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REVIEW OF THE USDA’S RULE

PROVIDING FOR CANADIAN BEEF AND

CATTLE IMPORTS

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

MARCH 1, 2005

Serial No. 109–1

(

Printed for the use of the Committee on Agriculture

www.agriculture.house.gov

COMMITTEE ON AGRICULTURE

BOB GOODLATTE, Virginia, Chairman

JOHN A. BOEHNER, Ohio

Vice Chairman

RICHARD W. POMBO, California

TERRY EVERETT, Alabama

FRANK D. LUCAS, Oklahoma

JERRY MORAN, Kansas

WILLIAM L. JENKINS, Tennessee

GIL GUTKNECHT, Minnesota

ROBIN HAYES, North Carolina

TIMOTHY V. JOHNSON, Illinois

TOM OSBORNE, Nebraska

MIKE PENCE, Indiana

SAM GRAVES, Missouri

JO BONNER, Alabama

MIKE ROGERS, Alabama

STEVE KING, Iowa

MARILYN N. MUSGRAVE, Colorado

DEVIN NUNES, California

RANDY NEUGEBAUER, Texas

CHARLES W. BOUSTANY, JR., Louisiana

JOHN J.H. ‘‘JOE’’ SCHWARZ, Michigan

JOHN R. ‘‘RANDY’’ KUHL, JR., New York

VIRGINIA FOXX, North Carolina

K. MICHAEL CONAWAY, Texas

JEFF FORTENBERRY, Nebraska

COLLIN C. PETERSON, Minnesota

Ranking Minority Member

TIM HOLDEN, Pennsylvania

MIKE MCINTYRE, North Carolina

BOB ETHERIDGE, North Carolina

JOE BACA, California

ED CASE, Hawaii

DENNIS A. CARDOZA, California

DAVID SCOTT, Georgia

JIM MARSHALL, Georgia

STEPHANIE HERSETH, South Dakota

G.K. BUTTERFIELD, North Carolina

HENRY CUELLAR, Texas

CHARLIE MELANCON, Louisiana

JIM COSTA, California

JOHN T. SALAZAR, Colorado

JOHN BARROW, Georgia

EARL POMEROY, North Dakota

LEONARD L. BOSWELL, Iowa

RICK LARESEN, Washington

LINCOLN DAVIS, Tennessee

BEN CHANDLER, Kentucky

PROFESSIONAL STAFF

WILLIAM E. O’CONNER, JR., Staff Director

KEVIN J. KRAMP, Chief Counsel

ROBERT L. LAREW, Minority Staff Director

(II)

(III)

C O N T E N T S

Page

Baca, Hon. Joe, a Representative in Congress from the State of California,

prepared statement .............................................................................................. 6

Fortenberry, Hon Jeff, a Representative in Congress from the State of Nebraska, prepared statement ................................................................................ 5

Goodlatte, Hon. Bob, a Representative in Congress from the Commonwealth

of Virginia, opening statement ............................................................................ 1

Hayes, Hon. Robin, a Representative in Congress from the State of North

Carolina, prepared statement ............................................................................. 5

Peterson, Hon. Collin C., a Representative in Congress from the State of

Minnesota, opening statement ............................................................................ 3

WITNESSES

Bull, Ken, vice president, cattle procurement, Cargill Meat Solutions, Wichita,

KS .......................................................................................................................... 11

Prepared statement .......................................................................................... 87

Johanns, Hon. Mike, Secretary, U.S. Department of Agriculture ....................... 37

Prepared statement .......................................................................................... 67

Answers to submitted questions ...................................................................... 71

Accompanied by:

Ron DeHaven, Administrator, Animal and Plant Health Inspection Service,

U.S. Department of Agriculture

Keith Collins, Chief Economist, U.S. Department of Agriculture

Kiker, Chuck, region 5 director, R-CALF United Stockgrowers of America ....... 7

Kuehne, Carl, president, American Foods Group, Green Bay, WI ...................... 13

Prepared statement .......................................................................................... 92

McAdams, Jim, president, National Cattlemen’s Beef Association, Adkins,

TX .......................................................................................................................... 9

Prepared statement .......................................................................................... 89

SUBMITTED MATERIAL

American Farm Bureau Federation, statement .................................................... 94

Hastings, Hon. Doc, a Representative in Congress from the State of Washington, statement ...................................................................................................... 7

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REVIEW USDA’S RULE PROVIDING FOR

CANADIAN BEEF AND CATTLE IMPORTS

TUESDAY, MARCH 1, 2005

HOUSE OF REPRESENTATIVES, COMMITTEE ON AGRICULTURE, Washington, DC.

The committee met, pursuant to call, at 2:08 p.m., in room 1300,

Longworth House Office Building, Hon. Bob Goodlatte (chairman of

the committee) presiding.

Present: Representatives Lucas of Oklahoma, Moran, Gutknecht,

Hayes, Osborne, Pence, Rogers, King, Musgrave, Neugebauer,

Schwarz, Conaway, Fortenberry, Peterson, Holden, Etheridge,

Baca, Case, Scott, Marshall, Herseth, Butterfield, Cuellar, Costa,

Salazar, Pomeroy, Boswell, Larsen, and Chandler.

Staff present: William E. O’Conner, Jr., staff director; Brent

Gattis, Pete Thomson, John Goldberg, Elizabeth Parker, Stephanie

Myers, Ben Anderson, Pamilyn Miller, Tyler Wegmeyer, Ryan Weston, Debbie Smith, chief legislative clerk; Alise Kowalski, Robert L.

Larew, Joh Riley, Andy Baker, Chandler Goule, April Demert, and

Jamie Wexer.

OPENING STATEMENT OF HON. BOB GOODLATTE, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH

OF VIRGINIA

The CHAIRMAN. Good afternoon. This hearing of the House Committee on Agriculture to review the U.S. Department of Agriculture’s rule providing for Canadian beef and cattle imports will

come to order.

I would like to welcome Secretary Johanns, who will join us

later, as he has been unavoidably delayed, and our other witnesses

to today’s hearing to review the USDA’s rule for providing for Canadian beef and cattle imports.

I believe all of our witnesses will agree that the discovery of a

BSE-positive cow in Canada in May 2003 set in motion a string of

events that have commanded our attention ever since. At the time

my view was that we should rely on sound science to work our way

through this problem. Since then I have not been swayed by arguments of those who would use this situation to create nontariff

trade barriers or unnecessarily disrupt the free operation of our

markets.

There have been some bumps along the way, and no doubt there

will be some more. However, I remain convinced that if we abandon science as our guiding principle we will harm the long-term

health of our beef and cattle community. Cattle producers, the peoVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00004 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
2

ple who work in our processing plants and retail establishments

and our Nation’s consumers, will benefit the most from a committed course based on sound science.

During the vigorous debate since the publication of this rule, a

couple of thoughts have continued to dominate my thinking. First,

of course, is the need to return to normalized trade. I resist the notion that we should link the opening of the Canadian border to success in gaining access to Asian markets. Doing so would only result

in complicating two efforts that are complex enough already.

At the same time, it is hard to deny that the two are interrelated. I don’t see how we convince the Japanese Government and

other Asian nations to open their markets if we were not making

significant progress in normalizing trade with Canada. We can debate whether or not our system is interdefined with Canada’s, and

we can debate the backgrounds of the BSE-positive cows found to

date all we want, but the fact is that the Japanese perceive that

there is a North American beef production system. If we keep the

border closed to Canada, I am concerned we give the Japanese a

pretext to keep their border closed to us.

The other concern I have centers on the rapid structural changes

that are occurring in North America’s beef production system.

From 2003 to 2004, slaughter capacity in Canada increased by a

remarkable 22 percent. I am told that this has not been accomplished by a temporary increase in lines of beef, but by investments

in bricks and mortar. These changes are a direct result of the economic disruption since May 2003.

Further, while these developments may be slowed by this rule,

as modified, it is going to continue unless and until our trade

across our border is normalized. As slaughter capacity in Canada

expands, I am concerned that capacity in the U.S., particularly

along our northern border, will wither. I believe it is valuable to

preserve packing capacity for our cattle producers in their own regions. It is always an undesirable outcome when government actions result in economic disruptions. I would counsel my colleagues

to remain cautious. I remain concerned that the current situation

may have caused a trend that is not in the best long-term interests

of our producers.

Now, having said all of that, I also believe it is important to remain vigilant. I anticipate that the Secretary’s testimony will trace

the long path to the final rule and its consideration of the facts as

well as the input from interested parties.

I look forward to fully analyzing the reports from the two teams

the Secretary has sent to Canada since the beginning of this year,

and I anticipate further discussions about how trade across our

border will be managed.

For those who have not had an opportunity to review the report

of the trade team of the National Cattlemen’s Beef Association, recently sent to Canada, I recommend it to you. In addition to reviewing animal feed and animal health issues, it includes a thorough discussion of the economic discussion. Our other witnesses

have contributed to this discussion as well, and I encourage you to

consider these observations.

The United States has in place an array of protective measures,

including the feed ban, SRM removal and a robust BSE surveilVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
3

lance system. These are designed to shield our herd and consumers

from current risks and prevent the amplification of BSE if it was

ever introduced into our herd.

It is important to remember that when the original BSE-positive

cow was discovered in Canada our border closed within hours. The

job is not over when the rule is finalized. Our ability to revisit this

rule in the future is not impaired, and if science warrants it we reserve the right to close the border. Producers, consumers and trading partners deserve our continued vigilance, and I am confident

that our neighbors in Canada understand this as well.

I look forward to the testimony of our witnesses today and the

discussions which will occur as a result of our questions.

It is now my pleasure to yield to the ranking Democratic member

of the committee, the gentleman from Minnesota, Mr. Peterson.

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MINNESOTA

Mr. PETERSON. I thank the chairman for holding this important

hearing and welcome all of today’s witnesses. To start, though, I

have to say that this is one fine mess in which we find ourselves

today. I read through much of today’s testimony, and I have to

admit that I am left with more questions than before I started that

reading.

Now having said that, I want to say that I think that some good

things have happened here. We have, by the Secretary moving

back—so we have a 30-month rule across the board, I think is a

positive thing, and I also, from my own perspective, think that

we—there is no question in my mind that we have a safe meat supply in this country.

But having said that, USDA is going to implement this new rule,

I guess next week, and we still don’t know how a Canadian cow

born after the implementation of Canada’s ban on the feeding of

meat and bone meal to cattle managed to get BSE.

APHIS states that the primary source of BSE’s infections appear

to be feed contaminated with infectious agent, and that a ban on

the feeding of ruminant protein to ruminants is a most effective

mitigation for contaminated feed.

APHIS also acknowledges the preeminent role of the OIE in recommending animal disease control measures. But rather than simply adopting the OIE recommendations for the length of time on a

feed ban, a time a feed ban should be in place, which is 8 years,

APHIS adopts a more ambiguous approach that does not set out a

specific length of time a feed ban must be in place.

While the agency’s approach gives it more flexibility, it comes at

the cost of transparency in rulemaking that is necessary, I think,

to ensure a fair process.

The lack of transparency in the rulemaking process, unfortunately, creates the appearance that the agency reached its conclusion that Canada was a minimal risk zone and then constructed a

rationale to support that conclusion.

This unfortunate appearance has been compounded by the embarrassing series of missteps, including an admission that the

4

former Secretary of Agriculture was unaware of the agency’s efforts

to expand the opening of the U.S. market to Canadian beef.

So I would ask the Secretary that we should take a step back

and reconsider the rush to implement this rule. Why don’t we direct the resources to implement the national animal ID system that

I have been talking about for some time? We have a pilot project

in place that has been operating for 6 years with a proven track

record. The pilot project even reads Canadian ear tags. Now, if you

want to reopen the Japanese market it only makes sense to me to

set up a system that would allow us to address Japanese demand

that the U.S. ship cattle that are 20 months or younger, and I

would have to say that I just came back from Japan and had some

discussions over there about this situation. It seems a little—to

point out the problem we have by not having an ID system, and

the fact that we are constructing a deal in the Japanese situation

where we identify cattle that are under 20 months, the case of the

Canadian situation where we are identifying cattle that are 30

months, and I think we are creating a problem here for ourselves

that could be solved if we had a mandatory ID system in place.

I just also note that the Japanese are considering a labeling system that would distinguish between beef from countries that have

an animal ID system in place and those that do not.

So why not also take a little more time to try to find out why

the feed ban failed to work in the case of the cow born 7 months

after the implementation of the ban and 5 months after the phasein period for the use of existing stocks was over?

I think it also would be helpful if the Secretary would clarify that

protecting human and animal health is our top priority, as he stated in the fifth paragraph of his Senate testimony here a couple

weeks ago. Rather than mixing this message with a statement that

is in the first paragraph of that testimony that says that addressing BSE issues, particularly as they relate to trade distortions,

would be the top priority of the Department.

So as I said earlier, a lot of questions that have been raised, not

so much about the rule as regards to 30 months, but the rulemaking that is going to take place from this point forward as it relates to those animals that are more than 30 months, and I am

probably going to have, Mr. Chairman, about 20 pages of questions

that I am going to be giving to the Secretary and to the other witnesses that have been raised in my reading of these different testimonies here today. Hopefully, we could be engaged in an oversight

capacity as they go forward with that new rule.

So in conclusion, again I just want to make it clear that I think

we have a safe meat supply in this country, and I think my concern

is, and all of us on the committee here, that we maintain that safe

meat supply and maintain the industry in the United States.

Thank you.

The CHAIRMAN. I thank the gentleman for his comments, and I

certainly will work with you to seek the Secretary’s response to any

written questions you may submit to him.

Any other opening statements will be made a part of the record.

[The prepared statements of Messrs. Fortenberry, Hayes, Baca

and Hayes follow:]

5

PREPARED STATEMENT OF HON. ROBIN HAYES, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF NORTH CAROLINA

Chairman Goodlatte and Ranking Member Peterson, I want to thank you for holding this important hearing to review the U.S. Department of Agriculture’s rule providing for the importation of Canadian cattle I am pleased Secretary Johanns has

delayed this portion of the rule and will now set forth a consistent policy for both

live cattle and product from cattle over 30 months of age. I understand USDA is

working on a risk assessment to resolve this issue.

I have heard some concerns regarding the rule that I want to address. First, we

want to make sure we don’t jeopardize our U.S. cattle economy by allowing a glut

of Canadian cattle to come across the border and depress market prices. This issue

has been examined by some cattle producers who have determined that USDA estimates were overstated because USDA did not take into account Canada’s processing

industry has increased by 22 percent and is projected to increase each year through

2007. Furthermore, some of our domestic processing facilities are not operating at

‘‘normal’’ capacity due to a lack of supply of Canadian cattle. While market prices

could see a decline with the resumption of Canadian cattle imports, prices are not

predicted to plummet as many originally thought as there won’t be a tremendous

amount of cattle streaming across the border.Second, I know it is vitally important

that Canada prove they are in compliance with the feed ban. When the rule was

announced in early January, eyebrows were raised when Canada coincidentally confirmed two more cases of BSE. USDA responded by sending a team of experts to

Canada to verify the Canadian feed industry was complying with the feed ban implemented in 1997. Producers representing the National Cattlemen’s Beef Association also went to Canada to review compliance. Both USDA and NCBA independently concluded that Canada has a robust inspection program and that overall compliance with the feed ban is good.

Third, we must reopen our export markets, especially to Japan. I want to commend Secretary Johanns for immediately calling upon Japan to resume trade as

quickly as possible. The Secretary has said that regaining this market is a top priority for him, and I appreciate all he has done to hold their feet to the fire. I recognize

this is a slow, bureaucratic process, but I want to encourage the Secretary not to

back down and to continue his diligent efforts to resume our export markets overseas. While some in the industry will continue to be skeptical of resuming imports of

Canadian cattle and ruminant products, we must remember to let science, not protectionism and scare tactics, dictate our policies regarding animal diseases. It is imperative for the U.S. to use the appropriate guidelines, risk assessments and science

to lead the way in resuming trade with minimal risk countries, like Canada. How

could we ever expect countries to open their market to our products if we continue

to uphold trade barriers that are not scientifically justified?

Mr. Chairman, I look forward to today’s testimony, and I appreciate you holding

this hearing on an issue that is dominating our cattle industry.

PREPARED STATEMENT OF HON. JEFF FORTENBERRY, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF NEBRASKA

Mr. Chairman, thank you for scheduling this important hearing. I look forward

to hearing the testimony from Secretary Johanns as well as the other witnesses who

will appear before the committee this afternoon.

With the March 7 deadline for reopening the border to Canadian cattle rapidly

approaching, it is vital that we carefully review the USDA’s plans to implement the

new rule and continue to safeguard the U.S. supply of beef.

Americans continue to have great confidence in the beef they purchase and with

good reason. The U.S. has worked hard to maintain and improve the safety and

quality of American beef. Consumers and cattle producers deserve the assurance

that nothing will be done to compromise that level of safety.

Obviously, the rule allowing the importation of cattle and beef products from regions posing a minimal BSE risk has generated strong concerns. This is clearly an

emotional issue, but it is also important for us to carefully examine the matter from

a factual perspective. We must review the effect of the new rule on U.S. beef exports, the effectiveness of the existing Canadian feed ban and BSE surveillance program, and the implementation and enforcement of safeguards at the border as well

as in Canada and the United States.

It is easy to understand why this issue attracts such strong feelings, especially

in a State such as Nebraska, which so heavily dependent on beef. In fact, beef is

the single largest industry in the State and cattle outnumber people in Nebraska

by nearly four to one. Issues involving cattle have an effect on each community in

6

the State. In addition, what happens in Nebraska with regard to beef affects the

rest of country, since the State accounts for more than 20 percent of all beef produced in the United States. While our focus today is Canada, I would like to take

this opportunity to commend Secretary Johanns for the high priority he has placed

on resuming beef exports to Japan. Clearly, this is one of the most pressing issues

for cattle producers in Nebraska. I am encouraged by some of the progress earlier

this year which Secretary Johanns helped to develop. However, there is still much

to be done before Japanese market is again fully open to American beef.

I recently joined a number of my House and Senate colleagues in contacting the

Japanese ambassador to the U.S. urging him to push for the reopening of the Japanese market to U.S. beef. Japan had represented a $1.2 billion market for American

beef and the ongoing ban has a devastating effect on communities throughout Nebraska and the Nation. The U.S. has gone the extra mile to ensure the safety of

its beef and now its time for Japan to work in a cooperative spirit with us to help

the Japanese consumers get access to the American beef that they clearly desire.

PREPARED STATEMENT OF HON. JOE BACA, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF CALIFORNIA

Mr. Chairman: First, I would like to echo your comments and those of Mr. Peterson and thank Secretary Johanns for joining us today on this important issue.

Should the Secretary ever find himself near southern California, I hope that he will

allow me to demonstrate the great bounty that our region contributes to American

agriculture.

Today’s hearing is about two challenges that we are facing in the beef market due

to mad cow disease—trade and food safety. To examine when it is appropriate to

reopen our borders to beef and cattle from a country that continues to have confirmed cases of mad cow, and the policies that are guaranteeing that tainted beef

will not be sold to American consumers

It is my opinion that USDA must identify and implement legal means to gradually resume trade with Canada. A gradual phase-in to Canadian beef exports will

prevent a shock to the U.S. cattle marketplace and mitigate the very real potential

for short-term economic harm to U.S. beef cattle producers.

Furthermore, we are obliged to protect American consumers from possible harm.

The possibility of additional cases of mad cow in Canada is declining due to the feed

ban, but—as we will discuss today—that feed ban didn’t completely go into effect

in August 1997. There is strong case for vigilance and caution in reopening our borders to Canadian beef.

Without question U.S. cattle producers will, in the long run, benefit from trade

policies that are science-based and fair. In fact, the adherence by our trading partners to such science-based trade policies would likely have prevented the closure of

their markets to U.S. beef after December 23, 2003.

It is the decidedly unscientific global approach to this disease that has cost cattle

producers in the U.S. a total of $4.8 billion in lost export value.

However, science-based trade policies should be established in a manner that not

only provides long-term benefits to cattle producers, but also minimizes short-term

negative impacts.

Cattle producers in California and throughout the Nation have expressed a tremendous amount of concern regarding the short-term market implications of the

rule on the importation of live cattle and additional categories of beef from Canada

that was published on March 7, 2005.

Opening trade to Canadian beef will result in large quantities of cattle and beef

being imported into the U.S. in a short period of time, resulting in marketplace instability.

Importing cattle and beef from Canada will affect our negotiations to resume exports of U.S. beef to key export markets, including Japan and South Korea, and

these imports will worsen the beef industry’s current trade deficit position.

Cattle producers don’t understand why the USDA is in such a hurry to renew imports of cattle and beef from Canada, especially in light of two additional cases of

mad cow. Notably, one of these animals was born in March 1998—8 months after

the implementation of Canada’s ruminant-to-ruminant feed ban.

These concerns are validated by the economic analysis accompanying the final

rule, which estimates that importation of live cattle and additional categories of beef

would result in near-term price declines costing U.S. cattle producers up to $3 billion per year over the next 5 years.

Lastly, I was also disappointed to learn last week that the United States and Canadian feed bans did not take place in August 1997, but instead took place when

the feed supplies in the market were exhausted. I think it is prudent to conclude

7

that the gradual phase-in of the feed ban serves as a compelling argument for a

gradual phase-out of the trade restrictions.

PREPARED STATEMENT OF HON. DOC HASTINGS, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF WASHINGTON

Mr. Chairman, thank you for your leadership and for holding this hearing on the

USDA’s final rule to reopen the U.S. market to Canadian beef imports. As the Member of Congress who represents Mabton, WA, where the only case of mad cow in

our Nation was detected in December 2003, I would like to express my concerns

with the USDA’s final rule to reopen the U.S. market to Canadian beef imports.

While I believe the United States should continue working towards resuming trade

with Canada, I am concerned that the USDA is acting before important questions

have been answered.

As you know, the final rule finds that Canada presents a minimal risk for BSE

based on mitigation measures including its ban on meat and bone meal feed. However, the efficacy of Canada’s measures must be called into question given the repeated detections of BSE in that country and in the Mabton cow which was imported from Canada. While I agree that disease issues can be managed in such as

way as to allow continued trade, I am not convinced that Canada has demonstrated

that its safety measures are adequately protective against what is a significant

threat to human and animal health.

The administration must implement a policy based on sound science that protects

the safety of consumers and supports American ranchers and beef producers. I commend you for your aggressive efforts in reopening foreign markets to U.S. beef exports. The progress you have made in the Mexican and Asian markets has been encouraging. However, too many crucial markets, including Japan, remain inaccessible

for U.S. beef producers. These countries are setting a very high standard of proof

that U.S. beef is safe for their consumers, and the USDA should be very cautious

as it considers opening our borders to the source of the BSE-infected cow found in

Mabton. It is essential that we work with Canada to address the issues surrounding

BSE. However, I believe it must be done in a way that does not unnecessarily harm

our beef producers or risk our hard-won access to foreign markets.

Mr. Chairman, I thank you again for your leadership on this important matter.

The CHAIRMAN. At this time we will turn to our first panel,

which as I indicated earlier was our second panel, but we are now

moving you all up to the top spot. We will start by introducing this

panel.

Mr. Chuck Kiker is the region 5 director of R-CALF, United

Stockgrowers of America from Beaumont, Texas.

Mr. Jim McAdams, president of the National Cattlemen’s Beef

Association from Adkins, Texas.

Mr. Ken Bull, vice president for cattle procurement with Cargill

Meat Solutions from Wichita, Kansas.

Mr. Carl Kuehne, president of the American Foods Group from

Green Bay, Wisconsin.

Mr. Kiker, we will invite you to begin first and remind you that

your entire statement will be made a part of the record and ask

that you limit your oral remarks to 5 minutes. Thank you.

STATEMENT OF CHUCK KIKER, REGION 5 DIRECTOR, R-CALF

UNITED STOCKGROWERS OF AMERICA, BEAUMONT, TX

Mr. KIKER. My name is Chuck Kiker. I am a cow/calf producer

from Beaumont, Texas, and a member of the Board of Directors of

R-CALF U.S.A. We are a nonprofit trade association representing

tens of thousands of independent cattle producers in 44 States.

Thank you, Chairman Goodlatte, Ranking Member Peterson and

all the members of the committee, for having this hearing regarding USDA’s final rule providing for Canadian beef and cattle imports. I very much appreciate the opportunity to share our views

providing for Canadian beef and cattle imports.

8

I am one of the thousands of U.S. cattle producers that have concerns regarding this final rule that permanently relaxes the import

restrictions that the U.S. has had in place since 1989. It is very important to note that these restrictions have effectively and successfully prevented BSE from entering the United States and contaminating the U.S. cattle herd in the U.S.-produced beef supply.

The effect of the final rule, if it is allowed to be implemented on

March 7, will be to potentially threaten consumer confidence and

the safety of beef available in the U.S. market. USDA initially

threatened consumer confidence in the available beef in the U.S.

market in August 2003, when it first began exposing the U.S. to

beef products from a country known to have BSE, but where the

severity of the BSE problem was uncertain.

Today the BSE problem in Canada is even more questionable.

With three additional BSE cases detected under limited testing,

now the USDA’s proposed final rule increases the risk that consumer confidence in our beef supply will be jeopardized. R-CALF

U.S.A. Believes the new rule falls short and potential problems lay

ahead. If the new USDA rule results in the erosion of consumer

confidence, then the cattle industry faces a potential disaster if the

markets collapse.

We also believe that the U.S. must be a leader in harmonizing

global standards on the importation of beef from countries affected

by BSE. Without such action, the U.S. will become the dumping

ground for beef in countries that have BSE.

In fact, we are seeing that right now. In 2004, U.S. beef exports

dropped by nearly 85 percent, while at the same time Canadian

beef imports to the U.S. rose 40 percent. The only way to correct

this gross imbalance is to globally harmonize import and export

standards from countries affected by beef from BSE.

We have submitted a detailed written statement that more comprehensively outlines our concerns and proposed resolutions to the

proposed final rule. In the time that I have left I will highlight

some of our key concerns.

APHIS has improperly classified Canada as a minimal BSE risk

country. This is a major flaw in the final rule. APHIS sought the

advice of OIE experts of whether or not the OIE would accept a relaxation of the OIE standards relating to the duration of the meat

and bone meal feed ban and OIE experts rejected APHIS’s request,

stating one of the most important conclusions of the recent OIE

group is that the scientific basis used in the present code is still

valid. APHIS has now changed the U.S. safety standards from the

maximum protection to the minimum.

Every other country in the world with BSE practices the maximum safety standards regarding BSE mitigation. They all remove

SRMs in cattle in over 12 months of age and they all test a large

portion of cattle that enter the human food change. Canada does

neither. The final rule does little to harmonize global beef trade

and will require Canada to practice the least stringent BSE mitigation measures of any country in the world where BSE exists.

The OIE uses two combined factors to determine the severity of

BSE risk mitigation measures necessary to manage the associated

human and animal health risk of the affected country and the disVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
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ease’s prevalence within the cattle herd and the feeding practices

of the country.

We know Canada’s feeding practices have been less than stellar,

and they have yet to conduct a comprehensive disease prevalence

study within their cattle herd. The U.S., unlike Canada, has no

known failures in its feed bans. Canada has documented four cases

of BSE in its native cattle herd and the U.S. has had none.

The U.S. is considered provisionally a BSE-free country and

should be able to export beef anywhere in the world. There is a difference between the BSE status of the U.S. and Canada. We are

not an integrated cattle industry.

The final rule is inconsistent with previous U.S. trade policy. The

final rule will allow cattle up to 30 months of age into the U.S.

while at the same time the U.S. is negotiating an under 21-month

age limit for exports to Japan. Where is the scientific justification

for this action by USDA? Of the 14 cases of BSE confirmed in

Japan, two have been in cattle under 30 months of age.

Presently all beef coming into the U.S. is deboned consistent with

the risk mitigation measures recommended by the OIE. By designating Canada a minimal risk country, the final rule lowers the

U.S.’s standards on boxed beef already coming into the U.S. from

Canada. However, the final rule will illuminate the strenuous

deboning requirement and will effectively lower the existing consumer protections against the risk of BSE from Canadian beef.

Science-based BSE rules allowing beef trade must complement

global harmonization.

R-CALF appreciates this opportunity to present its views to the

committee concerning the important changes that need to take

place in USDA’s proposed rule to reopen the border with Canada

as well as the critical issues facing the United States concerning

BSE. Thank you very much.

[The prepared statement of Mr. Kiker is on file with the committee.]

The CHAIRMAN. Thank you, Mr. Kiker.

Mr. McAdams, welcome.

STATEMENT OF JIM McADAMS, PRESIDENT, NATIONAL

CATTLEMEN’S BEEF ASSOCIATION, ADKINS, TX

Mr. MCADAMS. Thank you, Chairman Goodlatte, Ranking Member Peterson and the members of the House Committee on Agriculture. I am Jim McAdams, president of the National Cattlemen’s

Beef Association and a rancher from Texas.

BSE has been a priority issue for this Nation’s cattlemen since

it was first diagnosed years ago. Since that time, our Nation has

erected many safeguards to protect the safety of our consumers and

of our cattle.

