MODERATOR: Good afternoon from Washington. I'm Larry Quinn speaking to you from the Broadcast Center at the U.S. Department of Agriculture. Welcome to today's news conference with Under Secretary of Agriculture Bruce Knight to discuss the implementation of Country of Origin Labeling. Joining the Under Secretary in the studio is Lloyd Day, Administrator of USDA's Agricultural Marketing Service.
BRUCE KNIGHT: Good afternoon. As you know, today marks the end of the comment period on Country of Origin Labeling. We have been seeking comments on this for the last 60 days. We have probably around 175 to 200 comments at present. We will be evaluating those comments over the next upcoming weeks, but because this is an interim final rule, we move into the implementation stage today as well.
And so we will now be working with the retail establishments, and these are the establishments where Country of Origin Labeling applied. We'll be working with the retail establishments over the next six months under an informed compliance approach, working with them very closely, making sure they are implementing Country of Origin labeling in a manner which will provide to consumers the information that they are looking for.
This will apply to produce, to red meats, and will be very much in keeping with the rules that are already in place on fish and shellfish.
I will turn now to Administrator Lloyd Day to walk through some of the details of implementation of Country of Origin Labeling.
LLOYD DAY: Thank you, Under Secretary Knight. What I'm going to talk to you all about today is: who must label, what must be labeled, determining the origin of product, recordkeeping and compliance and enforcement.
So, who must label? The retailer is where this marketing law is going to occur. A "retailer" is defined as: "Any person licensed as a retailer under the Perishable Agricultural Commodities Act." This was put into the first (COOL proposed) legislation in 2002. And what that means, the definition of a retailer includes only those retailers handling fresh and frozen fruits and vegetables with an invoice value of at least $230,000. That means a fish market is exempt, a butcher shop is exempt -- and it's really your larger grocery stores across the nation that are covered and who must label for these products.
The law also exempts food service establishments, including those within retail establishments. So that would be restaurants, cafeterias, lunch rooms, food stands, and so forth.
What are the covered commodities? Well, starting now today it's muscle cuts of beef, lamb, chicken, goat and pork; ground beef, ground lamb, ground chicken, ground goat, and ground pork; fish and shellfish (which is already in enforcement in the marketplace); perishable agricultural economies, (that's fresh and frozen fruits and vegetables); peanuts, pecans, macadamia nuts and ginseng.
The law also excludes processed food items. And since the law did not define what "processed foods" are, we did this in the 2002 Fish and Shellfish Rule. And we defined it as a "change of character" or "combined with another food component."
So what does a "change of character" mean? Well, it means cooking or curing or smoking or restructuring. Examples of those, of cooking for instance, is frying, boiling, steaming, baking, roasting. Curing would be salt curing or sugar curing. Smoking would be hot or cold.
So what kind of items would we consider processed and are not covered? These would be things like a teriyaki pork loin or marinated chicken or a sausage or breaded okra, a salad mix that contains different commodities such as lettuce and carrots, or a fruit cup which contains grapes and pineapples and strawberries all mixed together.
One of the encouraging things I've noticed in my own shopping is that in the fruit and vegetable section, many of these items are already labeled, including those that we would consider processed. So I think you're going to see a lot of fruit and vegetables that will be covered, starting today.
For U.S. Country of Origin in meat, there were some significant changes in the 2008 Farm Bill. Essentially, Congress gave us four broad categories for origin declarations. The first would be "product of the United States." That means, an animal was born, bred and slaughtered in the United States. The second would be Country of Mixed Origin, meaning a feeder calf that might come in from Canada or from Mexico, and that would be Product of U.S. and Canada, or Product of U.S. and Mexico, and in some cases product of all three.
The third category would be for slaughter animals, and that's really Canadian cows that are coming in for slaughter. And that would be products of Canada and the United States.
And then the fourth area would be of foreign origin -- Product of Canada (or) Product of Mexico.
What about notification of marking? In your store, they must be legible. They must be in a conspicuous location, although that could be on the reverse side of a package as well. There are limited acceptable abbreviations: Customs and Border Patrol only allows for the abbreviations of the UK, the U.S. and Luxemburg. Symbols and flags will not be acceptable.
