no 
retroactive effect; and (3) does not require administrative proceedings 
before parties may file suit in court challenging this rule. However, 
the administrative procedures specified in 9 CFR 306.5, 381.35, and 
590.320 through 590.370 must be exhausted before any judicial challenge 
of the application of the provisions of this rule, if the challenge 
involves any decision of an FSIS employee relating to inspection 
services provided under the FMIA or PPIA.

Paperwork Requirements

    FSIS has reviewed the paperwork and recordkeeping requirements in 
this final rule in accordance with the Paperwork Reduction Act and has 
determined that the paperwork requirements have already been accounted 
for in the Marking, Labeling, and Packaging Material information 
collection approved by the Office of Management and Budget (OMB). The 
OMB approval number for the Marking, Labeling, and Packaging Material 
information collection is 0583-0092.

Additional Public Notification

    Public awareness of all segments of rulemaking and policy 
development is important. Consequently, in an effort to better ensure 
that minorities, women, and persons with disabilities are aware of this 
final rule, FSIS will announce it and make copies of this Federal 
Register publication available through the FSIS Constituent Update. 
FSIS provides a weekly Constituent Update, which is communicated via 
Listserv, a free e-mail subscription service. In addition, the update 
is available on-line through the FSIS web page located at http://www.fsis.usda.gov. The update is

[[Page 44870]]

used to provide information regarding FSIS policies, procedures, 
regulations, Federal Register notices, public meetings, recalls, and 
any other types of information that could affect or would be of 
interest to our constituents/stakeholders. The constituent Listserv 
consists of industry, trade, and farm groups, consumer interest groups, 
allied health professionals, scientific professionals, and other 
individuals that have requested to be included. Through the Listserv 
and web page, FSIS is able to provide information to a much broader, 
more diverse audience than would otherwise be possible.
    For more information contact the Congressional and Public Affairs 
Office, at (202) 720-9113. To be added to the free e-mail subscription 
service (Listserv) go to the ``Constituent Update'' page on the FSIS 
Web site at http://www.fsis.usda.gov/oa/update/update.htm. Click on the 
``Subscribe to the Constituent Update Listserv'' link, then fill out 
and submit the form.

List of Subjects

9 CFR Part 317

    Food labeling, Meat inspection.

9 CFR Part 319

    Food grades and standards, Food labeling, Meat inspection.

9 CFR Part 381

    Food labeling, Poultry and poultry products.

0
For the reasons stated in the preamble, FSIS amends 9 CFR Chapter III 
as follows:

PART 317--LABELING, MARKING DEVICES, AND CONTAINERS

0
1. The authority citation for part 317 continues to read as follows:

    Authority: 21 U.S.C. 601-695; 7 CFR 2.18, 2.53.


0
2. Section 317.8 is amended by adding a new paragraph (b)(40) to read 
as follows:


Sec.  317.8  False or misleading labeling or practices generally; 
specific prohibitions and requirements for labels and containers.

    (b) * * *
    (40) Products identified as ``pizza'' that list a meat component as 
part of the product name must bear a parenthetical statement contiguous 
to the ingredients statement that conveys the percent of the cooked, 
cured, or dried meat component in the product. This paragraph shall 
expire on October 30, 2006.
* * * * *

PART 319--DEFINITIONS AND STANDARDS OF IDENTITY OR COMPOSITION

0
3. The authority citation for part 319 continues to read as follows:

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


Sec.  319.600  Removed and Reserved]


0
4. Section 319.600 is removed and reserved.

PART 381--POULTRY PRODUCTS INSPECTION REGULATIONS

0
5. The authority citation for part 381 continues to read as follows:

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


0
6. Section 381.129 is amended by adding a new paragraph (f) to read as 
follows:


Sec.  381.129  False or misleading labeling or containers.

* * * * *
    (f) Products identified as ``pizza'' that list a poultry component 
as part of the product name must bear a parenthetical statement 
contiguous to the ingredients statement that conveys the percent of the 
cooked, cured, or dried poultry component in the product. This 
paragraph shall expire on October 30, 2006.

    Done at Washington, DC: July 28, 2003.
Linda Swacina,
Acting Administrator.
[FR Doc. 03-19505 Filed 7-30-03; 8:45 am]
BILLING CODE 3410-DM-P