In the past 9 months, we have tested over 250,000 head of cattle

without finding a single positive case of BSE. These safeguards will

work. In spite of the intense media coverage, we find that consumer confidence and the safety of our beef is at record levels. It

is at 93 percent. The demand for our product continues to grow.

When the United Kingdom first diagnosed BSE in a cow there,

the world adopted a policy for trade on BSE that was based upon

fear, not upon a sound science. Since that time the science has

10

evolved to a point that we know a lot more about this disease. It

is time for our global trading policies to evolve as well. The United

States needs to be a leader in this evolution.

In December 2003, we discovered that a Canadian cow in the

United States had BSE. Upon that discovery, we began to suffer

the same fate as the other countries in the world that had BSE.

We lost our export markets. The loss of these markets cost us $175

a head and the cumulative loss to date to our cattlemen is now at

$4.8 billion.

In August 2004, NCBA members adopted a policy that advocated

the world policy on trade evolve to a science-based one, getting

away from this policy based upon fear.

This hearing was called to discuss the rule declaring Canada as

a minimalrisk country. The USDA rule is generally consistent with

NCBA’s policy. However, on the announcement of this rule, it was

followed shortly thereafter by the discovery of two additional cases

of BSE in Canada. This increased the concern among our Nation’s

cattlemen. To address those concerns NCBA sent a trade team to

Canada to find out the facts. That trade team’s report is included

in our written testimony.

In the past month, we have had a convention of our membership.

This trade team report was reviewed. This issue was debated and

at the end of our convention our NCBA membership adopted an 11-

point directive that outlined our concerns with the rule and how we

felt it best to move forward with reestablishing our international

trade.

We still have several concerns regarding this rule, but we are

pleased that many of our concerns have already been addressed.

We are appreciative of USDA under the leadership of Secretary

Johanns and the fact that they delayed the implementation of the

rule regarding the importation of beef from cattle over 30 months.

But we still are concerned and feel that it is imperative that we

resolve once and for all the issue regarding anaplasmosis and blue

tongue on all cattle that are traded between the two countries. We

also have concerns that USDA will be able to effectively enforce

their ban on the importation of breed heifers, and of paramount

concern to us is how is this going to affect our ability to expand

our access for products from the U.S.

We have to have access for access. We appreciate the efforts of

you and Congress and the administration to get our export markets

opened, but the fact remains that many of our major trading partners still will not allow our product. We cattlemen expect that the

Government will ensure that we are treated fairly in the international arena, and when our trading partners do not use sound

science to base their rules upon, when they don’t follow the rules

and when they don’t negotiate in good faith, we expect our Government to defend us by using all the tools necessary, including economic sanctions.

The BSE policies of this country, we feel, are based upon sound

science and the OIE guidelines, as they should be. We think it is

important that all of us remember that the most important thing

that we can do is to withhold specified risk materials from the food

supply, and this is being done. I bring this up because we are concerned about some recent comments that infer that beef from the

11

U.S. is not safe. We feel this is not only irresponsible, it is inaccurate and it is dangerous, because it undermines the science that

is the foundation for our safeguards, and we run the risk of undermining consumer confidence, and we endanger the livelihoods of

the men and women of this country that depend on cattle and beef

for their livelihoods.

NCBA prides itself on making knowledge-based decisions based

upon the facts. We would urge that you would review the testimony

that accompanies our written testimony from the leading scientists

in this Nation that we feel reinforce the points that I have made.

I would like to thank you for allowing me this time with you, and

I look forward to answering your questions.

[The prepared statement of Mr. McAdams appears at the conclusion of the hearing.]

The CHAIRMAN. Thank you, Mr. McAdams.

Now we are pleased to hear the testimony from Mr. Bull.

STATEMENT OF KEN BULL, VICE PRESIDENT, CATTLE

PROCUREMENT, CARGILL MEAT SOLUTIONS, WICHITA, KS

Mr. BULL. Thank you, Mr. Chairman, Mr. Peterson and members

of the committee.

My testimony today will speak primarily to three important concerns, the absolute necessity that the U.S. continue its strict adherence to science-based sanitary and phyto-sanitary factors in its

trade dealings; that market disruptions can and do seriously impact industry competitiveness and structure; and that the North

American livestock and meat sector is interdependent and cannot

be artificially divided along the 49th parallel or the Rio Grande

River.

First, I want to offer a few comments on the science of this animal disease. There is near unanimous agreement in the scientific

community that the BSE risk in the U.S. and Canada is now extremely low and will continue to decline further over time.

Experts believe the initial exposure was due to the importation

and subsequent rendering of at least one animal infected from Europe from the early 1990’s, years before feed control measures were

implemented.

Scientists all agree that the most effective means to eradicating

BSE is addressing it in the animal feed supply, something that the

U.S., Canada and Mexico have taken steps to do. This action greatly reduced the potential for amplification of the disease and eliminated the potential for the kind of outbreak that has been witnessed in Europe and Japan.

BSE is a disease that when found is found primarily in much

older animals. In order for the disease to manifest itself in a young

animal, the animal would have had to have received a localized

high dose of infective agent.

The most effective means of protecting human health is to remove specified risk materials, or SRMs, from the human food supply. The U.S. and Canada implemented this key step in a rapid

manner after the first cases were detected in each country.

U.S. and Canada regulatory authorities are in the process of developing measures to enhance the existing animal feed controls.

12

These steps are meant to speed up the eradication of the disease

from North America.

It is critical that harmonized North American measures be implemented in an environmentally sound and cost-effective manner,

otherwise implementation will take time and the opportunity for

quick action be lost.

The U.S. and Canada have undertaken a very aggressive surveillance exercise, targeting the older, dead, disabled population where

BSE is most likely to be detected. To date, we understand USDA

has conducted over 250,000 tests since its surveillance program

was enhanced last year. Canada is testing proportionately in the

same range.

Moving on to trade considerations. The U.S. has suffered for a

generation now under the European ban of U.S. beef. It is based

on a nonscientific prohibition of growth promoting hormones. Those

that want to close the Canadian border by distorting science are

guilty of the same behavior as the European Community.

The U.S. is now cut off from four of its top seven export markets

because foreign governments have not moved to have a common

understanding of the science of BSE. Our only large trading partners accepting U.S. beef today are Mexico and Canada.

These circumstances are really no different than other agricultural trade blocking efforts like our challenges exporting poultry to

Russia and genetically enhanced soybeans and corn to Europe. We

have fought for years to gain access for beef to Japan, and our fear

is that any perpetuation of faulty science will end up costing us the

market that is so important to the economy of a trade dependent

industry.

The U.S. industry will prosper or wither with our success in

growing trade, but trade is a two-way street.

There are no more powerful examples of trade distorting nonscientific actions than the Japanese beef ban in December 2003. Here

the U.S. stood, with a single cow found to have BSE, and an aggressive globalized and increasingly strengthened surveillance program. Japan had nearly a dozen cases by that date and no system

of high-risk animal surveillance. The leverage from these facts is

yet to be made convincingly to the Japanese.

Moving on to market impacts. As the committee knows, U.S. cattle markets remained exceptionally strong for the past year and a

half. Part of this is because of the border closure, low cattle supplies and high demand have a way of ensuring high prices. On the

consumer demand side, we must give a lot of credit to the administration’s handling of the BSE situation. Polling data will suggest

that our knowledge of BSE in this country is extremely high and

yet our confidence that the Government is handling this is extremely high as well.

But what the committee may not have focused on is that there

is a quiet yet substantial change going on in the processing industry that does not bode well for the entire segment.

As Canada has been isolated, there has been a—with their large

supply of cattle, cattle that ultimately could have come to the

United States, there has been an increase in packing capacity in

Canada. Yet you have also heard that many packing plants in the

13

United States have either had layoffs or slowed down their line

speeds to adjust for the lower supply of cattle in the United States.

We have substantial structural changes that are occurring within

our industry that if this were to persist we would be faced with excess capacity across the border and diminished capacity in the

United States.

Finally, another concern is our mature animal processing facilities in the United States. We greatly share the concern that my fellow panelists from Wisconsin will address shortly.

In closing, I just want to say I appreciate the committee’s concern in this matter. We think it is one that needs to be addressed

and we appreciate any opportunity to answer questions.

[The prepared statement of Mr. Bull appears at the conclusion of

the hearing.]

The CHAIRMAN. Thank you, Mr. Bull.

Now, we will hear from Mr. Carl Kuehne. Mr. Kuehne, welcome.

STATEMENT OF CARL KUEHNE, PRESIDENT, AMERICAN

FOODS GROUP, GREEN BAY, WI

Mr. KUEHNE. Thank you, Chairman Goodlatte, Mr. Peterson and

members of the committee. I appreciate the opportunity to be here.

My name is Carl Kuehne, and I am the owner and chief executive

officer of American Foods Group headquartered in Green Bay, Wisconsin. My company is also a member of a coalition called the Meat

Equity Alliance for Trade Fairness or MEAT Fairness. Thirteen

smaller and mid-sized companies who harvest primarily older cattle make up this coalition.

At the outset, I want the committee to understand that our coalition favors an open border with Canada, with cattle and beef to be

treated equally.

In addition, a primary goal for all of us is to maintain consumer

confidence in our beef products. Our Government must continue to

maintain the consumer’s confidence, basing its actions on science,

not emotion, fear or political science.

All the scientific evidence is clear. BSE is not found in meat. We

also believe that science supports the designation of Canada as a

minimal risk country for BSE and normal trade should be resumed

as soon as possible.

Of course, it is critical that trade be resumed in a rational fashion. Like many others throughout the U.S. industry, we were troubled by the USDA’s final rule when it was published on January

4, since it permitted imports of beef from over 30-month-old cattle

but not the cattle themselves. That would create a perverse but

powerful incentive to harvest over 30-month old cattle in Canada,

rather than in the United States. This would be to the significant

detriment of U.S. packers and producers alike.

We appreciate Secretary Johanns’ action to temporarily delay the

effective date of that portion of the rule that would have permitted

over 30-month cattle—or over 30-month beef pending review of the

USDA studies on the Canadian feed ban and the epidemiological

studies relating to the two infected cows.

It is now critically important to move forward without delay to

create a regulatory structure that would allow both over 30-month

14

cattle and over 30-month beef to enter the United States at the

same time.

The segment of the packing industry that harvests older nonfed

animals is much less concentrated than the segment that harvests

fed cattle. Twenty-eight companies operate facilities in 18 States to

harvest nonfed beef. Twenty-four of these companies only have a

single location to produce nonfed beef. A study conducted by

Informa Economics, which is attached to my testimony, estimated

that the proposed rule would have cost our segment of the packing

industry over $150 million and reduced income to cow producers by

over $330 million per year. If the final rule were to go into effect

as published in January, some of the companies in our industry

simply would not make it. Either plants would be permanently

shut down with a loss of thousands of jobs in rural communities,

or plants would move into stronger hands with larger companies

swallowing smaller ones; however, the more likely scenario is the

one in which U.S. plants shut down and Canadian plants take

their place.

According to the report by the NCBA trade team, the Canadian

cattle slaughter capacity expanded 22 percent in 2004 alone and is

projected to increase each year through 2007. As many as 25 plants

are being expanded, in the process of being constructed or on the

drawing boards. We should not allow our portion of the industry

to be exported to Canada. The long-term effect on producers would

be devastating.

Mr. Chairman, I respectfully urge this committee to insist that

USDA avoid such inequitable, devastating results. Instead, USDA

should institute immediate science-based regulatory action to restore normal trade between the United States and Canada for both

over 30-month beef and over 30-month cattle.

This step will also be critical to restoring all our trading relationships worldwide, not only in a highly publicized Japanese market

but in other important markets like South Korea, Hong Kong and

Taiwan. Open trade with Canada, based on science, is crucial to establishing export trade with our other trading partners. The U.S.

must take a leadership role in establishing the standards for trade,

and these standards must be based on science.

Trade with Japan is especially critical for the entire industry.

Under the proposed rule now being discussed, only slightly more

than 1 percent of the cattle harvested in this country would meet

the Japanese customer’s specifications. The industry cannot afford

a hollow victory in reopening trade with Japan in minimal terms.

We need to restore normal trade.

Taking action based on science will also be the best way to maintain consumer confidence in beef. In taking this regulatory action,

it is critical that beef and cattle move on the same track and also

critical that they move quickly.

Thank you for this opportunity. I look forward to your questions.

[The prepared statement of Mr. Kuehne appears at the conclusion of the hearing.]

The CHAIRMAN. Thank you, Mr. Kuehne.

Mr. Kiker, most of the people that I visited with tell me that our

major export markets of Japan and Korea view the U.S. and Canada as an integrated North American market. Further, it has been

15

stated by many knowledgeable experts that failure of the U.S. in

reestablishing livestock and beef trade with Canada will be used as

a pretext by the Japanese to keep U.S. beef out of their markets.

Are you willing to sacrifice our Asian export market in order to

maintain a ban on Canadian cattle?

Mr. KIKER. As I said in our statements, in our written statements, we wish to globalize or harmonize the standards by which

everybody lives by. We want to open the export markets as bad as

anybody. But Japan has made several requests that would open

our markets back up to Japan, of which we have never really even

considered any of them, to my knowledge.

I just think—we have been trying to get Japan to take our beef

now for sometime now, a little over a year, going on the assumption that Canadian beef is safe and it is OK to commingle U.S. beef

with Canadian beef. Maybe we need to try a different direction and

not—and give them pure U.S. beef and see if that will satisfy them.

Because as I mentioned in my testimony, technically the U.S. is

BSE provisionally free. We should be able to export anywhere in

the world if we weren’t commingling beef from other countries with

ours.

The CHAIRMAN. So you do not want to sacrifice our export markets?

Mr. KIKER. No, sir, I don’t.

The CHAIRMAN. Recent briefing papers and public statements

made by your organization include a number of assertions about

how the Office of International Epizooties, or OIE, standards argue

against the rule. However, a recent filing by the OIE in your Montana court case would appear to repudiate the foundation of these

assertions. I wonder if you would take the opportunity to resolve

that apparent conflict.

Mr. KIKER. As the gentleman said, they are only guidelines, but

what is the point of having the OIE standards if we aren’t going

to follow them? I mean, they are just that, guidelines, and when

you lower the safety standards to the minimal standards, according

to those guidelines, is that going to open that Japanese market? I

think we stay with the maximum standards, and that is practiced

by every other country in the world that has had BSE. I mean, everybody else is pretty much on board but us.

The CHAIRMAN. Well, your organization has argued that for lowrisk countries, OIE standards for low-risk countries are not being

met in the instance of Canada. However, the filing by OIE states,

in part, and I quote, ‘‘OIE will only examine a member country’s

claim for BSE free or provisionally-free status.’’

In other words, there is no OIE low-risk standard in existence

that Canada can fail to meet.

Mr. KIKER. Exactly. But the OIE standards error guidelines. Regardless of whether they will put a standard on them, the fact of

the matter remains they have had four cases of BSE, and our export markets are closed.

The CHAIRMAN. Let me turn to Mr. McAdams and see if he would

like to respond to any of those comments. But also, I wish you

would tell us how and why the NCBA came up with its policy regarding the expansion of trade with Canada and also at your recent convention the NCBA adopted a directive listing 11 goals assoVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
16

ciated with the live cattle rule. Are you satisfied with the progress

made thus far on your 11 point directive?

Mr. MCADAMS. In response to your question regarding the 11

point directive, we have made substantial progress on most of the

issues in that directive.

I outlined our concerns regarding the brucellosis and

anaplasmosis and blue tongue rules. We think it is important that

we have been working on this rule for 17 years, and we need to

have a resolution to it once and for all. We also feel like that the

rule needs to be consistent, and we are banning the importation of

bovine needle sperm, and so we need to ensure that any heifers

that are imported are not bred. We feel like the way to do that is

through spaying. That would give the ultimate assurance until we

develop the rule for breeding stock.

Those are two of the key concerns that are ongoing. We feel,

though, that it is imperative that the United States be consistent

in following the sound science, and we feel comfortable that the

science supports, as long as Canada has effective safeguards in

place, that we should allow the process to continue. It needs to be

a process that assures that what we allow in we can enforce and

effectively monitor, but with those parameters in place we think we

do need to move forward.

We also are very much aware that it would do nobody any good

to break the U.S. cattle market. It wouldn’t help the Canadians

and it certainly would be to our detriment. But we have studied

this issue, we have studied the amount of cattle that are estimated

to come in. We feel like the USDA overestimated the numbers of

cattle that would be coming into this country by about double, and

we have increased our comfort level in how they will allow those

cattle to come in to the point that we can be supportive and moving

forward, but we continue to press for the assurances that the concerns that we have outlined and how this rule is implemented are

addressed.

The CHAIRMAN. Thank you.

Mr. Bull, the situation in Japan is enormously frustrating for all

stakeholders. What is your perspective on where discussion between our two countries sit today and what would you describe as

a meaningful resumption in trade and when would you expect to

see it?

Mr. BULL. Well, I think the discussions have been ongoing for a

long time, and maybe to comment a little bit on some of the earlier

comments, we have been basically free of Canadian cattle in this

country for a long time, and yet have still had the inability to get

the Japanese Government to accept our meat.

So I don’t think it is just the concern about whether the Canadian cattle or meat is in our country with the Japanese Government. What I perceive the problem is, is that the Japanese have

lost their consumer confidence in their ability to adhere to standards, and the Japanese have gone way overboard to try to regain

their consumer confidence. They have essentially done what Europe had to do, and that is go way beyond what science would dictate to try to solve their issue.

I think where we are at in the United States is that our consumers have high confidence in our ability, as we have been able to

17

demonstrate. The problem we have is convincing other governments that there needs to be a level playing field in understanding

what the science is.

We do think there are efforts being made. We do think that we

need to get the door open with Japan and then continue to aggressively pursue pulling Japan and the rest of the world into a common understanding of the science behind this disease.

The CHAIRMAN. Thank you very much.

The gentleman from Minnesota, Mr. Peterson, is recognized.

Mr. PETERSON. Thank you, Mr. Chairman.

Mr. McAdams, maybe you answered this before, but in reading

your testimony and these 11 points that the chairman alluded to,

I was going to ask you whether you were for this rule or not after

reading this, but apparently you are in favor of the rule and moving ahead?

Mr. MCADAMS. We feel that it is imperative that we have our

concerns addressed, and I have outlined those concerns, and we are

going to work hard to make sure that those concerns are addressed. However, we support the Government in basing this decision on sound science, and we are more concerned about the process and how it is implemented than we are about the rule.

We feel like we have to take the steps necessary to expedite the

movement to normalcy in our international trade, and we realize

that as big as the U.S. market is, the rest of the world will be looking at what we do, and we feel like as we move forward it will expedite our ability to move forward with exporting our product.

Mr. PETERSON. So, I guess I am understanding you that not all

of these 11 points have to be met because some of the things on

here, I think, are probably not too likely, like that the feeder cattle

be branded and there be no USDA stamps on imported beef products and so forth.

Mr. MCADAMS. Well, sir, along—the USDA rule, as I understand

it, feeder cattle must be branded with the CAN. When it comes to

the stamps and the grades, it is our understanding that we have

trade agreements that prohibit us from implementing that.

Mr. PETERSON. Right.

Mr. MCADAMS. So we have looked at each one of those points

point by point. We have made progress on many. On some we realize we can’t make progress on. On the others we are working hard

to get resolution to them and if we don’t get resolution we could

well be coming back to you and saying we have ongoing rules about

how these rules are being implemented and they need to be fixed.

Mr. PETERSON. OK. Also in your testimony you talked about

these lost export markets cost $175 a head, a cumulative loss of

$4.8 billion, these Asian markets. But wouldn’t you concede that

the closing of the Canadian market or border has probably raised

prices considerably to offset that?

Mr. MCADAMS. It certainly was a contributing factor, but the unfortunate circumstance is that our cost is the function of cutting

our domestic production by nearly 7 percent and the fortunate circumstance of our beef demand being up by about 7 percent. So that

is why we feel those were the two dominant reasons for the outstanding prices that we have been enjoying. Our concern is that if

we have to enjoy good prices only when we cut our production, we

18

are going to have a shrinking market, a shrinking industry, which

doesn’t give us the opportunity.

We feel like we need to be able to grow this industry by growing

demand, growing our export markets. This allows us to produce

more, sell at higher prices and we give a broader future not only

of our producers today, but of our children if they want to return

to this industry.

Mr. PETERSON. Maybe you could answer this or maybe somebody

on the panel could, but could anybody explain to me why Hong

Kong is accepting Canadian beef but not U.S. beef?

Mr. KUEHNE. Mr. Peterson, I could give you my view of that situation. I believe our USDA was very focused on Japan and opening

the Japanese market first. I was informed that any deviation from

their focus on Japan may end up undermining those situations.

Hong Kong was a market that was particularly important for my

company. We had a recognizable share of that marketplace. The

people that are now importing Canadian meat used to import ours.

Before the BSE case in Canada, the Canadian industry exported

about 600 metric tons per year to Hong Kong. In December alone,

they imported or exported to Hong Kong 900 metric tons. It is a

critical market for us, for our entire industry, and I believe one of

the reasons that we do not have that market is because of our intense focus on Japan as opposed to looking at other opportunities

in the world.

Mr. PETERSON. Well, that could be. Canada had the BSE cows;

we didn’t. And yet they have stopped our import. I don’t get it. I

mean, did they not stop both Canadian and U.S. beef?

Mr. KUEHNE. Yes.

Mr. PETERSON. And the Canadians got theirs opened up and we

didn’t.

Mr. KUEHNE. That is correct.

Mr. PETERSON. I just have to say, I was in Japan about a week

ago and this A40 deal they got, whatever, to determine these 20-

month cows or cattle first of all, I got the impression that our trade

people are putting a much more positive spin on whether this is

going to get done or not from what I picked up being over there.

I think we are in an uphill situation.

But, second of all, what really struck me, that here we are setting up yet another process to try to get this meat into Japan; we

have got 30 months that we are dealing with in Canada, now we

have got 20 months we are dealing with in Japan. They are trying

to set up this system to figure out how old the carcass is because

we don’t have any other way to do it.

I really was struck about how much a problem I think we are

causing ourselves by not having an animal ID system in this country, you know, that we are having to set up all these other methods

to try and get out a problem that wouldn’t be a problem if we

would have adopted an animal ID system back in July 2001 like

the Canadians did.

Mr. PETERSON. Mr. Kiker, what do you think about that? Do you

think the lack of an animal ID system is causing us some problems

in these markets?

Mr. KIKER. I think a lack of standards, global standards for BSE,

is causing us problems in the market. I think there is a lot of politiVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
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cal issues here that probably don’t have anything to do with the

cattle industry. But I think if the U.S. cattle industry thought they

could get beef into Japan, we could implement an identification

system. We have heard a lot of talk about how much that was expensive—how expensive that was going to be during the countryof-origin labeling debate. And then to put a date on the age of those

cattle was going to make it a little bit harder. I mean, some of

these big ranches, it is going to be real hard. They are going to

have to use a time period instead of a specific date for births on

cattle, I believe. So I am not sure if we can incorporate that in a

timely manner.

Mr. PETERSON. Well, probably not at this point. But thank you,

Mr. Chairman.

Mr. GOODLATTE. I thank the gentleman.

The gentleman from Kansas, Mr. Moran.

Mr. MORAN. Mr. Chairman, thank you. Thank you for your leadership on this issue, that I can’t imagine there is a congressional

district in the country that what happens in the livestock industry

matters more to our economy.

Mr. Bull, especially, welcome to you, a Kansan. And I thank the

witnesses for their testimony.

I know this is a hearing related to the issue of the Canadian border, but I would like to ask our panelists how do they see the effect

upon our ability to regain the Japanese market based upon the

adoption of this rule? Is it enhanced because we are utilizing sound

science, or is it diminished because of concerns about BSE? So if

this rule is fully implemented, would we expect our opportunities

for our negotiators to be improved in reaching a satisfactory agreement with Japan?

Mr. BULL. I will go first. First of all, I don’t think it is diminished in any way. I think we are trying to take a leadership role

in telling particularly Japan, but the rest of the world, that we

need to adopt sound science and sound science standards as a way

of dealing with border issues; that if we allow nonscience activities

to occur, you are not going to get anywhere. And it would be disingenuous for us to try and convince Japan to accept our ideology

while we didn’t apply sound science to our own Canadian border.

So my take is that it will not diminish, it will only help, as we take

a leadership role with the Japanese.

Mr. MORAN. Thank you, sir.

Mr. KUEHNE. I would agree with what Mr. Bull has said. I think

it is critically important that the United States take this leadership

role. We should have taken this leadership role much sooner than

we have. We now have an opportunity base rules on science, base

trade on science, and move forward with it. And it can only enhance our opportunity to gain markets. Thank you.

Mr. MCADAMS. Mr. Moran, I would just add that we need to remember that we have that Beef Export Verification Program that

guarantees what we are sending is U.S. product. So we don’t see

that as being an impediment as we move forward with the Japanese, because they don’t have to concern themselves that what we

are sending is not a product of the U.S.A.

20

Mr. KIKER. I think it diminishes, because I think there is some

question about whether we actually—that program is actually

working and they aren’t getting a little bit of product from Canada.

Mr. Bull said earlier that we haven’t been getting any Canadian

cattle. Well, that is not really completely true. Boxed beef imports

from Canada are up 40 percent. We are taking beef from Canada

right now. I think by lowering our standards it severely impedes

our ability to open the Japanese markets and some of the rest of

these markets around the world.

Mr. MORAN. The dilemma we the policymakers always face is

two sides to the same question. Some think it enhances the opportunities with Japan, and you, Mr. Kiker, think it diminishes.

Let me ask another question, more market oriented. Is there any

reason that if this March 7 date comes to fruition and the rule is

implemented, that our Department of Agriculture ought to be looking at a phase-in of the opportunity for importing beef to the

United States for market reasons, market reasons for our cattle

producers? Mr. McAdams?

Mr. MCADAMS. Well, thank you, sir. That is one reason that we

have involved ourselves so much in the process. And we sent the

trade team up there to examine and get comfortable with the numbers, look at the analyses from many different economists, and that

is why it is important that any rule that we implement can be effectively enforced. We feel like that if it is effectively enforced, that

we will not have a flood of cattle coming in this country; the market forces will work to the point that it will be an orderly flow. But

we are very conscientious in the responsibility of monitoring to assure that we don’t have unreasonable flow of cattle into this country. And we have gotten more comfortable, as we have examined

the data and the facts, that we will be able to absorb these cattle

if the rule is implemented in the right way.

Mr. MORAN. Mr. Bull, let me change the question before my time

expires. I think one of the things that I hear from USDA consistently is concern about packing capacity being exported to Canada.

Would you comment on that, the reality of that?

Mr. BULL. Well, I think it is a very real fact that is taking place,

as I presented in my testimony. We have expanded our plant in

Canada; our major competitor has expanded his. There is a number

of plants that are at least in the developmental stage and other capacity that has already been expanded. So the market will move

relatively quickly to take advantage of opportunities. While here in

the States the packing industry has been under a lot of pressure,

as you can note, there has been a number of plants that have been

either temporarily idled or permanently idled, and chain speeds are

down. Our packing capacity is probably running at about 85 percent capacity, which is disastrous for our industry if we were to

continue in that manner.

Mr. MORAN. Thank you for your responses. Thank you, Mr.

Chairman.

Mr. GOODLATTE. The gentleman from California, Mr. Costa, is

recognized for 5 minutes.

Mr. COSTA. Thank you very much, Mr. Chairman.

After listening carefully to the testimony, it seems to me that

there is an agreement, an overall agreement at least, that everyone

21

professes to believe in sound science. But it seems to me that what

we are really talking about here is something that we are more engaged in, and that is political science.

The efforts to deal with focusing on what occurred on December

24, 2003 as it relates to the find that occurred in Washington State

that has impacted the beef industry in the United States and the

efforts by the USDA to deal with this issue not just as it impacts

our relations with our Canadian border, but Japan. And Japan,

thus South Korea and Taiwan I think, is at the heart of the issue

that we are all struggling with. And people in California tell me

that pending this March 7 deadline next week, that they cannot

understand why we have not been able, with all the efforts that

have been put forth and your comment about we weren’t focused

in Hong Kong because we were focused in Japan, I find hard to believe. I mean, we have a lot of resources in this country. It doesn’t

pass your Google test either, I see.

The fact is, is that what people, what my producers want to

know in California is why can’t we focus on not just the science but

the political efforts to make movement in Japan? I mean—and it

is nice to dance around here about the issues not being linked, but

most folks I talk to believe there is a linkage. And I guess I would

like the witnesses, beginning with the gentleman from Kansas, to

tell us what your frustrations are in terms of whether or not you

think we have been doing everything possible with the USDA and

our other efforts to open the Asian markets, notwithstanding sound

science.

Mr. BULL. I appreciate the opportunity to talk about that. I think

our Government has invested a lot of time and effort into working

with the Japanese. I concur with Mr. Kuehne that I think if we are

to maybe knock the administration a little bit, it was focusing its

entire attention on one market hoping to get it resolved.

