[Federal Register Volume 74, Number 10 (Thursday, January 15, 2009)]
[Rules and Regulations]
[Pages 2658-2707]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-600]



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Part II





Department of Agriculture





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Agricultural Marketing Service



7 CFR Parts 60 and 65



Mandatory Country of Origin Labeling of Beef, Pork, Lamb, Chicken, Goat 
Meat, Wild and Farm-Raised Fish and Shellfish, Perishable Agricultural 
Commodities, Peanuts, Pecans, Ginseng, and Macadamia Nuts; Final Rule

  Federal Register / Vol. 74, No. 10 / Thursday, January 15, 2009 / 
Rules and Regulations  

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 60 and 65

[Docket No. AMS-LS-07-0081]
RIN 0581-AC26


Mandatory Country of Origin Labeling of Beef, Pork, Lamb, 
Chicken, Goat Meat, Wild and Farm-Raised Fish and Shellfish, Perishable 
Agricultural Commodities, Peanuts, Pecans, Ginseng, and Macadamia Nuts

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Farm Security and Rural Investment Act of 2002 (2002 Farm 
Bill), the 2002 Supplemental Appropriations Act (2002 Appropriations), 
and the Food, Conservation and Energy Act of 2008 (2008 Farm Bill) 
amended the Agricultural Marketing Act of 1946 (Act) to require 
retailers to notify their customers of the country of origin of covered 
commodities. Covered commodities include muscle cuts of beef (including 
veal), lamb, chicken, goat, and pork; ground beef, ground lamb, ground 
chicken, ground goat, and ground pork; wild and farm-raised fish and 
shellfish; perishable agricultural commodities; macadamia nuts; pecans; 
ginseng; and peanuts. The implementation of mandatory country of origin 
labeling (COOL) for all covered commodities, except wild and farm-
raised fish and shellfish, was delayed until September 30, 2008.
    The 2008 Farm Bill contained a number of provisions that amended 
the COOL provisions in the Act. These changes included the addition of 
chicken, goat, macadamia nuts, pecans, and ginseng as covered 
commodities, the addition of provisions for labeling products of 
multiple origins, as well as a number of other changes. However, the 
implementation date of September 30, 2008, was not changed by the 2008 
Farm Bill. Therefore, in order to meet the September 30, 2008, 
implementation date and to provide the newly affected industries the 
opportunity to provide comments prior to issuing a final rule, on 
August 1, 2008, the Department published an interim final rule with a 
request for comments for all of the covered commodities other than wild 
and farm-raised fish and shellfish. The Agency is issuing this final 
rule for all covered commodities. This final rule contains definitions, 
the requirements for consumer notification and product marking, and the 
recordkeeping responsibilities of both retailers and suppliers for 
covered commodities.

DATES: This final rule is effective March 16, 2009.

FOR FURTHER INFORMATION CONTACT: Erin Morris, Associate Deputy 
Administrator, Poultry Programs, AMS, USDA, by telephone on 202-720-
5131, or via e-mail at: [email protected].

SUPPLEMENTARY INFORMATION: The information that follows has been 
divided into three sections. The first section provides background 
information about this final rule. The second section provides a 
discussion of the rule's requirements, including a summary of changes 
from the October 5, 2004, interim final rule for fish and shellfish and 
the August 1, 2008, interim final rule for the remaining covered 
commodities as well as a summary of the comments received in response 
to the relevant prior requests for comments associated with this 
rulemaking and the Agency's responses to these comments. The prior 
requests for comments include: The interim final rule for fish and 
shellfish published in the October 5, 2004, Federal Register (69 FR 
59708); the reopening of the comment period (for costs and benefits) 
for the interim final rule that was published in the November 27, 2006, 
Federal Register (71 FR 68431); the reopening of the comment period for 
all aspects of the interim final rule that was published in the June 
20, 2007, Federal Register (72 FR 33851); and the interim final rule 
for the remaining covered commodities that was published in the August 
1, 2008, Federal Register (73 FR 45106). The last section provides for 
the required impact analyses including the Regulatory Flexibility Act, 
the Paperwork Reduction Act, Civil Rights Analysis, and the relevant 
Executive Orders.

I. Background

Prior Documents in This Proceeding

    This final rule is issued pursuant to the 2002 Farm Bill, the 2002 
Appropriations, and the 2008 Farm Bill, which amended the Act to 
require retailers to notify their customers of the origin of covered 
commodities. In addition, the FY 2004 Consolidated Appropriations Act 
(Pub. L. 108-199) delayed the implementation of mandatory COOL for all 
covered commodities except wild and farm-raised fish and shellfish 
until September 30, 2006. The Agriculture, Rural Development, Food and 
Drug Administration, and Related Agencies Appropriations Act of 2006 
(Pub. L. 109-97) delayed the applicability of mandatory COOL for all 
covered commodities except wild and farm-raised fish and shellfish 
until September 30, 2008.
    On October 11, 2002, AMS published Guidelines for the Interim 
Voluntary Country of Origin Labeling of Beef, Lamb, Pork, Fish, 
Perishable Agricultural Commodities, and Peanuts (67 FR 63367) 
providing interested parties with 180 days to comment on the utility of 
the voluntary guidelines.
    On November 21, 2002, AMS published a notice requesting emergency 
approval of a new information collection (67 FR 70205) providing 
interested parties with a 60-day period to comment on AMS' burden 
estimates associated with the recordkeeping requirements as required by 
the Paperwork Reduction Act of 1995 (PRA). On January 22, 2003, AMS 
published a notice extending this comment period (68 FR 3006) an 
additional 30 days.
    On October 30, 2003, AMS published the proposed rule for the 
mandatory COOL program (68 FR 61944) with a 60-day comment period. On 
December 22, 2003, AMS published a notice extending the comment period 
(68 FR 71039) an additional 60 days. On June 20, 2007, AMS reopened the 
comment period for the proposed rule for all covered commodities (72 FR 
33917).
    On October 5, 2004, AMS published the interim final rule for fish 
and shellfish (69 FR 59708) with a 90-day comment period. On December 
28, 2004, AMS published a notice extending the comment period (69 FR 
77609) an additional 60 days. On November 27, 2006, the comment period 
was reopened on the costs and benefits aspects of the interim final 
rule (71 FR 68431). On June 20, 2007, the comment period was reopened 
for all aspects of the interim final rule (72 FR 33851).
    On August 1, 2008, AMS published an interim final rule for covered 
commodities other than fish and shellfish (73 FR 45106) with a 60-day 
comment period.

II. Summary of Changes From the Interim Final Rules

Definitions

    In the regulatory text for fish and shellfish (7 CFR part 60), a 
definition for ``commingled covered commodities'' has been added for 
clarity and to conform to the regulatory text for the other covered 
commodities.
    In the regulatory text for the remaining covered commodities (7 CFR 
part 65), the definition of ``ground beef'' has been modified in 
response to

[[Page 2659]]

comments. Under this final rule, the term ``ground beef'' has the 
meaning given that term in 9 CFR Sec.  319.15(a), i.e., chopped fresh 
and/or frozen beef with or without seasoning and without the addition 
of beef fat as such, and containing no more than 30 percent fat, and 
containing no added water, phosphates, binders, or extenders, and also 
includes products defined by the term ``hamburger'' in 9 CFR 319.15(b). 
A full explanation of this change is discussed in the Comments and 
Responses section.
    In 7 CFR part 65, the definition of ``lamb'' has been modified in 
response to comments to include mutton. Under this final rule, the term 
``lamb'' means meat produced from sheep.
    In 7 CFR part 65, the definition of ``NAIS-compliant system'' has 
been deleted in response to comments received as it is no longer 
needed.
    A definition of ``pre-labeled'' has been added to both 7 CFR part 
60 and 7 CFR part 65 for clarity in response to comments received. 
Under this final rule, the term ``pre-labeled'' means a covered 
commodity that has the commodity's country of origin, and, as 
applicable, method of production information, and the name and place of 
business of the manufacturer, packer, or distributor on the covered 
commodity itself, on the package in which it is sold to the consumer, 
or on the master shipping container. The place of business information 
must include at a minimum the city and state or other acceptable locale 
designation.
    In 7 CFR part 65, the definition of ``produced'' has been modified 
for clarity in response to comments. Under this final rule, the term 
``produced'' in the case of perishable agricultural commodities, 
peanuts, ginseng, pecans, and macadamia nuts means harvested.

Country of Origin Notification

Labeling Covered Commodities of United States Origin

    The August 1, 2008, interim final rule contained an express 
provision allowing U.S. origin covered commodities to be further 
processed or handled in a foreign country and retain their U.S. origin. 
The Agency received numerous comments requesting further clarification 
of this provision as well as comments requesting that it be deleted. 
Accordingly, under this final rule, this provision has been deleted. To 
the extent that it is allowed under existing Customs and Border 
Protection (CBP) and Food Safety and Inspection Service (FSIS) 
regulations, U.S. origin covered commodities may still be eligible to 
bear a U.S. origin declaration if they are processed in another country 
such that a substantial transformation (as determined by CBP) does not 
occur. In addition, to the extent that additional information about the 
production steps that occurred in the U.S. is permitted under existing 
Federal regulations (e.g., CBP, FSIS), nothing in this final rule 
precludes such information from being included. A full explanation of 
this change is discussed in the Comments and Responses section.

Country of Origin Notification for Muscle Cuts

    Under the August 1, 2008, interim final rule, if an animal was 
born, raised, and/or slaughtered in the United States and was not 
imported for immediate slaughter as defined in Sec.  65.180, the origin 
of the resulting meat products derived from that animal could have been 
designated as Product of the United States, Country X, and/or (as 
applicable) Country Y, where Country X and Country Y represent the 
actual or possible countries of foreign origin.
    During the comment period, the Agency received extensive feedback 
from livestock producers, members of Congress, and other interested 
parties expressing concern about the provision in the interim final 
rule that allowed U.S. origin product to be labeled with a mixed origin 
label. It was never the intent of the Agency for the majority of 
product eligible to bear a U.S. origin declaration to bear a multiple 
origin designation. The Agency made additional modifications for 
clarity.
    Under this final rule, for muscle cut covered commodities derived 
from animals that were born in Country X or (as applicable) Country Y, 
raised and slaughtered in the United States, and were not derived from 
animals imported for immediate slaughter as defined in Sec.  65.180, 
the origin may be designated as Product of the U.S., Country X, and (as 
applicable) Country Y.
    For muscle cut covered commodities derived from animals born, 
raised, and slaughtered in the U.S. that are commingled during a 
production day with muscle cut covered commodities derived from animals 
that were raised and slaughtered in the United States, and were not 
derived from animals imported for immediate slaughter as defined in 
Sec.  65.180, the origin may be designated, for example, as Product of 
the United States, Country X, and (as applicable) Country Y.
    For muscle cut covered commodities derived from animals that are 
born in Country X or Country Y, raised and slaughtered in the United 
States, that are commingled during a production day with muscle cut 
covered commodities that are derived from animals that are imported 
into the United States for immediate slaughter as defined in Sec.  
65.180, the origin may be designated as Product of the United States, 
Country X, and (as applicable) Country Y.
    In all of the cases above, the countries of origin may be listed in 
any order. In addition, if animals are raised in another country and 
the United States, provided the animals are not imported for immediate 
slaughter as defined in Sec.  65.180, the raising that occurs in the 
United States takes precedence over the minimal raising that occurred 
in the animal's country of birth.
    A full explanation of these changes is discussed in the Comments 
and Responses section.

Markings

    Under the October 5, 2004, interim final rule for fish and 
shellfish and the August 1, 2008, interim final rule for the remaining 
covered commodities, only those abbreviations approved for use under 
CBP rules, regulations, and policies were acceptable. The 2008 Farm 
Bill and the August 1, 2008, interim final rule expressly authorized 
the use of State, regional, or locality label designations in lieu of 
country of origin for perishable agricultural commodities, peanuts, 
pecans, ginseng, and macadamia nuts. In response to comments received, 
under this final rule, abbreviations may be used for state, regional, 
or locality label designations for these commodities whether 
domestically harvested or imported using official United States Postal 
Service abbreviations or other abbreviations approved by CBP. A full 
explanation of this change is discussed in the Comments and Responses 
section.

Recordkeeping

    The 2008 Farm Bill made changes to the recordkeeping provisions of 
the Act. Specifically, the 2008 Farm Bill states that records 
maintained in the course of the normal conduct of the business of such 
person, including animal health papers, import or customs documents, or 
producer affidavits, may serve as such verification. Under the 2008 
Farm Bill, the Secretary is prohibited from requiring the maintenance 
of additional records other than those maintained in the normal conduct 
of business. In addition to the changes made as a result of the 2008 
Farm Bill, other changes were made in the August 1, 2008, interim final 
rule to reduce the recordkeeping burden. Further changes are being made 
in this final rule in response to comments received.

[[Page 2660]]

    For retailers, this rule requires records and other documentary 
evidence relied upon at the point of sale by the retailer to establish 
a covered commodity's country(ies) of origin and method of production 
(wild and/or farm-raised), as applicable, to be either maintained at 
the retail facility or at another location for as long as the product 
is on hand and provided to any duly authorized representative of USDA, 
upon request, within 5 business days of the request. For pre-labeled 
products, the label itself is sufficient information on which the 
retailer may rely to establish the product's origin and method of 
production, as applicable, and no additional records documenting origin 
and method of production information are necessary. Under the August 1, 
2008, interim final rule, retailers were required to maintain these 
records for a period of 1 year.
    Under this final rule, upon request by USDA representatives, 
suppliers and retailers shall make available to USDA representatives, 
records maintained in the normal course of business that verify an 
origin and method of production (wild and/or farm-raised) claim, as 
applicable. Such records shall be provided within 5 business days of 
the request and may be kept in any location.
    Under this final rule, producer affidavits shall also be considered 
acceptable records that suppliers may utilize to initiate origin claims 
for all covered commodities, provided it is made by someone having 
first-hand knowledge of the origin of the covered commodity and 
identifies the covered commodity unique to the transaction.

Responsibilities of Retailers and Suppliers

    With regard to the ``safe harbor'' language that was contained in 
the October 30, 2003, proposed rule and the October 5, 2004, interim 
final rule, which allowed retailers and suppliers to rely on the 
information provided unless they could have been reasonably expected to 
have knowledge otherwise, based on comments received, similar ``safe 
harbor'' language has been included in this final rule. A complete 
discussion is contained in the Comments and Responses section of this 
final rule.
    With regard to the recordkeeping provision concerning livestock 
that are part of a NAIS-compliant system, in response to comments 
received, the Agency has clarified that packers who slaughter animals 
that are tagged with an 840 Animal Identification Number device without 
the presence of any additional accompanying marking indicating the 
origin as being a country other than the U.S. (i.e., ``CAN'' or ``M'') 
may use that information as a basis for a U.S. origin claim. In 
addition, packers that slaughter animals that are part of another 
country's recognized official system (e.g. Canadian official system, 
Mexico official system) may also rely on the presence of an official 
ear tag or other approved device on which to base their origin claims.
Highlights of This Final Rule
Covered Commodities
    As defined in the statute, the term ``covered commodity'' includes: 
Muscle cuts of beef, lamb, pork, chicken, and goat; ground beef, ground 
lamb, ground pork, ground chicken, and ground goat; wild and farm-
raised fish and shellfish; perishable agricultural commodities (fresh 
and frozen fruits and vegetables); peanuts; pecans; ginseng; and 
macadamia nuts.
Exemption for Food Service Establishments
    Under the statute and therefore this final rule, food service 
establishments are exempt from COOL labeling requirements. Food service 
establishments are restaurants, cafeterias, lunch rooms, food stands, 
saloons, taverns, bars, lounges, or other similar facilities operated 
as an enterprise engaged in the business of selling food to the public. 
Similar food service facilities include salad bars, delicatessens, meal 
preparation stations in which the retailer sets out ingredients for 
different meals and consumers assemble the ingredients into meals to 
take home, and other food enterprises located within retail 
establishments that provide ready-to-eat foods that are consumed either 
on or outside of the retailer's premises.
Exclusion for Ingredient in a Processed Food Item
    Items are excluded from labeling under this regulation when a 
covered commodity is an ingredient in a processed food item. Under this 
final rule, a ``processed food item'' is defined as: A retail item 
derived from a covered commodity that has undergone specific processing 
resulting in a change in the character of the covered commodity, or 
that has been combined with at least one other covered commodity or 
other substantive food component (e.g., chocolate, breading, tomato 
sauce), except that the addition of a component (such as water, salt, 
or sugar) that enhances or represents a further step in the preparation 
of the product for consumption, would not in itself result in a 
processed food item. Specific processing that results in a change in 
the character of the covered commodity includes cooking (e.g., frying, 
broiling, grilling, boiling, steaming, baking, roasting), curing (e.g., 
salt curing, sugar curing, drying), smoking (cold or hot), and 
restructuring (e.g., emulsifying and extruding).
    With regard to determining what is considered an ``other covered 
commodity'' with respect to fruits and vegetables, the Agency will 
generally rely on U.S. Grade Standards for fruits and vegetables to 
make the distinction of whether or not the retail item is a combination 
of ``other covered commodities''. For example, different colored sweet 
peppers combined in a package will require country of origin 
notification because there is one U.S. Grade Standard for sweet 
peppers, regardless of the color. As another example, there are 
separate U.S. Grade Standards for iceberg lettuce and romaine lettuce. 
Therefore, this type of salad mix will not be required to be labeled 
with country of origin information. While the Agency previously used 
this example in the preamble of the August 1, 2008, interim final rule 
and concluded that such a salad mix would be subject to COOL, the 
Agency now believes the use of U.S. Grade Standards in determining when 
a perishable retail item is considered a processed food item provides a 
bright line to the industry and is an easy and straightforward approach 
as regulated entities are already familiar with U.S. Grade Standards.
    There are limited exceptions to this policy. One exception occurs 
when there are different grade standards for the same commodity based 
on the region of production. For example, although there are separate 
grade standards for oranges from Florida, Texas, and California/
Arizona, combining oranges from these different regions would not be 
considered combining ``other covered commodities'' and therefore, a 
container with oranges from Texas and Florida is required to be labeled 
with country of origin information.
    As examples of processing steps that are considered to further 
prepare product for consumption, meat products that have been needle-
tenderized or chemically tenderized using papain or other similar 
additive are not considered processed food items. Likewise, meat 
products that have been injected with sodium phosphate or other similar 
solution are also not considered processed food items as the solution 
has not changed the character of the covered commodity. In contrast, 
meat products that have been marinated with a particular flavor such as 
lemon-

[[Page 2661]]

pepper, Cajun, etc. have been changed in character and thus are 
considered processed food items.
    While the definition of a processed food item does exclude a number 
of products from labeling under the COOL program, many imported items 
are still required to be marked with country of origin information 
under the Tariff Act of 1930 (19 U.S.C. 1304) (Tariff Act). For 
example, while a bag of frozen peas and carrots is considered a 
processed food item under this final rule, if the peas and carrots are 
of foreign origin, the Tariff Act requires that the country of origin 
information be marked on the bag. Likewise, while roasted peanuts, 
pecans, and macadamia nuts are also considered processed food items 
under this final rule, under the Tariff Act, if the nuts are of foreign 
origin, the country of origin information must be indicated to the 
ultimate purchaser. This also holds true for a variety of fish and 
shellfish items. For example, salmon imported from Chile that is smoked 
in the United States as well as shrimp imported from Thailand that is 
cooked in the United States are also required to be labeled with 
country of origin information under the Tariff Act. In addition, items 
such as marinated lamb loins that are imported in consumer-ready 
packages would also be required to be labeled with country of origin 
information as both CBP and FSIS regulations require meat that is 
imported in consumer-ready packages to be labeled with origin 
information on the package.
    Examples of items excluded from country of origin labeling include 
teriyaki flavored pork loin, meatloaf, roasted peanuts, breaded chicken 
tenders, breaded fish sticks, flank steak with portabella stuffing, 
steakhouse sirloin kabobs with vegetables, cooked and smoked meats, 
blue cheese angus burgers, cured hams, bacon, corned beef briskets, 
prosciutto rolled in mozzarella cheese, a salad that contains iceberg 
and romaine lettuce, a fruit cup that contains cantaloupe, watermelon, 
and honeydew, mixed vegetables, and a salad mix that contains lettuce 
and carrots and/or salad dressing.
Labeling Covered Commodities of United States Origin
    The law prescribes specific criteria that must be met for a covered 
commodity to bear a ``United States country of origin'' declaration. 
Therefore, covered commodities may be labeled as having a United States 
origin if the following specific requirements are met:
    (a) Beef, pork, lamb, chicken, and goat--covered commodities must 
be derived from animals exclusively born, raised, and slaughtered in 
the United States; from animals born and raised in Alaska or Hawaii and 
transported for a period of time not more than 60 days through Canada 
to the United States and slaughtered in the United States; or from 
animals present in the United States on or before July 15, 2008, and 
once present in the United States, remained continuously in the United 
States.
    (b) Perishable agricultural commodities, peanuts, pecans, ginseng, 
and macadamia nuts--covered commodities must be from products 
exclusively produced in the United States.
    (c) Farm-raised fish and shellfish--covered commodities must be 
derived exclusively from fish or shellfish hatched, raised, harvested, 
and processed in the United States, and that has not undergone a 
substantial transformation (as established by CBP) outside of the 
United States.
    (d) Wild fish and shellfish--covered commodities must be derived 
exclusively from fish or shellfish either harvested in the waters of 
the United States or by a U.S. flagged vessel and processed in the 
United States or aboard a U.S. flagged vessel, and that has not 
undergone a substantial transformation (as established by CBP) outside 
of the United States.
Labeling Country of Origin for Imported Products
    Under this final rule, a fish or shellfish imported covered 
commodity shall retain its origin as declared to CBP at the time the 
product enters the United States, through retail sale, provided it has 
not undergone a substantial transformation (as established by CBP) in 
the United States. Similarly, for the other covered commodities, an 
imported covered commodity for which origin has already been 
established as defined by the Act (e.g., born, raised, slaughtered or 
harvested) and for which no production steps have occurred in the 
United States shall retain its origin as declared to CBP at the time 
the product enters the United States, through retail sale.
    Covered commodities imported in consumer-ready packages are 
currently required to bear a country of origin declaration on each 
individual package under the Tariff Act. This final rule does not 
change these requirements.
Labeling Fish and Shellfish Imported Products That Have Been 
Substantially Transformed in the United States
    Under this final rule, in the case of wild fish and shellfish, if a 
covered commodity was imported from country X and substantially 
transformed (as established by CBP) in the United States or aboard a 
U.S. flagged vessel, the product shall be labeled at retail as ``From 
[country X], processed in the United States.'' Alternatively, the 
product may be labeled as ``Product of country X and the United 
States''. The covered commodity must also be labeled to indicate that 
it was derived from wild fish or shellfish.
    In the case of farm-raised fish, if a covered commodity was 
imported from country X at any stage of production and substantially 
transformed (as established by CBP) in the United States, the product 
shall be labeled at retail as ``From [country X], processed in the 
United States.'' Alternatively, the product may be labeled as ``Product 
of country X and the United States''. The covered commodity shall also 
be labeled to indicate that it was derived from farm-raised fish or 
shellfish.
Labeling Muscle Cut Covered Commodities of Multiple Countries of Origin 
(That Includes the United States)
    Under this final rule, for muscle cut covered commodities derived 
from animals that were born in Country X or (as applicable) Country Y, 
raised and slaughtered in the United States, and were not derived from 
animals imported for immediate slaughter as defined in Sec.  65.180, 
the origin may be designated, for example, as Product of the U.S., 
County X, and (as applicable) Country Y. The countries of origin may be 
listed in any order.
    For muscle cut covered commodities derived from animals born, 
raised, and slaughtered in the U.S. that are commingled during a 
production day with muscle cut covered commodities derived from animals 
that were raised and slaughtered in the United States, and were not 
derived from animals imported for immediate slaughter as defined in 
Sec.  65.180, the origin may be designated as, for example, Product of 
the United States, Country X, and (as applicable) Country Y. The 
countries of origin may be listed in any order.
    If an animal was imported into the United States for immediate 
slaughter as defined in Sec.  65.180, the origin of the resulting meat 
products derived from that animal shall be designated as Product of 
Country X and the United States.
    For muscle cut covered commodities derived from animals that are 
born in Country X or Country Y, raised and slaughtered in the United 
States, that are commingled during a production day with muscle cut 
covered commodities that are derived from animals that are imported 
into the

[[Page 2662]]

United States for immediate slaughter as defined in Sec.  65.180, the 
origin may be designated as Product of the United States, Country X, 
and (as applicable) Country Y. The countries of origin may be listed in 
any order.
    In all cases above, the origin declaration may include more 
specific information related to production steps provided records to 
substantiate the claims are maintained and the claim is consistent with 
other applicable Federal legal requirements. In addition, if animals 
are raised in another country and the United States, provided the 
animals are not imported for immediate slaughter as defined in Sec.  
65.180, the raising that occurs in the United States takes precedence 
over the minimal raising that occurred in the animal's country of 
birth.
    With regard to the commingling of meat of different origin 
categories, the Agency has received comments requesting that the Agency 
provide additional clarification on how commingled meat products can be 
labeled. Under this final rule, it is permissible to commingle meat 
derived from animals imported for immediate slaughter with meat derived 
from mixed origin animals and label it as Product of U.S., Canada. It 
is also permissible to commingle meat derived from animals imported for 
immediate slaughter with meat of mixed origin and label it as category 
C (product imported for immediate slaughter, i.e., Product of Canada, 
U.S.). Further, the declaration for meat derived from mixed origin 
animals may list the countries of origin in any order (e.g., Product of 
U.S., Canada or Product of Canada, U.S.).
Labeling Commingled Covered Commodities
    In this final rule, a commingled covered commodity is defined as a 
single type of covered commodity (e.g., frozen peas, shrimp), presented 
for retail sale in a consumer package, that has been prepared from raw 
material sources having different origins. Further, a commingled 
covered commodity does not include meat products. If the retail product 
contains two different types of covered commodities (e.g., peas and 
carrots), it is considered a processed food item and is not subject to 
mandatory COOL.
    In the case of perishable agricultural commodities, wild and farm-
raised fish and shellfish, peanuts, pecans, ginseng, and macadamia 
nuts, for imported covered commodities that have not subsequently been 
substantially transformed in the United States that are commingled with 
commodities having different origins, the declaration shall indicate 
the countries of origin for all covered commodities in accordance with 
CBP marking regulations (19 CFR part 134). For example, a bag of frozen 
peas that were sourced from France and India is currently required 
under CBP regulations to be marked with that origin information on the 
package.
    In the case of wild and farm-raised fish and shellfish covered 
commodities, when the retail product contains imported covered 
commodities that have subsequently undergone substantial transformation 
in the United States are commingled with other imported covered 
commodities that have subsequently undergone substantial transformation 
in the United States (either prior to or following substantial 
transformation in the United States) and/or U.S. origin covered 
commodities, the declaration shall indicate the countries of origin 
contained therein or that may be contained therein.
Defining Country of Origin for Ground Meat Products
    The law states that the origin declaration for ground beef, ground 
pork, ground lamb, ground goat, and ground chicken covered commodities 
shall list the countries of origin contained therein or shall list the 
reasonably possible countries of origin. Therefore, under this final 
rule, when a raw material from a specific origin is not in a 
processor's inventory for more than 60 days, the country shall no 
longer be included as a possible country of origin. This does not mean 
that labels must change every 60 days. Labels containing the applicable 
countries (e.g., Country x, y, z) may extend beyond a given 60-day 
period depending on how long raw materials from those countries are 
actually in inventory. If a country of origin is utilized as a raw 
material source in the production of ground beef, it must be listed on 
the label. The 60-day in inventory allowance speaks only to when 
countries may no longer be listed. The 60-day inventory allowance is an 
allowance for the Agency' enforcement purposes for when the Agency 
would deem ground meat products as no longer accurately labeled. In the 
event of a supplier audit by USDA, records kept in the normal course of 
business should provide the information necessary to verify the origin 
claim.
Remotely Purchased Products
    For sales of a covered commodity in which the customer purchases a 
covered commodity prior to having an opportunity to observe the final 
package (e.g., Internet sales, home delivery sales, etc.) the retailer 
may provide the country of origin and method of production information 
(wild and/or farm-raised), as applicable, either on the sales vehicle 
or at the time the product is delivered to the consumer.
Markings
    Under this final rule, the country of origin declaration and method 
of production (wild and/or farm-raised) designation, as applicable, may 
be provided to consumers by means of a label, placard, sign, stamp, 
band, twist tie, pin tag, or other clear and visible sign on the 
covered commodity or on the package, display, holding unit, or bin 
containing the commodity at the final point of sale to consumers. The 
country of origin declaration and method of production (wild and/or 
farm-raised) designation may be combined or made separately.
    With respect to the production designation, various forms of the 
production designation are acceptable, including ``wild caught,'' 
``wild,'' ``farm-raised,'' ``farmed,'' or a combination of these terms 
for products that contain both wild and farm-raised fish or shellfish 
provided it can be readily understood by the consumer and is in 
conformance with other Federal labeling laws. Designations such as 
``ocean caught,'' ``caught at sea'', ``line caught,'' ``cultivated,'' 
or ``cultured'' do not meet the requirements of this regulation. 
Alternatively, the method of production (wild and/or farm-raised) 
designation may also be in the form of a check box.
    In general, country abbreviations are not acceptable. Only those 
abbreviations approved for use under CBP rules, regulations, and 
policies, such as ``U.K.'' for ``The United Kingdom of Great Britain 
and Northern Ireland'', ``Luxemb'' for Luxembourg, and ``U.S.'' or 
``USA'' for the ``United States of America'' are acceptable. The Agency 
is aware of a few additional abbreviations allowed by CBP such as 
``Holland'' for The Netherlands and has posted this information on the 
COOL Web site.
    The declaration of the country of origin of a product may be in the 
form of a statement such as ``Product of USA,'' ``Produce of the USA'', 
or ``Harvested in Mexico''; may only contain the name of the country 
such as ``USA'' or ``Mexico''; or may be in the form of a check box 
provided it is in conformance with CBP marking regulations and other 
Federal labeling laws (i.e., FDA, FSIS). For example, CBP marking 
regulations (19 CFR part 134) specifically require the use of the words 
``product of'' in certain circumstances. The adjectival form of the 
name of a country may be used as proper

[[Page 2663]]

notification of the country of origin of imported commodities provided 
the adjectival form of the name does not appear with other words so as 
to refer to a kind or species of product. Symbols or flags alone may 
not be used to denote country of origin. The labeling requirements 
under this rule do not supersede any existing Federal legal 
requirements, unless otherwise specified, and any country of origin or 
method of production (wild and/or farm-raised) designation, as 
applicable, must not obscure or intervene with other labeling 
information required by existing regulatory requirements.
    For domestic and imported perishable agricultural commodities, 
macadamia nuts, peanuts, pecans, and ginseng, State, regional, or 
locality label designations are acceptable in lieu of country of origin 
labeling. Such designations must be nationally distinct. For example, 
Rio Grande Valley would not be an acceptable designation because 
consumer would not know whether the country of origin was the U.S. or 
Mexico. Abbreviations may be used for state, regional, or locality 
label designations for these commodities whether domestically harvested 
or imported using official United States Postal Service abbreviations 
or other abbreviations approved by CBP.
    With regard to the use of established State marketing programs such 
as ``California Grown'', ``Go TEXAN'', ``Jersey Fresh'', etc., these 
programs may be used for COOL notification purposes provided they meet 
the requirements to bear a U.S. origin declaration as specified in this 
final rule.
    In order to provide the industry with as much flexibility as 
possible, this rule does not contain specific requirements as to the 
exact placement or size of the country of origin or method of 
production (wild and/or farm-raised) declaration. However, such 
declarations must be legible and conspicuous, and allow consumers to 
find the country(ies) of origin and method of production, as 
applicable, easily and read them without strain when making their 
purchases, and provided that existing Federal labeling requirements 
must be followed. For example, the country of origin declaration may be 
located on the information panel of a package of frozen produce as 
consumers are familiar with such location for displaying nutritional 
and other required information. Likewise, in the case of store overwrap 
and other similar type products, which is the type of packaging used 
for fresh meat and poultry products, the information panel would also 
be an acceptable location for the origin declaration and method of 
production (wild and/or farm-raised) designation, as applicable, as 
this is a location that is currently utilized for providing other 
Federally-mandated labeling information (i.e., safe handling 
instructions, nutrition facts, and ingredients statement). However, to 
the extent practicable, the Agency encourages retailers and suppliers 
to place this information on the front of these types of packages, also 
known as the principal display panel, so it will be readily apparent to 
consumers.
    With respect to the use of signage for bulk displays for meat 
covered commodities, the Agency has observed that a vast majority of 
retailers are utilizing one sign for either the entire meat case or for 
an entire commodity type (i.e., chicken) to provide the country of 
origin notification. While the statute and this regulation provide 
flexibility in how country of origin information can be provided, the 
Agency believes that the use of such signage could potentially be false 
or misleading to consumers. For example, frequently display cases also 
contain noncovered meat commodities for which no origin information has 
been provided to the retailer. Thus a sign that states, ``all of our 
beef products are of U.S. origin'' may not be completely accurate and 
may be in violation of other Federal laws, regulations, and policies 
that have truth in labeling provisions such as the Federal Meat 
Inspection Act, the Federal Trade Commission's ``Made in the USA'' 
policies, and the Federal Food, Drug, and Cosmetic Act. The Agency 
encourages retailers to review signage that they have used in the 
implementation of the fish and shellfish program for alternative 
acceptable methods of providing COOL information.
    With regard to the provision in both the interim final rule for 
fish and shellfish and the interim final rule for the remaining covered 
commodities concerning bulk containers that allows the bulk container 
to contain a covered commodity from more than one country of origin, 
under this final rule, it remains permissible provided all possible 
origins are listed. For example, if a retailer puts apples from the 
U.S. and New Zealand in a bulk bin, the sign for the bin should list 
both the U.S. and New Zealand. If the retailer has apples in the store 
from New Zealand, but has not added these apples to the bulk bin, it 
would not be permissible to have New Zealand on the sign. Likewise in 
the case of fish, if a retailer has salmon from both the U.S. and Chile 
in the back of the store, but has only put out for display salmon from 
Chile, the country of origin designation should only list Chile. It 
would not be permissible to list both the U.S. and Chile at that time 
because it is not possible that the display contains salmon of U.S. 
origin.
Recordkeeping Requirements and Responsibilities
    The law states that the Secretary may conduct an audit of any 
person that prepares, stores, handles, or distributes a covered 
commodity for retail sale to verify compliance. As such, records 
maintained in the normal course of business that verify origin and 
method of production (wild and/or farm-raised) declarations, as 
applicable, are necessary in order to provide retailers with credible 
information on which to base origin and method of production 
declarations.
    Under this final rule, any person engaged in the business of 
supplying a covered commodity to a retailer, whether directly or 
indirectly (i.e., growers, distributors, handlers, packers, and 
processors, etc.), must make available information to the subsequent 
purchaser about the country(ies) of origin and method of production, as 
applicable, of the covered commodity. This information may be provided 
either on the product itself, on the master shipping container, or in a 
document that accompanies the product through retail sale provided it 
identifies the product and its country(ies) of origin and method of 
production, as applicable.
    Any person engaged in the business of supplying a covered commodity 
to a retailer, whether directly or indirectly, must maintain records to 
establish and identify the immediate previous source (if applicable) 
and immediate subsequent recipient of a covered commodity for a period 
of 1 year from the date of the transaction.
    In addition, the supplier of a covered commodity that is 
responsible for initiating a country of origin and, as applicable, 
method of production declaration, must possess records that are 
necessary to substantiate that claim for a period of 1 year from the 
date of the transaction. In an effort to reduce the recordkeeping 
burden associated with COOL, for that purpose, packers that slaughter 
animals that are tagged with an 840 Animal Identification Number device 
without the presence of any additional accompanying marking indicating 
the origin as being a country other than the U.S. (i.e., ``CAN'' or 
``M'') may use that information as a basis for a U.S. origin claim. In 
addition, packers that slaughter animals that are part of another 
country's recognized official system (e.g., Canadian official system,

