[Federal Register Volume 78, Number 48 (Tuesday, March 12, 2013)]
[Proposed Rules]
[Pages 15645-15653]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-05576]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 78, No. 48 / Tuesday, March 12, 2013 /
Proposed Rules
[[Page 15645]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Parts 60 and 65
[Document No. AMS-LS-13-0004]
RIN 0581-AD29
Mandatory Country of Origin Labeling of Beef, Pork, Lamb,
Chicken, Goat Meat, Wild and Farm-Raised Fish and Shellfish, Perishable
Agricultural Commodities, Peanuts, Pecans, Ginseng, and Macadamia Nuts
AGENCY: Agricultural Marketing Service (AMS), USDA.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would amend the Country of Origin Labeling
(COOL) regulations to change the labeling provisions for muscle cut
covered commodities to provide consumers with more specific
information, and amend the definition for ``retailer'' to include any
person subject to be licensed as a retailer under the Perishable
Agricultural Commodities Act (PACA). The COOL regulations are issued
pursuant to the Agricultural Marketing Act of 1996. The Agency is
issuing this rule to propose changes to the labeling provisions for
muscle cut covered commodities to provide consumers with more specific
information and is proposing other modifications to enhance the overall
operation of the program.
DATES: Comments must be submitted on or before April 11, 2013.
ADDRESSES: Interested persons may submit written comments on this
proposed rule using the following address:
Federal eRulemaking Portal: http://www.regulations.gov. Follow the
instructions for submitting comments. Instructions: All submissions
received must include the docket number AMS-LS-13-0004; and/or
Regulatory Information Number (RIN)0581-AD29 for this rulemaking.
Comments may also be submitted to Julie Henderson, Director, COOL
Division, Livestock, Poultry, and Seed Program, Agricultural Marketing
Service, U.S. Department of Agriculture (USDA); STOP 0216; 1400
Independence Avenue SW., Room 2620-S; Washington, DC 20250-0216. All
comments should reference docket number AMS-LS-13-0004 and note the
date and page number of this issue of the Federal Register.
Submitted comments will be available for public inspection at
http://www.regulations.gov or at the above address during regular
business hours. Comments submitted in response to this proposed rule
will be included in the records and will be made available to the
public. Please be advised that the identity of the individuals or
entities submitting the comments will be made public on the Internet at
the above address.
FOR FURTHER INFORMATION CONTACT: Erin Morris, Deputy Associate
Administrator, AMS, USDA, by telephone on 202/690-4024, or via email
at: [email protected].
SUPPLEMENTARY INFORMATION:
Background
The Farm Security and Rural Investment Act of 2002 (2002 Farm Bill)
(Pub. L. 107-171), the 2002 Supplemental Appropriations Act (2002
Appropriations) (Pub. L. 107-206), and the Food, Conservation and
Energy Act of 2008 (2008 Farm Bill) (Pub. L. 110-234) amended the
Agricultural Marketing Act of 1946 (Act) (7 U.S.C. 1621 et seq.) to
require retailers to notify their customers of the country of origin of
covered commodities. Covered commodities include muscle cuts of beef
(including veal), lamb, chicken, goat, and pork; ground beef, ground
lamb, ground chicken, ground goat, and ground pork; wild and farm-
raised fish and shellfish; perishable agricultural commodities;
macadamia nuts; pecans; ginseng; and peanuts. AMS published a final
rule for all covered commodities on January 15, 2009 (74 FR 2658),
which took effect on March 16, 2009.
Executive Summary
Purpose of the Regulatory Action
In June 2012, in a WTO case brought by Mexico and Canada, the WTO
Appellate Body (AB) affirmed a previous WTO Panel's finding that the
COOL requirements for muscle cut meat commodities were inconsistent
with U.S. obligations under the WTO Agreement on Technical Barriers to
Trade (TBT Agreement). In particular, the AB affirmed the Panel's
determination that the COOL requirements were inconsistent with the TBT
Agreement's national treatment obligation to accord imported products
treatment no less favorable than that accorded to domestic products.
The WTO Dispute Settlement Body adopted its recommendations and rulings
on July 23, 2012. The United States has until May 23, 2013, to comply
with the WTO ruling.
As a result of this action, the Agency reviewed the overall
regulatory program and is issuing this rule, under the authority of the
Agricultural Marketing Act (7 U.S.C. 1621 et seq.), to propose changes
to the labeling provisions for muscle cut covered commodities and other
modifications to improve the overall operation of the program. The
Agency expects that these changes will improve the overall operation of
the program and also bring the current mandatory COOL requirements into
compliance with U.S. international trade obligations.
Summary of the Major Provisions of the Regulatory Action in Question
Under this proposed rule, origin designations for muscle cut
covered commodities derived from animals slaughtered in the United
States would be required to specify the production steps of birth,
raising, and slaughter of the animal from which the meat is derived
that took place in each country listed on the origin designation. In
addition, this proposed rule would eliminate the allowance for any
commingling of muscle cut covered commodities of different origins.
These changes will provide consumers with more specific information
about muscle cut covered commodities.
Costs and Benefits
The major cost of implementing the proposed amendments will be
incurred at the packing or processing facility, in the case of pre-
labeled products, or at the retail level, in the case of products
labeled at retail. The estimated number of firms that would need to
augment labels for muscle cut covered commodities is 2,808 livestock
processing and slaughtering firms, 38 chicken processing firms, and
4,335 retailers. This totals 7,181 firms that
[[Page 15646]]
would need to augment the mandatory COOL information presented on
labels for muscle cut covered commodities.
