Issues: Country of Origin Labeling

COOL Analysis

PMA Analysis: USDA Final Rule for Mandatory Country of Origin Labeling

Issued: January 29, 2009

On January 15, 2009, the U.S. Department of Agriculture’s (USDA) Agricultural Marketing Service issued a final rule regarding mandatory country of origin labeling (COOL) for produce and other commodities.

To help our members better understand the final rule, PMA has developed this analysis of the new regulations – which will go into effect March 16, 2009. A look at the final rule reveals that there were not many substantive changes from the interim final rule issued in August 2008.

Retailers

According to the statute, retailers must provide origin information on covered commodities. Restaurants and foodservice are excluded from the COOL rule, as are foodservice operations within a supermarket, such as a salad bar.

Covered Commodities

COOL applies to fresh and frozen fruits and vegetables – the same items as covered by the Perishable Agricultural Commodities Act. Various meats, peanuts, macadamias, pecans and ginseng must now also carry origin information.

Exclusions

Processed commodities do not have to carry origin information, and USDA has adopted a broad definition of processing: “undergoing a specific processing to change the character of the commodity or combining it with at least one other covered commodity or substantive food component.” A review of this definition reveals distinctions between a commodity that would need to carry COOL and one that it does not. For example:

Plain peanuts would need to carry COOL, but roasted peanuts would not (as roasting is a specific process).
Chopped lettuce would need to carry COOL, but it would not if it is combined with another commodity or with salad dressing.
Other examples of COOL-exempted products would be a mixed fruit cup that contains melons, bananas, and strawberries; or a bag of mixed vegetables that contains peas and carrots.

One important change from the interim final rule to the final rule applies to processed fruits and vegetables. In the final rule, USDA wrote it would generally rely on U.S. Grade Standards for fruits and vegetables to determine whether the item is a combination of “other covered commodities.”

For example, different colored sweet peppers combined in a package would require COOL because there is one U.S. Grade Standard for sweet peppers, regardless of color. As another example, there are separate U.S. Grade Standards for iceberg lettuce and romaine lettuce. Therefore, a salad mix of iceberg and romaine lettuce would not be subject to COOL labeling.

Although in the previously published IFR the agency concluded that such a salad mix would be subject to COOL, “the agency now believes the use of U.S. Grade Standards in determining when a perishable retail item is considered a processed food item provides a bright line to the industry and is an easy and straightforward approach as regulated entities are already familiar with U.S. Grade Standards.”

USDA noted that there are limited exceptions to this policy: “One exception occurs when there are different grade standards for the same commodity based on the region of production. For example, although there are separate grade standards for oranges from Florida, Texas and California/Arizona, combining oranges from these different regions would not be considered combining ‘other covered commodities’ and therefore, a container with oranges from Texas and Florida is required to be labeled with country of origin information.”)

Markings

The USDA rules permit great flexibility with regard to how the origin information can be conveyed to consumers. Whether by label, sign, band, twist tie, or other format, the information must be legible and the location conspicuous enough for an ordinary consumer to read and understand it. Only abbreviations that unmistakably indicate the name of the country are permitted (for example “U.S.” for the United States or “U.K.” for the United Kingdom). Flags or other symbols, by themselves, are insufficient to meet the COOL obligation. A shipping carton with COOL information may serve as an in-store display; a check box denoting the applicable country among several choices is also acceptable. Stickers are allowed, though USDA encourages in-store signs. However, if the majority of the bulk items carry a sticker, that is deemed sufficient to provide consumer notification.

State or Regional Claims

Labels that denote the state, region, or locality of a product satisfy the requirement of COOL. This applies not just to produce from the United States, but also to produce grown in other countries, e.g. “Florida Fresh” satisfies COOL and so does “Prince Edward Island” potatoes. In the final rule, USDA stated that state abbreviations may be used to satisfy COOL requirements as well.

Supplier Obligations and Recordkeeping

For covered commodities, suppliers must provide, either directly or through the supply chain, origin information to the retailer. This may be done by information on the label itself, or on the master shipping container or in documents that accompany the shipment.

In the final rule, USDA added language to indicate that the supplier and origin information needed to satisfy the COOL recordkeeping requirements can be in the same document or different documents, including in records that are currently maintained for Bioterrorism Act purposes, provided these records contain the necessary information to meet the COOL recordkeeping requirements.

For pre-labeled product, the entity responsible for placing COOL information on the label must retain for one year information that backs up the COOL statement. All others in the supply chain must only retain records that permit the tracing of the product (that is, from whom did you receive the product and where did it go). Those records must be retained for one year. They permit USDA to trace the product to the supplier who is required to have the documentation to prove the claim.

If the product is not labeled, the origin information must accompany that product through the chain, and each entity in the supply chain must then retain that information for one year.

Recordkeeping for Retailers

If the product shipped to retail comes pre-labeled, the retailer may rely on the information already on the label and has no additional recordkeeping requirements as to origin. For bulk items in which the store provides the information (for example, an in-store sign), the retailer must be able to provide the records, whether paper or electronic, to USDA upon request in five days. There is no requirement to retain the records at the store.

Penalties

A retailer may rely on the information provided to it by its suppliers. Penalties may be imposed against retailers only if their actions rise to the level of “bad faith.” USDA must first notify the retailer of a violation, and then give the retailer 30 days to correct the problem. Even after the 30-day period, the statute only permits fines if the violation is in “bad faith” – and then only after providing notice of the intention to seek penalties and permitting a response to those charges. The maximum fine is $1,000 per violation, and only USDA may impose penalties; private suits are not permitted.