For markings on a store or a declaration there, Country of Origin declarations can be made on a placard, a label, a band, a pin tag, a sign, a sticker, a twist tie. I've noticed that when I go to the store to buy asparagus, it's a twist tie, and it has the country of origin marked on that.
Bulk containers may contain covered commodities from multiple origins and must be labeled accordingly.
Some acceptable declarations for country of origin are: Product of the USA, Produce of the USA, Grown in Mexico, California, (and) Washington Apples.
State and regional designations are okay for everything except meats, fish and shellfish, and this was included in the 2008 farm bill.
Also to have a checked system where you may have many countries and you (place a) check (mark) where the country comes from.
What are the recordkeeping requirements? Well, retailers and suppliers must provide records maintained in the normal course of business that may verify an origin claim within five business days at the request of a USDA representative. Any person engaged in the business of supplying a covered commodity to a retailer -- directly or indirectly-- must make information available to the buyer about the countries or origin of a covered commodity.
Information can be provided on the product, master shipping container, or in a document that accompanies the product through retail sale. In general, records that identify the covered commodity, retail supplier, and origin information must be maintained for one year from the date the declaration is made at retail.
What are some of the recordkeeping for suppliers? Suppliers include but are not limited to: growers, slaughter facilities, distributors, handlers, packers and processors. Suppliers initiating claims must possess or have legal access to records necessary to substantiate claims. In the case of slaughter facilities, packers may rely upon producer affidavits to initiate claims, and this was, again, another change in the 2008 Farm Bill.
Affidavits must be made by someone having first-hand knowledge and identify animals unique to a transaction. Feedlots or other entities can use affidavits they receive from producers or other entities as firsthand knowledge of the origin of livestock and then complete an affidavit affirming the origin of information to a subsequent purchaser. The party preparing a consolidated affidavit would retain the original affidavits or other appropriate records to substantiate the claim.
What this produced was (from) an extraordinary meeting where most of the beef or meat marketing chain came together in Kansas City to determine how they would be able to communicate and pass records up and down the marketing chain. It's a little difficult to send millions of pieces of affidavits with every transaction that occurs in the United States herd. So, there's the opportunity as it goes up from a producer to an auction market, to a feed yard to a packer, to consolidate those affidavits and have something that we would call a composite affidavit.
How are we going to enforce this law? We have an official partnership established between USDA and the state departments of agriculture to assist with COOL retail surveillance responsibilities. Last year we looked at approximately 1,600 retail store reviews, and 540 of those audits showed violations of Country of Origin Labeling requirements. And within the 540 audits where violations occurred, there were 1,100 violations cited, which is an average of two violations per audit conducted.
When we go into the retail establishment, we point out these mistakes to the retailer. The retailer then has 30 days to initiate some kind of corrective action related to the violation, and so far in the history of our enforcement of this activity there hasn't been a single fine taken.
So for 2008, retail reviews and audits will continue to be performed, but only for fish and shellfish. We are enabling a six-month, essentially as Bruce said, an informed compliance or education and outreach activity so that the 36,000 retail establishments and all those supplying to them will understand how to comply with this law.
Only USDA can initiate enforcement actions. Again, there's going to be a 30-day period allowed for violators to come into compliance with the regulations. But once that's happened, if we do find retail establishments or suppliers that are willfully violating the law, the penalty is $1,000 per violation. And again, they have 30 days to come into compliance, so we don't expect to have many people to be a willful violators.
So what's next for AMS and for USDA? We are going to fully implement the COOL statute according to the 2008 farm bill. We're going to go into conduct industry education and outreach for six months to ensure that people will come into compliance. We're going to continue the retail surveillance for fish and shellfish. We're going to train our state cooperators. And then starting in April, we're going to begin the retail surveillance for the balance of the covered commodities.
So with that, I would urge you all to visit our website which is at www.ams.usda.gov/cool -- And if you have any questions after this radio session, we would encourage you to (email) your questions to COOL@USDA.GOV.
