[Federal Register Volume 77, Number 237 (Monday, December 10, 2012)]
[Notices]
[Pages 73401-73411]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-29516]


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 Notices
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  Federal Register / Vol. 77, No. 237 / Monday, December 10, 2012 / 
Notices  

[[Page 73401]]



DEPARTMENT OF AGRICULTURE

Food Safety and Inspection Service

[Docket No. FSIS-2005-0044]


Not Applying the Mark of Inspection Pending Certain Test Results

AGENCY: Food Safety and Inspection Service, USDA.

ACTION: Notice; final policy statement.

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SUMMARY: The Food Safety and Inspection Service (FSIS) is announcing 
that it is changing its procedures and will withhold its determination 
as to whether meat and poultry products are not adulterated, and thus 
eligible to enter commerce, until all test results that bear on the 
determination have been received. This notice responds to the comments 
FSIS received on the Federal Register notice it issued on April 11, 
2011, which announced the Agency's intention to implement this policy, 
and explains how this policy will apply to domestic and imported 
product. FSIS did not make any changes to the policy that it announced.

DATES: Effective February 8, 2013.

FOR FURTHER INFORMATION CONTACT: Rachel Edelstein, Assistant 
Administrator, Office of Policy and Program Development, FSIS, U.S. 
Department of Agriculture, 1400 Independence Avenue SW., Washington, DC 
20250-3700, telephone: (202) 205-0495.

SUPPLEMENTARY INFORMATION:

Background

    FSIS is responsible for protecting the nation's meat and poultry 
supply by making sure that it is safe, wholesome, not adulterated, and 
properly marked, labeled and packaged. FSIS administers the Federal 
Meat Inspection Act (FMIA) (21 U.S.C. 601 et. seq.) and the Poultry 
Products Inspection Act (PPIA) (21 U.S.C. 451 et. seq.) (the Acts). 
These statutes prohibit anyone from selling, transporting, offering for 
sale or transportation, or receiving for transportation in commerce, 
any adulterated or misbranded meat or poultry products (21 U.S.C. 610 
and 458).
    On April 11, 2011, FSIS published the notice in the Federal 
Register, ``Not Applying the Mark of Inspection Pending Certain Test 
Results'' (76 FR 19952). The notice explained that the Agency's 
practice has been to allow products tested for adulterants to bear the 
mark of inspection, and to enter commerce, even when test results have 
not been received. FSIS has asked, but had not required, official 
establishments to maintain control of products tested for adulterants 
pending test results. The notice stated that because establishments, 
including official import inspection establishments, were not 
consistently maintaining control of product, despite FSIS's request 
that they do so, adulterated product was entering commerce. In the 
April 11, 2011, notice, FSIS announced its tentative determination not 
to apply the mark of inspection until negative results are available 
and received for any testing for adulterants conducted by the Agency.
    In the notice, FSIS stated that the policy would cover non-intact 
raw beef product or intact raw beef product intended for non-intact use 
that is tested for Escheriachia coli O157:H7 (E. coli O157:H7). Also, 
FSIS explained the policy would cover any ready-to-eat products tested 
for Listeria monocytogenes, E. coli O157:H7, or Salmonella. Similarly, 
FSIS stated that the policy would cover ready-to-eat product that 
passed over food contact surfaces that have been tested for the 
presence of Listeria monocytogenes and Salmonella, pending receipt of 
negative test results. In the notice, FSIS stated that the policy would 
not cover raw meat or poultry products tested for Salmonella or other 
pathogens that FSIS has not designated as adulterants in those 
products.
    In the notice, FSIS stated that the policy would also apply to 
livestock carcasses subject to FSIS testing for veterinary drugs such 
as antibiotics, sulfonamides, or avermectins or the feed additive 
carbadox. FSIS also explained that because of the significant number of 
poultry carcasses in a lot, the economic effect of holding such a lot, 
and because, historically, FSIS has not seen residue problems in 
poultry tested for residues, such product would not need to be held 
from commerce pending negative test results (76 FR 19955).

Comments and FSIS Response

    FSIS received 26 comments in response to the notice from industry, 
domestic and foreign trade organizations, consumer groups, foreign 
government, and individuals, including FSIS personnel. Commenters 
supported effective procedures to prevent adulterated product from 
entering commerce. However, many comments from industry, foreign trade 
organizations, and foreign governments raised concern about the 
potential impact this policy would have on small businesses, especially 
those that produce product with a short-shelf life, and those entities 
who import product. Commenters also raised other concerns and requested 
clarification on some points.

Effect on Small and Very Small Businesses

    The majority of the industry commenters raised concerns about the 
impact of this policy on small businesses and businesses that produce 
product with a short-shelf life (e.g., fresh sausage, or fresh ground 
beef, or chicken salad). There was a general concern that 
establishments may need to hold product for longer than its shelf life. 
Some commenters emphasized the need for FSIS to pay special attention 
to the needs of small and very small establishments by providing them 
sufficient notification of the sample collection (e.g., more that 48 
hours) and to provide them the ability to produce smaller batches of 
product. Also, commenters suggested that FSIS laboratories should 
prioritize the analysis of samples, in particular samples of ground 
beef, collected at small and very small establishment. Commenters 
raised concerns that sample discards would further delay the process 
and have a negative financial impact on small and very small 
establishments.

Response

    Before implementing this new policy, FSIS will issue instructions 
reiterating to inspection program personnel that they are to provide 
establishments prior notification of sampling for adulterants. FSIS 
will also issue specific instructions

[[Page 73402]]

to address sample collection at small and very small establishments to 
make it clear that small and very small establishments can produce 
smaller representative batches of product for sampling. This will help 
small and very small establishments reduce their lot size on a day when 
FSIS collects a sample. Thus, for products with short shelf-life, a 
firm may produce and hold a lot subject to FSIS sampling that is 
demonstrated by the establishment to be microbiologically independent 
from other production lots, conduct a clean-up, and then produce other 
like product eligible to be shipped into commerce. FSIS also intends to 
provide small and very small establishments with new compliance 
guidance for how to properly produce representative small batches of 
product.
    FSIS begins testing of all ground beef samples for microbiological 
pathogen analysis the day of receipt, including Saturdays. Also, FSIS 
begins testing of all ready-to-eat product samples (e.g., chicken 
salad) for microbiological pathogen analysis the day of receipt, 
including Saturdays. FSIS will remain committed to having most negative 
tests results available in 1-2 days. In regard to sample discards, any 
sample that the FSIS laboratory may discard would occur the day of 
receipt and would not increase turnaround times in any way.
    Additionally, FSIS will consider reducing its frequency of sampling 
at small and very small establishments that have programs in place that 
include measures such as purchase specifications that address controls 
for pathogens in incoming product and product and food contact surface 
verification testing.

Imported Product

    FSIS received a number of comments, including comments from foreign 
trade organizations and governments, stating that this new procedure 
would impact imports because imported products would need to be held at 
the border, which would be costly and difficult. The commenters 
asserted that the domestic FSIS policy that provides that 
establishments can move product that FSIS has tested for adulterants 
under their control (e.g., under company seals) should be extended to 
importers.

Response

    Foreign establishments and inspection services will not be directly 
affected by this policy. However, the policy will affect the importer 
of record when FSIS tests product at the border during re-inspection. 
FSIS will not require the product tested by FSIS for adulterants to be 
held at the import establishment until results become available. When 
this new policy becomes effective, the policy for imported product will 
be consistent with the policy for domestic product. The importer of 
record will be required to control all affected products that FSIS 
tests for adulterants during re-inspection so that they do not enter 
commerce until the test results are received. However, the importer of 
record could move the product away from the import establishment, 
provided the product moves under company seal or other adequate 
controls.

