[Senate Hearing 106-784] [From the U.S. Government Publishing Office] S. Hrg. 106-784 INTERSTATE SHIPMENT OF STATE-INSPECTED MEAT AND POULTRY ======================================================================= HEARING before the COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY UNITED STATES SENATE ONE HUNDRED SIXTH CONGRESS SECOND SESSION ON INTERSTATE SHIPMENT OF STATE-INSPECTED MEAT AND POULTRY __________ APRIL 6, 2000 __________ Printed for the use of the Committee on Agriculture, Nutrition, and Forestry U.S. GOVERNMENT PRINTING OFFICE 67-862 CC WASHINGTON : 2000 _______________________________________________________________________ For sale by the U.S. Government Printing Office Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY RICHARD G. LUGAR, Indiana, Chairman JESSE HELMS, North Carolina TOM HARKIN, Iowa THAD COCHRAN, Mississippi PATRICK J. LEAHY, Vermont MITCH McCONNELL, Kentucky KENT CONRAD, North Dakota PAUL COVERDELL, Georgia THOMAS A. DASCHLE, South Dakota PAT ROBERTS, Kansas MAX BAUCUS, Montana PETER G. FITZGERALD, Illinois J. ROBERT KERREY, Nebraska CHARLES E. GRASSLEY, Iowa TIM JOHNSON, South Dakota LARRY E. CRAIG, Idaho BLANCHE L. LINCOLN, Arkansas RICK SANTORUM, Pennsylvania Keith Luse, Staff Director David L. Johnson, Chief Counsel Robert E. Sturm, Chief Clerk Mark Halverson, Staff Director for the Minority (ii) C O N T E N T S ---------- Page Hearing: Thursday, April 6, 2000, Interstate Shipment of State-Inspected Meat and Poultry............................................... 1 Appendix: Thursday, April 6, 2000.......................................... 39 Document(s) submitted for the record: Thursday, April 6, 2000.......................................... 91 ---------- Thursday, April 6, 2000 STATEMENTS PRESENTED BY SENATORS Lugar, Hon. Richard G., a U.S. Senator from Indiana, Chairman, Committee on Agriculture, Nutrition, and Forestry.............. 1 Fitzgerald, Hon. Peter G., a U.S. Senator from Illinois.......... 8 Harkin, Hon. Tom, a U.S. Senator from Iowa, Ranking Member, Committee on Agriculture, Nutrition, and Forestry.............. 13 Daschle, Hon. Tom, a U.S. Senator from South Dakota.............. 4 Baucus, Hon. Max, a U.S. Senator from Montana.................... 6 Johnson, Hon. Tim, a U.S. Senator from South Dakota.............. 6 Lincoln, Hon. Blanche, L., a U.S. Senator from Arkansas.......... 7 ---------- WITNESSES Hatch, Hon. Orrin G., a U.S. Senator from Utah................... 2 Panel I Rominger, Richard, Deputy Secretary, U.S. Department of Agriculture, Washington, DC; accompanied by Ms. Margaret O'K. Glavin, Associate Administrator for Food Safety; accompanied by Ms. Caren Wilcox, Deputy Under Secretary for Food Safety....... 10 Panel II Boyle, Patrick, President and CEO, American Meat Institute, Arlington, VA.................................................. 34 Dailey, Fred L., Director, Ohio Department of Agriculture, President, National Association of State Departments of Agriculture, Reynoldsburg, OH.................................. 23 Eickman, Michael, Eickman's Processing Co., Inc., representing the American Association of Meat Processors, the Illinois Association of Meat Processors, and 18 other state meat processing associations, Seward, IL............................ 26 Foreman, Carol, Tucker, Distinguished Fellow and Director of the Food Policy Institute Consumer Federation of America, Washington, DC................................................. 32 Heikens, Jolene, Triple T Country Meats, representing the American Association of Meat Processors, the Iowa Association of Meat Processors, and 18 other state meat processing associations, Wellsburg, IA.................................... 27 Nielson, Richard T., President, Utah Cattlemen's Association, representing the National Cattlemen's Beef Association, Salt Lake City, UT.................................................. 30 Pearson, Harry, President, Indiana Farm Bureau, representing the American Farm Bureau Federation, Indianapolis, IN.............. 29 ---------- APPENDIX Prepared Statements: Lugar, Hon. Richard G........................................ 40 Roberts, Hon. Pat............................................ 41 Harkin, Hon. Tom............................................. 50 Daschle, Hon. Tom............................................ 84 Johnson, Hon. Tim............................................ 86 Hatch Hon. Orrin, G.......................................... 88 Boyle, Patrick............................................... 82 Dailey, Fred L............................................... 52 Eickman, Michael............................................. 63 Foreman, Carol, Tucker....................................... 77 Heikens, Jolene.............................................. 68 Nielson, Richard T........................................... 74 Pearson, Harry............................................... 70 Rominger, Richard............................................ 43 Document(s) submitted for the record: Position statement, submitted by Mike Lorentz, Cannon Falls, MN......................................................... 92 Position statement, submitted by Michael Weaver, President, Weaver Meats, Inc., Past President, Ohio Assoc. of Meat Processors................................................. 94 Position statement of the National Chicken Council........... 96 Position statement of the Consumer Federation of America, submitted by Nancy Donley, President S.T.O.P., Caroline Smith DeWaal, Food Safety Director, CSPI, Carol Tucker Forman, Director, Food Policy Institute CFA,............... 101 Excerpts from the Wall Street Journal ``Consumer Groups Decry State Meat Inspections'', submitted by Carol Tucker Forman. 104 Position statement of the Kansas Department of Agriculture, submitted by Bill Graves, Governor......................... 109 Position statement of the National Confreence of State Legislatures, submitted by Larry Diedrich, South Dakota House of Representative Chair, NCSL Agriculture and International Trade Committee.............................. 111 House Concurrent Resolution No. 5050, submitted by Hon. Pat Roberts.................................................... 115 INTERSTATE SHIPMENT OF STATE-INSPECTED MEAT AND POULTRY ---------- THURSDAY, APRIL 6, 2000 U.S. Senate, Committee on Agriculture, Nutrition, and Forestry, Washington, DC. The Committee met, pursuant to notice, at 9:37 a.m., in room SR-328A, Russell Senate Office Building, Hon. Richard G. Lugar, (Chairman of the Committee), presiding. Present or submitting a statement: Senators Lugar, Fitzgerald, Harkin, Daschle, Baucus, Johnson, and Lincoln. OPENING STATEMENT OF HON. RICHARD G. LUGAR, A U.S. SENATOR FROM INDIANA, CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY The Chairman. This meeting of the Senate Agriculture Committee is called to order. The Committee is holding this hearing today to review interstate shipments of State-inspected meat and poultry. This is not a new issue for the Committee. Small plants that have operated under State inspection programs have long advocated interstate shipment of State-inspected meat and poultry. Plants located near the border with another State have been particularly supportive of this change because of the potential for increased markets for their products. Producers have been supportive because of the potential for additional markets for their livestock and poultry. At the end of last year's session, Senators Daschle and Hatch introduced legislation, S. 1988, which would permit interstate shipment of State-inspected meat and poultry. This legislation was based on a concept paper developed by the United States Department of Agriculture and endorsed by the National Advisory Committee for Meat and Poultry Inspection. We have the opportunity today before this committee to hear of support for this legislation and to air concerns about this approach to allow interstate shipment of State-inspected meat and poultry. We are honored to receive testimony from our colleague, Senator Hatch, an advocate of interstate shipment of State-inspected meat and poultry, and we will be pleased to hear the United States Department of Agriculture's perspective from Deputy Secretary Rominger. Finally, a panel of witnesses will testify, including representatives of the State Departments of Agriculture, producer groups, meat processors, and consumers. I offer a special welcome to Harry Pearson, representing the American Farm Bureau Federation, and a good delegation of Hoosiers who are with us today in this hearing. Before proceeding to our witness, let me mention that as soon as Senator Harkin, the distinguished ranking member, appears, he will be recognized for an opening statement. [The prepared statement of Senator Lugar, can be found in the appendix on page 40.] But for the moment, I would recognize our colleague, Senator Hatch, who I aforementioned is one of the authors of legislation we will be considering this morning. We are delighted to have you, Orrin, and proceed with your testimony. STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM UTAH Senator Hatch. Thank you, Senator Lugar, Senator Daschle, Senator Johnson. I am grateful to be with you and I applaud you for holding this hearing. I am particularly pleased that you are going to have the opportunity to hear from Richard Nielson, the President of the Utah Cattlemen's Association. I am sure you will find his testimony cogent and very informed. As you know, the New Markets for State-Inspected Meat Act, the Daschle-Hatch bill, would lift the outdated ban on the interstate shipment of State-inspected meat. Rather than state all the details of this legislation, I would like to describe to the members of this committee how the ban on interstate shipment is affecting small businessmen in rural Utah. I want to emphasize that what we are seeing in Utah is echoed in at least half the States in this country. The business owners I will tell you about own small meat packing plants that are inspected by State inspectors. The first is Eddie Roberts, who owns Tooele Valley Meats in Grantsville, Utah, not far from the Nevada border. Eddie is well known in the area for making some of the finest sausage available anywhere. Casinos just across the border in Wendover, Nevada, know of his sausage products and have tried to purchase them. Contracts with these casinos would be a tremendous boost for Tooele Valley Meats, but as we all know, Eddie is barred by law from selling his sausage products in Nevada or any other State. A casino in Las Vegas has also approached him, telling him they would buy as many roaster pigs as Eddie could produce, but the ban also applies to poultry. So much for rewarding product excellence. Mr. Chairman and the members of this committee, I am sure you appreciate what an order like that would mean for a small business in a rural community. Once again, Tooele Valley Meats was forced to turn down what they considered to be a dream opportunity. In Smithfield, Utah, Monte Lucherini owns L&H Packing Company, a State-inspected plant just 15-miles from the Idaho border. This plant produces roast beef, jerky products, hot and mild sausage, and other products. Monte has been contacted by a number of businesses in Idaho seeking to purchase his products. Once again, a small businessman in a rural area was faced with a chance to expand his business but was forced to turn it down. With regard to this legislation, Monte has said, and I quote, ``I believe that my gross sales would increase 30- to 40-percent. Employment would be increased also. I would need more butchers and more workers. It has also been a thorn in our side that we could not service the customers that want our products.'' So much for encouraging investment. In Vernal, Utah, Don Anderson owns and operates Uintah Packing. The principal part of Don's business has been selling steaks to river outfitters taking visitors down the Green and Colorado Rivers. He was doing excellent business with these customers until it was pointed out to the river guides that they could not serve Don's product because a portion of the river trip would dip into Colorado and Arizona, thus making it illegal for them to serve steaks produced by a State-inspected plant. Well, Mr. Chairman, Don lost his business and has never fully recovered from it. In this case, the currently policy not only hindered business, it actually hurt it. Finally, I would like to talk about Theone Merrill. Theone owns Heartland Foods in northern Utah and produces a number of excellent products, many of which are cooked and canned. Now, Mr. Chairman, Theone has an idea. He has recognized that if he could tap into the Internet as a marketing tool, the entire world would be within reach of his products. He had already learned of interested buyers of his products in other States, but he will not be able to pursue those markets. Needless to say, Theone is eager for the passage of this bill. Just as in the other cases, Mr. Chairman, his market is limited to the State of Utah. So much for rewarding innovation and risk taking. Now, these stories and the others like them around the country would be enough in my book to take action on this bill, but there is more. Each of the plants I have mentioned is completely free to sell buffalo meat, pheasant, ostrich, alligator, emu, and other meat products not only across State boundaries but even to foreign nations, and these meat products are inspected by State inspectors. Yet State-inspected beef, pork, and poultry cannot travel a few miles from Tooele, Utah, to Wendover, Nevada. Let me put this another way, Mr. Chairman. We trust State inspectors to efficiently inspect emu but not beef, and it is okay to sell State-inspected beef or pork in Utah, but nowhere else. This makes absolutely no sense, Mr. Chairman. But what makes even less sense, Mr. Chairman, is the fact that while those Nevada casinos or Idaho supermarkets are banned from buying sausage and other products from Utah, they have no problem whatsoever in importing those products from a foreign country. Foreign competitors have full freedom to sell their foreign-inspected products in the United States, and, of course, they are more than willing to do so. Mr. Chairman, I know you share my view that the American economic system should reward excellence, hard work, effort, and investment, yet current policy concerning State-inspected meat is holding Americans back for no justifiable reason. It is just plain stupid and I hope you and the other members of this committee will agree. Not only does this policy of prohibiting the interstate distribution of State-inspected meat stifle the growth and prosperity of individual small businesses, but it also contributes to the concentration