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Impact of COOL on Canadian Pork - Expectations

by 5m Editor
23 August 2008, at 6:29am

CANADA - North American pork producers, processors and retailers are preparing for the introduction of what is expected to be a complex but far less onerous U.S. food product labelling system than had originally been feared.

Mandated in the 2002 U.S. Farm Bill, Mandatory Country of Origin Labelling (M-COOL) will be expanded effective September 30, 2008 to several agricultural commodities. The regulation will compel food retailers in the United States to provide their customers Country of Origin information on a range of products.

2008 Version Scheduled for Implementation

Last month the U.S. Department of Agriculture (USDA) issued its interim final rule for Country of Origin Labelling, as outlined in the 2008 Farm Bill, and the agency is accepting public comments on the proposal until September 30.

Country of Origin Labelling was imposed in October 2004 on the fish and shellfish industry. The 2008 version will also cover muscle cuts and ground meat including beef, veal, lamb, chicken, goat and pork; perishable agricultural commodities, meaning fresh and frozen fruits and vegetables; macadamia nuts; pecans; ginseng; and peanuts. Although the new rules officially take effect September 30, USDA will focus on education and awareness rather than enforcement for the first six months.

Four Labels Outlined for Pork Products

As far as pork, the legislation provides for the use of four labels to define a product's country of origin. Label A, "Product of the United States" will designate meat from animals born, raised and processed exclusively in the U.S. Label B, "Product of the United States and Canada" or "Product of Canada and the United States" designates meat from animals born in Canada and partially raised and slaughtered in the U.S. Label C identifies meat from animals imported for direct slaughter. And Label D identifies meat that arrives from another country. Exempt from the rule are pork products that have been processed, products distributed through food service and products that are exported out of the U.S.

Canadian producers have welcome the USDA's latest version of the proposed rule..

"As a result of changes the made to the U.S. farm bill this year the record keeping requirements are much less onerous than what would have been the case under the 2002 farm bill. And there certainly is much more accommodation of existing market chains or value chains," observes Canadian Pork Council (CPC) Executive Director Martin Rice.

Commingling of Animals Considered Critical

One of the key change relates to the commingling of animals from different countries.

"They are allowing the Americans to put product from Label A into Label B," says Manitoba Pork Council Chairman Karl Kynoch.

That will allow U.S. processors to mix U.S. born, raised and processed hogs with, for example, Canadian origin hogs. In that case the meat could be labeled "Product of the United States and Canada."

Kynoch notes meat from hogs that have been in the U.S. a minimum of 15 days qualify for the Label B designation so any of the isoweans or 50 pounders sourced from Canada will qualify for that label.

The meat from market hogs imported into the U.S. from Canada for direct slaughter, however, will be restricted to Label C.

Rice explains while Label B allows processors the choice of using "Product of Canada and the United States" or "Product of the United States and Canada,” Label C only allows “Product of Canada and the United States.”

U.S. Processors and Retailers Expected to Determine Impact on Canadian Pork

Saskatchewan Pork Development Board policy analyst Mark Ferguson believes the impact of the new labelling requirements on Canadian pork producers will ultimately be determined by U.S. processors and retailers.

"Although the rule is apparently a little more flexible than the previous one, it's very similar to what was introduced several years ago. Everything filters down from the retail level."

Ferguson fears, if the rules are considered to complex or costly some U.S. pork processing plants could decide not to purchase Canadian hogs or discount the price.

He suggests, there are a few aspects that remain up in the air and we'll just have to wait and see how retailers apply the rule.

"Its effect on the Canadian market place will be decided by retailers and U.S. packing plants and their ability to efficiently comply with the rule while at the same time utilizing Canadian product."

Some Details Still Unclear

"Until we get clear interpretations from USDA on some of the key regulatory elements it's difficult to tell what the commercial implication will be," observes Deborah White the senior vice president and chief legal officer with the U.S. based Food Marketing Institute (FMI).

The FMI is the major trade association for the wholesale and retail food industry in the United states. Its approximately 1,500 food retail and wholesale members in the United States and around the world operate 26,000 retail outlets and generate a combined annual sales volume of 680 billion dollars.

Open Access to Foreign Products Identified as Fundamental

"In this day and age being able to access food products from around the world is absolutely essential. We strongly oppose any barriers to trade that prevent us from sourcing the best products possible for consumers," White stresses.

She notes, at this point, the FMI is working with the agriculture department for an interpretation of how the rule will be implemented.

"We're looking at issues such as whether USDA is going to require the countries to be identified in a certain order or a certain order for some products and a different order for other types of products. We're looking at the impacts on the distribution system as well.

Whether, for example the warehouses will need to keep products segregated by country of origin or whether they'll be able to mix them in the distribution centre."

Until we get definitive answers from USDA on some of these key points it's really difficult to give clear and specific guidance to people or to understand exactly how workable the system will be she says.

Disruptions in Marketing Patterns Possible

White concedes you can't rule out the possibility of disruptions in the supply chain, at least in the short term, until the market sorts itself out and reacts.

"U.S. retailers are as varied as the consumer groups that they serve," she says.

"Each one is going to have to assess the regulatory impact of the new requirements and figure out how best to continue to provide high quality food products to consumers efficiently. Some may very well decide to limit sourcing for some items, such as produce or particular meat items. Others will look at the volume of product that they are committed to providing to consumers and decide that single sourcing just isn't an option."

CPC Endorses Key Provisions

Rice notes the CPC supports the added flexibility being built into the system through allowing comingling and the six month education period to allow participants to adjust before the regulations are strictly enforced.

He adds the CPC will also be encouraging the maximum opportunity for the processing definition to be made available for processors.

"Pork that goes into processing is not subject to COOL, nor is pork used in food service or pork that is exported from the U.S. so we would be looking at maximizing opportunities to have the pork considered as processed. I think an area there could include pork which is marinated or other enhancements to the product. Right now those may not be considered as constituting processing but we’ll be arguing they should."

FMI Calls for Cooperation

White believes working together is going to be essential.

"Retailers have the primary burden under the law. We are the ones who are required to provide country of origin information but we can't look at a hand of bananas or a pork chop and know what the origin of those products are."

White insists the retail and food distribution industries in the United States are going to do their very best to comply with the law and to serve consumers well. And, in doing so, will be depending on sound partnerships with suppliers.

"We're all going to have to work together in order to make sure we can implement this law successfully both in terms our industry needs and also for consumers," she says.

5m Editor