NATIONAL MEAT ASSOCIATION
HOUSE AGRICULTURE COMMITTEE
JUNE 26, 2003
Mr. Chairman and members of the House Agriculture Committee, thank you for the opportunity to submit testimony on the mandatory country of origin labeling provision in the Farm Security and Rural Investment Act of 2002 on behalf of National Meat Association. National Meat Association has been advocating the interests of the meat industry since 1946. We are a non-profit trade association with over 600 members throughout the United States, as well as internationally. We appreciate that you are having this hearing to discuss a law that we perceive as being well intentioned but fatally flawed.
It is our belief that the current law simply cannot work in the real world. While good intentions drove the legislation, the subsequent law and the regulations proposed by the Department of Agriculture to implement it, simply will not work in the very complex farm to retail store meat distribution system. It is the belief of National Meat Association that this law should be repealed or amended because of the awesome cost burden, the practical impact on the meat industry's ability to produce quality product, and the impossibility to follow the law without some type of animal identification program.
On November 21, 2002, the Agricultural Marketing Service (AMS) released its findings on the estimated record-keeping burden of the Voluntary Country of Origin Labeling (COOL) guidelines for Beef, Lamb, Pork, Fish, Perishable Agricultural Commodities, and Peanuts that were published on October 11, 2002. AMS estimated the annual record-keeping burden associated with this program for the first year to be $1.97 billion. While this projected cost is obviously immense, it is not our belief that the AMS estimates take full account of the total costs that will be incurred just by cattle producers to be in a range of $1.50 billion to $2.00 billion annually. Even the cost estimates submitted by the COOL legislation's principal Senate author place the annual cost of maintaining the COOL record keeping requirements at the same level as AMS' cost estimate. Senator Johnson of South Dakota criticized the agency's cost estimates as too high, but submitted a study conducted by "an agricultural think tank of producers and market experts" called the Organization for Competitive Markets (OCM), which seems to contradict the proposition for which it is submitted. According to OCM figures, the annual cost of maintaining COOL record keeping will be $6.91 per person for each United States citizen. Multiplying these per capita costs by the current U.S. population of 281,429,906 people (as calculated in the last census), the annual cost of maintaining (not including implementing) COOL record keeping will be $1,944,680,650.46. This figure, which does not include start-up costs, is nearly equal to AMS' cost estimate for the first year of implementation, where the AMS estimate includes $400 million in start-up costs. When start-up costs are included, the OCM estimates submitted by Senator Johnson exceed, by a significant margin, the costs forecast by AMS. Therefore, it appears that even the substantial costs projected by AMS significantly underestimate the full costs associated with COOL record keeping. It is our belief that the overly prescriptive nature of the law and the inclusion of civil penalties are the primary reason that the implementation of the mandatory guidelines is estimated to be so unreasonably costly.
In Section 283 of the COOL Subtitle in the 2002 Farm Bill it states:
Fines -- If on completion of the 30-day period described in subsection (b)(2), the Secretary determines that the retailer has willfully violated section 282, after providing notice and an opportunity for a hearing before the Secretary with respect to the violation, the Secretary may fine the retailer in an amount of not more than $10,000 for each violation.
The law states that these fines will be imposed on retailers but organizations such as the Food Marketing Institute (FMI) have already released guidelines to their retail members stating that they should modify their supplier contracts to reflect the forthcoming requirements.
Suppliers should be required by contract to indemnify retailers for any errors made in the country of origin determination.
- Under the statute as currently interpreted by USDA, retailers will be held liable and subject to $10,000 penalties - for providing accurate country of origin information to consumers.
- Retailers must depend on suppliers to provide them with accurate information.
Contracts should specify that suppliers will be liable for any fines or other costs incurred by retailers for inaccurate country of origin information provided by suppliers.
In other words retailers are preparing contracts to pass on the burden of civil penalties to the suppliers of covered commodities. These are companies like the ones represented by NMA. Companies such as the ones referred to in the section of the law entitled Information, which states:
(e) INFORMATION - Any person engaged in the business of supplying a covered commodity to a retailer shall provide information to the retailer indicating the country of origin of the covered commodity.
We believe that the two aforementioned sections of the COOL subtitle hold suppliers and packers primarily accountable for records and civil penalties. Packers and processors have no choice except to hold their suppliers to the same standard. With the retailers developing contracts, supported by the law, to pass back the civil penalty burden to their suppliers without any provision for those suppliers to require accurate information from producers, it puts a grossly unfair burden on the suppliers. Civil penalty burdens such as
these can easily put the small and medium packers that National Meat Association represents out of business.
Mandatory COOL will significantly limit processors’ ability to produce lower fat blends of ground beef. Lean, imported boneless beef is typically blended with trimmings from high-quality Choice and Prime U.S. beef to produce the relatively lean ground beef products which American consumers prefer. COOL will be a serious impediment to the flexible product formulation, which is necessary to produce these consumer-preferred ground beef products.
USDA's cost estimates for COOL amount to approximately $45 to $60 per head of cattle. The cost of labeling product from Australia, New Zealand or Canada will inherently the much less, because they will not incur the same record-keeping burden as U.S. producers. This means that imported product will be significantly less expensive. Should consumers prefer the less expensive imported beef products, as they have come to prefer the less expensive imported automobiles, U.S. producers will have to meet lower import prices by absorbing their own $45 to $60 per head cost of country of origin labeling.
The COOL subtitle in the farm bill explicitly states, “The Secretary shall not use a mandatory identification system to verify the country of origin of a covered commodity.” NMA fails to see how it will be possible to audit and track livestock without some type of approved and official system of animal identification. It seems irrational to implement a law, such as this one, without a provision or plan for how to track livestock that is already on the ground as well as livestock that has not yet been born. Without an animal identification program, meat packers and retailers are faced with the burden of verifying
whether their supplier’s records are auditable and possibly facing civil penalties that they might not have been able to avoid.
If COOL is not repealed, the law needs to be amended to include a provision for an animal identification program. At the very least, this would be a template of what the government was asking for in the kind of records they want and how one develops an auditable trail. Even a voluntary COOL program, which we do support, would need a practical animal identification program to succeed.
It is our sincerest hope that Congress will take the points presented by our organization as well as numerous other organizations and companies and repeal Country of Origin Labeling. The provision, that was inserted in the 2002 Farm Bill without official hearings on what it would do to the various industries that if affected, was not thought through. The prescriptive law, which the Agricultural Marketing Service of USDA has attempted to turn into equally prescriptive regulations is a problem for our large packer/ processor members and disastrous for our small and medium-sized ones. Too often, the meat industry is faced with raising objections to well-intentioned laws that are the result of political maneuvering instead of being the product of sound science and good economics.
After this law is repealed, we will be pleased to work with Congress and develop a voluntary COOL law and program that will not hurt the very businesses it is intended to help. We see the benefits of advancing a “Product of the United States” designation and are aware that there is some consumer curiosity, especially in light of the recent BSE scare in Canada. In this regard NMA’s position is on par with livestock producer organizations such as the National Cattlemen’s Beef Association. There are other groups who will support a voluntary COOL program while disagreeing with current law that makes it mandatory.
In conclusion, NMA would like to thank the House Agriculture Committee again for holding hearings on the subject of country of origin labeling. The government is employed to serve the people. By holding a hearing on this volatile subject it is clear that this committee is listening to the concerns of the public here in DC as well as elsewhere. Thank you for allowing National Meat Association to submit comments on the behalf of our members.