in the meat packing industry in our country. As I am sure every member of this committee knows, there are fewer and fewer places for our livestock producers to sell their products. I believe the New Markets for State-Inspected Meat Act will help to increase competition in the meat packing industry. You do not need to take my word for it. Three separate USDA Advisory Committees have recommended lifting the ban on interstate shipment as a way to create more opportunities for small packers and livestock producers in rural America. I think that events in the State of Minnesota have confirmed this. Minnesota began a State inspection system only last year. As a result, in only a short time, 30 new plants started up in that State. Now, this is good for competition, it is good for consumers, and good for livestock producers. The Minnesota experience also demonstrates what many small plant owners have expressed to me, that most small plant owners prefer to work with State inspectors, which tend to be much more hands-on, informative, and responsive than Federal inspectors. This is why the small plants in Utah and in other States would be happy to comply with Federal inspection standards but shy away from turning their plants over to inspection by Federal inspectors. This is a key point, Mr. Chairman. There is absolutely nothing about this bill that would compromise food safety. The time is ripe to do away with the outdated and anti- competitive ban on interstate shipment of State-inspected meat. This bill will open markets and spur growth in the meat packing industry. It will be good for our small plant owners, our livestock producers, and rural America in general. So I urge the members of this committee to report this measure to the full Senate as soon as possible, and I want to thank personally the prime sponsor of this bill, Senator Daschle, for his willingness to lead out in this manner and to continue this fight to change what really is something that needs to be changed. I want to thank you for giving me this time this morning. The Chairman. Thank you very much, Senator Hatch, for your testimony. It is appropriate that, in fact, the co-author, Senator Daschle, is at hand, the Democratic leader and a distinguished member of our committee. Tom, would you like to make a statement or respond to Orrin or boost your bill or anything pertinent you may have? Senator Hatch. Come on, Tom, let us get up here. STATEMENT OF HON. TOM DASCHLE, A U.S. SENATOR FROM SOUTH DAKOTA Senator Daschle. First of all, Mr. Chairman, I thank you, as Orrin has, for holding this hearing. This is another example of your extraordinary interest in many of the issues relating directly to agriculture. I think Senator Hatch has pointed out as succinctly as I have heard the implications for processors all over the country, but in his State in particular. He has also pointed out the irrationality of the current situation and the implications of current law for not only producers but for agriculture in general. So I applaud him for his statement. I congratulate him on an excellent statement and appreciate very much his direct involvement in this legislation. He and I have been working on this now for some time. We have 17 other cosponsors on a very bipartisan basis, and so I am pleased that we have been able to get to this point. It is hard to believe that Congress has been debating this issue now for over 20-years. As a result of a lot of work by USDA and numerous other groups interested in the issue, at last, we have a proposal that Senator Hatch has outlined that can provide interstate shipment authority in a way that benefits everyone, either directly or indirectly. He and I, as I noted, had been working on this bill for a good period of time now, about 6 months, and it is based on recommendations made by the National Advisory Committee for Meat and Poultry Inspection. It is good for small plants, as Senator Hatch has noted, and the communities in which they are located. We think it is good for farmers and ranchers. It is good for the States with a State-inspection program. We think it is very good for consumers and it is good for the market because we think it will stimulate competition as well as innovation. Under current law, only State-inspected bison, venison, pheasant, and ostrich can be shipped interstate. S. 1988 would expand this shipment, at long last, to include beef and pork and lamb and poultry. Products would be eligible for interstate shipment, export to other countries, and use in products destined for export to other countries, as well. As Senator Hatch has noted, the current law severe limits State plants' marketing opportunities and unfairly penalizes them based on size and gives unfair market advantage to bigger plants for which Federal inspection is an option. This limitation penalizes producers, who bear the added transportation costs of shipping products to Federally- inspected plants if they want to market out of State. The current law is inequitable among species, of course. Some species can be shipped across State lines while others cannot. So with the full implementation of HACCP, State and Federal inspection programs will be enforcing the same food safety and standards and we will have the same seamless food safety inspection system we have talked about having now for some period of time. With S. 1988, we still have the benefit of our State- inspection programs and their specialized knowledge of local needs. In South Dakota, for example, we have 53 State-inspected plants. A number of them serve very isolated populations. So, Mr. Chairman, allowing this interstate and international shipment of products inspected at these plants would provide a tremendous opportunity for the producers that Senator Hatch noted, producers and processors in South Dakota, to owners and employees of these plants who have new business opportunities and to towns that are in need of new business and capital flow. So I am really interested in the testimony this morning of a number of witnesses who have come distance, as well as our experts from the Department of Agriculture. I again thank you for your interest in this issue and especially thank Senator Hatch for his cosponsorship and his leadership, as well. The Chairman. Thank you very much, Senator Daschle. Let me ask each of the Senators who have joined this hearing if they have opening comments or questions of our witness, Senator Hatch. Senator Johnson? STATEMENT OF HON. TIM JOHNSON, A U.S. SENATOR FROM SOUTH DAKOTA Senator Johnson. Just very briefly, I want to thank you, Mr. Chairman, for holding this hearing and Senator Hatch's leadership on this important bipartisan issue. As Senator Daschle has noted, this issue has been around a long, long time and it is overdue that we finally address it in a constructive way this year. I am pleased to be a cosponsor of S. 1988. This legislation, as Senator Daschle has noted and Senator Hatch has noted, would help create a seamless system of meat inspection between State and Federal systems, and particularly now with implementation of our HACCP system, we have the support of USDA and a great number of agricultural as well as consumer organizations in this country. At a time when there has been a lot of frustration expressed in South Dakota among my producers about lack of competition and integration going on in the packing industry, this is a step, I think, in the right direction which would be a boon, I think, to livestock producers as well as to the State's economy, to the economy of many small communities, as well as to consumers. As Senator Daschle has noted, we have some 53 small packing plants in South Dakota. Many of them are right along our borders, but for artificial and no longer rational reasons, not allowed to market their products across the State lines into Minnesota, Iowa, North Dakota, Wyoming, and Nebraska. I am confident talking to these producers in their small plants around the State that this would do a great deal to allow them to expand their business. It would create new niche markets for many of our livestock producers at a time when they need more alternative marketing opportunities for themselves and it would create greater competition in the livestock and meat industry in general. I think that is a good thing for consumers and it is a good thing, I think, for the country as a whole. So I applaud USDA's work with us on this legislation and all the bipartisan cosponsors of this bill and I am hopeful that we can, in fact, move beyond a hearing to a markup point at some expeditious time. Thank you. The Chairman. Thank you very much, Senator Johnson. Senator Baucus. STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM MONTANA Senator Baucus. I thank the Chairman. Mr. Chairman, as I think and reflect upon this issue, it really is somewhat in a certain sense sad that it takes Congress so long to do something that is so right. This is a no-brainer. Clearly, inspection plants, packing plants, processors in our country, whether they are Federal or State, should be able to ship product across State lines because under HACCP they will be subject to the same inspection standards. It just makes no sense at all for me that anyone would oppose this legislation. it is just that simple. Senator Johnson made a very good point about niche markets. This legislation will enable lots of different people to market their own meat products in a way that makes sense to them. We in my State, Mr. Chairman, we call ourselves the Big Sky State and we like to think that ``Made in Montana'' is going to be a good selling point, not only nationwide but internationally. It is my hope that this legislation is tailored in a way so that State-inspected plants will be able to sell not only across State lines but around the world. And clearly, it is to the best interest of a State processing plant to be safe. If they are going to sell their product and have it accepted, and probably because they are small, they know they have got to do a good job and they are going to do a good job. It is analogous to me like start-ups in the high-tech world. You have all these start-ups because people in our country today have the opportunity, if he or she has a good idea, to follow up and pursue it, and I think the same should be true here. If a group of people want to get together and put together their processing plant, they ought to be able to do so. There have been many attempts in my State that have been futile, frankly, and one of the reasons is this. It is just hard to ship. You cannot across State lines. I very much commend Senator Hatch, Senator Daschle, and others for finally getting this bill together. I am a cosponsor, proudly. Many others are, too. This is getting to be a thing, Senator. You and I are on a lot of bills, I have noticed. This is one more. Senator Hatch. It is starting to worry me. [Laughter.] Senator Baucus. It is a good sign. We Westerners are sticking together. Thank you very much, Mr. Chairman. The Chairman. Thank you, Senator Baucus. Senator Lincoln. STATEMENT OF HON. BLANCHE LINCOLN, A U.S. SENATOR FROM ARKANSAS Senator Lincoln. Thank you, Mr. Chairman. I appreciate your holding the hearing today and want to welcome Senator Hatch and thank him for his hard work on this issue. Food safety is an extremely important issue, I think, to all of us and I am pleased that the Committee is working on this issue here in this bill so that we can review the proposal that has been offered regarding the interstate shipment of State-inspected meat and poultry. The administration and several members of this committee have been working very hard on this measure to ensure that there is a consensus, and I applaud that effort and I would like to work to that degree. However, I do represent a State that has a very large poultry interest, and today the poultry industry still has a few concerns about the impact of this legislation, so I may have a few questions for the panelists later on. I am delighted to hear from Senator Hatch and would certainly like to ask him that maybe if there is a possibility, we can look at some of the concerns that we do have from the poultry industry's side. I look forward to the witnesses that will present that and would just simply highlight that food safety is truly the ultimate issue here and that we do not forget that and that we reflect on it, and as we can make improvements, hopefully we will to this very important issue. So thank you, Mr. Chairman, and thanks, Senator Hatch. The Chairman. Thank you, Senator Lincoln. The Chair would like to enter into the record a statement from Senator Roberts, who is a cosponsor of the legislation and is supportive of it. [The prepared statement of Senator Roberts can be found in the appendix on page 41.] Senator Fitzgerald. STATEMENT OF HON. PETER FITZGERALD, A U.S. SENATOR FROM ILLINOIS Senator Fitzgerald. Thank you, Mr. Chairman. I would like to welcome the distinguished Chairman of the Judiciary Committee here. You do our Agriculture Committee much honor by coming before us and I am pleased to be a cosponsor of your legislation, Senator Hatch. I think that now, in an era when we have a meat processing sector that continues to consolidate, and we are hearing a lot of complaints from the farm community about the continued consolidation at the end producer level, we now have the four largest processors controlling approximately 80-percent of the fed cattle market and approximately 60-percent of the pork market, it seems to me that allowing State-inspected plants to compete on a nationwide basis is a very worthwhile goal. I compliment you on this legislation. Illinois, according to our Illinois Department of Agriculture, has 283 meat processors. These plants employ about 6,000 people and have annual sales totaling $425 million. Whenever I am at a Farm Bureau meeting anywhere in any county in Illinois, somebody who is from one of these State-inspected plants will get up and complain that they cannot export their meat out of State. So I think we need to look at if these plants are complying with USDA standards, if they are using some of the science- based technology that the USDA is now requiring, I think it will improve food safety in our country, and in addition, it will allow for some more competition in the meat industry, give the farmers more end producers to sell their livestock to, and be good for consumers. So I want to congratulate Senator Hatch and I am pleased to be a cosponsor. I also want to point out that one of my constituents, Michael Eickman of Eickman's Processing Company in Seaward, Illinois, is here today and he is representing the American Association of Meat Processors, a national organization of 19 State meat processing associations. Mr. Eickman, I