[[Page 2664]]

Mexico official system) may also rely on the presence of an official 
ear tag or other approved device on which to base their origin claims. 
Producer affidavits shall also be considered acceptable records that 
suppliers may utilize to initiate origin claims, provided it is made by 
someone having first-hand knowledge of the origin of the covered 
commodity and identifies the covered commodity unique to the 
transaction.
    Under this final rule, any intermediary supplier handling a covered 
commodity that is found to be designated incorrectly as to the country 
of origin and/or method of production, as applicable, shall not be held 
liable for a violation of the Act by reason of the conduct of another 
if the intermediary supplier relied on the designation provided by the 
initiating supplier or other intermediary supplier, unless the 
intermediary supplier willfully disregarded information establishing 
that the country of origin and/or method of production, as applicable, 
was false.
    For an imported covered commodity, the importer of record as 
determined by CBP, must ensure that records: Provide clear product 
tracking from the United States port of entry to the immediate 
subsequent recipient and accurately reflect the country(ies) of origin 
of the item as identified in relevant CBP entry documents and 
information systems; and maintain such records for a period of 1 year 
from the date of the transaction.
    Under this final rule, retailers also have responsibilities. In 
providing the country of origin notification for a covered commodity, 
retailers are to convey the origin and, as applicable, method of 
production information provided by their suppliers. Only if the 
retailer physically commingles a covered commodity of different origins 
and/or methods of production, as applicable, in preparation for retail 
sale, whether in a consumer-ready package or in a bulk display (and not 
discretely packaged) (i.e., full service meat case), can the retailer 
initiate a multiple country of origin designation that reflects the 
actual countries of origin and methods of production, as applicable, 
for the resulting covered commodity.
    Records and other documentary evidence relied upon at the point of 
sale by the retailer to establish a covered commodity's country(ies) of 
origin and method of production, as applicable, must either be 
maintained at the retail facility or at another location for as long as 
the product is on hand and provided to any duly authorized 
representatives of USDA within 5 business days of the request. For pre-
labeled products, the label itself is sufficient information on which 
the retailer may rely to establish the product's origin and method of 
production, as applicable, and no additional records documenting origin 
and method of production information are necessary. A pre-labeled 
covered commodity is a covered commodity that has the commodity's 
country of origin and method of production, as applicable, and the name 
and place of business of the manufacturer, packer, or distributor on 
the covered commodity itself, on the package in which it is sold to the 
consumer, or on the master shipping container. The place of business 
information must include at a minimum the city and state or other 
acceptable locale designation.
    Additionally, records that identify the covered commodity, the 
retail supplier, and for products that are not pre-labeled, the country 
of origin and method of production information, as applicable, must be 
maintained for a period of 1 year from the date the origin declaration 
is made at retail.
    Under this final rule, any retailer handling a covered commodity 
that is found to be designated incorrectly as to the country of origin 
and/or method of production, as applicable, shall not be held liable 
for a violation of the Act by reason of the conduct of another if the 
retailer relied on the designation provided by the supplier, unless the 
retailer willfully disregarded information establishing that the 
declaration of country of origin and/or method of production, as 
applicable, was false.
Enforcement
    The law encourages the Secretary to enter into partnerships with 
States to the extent practicable to assist in the administration of 
this program. As such, USDA has entered into partnerships with States 
that have enforcement infrastructure to conduct retail compliance 
reviews.
    Routine compliance reviews may be conducted at retail 
establishments and associated administrative offices, and at supplier 
establishments subject to these regulations. USDA will coordinate the 
scheduling and determine the procedures for compliance reviews. Only 
USDA will be able to initiate enforcement actions against a person 
found to be in violation of the law. USDA may also conduct 
investigations of complaints made by any person alleging violations of 
these regulations when the Secretary determines that reasonable grounds 
for such investigation exist.
    Retailers and suppliers, upon being notified of the commencement of 
a compliance review, must make all records or other documentary 
evidence material to this review available to USDA representatives 
within 5 business days of receiving a request and provide any necessary 
facilities for such inspections.
    The law contains enforcement provisions for both retailers and 
suppliers that include civil penalties of up to $1,000 for each 
violation. For retailers and persons engaged in the business of 
supplying a covered commodity to a retailer (suppliers), the law states 
that if the Secretary determines that a retailer or supplier is in 
violation of the Act, the Secretary must notify the retailer or 
supplier of the determination and provide the retailer or supplier with 
a 30-day period during which the retailer or supplier may take 
necessary steps to comply. If upon completion of the 30-day period the 
Secretary determines the retailer or supplier has (1) not made a good 
faith effort to comply and (2) continues to willfully violate the Act, 
after providing notice and an opportunity for a hearing, the retailer 
or supplier may be fined not more than $1,000 for each violation.
    In addition to the enforcement provisions contained in the Act, 
statements regarding a product's origin and method of production, as 
applicable, must also comply with other existing Federal statutes. For 
example, the Federal Food, Drug, and Cosmetic Act prohibits labeling 
that is false or misleading. In addition, for perishable agricultural 
commodities, mislabeling country of origin is also in violation of PACA 
misbranding provisions. Thus, inaccurate country of origin labeling of 
covered commodities may lead to additional penalties under these 
statutes as well.
    With regard to the voluntary use of 840 tags on which to base 
origin claims, 9 CFR 71.22 prohibits the removal of official 
identification devices except at the time of slaughter. The importation 
of animals and animal health are regulated by the Animal and Plant 
Health Inspection Service (APHIS). This regulation does not alter any 
APHIS requirements.
Comments and Responses
    On October 30, 2003, AMS published the proposed rule for the 
mandatory COOL program (68 FR 61944) with a 60-day comment period. On 
December 22, 2003, AMS published a notice extending the comment period 
(68 FR 71039) an additional 60 days. AMS received over 5,600 timely 
comments from consumers, retailers, foreign governments, producers, 
wholesalers, manufacturers, distributors, members of

[[Page 2665]]

Congress, trade associations and other interested parties. The majority 
of the comments received were from consumers expressing support for the 
requirement to label the method of production of fish and shellfish as 
either wild and/or farm-raised. Numerous other comments related to the 
definition of a processed food item, the recordkeeping requirements for 
both retailers and suppliers, and the enforcement of the program. In 
addition, over 100 late comments were received that generally reflected 
the substance of the timely comments received.
    On June 20, 2007, AMS reopened the comment period for the proposed 
rule for all covered commodities (72 FR 33917). AMS received over 721 
comments from consumers, retailers, foreign governments, producers, 
wholesalers, manufacturers, distributors, members of Congress, trade 
associations and other interested parties.
    On October 5, 2004, AMS published the interim final rule for fish 
and shellfish (69 FR 59708) with a 90-day comment period. On December 
28, 2004, AMS published a notice extending the comment period (69 FR 
77609) an additional 60 days. AMS received approximately 800 comments 
on the interim final rule, the majority of which were form letters from 
consumers expressing their support for country of origin labeling and 
requesting that the definition of a processed food item be narrowed to 
require labeling of canned, breaded, and cooked products.
    On November 27, 2006, the comment period was reopened on the cost 
and benefit aspects of the interim final rule (71 FR 68431). AMS 
received over 192 comments from consumers, retailers, foreign 
governments, producers, wholesalers, manufacturers, distributors, 
members of Congress, trade associations and other interested parties. 
The majority of the comments received were from consumers expressing 
support for the requirement to label fish and shellfish with the 
country of origin and method of production as either wild and/or farm-
raised, and to extend mandatory COOL to the remaining covered 
commodities. Most of the comments did not address the specific question 
of the rule's costs and benefits. A limited number of the comments did 
relate to the costs and benefits of the documentation and recordkeeping 
requirements of the law. Some commenters noted no increased sales or 
demand for seafood as a result of COOL. Several commenters provided 
evidence regarding the costs of compliance with the interim final rule 
covering fish and shellfish. Other commenters cited academic and 
Government Accountability Office studies to argue that USDA 
overestimated the costs to implement systems to meet COOL requirements, 
and that the true costs to industry will be much lower than those 
projected by the economic impact analysis contained in the interim 
final rule for fish and shellfish. On August 1, 2008, AMS published an 
interim final rule with a 60-day comment period for the covered 
commodities other than fish and shellfish. The Agency received 275 
comments representing the opinions of 11,798 consumers, retailers, 
foreign governments, producers, wholesalers, manufacturers, 
distributors, members of Congress, trade associations and other 
interested parties. The majority of comments received were on the 
definition of a processed food item, labeling muscle cuts of multiple 
countries of origin, and the recordkeeping provisions for both 
retailers and suppliers.
    When the proposed rule was published on October 30, 2003, the 
regulatory provisions were all proposed to be contained in a new part 
60 of Title 7 of the Code of Federal Regulations. Under the August 1, 
2008, interim final rule, the regulatory provisions for the covered 
commodities other than fish and shellfish appeared at 7 CFR part 65. 
For the ease of the reader, the discussion of the comments has been 
broken down by issue. To the extent that a comment or issue pertains 
only to fish and shellfish covered commodities, it is noted in the 
explanation.

Definitions

Covered Commodity

    Summary of Comments: Several commenters requested that the Agency 
add products to the list of commodities covered by COOL. One commenter 
suggested that almonds should be included in mandatory COOL and another 
commenter requested that fresh chestnuts be added. A final commenter 
suggested that meat commodities derived from beefalo be included as 
covered commodities. Another commenter asked that the Agency better 
clarify what is a ``muscle cut.''
    Agency Response: The statute specifically defines the commodities 
covered by the mandatory COOL program. As such, the Agency does not 
have the authority to include additional classes of covered 
commodities. Accordingly, recommendations regarding covering additional 
classes of commodities cannot be adopted. With regard to clarifying 
what the Agency defined to be a muscle cut of beef, pork, lamb, 
chicken, or goat, the Agency has provided information on its Web site 
and in written form pertaining to specific items and will continue to 
do so as questions arise. In general, the Agency views those cuts of 
meat (with or without bone) derived from a carcass (e.g., beef steaks, 
pork chops, chicken breasts, etc.) to be covered items. However, cuts 
of meat that are removed during the conversion of an animal to a 
carcass (e.g., variety meats such as pork hearts, beef tongues, etc.) 
are not viewed to be muscle cuts nor are items sold as bones 
practically free of meat (e.g., lamb neck bones, beef femur bones, 
etc.) or fat practically free of meat (e.g., pork clear plate, chicken 
skin, etc.) removed from a carcass.

Ground Beef

    Summary of Comments: One commenter noted that fabricated steak is 
not specifically listed as a covered commodity in the law and expressed 
their belief that AMS could proactively cover a closely related 
commodity rather than limit COOL to only statutorily listed 
commodities. The commenter urged the Agency to broaden rather than 
narrow its scope of covered commodities to include fabricated steak in 
the definition of ground beef.
    Another commenter noted the rule exempts ground beef, hamburger and 
beef patties that have been seasoned (unless that seasoning is salt or 
sugar), but does not exempt ground beef, hamburger and beef patties 
that have not been seasoned. The commenter requested that the 
definition for ground beef be reconsidered and clarified so that ground 
beef, hamburger and beef patties where salt or sugar is added are 
recognized as a processed food item and therefore exempt under this 
rule.
    Several commenters did not agree that the Agency's expansion of the 
definition of ground beef to include hamburger and beef patties was 
justified. The commenters pointed out that the covered product 
specified by the 2008 Farm Bill is ``ground beef,'' which has its own 
regulatory standard of identity separate from hamburger and beef 
patties. One commenter also noted that the interim final rule's 
definitions of ``ground lamb'' and other ground meats do not similarly 
specify that patties made from such ground meats are covered items and 
suggested that this disparity appears to ``favor'' non-beef patties 
with possible exemption from the rule, to the disadvantage of beef 
patties. Another commenter stated that had Congress intended a more 
expansive range of processed food products to be subject to COOL, it 
would have specifically included them,

[[Page 2666]]

particularly where all other processed foods are categorically exempt 
from COOL requirements. The commenter urged the Agency to follow the 
intent of Congress and promulgate a rule that encompasses products 
captured in the regulatory standard of identity for ``ground beef'' and 
not extend the scope to items meeting other definitions.
    Agency Response: The Agency does not agree that commodities covered 
by the statute can be construed to cover fabricated steaks. Fabricated 
steaks are produced to appear like a whole muscle cut of meat but are 
in fact constructed from many different cuts of meat. Therefore, they 
are clearly not a ``muscle cut'' and, because the product is not ground 
nor is it sold as ground, it is not ground beef either.
    The Agency agrees that a regulatory standard of identity for the 
term ``ground beef'' exists, but does not agree that it was the intent 
of Congress to limit the mandatory COOL program to only those products 
marketed under that standard of identity. Further, the Agency believes 
it is not reasonable that consumers would understand why beef that is 
ground and marketed as ``ground beef'' would require labeling and beef 
that is ground and marketed as ``hamburger'' would not. The regulatory 
standard of identities for ``ground beef'' and ``hamburger'' are 
virtually identical with the minor exception of ``added fat'' being 
allowed in beef that is ground and marketed as ``hamburger''. Both are 
often marketed in bulk form or in patty form and can sit side by side 
in the fresh or frozen meat case with only the name capable of 
distinguishing them apart. Therefore, ground beef and hamburger sold in 
bulk or patty form are covered commodities under this final rule.
    However, in its analysis of the issue and the points raised by the 
commenters, the Agency does concur with several of the commenters that 
beef that is ground and marketed as ``imitation ground beef'', 
``imitation hamburger'', and ``beef patty mix'' should be exempt in 
this final rule. Products marketed under these standards of identities 
typically contain a number of binders and extenders that are not 
covered commodities and are not assumed by the consumer to be 
interchangeable with beef that is ground and marketed as ``ground 
beef'' or ``hamburger''. Because the Agency does not view such variety 
meat items as beef heart meat and tongue meat (which are not allowed in 
``ground beef'' or ``hamburger'') as covered commodities, requiring 
such products as ``beef patty mix'' to carry COOL information would 
also require the beef processing industry to identify the country of 
origin for such beef variety meat items in the event they would be used 
as extenders in commodities like ``beef patty mix'', which does allow 
their inclusion. The Agency believes that the costs associated with 
this segregation and identification of beef variety meats would be 
overly burdensome and that these items were not intended to be included 
as covered commodities under the statute. Accordingly, these 
recommendations are adopted in part.

Farm-Raised

    Summary of Comments: Some commenters expressed concerns regarding 
the definition of farm-raised in the fish and shellfish interim final 
rule. The commenters recommended that the Agency exempt molluscan 
shellfish from the COOL requirements.
    Agency Response: As the statute defines the term covered commodity 
to expressly include shellfish, the Agency does not have the authority 
to provide an exemption for molluscan shellfish. In addition, in the 
Agency's experience in three years of enforcement of the COOL program 
for fish and shellfish, it has found good compliance with the labeling 
of this commodity. Accordingly, this recommendation is not adopted in 
this final rule.

Lamb

    Summary of Comments: Several commenters requested that the 
regulation be revised to clarify the definition of lamb includes 
mutton. One of these commenters stated that because there are no common 
terminology differences describing the meat from different age groups 
of species such as cattle, swine, goat or chicken, the Agency was in 
error to exclude mutton in the definition of lamb in the interim final 
rule. The commenter further stated while specific definitional 
differences between lamb and mutton exist for other regulatory 
purposes, it is appropriate to cover meat from all ages of sheep in the 
rule as is done for the other livestock species.
    Agency Response: The Agency agrees that it is appropriate to 
include mutton under the definition of lamb as no distinctions 
describing meat from the different age groups of other livestock 
species were made. Accordingly, this recommendation has been adopted in 
this final rule.
NAIS-Compliant System
    Summary of Comments: Two commenters recommended that the Agency 
eliminate the definition of a ``NAIS-compliant system'' and replace it 
with the existing regulatory definition of ``Official identification 
device or method'' that is contained in 9 CFR Sec.  93.400. The 
commenters contend that this modification is necessary so as to not 
mislead the public into believing that they must comply with all of the 
requirements of USDA's NAIS (e.g., premises registration) in addition 
to maintaining current compliance with existing official identification 
systems. The commenters stated this change would be consistent with 
USDA's assurance that the NAIS ``does not alter any regulation in the 
Code of Federal Regulations or any regulations that exist at the State 
level.''
    Agency Response: The Agency continues to believe that voluntary use 
of the National Animal Identification System is an acceptable and easy 
option packers may utilize to obtain origin information on livestock. 
However, the Agency believes that the definition of NAIS-compliant 
should be deleted as it is not necessary. However, with regard to the 
commenter's suggestion to replace this definition with the definition 
of ``Official identification device or method'', because they may be 
applied to imported animals, other identification devices or methods 
alone cannot be used to establish the U.S.-origin of livestock. 
Producers' management records will need to be used in conjunction with 
these other identification devices and methods to establish U.S. 
origin. Additional discussion on the NAIS provision is included later 
in the Comments and Responses section.

Processed Food Item

    Summary of Comments: Numerous commenters suggested that the Agency 
should narrow its definition of a processed food item so that more food 
items sold at retail are covered commodities subject to COOL 
requirements. The commenters recommended that roasting, curing, smoking 
and other steps that make raw commodities more suitable for consumer 
use should not be the criteria for categorizing these commodities under 
the statutory exemption of an ingredient in a processed food item and 
therefore exempt from labeling. Many commenters stated that USDA's 
overly expansive definition of a processed food item, which comes from 
the 2004 interim final rule for fish and shellfish, should not be used 
for the other covered commodities. The commenters stated that although 
the definition was possibly appropriate for fish and shellfish, it 
resulted in a much more substantial percentage of meat and nut covered 
commodities sold at retail being exempt. The commenters urged USDA to 
develop different definitions of a

[[Page 2667]]

processed food item for each specific category of covered commodity so 
that as many items as possible would be covered by the mandatory COOL 
program.
    One commenter noted that relying on a change in character for the 
definition of processed food is fine as long as the Agency makes it 
clear that the change in character is such that a consumer would not 
use the items in the same manner as they would the original commodity. 
Thus, as spelled out in the 2003 proposed rule, not all forms of 
cooking (e.g., frying, broiling, grilling, boiling, steaming, baking, 
roasting), as well as canning would constitute a change in character. 
This commenter added that for muscle cuts of beef, lamb, pork, chicken 
and goat, chilling, freezing, cooking, seasoning or breading should not 
render those products as being processed food items as defined in the 
interim final rule and therefore exempt from mandatory COOL. The 
commenter expressed their support for the alternative proposal in the 
2003 proposed rule in which a covered commodity that is further 
processed (i.e., cured, restructured, etc.) should not be excluded 
unless the covered commodity is mixed with other commodities such as a 
pizza or TV dinner. The commenter noted that by exempting restructured 
and cured products from COOL, the rule excludes bacon, hams and corned 
beef briskets from labeling. The commenter further stated that Congress 
clearly stated that pork was included in COOL, but exempting bacon and 
hams would exclude a significant portion of the pork market. This 
commenter also recommended that orange juice be included as a covered 
commodity since orange juice represents a major component of orange 
consumption in the U.S. Finally, the commenter noted that in a series 
of decisions, CBP determined that roasting of pistachios, pecan nuts 
and coffee beans did not constitute substantial transformation.
    Several commenters urged AMS to revise the provision in the 
processed food item definition that states that combining different 
covered commodities renders those products being exempt from mandatory 
COOL. The commenters recommended that if covered commodities are 
combined, yet are still recognizable, they should be required to be 
labeled. The commenters suggested that broadly exempting all mixed 
vegetables as a processed food item is an excessive exclusion because 
most consumers would expect to have frozen mixed vegetables labeled.
    Several commenters agreed with the Agency's definition of a 
processed food item. The commenters noted that the processed food 
definition that the Agency adopted in the interim final rule for fish 
and shellfish is simple, straightforward and provides a bright line 
test retailers and others can use to understand which covered 
commodities are subject to mandatory COOL and which are not.
    One commenter recommended that the Agency designate that items with 
distinct varietal names within a generic category of products be deemed 
different products and excluded when two or more are combined. Several 
commenters recommended that any fresh-cut produce item, even those not 
combined with another substantive food item or other covered commodity, 
be included in the definition of a processed food item. By taking a raw 
agricultural commodity, washing it, then cutting it, the commenters 
contend that a company does change the product from a raw agricultural 
commodity to a ready-to-eat food item--similar to the way cooking 
changes a raw meat product to a ready-to-eat food, and that cutting 
fruit for a value-added package alters the commodity at retail.
    One commenter noted that the interim rule provides that ``the 
addition of a component (such as water, salt, or sugar) that enhances 
or represents a further step in the preparation of the product for 
consumption would not in itself result in a processed food item.'' The 
commenter stated that as water, salt and sugar are used only as 
examples, it is apparent that the Agency assumes other ingredients, 
too, may merely enhance or further prepare the product for consumption 
such that they would be insufficient to render a product a processed 
food item.
    Several commenters expressed that they were unclear when water, 
salt or sugar can be added to a product and still be covered and 
questioned why a marinated steak is exempt even though ``marinated'' is 
not defined. These commenters urged the Agency to clarify what is meant 
by enhancement steps that do not result in a processed food item. Some 
of these commenters further urged that the clarification encompass a 
much broader scope of flavorings, seasonings, etc., beyond water, salt 
or sugar.
    One commenter expressed support for the fact that the addition of a 
component (such as water, salt, or sugar) does not represent a 
processing step that changes the character of a covered commodity. The 
commenter recommended that USDA also expressly state that the addition 
of water-based or other types of flavoring--such as a solution 
containing water, sodium phosphate, salt, and natural flavoring 
purportedly injected into meat muscle-cut commodities by some 
retailers--does not represent a processing step that changes the 
character or identity of a covered commodity. Another commenter agreed 
with the provision in the 2003 proposed rule in which oil, salt and 
other flavorings were considered non-substantive ingredients. In 
addition, the commenter also expressed support for the position laid 
out in the 2003 proposed rule that ``needle-tenderized steaks; fully-
cooked entrees containing beef pot roast with gravy; seasoned, vacuum-
packaged pork loins; and water-enhanced case ready steaks, chops, and 
roasts * * * would not be considered processed food items''.
    One commenter discussed products made up of a variety of fresh pork 
and beef muscle cuts that have been injected with a patented solution 
which, beyond simple water, salt, or sugar, also includes sodium 
phosphates, potassium lactate and sodium diacetate. The commenter 
stated that these products should be considered to be ``covered 
commodities'' and, therefore, subject to mandatory COOL requirements on 
the grounds that these products have not undergone a change in 
character and that because consumers cannot ascertain any difference 
between such enhanced products and those covered commodities that do 
not contain such additional ingredients, such an exemption would only 
confuse consumers.
    Several commenters asked that the list of examples of processed 
food items be expanded. One commenter strongly supported inclusion of 
the following examples for the types of meat and other covered 
commodities that should be exempt as a processed food item as defined 
under the definition and recommended to be included in the final rule: 
flank steak with portabella stuffing, steakhouse sirloin kabobs with 
vegetables, meatloaf, meatballs with penne pasta, pot roast with 
roasted vegetables, cooked and smoked meats, blue cheese angus burgers, 
cured hams, bacon, sugar cured bacon, dry cured meats, corned beef 
briskets, marinated pork loin, marinated pork chops, marinated London 
broil, prosciutto rolled in mozzarella cheese, fruit salad, cooked and 
canned fruits and vegetables, orange juice, fresh apple sauce, peanut 
butter, candy coated peanuts, peanut brittle, etc.
    Agency Response: The Agency believes that the two-part definition 
of a processed food item defined in the final rule is an appropriate 
interpretation of the intent of Congress excluding covered commodities 
that are

[[Page 2668]]

an ingredient in a processed food item and provides a bright line 
differentiating the steps that do and do not result in a commodity 
being covered by mandatory COOL.
    Furthermore, the Agency does not agree that such processing steps 
as cutting or enhancing render a covered commodity a processed food 
item. The definition of a processed food item uses examples of the 
addition of components ``such as water, salt, or sugar''; however, such 
further preparation steps would also be meant to include other examples 
of enhancements that do not fundamentally alter the character of the 
product. For example, dextrose is a sugar, phosphate is a salt, and 
beef stock and yeast are flavor ``enhancers''. In addition, the Agency 
believes that enhancement with enzymatic tenderizers, such as ficin and 
bromelain, do not by themselves change the character of the covered 
commodity and therefore do not result in a processed food item.
    The Agency does agree that specific examples of products that are 
and are not covered can help the trade and consumers understand which 
products are covered by mandatory COOL. Therefore, the Agency will work 
to provide interpretive documents on its Web site and in print 
materials developed that will provide as many examples as necessary.

Produced

    Summary of Comments: One commenter noted that the interim final 
rule defines the term ``produced'' in the case of a perishable 
agricultural commodity, peanuts, ginseng, pecans, and macadamia nuts as 
grown. The commenter recommended that since some plants may be 
transplanted across national borders, the Agency should define the term 
produced as harvested.
    Agency Response: The Agency agrees with the commenter that the term 
``harvested'' more accurately defines the term ``produced'' in the case 
of a perishable agricultural commodity, peanuts, ginseng, pecans, and 
macadamia nuts and has adopted this change in this final rule.

Country of Origin Notification

Exemption for Food Service Establishments

    Summary of Comments: Several commenters disagreed with the 
exemption for food service establishments from the COOL requirements. 
These commenters contend that since items sold in these types of 
establishments represent a major segment of the food industry, these 
establishments should not be exempt from labeling.
    Agency Response: The statute contains an express exemption for food 
service establishments. Therefore, this exemption is retained in this 
final rule.

Method of Production

    Summary of Comments: Two commenters focused on details for the 
designation of method of production for fish and shellfish (wild-caught 
or farm-raised). One commenter sought a more thorough definition and 
suggested the inclusion of the following additional information: for 
wild fish, the method of harvest (i.e., long-line, gillnet, trawl, 
purse seine, line and hook); and for farm-raised fish (1) whether it is 
a genetically engineered, and (2) the feed conversion ratio (quantity 
of fish feed required for producing the end-commodity). Another 
commenter expressed concern about fraudulent labeling of method of 
production for fish and shellfish. The commenter noted that there may 
be an economic incentive to mislabel farm-raised fish as wild caught 
fish, and the commenter provided evidence from a small sample they had 
investigated in November and December 2005 during the off-season for 
wild-caught salmon. They purchased 17 salmon products labeled as wild-
caught, tested them for the presence of a synthetic coloring agent fed 
to farmed salmon to turn their flesh pink-orange and found that 7 of 
the 17 salmon products labeled as wild-caught were determined through 
this analysis to be actually farm-raised. The commenter noted that 
supermarkets were more likely to label wild-caught salmon correctly 
than fish markets.
    Agency Response: The statute only provides the Agency with the 
authority to require that fish and shellfish carry notification for 
country of origin and that the covered commodity distinguish between 
wild fish and farm-raised fish. Therefore, the additional labeling 
information cannot be required. With regards to the mislabeling of 
method of production identified by the commenter, in addition to 
conducting retail surveillance enforcement activities, the Agency also 
conducts supplier audits that are intended to prevent such mislabeling.

Labeling Covered Commodities of United States Origin

    Summary of Comments: Two commenters requested that the Agency 
revisit the regulatory requirements for labeling products as U.S. 
origin when they have been further processed or handled in a foreign 
country. One commenter recommended that USDA delete entirely Sec.  
65.300(d)(2), and include language instead that expressly prohibits the 
retention of a United States origin label for any commodity that 
undergoes additional processing or handling in a foreign country. 
Another commenter asked that the Agency clarify what it means by the 
terms ``handled'' and ``processed'' in the context of this provision. 
The commenter asked USDA to clarify if it intends to include meat 
products in this section of the interim final rule, and noted that the 
statute indicates that meat product processed in another country would 
need to list that particular country on the label. They pointed out 
that the interim final rule appears to have no discussion or rationale 
explaining why a U.S. product processed in another country would be 
eligible to maintain a U.S. origin label.
    Another commenter requested that a fourth option for labeling 
imported products be considered in the final rule. This commenter 
pointed out that there are no provisions for labeling product that is 
caught or harvested in the U.S. and substantially transformed in 
another country. For example, wild fish that is caught in the U.S. and 
then subsequently filleted in ``Country X'' must be marked as a product 
of ``Country X'' with no allowable reference to the original U.S. 
source. The commenter suggested an alternative would be to label 
covered commodities harvested in the U.S. but substantially transformed 
in another country as ``Harvested in U.S., processed in Country X.'' 
The commenter concluded that such a label would provide complete 
information for the consumer while maintaining the original U.S. source 
of the product.
    Agency Response: With regards to the origin determination of United 
States country of origin products that are exported to a foreign 
country for processing prior to reimportation back into the United 
States, the Agency has deleted the express provision in the final rule 
as the Agency believes that the provision may have caused confusion. 
However, to the extent that existing regulations, including those of 
CBP and FSIS allow for products that have been minimally processed in a 
foreign country to reenter the United States as Product of the U.S., 
nothing in this final rule precludes this practice. In addition, to the 
extent that additional information about the production steps that 
occurred in the U.S. is permitted under existing Federal regulations 
(e.g., CBP, FSIS), nothing in this final rule precludes such 
information from being included.

[[Page 2669]]

Labeling Imported Products That Have Not Undergone Substantial 
Transformation in the United States

    Summary of Comments: Four commenters offered suggestions relating 
to labeling imported products that have not undergone substantial 
transformation in the United States. One commenter contended that COOL 
was illogical, unworkable and misleading. Another commenter elaborated 
on the labeling for transshipped fish and shellfish. The commenter 
pointed out that many fish and shellfish products are imported into the 
U.S. from countries that are not necessarily the country where the fish 
or shellfish were harvested. The commenter recommended that the final 
rule for fish and shellfish require labeling to identify the location 
where the seafood was harvested or raised. Another commenter noted that 
frozen products of ``foreign origin,'' as determined by tariff laws, 
already are subject to country of origin labeling under a comprehensive 
set of regulations administered by CBP.
    Agency Response: With regard to the origin of imported covered 
commodities, the Agency follows existing regulations, including those 
of CBP, regarding the origin of such products and requires that such 
origin be retained for retail labeling.

Labeling Muscle Cut Covered Commodities of Multiple Countries of Origin 
That Include the United States

    Summary of Comments: Numerous commenters stated that commodities 
derived from animals born, raised, and slaughtered in the U.S. should 
be labeled as ``Product of the U.S.'' and not be diluted or commingled 
with a multiple country of origin label such as, ``Product of the U.S., 
Canada, and Mexico''. These commenters stated that the provision 
allowing this in the interim final rule directly contradicts the 
statute and diminished consumer choice and producer benefits that could 
have resulted from this program.
    These commenters stated that the statute established four major 
categories for meat labeling to enable consumers to have the right to 
know specifically where their food originates. Other commenters stated 
that the regulation does not contain specific provisions allowing 
packers to label meat from livestock exclusively born, raised, and 
processed in the U.S. as mixed origin and that packers doing so were 
acting in violation of the regulation. Several members of Congress also 
commented that it was not the intent of Congress that all U.S. products 
or such product from large segments of the industry be combined with 
the multiple countries of origin category nor was it provided for by 
the statute. The members of Congress stated that the purpose of COOL is 
to clearly identify the origin of meat products, providing consumers 
the most precise information available.
    One commenter stated that while processors claim that segregating 
U.S. meat from foreign meat would be burdensome, processors already 
easily segregate meat by grade (e.g. USDA. Choice vs. USDA. Prime) and 
by source (e.g., USDA Certified Organic vs. nonorganic) and that 
segregating the origin of U.S. and foreign meat is no more complicated 
or burdensome.
    In contrast, several other commenters expressed support for a more 
flexible approach to labeling notifications for meat products sourced 
from multiple countries of origin. One commenter indicated that 
retailers desperately need the flexibility to commingle product in the 
display, especially in a full-service display case. The commenter 
stated that disallowing the commingling of meat from multiple origins 
including the U.S. is a logistical nightmare for retailers. Another 
commenter stated that the interim final rule affords critically 
important flexibility to retailers and the entities that provide 
covered commodities to retailers with respect to the labeling of 
covered commodities derived from animals of U.S. origin, as well as 
animals with multiple countries of origin. Another commenter urged the 
Agency to apply flexibility consistently for all sectors of the chain 
including retailers.
    Several commenters stated their belief that Congress intended to 
provide flexibility between categories A and B afforded in the rule 
based on the permissive language of the statute for those two 
categories, which is supported by the absence of that very flexibility 
in subsections 282(a)(2)(C) and (D). The commenters noted that in 
subsections 282(a)(2)(C) and (D) of the statute, Congress used the word 
``shall'' with respect to types of covered commodities identified in 
those categories, imported for immediate slaughter and foreign country 
of origin, and arguably limited the Agency's discretion to interpret 
how those categories of product should be labeled.
    Another commenter recommended the same flexibility given to 
processors to label meat from animals of U.S. origin with a mixed 
origin label should be given to the labeling of meat from animals 
imported directly for slaughter. The commenter recommended that the 
final rule give processors the flexibility to make use of the order of 
countries mandated under this category (Product of Country X and the 
U.S.) when processing a production run including animals of U.S., mixed 
origin, or imported for immediate slaughter.
    Another commenter noted that little attention seems to have been 
paid to the amount of exported meat this rule is putting at risk, which 
is now sold to Mexico, compared to the small amount of cattle born in 
Mexico and exported to the United States. Another commenter added that 
producers on the border States rely on Mexican cattle imports. The 
commenter warned that by establishing these categories, the value of 
finished Mexican cattle will be discounted at the packing plant because 
they will have to be sorted on the line in the plant, which costs the 
packer money. Another commenter stated that COOL has effectively cut 
off U.S-Mexican cattle trade and that because of COOL the packers have 
advised producers that they will not buy Mexican cattle.
    One commenter indicated that the multiple country label prescribed 
in the rule for product derived from U.S.-raised pigs, regardless of 
their birth country, provides packers, processors and retailers with 
flexibility in labeling pork products. The commenter further stated 
that this labeling flexibility, in turn, gives flexibility to U.S. pork 
producers handling those pigs, which will reduce costs associated with 
label changes, product segregation, and duplicate stock keeping units 
at all levels of the pork marketing system.
    Several commenters noted that the ``Product of the U.S.'' label 
allows for the labeling of pork products exclusively from pigs born, 
raised and slaughtered in the U.S. These commenters stated it will be 
effectively used for pork products offered to buyers who find value in 
that label. The commenters fully support the approach taken in the 
interim final rule. The commenters also expressed that including U.S.-
raised pigs in the mixed origin labeling category also meets the 
``common sense'' test as well as the economic reality of today's U.S. 
pork industry since more than 95 percent of the total end weight of a 
Canadian-born weaned pig is actually produced in the U.S. using U.S. 
feed, labor and buildings.
    A final commenter wrote that the Agency should harmonize the final 
rule with the NAFTA Marking Rule. This commenter specifically 
encouraged the Agency to adopt a final rule that uses the tariff-shift 
method to determine the country of origin of covered commodities that 
are produced in the United States using ingredients or raw

[[Page 2670]]

materials imported from Canada or Mexico.
    Agency Response: The Agency recognizes that the multitude of 
different production practices and possible sales transactions can 
influence the value determinations made throughout the supply chain 
resulting in instances of commingling of animals or covered 
commodities, which will have an impact when mixing occurs. However, the 
Agency feels it is necessary to ensure information accurately reflects 
the origin of any group, lot, box, or package in accordance with the 
intent of the statute while recognizing that regulated entities must 
still be allowed to operate in a manner that does not disrupt the 
normal conduct of business more than is necessary. Thus, allowing the 
marketplace to establish the demand of categories within the bounds of 
the regulations will provide the needed flexibility while maintaining 
the structure needed to enforce these clearly defined categories. If an 
initiator of the claim chooses to mix commodities of different origins 
within the parameters of a production day, or if the retailer mixes 
product from different categories willingly, the resulting 
classification must reflect the broadest possible terms of inclusion 
and be labeled appropriately. The initiator may elect to segregate and 
specifically classify each different category within a production day 
or mix different sources and provide a mixed label as long as accurate 
records are kept. Likewise, if a retailer wants to mix product from 
multiple categories, it can only be done in multi-product packages and 
then only when product from the different categories is represented in 
each package in order to correctly label the product. With regard to 
producer benefits, while some U.S. producers may hope to receive 
benefits from the COOL program for products of U.S. origin, the purpose 
of the COOL program is to provide consumers with origin information.
    With regard to the commenter's recommendation that the same 
flexibility given to processors to label meat from animals of U.S. 
origin with a mixed origin label should be given to the labeling of 
meat from animals imported directly for slaughter, this final rule 
allows muscle cut covered commodities derived from animals that are 
born in Country X or Country Y, raised and slaughtered in the United 
States, that are commingled during a production day with muscle cut 
covered commodities that are derived from animals that are imported 
into the United States for immediate slaughter as defined in Sec.  
65.180, the origin may be designated as Product of the United States, 
Country X, and (as applicable) Country Y.
    With regard to using the tariff-shift method to determine the 
country of origin of covered commodities that are produced in the 
United States using ingredients or raw materials imported from Canada 
or Mexico, the Act specifically defines the criteria for covered 
commodities to be labeled with a U.S. origin declaration. Accordingly, 
this recommendation is not adopted.