Based on 2009 data, the Food Safety and Inspection Service (FSIS)
estimated there were approximately 121,350 raw meat and poultry unique
labels submitted by official establishments (i.e., establishments
regulated by FSIS) and approved by the Agency (76 FR 44862). Assuming
the upper bound estimate of 121,350 unique labels, the Agency
preliminarily estimates the midpoint cost of the proposed rule for this
label change is $32,764,500 with a range of $16,989,000 to $47,326,500.
The Agency believes that the incremental economic benefits from the
proposed labeling of production steps will be comparatively small
relative to those that were discussed in the 2009 final rule.
A complete discussion of the cost and benefits can be found under
the Executive Order 12866 section.
Summary of Proposed Changes to the COOL Regulations
Definitions
In the regulatory text for fish and shellfish (7 CFR part 60) and
for all other covered commodities (7 CFR part 65), the definition for
``retailer'' is proposed to be amended to include any person subject to
be licensed as a retailer under the Perishable Agricultural Commodities
Act (PACA) of 1930 (7 U.S.C. 499a(b)). This change would more closely
align with the language contained in the PACA regulation and would help
clarify that all retailers that meet the PACA definition of a retailer,
whether or not they actually have a PACA license, are also covered by
COOL.
Proposed Changes to the Labeling Provisions for Muscle Cut Covered
Commodities
As a result of the Agency's review of the program regulations, the
Agency is proposing to require that all origin designations for muscle
cut covered commodities slaughtered in the United States specify the
production steps of birth, raising, and slaughter of the animal from
which the meat is derived that took place in each country listed on the
origin designation. The requirement to include this information will
apply equally to all muscle cut covered commodities derived from
animals slaughtered in the United States. This requirement will provide
consumers with more specific information on which to base their
purchasing decisions without imposing additional recordkeeping
requirements on industry. The Agency considers that these changes,
which are discussed in detail below, are consistent with the provisions
of the statute.
Labeling Covered Commodities of United States Origin
Under the current COOL regulations, for muscle cut covered
commodities derived from animals that were born, raised, and
slaughtered in the United States, the origin is allowed to be
designated as ``Product of the U.S.''
Under this proposed rule, the United States country of origin
designation for muscle cut covered commodities would be required to
include location information for each of the production steps (i.e.,
``Born, Raised, and Slaughtered in the United States'').
Labeling Muscle Cut Covered Commodities of Multiple Countries of Origin
(From Animals Slaughtered in the United States)
For muscle cut covered commodities of multiple countries of origin
that include the United States, the current COOL regulations recognize
two basic scenarios.
The first scenario deals with meat derived from animals that were
born in another country (and thereby raised for a period of time) and
were imported as feeder cattle that were further raised and slaughtered
in the United States. For these products, current COOL regulations
allow the origin to be designated as ``Product of the U.S. and Country
X.'' Under this proposed rule, as with U.S.-only origin products, the
origin designation for these products would be required to include
location information for each of the production steps.
However, as discussed in the preamble of the January 15, 2009,
final rule (74 FR 2658), if animals are raised in another country and
the United States, the raising that occurs in the United States may
take precedence over the minimal raising that occurred in the animal's
country of birth. Accordingly, under this proposed rule, the production
step related to any raising occurring outside the United States may be
omitted from the origin designation of these products (e.g., ``Born in
Country X, Raised and Slaughtered in the United States'' in lieu of
``Born and Raised in Country X, Raised and Slaughtered in the United
States'').
This omission is not permitted in the relatively rare situation
where an animal was born in the United States, raised in another
country (or countries) and then raised and slaughtered in the United
States, which would result in the muscle cut covered commodity being
designated as having a solely U.S. country of origin.
The second scenario relates to muscle cut covered commodities
derived from animals that were imported for immediate slaughter as
defined in Sec. 65.180. In this scenario, under the current COOL
regulations, these products are required to be designated as ``Product
of Country X and the United States.''
Under this proposed rule, the origin designation for meat derived
from animals imported for immediate slaughter would be required to
include information as to the production steps taking place in the
countries listed on the origin designation. However, the country of
raising for animals imported for immediate slaughter as defined in
Sec. 65.180 shall be designated as the country from which they were
imported (e.g., ``Born and Raised in Country X, Slaughtered in the
United States'').
Commingling
The current COOL regulations allow for commingling of different
origins. For example, under the current COOL regulations, for muscle
cut covered commodities derived from animals born, raised, and
slaughtered in the United States that are commingled during a
production day with muscle cut covered commodities derived from animals
that were raised and slaughtered in the United States, and are not
derived from animals imported for immediate slaughter as defined in
Sec. 65.180, the origin is allowed to be designated, for example, as
Product of the United States, Country X, and (as applicable) Country Y.
Similarly, under the current COOL regulations, for muscle cut covered
commodities derived from animals that are born in Country X or Country
Y, raised and slaughtered in the United States, that were commingled
during a production day with muscle cut covered commodities that were
derived from animals that are imported into the United States for
immediate slaughter as defined in Sec. 65.180, the origin is allowed
to be designated as Product of the United States, Country X, and (as
applicable) Country Y.
This proposed rule would eliminate the allowance for any
commingling of muscle cut covered commodities of different origins. As
discussed above, all origin designations would be required to include
specific information as to the place of birth, raising, and slaughter
of the animal from which the meat is derived. Removing the commingling
allowance allows consumers to benefit from more specific labels.
[[Page 15647]]
Labeling Imported Muscle Cut Covered Commodities
Under the current COOL regulations, imported muscle cut covered
commodities retain their origin as declared to the U.S. Customs and
Border Protection at the time the products entered the United States
(i.e., Product of Country X) through retail sale.
