[Appendix A]{.underline}

[Final Regulatory Impact Analysis]{.underline}

FSIS is amending its regulations to require that official establishments
that produce certain ready-to-eat (RTE) meat and poultry products (MPPs)
take measures to prevent product adulteration by [L. monocytogenes
(Lm)]{.underline}. These amended regulations primarily affect
establishments that produce RTE MPPs that are exposed to the environment
following lethality treatment and that support the growth of
[Lm]{.underline}.

The final rule takes into account the differences in the risk of
[Lm]{.underline} contamination by type of RTE MPP product and by the
manner in which the pathogen is controlled in the production process. It
takes into account these differences by identifying four alternative
[Lm]{.underline} control approaches applying to RTE MPPs that are
exposed to the plant environment after undergoing a process that is
lethal to the pathogen. Each alternative involves a different level of
pathogen control and to each there corresponds a preferred level of
monitoring and verification, based on science and the nature of the
product.

[Need for the Rule]{.underline}

This action is compelled by recent outbreaks of food borne illness
related to the consumption of adulterated RTE meat and poultry products,
coupled with information on the pathogenicity of the organism and the
findings of the risk assessment and risk ranking conducted by FDA and
FSIS. [Lm]{.underline} contamination is often a result of post
processing contamination or growth of the organism after it leaves the
Federal establishment. FSIS concluded before beginning this rulemaking
that many establishments were not effectively implementing HACCP plans
and Sanitation SOPs to prevent [L. monocytogenes]{.underline} from
contaminating the RTE product in the post-lethality processing
environment.

Given the pathogenicity of [L. monocytogenes]{.underline}, the
opportunity for it to contaminate RTE product in the post-lethality
environment, and the significant consequences that this contamination
can have, FSIS is amending its regulations. The Agency is adding
provisions that require establishments that produce post-lethality
exposed RTE product to include in their HACCP plans or in their
Sanitation SOPs or other prerequisite programs measures that prevent
product adulteration by [L. monocytogenes]{.underline}.

[Market Failure]{.underline}. This final rule addresses a market
failure. Market failures occur when resources are misallocated or
allocated inefficiently. Markets fail, in the current case, because
processors may not always be provided with sufficient incentives to
allocate the additional resources and efforts needed to provide
effective prevention methods for pathogen contamination in their
products. These incentives are lacking because consumers cannot identify
(and reward) those firms that produce RTE MPPs and are implementing the
desired food safety safeguards. Therefore, consumers are unable to
distinguish these products from those produced by lower cost firms that
are applying less effective pathogen prevention methods. The lack of
information on the safety of the products produced by the establishments
in this latter group is a major concern of this rule. The recent FSIS
risk assessment clearly indicates that products from establishments that
are not taking these precautions can lead to illness or death.

The provisions of this final rule are designed to provide establishments
a choice of selected, proven technologies to minimize the presence of
[Listeria]{.underline} in their processing environment. The use of these
technologies and documentation of records on the environment of these
establishments, brought about by this final rule, will provide the kind
of information, and needed food safety assurance, that is lacking for
consumers.

[Rationale for the Approach Taken]{.underline}

The economic rationale for the requirements of the final rule is that it
recognizes that a combination of interventions have been shown to be
more effective that a single intervention and builds this into the
framework of regulation. Second, the requirements recognize that the
level of risk varies by product and how it is produced. Third, the
requirements provide incentives for the establishment to adopt
sanitation and testing practices that are most suitable for its products
and processes. And lastly, these incentives for establishments have been
shown to be preferable over mandatory requirements.

The FDA/FSIS risk ranking[^1] found that RTE MPPs posed a moderate to
high human health risk, particularly among vulnerable populations. These
products include deli meats, hotdogs, meat spreads, pâté, and deli
salads that include RTE meat or poultry products as components. The risk
ranking indicates that among the RTE MPPs, deli meats pose an especially
high risk.

The [FSIS Risk Assessment for L. monocytogenes in Ready-to-Eat Deli
Meats]{.underline}[^2] (FSIS [Lm]{.underline} risk assessment) estimated
the reduction in fatalities among vulnerable populations from consuming
contaminated deli meats that might be achieved through in-plant
sanitation with verification testing regimes of increasing intensity.
These results were compared with estimates for similar fatality
reductions that might be achieved by applying post-lethality treatments
or growth inhibiting additives or processes. Based on the finding of the
FSIS [Lm]{.underline} risk assessment, the Agency concluded that a
combination of interventions, including sanitation coupled with
verification testing, and the use of growth inhibitors, appears to be
more effective in controlling [Lm]{.underline} than a single
intervention in these operations.

FSIS considered the findings of the FDA/FSIS risk ranking and the
Agency's [Lm]{.underline} risk assessment and the public comments that
had been submitted on the Agency's proposed rule regarding control of
[Lm]{.underline} in RTE products. Many of the comments expressed
opposition to proposed mandatory testing frequencies \-- either the
frequencies themselves or the fact that they would be mandated. Instead
of mandatory testing requirements, the Agency is requiring that
establishments incorporate appropriate verification methods into their
HACCP plan, Sanitation SOP, or prerequisite program. This approach
provides establishments with incentives to test for [Lm]{.underline} and
the flexibility to implement control measures that are appropriate for
the types of products produced and processing methods at the
establishment.

The final rule sets out four alternative [Lm]{.underline} control
approaches. For the purposes of this analysis, FSIS has grouped the
affected establishments according to their use of these [Lm]{.underline}
control approaches.

[Changes between the Proposed and the Final Rule]{.underline}

FSIS considered four regulatory options for this final rule that had
been generated from comments on the proposed rule. The options were: (1)
no action; (2) a sanitation performance standard for reduction of
[Lm]{.underline} in RTE MPPs; (3) mandatory testing frequencies for
[Listeria]{.underline} species on food contact surfaces different from
the frequencies proposed; and (4) a warning label to inform consumers in
vulnerable groups of the potential for [Lm]{.underline} contamination.

FSIS determined that: (1) comments supported a final rule; (2)
scientific support for a sanitation performance standard was lacking;
(3) mandatory testing frequencies were objectionable for reasons given
in the comments; (4) a warning label would be inappropriate because,
under the law, all RTE meat and poultry products must be not adulterated
and thus safe for all consumers.

FSIS adopted a modification of the third option. It will require
establishments to describe their testing programs in their HACCP plans
or in their Sanitation SOPs or other prerequisite programs, as
appropriate for products and processing technologies. It will also
require establishments to set the frequency of their verification tests
for [Lm]{.underline} on food contact surfaces, but will not mandate a
specific frequency. The [Lm]{.underline} control alternative influences
the frequency of verification testing at an establishment. Verification
testing is expected to be most frequent for establishments that produce
post-lethality exposed deli meats and hotdogs and rely exclusively on
sanitation and verification testing to control [Lm]{.underline}.

The final rule identifies four [Lm]{.underline} control alternatives
that are typical of industry practices. The purpose of these control
alternatives is to link the usage of HACCP or sanitation procedures with
the risk of [Lm]{.underline} contamination based on the FDA/FSIS risk
ranking and the FSIS [Lm]{.underline} risk assessment. The control
approaches are: (1) A HACCP-based post-lethality treatment plus
[Lm]{.underline} growth limiting measures; (2) A HACCP-based
post-lethality treatment or [Lm]{.underline} growth limiting measures;
(3) Solely sanitation and verification control measures in its
post-lethality treatment and no [Lm]{.underline} growth inhibiting
measures -- and producing a class of post-lethality exposed product that
is not a deli product or a hotdog product; and (4) Solely sanitation and
verification control measures in its post-lethality treatment and no
[Lm]{.underline} growth inhibiting measures -- and producing a class of
post-lethality exposed product that is a deli product or a hotdog
product. For the purposes of this analysis, FSIS has grouped all
establishments producing RTE MPPs that are exposed post-lethality
according to their current and expected use of these [Lm]{.underline}
control approaches and this analysis will refer to these establishment
groups as establishment group (EG) 1 through 4.

The proposed rule would have required RTE MPP establishments to control
[Lm]{.underline} either in their HACCP plans or their Sanitation SOPs.
The final rule requires establishments to include post-lethality
treatments in their HACCP plans and allows them to have other types of
[Lm]{.underline} contamination controls in their HACCP plans or in their
Sanitation SOPs or other prerequisite programs. This modification of the
proposal is based on the finding that the establishment's use of a
post-lethality treatment represents a determination by the establishment
that [Lm]{.underline} is a hazard reasonably likely to occur.

The prerequisite program provisions in the final rule respond to
comments that the Agency should provide establishments with greater
flexibility in implementing [Lm]{.underline} contamination controls. In
particular, RTE MPP establishments usually do not control
post-processing contamination through HACCP alone, but through a variety
of prerequisite programs.

In response to public comments, the final rule also does not mandate
food contact surface (FCS) testing frequencies. Instead, the final rule
sets out specific requirements, for Alternatives 2 and 3 for sanitation
procedures that are included in HACCP plans, or in Sanitation SOPs or
other prerequisite programs. Establishments are allowed to choose their
own testing methods and frequencies for verifying the effectiveness of
their procedures.

The sanitation procedure requirements for Alternative 3 establishments
that that process hotdog and deli meat products and control for
[Lm]{.underline} using sanitation procedures only, include hold-and-test
provisions. These procedures are invoked when follow-up testing to
verify corrective actions in response to [Listeria]{.underline}-positive
FCS test results. A second positive FCS test for [L.
monocytogenes]{.underline} or an indicator organism entails withholding
from commerce product that was in contact with the contaminated surface.
Shipments can resume when subsequent tests in the same area of the plant
are negative. The product can be tested under a sampling plan that
provides sufficient confidence to enable the product to be released into
commerce. The requirements for Alternative 3 establishments that process
deli meats and hotdogs represent a modification of the hold-and-test
procedures that the proposal would have required (proposed §430.4(b))
but imposes this requirement only on establishments producing hotdog and
deli-meat type products. This particular change from the proposal is
responsive to comments opposing mandatory testing frequencies and the
proposed hold-and-test requirements, which would have applied to all RTE
MPPs. The requirements for Alternative 3 establishments that process
deli meats and hotdogs are also responsive to the FDA/FSIS risk ranking
which identified hot dog and deli-meat products as posing a moderate to
high risk for listeriosis on a per annum basis (as opposed to a per
serving basis), and the FSIS [Lm]{.underline} risk assessment which
evaluated the risk-reduction effectiveness of various combinations of
in-plant interventions, including FCS testing, with and without test and
hold actions.

The final rule also differs from the proposal by requiring RTE MPP
establishments to furnish FSIS with at-least-annual estimates of
production volume by type of RTE MPP and by alternative [Lm]{.underline}
control program used. This change responds to comments on the proposed
rule indicating opposition to the use of establishment size criteria in
determining verification testing intensity and to information provided
in the public comments indicating that there may not be a connection
between establishment size and volume of production. These comments
noted that production volume is dependent on factors other than
establishment size, such as technology.

Finally, the rule allows labels on RTE MPPs to show that the products
were processed in a manner to eliminate, reduce, or limit the growth of
[Lm]{.underline}, provided that the claim is validated. This provision
is not a regulatory requirement in that it does not mandate such
labeling, but is intended to encourage the industry to implement
effective [Lm]{.underline} controls and to provide useful information to
consumers, especially vulnerable subpopulations.

[Coverage]{.underline}

FSIS found that that the final rule will affect 2,930 federally
inspected RTE MPP establishments and about 2,046 State-inspected
establishments. About 144 of these establishments are considered large,
1276 small and 3,556 very small, using the size criteria adopted by FSIS
in implementing the HACCP regulations. FSIS was able to determine that
the baseline numbers of federally and State-inspected establishments in
the respective [Lm]{.underline} control groups 1 through 4 are,
respectively: 49; 2,297; 1,864; and 766. These numbers are expected to
change as a result of this rule.

FSIS was further able to determine that, because of the intensity of
verification testing that sanitation-and-testing establishments would
have to implement to ensure that product contaminated with
[Lm]{.underline} is not shipped, a certain percentage of establishments
in this group are likely to decide to put their [Lm]{.underline}
controls in their HACCP plans or to adopt [Lm]{.underline} growth
suppressing or limiting methods. They would decide, therefore, to "move
or migrate" into the grouping of establishments that take either the
first or the second [Lm]{.underline} control approach. The number of
establishments in establishment groups 1 through 4 is expected to be 95,
2,363, 1,864, and 654, respectively, after the final rule goes into
effect. The expected movement among establishment groups is discussed in
detail in a later section.

The numbers of establishments in each of these [Lm]{.underline} control
groupings will determine the allocation of FSIS inspection resources for
[Lm]{.underline} control verification. FSIS will verify that
establishments that produce RTE products are carrying out
[Lm]{.underline} control procedures in their post-lethality processing
areas as described in their HACCP plans or their Sanitation SOPs or
other prerequisite programs, and that they are complying with the
requirements of this final rule. In addition to verifying establishment
[Lm]{.underline} controls, the Agency will verify that any label claims
regarding [Lm]{.underline} control have been validated. The frequency of
FSIS verification testing of establishment [Lm]{.underline} controls is
expected to be higher for each successive [Lm]{.underline} control
alternative. In other words, the frequency will be lowest for
establishments that use control Alternative 1 and highest for
establishments that use control alternative 3 and that produce deli
meats and hotdogs.

[Establishment Groups]{.underline}

[Grouping by Control Method.]{.underline} For the purposes of this
analysis, four establishment groups can be identified in the final rule.
The four groups are composed respectively of the establishments choosing
[L. monocytogenes]{.underline} control Alternatives 1 through 3, and the
deli meat- and hotdog- producing establishments choosing Alternative 3
(9 CFR 430.4(b)(1), (b)(2), (b)(3)(i) and (b)(3)(ii)):

[Establishment Group One (9 CFR 430.4(b)(1)):]{.underline}
Establishments apply a post-lethality (PL) treatment to their products
or process **AND** use a [Lm]{.underline} growth inhibiting agent or
process. Products produced by establishments in EG 1 are expected to
present the least risk of possible [Lm]{.underline} contamination of
products because they use a combination of intervention measures. EG 1's
HACCP, Sanitation SOP or other prerequisite program controls and FSIS's
"normal" verification procedures are expected to provide information
that is adequate to assure the establishment and FSIS inspection
personnel that an adulterated product is not being produced.

[Establishment Group Two (9 CFR 430.4(b)(2)):]{.underline}
Establishments apply **EITHER** a post-lethality treatment to their
products **OR** use a [Lm]{.underline} growth inhibiting agent or
process. Because establishments in EG 2 apply a PL treatment to their
products or use a growth inhibiting agent or process, but not both, this
group's products present a somewhat higher level of risk. They still
would be considered "safe" with a high degree of certainty, but this
final rule will provide additional assurance that the products are not
adulterated by requiring EG 2 establishments to test food contact
surfaces (FCSs) and make the test results available to FSIS.

[Establishment Group Three (9 CFR 430.4(b)(3)(i)):]{.underline}
Establishments use **NEITHER** a PL treatment **NOR** a growth
inhibiting agent or process, but has Sanitation standard operating
procedures (Sanitation SOP) or other prerequisite programs **AND**
produce a class of post-lethality exposed product that is not a deli
product or a hotdog product.