Controlling Product

    Industry commenters raised several points regarding how FSIS 
expects establishments to control product. The 2011 notice explained 
that, consistent with current policy, establishments would be able to 
move product and maintain the integrity of the lot under company seal 
(76 FR 19955). The commenters stated that FSIS should not prescribe the 
specific use of company seals but should allow establishments to use 
any effective mechanism, which may or may not include company seals.
    Industry commenters also questioned the statement in the Federal 
Register notice that establishments could not transfer ownership of 
product until it received negative test results (76 FR 19955). The 
commenters held that strict application of this approach would force an 
unnecessary change in business practices. The commenters stated that 
the critical issue is not one of ownership, but one of product control.
    Lastly, several industry commenters expressed concerns with the 
statement in the Federal Register notice that the pre-shipment review 
of records associated with the production lot will not be complete 
without the pending test results (76 FR 19955). The commenters stated 
that establishments have been operating under the Hazard Analysis and 
Critical Control Point (HACCP) regulations for years and most likely 
have a specific way to complete HACCP documentation. The commenters 
believed that to interrupt the establishment procedures for the pre-
shipment review could cause confusion and could result in products 
being overlooked or mistakes in documentation.

Response

    Establishments will need to have effective controls to prevent 
product that has been tested for adulterants from entering commerce 
before results become available. For such product, FSIS is not 
requiring the use of company seals, but the Agency will require 
establishments to document and support that they can control the 
product pending the availability of test results.
    The statements made in the Federal Register concerning maintaining 
ownership of the product and not completing pre-shipment review are 
consistent with current policy. Also, if ownership of the product 
changes, the product has entered commerce. FSIS has stated in documents 
(e.g., in FSIS directives, notices, and questions and answers post of 
the FSIS web page) that establishments may move product off-site 
pending final test results if they do not complete pre-shipment review 
or transfer ownership of the product to another entity. When an 
establishment completes a pre-shipment review (9 CFR 417.5(c)), the 
establishment indicates that it takes full and final responsibility for 
applying its HACCP controls to the product that it has produced. 
Further, if the establishment has completed pre-shipment review pending 
test results, and the results are positive, the establishment has 
produced and shipped adulterated product into commerce.

Confusion Regarding Certain Terminology

    Industry commenters expressed concern over the use of the term 
``hold and test''. They asserted that they would need to hold all 
tested products on site, and that in most cases that would be costly 
and extremely difficult to accomplish. Others were concerned that FSIS 
would place ``U.S. retained'' tags on product.
    Similarly, industry commenters stated that the use of the term 
``withholding the mark of inspection'' may cause some individuals to 
think that the standard practice of preprinted labels with the Federal 
mark of inspection would be prohibited under this new policy.

Response

    Establishments will not be required to hold product tested by FSIS 
for adulterants at the establishment, provided they have effective 
controls in place for it to move elsewhere under their ownership so 
that the product does not enter into commerce until the establishment 
receives negative results. Also, FSIS inspectors do not retain products 
tested by FSIS for adulterants pending test results; however, when FSIS 
inspection program personnel believe an animal may contain violative 
levels of residues, they will continue to deem it ``U.S. Suspect,'' 
retain the carcass, and submit samples for residue testing.

[[Page 73403]]

    FSIS recognizes that the mark of inspection is pre-printed on the 
package label of many products, and that it is most efficient to allow 
the product to be packaged and labeled with the printed mark of 
inspection as part of the production process (76 FR 19955). FSIS will 
continue to allow meat and poultry establishments to package and label 
products sampled and tested for adulterants with the mark of 
inspection. However, such product will not be eligible for shipment 
into commerce until negative test results for adulterants are 
available.

Lot Definition

    A number of industry commenters recommended that FSIS should better 
define and provide guidance on lot sizes. Commenters stated that 
without clear guidance on lot sizing, establishments risk non-
compliance if they do not have a supportable basis for defining the 
sampled lot. Many commenters also recommended that FSIS better train 
its inspectors on lot-size definitions.

Response

    The establishment is responsible for having a supportable basis to 
define the sampled lot. FSIS has developed compliance guidance and 
questions and answers for ways to determine lot sizes based, in part, 
on establishing microbiological independence of one production lot to 
another. For drug residues, lots typically are determined on a carcass 
basis during the slaughter operation, unless there is evidence of flock 
or herd application of a drug treatment. Additionally, FSIS has 
provided its inspection program personnel with the necessary 
implementation issuances for them to assess how establishments may 
determine lot size.
    For E. coli O157:H7, prior to FSIS's sampling, inspection program 
personnel inform the establishment that it is responsible for defining 
the sampled lot. Some factors or conditions that the establishment 
should consider in defining the sampled lot include scientific, 
statistically-based sampling programs for E. coli O157:H7 that the 
establishment may use to distinguish between segments of production; 
Sanitation Standard Operating Procedures (Sanitation SOPs) or other 
prerequisite programs used to control the spread of E. coli O157:H7 
cross-contamination between raw beef components during production; 
processing interventions that limit or control E. coli O157:H7 
contamination; and whether beef manufacturing trimmings and other raw 
ground beef components or rework are carried over from one production 
period to another.
    FSIS does not recognize ``clean-up to clean-up'' alone as a 
supportable basis for distinguishing one portion of production of raw 
beef product from another portion of production. Rather, establishments 
should consider whether the same source materials are used during 
different production periods.
    For testing of ready-to-eat product or contact surfaces for 
Listeria monocytogenes or for testing such product for Salmonella, 
inspection program personnel also inform the establishment that it is 
responsible for determining the lot. In contrast to E. coli O157:H7, 
for these types of testing, the sampled lot is generally considered the 
ready-to-eat product that is produced from clean-up to clean-up because 
the product typically undergoes consistent cooking and other lethality 
procedures during the production period.

Applying the Policy to Establishment Testing

    Most industry commenters were against FSIS extending the new policy 
to establishment testing, although some consumer and trade organization 
groups thought the policy should apply to establishment testing. The 
commenters opposed were concerned that imposing this policy on 
establishment testing may cause them to test their own product less 
often.

Response

    At this time, the policy will apply only to product that FSIS tests 
for adulterants. However, FSIS will monitor the situation to track how 
often establishments release product into commerce before establishment 
test results for adulterants become available. If an establishment 
tests its product for an adulterant, releases the product into 
commerce, and results are positive, FSIS will request that the 
establishment recall the product. FSIS is aware of the impact of 
establishment verification testing on resources, particularly related 
to storage and handling and product shelf-life. Nonetheless, 
establishments should design their food safety system within their 
available resources to take all necessary and practical steps to ensure 
that only safe product enters commerce.

Economic Adulteration

    Some industry commenters raised concerns about the new policy 
extending to economic adulteration. The commenters stated that FSIS 
testing for economic adulteration (e.g., protein-fat-free, moisture in 
hams) is infrequent. The commenters requested that FSIS clarify whether 
or not this testing would fall under this new policy.

Response

    As stated in the 2011 Federal Register notice, FSIS testing that 
indicates product is economically adulterated would be subject to the 
actions outlined in this document, and, therefore, establishments will 
be required to control such products from entering commerce that FSIS 
tests for economic adulterants until negative results become available 
(76 FR 19953). As stated in the 2011 Federal Register notice, FSIS 
conducts minimal testing for economic adulteration (76 FR 19953).