I do think there is more that our Government can do. I do believe

it is going to take elevating the talks to a higher level than they

have been in the past. And not saying that the people we have sent

haven’t been talented in trying to resolve this. But I just believe

it is over their station, and I do believe we need to put forth a bigger effort from this administration to get this opened.

Mr. KUEHNE. If I could respond to that as well. At this point in

time, I think the pressures that are being brought by the congressional offices, the letters being sent to the Ambassador from the

House as well as the Senate, are very helpful. I also understand

that the administration is marshaling its forces, led by Secretary

Rice, to determine what leverage we do in fact have, particularly

with the Japanese market. I think that effort is, in fact, beginning

to get underway.

Mr. MCADAMS. I would just add that we as cattlemen are frustrated by the progress that has been made. We appreciate all the

efforts that have gone forward. But in the case of Japan, we have

answered all of their technical questions. We have done everything

that we know to do to show them how effective our processes are.

They don’t have disagreement about our processes.

We are very appreciative of the resolution introduced by Mr.

Moran, because we think that once you have used all of the other

tools available, we have to either have fair trade, or the world has

22

to understand that we are going to be looking at trade wars. So we

feel if the Japanese cannot respond in a conscientious, forthright

manner, we are going to have to ask that we have some sort of economic sanctions. And we are asking for those.

We do not want to—we understand their sovereign rights, but we

also have the sovereign obligation to follow the rules that we have

agreed upon. And in this case we feel like that is not happening.

Mr. COSTA. So you believe the science issues have been addressed?

Mr. MCADAMS. Yes, sir; I do.

Mr. COSTA. And do you believe there is linkage? Do you believe

the Japanese believe there is linkage between the March 7 actions

that will take place next week?

Mr. MCADAMS. We think that March 7 has served to create a

sense of urgency. And this sense of urgency needed to have been

created a long time ago, but sometimes we have to have deadlines

to move forward. And the U.S. cattlemen realize we have concerns

about the flow of product around the world. And for a beef industry

to be a vibrant industry, we are going to have to have that flow

of product.

And we can’t have protectionism; that is why we are not advocating a protectionist attitude in the United States, but we do have

to protect our industries and make sure that we have fair trade.

And we have become convinced that if we don’t move forward rapidly in opening these markets after we have addressed all the

issues that have been brought up, then that is the only alternative

that we see.

Mr. GOODLATTE. Thank you. The time of the gentleman has expired.

The gentleman from Minnesota, Mr. Gutknecht, is recognized.

Mr. GUTKNECHT. Thank you, Mr. Chairman. Mr. Chairman, I

want to thank you for having this hearing, and I do apologize that

I have another meeting to go to so I won’t be here, I don’t think,

when Secretary Johanns comes to testify before us.

Let me say that the testimony has been excellent. I think all of

the witnesses here have done a great job of expressing their point

of view and they have done it very well. I think the issue, we have

had some discussion already whether the issue is political science

or sound science. I think the issue is consistency. And from my perspective I want to congratulate the Department. They have moved

in a more consistent direction. But let me just say editorially that

I think they have a ways to go.

It was hard for me to explain—and, Mr. Kuehne, I think I have

some folks in my district who are in similar businesses to yours,

and they explained to me very clearly why it was very difficult for

them to understand, it became very difficult for me to understand,

what the difference between boxed beef, hanging carcasses, live

animals, and the way that the Department was going at it. So I

think we are moving in the right direction.

But let me just throw something else out for the benefit of my

colleagues and for those who may be here. We have another problem with consistency as it relates to the downer animals issue. And

I was one, and I do believe this is ultimately about consumer confidence. And before we get critical of the Japanese or other potenVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
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tial customers of American beef, I think we have to understand

that from my perspective I think that the Department overreacted

when we got that sort of unexpected Christmas present a couple of

years ago. But I supported that decision because I think if we had

to err then, we had to err on the side of consumer confidence in

the meat supply, because this is a serious disease. I mean, this is

not something to be played with. And we wanted to make certain

we erred on the safe side.

But now we have this almost inexcusable—and we had an example back in Minnesota a few months ago, or maybe about 6 weeks

ago, we had a couple of serious ice storms, and a number of our

folks had animals that broke their legs on the ice and they couldn’t

take those animals to the local locker to have them processed even

for their own family’s consumption. It seems to me that that is inconsistent.

Let me just also say one of the other things that I think is inconsistent, as long as I have a minute or two left, also for the benefit

of my colleagues, I think we have to always be careful to set an

absolutist standard, because there is no such thing. And we were

meeting with some of our European counterparts in the last several

days about biotechnology. We cannot absolutely prove anything.

And I think our own Government is guilty of that as well because

we have made this, as far as I am concerned, a preposterous standard for prescription drugs coming into the United States. We say,

well, we can’t guarantee that they are absolutely 100 percent all

the time completely safe. Well, that is true. We can’t make that

claim about anything. And so ultimately all we can do is rely on

the best science and be consistent.

And so I don’t really have a question for any of the panelists, except I just wanted to make it clear that from my perspective, the

Department is moving in the right direction in terms of consistency. And I think the rest of the world will look to the United

States, and if we have a consistent explainable policy relative to

this deadly disease and how we manage the feed supply and the

beef supply in this country, I think ultimately it will yield benefits

to beef producers here in the United States.

And, with that, I would yield back the balance of my time.

Mr. GOODLATTE. I thank the gentleman.

The Chair now recognizes the gentleman from Colorado, Mr.

Salazar, for 5 minutes.

Mr. SALAZAR. Thank you, Mr. Chairman.

Thanks to all of you for being here. Over the recess that we just

enjoyed, I happened to be out in the district in Durango, Colorado.

And I thought I was going to have pretty good support for opening

up the Canadian border, but out of 80 cattle ranchers that were

there, only one was undecided and all the other ones were opposed.

So they sent me here with a firm directive to tell you that it is important for us to protect our not only Colorado supplies of meat but

also the supply of meat throughout the United States.

But I would like to talk a little bit about a recent newspaper article that has revealed that the Canadian Food Inspection Agency,

CFIA, has found animal material in about 66 out of 110 feed ingredients, samples that were taken between January and March 2004.

A CFIA official also confirmed that some of the material might

24

have come from ruminant proteins. Do you know what efforts the

USDA has made to evaluate the significance of this find?

Mr. KIKER. Yes. They sent a team over there to investigate it. In

fact—this is hard to read, it is a fax. But I think they tested 109

samples, and it says they found less than 10 that contained ruminant animal protein. The fact is they found some. And this is from

John R. Clifford, Deputy Administrator of Veterinarian Services. So

they are checking on it, but there are, as we have said, still problems in the Canadian feed ban.

Mr. MCADAMS. Mr. Salazar, I would urge you to read our NCBA

Trade Team report. They looked at this issue thoroughly. They

found that it was somewhat media hot. It gives a good explanation

of how that came to be. The USDA team just issued a report last

week and I would urge you to look at that.

I agree with you that when this rule was announced and the two

additional cases in Canada were discovered, NCBA was getting the

same feedback from our members. But those that attended our convention—and they were nearly 7,000 of them—and heard our trade

team report, saw the documentation, and heard the facts, decided

that except for the concerns that are outlined in our directive, we

needed to move forward in our policy of trying to expedite return

to normalcy in international trade.

And I would also reiterate that we share concerns about the loss

of our infrastructure and the movement of that infrastructure to

Canada, and we realize that we have had record prices, and we are

grateful for them. But the problem is those record prices were driven by our domestic production being down 7 percent, due a lot to

the fact that we have had a drought and a lot of your constituency

have not been able to restock; and, due to the fact that we think

in large measure from our check-off program, we have been able to

build consumer demand to the point that it grew at nearly 7 percent last year.

Mr. SALAZAR. My question, I guess, is for Mr. Bull. In the potato

industry we face a similar situation as what you are seeing in the

meat packing industry, where much of the processing has actually

moved to Canada. Is this not just a trend, or is it a consequence

of closing off the Canadian border to the import of meat?

Mr. BULL. It is a consequence of the border closure. Canada’s cattle herd is very similar to the U.S. herd. It tends to expand and

contract at about the same level. The economics faced in both countries generally are about the same. So it is clearly a reflection or

response to the Canada border closure. There has been excess need

for packing capacity in Canada. The market has moved to take advantage of that excess capacity need and started building that supply. So it is in direct response to the closure.

Mr. KUEHNE. If I could respond to that as well. Prior to BSE, the

market between Canada and the United States, as well as Mexico,

was truly integrated. That integration allowed cattle to be raised

in Canada, harvested into the United States. Since the cattle can

no longer come across the border, it has created the opportunity

and also forced Canadian packers to expand their businesses.

The exportation of this portion of the cattle industry to Canada,

the packing industry to Canada, will be disastrous long term to the

producers and is clearly a direct result of this border closure. And

25

any continuation in time of that border closure will only greatly exacerbate the situation. So we need to have the border opened

quickly, and we need to have the border opened to cattle so we do

not export the businesses and the jobs to Canada and make it very,

very difficult for producers in the future.

Mr. SALAZAR. Thank you, Mr. Chairman. I yield back the rest of

my time.

Mr. GOODLATTE. I thank the gentleman.

Before recognizing the next member, let me read one sentence

from the executive summary of the USDA’s assessment of the Canadian feed ban, the report just received.

They say based on their review of inspection records and on-site

observations: ‘‘the inspection team found that Canada has a robust

inspection program; that overall compliance with the feed ban is

good; and that the feed ban is reducing the risk of transmission of

bovine spongiform encephalopathy, or BSE, in the Canadian cattle

population.’’

At this time it is my pleasure to recognize the gentleman from

Oklahoma, Mr. Lucas, for 5 minutes.

Mr. LUCAS. Thank you, Mr. Chairman. And I too have returned

from a series of a dozen town meetings out in the countryside this

last week.

And in that spirit, let me turn to Mr. McAdams and Mr. Kiker

and ask you first and foremost, gentlemen, assuming the rule

moves forward on the 7th day of March, the border opens up, how

is that going to impact the prices that your constituents, my constituents, will receive as those calves start to come off wheat pasture in central west Oklahoma around the 15th day of March?

Mr. KIKER. I think it is going to affect them negatively. The first

thing that is going to happen, we are killing less numbers because

we don’t have our export numbers. And everybody pretty much

knows that there is a certain amount of supply out there each week

and a certain amount of cattle procured. And if that supply tips

over to the other side, suddenly the packers are going to have the

leverage. And instead of getting 87, 88, and 89, and fluctuating

back and forth, they are going to have the supplies to drop that

price back somewhere in the 70’s, low 80’s. And as a result of that,

people feeding those cattle are going to quit paying $1 to $1.20 for

the calves out in the country. So we feel like it is going to dramatically affect the prices. It is going to bring those cattle producers to

their knees within a year if we don’t get those export markets back

open.

Mr. LUCAS. Mr. McAdams.

Mr. MCADAMS. Well, Mr. Lucas, what we need to bear in mind

is this past year we had record imports of beef and cattle into the

United States. Mexico exported a near record volume of feeder cattle. Per capita consumption was up 2 pounds this past year and

prices were up as well. So we have been having increased supplies;

it is just decreased domestic supplies. That concerns us. We pulled

together a myriad of different analysis of what the market would

do based upon the opening to Canada, and it was estimated by

those projections that it would be $2 to $3 a hundredweight. What

we need to bear in mind is the uncertainty that we have operated

under due to these rules has created the volatility of the market

26

that has been greater than anytime in our history. And this volatility is equally dangerous for someone that is trying to operate a

business.

The biggest concern we have is the loss of consumer confidence

and the loss in demand. And we all know that we can talk a market down as well. We don’t think that the fundamentals reflect that

there will be a big break in the market, although we always know

that we get into seasonality, things like that.

The main thing is we do this the right way. And if we do it the

right way and follow the science, we will be able to absorb this.

And we feel like the quicker we get back to normalcy, the less volatility we will have in the market and the more stable our business

will be.

Mr. LUCAS. So basically you are saying, Mr. McAdams, that with

the rule now that has been out there for weeks and weeks and

weeks, that the market has taken that into consideration and

factored it in, and we will see—since there is no surprise about

this, it is coming——

Mr. MCADAMS. That is exactly right. That is what our projections

show.

Mr. LUCAS. Let me turn to Mr. Bull and Mr. Kuehne. How do

you expect, speaking of confidence, the consumers, how do you expect the consumers to react when the borders open and you are

able to procure supplies from whatever source for your packing

plant? Do you think that it will make that much of a difference to

your consumers where your products come from originally?

Mr. BULL. I think we have already answered that question from

the standpoint that consumer demand is extremely high. We have

been importing meat from Canada now for a number of months.

Consumer demand continues to be robust. I think our consumers

are smarter than we are at times. I think they have been able to

read through. As we talked about earlier, public awareness for BSE

is at an all-time record high, and the consumers have figured out

and they have trust in the Government and trust that we are going

to be able to deliver those products safely. So I don’t believe consumer demand will be injured at all. I think they do have a trust

that we are going to manage this properly.

To tag on to the question you made, since we have a packing

plant in Canada, the supplies in Canada, because of the excess capacity up there, are diminished down pretty greatly. The cattle and

feeder reports in Canada show on feed numbers 25 percent lower

than a year ago. So it is not like there is this massive wall of cattle

sitting across the border ready to roll.

Also, if you read the requirements that we have put on getting

those cattle across the border, they are pretty onerous. It is not

open the gates and let cattle go. There are some very rigid requirements that those cattle have to go through to be qualifiable to come

across the border, which will also help slow down that pace.

Mr. KUEHNE. One thing that the U.S. Department of Agriculture

has done correctly is to maintain consumer confidence in the BSE

situation. I think that the Department can build on that, and the

consumers in this country have accepted the positions that the Department has taken. So I do not perceive any difficulty at all relVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
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ative to the limited amount of Canadian cattle that will be coming

into this country.

I would point out in response to your earlier question as well,

there is a differentiation in the market between over- and under–

30-month-old cattle. If we do not allow 30-month-old and older cattle into this country, there will be many plant closures; we will export this industry to Canada, our portion of the industry, and it

will be very negative for the producers long term. And we need to

have this border open and we need to have it open quickly both to

cattle and to the beef.

Mr. LUCAS. If the chairman will indulge me one more moment.

What is happening to the over–30-month-old stock up in Canada?

What are they doing to those animals?

Mr. KUEHNE. It is accumulating, and there is a significant supply

of older cattle in Canada. And if this rule is allowed to go forward

as proposed, that the meat from those animals is allowed to come

into this country, there will be a flood of meat into this country and

it will disastrously affect the producers because it will substantially

lower the value of their cows and their cattle in this country. So

it is critical that both the cattle and the beef be allowed to come

in at the same time.

Mr. LUCAS. And under 30 months of age.

Mr. KUEHNE. And over 30 months of age. The rule as originally

set forth provided for meat of older animals, over 30-month, to

come in, but not the cattle; and that creates the dichotomy.

Mr. LUCAS. And the proposal now is nothing over 30 months

would be allowed in, live or processed?

Mr. KUEHNE. No. The rule as originally proposed provided for

meat from over 30-month-old cattle to come into the country. That

has been merely delayed. It has not been taken out of the rule. And

it was delayed pending the review of the two studies that were conducted, undergone by USDA. So once those studies are completed

and studied, presumably the rule would go forward and the meat

would come in but not the cattle.

Mr. LUCAS. Thank you for clarifying that. I say we now have a

topic to discuss with the Secretary.

Thank you, Mr. Chairman.

Mr. GOODLATTE. I thank the gentleman.

The gentleman from Georgia, Mr. Scott, is recognized for 5 minutes.

Mr. SCOTT. Thank you very much, Mr. Chairman. This has been

a very fascinating and informative session, and I certainly commend each of you for your testimony. From what I am hearing, on

the surface it appears that reopening the Canadian border makes

good economic sense, business sense, and trade sense. But there is

still that looming question of getting the accurate and true assessment of the implication of the BSE disease. It seems to be all over

the place. But we will be discussing that, the pros and cons of the

Canadian issue. But I remain concerned about our beef export market to Japan. It seems to me to be very illogical.

I would like to address this question to you, Mr. McAdams, if I

could. It seems to me to be very illogical to seek to ban Canadian

beef products while we are simultaneously actively working to reVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
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open the Japanese market to U.S. beef. To that end, what is NCBA

doing to help open the Japanese market?

Mr. MCADAMS. Well, Mr. Scott, we have tried to cooperate with

the Japanese as we feel the USDA and the rest of our Government

has to answer all of their questions, to show them our production

processes, to show them the safeguards that we have implemented

to assure that beef that they get is safe, just as the beef that our

consumers consume is safe. We have agreed to their demands regarding beef from animals 20 months—younger than 20 months of

age. We feel like we negotiated in good faith. We understand the

delicacy of diplomacy and negotiations in trade agreements, but we

feel like that at some point in time you have to say enough is

enough. And we think it is vitally important that we walk the talk.

And that is why, if we implement correct rule in a correct way

with Canada, we can be supportive of it. We think that we have

negotiated to where we can do things in the correct way, following

the correct rules with Japan, and we are frustrated that we can’t

get continued movement. And that is why we are so grateful for efforts like those of Mr. Moran and many of the rest of you to help

say to Japan, this cannot continue forever; we need to have movement on this or we are going to have to react.

Mr. SCOTT. Thank you. Now let me ask you another question

about your industry members itself that hasn’t been touched upon

yet. There is a sense among some U.S. beef producers that the Canadian border should be closed at all cost. What would be the financial, economic, business, and trade implications of this potential

complete closure for your members?

Mr. MCADAMS. Well, Mr. Scott, we are in somewhat of a dilemma

today in that we have some of the lowest domestic supplies we will

be facing, and yet we are having trouble maintaining the market.

And one of the things that we are seeing is, is that we produce less

beef here; there is more beef comes in from other countries. We

have high prices at the consumer level. Unless we can continue to

grow demand, we are afraid that we will just shrink our industry.

If we lose our infrastructure, the packers will have leverage.

What we need in this country, and we have always felt this way,

is more packing plants, not less. So as we lose our infrastructure,

it is a spiral that we don’t want to go down. And all we need to

do is look at the lamb industry in this country and see the road

that we might follow, and we certainly don’t want to go down that

road. So that is why we think it is so important.

The key is growing consumer demand in this country and growing our share of the international markets, and working to grow

international demand as well. And that will allow us to grow our

markets, produce more, and sell at higher prices.

Mr. SCOTT. Thank you. My final question, Mr. Chairman, is to—

if each of the members could answer this question for me. Will reopening the Canadian border to Canadian beef endanger the American people who eat beef products?

Mr. KUEHNE. I will take the first answer to that, and emphatically I would say no. The Harvard risk assessment, the analysis

done by the United States Department of Agriculture from May 3,

2003 to January 2005, their risk assessment and all scientific eviVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
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dence and all scientific review shows that the consumers in this

country will not be harmed.

I would point out too, that we cannot have it both ways as a

country. We cannot tell Japan to take our beef when we don’t take

Canadian beef. We need to be consistent. We need to base it on

sound science that is consistent. It is very, very important, very

critical. We can’t have it both ways. And also when we trade with

Japan, it has to be meaningful trade, not a headline that says we

have reopened trade with Japan that encompasses 1 percent of the

cattle in this country. That doesn’t do it.

Mr. SCOTT. Mr. Bull?

Mr. BULL. I agree. I think the critical cog of this is ensuring consumer safety is critical to all of us in this industry. If we are to

lose consumer confidence, like Japan did and Europe did, all of us

at this table would be destroyed. And that has not happened in this

country, and it has not happened because we swiftly moved to remove the SRMs from the food supply and ensure that those are not

there. So no matter what happens with Canada, our food supply

will remain safe.

Mr. SCOTT. Mr. McAdams.

Mr. MCADAMS. I concur wholeheartedly. The key is the banning

of the specified risk materials from the food supply. And we very

effectively can do that. We very effectively have done that. And by

everyone that has reviewed the Canadian processes, they are doing

the same.

Mr. SCOTT. All right.

Mr. KIKER. The U.S. is taking great pains to prevent BSE from

entering this country, and we have done an excellent job. I have

the utmost confidence in the beef we produce in the U.S. Unfortunately, Canada has a problem, and I don’t think it is being addressed. There is a lot of science and research being done on BSE

right now, and I just think we need to stay by the science and keep

our standards at a maximum level to protect the U.S. cattle herd.

Mr. SCOTT. Thank you, Mr. Chairman.

Mr. GOODLATTE. I thank the gentleman.

The gentleman from Texas, Mr. Neugebauer, is recognized for 5

minutes.

Mr. NEUGEBAUER. Thank you, Mr. Chairman. And thank you for

conducting this very important hearing.

Mr. Kiker, one of the things that you were saying earlier was

that you are concerned that the Canadian beef and the Canadian

cattle are not as safe as American cattle. But they have similar

feed bans and they have the same testing programs and the same

processing requirements that we have. Basically, in many cases or

most cases, they have adopted our procedures. Are we sending a

mixed signal to the American people about American beef, then, if

we are concerned about Canadian beef, when basically they have

the same processes and standards that we have?

Mr. KIKER. They do, and they have followed suit with us. The

problem and the difference between the Canadian beef industry

and the U.S. beef industry is that the Canadians have BSE in their

herd. And by OIE standards and guidelines you increase all your

testing and everything else. Canada is still not doing that. When

they increased theirs just in proportion to ours, we tested some

30

240,000-something head, found no cases of BSE. They tested, I

think, somewhere around 15,000, they found two additional cases.

They still haven’t done a prevalence study.

Our guidelines work well for a country that has no BSE infection

in their herd. But, unfortunately, they do. So that is why they need

to step up their standards and they need to start testing. They still

haven’t found the prevalence of BSE in Canada.

Mr. NEUGEBAUER. So what is your recommendation as far as if

we didn’t adopt this rule, what would be your proposal?

Mr. KIKER. I say we stay with the OIE guidelines. Canada, by

OIE guidelines, is not a minimal-risk country; they are a moderaterisk country. In relation to that, they haven’t been very good with

their meat and bonemeal ban, which is the one aggressive action

in all the 6 points—everything else that you are supposed to do to

be minimal risk is a passive point. You use mitigation survey and

several other things that is in our testimony. But we need to call

Canada a moderate-risk country and accept the same meat that

you would from a moderate-risk country. USDA is making them a

minimal-risk country, which lets in more beef, different kind of—

bone-in beef.

Right now, we are practicing the measures of a moderate-risk

country by taking just beef cuts from Canada. This new rule will

let them bring bone-in beef in also.

Mr. NEUGEBAUER. Thank you.

Mr. McAdams, you indicated that recently at your board meeting,

that you all met and you all discussed, and I think you are encouraging the administration to take a fairly aggressive approach with

the Japanese. Even—I think you even mentioned possibly sanctions

against them. Could you elaborate on what kind of recommended

sanctions that you would ask the Secretary to consider?

Mr. MCADAMS. Well, they need to be stringent enough that we

get movement. There are times when we have to have confidence

in our Government, and we definitely have confidence in our Government to move forward and determine what is the most effective

way of getting movement in the opening of the Japanese market

and in the other markets for our product. So we are advocating

that this be taken into consideration and determine how we most

effectively do that, and economic sanctions certainly need to be one

of the avenues that we pursue.

I would just like to say that Mr. Kiker has raised concerns that

we hear time after time, and our trade team reviewed these allegations. We have seen that the Canadian cattle industry is about oneseventh of the U.S. cattle industry, and they are testing on a percentage basis an equal number as the animals that we are testing.

And in regards to OIE guidelines and how Canada should be regarded, I would urge you to review the document that is attached

to our testimony from the OIE and they submitted to the court

cases going to be heard tomorrow in Montana, and I think it will

clarify greatly their position on Canada.

Mr. NEUGEBAUER. Mr. Bull, if we were to continue with a ban

and we have a build-up of Canadian processing, does that begin to

jeopardize and potentially close processing plants in the U.S.?

Mr. BULL. Before I answer that, I would like to respond to a couple of the comments earlier, maybe to add a little clarification.

31

First of all, the U.S. has instituted an enhanced elevated testing

protocol that goes way beyond OIE standards. The Canadians have

also done the same thing. So to suggest that the Canadians have

not elevated their testing is just not right. Canadians have elevated

their testing pretty dramatically with this, and the U.S. has as

well. That is, taking steps well beyond. And the two countries did

that in concert.

Another comment. In our packing plant in Canada, we are doing

things we are not required to do in the United States. So I think

the Canadians have taken very strong steps to grab ahold of this

disease. They understand the implications. It has cost their government a lot of money.

Now, to your point. No doubt it is hinging solely on how long this

closure stays in place. Our packing capacity, as we have mentioned,

is under duress. If these closures were to stay the way they are

today, I have no doubt they would be packing capacity. And we

have got to remember, most of the Canadian cattle that come into

this country come into plants up in the Pacific Northwest where

those plants were built hinging upon having access to U.S. supply

but also access to Canadian supply. And once you take that away,

you really endanger those plants and their livelihood, and they will

close if this doesn’t get changed.

Mr. NEUGEBAUER. I think my time has expired, Mr. Chairman.

Thank you.

Mr. GOODLATTE. I thank the gentleman.

Let me announce to everybody, the Secretary is on his way and

will be here shortly. What we will do when he gets here is thank

and dismiss this panel. And we will then take up the Secretary’s

testimony, and, following that, the questioning first by myself and

then by the ranking Democrat. Then we will resume in the order

of those who have not had an opportunity to ask questions in this

first round. They will get an opportunity to question the Secretary

before anybody who has already had an opportunity to ask questions.

So at this time it is my pleasure to recognize the gentleman from

Hawaii, Mr. Case, for 5 minutes.

Mr. CASE. Thank you, Mr. Chairman.

Let me stay with the focus on what I think the focus should be,

and that is the continued safety of the beef supply in this country

based on sound science. I think that is what we are trying to get

at here. I do acknowledge and agree that the other issues that we

have been talking about, whether it be the export of processing capacity to Canada or the lack of the country of Japan to loosen up

its import structure are vital. But I do believe that they are ancillary.

One thing that we really haven’t sorted through is, assume, as

I think we all do, that the standards do go through next week.

What guarantees do we have that Canada will enforce them? I

guess, for a lack of better way of putting it, much of this depends

on Canada complying internally, having the commitment to compliance and having the structure in place to comply. I mean, we can

come up with great science, but this is not all in our control, is it?

It is in the control, to a large extent, of Canada. And where we inspect in this country is after the fact.

32

Some of you have made allusions to your trust in the Canadian

system of inspection and application of these standards, but where

is it said or written that everything is OK with the way Canada

administers?

Mr. McAdams, I am just going to start with you because you led

the delegation—or your organization led a delegation up there. You

observed what was going on in some of these places. Comment on

your level of confidence.

And then I would like to ask the other gentlemen the same question.

Mr. MCADAMS. Well, I would have to say that the level of trust

of the Canadians was pretty low among our members going up

there, and the trade team consisted of people representing organizations in areas that were very cynical. But they were given access

to whatever they asked for access to.

But this is a bigger issue. It is how can we trust any government.

And we depend on our Government to assure that they are doing

what they say, and we expect our Government to monitor effectively the processes regarding food safety on all foods from all countries on all issues. And we expect the USDA to do that. They have

been monitoring closely, too.

We withheld our judgment on some of these issues until we saw

the final report from the USDA team that went up there, and we

will continue to expect our Government to monitor all countries

that we trade with to assure that anything we get from them is

safe because Americans should expect nothing less.

Mr. CASE. Mr. Kiker, let me preface my question to you by saying that my understanding of your testimony, and you are the one

saying that the science—under the scientific standards, basically

we are increasing the risk rather than keeping it neutral or reducing it by opening up this border. How much of your concern, which

I take very seriously, by the way, because I think the risk does in

fact increase. The question is whether it is scientifically tolerable.

How much is related to any concerns you might have, if any, on

Canada’s ability to enforce the standards as—I guess what I am

trying to get at is, are your concerns based simply on the standards, are they in part on Canada’s internal capacity to enforce

those standards?

Mr. KIKER. A little of both. A lot of our concerns stand strictly

on the science in lowering our standards. But you have got to realize—and I am a rancher. I know what it means to get $200 for a

calf rather than $450. And the desperation in some of these ranchers that are actually going broke and losing their farms and

ranches is tragic. And people will do—I mean, it is not a trust

thing.

I think that that number, that 30-month age is going to be

vague. I don’t know that their ID system is that advanced that

they can determine age by date. There is going to be some animals

come over that are 31 months and 32 months. But I just think the

desperation of some of these folks to continue to make it in the

ranching business until they get through this is what concerns us

as far as trust. It is not the actual trust of the people.

Mr. CASE. Do you have any questions—Mr. McAdams observed

that he trusted our Government to ensure that the Canadian reguVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
33

latory scheme was working. Do you have that level of trust in our

Government’s ability to figure out whether the Canadians are in

fact complying?

Mr. KIKER. Well, I am not going to lie to you. There has been

a lack—the trust in USDA has been compromised by what has happened over the last 3 months. We have already been to court once

and stopped the importation of illegal meats by USDA. But, yes,

I think when those cattle get to the border, I trust our Government

to make sure they adhere to all the rules and regulations of the

United States.