[Establishment Group Four (9 CFR 430.4(b)(3)(ii)):]{.underline}
Establishments use **NEITHER** PL treatments **NOR** [Lm]{.underline}
growth inhibiting agents or processes in their RTE MPP production,
**BUT** have Sanitation SOP or other prerequisite programs **AND**
produce a class of post-lethality exposed product that is a deli product
or a hotdog product. Establishments in EG 4 produce RTE MPPs that have
been identified in recent risk assessments as posing significant risk of
[Lm]{.underline} contamination in their post-processing environment and
significantly contribute to illnesses and deaths. The [Lm]{.underline}
control measures for establishments in EG 4 are similar to those of EG
3, but FSIS feels that specific holding action requirements are
justified to ensure that no adulterated product enters commerce when a
second consecutive positive FCS test in the post-lethality processing
environment of a EG 4 is found. A guide to the final rule requirements
by establishment group is given in Table 1.

+----------------------------------------+-------+------+------+------+
| Table 1. Summary of final rule         |       |      |      |      |
| requirements by establishment group.   |       |      |      |      |
+----------------------------------------+-------+------+------+------+
| Item                                   | Est   |      |      |      |
|                                        | ablis |      |      |      |
|                                        | hment |      |      |      |
|                                        | Group |      |      |      |
+----------------------------------------+-------+------+------+------+
|                                        | 1     | 2    | 3    | 4    |
+----------------------------------------+-------+------+------+------+
| \(1\) Inclusion of a PL treatment to   | R     | R    | NR   | NR   |
| their product or process as a CCP in   |       |      |      |      |
| the establishment's HACCP plan.        |       | R    |      |      |
|                                        |       |      |      |      |
|                                        |       | R    |      |      |
|                                        |       |      |      |      |
|                                        |       | OR   |      |      |
+----------------------------------------+-------+------+------+------+
| \(2\) Validation of (1) as being       | R     |      | NR   | NR   |
| effective in eliminating [L.           |       |      |      |      |
| monocytogenes]{.underline}.            |       |      |      |      |
+----------------------------------------+-------+------+------+------+
| \(3\) Verification of (1) to be        | R     |      | NR   | NR   |
| effective in accordance with 417.4 on  |       |      |      |      |
| a continuous basis and provision of    |       |      |      |      |
| them to FSIS.                          |       |      |      |      |
+----------------------------------------+-------+------+------+------+
| \(4\) Apply a bacteriostatic agent or  | R     | R    | NR   | NR   |
| process that eliminates [L.            |       |      |      |      |
| monocytogenes]{.underline} growth in   |       | R    |      |      |
| the product.                           |       |      |      |      |
|                                        |       | R    |      |      |
+----------------------------------------+-------+------+------+------+
| \(5\) Validation of (4) as being       | R     |      | NR   | NR   |
| effective in eliminating [L.           |       |      |      |      |
| monocytogenes]{.underline}.            |       |      |      |      |
+----------------------------------------+-------+------+------+------+
| \(6\) Verification of (4) to be        | R     |      | NR   | NR   |
| effective in accordance with 417.4 on  |       |      |      |      |
| a continuous basis and provision of    |       |      |      |      |
| them to FSIS.                          |       |      |      |      |
+----------------------------------------+-------+------+------+------+
| \(7\) FCS testing with a frequency     | NR    | R    | R    | R    |
| determined by the establishment to be  |       |      |      |      |
| effective.                             |       |      |      |      |
+----------------------------------------+-------+------+------+------+
| \(8\) Provision of FCS testing results | NR    | R    | R    | R    |
| to FSIS.                               |       |      |      |      |
+----------------------------------------+-------+------+------+------+
| \(9\) Establishment's sanitation plan  | NR    | R    | R    | R    |
| explains how FCS is kept sanitary and  |       |      |      |      |
| free of [L.                            |       |      |      |      |
| monocytogenes]{.underline}.            |       |      |      |      |
+----------------------------------------+-------+------+------+------+
| \(10\) Specific requirements on        | NR    | NR   | NR   | R    |
| holding of each lot of product         |       |      |      |      |
| associated with two consecutive FCS    |       |      |      |      |
| positives, until two consecutive FCS   |       |      |      |      |
| negatives.                             |       |      |      |      |
+----------------------------------------+-------+------+------+------+
| NR = Not required; R = Required.       |       |      |      |      |
+----------------------------------------+-------+------+------+------+

[Analysis of Costs]{.underline}

[Number of Establishments.]{.underline} The preliminary regulatory
impact analysis relied on the 1997 Census of Manufacturers for an
initial count of RTE MPP establishment numbers. 1,630 establishments
were identified as producing a RTE MPP. The estimated number of
establishments affected by the proposed rule was expected to be fewer
than the actual number total for many reasons, but chiefly because the
Census classifies businesses according to their principal activity. In
some cases, the production of RTE MPP might be a secondary activity.
This undercounting was a major deficiency in the preliminary regulatory
impact analysis (PRIA). FSIS has corrected this problem and is
estimating the impacts of the final rule considering both federally and
State-inspected establishments producing RTE MPPs.

Basing the analysis on a more realistic estimate of the number and types
of establishments affected by the rule provides a better estimate of
industry impacts. However, using this approach, the product-specific
information, such as the value of production, that was available through
Census data, can not be used. Also, certain assumptions must be made in
manipulating the data for both federally and State-inspected
establishments to avoid double counting and to estimate HACCP process
categories for RTE MPPs at State-inspected establishments.

FSIS used the 2001 Performance-Based Inspection System (PBIS) databases
to identify Federal-inspected establishments that have at least one
HACCP process category code (actually, the pertinent procedure code from
FSIS's inspection system procedure guide) associated with a RTE MPP. The
2001 PBIS database showed that there were 2,930 federally inspected
establishments with 3,556 HACCP process category codes associated with
RTE MPPs. Establishments were grouped into HACCP establishment size
categories by cross tabulating this data with the 2001 Enhanced
Facilities Database (EFD). (HACCP establishment size categories have
been defined since the publication of the PR/HACCP rule (61 FR 38806;
July 25, 1996) as large: more than 500 employees; small: between 499 and
10 employees; and very small: fewer than 10 employees or less than \$2.5
million in annual sales.) To obtain the number of unique establishments
in each HACCP process category code, the number of HACCP plans for each
HACCP process code was divided by the average number of HACCP plans per
establishment in each size category (bottom of Table 2).

The EFD identified 2,046 State-inspected RTE MPP establishments
comprised of 1,992 very small establishments and 54 small
establishments. To obtain an estimate of the product types produced at
State-inspected plants, the total number of State-inspected
establishments was distributed across the four HACCP process category
codes in the same proportion that was found in federally inspected
establishments (Table 3).

+---------------------------------+--------+--------+--------+--------+
| Table 2. Federally inspected    |        |        |        |        |
| RTE MPP establishments by HACCP |        |        |        |        |
| process category code, 2002.    |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| Item                            | HACCP  |        |        | Total  |
|                                 | E      |        |        |        |
|                                 | stabli |        |        |        |
|                                 | shment |        |        |        |
|                                 |        |        |        |        |
|                                 | Size   |        |        |        |
|                                 | Ca     |        |        |        |
|                                 | tegory |        |        |        |
+---------------------------------+--------+--------+--------+--------+
|                                 | L      | S      | VS     |        |
+---------------------------------+--------+--------+--------+--------+
| O3E- Not heat-treated,          | 5      | 68     | 88     | 161    |
| shelf-stable                    |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| O3F- Heat-treated, self-stable  | 41     | 238    | 405    | 684    |
+---------------------------------+--------+--------+--------+--------+
| O3G-Fully cooked, not           | 122    | 1,079  | 1,319  | 2,520  |
| shelf-stable                    |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| O3I-Product w/ secondary        | 9      | 68     | 72     | 149    |
| inhibitors                      |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| Total HACCP plans               | 177    | 1,453  | 1,884  | 3,514  |
+---------------------------------+--------+--------+--------+--------+
| Total Unique Federally          | 144    | 1,222  | 1,564  | 2,930  |
| inspected Establishments        |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| HACCP plans/establishment       | 1.23   | 1.19   | 1.20   | 1.20   |
+---------------------------------+--------+--------+--------+--------+
| "Adjusted" number of            |        |        |        |        |
| federally-inspected             |        |        |        |        |
| establishments by HACCP Process |        |        |        |        |
| Category Code (Number of HACCP  |        |        |        |        |
| Process Category Codes by Size  |        |        |        |        |
| Category divided by HACCP       |        |        |        |        |
| plans/establishment)            |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| Item                            | L      | S      | VS     | Total  |
+---------------------------------+--------+--------+--------+--------+
| O3E- Not heat-treated,          | 4      | 57     | 73     | 134    |
| shelf-stable                    |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| O3F- Heat-treated, self-stable  | 33     | 200    | 336    | 570    |
+---------------------------------+--------+--------+--------+--------+
| O3G-Fully cooked, not           | 99     | 907    | 1,095  | 2,101  |
| shelf-stable                    |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| O3I-Product w/ secondary        | 7      | 57     | 60     | 124    |
| inhibitors                      |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| Total Federal-inspected RTE MPP | 144    | 1,222  | 1,564  | 2,930  |
| establishments                  |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+

  ------------------------------------ --------------------- ------- ------- ---------
  Table 3. State-inspected RTE MPP                                           
  establishments by HACCP process                                            
  category code, 2002.                                                       

  Item                                 Distribution of                       
                                       federally-inspected                   
                                       establishments                        

  HACCP Process Category Code          HACCP Establishment                   Total
                                       Size Category                         

                                       L                     S       VS      

                                       Percent                               

  O3E- Not heat-treated, shelf-stable  2.8                   4.7     4.7     4.6

  O3F- Heat-treated, self-stable       23.2                  16.4    21.5    19.5

  O3G-Fully cooked, not shelf-stable   68.9                  74.3    70.0    71.7

  O3I-Product w/ secondary inhibitors  5.1                   4.7     3.8     4.2

  Total Federal-inspected RTE MPP      100                   100     100     100
  establishments                                                             

  Item                                 "Adjusted" number of                  
                                       State- inspected                      
                                       establishments                        

  O3E- Not heat-treated, shelf-stable  0                     3       93      96

  O3F- Heat-treated, self-stable       0                     9       428     437

  O3G-Fully cooked, not shelf-stable   0                     40      1,395   1,435

  O3I-Product w/ secondary inhibitors  0                     3       76      79

  Total State-inspected RTE MMP        0                     54      1,992   2,046
  establishments                                                             
  ------------------------------------ --------------------- ------- ------- ---------

+---------------------------------+--------+--------+--------+--------+
| Table 4. Total number of RTE    |        |        |        |        |
| MPP Federally and               |        |        |        |        |
| State-inspected establishments  |        |        |        |        |
| by HACCP process category code, |        |        |        |        |
| 2002.                           |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| Item                            | HACCP  |        |        | Total  |
|                                 | E      |        |        |        |
|                                 | stabli |        |        |        |
|                                 | shment |        |        |        |
|                                 |        |        |        |        |
|                                 | Size   |        |        |        |
|                                 | Ca     |        |        |        |
|                                 | tegory |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| HACCP Process Category Codes    | L      | S      | VS     |        |
+---------------------------------+--------+--------+--------+--------+
| O3E- Not heat-treated,          | 4      | 60     | 166    | 230    |
| shelf-stable                    |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| O3F- Heat-treated, self-stable  | 33     | 209    | 764    | 1,007  |
+---------------------------------+--------+--------+--------+--------+
| O3G-Fully cooked, not           | 99     | 948    | 2,490  | 3,536  |
| shelf-stable                    |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| O3I-Product w/ secondary        | 7      | 60     | 136    | 203    |
| inhibitors                      |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| Total RTE MPP establishments    | 144    | 1,276  | 3,556  | 4,976  |
+---------------------------------+--------+--------+--------+--------+

The total number of establishments producing RTE MPP products is
estimated to be 4,976: 59 percent federally inspected and 41 percent
State-inspected. Of the total, 4.6 percent are associated with the O3E
HACCP code; 20.2 percent with the O3F code; 71.1 percent with the O3G
code; and, 4.1 percent with the O3I code (Table 4). Further analysis of
HACCP size categories shows that 71.5 percent of all RTE MPP
establishments are very small; 25.6 percent are small; and, 2.9 percent
are large.

[Product groups**.**]{.underline} The PRIA classified RTE MPP
establishments by the expected range of potential cost impact on those
establishments: those likely to incur the greatest costs, moderate
costs, minor costs, and no likely costs (Table 3 in Federal Register,
Vol. 66, No. 39). This grouping was based on the likely impact from both
the proposed testing programs as well as the proposed changes in
lethality and stabilization performance standards. The final rule
concerns only that section of the proposed rule dealing strictly with
FSIS's desire to increase safeguards with respect to possible
[Lm]{.underline} contamination. Because of this and also because
products and production processes vary across the same product
classification, it is not feasible to disaggregate in the fashion of the
PRIA. However, it appears that the largest impact will be on
establishments producing cooked RTE MPP products -- those products
associated with HACCP process code O3G. There is little likelihood that
there will be any cost impact on RTE MPP establishments producing
products in the O3E, O3F and O3I HACCP process codes, except for costs
attributable to a possible increase in FCS testing mandated by the rule.
These costs are expected to be minor because many of the establishments
in the HACCP process category codes already apply an agent or process
that inhibits [Lm]{.underline} growth so many of these establishments
"qualify" to be classified in EG 2.

Establishments associated with the O3G HACCP process category code
produce cooked RTE MPPs which may or may not be able to apply
post-lethality treatment to products, apply antimicrobial agents, or
include procedures in either Sanitation SOPs or prerequisite programs.
In some cases, FCS testing and disclosure of those results to FSIS may
result in minor cost increases similar to those for 03E, 03F, and 03I
HACCP process category codes. For other products in the 03G HACCP
process code, they could be produced under any of the four alternative
post-lethality [Lm]{.underline} control regimes identified in this final
rule. In those cases, the costs could be significantly higher.
Accordingly, the cost impact discussion is presented by each
establishment group, type of products produced, and their associated
establishment numbers and size distribution.

[Impacts according to establishment group.]{.underline} The Agency
anticipates that the measures taken by establishments will differ by
establishment group. The following describes the major types of
responses expected to be taken in response to the final rule for those
establishments switching establishment groups and/or validating current
[Lm]{.underline} controls.

[EG 1 EG 2 Impacts.]{.underline}

\(1\) *Incorporation of post-lethality treatments and/or their
validation for FSIS*: Many establishments are currently using
post-lethality measures to address possible [Lm]{.underline}
contamination. These actions may have been taken in response to client
requirements, the recent FSIS [Lm]{.underline} intensified verification
program, or in anticipation of further FSIS action. The costs of these
actions taken by establishments are not attributed to the final rule.
However, measures taken to satisfy this requirement or to validate these
measures to FSIS are attributed to the final rule. These measures
include: post-lethality heating (may not be feasible for many products,
especially those with a high fat content); high-pressure systems, which
may be limited to a few specialty items and usually have a low
throughput; and irradiation, which is not permitted to be applied to RTE
MPPs at present. FSIS expects establishments using post-lethality
treatments to verify that their treatments are effective and also to
monitor FCSs to assure that the treatment is effective. This level of
verification FCS testing for establishments in EG 1 is expected to be
about twice yearly.

