Fruit Juice Adulteration: Detection Is Difficult, and Enhanced Efforts
Would Be Costly (Letter Report, 11/03/95, GAO/RCED-96-18).

Pursuant to a legislative requirement, GAO reviewed the sale of
adulterated fruit juice to school meal programs, focusing on: (1) the
nature and extent of the problem; (2) whether federal inspection and
testing methods can detect juice adulteration; (3) recent federal
enforcement actions taken against juice adulterators; and (4) options
for enhancing the detection of adulterated juice.

GAO found that: (1) juice adulterators have cut costs by adding less
expensive ingredients to juice and labeling the product as pure; (2) the
extent of juice adulteration is unclear, since juice plant inspections
and laboratory tests are not designed to detect adulteration; (3)
government and industry officials believe that adulterated apple juice
is not a major problem, but as much as 20 percent of the orange juice
sold to school meal programs may be adulterated; (4) the Department of
Justice has convicted six juice adulterators and the Department of
Agriculture has debarred three companies that remain in operation; and
(5) in-plant inspections and juice testing programs are potentially
effective but costly options for enhancing the detection of adulterated
juice.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-96-18
     TITLE:  Fruit Juice Adulteration: Detection Is Difficult, and 
             Enhanced Efforts Would Be Costly
      DATE:  11/03/95
   SUBJECT:  Food inspection
             Testing
             Consumer protection
             Fraud
             Agricultural products
             School lunch programs
             Nutrition research
             Food additives
             Law enforcement
             Labeling law
IDENTIFIER:  Florida
             
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Cover
================================================================ COVER


Report to Congressional Committees

November 1995

FRUIT JUICE ADULTERATION -
DETECTION IS DIFFICULT, AND
ENHANCED EFFORTS WOULD BE COSTLY

GAO/RCED-96-18

Fruit Juice Adulteration

(150244)


Abbreviations
=============================================================== ABBREV

  AMS - Agricultural Marketing Service
  FDA - Food and Drug Administration
  FDOC - Florida Department of Citrus
  USDA - U.S.  Department of Agriculture

Letter
=============================================================== LETTER


B-265983

November 3, 1995

Congressional Recipients

Nationwide, school districts serve over 56 million gallons of fruit
juice annually.  Some members of the fruit juice industry expressed
concern that fruit juice served in the federal school meal programs
may be adulterated with cheaper ingredients and may not be accurately
labeled.  Several well-publicized prosecutions have led to the
conviction of processors for adding cheaper ingredients-- such as
water, sugar, and other adulterants--to juice products marketed as
100-percent-pure juice. 

Consequently, the Congress mandated, in the Healthy Meals for Healthy
Americans Act of 1994, that we review the costs and problems
associated with the sale of adulterated fruit juice to the school
meal programs.  Subsequent discussions with your offices refined the
scope of the mandate into the following questions: 

  What are the nature and extent of the juice adulteration problem in
     the federal school meal programs, and can current inspection and
     testing methods detect adulteration? 

  What recent federal enforcement actions have been taken against
     juice adulterators, and what was the magnitude of the fraud? 

  What are the options for enhancing the detection of juice
     adulteration, including inspections for juice plants that sell
     their products to the federal school meal programs? 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Unscrupulous juice processors can gain an economic advantage over
legitimate processors by adding less expensive ingredients--such as
water and sugar--to juice and labeling the resulting product as pure. 
The extent to which fruit juice adulteration takes place is
uncertain, however, because it is difficult to detect.  Inspections
of juice plants are not designed to detect adulteration, and current
laboratory tests have limitations.  Estimates of the problem's extent
vary widely for orange juice and apple juice, the two most frequently
consumed juices.  Government and industry officials believe that the
rate of adulteration for apple juice is insignificant, but estimates
of the rate of adulteration for orange juice range from 1 to 20
percent. 

Since the mid-1980s, the Department of Justice has prosecuted seven
cases of juice adulteration.  These prosecutions resulted in six
convictions and one acquittal.  Federal prosecutors conservatively
estimated that the magnitude of the fraud for the six successfully
prosecuted fraud cases ranged from $2 million for the smallest case
to $37 million for the largest case.  On the basis of these
convictions, the U.S.  Department of Agriculture has taken debarment
actions against the three companies that remain in operation and
against 21 individuals to prevent them from selling juice to the
school meal programs. 