Labeling Commingled Covered Commodities

    Summary of Comments: Several commenters expressed concerns about 
the notification requirements for commingled covered commodities. One 
produce supplier was concerned about their liability in the event 
ready-to-eat produce they supplied was commingled with other product 
from multiple vendors at retail stores. Another commenter voiced 
opposition to an alphabetical listing on a product sourced and 
commingled from multiple countries of origin. The commenter expressed 
support for the provision in the voluntary COOL guidelines published in 
2002 (67 FR 63367) that would have required country of origin for each 
raw material source of the mixed or blended retail item by order of 
predominance by weight.
    Another commenter expressed support for the current provision. The 
commenter noted that the current interim final rule states that for 
these products, the country of origin must be designated in accordance 
with CBP marking regulations, promulgated pursuant to the Tariff Act. 
To the extent that this will prevent a conflict between the two laws, 
this commenter supports the Agency's recent approach.
    One commenter asked for clarification about the use of the word 
``or,'' the phrase ``and/or,'' commas, slashes or spaces to separate 
the country names in a label listing multiple countries of origin for 
commingled commodities. The commenter pointed out that a comma would be 
equivalent to ``and,'' which might not be appropriate for labeling a 
single produce item that could not physically have been produced in two 
countries.
    Agency Response: As noted in both the interim final rule for fish 
and shellfish and the interim final rule for the other covered 
commodities, the Agency determined that requiring origin notification 
either by alphabetical listings or by listing the countries of origin 
by order of predominance by weight was overly burdensome to the 
regulated industries.
    As commingling of the same type of products at retail containing 
different origin is permissible under this final rule, the Agency 
cannot prohibit the commingling of like products from multiple vendors 
at retail. The COOL program is not a food safety program. Commingling 
like products is a commercially viable practice that has been 
historically utilized by retailers and any decision to continue this 
practice has to be determined by the retailer.
    The Agency does not agree that the statute allows for the use of 
terms and phrases such as ``or, may contain, and/or'' that only convey 
a list of possible origins. The intent of the statute is to require 
retailers to provide specific origin information to consumers. In 
addition, such disjunctive labeling schemes are not allowed under CBP 
regulations except under special circumstances.
    For commingled covered commodities, each country must be listed. 
The Agency does not agree that the regulations should mandate how this 
list of countries be punctuated with commas, slashes or spaces. The 
Agency believes that it is best left to individual businesses to decide 
how to convey the information in a way that is neither confusing nor 
misleading.

Labeling Ground Meat Covered Commodities

    Summary of Comments: Several commenters expressed the opinion that 
the provision in the interim final rule that states, ``when a raw 
material from a specific origin is not in a processor's inventory for 
more than 60 days, the country shall no longer be included as a 
possible country of origin'' is too long. The commenters stated that in 
practical terms, this provision appears to allow a processor to have 60 
days to correct the label of a product to delete specific country(s), 
even though that country's product may no longer exist in its 
inventory. The commenters provided the example that a processor on day 
one could have product from the U.S. and Canada, and then on day 7 run 
out of product from the U.S., and yet could continue using the 
``Product of U.S. and Canada'' label for another 53 days. Commenters 
feared this provision could be easily abused by meat processors. 
Several commenters requested that the Agency reconfirm the 
appropriateness of this time-frame and explain the rationale and 
justification for this duration. Another commenter urged AMS to clarify 
this issue for the public record because in the opinion of the

[[Page 2671]]

commenter, the wording in this section of the rule is confusing and 
potentially misleading.
    Another commenter pointed out this provision was intended to 
reflect the sourcing processes of commercial grinders and not to 
require them to change their labels simply because the market had 
changed and source product was more expensive from one country than 
another. As the statutory language that is interpreted here is directed 
to retailers, this commenter understood this provision to apply to 
retailers as well, and respectfully requested that the Agency confirm 
the applicable standard in the final regulation.
    One commenter was concerned about the impact that mandatory country 
of origin labeling will have on imported beef, particularly ground beef 
at retail. The commenter stated that mandatory origin labeling will add 
significantly to meat production costs at a time of rapidly increasing 
food costs, and consumers will have to bear the additional expense 
resulting from the labeling regime. The commenter was concerned, 
therefore, that retailers will be induced to simplify their labeling 
obligations by excluding imported and certain domestic beef from ground 
beef in order to minimize the resulting increase in the costs that will 
be associated with compliance.
    Agency Response: As already stated, the intent of the authorizing 
statute was for consumers to have available to them for the purposes of 
making purchasing decisions accurate information pertaining to the 
country of origin of certain covered commodities sold at retailers as 
defined. That said, the Agency believes this program should be 
implemented in as least burdensome a manner possible while still 
achieving this objective.
    In developing the interim final rule, the Agency spent considerable 
time analyzing the current production systems of the ground meat supply 
chain and retail industry so that this program could be implemented in 
a manner that was least burdensome as possible while still providing 
consumers with accurate information to base their purchasing decisions 
on. It also must be stressed that if a country of origin is utilized as 
a raw material source in the production of ground beef, it must be 
listed on the label. The 60-day in inventory allowance speaks only to 
when countries may no longer be listed. The 60-day inventory allowance 
is an allowance for the Agency' enforcement purposes for when the 
Agency would deem ground meat products as no longer accurately labeled.
    The Agency arrived at the 60-day allowance during its analysis of 
the ground meat industry. In this analysis, the Agency determined that 
in the ground beef industry a common practice is to purchase lean beef 
trimmings from foreign countries and mix those with domestic beef 
trimmings before grinding into a final product. Often those imported 
beef trimmings are not purchased with any particular regard to the 
foreign country, but the cost of the trimmings due to currency exchange 
rates or availability due to production output capacity of that foreign 
market at any particular time. Because of that, over a period of time, 
the imported beef trimmings being utilized in the manufacture of ground 
beef can and does change between various foreign countries.
    As large scale beef grinders can have in inventory at any one time, 
several days worth of beef trimmings (materials to be processed into 
ground beef) from several different countries and have orders from yet 
other foreign markets, or from domestic importers, trimmings from 
several foreign countries that will fulfill several weeks worth of 
ground beef production, the Agency determined that it was reasonable to 
allow the industry to utilize labels representing that mix of countries 
that were commonly coming through their inventory during what was 
determined to be a 60-day product inventory and on order supply. To 
require beef grinders to completely change their production system into 
grinding beef based on specific batches was determined to be overly 
burdensome and not conducive to normal business practices, which the 
Agency believes was not the intent of the statute. Further, because 
beef grinders often purchase their labeling material in bulk, if a 
given foreign market that a beef grinder is sourcing from is no longer 
capable of supplying product, the interim final rule allowed that 
grinder a period of time to obtain new labels with that given country 
of origin removed from the label.
    With regard to the commenters' concerns with the potential of 
``abuse'' of this allowance by processors, the Agency does not believe 
widespread abuses of this provision will occur and will address any 
issues with this provision during routine compliance reviews. As such 
and for all the reasons stated above, the Agency continues to believe 
that the 60-day inventory allowance is appropriate and was retained in 
this final rule.
    With regard to if this 60-day inventory allowance is made for 
retailers or for suppliers of covered commodities, the Agency has made 
no distinction in this final rule and, as such, the same requirements 
would apply. Other concerns raised, including the impact of this 
regulation on the utilization of imported meat and consumer food costs 
are addressed in the economic impact analysis contained in this action.

Remotely Purchased Products

    Summary of Comments: Two commenters expressed the opinion that the 
provision on remotely purchased products is too weak because it allows 
country of origin information to be disclosed either on the sales 
vehicle or at the time the product is delivered to the consumer. The 
commenters stated that for origin information to be of use to 
consumers, it must be disclosed at the time that purchasing decisions 
are made. The commenters recommended that the country of origin or the 
possible country(ies) of origin could be listed on the sales vehicle 
(i.e. Internet site, home delivery catalog, etc.) as part of the 
information describing the covered commodity for sale. Another 
commenter encouraged the Agency to maintain the provision for remotely 
purchased products with the additional flexibility of permitting the 
declaration either on the sales vehicle or on the product at the time 
of delivery.
    Agency Response: The Agency believes that the provision contained 
in the interim final rules, which allows the information to be provided 
either on the sales vehicle or on the product itself, provides 
flexibility to suppliers and also provides useful information to 
consumers. If a consumer desires to purchase a covered commodity of a 
certain origin, they can so specify to the retailer.

Marking

General

    Summary of Comments: Several commenters addressed the question of 
preponderance of stickering and sticker efficacy. The commenters 
recommended that the Agency define ``majority'' as it applies to bulk 
display stickering for perishable agricultural commodities. The 
commenters noted that the Agency has recognized that when fresh produce 
is stickered with origin information, every product may not bear a 
sticker for a variety of reasons, and that a majority of the product 
should have stickers. Two commenters recommended that the Agency define 
``majority'' as it applies to bulk display stickering for perishable 
agricultural commodities as ``50% plus one'' so that the industry has a 
specific understanding for compliance. Another commenter agreed with 
this definition, citing that the FDA found 50% product

[[Page 2672]]

labeling sufficient even in a case of human health. The commenter 
argued that such a standard would therefore be more than sufficient for 
adequate disclosure of country of origin. Another commenter recommended 
that the Agency not require more than a majority of produce items in 
any given bin to carry a PLU sticker. The commenter added that price 
look up (PLU) stickers, which include information on the supplier that 
initiates the country of origin claim, should not only satisfy a 
retailer's obligation to inform consumers of the country of origin of 
the item, it should satisfy the retailer's country of origin 
recordkeeping obligation as well.
    Another commenter expressed concern that the lack of a specific 
minimum labeling requirement could ultimately require suppliers to have 
multiple containers and packaging inventories available. The commenter 
stated that a producer supplying fruit for bulk sale that is not 
currently stickering fruit may now be required by retailers to sticker 
individual pieces of fruit because the rule only ``encourages'' 
retailers to use placards or other methods. The commenter recommended 
that the rule establish a specific minimum standard to ensure greater 
consistency in compliance.
    As it pertains to fish and shellfish, another commenter suggested 
that the Agency allow the use of statements such as ``wild and/or farm-
raised'' or ``may contain'' in addition to allowing the use of ``check 
box'' labeling options to minimize the cost of labeling while still 
providing the required information for the consumer.
    Agency Response: As stated in the preamble of the August 1, 2008, 
interim final rule, the Agency understands that stickering efficacy is 
not 100%. Further, the Agency believes that under normal conditions of 
purchase, consumers would likely be able to discern the country of 
origin if the majority of items were labeled regardless if additional 
placards or other signage was present. Accordingly, the Agency does not 
believe it is necessary to modify the language with respect to this 
provision. The Agency will address the issue of preponderance of 
stickering in its compliance and enforcement procedures, as applicable, 
to ensure uniform guidance is provided to compliance and enforcement 
personnel.
    With regard to this use of ``may contain'' and ``and/or'' 
statements, as previously stated, the Agency does not agree that the 
statute allows for the use of terms and phrases such as ``or, may 
contain, and/or'' that only convey a list of possible origins. Rather 
the Agency believes that the intent of the statute is to require 
retailers to provide specific origin information to consumers. In 
addition, such disjunctive labeling schemes are not allowed under CBP 
regulations except under special circumstances.

Signage Over Bulk Display Cases

    Summary of Comments: Several commenters expressed concern that the 
language authorizing a list of ``all possible origins'' on a bulk 
container (such as a meat display case that may contain commodities 
from different origins) would inadvertently allow a retailer to hang a 
sign over the entire meat display case that stated that the entire 
display contains products from the U.S. and one or more countries, even 
if the display case contains only commodities from the U.S. The 
commenters contend that nothing in the law expressly permits such 
labels on displays, holding units, or bins to merely provide 
information regarding ``all possible origins'' of the commodities 
contained therein and recommended that the Agency add language to 
require that if a meat display case contains commodities from more than 
one country, the commodities must be physically separated according to 
their origins within the meat display case and a separate origin 
declaration must be associated with each section.
    Another commenter stated that they understood that the Agency is 
concerned that a sign such as ``All beef is Product of the US'' might 
be interpreted by consumers to encompass beef products that are not 
covered by the statute because they are processed. In order to provide 
clarity, the commenter urged the Agency to provide ``safe harbor'' 
standards for language and placement in order to ensure that retailers 
are properly meeting their obligations.
    One commenter noted that retailers have the discretion to use 
signs, placards or other communications to convey origin information. 
Another commenter noted that the interim final rule allows for a bulk 
container at retail level that contains commingled products to be 
labeled with the country or countries of origin. However, the commenter 
also pointed out that the rule is silent on whether the individual 
pieces contained in bins must also be labeled, which would be difficult 
for certain species (e.g., broccoli, lettuce). This commenter requested 
confirmation that, for commingled produce sold in bins or trays, 
individual pieces of produce do not need to be labeled provided their 
origins are displayed on appropriate signage by the retailer.
    Agency Response: With regard to the provision in both interim final 
rules concerning bulk containers that allows the bulk container to 
contain a covered commodity from more than one country of origin, as 
previously stated, under this final rule it remains permissible 
provided that the notification representing a container, display case, 
bin or other form of presentation includes all possible country 
designations available for purchase.
    With respect to the use of signage for bulk displays for meat 
covered commodities, as previously discussed, the Agency has observed 
that a vast majority of retailers are utilizing one sign for either the 
entire meat case or for an entire commodity type (i.e., chicken) to 
provide the country of origin notification. While the statute and this 
regulation provide flexibility in how the country of origin information 
can be provided, the Agency believes that the use of such signage could 
be false or misleading to consumers. The Agency encourages retailers to 
review signage that they have used in the implementation of the fish 
and shellfish program for alternative methods of providing COOL 
information.
    With regard to comment concerning the labeling of individual pieces 
of produce, the rule provides flexibility in how the country of origin 
information may be conveyed. Thus, this final rule does not contain a 
requirement that individual pieces of product must be labeled with 
country of origin information. However, retailers may request that 
suppliers use specific methods of conveying origin information through 
contractual arrangements with their suppliers.

Abbreviations

    Summary of Comments: Several commenters requested additional 
guidance on acceptable abbreviations, and they provided a variety of 
recommendations to the Agency about specifying approved abbreviations. 
These commenters all favored the use of country abbreviations when 
marking country of origin declarations. One commenter requested that a 
select group of countries be permitted for abbreviation to include New 
Zealand, Guatemala, South Africa, Argentina and Australia. Another 
commenter said that abbreviations would serve a useful purpose on 
product labels and recommended that a list of reasonable abbreviations 
be developed that could be used by processors and retailers (e.g., CAN 
for Canada).
    Other commenters appreciated the Agency's recognition of the need 
to abbreviate the names of some countries

[[Page 2673]]

using abbreviations from CBP. The commenters recommended that the 
language in section (e) be reworded to remove the first sentence (``In 
general, abbreviations are not acceptable.''). The commenters reasoned 
that the available space on product labels (e.g., price look-up [PLU] 
sticker) or bills of lading is scarce. The commenters further stated 
that it is important for the industry to be able to convey origin 
information on both of those vehicles for several reasons. Information 
on the product itself (through a PLU sticker, rubber band, twist tie, 
tag, etc.) is particularly important because it informs the consumer at 
point of purchase and moves with the product to the home. When industry 
can include the information on a bill of lading, it allows companies to 
use existing records as the statute requires. The commenters suggested 
that the Agency remove the requirement that a key to abbreviations be 
included with documents (each time or even once), because the industry 
is well aware of the abbreviations used and their meanings.
    Several commenters suggested that the Agency rely on the ISO 3166 
country codes maintained by the International Standardization 
Organization. One commenter disagreed with the Agency's determination 
that such abbreviations may not be readily understood by the majority 
of consumers. One commenter added that in addition to the ISO country 
codes, CBP recognizes country codes as do other federal agencies such 
as the Bureau of the Census. The commenter pointed out that the United 
Nations also recognizes both the two letter and three letter ISO 
country codes. Another commenter requested that a list of 3-digit 
country abbreviations be developed and allowed to identify the 
countries of origin. The commenter noted that these 3-digit codes would 
not be confused with 2-digit codes used in the U.S. to identify 
individual States.
    One commenter indicated that in the event the Agency retains its 
current prohibition on abbreviations for consumer information, the 
Agency must be clear that origin information in records and paperwork 
can be maintained with any acceptable abbreviations. The commenter 
added that they strongly support the ability to utilize labeling of a 
U.S. State, region or locality in which a product is produced to meet 
label standards as product of United States. In addition, the commenter 
stated that they support the ability to use State abbreviations, which 
is standard practice in many current State labeling programs and is 
readily accepted identification by consumers. One commenter described a 
customer who had a requirement to list the State name in addition to 
the U.S. This commenter asked if it would be permissible to abbreviate 
State names when more than one needs to be listed (e.g., WA, CA, AZ). 
The commenter suggested putting the State abbreviations in brackets 
after USA (e.g., USA (CA, AZ)).
    Agency Response: As previously stated, the Agency believes that the 
limited application of abbreviations that unmistakably indicate the 
country of origin is appropriate. CBP has a long history of 
administering the Tariff Act and has issued a number of policy rulings 
with respect to the use of abbreviations. Because many of the covered 
commodities subject to the COOL regulation are also subject to country 
of origin marking under the Tariff Act, it would be inconsistent with 
CBP regulations to allow for the use of additional country 
abbreviations under the COOL program. With regard to the use of ISO 
codes that many commenters made reference to, CBP does allow for the 
use of such codes for statistical and other purposes with respect to e-
commerce; however, CBP does not allow for the use of ISO codes for 
marking purposes. The Agency has obtained a more complete list of 
abbreviations from CBP and has posted this information to the COOL Web 
site.
    With regard to State labeling for perishable agricultural 
commodities, peanuts, pecans, macadamia nuts, and ginseng, the Agency 
does believe that the majority of consumers are familiar with the 
standard State abbreviations used by the U.S. Postal Service and 
because the purpose of the COOL program is to provide consumers with 
origin information, it is reasonable to allow such abbreviations. 
Allowing this flexibility will address industry's concerns about the 
limited space on PLU stickers, twist ties, rubber bands and other 
package labels typically used for produce. Under this final rule, 
abbreviations may be used for state, regional, or locality label 
designations for perishable agricultural commodities, peanuts, pecans, 
macadamia nuts, and ginseng covered commodities whether domestically 
harvested or imported using official United States Postal Service 
abbreviations or other abbreviations approved by CBP. With regard to 
the use of abbreviations by suppliers or retailers in conveying origin 
information in records or documentary systems, there are no 
restrictions on the use of abbreviations as long as the information can 
be understood by the recipient. Accordingly, these recommendations are 
adopted in part.

State, Regional, and Locality Labeling

    Summary of Comments: Several commenters raised issues related to 
the provision for state, regional, and locality labeling of covered 
commodities. Three commenters requested that state, regional, and 
locality labeling be acceptable for covered meat commodities. One 
commenter sought confirmation that the provisions on State markings in 
the interim final rule apply also to States, regional and local labels 
of importing countries. This commenter understood that identification 
by region and locality is acceptable provided it is nationally 
distinct, but requested that this provision be clarified in the final 
rule.
    Another commenter noted that USDA is silent on the use of locality 
labeling, and requested that the final rule recognize that locality 
labeling is likewise permitted by the statute. The commenter stated 
that many retailers source products locally and choose to provide this 
information to consumers because it is meaningful to these customers.
    Agency Response: With regard to the commenters' recommendation to 
allow State, regional, and locality labeling for meat covered 
commodities, the statute contains an express provision for this type of 
labeling for perishable agricultural commodities, peanuts, pecans, 
macadamia nuts, and ginseng. As such, the Agency does not have the 
authority to extend this provision to any other covered commodities. 
With regard to the commenter's request that the Agency clarify that 
this provision applies to imported perishable agricultural commodities, 
nuts, and ginseng and that locality labeling is also permitted, 
clarifying language has been added to section 65.400(f). Accordingly, 
these recommendations have been adopted in part.

Supplier Responsibilities

    Summary of Comments: Several commenters expressed concerns with the 
Agency's assertion in the interim final rule that ``the supplier of a 
covered commodity that is responsible for initiating a country of 
origin claim * * * must possess or have legal access to records that 
are necessary to substantiate that claim.'' The commenters maintained 
that the Agency's jurisdiction stops with the initiator of the origin 
claim of a covered commodity, which in the case of meat products is the 
slaughter facility. The commenters further stated that the COOL law 
authorizes only the Secretary

[[Page 2674]]

of Agriculture to conduct an audit for verification purposes, not the 
packer, and that furthermore, the Secretary may not require a person 
that prepares, stores, handles, or distributes a covered commodity to 
maintain a record of the country of origin of a covered commodity other 
than those maintained in the course of the normal conduct of the 
business of such person. The commenters argued that the 2008 Farm Bill 
language states that producer affidavits are sufficient in making a 
country of origin claim; therefore, packers or processors should not be 
given legal access to producers' records. The commenters recommended 
that the Agency eliminate language referencing ``legal access'' from 
the final regulation as they contend it is not authorized by the law.
    Two commenters suggested that the Agency should require the 
original suppliers of covered products to substantiate the chain of 
custody and the accuracy of country of origin information. One 
commenter expressed the opinion that it is unreasonable that the 
liability ultimately is placed on the meat processor to provide country 
of origin information when they are relying on the word of livestock 
producers, who may or may not be providing accurate information.
    Another commenter pointed out the importance of maintaining origin 
information by all segments of the industry to verify origin claims and 
to ensure the integrity of the labeling program. This commenter also 
stated that it is important that producers not be asked for 
unreasonable information that goes beyond what would be considered 
acceptable or the lack of which is a pretext for penalties against a 
producer or producers. The commenter recommended that the Agency 
provide a safe harbor of reasonable or acceptable information that can 
be asked of a producer to help avoid the possibility of unreasonable 
requests for information that would be considered unfair or an effort 
to single out a particular producer.
    One commenter suggested removing the provision in the rule 
regarding supply chain traceability in the recordkeeping requirement. 
The commenter stated that the purpose of COOL is to inform consumers 
about the origin of the covered commodities and that the added 
recordkeeping requirement of traceability is not necessary and is an 
added regulatory burden.
    One commenter noted that while producers are not directly affected 
by the COOL law, Section 282(3) of the statute expressly requires that 
``anyone engaged in the business of supplying a covered commodity 
provide country of origin information.'' The commenter further stated 
that in the case of animals imported from Canada, this necessarily 
implicates Canadian producers who must present health papers to APHIS 
at the border. The commenter suggested further clarification is needed 
about the manner in which that origin will be tracked and conveyed to 
AMS should proof of origin be required further down the supply chain.
    One commenter noted that Agency representatives have repeatedly 
advised the industry of the need for significantly more extensive 
records than are currently maintained in order to verify COOL. The 
commenter strongly urged the Agency to clarify in the final rule that 
the statutory prohibition of any new record requirement is recognized 
and accepted. This commenter also encouraged the Agency to provide a 
definitive declaration that suppliers may convey COOL information to 
retailers through any method of their choosing in order to comply with 
the regulation. The commenter stated that in current trade practice, 
some have been confused as to whether supplier labeling of COOL on the 
actual produce item is required, or whether multiple documents such as 
invoices or bills of lading must contain COOL information. The 
commenter suggested that USDA should make clear that COOL information 
may be provided to the retailer in any form. The commenter further 
suggested that relationships in the marketplace--not the statute--will 
determine in what form that communication will take place, including 
whether individual product eventually is labeled by a supplier.
    One commenter stated that the most practical approach to meeting 
the COOL requirements for most covered commodities is for those 
producers to print the country of origin on all retail packaging for 
case and consumer ready, and on all case end labels for all products 
destined to be store processed or packaged by the retailer. The 
commenter suggested that producers will not need to continuously 
transmit country of origin information to the retailer on an order by 
order basis. Instead, package and case labeling in conjunction with the 
USDA establishment number (used to identify producer) and the lot or 
batch number (used to identify the specific lot of live animals from 
which products are derived) will already be on pre-packaged labels and 
case end codes. The commenter further stated that retailers already 
retain invoices to meet other reporting requirements, which identify 
the producers of the product, and can be used to satisfy the COOL 
recordkeeping obligation. The commenter also stated that there will be 
no required change in business processes for retailers but producers 
will be required to add accurate origin information to the retail 
packaging and/or case end labels.
    One commenter identified a business process flow they hoped could 
be simplified with the intervention of the Agency. In import situations 
where a consolidated shipment could have multiple origins covered by 
one Bill of Lading (for example, a combined load of Navel Oranges from 
Australia and South Africa, and Clementines and Lemons from Chile) the 
commenter currently notes each line item on the documentation, which is 
an added step in the paperwork process. The commenter requested that 
the Agency provide suggestions in the rule about alternative means to 
comply with COOL on Bills of Lading, invoices, or packing slips.
    One commenter suggested that the Agency consider a longer period, 
such as 10 business days, to provide records upon request to any duly 
authorized representatives of USDA for COOL compliance purposes. Two 
commenters referenced the statutory prohibition against the Agency 
requiring records that are not maintained in the normal conduct of 
business. These commenters noted that such records are deemed 
sufficient to satisfy the Bioterrorism Act's mandate to be able to 
identify immediate previous source and immediate subsequent recipient 
of foods. The commenters recommended that the Agency likewise accept 
multiple sourcing records for purposes of the mandatory country of 
origin labeling requirement for intermediary suppliers to identify 
their immediate previous source and immediate subsequent recipient.
    Agency Response: It is correct to say that the Agency's authority 
to audit ends at the slaughter facility as the slaughter facility is 
the first handler of the covered commodity and the Agency has deleted 
the requirement that suppliers have legal access to records from this 
final rule. However, as initiators of origin claims, packers must have 
records to substantiate those claims. With regard to records maintained 
in the course of the normal conduct of the business of such person and 
producer affidavits, the final rule states that producer affidavits 
shall be considered acceptable records that suppliers may utilize to 
initiate origin claims, provided it is made by someone having first-
hand knowledge of the origin of the covered commodity and identifies 
the covered commodity

[[Page 2675]]

unique to the transaction. With regard to the commenter's assertion 
that producers not be asked for unreasonable information that goes 
beyond what would be considered acceptable, the Agency has provided 
examples of records kept in the normal course of business that may be 
used to substantiate origin claims. As previously stated, packers can 
utilize producer affidavits to obtain origin information. This final 
rule has been drafted to minimize the recordkeeping burden as much as 
possible while still providing the Agency with the information 
necessary to verify origin claims.
    With regard to how suppliers may provide origin information to 
retailers, this final rule states that the information can be provided 
on the product itself, on the master shipping container, or in a 
document that accompanies the product through retail sale. It is up to 
the supplier and their retailer customers to decide which method is 
most appropriate. The Agency agrees that bills of lading, invoices, and 
packing slips may be used to provide origin information. Ultimately, 
retailers must ensure that covered commodities displayed for retail 
sale have country of origin designations.
    With regard to the recommendation to allow a 10 day period to 
supply documentation to USDA officials, the Agency believes that the 5 
business days provided in the August 1, 2008, interim final rule 
provides suppliers and retailers reasonable and appropriate time to 
provide records to USDA upon request. With regard to the commenters' 
reference to the statutory prohibition against the Agency requiring 
records that are not maintained in the normal conduct of business and 
that such records are deemed sufficient to satisfy the Bioterrorism 
Act's mandate to be able to identify immediate previous source and 
immediate subsequent recipient of foods, records maintained in the 
normal conduct of business can be used to satisfy the COOL 
recordkeeping requirements. However, the Agency recognizes that 
suppliers and retailers may need to make modifications to their 
existing records in order to provide the necessary information to be 
able to substantiate COOL claims as provided for in the statute.

Visual Inspection

    Summary of Comments: Several commenters expressed support for the 
Agency policy to accept visual inspection as a means to verify the 
origin of livestock during the period between July 15, 2008 and July 
15, 2009. Specifically, the majority of commenters supported the 
Agency's decision to authorize sellers of cattle to conduct a visual 
inspection of their livestock for the presence or absence of foreign 
marks of origin, and that such visual inspection constitutes firsthand 
knowledge of the origin of their livestock for use as a basis for 
verifying origin and to support an affidavit of origin. They noted that 
visual inspection for verification of origin is particularly important 
to the trade during the period between July 15, 2008, and whenever the 
final regulation is published. The commenters stated that producers now 
have livestock without all of the origin documentation that may be 
necessary and that it would be very difficult, and in some cases 
impossible, to recreate the paper trail on many of these animals. Other 
commenters noted that the visual inspection of animals for import 
markings is a highly reliable, cost effective method of verification of 
origin and will significantly reduce compliance costs for livestock 
producers. The commenters recommend that visual inspection be made a 
permanent method on which to base origin claims.
    Agency Response: The Agency initially allowed for a transition 
period for the period July 16, 2008, through July 15, 2009, during 
which producers may issue affidavits based upon a visual inspection at 
or near the time of sale that identifies the origin of livestock for a 
specific transaction. Affidavits based on visual inspection may only be 
issued by the producer or owner prior to, and including, the sale of 
the livestock for slaughter. The Agency agrees with the commenters that 
affidavits based on visual inspection reduce the burden on producers. 
Accordingly, the Agency is making the ability to utilize visual 
inspection as the basis for forming an affidavit permanent.

Producer Affidavits

    Summary of Comments: Numerous commenters expressed support for the 
``Universal Country of Origin Affidavit/Declaration'' that was 
developed by consensus across the livestock and chicken industry to 
serve as verification from producers to slaughter facilities for the 
country of origin of livestock. Several commenters requested that these 
agreed-upon documents be incorporated in the final rule. Several 
commenters also argued that producers should not be asked for 
unreasonable information. They urged AMS to consider a standardized 
producer affidavit that would accompany an animal from its first sale 
throughout the chain of custody.
    Several commenters expressed support for the Agency's decision to 
allow composite affidavits where a producer can put together lots of 
cattle for sale and have one new affidavit for that lot based on the 
affidavits received for each animal, or lot of animals, that was 
combined in the new lot. The commenters also expressed support for the 
ability for producers to file an ``evergreen'' or ``continuous'' 
affidavit with the buyers of their livestock saying that, until 
otherwise noticed or revoked, all the cattle they will deliver to that 
buyer will be of a specific origin.
    One commenter disagreed that a producer affidavit in conjunction 
with animal ID records can be deleted after 1 year when a majority of 
breeding stock lives beyond 5 years and 95% of cattle in the U.S. on 
July 15, 2008 were not close to slaughter age. The commenter was of the 
opinion that documentation and retention of affidavits needs to last 
longer if the Agency has to audit and trace back meats.
    Agency Response: The Agency believes the Universal Country of 
Origin Affidavit/Declaration that was developed by consensus across the 
livestock and chicken industry will assist the industry in implementing 
the rule in as least burdensome manner as possible. While the statute 
and this final rule allow for the use of producer affidavits, because 
the statute does not provide the Agency with authority to regulate 
producers, the Agency cannot mandate the use of such affidavits.
    The Agency recognizes that animal production cycles vary greatly 
and depending upon which records are used for origin verification, 
retention of documents should be commensurate with the claim being 
affirmed through an affidavit or other means of declaration. However, 
the Agency only has the authority to require record retention for 
covered commodities. As the initiator of origin claims for meat, 
packers may specify the length of time records need to be maintained by 
entities outside the packer's system.

National Animal Identification System (NAIS)

    Summary of Comments: Commenters had mixed opinions about relying on 
NAIS as a safe-harbor for COOL compliance. Numerous commenters 
supported the provision in the interim final rule stating that 
voluntary participation in NAIS program will comply with COOL 
verification requirements. The commenters that support the use of NAIS 
stated that official USDA 840-tags can serve as a

[[Page 2676]]

universal passport for an animal during its lifetime indicating the 
animal is of U.S. origin, no matter how many times ownership of the 
animal changes during its lifetime. Commenters strongly encouraged the 
Agency to utilize Radio Frequency Identification (RFID) tags in NAIS to 
allow verification of country of origin at the speed of commerce and 
stated that official NAIS USDA 840-RFID tags for livestock represent 
the simplest way for producers to assist in the marketing of their 
animals to ensure compliance with COOL.
    One commenter recommended that NAIS should be made mandatory. Two 
commenters suggested that the Agency could alleviate the record keeping 
burden by simply requiring all foreign cattle to bear a permanent mark 
that defines their origin. They suggested that this will not only aid 
commerce by reducing paperwork, but it will also enhance compliance.
    Three commenters expressed support for reliance on other existing 
animal identification systems. One commenter noted that USDA/APHIS 
currently operates the National Scrapie Eradication Program (NSEP), 
which includes a regulated animal identification program. By 
regulation, feeder and slaughter sheep that are imported from Canada 
must carry official permanent identification. The commenter urged AMS 
to help processors and others recognize the relatively straight-forward 
nature of proving animal origin in the sheep industry. Two commenters 
pointed out that livestock producers who participate in ``Age and 
Source Verified'' programs administered by USDA should also be in 
compliance with COOL for both origin and verification claims.
    Another commenter stated that identification of animal origin by 
ear tag is a cause for concern. This commenter noted that USDA has not 
provided guidance about what records will suffice for imported animals, 
stating only that for animals that are part of an official 
identification system, such as the Canadian cattle identification 
system, ear tags will suffice for proving origin at the slaughterhouse. 
The commenter was concerned with having requirements imposed because of 
a specific animal health concern, such as Canadian ear tags on cattle, 
ensnared in separate regulations for an entirely different and 
unrelated purpose. The commenter stated that this could restrict 
Canada's abilities to adapt its national cattle identification system 
to changing environments or technologies in the future.
    A final commenter warned that the acceptance of an ear tattoo does 
not meet the needs of modern industry practices. Due to issues 
associated with the speed of commerce, recordkeeping, accuracy and 
overall effectiveness of the program, the commenter stated that the 
Agency should only allow a hot iron brand on all live foreign cattle.
    Agency Response: The Agency believes that voluntary use of the 
National Animal Identification System is an easy option packers may 
utilize to obtain origin information on livestock. The Agency has also 
made modifications to this provision for clarity. The Animal 
Identification Number (AIN) is defined in the Code of Federal 
Regulations as ``A numbering system for the official identification of 
individual animals in the United States providing a nationally unique 
identification number for each animal. The AIN contains 15 digits, with 
the first 3 being the country code (840 for the United States), the 
alpha characters USA, or the numeric code assigned to the manufacturer 
of the identification device by the International Committee on Animal 
Recording. The AIN beginning with the 840 prefix may be used only on 
animals born in the United States.'' As stated in the interim final 
rule published on September 18, 2008, (73 FR 54059), the AIN version 
starting with 840 is prohibited for use on animals born outside the 
United States. Therefore, under this final rule, packers that slaughter 
animals that are tagged with an 840 Animal Identification Number device 
without the presence of any additional accompanying marking (i.e., 
``CAN'' or ``M'') may use that information as a basis for a U.S. origin 
claim. Packers that slaughter animals that are part of another 
country's recognized official system (e.g. Canadian official system, 
Mexico official system) may also rely on the presence of an official 
ear tag or other approved device on which to base their origin claims. 
With regard to the commenter's concern regarding having requirements 
imposed because of a specific animal health concern, such as Canadian 
ear tags on cattle, in separate regulations for an entirely different 
and unrelated purpose, this regulation does not impact regulations 
pertaining to animal health or importation. In addition, use of 
official ear tags as the basis of origin claims is just one option that 
can be utilized to obtain origin information.
    The other comments received relevant to making NAIS mandatory and 
allowing only hot iron brands on live foreign cattle are outside of the 
scope of this rulemaking. Accordingly, these recommendations have been 
adopted in part.