want to thank you for traveling to our nation's capital to be with us today. Thank you very much. The Chairman. Thank you very much, Senator Fitzgerald. Senator Hatch, you have heard from your colleagues and we appreciate very much your coming to offer this testimony personally. Let me just say that your presence prompts me to make really a further request. As if often the case with Congress, the jurisdiction of various committees is clear with regard to some issues and yet the issues are sometimes bigger than all of our committees. We have been talking in this committee a good bit about agricultural concentration. That was reflected in some of the statements by Senators today, Joel Klein before the Committee and others who are involved in that issue and we will be talking about that some more. We appreciate the cooperation with you as chairman of Judiciary and your members because obviously these are subjects of great interest to you. You have the whole antitrust issue in the country, but the agricultural part of it is very important to us. In the same spirit as we have worked with Senator Gramm in the Banking Committee and our own Senators, Senator Johnson, Senator Baucus, Senator Daschle, Senator Leahy are very active in the debate on extending to rural America the television satellite situation in the recent debate. These issues bob up in various ways, but they are of great importance to rural America, as you understand with your constituents. So we thank you for coming to be with us today and for giving of your time. Senator Hatch. I want to thank you, Mr. Chairman, and all of you who are cosponsors, particular Senator Daschle, who is a great leader and a very fine friend, and I really appreciate being given this time. I hope you will listen to our Utah cattlemen. They are good people. The Chairman. We will listen carefully. Senator Hatch. Thanks a lot. The Chairman. The chair would like to call now the Deputy Secretary of Agriculture, Richard Rominger. He will be accompanied by Ms. Margaret O'K. Glavin, Associate Administrator for Food Safety, and Ms. Caren Wilcox, Deputy Under Secretary for Food Safety. Secretary Rominger, we are pleased to have you, as always. You have been faithful in responding to our calls for testimony and have given us the benefit of your wisdom and counsel and we look forward to that again today. Before you begin, let me mention that my understanding still is that there will be two roll call votes cast at 10:30, which is a half an hour from now. That will necessarily mean the absence of most Senators for about a half an hour, given the time that it often takes to get the first vote cast and the second. So I ask your forgiveness to begin with before we even begin, but we would like to hear your testimony and then begin to proceed with Senators' questions. We probably will be interrupted somewhere in that passage. When we return, other Senators will be recognized if you can wait that half hour or so, and we will proceed then and then move on to our panel of other distinguished witnesses. Mr. Secretary. STATEMENT OF RICHARD ROMINGER, DEPUTY SECRETARY, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, DC.; ACCOMPANIED BY MARGARET O'K. GLAVIN, ASSOCIATE ADMINISTRATOR FOR FOOD SAFETY; AND CAREN WILCOX, DEPUTY UNDER SECRETARY FOR FOOD SAFETY Mr. Rominger. Thank you, Mr. Chairman and other members of the Committee. I am pleased to be here today to talk about S. 1988, to remove the statutory prohibitions on interstate shipment of State-inspected meat and poultry products that was introduced by Senators Daschle and Hatch last year. In addition to Senators Daschle and Hatch, I want to thank the ever- increasing bipartisan group of Senators who have cosponsored the legislation, which is known as the New Markets for State- Inspected Meat Act of 1999. As the former head of the California Department of Food and Agriculture, I am pleased that we have finally come up with a solution that is fair to States, fair to small producers, and fair to consumers. With me today, as you have indicated, are Deputy Under Secretary for Food Safety Caren Wilcox and Associate Administrator for Food Safety and Inspection Service Margaret Glavin, who have worked diligently with all of the stakeholders to resolve this interstate shipment issue. The bill here today solves the perennial question of how to level the playing field for small and very small State- inspected meat and poultry processing plants, allowing them to reach markets across State lines. I think the bill finds the right balance, providing packers with access to compete in new markets, ensuring the necessary Federal oversight to guarantee consumers and our foreign trading partners of the integrity of a seamless national inspection system, and maintaining the identity of State inspection programs. The genesis of this bill was a public meeting the Department's Food Safety and Inspection Service held back in June 1977 in Sioux Falls, South Dakota, at the request of Senator Daschle. The meeting initiated a consensus approach toward achieving interstate shipment for State products. Subsequently, the Agency shared with our National Advisory Committee on Meat and Poultry Inspection a concept paper on interstate shipment, and ultimately the Committee composed of consumer, State, and industry representatives endorsed this carefully balanced concept as a basis for legislation. When Senator Hatch requested a report on the recommendations for lifting the ban on interstate shipment last year, we were pleased to forward the administration's proposal. The linchpin of this bill is the provision that States will adopt and enforce Federal inspection statutes and regulations. Inspected and passed State products will bear a Federal mark of inspection, making it crystal clear wherever these products move in commerce their safety and wholesomeness is assured by the U.S. Government. In addition, States will be allowed to continue to use their State mark of inspection. They will also continue to be allowed to impose additional requirements on plants voluntarily opting for State inspection. But States cannot impose these requirements on or interfere with the free movement of product originating from Federal or another State's plants. Before State-inspected plants can ship interstate, USDA will first conduct comprehensive reviews of the State programs, confirm that all the recommendations from the reviews have been implemented, and then annual comprehensive reviews will continue to verify that States are fully enforcing Federal inspection requirements. Under the Hazard Analysis and Critical Control Point, the HACCP inspection system now in place, the Nation's food supply is even safer than it has been. We have seen the overall presence of salmonella in broilers, swine, ground beef, and ground turkey drop, and for some species by as much as 50- percent. To strengthen the seamlessness of the national inspection program under S. 1988, all salmonella performance standard samples for products eligible for a Federal mark of inspection, whether produced in a Federal or a State establishment, will be collected by the Department and analyzed in our laboratories. We believe this will also give consumers confidence of the Federal oversight of the system. So we think the time is ripe for S. 1988 with the final implementation of HACCP in January of this year. The approximately 2,300 State plants have adapted to the HACCP system very successfully and are producing safe and wholesome product under this new system of inspection. With the carefully planned in-depth reviews, the confidence will be there among consumers, industry, the States, and the Department to remove the inequity and allow State-inspected plants to ship their products interstate under the provisions of this bill. We have 25 great State partners that are on the map listed up there with the expertise to best provide inspection for their small and very small State plants. The States are illustrated on that chart. Those are the ones that are speckled there. USDA wants to strengthen its relationship with the State programs and ensure their viability. In fact, we want to encourage more States to implement their own program. To this end, the bill calls for raising the Federal reimbursement up to 60-percent of the cost of operating a State program. Currently, FSIS will reimburse a State for only up to 50-percent of its program's costs. Additionally, since these are voluntary programs on the States' part and a State's resources are not inexhaustible, States would be permitted to limit the size of plants that are eligible for State inspection and this bill would allow for that. The very small plants who produce specialty niche market products, such as award-winning Kansas beef--we have got some Kansas beef right here--or jerky from--this is the maple cured M&J jerky from Vermont, and here we have got Manly Meats sausage links from Indiana. These are winners with the passage of this bill. Interstate shipment will allow these State plants to reach new markets and to engage in new and innovative methods of marketing, such as mail order or e-commerce over the Internet. So this bill would allow these small plants to better compete with plants that are Federally inspected. I think the consumer is also a big winner here. Consumers would be able to enjoy a greater variety of safe meat and poultry products like those that I just mentioned. With the current prohibition in place, you or I here in Washington cannot enjoy the many specialty products produced under State inspection. However, once this bill passes and becomes law, not only would every American be able to enjoy these and other State-inspected products, but people from around the world would be able to enjoy these products since they would be eligible for export, and they will be able to do so with the assurance provided by the USDA mark of inspection. Small producers will also win because they will have more local plant options for delivering their animals. In some regions, small farmers and ranchers have to transport their animals over long distances. Even Federally-inspected plants will benefit because they are often suppliers to these small and very small plants that buy their product and then add value to those products. The Federal program and the State programs are winners, too. Greater coordination between Federal programs and State programs will ensure the consistent application of policy and enforcement. Importantly, the higher degree of coordination will ensure that the expertise will flow both ways, maximizing the use of talents available in a national inspection system. The interstate shipment debate, as we have heard, has gone on long enough. Back in the early 1980s, when Senators Daschle, Dorgan, and Roberts were members with Secretary Glickman on the House Committee on Agriculture, then-House Subcommittee Chairman Harkin held hearings on this subject, and this was a decade after the debate on the issue had begun. Senator Harkin. Was that in the last century or what? [Laughter.] Mr. Rominger. A long time ago. So we think the time is right. HACCP has been successfully implemented. We have a balanced bill addressing concerns of processors, consumers, State regulatory authorities, USDA, and the industry, and this bill has been introduced. It is time to pass this interstate shipment bill. Mr. Chairman, thank you for the opportunity to appear before you this morning and I look forward to working with you in passing S. 1988 so that we can move to a seamless national food safety system. We will be happy to answer any questions that you or other members of the Committee may have. Thank you. [The prepared statement of Mr. Rominger can be found in the appendix on page 43.] The Chairman. Thank you very much, Mr. Secretary. It is appropriate you had the historical reference of our members during their House service. I think already it has been mentioned, by Senator Daschle, I think, that the issue has been with us for 20-years. I can recall each of the conferences during that period of time in which this issue has arisen in one form or another from one house or another and it is appropriate at this point, because we do have the ranking member and the Chairman of the Subcommittee that heard this bill in the last century. [Laughter.] Tom, would you like to proceed with your opening comments or your questions? Senator Harkin. As soon as I sit my cane down back here, I will be set. [Laughter.] STATEMENT OF TOM HARKIN, A U.S. SENATOR FROM IOWA, RANKING MEMBER, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY Senator Harkin. Thank you, Mr. Chairman, and I apologize for being late. I had to testify before the Armed Services Committee this morning and I just got out of that. I will just ask that my statement be made a part of the record. The Chairman. It will be included in full. Senator Harkin. I just want to make sure that I welcome Jolene Heikens of Triple T Meats in Wellsburg, Iowa, who has come here today and I look forward to her testimony. We have, as I am sure you do in Indiana and I know you do in South Dakota, Senator Daschle and Senator Johnson, a lot of these small plants that really provide a good source of revenue, they employ people, they produce a great product. Especially if you are in the corner of a State where you are bordering two other States and your market sort of is right over there but you cannot do anything, it really works a terrible hardship. I think what we have here is a good approach on this to ensure that these plants meet all of the requirements of HACCP and meet the requirements of Federal inspection, even though we can deputize the State inspectors. So I think we have a good seamless system here now that we can bring these small plants into the national system. With that, I thank you very much. The Chairman. Thank you very much, Senator Harkin. [The prepared statement of Senator Harkin can be found in the appendix on page 50.] The Chairman. I will ask my questions last so that we get as many Senators in before the vote. We are now advised the vote will be about 10:40, so that gives us a little bit more time. Senator Daschle, do you have questions of the witness? Senator Daschle. Mr. Chairman, I will be brief, but first of all, let me compliment Secretary Rominger for his excellent statement. We appreciate his presence here today. He said a couple of things that I think we ought to elaborate on, if we could just a little. One intriguing statement was that you actually encourage State-inspected plants and you want to see more of a State role and State involvement. Could you elaborate a little bit on why you think that is important? Mr. Rominger. We think it is important because the States know their