Under this proposed rule, these labeling requirements for imported
muscle cut covered commodities remain unchanged, although the Agency
has restructured the regulatory text of this provision for clarity. As
is permitted under the current COOL regulations, the Agency will
continue to allow the origin designation to include more specific
information related to production steps, provided records to
substantiate the claims are maintained and the claim is consistent with
other applicable Federal legal requirements.
Executive Order 13175
This rule has been reviewed in accordance with the requirements of
Executive Order 13175, Consultation and Coordination with Indian Tribal
Governments. The review reveals that this regulation will not have
substantial and direct effects on Tribal governments and will not have
significant Tribal implications.
Executive Order 12866 and Executive Order 13563
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives, and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. This proposed rule has been designated as a ``significant
regulatory action'' under section 3(f) of Executive Order 12866, and,
therefore, has been reviewed by the Office of Management and Budget
(OMB). The Agency seeks comments and data on the estimated impacts of
this rulemaking that may affect its designation under Executive Order
12866 and the Congressional Review Act.
Regulations must be designed in the most cost-effective manner
possible to obtain the regulatory objective while imposing the least
burden on society. This proposed rule would amend the COOL regulations
(1) to change the labeling provisions for muscle cut covered
commodities to provide consumers with more specific information and (2)
to amend the definition for ``retailer'' to include any person subject
to be licensed as a retailer under the Perishable Agricultural
Commodities Act (PACA) to enhance the overall operation of the program.
Initial Analysis of Benefits and Costs
The baseline for this analysis is the present state of the beef,
chicken, goat, lamb and pork industries, which have been subject to the
requirements of mandatory COOL (7 CFR parts 60 and 65) since the
effective date of the final rule on March 16, 2009. Under this proposed
rule, COOL requirements would remain essentially unchanged for imported
muscle cut covered commodities. However, labeling requirements would
change for muscle cut covered commodities derived from animals
slaughtered in the United States--whether exclusively of United States
origin, of multiple countries of origin that include the United States,
or imported for immediate slaughter in the United States. For those
products, covered retailers would need to inform their consumers of the
country in which the relevant production steps--born, raised, and
slaughtered--occurred.
As mentioned above in the summary of proposed changes to the COOL
regulations, the definition for ``retailer'' would be amended to more
closely align with the language contained in the PACA regulation and
help clarify that all retailers that meet the PACA definition of a
retailer, whether or not they actually have a PACA license, are covered
by COOL. The Agency believes that this change in definition will not
substantially alter the number of retailers subject to the COOL
regulations. Therefore, the analysis of benefits and cost from this
proposed rule focuses solely on the potential effects of the proposed
amendments to the labeling provisions of the current COOL regulations.
Benefits: In the time since the Agency conducted the previous COOL
regulation's Preliminary Economic Impact Analysis (PRIA) in 2003 (68 FR
61952) and the Final Regulatory Impact Analysis (FRIA) in 2009 (74 FR
2682), a number of studies have been published regarding the economic
effects of mandatory COOL. However, the available literature has not
addressed the potential benefits and costs of providing more specific
information on production steps as proposed herein. As observed in the
PRIA and the FRIA, the expected benefits from implementing mandatory
COOL requirements remain difficult to quantify. This conclusion holds
true for the proposed amendments to the labeling requirements under the
current COOL regulations. The Agency invites comment on the benefits of
this proposed rule and welcomes data that would help to inform a more
quantifiable analysis.
Numerous comments received on previous COOL rulemaking actions
indicate that there is interest by some consumers in the designation of
the countries of birth, raising and slaughter on meat product labels.
Specifying the production step occurring in each country listed on meat
labels as proposed in this rule could provide additional benefits by
providing more specific information on which consumers can base their
purchasing decisions.
In addition, this proposed rule would eliminate the allowance for
commingling of muscle cut covered commodities of different origins. As
discussed in the preamble, removing the commingling allowance will
allow the labels proposed under this rule to provide specific
information as to the place of birth, raising, and slaughter of the
animal from which the meat is derived.
The Agency has been unable to quantify incremental economic
benefits from the proposed labeling of production steps and therefore
requests detailed comment and data on this issue, most notably detailed
data or studies on the value to consumers of having COOL information.
The Agency concluded in the PRIA and FRIA that the economic benefits
from the COOL requirements are positive, but difficult to quantify. The
Agency believes that incremental economic benefits from the proposed
labeling of production steps are difficult to quantify, and will be
comparatively small relative to those that were discussed in the 2009
final rule.
Costs: Two conditions are necessary to inform retail consumers of
the location in which production steps occurred. First, the relevant
information must be collected by packers from producers and then passed
to retailers. Second, the information must be made available by
retailers to consumers through a placard, sign, label, sticker, or
other format. Because of the steps that have been taken to achieve
compliance with existing mandatory COOL requirements, the first
condition has been met. That is, we do not anticipate that this
proposed rule will require additional recordkeeping or any new systems
to transfer information from one
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level of the production and marketing channel to the next. The Agency
is seeking comment on these assumptions and welcomes data that would
help to inform a more refined analysis of the impacts of the rule at
various points in production. The information provided to consumers at
retail would be augmented to include information on the location(s) in
which the three major phases of production occurred. Thus some
incremental costs of implementing the proposed amendments would result
from modifying the label (or other format) to reflect the additional
production step information. We are specifically asking for comment and
data regarding the extent to which there may be additional costs to
collect and transmit data along the production and marketing chain, and
how current production, distribution, and retail merchandising
practices may be affected by the proposed rule.
As previously mentioned, no changes are being proposed to the
existing country of origin labeling of imported muscle cuts derived
from animals slaughtered in another country. Those products would
continue to retain their origin as declared to the U.S. Customs and
Border Protection at the time the products entered the United States
through retail sale. Thus, there are no incremental costs associated
with that scenario.