Government and industry officials identified two primary options for
enhancing the detection of adulterated juice sold to
schools--conducting in-plant inspections and instituting either
systematic or risk-based juice-testing programs.  While these methods
could enhance efforts to detect adulterated juices, they would be
costly. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Over the years, several methods for adulterating juice have been
used.  Adulteration ranges in sophistication from simply diluting
juice with water to adding beet sugar, the adulterant that is most
difficult to detect.  Introducing these ingredients is not illegal;
however, knowingly selling the resulting product as pure juice
constitutes fraud.  Processors can increase their margin of profit or
undercut competitors' prices to increase sales by adulterating juice
and selling it as 100-percent-pure juice. 

Although these types of adulteration provide an economic advantage
(and are therefore referred to as economic adulteration), they pose
little threat to the public's health and safety.  The nutritional
benefits of adulterated juices are generally similar to those of
their pure counterparts, and the adulterated products are usually
considered harmless except for customers who are allergic to a
substituted ingredient. 

Orange juice and apple juice are the most widely purchased juices for
the school meal programs, as well as for consumption nationwide.  For
example, orange juice represents almost 45 percent of the fruit juice
served by schools.  For the 1994 school year, schools purchased over
98 percent of the juice they served directly from vendors, obtaining
the remainder through one of the U.S.  Department of Agriculture's
(USDA) commodity distribution programs. 

Two federal agencies--the U.S.  Department of Health and Human
Services' Food and Drug Administration (FDA) and USDA's Agricultural
Marketing Service (AMS)--have primary responsibility for ensuring the
quality and safety of the fruit juice served in the federal school
meal programs.  A third federal agency, USDA's Food and Consumer
Service, is responsible for setting minimum nutrient requirements for
the meals served in the school meal programs.  In addition, the
Department of Justice (Justice) prosecutes companies and individuals
suspected of adulterating fruit juice products. 

FDA has oversight and regulatory responsibility for domestic and
imported food products sold in interstate commerce.  To ensure that
foods are safe, wholesome, and honestly labeled, FDA monitors the
food industry, including fruit juice processors, by periodically
inspecting production facilities and occasionally sampling and
testing products.  FDA's standards identify the sweeteners that may
be added and specify certain labeling requirements and maximum levels
of water (expressed as minimum solid contents) that juice may
contain.  FDA investigates companies suspected of violating these
standards and refers cases to Justice for criminal fraud
prosecutions. 

AMS has responsibility for inspecting and grading food products.  The
agency grades the quality of juice on the basis of such factors as
appearance, color, flavor, aroma, and defects, as well as the level
of water, acid, and oils in the juice.  AMS grades products sold to
USDA's commodity programs and provides fee-for-service inspections to
companies that want AMS to certify other food products.  However,
there is no federal requirement that AMS inspect or grade the juice
that schools purchase directly from vendors for the school meal
programs. 

The Food and Consumer Service has responsibility for administering
the child nutrition programs sponsored by USDA.  The agency
subsidizes the cost of school meals and sets nutritional standards
for the meals.  These standards require schools to serve fruit,
vegetables, or pure fruit juice on a regular basis.  Although schools
may serve "juice drinks" that are less than 100 percent juice, only
pure juice meets the standards for nutrients established by the Food
and Consumer Service.  For example, to satisfy the school breakfast
requirements, schools may serve a 1/2-cup portion of 100-percent-pure
juice.  Serving a 1/2-cup portion of 50-percent-pure juice would
satisfy only half of the breakfast requirements.  The agency also
distributes federal commodities, including a relatively small amount
of juice, to schools. 

To protect the government's interests in the event that a vendor has
been convicted of fraudulent practices, such as juice adulteration,
the Food and Consumer Service has the authority to administratively
suspend for up to 1 year or debar for up to 3 years a company or
individual from selling to the government or government programs,
such as the school meal programs. 

Justice's Office of Consumer Litigation and U.S.  Attorneys' offices
prosecute fruit juice processors for violating federal fraud
statutes.  The Office of Consumer Litigation also forwards
information on convicted companies and individuals to the Food and
Consumer Service for possible debarment actions. 


   ADULTERATION IS DIFFICULT TO
   DETECT, AND ITS FULL EXTENT IS
   UNKNOWN
------------------------------------------------------------ Letter :3

The extent to which fruit juice purchased under the federal school
meal programs is adulterated cannot be determined precisely at this
time.  Generally, AMS' and FDA's inspections are not designed to
detect economic adulteration, and current tests cannot effectively
detect adulteration at levels below 10 percent.  In addition, schools
do not take steps to determine whether the juice they purchase is
adulterated.  Although comprehensive data are not available, industry
officials believe that the adulteration of apple juice is
insignificant.  However, on the basis of the testing that has been
conducted for orange juice, FDA, USDA, the Florida Department of
Citrus (FDOC), and private laboratories estimate that 1 to 20 percent
of the supply is adulterated. 