\(2\) *Use of agent in product formulation or change in processes to
inhibit [Lm]{.underline} growth in product*: FSIS has recently permitted
the use of certain food additives that inhibit [Lm]{.underline} growth
(65 FR 17128, March 31, 2000). These additives include lactate and
diacetates that have been applied increasingly to cooked and cured RTE
MPPs such as hotdogs. The cost to establishments of taking measures
involving the use of these additives is not attributable to the final
rule. The Agency estimates that up to 70 percent of all hotdog
manufacturers have recently changed their product formulations to
incorporate one of the recently permitted food additives. Changes in a
process that would help inhibit the [Lm]{.underline} growth in the
product include: lowering the pH or water activity levels and
refrigerating or freezing the product following processing. Growth
inhibiting processes uses antimicrobial agents to control growth in
post-lethality exposed products such as many hotdogs and certain other
kinds of sausages. Verification FCS testing for establishments in EG 2
would be expected at least once per quarter. This level of testing would
be expected whether the establishment administered a PL treatment or
applied a [Lm]{.underline} growth inhibiting agent or included a process
in either a Sanitation SOP or prerequisite program.

[EG 3 and EG 4 Impacts.]{.underline}

(1*) FCS testing frequencies*: For the purpose of this analysis, the
minimum level of FCS testing expected for establishments in EG 3 is at
least once per month: once a month for high, once a month for small, and
once a month for very small establishments. Also, the minimal level of
FCS testing for EG 4 is: at least weekly for high-volume establishments,
semi-monthly for small volume establishments, and monthly for very small
(or low volume) establishments (4-2-1). These testing frequencies are
illustrative in that the actual testing frequencies incorporated into
final compliance guidelines may differ.

A potential unintended impact of the rule for establishments in EG 4
might be the incentive to reduce their current level of FCS testing if
results are to be shared with FSIS. An establishment in this group may
conduct fewer tests if results could lead to costly hold-and-test
actions. This potential unintended impact was not be quantified in this
analysis.

[EG 4 Impacts.]{.underline}

\(1\) *Hold and Test*: EG 4 establishments may be unable to (1) apply a
post-lethality treatment or (2) apply an agent or include a process in
either the Sanitation SOP or prerequisite program for a variety of
reasons. Product from these establishments can be held on the basis of
FCS testing results shared with the Agency. Multiple episodes of holding
product may be incurred in the case of two consecutive positive FCS test
results.

[Baseline]{.underline}

[Establishment Types]{.underline}. The compliance cost impacts of the
rule differ significantly among establishment groups and by HACCP size
category. The current distribution of establishments by group and size
serves as the baseline for determining the distribution of compliance
cost and also the starting point for the expected establishment shifts
among establishment groups discussed below.

Table 4 indicates that 1,440 establishments produced RTE MPPs in the
O3E, O3F, and O3I HACCP process category codes. For purposes of this
analysis, these establishments are distributed 90 percent in EG 2 and 10
percent in EG 3. The high proportion in EG 2 is a result of the use of
growth inhibitors in most of these products which include cured and
salted products. These products have not been associated with
listeriosis outbreaks.

The remaining 3,536 establishments in O3G produce cooked RTE MPPs that
may be produced by any of the four [Lm]{.underline} control methods.
These establishments were partitioned into the four establishment groups
as follows:

\(1\) From a December 2002 FSIS hotdog and deli meat survey, we know
that there are 1,712 operations producing hotdogs and/or deli meats.
Given that 38 percent of these operations produce both hotdogs and deli
meats, the actual number of unique establishments involved is 1,061
((1-.38) x 1,712).

\(2\) The number of establishments producing cooked products other than
hotdogs and/or deli meats was estimated by subtracting the number of
single establishments producing hotdogs and/or deli meats from the total
number of establishments producing cooked products (3,536 -- 1,061 =
2,475).

\(3\) FSIS inspection program personnel were contacted to estimate the
proportion of establishments producing hotdog/deli meat and other cooked
products in each of the establishment groups. These estimates, provided
in Tables 5 and 6, were used to partition the establishments producing
hotdog and deli meats and the other cooked RTE MPPs by establishment
group (Table 7).

[Health Consequences]{.underline}. The baseline for comparing human
health benefits associated with the rule is established by the "Draft
FSIS Risk Assessment for [Listeria Monocytogenes]{.underline} in
Ready-to-eat Deli Meat Products"[^3] ([Lm]{.underline} Risk Assessment).
The [Lm]{.underline} Risk Assessment concludes that 320 deaths are
attributable to RTE deli meats. It is not possible at this time to
identify the number or deaths attributable to RTE MPPs, which in
addition to deli meats includes hotdogs, fermented sausages, and related
products.

The FDA/FSIS risk ranking model[^4] estimates that there are about 340
billion servings of all RTE products consumed per year. RTE MPPs are
contained within the following classes: reheated franks, non-reheated
franks, deli meats, fermented sausages, pâté, and deli-salads. These
classes comprise about 43 billions servings. The deli meat class is
responsible for 49 percent of the 43 billion servings of RTE MPP. The
two hotdog classes are together responsible for 15 percent of the
servings of RTE MPP. Based on these estimates, there could be as many
375 annual fatalities associated with RTE MPPs.

The [Lm]{.underline} Risk Assessment, because of its focus on deli
meats, is only able to estimate the human health benefits associated
with the rule as it affects this category of products. For purposes of
establishing a baseline for potential human health benefits, deli meats
are divided into two categories: products sliced and packaged at the
establishment; and retail sliced product. Pre-packed products are
post-lethality exposed and the focus of the regulation. Retail-sliced
products are not post-lethality exposed until prepared for use or sale
at a retail location. The human health exposure to each type of product
is a function of its share of total RTE deli meats consumed and the
level of contamination in each type of product. Actions by FSIS can
reduce the exposure to some, but not all RTE deli meat.

The Economic Research Service estimates that pre-packaged product
accounts for 46 percent (\$11.6 billion) of total sales of RTE deli
meats (\$25.2 billion) and retail sliced product the remaining 54
percent (\$13.6 billion).[^5] Volume of product in the categories would
provide a more suitable basis for establishing a baseline level.

There is considerable uncertainty about the level of contamination in
each type of product when purchased. A recent study by Gombas, Chen,
Clavero, and Scott[^6] finds that there is a 0.4 percent prevalence rate
for [Lm]{.underline} in pre-packaged product and a 2.7 percent
prevalence rate for [Lm]{.underline} in retail sliced product at the
retail level. If 0.4 percent of pre-packaged product was found to be
contaminated at the processing plant, it follows that 0.4 percent of the
2.7 percent prevalence rate at retail might be due to contamination at
the processing site. That means that the prevalence of product solely
contaminated during retail slicing is 2.3 percent (the observed 2.7
percent minus the 0.4 percent that was contaminated at the processor
site). Using this information and the relative market share weights for
pre-packaged and retail sliced deli meats from ERS provides a weighted
average exposure rate for deli meats:

.004(0.46) + 0.004(0.54) + .027 (.54) = .0164 or,

> .004 + .01242 = .01642

The pre-packaged product share of the weighted average exposure rate is
24.4 percent (.004/.01642 = 0.2436) and the retail sliced product share
is the remaining 75.6 percent. Therefore, the human health baseline risk
which the FSIS can affect at federally inspected establishments is a
potential maximum 78 deaths (24.4 x 320).

The Agency has several concerns about this approach to establish a
baseline level of human health risk. The prevalence levels estimated by
Gombas, et al. and based on National Food Processing Association (NFPA)
Survey data, taken at retail establishments, are significantly lower
than those found by FSIS and reported in the [Lm]{.underline} Risk
Assessment Model. Levine, et al.[^7] reported 1999 prevalence levels of
[Lm]{.underline} at 2.71 percent for cooked, roast, and corned beef and
4.58 percent in sliced ham and other pork luncheon meats. All samples
were collected at production facilities, not at retail. The prevalence
levels from the NFPA and FSIS studies are not entirely comparable, but
they do seem to be inconsistent, even after taking into account basic
limitations in the data used in both studies. The NFPA survey data
describe the difference in prevalence between product contaminated at
processing and product contaminated at retail. It is important to
recognize that some of the product found contaminated at retail was
contaminated at the processor but was only detected at retail. It is
difficult to reconcile FSIS product sampling which finds 2.7-4.6 percent
of RTE meats positive for [Lm]{.underline}, with the finding based on
the NFPA survey data that only 0.4 percent of packaged RTE meats are
positive at retail outlets. Some net growth, not dying off, of
[Lm]{.underline} within contaminated packages between processor and
retail is expected. The Agency concludes that there is much uncertainty
about the true proportion of products contaminated at the processor and
at the retail facility and among products affected by the rule and not
affected by the rule.

All things considered, the Agency concludes that it is appropriate to
make at least a 50-percent reduction in the potential deaths and
illnesses averted due to [Lm]{.underline} control measures taken by RTE
MPP establishments as a result of this rule (versus the 24.4 percent
based on the estimate presented). This percentage takes into account the
study by Gombas, et al., and discussions with FSIS industry experts,
risk assessors, and microbiologists. Consequently, the maximum potential
reduction in fatalities achieved through Agency measures for RTE deli
meat products is 180 (320 x .5). This level would be somewhat higher if
hotdogs, fermented sausage, and related products were included in the
[Lm]{.underline} Risk Assessment.

[Expected Movement Among Establishment Groups]{.underline}

There are six major industry cost impacts that are expected with the
final rule. Most of these impacts arise because some establishments are
expected to shift into establishment groups that entail different
technologies than they currently employ. These shifts are attributed to
compliance with requirements of the rule. Costs are estimated on the
basis of such shifts among the establishment groups. The movements among
establishment groups are based on the experience and judgment of FSIS
personnel which were pooled together to produce certain guidelines to
estimate the expected movement of establishments across establishment
groups, depending on their establishment size. For large establishments,
it is expected that, based on this collective judgment, 20 percent of
the establishments in EG 2 (that were already applying a PL treatment
and referred to as EG 2A) would move into EG 1 (Table 8). These seven
establishments already had the necessary equipment for these treatments,
but simply had not validated their use. Therefore, only very little
additional cost was involved for these establishments to move into EG 1
(along with the adoption of applying a [Lm]{.underline} inhibiting agent
or process). A 10-percent shift in establishments in EG 2B and EG 4 is
expected because these establishments have not incurred the high initial
costs of the post lethality equipment, resulting in a shift of seven
establishments from EG 2B and two from EG 4. No establishment shifts in
EG 3 are anticipated. In total, the application of these guidelines
produced an increase of 16 establishments in EG 1 (Table 9).

+-----+---------+-----+---------+-----+---------+--------+--------+
| Ta  |         |     |         |     |         |        |        |
| ble |         |     |         |     |         |        |        |
| 8   |         |     |         |     |         |        |        |
| .Ru |         |     |         |     |         |        |        |
| les |         |     |         |     |         |        |        |
| em  |         |     |         |     |         |        |        |
| plo |         |     |         |     |         |        |        |
| yed |         |     |         |     |         |        |        |
| in  |         |     |         |     |         |        |        |
| e   |         |     |         |     |         |        |        |
| sti |         |     |         |     |         |        |        |
| mat |         |     |         |     |         |        |        |
| ing |         |     |         |     |         |        |        |
| la  |         |     |         |     |         |        |        |
| rge |         |     |         |     |         |        |        |
| e   |         |     |         |     |         |        |        |
| sta |         |     |         |     |         |        |        |
| bli |         |     |         |     |         |        |        |
| shm |         |     |         |     |         |        |        |
| ent |         |     |         |     |         |        |        |
| shi |         |     |         |     |         |        |        |
| fts |         |     |         |     |         |        |        |
| acr |         |     |         |     |         |        |        |
| oss |         |     |         |     |         |        |        |
| e   |         |     |         |     |         |        |        |
| sta |         |     |         |     |         |        |        |
| bli |         |     |         |     |         |        |        |
| shm |         |     |         |     |         |        |        |
| ent |         |     |         |     |         |        |        |
| g   |         |     |         |     |         |        |        |
| rou |         |     |         |     |         |        |        |
| ps. |         |     |         |     |         |        |        |
+-----+---------+-----+---------+-----+---------+--------+--------+
|     | Went    |     |         |     | Came    |        |        |
|     | to:     |     |         |     | from:   |        |        |
+-----+---------+-----+---------+-----+---------+--------+--------+
| Est | 1       | 2A  | 2B      | 4   | 2A      | 2B     | 4      |
| ab. |         |     |         |     |         |        |        |
|     |         |     |         |     |         |        |        |
| Gr  |         |     |         |     |         |        |        |
| oup |         |     |         |     |         |        |        |
+-----+---------+-----+---------+-----+---------+--------+--------+
| 1   | NA      | \-\ | \-\-\-  | \-\ | 20% of  | 10% of | 10% of |
|     |         | -\- | \-\-\-\ | -\- | 34      | 74     | 13     |
|     |         | \-\ | -\-\-\- | \-\ |         |        |        |
|     |         | -\- | \-\-\-- | -\- |         |        |        |
|     |         | \-- |         | \-- |         |        |        |
+-----+---------+-----+---------+-----+---------+--------+--------+
| 2A  | 2A-1    | NA  | \-\-\-  | \-\ | \-\-    | \      | \      |
| /1  | above.  |     | \-\-\-\ | -\- | \-\-\-\ | -\-\-\ | -\-\-\ |
|     |         |     | -\-\-\- | \-\ | -\-\-\- | -\-\-\ | -\-\-\ |
|     |         |     | \-\-\-- | -\- | \-\-\-- | -\-\-\ | -\-\-\ |
|     |         |     |         | \-- |         | -\-\-- | -\-\-- |
+-----+---------+-----+---------+-----+---------+--------+--------+
| 2B  | 2B-1    | \-\ | NA      | \-\ | \-\-    | \      | 25% of |
| /1  | above.  | -\- |         | -\- | \-\-\-\ | -\-\-\ | 13     |
|     |         | \-\ |         | \-\ | -\-\-\- | -\-\-\ |        |
|     |         | -\- |         | -\- | \-\-\-- | -\-\-\ |        |
|     |         | \-- |         | \-- |         | -\-\-- |        |
+-----+---------+-----+---------+-----+---------+--------+--------+
| 3   | \-\-\-  | \-\ | \-\-\-  | \-\ | \-\-    | \      | \      |
|     | \-\-\-\ | -\- | \-\-\-\ | -\- | \-\-\-\ | -\-\-\ | -\-\-\ |
|     | -\-\-\- | \-\ | -\-\-\- | \-\ | -\-\-\- | -\-\-\ | -\-\-\ |
|     | \-\-\-- | -\- | \-\-\-- | -\- | \-\-\-- | -\-\-\ | -\-\-\ |
|     |         | \-- |         | \-- |         | -\-\-- | -\-\-- |
+-----+---------+-----+---------+-----+---------+--------+--------+
| 4   | 4-1     | \-\ | 4-2B    | NA  | \-      | \      | \      |
|     | above.  | -\- | above.  |     | \-\-\-\ | -\-\-\ | -\-\-\ |
|     |         | \-\ |         |     | -\-\-\- | -\-\-\ | -\-\-\ |
|     |         | -\- |         |     | \-\-\-- | -\-\-\ | -\-\-\ |
|     |         | \-- |         |     |         | -\-\-- | -\-\-- |
+-----+---------+-----+---------+-----+---------+--------+--------+
| /1  |         |     |         |     |         |        |        |
| 2A  |         |     |         |     |         |        |        |
| ref |         |     |         |     |         |        |        |
| ers |         |     |         |     |         |        |        |
| to  |         |     |         |     |         |        |        |
| th  |         |     |         |     |         |        |        |
| ose |         |     |         |     |         |        |        |
| es  |         |     |         |     |         |        |        |
| tab |         |     |         |     |         |        |        |
| lis |         |     |         |     |         |        |        |
| hme |         |     |         |     |         |        |        |
| nts |         |     |         |     |         |        |        |
| ap  |         |     |         |     |         |        |        |
| ply |         |     |         |     |         |        |        |
| ing |         |     |         |     |         |        |        |
| o   |         |     |         |     |         |        |        |
| nly |         |     |         |     |         |        |        |
| a   |         |     |         |     |         |        |        |
| PL  |         |     |         |     |         |        |        |
| t   |         |     |         |     |         |        |        |
| rea |         |     |         |     |         |        |        |
| tme |         |     |         |     |         |        |        |
| nt; |         |     |         |     |         |        |        |
| 2B  |         |     |         |     |         |        |        |
| ref |         |     |         |     |         |        |        |
| ers |         |     |         |     |         |        |        |
| to  |         |     |         |     |         |        |        |
| th  |         |     |         |     |         |        |        |
| ose |         |     |         |     |         |        |        |
| es  |         |     |         |     |         |        |        |
| tab |         |     |         |     |         |        |        |
| lis |         |     |         |     |         |        |        |
| hme |         |     |         |     |         |        |        |
| nts |         |     |         |     |         |        |        |
| ap  |         |     |         |     |         |        |        |
| ply |         |     |         |     |         |        |        |
| ing |         |     |         |     |         |        |        |
| o   |         |     |         |     |         |        |        |
| nly |         |     |         |     |         |        |        |
| a   |         |     |         |     |         |        |        |
| [   |         |     |         |     |         |        |        |
| Lm] |         |     |         |     |         |        |        |
| {.u |         |     |         |     |         |        |        |
| nde |         |     |         |     |         |        |        |
| rli |         |     |         |     |         |        |        |
| ne} |         |     |         |     |         |        |        |
| i   |         |     |         |     |         |        |        |
| nhi |         |     |         |     |         |        |        |
| bit |         |     |         |     |         |        |        |
| ing |         |     |         |     |         |        |        |
| ag  |         |     |         |     |         |        |        |
| ent |         |     |         |     |         |        |        |
| or  |         |     |         |     |         |        |        |
| p   |         |     |         |     |         |        |        |
| roc |         |     |         |     |         |        |        |
| ess |         |     |         |     |         |        |        |
| to  |         |     |         |     |         |        |        |
| th  |         |     |         |     |         |        |        |
| eir |         |     |         |     |         |        |        |
| p   |         |     |         |     |         |        |        |
| rod |         |     |         |     |         |        |        |
| uct |         |     |         |     |         |        |        |
| or  |         |     |         |     |         |        |        |
| pr  |         |     |         |     |         |        |        |
| oce |         |     |         |     |         |        |        |
| ss. |         |     |         |     |         |        |        |
+-----+---------+-----+---------+-----+---------+--------+--------+