Retail Exempt

    Some industry commenters asked whether the new policy would apply 
to retail exempt facilities, (e.g., grocery stores)as defined in 9 CFR 
303.1(d) & 381.10(d). These commenters noted that FSIS samples ground 
beef product at retail for Agency E. coli O157:H7 testing.

Response

    Meat and poultry products prepared at retail exempt facilities come 
from federally or state-inspected source materials. Such source 
material would already bear the Federal or State marks of inspection 
when it arrives at retail. Therefore, this new policy does not directly 
affect retail exempt facilities as the marks of inspection are not 
applied at retail.
    However, when FSIS OPEER Investigators sample raw ground beef for 
E. coli O157:H7 at retail facilities that grind raw beef products, the 
Agency recommends the facility hold the raw ground beef product pending 
Agency test results to prevent the need for a recall.

Comments Recommending Additional Agency Measures

    Some consumer group commenters who supported the policy stated that 
FSIS needs to pursue more rapid testing, define more pathogens as 
adulterants, test 100% of trim for E. coli O157:H7, and increase its 
trace back abilities. Also, a commenter stated that the new policy 
should apply to the residue testing of poultry carcasses. The commenter 
believed this to be necessary because of the use of arsenic-based drugs 
in poultry feed.

Response

    FSIS testing programs are integral to the day-to-day inspection 
program and verification activities of FSIS inspection program 
personnel in official

[[Page 73404]]

establishments. While the establishment is responsible for ensuring 
that the product it produces is safe, FSIS testing is an important 
activity to verify whether the establishment's HACCP system ensures the 
production of unadulterated product. In addition, FSIS has declared six 
non-O157 shiga toxin producing E. coli (non-O157 STEC) to be 
adulterants in non-intact raw beef products and raw beef products 
intended for non-intact use (76 FR 72331). FSIS recently improved its 
traceback procedures because, starting in 2010, the Agency began 
collecting supplier information at the time it collects ground beef and 
bench trim samples for E. coli testing. Furthermore, FSIS recently 
announced additional new traceback procedures and new recall procedures 
it intends to implement (77 FR 2675).
    FSIS has consulted with the Food and Drug Administration (FDA) in 
regard to use of arsenic-based drugs in poultry feed. Based on the 
sponsor's voluntary suspension of the U.S. sales of the primary arsenic 
product approved for use in poultry, 3-Nitro (Roxarsone), FDA does not 
expect residues to be an issue of concern. Therefore, as stated in the 
2011 Federal Register notice, because of the significant number of 
poultry carcasses in a lot, the economic effect of holding such a lot, 
and because, historically, FSIS has not seen residue problems in 
poultry tested for residues, such product will not need to be held from 
commerce pending negative test results. If FSIS were to find violative 
residues in poultry, FSIS would, of course, reconsider this issue.

Enforcement

    Some industry commenters stated that the Agency was silent on the 
potential penalties FSIS would issue should an establishment not comply 
with these new requirements and requested that FSIS specify the 
penalties that will apply.

Response

    When this policy becomes effective, FSIS will follow its 
regulations at 9 CFR part 500, Rules of Practice. If an establishment 
fails to prevent products tested by FSIS for adulterants from entering 
commerce before negative test results are received, the establishment 
may have produced and shipped adulterated or uninspected product. In 
this situation, the Office of Field Operations would take appropriate 
enforcement action (e.g., immediately suspending inspection or issuing 
a Notice of Intended Enforcement Action). Also, FSIS will request a 
voluntary recall of product, detain the product in commerce, or 
institute other product control actions if necessary. FSIS will 
consider additional enforcement actions or sanctions when necessary.

Downstream Testing

    Some industry commenters stated that if the policy is implemented, 
FSIS would need to consider what product is subject to the policy if 
the agency samples products downstream. They stated that if samples are 
taken downstream, the policy should only apply to the last 
establishment where FSIS tested product. As an example, they stated 
that if a distributor sells products (e.g., trim in small boxes), which 
in turn may be tested at a further processor, the lot subject to 
control is the lot produced at the further processor, not the product 
disseminated by the distributor.

Response

    The establishment responsible for controlling product tested by 
FSIS is the establishment where FSIS collects the sample. (Note that 
FSIS tests beef manufacturing trimmings at the slaughter establishment, 
not at a further processor.) However, if a further processor grinds the 
trim or produces bench trim from materials derived from cattle not 
slaughtered on site at that establishment, FSIS may sample such 
product.
    Nevertheless, FSIS, through its trace-back activities, seeks to 
determine the facts associated with contamination. In most cases, FSIS' 
objective is to identify the most likely point in the production 
process at which contamination occurred, e.g., the slaughter dressing 
operation. Therefore, if FSIS finds ground beef or bench trim positive 
at a further processor, FSIS conducts follow up testing and other 
verification activities at the slaughter establishment that supplied 
the source materials. In addition, each point in the production process 
affords an opportunity for the subsequent establishments and operations 
handling the product (e.g., including retail) to exert control to 
ensure that the product is not adulterated. Thus, FSIS takes 
appropriate action to ensure that all handlers of the product are 
complying with the requirements of the inspection laws and regulations.

Summary and Conclusion

    After consideration of all comments and for the reasons discussed 
above, FSIS will implement a new policy that requires official 
establishments and importers of record to maintain control of product 
tested for adulterants by FSIS and not allow such products to enter 
commerce until negative test results are received. The policy applies 
to non-intact raw beef product or intact raw beef product intended for 
non-intact use that is tested by FSIS for STECs. Also, the policy 
applies to any ready-to-eat products tested by FSIS for pathogens. 
Similarly, this policy applies to ready-to-eat product that passed over 
food-contact surfaces that have been tested for the presence of a 
pathogen by FSIS. This policy does not cover raw meat or poultry 
products tested for Salmonella or other pathogens that FSIS has not 
determined to be adulterants of those products.
    The new policy also applies to livestock carcasses subject to FSIS 
testing for veterinary drugs, such as antibiotics, sulfonamides, or 
avermectins or the feed additive carbadox.
    Finally, FSIS testing that indicates product is economically 
adulterated would be subject to the actions outlined in this document, 
and, therefore, establishments will be required to control such 
products from entering commerce that FSIS tests for economic 
adulterants until negative results become available.

Costs and Benefits

    The discussion below is consistent with the discussion of costs and 
benefits in the 2011 Federal Register notice. However, it has been 
updated to include 2010 recall data and new Cost of Illness per case 
numbers updated in April, 2012. The new estimates represent a lower 
bound for an average cost of illness because they only include medical 
costs and loss-of-productivity costs. They do not include pain and 
suffering costs. Complete 2011 recall data was not available at the 
time this notice was developed. FSIS did not update the cost estimates 
from the 2011 Federal Register notice because these data either do not 
change significantly from year to year or more updated data are not 
currently available.
    In addition, FSIS did not consider non-O157 STEC in the benefits 
and costs analysis. In June 2012, FSIS began testing for six non-O157 
STEC in raw beef manufacturing trimmings. Although FSIS anticipates 
additional public health benefits will accrue as a result of 
establishments maintaining control of such products tested by FSIS 
until negative results for non-O157 STEC become available, there is not 
enough data to accurately estimate benefits at this time. As for the 
costs, there would be no change from the numbers presented in this 
analysis. All of the costs associated with the implementation of the 
Agency's testing

[[Page 73405]]

for non-O157 STEC are captured within the estimates for E. coli O157:H7 
in raw, non-intact beef products (Group 1, Table 3). When FSIS collects 
samples of beef manufacturing trimmings, it tests them for both E. coli 
O157:H7 and non-O157 STEC.

