[Federal Register Volume 78, Number 101 (Friday, May 24, 2013)]
[Rules and Regulations]
[Pages 31367-31385]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-12366]
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Rules and Regulations
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Federal Register / Vol. 78, No. 101 / Friday, May 24, 2013 / Rules
and Regulations
[[Page 31367]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Parts 60 and 65
[Document No. AMS-LS-13-0004]
RIN 0581-AD29
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 (AMS), U.S. Department of
Agriculture (USDA).
ACTION: Final rule.
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SUMMARY: This final rule amends the Country of Origin Labeling (COOL)
regulations to change the labeling provisions for muscle cut covered
commodities to provide consumers with more specific information and
amends the definition for ``retailer'' to include any person subject to
be licensed as a retailer under the Perishable Agricultural Commodities
Act (PACA). The COOL regulations are issued pursuant to the
Agricultural Marketing Act of 1946. The Agency is issuing this rule to
make changes to the labeling provisions for muscle cut covered
commodities to provide consumers with more specific information and
other modifications to enhance the overall operation of the program.
DATES: This final rule is effective May 23, 2013. The requirements of
this rule do not apply to covered muscle cut commodities produced or
packaged before May 23, 2013.
FOR FURTHER INFORMATION CONTACT: Erin Morris, Deputy Associate
Administrator, AMS, USDA, by telephone on 202/690-4024, or via email
at: [email protected].
SUPPLEMENTARY INFORMATION:
Background
The Farm Security and Rural Investment Act of 2002 (2002 Farm Bill)
(Pub. L. 107-171), the 2002 Supplemental Appropriations Act (2002
Appropriations) (Pub. L. 107-206), and the Food, Conservation and
Energy Act of 2008 (2008 Farm Bill) (Pub. L. 110-234) amended the
Agricultural Marketing Act of 1946 (Act) (7 U.S.C. 1621 et seq.) 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. AMS published a final
rule for all covered commodities on January 15, 2009 (74 FR 2658),
which took effect on March 16, 2009. On March 12, 2013, AMS published a
proposed rule to amend the country of origin labeling provisions for
muscle cut covered commodities (78 FR 15645).
Executive Summary
Purpose of the Regulatory Action
In June 2012, in a WTO case brought by Mexico and Canada, the WTO
Appellate Body (AB) affirmed a previous WTO Panel's finding that the
COOL requirements for muscle cut meat commodities were inconsistent
with U.S. obligations under the WTO Agreement on Technical Barriers to
Trade (TBT Agreement). In particular, the AB affirmed the Panel's
determination that the COOL requirements were inconsistent with the TBT
Agreement's national treatment obligation to accord imported products
treatment no less favorable than that accorded to domestic products.
The WTO Dispute Settlement Body (DSB) adopted its recommendations and
rulings on July 23, 2012. The United States has until May 23, 2013, to
comply with the WTO ruling.
As a result of this action, the Agency reviewed the overall
regulatory program and is issuing this rule, under the authority of the
Agricultural Marketing Act (7 U.S.C. 1621 et seq.), to make changes to
the labeling provisions for muscle cut covered commodities and certain
other modifications to the program. The Agency expects that these
changes will improve the overall operation of the program and also
bring the current mandatory COOL requirements into compliance with U.S.
international trade obligations.
Summary of the Major Provisions of the Regulatory Action in Question
Under this final rule, origin designations for muscle cut covered
commodities derived from animals slaughtered in the United States are
required to specify the production steps of birth, raising, and
slaughter of the animal from which the meat is derived that took place
in each country listed on the origin designation. In addition, this
rule eliminates the allowance for commingling of muscle cut covered
commodities of different origins. These changes will provide consumers
with more specific information about the origin of muscle cut covered
commodities.
Costs and Benefits
The costs of implementing these requirements will be incurred by
intermediaries (primarily packers and processors of muscle cut covered
commodities) and retailers subject to requirements of mandatory COOL.
The Agency considers that the total cost of the rule is driven by the
cost to firms of changing the labels and the cost some firms will incur
to adjust to the loss of the flexibility afforded by commingling.
The estimated number of firms that will need to augment labels for
muscle cut covered commodities is 2,808 livestock processing and
slaughtering firms, 38 chicken processing firms, and 4,335 retailers.
This totals 7,181 firms that will need to augment the mandatory COOL
information presented on labels for muscle cut covered commodities.
Based on 2009 data, the Food Safety and Inspection Service (FSIS)
estimated there were approximately 121,350 raw meat and poultry unique
labels submitted by official establishments (i.e., establishments
regulated by FSIS) and approved by the Agency (76 FR 44862). Assuming
the upper bound estimate of 121,350 unique labels, the Agency estimates
the midpoint cost of the final rule for this label change is $32.8
million with a range of $17.0 million to $47.3 million.
With regard to the elimination of commingling flexibility, which
affects the beef and pork segments, the information submitted by
commenters
[[Page 31368]]
confirms the Agency's understanding that the commingling flexibility is
used by some packers, but that it is not possible to specify the extent
to which packers are making use of the flexibility. Accordingly, the
Agency made various assumptions and used several sources of data to
estimate the range of commingling activity that might be occurring in
the industry and the related range of costs that might be incurred from
the elimination of commingling.
The Agency estimates a potential range of commingling of U.S. and
foreign-origin livestock by U.S. packers of five percent to 20 percent.
The Agency considers that the data analyzed support the possibility
that the extent to which packers are commingling is closer to the lower
end than the higher end of the range. Midrange estimates of commingling
are 12.5 percent for fed cattle and hogs.
Estimated costs for the loss of commingling flexibility at the
packer/processor level are $7.16 per head for cattle and $1.79 per head
for hogs that are currently commingled. Estimated costs at the retail
level are $0.050 per pound for beef and $0.045 per pound for pork
muscle cuts derived from commingled livestock. For the beef segment,
total costs for the loss of commingling flexibility to intermediaries
and retailers are estimated to be $21.1 million, $52.8 million, and
$84.5 million at the lower, midpoint, and upper levels. Similarly for
the pork segment, total costs for the loss of commingling flexibility
to intermediaries and retailers are estimated to be $15.0 million,
$37.7 million, and $60.3 million at the lower, midpoint, and upper
levels.
Combining costs for label changes with costs from the elimination
of commingling flexibility yields estimated total adjustment costs of
$123.3 million at the midpoint and ranging from $53.1 million at the
low end to $192.1 million at the high end. Given that the Agency
believes that the current extent of commingling likely falls closer to
the lower end than the higher end of the estimates, the estimated
implementation costs narrow to a range of $53.1 to $137.8 million.
The Agency believes that the incremental economic benefits from the
labeling of production steps will be comparatively small relative to
those that were discussed in the 2009 final rule.
A complete discussion of the costs and benefits can be found under
the Executive Order 12866 section.
Summary of Changes to the COOL Regulations
Definitions
In the regulatory text for fish and shellfish (7 CFR part 60) and
for all other covered commodities (7 CFR part 65), the definition for
``retailer'' is amended to include any person subject to be licensed as
a retailer under the Perishable Agricultural Commodities Act (PACA) of
1930 (7 U.S.C. 499a(b)). This change more closely aligns with the
language contained in the PACA regulation and clarifies that all
retailers that meet the PACA definition of a retailer, whether or not
they actually have a PACA license, are also covered by COOL.
Country of Origin Notification
Labeling Provisions for Muscle Cut Covered Commodities
Under this final rule, all origin designations for muscle cut
covered commodities slaughtered in the United States must specify the
production steps of birth, raising, and slaughter of the animal from
which the meat is derived that took place in each country listed on the
origin designation. The requirement to include this information applies
equally to all muscle cut covered commodities derived from animals
slaughtered in the United States. This requirement will provide
consumers with more specific information on which to base their
purchasing decisions without imposing additional recordkeeping
requirements on industry. The Agency considers these changes, which are
discussed in detail below, consistent with the provisions of the
statute.
Labeling Covered Commodities of United States Origin
Under this final rule, the United States country of origin
designation for muscle cut covered commodities is required to include
location information for each of the three production steps (i.e.,
``Born, Raised, and Slaughtered in the United States''). The current
COOL regulations permit the term ``harvested'' to be used in lieu of
``slaughtered.'' This final rule retains that flexibility.
In the case of chicken muscle cut covered commodities, the current
COOL regulations define the term ``born'' as hatched from the egg.
Therefore, under this final rule, the origin designations for chicken
muscle cut covered commodities may use the term ``hatched'' in lieu of
``born.''
Labeling Muscle Cut Covered Commodities of Multiple Countries of Origin
(From Animals Slaughtered in the United States)
Muscle cut covered commodities derived from multiple countries
(from animals slaughtered in the United States) are those muscle cut
covered commodities derived from animals that were born in another
country (and thereby raised for a period of time in that country) and
then, following importation, were further raised and slaughtered in the
United States. Under this final rule, the origin designation for these
muscle cut covered commodities must include location information for
each of the three production steps (i.e., born, raised, and
slaughtered). As stated above, there is some flexibility in the
terminology that must be used with respect to referencing the
production steps.
As discussed in the preamble of the January 15, 2009, final rule
and in the March 12, 2013, proposed rule, if animals are born and
raised in another country and subsequently further raised in the United
States, only the raising that occurs in the United States needs to be
declared on the label, as it is understood that an animal born in
another country will have been raised at least a portion of its life in
that other country. Because the country of birth is already required to
be listed in the origin designation, and to reduce the number of
required characters on the label, the Agency is not requiring the
country of birth to be listed again as a country in which the animal
was also raised. Accordingly, under this final rule, the production
step related to any raising occurring outside the United States may be
omitted from the origin designation of these commodities (e.g., ``Born
in Country X, Raised and Slaughtered in the United States'' in lieu of
``Born and Raised in Country X, Raised and Slaughtered in the United
States'').
However, in the relatively rare situation where an animal was born
and raised in the United States, raised in another country (or
countries), and then raised and slaughtered in the United States, the
label must indicate all countries which the production step related to
raising occurred. In this rare case, the label could read ``Born and
Raised in the United States, Raised in Country X, Slaughtered in the
United States.''
Finally, the origin designation for muscle cut covered commodities
derived from animals imported for immediate slaughter as defined in
Sec. 65.180 is required to include
[[Page 31369]]
information as to the location of the three production steps. However,
the country of raising for animals imported for immediate slaughter as
defined in Sec. 65.180 shall be designated as the country from which
they were imported (e.g., ``Born and Raised in Country X, Slaughtered
in the United States'').
Commingling
This final rule eliminates the allowance for commingling of muscle
cut covered commodities of different origins. As discussed in the March
12, 2013, proposed rule, all origin designations are required to
include specific information as to the place of birth, raising, and
slaughter of the animal from which the meat is derived. Removing the
commingling allowance lets consumers benefit from more specific labels.
Labeling Imported Muscle Cut Covered Commodities
As stated in the March 12, 2013, proposed rule, under the current
COOL regulations, imported muscle cut covered commodities retain their
origin as declared to the U.S. Customs and Border Protection at the
time the products entered the United States (i.e., Product of Country
X) through retail sale.
Under this final rule, these labeling requirements for imported
muscle cut covered commodities remain unchanged. As is permitted under
the current COOL regulations, the Agency will continue to allow the
origin designation to include more specific information related to the
three production steps, provided records to substantiate the claims are
maintained and the claim is consistent with other applicable Federal
legal requirements.
Labeling
The current COOL regulations allow for a variety of ways that the
origin information can be provided, such as placards, signs, labels,
stickers, etc. Many retail establishments have chosen to use signage
above the relevant sections of the meat case to provide the required
origin information in lieu of or in addition to providing the
information on labels on each package of meat. Under this final rule,
the Agency will continue to allow the COOL notification requirements to
be met by using signs or placards. For example, for meat derived from
cattle born in Canada and raised and slaughtered in the United States,
the signage could read ``Beef is from animals born in Canada, Raised
and Slaughtered in the United States.''
In terms of using labels and stickers to provide the origin
information, the Agency recognizes that there is limited space to
include the specific location information for each production step.
Therefore, under this final rule, abbreviations for the production
steps are permitted as long as the information can be clearly
understood by consumers. For example, consumers would likely understand
``brn'' as meaning ``born''; ``htchd'' as meaning ``hatched'';
``raisd'' as meaning ``raised''; ``slghtrd'' as meaning ``slaughtered''
or ``hrvstd'' as meaning ``harvested''. In addition, the current COOL
regulations allow for some use of country abbreviations, as permitted
by Customs and Border Protection, such as ``U.S.'' and ``USA'' for the
``United States'' and ``U.K.'' for ``The United Kingdom of Great
Britain and Northern Island.'' This final rule retains that
flexibility. To help educate consumers about the new requirements, the
Agency will redesign its consumer brochures and use tools such as
social media, etc.