However, in the situation in which the covered muscle cut
commodities are derived from animals slaughtered in the United States,
labeling of the location(s) in which the animal was born, raised, and
slaughtered would now be required. Packers and processors that provide
muscle cut covered commodities to covered retailers, however, already
obtain this production step information needed either to pre-label
retail case-ready products with production step information or to
provide that information to their retail customers. In the latter
scenario, the retailer would then complete the labeling of the
production steps to provide notification to consumers.
Under current mandatory COOL requirements, packers and processors
must inform their retail customers as to the country of origin of the
meat cuts that they supply. In turn, that means that packers and
processors must obtain the country of origin information from their
supply chain. Thus, the information on production steps required by
this proposal is already available due to the current mandatory COOL
requirements. The additional costs attributable to the proposed
amendments would be the costs associated with transferring production
step information to the product label.
For animals exclusively born, raised, and slaughtered in the United
States, current labeling requirements would be augmented from, for
example, ``Product of the U.S.'' to ``Born, Raised and Slaughtered in
the U.S.'' In this example, the required statement increases from 19 to
40 characters and spaces. For animals born in another country and
raised and slaughtered in the United States, current labeling
requirements would be augmented from, for example, ``Product of U.S.
and Country X'' to ``Born in Country X, Raised and Slaughtered in the
U.S.'' Finally, for an animal imported for immediate slaughter, current
labeling requirements would be augmented from, for example, ``Product
of Country X and the U.S.'' to ``Born and Raised in Country X,
Slaughtered in the U.S.'' In these examples, the required statement
increases by a net of 20 characters and spaces.
In addition, commingling currently allowed under the current
mandatory COOL regulations would no longer be available under the
proposed amendments. For example, the current regulations allow muscle
cut covered commodities derived from animals born, raised, and
slaughtered in the United States that are commingled during a
production day with muscle cut covered commodities derived from animals
born in one or more other countries to be designated as, for example,
``Product of the United States, Country X, and Country Y'' (Sec.
65.300(e)(2)). That type of commingling would not be allowed under the
proposed amendments, as the labels must be specific as to where the
animal was born, raised, and slaughtered.
The Agency's experience with the current program suggests that the
majority of muscle cut covered commodities are not produced and labeled
using the labeling scheme afforded by commingling. The Agency invites
comment and data regarding the extent to which the flexibility afforded
by commingling on a production day is used to designate the country of
origin under the current COOL program and the potential costs, such as
labor and capital costs, which may result from the loss of such
flexibility.
Given that the information needed to label production steps is
already available and that most packers already segregate animals of
differing countries of origin in the slaughter and processing of those
animals,\1\ the most widespread cost of implementing the proposed
amendments is expected to be related to label change; this cost would
be incurred partially at the packing or processing facility and
partially at the retail level.
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\1\ For a discussion of various studies regarding the extent of
segregation and commingling, see Appellate Body Reports, US--Certain
Country of Origin Labelling (COOL) Requirements, WT/DS384/R, WT/
DS386/R, paras. 295-310 (adopted July 23, 2012); Panel Reports,
United States--Certain Country of Origin Labelling (COOL)
Requirements, paras. 7.365, 7.403 (adopted July 23, 2012).
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In the FRIA published in the earlier COOL rulemaking (74 FR 2681),
first-year incremental implementation costs for mandatory COOL were
estimated at $1,755 million for the beef, pork, lamb and goat, and
chicken industries. Of that total, intermediary suppliers and retailers
were estimated to incur costs of $618 million and $716 million
respectively, for a total of $1,334 million. Applying a Consumer Price
Index deflator of 1.07 to convert to 2012 dollar values, first-year
implementation costs for startup of mandatory COOL was estimated at
$661 million for intermediaries, $766 million for retailers, and $1,427
million for both industry segments. AMS believes that packer and
processor intermediary suppliers and retailers would be able to add the
proposed specific production step information to currently required
COOL designations at considerably lower cost than required for initial
implementation of the current COOL regulations.
In a 2010 survey of retail meat cases, 31 percent of beef, 58
percent of pork, 60 percent of lamb, and 94 percent of chicken packages
were case ready packages.\2\ For retailers, products pre-labeled with
production step locations would require no additional costs, as
suppliers would add the production step information. Retailers offering
case ready packages that do not include the production step information
required under this proposed rule would need to communicate that
information to consumers by some other means, such as placards or
stickers. The Agency requests comment and data on the means retailers
would utilize to communicate the production step information required
by this proposed rule.
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\2\ ``A Snapshot of Today's Retail Meat Case: 2010 National Meat
Case Study Executive Summary.'' http://www.beefretail.org/CMDocs/BeefRetail/research/2010NationalMeatCaseStudy.pdf.
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The estimated number of firms that would need to augment labels for
muscle cut covered commodities is 2,808 livestock processing and
slaughtering firms, 38 chicken
[[Page 15649]]
processing firms, and 4,335 retailers (Table 1). This totals 7,181
firms that would need to augment the mandatory COOL information
presented on labels for muscle cut covered commodities.
Cost estimates provided in a March 2011, Food and Drug
Administration (FDA) report \3\ represent one possible approach for
estimating the cost of including the additional production step
information to currently required COOL labels for muscle cut covered
commodities. There are limitations, however, to the applicability of
the FDA label cost model to the task faced by retailers in informing
consumers of the production step locations as proposed herein.
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\3\ Model to Estimate Costs of Using Labeling as a Risk
Reduction Strategy for Consumer Products Regulated by the Food and
Drug Administration, FDA, March 2011 (Contract No. GS-10F-0097L,
Task Order 5).