Retailer Responsibilities

    Summary of Comments: Numerous commenters addressed issues relating 
to the retailer recordkeeping provisions of COOL. One commenter stated 
that the Agency has offered simple, effective rules for recordkeeping 
by retailers. One commenter recommended that in Sec.  65.500(c)(1), the 
Agency put the last sentence of the paragraph first (``For pre-labeled 
products, the label itself is sufficient evidence on which the retailer 
may rely to establish the product's origin.''). The commenter also 
requested that the Agency state specifically that retailers need not 
maintain any new or additional records documenting origin for those 
products that are pre-labeled on the product itself or on the box/
container when the box/container is visible to consumers, such as when 
it is used as part of a retail display.
    One commenter suggested sample and common technological standards 
such as the portable document format (PDF) or use of a common and 
interoperable database file system such as Microsoft Excel to enable 
both industry and the Agency to adopt a common computing platform. 
Another commenter suggested that the Agency should refer to the two 
different types of documents required to be maintained by retailers as 
Verification Records and Supplier records. The commenter suggested that 
the Agency should clarify in the final regulation that the information 
to satisfy both requirements may be on the same or different documents, 
provided all of the requirements are met. Several commenters encouraged 
the Agency to permit retailers to rely on the records that are 
currently maintained for Bioterrorism Act purposes.
    One commenter strongly supported the specific recognition that 
retailers may rely upon pre-labeled products as ``sufficient evidence'' 
of the country of origin. The commenter stated that this is an 
important safe harbor for the produce and retail industries as an 
increasing share of fresh produce now arrives at retail stores pre-
labeled with the country of origin. The commenter expressed concern 
that the IFR and the Agency's Q&A documents are not written in a way 
that conveys this information accurately, which is creating significant 
confusion throughout the produce distribution chain. The commenter 
recommended that the Agency clearly define pre-labeled products to 
include all produce items that bear a COOL declaration, regardless of 
any other information that may or may not be affixed directly to the 
produce item. In turn, the Agency must then specify that additional

[[Page 2677]]

recordkeeping at retail is not required for pre-labeled products as the 
vendor who supplied the pre-labeled produce has the responsibility to 
verify the claim. One commenter recommended that the Agency only 
require retailers to maintain the country of origin for covered 
products in the retail store for as long as the product is on hand.
    Agency Response: With regard to pre-labeled covered commodities, 
the Agency has added a definition of pre-labeled in this final rule. In 
addition, the Agency has clarified that for pre-labeled products, the 
label itself is sufficient information on which the retailer may rely 
to establish the product's origin and no additional records documenting 
origin information are necessary. However, the Agency does not agree 
with the commenter's recommendation to change the order of the 
sentences with respect to the provision on pre-labeled products.
    With regard to the recommendation that the Agency adopt a common 
computing platform, the Agency does not have the authority to mandate a 
specific system. In addition, the Agency believes that retailers and 
suppliers should have the flexibility to choose whatever system works 
best in their particular operation. Accordingly, this recommendation is 
not adopted.
    With regard to the suggestion that the Agency should refer to the 
two different types of documents required to be maintained by retailers 
as Verification Records and Supplier records and that the Agency should 
clarify in the final regulation that the information to satisfy both 
requirements may be on the same or different documents provided all of 
the requirements are met, the Agency has added language to the preamble 
to indicate that the supplier and origin information needed to satisfy 
the COOL recordkeeping requirements can be in the same document or 
different documents. However, the Agency does not believe that any 
changes to how the required documents are referenced are necessary. 
Accordingly, these recommendations have been adopted in part.
    The Agency recognizes that several commenters encouraged the Agency 
to permit retailers to rely on the records that are currently 
maintained for Bioterrorism Act purposes. To the extent that these 
records contain the necessary information to meet the COOL 
recordkeeping requirements, the Agency agrees that records currently 
maintained to meet the requirements under the Bioterrorism Act can also 
be used to comply with the COOL recordkeeping requirements.
    With regard to the recommendation that the Agency only require 
retailers to maintain the country of origin for covered products in the 
retail store for as long as the product is on hand, under this final 
rule, records and other documentary evidence relied upon at the point 
of sale to establish a covered commodity's country(ies) of origin must 
be either maintained at the retail facility for as long as the product 
is on hand or provided to any duly authorized representative of USDA in 
accordance with Sec.  65.500(a)(2). For pre-labeled products, the label 
itself is sufficient information on which the retailer may rely to 
establish the product's origin and no additional records documenting 
origin information are necessary. Accordingly, this recommendation has 
been adopted in part.

Enforcement

Liability Shield

    Summary of Comments: Several commenters discussed the concept of a 
``liability shield'' found in the interim final rule for fish and 
shellfish, but deleted from the interim final rule for the remaining 
covered commodities. The commenters noted that the Agency had 
previously contemplated a ``shield'' from liability for entities 
subject to the law on the theory that they should be permitted to 
reasonably rely on information provided by their suppliers. The 
commenters recommended that the Agency add a clarification to the final 
rule that will assure retailers that they will not be penalized when a 
retailers' non-compliance results from the conduct of others. The 
commenters further stated that the interim final rule holds suppliers 
responsible for providing retailers with country-of-origin information 
and that because the statutory liability standard only penalizes 
retailers for ``willful'' violations, it follows that a retailer should 
not be held responsible for its supplier's failure to provide COOL 
information or its supplier's provision of inaccurate information. The 
commenters recognized that the Agency deleted the safe harbor language 
from the interim final rule for remaining covered commodities because 
that language created a negligence standard of liability instead of the 
willfulness standard specified in the 2008 Farm Bill. These commenters 
agreed that a willfulness standard is required by statute. However, 
they also stated that an explicit safe harbor should be restored to the 
rule, in addition to the willfulness standard the statute requires. 
Thus, paralleling the language that had been used in the safe harbor 
provision for the fish and shellfish interim rule, a safe harbor 
provision one commenter suggested new regulatory language, ``No 
retailer shall be held liable for a violation of the Act by reason of 
the conduct of another unless the retailer acted willfully in the same 
regard''. Another commenter strongly urged the Agency to reinstate the 
liability shield in the final rule, but given the change in the 
liability standard as a result of the 2008 Farm Bill, recommended 
alternative language.
    Agency Response: As noted by the commenters, the Agency deleted the 
liability shield language from the interim final rule for the remaining 
covered commodities because that language created a negligence standard 
of liability instead of the willfulness standard specified in the 2008 
Farm Bill. Because of the willfulness standard contained in the 2008 
Farm Bill, the Agency does not agree that the liability shield is 
necessary. However, to the extent that the liability shield language 
provides the industry with assurances that they will not be held liable 
for the conduct of others, the Agency believes that the liability 
shield is useful. Therefore, the Agency has included the liability 
shield provision in this final rule and has modified the language to 
reflect the willfulness standard contained in the 2008 Farm Bill. 
Accordingly, this recommendation has been adopted.

Assurances Against Meat Recalls for COOL Violations

    Summary of Comments: Several commenters expressed concerns about 
how FSIS or other federal agency may use a country of origin labeling 
failure as a reason to recall pork and other meat products. These 
commenters noted that the law does not amend any food safety law and 
that it is not a food safety program. The commenters further stated 
since it is a marketing program, failure to properly label the origin 
of products in the retail meat case should not force a product recall. 
Many producers reported to be confused and fearful that this law will 
be used to assert product liability claims. These commenters requested 
clarification regarding the scope of the COOL law to eliminate this 
confusion. They asked that USDA clarify that any violation of COOL will 
not trigger a recall of meat products.
    Agency Response: As noted by the commenter, the intent of the law 
and this rule is to provide consumers with additional information on 
which to base their purchasing decisions. COOL is a retail labeling 
program and as such does not provide a basis for addressing food 
safety. Food products, both imported

[[Page 2678]]

and domestic, must meet the food safety standards of the FDA and FSIS 
and are subject to any recall requirements imposed by those agencies. 
The Agency does note that FSIS did publish an interim final rule (73 FR 
50701) on labeling to address concerns with compliance of their 
voluntary labeling approval authority and requirements of the COOL 
program. In addition, FSIS provided guidance that inspection program 
personnel are not to take any action to enforce the FSIS interim final 
rule until further notice and that during the next six months, FSIS 
will defer to the AMS program of outreach and education to ensure that 
there is compliance.

Timeframe for Implementation

    Summary of Comments: Numerous commenters provided suggestions about 
the Agency's informed compliance period during which the Department 
will provide education and outreach to aid industry in understanding 
the requirements of the COOL program.
    Three commenters expressed appreciation for the 6-month phase-in 
period articulated in the rule and stated that the Agency must be 
prepared to provide producers, suppliers, retailers, and consumers with 
assistance to understand the regulations through guidance documents, 
seminars, and other resources that are readily available to the public 
during this period of informed compliance. One commenter pointed out 
that it will be critical for the AMS to work with officials with FSIS 
to ensure that there is common understanding between the two USDA 
agencies regarding questions that meat processing plant operators and 
federal meat inspectors may have. One commenter urged the Agency to 
withhold publishing a final rule until after the conclusion of the 6-
month period in order to maximize the lessons learned under the interim 
final rule. Another commenter encouraged the Agency to provide as much 
time as possible to acclimate both retailers and those involved within 
the supply chain to the new requirements of the regulations prior to 
any enforcement.
    Several commenters expressed support that the requirements of the 
interim final rule do not apply to covered commodities produced or 
packaged before September 30, 2008. However, these commenters noted 
that many firms in the industry procure packaging materials for a 
year's worth (or more) of production. The commenters recommended that 
given the short amount of time between the release of the Interim Final 
Rule and the effective date, companies subject to the rule be given a 
year from the effective date to use up existing packaging inventories, 
provided those packaging inventories were acquired prior to the 
effective date of the rule. One of these commenters expressed concern 
that a 6-month grace period will prove insufficient to implement a 
verifiable records system. This commenter stated that an 18-month 
implementation period will allow current nut products in the 
marketplace to rotate out and allow those in the field sufficient time 
to comply with all aspects of COOL. Another commenter was concerned 
about ensuring a reasonable phase-in period for the rule so that 
suppliers could use existing inventory to the greatest extent possible. 
This commenter supported a one-year phase-in as opposed to 6 months 
because the shipping season for table grapes and tree fruit generally 
runs from May through October. Therefore, a 6-month phase in from 
October through March would be of little benefit for this food sector. 
Another commenter noted that retailers, processors, and producers have 
expressed their willingness to make a good faith effort to comply with 
COOL; however, it is not clear that the 6-month industry education and 
phase-in period is sufficient. They strongly encouraged USDA to extend 
this period to 12 months in order that issues like recordkeeping and 
auditing the supply chain can be fully understood.
    Agency Response: In response to the commenters' request that the 
Agency not publish the final rule until after the six month period of 
education and outreach, the Agency is moving forward in an expeditious 
manner of publishing the final rule in order to provide retailers and 
suppliers as well as all other interested parties with the requirements 
for a permanent program. The Agency will allow sufficient time for the 
regulated industries to adapt to the changes in this final rule and 
will continue to provide for a period of education and outreach. The 
Agency believes that the six month period provided for in the interim 
final rule is adequate time for retailers and suppliers to adapt to the 
COOL program requirements. In addition, the Agency will continue to 
ensure that retailers and suppliers are educated on the Agency's 
compliance and enforcement procedures so that the regulated industries 
have clear expectations as to how the Agency will enforce this rule. 
With regard to using up existing packaging inventories, this final rule 
does not require that covered commodities are individually labeled with 
COOL information. Retailers can use placards and other signage to 
convey origin information.

Miscellaneous

WTO/NAFTA Trade Agreements

    Summary of Comments: Several commenters expressed concern that COOL 
may violate U.S. trade commitments under the World Trade Organization 
and the North American Free Trade Agreement, and that provisions of the 
COOL regulation ignore the reality of an integrated North American meat 
and livestock industry. Two foreign governments expressed that the 
amendments passed with the 2008 Farm Bill are still cause for concern, 
and that as they have consistently expressed in the past, COOL 
requirements should be consistent with the United States' international 
trade obligations. One commenter pointed out that the Codex General 
Standard for the Labeling of Prepackaged Food was considered adequate 
in the U.S. system for a number of years and will continue to remain 
the standard for retailers outside of the U.S. The commenter further 
stated that it remains the most practical, and also the most adaptable, 
to evolving commercial practice and growing international trade; and 
yet it is not the standard adopted in the COOL regulations.
    One commenter stated that the COOL statute and regulation will 
likely result in discrimination against imported product, contrary to 
U.S. obligations under the WTO Agreement on Technical Barriers to 
Trade. The commenter indicated that despite changes in the law and the 
IFR that have made it less onerous for regulated firms to comply with 
the requirements of the regulation, COOL will still discriminate 
against imported cattle and beef. This commenter warned that the 
industry practice of importing cattle for feeding and/or slaughter will 
be discouraged by the increased complexity associated with the 
identification, segregation, and labeling requirements mandated for the 
resulting products to be sold at retail. This commenter suggested that 
the simplest solution would be to allow processors and retailers to 
label ground product with ``May contain U.S. and imported meat'' with 
the option to list the specific countries if the producer or its 
customers so desired. Another commenter acknowledged that the IFR makes 
some concessions to earlier complaints by trading partners with 
concerns regarding the compatibility of COOL with the WTO obligations 
of the United States.
    Agency Response: With respect to the commenters' concern regarding

[[Page 2679]]

international trade obligations, the Agency has considered these 
obligations throughout the rulemaking process and concludes that this 
regulation is consistent with U.S. international trade obligations. 
Further, as described more fully in the Summary of Changes section of 
this rule, the Agency has made a number of modifications in this final 
rule that provide additional labeling flexibilities. In addition, the 
Agency has worked closely with USDA's Foreign Agricultural Service to 
educate U.S. trading partners on the requirements of COOL and to assist 
them in complying with the regulation.
    In regards to a commenter's statement that when a food undergoes 
processing in a second country that changes its nature, the country in 
which the processing is performed shall be considered to be the country 
of origin for the purposes of labeling, existing CBP rules and 
regulations with respect to determining origin of imported products 
apply to the extent that it is permissible under the statute. However, 
it is not permitted under the statute to consider imported products 
that are substantially transformed in the U.S. to be of U.S. origin as 
they do not meet the definition of U.S. origin provided in the Act.
    With regard to the comment to allow a label to state ``May contain 
U.S. and imported meats,'' the Agency does not believe this type of 
labeling meets the intent of the statute. Accordingly, this 
recommendation is not adopted.

COOL as a Food Safety Program

    Summary of Comments: Commenters expressed differing opinions 
regarding whether or not COOL serves as a food safety program. Several 
commenters expressed the opinion that COOL is a retail labeling program 
that does not provide a basis for addressing food safety. The 
commenters argued that the U.S. has a safe food safety system; that all 
meat sold at retail, whether grown domestically or imported, must be 
inspected and declared safe for human consumption; and that country of 
origin labeling is solely a marketing tool. One commenter found it 
particularly problematic that mandatory COOL has been portrayed by some 
advocates as contributing to efforts to make America's food safe, yet 
there is no provision in the COOL statute or the interim final rule 
that prescribes food safety or inspection standards. Another noted that 
the food production, supply and retailing industry needs to help 
consumers understand that geography cannot become shorthand for food 
safety. Several commenters noted that Congressional intent is clear 
that COOL is not intended to be a traceability law, but merely to 
provide country of origin information to consumers. These commenters 
urged the Agency to implement COOL in a way that is true to its goal to 
inform consumers about where produce comes from, not create a new 
regulatory infrastructure. Other commenters noted their support for the 
provision of accurate information to consumers as required by the law 
and agreed with the Agency's statement in the preamble that this law is 
not a food safety law.
    Two commenters wrote that COOL can serve as a risk management 
measure. One commenter suggested that developing countries, which may 
not have as stringent food safety regulations and/or have not 
implemented/enforced those regulations as rigorously as the U.S., may 
export hazardous food products. Another commenter referred to a GAO 
study that reported three elements of food-safety systems that were 
critical to respond to outbreaks of food borne illness: Traceback 
procedures that allow industry and government officials to quickly 
track food products to origin to minimize harm to consumers and the 
impact on business; cooperative arrangements between veterinarians and 
public health officials to document the names of suppliers and 
customers as well as the dates of delivery; and authority to recall a 
product from the market. The commenter noted that such food-safety 
systems depend on a verifiable chain of custody for food products that 
the COOL program can help institute. The commenter further stated that 
the COOL law provides for traceback provisions and for cooperative 
partnerships with states.
    Agency Response: As previously stated, the COOL program is neither 
a food safety or traceability program, but rather a consumer 
information program. Food products, both imported and domestic, must 
meet the food safety standards of the FDA and FSIS. Food safety and 
traceability are not the stated intent of the rule and the COOL program 
does not replace any other established regulatory programs that related 
to food safety or traceability.

USDA COOL Labeling Surveys

    Summary of Comments: Two commenters requested that USDA conduct 
nationwide retail surveys to gather information regarding country of 
origin labeling. One commenter requested that the Agency conduct a 
``nationwide retail meat labeling survey'' within the year to discern 
the amount of product, the kind of product and the locations where 
exclusively U.S. labeled meat is being sold. The second commenter 
suggested that the Agency insert additional data entry points in the 
retail survey instrument used for existing retail reviews. The 
commenter encouraged the Agency to gather information relative to the 
availability and price of meat items by origin at the retail stores 
under review. Furthermore, the commenter requested this information be 
reported to the House Committee on Agriculture and the House Committee 
on Appropriations 60 and 90 days after the labeling law takes effect.
    Agency Response: The Agency is currently reviewing possible methods 
to collect data relative to the availability and price of meat items by 
origin at the retail stores under review. The Agency will work with 
members of Congress to provide any information collected to the 
appropriate Congressional committees.

Existing State Programs

    Summary of Comments: One commenter agreed that the Agency had 
properly concluded that the COOL law preempts conflicting federal and 
state laws. This commenter stated it is imperative that companies 
subject to the federal statute be subject to one uniform set of 
regulatory requirements. One commenter agreed that it is preferable for 
producers to have one law to govern compliance, but suggested it is 
also important that the maximum amount of product information be 
provided to consumers as intended by the COOL legislation. In the event 
of conflict, this commenter preferred that the Agency err on the side 
of more information to the consumer rather than less, and asked the 
Agency to allow the States maximum flexibility to enforce their own 
laws, if doing so will provide the most information to the consumer.
    Agency Response: This rule has been reviewed under Executive Order 
13132, Federalism. This Order directs agencies to construe, in 
regulations and otherwise, a Federal statute to preempt State law only 
where the statute contains an express preemption provision or there is 
some other clear evidence to conclude that the Congress intended 
preemption of State law, or where the exercise of State authority 
conflicts with the exercise of Federal authority under the Federal 
statute. This rule is required by the 2002 Farm Bill, as amended by the 
2008 Farm Bill. While this statute does not contain an express 
preemption provision, it is clear from the language in the statute that 
Congress intended preemption of State law. The law assigns enforcement 
responsibilities to the Secretary and encourages the Secretary to enter 
into

[[Page 2680]]

partnerships with States with enforcement infrastructure to assist in 
the administration of the program.

Impacts on Livestock Producers and Meat Packers

    Summary of Comments: Several commenters felt that a large portion 
of the implementation costs will be shouldered by the meat production 
and packing industry because there is little evidence that consumers 
are willing to pay more for products bearing country of origin 
information and that these additional costs will not be successfully 
passed through the supply chain. These commenters concluded that the 
costs of COOL implementation and compliance will be highly detrimental 
to the livelihood of numerous small meat processors. One meat packer 
observed that COOL will require the company to incur additional costs 
due to the recordkeeping and labeling requirements. Due to the nature 
of the business, the company relies on livestock producers to provide 
and verify origin information, yet as the originator of covered 
commodities derived from those animals, the burden of proof is on the 
company in the event the source information is ever questioned. Because 
there is no universal animal identification system in place to provide 
meat processors with proper background information, meat processors do 
not have readily available information with which to accurately label 
covered products. One commenter noted that COOL costs to livestock 
producers will be $9 per head. This commenter was concerned that cattle 
owners will end up paying all costs as other sectors of the supply 
chain work on margin. This commenter urged USDA to consider costs when 
implementing this law since extra costs would be detrimental to 
consumers and producers.
    Numerous state and national pork producer organizations submitted 
comments contending that the majority of program costs would be driven 
by two factors: Disruption of product flow through packers caused by 
differentiated labels and record-keeping burdens for producers and 
packers.
    One commenter stated that since the true costs of COOL are as yet 
vague, and the burden of who is going to pay for the cost of additional 
recordkeeping requirements and labeling is unknown, the recordkeeping 
and documentation requirements should be designed so American producers 
do not end up paying for COOL.
    Agency Response: The Agency believes that firms and establishments 
throughout the supply chain for affected commodities will incur costs 
associated with the implementation of COOL. This includes producers, 
intermediaries, and retailers. Increased costs are likely to be 
absorbed by all firms and establishments throughout the supply chain 
and some costs may be passed on to consumers.
    As previously stated, the Agency believes that voluntary use of the 
National Animal Identification System is a straightforward option 
packers may utilize to obtain origin information on livestock. In 
addition, following the implementation of the August 1, 2008, interim 
final rule, a coalition of representatives from throughout the 
livestock and meat industries established a universal affidavit to 
convey country of origin information. This rule provides flexibility in 
how the required country of origin information is conveyed along the 
supply chain, thus enabling firms to implement the requirements with 
the least possible disruption to cost-efficient production methods and 
trade flows.

Costs on Affected North American Industries

    Summary of Comments: One commenter expressed concern that COOL will 
impose unnecessary costs on affected North American industries. The 
commenter stated that the substantial volume of two-way trade between 
Canada and the United States has been a testament to the integrated and 
cooperative nature of many of our industries and that trade with Canada 
supports more than 7.1 million jobs in the United States. The commenter 
further stated that trade is also vital in the agricultural sector 
where Canada is the largest single-country export market for the United 
States with more than US$15 billion in sales last year.
    Agency Response: As discussed more fully in the Regulatory Impact 
Analysis, the results of the Computable General Equilibrium (CGE) model 
suggest that overall impacts on trade in livestock and meats will be 
relatively small. The rule allows considerable flexibility, thus 
enabling firms to implement the requirements with the least possible 
disruption to cost-efficient production methods and trade flows.

Marketing Exclusion of Imported and Certain Domestically Produced Meat

    Summary of Comments: One commenter expressed concern about the 
impact that mandatory COOL will have on imported beef, particularly 
ground beef at retail. The commenter stated that mandatory origin 
labeling will add significantly to meat production costs at a time of 
rapidly increasing food costs, and consumers will have to bear the 
additional expense resulting from the labeling regime. This commenter 
was therefore concerned that retailers will be induced to simplify 
their labeling obligations by excluding imported and certain domestic 
beef from ground beef in order to minimize the resulting increase in 
the costs that will be associated with compliance. Another commenter 
reported that over the last several years, the total number of Mexican 
cattle crossing into the U.S. has ranged from 820,000 head to 1,200,000 
per year, and that those numbers per year represent less than a two-
week kill volume on a national basis. The commenter concluded that the 
loss to both the Mexican rancher and the U.S. producer will be 
considerable. Another commenter indicated that there is no question 
that while a vast majority of fresh beef in the retail sector is U.S. 
beef, it remains a huge question as to the benefit of identifying U.S. 
beef and adding costs to the producers and to consumers.
    One commenter provided a more detailed assessment of potential 
costs associated with this legislation and its regulations. The 
commenter noted their belief that COOL is already causing economic 
losses and threatening the survival of the hog industry in Manitoba, 
Canada. The commenter pointed out that hog producers in Manitoba have 
developed an integrated supply chain with family hog farms in the mid-
West U.S. by supplying over four million weanlings per year, and over 
one million finished pigs to packing plants in this area. Finally, the 
commenter stated that if the changes wrought in the marketplace by this 
legislation continue, Manitoba producers will lose about $200 million 
in finished hog sales to U.S. packers. This commenter reported that it 
is currently preparing an assessment of the immediate financial impact 
on its members and provided some examples of recent economic setbacks 
to producers.
    Agency Response: The Agency believes that there may be some 
adjustment costs as industry adapts to the requirements of the rule. 
Over the longer run, however, the Agency believes that uncertainty will 
lessen and firms will continue to seek sources of livestock and meat 
products consistent with efficient production and marketing operations. 
It is believed that the major cost drivers for the rule occur when 
livestock or other covered commodities are transferred from one firm to 
another, when livestock or other covered commodities are commingled in 
the production or marketing process, and

[[Page 2681]]

when products are assembled and then redistributed to retail stores. In 
part, some requirements of the rule will be accomplished by firms using 
essentially the same processes and practices as are currently used, but 
with information on country of origin added to the processes. This 
adaptation generally would require relatively small marginal costs for 
recordkeeping and identification systems. In other cases, however, 
firms may need to revamp current operating processes to implement the 
rule. For example, a processing or packing plant may need to sort 
incoming products by country of origin and, if applicable, method of 
production in addition to weight, grade, color, or other quality 
factors. This may require adjustments to plant operations, line 
processing, product handling, and storage. Ultimately, it is 
anticipated that a mix of solutions will be implemented by industry 
participants to effectively meet the requirements of the rule.

Quantifying Benefits of COOL

    Summary of Comments: One commenter expressed disappointment that 
the Department continues to deny any benefits or consumer desire for 
COOL. This commenter stated that since the COOL debate began, the 
number of consumers and organizations supporting the mandatory program 
has only expanded. The commenter further stated that numerous surveys 
and polls have indicated that consumers overwhelmingly support COOL and 
are willing to pay a premium for U.S.-origin labeled products and cited 
a June 2007 Consumer Reports poll, which found 92 percent of consumers 
think food should be labeled with country of origin information. 
Several other commenters noted that all consumers will pay to secure 
these labeling benefits demanded by a small minority.
    Agency Response: As stated in the Regulatory Impact Analysis, the 
Agency concludes after reviewing many studies and comments, the 
economic benefits from COOL will be small and will accrue mainly to 
those consumers who desire country of origin information. Several 
analysts concluded that the main benefit is the welfare effect 
resulting from removing informational distortions associated with not 
knowing the origin of products. Numerous comments received during the 
rulemaking process indicate that there clearly is interest by some 
consumers in the country of origin of food. The mandatory COOL program 
may provide additional benefits to these consumers. However, commenters 
provided no additional substantive evidence to alter the Agency's 
conclusion that the measurable economic benefits of mandatory COOL will 
be small. Additional information and studies cited by commenters were 
of the same type identified in the IRIA--namely, consumer surveys and 
willingness-to-pay studies, including the most recent studies reviewed 
for this analysis. The Agency does not believe that these types of 
studies provide a sufficient basis to estimate the quantitative 
benefits, if any, of COOL.

Improvements That Reduce COOL Costs

    Summary of Comments: One commenter noted that USDA has made the 
definition of a ``processed food item'' consistent with the definition 
used in the interim final rule for fish and shellfish, thereby reducing 
the number of affected establishments significantly. The commenter 
further noted that the estimated first-year implementation cost per 
producer operation is an average of $258, significantly lower than 
previously stated. This commenter regarded the implementation cost 
estimate as generally accurate. Another commenter noted that the use of 
producer affidavits and reliance on visual inspection should 
satisfactorily reduce costs of program compliance since import brands 
are highly visible. Another commenter pointed out that Congressional 
intent regarding the level of burden this law should impose on industry 
is clear. In the 2008 Farm Bill, Congress included provisions that 
expressly restrict USDA's ability to impact current business practices 
under the mandatory country of origin labeling law.
    A final commenter added comments related to USDA's administration 
of the program. This commenter believes the final rule should make it 
clear that it is essential that all costs to administer this program 
must be supported by USDA's appropriated budget, and should not be paid 
by an assessment of user fees or divert USDA staff time and commitment 
from other AMS programs for which user fees are required.
    Agency Response: The Agency is implementing COOL in the most cost-
effective way available while still meeting Congressional mandates. The 
Agency currently receives appropriated funds for the administration of 
the mandatory COOL program for fish and shellfish. As the budget for 
fiscal year 2009 has not yet been passed, it is unknown at this time 
whether the COOL program will received additional appropriated funds to 
administer the program for all covered commodities.

COOL as an Economic Barrier to Entry

    Summary of Comments: One commenter predicted that COOL will provide 
an economic barrier to entry for smaller companies that may wish to 
enter the food supply industry. This commenter noted that consumers who 
wish to avoid products that do not declare the country of origin are 
already free to do so. As a result, this commenter predicted that COOL 
will cost all consumers, but particularly those consumers who do not 
demand country of origin information.
    Agency Response: The Agency agrees that COOL will benefit those 
consumers who are seeking and using country-of-origin information in 
their purchasing decisions. However, the costs will be absorbed by all 
consumers shopping at covered retailers. The Agency disagrees that COOL 
will provide a barrier to entry for smaller companies that may wish to 
enter the food supply industry. These companies may decide to supply 
products to retailers or food service companies not covered by COOL. 
There is little evidence to support conclusions that complying with 
COOL is more costly for small firms as opposed to larger firms. Indeed, 
the likelihood is that smaller-scale operations would have more 
flexibility in implementation of COOL requirements compared to larger 
operations.
Executive Order 12866--Final Regulatory Impact Analysis
    USDA has examined the economic impact of this final rule as 
required by Executive Order 12866. USDA has determined that this 
regulatory action is economically significant, as it is likely to 
result in a rule that would have an annual effect on the economy of 
$100 million or more in any one year. This rule has been reviewed by 
the Office of Management and Budget (OMB). Executive Order 12866 and 
OMB Circular A-4 requires that a regulatory impact analysis be 
performed on all economically significant regulatory actions.
    This final rule defines covered commodities as muscle cuts of beef, 
lamb, goat, pork, and chicken; ground beef, ground lamb, ground pork, 
ground goat, and ground chicken; wild and farm-raised fish and 
shellfish; perishable agricultural commodities; ginseng; peanuts; 
macadamia nuts; and pecans. Thus, this regulatory impact assessment 
addresses the economic impacts of all covered commodities as defined by 
law.
    This regulatory impact assessment reflects revisions to the Interim 
Regulatory Impact Assessment (IRIA)

[[Page 2682]]

(73 FR 45106). Revisions to the IRIA were made as a result of changes 
to the rule relative to the August 1, 2008, interim final rule, and the 
interim final rule for wild and farm-raised fish and shellfish 
published October 5, 2004, Federal Register (69 FR 89708).
    The Comments and Responses section includes the comments received 
and provides the Agency's responses to the comments. When substantially 
unchanged, results of the IRIA are summarized herein, and revisions are 
described in detail. Interested readers are referred to the text of the 
IRIA for a more comprehensive discussion of the assumptions, data, 
methods, and results.
Summary of the Economic Analysis
    The estimated economic benefits associated with this final rule are 
likely to be small. The estimated first-year incremental costs for 
growers, producers, processors, wholesalers, and retailers are $2.6 
billion. The estimated cost to the United States economy in higher food 
prices and reduced food production in the tenth year after 
implementation of the rule is $211.9 million.
    Note that this analysis does not quantify certain costs of the rule 
such as the cost of the rule after the first year, or the cost of any 
supply disruptions or any other ``lead-time'' issues. Except for the 
recordkeeping requirements, there is insufficient information to 
distinguish between first year start up and maintenance costs versus 
ongoing maintenance costs for this final rule. Maintenance costs beyond 
the first year are expected to be lower than the combined start up and 
maintenance costs required in the first year.
    While USDA recognizes that there appears to be consumer interest in 
knowing the origin of food based on the comments received, USDA finds 
little evidence that private firms are unable to provide consumers with 
country of origin labeling (COOL) consistent with this regulation, if 
consumers are willing to pay a price premium for it. USDA also finds 
little evidence that consumers are likely to increase their purchase of 
food items bearing the United States origin label as a result of this 
rulemaking. Current evidence does not suggest that United States 
producers will receive sufficiently higher prices for United States-
labeled products to cover the labeling, recordkeeping, and other 
related costs. The lack of widespread participation in voluntary 
programs for labeling products of United States origin provides 
evidence that consumers do not have strong enough preferences for 
products of United States origin to support price premiums sufficient 
to recoup the costs of labeling.
Statement of Need
    Justification for this final rule remains unchanged from the IRIA. 
This rule is the direct result of statutory obligations to implement 
the COOL provisions of the 2002 and 2008 Farm Bills. There are no 
alternatives to federal regulatory intervention for implementing this 
statutory directive.
    The COOL provisions of the Act changed federal labeling 
requirements for muscle cuts of beef, pork, lamb, goat, and chicken; 
ground beef, ground pork, ground lamb, ground goat, and ground chicken; 
wild and farm-raised fish and shellfish; perishable agricultural 
commodities; ginseng; peanuts; macadamia nuts; and pecans (hereafter, 
covered commodities).
    As described in the IRIA, the conclusion remains that there does 
not appear to be a compelling market failure argument regarding the 
provision of country of origin information. Comments received on the 
IRIA and previous requests for comments elicited no evidence of 
significant barriers to the provision of this information other than 
private costs to firms and low expected returns. Thus, from the point 
of view of society, such evidence suggests that market mechanisms would 
ensure that the optimal level of country of origin information would be 
provided.
Alternative Approaches
    The IRIA noted that many aspects of the mandatory COOL provisions 
contained in the Act are prescriptive and provide little regulatory 
discretion for this rulemaking. As stated previously, this final rule 
provides flexibility in implementation to the extent allowed by the 
statute. Some commenters suggested that USDA explore more opportunities 
for less costly regulatory alternatives. Specific suggestions focused 
on methods for identifying country of origin, recordkeeping 
requirements, and the scope of products required to be labeled.
    A number of comments on the IRIA and previous requests for comment 
suggested that USDA adopt a ``presumption of United States origin'' 
standard for identifying commodities of United States origin. Under 
this standard, only imported livestock and covered commodities would be 
required to be identified and tracked according to their respective 
countries of origin. Any livestock or covered commodity not so 
identified would then be considered by presumption to be of United 
States origin. As stated in this final rule, the Agency is allowing for 
producers to issue affidavits based upon a visual inspection at or near 
the time of sale that identifies the origin of livestock for a specific 
transaction. Affidavits based on visual inspection may only be issued 
by the producer or owner prior to, and including, the sale of the 
livestock for slaughter (i.e., meat packers are not permitted to use 
visual inspection for origin verification).
    A number of commenters suggested that USDA reduce the recordkeeping 
burden for the rule. For retailers, this rule requires records and 
other documentary evidence relied upon at the point of sale by the 
retailer to establish a covered commodity's country(ies) of origin and 
method of production (wild and/or farm-raised), as applicable, to be 
either maintained at the retail facility or at another location for as 
long as the product is on hand and provided to any duly authorized 
representative of USDA, upon request, within 5 business days of the 
request. For pre-labeled products, the label itself is sufficient 
information on which the retailer may rely to establish the product's 
origin and method of production, as applicable, and no additional 
records documenting origin and method of production information are 
necessary. Under the August 1, 2008, interim final rule, retailers were 
required to maintain these records for a period of 1 year.
    These changes in recordkeeping requirements should lessen the 
number of changes that entities in the distribution chain need to make 
to their recordkeeping systems and should lessen the amount of data 
entry that is required.
    As noted in the IRIA, the law stated that COOL applies to the 
retail sale of covered commodities other than fish and shellfish 
beginning September 30, 2008. The implementation date for fish and 
shellfish covered commodities was September 30, 2004.