Effective Date and Period of Education and Outreach
The effective date of this regulation is May 23, 2013, and the rule
is mandatory as of that date. As the Agency explains below, it would be
impracticable and contrary to the public interest to delay the
effective date of the rule beyond May 23, 2013.
However, AMS understands that it may not be feasible for all of the
affected entities to achieve 100% compliance immediately and that some
entities will need time to make the necessary changes to achieve full
compliance with the amended provisions for 100% of muscle cut covered
commodities. Therefore, during the six month period following the
effective date of the regulation, AMS will conduct an industry
education and outreach program concerning the provisions and
requirements of this rule. AMS has determined that this allocation of
resources will ensure that the industry effectively and rationally
implements this final rule.
In addition, it is reasonable to allow time for the existing stock
of muscle cut covered commodities labeled in accordance with the 2009
COOL regulations that are already in the chain of commerce to clear the
system. Therefore, the requirements of this rule do not apply to muscle
cut covered commodities produced or packaged before May 23, 2013. The
Agency believes that providing an education and outreach period and
allowing existing stock to clear the chain of commerce is necessary to
prevent retailer and supplier confusion and will help alleviate some of
the economic burden on regulated entities.
Finally, the Agency recognizes that for some period of time
following the period of education and outreach, existing label and
package inventories may provide less specific origin information (e.g.,
Product of Country X and the U.S.). As long as retail establishments
provide the more specific information via other means (e.g., signage),
the Agency will consider the origin notification requirements to have
been met until these existing label and package inventories have been
completely used.
Comments and Responses
On March 12, 2013, the Agency published a proposed rule with a 30-
day comment period. AMS received 936 timely comments from consumers,
retailers, producers, wholesalers, foreign governments, distributors,
trade associations, and other interested parties. The majority of
commenters registered their support or opposition to the rule without
providing specific substantive guidance or information to modify the
rule text.
AMS received 453 comments, including four petitions signed by more
than 40,000 individuals, which indicated that the proposed rule makes
labels more informative for consumers. AMS also received 476 comments
opposing the rule from numerous producer, packer, and international
trading partner entities, as well as individual ranchers, packing
companies and Foreign Government officials. The comments expressed
opposition to the proposed rule due to concerns about the costs of
implementation and the lack of quantifiable benefits to consumers. For
the ease of the reader, the comments have been summarized by issue.
Executive Orders 13563 and 12866
Summary of Comments: Numerous commenters stated their belief that
the proposed rule should be withdrawn in light of Executive Order
(E.O.) 13563--Improving Regulation and Regulatory Review. The
commenters contended that they believe the costs of the rule outweigh
the benefits and, therefore, the standard of the E.O. is not being met.
Another commenter contended that the proposed rule does not comply with
E.O. 12866 based on the commenter's belief that there is no explanation
of the need for the rule; that the cost/benefit analysis lacks meaning;
and that there is no explanation of how regulation is consistent with
the statute.
Agency Response: The Agency believes that the proposed rule and
this final rule comply with both E.O. 13563
[[Page 31370]]
and E.O. 12866. The Act provides authority for the Secretary to
promulgate regulations necessary to implement the COOL program. In
addition, as explained previously, in order to implement mandatory
country of origin labeling for certain meat products as required by
statute, the Agency has made changes to the labeling provisions for
muscle cut covered commodities. These changes provide consumers with
more specific information and enhance the overall operation of the
program. The Agency also expects that these changes will bring the
mandatory COOL requirements into compliance with U.S. international
trade obligations.
The proposed rule contained an executive summary of the rule, which
included a statement of need. The Agency has conducted a cost benefit
analysis, as required, and has modified the analysis based on the
comments received. As noted in a subsequent response below, the Agency
believes that this final rule is consistent with the statute.
Miscellaneous
Summary of Comments: Several commenters stated their belief that
the proposed rule violates the First Amendment because it impermissibly
compels commercial speech. The commenters argued that AMS has not
stated an interest sufficient to require labeling of specific
production steps as recommended in the proposed rule.
Agency Response: The Agency disagrees. The Act directs that a COOL
program be implemented that provides consumers with country of origin
information on specified commodities, including muscle cuts of meat. It
also provides authority for the Secretary to promulgate regulations
necessary to implement the COOL program. The Agency believes that the
Act provides the authority to amend the COOL regulations to require the
labeling of specific production steps in order to inform consumers
about the origin of muscle cuts of meat at retail.
Summary of Comments: One commenter expressed concern that packers
will need to maintain two label inventories--one for domestic use and
one for export.
Agency Response: The COOL regulations apply to only those products
sold at covered domestic retail establishments. Because various
countries presently have different labeling and other requirements for
accepting products exported from the United States, packers already
utilize different labels for products destined for export (as well as
for products destined for food service) than for products destined for
the domestic retail market.
World Trade Organization
Summary of Comments: Several commenters expressed a wide range of
views regarding the WTO dispute. Some commenters contended that the
proposed rule will not bring the United States into compliance with its
international trade obligations while other commenters contended that
the proposed rule will satisfy U.S. trade obligations.
Agency Response: The Agency considers that this rule brings the
United States into compliance with its international trade obligations.
In the COOL dispute, the WTO affirmed that WTO Members have the right
to adopt country of origin labeling requirements, in that providing
such information to consumers about the products they buy is a
legitimate government objective. However, the WTO had concerns with
specific aspects of the current COOL requirements. In particular, the
WTO considered that the current COOL requirements imposed record
keeping costs that appeared disproportionate to the information
conveyed by the labels. This final rule addresses those concerns of the
WTO.
Statutory Authority
Summary of Commenters: Some commenters stated their belief that the
proposed rule is not authorized by the statute. One commenter stated
that the statute does not explicitly or implicitly allow USDA to
require retailers to provide point of processing information; that the
statute provides that labels must identify the origin of category C
covered commodities as the country from which it was imported and the
United States; and that, applying the whole statute rule, categories A
and B must be labeled in the same manner as categories C and D.
Agency Response: The Agency believes this rule is consistent with
the statute and that the Act provides authority for the Secretary to
promulgate regulations necessary to implement the COOL program. The
statute contemplates four different labeling categories for meat, based
on where the animal was born, raised, and/or slaughtered. This final
rule preserves these four different labeling categories for meat and is
consistent with the labeling criteria set forth in the statutory
scheme.
Effective Date and Period of Education and Outreach
Summary of Comments: Several commenters stated that the effective
date of the rule should be delayed until it is known whether the WTO
considers the final rule to be compliant with U.S international trade
obligations. Other commenters recommended that the effective date
should be the latter of 180 days after the WTO ruling or the
publication of the final rule. Another commenter recommended that the
effective date should be 18 months to 2 years after publication of the
final rule. With regard to enforcement, another commenter stated their
opinion that the industry needs 12-18 months to comply with the final
rule due to livestock commitments. Another commenter suggested that
companies need 12 months to work through existing inventory of labels.
Agency Response: The effective date of this regulation is May 23,
2013, and the rule is mandatory as of that date. As the Agency explains
below, it would be impracticable and contrary to the public interest to
delay the effective date of the rule beyond May 23, 2013.
However, and as discussed previously, the Agency determined that an
industry education and outreach program concerning the provisions and
requirements of this rule is appropriate. The Agency believes that a
six month period, as was provided for in the August 1, 2008, interim
final rule (73 FR 45106) and the 2009 final COOL rule, is sufficient
time for retailers and suppliers to become educated on and fully
transition over to the new requirements of the final rule.
Both during this six month period and beyond, the Agency will
continue to educate retailers and suppliers 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 working through existing packaging inventories, this final rule does
not require covered commodities to be individually labeled with COOL
information. As discussed previously, retailers can use placards and
other signage to convey origin information. In addition, as also
previously discussed, it is reasonable to allow time for the existing
stock of muscle cut covered commodities labeled in accordance with the
2009 COOL regulations that are already in the chain of commerce to
clear the system. Therefore, the requirements of this rule do not apply
to muscle cut covered commodities produced or packaged before May 23,
2013.
Labeling
Summary of Comments: Several commenters stated their belief that
retailers and suppliers should not have
[[Page 31371]]
to list production step information for U.S. origin products. Other
commenters stated their belief that requiring production step
information is too onerous and that consumers do not desire this
information. Another commenter stated that the rule will cause product
labels to mislead consumers and referenced the Federal Meat Inspection
Act (FMIA) (21 U.S.C. 601 et seq.). The commenter further stated that
consumers will be confused by imported meat products bearing an
``inspected & passed'' sticker. Another commenter recommended that
chicken should be labeled ``hatched'' instead of ``born.'' This
commenter as well as other commenters stated their opposition to having
to use the term ``slaughtered.'' The commenters suggested alternatives
to the term ``slaughtered'' that consumers may find more acceptable
including ``harvested'' or ``processed.''
Agency Response: Numerous comments received on this and previous
COOL rulemaking actions indicate that there clearly is interest by
certain U.S. consumers in the country of origin of food they purchase,
including the production step information that retailers must provide
pursuant to this final rule. The Agency also considers that providing
this more specific information regarding the country in which each
production step occurred is consistent with the COOL statute. The
Agency further considers that the rule will bring the United States
into compliance with its international trade obligations.
In addition, current country of origin labeling for imported meat
products follows pre-existing regulations, including those of the U.S.
Customs and Border Protection, regarding the origin of imported
products. Further, the ``inspected and passed'' sticker is applied
under the FMIA by FSIS inspectors and does not relate to the COOL
program. The Agency is not aware that the requirements set forth in the
2009 final rule are causing any confusion among consumers related to
meat products sold with the ``inspected and passed'' label. In any
event, as noted above, this final rule does not change existing COOL
labeling requirements for imported meat products nor does it alter the
``inspected and passed'' sticker. As such, there is no reason to
believe that this rule will cause confusion related to the ``inspected
and passed'' sticker among consumers.
With regard to chicken products, the current COOL regulations
define the term ``born'' with respect to chicken as ``hatched.''
Accordingly, it is permissible to utilize the term ``hatched'' in
origin designations for chicken products under this final rule. The
Agency has included additional language in this preamble to clarify
this point. With respect to the suggested alternatives that may be more
acceptable to consumers, the 2009 COOL regulations permit the use of
the term ``harvested'' in lieu of ``slaughtered.'' As discussed
previously, this flexibility will continue to be allowed under this
final rule.
Definition of Retailer
Summary of Comments: One commenter provided extensive comments on
both the definition of a retailer in the current COOL regulations and
the definition of a retailer in the proposed rule. The commenter stated
their belief that AMS should not use the definition that is contained
in PACA regulations and further stated that AMS should develop its own
definition. The commenter provided specific recommendations, including
using a definition similar to the one used by the Supplemental
Nutrition Assistance Program (SNAP), which is administered by USDA's
Food and Nutrition Service. Another commenter stated their support for
the proposed rule's definition change and indicated that the change
will make the definition less ambiguous.
Agency Response: The COOL statute defines the term ``retailer'' as
having the meaning given the term in section 1(b) of the Perishable
Agricultural Commodities Act of 1930 (7 U.S.C. 499a(b)). Therefore, the
Agency does not have the authority to develop an alternative definition
based on SNAP as it is not consistent with the COOL statute. As stated
in the March 12, 2013, proposed rule, the Agency believes that the
revised definition of a retailer more closely mirrors the definition in
the PACA and agrees that this definition is less ambiguous.
Accordingly, the Agency has not adopted the alternative
recommendations.
Recordkeeping
Summary of Comments: Several commenters stated that they were
unclear as to whether current producer affidavits systems will satisfy
the regulatory requirements of the proposed rule.
Agency Response: The proposed rule did not alter the recordkeeping
requirements of suppliers or retailers. Therefore, the use of
affidavits for conveying origin information is still permitted under
this final rule.
Raised
Summary of Comments: Several commenters suggested that the Agency
redefine the term ``raised'' to refer to the period of time
encompassing a majority of an animal's life. The commenters further
stated that compared to the retail value of beef, time spent in another
country, i.e., country of birth, could be considered de minimus.
Another commenter stated that retailers should be required to list all
countries of raising. Lastly, one commenter asked for clarification of
the phrase ``minimal raising,'' which was used in the proposed rule.