Expected Benefits of the Action

    The Agency expects benefits from this policy to accrue to 
consumers, Government, and industry.
    If an establishment fails to hold a product when FSIS tests for a 
pathogen, and the test is positive, the establishment will be asked to 
recall the product. Because the pathogens for which FSIS does testing 
represent an immediate threat to human health, the recall would be 
classified as a Class I recall.\1\ Table 1 shows Class I recalls (2007-
2010) for FSIS testing that are included in the universe for this 
policy analysis. These recalls were for E. coli O157:H7, Listeria 
monocytogenes (Lm), and Salmonella in RTE product. In 2007 there were 
14 Class I recalls as a result of FSIS testing; in 2008 there were 19 
Class I recalls; in 2009 there were 11 Class I recalls; and in 2010 
there were 5 Class I recalls. In 2007 seven of the Class I recalls were 
for E. coli O157:H7 and seven for Lm. In 2008, seven of the Class I 
recalls were for E. coli O157:H7 and twelve for Lm. In 2009, eight of 
the Class I recalls were for E. coli O157:H7, and three were for Lm. In 
2010, one of the Class I recalls was for E. coli 0157:H7, three for Lm, 
and one for Salmonella in Ready-to-Eat (RTE).
---------------------------------------------------------------------------

    \1\ There are three classes of recalls. Class I: a health hazard 
situation where there is a reasonable possibility that the use of 
the product will cause serious, adverse health consequences; Class 
II: a health hazard situation where there is a remote probability of 
adverse health consequences from the use of the product; and Class 
III: a situation where the use of the product will not cause adverse 
health consequences.

     Table 1--Class 1 Recalls Included in Test-and-Hold Policy Universe Derived From FSIS Tests (2007-2010)
----------------------------------------------------------------------------------------------------------------
                                                                E. coli
                        Year and type                           O157:H7         Lm       Salmonella     TOTAL
----------------------------------------------------------------------------------------------------------------
2007, FSIS..................................................            7            7            0           14
2008, FSIS..................................................            7           12            0           19
2009, FSIS..................................................            8            3            0           11
2010, FSIS..................................................            1            3            1            5
                                                             ---------------------------------------------------
    Total...................................................           23           25            1           49
----------------------------------------------------------------------------------------------------------------
Note: Data source FSIS recall division.

    If the combination of industry and Government costs per recall on 
average is $1 million,\2\ then the total annual cost of FSIS recalls 
could be on average as high as $12 million per year.\3\
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    \2\ ``Preliminary Regulatory Impact Analysis and Initial 
Regulatory Flexibility Analysis of the Proposed Rules to Ensure the 
Safety of Juice and Juice Products'' (63 FR 24258; May 1, 1998).
    \3\ The annual figure of $12 million is derived by summing the 
total number of FSIS recalls for 2007-2010 from Table 1, then 
multiplying the total by $1 million which is the average cost per 
recall for industry and government. That figure is then divided by 4 
to get the annual amount. (14 + 19 + 11 + 5 = 49 * 1M = 49M/4 = 
$12.3 M per year, which is then rounded to $12 M).
---------------------------------------------------------------------------

    Considering costs to retailers as well as manufacturers and State, 
local, and Federal authorities, a class I recall may cost as much as $3 
million to $5 million.\4\ Using a conservative estimate, if the actual 
cost of a recall for industry and government combined is closer to $3 
million than $5 million,\5\ then the annual cost of the recall (the 
benefit of avoiding these recalls) could be as high as $37.0 million 
annually (49 recalls/4 years* $3 million).
---------------------------------------------------------------------------

    \4\ ``Preliminary Regulatory Impact Analysis and Initial 
Regulatory Flexibility Analysis of the Proposed Rules to Ensure the 
Safety of Juice and Juice Products'' (63 FR 24258; May 1, 1998).
    \5\ Ibid.
---------------------------------------------------------------------------

    In addition to the cost savings attributed to avoiding recalls 
described above, firms generally suffer a loss of sales, at least 
temporarily, following a Class I or Class II recall. This alone does 
not result in a social cost, but rather a social transfer, as other 
firms will step forward to capture sales lost by the recalling firm. 
However, in addition to the resources invested in recalling the 
product, the recalling firm may incur additional advertising costs to 
recapture the loss of sales plus the flow of future sales, which is a 
social cost. Additionally, there can be a loss of reputation for the 
manufacturer and the brand associated with recalls that may affect 
future sales.

Consumer

    FSIS expects the consumer to benefit from: (1) Reduced incidence of 
adulterated product being released into commerce, (2) fewer recalls 
resulting in higher confidence and acceptability of products, and (3) 
lower levels of illness. This new policy will lead to increased 
consumer confidence and acceptance of product through reduced recalls 
and negative press.\6\
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    \6\ Ollinger, Michael, working paper. ``Many economists have 
examined the effects of reputation loss and the production of unsafe 
food. Packman (1998) argues that the negative publicity generated 
from a recall can erode prior investments in reputation and brand 
capital. Economists (Thomsen and McKenzie, 2001; Pruitt and 
Peterson; Salin and Hooker) found that firms that voluntarily 
recalled contaminated meat and poultry products suffered a decline 
in long run profitability (i.e., significant declines in stock 
prices). A number of studies (Piggott and Marsh, 2004; Marsh, 
Schroeder, and Mintert, 2004) determined that adverse meat and 
poultry food safety events led to temporary declines in meat and 
poultry consumption. Thomsen, Shiptsova, and Hamm (2006) established 
that sales of branded frankfurter products declined more than 20 
percent after product recalls.''
---------------------------------------------------------------------------

Government

    FSIS expects there to be a reduction in the number of recalls, and, 
therefore, the Agency expects to benefit from lower Agency costs for 
recalls and recovery of adulterated product because of: (1) Reduced 
inspection program personnel activities at Federal establishments, (2) 
reduced overtime hours for FSIS staff, and (3) reduced staff travel to 
establishments after recalls to conduct Food Safety Assessments (FSA) 
and recall effectiveness checks. These expenses would include air, 
train, or car travel; lodging; and per diem expenses for meals. In 
addition, FSIS should have less need to disseminate information about 
food recalls through press releases and recall releases.

Industry

    Under this policy change, the meat and poultry processing and 
slaughter industries will benefit from fewer recalls and negative 
press. As the number of recalls decline, there will likely be: (1) An 
increase in consumers' confidence, (2) reduced costs for recalls, and 
(3) greater consumer acceptance of products.
    Initially, preventing adulterated product from going into commerce 
should reduce operating costs.

[[Page 73406]]

Operating costs will be lower because companies will be less likely to 
have a recall and experience the adverse impacts to business reputation 
as well as the product loss associated with a recall. Avoiding adverse 
impacts on business reputation is an indirect benefit.

Imported Product

    There were 11 Class I recalls of FSIS tested imported product for 
the 2007-2010 (Table 1) time period, 4 for E. coli O157:H7 and 7 for 
Lm. One recall occurred in 2007, (Lm), eight in 2008 (4 for E. coli 
O157:H7 and 4 for (Lm)) and two in 2010 (Lm). There were no recalls 
from FSIS testing for imported product in 2009. All of these recalls 
are included within the universe described in Table 1 and therefore are 
included in the Benefits section within this analysis.