<table style="width:100%;">
<colgroup>
<col style="width: 15%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 11%" />
<col style="width: 5%" />
<col style="width: 5%" />
<col style="width: 5%" />
<col style="width: 3%" />
<col style="width: 9%" />
<col style="width: 5%" />
<col style="width: 5%" />
<col style="width: 7%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="13">Table 9. Absolute levels and changes in large
establishments across establishment groups.</td>
</tr>
<tr class="even">
<td>Item</td>
<td colspan="3">Start and End Levels</td>
<td colspan="5">Went to:</td>
<td colspan="4">Came from:</td>
</tr>
<tr class="odd">
<td><p>Estab.</p>
<p>Group</p></td>
<td>Old</td>
<td>New</td>
<td>Change</td>
<td>1</td>
<td>2A</td>
<td>2B</td>
<td>4</td>
<td>Total</td>
<td>2A</td>
<td>2B</td>
<td>4</td>
<td>Total</td>
</tr>
<tr class="even">
<td>1</td>
<td>9</td>
<td>25</td>
<td>16</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>7</td>
<td>7</td>
<td>2</td>
<td>16</td>
</tr>
<tr class="odd">
<td>2A /1</td>
<td>34</td>
<td>27</td>
<td>-7</td>
<td>-7</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>-7</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>2B /1</td>
<td>74</td>
<td>70</td>
<td>-4</td>
<td>-7</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>-7</td>
<td>0</td>
<td>0</td>
<td>3</td>
<td>3</td>
</tr>
<tr class="odd">
<td>3</td>
<td>14</td>
<td>14</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>4</td>
<td>13</td>
<td>8</td>
<td>-5</td>
<td>-2</td>
<td>0</td>
<td>-3</td>
<td>0</td>
<td>-5</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>All Estab.</td>
<td>144</td>
<td>144</td>
<td>0</td>
<td>-16</td>
<td>0</td>
<td>-3</td>
<td>0</td>
<td>-19</td>
<td>7</td>
<td>7</td>
<td>5</td>
<td>19</td>
</tr>
<tr class="even">
<td colspan="13">/1 2A refers to those establishments applying only a PL
treatment; 2B refers to those establishments applying only a <u>Lm</u>
inhibiting agent or process to their product or process.</td>
</tr>
</tbody>
</table>

For small establishments, the combination of the high cost of
technologies involved in EG 1 and/ or EG 2 plus their limited volume of
production is expected to lower their propensity for establishments to
shift to another establishment group. Also, characteristics of their
products and their production are expected to limit establishment
shifts. Because of these constraints, it is expected that only 31
establishments (or 10 percent of the small establishments in EG 4) are
likely to migrate to EG 1 as a result of the final rule (Table 10).
Recall that all such movement involves the purchase and use of new
technology. For most of these establishments, the option of adding a
[Lm]{.underline} inhibiting agent or process is probably a more
attractive, least-cost option. As a result, 25 percent of the existing
number of small establishments in EG 4 (or 77 establishments) is
expected to shift into EG 2. No small establishments in EG 3 are
expected to shift establishment groups. In total, 108 small
establishments are expected to shift from EG 4 into either EG 1 or EG 2
(Table 11).

+-----+---------+-----+---------+-----+--------+--------+---------+
| Ta  |         |     |         |     |        |        |         |
| ble |         |     |         |     |        |        |         |
| 10. |         |     |         |     |        |        |         |
| Ru  |         |     |         |     |        |        |         |
| les |         |     |         |     |        |        |         |
| em  |         |     |         |     |        |        |         |
| plo |         |     |         |     |        |        |         |
| yed |         |     |         |     |        |        |         |
| in  |         |     |         |     |        |        |         |
| e   |         |     |         |     |        |        |         |
| sti |         |     |         |     |        |        |         |
| mat |         |     |         |     |        |        |         |
| ing |         |     |         |     |        |        |         |
| sm  |         |     |         |     |        |        |         |
| all |         |     |         |     |        |        |         |
| e   |         |     |         |     |        |        |         |
| sta |         |     |         |     |        |        |         |
| bli |         |     |         |     |        |        |         |
| shm |         |     |         |     |        |        |         |
| ent |         |     |         |     |        |        |         |
| shi |         |     |         |     |        |        |         |
| fts |         |     |         |     |        |        |         |
| acr |         |     |         |     |        |        |         |
| oss |         |     |         |     |        |        |         |
| e   |         |     |         |     |        |        |         |
| sta |         |     |         |     |        |        |         |
| bli |         |     |         |     |        |        |         |
| shm |         |     |         |     |        |        |         |
| ent |         |     |         |     |        |        |         |
| g   |         |     |         |     |        |        |         |
| rou |         |     |         |     |        |        |         |
| ps. |         |     |         |     |        |        |         |
+-----+---------+-----+---------+-----+--------+--------+---------+
|     | Went    |     |         |     | Came   |        |         |
|     | to:     |     |         |     | from:  |        |         |
+-----+---------+-----+---------+-----+--------+--------+---------+
| Est | 1       | 2A  | 2B      | 4   | 2A     | 2B     | 4       |
| ab. |         |     |         |     |        |        |         |
|     |         |     |         |     |        |        |         |
| Gr  |         |     |         |     |        |        |         |
| oup |         |     |         |     |        |        |         |
+-----+---------+-----+---------+-----+--------+--------+---------+
| 1   | NA      | \-\ | \-\-\-  | \-\ | \      | \      | 10% of  |
|     |         | -\- | \-\-\-\ | -\- | -\-\-\ | -\-\-\ | 308     |
|     |         | \-\ | -\-\-\- | \-\ | -\-\-\ | -\-\-\ |         |
|     |         | -\- | \-\-\-- | -\- | -\-\-\ | -\-\-\ |         |
|     |         | \-- |         | \-- | -\-\-- | -\-\-- |         |
+-----+---------+-----+---------+-----+--------+--------+---------+
| 2A  | \-\-\-  | NA  | \-\-\-  | \-\ | \      | \      | \-\-    |
| /1  | \-\-\-\ |     | \-\-\-\ | -\- | -\-\-\ | -\-\-\ | \-\-\-\ |
|     | -\-\-\- |     | -\-\-\- | \-\ | -\-\-\ | -\-\-\ | -\-\-\- |
|     | \-\-\-- |     | \-\-\-- | -\- | -\-\-\ | -\-\-\ | \-\-\-- |
|     |         |     |         | \-- | -\-\-- | -\-\-- |         |
+-----+---------+-----+---------+-----+--------+--------+---------+
| 2B  | \-\-\-  | \-\ | NA      | \-\ | \      | \      | 25% of  |
| /1  | \-\-\-\ | -\- |         | -\- | -\-\-\ | -\-\-\ | 308     |
|     | -\-\-\- | \-\ |         | \-\ | -\-\-\ | -\-\-\ |         |
|     | \-\-\-- | -\- |         | -\- | -\-\-\ | -\-\-\ |         |
|     |         | \-- |         | \-- | -\-\-- | -\-\-- |         |
+-----+---------+-----+---------+-----+--------+--------+---------+
| 3   | \-\-\-  | \-\ | \-\-\-  | \-\ | \      | \      | \-\-    |
|     | \-\-\-\ | -\- | \-\-\-\ | -\- | -\-\-\ | -\-\-\ | \-\-\-\ |
|     | -\-\-\- | \-\ | -\-\-\- | \-\ | -\-\-\ | -\-\-\ | -\-\-\- |
|     | \-\-\-- | -\- | \-\-\-- | -\- | -\-\-\ | -\-\-\ | \-\-\-- |
|     |         | \-- |         | \-- | -\-\-- | -\-\-- |         |
+-----+---------+-----+---------+-----+--------+--------+---------+
| 4   | 4-1     | \-\ | 4-2B    | NA  | \-\-\  | \      | \-\-    |
|     | above.  | -\- | above.  |     | -\-\-\ | -\-\-\ | \-\-\-\ |
|     |         | \-\ |         |     | -\-\-\ | -\-\-\ | -\-\-\- |
|     |         | -\- |         |     | -\-\-- | -\-\-\ | \-\-\-- |
|     |         | \-- |         |     |        | -\-\-- |         |
+-----+---------+-----+---------+-----+--------+--------+---------+
| /1  |         |     |         |     |        |        |         |
| 2A  |         |     |         |     |        |        |         |
| ref |         |     |         |     |        |        |         |
| ers |         |     |         |     |        |        |         |
| to  |         |     |         |     |        |        |         |
| th  |         |     |         |     |        |        |         |
| ose |         |     |         |     |        |        |         |
| es  |         |     |         |     |        |        |         |
| tab |         |     |         |     |        |        |         |
| lis |         |     |         |     |        |        |         |
| hme |         |     |         |     |        |        |         |
| nts |         |     |         |     |        |        |         |
| ap  |         |     |         |     |        |        |         |
| ply |         |     |         |     |        |        |         |
| ing |         |     |         |     |        |        |         |
| o   |         |     |         |     |        |        |         |
| nly |         |     |         |     |        |        |         |
| a   |         |     |         |     |        |        |         |
| PL  |         |     |         |     |        |        |         |
| t   |         |     |         |     |        |        |         |
| rea |         |     |         |     |        |        |         |
| tme |         |     |         |     |        |        |         |
| nt; |         |     |         |     |        |        |         |
| 2B  |         |     |         |     |        |        |         |
| ref |         |     |         |     |        |        |         |
| ers |         |     |         |     |        |        |         |
| to  |         |     |         |     |        |        |         |
| th  |         |     |         |     |        |        |         |
| ose |         |     |         |     |        |        |         |
| es  |         |     |         |     |        |        |         |
| tab |         |     |         |     |        |        |         |
| lis |         |     |         |     |        |        |         |
| hme |         |     |         |     |        |        |         |
| nts |         |     |         |     |        |        |         |
| ap  |         |     |         |     |        |        |         |
| ply |         |     |         |     |        |        |         |
| ing |         |     |         |     |        |        |         |
| o   |         |     |         |     |        |        |         |
| nly |         |     |         |     |        |        |         |
| a   |         |     |         |     |        |        |         |
| [   |         |     |         |     |        |        |         |
| Lm] |         |     |         |     |        |        |         |
| {.u |         |     |         |     |        |        |         |
| nde |         |     |         |     |        |        |         |
| rli |         |     |         |     |        |        |         |
| ne} |         |     |         |     |        |        |         |
| i   |         |     |         |     |        |        |         |
| nhi |         |     |         |     |        |        |         |
| bit |         |     |         |     |        |        |         |
| ing |         |     |         |     |        |        |         |
| ag  |         |     |         |     |        |        |         |
| ent |         |     |         |     |        |        |         |
| or  |         |     |         |     |        |        |         |
| p   |         |     |         |     |        |        |         |
| roc |         |     |         |     |        |        |         |
| ess |         |     |         |     |        |        |         |
| to  |         |     |         |     |        |        |         |
| th  |         |     |         |     |        |        |         |
| eir |         |     |         |     |        |        |         |
| p   |         |     |         |     |        |        |         |
| rod |         |     |         |     |        |        |         |
| uct |         |     |         |     |        |        |         |
| or  |         |     |         |     |        |        |         |
| pr  |         |     |         |     |        |        |         |
| oce |         |     |         |     |        |        |         |
| ss. |         |     |         |     |        |        |         |
+-----+---------+-----+---------+-----+--------+--------+---------+

<table style="width:100%;">
<colgroup>
<col style="width: 15%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 11%" />
<col style="width: 5%" />
<col style="width: 5%" />
<col style="width: 5%" />
<col style="width: 3%" />
<col style="width: 9%" />
<col style="width: 5%" />
<col style="width: 5%" />
<col style="width: 7%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="13">Table 11. Absolute levels and changes in small
establishments across establishment groups.</td>
</tr>
<tr class="even">
<td>Item</td>
<td colspan="3">Start and End Levels</td>
<td colspan="5">Went to:</td>
<td colspan="4">Came from:</td>
</tr>
<tr class="odd">
<td><p>Estab.</p>
<p>Group</p></td>
<td>Old</td>
<td>New</td>
<td>Change</td>
<td>1</td>
<td>2A</td>
<td>2B</td>
<td>4</td>
<td>Total</td>
<td>2A</td>
<td>2B</td>
<td>4</td>
<td>Total</td>
</tr>
<tr class="even">
<td>1</td>
<td>24</td>
<td>55</td>
<td>31</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>31</td>
<td>31</td>
</tr>
<tr class="odd">
<td>2A /1</td>
<td>114</td>
<td>114</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>2B /1</td>
<td>561</td>
<td>638</td>
<td>77</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>77</td>
<td>77</td>
</tr>
<tr class="odd">
<td>3</td>
<td>269</td>
<td>269</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>4</td>
<td>308</td>
<td>200</td>
<td>-108</td>
<td>-31</td>
<td>0</td>
<td>-77</td>
<td>0</td>
<td>-108</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>All Estab.</td>
<td>1276</td>
<td>1276</td>
<td>0</td>
<td>-31</td>
<td>0</td>
<td>-77</td>
<td>0</td>
<td>-108</td>
<td>7</td>
<td>7</td>
<td>108</td>
<td>108</td>
</tr>
<tr class="even">
<td colspan="13">/1 2A refers to those establishments applying only a PL
treatment; 2B refers to those establishments applying only a <u>Lm</u>
inhibiting agent or process to their product or process.</td>
</tr>
</tbody>
</table>

For very small establishments, the combination of high costs associated
with technologies necessary to "qualify" for EG 1 or EG 3 and the nature
of their product or production is expected to make it highly unlikely
that any establishment will move into a different establishment group as
a result of this final rule. The total expected establishment movements
expected as a result of this final rule are given in the table below
(Table 12).