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Importantly, the FDA model was developed for all products subject
to FDA regulation, which includes not only food, but cosmetics, dietary
supplements, over-the-counter medications, pet foods, retail medical
devices, and tobacco products and accessories. Most of the products
covered by these categories are sold in fixed-volume or fixed-quantity
packages that are labeled by the manufacturer, processor, or
distributor, with no additional labeling added by the retailer.
However, this proposed rule covers muscle cut covered commodities,
which notably fall outside of FDA's jurisdiction (and are not included
within the model). As noted previously, unlike the FDA covered
commodities, a significant percentage of muscle cut covered commodities
are sold in random-weight packages, with the final weight and price
label applied by the retailer. Typically, retailers use a label
printing scale with a thermal dot printer to apply the unit price,
weight, total price, and other information such as the product name,
sell by date, and so forth on pressure-sensitive paper labels that are
applied to packages prior to sale. This important difference between
the products covered by this rule and the products contemplated by FDA
in creating its model indicates to the AMS that it would be
inappropriate to rigidly adhere to the model for purposes of this
analysis, as such an application of the model will overestimate the
label change costs of this rule.
Nevertheless, despite these important limitations, the Agency does
consider that the FDA model, with some qualifications can contribute to
an assessment of the potential impacts of the proposed requirements. In
the context of the FDA model, the proposed labeling change is assumed
to be a minor change in which only one color is affected and the label
does not need to be redesigned. Examples of a minor label change
include the addition of a toll-free number, or more pertinent in this
case, minimal changes to a claim on the back or side of a package
affecting one color.
Based on 2009 data, the Food Safety and Inspection Service (FSIS)
estimated there were approximately 121,350 raw meat and poultry unique
labels submitted by official establishments and approved by the Agency
(76 FR 44862). This number would represent an upper bound on the number
of unique labels that would be affected by this proposed rule, as there
are raw meat and poultry products that are exempt from COOL
requirements, (such as a teriyaki flavored pork loin and other
processed food items as defined by Sec. 65.220) or that are not
affected by this proposed rule (such as turkey), and that are not sold
at retail establishments (such as products sold to hotels, restaurants,
and institutional customers). The Agency welcomes data that would
account for such products and thus allow for refinement of the estimate
of the number of labels affected by the proposed rule.
Label changes in the FDA model fall on a spectrum from being
uncoordinated, in which the label change does not correspond to a
planned change, or coordinated, in which the label change corresponds
with a planned change. The model predicts that coordinated label
changes incur lower costs compared to uncoordinated changes. The Agency
recognizes that costs estimates under the FDA model are greatly
affected by the time over which required labeling changes are phased
in. In the case of food products under the FDA model, any compliance
period of less than 12 months is assumed to be an uncoordinated change,
with 100 percent coordinated changes assumed to require at least 24
months for branded foods and 42 months for private label foods. The
model predicts that coordinated label changes incur significantly lower
costs compared to uncoordinated changes.
For the reasons explained above, the Agency does not believe that
the rigid application of the FDA model will accurately predict the
costs of this rule. In particular, the Agency does not consider that
the distinction between coordinated and uncoordinated label changes as
applied in the FDA label cost model is predictive of the costs of this
rule. Rather, the Agency preliminarily estimates that label changes
proposed in this rule will create costs that correspond to a
coordinated change, even if the Agency ultimately decides to require a
phase in that is considerably shorter than 12 months, which the FDA
model assumes is a 100 percent uncoordinated label change.
Under the FDA model, one-time costs for a coordinated label change
are assumed to involve only administrative labor costs and
recordkeeping. However, as previously discussed, no additional
recordkeeping costs are anticipated from this proposed rule. The
midpoint estimate of administrative labor cost for a coordinated label
change is $270, with a range of $140-$390. For an uncoordinated label
change, the model includes administrative labor costs, non-
administrative labor costs, materials costs that vary with the type of
material and printing method, and recordkeeping costs. Again, no
additional recordkeeping costs are anticipated from this proposed rule,
and therefore the Agency considers that the model's predictions
regarding uncoordinated label changes would significantly overstate the
costs of the label change proposed here. As a point of reference,
depending on the printing method, low estimates for coordinated change
under the FDA model range from $1,990 to $2,940; midpoint estimates
range from $3,690 to $4,980; and high estimates range from $6,500 to
$7,890.
There are additional distinctions between the FDA model and the
COOL regime to support the conclusion that the model's assumptions
regarding coordinated versus uncoordinated label changes have limited
applicability in this situation. As previously mentioned, COOL
information already is made available to consumers under current
regulations, and that information can be provided through a variety of
means, including placards, signs, labels, stickers, or other formats.
Thus, the Agency believes that the label changes contemplated in this
proposed rule could be phased in with similar costs as predicted for a
coordinated label change under the model. For instance, placards could
be used to convey the augmented production step information pending
synchronization with a coordinated label change cycle. Also, many, if
not most, of the muscle cut covered commodities are sold as random-
weight items with price, weight, and other information (including COOL
information) printed for each individual package, thus allowing
production step information to be provided in a similar manner.
Assuming the upper bound estimate of 121,350 unique labels, the
[[Page 15650]]
estimated midpoint cost of the proposed rule for a label change is
$32,764,500 with a range of $16,989,000 to $47,326,500 million.
Note that the number of unique labels affected by this proposed
rule is expected to be lower than the upper-bound estimate of 121,350,
thus lowering the total estimated costs commensurately. Conversely,
coordinating the proposed label changes with the current COOL
requirements may involve additional costs that have not been included,
which would result in higher overall costs than are estimated here.