Agency Response: The COOL regulations define the term ``raised'' as
``the period of time from birth until slaughter or in the case of
animals imported for immediate slaughter as defined in section 65.180,
the period of time from birth until date of entry into the United
States.'' The proposed rule did not recommend a change to this
definition; therefore, the suggestion to modify the definition of the
term ``raised'' is outside the scope of this rulemaking. With regard to
the request to clarify the phrase ``minimal raising,'' that phrase does
not appear in the COOL regulations, and the Agency believes that the
language in the existing regulatory text provides readers with a clear
definition of the term ``raising.'' Regarding the suggestion to require
that all countries of raising be listed on the label, the Agency
believes this final rule provides more specific information to
consumers with regard to the place of raising in sufficient detail.
However, the Agency has added language to this preamble to further
explain the regulatory text in Sec. 65.300(e).
Miscellaneous
Summary of Comments: Several commenters stated that the proposed
rule runs counter to the shared U.S.-Canada vision of the Regulatory
Cooperation Council (RCC) initiative.
Agency Response: As explained previously, in order to implement
mandatory country of origin labeling for certain meat products as
required by statute in a manner consistent with U.S. WTO obligations,
the Agency has made these changes to the labeling provisions for muscle
cut covered commodities, which provide consumers with more specific
information and enhance the overall operation of the program. The
United States values its relationships with its trading partners and is
committed to looking for ways to improve regulatory transparency and
coordination with Canada as described in the RCC Joint Action Plan.
Summary of Comments: Several commenters stated their opinion that
there is no regulatory solution that will bring the United States into
compliance
[[Page 31372]]
with its international trade obligations. The commenters further stated
that the United States should seek a legislative change.
Agency Response: As discussed above, the Agency considers that this
final rule constitutes compliance with the WTO DSB's recommendations
and rulings.
Summary of Comments: One commenter suggested that the Agency should
expand the civil rights review statement to ensure that it is as broad
as possible. The commenter specifically requested that the Agency
remove the phrase ``. . . on minorities, women, or persons with
disabilities'' from the statement.
Agency Response: USDA prohibits discrimination in all its programs
and activities on the basis of race, color, national origin, age,
disability, and where applicable, sex (including gender identity and
expression), marital status, familial status, parental status,
religion, sexual orientation, political beliefs, genetic information,
reprisal, or because all or part of an individual's income is derived
from any public assistance program. The Agency has modified the civil
rights review statement as the commenter suggested by removing the
phrase in question and using ``protected groups'' in its place.
Alternatives
Summary of Comments: A number of commenters suggested alternatives
to the proposed rule, including: COOL should be voluntary; country of
origin should be where an animal is processed; and COOL should be based
on substantial transformation (recognizing need for statutory change).
Another commenter suggested that the enforcement of COOL should be
reduced and gave several specific examples.
Agency Response: The alternative labeling programs suggested by the
commenters are not authorized by the COOL statute, which provides for a
mandatory COOL program and four distinct categories of origin
designations for muscle cut covered commodities. Accordingly, these
suggestions are not adopted. With regard to the suggestions to reduce
the enforcement of the COOL program, this is not within the scope of
this rulemaking. The Agency notes, however, that it plans to review its
current enforcement procedures to determine if changes should be made.
Summary of Comments: A number of commenters provided
recommendations that are outside the scope of the proposed rule,
including: Food establishments should be covered because 48% of
spending on food occurs at restaurants; the definition of processed
should be narrowed such that more products are covered; turkey should
be a covered commodity; the definition of ground beef should be
narrowed; COOL is not food safety related and the Agency should clarify
that mislabeling will not result in a recall; the Agency should
disallow the 60-day inventory allowance for ground meat; the Agency
should remove the burden on producers of requiring affidavits.
Agency Response: Because these recommendations are outside the
scope of this rulemaking, they will not be considered.
Costs and Benefits
Proposal Adds Significant Costs
Summary of Comments: Several commenters stated their belief that
the recordkeeping and verification processes necessitated by the
proposed rule will be more onerous, disruptive, and expensive than the
current regulations. The commenters further contended that the costs of
new labels and printers and other equipment, together with increased
needs to segregate livestock and the need to make new investments in
trucks, processing lines and coolers will add cost to all segments of
the production chain.
Other commenters agreed with the Agency's estimates contained in
the proposed rule and noted that the incremental cost associated with
the proposed labeling changes is only a slight increase over the
initial COOL compliance cost estimates contained in the final rule
implementing the program. One commenter noted that the proposed rule
does not require the collection of additional information and that the
primary added costs are associated with changing the labels. Another
commenter pointed out that there will be no additional recordkeeping
requirements as a result of the proposed rule and that additional
labeling costs are concentrated almost entirely at the retail level.
Agency Response: As discussed further in the Regulatory Impact
Analysis (RIA), the Agency agrees that there will be additional costs
associated with this final rule, although only those muscle cut covered
commodities subject to COOL requirements will be affected by the
changes in this final rule. Those costs will be incurred by processors
and retailers as they adjust to the loss of commingling flexibility and
to the new labeling requirements in this final rule. It is necessary,
however, to ensure label information accurately reflects the origin of
muscle cut covered commodities in accordance with the intent of the
statute while complying with U.S. WTO obligations.
That said, the Agency does not agree that additional recordkeeping
or verification processes will be required to transfer information from
one level of the production and marketing channel to the next. There
are no recordkeeping requirements beyond those currently in place, and
the Agency believes that the information necessary to transmit
production step information is already maintained by suppliers in order
to comply with the current COOL regulations. As with the current
mandatory COOL program, this final rule contains no requirements for
firms to report to USDA. Compliance audits will continue to be
conducted at firms' places of business.
In addition, the Agency has sought to minimize the cost to industry
at each step of the marketing process. For example, the Agency has
clarified that retailers may continue to utilize existing label and
package inventories, as long as retail establishments convey the more
specific information concerning the location where the production steps
occurred via other means (e.g., signage). This will reduce the costs of
switching over to the new labels. The Agency further recognizes that
there is limited space to include the specific location information for
each production step. Therefore, to reduce the potential need for new
printers and other equipment, under this final rule, abbreviations for
the production steps are permitted as long as the information can be
clearly understood by consumers. The Agency also notes many retail
establishments have chosen to use signage above the relevant sections
of the meat case to provide the required origin information in lieu of
or in addition to providing the information on labels on each package
of meat.
The Agency further considers it reasonable to allow time for the
existing stock of muscle cut covered commodities labeled in accordance
with the 2009 COOL regulations that are already in the chain of
commerce to clear the system. Therefore, the requirements of this rule
do not apply to muscle cut covered commodities produced or packaged
before May 23, 2013.
Finally, while the requirements of this rule are mandatory as of
the effective date, because AMS understands that it may not be feasible
for all of the affected entities to achieve 100% compliance immediately
and that some entities will need time to make the necessary changes to
achieve full compliance with the amended provisions for 100% of
[[Page 31373]]
muscle cut covered commodities, AMS will conduct an industry education
and outreach program concerning the provisions and requirements of this
rule during the six month period following the effective date of the
regulation, as was provided for in the 2008 interim rule and the 2009
final rule. AMS has determined that this allocation of enforcement
resources will ensure that the industry effectively and rationally
implements this final rule. With regard to costs related to the
elimination of commingling flexibility, the Agency has responded to
these issues in a subsequent response below.
Processors' Cost of Segregation
Summary of Comments: Numerous commenters provided statements on the
costs of segregating livestock they believe will be necessitated by the
proposed rule. These commenters explained how, in their opinion, the
labeling changes will require additional livestock and meat segregation
and record keeping that will increase costs to the industry that must
be absorbed by livestock producers, feedlots, shippers, meat packers,
processors, retailers and consumers.
One commenter stated that the segregation of cattle and beef
carcasses within the packing plant requires unique operational
procedures. The commenter further contended that current packing plants
were neither designed for nor constructed in a manner to allow for
efficiency in the segregation of cattle and beef.
Several commenters stated their belief that the costs of
segregating livestock would adversely affect their businesses due to
the need to increase hiring and worker hours as well as make large
capital investments to accommodate the demands of segregation. In
addition, the commenters stated that they would experience an increase
in maintenance costs for contracted information technology services to
track the additional information required by the proposed rule in
company databases.
Another commenter presented an analysis showing how eliminating
commingling would significantly impact slaughter and processing
facilities now using commingling flexibility, as well as the rest of
the downstream supply chain. The commenter contended that increased
annual operating costs for the fed cattle and hog processing industries
would range from $97.9 to $132.6 million due to the elimination of
commingling. The commenter opined that the prohibition on commingling
could have an even greater adverse impact on smaller packers, providing
one example of a very small cattle slaughter company (fewer than 100
employees) that currently commingles production. According to the
commenter's estimate, elimination of commingling would impose an
additional $275,000 in costs annually on this company, which is
approximately the company's annual profit.
Another commenter stated that there would be significant costs
resulting from the need to reconfigure processing plants to segregate
product by origin for those plants currently commingling. The commenter
stated that estimates of capital costs for beef slaughter and
processing operations ranged from $20 to $50 million and from $12
million to $25 million for hog slaughter and processing operations for
those plants currently commingling.
Other commenters stated that the proposed rule will add only modest
costs to the industry. The commenters pointed out that, as noted in the
2009 COOL regulations, segregating animals by origin can be
accomplished through processes that are essentially the same as those
that firms already use to sort animals by weight, grade, and other
factors. In addition, the commenters stated that strengthening the
origin labels in this manner can be achieved without imposing
significant additional recordkeeping or verification requirements, as
producers are already required to track the origin of animals from
which meat is derived.
Agency Response: As previously discussed, no additional
recordkeeping is required by this final rule, and no new processes need
be developed to transfer information from one level of the supply chain
to the next. The information necessary to transmit production step
information should already be maintained by suppliers in order to
satisfy the 2009 COOL regulations.
With respect to additional operational costs anticipated from the
elimination of the commingling flexibility, the Agency has modified its
analysis to account for these estimated costs. As noted by commenters,
the elimination of this flexibility may require adjustments to plant
operations, line processing, product handling, storage, transportation,
and distribution for those companies that commingle. As discussed in
the RIA, commenters to the proposed rule submitted anecdotal
information indicating that commingling flexibility is used by some
packers. However, the information provided was insufficient to enable
the Agency to determine the extent to which industry is making use of
commingling flexibility. As discussed in the RIA, the Agency estimates
that the current use of the flexibility likely falls within a range of
five to 20 percent of the production of beef and pork muscle cut
covered commodities, although it is likely that the extent to which
packers are commingling is closer to the lower end than the higher end
of the range.
As also discussed in the RIA, the Agency estimates that adjustment
costs due to elimination of commingling will range between $19.0
million and $76.3 million in the processing sector and between $17.1
million and $68.5 million in the retail sector (see table 3). The
Agency believes these estimates, however, are likely to overstate
actual adjustment costs over time. The Agency anticipates that
intermediaries will develop ways to minimize down time and processing
line changes and that, ultimately, a mix of solutions will be
implemented by industry participants to effectively meet the
requirements of the final rule. Over the long run, the Agency believes
that initial adjustment costs are not likely to persist and that firms
will continue to seek methods for efficient production and marketing of
the affected products.
Processors' Ability To Source Animals
Summary of Comments: Several commenters discussed the sourcing of
animals and the impact the proposed changes will have on these
practices. The commenters contended that animals from other countries
are used to supplement domestic sources, often on a seasonal basis, and
that the proposed rule's new requirements may add sufficient burden
that this form of sourcing is no longer economically viable.
One commenter stated concern that his business will suffer because
current customers will no longer purchase his company's meat products,
which are sometimes sourced from Canadian cattle, because the customers
will now have to change all of their labeling. Two commenters stated
that the proposed rule gives an unfair advantage to those producers who
do not rely on Canadian pigs. A commenter suggested this would create
incentives for U.S. processors to use U.S. livestock over imported
livestock. Another commenter contended the proposed rule's new
requirements would cause the processing industry in Canada to expand at
the expense of jobs in the United States.
Agency Response: All labels for muscle cut covered commodities
produced in the United States must bear information related to the
location of birth, raising, and slaughter. Therefore, all affected
retailers and packers will
[[Page 31374]]
have to change their labeling practices to conform to this final rule,
regardless of the origin of the animal from which their muscle cut
covered commodities are derived. Accordingly, while the industry will
incur costs for augmenting the label, those particular costs will be
borne by all industry participants, regardless of their sourcing
decisions.