Mr. MCADAMS. Sir, if I could just add that I am a cattleman, too,

and that influences why I have the position that I have. And I entered the cattle business in 1972; upon graduating from college I

joined my father. In the wreck of 1974—I have spent my career recovering from it, and it was Government-managed wreck where the

Government was trying to manage the markets by implementing a

beef price freeze. So I have had a lot more confidence in the Government implementing rules and then trying to manage markets.

And that is one reason that I am so hesitant to go down that road

of managed supplies, managed markets.

Mr. CASE. I am going to stop there. I am sorry, gentlemen, my

time is up and I am going to have to defer back. Thank you.

Mr. GOODLATTE. I thank the gentleman.

The gentlewoman from Colorado, Mrs. Musgrave, is recognized

for 5 minutes.

Mrs. MUSGRAVE. Thank you, Mr. Chairman. Thank you so much

for holding this very important meeting. Many of the questions

that I would have asked have already been asked. But I would like

you, Mr. Kiker, to go over again what you see is the difference in

the firewalls that the U.S. and Canada have set up. I would like

you to go into percentages and tell me why you think that the Canadian firewall is not sufficient.

Mr. KIKER. Bear in mind, I am just a cattle farming rancher. I

don’t know that I have actual percentages. We have implemented

the same firewalls, but in—they implemented their meat and bone

meal ban in 1997. The last cow that was discovered, on January

11 I believe, was born after that date. And we learned that Canada

had a supply of meat and bone meal feed when their meet and

bone meal ban was implemented, and that feed was fed out until

it was depleted. That isn’t when their meat and bone meal ban

started.

The other problem is there has been lots of discrepancies on

whether there has been ruminant by-products in their feed up until

just last year. You can go to Canada right now and test, surely

they have it under control now. I mean, it is a robust feeding operation.

The real question here is what has been happening there over

the last 7 years. And that is the difference. We feel like the U.S.

did an excellent job of controlling ruminant by-products in our feed

and we have done an excellent job of adhering to the other firewalls. The biggest firewalls was not taking cattle or meat from a

country known to have BSE.

Mrs. MUSGRAVE. Mr. McAdams, would you discuss—there was a

Vancouver Sun article that reported animal protein in ruminant

34

feed. How much credence did you put into that article, and have

you researched that further?

Mr. MCADAMS. Yes, ma’am. It created a lot of concern. I had a

lot of concern when I first heard about it. Investigation of our trade

team revealed that this was almost a training process, that they

were going there to assure that they could detect particles of all

types of protein and identify it. It was—except for a very small percentage, they could identify them as being nonruminant proteins.

They were proteins such as feathers and rodents that were gathered up during harvest, and it was not a breach of the feed ban

firewall.

We also have to remember that if there are leakages in a feed

ban, the chances of anything catching BSE are so remote. And,

nonetheless, it has nothing to do with the safety of our food supply.

The fire wall that protects us, the safeguards that protects us in

our food supplies are the removal of specified risk materials. This

is to protect our animal health. As long as we are not feeding ruminant feed to ruminants, we will be protected. We also have research that shows how the infected rate—this is not a disease that

is easily transmitted.

As more and more research comes online, we are seeing that the

safeguards that we put in place in both Canada and the United

States are an overabundance of caution, so to speak, and that we

have to never lose sight of the fact that if we keep the specified

risk materials out of the food supply, we are safe.

Mrs. MUSGRAVE. Thank you.

When you talk about what you have done to open the Japanese

market, could you tell us what you have done—and, you are talking about sanctions—and how quickly will this move, do you anticipate?

Mr. MCADAMS. Well, first, I will like to thank you for your efforts

and the letter that you and some of your colleagues signed in supporting us on this.

We feel like that we have to open these foreign markets for our

product, and it needs to be done in an expedited manner. We understand the necessity of deliberation, and we have been patient in

our own Government’s deliberation as we move forward. But once

the deliberation is completed, it is time to get things open.

We have been patient in waiting for the Japanese to have all

their questions answered. They have acknowledged that we have

answered all of their questions now. They are acknowledging it is

in their political process; and when it gets into the political process,

we feel like then that is when it needs to be expedited.

So if we don’t see movement and we are already calling for it,

the Government will start looking into how we can affect the opening of these markets, including determining if the economic sanctions are going to be necessary. So we are asking for us to start

looking at that right away if we don’t see some additional movement in the opening of this border or agreement or we start having

movement. Secretary Johanns has been very supportive in asking

for a date certain, and we are frustrated that we can’t get that.

Mrs. MUSGRAVE. Thank you. Thank you, Mr. Chairman.

The CHAIRMAN. I thank the gentlewoman.

35

The Chair now recognizes the gentlemen woman from South Dakota, Ms. Herseth, for 5 minutes.

Ms. HERSETH. Thank you, Mr. Chairman. I want to commend

you and members of the committee staff for working to ensure that

this hearing took place today, and I want to thank each of you for

testifying.

Before I pose a couple of questions, I would just like to make a

statement.

I guess, Mr. Bull, you had made a statement at the outset of

your testimony comparing the European Union beef ban and the

distortion of science in that case with those that may feel that the

border to Canada should remain closed, suggesting that those that

feel that way are similarly disregarding science.

I would respectfully disagree, because I think that the issue that

we are talking about here isn’t so much the sound science that

needs to guide how we deal with these challenging issues but rather insuring sound standards, sound processes and accountability,

both within the U.S. Department of Agriculture and in Canada, to

insure verification has been adequate for consumer confidence, as

was pointed out by Mr. McAdams, that the administration is utilizing enforcement tools for trade policy, for our producers and insuring a long-term profitability of the industry here in the United

States and having these effective processes in place for the industry as a whole.

So I just wanted to make that initial comment before posing the

question to you, Mr. Bull.

You mentioned that Cargill does have facilities—processing packing facilities in Canada, is that correct?

Mr. BULL. That is correct, yes.

Ms. HERSETH. I assume that you are segregating the animals by

age so that you can then segregate the eligible and ineligible products for trade as is currently is set forth?

Mr. BULL. That is correct.

Ms. HERSETH. Can you tell me who the current customers are

then? If you are accepting animals over 30 months of age for

slaughter and you are segregating them, who currently are the customers for the beef from animals over 30 months of age?

Mr. BULL. Well, first of all, we are not, in our Canadian operation, in the business of bringing older, mature animals into our

plant. We are buying useful animals, fed cattle. Our rate of incidence of Canadian animals that are over 30 months old is less than

half a percent of our supply going through our plant, and product

is segregated as consumed in Canada.

Ms. HERSETH. Thank you.

Mr. McAdams, your team that was sent up as part of the investigative team with NCBA was part of the Canadian facilities; and

whether they are adequately segregating eligible or ineligible products—and were any of the facilities accepting older cattle for

slaughter and addressing the fact that in last month’s OIG report

they claim that not one Canadian facility was meeting the requirement in a satisfactory way?

Mr. MCADAMS. Our team did go up there. They did go through

and inspect facilities, processing facilities. In their report, I don’t

know if they specifically addressed the issue that you are referring

36

to from the OIE. But if you will allow me, we do have one of the

trade team members, our staff person that staffed that, and I could

ask him if they did that.

Mr. BULL. I could comment on that.

I think, first of all, that report is relatively old. When that study

took place, there were some Canadian plants that were allowing

mature animals—the mature animals and useful animals to be

processed in the same plants, and that has been stopped. There are

none of those plants in existence today in Canada. They either are

mature plants or they are useful plants buying useful animals.

Ms. HERSETH. Was that verified, Mr. McAdams?

Mr. MCADAMS. Yes, ma’am. What I was told is that is not what

the OIG report said anyway. We take exception to exactly what

they said.

But what our trade team found is that the way they were operating those plants was in compliance with the firewalls and with the

rules that we have in place in the United States as to how we handle aged cattle and cattle under 30 months.

Ms. HERSETH. My last question, Mr. Kiker, the whole issue here

that has been raised about exporting our processing market to Canada, resulting in the loss of jobs to the packing industry and affecting a number of constituents that many of us represent and the

loss of jobs, do you feel that if we were able to give producers in

the United States some assurance of longer-term profitability such

as better enforcement, including economic sanctions against those

that put up artificial trade barriers, that indeed U.S. producers

could meet the demands of U.S. packing facilities to provide them

with an adequate supply of animals?

Mr. KIKER. Oh, I definitely think so.

What happened in the 1990’s was a lot of producers went out of

business. It wasn’t just drought and everything else. They were

getting very little for their cattle. As those producers went out of

business, they were replaced by these large packers that were on

the Canadian border with imports and displacing jobs, and I don’t

see a lot of concern about all those ranchers in those rural communities, the small feed stores, fertilizer plants and everything else

that went out of business.

Yes, I think with the prices we have now you will see a growth

in the cattle industry in the United States that will change the

whole economics of rural America. I mean, there are people getting

money for their cattle and going out and buying new tractors, buying new bailers, even buying new land. If there was some stability

in that price and people knew they could count on it over the

course of years, it would be humongous for agriculture and the beef

industry.

Ms. HERSETH. Thank you.

Thank you, Mr. Chairman.

The CHAIRMAN. I thank the gentlewoman.

I thank this panel. You have been very responsive to a wide

array of questions and your information has been very helpful to

all of us. So we thank you.

At this time, we will welcome our next witness. It is now our

pleasure to welcome the Honorable Mike Johanns, Secretary of the

United States Department of Agriculture, who is accompanied by

37

Dr. Ron DeHaven, Administrator of the Animal Plant and Health

Inspection Service of the USDA, and Dr. Keith Collins, Chief Economist of the United States Department of Agriculture.

Mr. Secretary, we are delighted to have you with us. We are very

pleased that this is your first public testimony before our committee. We look forward to a long relationship and many more such

opportunities, and you are welcome to give your testimony.

STATEMENT OF HON. MIKE JOHANNS, SECRETARY, U.S. DEPARTMENT OF AGRICULTURE, ACCOMPANIED BY RON

DeHAVEN, ADMINISTRATOR, ANIMAL PLANT HEALTH INSPECTION SERVICE, AND KEITH COLLINS, CHIEF ECONOMIST

Secretary JOHANNS. Thank you very much.

Mr. Chairman, Mr. Peterson, members of the committee, I also

want to say thank you for holding this very important hearing

today and for giving me the opportunity to testify before you.

Before I begin, I also would like to use this opportunity to express my appreciation for the close, very positive working relationships that we have begun to forge. It is a pleasure indeed for me

to appear in my first hearing before this committee as Secretary of

Agriculture, and I look forward to building upon the productive

foundation that we have established.

I have said frequently that addressing bovine spongiform

encephalopathy, BSE issues, especially as they relate to trade disruptions, would be my top priority as Secretary. The actions that

the U.S. Department of Agriculture and the Federal Government

are taking in regard to BSE are potentially precedent-setting and

could affect international trade patterns for many years to come,

with important economic implications for our cattle producers and

for our entire beef industry. Therefore, our actions must be undertaken with the utmost deliberation, using science as our basis.

Accordingly, this hearing could not be more timely. Almost 1 year

ago, on March 8, 2004, the USDA published a notice reopening the

comment period on a rule to establish minimal-risk regions for

BSE, often referred to as the minimal risk rule, following the December 23, 2003, discovery of a single case of BSE in the United

States in a cow of Canadian origin.

In the time since then, a lot has transpired.

USDA has implemented enhanced BSE surveillance program to

test as many high-risk animals as possible over a 12- to 18-month

period. To date, in the 9 months since the program started on June

1, more than 252,000 high-risk animals have been tested, all of

which are negative.

On December 29, 2004, USDA announced the final rule establishing minimal-risk regions, which designated Canada as the first

minimal-risk region for BSE, and that is to become effective on

March 7, 2005. Preparations are currently under way to ensure a

coordinated and an orderly reopening of the border on that date.

On January 2, 2005, Canada confirmed its second domestic case

of BSE, followed 9 days later by a third case.

On January 24, 2005, USDA dispatched technical teams to Canada. We sent one of those teams to investigate the efficacy of Canada’s ruminant to ruminant feed ban because the third animal was

38

born shortly after the implementation of that ban and the other to

determine whether there were any potential links among the positive animals.

Just last week, on February 25, we released the results of the investigation relating to Canada’s feed ban, which showed that, overall, Canada’s compliance with the feed ban is good and that the

feed ban is reducing the risk of transmission of BSE in the Canadian cattle population.

The team’s final epidemiological report investigating possible

links of the positive animals is still pending and will be helpful as

USDA proceeds with a rule allowing imports of live cattle from 30

months of age and over.

The minimal-risk rule establishes criteria for geographic regions

to be recognized as presenting minimal risk of introducing BSE

into the United States. It places Canada in the minimal-risk category and defines the requirements that must be met for the import of certain ruminants and ruminant products from Canada.

The rule did originally allow the import of beef products from

animals of all ages. On February 9, 2005, because our investigation

in Canada would not be complete by March 7, I ordered that portion of the rule to be delayed. However, USDA intends to move forward expeditiously with a plan to allow import of live cattle and

beef products from animals 30 months of age and over.

We remain very confident that the minimal-risk rule, with the

risk mitigation requirements and the animal and public health

measures that the U.S. and Canada have in place, provide the utmost protection to consumers of livestock.

I simply cannot emphasize strongly enough the central role of

science in this entire process, especially with regard to the rigorous

evaluation of risk. Since the discovery of the first case of BSE in

Great Britain in 1986, we have learned a lot about the disease.

That knowledge has greatly informed our regulatory systems and

our response efforts.

After Canada reported its first case of BSE in May 2003, USDA

conducted a comprehensive risk analysis to review the potential

threat it posed, which confirmed that Canada has the necessary

safeguards in place to protect U.S. consumers and livestock against

BSE. The extensive risk assessment took into careful consideration

the possibility that Canada could experience additional cases of

BSE.

The public commented on the risk assessment that accompanied

the proposed rule, which we carefully reviewed, and responses were

published with the final rule. It should be noted that our risk analysis was reviewed by Dr. William Hueston, an international expert

on BSE and a member of the International Review Team.

While the SPS regulations protecting human and animal health

are the foremost concern, the USDA has examined the potential

economic impacts of the minimal-risk rule and related BSE trade

issues, as required by Executive Order 12866.

For more than 3 months following the May 20, 2003, BSE discovery in Canada, all imports of Canadian ruminants and ruminant

products were barred. Then, certain Canadian ruminant products

for which there is inherently lower risk were allowed to enter

under permit beginning in August 2003.

39

For all of 2003, the United States imported 336,000 metric tons

of beef from Canada. Imports increased to 476,000 metric tons in

2004, up nearly 42 percent and back to the level that prevailed in

the years prior to 2003.

Because the border has been closed to live cattle since 2003, May

6, 2003, imports of fed and feeder cattle under 30 months are expected to increase over historic levels in 2005, which is expected to

drive up U.S. beef production, reduce beef prices slightly and, consequently, reduce cattle prices. The cost-benefit analysis of the

original minimal-risk rule was based on Canada’s cattle population

as of July 1, 2004 and the cross-border price differential at that

time. USDA now estimates that about 1.3 million Canadian animals may be imported in all of 2005, down from previous estimates.

In addition, delaying the effective date for resuming import of

certain beef products from animals 30 months and over has narrowed our projection of price impact. We now project fed cattle

prices to be 2.6 percent lower if no trade in live cattle were to

occur. The projection also assumes that Asian markets do not open

to our beef during 2005.

At the same time, like many of you, I have been concerned about

the effect that the closure of the border has been having on the restructuring of the cross-border beef industry. We are already seeing

additional processing capacity in Canada, and further delays will

only exacerbate that trend, leading to long-term change.

In addition, to the extent that we can continue to open markets

that are currently closed to our beef, U.S. cattle price prospects will

strengthen. U.S. market-maintenance activities have been critical

in restoring our beef markets. In 2003, the total export value of

U.S. beef and ruminant products was $7.5 billion. After December

23, 2003, 64 percent of that market was immediately closed. Today,

we have recovered well over two-thirds of that, so that 41 percent

of that market, $3.1 billion, remains closed. Two countries, Japan

at $1.5 billion and Korea at $800 million, account for nearly threequarters of the existing closures.

As a leader in the critical Asian markets, Japan is a vital market

to reopen to U.S. beef exports. We are aware that the decision to

resume trade in this market will set an important precedent.

Therefore, we have endeavored to use science in our ongoing efforts

with Japan. Efforts to reopen this market have drawn on resources

across the Federal Government at the highest political levels.

As I have said previously, this issue has occupied much of my

first weeks. Just last week, I met with Ambassador Kato and also

wrote to my counterpart, Mr. Shimamura,on the importance of this

issue. At the same time, other U.S. Government officials continue

to contact their counterparts. These efforts are just the latest in

many policy discussions over the past 13 months. Indeed, the issue

has been a major focus of direct discussions between the President

and the Japanese Prime Minister.

On October 23, 2004, Japan and the United States developed a

framework to allow the resumption of bilateral beef trade following

the conclusion of a regulatory process in both countries. As a step

toward the resumption of normal trade, the agreement establishes

an interim special marketing program, known as the Beef Export

40

Verification Program, to allow the United States to sell beef and

beef products to Japanese importers from animals 20 months of age

and under. Animal age will be determined through a combination

of production records and physiological grading means. We are now

working with Japanese officials to gain approval of the BEV under

their regulatory process.

I have repeatedly pressed Japanese officials to set a date certain

for the resumption of U.S. beef exports to Japan. Additional delays

could further complicate relations between the United States and

Japan.

We are also pursuing efforts to reopen all of the markets that

have been closed to us. As I have stated, USDA, and indeed the

U.S. Government, is exerting every effort to resolve the matter.

As traditional trade barriers such as tariffs are lowered, our

focus to eliminate unjustified nontariff barriers such as nonsciencebased SPS regulatory measures become all the more important to

maintain the flow of mutually beneficial trade.

It is also critical that domestic trade rules reflect the current

state of knowledge regarding BSE, and here the United States is

leading as well.

At the same time, we will continue to work with our trading

partners to ensure the ongoing strength of their own BSE protection systems.

In summary, I am confident that we are continuing to keep the

protection of the public and animal health foremost in our concerns. It is critical that we continue to use science as a basis for

our decisions and regulations and that the United States maintain

its leadership role in advancing our scientific understanding of

these kinds of SPS-related issues and appropriate science-based responses.

Mr. Chairman, thank you again for holding this important hearing. We would now be pleased to answer any questions.

[The prepared statement of Secretary Johanns appears at the

conclusion of the hearing.]

The CHAIRMAN. Thank you, Mr. Secretary.

Some in the Congress have argued that we should not normalize

beef and cattle trade with Canada unless and until we regain access to the Japanese and other Asian markets. If these folks have

their way, what will be the effect on your discussions with the government of Japan?

Secretary JOHANNS. In every discussion I have had with Japan,

I keep going back to the point that their decision needs to be based

on science. Otherwise, quite honestly, it is the politics of the day

that would govern the decisionmaking. I believe very, very strongly, Mr. Chairman, that, in working with Canada, if we set a different standard and different example than what we are insisting

upon with the Japanese, we will pay a very, very heavy price for

that.

The best science says that with the standards we have in place,

the regulations that are in place, that the import of meat and live

animals under 30 months from Canada is safe not only for humans

but also for animals. I think if I were to do something else, the signal I would send to Japan is that we do not want them to act differently than the way we are acting with the Canadians.

41

The CHAIRMAN. Canadian slaughter capacity grew by 22 percent

last year, and analysts predict that this will continue leading the

growth by as much as 30 percent over the next 3 years. While

many people have expressed concern over Canadian cattle coming

south, what is the consequence of U.S. packing capacity moving

north?

Secretary JOHANNS. The consequence is what we are seeing already. It is job loss. It impacts the ability of the Canadian industry

to compete with us.

The Canadian cattle industry is going to do exactly what our cattle industry does and that is that it is going to fight for its survival.

The Canadian cattle industry has been shipping boxed beef, for example, into our market under permit now for many months. They

compete with other countries, including us, in the worldwide marketplace. If we move the processing to the other side of the line,

to the Canadian side of the line, all of a sudden you have developed

a whole new competitive atmosphere, plus you have impacted your

packers here.

Now, Mr. Chairman, if I might just wrap up and say, while some

would argue, those are the big guys in the industry. But, Mr.

Chairman, the very small packing operations have been in my office, too, saying the wrong decision here puts us out of business.

The CHAIRMAN. Well, that is a good point. What do you think the

impact of this increase in Canadian capacity will have on U.S.

packing, particularly as it relates to the concern raised by some

about packer concentration?

Secretary JOHANNS. I just think you have the potential for a very

downside impact on your small packers, the mom and pop operations that we see in our States across this country.

We cannot make our decisions based solely on economic justification. They have to be science based. But we are allowed to consider

the economic consequences. Very clearly, one of the issues that we

ran into with importing beef from animals over 30 months was that

it allowed that beef to be processed on the Canadian side and again

had a very negative impact from an economic standpoint on our

processors in the United States.

The CHAIRMAN. What are the consequences in terms of either

mitigation or making worse the delay of this proposal? In other

words, are these consequences going to be alleviated or will they

be made worse if you were to delay the implementation of the final

rule?

Secretary JOHANNS. I have had Members in both the House and

the Senate visit with me about the potential for delay. There is a

downside to that. I learned long ago that not deciding is deciding.

That industry in Canada is going to continue its efforts to restructure. They will find a way to do business in the international marketplace, and I believe it exacerbates the problem.

The CHAIRMAN. One more question. One of the concerns that has

been raised about the rule is the potential for a ‘‘wall of cattle’’ entering the U.S. market. Some of this concern was fed by remarks

made by the USDA when the rule was rolled out. However, other

sources, such as the National Cattlemen’s Beef Association, Canadian Trade Delegation Report, suggests imports would be far lower.

42

I wonder if you could please take the opportunity to clear this up

a bit.

Secretary JOHANNS. I do not see a wall of cattle. But the person

to my left can clear this up and explain exactly what we see. So,

Dr. Collins, if you would go ahead.

Mr. COLLINS. Mr. Chairman, I would just like to be clear that the

USDA never, in any comments it made talked about a wall of cattle. The remarks that we made were, of course, the data in the regulatory impact analysis that is required to be developed along with

the rule.

When we developed that analysis, we estimated that 2 million

head of cattle would come in from Canada during the 12 months

subsequent to March 7. We also had a lower bound estimate of 1.5

million head. There have been other numbers that have placed estimates, widely reported estimates, in the range of 900,000 head,

substantially below ours. Those numbers are for calendar year

2005. Ours were for the 12 months following March 7. So one of

the reasons for this discrepancy has been the timing, the time period that the estimates are based on.

Second, we put a large emphasis on a shift in slaughter capacity

in Canada towards slaughtering cows, because cow beef, under the

originally promulgated rule, could come into the United States. We

estimated as many as 460,000 cows would displace fed steers and

heifers in Canada, and those fed steers and heifers would come into

the United States. Because, of course, we could bring in animals

under 30 months, that was an important factor in our estimate of

cattle coming in. And I have no idea what other people assumed

regarding that displacement of cows for fed cattle.

The Secretary noted in his comments that we now estimate 1.3

million head. That estimate of cattle coming in would be for calendar year 2005, and it would reflect the Secretary’s decision on

February 9 that we are not going to take beef from animals over

30 months. Therefore, the shift toward more cows slaughtered in

Canada won’t occur. Therefore, they will slaughter more fed cattle,

and those fed cattle won’t come to the United States, and that is

why we have lowered our estimates. So now, I believe, the Department is much closer to many of the estimates that are out there

in the public domain.

Secretary JOHANNS. And, Mr. Chairman, to put that in context,

1.3 million animals—last year in the United States, we have

slaughtered about 32.5 million animals, so that is the context here

that we are dealing with.

The CHAIRMAN. Less than 3 percent of the current slaughter of

the United States or about 3 percent.

Secretary JOHANNS. Right.

Mr. COLLINS. I might also add if you go back to pre-BSE days

and you look at 2002 back to 1998, that 5-year-period, our average

annual imports of Canadian cattle was over 1 million head. So we

are moving toward normalcy.

The CHAIRMAN. Thank you.

The gentleman from Minnesota, Mr. Peterson, is recognized.

Mr. PETERSON. Thank you, Mr. Chairman; and thank you for

being here, Mr. Secretary. Good to see you again.

43

I appreciate your comments and your testimony about wanting

to be consistent and adhering to sound science. I think that is very

good way for us to go. But I guess I am curious how we square the

fact that we have got this rule for 30 months with Canada, and

worked on this this long, and yet we have agreed to this situation

with Japan where we are going to use 20 months. So can you explain to me how that is consistent? What is the science that says

it is 20 months in Japan and 30 months in Canada?

Secretary JOHANNS. Sir, I will just tell you straight up that I

don’t believe the 20 months is scientifically based. Japan claims

that it had a couple of animals, right around 20 months, that had

BSE. We have not been able to verify that, but that is the claim

they make.

The decision to negotiate those terms was a decision that was

made right before I arrived as Secretary.

I will say this, Mr. Peterson. I am not going to second guess it,

because I think there is so much desire and interest to move cattle

back into this Japanese marketplace that it literally was a negotiation that occurred and we ended up at 20 months, which I—the

statistics I have, that would be about a third of our herd, if I am

not mistaken. But, believe me, I would forcefully make the case

that we should be at 30 months.

Mr. PETERSON. But it is too late to back up now.

Secretary JOHANNS. Exactly. That has been agreed upon. My

hope is that we can continue to move that ball down the field once

we start moving beef into that marketplace.

Mr. PETERSON. Yes.

I was in Japan last week and the other thing that concerns me

about that—and this—probably there is nothing you can do about

this either—but we had this discussion, what, a couple of weeks

ago about how we were going to determine that the cattle that had

come in from Canada were under 30 months and all that sort of

thing. They have got an ID system that will help up there some,

and using dental, whatever it is.

But, apparently, in Japan we are going to use some kind of different program there as well, that they are going to use some kind

of method of testing the meat to figure out how old it is or something, which I have never heard of before. But how did that come

about?

Secretary JOHANNS. Dr. DeHaven can explain, I think, the process we will follow in Japan.

Mr. DEHAVEN. Thank you, Mr. Secretary.

I would clarify, as the Secretary has said, that the 20 months is

not based on science. We are viewing it as a marketing program.

What is driving that is the two animals that the Japanese claim

were positive, that they were 21- and 23-months old. So in order

to verify the age for animals that young, dentition doesn’t work as

we are using with the Canadians.

The A–40 process is based on the speed with which bones in the

vertebra, in the back calcify. So by measuring the relative degree

of calcification of the bones in the vertebra, you can estimate quite

accurately the age of the animals. So that in general terms is the

process.

44

Mr. PETERSON. The other question I have—I don’t want to get involved in this too long—but is there a process for segregating—like

say the border opens and we have 30-month cattle come in from

Canada. Is there some kind of a process where we are going to be

able to segregate those cattle that are Canadian from these cattle

that are going to go to Japan, if we ever get that opened up?

Secretary JOHANNS. There is.

Mr. PETERSON. Is there some kind of a process to do that?

Secretary JOHANNS. Yes. The rule is very, very extensive, describes in a very specific way how we are going to deal with that.

Again, Dr. DeHaven will walk down through it, but it is a pretty

tight regulation.

Mr. PETERSON. OK. Well, that—one other thing, Mr. Secretary,

I just wanted to—in your testimony today, you said that your top

priority as Secretary was going to be addressing BSE, particularly

as it related to trade disruptions.

Apparently in the Senate, you said that protecting human and

animal health was your top priority. Is that just some nuance of

that? I would guess that your top priority is protecting human and

animal health.

Secretary JOHANNS. It is no nuance. It all fits together. It really

does. Believe me, if I had any concern about human health or animal health in terms of this 30-month rule, it would cause me to

act differently. But it does. It is all interconnected, in my judgment.

Mr. PETERSON. Thank you.

Thank you, Mr. Chairman.

The CHAIRMAN. I thank the gentleman.

The gentleman from Texas, Mr. Conaway, is recognized for 5

minutes.

Mr. CONAWAY. Thank you, Mr. Chairman.

Mr. Secretary, thank you very much for joining us today.

It all gets down to what we eat. Is there a way—this may be

more simplistic than some folks like to hear it. Is there a way to

test beef that has already been processed as to whether or not it

is contaminated?

Mr. DEHAVEN. Unfortunately, we do not at this point have a test

for live animals or a test for tissues other than a specific portion

of the brain. A lot of tests are being developed, there is a lot of research being done to develop tests, but currently we don’t have

such a test.

Mr. CONAWAY. The point being though, I guess, is that you use

the best science you have available at any point in time. Today we

understand the risks of smoking. Forty years ago we didn’t understand that risk, and we get better. I guess our duty is to continue

to apply the best science as we get it.

Mechanically, we had a lamb processing plant closed in St. Angelo, Texas, because we couldn’t get the lambs from domestic producers. And it cost us about 100-plus jobs because couldn’t get domestic lambs to process. We hear that that is a risk to the domestic

processors as well, because the domestic production isn’t ramping

up quick enough.