  ------------------------ --------------- ---------- ---------- -------------
  Table 12. Changes in all                                       
  establishments across                                          
  establishment groups.                                          

  Item                     Establishment                         Total
                           Size                                  

  Establishment Group      Large           Small      Very Small 

  1                        16              31         0          +47

  2A /1                    -7              0          0          -7

  2B /1                    -4              77         0          +73

  3                        0               0          0          0

  4                        -5              -108       0          -113

  All Establishments       0               0          0          0

  /1 2A refers to those                                          
  establishments applying                                        
  only a PL treatment; 2B                                        
  refers to those                                                
  establishments applying                                        
  only a [Lm]{.underline}                                        
  inhibiting agent or                                            
  process to their product                                       
  or process.                                                    
  ------------------------ --------------- ---------- ---------- -------------

[Cost to validate a post-lethality treatment for establishments in EG 1
and EG 2]{.underline}. It is expected that 43 HACCP plans of 35
establishments (of the original 49 establishments in EG 1) will need to
be validated (Table 13). This represents only about 15 percent of all
the HACCP plan validations that will occur as a result of the final
rule. This number of HACCP plan validations is based on a 50-percent
validation rate currently being attained by large establishments,
30-percent rate by small, and a 10-percent rate by very small
establishments. These rates are based on information that FSIS obtained
from industry sources and in its public meetings related to the proposed
rule and [Lm]{.underline} risk assessment. Given the high relative
numbers of small and very small establishments whose HACCP plans require
validation, the total number of establishments affected is 35.

The major impact of the need for HACCP plan validation occurs in
establishments already in EG 2 that have an unvalidated PL treatment (60
percent of all expected validation expenses incurred by establishments
that already apply a PL treatment). To calculate this impact,
establishments in EG 2 are grouped by the same validation rate used for
EG 1 establishments above. To the extent that PL treatments are
validated by the manufacturer, validation costs would be lower.

Some validation costs are incurred by establishments in EG 2 that are
expected to move into EG 1 (20 percent of the large establishments that
currently have a PL treatment and 10 percent of those that do not have a
PL treatment in EG 2) and some establishments in EG 4 that are expected
to move into EG 1 (10 percent of the large and small establishments
currently in EG 4).

+-----------------------+-----------+-----------+----------+----------+
| Table 13. Costs for   |           |           |          |          |
| validation of PL      |           |           |          |          |
| treatments as CCPs in |           |           |          |          |
| HACCP plans           |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Item                  | HACCP     |           |          |          |
|                       | Esta      |           |          |          |
|                       | blishment |           |          |          |
|                       |           |           |          |          |
|                       | Size      |           |          |          |
|                       | Category  |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
|                       | L         | S         | VS       | Total    |
+-----------------------+-----------+-----------+----------+----------+
|                       | \         |           |          |          |
|                       | $thousand |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Cost per Plan         | 20        | 10        | 5        |          |
+-----------------------+-----------+-----------+----------+----------+
| Existing EG 1 HACCP   |           |           |          |          |
| plans                 |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Number of plans       | 6         | 20        | 17       | 43       |
+-----------------------+-----------+-----------+----------+----------+
| Number of             | 5         | 17        | 14       | 35       |
| establishments        |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
|                       | \         |           |          |          |
|                       | $thousand |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Cost                  | \$116.6   | 197.4     | 85.2     | 399.2    |
+-----------------------+-----------+-----------+----------+----------+
| Establishments in EG  |           |           |          |          |
| 2 moving to EG 1      |           |           |          |          |
| incurred by           |           |           |          |          |
| establishments that   |           |           |          |          |
| already apply a PL    |           |           |          |          |
| treatment             |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Number of plans       | 13        | 0         | 0        | 13       |
+-----------------------+-----------+-----------+----------+----------+
| Number of             | 10        | 0         | 0        | 10       |
| establishments        |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
|                       | \         |           |          |          |
|                       | $thousand |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Cost                  | 266.5     | 0         | 0        | 266.5    |
+-----------------------+-----------+-----------+----------+----------+
| Establishments in EG  |           |           |          |          |
| 4 moving to EG 1      |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Number of plans       | 2         | 37        | 0        | 39       |
+-----------------------+-----------+-----------+----------+----------+
| Number of             | 1         | 31        | 0        | 32       |
| establishments        |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
|                       | \         |           |          |          |
|                       | $thousand |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Cost                  | 31.1      | 366.6     | 0        | 397.7    |
+-----------------------+-----------+-----------+----------+----------+
| Cost for existing EG  |           |           |          |          |
| 2 HACCP plans         |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Number of plans       | 17        | 95        | 60       | 171      |
+-----------------------+-----------+-----------+----------+----------+
| Number of             | 14        | 80        | 50       | 143      |
| establishments        |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
|                       | \         |           |          |          |
|                       | $thousand |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Cost                  | 334.9     | 946.2     | 300.5    | 1,581.5  |
+-----------------------+-----------+-----------+----------+----------+
| Total Number of HACCP |           |           |          |          |
| Plan Validations and  |           |           |          |          |
| Cost                  |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Number of plans       | 37        | 151       | 77       | 266      |
+-----------------------+-----------+-----------+----------+----------+
| Number of             | 30        | 127       | 64       | 222      |
| establishments        |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
|                       | \         |           |          |          |
|                       | $thousand |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Total Cost, EG 1 and  | 749.1     | 1,510.1   | 385.7    | 2,644.8  |
| EG 2                  |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+

[Cost to install a post-lethality (PL) treatment]{.underline}*.*
Establishments in EG 1 and about half in EG 2 already have a PL
treatment by virtue of being classified in that establishment group.
Establishments in EG 4 and those in EG 2 that use an agent or have a
process to control [Lm]{.underline} do not necessarily have a PL
treatment. Seven large establishments are expected to move from EG 2 to
EG 1 and 1 large establishment moving from EG 4 will need to install PL
treatments. 31 small establishments are expected to move from EG 4 to EG
1 and will make similar adjustments.

The Agency received comments to the proposed rule indicated that such
investments, like high pressure processing units, cost up to \$1.0
million to \$1.5 million per unit. FSIS is using \$1.5 million and
\$1.25 million as the expected capital costs of such equipment for large
and small establishments, respectively. FSIS received comments regarding
per-pound operating expenses for various post-pasteurization processes,
but was unable to use this information because of the lack of data on
average production per establishment. FSIS assumes annual operating
expenses are 10 percent of the initial capital cost.

The changes in the industry (movement among establishment groups)
reflected by the installation of post-lethality treatments are given in
Table 14.

+-----------------------+-----------+-----------+----------+----------+
| Table 14. Costs for   |           |           |          |          |
| post-lethality        |           |           |          |          |
| treatments, equipment |           |           |          |          |
| and annual operating. |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Item                  | HACCP     |           |          |          |
|                       | Esta      |           |          |          |
|                       | blishment |           |          |          |
|                       |           |           |          |          |
|                       | Size      |           |          |          |
|                       | Category  |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
|                       | L         | S         | VS       | Total    |
+-----------------------+-----------+-----------+----------+----------+
|                       | \         |           |          |          |
|                       | $thousand |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| PL Equipment Cost per | 1,500.0   | 1,250.0   | NA       | NA       |
| Establishment         |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Establishments moving |           |           |          |          |
| from EG 2 to EG 1     |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Number of             | 7         | 0         | 0        | 7        |
| establishments        |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
|                       | \         |           |          |          |
|                       | $thousand |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Equipment cost        | 11,149.4  | 0         | 0        | 11,149.4 |
+-----------------------+-----------+-----------+----------+----------+
| Establishments moving |           |           |          |          |
| from EG 4 to EG 1     |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Number of             | 1         | 31        | 0        | 32       |
| establishments        |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
|                       | \         |           |          |          |
|                       | $thousand |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Equipment cost        | 1,897.2   | 38,536.9  | 0        | 40,434.1 |
+-----------------------+-----------+-----------+----------+----------+
| Total establishment   |           |           |          |          |
| movements to EG 1     |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Number of             | 8         | 31        | 0        | 39       |
| establishments        |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
|                       | \         |           |          |          |
|                       | $thousand |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Total equipment costs | 13,046.6  | 38,536.9  | 0        | 51,583.5 |
+-----------------------+-----------+-----------+----------+----------+
| Annual operating      | 1,304.7   | 3,853.7   | 0        | 5,158.4  |
| costs                 |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Total first year      | 14,351.3  | 42,390.6  | 0        | 56,741.9 |
| costs                 |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+

[Cost to add agent or alter process to inhibit Listeria growth in the
final product]{.underline}. One of the major impacts of the rule is that
it encourages establishments in EG 4 to move into EG 2 by adding an
agent or altering their production processes to inhibit [Lm]{.underline}
growth in the product. Adding such treatments would eliminate the need
for more frequent verification testing. It is expected that 25 percent
of the large and small establishments in EG 4 will move to EG 2 by doing
so\--3 large and 77 small establishments. The costs associated with this
impact are subject to several factors. They include each establishment's
unique situation with respect to product type, facility size, and
equipment. Assuming that the cost to add agents or alter a process
includes a one-time cost of installing equipment to add agents or alter
production processes of \$150,000 for a large, \$125,000 for a small,
and \$100,000 for a very small establishment, the initial treatment cost
totals \$10.1 million. Using an operating cost of 10 percent of the
initial cost produces a corresponding annual outlay of about \$1 million
(Table 15).

+-----------------------+-----------+-----------+----------+----------+
| Table 15. Costs for   |           |           |          |          |
| [Lm]{.underline}      |           |           |          |          |
| growth inhibiting     |           |           |          |          |
| treatments or         |           |           |          |          |
| processes, initial    |           |           |          |          |
| and annual operating. |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Item                  | HACCP     |           |          |          |
|                       | Esta      |           |          |          |
|                       | blishment |           |          |          |
|                       |           |           |          |          |
|                       | Size      |           |          |          |
|                       | Category  |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
|                       | L         | S         | VS       | Total    |
+-----------------------+-----------+-----------+----------+----------+
|                       | \         |           |          |          |
|                       | $thousand |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Initial cost per      | 150.0     | 125.0     | 100.0    |          |
| establishment         |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Number of             |           |           |          |          |
| Establishments        |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Establishments in EG  | 3         | 77        | 0        | 80       |
| 4 moving to EG 2      |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
|                       | \         |           |          |          |
|                       | $thousand |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Initial cost          | 474.3     | 9,634.2   | 0        | 10,108.5 |
+-----------------------+-----------+-----------+----------+----------+
| Annual operating      | 47.4      | 963.4     | 0        | 1,010.9  |
| costs                 |           |           |          |          |
+-----------------------+-----------+-----------+----------+----------+
| Total costs           | 521.7     | 10,597.6  | 0        | 11,119.4 |
+-----------------------+-----------+-----------+----------+----------+

[Cost of FCS testing for Listeria species]{.underline}. As with the
third impact discussed above, the testing provisions of the rule
encourage establishments to move from EG 4 into EG 1 and EG 2 (Table
16). These establishments are expected to be mostly small establishments
attempting to avoid frequent FCS verification testing requirements for
EG 4 establishments and the potential exposure to holding product upon
two consecutive positive FCS verification test results. Almost half of
the large establishments that were previously in EG 4 are expected to
migrate either to EG 1 or to EG 2.

The costs of testing for the remaining 2,518 establishments in EG 3 and
EG 4 are based on several assumptions. They include: the actual level of
FCS verification testing being conducted at the present time, the
percentage of establishments conducting this level of verification
testing, the number of production lines by establishment size, and the
costs of testing. The assumptions used in this analysis are supported by
observations by FSIS inspection personnel and by various recent surveys
conducted by FSIS and the industry. For example, in the recent FSIS
hotdog and deli-meat survey, about 20 percent of large, 26 percent of
small, and about 5 percent of very small establishments stated that they
conducted FCS verification testing for [Listeria]{.underline} spp. The
[Lm]{.underline} growth inhibiting processes and ingredients used in
producing these products probably lowers the level of verification
testing being conducted by establishments producing other RTE MPPs.
Therefore, FSIS believes that the actual proportion of establishments in
EG 3 and EG 4 that conduct FCS tests is probably double the proportions
reported in the recent hotdog and deli-meat survey for the small and
very small establishments. That is, FSIS assumes that the current FCS
verification testing levels for large, small, and very small RTE MPP
producing establishments are 100 percent, 50 percent, and 10 percent,
respectively (See middle rows in Table 17).

  ----------------- --------------- ------------- ---------------- --------------
  Table 16. Number                                                 
  of Federally and                                                 
  State-inspected                                                  
  RTE MPP                                                          
  establishments by                                                
  establishment                                                    
  group resulting                                                  
  from FCS testing                                                 
  provisions.                                                      
  (Numbers in                                                      
  parenthesis are                                                  
  baseline numbers                                                 
  from Table 7).                                                   

  Item              HACCP                                          
                    Establishment                                  
                    Size Category                                  

  Establish-ment    L               S             VS               Total
  Group                                                            

  1                 25 (9)          55 (24)       16 (16)          95 (49)

  2                 97 (108)        752 (675)     1514 (1514)      2363 (2297)

  3                 13 (13)         269 (269)     1581 (1581)      1864 (1864)

  4                 8 (13)          200 308)      445 (445)        654 (766)

  Total             143             1276          3556             4976
  establish-ments                                                  
  ----------------- --------------- ------------- ---------------- --------------

  ---------------------------------- --------------- -------- -------- ----------
  Table 17. Assumptions concerning                                     
  FCS testing in EG3 and EG4                                           

  Item                               HACCP                             
                                     Establishment                     
                                     Size Category                     

  Assumption                         L               S        VS       Total

  Assumed lines/establishment        6               4        2        

  Observed average testing                                             
  frequencies for those that conduct                                   
  FCS testing (number of times per                                     
  month)                                                               

  EG 3                               1               1        1        

  EG 4                               4               2        1        

  Proportion of establishments                                         
  conducting FCS testing at above                                      
  frequencies                                                          

  EG 3                               1.00            0.50     0.10     

  EG 4                               0.90            0.50     0.10     

  Number of tests not conducted by                                     
  establishments not testing at the                                    
  above frequencies                                                    

  EG 3                               0               539      2846     3385

  EG 4                               20              802      802      1623

  Total                              20              1341     3647     5007

  Cost of testing shortfall by EG 3  \$thousand                        
  and EG 4 at above                                                    
  frequencies,(\$35/test):                                             

  EG 3                               0.0             18.9     99.6     118.5

  EG 4                               0.7             28.1     28.1     56.8

  Total cost for increased FCS       0.7             47.0     127.7    175.3
  testing                                                              
  ---------------------------------- --------------- -------- -------- ----------

[Cost of Production Adjustments]{.underline}*.* As was discussed in the
PRIA, it is expected that a series of [Lm]{.underline} contamination
events may occur in some establishments. The PRIA expected that most --
about 85 percent -- of the establishments that obtain one positive FCS
test result could remedy the cause of the [Lm]{.underline} contamination
at no additional cost through more stringent sanitation and handling
techniques. The remaining 15 percent of establishments are expected to
encounter a greater degree of difficulty. Some of these establishments
(as discussed in the PRIA) will probably encounter [Lm]{.underline}
contamination problems that could be remedied at a cost of \$2,000 per
line (these establishments consist of 7 percent of the establishments
experiencing at least one positive FCS verification test result);
another 7 percent are expected to encounter more serious contamination
problems that would need to be remedied by actions costing up to about
1/10 of one percent of gross sales; and a final group made up of 1
percent of the establishments that discover that they have a chronic
[Lm]{.underline} contamination problem and have to cease their RTE MPP
production altogether. No comments were received that would either
support or refute this scenario or the set of assumptions needed in
describing it. Some commented at the May 2001 public meeting that
inclusion of these possible eventualities would help complete the
analysis. These results are expected to only apply to establishments in
EG 4 who face the highest level of FCS verification testing. The
underlying assumptions and resultant cost implications are given in
Table 18.