Furthermore, compared to the current COOL program, the changes
contemplated by the proposed amendments may involve ongoing activities
beyond label redesign. For example, without the commingling possible
under the current program, there may be a more frequent need to switch
labels at processing plants that may currently commingle meat or enter
different information into a label machine at a retail store when
production step information changes. A given lot of carcasses or a box
of meat from a production day may be of one origin, while the next lot
or box may be of another origin. As previously explained, under some
scenarios, under current COOL regulations, the same COOL designation
can be applied to the entire day's production. Under the proposed
amendments, however, the COOL designation would need to reflect the
appropriate birth and raising country of origin information along with
the United States location of slaughtering for individual muscle cuts
of meat.
The Agency invites public comment and associated quantitative data
that would improve the Agency's estimate of the cost of the changes in
the labeling and commingling requirements being proposed in this
rulemaking, including any additional costs that have not been included
in the estimates discussed above. The Agency also invites public
comment on how the length of time for compliance will affect the cost
of the changes being proposed in this rule.
Table 1--Estimated Number of Affected Entities, Share of Firms by Size, and Labeling Cost of Rule Revision *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Share of
NAICS Code NAICS Description Enterprise size Number of Number of firms by Estimated cost
criteria firms establishments size (%) of rule revision
--------------------------------------------------------------------------------------------------------------------------------------------------------
311611............................... Animal (except Poultry) <500 Employees......... 1,504 1,518 97.6 $1,491,344
Slaughtering.
500+ Employees......... 37 115 2.4 112,981
---------------------------------------------------------------
Total................. 1,541 1,633 ........... 1,604,325
311612............................... Meat Processed from <500 Employees......... 1,203 1,232 94.9 1,201,366
Carcasses.
500+ Employees......... 64 173 5.1 169,962
---------------------------------------------------------------
Total................. 1,267 1,405 ........... 1,380,328
311615............................... Chicken Processing...... <500 Employees......... 36 N/A 94.7 N/A
500+ Employees......... 2 N/A 5.3 N/A
---------------------------------------------------------------
Total................. 38 156 ........... 153,261
445110............................... Supermarkets and Other <$50,000,000 Sales..... 4,106 6,050 95.0 5,943,762
Grocery (except
Convenience) Stores,
Sales >$5,000,000.
$50,000,000+ Sales..... 217 19,846 5.0 19,497,504
---------------------------------------------------------------
Total................. 4,323 25,896 ........... 25,441,266
452910............................... Warehouse Clubs and <$50,000,000 Sales..... 0 0 ........... .................
Supercenters.
$50,000,000+ Sales..... 12 4,260 100.0 4,185,194
---------------------------------------------------------------
Total................. 12 4,260 ........... 4,185,195
---------------------------------------------------------------
GRAND TOTAL............ 7,181 33,350 ........... 32,764,500
--------------------------------------------------------------------------------------------------------------------------------------------------------
* We assume that each establishment, regardless of size or industry, incurs the average estimated label revision cost per establishment = $982.44.
Numbers may not sum due to rounding.
SOURCE: 2007 County Business Patterns and 2007 Economic Census.
Initial Regulatory Flexibility Analysis
This rule has been reviewed under the requirements of the
Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.). The purpose of
the RFA is to consider the economic impact of a rule on small
businesses and evaluate alternatives that would accomplish the
objectives of the rule without unduly burdening small entities or
erecting barriers that would restrict their ability to compete in the
marketplace. The Agency believes that this rule will have a relatively
small economic impact on a substantial number of small entities. As
such, the Agency has prepared the following initial regulatory
flexibility analysis of the rule's likely economic impact on small
businesses pursuant to section 603 of the RFA.
As mentioned in the summary above, this rulemaking was contemplated
after the Agency reviewed the overall regulatory program in light of
the WTO's finding that the current mandatory COOL measure is
inconsistent with the United States' WTO obligations. The objective of
this proposed rulemaking is to amend current mandatory COOL
requirements to provide consumers with information on the country in
which productions steps occurred for muscle cut covered
[[Page 15651]]
commodities, thus fulfilling the program's objective of providing
consumers with information on origin. The legal basis for the mandatory
COOL regulations is Subtitle D of the Agricultural Marketing Act of
1946 (Act) (7 U.S.C. 1638 et seq.).
Under preexisting Federal laws and regulations, origin designations
for muscle cut covered commodities need not specify the production
steps of birth, raising, and slaughter of the animals from which the
cuts are derived. Thus, the Agency has not identified any Federal rules
that would duplicate or overlap with this rule.
We do not anticipate that additional recordkeeping will be required
or that new systems will need to be developed to transfer information
from one level of the production and marketing channel to the next.
However, information available to consumers at retail will need to be
augmented to include information on the location in which the three
major production steps occurred. Therefore, the companies most likely
to be affected are packers and processors that produce case-ready
products, and retailers.
There are two measures used by the Small Business Administration
(SBA) to identify businesses as small: sales receipts or number of
employees.\4\ In terms of sales, SBA classifies as small those grocery
stores with less than $30 million in annual sales (13 CFR 121.201).
Warehouse clubs and superstores with less than $30 million in annual
sales are also defined as small. SBA defines as small those
manufacturing firms with less than 500 employees and wholesalers with
less than 100 employees.
---------------------------------------------------------------------------
\4\ Small Business Administration. http://www.sba.gov/sites/default/files/files/Size_Standards_Table(1).pdf.
---------------------------------------------------------------------------
While there are many potential retail outlets for the covered
commodities, food stores, warehouse clubs, and superstores are the
primary retail outlets for food consumed at home. In fact, food stores,
warehouse clubs, and superstores account for 75.6 percent of all food
consumed at home.\5\ Therefore, the number of these stores provides an
indicator of the number of entities potentially affected by this rule.