III. Analysis of Benefits and Costs

    As in the IRIA, the baseline for this analysis is the present state 
of the affected industries absent mandatory COOL. USDA recognizes that 
most affected firms have already begun to implement changes in their 
operations to accommodate the law and the requirements of the August 1, 
2008, interim final rule. Therefore, we will also discuss changes in 
the final rule analysis due to regulatory changes between the IFR and 
final rule.
    Because the Act contains an effective date of September 30, 2004, 
for wild and farm-raised fish and shellfish and September 30, 2008, for 
all other covered commodities, the economic

[[Page 2683]]

impacts of the rule will be staggered by four years. The analysis 
herein of benefits and costs of the rule abstracts away from the 
staggered dates of implementation and treats all commodities as having 
the same effective date of implementation. Since a two-pronged approach 
was used to estimate the costs of this rule, direct fish and shellfish 
costs have been updated using more recent data and included to estimate 
the overall impacts of this rule on the United States economy even 
though labeling of fish and shellfish was implemented in 2004. The 
results of the analysis are not significantly affected by this 
simplifying assumption.
    Benefits: The expected benefits from implementation of this rule 
are difficult to quantify. The Agency's conclusion remains unchanged, 
which is that the economic benefits will be small and will accrue 
mainly to those consumers who desire country of origin information. 
Several analysts conclude that the main benefit is the welfare effect 
resulting from removing informational distortions associated with not 
knowing the origin of products (Ref. 1). Numerous comments received on 
previous COOL rulemaking actions indicate that there clearly is 
interest by some consumers in the country of origin of food. The 
mandatory COOL program may provide additional benefits to these 
consumers. However, commenters provided no additional substantive 
evidence to alter the Agency's conclusion that the measurable economic 
benefits of mandatory COOL will be small. Additional information and 
studies cited by commenters were of the same type identified in the 
IRIA--namely, consumer surveys and willingness-to-pay studies, 
including the most recent studies reviewed for this analysis (Ref. 2; 
Ref. 3). The Agency does not believe that these types of studies 
provide a sufficient basis to estimate the quantitative benefits, if 
any, of COOL.
    There are several limitations with the willingness-to-pay 
contingent valuation studies that call into question the 
appropriateness of using this approach to make determinations about the 
benefits to consumers of this rule. First, respondents in such studies 
may overstate their willingness to pay for a product. This typically 
happens because survey participants are not constrained by their normal 
household budgets when they are deciding which product or product 
feature they most value. Second, in most of these willingness-to-pay 
studies, consumers are not faced with the actual or full choices they 
would face at retail outlets, such as all of the labeling options 
allowed under this final rule. In practice, this may distort valuations 
obtained from such studies, leading to both over and underestimation. 
Finally, the results reported from these studies do not take into 
account changes in consumers' preferences for a particular product or 
product attribute over time.
    As was the case in the interim final rule for fish and shellfish, a 
few commenters suggested that mandatory COOL would provide food safety 
benefits to consumers. As discussed in the IRIA, mandatory COOL does 
not address food safety issues. Appropriate preventative measures and 
effective mechanisms to recall products in the event of contamination 
incidents are the means used to protect the health of the consuming 
public regardless of the form in which a product is consumed or where 
it is purchased. In addition, foods imported into the United States 
must meet food safety standards equivalent to those required of 
products produced domestically.
    Costs: To estimate the costs of this rule, a two-pronged approach 
was employed. First, implementation costs for firms in the industries 
directly affected by the rule were estimated. The implementation costs 
on directly affected firms represent increases in capital, labor, and 
other input costs that firms will incur to comply with the requirements 
of the rule. These costs are expenses that these particular firms must 
incur, and thus represent the opportunity costs of the rulemaking.
    These costs, however, are not necessarily dead weight losses to the 
United States economy, as measured by the value of goods and services 
that are produced. This is simply because increases in capital, labor, 
and other inputs necessary to comply with the rule will benefit the 
providers of such inputs. In order to estimate the net decrease in 
economic activity as a result of this rulemaking, the implementation 
cost estimates were applied to a general equilibrium model to estimate 
overall impacts on the United States economy after a 10-year period of 
economic adjustment. The general equilibrium model provides a means to 
estimate the change in overall consumer purchasing power after the 
economy has adjusted to the requirements of the rule. In addition, 
since the Department has not identified a market failure associated 
with this rulemaking and therefore does not believe the rule would have 
measurable economic benefits, we believe this net decrease in economic 
activity can be considered the overall net costs (benefits minus costs) 
of this rulemaking.
    Details of the data, sources, and methods underlying the cost 
estimates are provided in the IRIA and the previous PRIA's. This 
section provides the revised cost estimates and describes revisions 
made to the IRIA for this final analysis.
    First-year incremental costs for directly affected firms are 
estimated at $2.6 billion, an increase of $0.1 billion over the IRIA 
due to the inclusion of fish and shellfish. Costs per firm are 
estimated at $370 for producers, $48,219 for intermediaries (such as 
handlers, importers, processors, and wholesalers), and $254,685 for 
retailers.
    To assess the overall net impacts of the higher costs of production 
resulting from the rule, a computational general equilibrium (CGE) 
model of the model of the United States economy developed by USDA's 
Economic Research Service (ERS) (Ref 4) was used. The model was 
adjusted by imposing the estimated implementation costs on the directly 
impacted segments of the economy. That is, the costs of production for 
directly affected firms increase due to the costs of implementing the 
COOL program. These increased costs of production were imposed on the 
CGE model. The model estimates changes in prices, production, exports, 
and imports as the directly impacted industries adjust to higher costs 
of production over the longer run (10 years). The CGE model covers the 
whole United States economy, and estimates how other segments of the 
economy adjust to changes emanating from the directly affected segments 
and the resulting change in overall productivity of the economy.
    Overall net costs to the United States economy in terms of reduced 
purchasing power resulting from a loss in productivity after a 10-year 
period of adjustment are estimated at $211.9 million in the tenth year. 
Domestic production for all of the covered commodities at the producer 
and retail levels is estimated to be lower, and prices are estimated to 
be higher, compared to the absence of this rulemaking. In addition, 
United States exports are estimated to decrease for all covered 
commodities. Compared to the baseline of no mandatory COOL, United 
States imports are estimated to increase for fruits and vegetables, 
cattle and sheep, hogs, chicken, and fish. United States imports of 
broilers, beef and veal, and pork are estimated to decrease.
    The findings indicate that, consistent with standard economic 
theory, directly affected industries recover the higher costs imposed 
by the rule through slightly higher prices for their products. With 
higher prices, the quantities of their products demanded also decline. 
Consumers pay slightly more for the

[[Page 2684]]

products and purchase less of the covered commodities. Overall, the 
model indicates that the net loss to society, or ``deadweight'' burden 
of the rule, is considerably smaller than the incremental opportunity 
costs to directly affected firms that were imposed on the model. The 
remainder of this section describes in greater detail how the estimated 
direct, incremental costs and the overall costs to the United States 
economy are developed.
    Cost assumptions: This rule directly regulates the activities of 
retailers (as defined by the law) and their suppliers. Retailers are 
required by the rule to provide country of origin information for the 
covered commodities that they sell, and firms that supply covered 
commodities to these retailers must provide them with this information. 
In addition, virtually all other firms in the supply chain for the 
covered commodities are potentially affected by the rule because 
country of origin information will need to be maintained and 
transferred along the entire supply chain.
    Number of firms and number of establishments affected: This rule is 
estimated to directly or indirectly affect approximately 1,333,000 
establishments owned by approximately 1,299,000 firms. Table 1 provides 
estimates of the affected firms and establishments.

             Table 1--Estimated Number of Affected Entities
------------------------------------------------------------------------
               Type                       Firms          Establishments
------------------------------------------------------------------------
Beef, Lamb, Pork, and Goat
    Cattle and Calves.............            971,400            971,400
    Sheep and Lambs...............             69,090             69,090
    Hogs and Pigs.................             65,540             65,540
    Goats.........................              9,146              9,146
    Stockyards, Dealers & Market                6,807              6,807
     Agencies.....................
    Livestock Processing &                      2,943              3,207
     Slaughtering.................
    Meat & Product Wholesale......              2,509              2,706
Chicken
    Chicken Producer and Processor                 38                168
    Chicken Wholesaler/Distributor                510                564
Fish
    Farm-Raised Fish and Shellfish              3,752              3,752
    Fishing.......................             71,128             71,142
    Fresh & Frozen Seafood                        516                590
     Processing...................
    Fish & Seafood Wholesale......              2,254              2,330
Perishable Agricultural
 Commodities
    Fruits & Vegetables...........             79,800             79,800
    Ginseng Farms.................                190                190
    Ginseng Dealers...............                 46                 46
    Frozen fruit, juice &                         155                247
     vegetable mfg................
    Fresh fruit & vegetable                     4,654              5,016
     wholesale....................
Peanuts, Pecans, & Macadamia Nuts
    Peanut Farming................                650                650
    Macadamia Farming.............                 53                 53
    Pecan Farming.................              1,119              1,119
    Roasted nuts & peanut butter                    8                  9
     mfg..........................
    Peanut, Pecan, & Macadamia                      5                  5
     Wholesalers..................
General line grocery wholesalers..              3,037              3,436
Retailers.........................              4,040             36,392
                                   -------------------------------------
    Totals:
        Producers.................          1,271,906          1,272,050
        Handlers, Processors, &                23,444             24,963
         Wholesalers..............
        Retailers.................              4,040             36,392
                                   -------------------------------------
            Grand Total...........          1,299,390          1,333,405
------------------------------------------------------------------------

    It is assumed that all firms and establishments identified in Table 
1 will be affected by the rule, although some may not produce or sell 
products ultimately within the scope of the rule. While this assumption 
likely overstates the number of affected firms and establishments, it 
is believed that the assumption is reasonable. Detailed data are not 
available on the number of entities categorized by the marketing 
channels in which they operate and the specific products that they 
sell.
    Source of cost estimates: To develop estimates of the cost of 
implementing this rule, comments on the interim final rule for beef, 
pork, lamb, chicken, goat meat, perishable agricultural commodities, 
peanuts, pecans, ginseng, and macadamia nuts as well as the interim 
final rule for fish and shellfish were reviewed and available economic 
studies were also examined. No single source of information, however, 
provided comprehensive coverage of all economic benefits and costs 
associated with mandatory COOL for all of the covered commodities. 
Available information and knowledge about the operation of the supply 
chains for the covered commodities were used to synthesize the findings 
of the available studies about the rule's potential costs.
    Cost drivers: This rule is a retail labeling requirement. Retail 
stores subject to this rule will be required to inform consumers as to 
the country of origin of the covered commodities that they sell. To 
accomplish this task, individual package labels or other point-of-sale 
materials will be required. If products are not already labeled by 
suppliers, the retailer will be responsible for labeling the items or 
providing the country of origin and, as applicable, method of 
production information through other point-of-sale

[[Page 2685]]

materials. This may require additional retail labor and personnel 
training. Modification of existing recordkeeping systems will likely be 
required to ensure that products are labeled accurately and to permit 
compliance and enforcement reviews. For most retail firms of the size 
defined by the statute (i.e., those retailing fresh and frozen fruits 
and vegetables with an invoice value of at least $230,000 annually), it 
is assumed that recordkeeping will be accomplished primarily by 
electronic means. Modifications to recordkeeping systems will require 
software programming and may entail additional computer hardware. 
Retail stores are also expected to undertake efforts to ensure that 
their operations are in compliance with the rule.
    Prior to reaching retailers, most covered commodities move through 
distribution centers or warehouses. Direct store deliveries (such as 
when a local truck farmer delivers fresh produce directly to a retail 
store) are an exception. Distribution centers will be required to 
provide retailers with country of origin and, as applicable, method of 
production information. This likely will require modification of 
existing recordkeeping processes to ensure that the information passed 
from suppliers to retail stores permits accurate product labeling and 
permits compliance and enforcement reviews. Additional labor and 
training may be required to accommodate new processes and procedures 
needed to maintain the flow of country of origin and, as applicable, 
method of production information through the distribution system. There 
may be a need to further separate products within the warehouse, add 
storage slots, and alter product stocking, sorting, and picking 
procedures.
    Packers and processors of covered commodities will also need to 
inform retailers and wholesalers as to the country of origin and, as 
applicable, method of production (wild and/or farm-raised) of the 
products that they sell. To do so, their suppliers will need to provide 
documentation regarding the country of origin and, as applicable, 
method of production of the products that they sell. The efficiency of 
operations may be affected as products move through the receiving, 
storage, processing, and shipping operations. For packers and 
processors handling products from multiple origins and/or methods of 
production, there may also be a need to separate shifts for processing 
products from different origins, or to split processing within shifts, 
or to alter labels to correctly identify the country or countries of 
origin and method or methods of production, as applicable. However, in 
the case of meat covered commodities, there is flexibility in labeling 
covered commodities of multiple origins under this final rule. In the 
case where products of different origins are segregated, our analysis 
indicates costs are likely to increase. The rule requires that records 
be maintained to ensure that accurate country of origin information is 
retained throughout the process and available to permit compliance and 
enforcement reviews.
    Processors handling only domestic origin products or products from 
a single country of origin may have lower implementation costs compared 
with processors handling products from multiple origins, although such 
costs would likely be mitigated in those cases where firms are only 
using covered commodities which are multiple-origin labeled. 
Procurement costs also may be unaffected in this case, if the processor 
is able to continue sourcing products from the same suppliers. 
Alternatively it is possible that a processor currently sourcing 
products from multiple countries may choose to limit its source to 
fewer countries. In this case, such cost avoidance may be partially 
offset by additional procurement costs to source supplies from a 
narrower country of origin. Additional procurement costs of a narrower 
supply chain may include higher transportation costs due to longer 
shipping distances and higher acquisition costs due to supply and 
demand conditions for products from a particular country of origin, 
whether domestic or foreign.
    At the production level, agricultural producers and fish and 
shellfish harvesters need to maintain records to establish country of 
origin and, as applicable, method of production information for the 
products they produce and sell. Country of origin and, as applicable, 
method of production information will need to be transferred to the 
first handler of their products, and records sufficient to allow the 
source of the product to be traced back will need to be maintained as 
the products move through the supply chains. For all covered 
commodities, producer affidavits shall be considered acceptable records 
on which suppliers may rely to initiate country of origin and, as 
applicable, method of production claims. In general, additional 
producer costs include the cost of modifying and maintaining a 
recordkeeping system for country of origin information, animal or 
product identification, and labor and training.
    Incremental cost impacts on affected entities: To estimate the 
direct costs of this rule, the focus is on those units of production 
that are affected (Table 2).

                             Table 2--Estimated Annual Units of Production Affected by Mandatory Country of Origin Labeling
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                               Peanuts,
                                                                                           Lamb and                                Fruit,    pecans, and
                                                                   Beef         Pork         goat       Chicken        Fish      vegetable,    macadamia
                                                                                                                                and ginseng      nuts
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            Million head
                                                                                 Million pounds
--------------------------------------------------------------------------------------------------------------------------------------------------------
Producer.....................................................         33.9        104.8          2.9     45,012.9      7,808.0    120,388.5        212.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     Million pounds
--------------------------------------------------------------------------------------------------------------------------------------------------------
Intermediary.................................................       24,890        6,721          354       27,710        3,024       99,449           11
--------------------------------------------------------------------------------------------------------------------------------------------------------
Retailer.....................................................        8,193        2,330          133       17,645        1,104       47,078            5
--------------------------------------------------------------------------------------------------------------------------------------------------------

    For livestock, the relevant unit of production is an animal because 
there will be costs associated with maintaining country of origin 
information on each animal. These costs may include recordkeeping, ear 
tagging, and other related means of identification on either an 
individual animal or lot basis. Annual domestic slaughter numbers are 
used to estimate the flow of animals through the live

[[Page 2686]]

animal production segment of the supply chain.
    For fish and chicken producers, production is measured by round 
weight (live weight) pounds, except mollusks, which excludes the weight 
of the shell. Wild caught fish and shellfish production is measured by 
United States domestic landings for fresh and frozen human food. It is 
assumed that fish harvesters generally know whether their catch is 
destined for fresh and frozen markets, canning, or industrial use. Fish 
production also includes farm-raised fish. Fish production has been 
updated with 2006 data from the regulatory analysis contained in the 
interim final rule for fish and shellfish.
    For fruits and vegetables, it is assumed that essentially all 
production is predestined for either fresh or processing use. That is, 
growers know before the crop is produced whether it will be sold for 
fresh consumption or for processing. However, producers do not know 
whether their products ultimately will be sold to retailers, 
foodservice firms, or exporters. Therefore, it is assumed that all 
fresh fruit and vegetable production and production destined for frozen 
processors at the producer level will be affected by this rule. Ginseng 
production has been included with the fruit and vegetable production.
    As previously discussed, only green and raw peanuts, macadamia 
nuts, and pecans sold at retail are subject to the requirements of this 
rule. Green and raw peanuts are specialty items typically sold at 
roadside stands, through mail order, and at specialty shops. These 
items frequently are not carried by many of the retailers subject to 
this rule. Statistics on the size of this niche market are not readily 
available. It is assumed that no more than 5 percent of the sales of 
peanuts at subject retailers are sold as green or raw peanuts. 
Macadamia nuts and pecans have been included with peanuts.
    It is assumed that all sales by intermediaries such as handlers, 
packers, processors, wholesalers, and importers will be affected by the 
rule. Although some product is destined exclusively for foodservice or 
other channels of distribution not subject to the rule, it is assumed 
that these intermediaries will seek to keep their marketing options 
open for possible sales to subject retailers.
    Fish production at the intermediary level is increased by 505 
million pounds from the RIA estimate of 2004 in the interim final rule 
for fish and shellfish due to more recently available data.
    Information and data on ginseng is limited. However, the Wisconsin 
Department of Agriculture reports the number of growers at 190, the 
number of dealers at 46, and grower sales at 282,055 dry root pounds 
for 2006 (Ref. 5). While some other regions in the country likely 
produce ginseng, information could not be found and it is believed that 
Wisconsin is the largest producing state. The information from 
Wisconsin likely underestimates the total number of farms, dealers, and 
production of ginseng. However, it is believed that Wisconsin 
represents most of the ginseng production and therefore, this 
information is used for this rule. Since the number of entities and 
production are likely underestimated and the production is relatively 
small as compared to other covered commodities, the production was not 
adjusted for retail consumption.
    The Census of Agriculture provides an estimate of the number of 
macadamia nut farming operations. The total number of macadamia farms 
is estimated at 1,059 [Ref. 6]. Businesses that husk and crack 
macadamia nuts are unofficially estimated by the Hawaii Field Office of 
the National Agricultural Statistical Service (NASS) at 8 firms and 
establishments. Businesses that wholesale macadamia nuts are estimated 
by the Hawaii Department of Agriculture at 21 firms and establishments. 
Similar to peanuts, the rule exempts most product forms of macadamia 
nuts sold at retail. While data on macadamia nuts sold at retail that 
are covered by this rule are not available, the volume of sales is 
certainly very small. For purposes of estimation, the number of 
affected entities at each level of the macadamia nut sector has been 
reduced to 5 percent of the total estimated. The number of farms has 
been reduced from 1059 to 53 and the number of wholesalers has been 
reduced from 21 to 1.
    The Census of Agriculture provides an estimate of 22,371 pecan 
farming operations [Ref. 7]. Similar to peanuts and macadamia nuts, the 
rule exempts most product forms of pecans sold at retail. For purposes 
of estimation, the number of affected entities at each level of the 
pecan sector has been reduced to 5 percent of the total 22,371 to 1,119 
farms.
    As with peanut, macadamia nut, and pecan production at the producer 
level, peanut, macadamia nut, and pecan production at the intermediary 
level is also reduced by 95 percent. The estimate of peanut, macadamia 
nut, and pecan production is intended to include only green and raw 
peanuts, macadamia nuts, and pecans.
    For retailers, food disappearance figures are adjusted to estimate 
consumption through retailers as defined by the statute. For each 
covered commodity, disappearance figures are multiplied by 0.470, which 
represents the estimated share of production sold through retailers 
covered by this rule. To derive this share, the factor of 0.622 is used 
to remove the 37.8 percent food service quantity share of total food in 
2006 (Ref. 8). This factor is then multiplied by 0.756, which was the 
share of sales by supermarkets, warehouse clubs and superstores of food 
for home consumption in 2006 (Ref. 9). In other words, supermarkets, 
warehouse clubs and superstores represent the retailers as defined by 
PACA, and these retailers are estimated to account for 75.6 percent of 
retail sales of the covered commodities.
    Table 3 summarizes the direct, incremental costs that firms will 
incur during the first year as a result of this rule. These estimates 
are derived primarily from the available studies that addressed cost 
impacts of mandatory COOL.

                                   Table 3--Estimates of First-Year Implementation Costs per Affected Industry Segment
                                                                    [Million dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  Peanuts,
                                                                                                                      Fruit,     pecans, &
                                                      Beef         Pork     Lamb & goat    Chicken        Fish      vegetable,   macadamia      Total
                                                                                                                   and ginseng      nuts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Producer........................................          305          105           10            0           20           30            0          470
Intermediary....................................          373          101            5          139           15          497            0        1,130
Retailer........................................          574           93            5           44           77          235            0        1,029
                                                 -------------------------------------------------------------------------------------------------------
    Total.......................................        1,252          299           21          183          112          763            0        2,629
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 2687]]

    Assumptions and procedures underlying the cost estimates are 
described fully in the discussion of the estimates presented in the 
PRIA and the IRIA.
    Considering all producer segments together, we have estimated a $9 
per head cost to cattle producers to implement the rule. This estimate 
reflects the expectation of relatively small implementation costs at 
the cow-calf level of production, but relatively higher costs each time 
cattle are resold. Typically, fed steers and heifers change hands two, 
three, or more times from birth to slaughter, and each exchange will 
require the transfer of country of origin information. Thus, total 
costs for beef producers are estimated at $305 million.
    It is expected that intermediaries will face increased costs 
associated with tracking cattle and the covered beef commodities 
produced from these animals and then providing this information to 
subsequent purchasers, which may be other intermediaries or covered 
retailers. Incremental costs for beef packers may include additional 
capital and labor expenditures to enable cattle from different origins 
to be tracked for slaughter, fabrication, and processing. As previously 
discussed, under this final rule, there is greater flexibility for 
labeling muscle cut covered commodities. In addition, the rule also 
provides for flexibility in labeling ground products by allowing the 
notice of country of origin to include a list of countries contained 
therein or that may reasonably be contained therein. Considering the 
costs likely to be faced by intermediaries in the beef sector, $0.015 
per pound is adopted as an estimate of costs, which is consistent with 
estimates from the available studies. Total costs are thus estimated at 
$373 million.
    The implementation costs are estimated at $0.07 per pound for beef 
retailers, for a total of $574 million. This figure reflects the costs 
for individual package labels, meat case segmentation, record keeping 
and information technology changes, labor, training, and auditing. In 
addition, there likely will be increased costs for in-store butcher 
department operations related to cutting, repackaging, and grinding 
operations.
    Total costs for affected entities in the beef sector are thus 
estimated at $1,252 million.
    Costs for pork producers are estimated at $1.00 per head. With 
annual slaughter of 104.8 million head, total costs for producers are 
estimated at $105 million.
    Costs for all pork sector intermediaries (including handlers, 
processors, and wholesalers) should be similar to costs for beef sector 
intermediaries. These estimated costs for pork industry intermediaries 
are $0.015 per pound, for a total of $101 million.
    Costs for retailers of pork are estimated to be $0.04 per pound. 
The per-pound cost estimate for pork is lower than for beef primarily 
to reflect the higher costs incurred by in-store grinding operations to 
produce ground beef. Although ground pork may also be produced in-
store, most ground pork is processed into sausage and other products 
not covered by the rule. Total estimated costs for pork retailers are 
$93 million. Total costs for the pork sector are estimated at $299 
million.
    Costs per head for lamb and goat producers are estimated at $3.50 
per head. Total costs for lamb and goat producers are estimated at $10 
million.
    Intermediaries in the lamb and goat sector will likely face per-
pound costs similar to costs faced by beef and pork sector 
intermediaries, which are estimated at $0.015 per pound. Total costs 
for lamb and goat sector intermediaries are thus estimated at $5 
million.
    Costs to retailers for lamb and goat should be similar to costs 
borne for pork, which was estimated at $0.04 per pound. Total costs for 
retailers of lamb and goat are estimated at $5 million.
    Total costs for producers, intermediaries, and retailers in the 
lamb and goat industries are estimated costs at $21 million.
    Costs for chicken producers who grow-out chicken for an integrator 
(the firm that will slaughter and possibly further process the 
chickens) is $0.00 because these individuals do not own or control the 
movement of the chickens they are raising. All chickens produced are 
owned by the integrator which is the main intermediary in the chicken 
supply chain. We do not expect that producers will need change any 
current practices and thus will not incur any additional costs due to 
this rule.
    Costs for the intermediaries in the chicken supply chain are 
estimated to be $0.005 per pound. Since the integrators own their 
chickens from the time they hatch to time they are sold to a retailer 
or distributor, there is no need to ``collect'' country of origin 
information. Costs to the integrator are mainly due to system changes 
to incorporate COOL information, recordkeeping, and supplying required 
information to the retailers and food distributors. Approximately 69 
percent of chicken covered by COOL is supplied directly to the retailer 
from the integrator. The vast majority, if not all, of the chicken 
supplied by the integrator is pre-labeled. The bulk of the rest is 
supplied by the distributors whose costs will be slightly higher since 
they are receiving product from integrators and selling product to 
retailers. Total costs for intermediaries are estimated at $139 
million.
    Costs for retailers are estimated to be $0.0025 per pound. As noted 
above most chicken is purchased directly from integrators and will have 
been pre-labeled. This will significantly lower the retailers' cost in 
terms of meeting COOL requirements. Most of the costs retailers will 
bear will be from distributors. Total cost for retailers are estimated 
at $44 million.
    Total estimated costs for chicken producers, intermediaries, and 
retailers are $183 million.
    The estimated costs to fish and seafood producers are $0.0025 per 
pound. Total costs for fish and seafood producers are thus estimated at 
$20 million, $1 million more than the RIA in the interim final rule for 
fish and shellfish.
    Costs for intermediaries are estimated at $0.005 per pound in the 
fish and seafood sector. Processors need to collect country of origin 
and method of production information from producers, maintain this 
information, and supply this information to other intermediaries or 
directly to retailers. There are also labeling costs associated with 
providing country of origin and method of production information on 
consumer-ready packs of frozen and fresh fish that are labeled by 
processors. Total costs for fish and seafood intermediaries are thus 
estimated at $15 million, an increase of $2 million from the RIA in the 
interim final rule for fish and shellfish. The increase is attributable 
to using the most recently available data, which reflects a higher 
demand for fresh fish and shellfish.
    Retailer costs are estimated at $0.07 per pound for fish and 
seafood. This estimate results in total costs of $77 million for 
retailers of fish and seafood, an increase of $20 million from the RIA 
in the interim final rule for fish and shellfish.
    Total costs for fish and seafood are estimated at $112 million, an 
increase of $23 million from the RIA in the interim final rule for fish 
and shellfish.
    Although fruit, vegetable, and ginseng producers maintain the types 
of records that will be required to substantiate origin claims, it is 
believed that this information is not universally transferred by 
producers to purchasers of their products. Producers will have to 
supply this type of information in a format that allows handlers and

[[Page 2688]]

processors to maintain country of origin information so that it can be 
accurately transferred to retailers. For fruit, vegetable, and ginseng 
producers, costs are estimated at $0.00025 per pound to make and 
substantiate COOL claims, which equates to $0.01 for a 40 pound 
container. Because fruits and vegetables only have a single point of 
origin, which is where they are grown, substantiating country of origin 
claims is substantially simpler for fruit and vegetable producers than 
for livestock producers. Total costs for fruit, vegetable, and ginseng 
producers are estimated at $30 million.
    Fruit, vegetable, and ginseng intermediaries will shoulder a 
sizeable portion of the burden of tracking and substantiating country 
of origin information. Intermediaries will need to obtain information 
to substantiate COOL claims by producers and suppliers; maintain COOL 
identity throughout handling, processing, and distribution; and supply 
retailers with COOL information through product labels and records. The 
estimated cost for these activities for fruit and vegetable sector 
intermediaries is $0.005 per pound, resulting in total estimated costs 
of $497 million.
    Because intermediaries will bear a large portion of the burden of 
COOL tracking and labeling, implementation costs for retailers will be 
reduced. It is believed that virtually all frozen fruits and vegetables 
will be labeled by suppliers, thus imposing minimal incremental costs 
for retailers. In addition, over 60 percent of fresh fruits and 
vegetables arrive at retail with labels or stickers that may be used to 
provide COOL information. It is believed that fresh fruit and vegetable 
suppliers will provide COOL information on these labels and stickers, 
again imposing minimal incremental costs for retailers. Costs for 
retailers are estimated at $0.005 per pound of fresh and frozen fruits 
and vegetables. For pre-labeled products, the label itself is 
sufficient evidence on which the retailer may rely to establish a 
product's country of origin. For these pre-labeled products, the 
product label or sticker carries the required country of origin 
information, while the recordkeeping system maintains the information 
necessary to track the product back through the supply chain. Total 
costs for retailers of fruits, vegetables, and ginseng are estimated at 
$235 million.
    Total costs for producers, intermediaries, and retailers of fruit, 
vegetable, and ginseng products are estimated at $763 million.
    Costs per pound for each segment of the peanut, macadamia nut, and 
pecan industries is estimated at $0.00025 for producers, $0.005 for 
intermediaries and $0.015 for retailers. As a result, costs for the 
peanut, macadamia nut, and pecan industries are estimated at about 
$400,000, with negligible costs for producers and costs of less than 
$200,000 at the intermediary and retailer levels.
    Total incremental costs are estimated for this rule at $470 million 
for producers, $1,130 million for intermediaries and $1,029 million for 
retailers for the first year. Total incremental costs for all supply 
chain participants are estimated at $2,629 million for the first year, 
an increase of $112 million from the IRIA due to the inclusion of and 
updating of data for the fish and shellfish industries.
    There are wide differences in average estimated implementation 
costs for individual entities in different segments of the supply chain 
(Table 4). With the exception of a small number of fishing operations 
and chicken producers, producer operations are single-establishment 
firms. Thus, average estimated costs per firm and per establishment are 
somewhat similar. Retailers subject to the rule operate an average of 
just over nine establishments per firm. As a result, average estimated 
costs per retail firm also are just over nine times larger than average 
costs per establishment.