Human Health Benefits

Introduction

    The Centers for Disease Control and Prevention (CDC) has estimated 
that Shiga toxin-producing E. coli O157:H7 infections cause 63,000 
illnesses annually in the United States, resulting in more than 2,138 
hospitalizations and 20 deaths.\7\ The Economic Research Service (ERS) 
estimates that the annual economic cost of illness caused by E. coli 
O157:H7 is $489 million \8\ (in 2010 dollars) for all cases, not just 
for foodborne cases.
---------------------------------------------------------------------------

    \7\ Scallan E. Hoekstra RM, Angulo FJ, Tauxe RV, Widdowson MA, 
Roy SL, et al. ``Foodborne Illness Acquired in the United States--
Major Pathogens''. Emerging Infectious Diseases. 2011 January. Table 
2 of this report provides foodborne STEC O157:H7 illnesses at: 
63,153, with 90% confidence of (17,587-149,631). Table 3 of this 
report provides STEC O157:H7 hospitalizations at 2,138, with 90% 
confidence of (549-4,614) and deaths of 20, with 90% confidence of 
(0-113).
    \8\ Frenzen, Paul D., Drake, Alison, Angulo, F.J., and the 
Emerging Infections Program Foodnet Working Group. Journal of Food 
Protection, Vol. 68 No. 12, 2005, pp. 2623-2630.
---------------------------------------------------------------------------

    The occurrence of recalls demonstrates that pathogens have been 
present on raw meat and poultry products distributed in commerce under 
FSIS's existing approach. These pathogens represent a hazard to human 
health. Thus, public health likely will benefit because meat and 
poultry products will be held until results of pathogen tests are 
returned as negative. If test results are positive, the product will be 
destroyed or further processed to destroy the pathogen, rather than 
having to be recalled. This change will thus reduce foodborne pathogens 
in products that are released into commerce. The economic health 
benefits are expected to be small relative to the economic benefits of 
avoided recalls.
    To reach this conclusion FSIS analyzed both the actual illnesses 
from the universe described in Table 1 and estimated future illnesses 
averted as a result of this change. We discuss in Section A (Potential 
averted illnesses from this policy using actual case data) the research 
conducted by the Economic Research Service (ERS) for each of the 
pathogens, E. coli O157:H7, Lm, and Salmonella, as well as their 
associated costs per case.\9\
---------------------------------------------------------------------------

    \9\ ERS cost calculator can be found on their Web site at http://www.ers.usda.gov.
---------------------------------------------------------------------------

A. Potential Averted Illnesses From This Policy Using Actual Case Data

    (1) During 2007-2010, there were 23 recalls for E. coli O157:H7 
from FSIS testing. None of these recalls resulted in any illnesses 
according to FSIS's Office of Public Health Science (OPHS) data. The 
ERS estimate excludes a number of other potential costs, such as those 
for special education, nursing homes, travel, childcare, and pain and 
suffering. Illnesses for E. coli O157:H7 are divided into seven 
severity levels depending on whether the patient visits a physician or 
not, develops Hemolytic Uremic Syndrome (HUS) or not, develops End-
stage renal disease or not, and finally whether death occurs. For each 
of these classes, ERS derives an average cost of illness. The CDC 
classifies illnesses into three classes: Death, hospitalizations, and 
other.\10\ FSIS used these classifications and the percentages of cases 
identified in them to estimate $3,281 as the average cost per case.\11\
---------------------------------------------------------------------------

    \10\ Scallan E. Hoekstra, Angulo FJ, Tauxe RV, Widdowson MA, Roy 
SL, et. al. ``Foodborne Illness Acquired in the United States--Major 
Pathogens''. Emerging Infectious Diseases. 2011 January.
    \11\ The FSIS estimate for the cost of E. coli O157:H7($3,281 
per case,--2010 dollars) was developed using the USDA, ERS 
Foodborned Illness Cost Calculator: STEC O157 (June 2011). FSIS 
updated the ERS calculator to incorporate the Scallan (2011) case 
distribution for STEC O157.Scallan E. Hoekstra, Angulo FJ, Tauxe RV, 
Widdowson MA, Roy SL, et. al. ``Foodborne Illness Acquired in the 
United States--Major Pathogens''. Emerging Infectious Diseases. 2011 
January.
---------------------------------------------------------------------------

    (2) During 2007-2010 there were 25 recalls for Lm from FSIS 
testing. Only one of these recalls was associated with illnesses. In 
2008, there were two illnesses, one of which was fatal, when a customer 
consumed chicken salad that had been released into commerce before the 
FSIS test results were returned as positive. The cost of Lm illness is 
$1.3 million per case.\12\ Benefits from averting the two illnesses had 
the establishment held the product until the test results returned a 
positive would be $2.6 million ($1.3 M * 2), or $650,000 annually.
---------------------------------------------------------------------------

    \12\ The FSIS estimate for the cost of Lm illness ($1.3 million 
per case--2010 dollars) is based on a model developed by Buzby, et 
al. (1996). The Buzby model is limited to medical costs and 
productivity loss. Therefore, in order to account for death, FSIS 
incorporated the value of statistical life in the overall cost 
calculation. Buzby, J.C., T.C. Roberts, J.T. Lin, and J.M. 
MacDonald. 1996. ``Bacterial foodborne disease: medical costs and 
productivity losses''. U.S. Department of Agriculture, Economic 
Research Services, AER-741. U.S. Department of Agriculture, 
Washington, DC.
---------------------------------------------------------------------------

    (3) There was one recall from FSIS testing for Salmonella in RTE 
product during 2007-2010. Research has shown that the cost per case of 
a Salmonella illness is $2,423, or $606 annually.\13\
---------------------------------------------------------------------------

    \13\ The FSIS estimate for the cost of Salmonella ($2,423 per 
case--2010 dollars) was developed using the USDA, ERS Foodborne 
Illness Cost Calculator: Salmonella (June 2011). FSIS updated the 
ERS calculator to incorporate the Scallan (2011) case distribution 
for Salmonella.
---------------------------------------------------------------------------

B. Estimated Averted Illnesses From This Policy

    FSIS has developed a model \14\ to estimate annual illnesses 
averted per positive sample from holding FSIS tested product until 
testing results are returned. This model is based on 2007-2010 recall 
data, as well as the OPHS illness data occurring from these 
recalls.\15\ The model estimates expected illnesses by accounting for 
volume of product recalled and ``time in days'' between the dates of 
production of adulterated product until the date of recall of that 
adulterated product. With this policy in effect, the FSIS model 
estimated the upper 95% confidence bound of averted E. coli O157:H7 
illnesses to be approximately 3.07 for a four year period (based on the 
2007-2010 data). FSIS estimated human health benefits, based on 
averting these 3.07 E. coli O157:H7 illnesses to be approximately 
$2,518 annually ($3,281*3.07/4).
---------------------------------------------------------------------------

    \14\ See Appendix 1: ``Development of model for predicting 
averted illnesses due to E. coli O157:H7 from Test and Hold'' and 
Appendix 2: ``Data used in Analysis.'' A copy of these documents are 
available for viewing in the FSIS Docket Room and on the FSIS Web 
site as related documents associated with this docket.
    \15\ OPHS data was used for the model that contained illnesses 
from all recalls and all sources. This included Outbreak, Illness, 
FSIS Test, and Establishment Test. This was done only for the 
purpose of estimating the rational expectation of future illnesses 
averted by this policy.
---------------------------------------------------------------------------

    Using similar methodology and an estimated number of illnesses of 
0.32 for Listeria monocytogenes and .34 for Salmonella, in RTE product, 
the annual cost is $104,000 and $206 respectively. For the three 
pathogens, E. coli O157:H7, Listeria monocytogenes, and Salmonella 
human health benefits are estimated from the model to be

[[Page 73407]]

approximately $106,724 annually. See Table 2.