The 2007 Economic Census \6\ shows there were 4,335 supermarkets and
grocery stores (not including convenience stores), warehouse clubs, and
superstore firms operated for the entire year with annual sales
exceeding $5,000,000 (Table 1). We assume that stores with overall
sales above this threshold would be most likely to be subject to the
PACA and therefore subject to mandatory COOL and the proposed
amendments. We recognize that there may be retail firms, particularly
smaller retail firms, subject to PACA but that do not actually hold a
PACA license. Therefore, a lower annual sales threshold may be
appropriate for estimating the number of retailers subject to PACA.
However, the $5,000,000 threshold provides estimated firm and
establishment numbers that are generally consistent with the PACA
database listing licensed retailers.
---------------------------------------------------------------------------
\5\ ERS, USDA. Food CPI, Prices and Expenditures: Sales of Food
at Home by Type of Outlet. http://www.ers.usda.gov/Briefing/CPIFoodAndExpenditures/Data/table16.htm.
\6\ U.S. Census Bureau. 2007 Economic Census. Retail Trade
Subject Series. Establishment and Firm Size. EC0744SSSZ4 and. Issued
January 2013.
---------------------------------------------------------------------------
The 2007 Economic Census data provide information on the number of
food store firms by sales categories. Of the 4,335 food store,
warehouse club, and superstore firms with annual sales of at least
$5,000,000, an estimated 4,106 firms had annual sales of less than
$50,000,000, which is higher than the threshold for the SBA definition
of a small firm. The Economic Census data do not provide a breakout at
the $30,000,000 SBA threshold, which means that the estimated number of
small businesses likely is an overestimate.
We estimate that 33,350 establishments owned by 7,181 firms will be
either directly or indirectly affected by this rule (Table 1). Of these
establishments/firms, we estimate that 6,849 qualify as small
businesses. The mid-point total direct incremental costs are estimated
for the proposed rule at approximately $32.8 million. The direct
incremental costs of the proposed rule are the result of revisions in
labeling of muscle cut covered commodities. Of the total labeling costs
of $32.8 million, $8.6 million is estimated to be costs borne by small
businesses.
Small retailers' portion of these costs is estimated at $5.9
million. Mid-point estimated costs are $982 per retail establishment.
Any manufacturer that supplies retailers or wholesalers with a
covered commodity will be required to provide revised country of origin
information to retailers so that the information can be accurately
supplied to consumers. Of the manufacturers potentially affected by the
rule, SBA defines those having less than 500 employees as small.
The 2007 Economic Census \7\ provides information on manufacturers
by employment size. For livestock processing and slaughtering there is
a total of 2,808 firms (Table 1). Of these, 2,707 firms have less than
500 employees. This suggests that 96 percent of livestock processing
and slaughtering operations would be considered as small firms using
the SBA definition. For chicken processing there are a total of 38
firms, only two of which are classified as small. Thus, only 5 percent
of the chicken processors are small businesses.
---------------------------------------------------------------------------
\7\ U.S. Census Bureau. 2007 Economic Census. Historical Data
Tabulations by Enterprise Size. 2007 Annual Tabulations: U.S., All
Industries. http://www.census.gov/econ/susb/data/susb2007.html.
---------------------------------------------------------------------------
Small packer and processor labeling costs under the proposed rule
are estimated at $2.7 million. As with retailers, labeling costs are
estimated at $982 per establishment.
The Agency seeks comment on the accuracy of these estimates and the
impacts on small businesses that may not be captured using the label
cost model discussed above.
Alternatives considered: Section 603 of the RFA requires the Agency
to describe the steps taken to minimize any significant economic impact
on small entities including a discussion of alternatives considered.
The law explicitly identifies those retailers required to provide their
customers with country of origin information for covered commodities
(namely, retailers subject to PACA). Thus, the proposed amendments are
consistent with the requirements of the Act in terms of who is subject
to the proposed rule.
The proposed change in the definition of a retailer is not expected
to have a substantial effect on the number of retailers subject to COOL
requirements. The PACA program continually monitors the retail industry
for firms that may meet the threshold for PACA licensing and seeks to
enforce compliance with those requirements. Thus, those retailers that
are required to hold a PACA license should, in fact, be licensed
separate and apart from any COOL program requirements.
The Agency considered other alternatives including taking no action
or providing less information than is currently required under the COOL
regulations. These alternatives would not achieve the purpose of this
rulemaking.
As with the current mandatory COOL program, the proposed rule has
no requirements for firms to report to USDA. Compliance audits will be
conducted at firms' places of business. There are no recordkeeping
requirements beyond those currently in place, and we believe that the
information necessary to transmit production step information largely
is already in place within the affected industries. As stated in the
RFA of the COOL final rule, the current COOL
[[Page 15652]]
requirements provide the maximum flexibility practicable to enable
small entities to minimize the costs on their operations. This proposed
rule in large measure retains these flexibilities. In addition, small
packers, processors, and retailers are expected to produce and stock a
smaller number of unique muscle cut covered commodities compared to
large operations. Thus, labeling costs for small establishments likely
will be lower than the estimated mid-point average of $982 for all
establishments.
Paperwork Reduction Act
Pursuant to the Paperwork Reduction Act (PRA) (44 U.S.C 3501-3520)
the information collection provisions contained in this rule were
previously approved by OMB and assigned OMB Control Number 0581-0250.
On December 4, 2012, AMS published a notice and request for comment
seeking OMB approval to revise this information collection. The comment
period closed on February 4, 2013. This proposed rule does not change
these provisions.
Executive Order 12988
The contents of this rule were reviewed under Executive Order
12988, Civil Justice Reform. This rule is not intended to have a
retroactive effect. States and local jurisdictions are preempted from
creating or operating country of origin labeling programs for the
commodities specified in the Act and these regulations. With regard to
other Federal statutes, all labeling claims made in conjunction with
this regulation must be consistent with other applicable Federal
requirements. There are no administrative procedures that must be
exhausted prior to any judicial challenge to the provisions of this
rule.