With regard to commingling, the Agency recognizes that those
packers that are commingling will incur additional costs in complying
with this rule. However, removing the commingling allowance lets
consumers benefit from more specific and detailed labels. Moreover,
given that the current COOL requirements already compel retailers to
differentiate muscle cut commodities based on origin, the Agency does
not believe there is a sufficient basis to definitively conclude that
this rule, which continues to require retailers to make that same
differentiation based on origin (albeit with more specific labels),
will affect purchasing decisions of industry participants or give an
unfair advantage to any particular participants.
Retailers' and Wholesalers' Costs
Summary of Comments: Some commenters discussed the additional cost
related to retraining associates at their stores, replacing scales, and
upgrading distribution systems to allow for the tracking of COOL
related information for invoices and manifests.
Several commenters stated that the proposed rule will require
retailers to double the number of words on the retail label. For
example, a product currently labeled ``Product of the US'' would have
to be labeled ``Born, Raised and Slaughtered in the US.'' Those
commenters also contended that the more likely result will be that
retailers will make an economic decision to purchase only meat from
animals born, raised and slaughtered in the U.S. to reduce their risk
of inadvertently not complying with this rule. An additional commenter
made the point that one of the reasons the current scale systems have
less space remaining is due to the implementation of mandatory meat
nutrition labeling.
One commenter stated their opinion that certain retailers repack
muscle cuts and that the revised labeling requirements would impose an
additional layer of complexity and cost from redoing labels,
maintaining more complex records and recordkeeping systems, buying new
equipment and software, and employee training.
Another commenter that supplies independent stores indicated that
the commenter's present software will not allow it to comply with the
new rule, and that its stores will need new equipment or must use a
second label.
Another commenter stated that the COOL law currently imposes
enormous burdens on the supermarket industry and specifically the
wholesale industry. The commenter believed that should the proposed
rule be adopted, packers will need to document the country or countries
with ``all of the production steps'' on the master case and bill of
lading and will need to validate proper COOL labeling prior to selling
product to their customers. The commenter contended that this will
create another step in their receiving process at the warehouse.
An industry association stated that the proposed rule makes
substantial changes to COOL requirements that will result in market and
supply dislocations and will adversely affect jobs, business
operations, and international trade. The commenter stated that a large
volume of product is still subject to costly labeling in retail stores
and reported that costs would vary, depending on whether retailers
could accommodate the additional language required by the proposed rule
on current label sizes and existing printers. The commenter also noted
the cost of liquidating old labels.
Another commenter stated that because imported products will now
have to be separated under the proposal, the cost of U.S. products sold
to supermarkets will go up, and imported product will be sold through
foodservice channels like restaurants where it will not have to be
labeled and likely will be sold at a cheaper price.
Agency Response: The Agency recognizes that additional costs will
be borne by industry participants. Estimates of those costs include
adjustment costs to processors and retailers due to losing the
flexibility to commingle muscle cut covered commodities for purposes of
COOL. In addition, the estimated costs include adjustments due to the
need to change the labels currently in place. As discussed in further
detail in a prior response, the Agency has, to its best ability, sought
to minimize the cost to industry at each step of the marketing process,
including allowing abbreviations to be used on the new labels.
The Agency further notes that the existing COOL regulations already
require retailers to maintain records and other documentary evidence
upon which they have relied to establish a covered commodity's country
or countries of origin. Similarly, any person directly or indirectly
engaged in the business of supplying a covered commodity to a retailer,
including wholesalers, must make available information to the buyer
about the country(ies) of origin of the covered commodity. Thus, to
comply with existing COOL regulations, wholesalers must already have
distribution systems to allow for the tracking of COOL-related
information for invoices and manifests and receiving procedures to
verify the origin information received from packers and processors.
This final rule does not alter those requirements, and, accordingly, no
new records are required of retailers or wholesalers. As such, the
Agency does not agree that a retailer using a mixed origin label would
be more likely to find itself inadvertently out of compliance with this
rule than it would when using a mixed origin label under the 2009 COOL
regulations.
Producer Impacts
Summary of Comments: Many commenters expressed concern that U.S.
cattle producers are facing burdens that adversely impact profitability
and the viability of their operations. Concerns include the continuing
drought conditions across much of the country's cattle producing areas.
These commenters observed that drought-induced liquidation of cattle
has driven the national beef herd down to the lowest cattle numbers in
60 years. As a result, the commenters asserted that the beef industry
must continue to use other feeder cattle procurement possibilities.
One commenter asserted that without these added imported animals in
the U.S. herds, the United States would face a large shortage because
of the shrinking supply in the United States. The commenter stated that
it ships Canadian-sourced cattle an extra 300 miles to a plant that
processes Canadian cattle, even though the company is located only 45
miles away from a plant owned by the same processing company that does
not process Canadian cattle. The commenter also suggested that the beef
produced from imported Mexican feeder cattle should be treated as U.S.
beef, since the value of the imported animal is relatively minimal
compared to the retail value of the beef from the finished animal once
it undergoes substantial transformation into fed beef in the United
States.
One commenter expressed concerns about the effects of any trade
retaliation that might be implemented by either Mexico or Canada. The
commenter was also concerned that retailers may decide to reduce or
eliminate sales of pork rather than implement systems necessary to
comply with the proposed labeling requirements.
[[Page 31375]]
One commenter stated that its members support the rule change and
are already very well versed with providing affidavits at point of sale
and other documentation to verify the origin of their livestock as
needed in order to assure supplier and retailer compliance with COOL.
The organization does not have concerns that this rule will cause
members any additional hardships.
Another commenter stated that the only industry actor that cannot
pass along the costs of doing business in the meat sector is the
livestock producer. The commenter stated that compared to the impact
that drought has had on feed costs for beef producers, the cost of
labeling for food retailers is negligible and that the revised labeling
requirements will provide necessary information to consumers.
Agency Response: USDA recognizes the hardship imposed on the U.S.
livestock industry due to the recent drought and has addressed this
issue to the greatest extent possible through authorized means. The
drought has also reduced the size of the Mexican cattle herd and made
fewer animals available for export to the United States.
The Agency recognizes that additional costs will be borne by
industry participants as they comply with the requirements of this
final rule. However, the Agency believes it is necessary to ensure
label information more accurately reflects the origin of muscle cut
covered commodities in accordance with the intent of the statute while
complying with U.S. WTO obligations. As the Agency has noted, the
requirement to include this information will apply equally to all
muscle cut covered commodities derived from animals slaughtered in the
United States, regardless of where the animal was born or raised. The
Agency does not believe that these requirements will prevent the U.S.
industry from continuing to purchase animals from Canada or Mexico.
With regard to costs borne by the U.S. industry, and as discussed
in a prior response, the Agency has sought to minimize the cost to
industry at each step of the marketing process. This final rule does
not lessen any existing flexibility in how required country of origin
information is currently conveyed along the supply chain. The Agency's
goal is to enable firms to implement the requirements of this final
rule with the least possible disruption to cost-efficient production
methods.
Rural Economy/Miscellaneous
Summary of Comments: Some commenters expressed concern about the
state of the economy, particularly the rural economy, and the impact
the rule might have regarding loss of jobs. For example, one commenter
stated that with around 2,000 employees in a typical meat processing
plant, it is important not to jeopardize these jobs. Another commenter
expressed concern about the elimination of thousands of jobs in rural
America at a time when jobs are badly needed.
Agency Response: USDA supports strong rural economies. Through
various programs, including USDA's Rural Development, the USDA provides
assistance to rural communities. USDA also supports the creation of
jobs in this industry, including through the opening of foreign markets
for U.S. agricultural exports, including beef and pork. For example, in
January, USDA and the United States Trade Representative announced that
the United States and Japan have agreed on new terms and conditions
that pave the way for expanded exports of U.S. beef and beef products
to Japan. Under these new terms, which are now in effect, Japan now
permits the importation of beef from cattle less than 30 months of age,
compared to the previous limit of 20 months, among other steps. It is
estimated that these important changes will result in hundreds of
millions of dollars in exports of U.S. beef to Japan in the coming
years.
That said, the Agency recognizes that additional costs will be
borne by industry participants as a result of this final rule. However,
the Agency believes it is necessary to ensure label information more
accurately reflects the origin of muscle cut covered commodities in
accordance with the intent of the statute while complying with U.S. WTO
obligations. At the same time, as discussed in a prior response, the
Agency has sought to minimize the cost to industry at each step of the
marketing process. As previously stated, the Agency's goal is to enable
firms to implement the requirements of this final rule with the least
possible disruption to cost-efficient production methods. This final
rule does not lessen existing flexibility in how required country of
origin information is currently conveyed along the supply chain.
Benefits
Summary of Comments: Some commenters expressed their support for
the proposed rule on the grounds that the proposed labeling
requirements provide consumers with information they need to make
informed choices about the source of food and how it was raised. The
commenters stated that there is increased consumer demand to know where
and how food is produced.
Some commenters stated that consumer confidence benefits can accrue
just as a result of having the information available, even if the
consumers do not read the labels' information. In the opinion of some
commenters, mandatory labels address concerns of market failure and
fraudulent labeling and help investigators trace-back foodborne illness
outbreaks. A commenter referenced a 2005 survey that found that nearly
two-thirds of consumers (60 percent) preferred country of origin
labeling to be administered by a government policy rather than by
companies marketing the meat.
Some commenters stated their belief that consumers can
differentiate various attributes of competing products and will
increase demand, and price, for those attributes they view favorably,
including the perceived higher quality of meat derived from animals
born, raised and slaughtered in one country rather than another
country.
Other commenters provided additional rationale and references to
studies indicating consumers benefit from food origin information. The
commenters noted there have been numerous polls and studies
demonstrating that consumers value origin information regarding the
food that they buy, including meat, including a national poll in 2007
that found that 94 percent of those surveyed believed that consumers
have a right to know the country of origin of the foods that they
purchase, and 85 percent of consumers say knowing where their food
comes from is important.
Commenters also referenced a study showing that consumers are
willing to pay more for a more precise, country-specific label than for
a less precise, mixed-origin label. The commenters noted that mixed-
origin labels may be affixed to exclusively U.S. origin product due to
the commingling flexibilities in the current program and that
eliminating the commingling flexibility and ensuring that single-origin
product is accurately labeled will therefore benefit consumers who
value being able to purchase products with more precise label
information.
Other commenters noted that the Agency did not offer an estimate of
any additional benefits from the proposed rule, noting only that the
Agency had ``been unable to quantify incremental economic benefits from
the proposed labeling of production steps . . . .'' These commenters
shared a belief that the Agency's analysis is consistent with recent
work on COOL, which has generally failed to document any demand-side
benefits from the program.
[[Page 31376]]
Numerous commenters stated that there is little evidence that
consumers benefit from country of origin labeling and referred to a
recent study by Kansas State University and Oklahoma State University
\1\ which found no demand increase following the implementation of the
mandatory COOL program in spite of previous research suggesting
consumers would pay more for products carrying origin information. The
study concluded that consumers do not value meat products carrying
Product of United States labels over those with Product of North
America labels and that economic gains would occur by utilizing the
latter, less expensive, labeling requirement.
---------------------------------------------------------------------------
\1\ Tonsor, Lusk et al. Mandatory Country of Origin Labeling:
Consumer Demand Impact, November 2012 http://www.agmanager.info/livestock/policy/Tonsor_KSU_FactSheet_MCOOL_11-13-12.pdf.
---------------------------------------------------------------------------
One commenter stated their belief that there is no evidence that
consumers base their buying decisions on the source information
currently available through the COOL program. The commenter stated that
the market has demonstrated and fulfilled the existing limited demand
for such information through the success of local production systems,
farmers markets, source-verified programs and ``USA'' branded programs.
The commenter believed that there is a strong argument that the
promulgation of this rule will actually erode these market-driven,
premium source-verified programs because it will erode the
differentiation they currently own in the marketplace.
One commenter asserted that the Agency has failed to quantify the
benefits arising from the promulgation of the proposed rule and that
the costs of the proposed rule clearly outweigh any benefits. The
commenter cited a study of shrimp purchases \2\ which found no
difference between consumer purchases before the implementation of COOL
and those after it went into effect, quoting from a USDA publication
\3\ that ``the implications of the research suggest that price is a
more important determinant of buyer behavior than COOL, a finding
consistent with various consumer surveys.''
---------------------------------------------------------------------------
\2\ ``Do Consumers Respond to Country-of-Origin Labeling?'' by
Fred Kuchler, Barry Krissoff, and David Harvey, in Journal of
Consumer Policy, 2010, Vol. 33, pp. 323-337.