local small plants and we think they are in a good position to be able to do a good job of inspecting those plants, and now that we have a national seamless system, why, we will be able to guarantee the consumers that those small State-inspected plants are up to the standards of Federal inspection and, in fact, will carry that Federal inspection stamp in addition to the State stamp, if the States still want to use that. So we think that would give the States an opportunity to put their State stamp on it as well as the Federal stamp. Senator Daschle. You also mentioned that this legislation could enhance food safety because of the food testing provisions. I would be interested, if you could, to elaborate a little bit more on that, especially as it relates to salmonella. Why is this a better food safety law than we might have otherwise had? Mr. Rominger. We have, as you know, recently instituted the salmonella testing, and perhaps one of my colleagues will elaborate on that, but we think that, that is important to make sure that all of these plants are testing for salmonella. USDA would continue to take the samples not only in the Federal plants but in the State-inspected plants, as well, and analyze them so that we would be able to assure consumers that those plants are meeting the salmonella requirements, as well, and we think that is important because salmonella is one of the pathogens that has caused sickness in a lot of people. Senator Daschle. And that is not happening today, correct? Ms. Glavin. Under HACCP, we do have plants where we test for salmonella. We have been doing that now for 3-years. The overwhelming majority of the plants, over 90-percent, have been able to meet the salmonella performance standards, which is a real tribute to those plants. They have stepped up to the plate and really taken charge. We think that having a single set of salmonella sampling, in other words, done all by the Federal Government, will enhance the safety of the product and will enhance consumer confidence that all plants are being held to the same standard. This has been a big success. Senator Daschle. Could I finally ask, obviously, a lot of groups, consumer groups, producer groups, processor groups, all have an interest in this. I appreciate your efforts to reach out to all of them to try to reach a consensus. Could you give us your appreciation of that effort? Was everybody included in this consensus making effort in the beginning and how do you feel about the role that all the groups have had in getting us to this point? Mr. Rominger. I will ask Caren to elaborate, but yes, we did include everyone who was interested and wanted to come to the discussions that were held, and, of course, our Advisory Committee also reviewed this process extensively. So we think everyone who was interested was included. Caren, do you want to elaborate on the amount of work that went into that? Ms. Wilcox. The National Meat and Poultry Advisory Committee, the Advisory Committee to the Secretary, did discuss this on numerous occasions. They looked at various work plans for the legislation. They made suggestions about changes. Those discussions--our meetings, of course, are public and were well attended by both the members and also those that are not formal members but they were perfectly able to make comments at that time. So there were several public discussions and extensive other discussions. Senator Daschle. Mr. Chairman, I have to say the Department has just been very, very helpful and cooperative in this whole effort. As was just noted, I think the outreach here to try to ensure that we have addressed the concerns and the priorities of all groups has really been a remarkable effort. I applaud them and I thank them for their participation and certainly appreciate their testimony this morning. Thank you. The Chairman. I thank the Senator. Senator Fitzgerald. Senator Fitzgerald. Thank you, Mr. Chairman. I neglected to congratulate the minority leader for his help and his lead sponsorship here. In my enthusiasm to thank Senator Hatch, I neglected to mention that you were the lead sponsor. While we are of different parties, I have enjoyed working with the minority leader on issues of importance to farm country out there. Mr. Rominger, thank you for addressing that issue about the consensus building process because I have noticed that there are a list of four organizations that opposed the legislation. I am glad you have attempted to work at the USDA with all interested parties. I have a little bit of a different question. I am wondering if the USDA has estimated the cost of implementing this legislation and does the President's or the current budgets that are floating out there right now being debated on the floor of the Senate, do we have appropriate levels of funding for the Food Safety Inspection Services to take on this new role? Mr. Rominger. Yes, we do. The FSIS 2001 budget includes a request for $1 million to cover the increased cost that would be associated with the comprehensive reviews of all the State programs. As far as the reimbursement from 50-percent to 60- percent, if all of the States opted for that, that would add an additional $8 million in payments to the States, but that will not be needed until fiscal year 2002, but we would request that at that time. Senator Fitzgerald. So you think the States are in a pretty good position, too? You are saying there is going to be an increase in the amount of sharing of the expenses from 50- to 60-percent? Mr. Rominger. Yes. This bill allows for that. Senator Fitzgerald. That is good. So the States should be in pretty good order, too. And if they are not, they probably will have trouble with you, I would imagine, because you have to approve the systems they have in place. Mr. Rominger. Well, the States, the 25 States that have programs now are operating under a 50-percent reimbursement, so we think this just will help them. Senator Fitzgerald. Thank you. You did touch upon this briefly in your testimony, but I just wondered if you could update the Committee a little bit more expansively on your progress in implementing the HACCP systems, the Hazard Analysis and Critical Control Point systems, in both the Federal and State-inspected plants. Mr. Rominger. As we have indicated, we have been through this process now. It was a 3-year process. First, we had the large plants that came on January 1, what would that have been, 1998, and then we had the medium-sized plants and small plants on January 1, 1999, and now in January 2000, the very small plants have come under the HACCP regulation. We have seen a huge majority of those plants meeting their HACCP requirements, have their HACCP plans in place, and are doing a good job. So we think that now is the time to include all of them in this State and Federal inspection system. But they have done a good job. Maggie, would you like to comment? Ms. Glavin. I would only like to add that this past year, when we brought on the very small plants, a large number of those were State-inspected plants and the States did a wonderful job of bringing those plants along. These are the very small plants, fewer than ten employees, and we and the States worked very closely together to make sure that they were prepared. Senator Fitzgerald. Thank you very much. The Chairman. Thank you very much, Senator. Senator Johnson. Senator Johnson. Yes. I want to second the comments made about appreciation, not only for being here but for the work that you have done to build a consensus among so many different players who have an interest in this reform. I think we need to do more of that in general in Congress, frankly, but in this particular instance it is very, very welcome. You observed about how we are enhancing our meat safety inspection with the implementation now of HACCP and the salmonella testing and so on, but, in fact, the track record of State-inspected meat products, even before that, how would you characterize it? We are starting from what, in fact, was a very high level in the first place is my understanding. Is that a fair characterization of our State-inspected meat plants, by and large, in the past? Mr. Rominger. Yes. Yes, I think so. I think the States have done a good job in the past. We think that this will assure consumers and assure our foreign trading partners that they are equal, they are the same as the Federally-inspected plants. So there would be even more confidence. Senator Johnson. Do you anticipate any resistance from our trading partners, having evaluated this new approach in the U.S.? Mr. Rominger. No, I do not. Senator Johnson. Good. When you talk about increasing our cost share from 50- to 60-percent and then ultimately an $8 million increase, a very modest level when you think of a national effort such as this, what is that added increment designed to enable the States to do? What is the rationale for the 50- to 60-percent and how will that $8 million assist the States? Mr. Rominger. Well, there may be some added costs to the States in their coordination with the Federal Government, making sure that our inspectors and their inspectors keep up to date on all the training that goes on. So there may be a little added expense for States in being part of this seamless system, so we thought that this would be a way to compensate them for that. Senator Johnson. Do you anticipate that there will be an overwhelming positive response from these 25 States that have State inspection systems? Mr. Rominger. I think so. Caren, do you have any comment? Ms. Wilcox. We certainly believe that probably all of them will be very enthusiastic about it. Senator Johnson. And you anticipate additional States may, in fact, as well, join in with State inspection systems? Mr. Rominger. Have we had any? Ms. Wilcox. There are provisions in the bill for them to come in and we would hope that there would be. We have some indications from some States that they are interested in the new program. Mr. Rominger. Because there are some States that have given up State inspection in the last few years and they may be interested now in getting back in. Senator Johnson. Again, I appreciate your testimony here today. I think there is a lot of enthusiasm among the American public as well as producers on this issue, and again, your work to really put us in a position now to finally begin to implement this reform, I think is very welcome and badly needed. Thank you. The Chairman. Thank you, Senator Johnson. Senator Lincoln. Senator Lincoln. Thank you, Mr. Chairman, and I, too, appreciate your availability here today. I just have a couple of questions. I do not think anyone in the room will disagree with the fact that our agricultural community today faces a variety of struggles on a daily basis, and one of the top ones is truly trade barriers. Senator Johnson asked a few questions about that. You answered with a no, that you felt pretty confident that we would not have any problem with our trading partners, but I cannot help but imagine a scenario where you have a product that is inspected in, say, a State like Oklahoma, maybe shipped to Louisiana, where it is further processed into a Cajun sausage, and then shipped to Europe. I just wonder if our trading partners are going to be willing to deal with each of those individual inspecting systems through the various States. From your previous answer, I can only assume that it is that you maintain that S. 1988 would not violate any current international trade agreements, is that correct, Mr. Rominger? Mr. Rominger. That is correct, and we think that our trading partners will accept this because that Federal stamp will be on the product that is inspected by the State plants because they are meeting Federal inspection requirements. Senator Lincoln. That just kind of leads me to, and we talk about the 25 States that have State inspection systems are very pleased with this legislation. I thought it was 26, I guess. There are 24 States that do not, is that correct, that do not have State---- Mr. Rominger. No, we have got 25. Ms. Wilcox. One dropped out recently. Senator Lincoln. The numbers do not matter. I am just saying that there is another side to that coin. There are the other 25 States that do not have State inspection systems. When you mention that, if, in fact, they are meeting Federal guidelines, why would it be--I do not know that they would not want to be Federally inspected. Mr. Rominger. Why would not the small plants want to be Federally inspected---- Senator Lincoln. Because of the cost? Mr. Rominger.--instead of staying with the State program? Senator Lincoln. Yes. Ms. Glavin. Certainly at our public meeting back in 1997 in Sioux Falls, we heard extensively from small producers about their desire to continue to work with State people who were much closer to them, who were much more available than the faceless people in Washington, is what they would call us. I think I became convinced certainly in that meeting that the very small plants, these plants that have a small number of employees, often are family owned and family run, are better served by a government agency that is closer to them, that knows the community, that knows them, is able to get to them faster. That was the basic reason, because we kept asking that question. Why not come under Federal inspection if you want to ship interstate? Universally, that was the answer. I know the people in the State. They respond to me. They respond to my phone calls. Senator Lincoln. Well, in terms of leveling playing fields, I definitely think that is important, but you have States that have opted not to do a State system because they chose to do the international trade, or to trade across State lines and internationally. If, in fact, that Federal stamp is over the State stamp, does that mean that the Federal Government assumes the liability and the responsibility? Mr. Rominger. It would be the same as any other Federally- inspected plant now. The Federal inspection is on it, which means that we are assuring consumers that, that is a safe, wholesome, healthy product. Senator Lincoln. So you do assume the liability and the responsibility of that. Well, then can you just describe how the State-inspected facilities would have to comply with the FSIS, the regulatory requirements? Ms. Glavin. First of all, they would be required to adopt all of the requirements of both our legislation and our regulation and they would have to enforce those in the same way that we do. They do that today. They have equal to. But they would have to have the same laws and regulations and enforce them as we do. Senator Lincoln. So it almost sounds like the Federal Government wants to get out of meat inspection. Ms. Glavin. No. Senator Lincoln. No? Ms. Glavin. I would not go that far. Senator Lincoln. But, I mean, if, in fact, you take the liability but allow the State to do it as long as they comply with your guidelines, then it is kind of like was mentioned earlier, the deputizing, apparently, of State inspection systems. Ms. Glavin. We would continue to have oversight of those State systems, including yearly reviews of them, and as has been mentioned, we will do the salmonella performance standard testing, which would be an ongoing check that, in fact, things were operating properly. Senator Lincoln. The number that you mentioned on that salmonella testing, the 90-percent compliance, I guess, or positive results from that, were those all Federally--I did not understand your answer. Those were all Federally-inspected facilities, right---- Ms. Glavin. Those are Federally inspected. Senator Lincoln.