               Table 2--Human Health Benefits From Actual Recalls and Estimated Model (2007-2010)
----------------------------------------------------------------------------------------------------------------
                                                                                       FSIS
                                                                   Actual annual     estimated
            Pathogen               Cost per case   Actual cases   benefit  2007-   cases averted  Annual benefit
                                                     2007-2010         2010       (model)  2007-      (model)
                                                                                      2010 **
----------------------------------------------------------------------------------------------------------------
E. coli O157:H7.................          $3,281               0              $0            3.07         $ 2,518
Listeria Monocytogenes..........           1.3 M               2         650,000             .32         104,000
Salmonella......................           2,423               0               0             .34             206
                                 -------------------------------------------------------------------------------
    Total.......................  ..............  ..............         650,000            3.73         106,724
----------------------------------------------------------------------------------------------------------------
* Note: LM is known to have a high death rate and as such one death is included in the expectation of benefits
  from illnesses averted.
** Table 3 of the Model (Appendix) estimates illnesses for 10 years. To make the numbers comparable we used
  estimated illnesses from the model/10*4 to derive the numbers in this column.

    Total human health benefits from the FSIS model and actual reported 
illnesses combined would be approximately $756,724 annually ($650,000 + 
$106,724). Differences may be due to rounding.

Residue Benefits

    Microbiological hazards are expected to drive the cost-benefit 
analysis because they result in an attributable short term, low 
(morbidity) to high (morbidity) impact consequences that can be 
realistically estimated.
    The cost-benefit analysis for chemical hazards on the other hand is 
difficult to quantify. The negative health effects of exposure to low 
levels of chemicals are long term and multifactorial. Single exposure 
to low levels of chemicals or cumulative exposure can contribute to 
negative health affects for example, cancer, 10, 20, or more years 
later. Of course, over such long periods of time, individuals are 
exposed to a variety of hazards making it impossible to quantify the 
contribution of the chemical exposure to societal and medical costs. 
The approach for conducting a cost benefit analysis for single 
incidents of contamination at levels that cause immediate morbidity or 
mortality, i.e., where the health effects are readily attributable to 
the exposure, is comparable to microbiological hazards.
    The Food and Drug Administration (FDA) conducts risk assessments to 
establish what level of chemical residues in food has a reasonable 
certainty of no harm when consumed by humans.\16\ They consider acute 
and chronic exposure scenarios to set residue limits and include a wide 
margin of safety in their calculations. Meat, poultry, and egg products 
with chemical residues that exceed the tolerances or other limits set, 
or for which no scale level has been set, by EPA and FDA are 
adulterated and unsafe for human consumption.
---------------------------------------------------------------------------

    \16\ See General Accounting Office (GAO) report ``Chemical Risk 
Assessment: Selected Federal Agencies' Procedures, Assumptions, and 
Policies'', GAO-01-810, August 2001 at http://www/gao.gov/new.items/d01810.pdf.
---------------------------------------------------------------------------

Summary of Benefits

    The annual benefits from this policy change come from:
    (1) Reduced costs of recalls, $12 million to $37 million,
    (2) Actual averted illnesses, $650,000 as shown in Table 2, and
    (3) Estimated Averted illnesses for E. coli O157:H7, Listeria 
moncytogenes and Salmonella of $106,724 as shown in Table 2.
    Total benefits from this policy change are estimated to range 
between $12.8 million and $37.8 million annually.

Expected Costs of the Action

    FSIS prepared a paper in September, 2006 to provide data on trends 
in the industry practice of holding meat and poultry products pending 
results of FSIS microbiological testing.\17\ Identifying trends in 
industry holding practices provides a context and baseline for any 
future evaluation of the effects of holding product pending test 
results. FSIS examined test data for the calendar years 2003 through 
2005, as well as data for the first eight months of 2006, and grouped 
data by establishment size and pathogen. Specifically, FSIS examined 
the hold/release information included with FSIS testing results for the 
following pathogens in five different groups: (1) E. coli O157:H7 in 
raw, non-intact beef produced by domestic official establishments; \18\ 
(2) E. coli O157:H7 in domestically-produced RTE meat and poultry; (3) 
Salmonella in domestically-produced RTE meat and poultry; (4) Lm in 
domestically-produced RTE meat and poultry; and (5) Lm on food-contact 
surfaces in establishments that produce RTE meat and poultry products.
---------------------------------------------------------------------------

    \17\ A summary of the FSIS's analysis is available 
electronically at http://www.fsis.usda.gov/OPPDE/NACMPI/May2006/Test_and_Hold_Report_NACMPI.pdf.
    \18\ In this paper, FSIS did not examine results from the 
recently initiated FSIS baseline testing of beef trim for E. coli 
O157:H7 and Salmonella.
---------------------------------------------------------------------------

A. Domestic Product

(1) Micro Testing
    FSIS found the following results of meat and poultry product being 
held by establishments prior to receiving FSIS test results. Table 3 
shows the results by establishment size for the first 8 months of year 
2006 for the five test groups described above.

                 Table 3--Percent of Product Being Held by Establishment Size for 2006 (Jan-Aug)
----------------------------------------------------------------------------------------------------------------
                                                     Large  %        Small  %      Very small  %    Unknown  %
----------------------------------------------------------------------------------------------------------------
Group 1.........................................             100              83              79              57
Group 2.........................................             100              93              88             100
Group 3.........................................             100              90              82              93

[[Page 73408]]

 
Group 4.........................................              99              91              82              93
Group 5.........................................             100              97              88              --
----------------------------------------------------------------------------------------------------------------
Group 1: Percent of raw, non-intact beef Products held after Agency E. coli O157:H7 Sampling.
Group 2: Percent of RTE Products held after Agency E. coli O157:H7 Sampling.
Group 3: Percent of RTE Products held after Agency Salmonella Sampling.
Group 4: Percent of RTE Products held after Agency Lm Product Sampling.
Group 5: Percent of RTE Products held after Agency Lm Food Contact Surface Sampling.
Note: This data is the latest available data for product held in establishments from FSIS testing. Study by the
  Office of Program, Evaluation, Enforcement, and Review (OPEER).

    In evaluating recent data, the Agency has noted that 
establishments' releasing product into commerce before receiving test 
results continues to be a problem.
    However, using the percentage numbers from Table 3 for the first 
eight months of 2006 will provide a basis for establishing the costs 
for 2007-2010 to hold product until test results are returned.
    Table 4 shows the number of Federally inspected meat and poultry 
establishments by establishment size and presents in columns 3 and 4, 
based on the results from Table 3, the number of establishments 
currently holding product, as well as the number of establishments that 
will need to hold product as a result of this policy change.

                             Table 4--Federal Inspected Meat/Poultry Establishments
----------------------------------------------------------------------------------------------------------------
                                                               Number of                          Does not hold
                   Establishment size                      establishments *     Holds product        product
(1)                                                                      (2)       (3)               (4)
----------------------------------------------------------------------------------------------------------------
LARGE...................................................                 362       362                 0
SMALL...................................................               2,366  1,964-2,295         71-402
VERY SMALL..............................................               2,900  2,291-2,552        348-609
UNKNOWN.................................................                 578   329-578             0-249
                                                         -------------------------------------------------------
    TOTAL...............................................               6,206  4,946-5,787       419-1,260
----------------------------------------------------------------------------------------------------------------
* Source: Performance Based Inspection System (PBIS) 1/3/2008. There has been no substantial change in
  establishment numbers.
The data provided in Table 3 are used to calculate the number of establishments holding product (column 3) and
  the number of establishments not holding product (column 4).