   Table 4--Estimated Implementation Costs Per Firm and Establishment
------------------------------------------------------------------------
                                               Cost estimates per
                                       ---------------------------------
                                              Firm        Establishment
------------------------------------------------------------------------
Producer..............................             $370             $369
Intermediary..........................           48,219           45,285
Retailer..............................          254,685           28,273
------------------------------------------------------------------------

    Average estimated implementation costs per producer are relatively 
small at $370 and slightly less than from the IRIA due to the inclusion 
of fish and shellfish producers. The slight difference between the cost 
per producers for firms and establishments is due to the inclusion of 
fish and shellfish and that there are more fishing establishments than 
firms. Estimated costs for intermediaries are substantially larger, 
averaging $48,219 per firm and $45,285 per establishment. The average 
cost per firm is $5,729 less than the IRIA estimated cost, with the 
lower cost attributable to the inclusion of fish and shellfish. 
Similarly, the average cost per intermediary establishment is $5,313 
lower than IRIA estimate due to the inclusion of fish and shellfish. At 
an average of $254,685 per firm, retailers have the highest average 
estimated costs per firm. This is $19,134 higher than the IRIA 
estimate. The higher estimated cost per retailer is attributable to the 
inclusion of fish and shellfish. Retailers' average estimated costs per 
establishment are $28,273. This amount is $2,124 higher than the IRIA 
estimate.
    The costs per firm and per establishment represent industry 
averages for aggregated segments of the supply chain. Large firms and 
establishments likely will incur higher costs relative to small 
operations due to the volume of commodities that they handle and the 
increased complexity of their operations. In addition, different types 
of businesses within each segment are likely to face different costs. 
Thus, the range of costs incurred by individual businesses within each 
segment is expected to be large, with some firms incurring only a 
fraction of the average costs and other firms incurring costs many 
times larger than the average.
    Average costs per producer operation can be calculated according to 
the commodities that they produce (Table 5). Average estimated costs 
are lowest for lamb and goat producers ($128) and highest for hog 
operations ($1,599). Again, chicken ``producers'' do not own or control 
the movement of the birds they are growing-out. We do not expect that 
the rule will result in any changes in their current production 
practices, and thus their average cost is zero. Because average 
production volume per hog operation is large relative to other types of 
producer

[[Page 2689]]



     Table 5--Estimated First-Year Implementation Costs Per Producer
                                Operation
------------------------------------------------------------------------
                           Producer                              Average
------------------------------------------------------------------------
Beef..........................................................      $314
Lamb & Goats..................................................       128
Pork..........................................................     1,599
Chicken.......................................................         0
Fish..........................................................       261
Fruits, Vegetables, & Ginseng.................................       376
Peanuts, Pecans, & Macadamia Nuts.............................       258
    All.......................................................       369
------------------------------------------------------------------------

operations, estimated costs per hog operation are large relative to 
other producer operations. These costs are unchanged from the IRIA 
estimates except for fish which used more up-to-date information.
    It is believed that the major cost drivers for the rule occur when 
livestock or other covered commodities are transferred from one firm to 
another, when livestock or other covered commodities are segregated in 
the production or marketing process when firms are not using a 
multiple-origin label, and when products are assembled and then 
redistributed to retail stores. In part, some requirements of the rule 
will be accomplished by firms using essentially the same processes and 
practices as are currently used, but with information on country of 
origin claims added to the processes. This adaptation generally would 
require relatively small marginal costs for recordkeeping and 
identification systems. In other cases, however, firms may need to 
revamp current operating processes to implement the rule. For example, 
a processing or packing plant may need to sort incoming products by 
country of origin and, if applicable, method of production, in addition 
to weight, grade, color, or other quality factors. This may require 
adjustments to plant operations, line processing, product handling, and 
storage. Ultimately, it is anticipated that a mix of solutions will be 
implemented by industry participants to effectively meet the 
requirements of the rule. Therefore, it is anticipated that direct, 
incremental costs for the rule likely will fall within a reasonable 
range of the estimated total of $2.6 billion.
    In the IRIA, one regulatory alternative considered by AMS would be 
to narrow the definition of a processed food item, thereby increasing 
the scope of commodities covered by the rule. This alternative is not 
adopted in this final rule. An increase in the number of commodities 
that would require COOL would increase implementation costs of the rule 
with little expected economic benefit. Additional labeling requirements 
may also slow some of the innovation that is occurring with various 
types of value-added, further processed products.
    A different regulatory alternative would be to broaden the 
definition of a processed food item, thereby decreasing the scope of 
commodities covered by the rule. Accordingly, such an alternative would 
decrease implementation costs for the rule. At the retail level and to 
a lesser extent at the intermediary level, cost reductions would be at 
least partly proportional to the reduction in the volume of production 
requiring retail labeling, although if the broader definition excluded 
products for which incremental costs are relatively high, the impact 
could be more than proportional. Start-up costs for retailers and many 
intermediaries likely would be little changed by a narrowing of the 
scope of commodities requiring labeling because firms would still need 
to modify their recordkeeping, production, warehousing, distribution, 
and sales systems to accommodate the requirements of the rule for those 
commodities that would require labeling. Ongoing maintenance and 
operational costs, however, likely would decrease in some proportion to 
a decrease in the number of items covered by the rule. On the other 
hand, implementation costs for the vast majority of agricultural 
producers would not be affected by a change in the definition of a 
processed food item. This is because it is assumed that virtually all 
affected producers would seek to retain the option of selling their 
products through supply channels for retailers subject to the rule. 
Agricultural producers generally would have little influence on the 
ultimate product form in which their products are sold at retail, and 
thus would be little affected by changes in the definition of a 
processed food item.
    The definition of a processed food item developed for this rule has 
taken into account comments from affected entities and has resulted in 
excluding products that would be more costly and troublesome for 
retailers and suppliers to provide country of origin information.
    Net Effects on the economy: The previous section estimated the 
direct, incremental costs of the rule to the affected firms in the 
supply chains for the covered commodities. While these costs are 
important to those directly involved in the production, distribution, 
and marketing of covered commodities, they do not represent net costs 
to the United States economy or net costs to the affected entities for 
that matter.
    With respect to assessing the effect of this rule on the economy as 
a whole, it is important to understand that a significant portion of 
the costs directly incurred by the affected entities take the form of 
expenditures for additional production inputs, such as payments to 
others whether for increased hours worked or for products and services 
provided. As such, these direct, incremental costs to affected entities 
represent opportunity costs of the rule, but they do not represent 
losses to the economy. As a result, the direct costs incurred by the 
participants in the supply chains for the covered commodities do not 
measure the net impact of this rule on the economy as a whole. Instead, 
the relevant measure is the extent to which the rule reduces the amount 
of goods and services that can be produced throughout the United States 
economy from the available supply of inputs and resources.
    Even from the perspective of the directly affected entities, the 
direct, incremental costs do not present the whole picture. Initially, 
the affected entities will have to incur the operation adjustments and 
expenses necessary to implement the rule. However, over time as the 
economy adjusts to the requirements of the rule, the burden facing 
suppliers will be reduced as their production level and the prices they 
receive change. What is critical in assessing the net effect of this 
rule on the affected entities over the longer run is to determine the 
extent to which the entities are able to pass these costs on to others 
and consequently how the demand for their commodities is affected.
    Conceptually, suppose that all the increases in costs from the rule 
were passed on to consumers in the form of higher prices and that 
consumers continued to purchase the same quantity of the affected 
commodities from the same marketing channels. Under these conditions, 
the suppliers of these commodities would not suffer any net loss from 
the rule even if the increases in their operating costs were quite 
substantial. However, other industries might face losses as consumers 
may spend less on other commodities. It is unlikely, however, absent 
the rule leading to changes in consumers' preferences for the covered 
commodities that consumers will maintain their consumption of the 
covered commodities in the face of increased prices. Rather, many or 
most consumers will likely reduce their consumption of the covered 
commodities. The resulting changes in consumption patterns will in turn 
lead to changes in production patterns and

[[Page 2690]]

the allocation of inputs and resources throughout the economy. The net 
result, once all these changes have occurred, is that the total amount 
of goods and services produced by the United States economy will be 
less than before.
    To analyze the effect of the changes resulting from the rule on the 
total amount of goods and services produced throughout the United 
States economy in a global context, a computable general equilibrium 
(CGE) model developed by Economic Research Service (ERS) is utilized 
(Ref. 4). The ERS CGE model includes all the covered commodities and 
the products from which they are derived, as well as non-covered 
commodities that will be indirectly affected by the rule, such as feed 
grains. Even though COOL for fish was implemented in 2004, the costs 
for fish and shellfish are included to account for the cross-commodity 
effects between covered commodities. Peanuts, however, are aggregated 
with oilseeds in the model, and there is no meaningful way to modify 
the model to account for the impacts of the rule on peanut production, 
processing, and consumption. Given the definition of a processed food 
item, almost all peanut products are exempt from this rule. As a 
consequence, the peanut sector accounts for only a negligible fraction 
of the total estimated incremental costs for all directly affected 
entities. Thus, omitting the small direct costs on the peanut sector is 
expected to have negligible impacts with respect to estimated impacts 
on the overall United States economy.
    The ERS CGE model traces the impacts from an economic ``shock,'' in 
this case an incremental increase in costs of production, through the 
U.S agricultural sector and the U.S economy to the rest of the world 
and back through the inter-linking of economic sectors. By taking into 
account the linkages among the various sectors of the United States and 
world economies, a comprehensive assessment can be made of the economic 
impact on the United States economy of the rule implementing COOL. The 
model reports economic changes resulting after a ten-year period of 
adjustment.
    The results of this analysis indicate that the rule implementing 
COOL after the economy has had a period of ten years to adjust will 
have a smaller net impact on the overall United States economy than the 
incremental costs for directly affected entities for the first year. 
Under the assumption that COOL will not change consumers' preferences 
for the covered commodities, it is estimated that the overall costs to 
the United States economy due to the rule, in terms of a reduction in 
consumers' purchasing power, will be $211.9 million. This represents 
the cost to the United States economy after all transfers and 
adjustments in consumption and production patterns have occurred.
    As noted above, the overall net costs to the United States economy 
after a decade of adjustment are significantly smaller than the 
implementation costs to directly affected firms. This result does not 
imply that the implementation costs for directly affected firms have 
been substantially reduced from the initial estimates. While some of 
the increase in their costs will be offset by reduced production and 
higher prices over the longer term, the suppliers of the covered 
commodities will still bear direct implementation costs.
    The estimates of the overall costs to the United States economy are 
based on the estimates of the incremental increases in operating costs 
to the affected firms. The model does not permit supply channels for 
covered commodities that require country of origin information to be 
separated from supply channels for the same commodities that do not 
require COOL. Thus, the direct cost impacts must be adjusted to 
accurately reflect changes in operating costs for all firms supplying 
covered commodities. Table 6 reports these adjusted estimates in terms 
of their percentage of total operating costs for each of the directly 
affected sectors. The percentages used are based on the estimate of the 
percentage change in operating costs for the entire supply channel and 
are adjusted between the various segments of each covered commodity's'' 
supply chain (producers, processors, importers, and retailers) based on 
the estimate of how the costs of the regulation will be distributed 
among them. As a result, the cost changes shown in Table 6 only 
approximate the direct cost estimates previously described.

                                  Table 6--Estimated Increases in Operating Costs by Supply Chain Segment and Industry
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           Beef, Lamb, &
                                                                               Goat            Pork           Chicken          Fish        Fresh produce
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          Percent change
--------------------------------------------------------------------------------------------------------------------------------------------------------
Farm Supply..............................  Domestic.....................            1.30            1.30            0.00            0.60            0.10
                                           Imported.....................            1.30            1.30            1.00            0.60            0.10
Processing...............................  Domestic.....................            2.10            1.00            1.10            n.a.            n.a.
                                           Imported.....................            2.10            1.00            1.10            n.a.            n.a.
Retail...................................  Domestic.....................            2.20            0.40            0.60            0.40            0.60
                                           Imported.....................            2.20            0.40            0.60            0.40            0.60
--------------------------------------------------------------------------------------------------------------------------------------------------------
n.a.--Not Applicable.

    In addition, it is assumed that domestic and foreign suppliers of 
the covered commodities located at the same level or segment of the 
supply chain face the same percentage increases in their operating 
costs. In reality, the incremental costs for some imported covered 
commodities may be lower, as a portion of those products already enter 
the United States with country of origin labels.
    As discussed above, consumption and production patterns will change 
as the incremental increases in operating costs are passed on, at least 
partially, to consumers in the form of higher prices by the affected 
firms. The increases in the prices of the covered commodities will in 
turn cause exports and domestic consumption and ultimately domestic 
production to fall. The results of our analysis indicate that United 
States production of all the covered commodities combined will decline 
0.02 percent and that the overall price level for these commodities (a 
weighted average index of the prices received by suppliers for their 
commodities) will increase by 0.02 percent.
    The structure of the model does not enable changes in net revenues 
to suppliers of the covered commodities to be determined. Likewise, the 
model cannot be used to determine the extent to which the reductions in 
production

[[Page 2691]]

arise from some firms going out of business or all firms cutting back 
on their production. To provide an indication of what effect this will 
have on the suppliers of the covered commodities, changes in revenues 
using the model results are estimated. The result of this calculation 
shows that revenues to suppliers of the covered commodities will 
decrease by $461 million. This decrease in revenue is due to the 
decrease in estimated revenues in all covered commodities; all affected 
sectors show a small revenue decrease due to the increased costs of the 
rule.
    The costs of the rule will not be shared equally by all suppliers 
of the covered commodities. The distribution of the costs of the rule 
will be determined by several factors in addition to the direct costs 
of complying with the rule. These are the availability of substitute 
products not covered by the rule and the relative competitiveness of 
the affected suppliers with respect to other sectors of the United 
States and world economies.
    Although the increases in operating costs are the initial drivers 
behind the changes in consumption and production patterns resulting 
from this rule, they do not, as can be seen by examining Table 7, 
determine which commodity sector will be most affected. Table 7 
contains the percentage changes in prices, production, exports, and 
imports for the three main segments of the marketing chain by covered 
commodities. The estimated increases in operating costs reflect 
anticipated adjustments by industry as a result of the rule and provide 
the basis for the CGE analysis. However, the analysis does not reflect 
dynamic adjustments that industry will undertake to comply with the 
requirements of the rule, such as the flexibilities afforded by the use 
of multiple-origin labels.

           Table 7--Estimated Impact of Rule on U.S. Production, Prices and Trade of Impacted Sectors
----------------------------------------------------------------------------------------------------------------
                                                                                      Exports         Imports
                    Commodity                          Price        Production       (volume)        (volume)
----------------------------------------------------------------------------------------------------------------
                                                                   Percent change from base year
                                                 ---------------------------------------------------------------
Fruits and Vegetables...........................            0.21           -0.20           -0.39            0.04
Cattle and Sheep................................            0.52           -0.94           -1.18            0.25
Broilers........................................            0.03           -0.57           -0.36           -0.03
Hogs............................................            0.26           -0.46           -0.60            0.16
Beef and Veal...................................            0.99           -1.09           -1.93           -2.32
Chicken.........................................            0.82           -0.90           -1.54            0.29
Pork............................................            0.68           -0.81           -1.37           -0.86
Fish............................................            0.50           -0.68           -0.06            0.04
----------------------------------------------------------------------------------------------------------------

    As mentioned previously, peanuts, macadamia nuts, and pecans are 
included with oilseed products in the ERS CGE model. As a result they 
are not included in this analysis.
    The rule increases operating costs for the supply chains of the 
covered commodities. As shown in Table 7, the increased costs result in 
higher prices for these products. The quantity demanded at these higher 
prices falls, with the result that the production of all of the covered 
commodities decreases.
    Imports of fruits, vegetables, cattle, sheep, chicken, fish, and 
hogs increase because the model assumes United States domestic 
suppliers of these products respond more to changes in their operating 
costs than do foreign suppliers. The resulting gap between the supply 
response of United States and foreign producers provides foreign 
suppliers with a cost advantage in United States markets that enables 
them to increase their exports to the United States even though they 
face similar increases in operating costs.
    To put these impacts in more meaningful terms, the percentage 
changes reported in Table 7 were converted into changes in current 
prices and quantities produced, imported, and exported (Table 8). The 
base values in Table 8 vary from those reported in Table 2 above 
because they are derived from projected levels reported in the USDA 
Agricultural Baseline for 2006 (Ref. 10), while values in Table 2 
represent actual reported values for 2006 as compiled by USDA's NASS. 
Baseline values were used to accommodate the structure of the model.
    Increases in prices for all covered commodities are small, less 
than one cent per pound. Production changes are similarly small, less 
than 100 million pounds for all covered commodities. The declines in 
the production of beef, chicken, and pork mirrors the decline in the 
production of beef, broilers, and hogs.

            Table 8--Estimated Changes in U.S. Production Prices, and Trade for Affected Commodities
----------------------------------------------------------------------------------------------------------------
                                                                                                    Change from
                   Indicator                                  Units                    Base            base
----------------------------------------------------------------------------------------------------------------
U.S. Production:
    Veg. & Fruits.............................  Mil. Lbs. Thous.................         191,523            -383
    Cattle....................................  Hd..............................          32,229            -303
    Broilers..................................  Mil. Hd.........................           6,503             -36
    Hogs......................................  Thous. Hd.......................         103,015            -474
    Beef......................................  Mil. Lbs........................          24,784            -270
    Chicken...................................  Mil. Lbs........................          35,733            -322
    Pork......................................  Mil. Lbs........................          20,706            -168
    Fish......................................  Mil. Lbs........................           7,997             -54
U.S. Price:
    Veg. & Fruits.............................  $/Lb............................            0.25          0.0005
    Cattle and sheep..........................  $/Cwt...........................           89.55          0.4657
    Broilers..................................  $/Lb............................            0.43          0.0001

[[Page 2692]]

 
    Hogs......................................  $/Cwt...........................           49.62          0.1290
    Beef and veal.............................  $/Lb............................            4.09          0.0405
    Chicken...................................  $/Lb............................            1.74          0.0143
    Pork......................................  $/Lb............................            2.83          0.0192
    Fish......................................  $/Lb............................            0.93          0.0047
U.S. Exports (volume):
    Fruits & Vegetables.......................  Mil Lbs.........................          19,990             -78
    Beef......................................  Mil Lbs.........................             697             -13
    Chicken...................................  Mil Lbs.........................           5,203             -80
    Pork......................................  Mil Lbs.........................           2,498             -34
    Fish......................................  Mil Lbs.........................           6,384              -4
U.S. Imports (volume):
    Fruits & Vegetables.......................  Mil. Lbs. Thous.................          37,573              15
    Beef......................................  Hd..............................           2,502             -58
    Chicken...................................  Mil. Hd. Thous..................               0               0
    Pork......................................  Hd..............................           5,741             -49
    Fish......................................  Mil. Lbs........................          10,158               4
----------------------------------------------------------------------------------------------------------------
Sources: Base values for meat and fruits and vegetables come from USDA Agricultural Baseline Projections to
  2016, Staff Report WAOB-2007-1. USDA, Office of the Chief Economist, 2007. Changes are derived from applying
  percentage changes obtained from the ERS CGE model to the base values. \a\ Live animal estimates derived from
  baseline values for meat product using 2005 average dress weight for cattle, hogs and broilers. \b\ Base
  values for fish come from Fisheries of the United States, 2005. National Marine Fisheries Service, National
  Oceanic and Atmospheric Administration, U.S. Department of Commerce, 2006. \c\ Fruit and vegetable price
  derived by dividing the total value of fruit and vegetable production by total quantity of fruit and
  vegetables produced as reported in USDA baseline for 2005. \d\ Fish price derived by dividing total value of
  commercial and aquaculture production, excluding other, by total commercial and aquaculture production.

    The estimated changes in prices and production cause revenues for 
the fruit and vegetable industry to increase an estimated $5 million. 
The small revenue increase in the fruit and vegetable industry is 
attributed to the fact that the price increase just offsets the 
production decrease. The estimated changes in production and prices 
result in revenues decreasing by $94 million for beef cattle producers 
while revenues from production and sale of beef decrease by an 
estimated $112 million dollars. Revenues for broiler production 
declines by $91 million and revenues for the production and sale of 
chicken decrease by $54 million. In addition, revenues for hog 
production decrease by $21 million and revenues from production and 
sale of pork decrease by $79 million. Finally, revenues to the fish 
industry fall by nearly $14 million.
    The increase in the prices of all covered commodities causes 
exports to decline (Table 8). These declines are small; they are for 
the most part smaller than the declines in United States production of 
these commodities.
    The ERS CGE model assumes that firms behave as though they have no 
influence on either their input or output prices. On the other hand, a 
model that assumed that processors could influence their input and 
output prices could find that prices received by agricultural producers 
decreased because processors passed their cost increases down to their 
suppliers rather than increase the price they charged their customers.
    The estimates of the economic impact of the rule on the United 
States are based on the assumption that country of origin labeling does 
not shift consumer demand toward the covered commodities of United 
States origin. This assumption is based on the earlier finding that 
there was no compelling evidence to support the view that mandatory 
COOL will increase the demand for United States products. Despite this 
lack of evidence, it is examined how much of a shift or increase in 
demand for commodities of United States origin would need to occur to 
offset the costs imposed on the economy by the rule. Consumer demand 
for the covered commodities would have to increase 0.90 percent to 
offset the costs to the economy of COOL as outlined in the rule.
    The hypothetical 0.90 percent increase in demand for covered 
commodities represents the overall increase (shift) in demand from all 
outlets. If there were such a demand increase for domestically produced 
covered commodities, however, it would presumably occur at those 
retailers required to provide country of origin information. As 
previously discussed, the percentage share of covered commodities sold 
by retailers subject to this rule is estimated at 47.0 percent of total 
consumption. This suggests that demand at covered retailers actually 
would have to increase by 1.9 percent for purposes of this hypothetical 
exercise, assuming no change in demand at other domestic outlets or in 
export demand.
    As previously mentioned, the estimates of the overall economic 
effects of the rule are derived from a CGE model developed by ERS. The 
results from this model show the changes in production and consumption 
patterns after the economy has adjusted to the incremental increase in 
costs (medium run results). Such changes occur over time and the 
economy does not adjust instantaneously.
    The results of this analysis describe and compare the old 
production and consumption patterns to the new ones, but do not reflect 
any particular adjustment process. The purpose of using the ERS CGE 
model is not to forecast what prices and production will be over any 
particular time frame, but to explore the implications of COOL on the 
United States economy and capture the direction of the changes.
    The ERS CGE model is global in the sense that all regions in the 
world are covered. Production and consumption decisions in each region 
are determined within the model following behavior that is consistent 
with economic theory. Multilateral trade flows and prices are 
determined simultaneously by world market clearing conditions. This 
permits prices to adjust to ensure that total demand equals total 
supply for each commodity in the world.
    The general equilibrium feature of the model means that all 
economic sectors--agricultural and non-agricultural--are included. 
Hence,

[[Page 2693]]

resources can move among sectors, thereby ensuring that adjustments in 
the feed grains and livestock sectors, for example, are consistent with 
adjustments in the processed sectors.
    The model is static and this implies that possible gains (or 
losses) from stimulating (or inhibiting) investment and productivity 
growth are not captured. The model allows the existing resources to 
move among sectors, thereby capturing the effects of re-allocation of 
resources that are the result of policy changes. However, because the 
model fixes total available resources, it underestimates the long-run 
effects of policies on aggregate output. For example, the 10-year 
average real growth of GDP between 1997 and 2007 was approximately 3.1 
percent (Ref. 11). If applied to the next 10 years this implies an 
economy approximately 36 percent larger at the end of this analysis 
than at the beginning of this analysis.
    The ERS CGE model uses data from the Global Trade Analysis Project 
(GTAP database, version 7.2). The database represents the world as of 
2004 and includes information on macroeconomic variables, production, 
consumption, trade, demand and supply elasticities, and policy 
measures. The GTAP database includes 57 commodities and 101 countries/
regions. For this analysis, the regions were represented by the 
following country/regions: the United States, Canada, Mexico, the 
European Union-25 (EU), Oceania, China, Other East Asian Countries, 
India, Other South Asian Countries, Brazil, South America (including 
Central America), OPEC Countries, Russia, Africa and the Rest of the 
World. The agricultural sector is subdivided into the following 7 
commodity aggregations: rice, wheat, corn, other feed grains (barley, 
sorghum), soybeans, sugar (cane and beets), vegetables and fresh 
fruits, other crops (cotton, peanuts), cattle and sheep, hogs and 
goats, poultry, and fish. The food processing sectors are subdivided 
into the following 6 commodity aggregations, bovine cattle and sheep 
meat, pork meat, chicken meat, vegetable oils and fats, other processed 
food products, beverages and tobacco, and fish. The remaining sectors 
in the database were represented by 18 aggregated non-agricultural 
sectors.

Regulatory Flexibility Analysis

    This rule has been reviewed under the requirements of the 
Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.). The purpose of 
RFA is to consider the economic impact of a rule on small businesses 
and evaluate alternatives that would accomplish the objectives of the 
rule without unduly burdening small entities or erecting barriers that 
would restrict their ability to compete in the marketplace. The Agency 
believes that this rule will have a significant economic impact on a 
substantial number of small entities. As such, the Agency has prepared 
the following final regulatory flexibility analysis of the rule's 
likely economic impact on small businesses pursuant to section 604 of 
the Regulatory Flexibility Act. Section 604 of the RFA requires the 
Agency to provide a summary of the significant issues raised by public 
comments in response to the initial regulatory flexibility analysis. 
The Comments and Responses section includes the comments received on 
the interim final RFA and provides the Agency's responses to the 
comments.
    The rule is the direct result of statutory obligations to implement 
the COOL provisions of the 2002 and 2008 Farm Bills. The intent of this 
law is to provide consumers with additional information on which to 
base their purchasing decisions. Specifically, the law imposes 
additional Federal labeling requirements for covered commodities sold 
by retailers subject to the law. Covered commodities include muscle 
cuts of beef (including veal), lamb, pork, goat; ground beef, ground 
lamb, ground pork, ground goat, and ground chicken; farm-raised fish 
and shellfish; wild fish and shellfish; chicken; perishable 
agricultural commodities; ginseng; peanuts; macadamia nuts; and pecans. 
The implementation date for mandatory COOL for the fish and shellfish 
covered commodities was September 30, 2004. The implementation date for 
the other covered commodities was September 30, 2008.
    Under preexisting Federal laws and regulations, COOL is not 
universally required for the commodities covered by this rule. In 
particular, labeling of United States origin is not mandatory, and 
labeling of imported products at the consumer level is required only in 
certain circumstances. Thus, the Agency has not identified any Federal 
rules that would duplicate or overlap with this rule.
    Many aspects of the mandatory COOL provisions are prescriptive and 
provide little regulatory discretion in rulemaking. The law requires a 
statutorily defined set of food retailers to label the country of 
origin and, if applicable, method of production (wild and/or farm-
raised) of covered commodities. The law also prohibits USDA from using 
a mandatory identification system to verify the country of origin of 
covered commodities. However, the rule provides flexibility in allowing 
market participants to decide how best to implement mandatory COOL in 
their operations. Market participants other than those retailers 
defined by the statute may decide to sell products through marketing 
channels not subject to the rule. A complete discussion of the 
information collection and recordkeeping requirements and associated 
burdens appears in the Paperwork Reduction Act section.
    The objective of the rule is to regulate the activities of 
retailers (as defined by the law) and their suppliers so that retailers 
will be able to fulfill their statutory obligations. The rule requires 
retailers to provide country of origin information for all of the 
covered commodities that they sell. It also requires all firms that 
supply covered commodities to these retailers to provide the retailers 
with the information needed to correctly label the covered commodities. 
In addition, all other firms in the supply chain for the covered 
commodities are potentially affected by the rule because country of 
origin information will need to be maintained and transferred along the 
entire supply chain. In general, the supply chains for the covered 
commodities consist of farms, fishing operations, processors, 
wholesalers, and retailers. Section 604 of the RFA requires the Agency 
to provide an estimate of the number of small entities to which the 
rule will apply. A listing of the number of entities in the supply 
chains for each of the covered commodities can be found in Table 1.
    Retailers covered by this rule must meet the definition of a 
retailer as defined by Perishable Agricultural Commodities Act of 1930 
(PACA). The PACA definition includes only those retailers handling 
fresh and frozen fruits and vegetables with an invoice value of at 
least $230,000 annually. By utilizing an existing regulatory definition 
for a retailer, Congress provided a simple and straightforward approach 
to determine which retailers are subject to the COOL program. In 
utilizing this definition, the number of retailers affected by this 
rule is considerably smaller than the total number of retailers 
nationwide. In addition, there is no requirement that firms in the 
supply chain must supply their products to retailers subject to the 
rule.
    Because country of origin and, if applicable, method of production 
information will have to be passed along the supply chain and made 
available to consumers at the retail level, it is assumed that each 
participant in the supply chain as identified in Table 1 will likely 
encounter recordkeeping

[[Page 2694]]

costs as well as changes or modifications to their business practices. 
Absent more detailed information about each of the entities within each 
of the marketing channels, it is assumed that all such entities will be 
affected to some extent even though some producers and suppliers may 
choose to market their products through channels not subject to the 
requirements of this rule. Therefore, it is estimated that 
approximately 1,333,000 establishments owned by approximately 1,299,000 
firms will be either directly or indirectly affected by this rule. The 
only change from the Interim Regulatory Impact Analysis contained in 
the August 1, 2008, interim final rule is the inclusion of affected 
firms and establishments in the fish and shellfish sector in this final 
rule. These changes and the use of more up-to-date information resulted 
in the number of establishments and firms increasing from the IRIA.
    This rule potentially will have an impact on all participants in 
the supply chain, although the nature and extent of the impact will 
depend on the participant's function within the marketing chain. The 
rule likely will have the greatest impact on retailers and 
intermediaries (handlers, processors, wholesalers, and importers), 
while the impact on individual producers is likely to be relatively 
small.
    The direct incremental costs are estimated for the rule at 
approximately $2,629 million as noted in Table 3. The increase in the 
direct incremental cost in the rule as compared to the IRIA is mainly 
the result of including fish and shellfish in this final rule.
    There are two measures used by the Small Business Administration 
(SBA) to identify businesses as small: sales receipts or number of 
employees. In terms of sales, SBA classifies as small those grocery 
stores with less than $25 million in annual sales and specialty food 
stores with less than $6.5 million in annual sales (13 CFR 121.201). 
Warehouse clubs and superstores with less than $25 million in annual 
sales are also defined as small. SBA defines as small those 
agricultural producers with less than $750,000 in annual sales and 
fishing operations with less than $3.5 million in annual sales. Of the 
other businesses potentially affected by the rule, SBA classifies as 
small those manufacturing firms with less than 500 employees and 
wholesalers with less than 100 employees.
    Retailers: While there are many potential retail outlets for the 
covered commodities, food stores, warehouse clubs, and superstores are 
the primary retail outlets for food consumed at home. In fact, food 
stores, warehouse clubs, and superstores account for 75.6 percent of 
all food consumed at home (Ref. 8). Therefore, the number of these 
stores provides an indicator of the number of entities potentially 
affected by this rule. The 2002 Economic Census (Ref. 9) shows there 
were 42,318 food stores, warehouse clubs, and superstore firms operated 
for the entire year. Most of these firms, however, would not be subject 
to the requirements of this rule.
    The law defines the term retailer as that described in section 1(b) 
of the Perishable Agricultural Commodities Act of 1930 (PACA) Thus, 
under this final rule, a retailer is defined as any person licensed as 
a retailer under PACA. The number of such businesses is estimated from 
PACA data (Ref. 12). The PACA definition of a retailer includes only 
those retailers handling fresh and frozen fruits and vegetables with an 
invoice value of at least $230,000 annually. Therefore, the number of 
retailers affected by this rule is considerably smaller than the number 
of food retailers nationwide. USDA data indicate that there are 4,040 
retail firms as defined by PACA that would thus be subject to the rule. 
As explained below, most small food store firms have been excluded from 
mandatory COOL based on the PACA definition of a retailer.
    The 2002 Economic Census data provide information on the number of 
food store firms by sales categories. Of the 42,318 food store, 
warehouse club, and superstore firms, an estimated 41,629 firms had 
annual sales meeting the SBA definition of a small firm plus 689 other 
firms that would be classified as above the $25 million threshold. USDA 
has no information on the identities of these firms, and the PACA 
database does not identify firms by North American Industry 
Classification System code that would enable matching with Economic 
Census data. USDA assumes, however, that all or nearly all of the 689 
large firms would meet the definition of a PACA retailer because most 
of these larger food retailers likely would handle fresh and frozen 
fruits and vegetables with an invoice value of at least $230,000 
annually. Thus, an estimated 83 percent (3,351 out of 4,040) of the 
retailers subject to the rule are small. However, this is only 8.0 
percent of the estimated total number of small food store retailers. In 
other words, an estimated 92.0 percent of small food store retailers 
would not be subject to the requirements of the rule.
    Retailer costs under the rule are estimated at $1,029 million. 
Costs are estimated at $254,685 per retail firm and $28,273 per retail 
establishment. Retailers will face recordkeeping costs, costs 
associated with supplying country of origin and, if applicable, method 
of production information to consumers and possibly additional handling 
costs. These cost increases may result in changes to retailer business 
practices. The rule does not specify the systems that affected 
retailers must put in place to implement mandatory COOL. Instead, 
retailers will be given flexibility to develop or modify their own 
systems to comply with the rule. There are many ways in which the 
rule's requirements may be met and firms will likely choose the least 
cost method in their particular situation to comply with the rule.
    Wholesalers: Any establishment that supplies retailers with one or 
more of the covered commodities will be required by retailers to 
provide country of origin and, if applicable, method of production 
information so that retailers can accurately supply that information to 
consumers. Of wholesalers potentially affected by the rule, SBA defines 
those having less than 100 employees as small. Importers of covered 
commodities will also be affected by the rule and are categorized as 
wholesalers in the data.
    The 2004 Statistics of United States Businesses (Ref. 13) provides 
information on wholesalers by employment size. For meat and meat 
products wholesalers there is a total of 2,509 firms. Of these, 2,401 
firms have less than 100 employees. This indicates that approximately 
96 percent of meat wholesalers are considered as small firms using the 
SBA definition.
    For fish and seafood wholesalers there are a total of 2,254 firms. 
Of these, 2,199 firms have less than 100 employees. Therefore, 
approximately 98 percent of the fish and seafood wholesalers could be 
considered as small firms.
    There are 510 chicken wholesaler/distributor firms operating 564 
facilities. Of these, there are 332 firms which have less than 100 
employees, resulting in approximately 65 percent of the chicken 
wholesalers/distributors being classified as small businesses.
    For fresh fruit and vegetable wholesalers there are a total of 
4,654 firms. Of these, 4,418 firms have less than 100 employees, 
resulting in approximately 95 percent of the fresh fruit and vegetable 
wholesalers being classified as small businesses.
    While information on ginseng wholesalers is not available, 46 
dealers have been identified and they would all be considered as small 
businesses.
    In addition to specialty wholesalers that primarily handle a single 
covered commodity, there are also general-line wholesalers that handle 
a wide range of

[[Page 2695]]

products. It is assumed that these general-line wholesalers likely 
handle at least one and possibly all of the covered commodities. 
Therefore, the number of general-line wholesale businesses is included 
among entities affected by the rule.
    The 2004 Statistics of United States Businesses provides 
information on general-line grocery wholesalers by employment size. 
There were 3,037 firms in total, and 2,858 firms had less than 100 
employees. This results in approximately 94 percent of the general-line 
grocery wholesalers being classified as small businesses.
    In general, over 94 percent of the wholesalers are classified as 
small businesses. This indicates that most of the wholesalers affected 
by mandatory COOL may be considered as small entities as defined by 
SBA.
    It is estimated that intermediaries (importers and domestic 
wholesalers, handlers, and processors) will incur costs under the rule 
of approximately $1,130 million. Costs are estimated at $48,219 per 
intermediary firm and $45,285 per establishment.
    Wholesalers will encounter increased costs in complying with 
mandatory COOL. Wholesalers will likely face increased recordkeeping 
costs, costs associated with supplying country of origin and, if 
applicable, method of production information to retailers, possibly 
costs associated with segmenting products by country of origin and, if 
applicable, method of production and possibly additional handling 
costs. Some of the comments received on the proposed rule from 
wholesalers and retailers have indicated that retailers may choose to 
source covered commodities from a single supplier that procures the 
covered commodity from only one country in an attempt to minimize the 
costs associated with complying with mandatory COOL. These changes in 
business practices could lead to the further consolidation of firms in 
the wholesaling sector. The rule does not specify the systems that 
affected wholesalers must put in place to implement mandatory COOL. 
Instead, wholesalers will be given flexibility to develop their own 
systems to comply with the rule. There are many ways in which the 
rule's requirements may be met. In addition, wholesalers have the 
option of supplying covered commodities to retailers or other suppliers 
that are not covered by the rule.
    Manufacturers: Any manufacturer that supplies retailers or 
wholesalers with a covered commodity will be required to provide 
country of origin information to retailers so that the information can 
be accurately supplied to consumers. Most manufacturers of covered 
commodities will likely print country of origin and, if applicable, 
method of production information on retail packages supplied to 
retailers. Of the manufacturers potentially affected by the rule, SBA 
defines those having less than 500 employees as small.
    The 2004 Statistics of United States Businesses (Ref. 13) provides 
information on manufacturers by employment size. For livestock 
processing and slaughtering there is a total of 2,943 firms. Of these, 
2,834 firms have less than 500 employees. This suggests that 96 percent 
of livestock processing and slaughtering operations would be considered 
as small firms using the SBA definition.
    For chicken processing there are a total of 38 firms, only two of 
which are classified as small. Thus, only 5 percent of the chicken 
processors are small businesses.
    For fresh and frozen seafood processing there is a total of 516 
firms. Of these, 492 have less than 500 employees and thus, 95 percent 
are considered to be small firms.
    For frozen fruit, juice, and vegetable manufacturers there is a 
total of 155 firms. There are 132 of these firms that are considered to 
be small. This suggests that 85 percent of the frozen fruit, juice, and 
vegetable manufacturers would be considered as small using the SBA 
definition.
    There are a total of 161 roasted nuts and peanut butter 
manufacturers, which includes firms that do drying. Because only green 
and raw peanuts, macadamia nuts, and pecans will require retail country 
of origin labeling under this rule, it is estimated that no more than 5 
percent of peanut, macadamia nut, and pecan manufacturing firms will be 
affected. Therefore, 8 peanut, macadamia nut, and pecan manufacturers 
are estimated to be affected, most if not all of which likely could be 
considered as small.
    In general, approximately 95 percent of the manufacturers are 
classified as small businesses. This indicates that most of the 
manufacturers of covered commodities impacted by the rule would be 
considered as small entities as defined by SBA.
    Manufacturers are included as intermediaries and additional costs 
for these firms are discussed in the previous section addressing 
wholesalers. Manufacturers of covered commodities will encounter 
increased costs in complying with mandatory COOL. Manufacturers like 
wholesalers will likely face increased recordkeeping costs, costs 
associated with supplying country of origin and, if applicable, method 
of production information to retailers, possibly costs associated with 
segmenting products by country of origin and, if applicable, method of 
production and possibly additional handling costs. Some of the comments 
received on the interim final rule from manufacturers have indicated 
that they may limit the number of sources from which they procure raw 
products. These changes in business practices could lead to the further 
consolidation of firms in the manufacturing sector. The rule does not 
specify the systems that affected manufacturers must put in place to 
implement mandatory COOL. Instead, manufacturers will be given 
flexibility to develop their own systems to comply with the rule. There 
are many ways in which the rule's requirements may be met.
    Producers: Producers of fish, perishable agricultural commodities, 
peanuts, macadamia nuts, pecans, and ginseng are directly affected by 
mandatory COOL. Producers of cattle, hogs, sheep, and goats while not 
directly covered by this rule, will nevertheless be affected because 
covered meat commodities are produced from livestock. Whether directly 
or indirectly affected, these producers will more than likely be 
required by handlers and wholesalers to create and maintain country of 
origin and, if applicable, method of production information and 
transfer it to them so that they can readily transfer this information 
to retailers. Individuals who grow-out chickens for an integrator are 
not expected to be affected by this rule.
    SBA defines a small agricultural producer as having annual receipts 
less than $750,000. The 2002 United States Census of Agriculture (Ref. 
7) shows there are 1,018,359 farms that raise beef cows, and 2,458 are 
estimated to have annual receipts greater than $750,000. Thus, at least 
99 percent of these beef cattle farms would be classified as small 
businesses according to the SBA definition. Similarly, an estimated 82 
percent of hog farms would be considered as small and an estimated 99 
percent of sheep, lamb, and goat farms would be considered as small.
    Based on 2002 United States Census of Agriculture information, 92 
percent of vegetable farms, 94 percent of fruit, nut, and berry farms, 
and 91 percent of peanut, macadamia nut, and pecan farms could be 
classified as small.
    Based on 2005 Census of Aquaculture data (Ref. 14), it is estimated 
that at least 95 percent of fish and shellfish farming operations are 
small. Similar information on fishing operations is not