\3\ http://www.ers.usda.gov/amber-waves/2012-june/consumers-appear-indifferent.aspx.
---------------------------------------------------------------------------
Agency Response: As discussed more fully in the RIA, the many
comments the Agency has received noting the proposed rule's benefits to
consumers reinforce the Agency's original conclusion that implementing
the proposed label changes will in fact benefit consumers. These
comments demonstrate that there is interest by certain U.S. consumers
in information disclosing the countries of birth, raising, and
slaughter on muscle cut product labels. Specifying the production step
occurring in each country listed on meat labels and eliminating the
commingling flexibility as required by this final rule will benefit
consumers by providing them with more specific information on which to
base their purchasing decisions. The Agency does not agree that this
rule will negatively impact the value of premium source-verified
programs. The 2009 COOL regulations already differentiate covered
muscle cut commodities based on origin. This final rule ensures that
the labels will provide the consumers more specific information.
Premium source-verified programs are thereby unaffected by this rule.
The Agency acknowledges that an empirical finding of a change in
demand due to COOL would support the conclusion that consumers act on
the information provided through COOL. Conversely, however, the Agency
does not concur that an empirical finding of no change in demand
implies that consumers do not value the information or that there are
no benefits from providing the information; it may instead imply that
the economic benefits are positive but too small to be measurable in a
general-population study. The purpose of COOL is to provide consumers
with information upon which they can make informed shopping choices.
The availability of COOL information does not imply that there will
necessarily be any change in aggregate consumer demand or in demand for
products of one origin versus others.
Comments received on the proposed rule do not alter the Agency's
conclusion that the expected benefits from implementing mandatory COOL
requirements remain difficult to quantify and that the incremental
economic benefits of this final rule will be comparatively small
relative to those afforded by the current COOL requirements.
Regulatory Flexibility Analysis
Summary of Comments: The effects of the proposed rule on small meat
plants were described by several commenters including trade
associations and individual plant operators. As noted previously, one
commenter stated that the prohibition on commingling could have an even
greater adverse impact on smaller packers, providing one example of a
very small cattle slaughter company (fewer than 100 employees) that
currently commingles production. According to the commenter's estimate,
elimination of commingling would impose an additional $275,000 in costs
annually on this company, which is approximately the company's annual
profit.
A commenter stated that many small and very small establishments
will need to expand their infrastructure and hire more employees to
maintain segregation of carcasses on the slaughter floor and of product
in the coolers. One commenter summarized that small meat processing
firms estimated their costs to implement the revisions will range from
$5,000 on the low end to tens of thousands of dollars on the high end.
Several small-scale, local and regional packing plants commented
individually and collectively that they do not have the flexibility to
segregate and label three different sources of cattle, create different
product categories for each (potentially adding 600 times the number of
product codes), and segregate the customers as well. The commenters
stated that there will be a significant advantage to the larger packing
companies that can isolate different categories of consolidation of the
industry. The commenters claimed that the vast majority of plants,
particularly the small to medium size plants, that purchase cattle from
different origins apply the commingling practice. Commenters stated
that smaller plants will be forced out of business because of their
inability to utilize all sources of the cattle supply, leading to more
consolidation and packer concentration with significant negative
impacts on suppliers and customers.
One beef packer commented that 2009 COOL regulations forced its
customers to accept two SKUs of every item the company sold to them,
one labeled Product of USA and the other labeled Product of USA,
Mexico. The commenter stated that several of the smaller independent
grocery customers indicated that they simply could not handle that many
SKUs in their distribution warehouses and in their invoicing and record
keeping systems. These retailers told the commenter to choose one or
the other or they would have to find other suppliers. The commenter
stated that the proposed rule requires even more segregation and even
more duplication of labels and SKUs, noting that this may be possible
for a large packer and a large retailer but it is extremely difficult
and restrictive for a small operator.
Agency Response: As previously discussed, no additional
recordkeeping is required by this final rule. Processes currently in
place to transfer
[[Page 31377]]
information from one level of the supply chain to the next should be
sufficient to accommodate the additional requirements of this rule.
With respect to additional operational costs anticipated from the
elimination of the commingling flexibility, the Agency has modified its
analysis to account for these estimated costs. Over the long run, the
Agency believes that initial adjustment costs are not likely to persist
and that firms will continue to seek methods for efficient production
and marketing of the affected products.
The Agency notes that comments referencing changes and adjustments
to production and marketing practices already in place to comply with
the 2009 COOL requirements should not be ascribed to the amendments set
forth in this final rule.
With regard to commingling, the Agency recognizes that those
packers that may currently be commingling will incur additional costs
in complying with this rule. However, removing the commingling
allowance lets consumers benefit from more specific and detailed
labels. That said, there is no clear indication that adjustment will be
more difficult for smaller versus larger packers. As noted in the
comments and responses to the economic impact analysis, packers already
have systems in place for handling and sorting livestock and resultant
muscle cuts according to various criteria such as grade, weight, and
other factors. Adjustment to the final rule should be able to be
accomplished in a similar manner.
Executive Order 12866 and Executive Order 13563
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives, and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. This final rule has been designated as an ``economically
significant regulatory action'' under section 3(f) of Executive Order
12866, and, therefore, has been reviewed by the Office of Management
and Budget (OMB).
Regulations must be designed in the most cost-effective manner
possible to obtain the regulatory objective while imposing the least
burden on society. This final rule amends the COOL regulations (1) by
changing the labeling provisions for muscle cut covered commodities to
provide consumers with more specific information and (2) by amending
the definition for ``retailer'' to include any person subject to be
licensed as a retailer under PACA to enhance the overall operation of
the program and to bring the COOL requirements into compliance with the
United States' WTO obligations.
Statement of Need
Justification for this final rule remains unchanged from the 2009
final rule. This rule, as with the 2009 final rule, is the 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 those laws 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 2009 final rule, 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 2009 final rule 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 could ensure that the optimal level of
country of origin information would be provided to the degree valued by
consumers.
Analysis of Benefits and Costs
As set forth in the initial analysis of benefits and costs, the
baseline for this analysis is the present state of the beef, chicken,
goat, lamb and pork industries, which have been subject to the
requirements of mandatory COOL (7 CFR parts 60 and 65) since the
effective date of the final rule on March 16, 2009.
Benefits: Comments on the initial regulatory impact analysis for
the proposed rule (78 FR 15647) as well as on previous COOL rulemaking
actions, reinforce the Agency's conclusion that the final rule's
amendments to the COOL labeling requirements will benefit consumers.
Numerous comments supported the proposed rule and confirmed that
certain U.S. consumers value the designation of the countries of birth,
raising, and slaughter on meat product labels. These attributes of meat
products are credence attributes, meaning that otherwise consumers
would not be able to obtain information on or verify by inspection of
the product at the point of purchase. Economic theory shows that
unregulated markets may undersupply information on such credence
attributes. Specifying the production step occurring in each country
listed on meat labels as provided in this rule will provide additional
benefits by providing more specific information on which consumers can
base their purchasing decisions. Furthermore, information on the
production steps in each country may embody latent (hidden or
unobservable) attributes, which may be important to individual
consumers and result in additional but hard to measure benefit
increases. The Agency, however, has not been able to quantify this
benefit, as singling out the value of those additional latent
attributes and the resultant consumer benefit increases would require
complicated modeling techniques that none of the available studies
utilized.
The final rule also eliminates the allowance for commingling of
muscle cut covered commodities of different origins. As discussed
above, the rule requires all origin designations to include specific
information as to the place of birth, raising, and slaughter of the
animal from which the meat is derived and no longer allows a single
mixed origin label to be used on muscle cuts derived from animals of
different origins commingled during a single production day. Removing
the commingling allowance will benefit consumers by resulting in more
specific labels.
The Agency observes that the comments it has received on the
proposed rule reinforce the Agency's conclusion that the expected
benefits from implementing the final rule's amendments to the existing
COOL labeling requirements are difficult to quantify, as no commenters
provided quantified assessments of the benefits. Moreover, the comments
received do not alter the Agency's conclusion that the incremental
economic benefits from the labeling of production steps will be
positive, but likely will be comparatively small relative to those
already afforded by the 2009 COOL final rule.
Costs: A number of commenters directly addressed or provided
information related to the Agency's estimated costs of the proposed
rule. Most of these commenters asserted that
[[Page 31378]]
the Agency underestimated implementation costs, mainly by omitting
costs associated with activities that commenters said would be required
to comply with the proposed amendments to the current COOL regulations.
The revised cost estimates below take into account these comments.
The Agency believes that there are two primary cost drivers that
will be incurred as firms adjust to the amendments to the 2009 COOL
regulations. First, muscle cut covered commodity COOL information will
need to be augmented to provide the additional specific origin
information required by this rule. Second, those firms currently using
the flexibility afforded by commingling livestock of more than one
origin on a single production day will need to adjust to the new
requirement to provide origin information on the birth, raising, and
slaughter of the muscle cut covered commodities derived from livestock
of each origin. Moreover, the new requirements preclude the use of
commingling flexibility.
With respect to commingling, the initial analysis of costs sought
``comment and data regarding the extent to which the flexibility
afforded by commingling on a production day is used to designate the
country of origin under the current COOL program and the potential
costs, such as labor and capital costs, which may result from the loss
of such flexibility'' (78 FR 15648). Such flexibility is relevant to
the beef and pork industries in the United States. Both feeder and
slaughter cattle and hogs are imported from Canada, while mainly feeder
cattle are imported from Mexico.
As noted by several commenters, commingling may allow some packers
with reliable access to U.S. and foreign-origin livestock to produce
products with a single country of origin label, such as ``Product of
the U.S. and Canada'' or ``Product of the U.S. and Mexico.'' Several
commenters stated that packers can currently take advantage of the
commingling flexibility to label all of their production with the same
COOL label information every day, even if the animals processed each
day are of different origins, so long as the packers can ensure that
they process animals of the declared mix of origins every production
day. The commenters stated that, in those cases, there may be no need
for segregation, sorting, additional labels, and other processes that
would otherwise be required to provide COOL information.
In the case of lamb, chicken, and goat meat, imports of live
animals for feeding and slaughter in the United States are
inconsequential for purposes of this regulatory impact analysis, due to
being of negligible quantities.\4\ Thus, the following discussion
addresses the potential impacts of the loss of commingling flexibility
on the beef and pork sectors only.
---------------------------------------------------------------------------
\4\ In 2012, over 8.4 billion broilers were produced in the
United States (USDA, NASS. Poultry--Production and Value, 2012
Summary. April 2013.). However, only 4.2 million chickens other than
breeding stock were imported into the United States (USDA FAS. GATS
Global Agricultural Trade System Online. http://www.fas.usda.gov/gats/Default.aspx), constituting just 0.05 percent of U.S. broiler
production. The FAS data also show that only 2,569 sheep and 316
goats were imported into the United States in 2012.)
---------------------------------------------------------------------------
Commenters to the notice of proposed rulemaking submitted anecdotal
information that confirmed that commingling flexibility is used by some
packers. However, the information submitted was not sufficient to allow
the Agency to determine the extent to which industry is making use of
commingling flexibility. Therefore, to develop a range of estimates of
the extent to which the beef and pork subsectors may potentially use
commingling flexibility under the current COOL regulations (Table 1),
the Agency made various assumptions and used several sources of data to
examine the cost implications of ending the commingling activity that
might be occurring in the industry.
Table 1--Range of Estimated Potential Current Use of Commingling Flexibility
----------------------------------------------------------------------------------------------------------------
Lower Midpoint Upper
Segment (percent) (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Beef............................................................ 5 12.5 20
Pork............................................................ 5 12.5 20
----------------------------------------------------------------------------------------------------------------
The lower-bound estimate is derived from the position of certain
U.S. industry actors as well as the complainants in the WTO dispute
that the proportion of beef and pork that carries the U.S.-origin label
is close to 90 percent.\5\ Given that imported livestock represent
about eight percent of fed steer and heifer slaughter and just over
five percent of barrow and gilt slaughter in recent years, and assuming
that some portion of these animals are segregated and labeled
accordingly, the Agency adopts five percent as a plausible lower-bound
estimate of the portion of total production that may be commingled.\6\
For the upper bound of commingling, 20 percent is adopted for both beef
and pork and is derived from mandatory COOL retail record reviews that
were conducted in 2012. Although the sampling plan for retail
compliance reviews is not constructed so as to allow generalization to
the entire amount of beef and pork muscle cut covered commodities
according to different label types, there are randomization procedures
used to select the stores and items for record reviews. Thus, for
purposes of establishing an upper bound on the current extent to which
commingling flexibility may currently be used, the proportions of
different label types found in the sample of retail record reviews
provides a source of empirical evidence of the proportions that may be
found in the population of retailers subject to the COOL requirements.