      INSPECTIONS AND TESTS HAVE
      LIMITATIONS
---------------------------------------------------------- Letter :3.1

AMS' inspections are designed to grade the product, and FDA's
inspections are designed primarily to identify unsanitary conditions
in food-processing plants.  These agencies do not routinely inspect
all U.S.  juice-processing plants, which number over 500.  Most
inspections do not include tests for adulteration.  Moreover, the
tests for adulteration performed by these agencies and by private
laboratories have limitations, and most are expensive. 


         CURRENT FEDERAL
         INSPECTION PROGRAMS ARE
         NOT LIKELY TO DETECT
         ADULTERATION
-------------------------------------------------------- Letter :3.1.1

AMS' inspections are not designed to detect adulteration, but rather
to grade products in accordance with AMS' standards.  Lot
inspections, which look only at juice and not at a plant's
operations, can allow illegal activities, such as adulteration, to
occur in the plant without being observed by the inspector. 
According to AMS officials, even during an in-plant inspection, which
looks at both juice and a plant's operations, an inspector can
identify adulteration only if a company is blatant in its actions and
the inspector observes unusual piping arrangements or substances
commonly used as adulterants.  AMS' inspections are mandatory only
for juice produced for USDA's commodity distribution programs and for
juice processed in Florida.\1 Therefore, many juice processors in the
United States do not have their products inspected by AMS.  In fiscal
year 1995, for example, AMS inspected the operations and juice
products of 130 plants.\2 (See app.  I for additional information on
AMS' inspection services and costs.)

AMS officials told us that the routine tests done to grade juice
products, such as determinations of acid levels and solid contents,
might identify some potential adulteration.  However, these officials
emphasized that such tests are not designed to identify potential
adulteration.  In a special agreement with the state of Florida, AMS
also tests frozen concentrated juice coming into the state for
economic adulteration, among other things.  However, this juice
accounts for only 15 percent of the juice processed in Florida. 

FDA's inspections of juice plants are likewise not specifically
designed to detect the economic adulteration of juice.  These
inspections are instead done primarily to determine if a juice plant
engages in good manufacturing practices.  As a result, such
inspections focus on sanitary conditions at the plant, as determined
primarily by the inspector's visual observations.\3

Furthermore, FDA does not inspect all juice plants each year.  From
1992 to 1994, FDA inspected no more than 20 percent of the nation's
over 500 juice plants in any one year.  In fiscal year 1992, FDA (and
its contractors) inspected 77 juice plants; in fiscal year 1993, 70
plants; and in fiscal year 1994, 102 plants.  Although FDA can test
juice for adulteration at several of its laboratories, FDA officials
told us that juice samples are not routinely collected for analysis. 
If an inspector observes something suspicious that might indicate a
product is being adulterated, products may be selected for laboratory
analysis to determine whether they comply with FDA's standards for
fruit juice.  For example, adulteration was detected by one inspector
who happened to observe an employee adding other ingredients to
orange juice. 

Even the presence of inspectors in the plant during processing does
not preclude adulteration.  Two companies convicted of adulterating
juice since the mid-1980s had their juice inspected by AMS and FDA
while they were adulterating it.  One company had been adulterating
juice while AMS was inspecting its plant and certifying its juice as
USDA Grade A.  The adulteration went undetected because it occurred
at night when the AMS inspector was not in the plant.  The company
also passed an inspection by FDA during the same period.  Another
company was also inspected by AMS and FDA but evaded detection by
elaborately modifying the structure of its plant to hide a
sophisticated piping system through which beet sugar was added to
orange juice. 


--------------------
\1 Florida Citrus Code 601.27 requires that all citrus juice products
packed in Florida be inspected and graded.  AMS inspects these
products under a cooperative agreement with the state. 

\2 The 130 inspections conducted by AMS in fiscal year 1995 include
both voluntary and mandatory inspections. 

\3 In May 1995, FDA issued a guide for juice inspections, which is
intended to assist investigators in identifying juice adulteration as
part of their sanitary inspections of juice plants. 