[[Page 2696]]

known to exist. However, it is assumed that the majority of these 
producers would be considered small businesses.
    At the production level, agricultural producers will need to 
maintain records to establish country of origin and, if applicable, 
method of production information for the products they sell. This 
information will need to be conveyed as the products move through the 
supply chains. In general, additional producer costs include the cost 
of establishing and maintaining a recordkeeping system for the country 
of origin and, if applicable, method of production information, animal 
or product identification, and labor and training. Based on our 
knowledge of the affected industries as well as comments received on 
the interim final rules, the proposed rule, and the voluntary 
guidelines, it is believed that producers already have much of the 
information available that could be used to substantiate country of 
origin and, if applicable, method of production claims. Cattle, hog, 
lamb, sheep, chicken, and goat producers may have a slightly larger 
burden for recordkeeping than fruit, vegetable, ginseng, peanut, 
macadamia nut, and pecan producers because animals can be born in one 
country and fed and slaughtered in another country. However, this rule 
provides flexibility in labeling meat covered commodities of multiple 
origins.
    The costs for producers are expected to be relatively limited and 
should not have a larger impact on small producers than large 
producers. Producer costs are estimated at $470 million, or an 
estimated $370 per firm.
    Economic impact on small entities: Information on sales or 
employment is not available for all firms or establishments shown in 
Table 1. However, it is reasonable to expect that this rule will have a 
substantial impact on a number of small businesses. At the wholesale 
and retail levels of the supply chain, the efficiency of these 
operations may be affected. For packers and processors handling 
products sourced from multiple countries, there may also be a desire to 
operate separate shifts for processing products from different origins, 
or to split processing within shifts. In either case, costs are likely 
to increase. Records will need to be maintained to ensure that accurate 
country of origin and, if applicable, method of production information 
is retained throughout the process and to permit compliance and 
enforcement reviews.
    Even if only domestic origin products or products from a single 
country of origin are handled, there may be additional procurement 
costs to source supplies from a single country of origin. Additional 
procurement costs may include higher transportation costs due to longer 
shipping distances and higher acquisition costs due to supply and 
demand conditions for products from a particular country of origin, 
whether domestic or foreign.
    These additional costs may result in consolidations within the 
processor, manufacturer, and wholesaler sectors for these covered 
commodities. Also, to comply with the rule, retailers may seek to limit 
the number of entities from which they purchase covered commodities.
    Additional alternatives considered: Section 604 of the RFA requires 
the Agency to describe the steps taken to minimize the significant 
economic impact on small entities including a discussion of 
alternatives considered. As previously mentioned, the COOL provisions 
of the Act leave little regulatory discretion in defining who is 
directly covered by this rule. The law explicitly identifies those 
retailers required to provide their customers with country of origin 
and, if applicable, method of production information for covered 
commodities (namely, retailers as defined by PACA).
    The law also requires that any person supplying a covered commodity 
to a retailer provide information to the retailer indicating the 
country of origin and, if applicable, method of production of the 
covered commodity. Again, the law provides no discretion regarding this 
requirement for suppliers of covered commodities to provide information 
to retailers.
    The rule has no mandatory requirement, however, for any firm other 
than statutorily defined retailers to make country of origin and, if 
applicable, method of production claims. In other words, no producer, 
processor, wholesaler, or other supplier is required to make and 
substantiate a country of origin and, if applicable, method of 
production claim provided that the commodity is not ultimately sold in 
the form of a covered commodity at the establishment of a retailer 
subject to the rule. Thus, for example, a processor and its suppliers 
may elect not to maintain country of origin and, if applicable, method 
of production information nor to make country of origin and, if 
applicable, method of production claims, but instead sell products 
through marketing channels not subject to the rule. Such marketing 
alternatives include foodservice, export, and retailers not subject to 
the rule. It is estimated that 47.0 percent of United States food sales 
occur through retailers subject to the rule, with the remaining 53.0 
percent sold by retailers not subject to the rule or sold as food away 
from home. Additionally, food product sales into export markets provide 
marketing opportunities for producers and intermediaries that are not 
subject to the provisions of the rule. The majority of product sales 
are not subject to the rule, and there are many current examples of 
companies specializing in production of commodities for foodservice, 
export markets, and other channels of distribution that would not be 
directly affected by the rule.
    The rule does not dictate systems that firms will need to put in 
place to implement the requirements. Thus, different segments of the 
affected industries will be able to develop their own least-cost 
systems to implement COOL requirements. For example, one firm may 
depend primarily on manual identification and paper recordkeeping 
systems, while another may adopt automated identification and 
electronic recordkeeping systems.
    The rule has no requirements for firms to report to USDA. 
Compliance audits will be conducted at firms' places of business. As 
stated previously, required records may be kept by firms in the manner 
most suitable to their operations and may be hardcopy documents, 
electronic records, or a combination of both. In addition, the rule 
provides flexibility regarding where records may be kept. If the 
product is pre-labeled with the necessary country of origin and, if 
applicable, method of production information, records documenting once-
forward and once-back chain of custody information are sufficient as 
long as the source of the claim can be tracked and verified. Such 
flexibility should reduce costs for small entities to comply with the 
rule.
    The rule requires that covered commodities at subject retailers be 
labeled with country of origin and, as applicable, method of production 
information, that suppliers of covered commodities provide such 
information to retailers, and that retailers and their suppliers 
maintain records and information sufficient to verify all country of 
origin and method of production claims. The rule provides flexibility 
regarding the manner in which the required information may be provided 
by retailers to consumers. The rule provides flexibility in the manner 
in which required country of origin information is provided by 
suppliers to retailers, and in the manner in which records and 
information are maintained to substantiate country of origin claims. 
Thus, the rule provides the maximum flexibility practicable to enable 
small

[[Page 2697]]

entities to minimize the costs of the rule on their operations.

Paperwork Reduction Act

    Pursuant to the Paperwork Reduction Act (PRA) (44 U.S.C 3501-3520) 
the information collection provisions contained in this rule have been 
approved by OMB and have been assigned OMB Control Number 0581-0250. 
This revision reflects a 155,464 increase in the number of annual 
responses and an 861,282 increase in the number of annual burden hours 
from the August 1, 2008, interim final rule due to the inclusion of 
fish and shellfish data. The Comments and Responses section includes 
the relevant comments received and provides the Agency's responses to 
the comments. A description of these provisions is given below with an 
estimate of the annual recordkeeping burden.
    Title: Mandatory Country of Origin Labeling of Covered Commodities.
    OMB Number: 0581-0250.
    Type of Request: Revision of a previously approved collection.
    Expiration Date: November 30, 2011.
    Abstract: The COOL provision in the 2002 and 2008 Farm Bills 
requires that specified retailers inform consumers as to the country of 
origin and, if applicable, method of production (wild and/or farm-
raised) of covered commodities. Covered commodities included in this 
rulemaking are: Muscle cuts of beef, lamb, goat, pork, and chicken; 
ground beef, ground lamb, ground pork, ground goat, and ground chicken; 
wild and farm-raised fish and shellfish; perishable agricultural 
commodities; ginseng; peanuts; macadamia nuts; and pecans. Upon request 
by USDA representatives, suppliers and retailers subject to this 
subpart shall make available records maintained in the normal course of 
business that verify an origin claim. Such records shall be provided 
within 5 business days of the request and may be maintained in any 
location. Any person engaged in the business of supplying a covered 
commodity to a retailer (i.e., including but not limited to growers, 
distributors, handlers, packers, and processors), whether directly or 
indirectly, must make country of origin and, if applicable, method of 
production information available to the retailer and must maintain 
records to establish and identify the immediate previous source and 
immediate subsequent recipient of a covered commodity for a period of 1 
year from the date of the transaction. In addition, the supplier of a 
covered commodity that is responsible for initiating a country(ies) of 
origin claim, which in the case of beef, lamb, chicken goat, and pork 
is the slaughter facility, must possess records that are necessary to 
substantiate that claim for a period of 1 year from the date of the 
transaction. In the case of all covered commodities, producer 
affidavits shall also be considered acceptable records that suppliers 
may utilize to initiate origin claims, provided it is made by someone 
having first-hand knowledge of the origin of the covered commodity and 
identifies the covered commodity unique to the transaction.
    For an imported covered commodity, the importer of record must 
ensure that records provide clear product tracking from the port of 
entry into the United States to the immediate subsequent recipient. In 
addition, the records must accurately reflect the country of origin in 
relevant United States Customs and Border Protection entry documents 
and information systems and must be maintained for a period of 1 year 
from the date of the transaction.
    As previously mentioned, upon request by USDA representatives, 
suppliers and retailers subject to this subpart shall make available to 
USDA representatives, records maintained in the normal course of 
business that verify an origin claim. Such records shall be provided 
within 5 business days of the request and may be maintained in any 
location.
    Description of Recordkeepers: Individuals who supply covered 
commodities, whether directly to retailers or indirectly through other 
participants in the marketing chain, are required to establish and 
maintain country of origin and, if applicable, method of production 
information for the covered commodities and supply this information to 
retailers. As a result, producers, handlers, manufacturers, 
wholesalers, importers, and retailers of covered commodities will be 
affected by this rule.
    Burden: Approximately 1,333,000 establishments owned by 
approximately 1,299,000 firms are estimated to be either directly or 
indirectly affected by this rule. The only changes from the IRIA are 
increases in the numbers of affected firms and establishments due to 
including and updating fish and shellfish information.
    In general, the supply chain for each of the covered commodities 
includes agricultural producers or fish harvesters, processors, 
wholesalers, importers, and retailers. Imported products may be 
introduced at any level of the supply chain. Other intermediaries, such 
as auction markets, may be involved in transferring products from one 
stage of production to the next. The rule's paperwork burden will be 
incurred by the number and types of firms and establishments listed in 
Table 9, which follows.

                                                     Table 9--Costs Associated With Paperwork Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                         Maintenance
                             Type                                     Firms         Initial costs    Establishments         costs          Total costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Producers:
    Cattle & Calves...........................................           971,400        75,699,259           971,400       145,651,716       221,350,975
    Sheep & Lambs.............................................            69,090         5,384,046            69,090        10,359,355        15,743,400
    Hogs & Pigs...............................................            65,540         5,107,401            65,540         9,827,068        14,934,469
    Goats.....................................................             9,146           712,745             9,146         1,371,381         2,084,126
    Chicken Producer and Processor............................                38             2,961               168            25,190            28,151
    Farm-Raised Fish & Shellfish..............................             3,752           292,386             3,752           562,575           854,961
    Fishing...................................................            71,128         5,542,863            71,142         3,555,677         9,098,540
    Fruits & Vegetables.......................................            79,800         6,218,654            79,800         3,788,984        10,007,638
    Ginseng...................................................               190            14,806               190             9,021            23,828
    Peanuts...................................................               650            50,653               650            30,863            81,516
    Pecans....................................................             1,119            87,192             1,119            53,130           140,323
    Macadamia.................................................                53             4,130                53             2,516             6,647
Handlers, Processors, & Wholesalers:
    Stockyards, Dealers & Market Agencies.....................             6,807         8,910,363             6,807         6,589,040        15,499,403
    Livestock Processing & Slaughtering.......................             2,943         3,582,387             3,207        62,086,237        65,938,624
    Meat & Meat Product Wholesale.............................             2,509         3,284,281             2,706         2,619,354         5,903,635

[[Page 2698]]

 
    Chicken Processor and Wholesaler..........................               510           667,590               564           545,941         1,213,531
    Fresh & Frozen Seafood Processing.........................               516           675,444               590           571,108         1,246,552
    Fish & Seafood Wholesale..................................             2,254         2,950,486             2,330         2,255,393         5,205,879
    Frozen Fruit, Juice & Vegetable Mfg.......................               155           202,895               247           239,091           441,986
    Fresh Fruit & Vegetable Wholesale.........................             4,654         6,092,086             5,016         4,855,388        10,947,474
    Ginseng Dealers...........................................                46            60,214                46            44,527           104,741
    Roasted Nuts & Peanut Butter Mfg..........................                 8            10,472                 9             8,712            19,184
    Peanut, Pecans, & Macadamia Nut Wholesalers...............                 5             6,545                 5             4,840            11,385
    General Line Grocery Wholesalers..........................             3,037         3,975,433             3,436         3,325,979         7,301,412
Retailers.....................................................             4,040         5,288,360            36,392       247,264,534       252,552,894
        Totals
            Producers.........................................         1,271,906        99,117,097         1,262,050       175,237,476       274,354,573
            Handlers, Processors, & Wholesalers...............            23,444        30,688,196            24,963        83,145,610       113,833,806
            Retailers.........................................             4,040         5,288,360            36,392       247,264,534       252,552,894
                                                               -----------------------------------------------------------------------------------------
                Grand Total...................................         1,299,390       135,093,653         1,333,405       505,647,620       640,741,274
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The affected firms and establishments will broadly incur two types 
of costs. First, firms will incur initial or start-up costs to comply 
with the rule. Initial costs will be borne by each firm, even though a 
single firm may operate more than one establishment. Second, 
enterprises will incur additional recordkeeping costs associated with 
storing and maintaining records on an ongoing basis. These activities 
will take place in each establishment operated by each affected 
business.
    With respect to initial recordkeeping costs, it is believed that 
most producers currently maintain many of the types of records that 
would be needed to substantiate country of origin and, if applicable, 
method of production claims. However, producers do not typically record 
or pass along country of origin and, if applicable, method of 
production information to subsequent purchasers. Therefore, producers 
will incur some additional incremental costs to record, maintain, and 
transfer country of origin and, if applicable, method of production 
information to substantiate required claims made at retail. Because 
much of the necessary recordkeeping has already been developed during 
typical farm, ranch, and fishing operations, it is estimated that the 
incremental costs for producers to supplement existing records with 
country of origin and, if applicable, method of production information 
will be relatively small per firm. Examples of initial or start-up 
costs would be any additional recordkeeping burden needed to record the 
required country of origin and, if applicable, method of production 
information and transfer this information to handlers, processors, 
wholesalers, or retailers via records used in the normal course of 
business.
    Producers will need an estimated 4 hours to modify an established 
system for organizing records to carry out the purposes of this 
regulation. This additional time would be required to modify existing 
recordkeeping systems to incorporate any added information needed to 
substantiate country of origin claims. Although not all farm products 
ultimately will be sold at retail establishments covered by this rule, 
it is assumed that virtually all producers will wish to keep their 
marketing options as flexible as possible. Thus, all producers of 
covered commodities or livestock (in the case of the covered meat 
commodities) will establish recordkeeping systems sufficient to 
substantiate country of origin claims. It is also recognized that some 
operations will require substantially more than 4 hours modifying their 
recordkeeping systems. In particular, it is believed that livestock 
backgrounders, stockers, and feeders will face a greater burden in 
establishing recordkeeping systems. These types of operations will need 
to track country of origin information for animals brought into the 
operation as well as for animals sold from the operation via records 
used in the normal course of business, increasing the burden of 
substantiating country of origin claims. Conversely, operations such as 
fruit and vegetable farms that produce only United States products 
likely will require little if any change to their existing 
recordkeeping systems in order to substantiate country of origin 
claims. Overall, it is believed that 4 hours represents a reasonable 
estimate of the average additional time that will be required per year 
across all types of producers.
    In estimating initial recordkeeping costs, 2006 wage rates and 
benefits published by the Bureau of Labor statistics from the National 
Compensation Survey are used.
    For producers, it is assumed that the added work needed to 
initially adapt an existing recordkeeping system for country of origin 
and, if applicable, method of production information is primarily a 
bookkeeping task. This task may be performed by independent 
bookkeepers, or in the case of operations that perform their own 
bookkeeping, an individual with equivalent skills. The Bureau of Labor 
Statistics (BLS) publishes wage rates for bookkeepers, accounting, and 
auditing clerks (Ref. 15). It is assumed that this wage rate represents 
the cost for producers to hire an independent bookkeeper. In the case 
of producers who currently perform their own bookkeeping, it is assumed 
that this wage rate represents the opportunity cost of the producers' 
time for performing these tasks. The May 2006 wage rate is estimated at 
$15.28 per hour. For this analysis, an additional 27.5 percent is added 
to the wage rate to account for total benefits which includes social 
security, unemployment insurance, workers compensation, etc. The 
estimate of this additional cost to employers is published by the BLS 
(Ref. 15). At 4 hours per firm and a cost of $19.48 per hour, initial 
recordkeeping costs to producers are estimated at approximately $135.1 
million to modify existing recordkeeping systems in order to 
substantiate country of origin and, if applicable, method of production 
claims.

[[Page 2699]]

    The recordkeeping burden on handlers, processors, wholesalers, and 
retailers is expected to be more complex than the burden most producers 
face. These operations will need to maintain country of origin and, if 
applicable, methods of production information on the covered 
commodities purchased and subsequently furnish that information to the 
next participant in the supply chain. This will require adding 
additional information to a firm's bills of lading, invoices, or other 
records associated with movement of covered commodities from purchase 
to sale. Similar to producers, however, it is believed that most of 
these operations already maintain many of the types of necessary 
records in their existing systems. Thus, it is assumed that country of 
origin and, if applicable, method of production information will 
require only modification of existing recordkeeping systems rather than 
development of entirely new systems.
    The Label Cost Model Developed for FDA by RTI International (Ref. 
16; Ref. 17) is used to estimate the cost of including additional 
country of origin and, if applicable, method of production information 
to an operation's records. It is assumed that a limited information, 
one-color redesign of a paper document will be sufficient to comply 
with the rule's recordkeeping requirements. The number of hours 
required to complete the redesign is estimated to be 29 with an 
estimated cost at $1,309 per firm. While the cost will be much higher 
for some firms and lower for others, it is believed that $1,309 
represents a reasonable estimate of average cost for all firms. Based 
on this, it is estimated that the initial recordkeeping costs to 
intermediaries such as handlers, processors, and wholesalers (importers 
are included with wholesalers) will be approximately $31 million, and 
initial recordkeeping costs at retail will be approximately $5 million. 
The recordkeeping cost to producers increases due to the inclusion of 
fish and shellfish.
    The total initial recordkeeping costs for all firms are thus 
estimated at approximately $135 million. This increase in the 
recordkeeping cost as compared to the recordkeeping costs in the 
interim final rule is due to the inclusion of fish and shellfish.
    In addition to these one-time costs to modify recordkeeping 
systems, enterprises will incur additional recordkeeping costs 
associated with storing and maintaining records. These costs are 
referred to as maintenance costs in Table 9. Again, the marginal cost 
for producers to maintain and store any additional information needed 
to substantiate country of origin and, if applicable, method of 
production claims is expected to be relatively small.
    For wild fish harvesters, fruit, vegetable, and ginseng producers, 
and peanut, macadamia nut, and pecan producers, country of origin and, 
if applicable, method of production generally is established at the 
time that the product is harvested, and thus there is no need to track 
country of origin and, if applicable, method of production information 
throughout the production lifecycle of the product. Likewise, this is 
also the case for chicken as the vast majority of chicken products sold 
by covered retailers are from chickens that are produced in a 
controlled environment in the United States. This group of producers is 
estimated to require an additional 4 hours a year, or 1 hour per 
quarter, to maintain country of origin and, if applicable, method of 
production information.
    Compared to wild fish harvesters, chicken, fruit, vegetable, 
ginseng, peanut, macadamia nut, and pecan producers, it is expected 
that fish farmers and livestock producers will incur higher costs to 
maintain country of origin and, if applicable, method of production 
information. Wild fish, chicken, fruits, vegetables, ginseng, peanuts, 
and macadamia nuts are generally harvested once and then shipped by the 
producer to the first handler. In contrast, farm-raised fish and 
livestock can and often do move through several geographically 
dispersed operations prior to sale for processing or slaughter. Cattle, 
for example, typically change ownership between 2 to 3 times before 
they are slaughtered and processed. Fish and livestock may be acquired 
from other countries by United States producers, which may complicate 
the task of tracking country of origin and, if applicable, method of 
production information. Because animals are frequently sorted and 
regrouped at various stages of production and may change ownership 
several times prior to slaughter, country of origin information will 
need to be maintained on animals as they move through their lifecycle. 
Thus, it is expected that the recordkeeping burden for fish farmers and 
livestock producers will be higher than it will be for producers of 
other covered commodities. It is estimated that these producers will 
require an additional 12 hours a year, or 1 hour per month, to maintain 
country of origin and, if applicable, method of production records. 
Again, this is an average for all enterprises.
    It is assumed that farm labor will primarily be responsible for 
maintaining country of origin information at producers' enterprises. 
NASS data (Ref. 18) are used to estimate average farm wage rates--$9.80 
per hour for livestock workers and $9.31 per hour for other crops 
workers. Applying the rate of 27.5 percent to account for benefits, 
this results in an hourly rate of $12.50 for livestock workers and 
$11.87 for other crops workers. Wage rates for fish workers were 
unavailable, so the average wage rate for livestock workers is used. 
Assuming 12 hours of labor per year for livestock and farmed fish 
operations and 4 hours per year for all other operations, the estimated 
total annual maintenance costs to producers is $175 million which is 
higher than the initial maintenance costs in the interim final rule. 
The increase in the estimated maintenance cost is due to the inclusion 
of fish and shellfish in this final rule.
    It is expected that intermediaries such as handlers, processors, 
and wholesalers will face higher costs per enterprise to maintain 
country of origin and, if applicable, method of production information 
compared to costs faced by producers. Much of the added cost is 
attributed to the larger average size of these enterprises compared to 
the average producer enterprise. In addition, these intermediaries will 
need to track products both coming into and going out of their 
businesses.
    With the exception of livestock processing and slaughtering 
establishments, the maintenance burden hours for country of origin and, 
if applicable, method of production recordkeeping is estimated to be 52 
hours per year per establishment. For this part of the supply chain, 
the recordkeeping activities are ongoing and are estimated to require 
an additional hour a week. It is expected, however, that livestock 
processing and slaughtering enterprises will experience a more 
intensive recordkeeping burden. These enterprises disassemble carcasses 
into many individual cuts, each of which must maintain its country of 
origin identity. In addition, businesses that produce ground beef, 
lamb, goat, and pork products may commingle product from multiple 
origins, which will require some monitoring and recordkeeping to ensure 
accurate labeling and to substantiate the country of origin information 
provided to retailers. Maintenance of the recordkeeping system at these 
establishments is estimated to total 1,040 hours per establishment, or 
20 hours per week.
    Maintenance activities will include inputting, tracking, and 
storing country of origin and, if applicable, method of production 
information for each covered

[[Page 2700]]

commodity. Since this is mostly an administrative task, the cost is 
estimated by using the May 2006 BLS wage rate from the National 
Compensation Survey for administrative support occupations ($14.60 per 
hour with an additional 27.5 percent added to cover benefit costs for a 
total of $18.62 per hour). This occupation category includes stock and 
inventory clerks and record clerks. Coupled with the assumed hours per 
establishment, the resulting total annual maintenance costs to 
handlers, processors, and wholesalers and other intermediaries are 
estimated at approximately $83 million.
    Retailers will need to supply country of origin and, if applicable, 
method of production information for each covered commodity sold at 
each store. Therefore, additional recordkeeping maintenance costs are 
believed to affect each establishment. Because tracking of the covered 
commodities will be done daily, it is believed that an additional hour 
of recordkeeping activities for country of origin and, if applicable, 
method of production information will be incurred daily at each retail 
establishment. These additional activities result in an estimated 365 
additional hours per year per establishment. Using the BLS wage rate 
for administrative support occupations ($14.60 per hour with an 
additional 27.5 percent added to cover benefit costs for a total of 
$18.62 per hour) results in total estimated annual maintenance costs to 
retailers of $247 million.
    The total maintenance recordkeeping costs for all enterprises are 
thus estimated at approximately $506 million. The increase in the total 
maintenance cost over the maintenance cost estimate in the interim 
final rule is due to the inclusion of fish and shellfish in this final 
rule.
    The total first-year recordkeeping burden is calculated by summing 
the initial and maintenance costs. The total recordkeeping costs are 
estimated for producers at approximately $274 million; for handlers, 
processors, and wholesalers at approximately $114 million; and for 
retailers at approximately $253 million. The total recordkeeping cost 
for all participants in the supply chain for covered commodities is 
estimated at $641 million for the first year, with subsequent 
maintenance costs of $506 million per year.
    Annual Reporting and Recordkeeping Burden for the First Year 
(Initial): Public reporting burden for establishing this initial 
recordkeeping is estimated to average 4.5 hours per year per individual 
recordkeeper.
    Estimated Number of Firms Recordkeepers: 1,299,390.
    Estimated Total Annual Burden: 5,884,661 hours.
    Annual Reporting and Recordkeeping Burden (Maintenance): Public 
reporting burden for recordkeeping storage and maintenance is estimated 
to average 23.8 hours per year per individual recordkeeper.
    Estimated Number of Establishments Recordkeepers: 1,333,405.
    Estimated Total Annual Burden: 31,790,642 hours.
    To the extent possible, the Agency complies with the e-Government 
Act, which requires Government agencies in general to provide the 
public the option of submitting information or transacting business 
electronically to the maximum extent possible. This information 
collection has no forms and is only for recordkeeping purposes. 
Therefore, the provisions of an electronic submission alternative are 
not required.

References

1. Dinopoulos, Elias, Grigorios Livanis, and Carol West. ``How Cool 
is C.O.O.L.?'' Working Paper WPTC 05-11, University of Florida, 
International Agricultural Trade and Policy Center, 2005.
2. Plastina, Alejandro and Konstantinos Giannakas. ``Market and 
Welfare Effects of Mandatory Country-of-Origin Labeling in the US 
Specialty Crops Sector.'' Selected Paper American Agricultural 
Economics Association Annual Meeting, Portland, Oregon, July 2007.
3. Mabiso, Athur, James Sterns, Lisa House, and Allen Wysocki. 
``Estimating Consumers'' Willingness-To-Pay for Country-Of-Origin 
Labels in Fresh Apples and Tomatoes: A Double-Hurdle Probit Analysis 
of American Data Using Factor Scores.'' American Agricultural 
Economics Association Annual Meeting, Providence, Rhode Island, July 
2005.
4. Krissoff, Barry, Fred Kuchler, Kenneth Nelson, Janet Perry, and 
Agapi Somwaru. ``Country of Origin Labeling: Theory and Observation. 
USDA, ERS, WRS-04-02, January 2004.
5. NASS, USDA, Wisconsin Department of Agriculture. Wisconsin 2007 
Agricultural Statistics. http://www.nass.usda.gov/Statistics_by_State/Wisconsin/
6. NASS, USDA, Hawaii Department of Agriculture. Hawaii 2007 
Agricultural Statistics. http://www.nass.usda.gov/hi/stats/t_of_c.htm
7. NASS, USDA. 2002 Census of Agriculture.
8. ERS, USDA. Food CPI, Prices and Expenditures: Sales of Food at 
Home by Type of Outlet. http://www.ers.usda.gov/Briefing/CPIFoodAndExpenditures/Data/table16.htm
9. U.S. Census Bureau. 2002 Economic Census. Retail Trade Subject 
Series. Establishment and Firm Size. EC97R44S-SZ. Issued September 
2004.
10. Office of the Chief Economist, USDA. USDA Agricultural Baseline 
Projections to 2016, Staff Report WAOB-2007-1. February 2007.
11. Bureau of Economic Analysis. http://www.bea.gov/national/index.htm#gdp.
12. AMS, USDA. Perishable Agricultural Commodities Act database.
13. U.S. Census Bureau. 2004 Statistics of U.S. Businesses.
14. NASS, USDA. 2005 Census of Aquaculture.
15. Bureau of Labor Statistics, Department of Labor, National 
Compensation Survey, May 2006, Employer Cost for Employee 
Compensation.
16. Food and Drug Administration. ``Establishment and Maintenance of 
Records Under the Public Health Security and Bioterrorism 
Preparedness and Response Act of 2002,'' proposed rule. May 9, 2003.
17. RTI, International 2000. FDA Labeling Cost Model: Final Report. 
Revised April 2002.
18. NASS, USDA. Farm Labor, August 17, 2007.

Executive Order 12988

    The contents of this rule were reviewed under Executive Order 
12988, Civil Justice Reform. This rule is not intended to have a 
retroactive effect. States and local jurisdictions are preempted from 
creating or operating country of origin labeling programs for the 
commodities specified in the Act and these regulations. With regard to 
other Federal statutes, all labeling claims made in conjunction with 
this regulation must be consistent with other applicable Federal 
requirements. There are no administrative procedures that must be 
exhausted prior to any judicial challenge to the provisions of this 
rule.

Civil Rights Review

    AMS considered the potential civil rights implications of this 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, national origin, gender, religion, age, disability, sexual 
orientation, marital or family status, political beliefs, parental 
status, or protected genetic information. This review included persons 
that are employees of the entities that are subject to these 
regulations. This final rule does not require affected entities to 
relocate or alter their operations in ways that could adversely affect 
such persons or groups. Further, this rule will not deny any persons or 
groups the benefits of the program or subject any persons or groups to 
discrimination.

Executive Order 13132

    This rule has been reviewed under Executive Order 13132, 
Federalism. This Order directs agencies to construe, in regulations and 
otherwise, a Federal statute to preempt State law only where

[[Page 2701]]

the statute contains an express preemption provision or there is some 
other clear evidence to conclude that the Congress intended preemption 
of State law, or where the exercise of State authority conflicts with 
the exercise of Federal authority under the Federal statute. This rule 
is required by the 2002 Farm Bill, as amended by the 2008 Farm Bill.
    While this statute does not contain an express preemption 
provision, it is clear from the language in the statute that Congress 
intended preemption of State law. The law assigns enforcement 
responsibilities to the Secretary and encourages the Secretary to enter 
into partnerships with States with enforcement infrastructure to assist 
in the administration of the program. The law provides for a 30-day 
period in which retailers and suppliers may take the necessary 
corrective action after receiving notice of a nonconformance. The 
Secretary can impose a civil penalty only if the retailer or supplier 
has not made a good faith effort to comply and only after the Secretary 
provides notice and an opportunity for a hearing. Allowing private 
rights of actions would frustrate the purpose of this comprehensive 
enforcement system in which Congress struck a delicate balance of 
imposing a requirement, but ensuring that the agency had wide latitude 
in enforcement discretion. Thus, it is clear that State laws and other 
actions were intended to be preempted.
    Several States have implemented mandatory programs for country of 
origin labeling of certain commodities. For example, Alabama, Arkansas, 
Mississippi, and Louisiana have origin labeling requirements for 
certain seafood products. Other States including Wyoming, Idaho, North 
Dakota, South Dakota, Louisiana, Kansas, and Mississippi have origin 
labeling requirements for certain meat products. In addition, the State 
of Florida and the State of Maine have origin labeling requirements for 
fresh produce items.
    To the extent that these State country of origin labeling programs 
encompass commodities that are not governed by this regulation, the 
States may continue to operate them. For those State country of origin 
labeling programs that encompass commodities that are governed by this 
regulation, these programs are preempted. In most cases, the 
requirements contained within this rule are more stringent and 
prescriptive than the requirements of the State programs. With regard 
to consultation with States, as directed by the Executive Order 13132, 
AMS has consulted with the States that have country of origin labeling 
programs.
    The effective date of this regulation is March 16, 2009. In the 
August 1, 2008, interim final rule for the remaining covered 
commodities, the Agency indicated that during the six month period 
following the effective date of that regulation, AMS would conduct an 
industry education and outreach program concerning the provisions and 
requirements of that rule. AMS will continue this period of informed 
compliance for this regulation through March 2009.

List of Subjects

7 CFR Part 60

    Agricultural commodities, Fish, Food labeling, Reporting and 
recordkeeping requirements.

7 CFR Part 65

    Agricultural commodities, Food labeling, Meat and meat products, 
Macadamia nuts, Peanuts, Pecans, Reporting and recordkeeping 
requirements.

0
For the reasons set forth in the preamble, 7 CFR chapter I is amended 
as follows:
0
1. Part 60 is revised to read as follows:

PART 60--COUNTRY OF ORIGIN LABELING FOR FISH AND SHELLFISH

Subpart A--General Provisions

Definitions

Sec.
60.101 Act.
60.102 AMS.
60.103 Commingled covered commodities.
60.104 Consumer package.
60.105 Covered commodity.
60.106 Farm-raised fish.
60.107 Food service establishment.
60.108-60.110 [Reserved]
60.111 Hatched.
60.112 Ingredient.
60.113 [Reserved]
60.114 Legibly.
60.115 [Reserved]
60.116 Person.
60.117 [Reserved]
60.118 Pre-labeled.
60.119 Processed food item.
60.120 [Reserved]
60.121 [Reserved]
60.122 Production step.
60.123 Raised.
60.124 Retailer.
60.125 Secretary.
60.126 [Reserved]
60.127 United States.
60.128 United States country of origin.
60.129 USDA.
60.130 U.S. flagged vessel.
60.131 Vessel flag.
60.132 Waters of the United States.
60.133 Wild fish and shellfish.

Country of Origin Notification

60.200 Country of origin notification.
60.300 Labeling.

Recordkeeping

60.400 Recordkeeping requirements.
Appendix A to Subpart A-Exclusive Economic Zone and Maritime 
Boundaries; Notice of Limits

    Authority: 7 U.S.C. 1621 et seq.

Subpart A--General Provisions

Definitions


Sec.  60.101  Act.

    Act means the Agricultural Marketing Act of 1946 (7 U.S.C. 1621 et 
seq.).


Sec.  60.102  AMS.

    AMS means the Agricultural Marketing Service, United States 
Department of Agriculture.


Sec.  60.103  Commingled covered commodities.

    Commingled covered commodities means covered commodities (of the 
same type) presented for retail sale in a consumer package that have 
been prepared from raw material sources having different origins.


Sec.  60.104  Consumer package.