Of 1,472 retail record reviews for beef and 1,652 for pork, 80 percent
were of single-country origin and by definition, could not be the
result of commingling. The remaining 20 percent of items reviewed had
either two or more countries of origin or were unlabeled. At the most,
then, 20 percent of the production could potentially be commingled,
which implies the technically possible but highly unlikely assumption
that every item with more than one country of origin plus all items
without country of origin information are the result of commingling.
---------------------------------------------------------------------------
\5\ See Panel Reports, United States--Certain Country of Origin
Labelling (COOL) Requirements, WT/DS384/R/WT/DS386/R, adopted 23
July 2012, paras. 7.361, 7.370.
\6\ This lower bound estimate is consistent with estimates of
U.S. industry in 2009 as well as the complaining parties in the WTO
dispute. See US--COOL (Panel), para. 7.365.
---------------------------------------------------------------------------
Given that the assumption underlying the higher end estimate is
highly unlikely, the extent to which the industry is commingling likely
falls closer to the lower end than the higher end of the estimated
range of commingling.
[[Page 31379]]
The second step in estimating the impact of the elimination of
commingling flexibility is to determine the cost of the change. A
number of commenters provided information regarding the costs
associated with the loss of the flexibility afforded by the current
allowance of commingling multiple countries of origin on a production
day. As noted by commenters, the loss of commingling flexibility means
that muscle cut covered commodities of different production step
origins will need to be separately labeled with their specific
production step information to make the information available to
retailers. Commenters pointed out a number of costs that would be
incurred to accommodate this requirement. For instance, packers
indicated that there would be decreased processing plant efficiency due
to an increased number of changes from processing carcasses of one
origin to another. For each change, commenters indicated that there is
downtime of processing plant labor and capital that runs from $750 to
$900 per minute in large beef and pork processing facilities.
Commenters also indicated that there would be additional stock keeping
units (SKUs) to distinguish differently labeled products, and that the
additional SKUs would require reconfiguration of slaughter and
processing facilities to segregate animals in pens and products in
coolers. Retailers likewise indicated that there would be additional
costs associated with an increase in the potential number of origins
due to the loss of commingling flexibility at the processor level and
the requirement to provide information on the country of birth,
raising, and slaughter.
As noted by several commenters, the mandatory COOL proposed rule
published in October 2003, did not provide for commingling of muscle
cut covered commodities (68 FR 61944). Thus, the regulatory impact
analysis (hereafter, 2003 RIA (68 FR 61952)) accounted for the fact
that animals and products would need to be segregated to enable
labeling of muscle cut covered commodities by country of origin. Among
other changes from the 2003 proposed rule, the mandatory COOL final
rule published in January 2009, provided that muscle cut covered
commodities could be commingled in a single production day.\7\ Thus,
the regulatory impact analysis (hereafter, 2009 RIA (74 FR 2682))
accounted for the expectation that some degree of commingling according
to these two provisions would occur, with the resultant costs estimated
to be lower than would be the case without the flexibility of
commingling.
---------------------------------------------------------------------------
\7\ As discussed in the 2009 final rule, USDA considers that
commingling typically takes place in two different scenarios. First,
muscle cut covered commodities derived from animals born, raised,
and slaughtered in the United States 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,
could be designated as, for example, Product of the United States,
Country X, and (as applicable) Country Y. Second, 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, could be designated as
Product of the United States, Country X, and (as applicable) Country
Y.
---------------------------------------------------------------------------
Despite receiving anecdotal evidence from commenters on costs of
specific activities associated with adjustment to the loss of
commingling flexibility, the information was not suitable for compiling
into industry-wide total cost estimates. However, with appropriate
adjustments, comparing estimated costs from the 2003 RIA (no
commingling) to the estimated costs from the 2009 RIA (commingling
allowed) provides a basis for estimating the portion of the adjustment
costs of this final rule that arise from the disallowance of
commingling. The 2003 RIA presented lower-range and upper-range
estimates of implementation costs for affected producer, intermediary,
and retailer segments. The upper-range estimates were derived from
available studies, comments on guidelines for interim voluntary COOL
(67 FR 63367), and institutional knowledge of the industries subject to
the proposed rule. The 2003 proposed rule did not allow for commingling
of covered beef, pork, and lamb muscle cut covered commodities.
The 2009 RIA presented estimates of implementation costs for the
requirements of the COOL final rule. In deriving cost estimates for the
2009 RIA, the underlying assumptions were adjusted to reflect changes
in the requirements from the proposed rule to the final rule. Most
importantly for purposes of deriving cost estimates for muscle cut
covered commodities, the 2009 RIA assumed that commingling on a
production day would be permitted. Thus, per-unit incremental
implementation costs were lowered from the upper-range estimates
presented in the 2003 RIA. As a result, differences between the 2003
RIA estimates and the 2009 RIA estimates mainly represent expected
marginal cost impacts of the loss of commingling flexibility (Table 2).
Table 2--Estimated Implementation Costs per Affected Industry Segment Adjusted to 2012 Dollars
----------------------------------------------------------------------------------------------------------------
Beef Pork
Segment -----------------------------------------------------------------------------
2003 RIA 2009 RIA Difference 2003 RIA 2009 RIA Difference
----------------------------------------------------------------------------------------------------------------
Intermediary ($/head)............. 20.00 12.84 7.16 5.00 3.21 1.79
Retailer ($/pound)................ 0.125 0.075 0.050 0.088 0.043 0.045
----------------------------------------------------------------------------------------------------------------
In the 2003 RIA, upper-range implementation costs for
intermediaries (primarily packers and processors) in the beef segment
were estimated at $0.02 per pound of carcass weight. Assuming an 800
pound average carcass weight for steers and heifers, the cost per pound
estimate translates into $16.00 per head, or $20 per head after
adjusting to 2012 dollars using a Consumer Price Index (CPI) inflation
factor of 1.25 (see Table 2). In the 2009 RIA, the implementation cost
for beef segment intermediaries was estimated at $0.015 per pound or
$12.00 per head, which was considered a best estimate. Adjusting to
2012 dollars using a CPI inflation factor of 1.07 results in an
estimate of $12.84 per head. Consequently, in 2012 dollars, the
difference between the 2003 RIA estimate and the 2009 RIA estimate for
beef segment intermediaries is $7.16 per head, which represents
potential adjustment costs due to the loss of commingling
flexibilities. Similar calculations apply at the retail level for the
beef segment, where the upper-range of costs were estimated at $0.10
per pound in the 2003 RIA and a best estimate of $0.07 per pound in the
2009 RIA. The resulting difference in retailer costs for the beef
segment is $0.050 per
[[Page 31380]]
pound in 2012 dollars, which represents adjustment costs to affected
retailers that no longer can market commingled meat cuts.
The same procedures that were applied to the beef segment were
applied to the pork segment to arrive at estimated marginal impacts of
the loss of commingling flexibility, also shown in Table 2. The
relevant figures are $0.02 per pound for pork segment intermediaries in
the 2003 RIA, which converts to $4.00 per head assuming an average 200
pound carcass weight for barrows and gilts. In the 2009 RIA, the
intermediary estimate was $0.015 per pound or $3.00 per head. Adjusted
to 2012 dollars, the difference between the 2003 RIA and 2009 RIA cost
estimates for intermediaries in the pork segment is $1.79 per head. At
the retail level in the pork segment, costs were estimated at $0.07 per
pound in the 2003 RIA and $0.04 per pound in the 2009 RIA. The
difference translates to $0.045 per pound adjusted to 2012 dollars.
The final step in estimating the potential costs of the loss of
commingling flexibility is to apply the estimated costs per unit to the
relevant measure of production. At the intermediary level for the beef
segment, the starting point begins with estimated slaughter of 33.0
million head of cattle in 2012.\8\ Given that steers and heifers made
up 78.4 percent of total Federally inspected cattle slaughter,\9\ total
commercial slaughter of steers and heifers is estimated at 25.8 million
head. Only steer and heifer slaughter is examined, as the amended
labeling requirements only apply to muscle cuts (e.g., steaks and
roasts). While a small amount of muscle cuts of cows are marketed at
retail, most beef derived from cows (and bulls) is used for grinding or
other further processed items. Muscle cuts from cows typically are
marketed through hotel, restaurant, or institutional channels or are
further processed such that COOL requirements no longer apply.
---------------------------------------------------------------------------
\8\ USDA National Agricultural Statistics Service. Livestock
Slaughter. January 2013. http://usda01.library.cornell.edu/usda/nass/LiveSlau//2010s/2013/LiveSlau-01-24-2013.pdf.
\9\ Ibid.
---------------------------------------------------------------------------
The total number of head of steers and heifers is then multiplied
by the lower, midpoint, and upper ranges of potentially affected
animals (or five, 12.5, and 20 percent from above) to arrive at the
range of potential adjustment costs shown in Table 3. Specifically, the
estimated number of commingled steers and heifers is 1.3 million head
at the lower bound, 3.2 million head at the midpoint, and 5.2 million
head at the upper bound. Note that within each scenario, different
mixes of U.S.-origin cattle versus foreign-origin cattle are possible
and the actual mix is undetermined.
Table 3--Estimated Affected Quantities and Costs of the Loss of Commingling Flexibility by Industry Segment
[In millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Lower bound Midpoint Upper bound
-----------------------------------------------------------------------------------------------
Beef Pork Beef Pork Beef Pork
--------------------------------------------------------------------------------------------------------------------------------------------------------
Intermediary
Head................................................ 1.3 5.5 3.2 13.7 5.2 22.0
Segment Cost........................................ $9.2 $9.8 $23.1 $24.6 $37.0 $39.3
Retailer
Pounds.............................................. 237.6 116.5 594.0 291.3 950.4 570.2
Segment Cost........................................ $11.9 $5.2 $29.7 $13.1 $47.5 $21.0
-----------------------------------------------------------------------------------------------
Total Cost...................................... $21.1 $15.0 $52.8 $37.7 $84.5 $60.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Multiplying the number of head in Table 3 by the estimated cost per
head of $7.16 shown in Table 2 yields beef segment intermediary costs
of $9.2 million, $23.1 million, and $37.0 million at the lower,
midpoint, and upper levels. These are industry-wide total costs that
are expected to be borne primarily by beef packers and processors that
currently commingle domestic and foreign-origin cattle under a single
COOL declaration. Those costs represent activities such as segregation,
sorting, breaks or changes in processing lines from one COOL category
to another, additional labels, and other activities above and beyond
those required for compliance with current COOL regulations.
Costs of the loss of commingling flexibility for pork segment
intermediaries are calculated in a similar manner to that used for the
beef segment. In 2012, U.S. commercial hog slaughter was 113.0 million
head. Of Federally inspected slaughter, 97.0 percent was barrows and
gilts, resulting in an estimated commercial slaughter of 109.8 million
barrows and gilts. Meat derived from sows and boars is used for further
processed products and is not marketed as muscle cuts that would be
subject to COOL requirements. Table 3 shows the estimated number of
commingled barrows and gilts to be 5.5, 13.7, and 22.0 million head at
the lower, midpoint, and upper levels. After multiplying by the per-
head cost estimate of $1.79, expected costs due to the loss of
commingling flexibility for pork muscle cut covered commodities at the
intermediary level are estimated to be $9.8 million at the lower bound,
$24.6 million at the midpoint, and $39.3 million at the upper bound.
The anticipated cost at the retail level due to the loss of
commingling flexibility can be computed in a manner similar to that
applied at the intermediary level. Adjustment costs for retailers
currently marketing commingled beef and pork muscle cut covered
commodities stem from activities that may be associated with switching
from handling a stream of commingled products carrying the same COOL
information to dealing with products that may carry two or more
distinct origin labels due to the disallowance of commingling
flexibility and the requirement for more specific information on the
place of birth, raising, and slaughter. As at the intermediary level,
retailers may incur additional costs for segregation, breaks or changes
in retail scale weighing and printing from one COOL category to
another, additional labels, and other activities above and beyond those
required for compliance with current COOL regulations.
Estimating the quantity of beef and pork products that may be
commingled at the retail level differs from the process applied at the
intermediary
[[Page 31381]]
level. At the intermediary (packer/processor) level, conveying COOL
information begins with entire animals and subsequently carcasses.