         LABORATORIES' TESTING
         CAPABILITIES ARE LIMITED,
         AND TESTS ARE EXPENSIVE
-------------------------------------------------------- Letter :3.1.2

With today's testing technology, it is not possible to detect all
adulterants in juice.  Most experts agree that current tests cannot
effectively detect adulteration levels below 10 percent.  Tests that
examine the sugars in the juice to determine their authenticity
appear to be the most sensitive.  These tests can generally detect
adulteration rates as low as 10 to 20 percent. 

Government and industry experts agree that a battery of tests is
needed to verify that nothing has been added to or substituted for
pure juice.  The costs of analyzing juice samples for adulteration
range from $15 for a basic test to identify dilution with water, to
$700 for a test to identify the presence of pure beet sugar.  A
battery of tests to detect adulterants in orange juice and apple
juice, excluding the most sophisticated test to detect pure beet
sugar, can cost from $450 to $800.  Currently, only a few government
and private laboratories in this country can conduct such a complete
analysis for authenticity, and the most sophisticated test used to
detect beet sugar is not currently available in the United States. 
(See app.  II for additional information on tests and costs.)


      SCHOOLS DO NOT TEST JUICE
---------------------------------------------------------- Letter :3.2

Few if any school districts take steps to ensure that the juice they
purchase is free from adulterants.  Food and Consumer Service
officials told us that schools rely on government regulators and
assume that juice processors are complying with federal and state
laws.  Sixteen of the 18 school districts we contacted required
100-percent-pure juice to meet the Food and Consumer Service's
nutritional standards, but none of these districts took additional
steps to ensure that the juice they purchased met this specification. 
Instead, the schools relied primarily on the integrity of the vendor
and the product label.  Six districts also required that their juice
be graded by AMS to further ensure its quality. 


      ESTIMATES OF JUICE
      ADULTERATION RATES VARY
---------------------------------------------------------- Letter :3.3

Estimates of the extent to which juice is adulterated vary according
to the kind of juice and the type of customer.  Government and
industry experts said that in their experience, adulteration rates
for apple juice are insignificant.  However, estimated rates of
adulteration for orange juice (based on limited testing by government
and private laboratories) range from a low of 1 percent for juice
sold in the retail market to as high as 20 percent for juice sold to
institutions, such as schools.  The lower end of this range comes
from retail and institutional testing by AMS' and FDOC's
laboratories.  For example, FDOC found that about 1 percent (16 out
of 2,503) of the juice samples that it tested from August 1992 to
April 1995 were adulterated. 

The higher end of the range comes from testing by private
laboratories and FDOC of juice sold in the institutional market.  For
example, FDOC found, under its program for monitoring adulteration,
that from August 1992 to April 1995, 18 percent of the samples
destined specifically for the institutional market were adulterated. 
Government and industry experts believe that the institutional
market, which is generally the source of juice for the school meal
programs, is more vulnerable to adulteration than the retail market
because juice is less likely to be tested in this market.  (See app. 
III for more information on estimates.)

According to government and industry experts, the incentive for
adulteration increases when the price of orange juice rises.  FDOC's
monitoring program found, for example, that when juice supplies were
down because of the freezes during the early 1980s, orange juice was
extensively adulterated with pulpwash and diluted with water.\4 In
1981, 50 percent of the samples analyzed in accordance with Florida's
standards were adulterated with pulpwash, and in 1984, 32 percent
were diluted with water.  FDOC officials attributed the high
adulteration rates to the reduced supplies of frozen concentrated
orange juice and higher prices, which created an economic incentive
to adulterate orange juice. 

In contrast, the supply of concentrated orange juice is currently
high, and the prices for it are low.  Industry figures show that the
total volume of domestically produced and imported orange juice
increased by 31 percent from 1990 to 1994.  During the same period,
the annual average price of frozen concentrated orange juice
decreased by 41 percent.  Hence, FDOC officials believe that the
incentive to adulterate has decreased and the level of adulteration
is comparatively low. 


--------------------
\4 Pulpwash is created by extracting soluble fruit solids from orange
pulp with water.  Florida's standard of identity, which defines what
may be included in "frozen concentrated orange juice," has prohibited
the addition of in-line pulpwash (i.e., pulpwash that comes from the
same fruit as the juice) to the product.  In contrast, FDA's standard
of identity for the same product permits the addition of in-line
pulpwash.  The federal standard permitting the addition of pulpwash
now prevails, since, under the Nutrition Labeling and Education Act
of 1990, federal standards of identity preempt state requirements
that are not identical to federal standards. 