--not State-inspected facilities. Ms. Glavin. That is what is in our database, yes. Senator Lincoln. Right. So then what you would be hoping would be if they comply with all of your standards and requirements, then those State facilities would meet that 90- percent level, hopefully, as well? Ms. Glavin. The 90-percent was 90-percent of plants are meeting the standard, and all plants are required to meet them. It is clear that plants are stepping up to the plate and doing that. The States---- Senator Lincoln. Those are Federally-inspected plants, correct? Ms. Glavin. The ones that my data refers to are Federally, yes, but the State plants all have the same requirement. Senator Lincoln. They do now? Ms. Glavin. Yes. Senator Lincoln. OK. Do you know if they are meeting that same---- Ms. Glavin. Yes, they are. I do not know the exact percentage of plants that are meeting it, but I would assume it is in the same area of 90-percent. Ms. Wilcox. Most of the small plants, the very small plants, have just come into the program and therefore the database is not complete as to the salmonella sets for the very small. Senator Lincoln. I just had a few concerns and wanted to make sure that I had those expressed and would like to maybe visit with you further on some other questions that we may have. Thank you, Mr. Chairman. The Chairman. Thank you, Senator Lincoln. One concern of critics of the bill has been phrased in this way. Under this bill, would all State-inspected plants have to comply with all USDA directives, notices, and policy memorandum? Was that the intent of the proposal as prepared for transmittal to Congress? Mr. Rominger. Yes. Ms. Glavin. Yes. Ms. Wilcox. It is our intent, yes. The Chairman. Under this bill, would States still be able to require and to pay for inspection of all meat species? For example, in Indiana, inspection is required for farm-raised deer and elk, bison and ostrich and emu, and there are a few plants in the State that slaughter these species. Is the legislation comprehensive in that way and what comment can you make about all meat species? Ms. Glavin. That would continue to be allowed, although as is the case today, there would be no Federal payment for that part of a State's program. The Chairman. I see, no Federal payment there. So the States could do it, but they have to assume total payment there? Ms. Glavin. Right, and that is the case today. The Chairman. There would still, however, be the dual stamps, both the Federal and the State stamps? Ms. Glavin. No, only on product covered by the Federal Meat and Poultry Acts. The Chairman. So on, for instance, the farm-raised deer, this is a State responsibility and the State stamps it and pays for it? Mr. Rominger. Unless the Federal Meat Inspection Act is changed to include them. The Chairman. The bill allows USDA to reimburse a State for up to 60-percent of the costs. The bill also requires a comprehensive Federal review of State inspection programs to determine their effectiveness of each program, identify changes that are required. Is it possible that changes could be required that would substantially increase the cost to the State of this process, even with the higher Federal reimbursement? Ms. Glavin. I think the one area where there could be additional cost is if additional small plants decided to move over to the State system, that could add to the States' costs. They would need additional inspectors, etc.. So there is the possibility that their cost could increase. The Chairman. And it is in that area that the States are likely to incur costs? In other words, if you are a State and you are taking a look at this and you wonder, granted, the 60- percent reimbursement is more generous, but am I going to be required to do a lot of other things that lead to my costs being higher. Ms. Glavin. That is part of the reason for allowing States in this bill to set a size limit on the plants that they would be willing to take into their program so that they have some way to control their cost. The Chairman. Now, in response to other Senators, you have commented you do not anticipate difficulty with regard to our trading partners abroad. I am just curious, have any inquiries gone out from the Department to any of these markets or any other countries? Are they aware that this legislation has been drafted by USDA, offered by distinguished Senators, and do you have any official reaction from them? Mr. Rominger. Caren? Ms. Wilcox. I know that they have been informed because USTR and FAS have reviewed this bill and there have been notices, but I do not know of any formal responses. We do know that some of our meetings have been monitored by representatives of other governments. The Chairman. And they have made either favorable comments or no comments or how would you characterize it? Ms. Wilcox. No formal comments. The Chairman. Now, 25 States are covered on your chart by both State and Federal programs presently. Are more States likely to join this process, and do you have any evidence, any comment as to what kind of decisions might be made by States that do not have programs presently? Mr. Rominger. I do not think we know for sure whether any States will decide to go back to adopt a State-inspected program because it does incur costs for a State that does their own program because the Federal Government will only reimburse under this bill up to 60-percent of their costs. So there would be additional costs for the States if they decide to do their own program. The Chairman. Is that your view as to why many States have not adopted State programs, because it does have an added cost to it and, therefore, they have just simply been a part of the Federal business from the beginning? Mr. Rominger. I think that is a major cost, major reason, yes. Ms. Glavin. There is some movement over the years in and out of the program, and in the past few years, the two States I remember that have dropped the program were Florida and Alaska, and in both cases it was for financial reasons caused. The Chairman. And presumably, they did not have additional meat products that were outside the Federal bounds. I mentioned the Indiana situation of these additional species. That might be a justification for having a State program, if you had additional items that you wanted to certify. Ms. Wilcox. Yes. If you had an industry with non-amendable species, yes. The Chairman. Senator Harkin, do you have further questions? Senator Harkin. Mr. Chairman, I just have one. I think you and others have covered this waterfront pretty thoroughly. I just have one just a little bit different than this, Mr. Rominger. I wrote a letter to Secretary Glickman on March 27. It has to do with the reduction of 197 inspector years contained within the USDA's budget for next year. I am very disturbed by this, as a matter of fact, and why that is in there. Here we are talking about inspections, and yet the USDA in their own budget is asking us to reduce by 197 inspector years, and yet we just recently had another outbreak of listeria, as you know. So I am really disturbed by this and I hope that you will take this back to the Secretary and ask him please to take a look at the letter I wrote just the other day. I really believe that you are doing this without soliciting any public comment. I really think that before any changes are made in the inspection process, I really do think you need to go through an open rulemaking just as you would for any changes in slaughter inspection. That was sort of the content of my bill. I do not need you to reply to that, but please take this back to the Secretary and let him know that we need to really discuss this because the last thing we need is a reduction in inspectors, I think, out there. If you want to comment on that, I would be glad to hear that. Mr. Rominger. We appreciate and we understand your concerns. Certainly, the Secretary will be responding to your letter. I will ask my colleagues to amplify about that, but I would just add that, currently, we have funds in the budget for additional inspectors and we have an aggressive recruiting program underway right now to add some additional inspectors in this fiscal year. Senator Harkin. So you are adding them this year and cutting them next year. Ms. Glavin. We do intend to, for slaughter inspection, do a full notice and comment rulemaking process for any changes there, and we are also committed to a full public process on making any changes in the frequency of processing inspection. Senator Harkin. I have to tell you, Ms. Glavin, through all my years here, I do keep fairly open doors to a lot of producers around the country, large and small, and I am hearing more and more complaints about the fact of the lack of being able to get a Federal inspector, and then I get hit with this budget of 197 reduction and I am wondering, what is happening here? I do not understand this. Do you have any other comment on that? I do not understand it. Ms. Glavin. Well, no. As the Secretary indicated, we have had a very aggressive recruiting program this year and we have seen some success in increasing the number of slaughter line inspectors and we are committed to continuing that. Senator Harkin. Maybe we can work this out, but maybe you can enlighten me more as to why that was in the budget. Ms. Glavin. Yes. Senator Harkin. Thank you very much. Mr. Rominger. We would like to continue the discussion with you on that issue. Senator Harkin. I appreciate that. Thanks. Senator Lincoln. Mr. Chairman, can I just ask them to qualify an answer to the Chairman's question? In discussion about having presented the proposal to USTR, you did not get a formal response from them? Ms. Wilcox. Oh, no, from them, but there is a process that they have once a bill is introduced that could have implications in international trade that they have. Senator Lincoln. I just want to make sure that I understand. I realize that you have no---- Ms. Wilcox. No. USTR fully oversaw this bill---- Senator Lincoln. And supports it? Ms. Wilcox.--and the administration as a whole supports this bill. Senator Lincoln. So USTR, they fully support it? Ms. Wilcox. They reviewed this bill---- Senator Lincoln. It is just the other countries that you are saying? Ms. Wilcox. Our understanding of the Chairman's question was, did other countries know about the bill, and there is a process for informing them about it. Senator Lincoln. You have gotten no formal comment from the other countries---- Ms. Wilcox. We have no formal comment that I know of from them. Senator Lincoln.--but you have a formal endorsement from USTR? Ms. Wilcox. Yes. There was a full review by USTR, yes. Senator Lincoln. I just wanted to make sure I was correct on that. Ms. Wilcox. Thank you for clarifying the record. Senator Lincoln. Thank you, Mr. Chairman. The Chairman. Thank you, Senator Lincoln. We are concluded with this panel, which is fortuitous. You can go back to work. But we appreciate very much Secretary Rominger, Ms. Glavin, Ms. Wilcox and will return after these votes and have a distinguished panel. Mr. Rominger. Thank you, Mr. Chairman. The Chairman. For the moment, the hearing is recessed. [Recess.] The Chairman. The hearing is called to order again. We thank you for the patience that you have displayed already as our witnesses. We look forward to hearing from each one of you. Let me introduce the panel who have assembled. They are Fred L. Dailey, the Director of the Ohio Department of Agriculture and President of the National Association of State Departments of Agriculture from Reynoldsburg, Ohio; Michael Eickman, Eickman's Processing Company, Incorporated, representing the American Association of Meat Processors, the Illinois Association of Meat Processors, and 18 other State meat processing associations, from Seward, Illinois; Jolene Heikens, Triple T Country Meats, representing the American Association of Meat Processors, the Iowa Association of Meat Processors, and 18 other State meat processing associations, from Wellsburg, Iowa; Harry Pearson, President of the Indiana Farm Bureau, representing the American Farm Bureau Federation, from Indianapolis, Indiana; Richard T. Nielson, President of the Utah Cattlemen's Association, representing the National Cattlemen's Beef Association from Salt Lake City, Utah; Carol Tucker Foreman, Distinguished Fellow and Director of the Food Policy Institute, Consumer Federation of America; and Patrick Boyle, President and CEO of the American Meat Institute, Arlington, Virginia. We are delighted that you are all here. I will ask you to testify in the order that I have introduced you. Please try to summarize your comments in 5 minutes, more or less, and your full statements will all be made a part of the record of this hearing. Mr. Dailey. STATEMENT OF FRED L. DAILEY, DIRECTOR, OHIO DEPARTMENT OF AGRICULTURE, PRESIDENT, NATIONAL ASSOCIATION OF STATE DEPARTMENTS OF AGRICULTURE, REYNOLDSBURG, OHIO Mr. Dailey. Thank you, Mr. Chairman. Thank you for the introduction, as well. I did not have it on my resume, but I did serve 6-years as Director of the Indiana Division of Agriculture during the 1970s, so I am almost a Hoosier. The Chairman. Indeed, always a Hoosier. [Laughter.] Mr. Dailey. But I am also responsible for a State meat inspection and poultry program which oversees 215 establishments in our State and I have with me today Dr. Lee Jan, Director of the Meat Safety Assurance Division of the Texas Department of Health, and he is President of the National Association of State Meat and Food Inspection Directors. We thank you for the opportunity to speak here today. I am here on behalf of all the States to support the approach embodied in this bill, which would lift the unfair ban on interstate shipment of State meat and poultry products. This is a subject of extreme importance to State Departments of Agriculture and the time to act is now. The reasons to act are clear, simple, and, I think, very