Thus, the marginal costs of the loss of commingling flexibility are
estimated on a per-head basis. In the case of retailers, however, only
those muscle cut covered commodities subject to COOL requirements may
potentially be affected by the loss of commingling flexibility. For
both beef and pork, estimated retail quantities begin with the
estimated quantities shown in Table 2 of the 2009 RIA. The retail
quantities from the 2009 RIA--8.2 million pounds of beef and 2.3
million pounds of pork--reflect the volume of product estimated to be
subject to COOL requirements at retailers subject to the regulations.
Further, the retail quantities are adjusted to account for processed
products that are exempt from COOL requirements, such as marinated beef
tenderloin or cooked ham. The retail quantities are then further
adjusted to estimate the quantity of muscle cut covered commodities.
For beef, 58 percent of the retail weight is estimated to be sold as
cuts,\10\ and then the factors of five, 12.5, and 20 percent are
applied to arrive at the lower, midpoint, and upper estimates shown in
Table 3. For pork, no further adjustment is applied to the retail
weight, but the factors of five, 12.5, and 20 percent are applied to
arrive at the lower, midpoint, and upper estimates.
---------------------------------------------------------------------------
\10\ http://www.beefusa.org/CMDocs/BeefUSA/Resources/Statistics/averageannualpercapitaconsumptionbeefcutsandgroundbeef559.pdf.
---------------------------------------------------------------------------
The retail quantity estimates for beef and pork are multiplied by
the respective per-pound cost estimates of $0.050 and $0.045 to
calculate the anticipated cost to retailers for the loss of commingling
flexibility. Summing the intermediary and retailer costs yields the
total cost estimates shown in the bottom row of Table 3. The total
estimated costs for the loss of commingling flexibility range from
$15.0 million at the lower end for pork to $84.5 million at the upper
end for beef.
Total costs for adjustment to this rule are estimated as the sum of
costs for label changes and costs associated with the elimination of
the provision that allows for commingling. While some comments
suggested that costs of changing labels would be higher than estimated
in the regulatory impact analysis for the proposed rule, others
suggested that costs of changing labels would be within the range
estimated in the proposed rule.
As discussed previously, the 2009 COOL regulations allow for a
variety of ways that origin information can be provided, such as
placards, signs, labels, stickers, etc. Many retail establishments have
chosen to use signage above the relevant sections of the meat case to
provide the required origin information in lieu of or in addition to
providing the information on labels on each package of meat. Under this
final rule, the Agency will continue to allow the COOL notification
requirements to be met, including the requirement to provide the
location where the production steps occurred, by using signs or
placards. For example, for meat derived from cattle born in Canada and
raised and slaughtered in the United States, the signage could read
``Beef is from animals born in Canada, Raised and Slaughtered in the
United States.'' Further, the Agency recognizes that for some period of
time following the period of education and outreach, existing label and
package inventories will include less specific origin information
(e.g., Product of Country X and the U.S.) As long as retail
establishments provide the more specific information via other means
(e.g., signage), the Agency will consider the origin notification
requirements to have been met. This ability to use in-store signage is
expected to reduce transition costs from the current COOL requirements
to the more specific information required by this rule.
With respect to changing current COOL label information, in the
initial regulatory impact analysis, cost estimates provided in a March
2011, Food and Drug Administration (FDA) report \11\ were used to
estimate the cost of adding the production step information to
currently required COOL labels for muscle cut covered commodities.
---------------------------------------------------------------------------
\11\ Model to Estimate Costs of Using Labeling as a Risk
Reduction Strategy for Consumer Products Regulated by the Food and
Drug Administration, FDA, March 2011 (Contract No. GS-10F-0097L,
Task Order 5).
---------------------------------------------------------------------------
Under the FDA model, one-time costs for a coordinated label change
are assumed to involve only administrative labor costs and
recordkeeping. However, as discussed in the regulatory impact analysis
for the proposed rule, no additional recordkeeping costs are
anticipated from this rule. Assuming an upper bound estimate of 121,350
unique labels, the Agency estimated the midpoint cost at $32.8 million
with a range of $17.0 to $47.3 million in the proposed rule.
Table 4 shows the total estimated adjustment costs for the
amendments to the labeling requirements for muscle cut covered
commodities. The estimates are presented as a matrix spanning the range
of estimated costs of modifying existing labels cross-tabulated with
the range of estimated costs resulting from the loss of the flexibility
to commingle more than one specific birth, raising, and slaughter
origin. The total adjustment costs calculated by adding the labeling
costs at the lower, midpoint, and upper range ($17.0, $32.8, and $47.3
million, respectively) to the commingling costs at the lower, midpoint,
and upper range ($36.1, $90.5, and $144.8 million, respectively).
Table 4--Estimates of Adjustment Costs
[Million dollars]
----------------------------------------------------------------------------------------------------------------
Loss of commingling flexibility
Label cost --------------------------------------------------------------------------
Lower 36.1 Midpoint 90.5 Upper 144.8
----------------------------------------------------------------------------------------------------------------
Lower 17.0 53.1 107.5 161.8
Midpoint 32.8 68.9 123.3 177.6
Upper 47.3 83.4 137.8 192.1
----------------------------------------------------------------------------------------------------------------
Total costs are estimated to range from $53.1 million at the low
end to $192.1 million at the high end. Comparatively, implementation
costs for intermediaries and retailers for beef, pork, lamb, goat, and
chicken covered commodities for the current COOL requirements were
estimated to total $1,334.0 million in the 2009 RIA, or
[[Page 31382]]
$1,427.4 million in 2012 dollars. Adjustment costs for the amendments
to the current labeling requirements for these commodities are thus
estimated at 3.7 to 13.5 percent of the initial COOL adjustment costs
for intermediaries and retailers.
The likely range of adjustment costs can be narrowed to some extent
from the wide range shown Table 4. In terms of commingling flexibility,
the true, but unknown, percentages of beef and pork muscle cut covered
commodities that are currently produced and marketed through retailers
subject to COOL requirements are unlikely to be at the upper range of
estimates. The upper range estimates imply that one in five beef and
pork muscle cut items are commingled. While technically possible, that
is unlikely, because it requires the assumption that every item in the
COOL record review in 2012 having more than one country of origin plus
all items without country of origin information would have been the
result of commingling. This assumption is unrealistic and not
consistent with numerous comments received on the proposed rule as well
as comments of industry on the effect that the 2009 final rule has had
on the industry.\12\ Considering only the lower to midpoint estimates
for commingling narrows the estimated adjustment costs to a range of
$53.1 to $137.8 million.
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\12\ See US--COOL (Panel), paras. 7.361-7.365.
---------------------------------------------------------------------------
Furthermore, over time those costs are expected to fall as packing
facilities develop procurement arrangements that are tailored to the
loss of commingling. Similarly, retailers' additional labeling costs
and adjustment costs for separately providing information on different
origin products will diminish over time. Thus, initial adjustment costs
are expected to fall over time.
The greater the extent to which individual packers, processors, and
retailers use commingling flexibility, the higher is the expected cost
of adjustment due to the loss of that flexibility. Packers and
processors located nearer to sources of imported cattle and hogs may be
commingling to a greater extent than others.
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
the 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 relatively
small economic impact on a substantial number of small entities. As
such, the Agency has prepared the following regulatory flexibility
analysis of the rule's likely economic impact on small businesses
pursuant to section 603 of the RFA. 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 initial RFA and provides the Agency's responses to the comments.
As mentioned in the summary above, this rulemaking was contemplated
after the Agency reviewed the overall regulatory program in light of
the WTO's finding that the current COOL requirements are inconsistent
with U.S. WTO obligations. The objective of this rulemaking is to amend
current mandatory COOL requirements to provide consumers with
information on the country in which productions steps occurred for
muscle cut covered commodities, thus fulfilling the program's objective
of providing consumers with information on origin in a manner
consistent with the COOL statute and U.S. international trade
obligations. The legal basis for the mandatory COOL regulations is
Subtitle D of the Agricultural Marketing Act of 1946 (Act) (7 U.S.C.
1638, et seq.).
Under preexisting Federal laws and regulations, origin designations
for muscle cut covered commodities need not specify the production
steps of birth, raising, and slaughter of the animals from which the
cuts are derived. Thus, the Agency has not identified any Federal rules
that would duplicate or overlap with this rule.
We do not anticipate that additional recordkeeping will be required
or that new systems will need to be developed to transfer information
from one level of the production and marketing channel to the next.
However, information available to consumers at retail will need to be
augmented to include information on the location in which the three
major production steps occurred. Therefore, the companies most likely
to be affected are packers and processors that produce muscle cut
covered commodities and retailers that sell them.
There are two measures used by the Small Business Administration
(SBA) to identify businesses as small: Sales receipts or number of
employees.\13\ In terms of sales, SBA classifies as small those grocery
stores with less than $30 million in annual sales (13 CFR 121.201).
Warehouse clubs and superstores with less than $30 million in annual
sales are also defined as small. SBA defines as small those
manufacturing firms with less than 500 employees and wholesalers with
less than 100 employees.
---------------------------------------------------------------------------
\13\ Small Business Administration. http://www.sba.gov/sites/default/files/files/Size_Standards_Table(1).pdfhttp://www.sba.gov/sites/default/files/files/Size_Standards_Table(1).pdf.
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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.\14\ Therefore, the number of these stores provides an
indicator of the number of entities potentially affected by this rule.
The 2007 Economic Census \15\ shows there were 4,335 supermarkets and
grocery stores (not including convenience stores), warehouse clubs, and
superstore firms operated for the entire year with annual sales
exceeding $5,000,000 (Table 5). We assume that stores with overall
sales above this threshold would be most likely to be subject to the
PACA and therefore subject to mandatory COOL and the proposed
amendments. We recognize that there may be retail firms, particularly
smaller retail firms, subject to PACA but that do not actually hold a
PACA license. Therefore, a lower annual sales threshold may be
appropriate for estimating the number of retailers subject to PACA.
However, the $5,000,000 threshold provides estimated firm and
establishment numbers that are generally consistent with the PACA
database listing licensed retailers.
---------------------------------------------------------------------------
\14\ 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.htmhttp://www.ers.usda.gov/Briefing/CPIFoodAndExpenditures/Data/table16.htm.
\15\ U.S. Census Bureau. 2007 Economic Census. Retail Trade
Subject Series. Establishment and Firm Size. EC0744SSSZ4 and
EC0744SSSZ1. Issued January 2013.
[[Page 31383]]
Table 5--Estimated Number of Affected Entities, Share of Firms by Size, and Cost of Rule Revision
--------------------------------------------------------------------------------------------------------------------------------------------------------
Share of Cost of
NAICS code NAICS description Enterprise size criteria Number of Number of firms by rule
firms establishments size % revision
--------------------------------------------------------------------------------------------------------------------------------------------------------
311611................................ Animal (except Poultry) <500 Employees........... 1,504 1,518 97.6 $5,165,754
Slaughtering. 500+ Employees........... 37 115 2.4 27,874,505
Total.................... 1,541 1,633 ........... 33,040,259
311612................................ Meat Processed from Carcasses. <500 Employees........... 1,203 1,232 94.9 6,745,200
500+ Employees........... 64 173 5.1 10,902,633
Total.................... 1,267 1,405 ........... 17,647,833
311615................................ Chicken Processing............ <500 Employees........... 2 N/A 5.3 N/A
500+ Employees........... 36 N/A 94.7 N/A
Total.................... 38 156 ........... 153,504
445110................................ Supermarkets and Other Grocery <$50,000,000 Sales....... 4,106 6,050 95.0 14,536,907
(except Convenience) Stores, $50,000,000+ Sales....... 217 19,846 5.0 47,685,862
Sales >$5,000,000. Total.................... 4,323 25,896 ........... 62,222,770
452910................................ Warehouse Clubs and <$50,000,000 Sales....... 0 0 0.0 ...........
Supercenters. $50,000,000+ Sales....... 12 4,260 100.0 10,235,905
Total.................... 12 4,260 ........... 10,235,905
���������������������������������������
Grand Total....................... .............................. ......................... 7,181 33,350 ........... 123,300,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Numbers may not sum due to rounding.
SOURCE: 2007 County Business Patterns and 2007 Economic Census.
The 2007 Economic Census data provide information on the number of
food store firms by sales categories. Of the 4,335 food store,
warehouse club, and superstore firms with annual sales of at least
$5,000,000, an estimated 4,106 firms had annual sales of less than
$50,000,000, which is higher than the threshold for the SBA definition
of a small firm. The Economic Census data do not provide a breakout at
the $30,000,000 SBA threshold, which means that the estimated number of
small businesses likely is an overestimate.