   FEDERAL ENFORCEMENT ACTIONS
   HAVE BEEN SUCCESSFUL
------------------------------------------------------------ Letter :4

Since the mid-1980s, Justice has successfully prosecuted six of seven
fruit juice adulteration cases.  These successful actions resulted in
fines and settlements of more than $11 million and prison sentences
for company employees of up to 104 months, as table 1 shows. 
Collectively, 32 employees were convicted of felonies or
misdemeanors.  Federal prosecutors believe that the fruit juice
industry is less subject to fraud today than it was 10 years ago
because of the publicity surrounding these prosecutions and the
significant prison sentences imposed by the courts. 



                                Table 1
                
                   Summary of Federal Convictions for
                        Adulterating Fruit Juice


                                                                 Range
                                                                    of
                                                                prison
                                                                senten
                                                                   ces
                                      Year  Magnitud               (in
                                    senten      e of  Cumulati  months
Name of company                        ced   fraud\a  ve fines       )
----------------------------------  ------  --------  --------  ------
Apple Valley International, Inc.      1993  $2,100,0  $580,000       0
                                                  00
Beechnut Nutrition Corp.              1989  5,000,00  2,435,15    0-12
                                                 0\c         5
Bodines, Inc.                         1990  37,000,0   450,000    0-24
                                                  00
Paramount Citrus Association          1993  1,980,00  6,900,00       0
                                                   0         0
Peninsular Products Co. and           1993  10,300,0   622,000    0-60
 Flavor Fresh Foods Corp.\d                       00
Sun Up Foods, Inc.                    1994  22,000,0   200,000   0-104
                                                  00
Total:                                                $11,187,
                                                           155
----------------------------------------------------------------------
Note:  Only recent fraud convictions by Justice are included. 

\a The magnitude of fraud accepted by different courts is not
comparable because estimating procedures vary. 

\b Fines are cumulative for companies and employees; the range of
prison sentences for company employees excludes probation. 

\c The magnitude of fraud is based on the value of the adulterated
product in Beechnut's inventory when the fraud was discovered. 

\d Flavor Fresh Foods Corp.  and Peninsular Products Co.  were
jointly involved in a single fruit juice adulteration case. 

Source:  Justice's Office of Consumer Litigation. 

Estimates of the magnitude of the fraud associated with the
individual prosecuted cases ranged from about $2 million to $37
million and represent the difference between the processor's costs
for pure juice and for adulterated juice.  However, these estimates
may understate the true magnitude of the fraud because they are based
on available company records, which may be incomplete.  For example,
prosecutors said the adulteration scheme in one case probably began
in 1979, but the $10.3 million estimate of the fraud's magnitude was
based on company records that were available only from 1985. 

In addition, since prosecutors base these fraud estimates on reduced
costs to producers, the ultimate impact on customers is not known. 
Instead of using differences in retail prices, prosecutors use
differences in the cost of ingredients to estimate the magnitude of
the fraud because they generally lack complete information on who
purchased the juice and at what price.  Prosecutors said the impact
on customers is further obscured by the widespread practice of
repackaging and distributing adulterated juice products under several
brand names at different prices.  For example, adulterated
concentrated juice in one fraud case was sold over a period of
several years under more than 20 brand names in at least 29 states. 

The Food and Consumer Service has initiated debarment actions against
companies or former employees in four of the six successfully
prosecuted cases.  Collectively, it has debarred or is debarring 21
individuals associated with these cases and all three companies that
remain in operation.  Debarment actions were not taken in two cases
prosecuted before the agency was authorized to take such actions in
March 1989. 


   ENHANCING DETECTION WOULD
   INCREASE COSTS
------------------------------------------------------------ Letter :5

Government and industry officials identified two primary options for
enhancing the detection of adulterated fruit juice:  conducting
in-plant inspections and instituting a juice-testing program. 
Officials agree that inspections alone, no matter how comprehensive,
cannot effectively identify juice adulteration.  Most experts believe
that juice testing, used in conjunction with definitive purchasing
specifications for juice, would enhance the ability of the federal
government and school districts to detect adulterated juice.  Both of
these options, however, would be costly. 


      IN-PLANT INSPECTIONS
---------------------------------------------------------- Letter :5.1

Industry officials have proposed that all processors selling juice to
schools for the federal school meal programs be subject to in-plant
inspections by USDA.  Under these inspection programs, inspectors
would be located in the plants to observe processing and packaging
operations and to sample juice for use in grading the product.  The
presence of such an inspector might serve as a deterrent by making it
more difficult for adulterators to receive shipments of adulterants,
store them on the premises, and add them to the juice during
processing. 