    Across establishment size, between 79 percent and 100 percent of 
establishments already hold product pending test results, and between 
zero and 21 percent will need to hold product pending test results.
    From the enumerations shown in Table 4, FSIS assumes, for cost 
purposes only, that all 362 large establishments are holding all tested 
product for results. Approximately 71-402 small establishments, 348-609 
very small establishments, and between 0 and 249 unknown size 
establishments do not hold tested product and will be affected by this 
new policy. Table 4, column 4 shows the range of establishments that 
will have to hold product pending test results before FSIS will apply 
the USDA mark of inspection. A total of between 419 and 1,260 federally 
inspected meat and poultry establishments will be affected by this 
policy change. There will be no additional costs to any of the large 
establishments as they are assumed to hold all tested product. FSIS 
expects that among the remaining establishments that do not hold tested 
product, there will be an adjustment of lot size to accommodate 
necessary storage capacity at the establishment prior to an FSIS test.
    FSIS conducted further research on all FSIS tests conducted in the 
year 2007. Combining the percentages of product held from Table 3 and 
the estimates of common lot sizes from the following Table 5, FSIS 
reached certain conclusions about the additional pounds of product that 
would need to be held by the small and very small establishments which 
is shown in Table 6.

                               Table 5--Estimated Lot Sizes by Establishment Size
----------------------------------------------------------------------------------------------------------------
           Establishment size                 Lot size produced               Average lot size tested *
----------------------------------------------------------------------------------------------------------------
LARGE..................................  2,000-30,000 pounds.......  2,000 pounds.
SMALL..................................  1,000-10,000 pounds.......  1,000 pounds.
VERY SMALL.............................  50-2,000 pounds...........  50-60 pounds.
----------------------------------------------------------------------------------------------------------------
Source: Common Industry Practice and expert elicitation.
* Tested lots are smaller than typical production lot sizes.

    FSIS estimates the common industry practice for average lot sizes 
tested to be approximately 2,000 pounds at large establishments, 1,000 
pounds at small establishments, and between 50-60 pounds at very small 
establishments. As a result of the above lot size estimations, there 
may be a certain number of small and very small establishments that 
will

[[Page 73409]]

incur costs relative to additional storage (recurring costs) or for 
capital equipment (one-time costs), in order to hold tested product.

                 Table 6--Additional Cost per Establishment To Hold Estimated Pounds of Product
----------------------------------------------------------------------------------------------------------------
                                                                                                   Cost per Est.
                                                                     Lbs to be     Days  product     to  store
                                                                   held by  Est.    to be  held       product
----------------------------------------------------------------------------------------------------------------
LARGE...........................................................               0             3-8              $0
SMALL...........................................................           4,511             3-8           5,000
V/SMALL.........................................................           1,329             3-8           1,000
UNKNOWN.........................................................           1,011             3-8           1,000
----------------------------------------------------------------------------------------------------------------
Source: FSIS/OPEER/OCIO data.
Cost per commercial freezer @ $5,000 per 300 cu. ft. for small establishments. Cost of stand-up freezer for very
  small establishments @ $1,000.

    Factors affecting this cost impact include: (1) The amount of 
product needed to be handled and placed into storage; (2) the average 
number of days of storage; (3) the number of times per year that tests 
occur; and (4) the cost per day in handling and storage.
    The costs shown in Table 6 would predominately be one-time capital 
expenditures to purchase freezers for storage of tested product. There 
will be a small amount of electricity charges to operate the 
refrigeration units, but we do not anticipate that they would be 
significant. Labor costs would also be minimal to accommodate the 
additional product stored. Additionally, FSIS recognizes the concern of 
some very small establishments that they could lose some product 
because of the product's short shelf life, and that an establishment 
could experience some inability to satisfy customer orders, resulting 
in a short-term disruption in business activities.\19\ FSIS does not 
have sufficient information to include costs associated with this 
disruption in the analysis.
---------------------------------------------------------------------------

    \19\ The American Meat Institute (AMI) survey dated April, 2007, 
conducted for the Lm Final Regulatory Impact Analysis shows various 
amounts reported for spoilage due to products exceeding shelf-life 
prior to obtaining test results or diminished shelf-life after 
obtaining test results for Lm. Large establishments report a range 
of $0-$50,000 or on average $3,571 and a median of $0; small 
establishments report a range of $0-$150,000 or on average $5,750 
and median of $0; and very small establishments report a range of 
$0-$5,000, or on average $450 and a median of $0. Only 16 very small 
and 75 small establishments responded to the survey. There are 2,900 
very small and 2,366 small federally inspected establishments from 
PBIS data.
---------------------------------------------------------------------------

    Table 7 combines the results of tables 4, 5 and 6 and shows that 
the estimated total costs to all small and very small (and unknown) 
establishments that do not hold product domestically would range 
between $703,000 and $2.87 million.

                                                   Table 7--Total One-Time Cost per Establishment Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Number of           Cost/Est. to  store    One-time  total cost to
                 Establishment size                   establishments affected          product               hold product *      Annualized 7%--10 years
--------------------------------------------------------------------------------------------------------------------------------------------------------
Large...............................................                        0                       $0                       $0                       $0
Small...............................................                   71-402                    5,000               355K-2.01M           50,541-299,000
Very Small..........................................                  348-609                    1,000                348K-609K            49,545-86,700
Unknown.............................................                    0-249                    1,000                   0-249K                 0-17,227
    TOTAL...........................................                419-1,260  .......................            703,000-2.87M          100,000-408,600
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Note: Total cost to hold product is result of  of Establishments affected * cost/Est to store product.

(2) Residue Testing
    The National Residue Program (NRP) consists of two sampling plans: 
Domestic and import. These plans are further divided to facilitate the 
management of chemical residues such as veterinary drugs, pesticides, 
and environmental contaminants in meat, poultry, and egg products. The 
domestic sampling plan includes both a scheduled sampling program that 
is derived statistically by an interagency (FSIS, EPA, and FDA) 
technical team and by inspector generated sampling in which samples are 
collected by in-plant veterinarians when they suspect an animal 
presented for slaughter may have violative levels of chemical residues. 
The import re-inspection sampling plan verifies the equivalence of 
inspection systems of exporting countries. FSIS inspectors collect 
samples randomly from imported products, and the intensity of sampling 
increases when products fail to meet U.S. requirements.

Residue Costs

    In CY 2008, under the National Residue Plan, there were 22,709 FSIS 
residue samples completed. An additional 135,552 inspector-generated 
samples were taken. The number of samples includes those taken in-
plant, taken from show animals, taken by inspectors or OPEER personnel 
as part of their regular work, and as part of state programs.
    The average range of days between a sample arriving at the lab and 
the report being available is generally 3-10 working days. Some screen 
results are available the same day by Kidney Inhibition Swab (KIS), 
tests, while other tests may take longer than 10 days.
    The Agency does not anticipate any substantial cost impact from 
additional storage space requirements for FSIS residue testing. For 
establishment residue testing, the establishment as part of its HACCP 
program should already be holding any tested carcasses.
    Products will have a reduced shelf-life at retail as a result of 
carcasses being held pending FSIS and establishment test results. Some 
beef product that has been residue tested and held for three to ten 
days will lose freshness and will need to be frozen. Over the past nine 
years, on average, the difference in fresh

[[Page 73410]]

vs. frozen beef prices is approximately $0.054 a pound.\20\ The worst 
case scenario for loss of business revenue for dairy cows, used for 
beef estimation purposes, would be approximately $39,500.\21\ While 
these lost revenue estimates are a worst case scenario, we also 
estimate the range for reduced beef sales to be between $19,700 and 
$39,500.
---------------------------------------------------------------------------

    \20\ Beef price data provided by the Economic Research Service, 
USDA. The data is for 90% lean beef, not carcasses and can be 
interpreted as cents per pound or dollars per cwt of product.
    \21\ Estimation of worst case business loss for dairy cows: 
total number of animals selected for dairy cows (300) * 4 (number of 
chemicals sampled) * average lbs of animal (609) = total lbs to be 
held * price difference per lb. from fresh to frozen ($0.054).
---------------------------------------------------------------------------

    Additionally, roaster pig carcasses could go rancid and would also 
need to be frozen. Some product will go to secondary markets, such as 
renderers, pet foods, and fertilizer product. For roaster pigs, we 
estimate a worst case scenario loss of business at approximately 
$92,400.\22\ The lower estimate for roaster pigs is $46,200.
---------------------------------------------------------------------------

    \22\ Estimation of worst case business loss for roaster pigs: 
total number of animals selected for roaster pigs 300 *4 (number of 
chemicals sampled) * average lbs of animal (70) = total lbs to be 
held * price per lb. ($1.10).