Some explanation of the cost estimates of this impact is needed. First,
the calculations for cost estimates for minor remedies are the same as
in the PRIA. That is, the number of firms in each establishment group is
faced with a \$2000 per line cost times the number of lines in the
establishment for production adjustments. Second, the cost estimates for
major repairs are slightly different from those in the PRIA. In the
PRIA, the value of shipments for the 1,479 establishments was available
and estimated by Census at \$25.2 billion for 1999. In the PRIA, this
value of shipments was distributed across the 133 large establishments,
840 small ones and 506 very small ones using an average distribution for
value of shipments by those size categories of 80-percent (for large),
15-percent (for small), and 5-percent for very small). This average
distribution was derived from averages across broad categories of
agricultural commodities. A much different distribution of value of
production was found in the Fall 2002 FSIS survey of hotdog and deli
meat establishments. It found a value of production distribution of
48-percent (large), 48-percent (small), and 4-percent (very small). The
final regulatory impact analysis uses a distribution of 65, 35, and 5 in
conjunction with the original \$25.2 billion for total value of
shipments. This calculation produced average per establishment value of
shipment estimates of \$123 million for large establishments, \$9
million for small establishments, and \$2 million for very small
establishments. This estimate is important because it serves as the
basis for calculating the costs to remedy the major cases of
[Lm]{.underline} contamination. As in the PRIA it is expected that a
small number of establishments whose contamination problems will be
perceived to be prohibitively costly to "fix" and/or not feasible to
undertake without complete modernization or renovation. Without making
these needed capital improvements, their only option is to either
partially or entirely cease RTE MPP production. FSIS expects that up to
two small and four very small establishments may be in this situation.

  ----------------------------------- --------------- -------- -------- ----------
  Table 18. Assumptions about                                           
  production adjustments to eliminate                                   
  L. monocytogenes contamination and                                    
  associated costs                                                      

  Item                                HACCP                             
                                      Establishment                     
                                      Size Category                     

                                      L               S        VS       Total

  Lines per establishment             6               4        2        NA

  Proportion of establishments with                                     
  no major [L.                                                          
  monocytogenes]{.underline}                                            
  contamination problems by                                             
  establishment group:                                                  

  EG 3                                0.95            0.95     0.9      NA

  EG 4                                0.85            0.85     0.85     NA

  Number of establishments                                              

  EG 3                                1               13       158      172

  EG 4                                1               30       67       98

  Total                               2               44       225      270

  Number of establishments incurring                                    
  a \$2,000 per line costs                                              

  EG 3                                0               0        158      158

  EG 4                                1               14       31       46

  Total                               1               14       189      204

  Number of establishments incurring                                    
  a major [L.                                                           
  monocytogenes]{.underline}                                            
  contamination problem                                                 

  EG 3                                0               0        0        0

  EG 4                                1               14       31       46

  Total                               1               14       31       46

  Number of establishments incurring                                    
  a severe [L.                                                          
  monocytogenes]{.underline}                                            
  contamination problem                                                 

  EG 3                                0               0        0        0

  EG 4                                0               2        4        6

  Total                               0               2        4        6

  Production adjustment Costs         \$thousand                        

  EG 3                                0               0        632.4    632.4

  EG 4                                77.9            238.7    202.4    519.0

  Costs of production adjustments     77.9            238.7    834.8    1,151.4
  ----------------------------------- --------------- -------- -------- ----------

[Costs related to possible hold-and-test actions]{.underline}*.*
Hold-and-test actions are expected to be taken by establishments in EG 4
and to a lesser extent in EG 3. For purposes of this analysis, 50
percent of the EG 3 and 95 percent of the EG 4 establishments that are
expected to have some problems with [Lm]{.underline} contamination are
also expected to be faced with one or more hold and test events
annually. This calculation suggested that seven small and 79 very small
establishments in EG 3 and one large establishment and 29 small and 63
very small establishments in EG 4 are expected to take one or more
hold-and-test actions over a typical year. In addition to the number of
establishments affected, there are five other factors that affect this
cost impact. These are: (1) the amount of production likely affected
(based on the number of lines times number of shifts and production per
shift estimates); (2) the pounds per pallet that will need to be handled
and placed into storage; (3) the average number of days that the product
will be held in storage; (4) the number of times per year that a
hold-and-test action occurs; and, (5) the cost per day per pallet in
handling and storage. Also, the amount of existing available storage
will influence any expected burden placed on establishments. The recent
FSIS hotdog and deli-meat survey found that up to 40 percent of
establishments have sufficient storage to hold product, but for only one
to two days of production. Even though this finding only reflects the
capacity of hotdog and deli-meat establishments, FSIS does not
anticipate any serious problems with establishments finding available
storage for holding product under possible increased hold-and-test
situations on their premises or at other locations. FSIS bases its
estimate for expected industry-wide costs of hold-and test on parameters
stated in Table 19. These costs are intended to include the
transportation, handling and storage costs associated with product that
has been tested and may or may not prove to be contaminated with
[Lm]{.underline}. For example, the \$119,500 cost calculation for hold
and test expected to be incurred by very small establishments was made
by multiplying the expected number of affected establishments (79) times
the number of expected hold and test occurrences per year (3) times the
daily cost of holding (5 days times 5.6 pallets times \$18 per pallet
per day). Similar calculations were made for other affected
establishments in the other HACCP establishment size categories and
establishment groups. FSIS does not consider that the costs associated
with the handling and eventual disposition of contaminated product,
including its possible destruction, should be attributed to this final
rule. It is believed that this product would have or should have been
discovered and appropriately disposed of under current good
manufacturing practices had they been followed by the establishment.
Also to the extent that some of these products are normally
refrigerated, these holding cost estimates would over-estimate the
impact on the industry.

+----------------------------+---------+--------+---------+---------+
| Table 19. Cost of          |         |        |         |         |
| hold-and-test actions      |         |        |         |         |
+----------------------------+---------+--------+---------+---------+
| Item                       | HACCP   |        |         |         |
|                            | Establ  |        |         |         |
|                            | ishment |        |         |         |
|                            |         |        |         |         |
|                            | Size    |        |         |         |
|                            | C       |        |         |         |
|                            | ategory |        |         |         |
+----------------------------+---------+--------+---------+---------+
| Assumption                 | L       | S      | VS      | Total   |
+----------------------------+---------+--------+---------+---------+
|                            | Pounds  |        |         |         |
+----------------------------+---------+--------+---------+---------+
| Production affected        | 228,000 | 28,400 | 5,600   |         |
+----------------------------+---------+--------+---------+---------+
|                            | Number  |        |         |         |
|                            | of:     |        |         |         |
+----------------------------+---------+--------+---------+---------+
| Pallets (1000 lbs. per     | 228     | 28     | 6       |         |
| pallet)                    |         |        |         |         |
+----------------------------+---------+--------+---------+---------+
| Average days in storage    | 5       | 5      | 5       |         |
+----------------------------+---------+--------+---------+---------+
| Hold and test frequencies  |         |        |         |         |
+----------------------------+---------+--------+---------+---------+
| EG 3                       | 3       | 3      | 3       |         |
+----------------------------+---------+--------+---------+---------+
| EG 4                       | 6       | 6      | 6       |         |
+----------------------------+---------+--------+---------+---------+
|                            | Dollars |        |         |         |
+----------------------------+---------+--------+---------+---------+
| Handling and storage cost  | 18      | 18     | 18      |         |
| per day (\$/pallet)        |         |        |         |         |
+----------------------------+---------+--------+---------+---------+
| Handling and storage costs |         |        |         |         |
+----------------------------+---------+--------+---------+---------+
|                            | \$th    |        |         |         |
|                            | ousands |        |         |         |
+----------------------------+---------+--------+---------+---------+
| EG 3                       | 20.7    | 51.7   | 119.5   | 191.9   |
+----------------------------+---------+--------+---------+---------+
| EG 4                       | 144.2   | 437.9  | 191.9   | 774.1   |
+----------------------------+---------+--------+---------+---------+
| Cost of hold and test      | 164.9   | 489.6  | 311.4   | 966.0   |
+----------------------------+---------+--------+---------+---------+

[Analysis of Alternatives]{.underline}

For purposes of the analysis, the expected frequency of FCS verification
testing for [Listeria]{.underline} spp. for establishments in EG 2 is
once per line per quarter; for EG 3, at least once per line per month;
and for EG 4, once per line per month for very small establishments;
semi-monthly for small producing establishments and weekly for high
volume producing establishments (4-2-1). These testing frequencies are
to be considered minimum expected levels for the purposes of estimating
costs and benefits. Conditions may warrant a higher frequency of FCS
verification testing to assure FSIS that establishments' sanitation or
prerequisite plans are adequately addressing the risk of possible
contamination in its products. As an additional precaution, FSIS is
requiring that after a second positive [Listeria]{.underline} spp. FCS
test result in an EG 4 establishment, hold and test actions are taken
until such time that FSIS is assured that this action is no longer
needed.

The FSIS [Lm]{.underline} Risk Assessment found an increase in median
lives saved as FCS verification testing frequencies increase relative to
the baseline. The minimum FCS verification testing frequency for EG 4
(4-2-1) results in 25 deaths averted if there is 100 percent adoption of
this testing frequency by all establishments producing deli meats.

An alternative FCS verification testing frequency could be 40-20-10 for
EG 4. In this case, the reduction in human health risk increases to 89
deaths averted, given 100 percent adoption. At an extremely high level
of testing, such as 60-60-60 (for either FCS verification testing for
[Listeria]{.underline} spp. or product testing for [Lm]{.underline}),
153 deaths are averted given 100 percent adoption. Also, at these high
levels of FCS verification testing, hold and test protocols were shown
to reduce the level of [Lm]{.underline} contamination at retail.

Extremely high FCS verification testing levels may not be required to
assure adequate sanitation. Nor are they necessarily effective from an
economic perspective. Costly hold and test actions increase with FCS
verification testing frequency. As such costs increase, establishments
producing RTE MPPs, especially small and very small establishments, may
eliminate product lines or cease production entirely. FSIS recognizes,
however, that FCS verification testing frequencies higher than 4-2-1 may
be appropriate for establishments with a history of poor sanitation
controls or evidence of producing adulterated product.

Another concern about high FCS verification testing frequencies is the
likelihood that many establishments that produce RTE MPPs using
traditional methods will no longer produce such products. To the extent
that this reduces the amount of adulterated product, this rule and its
emphasis on FCS verification testing is appropriate. It may be
inappropriate for any product that FCS testing for
[Listeria]{.underline} species is not a reliable indicator for
[Lm]{.underline} product contamination. FSIS believes that its
establishment categorization in this final rule will place only those
products in EG 4 where intense sanitation and verification testing is
most appropriate. However, extremely high verification testing
frequencies in most cases may be unnecessary and burdensome.

The risk assessment clearly shows that a combination of post-lethality
treatment or [Lm]{.underline} growth inhibition along with sanitation
and FCS verification testing and other measures is more effective than a
"sanitation coupled with FCS verification testing only" strategy. This
result also reinforces the observed industry practice of maintaining a
series of adequate precautions throughout slaughter and processing, and
of not exclusively relying on verification of sanitation through FCS
testing alone to assure that products are not adulterated. FCS
verification testing of sanitation procedures for [Listeria]{.underline}
species can compliment these other measures, e.g. post processing
pasteurization, the addition of [Lm]{.underline} growth inhibiting
packaging. To the extent that establishments take a series of steps to
address their possible [Lm]{.underline} contamination, the need for
higher FCS verification testing frequencies, and its impact of
inspection personnel to review these data, is reduced.

[Summary of Direct Industry Costs]{.underline}

The PRIA identified three major possible industry-wide impacts from
mandatory FCS verification testing: HACCP plan modification costs
(\$1.28 million); direct testing costs (\$1.75 million); and, production
adjustments (\$2.5 million). The total first-year cost of these impacts
was \$5.53 million\--\$3.8 million in one-time outlays and \$1.75
million in recurring annual costs associated with testing).

The Final Regulatory Impact Analysis (FRIA) reflects many comments
received in the public comment period. In addition to the impacts
identified in the PRIA, the FRIA estimates (1) the cost of PL treatments
(initial and annual operating); (2) the cost of using an agent or
process to inhibit [Lm]{.underline} growth (initial and annual
operating); and, (3) the costs of holding product while awaiting
confirmation of FCS verification testing.

The validation of PL treatments and related HACCP plan modifications
results in a one-time cost of \$2.6 million. The estimated cost in the
FRIA is higher than that in the PRIA due to an increase in the number of
establishments affected. The FRIA estimate may be conservative as it
does not take into account the use of validation studies conducted by PL
equipment manufacturers. Direct testing costs are substantially lower
than estimated in the PRIA (\$175,260 versus \$1.75 million) because the
expected movement of establishments out of EG 4 and into the other
establishment groups where higher FCS verification testing is not
expected. Production adjustments are estimated at \$1.15 million in
one-time costs in the FRIA compared to \$2.5 million in the PRIA. The
difference is due mainly to fewer expected cases where establishments
are not able to overcome their [Lm]{.underline} contamination problem.
More establishments adopt PL treatments and move into EG 1 or EG 2. The
total of the two, one-time cost components (production adjustments and
use of PL treatments) is the same as that estimated in the PRIA (\$3.8
million as opposed to \$3.75 million estimated in the PRIA).
Verification testing costs, as noted above, are substantially lower than
that estimated in the PRIA.

The additional costs associated with the installation of PL treatments
and/or altering their production to incorporate an agent or process to
inhibit [Lm]{.underline} growth introduces potentially large cost
outlays, especially for the initial, one-time investments in plant and
equipment (Table 20). The initial industry-wide, one-time cost outlays
for equipment associated with production adjustments and PL treatments
are expected to be as high as \$51.6 and \$10.1 million, respectively.
The annual operating (recurring) costs of \$5.2 and \$1 million,
respectively, make first-year costs for these two technologies, \$56.7
and \$11.1 million, respectively.