However, as previously mentioned, in-plant inspections are costly and
do not always detect adulteration.  USDA's inspections would be
labor-intensive and, according to the agency, would require it to
hire at a minimum between 30 and 40 more staff.  These inspections,
charged to the juice processor, cost about $40 per hour.  For
example, USDA's in-plant inspections currently cost one plant selling
a medium volume of juice (i.e., about 250,000 gallons) destined for
schools about $8,538 per year.  Some industry and government
officials believe the added costs would place an unfair burden on
small juice companies with fewer resources.  A portion, if not all,
of these added costs would likely be passed on to the school
districts in the form of higher juice prices. 


      TESTING
---------------------------------------------------------- Letter :5.2

Alternatives to observations made by in-plant inspectors are
systematic or risk-based programs for testing fruit juice sold to
schools.  Many experts believe that school purchase contracts with
definitive specifications for juice, combined with either of these
two forms of testing, would reduce the likelihood of schools'
purchasing adulterated juice.  Systematic and risk-based
juice-testing programs differ significantly in that systematic
programs test a set number of samples at a set frequency, while
risk-based programs vary the number of samples and the frequency of
the testing with the estimated risk.  Since the number of samples and
the frequency of the testing can be reduced when the risk is thought
to be low, programs based on specific risk factors tend to be less
expensive than systematic programs. 

Under a risk-based testing program, school purchase contracts would
include definitive specifications for juice and a provision for
random testing that would form the basis for rejecting substandard
juice.  Such an approach would call for increasing the frequency of
sampling and testing when certain high-risk factors were present. 
High-risk factors could include bids that were significantly below
market; suspicious results from federal, state, or other monitoring
programs; referrals from industry; or unusually high prices for
concentrated juice that would presumably increase the economic
incentive to adulterate juice. 

Although testing against juice specifications could reduce a school
district's risk of buying adulterated juice, such testing would
likely increase the cost of juice significantly.  For example, the
cost of purchasing fruit juice for the 1993-94 school year in the
school districts we examined ranged from $7,600 in a small district
to $240,000 in a large district.  According to our calculations, the
annual cost of testing for that period would have averaged about
$6,400 per district if each district had tested only one sample of
juice each quarter.\5 Thus, for that 1-year period, the cost of
testing in the small district would have been almost 84 percent of
the entire cost of purchasing the juice.  Many officials believe that
if industry were required to incur the cost of testing, this cost
would most likely be passed on to schools in the form of higher juice
prices. 

The federal government would also incur additional costs in
implementing and administering such testing programs.  Such costs
would include those that the Food and Consumer Service and FDA would
incur in developing a set of definitive juice specifications,
disseminating these specifications to the school districts, and
educating the districts about the new testing program.  Because of
the many factors involved in these actions, we did not attempt to
determine these costs. 


--------------------
\5 Laboratory officials who test juice believe that schools would
need to test each type of juice from each vendor about once a
quarter.  Total testing costs were based upon the average cost of
about $500 for a series of juice authenticity tests currently offered
by two laboratories in the United States.  Testing costs would be
reduced if only a few tests, rather than a complete series, were
conducted. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :6

We provided copies of a draft of this report to AMS, the Food and
Consumer Service, FDA, and Justice.  We met with AMS' Deputy
Director, Science Division, and Deputy Director, Fruit and Vegetable
Division; the Food and Consumer Service's Branch Chief, Program
Analysis and Monitoring Branch, Child Nutrition Division; and FDA's
Director, Executive Operations and Consumer Safety Officer, Office of
Plants, Dairy Foods and Beverages, Center for Food Safety and Applied
Nutrition.  These officials generally agreed with the factual
accuracy of the report and made suggestions for technical revisions,
which we incorporated as appropriate. 

We also discussed the report with Justice's Assistant Director,
Office of Consumer Litigation, who said the report presents a
balanced picture of the economic adulteration of fruit juice in this
country and accurately reflects Justice's successful prosecution of
cases in this area.  He also made suggestions for technical
revisions, which we incorporated as appropriate. 


---------------------------------------------------------- Letter :6.1

We conducted our work from March through October 1995 in accordance
with generally accepted government auditing standards.  Details on
our objectives, scope, and methodology appear in appendix IV. 

We are providing copies of this report to the appropriate
congressional committees, interested Members of Congress, the
Secretaries of Agriculture and Health and Human Services, the
Attorney General, and other interested parties.  We will also make
copies available to others on request.  If you have any questions,
please contact me at (202) 512-5138.  Major contributors to this
report are listed in appendix V. 

