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Issues: Country of Origin LabelingAugust 17, 2007 To: Country of Origin Labeling Program, AMS, USDA Re: Docket No. AMS–LS–06–0081; LS–04–04, Mandatory Country of Origin Labeling of Beef, Lamb, Pork, Perishable Agricultural Commodities, and Peanuts (Comment period reopened) The Produce Marketing Association (PMA) is pleased to submit these comments on the U.S. Department of Agriculture’s Country of Origin Labeling program pursuant to the reopening of the comment period. Our comments refer to USDA’s Proposed Rule on Mandatory Country of Origin Labeling of Beef, Lamb, Pork, Fish, Perishable Agricultural Commodities, and Peanuts. We offer these comments with the intent of further shaping that mandatory program, although we believe a program with far greater flexibility is preferable and will work to that end as well. PMA is the largest global not-for-profit trade association representing companies that market fresh fruits and vegetables. PMA's purpose is to sustain and enhance an environment that advances the marketing of produce and related products and services. The association represents 2,200 companies throughout the food distribution chain that market more than 90% of fresh produce sold at the consumer level in the United States. PMA is funded primarily by members’ dues, revenues from exhibits, product sales, and meeting registrations. From the beginning, PMA has recognized and expressed its concerns about fundamental flaws in the 2002 law, which the U.S. Department of Agriculture cannot change through the regulatory process. This is why we seek a legislative change. We stress that PMA does not oppose origin labeling. In fact, more than 60% of the top 20 fruits and top 20 vegetables (by consumption) are labeled as to origin (including state and local designations as well as country of origin). The industry is providing such labeling and will continue to do so. Our concerns revolve around the mandates of the law and the proposed rule that emanates from that law. PMA appreciates the efforts USDA made in drafting its proposed final rule on this matter. USDA listened to the industry and addressed many of the concerns PMA expressed in its initial comments to the agency. We appreciate the opportunity to comment again on the proposed final rule, but our participation in this important regulatory process should not be construed as support for the 2002 law itself. In fact, PMA advocates legislative change to make the program more flexible and less costly to industry and consumers. We have serious concerns with the costs of this proposed program and the lack of benefits to consumers or the industry. Program costs identified by USDA and costs from common industry practices will be pushed back to suppliers and will be borne ultimately by consumers. Higher costs to consumers will reduce consumption, clearly something we cannot support. Informing consumers about the origin of fresh produce can be accomplished in a more-flexible and less-costly manner than mandated in the law and proposed in regulation. We commend the agency for its openness in receiving comments and offer not only our comments here but our availability in the future if we can be of further assistance. The system outlined by USDA in its proposed rule is burdensome to industry, to regulators, and to consumers. The significant costs are not justified by any benefit, as USDA stated in the proposed rule. The agency said: “USDA finds little evidence that consumers are willing to pay a price premium for country of origin labeling. USDA also finds little evidence that consumers are likely to increase their purchase of food items bearing the U.S. origin label as a result of this rulemaking. Current evidence does not suggest that U.S. producers will receive sufficiently higher prices for U.S.-labeled products to cover the labeling, recordkeeping, and other related costs.” We concur with USDA’s assessment. The cost of this mandatory country of origin labeling program is significant and will not provide consumer benefit. The fact that a majority of fresh produce already is labeled as to origin (including state/regional designations) shows that the marketplace can and will label in cost-effective consumer-friendly ways. Putting this type of program in place that increases those costs is inefficient and provides no additional consumer benefit.
Timing Throughout the distribution chain, significant lead times are needed to change packaging; design and implement or modify recordkeeping systems; design and implement product segregation systems; educate/train employees on the final rules; devise/establish auditing/certification systems; etc. Implementation of a final regulation must allow for a minimum one-year phase-in. If the final regulation cannot be published one year in advance of the implementation date (of September 30, 2008), discretion in enforcement must be permitted as the industry cannot change its packaging and practices overnight, and the industry cannot begin the changes until it knows the full scope of those changes when they are published in the final rule. Although many in the industry are providing origin labeling, the final rule may force changes in how that labeling is accomplished, and the industry must have time to adapt. This law is the only labeling law in the U.S. that makes the retailer responsible for content and accuracy. Because the retailer has no independent knowledge of the source of the products it sells, it will pass that responsibility on to its suppliers. In the proposed rule, USDA has significantly clarified some issues about liability, noting that any retailer handling a covered commodity that is found to be mislabeled for country of origin shall not be held liable for a violation of the law by reason of the conduct of another if the retailer could not have been reasonably expected to have had knowledge of the violation from the information provided by the supplier. The agency also noted that any intermediary supplier (i.e., not the supplier responsible for initiating a country of origin declaration) handling a covered commodity that is found to be mislabeled for country of origin shall not be held liable for a violation of the law by reason of the conduct of another if the intermediary supplier could not have been reasonably expected to have had knowledge of the violation from the information provided by the previous supplier. PMA appreciates those clarifications, and we still expect the burden on suppliers will be far greater than the agency envisions, even with these clarifications. Although this is a program that requires retailers to inform consumers about covered commodities’ country of origin, the greater burden will fall on the suppliers who must provide that information to