MODERATOR: And reporters, as we prepare to receive your questions about Country of Origin Labeling, we remind you that you need to press *1 on your telephone touchpad to let us know that you do have a question. And while we're waiting on that first question, Secretary Knight, do you have any additional thoughts you want to make?
KNIGHT: Administrator Day has outlined the details of Country of Origin Labeling. We will be moving forward very aggressively over the next six months to fully implement these provisions in a manner that will best meet the needs of the consumer, recognizing that this is a marketing program. And as a marketing program, our intent is to have a label that addresses the needs of the consumers so that a consumer, upon purchase of produce or meat products, can best tell the country of origin.
MODERATOR: And our first question is coming from Andrea Johnson. And standing by should be Chuck Abbott. Andrea?
REPORTER: Hello. This is Andrea Johnson calling from Minnesota Farm Guide and Farm and Ranch Guide. My question is, will the labels actually say the categories A, B, C and D, or will you simply see "Product of the United States," "Product of Canada," etcetera?
KNIGHT: I appreciate the question, Andrea. And it's very important to see that this is about providing the information to the consumers, and that's why there's not a standardized label. There's a recognition that the label needs to work in a manner that works well, and as such it may be on rubber bands on broccoli, it may be on twist-ties on asparagus, it may be on a placard at the meat case or on the meat label. As such, it will contain the countries of origin on that. And so it will contain the actual country of origin. For those grapes, you go to the produce section, you buy a bag of grapes such as they come in now, and that baggie will in all likelihood contain the actual country that it came from.
MODERATOR: The next question comes from Chuck Abbott. Chuck, go ahead, please.
REPORTER: Thank you. I always love explanations that are as clear as Knight and Day. What I'm wondering, how much money does USDA have to expend on the outreach and education effort for the next six months? And this question has been raised earlier: Once you reach April, how much money will USDA have for enforcement of the mandatory labeling requirements?
DAY: Currently, since we don't have a budget for this, we will utilize the existing $1 million that was given to us for the enforcement of fish and shellfish. We estimate that we need about $9.6 million to carry out enforcement for this activity, and we'll look forward to seeing if that is actually included in an appropriations bill when indeed we do get an appropriations bill.
MODERATOR: Next question comes from Tom Karst. Tom, go ahead, please.
REPORTER: Yes. I know that some people have said that the six month education period is not enough, such as the tree fruit growers. Were there any thoughts of lengthening it for some commodity groups or some types of fruit that may not be active right now but need a period to work through some of the issues?
DAY: We had considered a longer period of time, but we're very well aware that the intent of the United States Congress is to see this be implemented as quickly as possible. And so we kind of came to a deal with them that a six-month window of time would be an acceptable period for the marketing chain to clear out old material and for people to have enough time to get up to speed on the new law.
MODERATOR: Next question is from Bill Tomson. Bill, go ahead. And standing by should be Kristi Pettis. Bill?
REPORTER: Yes. Hi, Mr. Knight. Can you just clarify, is there any, any food safety component to this whatsoever?
KNIGHT: The legislation as passed by Congress clearly has an intention for this to be a marketing program. And as a process program it provides marketing information and provides information for the consumer. And so one should not construe this to be anything more than additional information as it pertains to food safety.
REPORTER: So that would be a no.
MODERATOR: Next question is from Kristi Pettis of Northern Ag Network. And standing by should be Janie Gabbett. Kristi?
REPORTER: Good morning, gentlemen. My question has to do with anymore details or anything solved I guess with the packers or the industry that has been talked about using that loophole in COOL as far as not using specifically "U.S. Produced," and just bunching it into the "North American Produced?"
KNIGHT: On Friday we posted to the website at AMS a couple of clarifying questions and answers that placed sideboards on the ability for packers to move U.S. product that is solely U.S. product into that category B or that mixed origin category. It's very clear from the way we had worked the rules and regulations we did not intend for wholesale movements of U.S. origin product to be moved into category B.
We believe that the congressional intent was equally clear, and so we put that clarifying language out there. We will now be reviewing the comments as they come in, and we'll take under consideration if any further adjustments need to be made before we finalize the rule and move forward with implementation of Country of Origin Labeling.