In my mind, it is simply mechanics. If I am growing beef in one

part of the country and I have to ship it a long way off, that would

seem to have a direct impact on my profits. Is that inaccurate?

45

Secretary JOHANNS. I don’t think that is inaccurate at all. If you

have to ship that animal a long distance, not only do you have the

shipping cost involved but you have the risk to the animal.

Mr. CONAWAY. Right.

Secretary JOHANNS. There is danger to that animal in being

shipped a distance, so I would assume that both would have an impact.

Mr. CONAWAY. The other thing is, if—this is not a static environment. If tests and science prove us wrong or prove something different, if Canada has other cases or we find, in relation to the two

they have already had, how quickly can you respond to—based on

the facts from what we know today in your decision today?

Secretary JOHANNS. We can respond quickly. But there is a point

to be made here. The minimal-risk rule is exactly that. It assesses

the risk in a given country. Under the international standards, you

look at the whole host of factors to determine how to manage—how

to best manage that risk. That is the approach that is adopted

here.

So we have said publicly on a number of occasions, every time

we have been asked, that Canada could have a number of BSE animals, as could the United States, and still qualify as a minimalrisk country under this approach. And, again, this approach is accepted—in fact, it was an approach that was based on OIE standards, international standards.

Mr. CONAWAY. One last point. There is a great scene in a movie

called ‘‘Erin Brockovich’’ where the role played by Julia Roberts is

negotiating with some folks who are claiming that a particular

water supply is not contaminated—it is the lawyers she is going to

give this water supply to—and so she offers them water from the

supply that they think has crippled all these children and killed all

those children, and the lawyers don’t drink it. If we were to sit

down at a meal tonight with cattle that was 29 months and 28

days sold when it was slaughtered, would you and I share that

steak?

Secretary JOHANNS. Yes, we would. Without hesitation, I would

share that steak. I just had a great steak within the last week.

Mr. CONAWAY. In Canada?

Secretary JOHANNS. I would go to Canada. I wouldn’t hesitate a

moment.

Sir, when you are talking about this rule, quite honestly, we

have so little risk. The day—on December 23, 2003, when we identified the first BSE case in the United States, I called a news conference for the next day, December 24. After that news conference,

I said, this is my anniversary, and my wife and I have had a tradition since the very first anniversary of sitting down together on

Christmas Eve and enjoying a great steak, and we are going to do

that tonight, and we did. I wouldn’t hesitate a moment.

Mr. CONAWAY. Thank you, Mr. Secretary.

Mr. Chairman, I will pass it back.

The CHAIRMAN. I thank the gentleman.

Mr. Secretary, I doubt very seriously the Senate brought Erin

Brockovich into this.

Secretary JOHANNS. That is true.

46

The CHAIRMAN. At this time, it is my pleasure to recognize the

gentleman from North Carolina, Mr. Butterfield, for 5 minutes.

Mr. BUTTERFIELD. Thank you.

Mr. Chairman, I will waive my statement and submit my questions.

The CHAIRMAN. Very good.

I recognize the gentleman from Nebraska, Mr. Osborne, for 5

minutes.

Mr. OSBORNE. Thank you, Mr. Chairman; and thank you, Mr.

Chairman for being here. I got to watch you for 6 years as governor, and it seemed like you had a lot of difficult issues that were

not of your own cause or choosing and it looks like things haven’t

changed.

Secretary JOHANNS. That is true.

Mr. OSBORNE. But I always was impressed by the way you were

consistent, fair and well-informed, and we appreciate your approach.

I would also like to thank you for delaying the importation of

beef over 30 months. I think that was a very good decision, and all

of us appreciate that.

About 4 or 5 weeks ago I toured the State that you know very

well. I talked to about 240, 250 cattlemen at 8 different sites, and

I think part of our job here is to report to folks like you what we

are hearing. I was a little bit concerned because I just wasn’t hearing anybody that said we ought to go ahead and open the border.

Finally, I did have one fellow who said we really are concerned that

our packers are going to move north of the border. I think that has

been brought out here today, and so there is that awareness out

there, and they are concerned.

Also, there was a great deal of empathy for what is going on in

Canada, for the cattlemen in Canada, and I often ask people well

how would you feel if the shoe was on the other foot. So they understood that.

But I would guess that the big concern that I heard—and I

would just like to bring this home to you—is that there have been

four cows, I think, in North America that have been positive for

BSE—maybe five, but at least four—and all of them apparently

were infected in Canada. One of them, unfortunately, was detected

when it came across the border, and it was alive. Now if it had

come across in a box, it would have been a problem.

So I think what a lot of our cattlemen are seeing and saying, this

bringing in live cattle is a big deal, because once an infected cow

comes across the border it is no longer a Canadian cow. It is our

cow, if it is alive. So they are pretty cautious at this point, and I

know you are cautious and I know everybody is really concerned.

So, with that as a context, I would just like to ask a couple of

questions. I read the whole report last night, and that was exciting

reading. I can’t imagine—I don’t know how you guys do it.

But, anyway, a couple questions.

We have talked about the 30-month rule at times, and I believe

Canada has animal ID system up there, but they don’t apparently

document birth dates. So I was just wondering if you were satisfied—or Dr. Collins or Dr. DeHaven—that we were able to accurately document those animals that are 30 months. Is there a posVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
47

sibility of getting somebody—some cow that is 36 months, or do we

feel we have good documentation?

Secretary JOHANNS. Dr. DeHaven.

Mr. DEHAVEN. Thank you, Mr. Secretary.

With regard to the Canadian animal identification system—actually, there are two systems in place, one that has been in place in

the province of Quebec for about 5 years that does, in fact, require

a birth date as part of that system.

The Canadian national system that was initiated in 2001, and

has been required only in the last 8 to 14 months or so, has had

a required entry in that system for a birth date. So, in fact, we

are—if birth records or animal identification are not available to

definitively determine the date of birth—using the same system

that we are using in the United States to determine if an animal

is over 30 months or not for the purpose of SRM removal, specifically using dentition.

We recognize in doing that we are erring on the side of identifying younger animals in that the time periods or the ages of dental

eruption that we are using would tend towards identifying animals

that are much younger than 30 months, as opposed to older. So we

are erring on the side of conservative.

Mr. OSBORNE. One last question. I noticed in the report that the

Canadian feed inspection agency, and I quote, said this in the report, that they have not been able to dedicate extensive resources

to evaluating on-farm feed manufacturing or feeding practices to

determine the level of compliance with the law. It seemed like most

of the report was focused on feed mills and a little bit on rendering

and, of course, there was some error there.

But I just wondered if that was a concern to you. It kind of

raised my suspicions a little bit when I saw that they didn’t—they

admitted they didn’t seem to be able to get a very good handle on

what was going on the farm and that there could certainly be some

deviations from procedures on the farm. I wondered if that was a

concern of yours.

Secretary JOHANNS. I can tell you, again, when you look at the

whole rule and what we are doing here, animals under 30 months,

SRM removal, it really is not a concern. The risk analysis is still

very valid. The approach is valid. When we start talking about the

older animals, we are going to do a separate risk analysis on older

animals, live animals. So the answer to your question is, I certainly

noted it.

It is certainly worth recognizing their admission in that regard.

But, again, when you look at the constellation of what we are doing

here, I am just absolutely comfortable with going forward on March

7, especially comfortable with the decision that we delay the meat,

as you referred to, from animals over 30 months until we can bring

along live animals over 30 months.

Mr. OSBORNE. Thank you, Mr. Chairman.

The CHAIRMAN. I thank the gentleman.

The Chair now recognizes the gentleman from North Carolina,

Mr. Etheridge, for 5 minutes.

Mr. ETHERIDGE. Thank you, Mr. Chairman. Let me thank you for

calling this very important hearing. I think it is important for the

American people and for our consumers and certainly for the proVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
48

ducers as well. It is important to our country. Certainly the question regarding Canadian beef and cattle imports is a crucial one

not only for us here at the hearing but all across the country and

around the world. I have every confidence that my colleagues from

the beef-producing States that produce a lot more beef than those

in North Carolina can ask a few more questions that covers these

interests.

But let me go off subject for just a moment, if I may, Mr. Secretary, because I don’t know when we are going to have you again,

and I have a couple of questions I would like to get on the record.

If you can’t respond to them here, I hope I can get a written response back, because I think they are important.

As you know, USDA is working on the implementation of the tobacco buyout legislation that Congress passed last year. Early in

January, a number of us from the producing States wrote Under

Secretary Penn to voice our concern about the development of regulations to implement that specific piece of legislation. In particular,

we wanted the Department to make it crystal clear that buyout

payments will continue each year, regardless of any problem that

theoretically could arise with the collection of assessments. The paperwork has already been put out and cleared as it relates to the

assessment piece.

I can’t tell you how many farmers and bankers that I have heard

from who want to know something about these guaranteed payments. As you can appreciate, this is a critical issue now as the

crop year is beginning to start. They are nervous. It is tied to land.

There are some serious problems across the Southeast.

While Congress directed the Department to tap the Commodity

Credit Corporation funds to pay for the buyout payments, farmers

and bankers want to see something in the regulations, as you can

appreciate. Because, without it, bankers and other financial institutions will not be helped with the best interest rates if they want

to discount and make the buyout up front and get a lump-sum payment.

Why is this important? Because the decision the Department

makes could cost these folks millions of dollars in getting lower interest rates that will be available to them and ultimately would

benefit an awful lot of consumers.

Since I have not heard back from Under Secretary Penn, I would

say, sir, how does the Department plan to address this issue?

Secretary JOHANNS. That is one, if you don’t mind, I would love

to take the opportunity to respond in writing. I will get your response here very quickly, because I note that sign-up on the individual contracts is coming up in mid-March.

Mr. ETHERIDGE. Yes.

Secretary JOHANNS. So, in the end, you would probably like to

have something from me in writing anyway on the issue; and I

would be happy to do that.

Mr. ETHERIDGE. Thank you. I appreciate that. Because, with the

sign-up, that creates a whole new problem for people making decisions ultimately this year, and I appreciate that. Thank you very

much.

49

Let me move very quickly to just a couple of generic questions,

if I may, and you may want to get back to me on these, also, because they deal with the budget.

The USDA budget plan for agriculture, as a commodity class, you

mentioned how valuable value-added agriculture is and how near

and dear it was to your heart. I happen to share that sentiment,

being from a State that has a lot of specialty crops and small farmers. So, as someone who believes in value-added agriculture, I hope

you will take a look at the budget that has been proposed by the

administration, because the grant programs for value-added crops

has been cut from $120 million to zero.

[Secretary Johanns responded for the record:]

The $120 million cut that you refer to is actually a cumulative amount of mandatory authority that was provided by the 2002 farm bill. Some of this amount was

blocked for use by Congress in prior years. the 2006 budget simply extends the

blockage for another year. The 2005 appropriations act provided $15 million in discretionary funding for the same purpose, which is to make grants to producers for

value-added processing of agricultural products. The President’s 2006 budget includes $16 million for this purpose.

I want to assure you that I am committed to supporting value-added agriculture.

I want to emphasize that USDA’s support for value-added processing has many different dimensions, including research, extension, and other assistance. The Department sent Congress a report on January 3, 2005 that provided information on the

various programs to support value-added processing. The report also contains information for improving the coordination among these programs. I can assure you that

we will give careful consideration to this matter.

Mr. ETHERIDGE. My other question deals with priorities. In your

budget statement you mention that the budget reflects the President’s priorities. That being the case, I hope you will share with

me the reduction in gross income from farmers to 10 to 40 percent

because of the priorities in the administration’s budget and how

would this be accomplished—and this comes, of course, comes from

a letter from my colleagues.

I hope you can respond back to us on that, because I think that

is a critical piece as it relates not just to farmers in our area but

ultimately to help—it could have a significant impact on our ability

to continue to produce and export.

Secretary JOHANNS. OK. We will respond.

Mr. ETHERIDGE. Thank you, Mr. Secretary; and I appreciate that.

Thank you, Mr. Chairman.

[Secretary Johanns responded for the record:]

One of the President’s priorities, which I support, is to take action now to reduce

the budget deficit. And one of the many proposals in the budget to reduce the deficit

is to make some modest reductions in farm program spending The President proposed reducing farm program spending by $5.7 billion during fiscal years 2006–15

or an average of $570 million annually. In comparison, USDA projects gross cash

farm income will average over $275 billion during calendar years 2006–14. Based

on these projections, the proposed reduction in farm program spending would lower

gross cash farm income by less than 1 percent. Obviously any reduction in Government spending for farm programs will be felt by those who currently benefit from

these payments. And some producers would certainly receive smaller payments

under any effective measure to reduce spending. However, when you look at the current record high levels of net cash farm income in the neighborhood of $78 billion

and the corresponding high level of gross farm income, it’s not conceivable that the

proposed reduction in farm spending of a few billion dollars spread over several

years would have a particularly noticeable effect on the sector as a whole. In addition, the longer run impact of budget deficit reduction on improving macroeconomic

conditions such as in helping keep interest rates low will be of major benefit to our

farmers and ranchers. So to address your concern about thte impact on our ability

50

to produce and export, I believe the ultimate impacts will prove to be favorable even

though the short run impact will not be painless

The CHAIRMAN. Thank you.

The Chair now turns to the gentleman from Iowa, Mr. King.

Mr. KING. Thank you, Mr. Chairman. I thank the Secretary for

his testimony.

First, I would ask a question that maybe isn’t rhetorical, but it

is going to be difficult to answer. That is, in the entire history of

the United States of America, can you think of a single health

issue, especially a meat safety issue, by which a country has committed more resources to when there has been less risk than BSE?

Secretary JOHANNS. That is a really good question, and these

folks have a ton more experience than I do. But it is hard to imagine. We devote enormous amount of money and time and effort and

energy dealing with a situation where, so far, we have found one

animal and, so far, we have not documented a single human case

attributed to U.S. beef that I am aware of in this country.

Again, by any definition, when you talk about the rule that we

have in front of us, which is meat from animals under 30-months

and animals under 30 months and all of the safeguards in place,

you have really just brought this down to virtually nothing. I don’t

think that is too strong a statement to make.

Under current science, it is just the most remarkable phenomena

that we are spending the kind of resources that your question anticipates. Not that it is not important. It is terribly important. But

we devoted a tremendous amount of energy to this.

Mr. KING. Thank you, Mr. Secretary.

I would point out that our tradition is a big old long chunk of

prime rib in the middle of the table for Christmas, except for—and

when it comes to beef over the age of 30 months and if the SRMs

are removed, I will tell you that I will eat that, too, Canadian or

U.S. and without a bit of a qualm and no fear—and I don’t know

that there is any science that would indicate that beef itself has

any effect on whether a person might have detrimental effects from

BSE.

Can you respond to that? As long as we are eating beef muscle

tissue, just had the SRMs removed, is there any scientific indicator

that that could be dangerous to anyone?

Secretary JOHANNS. I will let Dr. DeHaven jump into that, because he is a science guy. But your observation again hits the

mark. With the removal of SRMs and the consumption of the muscle meat, more of the current science says we are on safe ground.

But, again, let me ask the Doctor to offer a thought.

Mr. DEHAVEN. Thank you, Mr. Secretary.

Congressman King, as you point out, meat is safe; and that is

based on the research showing at what age, what tissues become

infected in a research environment, and so that is the basis for our

SRM removal. We know that those tissues in an infected animal

at a certain age become a problem. The meat has not been shown

to become a problem, whether it is from animals under or over 30

months of age. It is those tissues that we have specified as potentially risky materials that we are moving from the human food

chain.

51

Mr. KING. Thank you, and I would also point out that we shared

a roast beef dinner while we discussed these things, Dr. DeHaven,

and I appreciate that.

I guess my concluding question here, unless something else

arises, is that a question—it is my understanding that the Canadians are moving ahead with a radio frequency ID system and that,

since they are moving ahead with that, it will add more credibility

to their recordkeeping and the safety of their beef products. Can

you, Mr. Secretary, envision a scenario by which the Canadians

may have access to the Japanese, Korean and Pacific Rim markets

ahead of that of the United States if they are able to accelerate in

their process up there? I know that would be their intent, and I

wouldn’t blame them.

Secretary JOHANNS. It is hard to know, just simply because they

have their own negotiations and discussions going on, and they are

in discussions with the Japanese that I am just absolutely not

privy to.

I will offer this observation and that, again, industry is going to

fight for its survival. Processing is locating in Canada not

accidently. It is locating there because folks are making a rational

decision about where to invest their money to best ensure a return

on that investment.

So, as the chairman points out, the processing numbers increase.

Well, what are we doing, we are creating a real competitor in the

international marketplace, or contributing to it, is probably a better way. I don’t believe we own the whole issue here, but this industry in Canada is trying to figure out a way to be an international competitor.

So, could I envision—I guess I could envision anything, you

know. They are going to work to sell their product, just like I work

to sell product here on behalf of the American producers, whether

it is beef or fruit.

Mr. KING. I thank you, Mr. Secretary. And in 10 seconds I would

say that if they establish an animal identification system with an

effective trace-back, that might be the opening by which we see the

Canadians have access to the Asian markets ahead of that of the

United States.

Mr. LUCAS [presiding.] The Chair turns to the gentleman from

North Dakota, Mr. Pomeroy.

Mr. POMEROY. I thank the gentleman.

Mr. Secretary, thank you for being here, and I am very appreciative of the chairman for calling this important hearing.

One Canadian-born cow detected with BSE in Washington State

has caused so much problem for our beef export business, you can

certainly understand why the prospect of 1.3 million Canadian cattle coming south causes great anxiety among the producer community, certainly in North Dakota, and across the country.

While I very much appreciate you being here to hear directly

from us, I am pleased to note also that you will be in my State of

North Dakota later this week, and I am wondering if you would

agree to meet with farm groups there while in the State to hear

directly from them. I think that would be something deeply appreciated by the ranchers I represent.

52

Secretary JOHANNS. Yes. I will even do you one better. Because

I am going to be there a short period of time on Friday. I do believe

a meeting is being set up. But I think we are also working on a

meeting or a time for me to return to your State I believe in April,

if I am not mistaken. So, but I do believe a group is being set up

before I speak on Friday evening.

Mr. POMEROY. We will always be delighted to have you in North

Dakota, and appreciate you making yourselves available. One thing

about Friday as opposed to April, it is still before the lifting of the

rule on the 7th.

Secretary JOHANNS. Right.

Mr. POMEROY. You know, one takes one’s customers as one finds

them, and it doesn’t matter what the basis is that we want them

to review our exports. If they don’t take them and they have other

reasons for not taking them, it seems to me we have to pay a lot

of attention to what they are saying.

As we propose to open the border, I haven’t heard much from the

U.S. Department of Agriculture about whether we have vetted this

idea with the very markets we have worked so hard to win back.

Last week I was in Korea, and I met with—among others, I raised

the concerns about their embargo with members of the Assembly,

with the Foreign Minister, and with the Deputy Agriculture Minister with responsibility of trade. I was informed that a team was

meeting in Seoul yesterday, and it was viewed by this assistant

minister as a very substantive engagement by their government in

resolving this issue. But what I didn’t get a sense was whether or

not we had asked them whether we complicate our case to win that

market back by bringing Canadian cattle down.

So my question is, very simply, have we asked the Koreans what

they think about this business of live cattle coming into our market

from Canada as we seek to win that export market back?

Secretary JOHANNS. My focus has been with the Japanese in the

very short time that I have been Secretary. Our team at the USDA

has had a meeting with the Koreans, probably a number of meetings, some predating my arrival a month ago.

I will share an interesting story with you. And, again, this is

Japan. It really doesn’t directly relate to your question about

Korea, but it illustrates I think a very interesting phenomena relative to at least the Japanese consumer. There was a—I think it

was a grocery store chain that still has U.S. beef in inventory, not

a lot of it, but had some. Brought it out of inventory and served

a rice bowl. Very recently. People stood in line to get that product,

paid 5 percent more, and they literally ran out of supply.

I guess here is my point. I believe we can capture this market.

And I believe, whether it is Korea or Japan or whatever, if they

sit down with us and work through the science that is available,

they will see that with the removal of the SRMs, in this case with

animals under 30 months and meat under 30 months, from Canada, they are just going to see there isn’t a risk.

Mr. POMEROY. Mr. Secretary, if I just might respond with what

I heard in Korea. And that is an important market. Their export

market, $850 million worth of product in 2003. The trade minister,

the ag ministry told me it isn’t just the government that are keeping their eye on, in terms of—also, the government itself is very

53

concerned about the response of consumer NGOs that largely determine the perception in the marketplace of U.S. beef products. That

single incident in the State of Washington has caused beef consumption in Korea to decline significantly. And I believe, again, it

is a matter of hypersensitive perception, and anybody that has ever

sold a product knows you have got to listen to your customer carefully and you have got to respond to the concerns of that customer.

That is why I come back from Korea very concerned that we are

proposing to rush forward, bring these Canadian cattle down, that

is going to make it more difficult for us in the end to win back that

market.

I thank you for listening to me, Mr. Secretary, and I especially

thank you to agree to meet with North Dakota ranchers. Thank

you.

Secretary JOHANNS. Thank you very much.

Mr. LUCAS. The Chair turns to Mr. Fortenberry.

Mr. FORTENBERRY. Thank you, Mr. Chairman.

Hello, Mr. Secretary. Nice to see you again. I understand you

may be returning home this week.

Secretary JOHANNS. I will be speaking, so I look forward to it.

Mr. FORTENBERRY. I hope you have a nice trip. I will be back

here working.

Mr. Secretary, as you know, I live in a State which produces 20

percent of all the beef produced in the United States. Cattle outnumber people 4 to 1. Exports are essential to the well-being of Nebraska agriculture. And we are dealing with two issues here that

are separate but inextricably intertwined, the reopening of the Canadian border and potential resumption of beef exports to Asian

markets.

In that regard, my question is similar to Mr. Pomeroy’s in that

in your conversations with Japanese officials what has been their

reaction to this border reopening? And I just have to tell you, I

think there is a growing sense of impatience in the Congress with

the Japanese. I signed a letter along with some of my colleagues

in the House and sent it to urge the Japanese Ambassador to move

on this issue and move quickly given the good-faith effort that you

have undertaken and to resume these markets. It is critical to our

well-being in Nebraska, but again with the declining trade balance

in the United States it is an essential question for our entire country’s trade balance or issue of trade imbalance. So if you could address that, that would be very helpful.

Secretary JOHANNS. Yes. Japan is very definitely a leader in

their region, and I strongly believe that the decisions made in

Japan will have an impact on how other countries deal with us and

work through this issue. As the Congressman from North Dakota

indicated, there clearly are two countries that really define the rest

of the marketplace, and that is Japan and Korea. They make up

the vast majority of what is left in terms of recapturing the marketplace.

I met on a number of occasions with the Ambassador. There has

never been a link drawn between Japan opening up their border

and the work that I was doing in terms of the minimal risk rule

with Canada. In fact, I will ask one of these two gentlemen to correct me if I misstate this, but I think when Canada first found its

54

first BSE case, I don’t believe Japan closed their border to Canada.

Is that right, Dr. DeHaven?

Mr. DEHAVEN. I believe they did. They did not close their border

to the United States, however.

Secretary JOHANNS. OK. So even though we were trading with

Canada and Canadian cattle were in our State, they did not close

the border to us.

My point is this: Again, in every discussion I have ever had with

Japan my emphasis is to make the decision on good science, otherwise it is just the politics of the day. I believe, if I were to do anything inconsistent with that position in dealing with Canada, I feel

strongly it would be devastating in terms of the discussions we are

having with Japan. I think they would come back and say, well,

Mr. Secretary, you talked to us about making decisions upon sound

science and you are not doing that, and I just think it would make

it impossible for us to move that forward.

The other thing I would say, because of the activity in the House

and the Senate, because of the activity from the President on down,

I do believe the Japanese understand this is an enormously important issue. I am absolutely convinced of that.

Mr. FORTENBERRY. To follow up with you on one more question.

You mentioned the cattle 20 months and under represent about a

third of the herd. Do you have a timetable on which the resumption

of exports for that age cattle will fully begin? And then, what do

you foresee—or cattle up to 30 months—in terms of a timetable

with the Japanese?

Secretary JOHANNS. I wish I had a timetable, Congressman. I

don’t. I have been pressing Japan to set a timetable for agreement

on the 20-month animals, and then to start work in terms of moving beyond that. To date, there isn’t a timetable for that. But that

is the point; that is, every meeting I have had I said we need a

date. So that continues to be my message in working with the Japanese.

Mr. FORTENBERRY. So where are they in their process? At what

level of governmental decisionmaking are they in their process that

would move us toward an ultimate date, or at least give us some

broad parameters for an understanding of when full resumption of

exports at least 20 months and under would resume?

Secretary JOHANNS. They have approved, if you will, the A–40

system. I think that is fair to say. They have publicly indicated

their satisfaction with that approach. They have moved beyond the

100 percent testing which was so much a part of the early discussions. But there is still a regulatory process that needs to be undertaken which, according to my understanding, has not occurred yet.

So that process needs to be completed.

Mr. FORTENBERRY. Thank you, Mr. Secretary.

Mr. LUCAS. I thank the gentleman.

The gentleman from California, Mr. Baca, is recognized for 5

minutes.

Mr. BACA. First of all, thank you very much, Mr. Chairman, for

having this important meeting, especially as we deal with human

health safety for the American people.

And thank you very much, Mr. Secretary, for appearing once

again here and with all of us on this open hearing right now. I

55

have a couple of questions, and I would like to start with the very

first one that I am very much concerned, Mr. Secretary, that the

feeder cattle and the cattle supply outside the feed lot in Canada

are currently at a record level and nearly double what they were

the year 2002, a high watermark year in terms of feeder and fed

cattle import from Canada.

What efforts has USDA made to identify and implement legal

means to gradually resume the trade with Canada so that we can

prevent a shock to the U.S. cattle marketplace and mitigate the

very real potential for short-term economic harm to U.S. beef cattle

producers?

Secretary JOHANNS. I will offer a couple of thoughts on that.

Again, just by the terms of the rule, we are talking about cattle

under 30 months.

The other piece of it is that, if you read through the rule, there

is a significant amount of complexity in how this is going to proceed. It is just the nature of the process, the verification issues, the

branding issue, and we could go on and on. It is very extensive. It

just simply is going to take some time for all of that to occur. Every

one of those animals, whether it comes over in terms of boxed beef

or whether it comes over on the hoof are going to have to be transported. There is logistics involved in that. There is an inspection

process. And as Dr. DeHaven observed a week or so ago, these

things just take some time to get into place.

Now, again, Dr. Collins has looked at this and he estimates

about 1.3 million head. The comparison that I draw there is last

year we slaughtered about 321⁄2 million head in the United States.

He has also made a price estimation and says it could impact the

market in the United States, the cattle market by about 2.6 percent. Translated, again—you know. So I think we can offer those

things to you.

Mr. BACA. When you look at the impact of the cattle market

being 2.6 of the market, I heard you make a statement earlier that

jobs lost, that we would lose jobs or the possibility. Do you have

a number of how many jobs would be lost here in the United States

and what impact it would have op our cattle industry producers

here?

Secretary JOHANNS. That is a concern that we have when we

look at how many jobs are currently going to be lost, what is the

revenue? Are we really being cost effective in terms of the short

term, long range as well?

Those are important factors. I can tell you that the USDA has

not done an economic analysis on jobs lost. The numbers in terms

of processing capacity going to Canada——

Mr. BACA. But shouldn’t we have done this before this begins to

happen? Because as we start putting a plan into place, we have to

look at how many jobs are we losing here. And are we doing

outsourcing in terms of what even Canada is going to do based on

a statement that you said earlier, that they would be producing

and processing located in Canada. So it is going to affect us and

our industry here, and I am very much concerned with our cattle

industry here, too, as well the jobs that are here that are maintained not only in terms of goods but I am also very much concerned with the safety aspect, too, as well.

56

And I like the word that you used, you used sound science. Well,

sound science means let us not take a risk, too, as well. And if

there has been detection of BSE in that area, then we know very

well, are we doing that in reference to what needs to be done? And

is our consumers, are they totally aware of the products that they

are going to buy? Because we know under the agriculture bill originally we wanted to put a provision that would have had the labeling on there. At least they would have known from a safety perspective what they were buying and where they were buying it.

Secretary JOHANNS. The country of origin labeling, which I think

you are referring to, I don’t think was ever designed to be a safety

measure so much as an identification of——

Mr. BACA. But it should be probably a safety, because now we

are talking about what has been detected right now. And our consumers want to know the product that they are buying. Is there an

effect on them? And we want to make sure that we use sound

science and the safety is still there, regardless of whether you

would buy it or not. But at least that consumer then has an opportunity. That is just one aspect of what I am concerned with.

Let me ask another question. You recently stated that it was not

scientifically consistent to allow meat from older Canada cattle but

not the cattle themselves to enter the United States. Why did the

USDA regulators initially decide to include meat from older cattle

in the January 4 rule?

Number two, what did your expert panels recommend with regard to this aspect of the rule?

Secretary JOHANNS. The why is, I will be just very blunt with

you again.

Mr. BACA. I hope so.

