Following GAO report Daschle, Johnson to seek amendment to fund COOL

WASHINGTON, D.C. - The U.S. General Accounting Office (GAO) provided a report last week that concluded cost estimates for implementing country-of-origin labeling (COOL) are inconclusive.
calendar icon 16 September 2003
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The report was greeted by COOL opponents as missing the point about costs and, at the same time, was interpreted by them as finding that implementation can't be modeled on existing programs and that the law will be negative to trade into and out of the U.S.

The report was accepted by COOL proponents as evidence that the COOL law can be implemented easily and efficiently without burdening the beef industry and consumers with the confusion and costs others say will occur.

The GAO investigation was asked for by Sens. Tom Daschle (D., S.D.) and Tim Johnson (D., S.D.), and GAO report in hand, both said they will fight to preserve COOL for beef and pork and will introduce a bipartisan amendment to the Senate agriculture appropriations bill instructing Senate negotiators not to allow agriculture appropriations out of conference committee without funding to continue COOL implementation for meat.

They will be joined in the amendment by Sen. Mike Enzi (R., Wyo.), according to the Daschle-Johnson announcement.

COOL was included in the 2002 farm bill and requires that, effective Oct. 1, 2004, all beef, pork and lamb muscle cuts and ground meat marketed at retail be labeled as to the country, or countries, of origin of the animal, or animals, from which the meat cut or product was produced.

The law also covers fish, both captured and farm raised, as well as fresh fruit and produce and peanuts, but it does not cover food marketed through foodservice nor poultry.

The Agricultural Marketing Service (AMS) developed a rule for interested parties to follow in implementing COOL on a voluntary basis prior to when the law becomes mandatory next year and is now developing a final rule for implementation of mandatory COOL next year. The final rule is to be proposed this fall.

COOL has been fiercely supported by groups such as R-Calf USA and the Organization for Competitive Markets (OCM), which believe that consumers have a right to know -- and want to know -- the country of origin of the meat that they buy in retail stores and maintain that origin labeling will increase demand and prices for U.S. meat and, therefore, prices for producers.

COOL has been just as fiercely opposed by groups such as the National Cattlemen's Beef Assn. (NCBA), National Pork Producers Council (NPPC), American Meat Institute (AMI) and Food Marketing Institute (FMI), which counter that if there was demand for origin labels, the market would already have them in place and maintain that COOL's documentation will be costly for producers, packers and retailers and that those costs will take the form of decreased prices for producers and/or increased prices for consumers that will be harmful to beef, pork and other demand.

The conflict intensified when AMS put implementation costs at $1.9 billion, which opponents cited as demonstration of their position and supporters said was founded in overly restrictive rulemaking.

The controversy reached a boiling point this spring when the House agriculture appropriations bill passed with language prohibiting the U.S. Department of Agriculture from allocating any funds from its 2004 fiscal year budget for implementation of COOL for beef and pork. However, the Senate bill did not include that language, and House-Senate negotiators are now trying to resolve the two chambers' differences in conference committee.

The GAO report said the assumptions AMS made in its $1.9 billion cost estimate for implementation paperwork burden "are questionable and not well supported." For instance, AMS did not consider the extent to which meat and other covered businesses already keep records that would be appropriate for documentation and verification, GAO said, acknowledging, though, that AMS has since then compiled and published examples of such record keeping.

GAO also said there are existing programs that involve compliance and verification, such as the school meals program and defense prime vendor program, that could be implementation models. GAO recommended that AMS consult with covered production segments to identify implementation and verification protocols and with the Bureau of Customs "to develop an approach" for identifying and labeling imported products.

However, missed by COOL supporters in their embrace of the report was GAO's conclusion that there will be "implementation challenges" due to how the COOL law defines domestic meat and to how the meat sector does not routinely maintain origin identity for imported meat.

GAO also said that while many trading partners have COOL laws of their own, several that were surveyed said they regard the U.S. COOL law as a potential trade barrier that could lead to retaliation.

Indeed, Daschle and Johnson, in their announcement, mentioned only that GAO found the AMS estimate for implementation costs "inflated" and found that 72% of trading partners require COOL for one or more of the commodities covered in the U.S. law.

COOL would give consumers important information about food they purchase and increase prices for U.S. meat products, "ultimately helping producers across South Dakota and across the country," Daschle said. "This law is too important to consumers and producers" not to be implemented for beef and pork, which is the reason the bipartisan Senate amendment is being prepared, he said.