+-----------------------------+---------+---------+--------+---------+
| Table 20. Total Expected    |         |         |        |         |
| Industry-wide Costs         |         |         |        |         |
+-----------------------------+---------+---------+--------+---------+
| Item                        | HACCP   |         |        | Total   |
|                             | Establ  |         |        |         |
|                             | ishment |         |        |         |
|                             |         |         |        |         |
|                             | Size    |         |        |         |
|                             | C       |         |        |         |
|                             | ategory |         |        |         |
+-----------------------------+---------+---------+--------+---------+
|                             | L       | S       | VS     |         |
+-----------------------------+---------+---------+--------+---------+
|                             | \$t     |         |        |         |
|                             | housand |         |        |         |
+-----------------------------+---------+---------+--------+---------+
| PL validation               | 749.1   | 1,510.1 | 385.7  | 2,644.8 |
+-----------------------------+---------+---------+--------+---------+
| PL Equipment & operations   | 1       | 4       | 0      | 56,741. |
|                             | 4,351.3 | 2,390.6 |        |         |
+-----------------------------+---------+---------+--------+---------+
| Growth inhibiting agent or  | 521.7   | 1       | 0      | 1       |
| process                     |         | 0,597.6 |        | 1,119.4 |
+-----------------------------+---------+---------+--------+---------+
| FCS testing                 | .7      | 46.9    | 127.7  | 175.3   |
+-----------------------------+---------+---------+--------+---------+
| Production adjustments      | 77.9    | 238.7   | 834.8  | 1,151.4 |
+-----------------------------+---------+---------+--------+---------+
| Product handling and        | 165.0   | 489.6   | 311.4  | 966.0   |
| storage                     |         |         |        |         |
+-----------------------------+---------+---------+--------+---------+
| Total Costs                 | 1       | 5       | 1      | 7       |
|                             | 5,865.7 | 5,273.5 | ,659.5 | 2,798.7 |
+-----------------------------+---------+---------+--------+---------+

Converting initial costs into an annual equivalent cost of capital
recovery provides a more accurate measure of economic impacts[^8]. Using
a 7-percent discount rate over ten years results in annualized cost of
\$9.3 million for PL validation, installation, agent and/or process
alteration cost, and production adjustments. The annual operating
(recurring) costs are estimated at \$7.3 million. Combining these two
estimates produces a total annual cost of the final rule of \$16.6
million (bottom of Table 21).

+-------------+---------+---------+---------+---------+------------+
| Table 21.   |         |         |         |         |            |
| Total       |         |         |         |         |            |
| Annualized  |         |         |         |         |            |
| In          |         |         |         |         |            |
| dustry-wide |         |         |         |         |            |
| Cost        |         |         |         |         |            |
| Impact, by  |         |         |         |         |            |
| es          |         |         |         |         |            |
| tablishment |         |         |         |         |            |
| size.       |         |         |         |         |            |
+-------------+---------+---------+---------+---------+------------+
| Item        | HACCP   |         |         |         |            |
|             | Establ  |         |         |         |            |
|             | ishment |         |         |         |            |
|             |         |         |         |         |            |
|             | Size    |         |         |         |            |
|             | C       |         |         |         |            |
|             | ategory |         |         |         |            |
+-------------+---------+---------+---------+---------+------------+
|             | L       | S       | VS      | Total   |            |
+-------------+---------+---------+---------+---------+------------+
|             | \$t     |         |         |         |            |
|             | housand |         |         |         |            |
+-------------+---------+---------+---------+---------+------------+
| Initial     | 1       | 4       | 1,220.5 | 6       |            |
|             | 4,347.9 | 9,919.9 |         | 5,488.2 |            |
+-------------+---------+---------+---------+---------+------------+
| Recurring   | 1,517.8 | 5,353.5 | 439.1   | 7,310.4 |            |
+-------------+---------+---------+---------+---------+------------+
| Total       | 1       | 5       | 1,659.5 | 7       |            |
|             | 5,865.6 | 5,273.5 |         | 2,798.6 |            |
+-------------+---------+---------+---------+---------+------------+
|             | 22%     | 76%     | 2%      | 100%    |            |
+-------------+---------+---------+---------+---------+------------+
| Annualized  | 10      |         |         |         |            |
| Cost        | year,   |         |         |         |            |
|             | 7-      |         |         |         |            |
|             | percent |         |         |         |            |
+-------------+---------+---------+---------+---------+------------+
| > Initial   | 2,042.8 | 7,107.5 | 173.8   | 9,324.0 |            |
+-------------+---------+---------+---------+---------+------------+
| > Recurring | 1,517.8 | 5,353.6 | 439.1   | 7,310.4 |            |
+-------------+---------+---------+---------+---------+------------+
| > Total     | 3,560.6 | 1       | 612.8   | 1       |            |
|             |         | 2,461.1 |         | 6,634.5 |            |
+-------------+---------+---------+---------+---------+------------+
|             | 21%     | 75%     | 4%      | 100%    |            |
+-------------+---------+---------+---------+---------+------------+

[Possible Indirect and Unintended Cost Impacts]{.underline}

The focus of the cost discussion thus far was mainly on industry-wide
direct compliance costs: these costs, on an annual basis, were estimated
at \$16.6 million, roughly one-half of one percent of the total annual
value of industry sales (\$16.6 million divided by \$25.2 billion). In
addition, some discussion was made of the possible impacts that the
final rule may have on lowering product quality, reducing current FCS
testing frequencies in some establishments, and forcing some
establishments to exit the industry. However, these impacts were not
quantified. Two other possible indirect cost impacts are on consumers
and other sectors of the economy.

No market product quantity and price data are available to calculate the
possible consumer price implications brought about by the higher
compliance costs identified in this analysis. This information, plus an
estimation of any reduction in market supplies, could be used to
calculate the social costs of shifts in supply and demand in a consumer-
and producer-surplus framework. Also, a complicating factor in
estimating possible market supply reductions is to what extent imported
product could be substituted for any US RTE MPP production cutback.
Without such information, one can only say that higher industry
compliance costs and lower market supplies would be expected to raise
consumer prices to some extent. From the information provided in this
analysis (the expected small cost impacts relative to total value of
production and the likely small quantity cut-backs), it is expected that
these impacts would be minimal.

A related issue is the possible impact on other sectors of the economy.
Census data show that swine, beef, dairy, and poultry industries supply
significant amounts of raw product to the RTE MPP industry. Because,
however, the quantity effect is expected to be minimal, these upstream
suppliers of raw material are not expected to be significantly affected
by the final rule.

[Analysis of Benefits]{.underline}

The analysis of benefits resulting from the final rule examines the
reduction in human health risk (deaths and illnesses caused by
listeriosis) from actions taken as a result of this final rule by RTE
MPP establishments in only one product group: deli meats (primarily
sliced luncheon meats). This analysis of benefits thus differs from that
in the PRIA which examined the reduction in human health risk from all
RTE MPPs.

FSIS is focusing on deli products for several reasons. First, the
FDA-FSIS risk assessment identified this product group as having the
highest risk of all food classes and the cause of a large share of
listeriosis deaths and illnesses. Second, the FSIS [Lm]{.underline} Risk
Assessment, when calibrated to a revised version of FDA-FSIS risk
assessment, tied risk mitigation actions at deli-meat producing
establishments to potentially lower rates of listeriosis death and
illnesses. FSIS plans to modify the model to capture the dynamics of
[Lm]{.underline} contamination and containment in other RTE MPP
products, such as hotdogs, along with the impact of production volume.
Third, the FSIS [Lm]{.underline} Risk Assessment, having been presented
to the public for comment, has been revised to the extent possible at
this time.

The analysis of benefits uses the FSIS [Lm]{.underline} Risk Assessment
to evaluate the human health risk reduction effects of sanitation
coupled with FCS verification testing, the use of growth inhibiting
packaging (GIP); and the use of PL treatments. The likely reduction in
listeriosis deaths from a 100-percent adoption of these practices and
treatments by the industry is given in Table 22. FSIS is reporting three
values for the possible benefits derived from this rule: the median, the
5^th^ percentile, and the 95^th^ percentile for each scenario (baseline,
sanitation/FCS verification testing, [Lm]{.underline} growth-inhibiting
packaging (GIP) and post-lethality processing (PP) + GIP).  This range
of values represents the uncertainty in the true number of averted
number of deaths per year. The reported results imply 90 percent
certainty that the true value lies between the 5^th^ and 95^th^
percentiles. Each uncertainty distribution is the result of three
hundred computer simulations, each simulation consisting of 100,000
iterations, of the FDA-FSIS risk ranking model. The risk
characterization portion of that model comprises 4,000 combinations of
the exposure distributions for the 23 different food groups in the
FDA-FSIS risk ranking model. The median reports the mid-point value of
deaths averted from these multiple computer simulations for each
scenario. The median is reported because it is the preferred measure of
central tendency in the FDA-FSIS risk ranking. Furthermore, the
distribution of results suggests that the mean, as an alternative
measure of central tendency, is less informative about the shape of the
distribution because of the influence of outliers in its calculation.
Illnesses are estimated using the standard .20 case-fatality rate
commonly reported in the literature.

  --------------- ---------- --------- --------- ----------- ---------- ----------
  Table 22.                                                             
  Incremental                                                           
  Reductions in                                                         
  Deaths Due to                                                         
  Various                                                               
  Interventions                                                         
  (assuming 100%                                                        
  industry-wide                                                         
  adoption)                                                             

  Scenario        Averted                        Averted                
                  Deaths                         Illnesses              

                  Median     5%        95%       Median      5%         95%

  FCS testing /1  25 (24)    8 (8)     25 (24)   125 (120)   42 (40)    125 (120)

  GIP             141 (135)  48 (45)   165 (158) 707 (675)   240 (225)  823 (790)

  PP & GIP        238 (227)  77 (72)   272 (261) 1188 (1135) 384 (360)  1360
                                                                        (1305)

  /1 FCS testing                                                        
  at a 4-2-1                                                            
  rate.                                                                 

  /2 Numbers in                                                         
  parentheses                                                           
  exclude                                                               
  reductions in                                                         
  neonate deaths.                                                       
  --------------- ---------- --------- --------- ----------- ---------- ----------

The greatest reduction in listeriosis deaths and illnesses would occur
if all establishments used both PP and GIP. However, 100 percent
adoption is not possible for a variety of reasons, including technical
\-- not all products are amenable to the use of PL or GIP \-- and
economic \-- the costs are prohibitive in relation to the value of the
product.

The analysis of costs described movements among establishment groups
that are likely to occur as a result of the final rule. These movements
are the basis for estimating the human health benefits of the final
rule. Establishment group net movements are placed on a percentage basis
of establishments in each size class (Table 23). The absolute changes in
establishment numbers are converted into percentage increases by
dividing the number establishments estimated to adopt one or more
measures by the total number of establishments in that size class. For
example, 2 of the 42 large establishments producing deli meats (4.8
percent) are estimated to adopt PL and GIP measures. Next, the
percentage change in establishments is weighted by the relative volume
of deli meats produced by that size class. The two large establishments
are estimated to account for 2.3 percent of deli-meat production (4.8
times 0.48). The summation of these weighted percentages produces the
percentage increase in that technology which is adopted as a result of
the final rule. Thus, deli-meat producing establishments adopting PL and
GIP represent a 5.4-percent increase in the amount of deli-meat
production that is produced using this technology. Likewise, the percent
increase in the amount of production using GIP and FCS
sanitation/verification testing is 8.9 and 13.3 percent, respectively.

+--------------------------------+---------+---------+-------+-------+
| Table 23. Number of            |         |         |       |       |
| establishments adopting        |         |         |       |       |
| various interventions          |         |         |       |       |
+--------------------------------+---------+---------+-------+-------+
| Item                           | HACCP   |         |       | Av    |
|                                | Establ  |         |       | erage |
|                                | ishment |         |       |       |
|                                |         |         |       |       |
|                                | Size    |         |       |       |
|                                | C       |         |       |       |
|                                | ategory |         |       |       |
+--------------------------------+---------+---------+-------+-------+
|                                | L       | S       | VS    |       |
+--------------------------------+---------+---------+-------+-------+
| Product Volume Weights         | 0.48    | 0.48    | 0.04  |       |
+--------------------------------+---------+---------+-------+-------+
| Deli-meat producing stab.      | 42      | 311     | 340   |       |
+--------------------------------+---------+---------+-------+-------+
| Mitigation Measure             | Number  |         |       |       |
|                                | of      |         |       |       |
|                                | Establi |         |       |       |
|                                | shments |         |       |       |
+--------------------------------+---------+---------+-------+-------+
| Establishments adopting PL and | 2       | 20      | 0     |       |
| GIP                            |         |         |       |       |
+--------------------------------+---------+---------+-------+-------+
|                                | Percent |         |       |       |
+--------------------------------+---------+---------+-------+-------+
| Establishments                 | 4.8     | 6.4     | 0.0   |       |
+--------------------------------+---------+---------+-------+-------+
| Product                        | 2.3     | 3.1     | 0.0   | 5.4   |
+--------------------------------+---------+---------+-------+-------+
|                                |         |         |       |       |
+--------------------------------+---------+---------+-------+-------+
| Mitigation Measure             | Number  |         |       |       |
|                                | of      |         |       |       |
|                                | Establi |         |       |       |
|                                | shments |         |       |       |
+--------------------------------+---------+---------+-------+-------+
| Establishments adopting GIP    | 1       | 50      | 0     |       |
+--------------------------------+---------+---------+-------+-------+
|                                | Percent |         |       |       |
+--------------------------------+---------+---------+-------+-------+
| Establishments                 | 2.4     | 16.1    | 0.0   |       |
+--------------------------------+---------+---------+-------+-------+
| Product                        | 1.2     | 7.7     | 0.0   | 8.9   |
+--------------------------------+---------+---------+-------+-------+
| Mitigation Measure             | Number  |         |       |       |
|                                | of      |         |       |       |
|                                | Establi |         |       |       |
|                                | shments |         |       |       |
+--------------------------------+---------+---------+-------+-------+
| Establishments adopting FCS    | 0       | 66      | 260   |       |
| Testing at a 4-2-1 rate        |         |         |       |       |
+--------------------------------+---------+---------+-------+-------+
|                                | Percent |         |       |       |
+--------------------------------+---------+---------+-------+-------+
| Establishments                 | 0.0     | 21.2    | 76.5  |       |
+--------------------------------+---------+---------+-------+-------+
| Product                        | 0.0     | 10.2    | 3.1   | 13.3  |
+--------------------------------+---------+---------+-------+-------+

The results in Tables 22 and 23 are used to estimate the possible
reduction in listeriosis deaths that may be attributed to actions taken
be deli-meat producing establishments as a result of the final rule
(Table 24).

This analysis excludes neonate deaths estimated by the FSIS risk
assessment because of concerns about using the standard values for a
statistical life, which are derived from adult lives. Of course, it is
obvious that averting such neonate losses is a potentially significant
benefit. However, excluding these losses does not substantially affect
the conclusions of this analysis.

Calculations combining information from Tables 22 and 23 are fairly
straightforward: for example, the 13.3 percet increase in adoption rates
of sanitation coupled with FCS verification testing translates into 3.1
fewer listeriosis deaths at the median (0.133 from Table 23 times 24
from Table 22); 1.0 fewer at the 5^th^ percentile (0.133 x 8.0); and,
3.1 fewer at the 95^th^ percentile (0.133 x 24). Similar calculations
for the other two mitigation measures result in a total reduction of
27.3 at the median; 8.9 at the 5^th^ percentile; and, 31.2 at the 95^th^
percentile. The corresponding reductions in illnesses are 136.7 at the
median, 44.6 at the 5^th^ percentile, and 156.0 at the 95^th^
percentile, respectively.