We estimate that 33,350 establishments owned by 7,181 firms will be
either directly or indirectly affected by this rule (Table 5). Of these
establishments/firms, we estimate that 6,849 qualify as small
businesses. The midpoint total direct incremental costs are estimated
for the rule at approximately $123.3 million with a range of $53.1
million to $192.1 million. The direct incremental costs of the rule are
the result of revisions in labeling of muscle cut covered commodities.
At the total estimated midpoint cost of $123.3 million, $26.4 million
would be estimated to be costs borne by small businesses based on the
calculations explained below. As also explained below, implementation
costs are not expected to be the same for all establishments.
The average cost for each retail establishment is calculated
assuming an average label cost per establishment of approximately $984
plus and an average cost for loss of commingling of approximately
$1,419 for a total of $2,403. The average label cost for retailer as
well as packer and processor establishments is the total midpoint label
cost of $32.8 million divided by the total of 33,350 establishments.
The average cost per retail establishment for the loss of commingling
is the total midpoint cost of $42.8 million for all retailers divided
by 30,156 retail establishments. Assuming the same average
implementation cost of approximately $2,403 for all retail
establishments, small retailers' portion of these costs would be
estimated at approximately $14.5 million. However, small retail
establishments are expected to incur substantially lower implementation
costs due to lower volumes and varieties of muscle cut covered
commodities typically marketed at such operations.
Any manufacturer that supplies retailers or wholesalers with a
muscle cut covered commodity will be required to provide revised
country of origin information to retailers so that the information can
be accurately supplied to consumers. Of the manufacturers potentially
affected by the rule, SBA defines those having less than 500 employees
as small.
The 2007 Economic Census \16\ provides information on manufacturers
by employment size. For livestock processing and slaughtering there is
a total of 2,808 firms (Table 5). Of these, 2,707 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 five
percent of the chicken processors are small businesses.
---------------------------------------------------------------------------
\16\ U.S. Census Bureau. 2007 Economic Census. Historical Data
Tabulations by Enterprise Size. 2007 Annual Tabulations: U.S., All
Industries. http://www.census.gov/econ/susb/data/susb2007.html.
---------------------------------------------------------------------------
As with retailers above, the average cost for each packer/processor
establishment is calculated assuming an average label cost per
establishment of approximately $984 plus and an average cost for loss
of commingling. The average label cost for packer and processor
establishments is calculated as previously explained for retail
establishments. However, the average cost per packer/processor
establishment for the loss of commingling is calculated using
additional information that relates to the size of establishments.
Estimated receipts from the 2007 Economic Census are used as a proxy
for the relative throughput of livestock slaughtering and meat
processing establishments. For instance, small livestock slaughtering
enterprises had 7.7 percent of total receipts of $104.7 billion for
animal slaughtering (NAICS code 311611) and meat processing (NAICS code
311612) combined. Large livestock slaughtering enterprises had 58.2
percent of the combined receipts, while shares were 11.6 percent for
small meat processors and 22.5 percent for large meat processors. These
percentages are then applied to the total midpoint cost of $47.7
million for the loss of commingling for all packers and processors. The
resulting values are then divided by the number of establishments to
estimate the cost per establishment resulting from the loss of
commingling flexibility. For livestock slaughtering, the estimated
costs are $2,420 for small establishments and
[[Page 31384]]
$241,403 for large establishments. For meat processing, the estimated
costs are $4,491 for small establishments and $62,038 for large
establishments. Adding in the average estimated label cost of $984
yields total estimated costs of $3,403 per small livestock slaughtering
establishment and $242,387 per large establishment. Similarly, the
total estimated costs are $5,475 per small meat processing
establishment and $63,021 per large establishment. Based on these
average estimated implementation costs, small packer and processor
costs under the rule are estimated at about $11.9 million. However, the
cost of the loss of commingling flexibility is expected to be mostly
concentrated among those facilities that currently commingle domestic
and foreign-origin cattle or hogs. The number of small slaughtering and
processing establishments that currently commingle is expected to be
considerably fewer than the total number of small establishments.
Alternatives considered: Section 603 of the RFA requires the Agency
to describe the steps taken to minimize any significant economic impact
on small entities including a discussion of alternatives considered.
The law explicitly identifies those retailers required to provide their
customers with country of origin information for covered commodities
(namely, retailers subject to PACA). Thus, the amendments are
consistent with the requirements of the Act in terms of who is subject
to the final rule.
The change in the definition of a retailer will not have a
substantial effect on the number of retailers subject to COOL
requirements. The PACA program continually monitors the retail industry
for firms that may meet the threshold for PACA licensing and seeks to
enforce compliance with those requirements. Thus, those retailers that
are required to hold a PACA license should, in fact, be licensed
separate and apart from any COOL program requirements.
The Agency considered other alternatives including taking no action
or providing less information than was required under the 2009 COOL
regulations. These alternatives would not achieve the purpose of this
action.
As with the current mandatory COOL program, this final rule
contains no requirements for firms to report to USDA. Compliance audits
will be conducted at firms' places of business. There are no
recordkeeping requirements beyond those currently in place, and the
Agency believes that the information necessary to transmit production
step information largely is already in place within the affected
industries.
As stated in the RFA of the COOL final rule published in January
2009 (74 FR 2693), the COOL program provides the maximum flexibility
practicable to enable small entities to minimize the costs on their
operations. While the allowance for commingling has been removed from
this final rule, the Agency is providing other labeling flexibilities.
The 2009 COOL regulations allowed for a variety of ways that the
origin information can be provided, such as placards, signs, labels,
stickers, etc. Many retail establishments have chosen to use signage
above the relevant sections of the meat case to provide the required
origin information in lieu of or in addition to providing the
information on labels on each package of meat. Under this final rule,
the Agency will continue to allow the COOL notification requirements to
be met, including the requirement to provide the location where the
production steps occurred, by using signs or placards. For example, for
meat derived from cattle born in Canada and raised and slaughtered in
the U.S., the signage could read ``Beef is from animals born in Canada,
Raised and Harvested in the U.S.'' Further, the Agency recognizes that
for some period of time following the period of education and outreach,
existing label and package inventories will include less specific
origin information (e.g., Product of Country X and the U.S.) As long as
retail establishments provide the more specific information via other
means (e.g., signage), the Agency will consider the origin notification
requirements to have been met.
In addition, small packers, processors, and retailers are expected
to produce and stock a smaller number of unique muscle cut covered
commodities compared to large operations. Thus, adjustment costs for
small establishments likely will be substantially lower than the
estimated midpoint average of approximately $3,700 assuming the same
average cost for all establishments regardless of type or size.
Executive Order 13175
This rule has been reviewed in accordance with the requirements of
Executive Order 13175, Consultation and Coordination with Indian Tribal
Governments. The review reveals that this regulation will not have
substantial and direct effects on Tribal governments and will not have
significant Tribal implications.
Paperwork Reduction Act
Pursuant to the Paperwork Reduction Act (PRA) (44 U.S.C 3501-3520)
the information collection provisions contained in this collection
package are currently approved by OMB under Control Number 0581-0250.
On December 4, 2012, AMS published a notice and request for comment
seeking OMB approval to renew and revise this information collection.
The comment period closed on February 4, 2013. This final rule does not
change any of the recordkeeping provisions.
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 protected groups 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 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 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 program
is required by the
[[Page 31385]]
2002 Farm Bill, as amended by the 2008 Farm Bill.
In the January 15, 2009, final rule, the Federalism analysis stated
that to the extent that State country of origin labeling programs
encompass commodities that are not governed by the COOL program, the
States may continue to operate them. It also contained a preemption for
those State country of origin labeling programs that encompass
commodities that are governed by the COOL program. This final rule does
not change the preemption. With regard to consultation with States, as
directed by the Executive Order 13132, AMS previously consulted with
the States that have country of origin labeling programs. AMS has
cooperative agreements with all 50 States to assist in the enforcement
of the COOL program and has communications with the States on a regular
basis.
It is found and determined that good cause exists for implementing
this final rule May 23, 2013. This rule has been determined to be a
major rule for purposes of the Congressional Review Act (5 U.S.C. 801
et seq.); however, the Agency finds that under 5 U.S.C. 808(2) good
cause exists to waive the 60-day delay in the effective date for two
reasons. First, and as discussed above, on July 23, 2012, the DSB
adopted its recommendations and rulings, finding certain COOL
requirements to be inconsistent with U.S. WTO obligations. A WTO
arbitrator determined that the reasonable period of time for the United
States to comply with the DSB recommendations and rulings is ten
months, meaning that the United States must comply with the
recommendations and rulings by May 23, 2013. If the United States does
not bring the rule into effect by this date, the complaining parties in
the WTO dispute, Canada and Mexico, may seek to exercise their rights
to suspend application to the United States of WTO concessions or other
obligations equivalent to the trade benefits they have lost as a result
of the inconsistent COOL requirements. If so authorized, Canada and
Mexico could take action that adversely affects U.S. interests (e.g.,
increasing tariffs on U.S. goods). Second, and as also discussed above,
changes to the labeling provisions for muscle cut covered commodities,
which will provide consumers with more specific information with regard
to muscle cut covered commodities, and the other modifications to the
regulations will enhance the overall operation of the program. For
these same reasons, pursuant to 5 U.S.C. 553, it is found and
determined that good cause exists for not postponing the effective date
of this rule until 30 days after publication in the Federal Register.
Accordingly, this rule will be effective May 23, 2013.
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.
For the reasons set forth in the preamble, 7 CFR parts 60 and 65
are amended as follows:
PART 60--COUNTRY OF ORIGIN LABELING FOR FISH AND SHELLFISH
0
1. The authority citation for part 60 continues to read as follows:
Authority: 7 U.S.C. 1621 et seq.
0
2. Section 60.124 is revised to read as follows:
Sec. 60.124 Retailer.
Retailer means any person subject to be licensed as a retailer
under the Perishable Agricultural Commodities Act of 1930 (7 U.S.C.
499a(b)).
PART 65--COUNTRY OF ORIGIN LABELING OF BEEF, PORK, LAMB, CHICKEN,
GOAT MEAT, PERISHABLE AGRICULTURAL COMMODITIES, MACADAMIA NUTS,
PECANS, PEANUTS, AND GINSENG
0
3. The authority citation for part 65 continues to read as follows:
Authority: 7 U.S.C. 1621 et seq.
0
4. Section 65.240 is revised to read as follows:
Sec. 65.240 Retailer.
Retailer means any person subject to be licensed as a retailer
under the Perishable Agricultural Commodities Act of 1930 (7 U.S.C.
499a(b)).
0
5. Section 65.300 paragraphs (d), (e), and (f) are revised to read as
follows:
Sec. 65.300 Country of origin notification.
* * * * *
(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. The United
States country of origin designation for muscle cut covered commodities
shall include all of the production steps (i.e., ``Born, Raised, and
Slaughtered in the United States'').
(e) Labeling Muscle Cut Covered Commodities of Multiple Countries
of Origin from Animals Slaughtered in the United States. If an animal
was born and/or raised in Country X and/or (as applicable) Country Y,
and slaughtered in the United States, the resulting muscle cut covered
commodities shall be labeled to specifically identify the production
steps occurring in each country (e.g., ``Born and Raised in Country X,
Slaughtered in the United States''). If an animal is raised in the
United States as well as another country (or multiple countries), the
raising occurring in the other country (or countries) may be omitted
from the origin designation except if the animal was imported for
immediate slaughter as defined in Sec. 65.180 or where by doing so the
muscle cut covered commodity would be designated as having a United
States country of origin (e.g., ``Born in Country X, Raised and
Slaughtered in the United States'' in lieu of ``Born and Raised in
Country X, Raised in Country Y, Raised and Slaughtered in the United
States'').
(f) Labeling Imported Covered Commodities. (1) Perishable
agricultural commodities, peanuts, pecans, ginseng, macadamia nuts and
ground meat covered commodities that have been produced in another
country 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.
(2) Muscle cut covered commodities derived from an animal that was
slaughtered in another country 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 (e.g., ``Product of Country
X''), including muscle cut covered commodities derived from an animal
that was born and/or raised in the United States and slaughtered in
another country. In addition, the origin declaration may include more
specific location information related to production steps (i.e., born,
raised, and slaughtered) provided records to substantiate the claims
are maintained and the claim is consistent with other applicable
Federal legal requirements.
* * * * *
Dated: May 20, 2013.
Rex A. Barnes,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2013-12366 Filed 5-23-13; 8:45 am]
BILLING CODE 3410-02-P