"I believe the Senate will not support the House provision to repeal COOL."

Johnson, the author of the legislation that established the COOL law in the farm bill, noted that Congress passed and the President signed the law. USDA "should stop dragging (its) feet, follow congressional intent and implement this law," he said.

According to Feedstuffs, Bill Bullard, R-Calf chief executive officer, said that the GAO report "reinforces what R-Calf is pursuing, which he described as an alternative, or "novel," approach to what AMS has proposed.

In fact, R-Calf representatives were in Washington, D.C., last week presenting such an approach to congressional and USDA representatives, telling them, according to an announcement, that COOL can get implemented without "unnecessary costs ... by simply avoiding unnecessary government and industry regulations on producers." R-Calf's recommendations included:

  • Requiring that all imported livestock be permanently marked as to their country of origin by Jan. 1, 2004;
  • Specifying that a determination of country of origin be made only by reference to such markings on an animal at the time of slaughter, and all unmarked animals be deemed as born and raised in the U.S.;
  • Specify that the place of slaughter be "the first transaction point for verifying origin" rather than a point earlier in the supply chain such as a farm, ranch or feedlot, and
  • Prohibit packers from seeking producer documentation or indemnification.

R-Calf member and Grenville, N.M., cow/calf producer Sam Britt said Congress should suggest that AMS incorporate these principals in its final rule, and should it not, Congress should direct the agency to do so.

Bullard said these recommendations would not impose burdens on producers, and he said the fact that so many trading partners have COOL laws "clearly demonstrates that this is doable."

OCM said the report "negates" any arguments opposing the law related to costs and proves what OCM has been saying since February that AMS' implementation estimates are not supportable and that its implementation process is overly burdensome.

OCM president Fred Stokes said OCM has repeatedly asked AMS to adjust or withdraw its estimates or rethink its process but that the agency instead acted in a manner that gave unsubstantiated support to COOL opponents. "The price of eggs is probably rising today," he said, "because there's yolk on a lot of faces."

AMI senior vice president for regulatory affairs and general counsel Mark Dopp said the COOL law, despite GAO's conclusion, "is extraordinarily costly with no discernable benefit."

He said GAO addressed only paperwork costs, not the additional costs that will be incurred for capital expenses and time for segregating animals and products and additional labeling that are estimated to be "in the millions per plant."

Furthermore, he said GAO did not address the fact that no producer, packer or retailer has embraced the voluntary rule, which suggests that "the only real value of (the law) is its ability to block imports -- the real motive behind this law."

(A spokesperson for Premium Standard Farms, which earlier this year informed its retail customers that it could deliver documented, verifiable and labeled U.S.-origin pork], recently said that no customer has requested the product.)

Dopp also said GAO, while noting that trading partners have COOL laws, did not address the fact that the U.S. version is far more onerous, requiring that every meat package in the retail counter describe where the animal, or animals, from which the meat came were born, raised and slaughtered.

NCBA director of legislative affairs Bryan Dierlam noted that the GAO report did dispute AMS' implementation costs but did not dispute that there will be costs and, in fact, stated that COOL "will inevitably impose an additional burden" on the U.S. meat sector. The report confirms that COOL "won't be free," he said, and NCBA has long pushed a labeling program "that promotes U.S. beef, not burdens U.S. producers."

He said there have been "years of meetings" about origin labeling, "congressional hearings, the House farm bill mark-up (discussion), USDA reports, two GAO reports, 12 USDA listening sessions and now another GAO report all saying that mandatory labeling will come with a cost. Is anyone listening?"

He also noted that GAO did point to existing programs that could be implementation models, but then the agency said those programs probably won't be "particularly useful (because of) the law's unique definition of a U.S. product."

NPPC president Jon Caspers, a pork producer from Swaledale, Iowa, said what's important is not that GAO questioned AMS' implementation costs estimates but that there will be costs and that they will be born by retailers, packers, processors and producers, as well as consumers, and that costs "are only half the story" as COOL provides "no demonstrable benefits" for producers or consumers.

Caspers said "cool heads and logic need to prevail on this issue. ... It is simply too important to consumers and many thousands of producers who could be put out of business (due to costs without benefits) if we do not have a careful and thoughtful review of this law."

Caspers called on Congress to replace the COOL law with its mandatory provision with a "workable voluntary program."

Source: National Pork Producers Council (NPPC) - 15th September 2003

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