  -------------------------- ----------------- ------------- --------------
  Table 24. Reduction in                                     
  listeriosis deaths due to                                  
  various interventions                                      

  Interventions              Averted Deaths                  

                             Median            5th           95^th^
                                               percentile    percentile

  FCS Testing (4-2-1)        3.1               1.0           3.2

  GIP                        12.0              4.0           14.0

  PL & GIP                   12.2              3.9           14.0

                                                             

  Total Reduction            27.3              8.9           31.2
  -------------------------- ----------------- ------------- --------------

The Economic Research Service of USDA presented a method for estimating
the human health benefits of reduced listeriosis at a public meeting on
the proposed rule held in May 2001. To estimate the benefits, it was
assumed that 5 percent of the cases were moderate, and that moderate
cases resulted in hospital costs of \$10,300 per case. The remaining 95
percent of the illness were severe, resulting in hospital costs of
\$28,300 per case[^9]. Using these assumptions and excluding the loss in
productivity of those affected and any pain and suffering, the benefits
of the reduction in illness-related losses due to the final rule are
estimated to be \$3.7 million at the median (0.05 x 136.7 x \$10,300) +
(0.95 x 136.7 x \$28,300)) and \$1.2 million at the 5^th^ and \$4.3
million at the 95^th^ percentile.

ERS estimated the value of statistical life at \$4.8 million^7^ as a
proxy for the cost of one fatality. Based on this estimate, the annual
human health benefits from the implementation of the final rule are
\$134.9 million at the median (the \$3.7 million above plus 27.3 x \$4.8
million) and \$44.0 million at the 5^th^ percentile and \$154.0 million
at the 95^th^ percentile.

Given the limitations in data and the output of the risk assessment
dealing only with deli meats and as per the discussion found earlier
concerning the estimates of health consequences, FSIS believes that this
estimate may be overstated by as much as 50 percent. If so, the adjusted
annual net benefits then become \$50.8 million, \$5.4 million and \$60.4
million at the median, 5^th^ and 95^th^ percentile levels, respectively
(Table 25). It appears that a downward adjustment in total benefits of
85 percent would be necessary to lower net benefits to near zero.

  -------------------- --------------- ------------------- ----------------
  Table 25. Summary of                                     
  Annual Total and Net                                     
  Benefits                                                 

  Item                 No adjustment   Benefits reduced 50 Benefits at
                                       percent             Breakeven (15%)

                       \$million                           

  Total Benefits                                           

  Median               134.9           67.5                20.2

  5^th^ percentile     44.0            22.0                6.6

  95^th^ percentile    154.0           77.0                23.1

  Net Benefits                                             

  Median               118.3           50.8                3.6

  5^th^ percentile     27.4            5.4                 -10.0

  95^th^ percentile    137.4           60.4                6.5

  Net benefits hold                                        
  industry-wide                                            
  compliance cost of                                       
  this regulation                                          
  constant at \$16.6                                       
  million.                                                 
  -------------------- --------------- ------------------- ----------------

[Compliance with Regulatory Flexibility Act of 1996]{.underline}

The Administrator has determined that for the purposes of the Regulatory
Flexibility Act (5 U.S.C. 601-612), this rule will have a significant
economic impact on a substantial number of small entities. As discussed
above, FSIS estimates that the [Lm]{.underline} sanitation coupled with
FCS verification testing provisions of this final rule may result in
annual costs to small and very small producers of post-lethality exposed
RTE MPPs of \$12.5 and \$0.6 million, respectively. These establishments
incur about 79 percent of the total industry-wide costs of compliance
with the sanitation coupled with FCS verification testing provisions of
this final rule.

The Small Business Regulatory Enforcement Fairness Act of 1996 (P. L.
104-121) requires, among other things, that

for each rule or group of related rules for which an agency is required
to prepare a final regulatory flexibility analysis under section 604 of
title 5, United States Code, the agency must publish one or more guides
to assist small entities in complying with the rule, and must designate
such publications as \"small entity compliance guides\". The guides must
explain the actions a small entity is required to take to comply with a
rule or group of rules. FSIS is developing guidance to assist small and
very small establishments in fulfilling their responsibilities under the
final rule. The guides will include instructions on how establishments
that produce post-lethality exposed RTE MPPs can conduct sanitation
coupled with FCS and product verification testing. Establishments that
wish to use the guides may incorporate their features into their HACCP
plans, Sanitation SOPs or other prerequisite programs. Because FSIS is
basing its guidance on existing research and industry practices that are
known to be effective, the Agency also will consider the processing
instructions to be already validated. That is, an establishment may
follow the guidance without contracting for or conducting additional
validation of the content of the materials.

FSIS is examining other options to minimize the potential negative
economic effects of these proposed regulations on small businesses,
including encouraging research that would facilitate validation of
pathogen lethality in many products, especially those produced by
traditional methods by small and very small establishments.

[Types of Entities and Production Affected by the Final
Regulations.]{.underline} The preliminary RIA found that small and very
small establishments made up about 91 percent of the number of
establishments in the US RTE MPP industry and were expected to incur up
to 69 percent of the cost of complying with the requirements of the
proposed rule. The FRIA finds that small and very small establishments
make up about 97 percent of the number of establishments in the industry
and are expected to incur nearly 80 percent of total cost impact on the
industry. As was also stated in the FRIA, the final rule only involves
that part of the original proposal dealing with FCS verification testing
for [Lm]{.underline} or indicator organism and also uses a more accurate
baseline for the number of establishments affected by the final rule.

An important note to consider throughout this analysis is that much of
the projected impacts originate from expected movements of
establishments from one establishment group to another. As was stated in
the preliminary RIA, "mandatory [Listeria]{.underline} testing is the
most difficult provision in the proposed rule to analyze because of the
uncertainty of current practices and how establishments will react to
the proposed rule. Major uncertainties include: the degree to which
firms will switch to a [Listeria]{.underline}-related CCP in their HACCP
plan, the degree to which firms will be able to resolve their
[Listeria]{.underline}-related problems if they present themselves, and
the degree to which they must increase their testing." This problem is
further compounded in this analysis because the final rule is not
limited to whether establishments either elect to incorporate a
[Lm]{.underline}-related CCP in their HACCP plan or face mandatory
testing. In this analysis, it is possible for establishments to address
possible [Lm]{.underline} contamination in their operations through a
variety of methods.

A large share of the cost impact is on small establishments, which are
expected to absorb nearly 75 percent of the total industry-wide cost
impact (Table 26 and 27). These establishments have the same incentives
to move to new post-pasteurization technologies as do very small
establishments, but their production volumes more easily justify the
associated high capital and recurring expenditures. Very small
establishments will likely have to increase sanitation coupled with FCS
verification testing to comply with this final rule. Large
establishments are likely to complete the process of adopting new
technologies. The expected impacts on large, small, and very small
establishments are discussed below.

[Large establishments.]{.underline}

As discussed in the "Baseline" section of this analysis, most (131 out
of 144 large establishments) already fall into either establishment
group 1, 2 or 3. This number is expected to increase by 5 establishments
as a result of the final rule, leaving only 8 establishments in the
establishment group 4: those establishments required to conduct more
intense sanitation coupled with FCS [L. spp**.**]{.underline}
verification testing than establishments producing product in the other
establishment groups. Many of these firms already employ
post-pasteurization technologies, but need them validated to comply with
the final rule. In fact, six of the existing establishments in EG 1 and
four of the establishments from EG 2 already employ the technology, but
simply have not validated their processes. It is expected that total
validation costs will run about \$749,000 in first-year costs for these
establishments.

The remaining establishments are likely to have high enough product
volume levels to justify the acquisition of new post-pasteurization
technologies and/or to alter product formulations and packaging. The
remaining eight establishments (seven of the ten establishments from EG
2 (or 10 percent of the establishments in EG 2 that do not apply a
post-pasteurization step)); and one from EG 4 (or 10 percent of the
establishments in EG 4) all are expected to need post-pasteurization
equipment and have their processes validated. The resulting large
initial cost outlays plus the estimated recurring annual operating costs
are expected to total \$14.3 million in first-year costs. This cost
represents about 90 percent of all the costs that are expected to be
incurred by large establishments as a result of this final rule. The
remaining costs are incurred by those establishments electing to add an
inhibiting agent or process in their production or to a lesser degree,
as a result of sanitation coupled with FCS verification testing and
possible subsequent actions related to hold and test and finding
remedies to possible persistent [Lm]{.underline} contamination problems.

[Small Establishments.]{.underline}

It is estimated that there are 1,276 small establishments producing RTE
MPPs. FSIS estimates that 108 small establishments will migrate to other
establishment categories as a result of the final rule. This is a costly
undertaking, especially for those establishments that elect to migrate
into EG 1. Due to the high cost of both technologies (post-lethality
processing and adding an agent or process to the product) and because
their products must conform to both process adjustments, it is expected
that only 31 establishments (or 10 percent of the small establishments
that were formally in EG 4) migrate to EG 1 as a result of the final
rule. All movement involves the purchase and use of new technology which
is expected to cost these establishments over \$42 million. About twice
the number of establishments that is expected to migrate to EG 1 is
expected to migrate to EG 2. This move is less costly and it is expected
that more RTE MPPs lead themselves to the addition of an inhibiting
agent or process. These 77 establishments are expected to incur \$10.6
million in first-year, total direct and recurring costs. All of the 108
establishments are expected to migrate from EG 4.

[Very small establishments.]{.underline}

It is estimated that there are 3,556 very small establishments producing
RTE MPPs. The preliminary RIA had an estimate of only 524
establishments, acknowledging that that estimate severely underestimated
the true number of very small establishments. Due to the combination of
high costs and technical difficulties faced by very small
establishments, FSIS projects that no very small establishments will
shift into a different establishment group. Consequently, FSIS does not
expect that very small establishments will incur any costs associated
with the adoption of post lethality treatment methods or by
incorporating an inhibiting agent or process in their production.
Instead, most of the entire cost impact of this final rule on very small
establishments is expected to originate from sanitation coupled with FCS
verification testing and the possible production adjustments and
additional handling and storage associated with increased testing and
the higher likelihood of incurring [Listeria]{.underline} species
positive FCS test results. A small amount of costs are expected to be
incurred by those very small establishments that currently employ
un-validated post-lethality processing technologies.

[Summary.]{.underline}

Small establishments make up 26 percent of the establishments, yet are
expected to incur up to 75 percent of the aggregate cost burden. Much of
these expected costs are in large capital expenditures in post lethality
processing equipment and in changing their production process to
incorporate [Lm]{.underline} growth inhibiting agents or processes. This
cost impact would be reduced to the extent that these cost estimates
over-estimate the actual costs of acquiring these technologies or
over-estimate the establishment movements. It is unlikely that actual
cost impacts would exceed those estimated in this analysis. Very small
establishments make up 71 percent of the number of establishments in the
industry and yet are expected to incur only 4 percent of the total costs
of this final rule. This estimate may under-estimate their exposure to
cost increases related to FCS testing. Thus, it is unlikely that actual
cost impacts would be lower than those estimated in this analysis. The
estimates for large establishments are highly contingent on their
movement into EG1 and EG2. To the degree that actual movements into
these establishment groups occur, the estimates in this analysis should
reflect these expected cost outlays.

  ------------------ ---------- --------------- ---------- ------------ -------------- --------------
  Table 26.                                                                            
  Potential                                                                            
  First-Year Total                                                                     
  Direct and                                                                           
  Recurring Cost                                                                       
  Impacts Across                                                                       
  HACCP                                                                                
  Establishment Size                                                                   
  Categories.                                                                          

  Cost Component                HACCP                                                  
                                Establishment                                          
                                Size Category                                          

                                L               S                       VS             Total 2/

                                \$thousand                                             

  PL Validation                 749.0                      1,510.1      385.7          2,644.8

  PL Installation               14,351.3                   42,390.6     0              56,741.9

  Growth Inhibitor              521.7                      10,597.6     0              11,119.3

  FCS testing                   0                          46.8         127.5          175.3

  Production                    77.9                       238.7        834.8          1,151.4
  Adjustments                                                                          

  Handling & Storage            165.0                      489.6        311.4          966.0

  Total Costs Above             15,865.6                   55,273.5     1,659.5        72,798.6

  Total Costs broken                                                                   
  into one-time,                                                                       
  initial year costs                                                                   
  and recurring                                                                        
  costs.                                                                               

  One-time, initial  14,347.9                   49,919.9                1,220.4        65,488.2
  year                                                                                 

  Recurring          1,517.8                    5,353.6                 439.0          7,310.4
  ------------------ ---------- --------------- ---------- ------------ -------------- --------------

  ----------------------- --------------- ------------ ------------ ----------
  Table 27. Estimated                                               
  Total Cost Impact of                                              
  Final Rule, Annualized.                                           

  Annualized Cost         10 year,                                  
                          7-percent                                 

                          HACCP                                     
                          Establishment                             
                          Size Category                             

                          L               S            VS           Total

                          \$thousand                                

  One-time costs          2,042.8         7,107.5      173.8        9,324.0

  Recurring               1,517.8         5,353.6      439.1        7,310.4

  Total                   3,560.6         12,461.1     612.8        16,634.5

                          Percent                                   

  Total Costs             21              75           4            100

                          Percent                                   

  Establishments          3               26           71           100
  ----------------------- --------------- ------------ ------------ ----------

[^1]: FDA, FSIS, CDC. "Draft Assessment of the Relative Risk to public
    Health from Foodborne Listeria monocytogenes Among Selected
    Categories of Ready-to-Eat Foods". The document is available at
    www.foodsafety.gov.

[^2]: USDA, FSIS. "Draft Risk Assessment for Listeria Monocytogenes in
    Ready-to-eat Deli Meat Products". FSIS. March 2003. The risk
    assessment is available at www.fsis.usda.gov.

[^3]: USDA, FSIS. "Draft Risk Assessment for Listeria Monocytogenes in
    Ready-to-eat Deli Meat Products". FSIS. March 2003. The risk
    assessment is available at www.fsis.usda.gov.

[^4]: FDA, FSIS, CDC. "Draft Assessment of the Relative Risk to public
    Health from Foodborne Listeria monocytogenes Among Selected
    Categories of Ready-to-Eat Foods". The document is available at
    www.foodsafety.gov.

[^5]: The estimate is based on information from the A.C. Nielson Co.
    2001 Consumer Expenditure Study as reported in [Progressive
    Grocer]{.underline}, September, 2002. The data sources are:
    supermarket checkout scanner data from a representative sample of
    10,000 U.S. supermarkets, a representative consumer panel consisting
    of 55,000 households, and [Progressive Grocer]{.underline}
    estimates.

[^6]: "Survey of Listeria monocytogenes in Ready-to-Eat Foods", Journal
    of Food Protection 66(H):559-569.

[^7]: Levine P, Rose B, Green S, Ransom G, and Hill W (2001). Pathogen
    testing of ready-to-eat meat and poultry products collected at
    federally-inspected establishments in the United States, 1990 to
    1999. Journal of Food Protection 64(8):188-1193.

[^8]: Lynn E. Bussey, [The Economic Analysis of Industrial
    Projects]{.underline}, Engelwood Cliffs, New Jersey, 1978.

[^9]: Stephen Crutchfield, "The Benefits of Reducing Listeria in ready
    to Eat Products." 2001. Presented at public meeting, "Performance
    Standards for the Production of processed Meat and Poultry
    Products," May 9-10, 2001. FSIS-USDA Washington, D.C. Roberts,
    Tanya, and Robert Pinner. Economic Impact of Disease Caused by
    Listeria monocytogenes." In Miller, AJ, Smith JL, and Somkuti GA,
    (Eds.) [Foodborne Listeriosis. Amsterdam, the Netherlands: Elsevier
    Science Publishing Co., 1990, pp. 137-144.]{.underline}