compelling. Because of our long history of oversight and compliance with the ``equal to'' inspection requirements of Federal law, the States have never viewed this question of removing interstate shipment as a food safety issue. In fact, we are very, very proud of our food safety record. Some of you may wonder why we have 25 States with their own State meat inspection programs. Who are we serving? Our mission is to provide consumers with wholesome, unadulterated products that are properly labeled and safe. State programs are geared to regulating small and medium-sized businesses. Our personnel are generally more accessible and more flexible in providing inspection resources that are geared to the needs and timing of small plants that are not running three production shifts per day working five or 6 days per week. State programs also provide practical information and technical assistance and our overtime inspection fees are considerably less than Federal rates. In Ohio, for example, it is $18 an hour versus $47 an hour for the USDA. We are geared to working with and supporting businesses that cannot afford to employ a scientific staff or attorneys to sort through all the regulations in searching for answers. We provide a direct line of information sharing and decision making that is accessible to small businesses much more easily than the multi-layered chain of command and the frequently adversarial attitude of the larger Federal system. So we feel there is definite need for existing State programs to continue, and if this legislation passes, you are more likely to see additional States adopt programs. Now, the question before you this morning is whether to change, whether to level the playing field and provide the same opportunities for all meat and poultry processors, or to continue the Government sanctioned economic advantage for large corporations and foreign competitors at the expense of small businesses. As I was preparing my testimony, I looked back to testimony I gave back in 1996, almost 4-years ago, and I began wondering how many of our small processors we had lost in that time. I went back and counted and it was 41 different plants that we have lost. We have also had a number of small cattle ranchers and hog farmers that have not been paid competitive prices and there have not been as many opportunities for price discovery. If you go to a livestock auction, they used to be crowded affairs with a lot of packer buyers. Now, there is one or two and you almost sense that you take this lot and I will take that lot. Mr. Chairman, quite a lot has not changed since the 1996 hearing, and yet quite a bit has changed. That presents us with new opportunities. First, let me tell you what has not changed over the years and why this issue is so important to us. Most importantly, small meat processors under State programs are still denied many opportunities to sell their product today because they do not have full access to the U.S. marketplace. Many of these companies make and market specialty products, like sausage, bratwurst, jersey, and ethnic meat products often made from old world recipes which are not cost effective product lines for large operators but for which there is clearly a demand. Repealing the ban would provide consumers with more choices in the supermarket and convenience stores. It has always struck us as both unfair and illogical to say that consumers in one State may enjoy meat product while consumers in another State may not meet that same product. I choose the word ``meat product'' carefully because this is the only State-inspected product that cannot be shipped interstate. You heard the difference between buffalo and beef and we have beefalo, which is actually five-eighths beef and it has to be inspected because it is more beef than it is buffalo. You can actually cross-breed the two. But it is illogical when you get down and look at the absurdity of it all. Maintaining the interstate ban prevents small businesses from capitalizing on other sales opportunities, such as niche marketing through mail order catalogs, the Internet, and we even have a situation in Ohio and Indiana where we have Union City. You can sell product on one side of the street, but you cannot cross this street and sell it on the other side. In my State, Ohio State University recently did a study and they found that lifting the ban would mean an additional $56 million to our State economy and create almost 600 new jobs for our State. The second thing that has not changed is the unfairness of the ban. You have heard about the large packing conglomerates, but particularly I think it is very unfair with the foreign competition. The trade agreements allow foreign inspected product to be shipped anywhere in the United States so long as that foreign inspection program is equivalent to the U.S. Federal standards, in practice, the same standard which the State must meet. If any of our State-inspected plants were located in Guatemala, Mexico, Australia, they could ship anywhere in the United States. But because they are not, they are restricted to intra-State marketing. As you have heard, the Secretary has three Advisory Committees which has now recommended that HACCP is fully implemented in the small plants. The third major thing that has changed is that we finally have the administration on board supporting our effort. While the legislation may not be perfect, it is something that will work and it would move us even closer to a uniform national inspection program. The bottom line is that today, there are now meaningful distinctions between Federal and State inspection programs which justify perpetuating this unfair ban. I want to thank the administration for putting this concept on the table. It is billed as a consensus bill. Some of us feel like we have not had as much input as we would like, but we do believe that the true consensus is very close, Mr. Chairman. With a little work by the Committee with all the interested stakeholders and all the issues, we can reach a reasonable accommodation that maintains all the essential elements of the USDA concept. I would like to challenge my colleagues in the food, consumer, and agriculture communities who are here this morning to commit to working these remaining issues out, getting a bill passed, not believe that keeping the status quo is in the best interest of anyone. So we all have a reason to remain engaged in the process and see this bill through to completion. Our NASDA members and the constituents we serve hope that Congress will act this year to remove this unfair ban and competitive barrier to small businesses. Thank you, Mr. Chairman. The Chairman. Thank you, Mr. Dailey. [The prepared statement of Mr. Dailey can be found in the appendix on page 52.] Mr. Eickman. STATEMENT OF MICHAEL EICKMAN, EICKMAN'S PROCESSING CO., INC., REPRESENTING THE AMERICAN ASSOCIATION OF MEAT PROCESSORS, THE ILLINOIS ASSOCIATION OF MEAT PROCESSORS, AND 18 OTHER STATE MEAT PROCESSING ASSOCIATIONS SEWARD, IL Mr. Eickman. Thank you, Senator Lugar and members of the Committee. My name is Mike Eickman. I own and operate Eickman's Processing Company, Incorporated, in Seward, Illinois. I presently employ 25 men and women in a small State-inspected meat packing facility. We do slaughter and complete processing from farm to table as well as wholesaling and catering. We are located 25 miles from the Wisconsin border. I am speaking on behalf of myself and the State-inspected processing plants across the country representing the American Association of Meat Processors and the Illinois Association of Meat Processors. These organizations and I strongly ask and urge the Senate bill and interstate shipment be favorably considered and passed. This legislation will help smaller processors economically and finally allow them to compete in free trade, which has been restricted through invisible barriers called State lines for too long. There are presently 25 States that have State inspection and they have State inspection because their State legislatures feel that meat products within their States should be inspected so that the consumer will have a wholesome meat product. The Federal system does not require inspection for custom slaughtered products that are the property of the local farmers and sold to his customers. Currently, the Federal Government assists States with funding for their programs and requires these States to recognize and follow USDA and FSIS regulations. If a State does not meet these requirements, then the USDA can intervene and may take over the State's program. This would then mean that Federal inspectors would be required to inspect in those programs so that the products may be sold. Since this HACCP was installed, requiring the State inspection systems for them to continue to get funding, I feel that States should be awarded the opportunity to ship in interstate commerce if they so desire. It would not be a program that everyone would necessarily have to participate in but could be available for those qualified and willing to follow the regulations set down by the USDA and State officials. Secretary Glickman was asked about interstate shipment at our convention in Louisville, Kentucky, several years ago and he said that it could not happen unless the HACCP system was implemented and in place. Now that system is in place and operating. I have been asked why my plant never went Federal for inspection and there are several reasons. In the early years, in 1967 when the Wholesome Meat Act was enacted, we were busy with doing custom processing. Over the years, this has changed. Now there are fewer farms with livestock and the larger feeders direct their livestock to larger packers away from our facilities. We also felt that the Federal system did not want to hassle with small facilities due to the lack of personnel and necessary funding to pay for added inspectors. Today, we still wonder if the system wants small plants. Illinois has nine State plants that have applied for Federal inspection and 12 more are in the process of looking into it and going Federal. Currently, none of these have received a response from the circuit supervisor, and that was as of last week. I even had a Federally-inspected plant operator tell me that his inspector told him he wished this bill would pass so that they could give the smaller plant back to the State. This would allow the Federal inspectors to concentrate on the larger facilities. Another reason is the method of communications the State uses to solve problems. We do not have the pile of red tape to work through to solve a problem. Just a few phone calls and the problem can be solved. We also have heard of the horror stories that the larger plants have for trying to get something solved on the Federal system and it can be a real task to accomplish something. In our plant, we also process and inspect exotic animals. These are inspected and can be shipped anywhere in the world and across the State lines. However, beef, pork, and lamb are restricted by the inspection system. Our exotics are inspected the same ways by the same inspector and we just have never figured out why. This is not a food safety issue. It is an economic issue concerning small State-inspected operations and they need a chance to expand our market base, move freely in interstate trade. The passage of legislation will not lower the quality of inspection but will enhance the quality of products available to the customer. We have customers waiting for our products but we cannot ship over that interstate fence and it is a bill that is really needed. Once again, I ask you to look favorably upon this bill. It is needed, wanted, and now is the time for the processors in these States to kind of get some compensation for their efforts. Please vote yes, and I sure appreciate the opportunity to talk to you today. The Chairman. Thank you very much, Mr. Eickman. We appreciate your testimony. [The prepared statement of Mr. Eickman can be found in the appendix on page 63.] Ms. Heikens. STATEMENT OF JOLENE HEIKENS, TRIPLE T COUNTRY MEATS, REPRESENTING THE AMERICAN ASSOCIATION OF MEAT PROCESSORS, THE IOWA ASSOCIATION OF MEAT PROCESSORS, AND 18 OTHER STATE MEAT PROCESSING ASSOCIATIONS, WELLSBURG, IA Ms. Heikens. My name is Jolene Heikens and I am from Wellsburg, Iowa. My husband and I own and operate Triple T Country Meats. I am here today representing the Iowa Meat Processors Association and the American Association of Meat Processors. Currently, State-inspected meat plants can only sell their products inside their own State. We feel our businesses are being discriminated against for no apparent reason. Last year, our business had no choice but to turn down the largest beef order we have ever received because we could not cross State lines. Is the consistency there when I can sell a State- inspected buffalo, deer, ostrich, emu, or elk all over the United States and the State-inspected beef and pork have to be sold within the State? What is so special about beef or pork that they get a mandatory free inspection? I can literally watch beef be State- inspected the exact same way as a buffalo or any of the above- mentioned animals and they could be marketed through the United States. Why should these animals be governed under different rules? Are we not as concerned about products made from these animals as we are with our beef and pork products? Interstate shipment is not a food safety issue. This is about placing marketing restrictions on State plants who are enforcing Federal regulations. Our State has spent hours educating processors with the help of Dr. Joe Cordray, an Iowa State University meat specialist. The Iowa Department of Economic Development, the Iowa Meat Processors Association, and Mike Mamminga are just a few that have supported this effort to help implement HACCP. Communication between plant owners and our State inspection people have been a key component to the success of our State inspection program. The ease of communication between State inspection personnel and plant owners is something I probably did not realize the benefits of or the importance until I was faced with the frustration of wanting to expand. I had no choice but to look at the Federal level because I had possible clientele out of State. After 2-years of working on writing a business plan and applying for several loans and grants, I came to the point of being ready to begin building. So I called the Federal office in Des Moines and I asked for an appointment to jointly look at our plans for our new facility. I was told that would make them a consultant and they were not allowed to do that. They would come after the plant had been built and ready to open. Then I would be made aware of any