Secretary JOHANNS. When you look at the whole idea of allowing

meat in from animals over 30 months but not allowing the live animal in, again the scientific consistency of that just quite honestly

escapes me. There is probably an argument that can be made that

it is a different risk analysis and the SRMs have been removed and

therefore the SRM product is on that side of the border and not on

this side of the border, et cetera, et cetera. But the more I delved

into it and the more the issue was raised with me, I just felt very

strongly that the scientific consistency just simply was not there

and it made sense to hold that part of the rule while we did a rule

on live cattle over 30 months. And that is as straight as I can be

with you. I just didn’t think it was consistent from a scientific

standpoint.

And the other issue you raised, sir, was——

Mr. BACA. What did your expert panels recommend with regard

to that aspect of the rule?

Secretary JOHANNS. Well, they made the case that there were

differences that were considered, that if the SRMs were removed

from animals over 30 months that there was virtually no risk. But

it kind of begged the question in my mind, well, if you were to do

that on this side of the border, doesn’t that get you there? In other

words, why not do a rule that consistently says you can ship the

animals over to this side of the border for slaughter? Again, you

kind of get tied around the axle here. And I just thought, in terms

of the scientific approach, it made sense to put that one on hold,

57

move animals over 30 months, deal with that risk analysis, and

hopefully bring those forward in the end in the same time frame.

So that was the decision I made.

Mr. BACA. I know that my time has expired but, Mr. Chairman,

can I submit the additional questions for the record and then my

statement as well?

The CHAIRMAN [presiding.] You may indeed.

Mr. BACA. Thank you very much.

The CHAIRMAN. The gentleman from North Carolina, Mr. Hayes,

is recognized for 5 minutes.

Mr. HAYES. Thank you, Mr. Chairman. Thank you, Mr. Secretary. You come very highly recommended by my fellow who has

been here most of the afternoon, Coach Osborne. So you don’t get

a better recommendation than that.

We appreciate all the things that you have done coming here

today, putting science and the facts on the table so that the people

can see them. It is somewhat of a complex issue, again it is fairly

basic.

I want to commend you for your work in trying to reopen our

trade with Japan. That is vitally important. As hard as you have

worked, the process still, at least to our farmers and ranchers,

seems to be going a bit slower than they would like to see it happen. What can we as a committee and the Congress do to again

help you and your Department in your efforts to reopen those borders?

Secretary JOHANNS. Every time a House Member or a Senate

Member explains forcefully the importance of that border reopening

it underscores to the Japanese that I am not out here alone, that

people here on Capitol Hill are very, very concerned. The numbers

are obvious. We are talking about 1.3 million animals in Canada.

Well, if you add Japan and Korea together, you are just about

there. I don’t remember the exact number, but very, very similar.

It is more.

So every time, sir, that the House and the Senate step forward

and say enough time has passed, we have done the scientific work,

we have done the technical work, it is time to pull the trigger and

make a decision, I believe it supports what I am saying to the Japanese, which is, look, this is a very serious issue here, this is an

issue quite honestly that at some point there could be serious consequences to our relationship. And so that is what I would offer.

Every time that happens, I believe that supports my initiative.

Mr. HAYES. I hope this hearing today, at least from my perspective, has done a lot to reinforce what you have just said. And the

material prepared by staff, yours, ours, and others, has been very,

very thorough, and it shows the degree to which you all have

looked at the process both from USDA, the industry, packers,

everybody’s perspective, again, to make sure that food safety and

ultimately borders and markets are all consistently protected in

the right kind of way. So I think that will have an effect.

Recently, the Taiwan Government leadership has changed. Have

you and the USDA approached the new leadership talking about

the issues that we are talking about today, opening the borders for

beef as well there?

58

Secretary JOHANNS. I have not talked to the new leadership, but

I can tell you Taiwan has been very, very active in this area, we

hope moving toward reopening its border. In fact, I believe Taiwan

had a group in Nebraska in December, if I am not mistaken, looking at facilities or processing or whatever. So, again, our goal is not

just Japan, although it gets a lot of attention because it is the largest, but our goal is to normalize trade worldwide based upon good

science, based upon sound science. And that is what we are heading out to do.

Mr. HAYES. Well, we appreciate that. Our farmers and the USDA

have done I think an admirable job, and we will certainly continue

to increase our efforts to make sure that our trading partners

around the world, and certainly folks in Japan and Taiwan fit that

category very well, are aware of your efforts, and thanks to all of

you all for being here today.

I yield back my time, Mr. Chairman.

The CHAIRMAN. I thank the gentleman.

The gentleman from Washington, Mr. Larsen, is recognized for

5 minutes.

Mr. LARSEN. Thank you, Mr. Chairman. And, Mr. Secretary,

thank you for appearing before the committee. And I have relatives

of relatives in Nebraska who speak very highly of you and your

time as Governor there, and I want to pass that on to you. And I

represent seven districts in Washington State who have a lot of

things going on in agriculture there. But as a representative from

there, I want to thank you for your work in preventing Vietnam

from blocking the importation of Washington beef. But I am concerned there are similar demands from countries such as Kuwait

and Saudi Arabia that will set an unnecessary precedent. In fact,

the effort there is to block strictly Washington beef, not U.S. beef

as a whole but only beef from Washington State.

So I wanted to just ask you about that situation and ask you to

continue your efforts by countries that want to block strictly Washington beef. Is the administration in fact continuing to work this

issue, and can you fill me in on the steps?

Secretary JOHANNS. Here is what I would offer. Beef in the

United States is safe, and I say that all across the United States.

I don’t exclude any State. Beef in the United States is going to continue to be safe. With the minimal risk rule, beef in the United

States is going to continue to be safe even with the reopening of

the Canadian border.

This is a very integrated market in our country, and how do you

draw a curtain around any State? We trade cattle back and forth,

we sell cattle at sale barns. When I was growing up, we bought bottled calves at sale barns and taught them how to drink out of a

bucket and eventually feed them up and sold them. If we start

carving out areas in the United States, I don’t know how you would

possibly manage it.

So that is my philosophy on this. And, again, I just reiterate,

based upon science, our product is safe. I have no hesitancy, no

qualms in saying that whatsoever, and I won’t have a bit of qualm

in saying that on March 8 when this rule is in effect.

Mr. LARSEN. I appreciate that, and appreciate your commitment

to deal with the specific issues as well facing Washington beef proVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00061 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
59

ducers in that regard. Washington State University’s animal diagnostic laboratory is one of seven surveillance labs in the detection

of BSE. In June of last year, the USDA began their expanded surveillance program with a goal to test roughly 250,000 cattle by December of this year. Once the school is completed, what is the

USDA’s plan going forward, and what should a university like

Washington State University plan for post-December 2005?

Secretary JOHANNS. What we have done to date is we have tested

about 250,000 high-risk cattle. And what we are going to do as we

get toward summer, we are going to evaluate how we are doing. We

will look at areas of the country. We will try to make sure that all

the bases have been touched in this enhanced surveillance. And I

will tell you no final decision has been made on what surveillance

may or may not look like in the future. I also committed to the

Senate Agriculture Committee that I would take a look at the

shape of the rules. Is there an opportunity to tweak something here

and tweak something there because of the information? It is possible. I will tell you this, because of surveillance we have a tremendous amount of information at our disposal that we did not have

6 months or a year ago. I think it has been very helpful. I think

the money has been well spent. What the new world will look like

I wouldn’t even hazard a guess about that other than to tell you

that we will sit down and in a very transparent way we will try

to explain what we are doing and what we found from the surveillance process.

Mr. LARSEN. Well, I would just remind you to obviously keep the

universities in mind as you move forward on that. And with my

few seconds left, I will just put my oar in the water. You have

heard it from practically every member of the committee I am sure

about Japan and opening up the markets there, and want to be

sure from Washington State’s perspective we think that is a good

thing, too, and want to support your efforts in doing that.

Secretary JOHANNS. Thank you.

Mr. LARSEN. Thank you, Mr. Chairman.

The CHAIRMAN. I thank the gentleman.

The gentleman from Michigan, Mr. Schwarz, is recognized for 5

minutes.

Mr. SCHWARZ. Thank you, Mr. Chairman.

Mr. Secretary, in the real world I am a surgeon. And I wonder

frequently when people talk to me about bovine spongiform

encephalopathy if—it is a real mouthful, and I think it tends to

make people panic sometimes. And then you say, well, it is a prion,

and, well, it is not a virus, it is not a bacteria, it is a prion. Well,

what is a prion? A non-DNA piece of protein within a cell. And

yet—so the question—and I would ask your two colleagues from

the Department as well. And you may not want to answer it, and

it is OK if you don’t want to answer it. Is this not much ado about

nothing because we know that it exists and we know what happened in the U.K. But it seems to me that this country has done

a superb job in protecting its beef, that Canada has done a superb

job in doing the same. And the impression that I get is that our

good friends and trading partners in the eastern atmosphere may

even, with the reassurances that we have given them, the assurances and reassurances that we have given them, pushed the panic

60

button a little bit. And as you approach these folks, is that one of

the arguments that you use, is just keep your cool here, this is not

something that is knowing going to taint the beef supply in the entire world?

It is something that we have got our arms around. Our beef is

safe. Please don’t hit the panic button. Has that kind of a conversation been held?

Secretary JOHANNS. It has over and over again. Our beef is safe,

and so it is a very easy thing for me to argue. These days I can

tell you that without any hesitation, and again I will tell you that

on March 8 with the implementation of the minimal risk rule.

The other thing that we preach over and over again is we need

to make these decisions based upon the science. Otherwise, our

trade relationships will depend upon the politics and the given

country and who is jerking the chain of whomever. That is really

what it will come down to. And then you don’t have a trading relationship, do you? You have whatever is going on. And that would

be devastating to agriculture in the United States.

Minimal risk approach is exactly that, it is designed to do a very

thoughtful, transparent, thorough evaluation of risk, and then

make a determination as to what should be in place to deal with

that risk. Your observation is correct. We have had one animal in

the United States, there have been three in Canada out of millions

of animals, millions of animals. We studied their feed ban, and we

come back and we find that they have a robust inspection program.

They are doing everything they can, as we are, to implement the

feed ban. Their feed ban took place on the same day ours did. It

wasn’t a recall, as you know, it is not like we went out and grabbed

all the bags of feed and hauled them off somewhere and destroyed

them. We said, if you have feed in the bin, you can feed it out. If

you have feed in the inventory, you can sell it. So there was some

phase-in here.

The remarkable thing about all of this is that we keep testing

animals every day. We kept saying to people we think we are going

to find some BSE animals with this kind of testing. So far we

haven’t. It has been a very, very remarkable thing. And then, Doctor, Congressman, as you know, you get under 30-month animals

and beef from animals under 30 months with this rule, and, gee,

you remove the SRMs and you have just basically brought this

down to a risk that is so low that, again, I have no hesitancy whatsoever in telling you we have a safe food supply and it is going to

continue to be safe.

Mr. SCHWARZ. Our testing is reliable?

Secretary JOHANNS. Our testing is reliable. If we see an inconclusive test, we do further testing. Our testing is reliable.

Mr. SCHWARZ. And the gold standard is done only at Ames, is

that correct?

Secretary JOHANNS. Yes.

Mr. SCHWARZ. Thank you very much, Mr. Chairman.

The CHAIRMAN. I thank the gentleman.

The gentleman from California, Mr. Costa, is recognized for 5

minutes.

Mr. COSTA. Thank you very much, Mr. Chairman, again, for

hosting the Secretary and the importance of this hearing.

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Mr. Secretary, we do appreciate very much your attentiveness toward this effort. I have two questions. As you have stated, this is

among your highest priorities as Secretary, and I think with all the

questioning that has taken place this afternoon, no one doubts, and

I think everyone shares, your opinion that American beef is among

the safest in the entire world. And not only that, but we have been

doing more longer and harder to ensure the safety of our beef and

all of our food products.

I want to kind of go back one more time since whether or not

we agree as to whether or not the date next week on March 7 is

proper in the lifting of the ban and move to the issue of the other

markets, Japan, South Korea, Taiwan, and Hong Kong, because

there was a reference before you earlier today that we may not

have focused on Hong Kong. And I want to paraphrase your statement, because it seems like almost everything has been done and

certainly the Congress is trying to do what it can do, and you responded in part to the question by our colleague Mr. Hayes a moment ago. But you say in your statement: We are aware that the

decision to resume trade in this market will set an important

precedent for other markets. You also say that: We have endeavored to use science, the best science for ongoing efforts. You have

continued to indicate that our efforts to reopen these markets have

drawn on every resource of the Federal Government at the highest

of political levels. You reinforce that by your comments about meeting with Ambassador Kato and your counterpart Minister Shamira

on the importance of this issue. You further went on to talk about

Ambassador Baker’s efforts. And then you talked about most recently on February 19 Secretary of State Rice personally raised this

issue in her meeting with the Japanese Foreign Minister.

I guess my question, simply stated, is, after all of this effort over

a year now, what possibly could be left to open up these markets,

notwithstanding the efforts on March 7 and the impact of the Canadian border, but in Japan, in South Korea, in Taiwan, and in

Hong Kong? I mean, it seems like, based upon the testimony here

and the chronological order of events, that we have done everything. And I guess we are sharing with you our frustration, Mr.

Secretary, because of all the hard work and all the energy and all

the effort that has been put forth, what possibly is left to be done?

Secretary JOHANNS. I can tell you this. I think from a technical

exchange of information, from a scientific analysis, from all of the

things that the USDA can possibly do, we have done it all. Another

fact-finding mission, another whatever by Japan, just simply is

ploughing old ground. That ground has been plowed over and over

again. Again, we are making progress, but it is painfully slow. If

I would have been here for a hearing 8 months ago, we would have

been debating 100 percent testing. If I would have been here for

a hearing just a couple of months ago, we would have been arguing

about the A–40 approach. And those things are now behind us. I

really believe that it is now at a point where the Japanese Government has to signal that we have met their requirements, which I

feel very confident we have, we have negotiated down to 20-monthold animals, which quite honestly you could criticize us. I am arguing 30 months over and over again. But——

Mr. COSTA. That was a concession on our part.

62

Secretary JOHANNS. That was a concession to try to get that market open. And I will assert very, very strongly again, every time a

House Member or United States Senator forcefully explains how

important this is to their district and to their State and to their

country, that message is being heard. I met with the Ambassador

last week to explain that and handed to him the letter that had

been circulated by the United States Senate. And I think 20 Senators had signed on to that. The message is getting through. But

I believe we are beyond scientific analysis. We have done that. We

have been there, we have done that, and it is now time for the decision to be made in Japan.

Mr. COSTA. Thank you very much, Mr. Chairman.

The CHAIRMAN. I thank the gentleman.

The gentleman from Kansas, Mr. Moran, is recognized for 5 minutes.

Mr. MORAN. Mr. Chairman, thank you very much.

Mr. Secretary, thank you for joining us again. You have in my

opinion done an admirable job of testifying this afternoon. Any

qualms I had about you becoming the Secretary of Agriculture were

relieved when you hired a Kansan to remain as your chief of staff.

We are grateful for that cooperation between our bordering States.

Mr. Secretary, to pick up on what you just were saying about the

letter from the Senators and the time for Japan to make a decision,

I am a Member of Congress who is exasperated not at our own

Government, I think our Department of Agriculture, our Secretary

of State, our United States Trade Representative have advocated,

have taken the necessary steps, have demonstrated on a scientific

basis how valid our position is, how invalid the position of the Japanese are. And I just would say for the record today that I think

the Japanese have a lot at stake in this issue. This has been a

long-term bilateral trade relationship that we do not want to damage. We have a lot to gain by trading with the Japanese; they have

a lot to gain by trading with us. They have a significant trade imbalance. We buy much more from the Japanese than they sell to

us when it comes to all goods and services. In the agricultural

world, we sell a lot of agricultural commodities to Japan; they sell

us fewer. This is a relationship that is important, I would think,

to both countries. And we will continue to work with you and others to try to communicate to the Japanese that the time has come

for action, that it is important for them to make appropriate decisions. And I would—I know this is a hearing related to the Canadian border. I would want to give you the opportunity to again reiterate the importance of this issue, resolving the Canadian border

issue as it relates to trade with Japan. Is there a connection in

making a decision different than what you would propose with this

March 7 deadline?

Secretary JOHANNS. The connection again, if I were to send a signal to the Japanese that I will talk one way with them and operate

differently with Canada, I believe it would have a devastating impact on my future credibility in working with that marketplace or,

for that matter, any marketplace, again, if phytosanitary and sanitary issues are becoming the barrier of choice in many parts of the

world. And that is terribly unfortunate because it is disruptive to

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trade. And American agriculture needs the opportunity to trade. It

is just as simple as that.

So the answer to your question, very directly: I cannot act one

way and speak in another way with a different country. Everything

we are doing here is being watched under the microscope. And so,

again, we have to base our approach—and, again, I would forcefully

argue that we should be at 30 months with Japan. But I understand. Negotiations occur. The desire was to start moving product

into that market, reestablish our place in the market. So I won’t

second-guess that. But the science would seem to indicate that with

the safeguards in place there just isn’t a risk.

Mr. MORAN. And throughout the course of your term as Secretary

of Agriculture my guess is that you will be before this committee,

you will meet with us and encourage us to support trade agreements?

Secretary JOHANNS. Yes.

Mr. MORAN. It has been a significant component of the economic

viability of agriculture in this country. I think one of the things

that has to take place, and this again goes back to Japan, for us

to continue to support trade agreements we have to have the ability to enforce those trade agreements. And when other countries

treat us unfairly, there has to be a response.

So, again, I support your efforts. I commend you for the position

that you have taken in regard to the trade with Japan.

It does seem to me in regard to Canada that one of the positions

that you have advocated and justifications for your March 7 decision, or the decision that takes effect on March 7 is the loss of

packing jobs, the loss of meat processing capacity in this country.

I just wanted to see if you could quantify what has occurred or

what you predict may occur if the Canadian border is not opened.

And then, is there a consequence, a price consequence to the livestock, to the cattle producer in Kansas or Nebraska by that packing capacity departing this country? Is there a consequence beyond

just the packing companies? Is there a consequence to the person

who raises cattle?

Secretary JOHANNS. This is probably so obvious that you will

laugh at me when I say it. But cattle will follow processing. I guess

that is pretty obvious. They process cattle, so——

Mr. MORAN. You were polite to take the approach that it was not

my question that was so obvious, it was your answer that was obvious.

Secretary JOHANNS. But it truly is obvious. And these aren’t our

numbers, but people who have looked at that processing capacity

in Canada have used numbers like 15 to 20 percent increase, projections of 30 percent increase in processing. Well, of course that

is going to have an impact. All of a sudden you have a competitor

that is now building their processing capacity. If in fact you agree

with the rather obvious statement that cattle will follow processing,

it is going to have a long-term impact. They are doing some rather

remarkable things with animal identification, et cetera. This industry is going to fight to succeed and to survive just like we would

in the United States. And so there may be some short-term gain

in the suggestion that the rule be postponed 6 months or a year

or that we try to stop it entirely. But I believe the long-term conVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00066 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
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sequences for agriculture and specifically the cattle industry have

a lot of downside to them. And I think the next round of hearings,

if that were to occur, is going to be, Mr. Secretary, why did you let

the processing jobs go up to Canada?

Mr. Moran. Mr. Secretary, thank you very much. You don’t have

to look any further than southwest Kansas, Dodge City, Liberal or

Garden City, KS to see that cattle follow processing. Thank you,

sir.

The CHAIRMAN. I thank the gentleman.

Mr. Secretary, we are nearing the end. It appears that the gentlewoman from South Dakota, Ms. Herseth, will get the final word.

Actually, I will get the final word, she will get the last 5 minutes

of questioning, however. The gentlewoman is recognized.

Ms. HERSETH. Thank you, Mr. Chairman. And, Mr. Secretary, it

is good to see you again. I know a lot of questions have already

been asked that I was interested in, and I am sure there will be

written questions submitted, too. I just want to tease out a few

things, if I might, under the proposed rule. And this follows a little

bit on some of the questioning of Mr. Peterson earlier. But under

the proposed rule, will Canadian animals be required to be segregated from non-Canadian animals when they come into the country?

Mr. DEHAVEN. No. They will obviously come into the country as

a group in sealed conveyances. Once they enter a feed lot, they

could in fact be mixed with domestic cattle. When they then go

from the feed lot to a slaughter plant, they would have go as a

group of Canadian cattle identified obviously with Canadian tags

and the brand.

Ms. HERSETH. So that is how we are going to be able to distinguish then the Canadian beef from cattle over 20 months isn’t commingled with beef destined for Japan once we reestablish that market? So you are saying, if the animals aren’t segregated at the feed

lot, they then have to be segregated at the point that they go to

slaughter based on tags. And then that is how we are going to prevent the commingling of the Canadian beef, the Canadian cattle

over 20 months being commingled with the beef that is destined for

Japan?

Mr. DEHAVEN. Congresswoman Herseth, if that becomes an

issue, indeed the process you described could be used for that purpose. We have no indication that that will be a requirement for

opening up the markets in Asia. However, the fact that we do have

Canadian identification, the animals that go to the feed lots that

originate in Canada will have a brand on their right hip that identifies them as Canadian. And I would also bring up the point that

prior to the time when we had identified the cow in the United

States on December 23, we had a program in place where we were

certifying for the Japanese that we were not sending them any

product from Canada. So we could certainly reinstitute that as

well.

Ms. HERSETH. OK. Well, Dr. DeHaven, I appreciate that you

bring up—I am going back to December. Because you recently dispatched, Mr. Secretary, a group of scientists from USDA to go to

Canada to conduct an assessment of the country’s ruminant to ruminant feed ban. My question is why would you do this only after

65

announcing that Canadian cattle would again be allowed into the

country on March 7? In other words, was this not an activity that

should have been undertaken before USDA announced that it was

reopening the border?

Secretary JOHANNS. That decision was actually made just before

I arrived. They left on the first Monday I was in office. There

were—really, I believe what drove that decision was there was an

animal that was found that was younger than the feed ban.

Ms. HERSETH. So it was just, it was—even though the proposed

rule to characterize Canada as a minimal risk country, there

weren’t any concerns prior to that one younger cow that were

raised with regard to effective implementation of the ruminant to

ruminant feed ban in Canada?

Secretary JOHANNS. Boy, you have kind of drawn on my—well,

you have drawn on time before I arrived, and so again I will defer

to Dr. DeHaven to help with that answer.

Mr. DEHAVEN. We have a long history of working with the Canadians in a number of disease programs and activities. In fact, if you

look at our BSE programs between the two countries, they are almost mirrors of each other in terms of when we instituted import

restrictions, when we in fact instituted those feed bans in August

of 1997 that are very, very similar. Our surveillance programs are

very similar. Knowing their infrastructure and their system, we

had—and based on the findings of our report, had reason to have

confidence in the effectiveness of their feed ban.

Ms. HERSETH. I am going to stop you there just because I want

to get one last comment in before my time is up, and that is to address the issue that Mr. Moran was pursuing and that I posed a

question to the prior panel. And that is this whole issue of the

change in the structure up in Canada of the industry and a focus

on the processing and a concern that at some point our cattle may

have to be shipped up to Canada to meet the demands there, and

that we lose jobs in the processing sector. And I know that there

have been a number of important decision memos within USDA

that talks about the impact to the meat industry, and I am sometimes concerned about whether or not there is sufficient attention

to the cattle industry and consumers at the same time that we are

looking at the impact to the meat industry.

But I question whether or not if U.S. producers could be assured

more long-term profitability through enforcement of trade policies

like the EU beef ban and also reestablishing these export markets,

that you wouldn’t see an increase of supply being provided by U.S.

producers with that longer term profitability to meet the demands

of the processing and packing producers here in this country, given

that we have the infrastructure, that it exists, and that perhaps it

has been exaggerated the claims that we would be losing the processing industry to Canada. If you would care to comment.

Secretary JOHANNS. With all due respect, Congresswoman, here

is where I find your question, again, with all due respect, to be

somewhat confusing. This industry, like all of American agriculture, depends upon foreign markets for its success. Our ability

to open markets and market our products is hugely important. It

is hard for me to overstate the importance of that, and so to isolate

66

an industry with your question I am not sure is fair to the whole

picture, and I think that is where I am being asked to go here.

The whole key here is that we do have open markets based upon

good scientific decisions, and that is what we are trying to lead the

world in doing. Otherwise, your observation at least in part is right

that you are going to constantly be bumping into these issues, and

our goal is to try to lead the world, if you will, in saying, look, the

important thing is we need to base these decisions upon good

science. And if the science is there, the market needs to be open.

The other thing I will offer to you is that we consider the economic consequences, but I don’t believe I am empowered by law to

make a decision solely based upon economics. And I again believe

that I have got to focus on animal health and human health. And

you can debate me there, but it is very true. We consider it, but

I think I have to again focus on the science and animal health and

human health.

Ms. HERSETH. Just one comment in response, though. I understand that, but my point is when you talk about losing processing

to Canada, you are considering an economic; it is just depending

on which economic impact on which part of the industry is being

evaluated. And I guess I am suspect of the claims that we are jeopardizing our processing industry given that we have the infrastructure in the United States and that now many of our producers are

actually experiencing a level of profitability whereas many were

struggling throughout a good part of the 1990’s, that in effect we

can meet the demands of many of our packers, whether they are

small or larger, if—and not that we indefinitely delay opening the

border, until we have sufficient verification we reestablish the export markets that we are in a position with our domestic livestock

industry to meet the demands of the packing industry within the

United States.

Secretary JOHANNS.] My only response to that would be, if I went

to Japan and they said, Mike, here is where we are headed, we

think we can meet the needs of the Japanese people, we are happy

to do that here, and so go sell your beef someplace else, I mean,

I would be more than livid. And, again, I think we can have a great

debate here, but I have got to keep coming back to this notion that

if the science is there—and I believe very, very strongly it is—then

in order to have orderly international trade and credibility in the

international community, we have to make the decision on that.

And are there other factors? Sure. Did Keith do an economic

analysis? Yes. But I don’t think I could grab that and say this is

my only reason for deciding in the way that I did. I think I would

be outside the bounds of Federal law on that one.

The CHAIRMAN. Mr. Secretary, thank you very much. I have to

commend you and your associates for doing an outstanding job and

for taking every question from every member of the committee that

was able to get here today. We thank you very much for that. We

also think that your testimony and the dialogue that we have had

has been very helpful in expanding an understanding of the issues

that you have had to wrestle with in issuing this rule. And as we

wrestle with the developments that will doubtless occur in the coming days, weeks, and months, I am confident that today’s hearing

67

will help us work through this important topic from a point of common understanding.

Going forward, my advice to my colleagues and the constituents

of this committee would be to remain rooted in science with an eye

towards the long-term structure and economic health of the beef

and cattle industry. The public policy decisions being made now

will have far-reaching implications for producers, processors, retailers, and consumers, and we owe it to them to be both prudent and

thoughtful as we move toward.

Mr. Secretary, thank you very much again.

Secretary JOHANNS. Thank you. It was an honor.

The CHAIRMAN. Without objection, the record of today’s hearing

will remain open for 10 days to receive additional material and

supplementary written responses from witnesses to any question

posed by a member of the panel. And, Mr. Secretary, I might add,

I have been asked by a couple of members to be able to submit

some questions to you in writing, and we hope that you will be able

to answer those in a reasonable period of time.

Mr. Johanns. And we will.

The CHAIRMAN. Thank you, Mr. Secretary. This hearing of the

House Committee on Agriculture is adjourned.

[Whereupon, at 6:00 p.m., the committee was adjourned.]

[Material submitted for inclusion in the record follows:]

STATEMENT OF MIKE JOHANNS

Chairman Goodlatte, Mr. Peterson, Members of the Committee, thank you for

holding this important hearing today and for the opportunity to testify before you.

Accompanying me today are Dr. Keith Collins, USDA’s Chief Economist and Dr. Ron

DeHaven, Administrator of USDA’s Animal and Plant Health Inspection Service

(APHIS). They will be available to assist me in answering any questions you might

have.

Before I begin, I want to thank you for the close, positive working relationships

that we have begun forging. It is a pleasure to appear in my first hearing before

this committee as Secretary, and I look forward to building upon the productive

foundation that we are establishing on behalf of American food and agriculture.

I have said frequently that addressing Bovine Spongiform Encephalopathy (BSE)

issues, particularly as they relate to trade disruptions, would be my top priority as

Secretary. The actions that the U.S. Department of Agriculture and the Federal

Government are taking in regard to BSE are potentially precedent-setting and could

affect international trade patterns for years to come, with important economic implications for our cattle producers and the entire beef industry. Therefore, our actions

must be undertaken with the utmost deliberation, using science as the basis. In the

absence of that scientific-foundation, sanitary and phytosanitary (SPS) restrictions

will be used arbitrarily by many nations, without any basis of protecting human,

animal and plant life and health.

Accordingly, this hearing could not be timelier, and I appreciate the opportunity

it provides to closely examine some useful and valid questions. I want to be very

clear that while protecting human and animal health must remain our top priorities, I am confident that we can seek to return to normal patterns of international

commerce in beef and cattle by continuing to use science as the basis for decision

making by U.S. regulatory authorities and our trading partners.