    Consumer package means any container or wrapping in which a covered 
commodity is enclosed for the delivery and/or display of such commodity 
to retail purchasers.


Sec.  60.105  Covered commodity.

    (a) Covered commodity means:
    (1) [Reserved]
    (2) [Reserved]
    (3) Farm-raised fish and shellfish (including fillets, steaks, 
nuggets, and any other flesh);
    (4) Wild fish and shellfish (including fillets, steaks, nuggets, 
and any other flesh);
    (5) [Reserved]
    (6) [Reserved]
    (b) Covered commodities are excluded from this part if the 
commodity is an ingredient in a processed food item as defined in Sec.  
60.119.


Sec.  60.106  Farm-raised fish.

    Farm-raised fish means fish or shellfish that have been harvested 
in controlled environments, including ocean-ranched (e.g., penned) fish 
and including shellfish harvested from leased beds that have been 
subjected to production enhancements such as providing protection from 
predators, the addition of artificial structures, or providing 
nutrients; and fillets, steaks, nuggets, and any other flesh from a 
farm-raised fish or shellfish.

[[Page 2702]]

Sec.  60.107  Food service establishment.

    Food service establishment means a restaurant, cafeteria, lunch 
room, food stand, saloon, tavern, bar, lounge, or other similar 
facility operated as an enterprise engaged in the business of selling 
food to the public. Similar food service facilities include salad bars, 
delicatessens, and other food enterprises located within retail 
establishments that provide ready-to-eat foods that are consumed either 
on or outside of the retailer's premises.


Sec.  60.108-60.110  [Reserved]


Sec.  60.111  Hatched.

    Hatched means emerged from the egg.


Sec.  60.112  Ingredient.

    Ingredient means a component either in part or in full, of a 
finished retail food product.


Sec.  60.113  [Reserved]


Sec.  60.114  Legible.

    Legible means text that can be easily read.


Sec.  60.115  [Reserved]


Sec.  60.116  Person.

    Person means any individual, partnership, corporation, association, 
or other legal entity.


Sec.  60.117  [Reserved]


Sec.  60.118  Pre-labeled.

    Pre-labeled means a covered commodity that has the commodity's 
country of origin and method of production and the name and place of 
business of the manufacturer, packer, or distributor on the covered 
commodity itself, on the package in which it is sold to the consumer, 
or on the master shipping container. The place of business information 
must include at a minimum the city and state or other acceptable locale 
designation.


Sec.  60.119  Processed food item.

    Processed food item means a retail item derived from fish or 
shellfish that has undergone specific processing resulting in a change 
in the character of the covered commodity, or that has been combined 
with at least one other covered commodity or other substantive food 
component (e.g., breading, tomato sauce), except that the addition of a 
component (such as water, salt, or sugar) that enhances or represents a 
further step in the preparation of the product for consumption, would 
not in itself result in a processed food item. Specific processing that 
results in a change in the character of the covered commodity includes 
cooking (e.g., frying, broiling, grilling, boiling, steaming, baking, 
roasting), curing (e.g., salt curing, sugar curing, drying), smoking 
(hot or cold), and restructuring (e.g., emulsifying and extruding, 
compressing into blocks and cutting into portions). Examples of items 
excluded include fish sticks, surimi, mussels in tomato sauce, seafood 
medley, coconut shrimp, soups, stews, and chowders, sauces, pates, 
smoked salmon, marinated fish fillets, canned tuna, canned sardines, 
canned salmon, crab salad, shrimp cocktail, gefilte fish, sushi, and 
breaded shrimp.


Sec.  60.120  [Reserved]


Sec.  60.121  [Reserved]


Sec.  60.122  Production step.

    Production step means in the case of:
    (a) [Reserved]
    (b) Farm-raised Fish and Shellfish: Hatched, raised, harvested, and 
processed.
    (c) Wild Fish and Shellfish: Harvested and processed.


Sec.  60.123  Raised.

    Raised means in the case of:
    (a) [Reserved]
    (b) Farm-raised fish and shellfish as it relates to the production 
steps defined in Sec.  60.122: The period of time from hatched to 
harvested.


Sec.  60.124  Retailer.

    Retailer means any person licensed as a retailer under the 
Perishable Agricultural Commodities Act of 1930 (7 U.S.C. 499a(b)).


Sec.  60.125  Secretary.

    Secretary means the Secretary of Agriculture of the United States 
or any person to whom the Secretary's authority has been delegated.


Sec.  60.126  [Reserved]


Sec.  60.127  United States.

    United States means the 50 States, the District of Columbia, the 
Commonwealth of Puerto Rico, the U.S. Virgin Islands, American Samoa, 
Guam, the Northern Mariana Islands, and any other Commonwealth, 
territory, or possession of the United States, and the waters of the 
United States as defined in Sec.  60.132.


Sec.  60.128  United States country of origin.

    United States country of origin means in the case of:
    (a) [Reserved]
    (b) [Reserved]
    (c) Farm-raised Fish and Shellfish: From fish or shellfish hatched, 
raised, harvested, and processed in the United States, and that has not 
undergone a substantial transformation (as established by U.S. Customs 
and Border Protection) outside of the United States.
    (d) Wild-fish and Shellfish: From fish or shellfish harvested in 
the waters of the United States or by a U.S. flagged vessel and 
processed in the United States or aboard a U.S. flagged vessel, and 
that has not undergone a substantial transformation (as established by 
U.S. Customs and Border Protection) outside of the United States.
    (e) [Reserved]
    (f) [Reserved]


Sec.  60.129  USDA.

    USDA means the United States Department of Agriculture.


Sec.  60.130  U.S. flagged vessel.

    U.S. flagged vessel means:
    (a) Any vessel documented under chapter 121 of title 46, United 
States Code; or
    (b) Any vessel numbered in accordance with chapter 123 of title 46, 
United States Code.


Sec.  60.131  Vessel flag.

    Vessel flag means the country of registry for a vessel, ship, or 
boat.


Sec.  60.132  Waters of the United States.

    Waters of the United States means those fresh and ocean waters 
contained within the outer limit of the Exclusive Economic Zone (EEZ) 
of the United States as described by the Department of State Public 
Notice 2237 published in the Federal Register volume 60, No. 163, 
August 23, 1995, pages 43825-43829. The Department of State notice is 
republished in Appendix A to this subpart.


Sec.  60.133  Wild fish and shellfish.

    Wild fish and shellfish means naturally-born or hatchery-originated 
fish or shellfish released in the wild, and caught, taken, or harvested 
from non-controlled waters or beds; and fillets, steaks, nuggets, and 
any other flesh from a wild fish or shellfish.

Country of Origin Notification


Sec.  60.200  Country of origin notification.

    In providing notice of the country of origin as required by the 
Act, the following requirements shall be followed by retailers:
    (a) General. Labeling of covered commodities offered for sale 
whether individually, in a bulk bin, display case, carton, crate, 
barrel, cluster, or consumer package must contain country of origin and 
method of production information (wild and/or farm-raised) as set forth 
in this regulation.
    (b) Exemptions. Food service establishments as defined in Sec.  
60.107

[[Page 2703]]

are exempt from labeling under this subpart.
    (c) Exclusions. A covered commodity is excluded from this subpart 
if it is an ingredient in a processed food item as defined in Sec.  
60.119.
    (d) Designation of Method of Production (Wild and/or Farm-Raised). 
Fish and shellfish covered commodities shall also be labeled to 
indicate whether they are wild and/or farm-raised as those terms are 
defined in this regulation.
    (e) Labeling Covered Commodities of United States Origin. A covered 
commodity may only bear the declaration of ``Product of the U.S.'' at 
retail if it meets the definition of United States Country of Origin as 
defined in Sec.  60.128.
    (f) Labeling Imported Products That Have Not Undergone Substantial 
Transformation in the United States. An imported covered commodity 
shall retain its origin as declared to U.S. Customs and Border 
Protection at the time the product entered the United States, through 
retail sale, provided that it has not undergone a substantial 
transformation (as established by U.S. Customs and Border Protection) 
in the United States.
    (g) Labeling Imported Products That Have Subsequently Been 
Substantially Transformed in the United States.
    (1) [Reserved]
    (2) Wild and Farm-Raised Fish and Shellfish: If a covered commodity 
was imported from country X and subsequently substantially transformed 
(as established by U.S. Customs and Border Protection) in the United 
States or aboard a U.S. flagged vessel, such product shall be labeled 
at retail as ``From country X, processed in the United States.'' 
Alternatively, the product may be labeled as ``Product of country X and 
the United States''.
    (h) Labeling Commingled Covered Commodities. (1) For imported 
covered commodities that have not subsequently been substantially 
transformed in the United States that are commingled with other 
imported covered commodities that have not been substantially 
transformed in the United States, and/or covered commodities of U.S. 
origin and/or covered commodities as described in Sec.  60.200(g), the 
declaration shall indicate the countries of origin for covered 
commodities in accordance with existing Federal legal requirements.
    (2) For imported covered commodities that have subsequently 
undergone substantial transformation in the United States that are 
commingled with other imported covered commodities that have 
subsequently undergone substantial transformation in the United States 
(either prior to or following substantial transformation in the United 
States) and/or U.S. origin covered commodities, the declaration shall 
indicate the countries of origin contained therein or that may be 
contained therein.
    (i) Remotely Purchased Products. For sales of a covered commodity 
in which the customer purchases a covered commodity prior to having an 
opportunity to observe the final package (e.g., Internet sales, home 
delivery sales, etc.), the retailer may provide the country of origin 
notification and method of production (wild and/or farm-raised) 
designation either on the sales vehicle or at the time the product is 
delivered to the consumer.


Sec.  60.300  Labeling.

    (a) Country of origin declarations and method of production (wild 
and/or farm-raised) designations can either be in the form of a 
placard, sign, label, sticker, band, twist tie, pin tag, or other 
format that provides country of origin and method of production 
information. The country of origin declaration and method of production 
(wild and/or farm-raised) designation may be combined or made 
separately. Except as provided in Sec.  60.200(g) and 60.200(h) of this 
regulation, the declaration of the country(ies) of origin of a product 
shall be listed according to applicable Federal legal requirements. 
Country of origin declarations may be in the form of a check box 
provided it is in conformance with other Federal legal requirements. 
Various forms of the production designation are acceptable, including 
``wild caught'', ``wild'', ``farm-raised'', ``farmed'', or a 
combination of these terms for blended products that contain both wild 
and farm-raised fish or shellfish, provided it can be readily 
understood by the consumer and is in conformance with other Federal 
labeling laws. Designations such as ``ocean caught'', ``caught at 
sea'', ``line caught'', ``cultivated'', or ``cultured'' are not 
acceptable substitutes. Alternatively, method of production (wild and/
or farm-raised) designations may be in the form of a check box.
    (b) The declaration of the country(ies) of origin and method(s) of 
production (wild and/or farm-raised) (e.g., placard, sign, label, 
sticker, band, twist tie, pin tag, or other display) must be placed in 
a conspicuous location, so as to render it likely to be read and 
understood by a customer under normal conditions of purchase.
    (c) The declaration of the country(ies) of origin and the method(s) 
of production (wild and/or farm-raised) may be typed, printed, or 
handwritten provided it is in conformance with other Federal labeling 
laws and does not obscure other labeling information required by other 
Federal regulations.
    (d) A bulk container (e.g., display case, shipper, bin, carton, and 
barrel), used at the retail level to present product to consumers, may 
contain a covered commodity from more than one country of origin and/or 
more than one method of production (wild and farm-raised) provided all 
possible origins and/or methods of production are listed.
    (e) In general, country abbreviations are not acceptable. Only 
those abbreviations approved for use under CBP rules, regulations, and 
policies, such as ``U.K.'' for ``The United Kingdom of Great Britain 
and Northern Ireland'', ``Luxemb'' for Luxembourg, and ``U.S. or USA'' 
for the ``United States'' are acceptable. The adjectival form of the 
name of a country may be used as proper notification of the 
country(ies) of origin of imported commodities provided the adjectival 
form of the name does not appear with other words so as to refer to a 
kind or species of product. Symbols or flags alone may not be used to 
denote country of origin.
    (f) State or regional label designations are not acceptable in lieu 
of country of origin labeling.

Recordkeeping


Sec.  60.400  Recordkeeping requirements.

    (a) General. (1) All records must be legible and may be maintained 
in either electronic or hard copy formats. Due to the variation in 
inventory and accounting documentary systems, various forms of 
documentation and records will be acceptable.
    (2) Upon request by USDA representatives, suppliers and retailers 
subject to this subpart shall make available to USDA representatives, 
records maintained in the normal course of business that verify an 
origin claim and method of production (wild and/or farm-raised). Such 
records shall be provided within 5 business days of the request and may 
be maintained in any location.
    (b) Responsibilities of suppliers. (1) Any person engaged in the 
business of supplying a covered commodity to a retailer, whether 
directly or indirectly, must make available information to the buyer 
about the country(ies) of origin and method(s) of production (wild and/
or farm-raised), of the covered commodity. This information may be 
provided either on the product itself, on the master shipping 
container, or in a document that accompanies the product

[[Page 2704]]

through retail sale provided that it identifies the product and its 
country(ies) of origin and method(s) of production. In addition, the 
supplier of a covered commodity that is responsible for initiating a 
country(ies) of origin and method(s) of production (wild and/or farm-
raised) claim must possess records that are necessary to substantiate 
that claim for a period of 1 year from the date of the transaction. 
Producer affidavits shall also be considered acceptable records that 
suppliers may utilize to initiate origin claims, provided it is made by 
someone having first-hand knowledge of the origin of the covered 
commodity and identifies the covered commodity unique to the 
transaction.
    (2) Any intermediary supplier handling a covered commodity that is 
found to be designated incorrectly as to the country of origin and/or 
method of production (wild and/or farm-raised) shall not be held liable 
for a violation of the Act by reason of the conduct of another if the 
intermediary supplier relied on the designation provided by the 
initiating supplier or other intermediary supplier, unless the 
intermediary supplier willfully disregarded information establishing 
that the country of origin and/or method of production (wild and/or 
farm-raised) declaration was false.
    (3) Any person engaged in the business of supplying a covered 
commodity to a retailer, whether directly or indirectly (i.e., 
including but not limited to harvesters, producers, distributors, 
handlers, and processors), must maintain records to establish and 
identify the immediate previous source (if applicable) and immediate 
subsequent recipient of a covered commodity for a period of 1 year from 
the date of the transaction.
    (4) For an imported covered commodity (as defined in Sec.  
60.200(f)), the importer of record as determined by U.S. Customs and 
Border Protection, must ensure that records: provide clear product 
tracking from the port of entry into the United States to the immediate 
subsequent recipient and accurately reflect the country of origin and 
method of production (wild and/or farm-raised) of the item as 
identified in relevant CBP entry documents and information systems; and 
must maintain such records for a period of 1 year from the date of the 
transaction.
    (c) Responsibilities of retailers. (1) In providing the country of 
origin and method of production (wild and/or farm-raised) notification 
for a covered commodity, in general, retailers are to convey the origin 
and method of production information provided to them by their 
suppliers. Only if the retailer physically commingles a covered 
commodity of different origins and/or methods of production in 
preparation for retail sale, whether in a consumer-ready package or in 
a bulk display (and not discretely packaged) (i.e., full service fish 
case), can the retailer initiate a multiple country of origin and/or 
method of production designation that reflects the actual countries of 
origin and method of production for the resulting covered commodity.
    (2) Records and other documentary evidence relied upon at the point 
of sale to establish a covered commodity's country(ies) of origin and 
designation of wild and/or farm-raised must either be maintained at the 
retail facility or at another location for as long as the product is on 
hand and provided to any duly authorized representative of USDA in 
accordance with Sec.  60.400(a)(2). For pre-labeled products, the label 
itself is sufficient information on which the retailer may rely to 
establish the product's origin and method(s) of production (wild and/or 
farm-raised) and no additional records documenting origin and method of 
production information are necessary.
    (3) Records that identify the covered commodity, the retail 
supplier, and for products that are not pre-labeled, the country of 
origin information and the method(s) of production (wild and/or farm-
raised) must be maintained for a period of 1 year from the date the 
declaration is made at retail.
    (4) Any retailer handling a covered commodity that is found to be 
designated incorrectly as to the country of origin and/or the method of 
production (wild and/or farm-raised) shall not be held liable for a 
violation of the Act by reason of the conduct of another if the 
retailer relied on the designation provided by the supplier, unless the 
retailer willfully disregarded information establishing that the 
country of origin and/or method of production declaration was false.

Subpart B--[Reserved]

0
2. Part 65 is revised to read as follows:

PART 65--COUNTRY OF ORIGIN LABELING OF BEEF, PORK, LAMB, CHICKEN, 
GOAT MEAT, PERISHABLE AGRICULTURAL COMMODITIES, MACADAMIA NUTS, 
PECANS, PEANUTS, AND GINSENG

Subpart A--General Provisions

Definitions

65.100 Act.
65.105 AMS.
65.110 Beef.
65.115 Born.
65.120 Chicken.
65.125 Commingled covered commodities.
65.130 Consumer package.
65.135 Covered commodity.
65.140 Food service establishment.
65.145 Ginseng.
65.150 Goat.
65.155 Ground beef.
65.160 Ground chicken.
65.165 Ground goat.
65.170 Ground lamb.
65.175 Ground pork.
65.180 Imported for immediate slaughter.
65.185 Ingredient.
65.190 Lamb.
65.195 Legibly.
65.205 Perishable agricultural commodity.
65.210 Person.
65.215 Pork.
65.218 Pre-labeled.
65.220 Processed food item.
65.225 Produced.
65.230 Production step.
65.235 Raised.
65.240 Retailer.
65.245 Secretary.
65.250 Slaughter.
65.255 United States.
65.260 United States country of origin.
65.265 USDA.

Country of Origin Notification

65.300 Country of origin notification.
65.400 Labeling.

Recordkeeping

65.500 Recordkeeping requirements.
Subpart B--[Reserved]

    Authority: 7 U.S.C. 1621 et seq.

Subpart A--General Provisions

Definitions


Sec.  65.100  Act.

    Act means the Agricultural Marketing Act of 1946, (7 U.S.C. 1621 et 
seq.).


Sec.  65.105  AMS.

    AMS means the Agricultural Marketing Service, United States 
Department of Agriculture.


Sec.  65.110  Beef.

    Beef means meat produced from cattle, including veal.


Sec.  65.115  Born.

    Born in the case of chicken means hatched from the egg.


Sec.  65.120  Chicken.

    Chicken has the meaning given the term in 9 CFR 381.170(a)(1).


Sec.  65.125  Commingled covered commodities.

    Commingled covered commodities means covered commodities (of the 
same type) presented for retail sale in a consumer package that have 
been prepared from raw material sources having different origins.

[[Page 2705]]

Sec.  65.130  Consumer package.

    Consumer package means any container or wrapping in which a covered 
commodity is enclosed for the delivery and/or display of such commodity 
to retail purchasers.


Sec.  65.135  Covered commodity.

    (a) Covered commodity means:
    (1) Muscle cuts of beef, lamb, chicken, goat, and pork;
    (2) Ground beef, ground lamb, ground chicken, ground goat, and 
ground pork;
    (3) Perishable agricultural commodities;
    (4) Peanuts;
    (5) Macadamia nuts;
    (6) Pecans; and
    (7) Ginseng.
    (b) Covered commodities are excluded from this part if the 
commodity is an ingredient in a processed food item as defined in Sec.  
65.220.


Sec.  65.140  Food service establishment.

    Food service establishment means a restaurant, cafeteria, lunch 
room, food stand, saloon, tavern, bar, lounge, or other similar 
facility operated as an enterprise engaged in the business of selling 
food to the public. Similar food service facilities include salad bars, 
delicatessens, and other food enterprises located within retail 
establishments that provide ready-to-eat foods that are consumed either 
on or outside of the retailer's premises.


Sec.  65.145  Ginseng.

    Ginseng means ginseng root of the genus Panax.


Sec.  65.150  Goat.

    Goat means meat produced from goats.


Sec.  65.155  Ground beef.

    Ground beef has the meaning given that term in 9 CFR 319.15(a), 
i.e., chopped fresh and/or frozen beef with or without seasoning and 
without the addition of beef fat as such, and containing no more than 
30 percent fat, and containing no added water, phosphates, binders, or 
extenders, and also includes products defined by the term ``hamburger'' 
in 9 CFR 319.15(b).


Sec.  65.160  Ground chicken.

    Ground chicken means comminuted chicken of skeletal origin that is 
produced in conformance with all applicable Food Safety and Inspection 
Service labeling guidelines.


Sec.  65.165  Ground goat.

    Ground goat means comminuted goat of skeletal origin that is 
produced in conformance with all applicable Food Safety and Inspection 
Service labeling guidelines.


Sec.  65.170  Ground lamb.

    Ground lamb means comminuted lamb of skeletal origin that is 
produced in conformance with all applicable Food Safety and Inspection 
Service labeling guidelines.


Sec.  65.175  Ground pork.

    Ground pork means comminuted pork of skeletal origin that is 
produced in conformance with all applicable Food Safety and Inspection 
Service labeling guidelines.


Sec.  65.180  Imported for immediate slaughter.

    Imported for immediate slaughter means imported into the United 
States for ``immediate slaughter'' as that term is defined in 9 CFR 
93.400, i.e., consignment directly from the port of entry to a 
recognized slaughtering establishment and slaughtered within 2 weeks 
from the date of entry.


Sec.  65.185  Ingredient.

    Ingredient means a component either in part or in full, of a 
finished retail food product.


Sec.  65.190  Lamb.

    Lamb means meat produced from sheep.


Sec.  65.195  Legible.

    Legible means text that can be easily read.


Sec.  65.205  Perishable agricultural commodity.

    Perishable agricultural commodity means fresh and frozen fruits and 
vegetables of every kind and character that have not been manufactured 
into articles of a different kind or character and includes cherries in 
brine as defined by the Secretary in accordance with trade usages.


Sec.  65.210  Person.

    Person means any individual, partnership, corporation, association, 
or other legal entity.


Sec.  65.215  Pork.

    Pork means meat produced from hogs.


Sec.  65.218  Pre-labeled.

    Pre-labeled means a covered commodity that has the commodity's 
country of origin and the name and place of business of the 
manufacturer, packer, or distributor on the covered commodity itself, 
on the package in which it is sold to the consumer, or on the master 
shipping container. The place of business information must include at a 
minimum the city and state or other acceptable locale designation.


Sec.  65.220  Processed food item.

    Processed food item means a retail item derived from a covered 
commodity that has undergone specific processing resulting in a change 
in the character of the covered commodity, or that has been combined 
with at least one other covered commodity or other substantive food 
component (e.g., chocolate, breading, tomato sauce), except that the 
addition of a component (such as water, salt, or sugar) that enhances 
or represents a further step in the preparation of the product for 
consumption, would not in itself result in a processed food item. 
Specific processing that results in a change in the character of the 
covered commodity includes cooking (e.g., frying, broiling, grilling, 
boiling, steaming, baking, roasting), curing (e.g., salt curing, sugar 
curing, drying), smoking (hot or cold), and restructuring (e.g., 
emulsifying and extruding). Examples of items excluded include teriyaki 
flavored pork loin, roasted peanuts, breaded chicken tenders, and fruit 
medley.


Sec.  65.225  Produced.

    Produced in the case of a perishable agricultural commodity, 
peanuts, ginseng, pecans, and macadamia nuts means harvested.


Sec.  65.230  Production step.

    Production step means, in the case of beef, pork, goat, chicken, 
and lamb, born, raised, or slaughtered.


Sec.  65.235  Raised.

    Raised means, in the case of beef, pork, chicken, goat, and lamb, 
the period of time from birth until slaughter or in the case of animals 
imported for immediate slaughter as defined in Sec.  65.180, the period 
of time from birth until date of entry into the United States.


Sec.  65.240  Retailer.

    Retailer means any person licensed as a retailer under the 
Perishable Agricultural Commodities Act of 1930 (7 U.S.C. 499a(b)).


Sec.  65.245  Secretary.

    Secretary means the Secretary of Agriculture of the United States 
or any person to whom the Secretary's authority has been delegated.


Sec.  65.250  Slaughter.

    Slaughter means the point in which a livestock animal (including 
chicken) is prepared into meat products (covered commodities) for human 
consumption. For purposes of labeling under this part, the word 
harvested may be used in lieu of slaughtered.

[[Page 2706]]

Sec.  65.255  United States.

    United States means the 50 States, the District of Columbia, the 
Commonwealth of Puerto Rico, the U.S. Virgin Islands, American Samoa, 
Guam, the Northern Mariana Islands, and any other Commonwealth, 
territory, or possession of the United States.


Sec.  65.260  United States country of origin.

    United States country of origin means in the case of:
    (a) Beef, pork, lamb, chicken, and goat:
    (1) From animals exclusively born, raised, and slaughtered in the 
United States;
    (2) From animals born and raised in Alaska or Hawaii and 
transported for a period of not more than 60 days through Canada to the 
United States and slaughtered in the United States; or
    (3) From animals present in the United States on or before July 15, 
2008, and once present in the United States, remained continuously in 
the United States.
    (b) Perishable agricultural commodities, peanuts, ginseng, pecans, 
and macadamia nuts: from products produced in the United States.


Sec.  65.265  USDA.

    USDA means the United States Department of Agriculture.

Country of Origin Notification


Sec.  65.300  Country of origin notification.

    In providing notice of the country of origin as required by the 
Act, the following requirements shall be followed by retailers:
    (a) General. Labeling of covered commodities offered for sale 
whether individually, in a bulk bin, carton, crate, barrel, cluster, or 
consumer package must contain country of origin as set forth in this 
regulation.
    (b) Exemptions. Food service establishments as defined in Sec.  
65.135 are exempt from labeling under this subpart.
    (c) Exclusions. A covered commodity is excluded from this subpart 
if it is an ingredient in a processed food item as defined in Sec.  
65.220.
    (d) Labeling Covered Commodities of United States Origin. A covered 
commodity may bear a declaration that identifies the United States as 
the sole country of origin at retail only if it meets the definition of 
United States country of origin as defined in Sec.  65.260.
    (e) Labeling Muscle Cut Covered Commodities of Multiple Countries 
of Origin that include the United States. (1) For muscle cut covered 
commodities derived from animals that were born in Country X or (as 
applicable) Country Y, raised and slaughtered in the United States, and 
were not derived from animals imported for immediate slaughter as 
defined in Sec.  65.180, the origin may be designated as Product of the 
United States, Country X, and (as applicable) Country Y.
    (2) For muscle cut covered commodities derived from animals born, 
raised, and slaughtered in the U.S. that are commingled during a 
production day with muscle cut covered commodities described in Sec.  
65.300(e)(1), the origin may be designated as Product of the United 
States, Country X, and (as applicable) Country Y.
    (3) If an animal was imported into the United States for immediate 
slaughter as defined in Sec.  65.180, the origin of the resulting meat 
products derived from that animal shall be designated as Product of 
Country X and the United States.
    (4) For muscle cut covered commodities derived from animals that 
are born in Country X or Country Y, raised and slaughtered in the 
United States, that are commingled during a production day with muscle 
cut covered commodities that are derived from animals that are imported 
into the United States for immediate slaughter as defined in Sec.  
65.180, the origin may be designated as Product of the United States, 
Country X, and (as applicable) Country Y. In each case of paragraphs 
(e)(1), (e)(2), and (e)(4) of this section, the countries may be listed 
in any order. In addition, the origin declaration may include more 
specific information related to production steps provided records to 
substantiate the claims are maintained and the claim is consistent with 
other applicable Federal legal requirements.
    (f) Labeling Imported Covered Commodities. Imported covered 
commodities for which origin has already been established as defined by 
this law (e.g., born, raised, and slaughtered or produced) and for 
which no production steps have occurred in the United States, shall 
retain their origin, as declared to U.S. Customs and Border Protection 
at the time the product entered the United States, through retail sale.
    (g) Labeling Commingled Covered Commodities. In the case of 
perishable agricultural commodities; peanuts; pecans; ginseng; and 
macadamia nuts: For imported covered commodities that have not 
subsequently been substantially transformed in the United States that 
are commingled with covered commodities sourced from a different origin 
that have not been substantially transformed (as established by CBP) in 
the United States, and/or covered commodities of United States origin, 
the declaration shall indicate the countries of origin in accordance 
with existing Federal legal requirements.
    (h) Labeling Ground Beef, Ground Pork, Ground Lamb, Ground Goat, 
and Ground Chicken. The declaration for ground beef, ground pork, 
ground lamb, ground goat, and ground chicken covered commodities shall 
list all countries of origin contained therein or that may be 
reasonably contained therein. In determining what is considered 
reasonable, when a raw material from a specific origin is not in a 
processor's inventory for more than 60 days, that country shall no 
longer be included as a possible country of origin.
    (i) Remotely Purchased Products. For sales of a covered commodity 
in which the customer purchases a covered commodity prior to having an 
opportunity to observe the final package (e.g., Internet sales, home 
delivery sales, etc.), the retailer may provide the country of origin 
notification either on the sales vehicle or at the time the product is 
delivered to the consumer.


Sec.  65.400  Labeling.

    (a) Country of origin declarations can either be in the form of a 
placard, sign, label, sticker, band, twist tie, pin tag, or other 
format that allows consumers to identify the country of origin. The 
declaration of the country of origin of a product may be in the form of 
a statement such as ``Product of USA,'' ``Produce of the USA'', or 
``Grown in Mexico,'' may only contain the name of the country such as 
``USA'' or ``Mexico,'' or may be in the form of a check box provided it 
is in conformance with other Federal labeling laws.
    (b) The declaration of the country of origin (e.g., placard, sign, 
label, sticker, band, twist tie, pin tag, or other display) must be 
legible and placed in a conspicuous location, so as to render it likely 
to be read and understood by a customer under normal conditions of 
purchase.
    (c) The declaration of country of origin may be typed, printed, or 
handwritten provided it is in conformance with other Federal labeling 
laws and does not obscure other labeling information required by other 
Federal regulations.
    (d) A bulk container (e.g., display case, shipper, bin, carton, and 
barrel) used at the retail level to present product to consumers, may 
contain a covered commodity from more than one country of origin 
provided all possible origins are listed.
    (e) In general, country abbreviations are not acceptable. Only 
those

[[Page 2707]]

abbreviations approved for use under Customs and Border Protection 
rules, regulations, and policies, such as ``U.K.'' for ``The United 
Kingdom of Great Britain and Northern Ireland'', ``Luxemb'' for 
Luxembourg, and ``U.S. or USA'' for the ``United States of America'' 
are acceptable. The adjectival form of the name of a country may be 
used as proper notification of the country of origin of imported 
commodities provided the adjectival form of the name does not appear 
with other words so as to refer to a kind or species of product. 
Symbols or flags alone may not be used to denote country of origin.
    (f) Domestic and imported perishable agricultural commodities, 
peanuts, pecans, macadamia nuts, and ginseng may use State, regional, 
or locality label designations in lieu of country of origin labeling. 
Abbreviations may be used for state, regional, or locality label 
designations for these commodities whether domestically harvested or 
imported using official United States Postal Service abbreviations or 
other abbreviations approved by CBP.

Recordkeeping


Sec.  65.500  Recordkeeping requirements.

    (a) General. (1) All records must be legible and may be maintained 
in either electronic or hard copy formats. Due to the variation in 
inventory and accounting documentary systems, various forms of 
documentation and records will be acceptable.
    (2) Upon request by USDA representatives, suppliers and retailers 
subject to this subpart shall make available to USDA representatives, 
records maintained in the normal course of business that verify an 
origin claim. Such records shall be provided within 5 business days of 
the request and may be maintained in any location.
    (b) Responsibilities of suppliers. (1) Any person engaged in the 
business of supplying a covered commodity to a retailer, whether 
directly or indirectly, must make available information to the buyer 
about the country(ies) of origin of the covered commodity. This 
information may be provided either on the product itself, on the master 
shipping container, or in a document that accompanies the product 
through retail sale. In addition, the supplier of a covered commodity 
that is responsible for initiating a country(ies) of origin claim, 
which in the case of beef, lamb, chicken, goat, and pork is the 
slaughter facility, must possess records that are necessary to 
substantiate that claim for a period of 1 year from the date of the 
transaction. For that purpose, packers that slaughter animals that are 
tagged with an 840 Animal Identification Number device without the 
presence of any additional accompanying marking (i.e., ``CAN'' or 
``M'') may use that information as a basis for a U.S. origin claim. 
Packers that slaughter animals that are part of another country's 
recognized official system (e.g., Canadian official system, Mexico 
official system) may also rely on the presence of an official ear tag 
or other approved device on which to base their origin claims. Producer 
affidavits shall also be considered acceptable records that suppliers 
may utilize to initiate origin claims, provided it is made by someone 
having first-hand knowledge of the origin of the covered commodity and 
identifies the covered commodity unique to the transaction. In the case 
of cattle, producer affidavits may be based on a visual inspection of 
the animal to verify its origin. If no markings are found that would 
indicate that the animal is of foreign origin (i.e., ``CAN'' or ``M''), 
the animal may be considered to be of U.S. origin.
    (2) Any intermediary supplier handling a covered commodity that is 
found to be designated incorrectly as to the country of origin shall 
not be held liable for a violation of the Act by reason of the conduct 
of another if the intermediary supplier relied on the designation 
provided by the initiating supplier or other intermediary supplier, 
unless the intermediary supplier willfully disregarded information 
establishing that the country of origin declaration was false.
    (3) Any person engaged in the business of supplying a covered 
commodity to a retailer, whether directly or indirectly (i.e., 
including but not limited to growers, distributors, handlers, packers, 
and processors), must maintain records to establish and identify the 
immediate previous source (if applicable) and immediate subsequent 
recipient of a covered commodity for a period of 1 year from the date 
of the transaction.
    (4) For an imported covered commodity (as defined in Sec.  
65.300(f)), the importer of record as determined by CBP, must ensure 
that records: provide clear product tracking from the port of entry 
into the United States to the immediate subsequent recipient and 
accurately reflect the country of origin of the item as identified in 
relevant CBP entry documents and information systems; and must maintain 
such records for a period of 1 year from the date of the transaction.
    (c) Responsibilities of retailers. (1) In providing the country of 
origin notification for a covered commodity, in general, retailers are 
to convey the origin information provided by their suppliers. Only if 
the retailer physically commingles a covered commodity of different 
origins in preparation for retail sale, whether in a consumer-ready 
package or in a bulk display (and not discretely packaged) (i.e., full 
service meat case), can the retailer initiate a multiple country of 
origin designation that reflects the actual countries of origin for the 
resulting covered commodity.
    (2) Records and other documentary evidence relied upon at the point 
of sale to establish a covered commodity's country(ies) of origin must 
either be maintained at the retail facility or at another location for 
as long as the product is on hand and provided to any duly authorized 
representative of USDA in accordance with Sec.  65.500(a)(2). For pre-
labeled products, the label itself is sufficient information on which 
the retailer may rely to establish the product's origin and no 
additional records documenting origin information are necessary.
    (3) Any retailer handling a covered commodity that is found to be 
designated incorrectly as to the country of origin shall not be held 
liable for a violation of the Act by reason of the conduct of another 
if the retailer relied on the designation provided by the supplier, 
unless the retailer willfully disregarded information establishing that 
the country of origin declaration was false.
    (4) Records that identify the covered commodity, the retail 
supplier, and for products that are not pre-labeled, the country of 
origin information must be maintained for a period of 1 year from the 
date the origin declaration is made at retail.

Subpart B--[Reserved]

    Dated: January 9, 2009.
James E. Link,
Administrator, Agricultural Marketing Service.
[FR Doc. E9-600 Filed 1-12-09; 11:15 am]
BILLING CODE 3410-02-P