John W.  Harman
Director, Food and
 Agriculture Issues


List of Recipients

The Honorable Richard G.  Lugar
Chairman
The Honorable Patrick J.  Leahy
Ranking Minority Member
Committee on Agriculture, Nutrition,
 and Forestry
United States Senate

The Honorable Pat Roberts
Chairman
The Honorable E (Kika) de la Garza
Ranking Minority Member
Committee on Agriculture
House of Representatives

The Honorable William F.  Goodling
Chairman
The Honorable William Clay
Ranking Minority Member
Committee on Economic and
 Educational Opportunities
House of Representatives


AGRICULTURAL MARKETING SERVICE'S
INSPECTION SERVICES AND COSTS
=========================================================== Appendix I

The U.S.  Department of Agriculture's (USDA) Agricultural Marketing
Service (AMS) offers food producers three types of inspection
services, as table I.1 shows.  USDA requires that fruit juice
processors agree to being inspected by AMS if they want to
participate in USDA's commodity distribution programs.  Otherwise,
inspections are optional for juice processors. 



                               Table I.1
                
                   AMS' Inspection Services and Costs

                                                                Number
                                                                    of
                                                                 juice
                                                                plants
                                                                inspec
                                                                   ted
                              Items                                (FY
Type of inspection            inspected       Cost               1995)
----------------------------  --------------  ----------------  ------
In-plant continuous           All products    $34 per hour for      44
                              processed in    year-round
                              the plant and   service and
                              the plant       $39.50 per hour
                              itself          for less than
                                              year-round
                                              service

In-plant designated lot       Only those      $34 per hour for      48
                              products sold   year-round and
                              to the          $39.50 per hour
                              government and  for less than
                              the plant       year-round
                              itself          service

                                              Additional
                                              charges for
                                              travel expenses
                                              at $39.50 per
                                              hour for service
                                              that requires
                                              less than 4
                                              weeks or 40
                                              hours per week

Lot                           Only those      $39.50 per hour       38
                              products sold
                              to the          Additional
                              government      charges for
                              (the plant      travel expenses
                              itself is not   at $39.50 per
                              inspected)      hour
----------------------------------------------------------------------
Source:  AMS. 


TESTS FOR DETECTING FRUIT JUICE
ADULTERATION AND THEIR COSTS
========================================================== Appendix II

Several tests are available for detecting the various types of
adulterants in fruit juice.  The costs of these tests range from $15
to $700.  However, the tests generally cannot detect adulteration
levels below 10 percent, as table II.1 shows. 



                               Table II.1
                
                    Tests for Detecting Fruit Juice
                         Adulteration and Costs

                                                               Minimum
                                                              effectiv
                                                        Cost         e
                                                         per  detectio
Type of adulteration                    Name of test    test   n level
--------------------------------------  ------------  ------  --------
Dilution with water                     Brix             $15
Dilution with other fruit juices        Polyphenolic      80
Dilution with sugars                    Sugar             65
                                         profiling
Dilution with sugars                    Oligosacchar    150-
                                         ide             190
Dilution with cane or corn sugars       Carbon            50
                                         isotope
Dilution with beet sugar                Nuclear         450-
                                         magnetic        700
                                         resonance
----------------------------------------------------------------------
\a Minimum detection thresholds have not been established.  The Brix
test accurately determines the ratio of solids to water in fruit
juice.  The observed ratio is then compared with predetermined
standards.  For example, the Brix standard for 100-percent-pure
orange juice is 11.8.  However, this test cannot determine whether
the solids come from 100-percent-pure juice. 

Source:  Food and Drug Administration, Florida Department of Citrus,
and numerous experts from private laboratories, and academia. 


ESTIMATES ON THE EXTENT OF ORANGE
JUICE ADULTERATION
========================================================= Appendix III

Comprehensive or statistically valid data are not available on the
extent to which orange juice is adulterated, but government and
private laboratory officials' estimates ranged from 1 to 20 percent. 
The lower estimates were for orange juice sold to retail customers,
and the higher estimates were for orange juice sold to institutions,
as table III.1 shows. 