Almost one year ago, on March 8, 2004, USDA published a notice reopening the

comment period on a rule to establish minimal-risk regions for BSE (the minimalrisk rule), following the December 23, 2003, discovery of a single case of BSE in the

United States in a cow of Canadian origin.

In the time since then, much has transpired:

On March 15, 2004, consistent with the recommendations of an International Review Team (IRT) of scientific advisers, USDA announced that beginning June 1 it

would implement an enhanced BSE surveillance program to test as many high-risk

animals as possible over a 12- to 18-month period. We wanted once and for all to

clearly ascertain whether we had BSE in our cattle herd and, if so, how prevalent

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it might be. USDA began the work of setting up the infrastructure required, including laboratory equipment and certification, staff training, outreach efforts, and licensing and approval of rapid tests. The plan was reviewed by the IRT, which characterized it as ‘‘comprehensive, scientifically based and address[ing] the most important points regarding BSE surveillance in animals.’’

On June 1, 2004, the enhanced surveillance program began. Our goal is to test

as many high-risk cattle as possible in 12–18 months. If we test 268,500 high risk

animals we will be able to detect the presence of as few as five targeted, high-risk

cattle with BSE at a 99 percent confidence level. At the time, USDA officials consistently stated that the surveillance plan might uncover additional BSE-positive animals. To date, some nine months later, more than 242,000 high-risk animals have

been tested, all of which have been negative.

In order to help raise awareness among animal-health professionals and livestock

producers about potential BSE cases, education and outreach have also been critical

components of these efforts. These activities have included advertisements in industry publications, media articles, presentations at trade shows, and other materials.

The role of producers, renderers and others in helping obtain samples of high-risk

animals has been indispensable to the success of our surveillance program, and the

cooperation we have received has been outstanding.

On December 29, 2004, USDA announced the final rule establishing minimal-risk

regions, which designated Canada as the first minimal-risk region for BSE, and

which will become effective on March 7, 2005. Preparations are currently underway

to ensure a coordinated and orderly reopening of the border on that date.

On January 2, 2005, Canada confirmed its second domestic case of BSE in a cow

that was born in October of 1996 (the first since May 20, 2003). It was followed nine

days later by a third case, an 81-month-old cow.

On January 24, 2005, USDA dispatched a technical team to Canada. We sent the

team to investigate the efficacy of Canada’s ruminant to ruminant feed ban because

the animal was born shortly after the implementation of that ban and to determine

if there are any potential links among the positive animals. We have appreciated

Canada’s willingness to cooperate and assist us in these efforts.

The team was composed of experts from APHIS and other relevant, partner agencies.

Just last week, on February 25, we released the results of the investigation relating to Canada’s feed ban. Based on a review of inspection records and on-site observations, the team found that Canada has a robust inspection program, that overall

compliance with the feed ban is good, and that the feed ban is reducing the risk

of transmission of BSE in the Canadian cattle population. Where isolated issues

were found to exist, they were related mostly to areas of documentation and recordkeeping.

The team’s final epidemiological report investigating possible links of the positive

animals is still pending, and will be helpful as USDA proceeds with a rule allowing

imports of live cattle from animals 30 months of age and over.

THE MINIMAL-RISK RULE

As you are aware, USDA’s minimal-risk rule has come under legal challenge. I

will address the process of promulgating the rule, which was transparent, deliberative and science-based.

Two rounds of public comment were conducted on the rule, with more than 3,300

comments received.

The final rule establishes criteria for geographic regions to be recognized as presenting minimal risk of introducing BSE into the United States. It places Canada

in the minimal-risk category, and defines the requirements that must be met for the

import of certain ruminants and ruminant products from Canada. A minimal-risk

region can include a region in which BSE-infected animals have been diagnosed, but

where sufficient risk-mitigation measures have been put in place to make the introduction of BSE into the United States unlikely.

As you are aware, the rule originally allowed the import of beef products from animals of all ages. However, on February 9, 2005, because our investigation in Canada

would not be complete by March 7, I ordered that the portion of the rule allowing

beef products from animals 30 months and over be delayed. USDA plans to move

forward expeditiously with a plan including rule-making to allow imports of live cattle from animals over 30 months of age and over.

Because the rule that goes into effect on March 7 allows the import of live cattle

under 30 months of age, it is useful to note the risk mitigation measures. These include: proper animal identification; accompanying animal health certification that

includes information on age, origin, destination, and responsible parties; the moveVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00071 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
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ment of the cattle to feedlots or slaughter facilities in sealed containers; the prohibition on cattle moving to more than one feedlot in the United States; and just as

in U.S. cattle, the removal of specified risk materials (SRMs) at slaughter.

For live sheep and goats under 12 months of age, all of the same mitigation measures apply, except for the requirement that SRMs be removed from the animal at

slaughter.

We remain very confident that the combination of all of these requirements, in

addition to the animal and public health measures that Canada has in place to prevent the spread of BSE, along with the extensive U.S. regulatory food-safety and

animal-health systems, provide the utmost protection to U.S. consumers and livestock.

USDA continues to undertake several steps to ensure Canada’s compliance with

its BSE regulations. In addition to the investigation that I already discussed,

USDA’s Food Safety and Inspection Service in December 2004 conducted an intensive audit of Canada’s compliance with the BSE requirements of the United States,

with particular attention to SRM removal. FSIS visited several facilities that

slaughter cattle under 30 months of age and determined that they are effectively

implementing the BSE regulations.

Last month, FSIS conducted a similar BSE audit of Canadian plants that slaughter cattle 30 months and older. Canada currently has only seven such plants that

are certified to export meat to the United States.

THE ROLE OF SCIENCE

I simply cannot emphasize strongly enough the central role of science in this entire process, particularly with regard to the rigorous evaluation of risk.

Since the discovery of the first case of BSE in Great Britain in 1986, we have

learned a tremendous amount about this disease. That knowledge has greatly informed our regulatory systems and response efforts.

We have learned that the single most important thing we can do to protect human

health regarding BSE is the removal of SRMs from the food supply. It is because

of the strong systems the United States has put in place already, especially the removal of SRMs from the human food supply and the prohibition of ruminant and

certain other animal proteins in ruminant feed, that we can be confident of the safety of our beef supply and that the spread of BSE has been prevented in this nation.

After Canada reported its first case of BSE in May 2003, USDA conducted a comprehensive risk analysis to review the potential threat it posed. The initial analysis

followed the recommended structure of the World Organization for Animal Health,

or OIE, and drew on findings from the Harvard-Tuskegee BSE risk assessment,

findings from the epidemiological investigation of BSE in Canada, and information

on Canadian BSE surveillance and feed ban, and history of imports of cattle and

meat and bone meal from countries known to have BSE.

The results of that analysis, available on the USDA Website, confirmed that Canada has the necessary safeguards in place to protect U.S. consumers and livestock

against BSE. These mitigation measures include the removal of SRMs from the food

chain supply, a ruminant-to-ruminant feed ban, a strong national surveillance program and import restrictions. The extensive risk assessment conducted as part of

USDA’s rulemaking process also took into careful consideration the possibility that

Canada could experience additional cases of BSE.

In the risk analysis update for the final rule, USDA also considered the additional

risk protection from new slaughter requirement procedures, such as the prohibition

on the use of downer animals for food.

The public commented on the risk assessment that accompanied the proposed rule

and the Explanatory Note released following the finding of BSE in a cow in Washington State. Over a period of months, USDA carefully considered these comments,

and responses were published with the final rule. The comments were beneficial to

the final risk analysis. The risk analysis was reviewed internally at USDA and by

Dr. William Hueston, an international expert on BSE and a member of the International Review Team.

The OIE recommends the use of risk assessment to manage human and animal

health risks of BSE. OIE guidelines, based on current scientific understanding, recognize that there are different levels of risk in countries or regions, and suggest how

trade may safely occur according to the levels of risk. USDA used the OIE guidelines as a basis in developing our regulations defining Canada as a minimal risk

country.

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CATTLE AND BEEF TRADE IMPACTS

While SPS regulations protecting human and animal health are the foremost concern, USDA also has examined the potential economic impacts of the minimal-risk

rule and related BSE trade issues, as required by Executive Order 12866.

For more than three months following the May 20, 2003, BSE discovery in Canada, all imports of Canadian ruminants and ruminant products were barred. Then,

certain Canadian ruminant products for which there is inherently lower risk were

allowed to enter under permit beginning August 2003.

For all of 2003, the United States imported 336,000 metric tons of beef from Canada. Imports increased to an estimated 476,000 metric tons in 2004, up nearly 42

percent and back to about the level that prevailed in years prior to 2003.

Because the border has been closed to live cattle since May 2003, imports of fed

and feeder cattle under 30 months are expected to increase over historic levels in

2005, which is expected to drive up U.S. beef production, reduce beef prices slightly

and, consequently, reduce cattle prices. The cost-benefit analysis of the original

minimal risk rule was based on Canada’s cattle population as of July 1, 2004, and

the cross-border price differential at that time. USDA now estimates that about 1.3

million Canadian animals may be imported in all of 2005, down from previous estimates of 1.5 million to 2 million head.

In addition, delaying the effective date for resuming import of beef products from

animals over 30 months has narrowed our projection of price effects. We now project

a decline in fed cattle prices of 2.6 percent lower than if no additional trade in live

cattle were to occur, down from 3.2 percent in the earlier projection. The projection

also assumes that Asian markets do not open to our beef during 2005.

The precise economic effects will depend on the timing and volume of cattle and

beef imports from Canada. If USDA’s price forecast turns out to be correct, that

would be the third-highest annual fed cattle price on record. Cattle futures prices

may be less affected than indicated by our forecast, as market prices have likely already reflected some probability of the border opening.

At the same time, I have been concerned about the effect that the closure of the

border has been having on the restructuring of the cross-border beef industry. We

are already seeing additional processing capacity in Canada, and further delays will

only exacerbate that trend, leading to long-term change.

In addition, to the extent that we can continue to open markets that are currently

closed to our beef, U.S. cattle price prospects will strengthen.

U.S. market-maintenance activities have been critical in helping restore our beef

export markets. In 2003, the total export value of U.S. beef and ruminant products

was $7.5 billion. After December 23, 2003, 64 percent of that market was immediately closed. Today, we have recovered well over a third of that, so that 41 percent

of that market ($3.1 billion) remains closed. Two countries—Japan ($1.5 billion) and

Korea ($800 million)—account for nearly three-quarters of the existing closures.

OPENING THE JAPANESE MARKET

As a leader in the critical Asian markets, Japan is a vital market to reopen to

U.S. beef exports. We are aware that the decision to resume trade in this market

will set an important precedent for trade resumption in many other markets. Therefore we have endeavored to use science in our ongoing efforts. Efforts to re-open this

market have drawn on resources across the Federal Government and at the highest

political levels. As I have previously said, this issue has occupied much of my first

few days as Secretary. Just last week, I met with Ambassador Kato and also wrote

to my counterpart, Minister Shimamura, on the importance of this issue. At the

same time, Ambassador Baker continued to press this issue with Government of

Japan officials until his very last days in Tokyo, and other U.S. Government officials

continue to contact their counterparts. On February 19, Secretary of State Rice personally raised this issue in a meeting with the Japanese Foreign Minister.

These efforts are just the latest in many policy discussions and technical exchanges over the past 13 months. Indeed, the issue has been a major focus of direct

discussions between President Bush and Japanese Prime Minister Koizumi.

On October 23, 2004, Japan and the United States developed a framework to

allow the resumption of bilateral beef trade following the conclusion of regulatory

processes in both countries. As a step toward the resumption of normal trade, the

agreement establishes an interim special marketing program, known as the Beef

Export Verification (BEV) Program, to allow the United States to sell beef and beef

products to Japanese importers from animals 20 months of age and under. Animal

age will be determined through a combination of production records and physiological (grading) means. We are now working with Japanese officials to gain approval of the BEV under their regulatory process.

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I have repeatedly pressed Japanese officials to set a date certain for the resumption of U.S. beef exports to Japan. However, additional requests from Japan for data

regarding grading and the plodding regulatory process that Japan insists on using

could delay that process. Additional delays could further complicate relations between the United States and Japan.

While we are focusing on Japan because of our important trading relationship and

its leadership role in the region, we are also pursuing efforts to reopen all of the

markets that have been closed to us. We are actively engaged with Korea, Hong

Kong, Taiwan, China, Egypt, and Russia and have specific actions underway in each

market to get trade resumed. I would be pleased to provide Members upon request

additional detail on these and other secondary markets. While the progress that has

been made has taken far longer than we had hoped, progress is indeed being made.

And, I have stated that USDA, and indeed the entire U.S. Government, will exert

every effort to resolve the matter at the earliest possible time.

As traditional trade barriers such as tariffs are lowered, our focus to eliminate

unjustified non-tariff barriers such as non-science based SPS regulatory measures

become all the more important to maintain the flow of mutually beneficial trade.

For USDA, a common touchstone across these issues is the need to maintain consistency and predictability, to base our domestic regulations on science and to encourage the use of science-based solutions within the international community. The

United States has long been a leader in this regard, including negotiating the World

Trade Organization Agreement on the Application of Sanitary and Phytosanitary

Measures during the Uruguay Round.

Even before the discovery of a single case of BSE in the United States, USDA had

begun talking with other countries about the need for international trade standards

to keep pace with the science, and we will redouble our efforts in this regard.

It is also critical that domestic trade rules reflect the current state of knowledge

regarding BSE, and here the United States is leading, as well. We are confident

that trade can be resumed with countries where BSE has been discovered, contingent upon strong protections within those countries, as well as the robust and effective regulatory system those imports are subject to when they enter the United

States. These facts are reflected in the minimal-risk rule.

At the same time, we will continue to work with our trading partners to ensure

the ongoing strength of their own BSE protection systems, especially the removal

of SRMs and implementation of the feed ban. While trade opportunities are multiplying in an increasingly global marketplace, we must always remain mindful of

our paramount responsibility to protect the public health and animal health.

In summary, I am confident that we are continuing to keep the protection of public and animal health foremost in our concerns. It is critical that we continue to use

science as a basis for our decisions and regulations, and that the United States

maintain its leadership role in advancing our scientific understanding of these kinds

of SPS-related issues and appropriate science-based responses.

Mr. Chairman, thank you once again for holding this important hearing. I would

now be pleased to take any questions you or other members may have.

ANSWERS TO SUBMITTED QUESTIONS

1. Now that APHIS has established a rule establishing criteria for regions

to be recognized as presenting minimal risk of introducing BSE into the

United States, do you plan to categorize additional countries as either

minimal risk, moderate risk, high risk, or BSE free? If so, is there a chance

your list would be different form the OIE’s list of BSE free or provisionally

free countries? How might this affect the current restrictions we have in

place on the importation of specified-risk materials?

Response: APHIS’s current regulations on BSE lists countries in two categories.

These are countries affected with BSE, and countries presenting undue risk for

BSE. Import restrictions are the same for these two listings. These regulations

would have to be amended, through a formal rulemaking process, to add any additional categories or to re-define the existing categories. An example of this is the

recent final rule that would establish a minimal risk category and add Canada to

that category.

At this time, no country besides Canada has asked the United States to conduct

a thorough and exhaustive assessment to evaluate its overall BSE risk and to

change its regulatory status. This is the first step in considering whether to allow

live cattle and beef imports from a country where BSE has been identified. Other

countries may request APHIS to change their status in the future.

The World Organization for Animal Health’s (OIE) list of BSE-free and provisionally-free countries is not intended to be comprehensive. OIE will examine, upon reVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00074 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
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quest from a member country, its claims for a particular BSE status. Currently, the

OIE will only examine a country’s claim for BSE free or provisionally-free status,

and will not classify any country as low, moderate or high risk for BSE. Only a

handful of countries have asked for such an evaluation to be endorsed as BSE-free

or provisionally-free, and four countries have actually completed the evaluation.

The current OIE Code Chapter on BSE provides guidelines for five classifications

of countries. Member countries are free to use these guidelines to help determine

their trading partners’ overall BSE risk. However, it is important to keep in mind

that as a result of the recommendations made by the expert ad hoc group on BSE,

the OIE is presenting, for adoption at its May 2005 General Session, a revised Code

Chapter with three BSE classifications: negligible risk without mitigations; negligible risk with mitigations; and undetermined risk.

Finally, with regard to your question about the importation of specified-risk materials (SRMs), the removal of SRMs is one of the most critical components of an effective BSE prevention program in terms of protecting public health. The U.S. has

issued interim final rules requiring the removal of SRMs from all cattle. USDA and

DHHS/FDA are evaluating comments received on those rules.

2. Why did APHIS diverge from the OIE recommendation to require that

a feed ban be in place for at least 8 years in order for a country to be considered a minimum risk country? Was there a concern that inclusion of

such a requirement would make the rule vulnerable to challenge in the

WTO on the grounds that it was not based on science?

Response: The OIE standards are not intended to be used as a check list, rather

they are intended as a set of guidelines that allow countries the flexibility to develop

their own tailored regulations for protecting public and animal health. The standards should be used to help a country identify and evaluate, through a risk assessment, all of the potential risk factors for BSE and their management. The outcome

of such a risk assessment can be used to determine whether an alternative risk

management measure could be applied to achieve the same level of protection.

An effective feed ban is a key component of both the OIE guidelines set forth to

establish a country as a minimal-risk region for BSE and of USDA’s criteria to define a BSE minimal-risk region. USDA has acknowledged that Canada’s feed ban

falls some months short of the 8-year recommendation. However, Canada has had

a comprehensive feed ban in place for more than 7 years. Furthermore, the feed ban

is just one component of a much larger system of safeguards that includes, among

others, surveillance and specified risk material removal. In keeping with the OIE

Code, these risk mitigation measures are considered in their totality for their ability

to work as a series of interlocking, overlapping and sequential steps to prevent the

introduction and establishment of BSE.

The OIE standards are intended to be used as guidelines to assist countries in

using the underlying scientific knowledge on BSE. USDA is not concerned that the

minimal risk rule is vulnerable to challenge in the WTO. USDA conducted a thorough and exhaustive risk analysis and our decision to allow live cattle and beef imports from Canada was based on science with the protection of public and animal

health being our highest priority.

3. The USDA audit of Canada’s feed ban says that the ban was implemented on August 4, 1997, ‘‘with provisions for a phase-in period so that existing stocks of feed material could be depleted. Feed mills were allowed

a 30-day period to use and distribute existing stocks, while farms were allowed 60 days to use existing stocks. No recall was ordered for products

that were already in the production or distribution chain...’’. The last BSE

cow would have been fed starting sometime after its birth in March 1998.

Doesn’t this show that the ban was not effective?

Response: On February 25, 2005, USDA released the final report of the technical

team that reviewed the feed ban in Canada. The technical team found that Canada

has a robust feed ban inspection program, that overall compliance with the feed ban

is good, and that the feed ban is reducing the risk of transmission of BSE in the

Canadian cattle population. The risk analysis conducted for the minimal risk rule

concluded that the feed ban is effective. It should be noted that this analysis did

not assume 100 percent compliance with the feed ban, as that is not realistic in any

situation. The information provided by the U.S. team verifies the information cited

in the risk analysis, and supports the conclusion that the feed ban is effective.

The Canadian feed ban restricts the use of most mammalian-origin protein in ruminant feed. It was implemented in 1997, and similar to the U.S. feed ban, was put

in place as a proactive, preventive measure. Achieving full compliance with a feed

ban inevitably takes time, due to complexities of the regulations and the industries

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involved. International authorities generally recognize that it may take 6 months or

longer to completely clear out any remaining feed from the old system after a feed

ban is implemented. It also takes time before the feed and livestock industries are

able to fully meet the record-keeping and labeling requirements in the feed ban, and

the requirements for preventing cross-contamination.

4. Despite a rigorous surveillance program, that has tested many more

cattle than in Canada we have not found a single case of BSE in a U.S.-born

cow. Canada has found three cases so far. Does this mean that Canada’s

testing program is more effective at finding the disease, or does it mean

that BSE is more prevalent in Canada than in the United States?

Response: The United States is still in the midst of an intensive one-time enhanced surveillance effort that will provide a snapshot of the domestic cattle population to help define whether BSE is present in the United States, and if so help

calculate at what level. It is possible that during the course of this intensive surveillance, we may find a case of BSE in a native U.S. animal. When USDA kicked off

our enhanced surveillance in June, 2004, we were clear in stating this possibility.

At the same time our current results are promising. As of May 1, 2005, we have

tested 339,271 cattle and all have tested negative for BSE.

USDA has not made a prediction about the number of cases the United States

or Canada might find as a result of ongoing surveillance. Rather, this effort is intended to give the United States a better understanding of the prevalence of the

disease and the same is true for Canada. Surveillance is a key component of any

BSE program, providing a way to monitor the effectiveness of the various risk mitigation measures, which is why the United States and Canada are conducting such

thorough surveillance. Additional information from continuing an epidemiological

study in Canada may provide more insight into whether the BSE exposure was an

isolated or clustered incident, or whether it may be more widespread. There are currently no indications that it is widespread, nor do analyses indicate that the disease

continues to spread and amplify given current risk mitigation measures. We would

note that since the start of their enhanced surveillance program, Canada has tested

approximately 45,000 animals to date. Given the relative herd size in Canada in relation to the size of the U.S. cattle herd, we believe Canada is achieving comparable

sensitivity in their enhanced surveillance program.

5. After Canada reported its first BSE case in May 2003, a scientific International Review Team there recommended that stronger feed measures be

put into place. Why did Canada wait until December 2004 to propose a new

rule to also prohibit specified risk material (SRM) in all animal feeds?

Response: The changes proposed by Canada are significant, and would require restructuring of the animal disposal industry. If regulations are established which

completely prohibit the use of certain products, alternative disposal options must be

available and in place at the time the regulations are implemented. The Canadian

government appropriately has taken time to consider all of the implications, costs

and benefits of any such changes. The Canadian government has been carefully considering various options in consultation with a wide variety of interests, including

various industry groups, provincial representatives, other agencies, and international counterparts.

It is important to note that Canada’s existing feed ban is effective, and based on

current scientific consensus, would lead to the eradication of BSE. The Canadian

government believes that the proposed changes will simply lead to a faster rate of

progress to eradication. Canada has noted that the relative probabilities of further

transmission of BSE to other animals and, indirectly, exposure to people through

food or other human uses of rendered bovine tissues are low. Therefore, taking time

to thoroughly analyze any proposed changes allows an appropriate decision to be

made that has a better chance of successful implementation.

6. USDA’s assessment of the risk of BSE from Canadian imports was completed before a cow with BSE was discovered in Washington State in December 2003. (In support of the rule proposed in November 2003 and finalized January 4, 2005.) Why did USDA decide it was not necessary to alter

its risk assessment in light of this first U.S. finding?

Response: USDA conducted a risk analysis in October 2003 that was published

with the initial proposed rule. This analysis was updated in early 2004, and was

published as an ‘‘Explanatory Note’’ when the comment period on the proposed rule

was re-opened. This explanatory note fully considered the implications of the December 2003 case identified in Washington State, and concluded that the additional

case did not significantly alter the original risk estimate. Based on factors addressed

in the original risk analysis, and the risk mitigation measures (both existing and

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outlined in the proposed rule), it concluded that it was unlikely that BSE would be

introduced from Canada under the conditions described in the proposed rule. Finally, the risk analysis was updated again in December 2004 and was published

along with the final rule.

7. In February, the Office of Inspector General (OIG) released its audit

of USDA’s oversight of beef imports from Canada. OIG reported that the

APHIS permit process was used to begin imports of Canadian beef products, even though this process has always been intended for other, low volume products. Why did USDA decide to use the permit process for the import of large quantities of beef?

Response: Prior to the August 2003 announcement, USDA conducted a close review of Canada’s exhaustive epidemiological investigation into the BSE case that

was reported by Canadian officials in May 2003. USDA also took into account the

international animal health guidelines set by the World Animal Health Organization (OIE) and scientific literature regarding the pathogenesis and transmission of

BSE. Additionally, USDA reviewed the ongoing preventive measures that Canada

had in place prior to the detection of BSE and the additional risk mitigation measures Canada put in place in response to a review of the investigation by an independent expert panel.

After this review, USDA determined that the permitting process was an appropriate, legal, and scientifically-sound vehicle for re-opening trade with Canada.

8. OIG reported that 42,000 pounds of beef ‘‘of questionable eligibility’’ entered the U.S. from Canada after a May 2004 court agreement limited what

could be imported. How did this happen and what has USDA done to ensure this won’t happen again?

Response: The situation you refer to was the result of confusion between APHIS

and FSIS about the eligibility of beef cheek meat. On several occasions, beef cheek

meat was allowed entry under import permits that indicated ‘‘boneless beef’’ due to

confusion over whether or not beef cheek meat was included in the definition of

‘‘boneless beef.’’ Although it is a low risk product and poses no safety risk to humans

or animals, APHIS and FSIS agreed with OIG’s recommendations regarding the

confusion and need for consistency in definitions in this case, and have implemented

or are implementing the following actions:

• On February 14, 2005, APHIS notified, by letter, holders of permits for ‘‘boneless

beef’’ that such permits do not allow the importation of cheek meat.

• FSIS will implement controls to communicate the specific eligibility of product

when the eligibility status changes. FSIS will complete the review and update of the

controls by July 2005.

• FSIS currently performs quarterly verification of its import information system

while monitoring and overseeing the system and import inspection program performance. In addition, the import inspection system has a limited set of edit checks

that are presently incorporated in its current configuration. FSIS will enhance this

feature of the system by reprogramming the Automated Import Information System

(AIIS) to include drop-down menus containing a specific set of eligible products. The

reprogrammed system will eliminate product description from being entered into a

text field and thereby mitigate or restrict the possibility of ineligible product being

entered in the system. FSIS expects to complete the AIIS reprogramming by January 2006.

9. What was the basis for USDA making a conscious decision not to publicly announce its Canadian import policy changes?

Response: APHIS recognizes that it was not timely in posting all updates during

the immensely busy period following the August 8, 2003, announcement. The Agency will continue to move information through the previously established channels

described above and work to identify new and more efficient ways to ensure all interested parties receive all necessary information regarding changes in import policy. As we determine specific improvement regarding internal communication channels we can use to ensure all web-based notifications are posted in a timely fashion,

we will document and implement those procedures.

10. OIG concluded that APHIS did not have a process to identify discrepancies between agency practices and their publicly stated policies. How

will APHIS address this issue?

Response: APHIS has taken action to implement changes in addition to existing

procedures. APHIS’ Veterinary Services (VS) maintains standard operating procedures (SOPs) and standardized permit language for drafting permits to ensure conVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00077 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
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sistency. VS provides all permitting staff with a copy of the SOP manual and trains

staff accordingly. The permitting staff holds frequent meetings where experts discuss and establish procedures for any emerging issues concerning importation of

animal origin material.

While these mechanisms have been very successful in the past, APHIS’ systems

were clearly strained under the unprecedented volume of permit requests after the

Secretary’s announcement.

VS has developed a refined tracking system and enhanced protocols to ensure that

staff will update the system whenever changes are made to policies, product certification statements, and permit guidelines. Furthermore, FSIS and APHIS are in

close and constant contact to ensure parallel operations and definitions, where appropriate.

11–12. OIG criticized USDA for not documenting its decisions, failure to

communicate with other agencies, and inadequate internal controls over

the rulemaking process. Have all of OIG’s recommendations to fix these

problems been implemented?

Response: (Questions11–12) While many of OIG’s recommendations have already

been implemented following the identification of the problem, APHIS and FSIS continue to work on several projects that will further address OIG’s concerns. The results of these projects will be seen over the next year and include, among others:

• FSIS will include an edit check function in the automated import information

system by January 2006;

• FSIS will complete the review and update of communication controls by July

2005;

• APHIS is working to develop a new, sophisticated E-permits system by January

2006; and

• APHIS and FSIS will use consistent terminology by May 2005.

13. The Inspector General recommended that APHIS develop and implement procedures for communicating policy changes to all interested parties, including importers, Congress, and the public. APHIS states that it

will have refined procedures in place by late March. What changes is the

agency implementing, and will they be in place when anticipated?

Response: As part of the response to OIG, APHIS has agreed to consistently:

• Post ‘‘dear importer’’ letters on the Agency web page to notify interested parties

of changes to import policy;

• Issue alerts to Agency port personnel and Department of Homeland Security

Customs and Border Protection personnel, which is then provided to all their interested parties;

• APHIS will work closely with FSIS and provide frequent policy updates and

work together to use consistent terminology when identifying products;

• Work with Congress to ensure that legislators are aware of import policy

changes.

APHIS has also committed to OIG that the Agency will have in place new procedures to notify applicants of APHIS permits to remove or revise material and explain the reasons for decisions. In order to facilitate this, the Agency will take and

has taken the following actions:

• National Center for Import and Export (NCIE) has implemented a mail-in tracking system and enacted protocols to ensure that changes or updates to policies, product certification statements and permit guidelines are documented.

• NCIE can now query the Permit Information Tracking System by shipper to

identify permits that need revision or cancellation.

• APHIS is developing a new, sophisticated E-permits system for use Agencywide.

This new system will be operational by January, 2006.