retailers. Costs associated with getting product to market, including all new costs associated with COOL, will be pushed down to suppliers and, ultimately, to the consumer. Nothing in our comments is intended to suggest or recommend that suppliers be exempt from these requirements, as USDA has accurately noted that retailers must get the information they need from their suppliers, and verification/accuracy is the only way to maintain consumer confidence in the information displayed at retail. Small business, local produce needs The burden will be especially heavy on smaller retailers and suppliers, including family farms, and we are concerned about the current lack of infrastructure in those smaller companies to comply with the COOL guidelines. On December 5, 2003, the Office of Advocacy (Advocacy) for the Small Business Administration filed a comment letter with USDA urging USDA to minimize the impacts of the country of origin labeling rule on the food industry and expressing the Office of Advocacy’s concerns for small businesses about costs, confusion, and other burdens. (A complete copy of Advocacy’s comment letter may be accessed at www.sba.gov/advo/laws/comments.) Many companies are fortunate to have labeling systems as well as data management systems in place that will allow them to track products, vendors, country of origin (with modifications to their systems), etc. Others do not, and that will make it very difficult, if not impossible, for some operations to comply with either regulatory directives or unintended consequences within the supply chain. Local producers may not be able to provide customers with the same level of labeling that larger operators can, which could put them at a disadvantage in the marketplace. This would be unfortunate as local and seasonal produce continues to increase in popularity with consumers. Data management becomes a critical issue with COOL, and many operators are still making manual entries. Even retailers with sophisticated computer systems will incur millions of dollars in costs to develop systems that will keep records at the level of detail required by these regulations. Infrastructure concerns extend to applications such as scale systems and printers for labels. If the required COOL information takes up more space on labels, businesses will need bigger labels and need to upgrade equipment to handle bigger labels, which adds costs to the process. Every change required by these new regulations is an expense at some point (and often at multiple points) throughout the distribution chain. Multiple origins, blended products, processed products In the proposed final rule, USDA said that for commingled or blended retail food items comprising the same covered commodity (e.g., bagged lettuce) that are prepared from raw material sources having different origins, the label shall list alphabetically the countries of origin for all raw materials contained therein. USDA cited an example of a bag of red and green leaf lettuce from country A and country B being labeled as “Product of country A, Product of country B.” USDA must clarify what constitutes the “same covered commodity.” The example uses green leaf lettuce and red leaf lettuce as if they are a single commodity. The produce industry would consider those two different items, which would render this bag of green and red leaf lettuce a processed item that would not require a country of origin label. USDA should clearly identify when a covered commodity is the “same.” PMA would propose that if a commodity has a unique identifier such as a unique price look up code (PLU) related to anything but size or region, it is a unique item. Any time more than a single commodity is marketed together in a package, it would then become a processed item and would not require a country of origin label. This would be consistent with the interim final rule for fish/seafood that states that when one covered commodity is combined with at least one other covered commodity, it is a processed product and is excluded from the rule.
State and regional designations By interpreting the law narrowly, USDA concluded that the notification of country of origin by retailers would not be satisfied by state or regional designations, such as “Jersey Fresh” or “Idaho Potato.” We again disagree with this interpretation. Because this is a program designed to be seen by U.S. consumers, it is reasonable to expect that they understand U.S. state and regional labels as indicating U.S. origin. For U.S. origin perishable agricultural commodities offered for sale in the U.S., a state/regional designation should be sufficient to notify consumers of the country of origin. This would avoid the need to relabel such products that already bear a state/regional designation, as a significant amount of fresh produce items do already.
Recordkeeping USDA proposes that records and other documentary evidence (e.g., shipping receipt from central warehouse) relied upon at the point of sale to establish a product’s country of origin must be maintained at the point of sale or otherwise be reasonably available to any duly authorized representative of USDA at the facility for at least seven days following the retail sale of the product. Under the proposed rule, records that identify the retail supplier, the product unique to that transaction, and the country of origin information must be maintained for a period of two years from the date the origin declaration is made at retail. Such records, according to the proposal, may be located at the retailer’s point of distribution, warehouse, central offices, or other off-site location. PMA believes retailers and suppliers should be required to document country of origin only for the products they have on hand, which appears to be consistent with USDA’s interim final rule for fish/seafood. Most records could be maintained centrally and provided to the specific retail outlet if requested by USDA inspectors. Records quickly could be made available electronically via computer file or fax, and maintaining records centrally would greatly reduce the potential for errors at individual retail locations. Records for products purchased for individual stores within a chain (e.g. product purchased at a wholesale market) might be kept at the store level. The COOL two-year retention period does not need to be tied to recordkeeping rules under the PACA. The PACA two-year retention period deals more with regulating the produce industry to ensure fair trading (including pay) practices among industry members and was not intended nor would it be necessary for consumer information. We do not support a two-year recordkeeping requirement. That said, PMA believes existing records and record-keeping rules are sufficient for the purpose of country of origin labeling.