deficiencies that needed my attention. My goal here was to prevent any problems that could arise after construction had become, and I certainly do not want to be made aware of my deficiencies when I am about ready to open a new facility. I guess I am back to the ease of communication. I do not mean easier terms of inspection purposes. I am talking about an inspection service that is available not just to regulate but who tries to participate and provide direction. We are running a market-driven business which the State inspection programs seem to have a much better understanding of because they not only want to make sure our meat products are safe to the consumer, State inspection is there to help and provide answers and direction in a timely fashion. In closing, I just simply cannot fathom why interstate shipment should even be an issue. Our plants are enforcing Federal regulations and we have done everything that we have been mandated to do. There should not have to be frustrating in wanting to expand to small business, especially when my guidelines and regulations are equal to, and in some cases better than those regulated in Federal facilities. Therefore, I cannot find any valid reasons or laws that should prevent interstate shipment of meat and poultry products. Thank you for your time. And I am a Hawkeye and a Cyclone. [Laughter.] The Chairman. I understand. [The prepared statement of Ms. Heikens can be found in the appendix on page 68.] It is my privilege to introduce now a Hoosier, so it turns up in the batting order. [Laughter.] I wanted to take this occasion of introducing Harry Pearson, President of the Indiana Farm Bureau, to congratulate him on presiding over the publication of a remarkable history, 80-year history of Indiana Farm Bureau, which we just received and enjoyed enormously. It is good to have you, Harry, and please testify. STATEMENT OF HARRY PEARSON, PRESIDENT, INDIANA FARM BUREAU, REPRESENTING THE AMERICAN FARM BUREAU FEDERATION, INDIANAPOLIS, IN Mr. Pearson. Thank you very much, Chairman Lugar. It is certainly a pleasure to be here this morning and we appreciate you holding this hearing. I tried to summarize my comments a little bit in comparison to those that have been presented. I am Harry Pearson, the President of the Indiana Farm Bureau, and I live on a farm and farm in partnership with my brother and our family. The American Farm Bureau certainly appreciates the opportunity to make comments regarding the interstate shipment of State-inspected meat. This is an issue of great importance to our farmers and ranchers all across the country. We strongly support efforts to align and implement meat and poultry inspection laws that would allow these products under both Federal and State programs to be distributed in interstate commerce. The mission of the Food Safety Inspection Service is to provide appropriate regulatory safeguards and services to ensure that all meat, lamb, and poultry products for interstate shipment or foreign commerce meet food safety standards. As State and Federal budgets become more and more limited, it seems that the time is right for increased coordination between State and Federal meat inspection programs. Many times, the products inspected in a State-inspected facility are small- volume specialty products, and quite often, those items prepared by the small operators are not always economically feasible for large-volume operators. The ability to ship interstate could benefit livestock producers, small processors, and consumers, and at the same time stimulate economic development in rural communities. As has been mentioned earlier, the four major packers account for more than 80-percent of the fed cattle slaughter. Fifteen-years ago, large packing houses only accounted for about 36-percent of that volume. Farm Bureau members believe that competitive pricing activities of the livestock industry have been reduced due to the high concentration of processing by the four major packers. Allowing State-inspected meats from small and mid-sized processing plants to move interstate gives them additional opportunities to expand their business. In 1996, the USDA Packer Concentration Panel determined that allowing interstate shipment of State-inspected meats would provide additional competition in the marketplace. The Farm Bureau has worked diligently for the passage of NAFTA and GATT and that same type of effort is being applied toward the passage of permanent normal trade relations with China. World trade opportunities also increase our opportunities as we open new markets. We strongly believe in food safety and maintaining the highest level of consumer confidence in our food safety. As has already been mentioned, however, this debate is not about food safety but is about our own U.S. processors having the access to our U.S. markets on terms that are no more restrictive than those that foreign exporters must meet. Several years ago, we supported and worked closely with Congress and the administration to pass the HACCP system into law. HACCP is now fully implemented, with every meat processing plant in this country operating under this scientifically-based process. It is now time to further the coordination in meat inspection and to incorporate interstate commerce for State- inspected meats. There is support from several individuals in our State regarding S. 1988 and they are all supportive of its passage. These individuals include our State veterinarian, Dr. Brett Marsh, representatives from the State Board of Animal Health, Dr. Paul Dieterlin, Administrator of the Indiana Meat Inspection Program, and Mr. Jim Rihm, President of the Indiana Meat Packers and Processors Association. Indiana has 101 State- inspected plants and Mr. Rihm believes this legislation will help the small packer to better compete in the specialty meats products market. I talked to a producer, a young producer by the name of Greg Gunther, who also served on the Small Farm Commission that was appointed by Secretary Glickman. He lives eight miles from a State line and he has developed a niche market with specialty products, but he has to go out of State to a Federally- inspected plant to get his hogs processed and then take those to Chicago. He also does some work with the State-inspected plant but cannot move those products across the State lines and estimated that, conservatively, that it has cost him about $20,000 in income just because he has to go out of State to get that inspection done. The American Farm Bureau Federation encourages Congress to support and pass S. 1988 and allow the Food and Safety Inspection Service to take the necessary steps to facilitate the movement of State-inspected meats across State lines. Mr. Chairman, we appreciate the opportunity to appear before you this morning and make comments. The Chairman. Thank you very much, Mr. Pearson. [The prepared statement of Mr. Pearson can be found in the appendix on page 70.] Mr. Nielson. STATEMENT OF RICHARD T. NIELSON, PRESIDENT, UTAH CATTLEMEN'S ASSOCIATION, REPRESENTING THE NATIONAL CATTLEMEN'S BEEF ASSOCIATION, SALT LAKE CITY, UT Mr. Nielson. Good morning, Mr. Chairman. Thank you for the invitation to be here today and the opportunity to present this testimony. I am Richard B. Nielson and I am the President of the Utah Cattlemen's Association and a board member of the National Cattlemen's Beef Association. I come from a small farm in Central Utah that I operate with my brother and my son. Interstate shipment of State-inspected meat is one of the top priorities of Utah Cattlemen's Association, the National Cattlemen's Beef Association, and the other producer groups represented here today. Under current law, State-inspected plants cannot ship beef, pork, lamb, or poultry across State lines. This restriction limits the ability of these plants to expand marketing opportunities and limits competition for market animals. Current law also applies unequally to different species in regards to State inspection programs. For example, based on information provided by the Agriculture Committee, there is no restriction on the interstate shipment of State- inspected bison, venison, pheasant, and ostrich. This bill would expand interstate shipment of State- inspected meat to include beef, pork, lamb, and poultry. Meat inspection programs would enforce the same inspection laws and regulations enforced under the Federal program to create a seamless national inspection system with the States retaining the right to impose additional inspection requirements. Products inspected under this authority would be eligible for interstate shipment, export, and for use in products destined for export. I would like to share several reasons and anecdotes as to why this legislation is justified and why the ban on interstate shipment of State-inspected meat should be eliminated. Elimination of the ban is good for small businesses. State- inspected plants are typically family owned and operated small businesses whose growth is limited to the markets in their own State. Because their markets are limited, so is their ability to compete with large corporate processors who have a worldwide market. Removing the ban would give these businesses a substantial boost in market opportunities for their products and create additional competition in the live cattle market, which is just one facet in dealing with the issue of packer concentration. The current ban actually favors imported meat over U.S. produced State-inspected beef. While State-inspected products are restricted from interstate commerce, meat from over 30 countries that is not directly inspected by USDA can be sold anywhere in the United States. This legislation will recognize State inspection systems that are the same as Federal requirements and allow State-inspected products to compete on an equal footing with imported products. I would like to share with you a couple of examples of how this ban has gone awry. Tyler Meat Company of Toledo, Ohio, sold meat for 10-years to the River Cafe located on the Michigan-Ohio border. USDA ordered Tyler to stop sales to the cafe even though its kitchen was in Ohio. The cafe dining area is located in Michigan. Thus, the sale of Tyler meat was considered interstate commerce. Another example is the Jackson Brothers Food Locker in Post, Texas. Jackson Brothers supplied beef jerky to support U.S. troops during Operation Desert Storm. They could ship their product halfway around the world to support U.S. troops, but they cannot send their product 80 miles west into New Mexico. Not only are they limited from growing their business, they are prohibited from selling their product to former Desert Storm servicemen and women who came to like their product. It is very important to note that Jackson Brothers met the standards set by the State of Texas Department of Health Meat Inspection Service, one of the best programs in the country. The HACCP plan for their plant was in place in November of 1999, 3 months before it was required for plants of their size. To summarize, this legislation will remove a barrier that impedes competition, stifles growth, and limits the marketing opportunities for U.S. beef. Passage of this legislation will create a tremendous opportunity for State-inspected plants and subsequently for cattle producers who market their livestock to State-inspected plants. Our goal is a dynamic and profitable beef industry. With the growth in technology and the Internet, the world is truly our market. We have recently been informed that other groups opposing this particular bill have offered to compromise. We look forward to working with them and getting as much support for this bill as we can. Mr. Chairman, we urge you to mark up this legislation in your committee as soon as possible and report it to the Senate floor. I want the beef industry to have the opportunity to grow by meeting the needs of our consumer and not be stifled by laws that have outgrown their use. Thank you very much. The Chairman. Thank you very much, Mr. Nielson, for your testimony. [The prepared statement of Mr. Nielson can be found in the appendix on page 74.] It is a pleasure always to welcome Carol Tucker Foreman. We have talked about the history of this issue and Carol Tucker Foreman, as you know, served in the administration of President Carter. I can remember her testimony, not necessarily on this issue, but she may very well have discussed it 20-some years ago. Ms. Foreman. I am really sorry to say I did. The Chairman. Nevertheless, we look forward to your opinion today. Please continue. STATEMENT OF CAROL TUCKER FOREMAN DISTINGUISHED FELLOW AND DIRECTOR OF THE FOOD POLICY INSTITUTE CONSUMER FEDERATION OF AMERICA, WASHINGTON, DC. Ms. Foreman. Thank you, Sir. I am here representing the Consumer Federation of America, and as you pointed out, I served as Assistant Secretary of Agriculture with responsibility for meat, poultry, and egg inspection. I am also serving now as a member of the National Advisory Committee on Meat and Poultry Inspection. All three of the consumer representatives on the Advisory Committee have endorsed S. 1988. The legislation would ensure that all meat and poultry products produced in the United States are inspected under a seamless system constituting a basic set of public health-based requirements. It would also eliminate the prohibition on shipping that meat in interstate or international commerce. The consumer interest in S. 1988 is clear. If passed in its present form, this bill could help make meat and poultry products safer and contribute to improved public health. Pathogens do not recognize distinctions between Federal and State systems or large and small plants. Contaminated meat is a public health threat regardless of its source and the risk of contamination should be reduced wherever they occur. According to the Centers for Disease Control, USDA's new public health-based pathogen reduction Hazard Analysis and Critical Control Point program is successfully reducing pathogen contamination and foodborne illness. All meat and poultry plants, whether inspected by Federal or State personnel, should meet those same minimum Federal requirements. Although theoretically equal to Federal standards, State- inspected plants have too frequently operated at a lower level. The General Accounting Office and USDA's Office of Inspector General have both criticized the quality of State inspection programs. In 1996, the Wall Street Journal detailed the problems with Florida's State inspection system and quoted the head of the State inspection program acknowledging that State inspectors are more lenient on inspection than Federal inspectors would be. Under S. 1988, State meat and poultry inspectors would enforce Federal standards. Federal inspectors would