        Table 8--Loss of Revenues for Domestic Beef and Roaster Pigs Due to Residue Test and Hold Policy
----------------------------------------------------------------------------------------------------------------
                                                                                Roaster pigs
           Establishment size              Beef number of     Beef  $ lost        number of      Roaster pigs  $
                                           establishments                      establishments         lost
----------------------------------------------------------------------------------------------------------------
Large...................................               132            $1,264                 4              $601
Small...................................               810             7,900                85            13,860
Very Small..............................              3164            30,099               467            77,616
Unknown.................................                25               237                 2               323
                                         -----------------------------------------------------------------------
    TOTAL...............................              4131            39,500               558            92,400
----------------------------------------------------------------------------------------------------------------
Source of data: Data Analysis Integration Group (DAIG) and Office of Policy and Program Development (OPPD)/Risk
  Management Division.

B. Imported Product

Imported Re-inspection Sampling Plan
    Import Inspection Personnel are to sample imported ready-to-eat 
(RTE) meat and poultry products produced in foreign establishments. 
Analyses will include Lm and Salmonella testing for all RTE products, 
and E. coli O157:H7 for cooked beef patties and dry or semi-dry 
fermented sausages.
    Ready-to-eat cooked meat or poultry product is subjected to 
microbial sampling at the port-of-entry. This includes any product that 
is intended to be consumed without any further safety preparation 
steps.
    Table 9 describes the two different types of tests that are 
conducted on imported product, (1) micro testing, and (2) residue 
testing (column 1). Column 2 shows the number of samples where product 
was held, while column 3 shows the number of samples where the product 
was not held. Column 4 shows the number of samples for which the 
available data do not show whether or not the product was held. Column 
5 is the total of all tests taken on imported product (sum of columns 
2, 3 & 4). Column 6 is the percentage of tested product that is 
currently being held.

                  Table 9--Percent of Imported Product Held That Has Been FSIS Tested (by Lots)
----------------------------------------------------------------------------------------------------------------
                                                                                                        % Age
                                                                               Not                     product
                      Type                           Held       Not held    indicated      Total      currently
                                                                                                         held
(1)                                                      (2)          (3)          (4)          (5)          (6)
----------------------------------------------------------------------------------------------------------------
Micro..........................................         1994         1799           88         3881         51.4
Residues.......................................         2320         2490          493         5303         43.7
----------------------------------------------------------------------------------------------------------------
Source: FSIS International Policy Division.

    Table 10 shows the type of samples (column 1) and the number of 
FSIS samples taken (column 2). The average lot size derived by dividing 
the total pounds of product presented for import in 2008 by the total 
lots presented for import in 2008 is shown in column 3 (3,270,643,817/
210,592). Column 4 and 5 are percentage of product currently held and 
percentage of product to be held. Column 6 and 7 represent the total 
pounds to be held and the cost of holding that product. The cost of 
holding imported product when this policy becomes effective will range 
from approximately $757,000 to $832,000.\23\
---------------------------------------------------------------------------

    \23\ The storage cost data was not robust, therefore a cost + 
10% range was cited. Adding the 10% leads to a storage cost of 
$832,242.

                               Table 10--Cost To Hold Imported FSIS Tested Product
----------------------------------------------------------------------------------------------------------------
                                                                            Additional
                                     Number of     Average     % Product     % age of      Total       Cost for
               Type                     FSIS       lot size     now held    product to   pounds to     holding
                                      samples                               be held *     be held      product
(1)                                         (2)          (3)          (4)          (5)          (6)          (7)
----------------------------------------------------------------------------------------------------------------
Microbial.........................         3881       15,530         51.4         48.6   29,292,158     $292,922

[[Page 73411]]

 
Residue...........................         5303       15,530         43.7         56.3   46,366,197      463,662
                                   -----------------------------------------------------------------------------
    Total.........................  ...........  ...........  ...........  ...........  ...........      756,584
----------------------------------------------------------------------------------------------------------------
Note: Cost is based on storage of product for up to 30 days @ $.01/pound.
Source: FSIS--International Policy Division.
* Column 5 is the additional percentage of product that will need to be held once this policy becomes effective.
  (100%--column 4 % age).

Summary of Annual Costs

    Total Domestic Product--$100,000-$408,600.
    Loss of Business Revenue--$66,000-$131,900.
    Total Import Product--$757,000-$832,000.
    Total Cost: $923,000-$1.4 million.
    Estimated annual benefits range between $12.8 million and $37.8 
million and exceed the estimated costs. Annual net benefits range 
between $11.9 million and $36.4 million.

USDA Nondiscrimination Statement

    The U.S. Department of Agriculture (USDA) prohibits discrimination 
in all its programs and activities on the basis of race, color, 
national origin, gender, religion, age, disability, political beliefs, 
sexual orientation, and marital or family status. (Not all prohibited 
bases apply to all programs.) Persons with disabilities who require 
alternative means for communication of program information (Braille, 
large print, or audiotape) should contact USDA's Target Center at (202) 
720-2600 (voice and TTY).
    To file a written complaint of discrimination, write USDA, Office 
of the Assistant Secretary for Civil Rights, 1400 Independence Avenue 
SW., Washington, DC 20250-9410 or call (202) 720-5964 (voice and TTY). 
USDA is an equal opportunity provider and employer.

Additional Public Notification

    FSIS will announce this rule online through the FSIS Web page 
located at: http://www.fsis.usda.gov/regulations_&_policies/Federal_Register_Notices/index.asp
    FSIS will also make copies of this Federal Register publication 
available through the FSIS Constituent Update, which is used to provide 
information regarding FSIS policies, procedures, regulations, Federal 
Register notices, FSIS public meetings, and other types of information 
that could affect or would be of interest to constituents and 
stakeholders. The Update is communicated via Listserv, a free 
electronic mail subscription service for industry, trade groups, 
consumer interest groups, health professionals, and other individuals 
who have asked to be included. The Update is also available on the FSIS 
Web page. In addition, FSIS offers an electronic mail subscription 
service which provides automatic and customized access to selected food 
safety news and information. This service is available at http://www.fsis.usda.gov/News_&_Events/Email_Subscription/. Options range 
from recalls to export information to regulations, directives and 
notices. Customers can add or delete subscriptions themselves, and have 
the option to password protect their accounts.

    Done at Washington, DC, on: November 30, 2012.
Alfred V. Almanza,
Administrator.
[FR Doc. 2012-29516 Filed 12-7-12; 8:45 am]
BILLING CODE 3410-DM-P