MODERATOR: And our next question comes from Janie Gabbett.
REPORTER: The American Meat Institute put out a statement saying that the changes that you clarified, the ones you just talked about on Friday about mixed origin, would now cost meat processors closer to $3-point-9 billion than $2-point-5 billion to implement. Can you comment on that? And what is your estimate of how much more it might cost to implement in the first year based on the clarification on Friday?
KNIGHT: Our estimates of the implementation costs in the first year were clearly laid out in the Federal Register, and they are $2-point-5 billion. There are significant cost impacts associated with Country of Origin Labeling as passed by Congress. The American Meat Institute has not shared with us any subsequent estimates that they have done, and I, as such, cannot react to what they may or may not have said.
MODERATOR: One more call for any questions that you may have for either Administrator Day or Secretary Knight. Any further questions, press *1 on your telephone touchpad.
And we'll go back to a question from Tom Karst. Go ahead, Tom.
REPORTER: Yes. I know some have asked for more clarification as far as when products, say, processed products, fresh-cut products are together in, say, different types of lettuces, and whether they would be covered or not covered. Do you feel there is sufficient clarity in the rule to help fresh-cut marketers to understand what is covered and what is not?
DAY: Yes. I feel that there's clarity in what we've provided for in the regulation already. There has been some criticism of what we've put out there, and we are encouraging and have encouraged interested groups to comment. And we're going to look at those comments seriously, and when we come out with a final rule we'll try to make it as clear as possible so that everyone will know what they have to do to comply.
KNIGHT: It is certainly our intent and our intention to be able to gather all the comments that have come in thus far. And for your listeners and your readers there is still time yet before close of business today for people to file comments. But given the fact that we are somewhere in the neighborhood of 175 to 200 comments, which is a significant number of comments but a very manageable workload, this indicates that we should be able to stay on our current schedule of an intention to go to a final rule before the end of this calendar year. And in doing so, we should be able to take into factor any of the comments, any of the experiences that we will have in the first several months of implementation, and be able to utilize that before we move to a final rule at the end of this year.
MODERATOR: Thank you, reporters, for your questions. Any final thought, Administrator Day?
DAY: Well, I just thank (reporters) for your interest in this, and please keep informing and helping us educate the marketing chain across the covered commodities. It's important that the information gets out there, that everyone is calm, that they know that while it has taken effect for the new covered commodities starting today, we are not going to begin enforcement until six months from now because we want to make sure that everyone will be able to come into compliance as quickly as possible.
MODERATOR: Secretary Knight?
KNIGHT: As we have continued to move forward on the implementation of Country of Origin Labeling, we are making every attempt to make each and every decision as common-sense and as transparent as we possibly can. While this applies at the retail level - and that means it has its impact primarily at the grocery store - we are cognizant that we have a consuming public that we need to be able to provide the information to, and we have farmers and ranchers around the country that will bear some of the regulatory burden. And so we have tried to find that right balance, provide the information that the consumers are desiring, limit the regulatory burden, but meet the intent and letter of the law.
There are several important things contained within the implementation strategies here that work well for finding that balanced approach. A six-month informed compliance stage for implementation allows people to move gradually and correctly into compliance with Country of Origin Labeling. For the producers, a system of affidavits that is supported by the industry from swine to sheep to cattle, with the support of the infrastructure and the packers, that will minimize the regulatory burden associated with Country of Origin Labeling.
And on top of that, we have made decisions that allow the National Animal ID System to work as well to provide information in compliance with Country of Origin Labeling -- which means that producers have two ways that they can use for compliance: either animal ID and their existing recordkeeping and business practices, or an affidavit to support those existing recordkeeping and business practices.
I think when everybody stands back, takes a look at the implementation of Country of Origin Labeling, they will find that USDA has taken a very pragmatic approach to implementation and has done this in a very common-sense manner.
MODERATOR: Under Secretary of Agriculture Bruce Knight.
I'm Larry Quinn bidding you a good afternoon from Washington.