perform salmonella testing. USDA would also conduct annual compliance audits of State inspection programs. In return, the restrictions on shipment of these products would be appropriately removed. Frankly, Mr. Chairman, consumer advocates would probably prefer a single Federal system rather than what is being suggested here today. We all have to rely on separate systems to inspect toys or airplanes or cars. We are, however, prepared to accept this legislation because we think it does set a standard for human health protection. We will have to oppose the legislation if it is altered in a manner that undercuts the public health standards. In addition, we will be forced to oppose S. 1988 if USDA for any reason restricts its program for pathogen reduction and salmonella testing that is so basic to the new system. S. 1988 articulates USDA's ability to enforce the pathogen reduction standards in State-inspected plants. In the absence of salmonella testing, we just would not be able to judge whether State-inspected meat really is as clean and safe as Federally- inspected meat. That is why we can accept this bill now. The system has changed. Under USDA FSIS regulations, each company gets to establish its own HACCP plan. In the absence of a Federal standard based on public health protection, that is the salmonella standard, each company would be free to establish a pathogen level based solely on its own preferences for quality and safety. All meat and poultry products bear the seal of the U.S. Department of Agriculture. Consumers assume that mark means the product meets a standard based on public health, not marketing convenience. The salmonella standard is not unreasonable or unworkable. Over 90-percent of the companies are complying now. The success of the program is reducing foodborne pathogens and illness. It also improves public confidence in the meat supply. Last year, beef consumption increased to the highest level in a number of years, in part because of reports that ground beef is safer than it used to be. Eliminating the salmonella performance standards and testing would endanger public health. It would also threaten public confidence in the meat supply. It would almost surely diminish both the domestic and international market for American meat and poultry. Eliminating that salmonella standard and testing would be both bad public policy and bad business. Thank you. The Chairman. Thank you very much, Ms. Foreman. [The prepared statement of Ms. Foreman can be found in the appendix on page 77.] It is a pleasure always to have Patrick Boyle, the President and CEO of the American Meat Institute. We look forward to your testimony, Mr. Boyle. STATEMENT OF PATRICK BOYLE, PRESIDENT AND CEO, AMERICAN MEAT INSTITUTE, ARLINGTON, VA Mr. Boyle. Thank you very much, Mr. Chairman. It is always a pleasure to appear before this committee. AMI has long opposed a blanket lifting of the current prohibition against interstate shipment of State-inspected meat and poultry. This policy stems from our firm belief in the need for a single uniform system for oversight of this nation's meat and poultry industry, whether that system is administered by USDA or by State inspection programs in the State Departments of Agriculture. Currently, we believe there are actually 26 different meat and poultry inspection programs in the U.S., one Federal program covering 6,000 plants in 50 States plus 25 different State programs covering an additional 3,000 plants. AMI would like to see a single food safety oversight program for all 9,000 of these plants in all 50 States and would support a bill that achieves that objective. This desire for a uniform system was also in the minds of those who cosponsor S. 1988 and in the minds of the Department of Agriculture, which developed a white paper in both 1998 and 1999. Both documents outline the elements necessary for creating a more uniform system than we have in place today. I believe one clear outcome of the many discussions and public hearings held on this issue over the past 4-years, at least the past 4-years, is the strong message that greater uniformity is required before we can contemplate interstate shipment of State-inspected meat and poultry products. While AMI commends Senators Hatch and Daschle and their cosponsors for introducing the bill, AMI member companies remain concerned about various provisions of the bill, all of which, by the way, fall short of achieving national uniformity. For example, to create a truly uniform system, AMI members believe that the current bill must incorporate references to the many FSIS notices, directives, and other policy memoranda that, while not Federal regulations, they do constitute the day-to-day details of the system under which Federal plants currently operate. To be truly uniform, State plants must meet these same requirements and the bill should explicitly state so, especially since USDA testified earlier today in response to one of your questions, Mr. Chairman, that is indeed their intent. Also to be truly uniform, we believe States should not be permitted to set regulatory requirements that are different from or in addition to the Federal requirements. Every plant, Federal or State-inspected, should be subject to the same identical requirements. Also, national uniformity should also be exercised with respect to the thresholds for entry into a State inspection program. The current bill would let each of the 25 States set its own threshold. AMI believes there should be a uniform standard of eligibility for a plant to enter a State inspection program. At this time, AMI remains opposed to S. 1988 unless these and other areas can be addressed. In that regard, however, I am pleased to say that we have had some very productive discussions with officials from NASDA, including Commissioner Dailey, prior to this hearing today, and based upon those conversations, I am hopeful that we will be able to work with them, with this committee, Mr. Chairman, the sponsors of the bill, and the Department of Agriculture and the other interested parties to achieve a consensus bill, a true consensus bill which replaces the 26 different inspection systems with a single uniform meat and poultry inspection system for all of the 9,000 plants in this country. Thank you very much. The Chairman. Thank you very much, Mr. Boyle, for your testimony. [The prepared statement of Mr. Boyle can be found in the appendix on page 82.] Before I ask questions of the panel, let me just indicate that I have asked the Agriculture Committee staff to convene a meeting next week of the major parties involved, all of which are represented here today and maybe some others who may have been stimulated by the hearing, to try to work through differences that may be here. Some of these are apparent from the testimony you have given, but there also is a spirit, at least that I sense, of people already convening and conversing and coming reasonably close. I never want to predict in advance consensus before it occurs, and this committee attempts to obtain that so that we have the strongest support of our committee members when we go to the floor and have some prospects for success of the bills that we report, but I do sense that there is a constructive spirit here. It is one that I would like to promote, and so I simply mention that as early as next week, we will be coming to grips really with the issues that have been developed today, the nuances some of you have mentioned. Some of you have supported the bill with reservations and suggested if some things happen, you will not support it, and others have suggested that you are still attempting to come to consensus. Let me just ask for a moment, what barriers hinder State- inspected plants from shifting to Federal inspections now? Are there barriers that we ought to be considering that are out there that make a difference as we look at this legislation, or is this a significant factor? Yes, Mr. Dailey? Mr. Dailey. Mr. Chairman, I think there are three reasons that we hear people saying they do not want to switch to Federal. One is facilities. Many times the USDA, when they look at the engineering and design plans, as you heard here, they would require something that does not relate to food safety. For example, many of the old plants and even the Federal plants that were grandfathered in had three-inch drain tiles. Now they have to have four-inch drain tiles. It is really not a food safety issue, but it is a very expensive item if you have to switch to do that. Another issue is the communications and bureaucracy. People indicate, if I have to deal with a bureaucracy, I would rather deal with a bureaucracy in Indianapolis or Columbus rather than Washington, DC. The third area, and all of these relate to economics, is the overtime pay. As I mentioned, 8 hours a day is provided free 40 days a week [sic], but if it happens to be a holiday, if it happens to be a weekend, and we do maintain a great degree of flexibility with our local plants, then they are required to pay much more in per hour charge than what they would at the State level. The Chairman. I think those are important distinctions. Does anyone else want to add to that part of the record? [No response.] Let me ask, then, a concern that has been raised is the need for national uniformity with the Federal inspection system and two specific points have been mentioned, whether States should be able to set regulatory requirements and whether States should be allowed to determine what size plants may participate in a State inspection program. Does anyone have a comment on those points? Mr. Boyle. I addressed those two in my testimony, Mr. Chairman, and just to reiterate, it is our view if we are going to have a truly uniform system that the State requirements should match the Federal requirements and vice versa. Allowing the States to have authority to set additional requirements on its face contradicts what I think is the overall objective here of national uniformity. The Chairman. I recall your making those points and I appreciate your mentioning them. What is the response of other members of the panel? For instance, on the second point, this sometimes arises in issues before this committee. The States come in and say, well, we are not satisfied with the level of what the Federal people are leaving. We have some constituents who want something extra special on top of this. So then many people from the food industry come in and say, well, sort of like the Grocery Manufacturers amendment comes up from time to time and the idea for preemptive Federal authority so that you do not have a piling on of additional authorities in an interstate system of distribution. Is that applicable to this problem, Ms. Foreman? Ms. Foreman. I am going to respond here on promoting what the Department of Agriculture said this morning in their testimony, that none of these additional requirements could be imposed on product coming into this State, any particular State, as opposed to those originating in the State and under State inspection. So I do not think you do have that problem of piling on. It is particularly what a State wants to accomplish for itself. Consumer advocates always believe that standards are minimum and that people who want to add to them should be allowed to do so. The Chairman. Is that everybody else's understanding of how this would work out? Mr. Dailey. Mr. Chairman, I do not want to monopolize the microphone, but let me say that we have been doing salmonella testing for 12-years, long before the USDA mandated we do salmonella testing. Last year in Ohio, we had 15-human and fetal deaths from listeria monocytogenes in meat products that happened to be Federally inspected. I think it is--and there may be new bacteria or different pathogens that we do not know about in the future. But our goal is to develop this seamless system and I think we ought to work towards that. The Chairman. Let me ask, on the affirmative side, the suggestion has been made if we move toward this legislation, it will increase sales, that this will be good for the business. Has anybody done a study or have any idea of quantifying how much good? In other words, is this a philosophical distinction without any commercial effect or do you anticipate that volume and profits will increase? Yes, Mr. Nielson? Mr. Nielson. Mr. Chairman, I would like to respond to that in what it would do for cattle producers in the country. If we take an animal to a livestock auction and there are two or three small plant owners there to bid on that animal as well as some of the big operators, my cow brings more money. So it is an economic benefit to those of us who produce cattle and animals, and that is the group I represent. But I can assure you, as a person who goes to an auction, going every week, I know how the system works and competition is where it is at, Sir. The Chairman. That consideration comes before the Committee frequently these days and so your testimony is that it enhances the markets available to cattle producers. Mr. Nielson. Certainly. The Chairman. Mr. Pearson. Mr. Pearson. Mr. Chairman, I talked to three or four small producers that are looking at ways to develop niche markets with their animals from the farm, and I mentioned the one, but normally, they are going to be able to align themselves with a smaller processor much more easily than they can with a Federally-inspected plant, and one of them in particular had been the Federal plant and that plant closed down and basically put him out of business because he could not get at point anyplace else and cross State lines. The other one I mentioned, he is taking product into Chicago that is costing him considerably more because he has to go out of State to a Federally-inspected plant, which is still twice as far away from him as a small State-inspected plant. So for the people that are really looking at ways to develop branded products, and we see more individuals, small producers, trying to do that, they can do that more easily with the small plants that are close to them and even have a branded product that they are looking for to really track that product all the way to their final consumer. The Chairman. I thank each one of you for your individual testimony. As I mentioned before, your full statements will be a part of the record, but the oral statements you have made, I think have been very helpful in delineating the issues, and your spirit of being willing to continue to converse likewise is very encouraging. We will try to proceed with that good will in mind with the meetings that commence next week. We thank you for coming today and participating in this hearing and the hearing is now adjourned. 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