                                   Table III.1
                     
                     Estimates on the Extent of Orange Juice
                                   Adulteration

Cust  Source of            Extent of
omer  estimate          adulteration      Basis for estimate  Limitations
----  --------------  --------------  --  ------------------  ------------------
Reta  Florida                     1%      2,503 samples       Samples mainly
il    Department of                       analyzed from 1992  from companies
      Citrus (FDOC)                       through 1995        participating in
                                                              FDOC's trademark
                                                              program

Inst  FDOC                       18%      120 samples         Samples mainly
itut                                      analyzed from 1992  from companies
ions                                      through early 1995  participating in
only                                                          FDOC's trademark
                                                              program

Reta  Agricultural                1%      1,299 samples       Only samples of
il    Marketing                           analyzed from 1991  orange juice
and   Service (AMS)                       through 1994        concentrate coming
inst                                                          into Florida
itut
ions

Reta  Food and Drug              16%      74 samples          Samples not
il    Administration                      analyzed in 1994    randomly selected;
and   (FDA)                                                   includes samples
inst                                                          from juice plants
itut                                                          suspected of
ions                                                          adulteration

Reta  Private                     3%      Testimonial         Generally, samples
il    laboratory A                        evidence based on   suspected of
only                                      laboratory          adulteration
                                          experience.

Reta  Private                     5%      Testimonial         Generally, samples
il    laboratory B                        evidence based on   suspected of
only                                      laboratory          adulteration
                                          experience.

Reta  Private                    10%      Testimonial         Generally, samples
il    laboratory C                        evidence based on   suspected of
only                                      laboratory          adulteration
                                          experience.

Inst  Private                    10%      Testimonial         Generally, samples
itut  laboratory A                        evidence based on   suspected of
ions                                      laboratory          adulteration
only                                      experience.

Inst  Private                    20%      Testimonial         Generally, samples
itut  laboratory B                        evidence based on   suspected of
ions                                      laboratory          adulteration
only                                      experience.

Inst  Private                    20%      Testimonial         Generally, samples
itut  laboratory C                        evidence based on   suspected of
ions                                      laboratory          adulteration
only                                      experience.
--------------------------------------------------------------------------------
Source:  Officials from AMS, FDA, FDOC, and private laboratories. 


OBJECTIVES, SCOPE, AND METHODOLOGY
========================================================== Appendix IV

The Congress mandated in the Healthy Meals for Healthy Americans Act
of 1994 that we review the costs and problems associated with the
sale of adulterated fruit juice to the school meal programs. 
Subsequent discussions with your offices refined the scope of the
mandate into the following questions:  (1) What are the nature and
extent of the juice adulteration problem in the federal school meal
programs, and can current inspection and testing methods detect
adulteration?  (2) What recent federal enforcement actions have been
taken against juice adulterators, and what was the magnitude of the
fraud?  (3) What are the options for enhancing the detection of juice
adulteration, including mandatory inspection of juice plants that
sell their products to the federal school meal programs? 

To determine the nature and extent of the adulteration problem and
the ability of current inspection and testing methods to detect
adulteration, we contacted officials from the Food and Drug
Administration's (FDA) Center for Food Safety and Applied Nutrition
and Office of Regulatory Affairs, the U.S.  Department of
Agriculture's (USDA) Food and Consumer Service and Agricultural
Marketing Service, and the Florida Department of Citrus, as well as
academic experts and officials from private laboratories involved in
testing juice for adulteration.  We also contacted various industry
associations, including the National Food Processors' Association,
the Technical Committee for Juice and Juice Products (an independent
organization), and the Apple Processors' Association.  We contacted
18 school districts in the 6 states that receive the most federal
funding for school meals (California, Florida, Illinois, New York,
Pennsylvania, and Texas).  We reviewed FDA's and USDA's regulatory
standards for fruit juice and USDA's school meal requirements for
fruit juice.  We also reviewed relevant reports, technical
publications on fruit juice testing, and data from FDA and USDA on
fruit juice inspections. 

To determine recent federal enforcement actions taken against
companies for adulterating fruit juice, we discussed prosecutions and
the debarment of juice adulterators with officials from FDA, USDA,
and the Department of Justice.  In addition, we reviewed available
literature on court cases and case files maintained by the Department
of Justice. 

To determine the various options for detecting adulterated juice, we
solicited the opinions of government and industry experts.  We
discussed these options with officials from FDA, USDA, the Florida
Department of Citrus, state education offices, and school districts,
and with industry experts, such as members of the Technical Committee
for Juice and Juice Products.  We did not fully analyze the cost
implications of these options. 


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V

SAN FRANCISCO FIELD OFFICE

Keith Oleson, Assistant Director
David Moreno, Project Leader
Wayne Marsh, Staff Member
Jon Silverman, Staff Member
Kathy Stone, Staff Member