Penalties The law contains enforcement provisions for both retailers and suppliers that include civil penalties of up to $10,000 for each violation. For retailers, the law states that if USDA determines that a retailer is in violation, it must notify the retailer of the determination and provide the retailer with a 30-day period during which the retailer may take necessary steps to comply. If upon completion of the 30-day period USDA determines the retailer has willfully violated the act, after providing notice and an opportunity for a hearing, the retailer may be fined not more than $10,000 for each violation. USDA received numerous comments asking how AMS will apply the standard of willfulness. They urged USDA to recognize that if a majority of covered commodity items bear a label indicating the product’s country of origin, the retailer has met its obligation under these regulations. USDA said it recognizes that many suppliers, particularly in the case of produce, will apply stickers to individual commodities indicating the country of origin and that such labeling technology does not result in a 100 percent adhesion level. USDA also recognizes that consumers may divide hands of bananas that may only have one or two stickers per hand or otherwise move an item from one bin to another as they make their selections. USDA said it will take these and all other circumstances into account in determining whether or not a retailer has committed a willful violation. We appreciate this understanding of real-world issues. We also want to stress that companies that are subject to enforcement action will prepare for the worst for themselves and in their negotiations with supply chain partners because they will not know whether any given inspector or interpretation will be as understanding. Consumer issues We are concerned about the misuse of this program in the marketplace. During a foodborne illness outbreak linked to a single fresh produce item, the country of origin labeling debate was brought into discussions in the media, including representatives of federal agencies. The point made was that a U.S. country of origin labeling program would have ameliorated the situation. The product in question was sold chiefly through restaurants, which are not covered by this program. This program is not a food safety program, and it is not designed to protect consumers. This incident shows how quickly a “marketing” program was transformed into a “safety” program even by representatives of federal agencies who would know better. A significant portion of produce sold in the U.S. is imported, and consumers are accustomed to year-round availability of most products, understanding that at times, the products are from non-U.S. sources. There are times of the year when certain items are not available from U.S. sources, and the consumer can only purchase an imported product (e.g. Chilean stone fruit and grapes and Central American melons in the winter months, bananas year-round). Further, adverse weather will often make U.S.-grown product temporarily unavailable or available in greatly reduced quantities and of a lower quality, at which time imports are used to fill in supplies. With the current food safety climate, we are more concerned than ever that, improperly used, COOL will be distorted to lead the consumer to perceive that imported products are less safe and of lower quality than U.S. products. USDA must make every effort to explain to consumers that imported products are not of lesser quality or safety. Its own tests, as well as those of the Food and Drug Administration, have shown little difference in the safety of imported and U.S.-grown products. This proactive stance is appropriate for USDA, as the agency has done this in the area of organics labeling, stressing to consumers that an organic label refers to a production process and does not indicate greater quality, nutrition, or safety. Having fresh fruits and vegetables available year-round contributes to choice in the marketplace and a healthful diet for consumers. Anything that jeopardizes consumers’ confidence in the food supply will jeopardize their health as well. USDA, through its Food Guide Pyramid, advocates eating 3.5 to 5 cups of fruits and vegetables a day for adults. The agency has a responsibility to be sure consumers understand that COOL is not intended as a quality or safety program.
Other issues Enforcement is problematic. Inconsistent enforcement may lead to bad public relations for some, but given the scope of enforcement (every retail store in the United States), not all violations will be found, and consumer confidence will not be enhanced. Valuable and increasingly scarce resources will be spent on these government-mandated marketing activities rather than true value‑added services or lower costs for consumers. The regulations will add hurdles that will make success and innovation more difficult. The stated goal of country of origin labeling appears simple — "people want to know...." The execution under these regulations will be highly complex and expensive due to difficulty, costs, and the desire for competitive advantage by all players. A much simpler program for a domestic marketing initiative such as this would better serve consumers and industry. The marketplace traditionally has responded to the demands of its consumers. Retailers and suppliers coordinate regularly and voluntarily on country of origin labeling programs that give value to consumers for specific products. This regulation is not being driven by consumers or the marketplace. If the marketplace wanted this, it would be done already, and where it has added value, it has been done. As mentioned before, more than 60% of the top 20 fruits and top 20 vegetables (by volume sold to consumers) already are labeled by origin (including by state/region origin). Summary In summary, the Produce Marketing Association continues to support a simpler approach to origin labeling that would replace the existing mandatory program. Given that the mandatory program is provided by statute, we call on USDA to recognize the significant burdens its proposed regulations impose on all links in the supply chain that will lead to increased costs for consumers. Increased costs can only cause reduced consumption of the very products USDA, other federal agencies, and reputable health authorities urge consumers to eat more of — fresh fruits and vegetables. We encourage USDA to simplify the program significantly. PMA appreciates the opportunity to offer these comments, and we are ready to assist the agency in any way USDA deems helpful. Sincerely, Kathy Means Vice President of Government Relations and Public Affairs |
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