With the recent implementation of mandatory country-of-origin labeling on many fresh and frozen produce items and certain meat products, consumers are seeing new labels in their grocery stores. Not only does COOL impact the point of sale, it also affects the entire meat industry, from retailers to producers.
At face value, the COOL requirements seem simple enough — identify the country from which the product originates. However, the devil is in the details. The new regulations pose several challenges for retailers and meat processors, as well as individuals and entities further down the production and processing chain. Among other things, the regulations require that supporting country-of-origin information be readily obtainable for a year. This means increased paperwork for producers, feedlots, animal auctions, processors and retailers. It also requires that these entities all pay careful attention to the paper trail. Birth records, sale receipts, purchase invoices and other similar documents will suffice to prove an animal’s country of origin. For producers who do not have these records, information contained in a signed affidavit will be acceptable to prove an animal’s origin.
In addition to determining and keeping tabs on an animal’s origin coming into the plant for that day or even a specific shift, the label itself and the information it contains present another set of challenges for processors. COOL requirements encompass an animal’s country of birth as well as the country in which it was raised or fed out, the country in which it was slaughtered and the country in which it was processed. For example, a pork roast from a hog born in Canada but raised, slaughtered and processed in the United States would be required to have a label indicating that it was a product of both Canada and the United States.
Processors have taken different approaches to address the issues posed by this requirement. Some have announced that they will switch their production and purchases to use only animals born, raised and processed in the United States. Others are attempting to coordinate purchases and shifts so that the same label can be used for animals processed during that specified period. Yet other companies have announced plans to use a more generic “North American” label for all products coming out of their facilities, identifying the items as products of the “United States, Mexico, Canada.” The rationale for using this label is that on various days there may be animals moving through the plant that could be traced back to Mexico or Canada; thus, it saves the processor the time and expense of trying to micromanage production and sort out these animals on a daily basis.
However, USDA contends that the wholesale use of a North American label violates the spirit of the regulations because it fails to provide the very information to consumers that the law is intended to provide — namely, the actual country or countries from which the product originates. Several congressmen agree, and there may be an effort to amend the regulations in the future. For its part, USDA has stated that processors should not use the generic North American label unless there is actually at least one animal processed each day that originates from each country.
Since the initial discussions regarding the North American label, some processors have announced plans to change their approach. While some are making changes to their contracting and purchasing plans in order to use a U.S.-only label, others are waiting to see what consumers demand. Market demand will be one of the major driving forces in how processors and, to an extent, producers adapt to the COOL regulations.
Cost and Enforcement Concerns
The next six months will be key in determining USDA’s enforcement and interpretation of the various COOL regulations. The onset of a new presidential administration this month may complicate the process. Depending on the new administration’s perceptions of COOL, USDA’s interpretation of the regulations may be altered after only a few months. Enforcement budget concerns also exist as the products now subject to COOL requirements have greatly increased, but USDA’s enforcement budget currently remains the same.
In addition, consumer demand for COOL and a willingness to pay for it remains largely unknown, and much of the cost involved will be passed down the line to consumers. Initial estimates predict that implementation will cost producers, processors and retailers approximately $2.5 billion in the first year. However, if experience is any guide, such estimates may be low. For example, the actual costs of implementing COOL for seafood and fish ran about five to 10 times higher than the initial estimates.
The next few months will allow the meat industry to gauge the extent of implementation costs and will demonstrate how much of the increased costs will be passed along to consumers. Only time will reveal whether consumers will demand U.S.-only labeled products at increased prices, particularly as they face other economic challenges.
Potential Changes Ahead
While some tout COOL as a food-safety regulation, others contend it is nothing more than a protectionist regulation. The truth likely lies somewhere in between and may evolve as the implementation process is evaluated. Producers in Mexico and Canada will keep a close eye on the process, as there are concerns that COOL regulations may violate the North American Free-trade Agreement, as well as cause a decline in animal sales between those countries and the United States.
Legislation also has been introduced to expand COOL to dairy products, largely in response to the issues related to China discovering melamine in its powdered milk and other dairy products. This contaminant caused several deaths and hundreds of illnesses in China and other countries where the products were sold. However, for COOL to apply to dairy products in the United States and address concerns like those occurring in China, the definition of regulated products will need to be altered. If, like meat and other products, only unprocessed dairy products would be required to conform to COOL regulations, products like powdered milk would not be regulated.
The next six months will be critical as the impact of COOL regulations is assessed and potential changes and additions to the law are considered. The enforcement level will play a major role in assessing these regulations and their effectiveness, as will consumers’ actions.
Kristin Eads and Jennifer Williams Zwagerman are lawyers in the Food, Agriculture and Biofuels group at Faegre & Benson, dealing primarily with agribusiness issues and litigation. Eads is a partner in the Minneapolis office and Zwagerman is an associate in the Des Moines office. Eads can be reached at email@example.com or (612) 766-7000, and Zwagerman can be reached at firstname.lastname@example.org or (515) 248-9000.