Civil Rights Review
AMS considered the potential civil rights implications of this rule
on minorities, women, or persons with disabilities to ensure that no
person or group shall be discriminated against on the basis of race,
color, national origin, gender, religion, age, disability, sexual
orientation, marital or family status, political beliefs, parental
status, or protected genetic information. This review included persons
that are employees of the entities that are subject to these
regulations. This proposed rule does not require affected entities to
relocate or alter their operations in ways that could adversely affect
such persons or groups. Further, this rule will not deny any persons or
groups the benefits of the program or subject any persons or groups to
discrimination.
Executive Order 13132
This rule has been reviewed under Executive Order 13132,
Federalism. This Order directs agencies to construe, in regulations and
otherwise, a Federal statute to preempt State law only where the
statute contains an express preemption provision or there is some other
clear evidence to conclude that the Congress intended preemption of
State law, or where the exercise of State authority conflicts with the
exercise of Federal authority under the Federal statute. This program
is required by the 2002 Farm Bill, as amended by the 2008 Farm Bill.
In the January 15, 2009, final rule, the Federalism analysis stated
that to the extent that State country of origin labeling programs
encompass commodities that are not governed by the COOL program, the
States may continue to operate them. It also contained a preemption for
those State country of origin labeling programs that encompass
commodities that are governed by the COOL program. This proposed rule
does not change the preemption. With regard to consultation with
States, as directed by the Executive Order 13132, AMS previously
consulted with the States that have country of origin labeling
programs. AMS has cooperative agreements with all 50 States to assist
in the enforcement of the COOL program and has communications with the
States on a regular basis.
Because the United States wants to provide more specific
information to the consumer at the earliest possible date, and
consequently to bring COOL into compliance with the WTO ruling by May
23, 2013, the Agency has determined that a 30-day comment period is
appropriate.
For the reasons set forth in the preamble, 7 CFR part 60 is
proposed to be amended as follows:
PART 60--COUNTRY OF ORIGIN LABELING FOR FISH AND SHELLFISH
0
1. The authority citation for part 60 continues to read as follows:
Authority: 7 U.S.C. 1621 et seq.
0
2. Section 60.124 is revised to read as follows:
Sec. 60.124 Retailer.
Retailer means any person subject to be licensed as a retailer
under the Perishable Agricultural Commodities Act of 1930 (7 U.S.C.
499a(b)).
For the reasons set forth in the preamble, 7 CFR part 65 is
proposed to be amended as follows:
PART 65--COUNTRY OF ORIGIN LABELING OF BEEF, PORK, LAMB, CHICKEN,
GOAT MEAT, PERISHABLE AGRICULTURAL COMMODITIES, MACADAMIA NUTS,
PECANS, PEANUTS, AND GINSENG
0
1. The authority citation for part 65 continues to read as follows:
Authority: 7 U.S.C. 1621 et seq.
0
2. Section Sec. 65.240 is revised to read as follows:
Sec. 65.240 Retailer.
Retailer means any person subject to be licensed as a retailer
under the Perishable Agricultural Commodities Act of 1930 (7 U.S.C.
499a(b)).
Sec. 65.300 [Amended]
0
3. Section 65.300 paragraphs (d), (e), and (f) are revised to read as
follows:
(d) Labeling Covered Commodities of United States Origin.
A covered commodity may bear a declaration that identifies the
United States as the sole country of origin at retail only if it meets
the definition of United States country of origin as defined in Sec.
65.260. The United States country of origin designation for muscle cut
covered commodities shall include all of the production steps (i.e.,
``Born, Raised, and Slaughtered in the United States'').
(e) Labeling Muscle Cut Covered Commodities of Multiple Countries
of Origin from Animals Slaughtered in the United States.
If an animal was born and/or raised in Country X and/or (as
applicable) Country Y, and slaughtered in the United States, the
resulting muscle cut covered commodities shall be labeled to
specifically identify the production steps occurring in each country
(e.g., ``Born and Raised in Country X, Slaughtered in the United
States''). If an animal is raised in the United States as well as
another country (or multiple countries), the raising occurring in the
other country (or countries) may be omitted from the origin designation
except if the animal was imported for immediate slaughter as defined in
Sec. 65.180 or where by doing so the muscle cut covered commodity
would be designated as having a United States country of origin (e.g.,
``Born in Country X, Raised and Slaughtered in the United States'' in
lieu of ``Born and Raised in Country X, Raised in Country Y, Raised and
Slaughtered in the United States'').
(f) Labeling Imported Covered Commodities.
(1) Perishable agricultural commodities, peanuts, pecans, ginseng,
macadamia nuts and ground meat covered commodities that have been
[[Page 15653]]
produced in another country shall retain their origin, as declared to
U.S. Customs and Border Protection at the time the product entered the
United States, through retail sale.
(2) Muscle cut covered commodities derived from an animal that was
slaughtered in another country shall retain their origin, as declared
to U.S. Customs and Border Protection at the time the product entered
the United States, through retail sale (e.g., ``Product of Country
X''), including muscle cut covered commodities derived from an animal
that was born and/or raised in the United States and slaughtered in
another country. In addition, the origin declaration may include more
specific location information related to production steps (i.e., born,
raised, and slaughtered) provided records to substantiate the claims
are maintained and the claim is consistent with other applicable
Federal legal requirements.
Dated: March 7, 2013.
Robert Epstein,
Acting Administrator.
[FR Doc. 2013-05576 Filed 3-11-13; 8:45 am]
BILLING CODE 3410-02-P