In order to ensure that risk mitigation measures are attached to permits, APHIS

intends to strengthen its current system to allow for a larger number of permits to

be handled within a limited time frame. To do this, APHIS has implemented the

procedures described above and will hire additional staff as funding allows to handle

any future situations where a large number of permits are received in a limited

amount of time (such as during the Canadian ruminant ban).

14. Canadian plants were required by USDA to have approved plans for

segregating eligible from ineligible products. OIG says that no Canadian facility met this requirement. Have all the required plans now been submitted by the Canadian plants?

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Response: The segregation plan requirement applied only to facilities that received both ineligible and eligible beef cuts from which they derived processed product. Only one facility that received and processed both ineligible and eligible cuts

of meat applied for a permit, and thus submitted a segregation plan. APHIS reviewed the plan, had concerns with the plan, and, therefore, did not approve the

plan. APHIS did correctly issue permits to other facilities for processed product.

Again, however, because these facilities do not receive and process both ineligible

and eligible cuts, they were not required to submit a segregation plan.

15. In its report, OIG refers to a decision memorandum to permit ground

meat imports. In the memo, APHIS stated that the decision constituted a

significant change in policy that increased the likelihood of importing

higher risk products. Why was this decision made without the opportunity

for public comment? Who reviewed and approved the memo?

Response: The memo referenced was reviewed by APHIS management and was

seen as the processing in Canada of products that were already safe and approved

for export into the United States. While there was a slight risk of commingling with

ineligible products, the risk was mitigated by requiring certification by CFIA and

segregation plans. There was no food safety issue.

16. Several import decision memos discussed the meat industry’s concerns about the beef import policy. Did they also discuss the concerns of

the cattle industry and of consumers?

Response: The safety of U.S. citizens and livestock is always the highest concern

when dealing with a disease such as BSE. All constituents’ concerns were thoroughly considered.

17. What restrictions does Canada place on imports U.S. cattle related to

bluetongue and anaplasmosis concerns?

Response: For over 17 years, the United States has been working to achieve greater access for U.S. feeder cattle to Canada. On October 22, 1997, the United States

and Canada announced a pilot project to facilitate exports of live cattle from participating U.S. states to Canada. Under this project, exports of feeder cattle from the

United States were limited to a six-month shipping season, designated as a low-risk

vector season for bluetongue and anaplasmosis.

On March 10, 2004 Canada announced that it would remove anaplasmosis and

bluetongue testing and treatment requirements from feeder cattle imported from the

United States enabling year-round access to Canadian feedlots. Specifically, the

CFIA permit system that governs these imports would be changed. This new policy

will take effect when the BSE prohibition is lifted.

Under the new permit policy, U.S. feeder cattle from 39 states considered to have

a low incidence of bluetongue will be able to enter Canada directly without testing.

Feeder cattle from the remaining 11 states, which are considered to have a high incidence of bluetongue will also not be required to test, provided that their cattle reside in a low incidence state for at least 60 days prior to import. Testing can still

be used in these high incidence States, in lieu of residency in a low incidence State.

18. USDA is permitting cattle, and beef from cattle, under 30 months of

age to enter the United States from Canada. However, it also has agreed

to Japanese demands that the United States ship beef from cattle 20

months and younger. How are these policies consistent?

Response: Resumption of U.S. beef trade with Japan and reopening the border to

live cattle from Canada are separate and distinct trade issues. The BSE minimalrisk rule is based on sound scientific principles in accord with OIE guidelines for

trade with BSE-affected regions. Negotiations with Japan have focused on smaller

steps to reopen a critical international market for U.S. producers. In October, 2004,

USDA announced an understanding with Japan to export meat from cattle 20

months of age or younger. This age limit falls is not based on internationally recognized sound science. It is important to make clear that while we have agreed to the

20-month age limit as a marketing program, we continue to work with Japan on

a technical level regarding the specific terms of the understanding. In addition, an

international body of scientific experts is expected to review the terms of the export

marketing program in July 2005, at which time we expect to make a strong case

to move Japanese officials toward a scientifically sound policy.

It’s critical that even while USDA is accommodating Japan’s standards, we must

take the lead at home in establishing the concept of minimal-risk regions based on

scientific risk analyses for animal pests and diseases and push to have other countries base their BSE measures on the OIE guidelines. In implementing the BSE

minimal-risk rule, the United States is taking a strong stand and seeking to ensure

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that all countries adopt science and risk-based import and export standards and

apply them equivalently and without discrimination. The United States cannot effectively protest unjustified measures applied to our products if we similarly apply

the same virtually impossible measures to others.

19. How, specifically, will USDA ensure that Canadian beef from cattle

over 20 months is not co-mingled with beef destined for Japan? What procedures will be in place to monitor Canadian products and ensure that all

import requirements are being met?

Response: Once an agreement is finalized with Japan, the Agricultural Marketing

Service (AMS) will develop a Beef Export Verification (BEV) program to ensure that

the terms of the agreement, such as appropriate segregation of products, age, are

met. A BEV program addressing the commingling issue was implemented for Japan

to accept U.S. beef after the first case of BSE was found in Canada in May 2003.

The Food Safety Inspection Service will take AMS’s verification and certify on a

U.S. export health certificate compliance with Japan’s import requirements. FSIS officials assigned to the packing plants will have oversight responsibilities to ensure

all requirements are being met.

20. In its testimony, the National Cattlemen’s Beef Association (NCBA)

listed 11 criteria that would have to be met before it would support implementation of the rule. How many of these criteria are achievable before the

implementation of the rule? Are these (or similarly rigorous) criteria something that the Department would be comfortable having our foreign customers requiring before they would accept U.S. beef and cattle products?

Response: We appreciate the proactive work of the National Cattlemen’s Beef Association (NCBA) on this issue. Some of the recommendations, such as assurance

that all Canadian firewalls to prevent BSE are functioning properly, are relating to

the science of the rule, while others, such as the movement of Canadian cattle into

the U.S. must be managed to minimize market disruptions, are economic in nature.

USDA does not have the authority to promulgate rules solely on economic factors.

Rulemaking is done based on science; in this case, USDA’s risk assessment evaluated the risk that opening the Canadian border to specific animals and products

would pose to animal and human health and determined it to be of minimal risk.

We must also stress that, in implementing the BSE minimal-risk rule, the United

States is taking a stand and seeking to ensure that all countries adopt science and

risk-based import and export standards and apply them equivalently and without

discrimination. The United States cannot effectively protest unjustified measures

applied to our products if we similarly apply the same virtually impossible measures

to others.

21. NCBA testified that the import ban on U.S. beef because of BSE has cost U.S. cattlemen $4.8 billion over the 14 months that the ban has been

in place. Does USDA agree with this number? If so, does the calculation include the net effect on beef prices from the U.S. import ban on Canadian

cattle entering the US? For example, Secretary Johanns’ written testimony

indicates that a removal of the ban, which will allow Canadian cattle under

30 months of age to enter the US, will reduce prices by 2.6 percent. Has the

U.S. ban on Canadian imports reduced $4.8 billion the impact on U.S.

cattlemen that NCBA calculated? If you do not agree with the NCBA number, please provide your own estimate of the cost to U.S. cattlemen and explain how you reached that number and specifically what effect the U.S.

ban on Canadian imports has had on the losses.

Response: USDA has not analyzed the impacts in NCBA’s assessment of the ban

on U.S. exports of beef due to the discovery of BSE. However, USDA has done some

partial estimates of the value of the loss of export sales of beef and loss of sales

value of fed cattle. This analysis estimates these lost exports sales of beef and beef

products at about $3.5–4 billion since December 2003. These lost exports sales do

not fully translate into lost sales value of fed cattle because beef that would have

been exported was consumed domestically. Thus, our analysis estimates lost sales

value of fed cattle of at $1.7–2.3 billion since the discovery of BSE in December

2003. There are also additional losses to the cow slaughter industry.

The assumptions underlying this estimate are as follows: Prior to the discovery

of BSE, USDA had forecast that beef exports would increase 1–2 percent in 2004.

Given strong demand for limited supplies of U.S. beef, prices may have been 5–7

percent higher than in the absence of expanded exports. The lost export volume was

offset by increased domestic beef consumption. Thus, the loss in the value of fed cattle sales is the difference between the cattle price estimated to have prevailed had

the U.S. been able to export beef to all markets and the price that prevailed with

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export markets closed. Assuming fed cattle prices were reduced 5–7 percent by the

loss of export markets, the average fed steer price would have been reduced by

about $50-$70 per head. In 2004, 27 million head of fed steers and heifers were

slaughtered, and it is expected that an additional 6 million head will be slaughtered

in the first quarter of 2004, thus producers likely would have received an additional

$1.7-$2.30 billion for the fed cattle marketed had export markets not been lost. This

estimate may be conservative in that, given higher prices, producers may have chosen to market a greater number of cattle. On the other hand, higher domestic beef

prices might have limited increases in U.S. beef demand. The U.S. generally does

not export nonfed beef, and it is likely that U.S. imports of nonfed beef may have

been higher with all export markets open, since Australia would not have diverted

exports to Asia to fill in behind the U.S.

U.S. cattle prices and the value of U.S. exports are supported by the current ban

on imports of Canadian cattle. In the absence of the ban, it is expected that U.S.

cattle prices and wholesale prices would have been lower than existed in the past

14 months. Thus, the value of forgone exports would have been less had there been

no ban on imports of cattle from Canada.

22. If this rule becomes effective, how do you anticipate it will change the

structure of Canadian beef exports to the US? —Will more or less of the

beef sourced by U.S. customers come as boxed beef, case-ready product,

chilled sides or live cattle?

Response: If the minimal-risk rule becomes effective, it likely will lead to initial

increases in imports of live cattle as Canada works through its backlog of animals

under 30 months old. However, as inventories of backlogged animals are reduced,

it is expected that increased slaughter capacity in Canada will result in active bidding between U.S. and Canadian packers for the available pool of live cattle. It is

possible that imports of live slaughter cattle may decline from historic proportions,

but the amount of change will depend on capacity utilization of Canadian and U.S

meat packers, exchange rates and transaction costs such as transportation and age

certification. Imports of feeder cattle will depend on forage conditions and grain

prices in the U.S. and Canada. It is likely that imports of beef will expand given

increased Canadian slaughter capacity. Import data does not permit an exact determination of the form in which beef is imported. However, beef cuts fabricated in

Canada cannot receive a U.S. grade; thus imports of boxed beef and case ready beef

will likely be limited to those proportions which existed prior to the ban. Carcasses

and quarters may be transported in such a fashion as to permit their reassembly

into a carcass for the purposes of grading. Prior to the BSE discovery in Canada,

about 8 percent of imported beef from Canada entered the U.S. as carcasses, halves,

and quarters. Following the reopening of the border, beef imports were limited to

boneless beef, as a result there was has been no trade in carcasses. It is likely that

trade in carcasses will resume and proportion of cut imports may decline slightly.

23. Many packers have reported reductions in operations at beef plants.

Is this due to the inability to obtain Canadian cattle, to the Japanese ban,

or are there other reasons?

Response: There are varied reasons for reduced operations at some U.S. meat

packing plants during 2004 and 2005. Firms reducing operations have pointed to

weak consumer demand due to high beef prices, loss of export sales, difficulties in

obtaining slaughter cattle and poor operating margins. For example, one firm that

temporarily reduced operations in 5 plants in early 2005 raised concerns about tight

cattle supplies and attractive values in alternative meats given high retail beef

prices. The inability to obtain Canadian cattle is an important factor in reduced operations because inability to access Canadian cattle has come at the same time the

cattle cycle has reached its low point. During 2004, 32.7 million head of cattle were

slaughtered in the United States, compared with 35.5 million during 2003. This 8-

percent decline reduced meat packers capacity utilization and drove up operating

costs. At the same time, farm-to-wholesale price spreads declined throughout 2004

putting additional pressure on plant profitability. While the opening of Asian markets would increase demand for beef, and help some packers, the continued limitation on the supply of available slaughter cattle would result in continued strong cattle prices and pressure on price spreads. Another factor has been imports of beef

from Canada and elsewhere. As U.S. retail beef prices set record highs in 2005, U.S.

imports of beef rose, providing additional competitive pressure for U.S. meat packers. Cow slaughter facilities, in particular, faced very limited availability of slaughter cows, thus squeezing their profitability.

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24. The national animal ID plan now under development indicates that

it will be implemented for all farm species. If our major meat trade problem is currently BSE-related, why not implement it more quickly for cattle?

Response: The National Animal Identification System will ultimately cover all

segments of production animal industries in the United States. Initially, the cattle

industry is our primary concern. We have implemented premises identification

which is a prerequisite for animal identification. The animal identification component utilizing the new numbering system for individual animals will be implemented mid year 2005. The cattle working group is well advanced in drafting identification program standards, including the recommendation to utilize radio frequency

technology to automate the collection of animal identification movements. The plans

for the pork, sheep, and goat industries are also well along in development. Each

of these segments will be part of the initial phases of NAIS implementation.

25. If a national animal ID program were in place, how might that improve prospects for reopening foreign markets to U.S. beef?

Response: The NAIS would allow for rapid tracing of animals in the event of an

outbreak, helping to limit the scope and expense of the outbreak and allowing us

to minimize impact on domestic and foreign markets. Additionally, the NAIS would

allow for the tracing of animals to specific regions, increasing the likelihood of opening trade to those parts of the country that are not affected with highly infectious

diseases like foot-and-mouth disease (FMD).

26. Just four countries (Japan, Korea, Canada, and Mexico) have accounted for most U.S. beef exports. What is USDA doing in the short term

(the next 3–6 months) to explore and exploit opportunities in other countries?

Response: Some 64 markets are currently accepting U.S. beef. Of those markets

still prohibiting U.S. beef exports, Japan, Korea, and Hong Kong represent over 90

percent of the export value based on 2003 exports. USDA is actively engaged in negotiations with Hong Kong and prospects for resuming trade in this market within

the next three-to six months is high. In other secondary markets, Egypt and Taiwan

have both resumed imports of U.S. beef from cattle under 30 months of age. These

nations are setting an important example for their respective regions. We are also

engaging Russia and have submitted a proposal for resuming trade. Our agricultural attaches and diplomats at U.S. Embassies around the world continue to engage government officials at all levels as this administration remains committed to

resuming beef trade in all closed export markets.

27. Please describe the situation for U.S. beef exports in Asian markets

other than Japan, including Korea and Hong Kong and explain why Hong

Kong has agreed to accept Canadian but not U.S. beef?

Response: Taiwan opened its borders to U.S. beef on April 16, 2005 and the first

‘‘resumed’’ shipments arrived on April 24, 2005. On April 19–22 a USDA technical

team traveled to Korea for technical talks. There was a very positive exchange of

information and we agreed to host a Korean consumer group the week of May 9,

2005 and a technical team in early June. After these visits, we will engage Korea

in discussions on the terms and details of resuming U.S. exports. In Hong Kong,

after satisfying all of Hong Kong’s concerns regarding BSE mitigation measures,

and before the findings of the additional BSE cases, the Hong Kong government

(HKG) lifted its import ban on Canadian beef. Hong Kong has continued to express

concerns about U.S. capabilities to conduct animal trace backs in the event of another BSE finding in the United States. The HKG is also questioning whether the

U.S. is making progress on a proposal to ban Specified Risk Materials (SRMs) from

all animal feed. The United States has provided considerable information to address

these concerns in a number of meetings and technical discussions. A Hong Kong

technical team is expected to visit the United States to see U.S. BSE control procedures. We take this development as an indication that Hong Kong is close to making

a decision to lift the import ban on U.S. beef exports.

28. How exactly does USDA monitor Canadian compliance with U.S. import requirements? For example, what specific assurances does USDA have

that these plants are properly segregating products? What changes in compliance monitoring will occur when the border is further opened by the

January 4 final rule?

Response: FSIS monitors Canadian compliance with U.S. import requirements

through port-of-entry reinspections, as well as on-site system audits. While FSIS

has been assured by the Canadian government that it will comply with the U.S. imVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00082 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
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port requirements, FSIS sends auditors to Canada on a regular basis to ensure that

our requirements for properly segregating products are being fully implemented and

enforced in those Canadian establishments certified to export to the United States.

FSIS has already conducted two audits - one in December 2004, and the other in

February 2005 - to focus on Canadian compliance with United States BSE food safety requirements. These audits, combined with import reinspection, are the primary

means by which FSIS verifies compliance with U.S. food safety import requirements

and thereby protecting public health.

29. How many violations of the existing import rules has USDA found?

Have they been corrected? How many import permits have been rescinded

due to irregularities or violations?

Response: Since August of 2003 when USDA began allowing the importation of

boneless bovine meat from cattle under 30 months of age as well as certain other

ruminant products from Canada, compliance with permit conditions has been extremely high. This has been due in large part to on-going communication and coordination with Canadian agricultural officials who certify that all imports of approved

bovine products meet USDA guidelines. We have also worked closely with our counterparts at the Department of Homeland Security to ensure that they are well informed on all issues associated with Canadian imports. As such, we have only had

two issues that required some type of action either by Canadian agriculture officials

or USDA. We will remain vigilant in our efforts to ensure that only approved products are allowed entry to the United States.

30. Recent newspaper articles have revealed that the Canadian Food Inspection Agency (CFIA) found animal material in 66 of 110 feed ingredient

samples taken between January and March 2004. A CFIA official confirmed

that some of this material might have been ruminant protein. What efforts

did USDA take to evaluate the significance of these reports, and was this

evaluation taken into consideration in the January 4th rulemaking?

Response: Because of its close working relationship with Canada, USDA was

aware that CFIA had been considering animal feed testing as a potential part of

their feed ban compliance program. CFIA trained laboratory analysts to perform

this testing. These considerations led CFIA to implement a pilot project to test feed

during January, February, and March of 2004. Under this pilot project, CFIA inspectors accepted feed samples—some from feed ingredients intended for use in ruminant feed and some from finished ruminant feed products—and tested those samples for the presence of animal protein. Instructions were to obtain approximately

half of the samples from domestic products and half from imports.

Officials found that multiple samples contained evidence of animal protein, but

the type of testing was not specific enough to identify the species of origin of such

protein. In other words, while the tests could identify animal protein they could not

determine whether or not the animal protein was prohibited material (like ruminant

meat-and-bone meal) or whether it was animal protein allowed under the feedban

(such as blood or porcine protein). Additional analysis and follow-up inspections at

firms where the sampled feed was produced had to be conducted to determine if the

feed actually contained prohibited material. These inspections found that only a

small percentage could have contained prohibited material, and CFIA and the producers have taken corrective measure in these instances.

It should also be noted that the risk analysis never assumed 100 percent compliance with the feed ban. Instead, it considered that the feed ban was effective overall. As demonstrated in the Harvard risk analysis, which assumed a certain level

of non-compliance with the feed ban, even feed bans without 100 percent compliance

can effectively prevent or decrease the spread of BSE.

31. In late 2003, the United States and several other countries asked the

OIE to change the BSE risk categories. Please describe these changes and

their status within the OIE?

Response: During the fall of 2003, the OIE convened a group of experts to update

the Code Chapter on BSE. One of the group’s tasks was to examine ways to simplify

the Chapter by reducing the number of BSE risk categories from five to three. In

July of 2004, after obtaining input from member countries, the OIE presented for

consideration and comment two separate Code Chapters on BSE. One Chapter was

based on the existing Code, and included updated information while still retaining

the five BSE risk categories: free, provisionally free, minimal risk, moderate risk

and high risk. The other chapter was a proposal to simplify the number of risk categories to three: negligible BSE risk without mitigating measures, negligible risk

with mitigating measures, and undetermined risk. Member countries commented on

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ate comments. After this meeting, the OIE officially proposed moving from a 5-category system to a 3-category system. Although the categories are simplified, the system continues to focus on a risk-based approach for trading in bovine commodities.

These proposed changes are up for adoption at the upcoming OIE General Session

in May 2005.

32. What, specifically, has the Department done to rebuild the U.S.

public’s confidence in its BSE safeguards?

Response: We believe that effective communication with all stakeholders, especially the public, has been key to ensuring confidence in the steps USDA has

taken—and will continue to take—with regard to BSE. In this regard, USDA officials continue to inform the public and other groups through a variety of different

forums. We have held numerous teleconference briefings with the media, industry

representatives, and State officials to provide information and respond to specific

questions. In addition, USDA officials have attended countless meetings and conferences across the country to meet with concerned groups and individuals and reinforce our findings that the overall risk to human and animal health from BSE in

the United States is exceedingly minimal. There is also extensive information posted

on USDA’s website.

Through this communication, USDA has been able to explain the science behind

its policies. With the price and demand for U.S. beef remaining relatively steady,

it is evident that American consumers have received the message that BSE presents

an extremely low risk to public health.

33. In what way, if any, has the widespread criticism of USDA’s BSE actions provided stronger arguments for those who believe some agency outside of the Department of Agriculture ought to be responsible for meat

safety?

Response: The December 2003 discovery of a BSE-positive cow in Washington

State strengthened the partnership the Food Safety and Inspection Service (FSIS)

has with the Animal and Plant Health Inspection Service (APHIS). For instance,

under APHIS’ enhanced BSE surveillance program, FSIS collects samples from all

antemortem condemned cattle, except for veal calves not exhibiting central nervous

system symptoms, and provides the samples to APHIS for BSE testing. In addition,

senior level FSIS officials worked closely with their APHIS counterparts on the development of the proposed minimal risk rule.

Moreover, FSIS has been and will continue to engage in substantive food safety

discussions with FDA and other agencies who share public health and food safety

responsibilities. Since 1999, FSIS and FDA have had a Memorandum of Understanding (MOU) to exchange information on an on-going basis about establishments

that fall under both jurisdictions. FSIS and FDA will continue to work together to

ensure the safety of food products.

34. USDA continues to argue that its BSE protections have a sound basis

in science. If that is true, why is there still widespread public sentiment

that ‘‘mad cow’’ is a far more serious problem than USDA believes?

Response: As we mentioned, effective communication with all stakeholders, especially the public, is key to ensuring confidence in the steps USDA has take—and

will continue to take—with regard to BSE. In this regard, USDA officials have set

out to inform the public and other groups through a variety of different forums.

Through this communication, USDA has been able to explain the science behind

its policies. American consumers have received the message that BSE presents an

extremely low risk to public health. It is worth noting that the price and demand

for U.S. beef has remained relatively steady.

35. Has USDA been successful in communicating the nature and level of

risk from BSE, relative to other food safety threats? Why or why not, and

what improvements are needed?

Response: Prior to the December 2003 discovery of a BSE-positive cow in Washington State, USDA had in place a series of safeguards to protect the public health

from food safety threats, including those related to BSE. Upon discovery of the infected animal, USDA published a notice and three interim final rules relating to

BSE which add a significant level of protection to an already robust food safety system.

The American public remains confident in the safety of the U.S. meat, poultry,

and egg supply, in part due to the many food safety accomplishments FSIS made

in 2004. In August of 2004, a Gallup poll found that more than 85 percent of Americans are confident in the Federal Government’s ability to protect our food supply.

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36. What are the latest estimates on the economic impact of the ongoing

bans (in Japan and elsewhere) on U.S. beef and beef products? What have

been the impacts on: U.S. cattle producers; U.S. meat packers and processors; and workers in the meat industry?

Response: USDA estimates that the value of lost beef and beef product exports is $3.5–4.0 billion since the ban on U.S. exports was put into place. However, much

of that product was consumed domestically albeit at a lower price than would have

been expected had the U.S. been able to export freely. Had the U.S. been able to

export freely, it is likely cattle prices would have been $50-$70 per head higher generating $1.7-$2.30 billion in increased cash receipts to producers. There are no formal economic estimates of the losses to the meat packing industry. However, there

is anecdotal evidence that the bans have affected the sector. Swift and Tyson both

indicated that market closures, as well as the inability to source sufficient cattle,

were factors in reduced earnings. Several packers have reduced production at their

plants:

In October 2004, Swift cut second shift production 15 percent.

In late December 2004, Creekstone laid off 150 employees and reduced operations

to 4 days per week, due to the inability to ship to Japan. Majority interest in

Creekstone was sold in early March. The new owners have indicated that they

would plan to expand production.

In early January 2005, Tyson announced that it was temporarily suspending operations at 4 plants and cutting a shift at a 5th plant. Tyson announced that operations would resume in February.

In early January 2005, National Beef cut production. Production had previously

been cut in November but later restored.

In early March 2005, Swift & Company announced a 20-percent reduction in production at a Nebraska plant. They cited high cattle prices

In early March 2005, Cargill Meat Solutions announced additional cuts in production at 7 plants located in Texas, Kansas, Nebraska, Colorado, Wisconsin, and Pennsylvania. High cattle prices and tight supplies were cited as reasons for reductions.

37. Tyson recently reported that it was reducing operations at four beef

plants. Was this due primarily to the inability to obtain Canadian cattle, to

the Japanese ban, or to other reasons?

Response: Tyson Foods is the best source for understanding their motives for reducing plant operations. Tyson’s temporarily suspended operations on January 10

at plants in Denison, Iowa; Norfolk and West Point, Nebraska; and Boise, Idaho.

Second-shift processing at Pasco, Washington, was also suspended. The reduced operations were attributed to ‘‘unfavorable beef operating margins’’ (Tyson press release, January 6, 2005). John Tyson, chairman and CEO of Tyson Foods, indicated,

‘‘This is a difficult decision, however, we believe it’s the right thing for us to do at

this time, especially given the challenging market conditions and unfavorable operating margins our beef business continues to face. Our plants have been running

at less than 75 percent of capacity over the past 2 months, which is 10 to 15 percent

below historical levels.’’

On February 10, 2005, Tyson announced a schedule to resume operations at the

plants. At that time, John Tyson said in a statement, ‘‘While cattle numbers remain

tight, we believe supplies will improve in the months ahead, especially as the anticipated flow of Canadian cattle resumes. Beef demand has been weak, largely because

of high beef prices and the attractive value of competing meats. We typically experience seasonal improvements in beef sales as we move into the spring and summer

months. We’re hopeful cattle prices will moderate, so beef can be priced more competitively with other proteins’’ (Tyson press release, February 10, 2005).

38. There have been conflicting reports about when U.S. beef exports to

Japan will begin again. What is your best assessment of a start-up date?

Response: It is difficult to provide a specific date on when U.S. beef exports will

begin. President Bush has talked to Prime Minister Koizumi, who said he wants to

resume beef trade as soon as possible, but refrained from offering a timetable.

USDA has been frustrated by the slow progress made by Japan in opening its market to U.S. beef. Nevertheless, reestablishing trade with Japan remains this administrations top priority. In fact, Secretaries Rice and Mineta recently raised the issue

with their counterparts on separate occasions while visiting Japan. In addition, on

April 25–28, 2005 Dr. Charles Lambert, Deputy Under Secretary for Regulatory and

Marketing Programs, led a team of USDA officials and academic experts to Japan

for technical discussions and to participate in a number of public diplomacy activities aimed at educating Japanese media and consumer groups about the safety of

U.S. beef. Dr. Lambert had very positive discussions with Japanese government offiVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00085 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
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cials and to encourage more rapid progress, we agreed to host a technical team from

Japan in early May to review our BSE control procedures.

39. Please describe exactly what conditions must be satisfied in order for

U.S. beef to begin entering Japan.

Response: Japan’s Food Safety Commission submitted its report to Japanese government officials recommending an exemption of BSE testing from animals under

21 months of age. The decision to exempt these animals from BSE testing is expected to become final soon now that the 30-day comment period has passed. With

the testing decision to be finalized, Japan must also prepare for rulemaking on imports. We have submitted a series of responses to questions the Ministries of Agriculture (MAFF) and Health (MHLW) had as they prepare for deliberations by the

Food Safety Commission regarding imports of U.S. beef. In addition, a team of Japanese technical experts will visit the United States on May 9, 2005 to verify U.S.

BSE control measures. After the site visit, MAFF and MHLW will hold a series of

public hearings in Japan before a final decision to lift the import ban is made.

USDA will also need to finalize a beef export verification program for U.S. packers

to certify that Japan’s import requirements are being met.

40. How, specifically, will USDA ensure that Canadian beef from cattle

over 20 months is not co-mingled with beef destined for Japan? What procedures will be in place to monitor Canadian products and ensure that all

import requirements are being met?

Response: Once an agreement is finalized with Japan, the Agricultural Marketing

Service (AMS) will develop a Beef Export Verification program to ensure the terms

of the agreement, such as age and country of origin, are met. In fact, a BEV program addressing the commingling issue was developed for Japan to accept U.S. beef

after the first case of BSE was found in Canada in May 2003. The Food Safety Inspection Service will take AMS’s verification and certify on a U.S. export health certificate compliance with Japan’s import requirements. USDA officials assigned to

the packing plants will have oversight responsibilities to ensure all requirements

are being met.

41. USDA states that its Beef Export Verification Program will be used

to ensure that beef to Japan is from cattle 20 months and younger. Is USDA

willing to consider a program of this type for small beef packers who also

want to satisfy the same Japanese market by testing all cattle? Why or why

not?

Response: Some small packers have expressed an interest in testing all cattle presented for slaughter for BSE as a means of assuring consumers and trading partners of food safety. Because of the nature of the disease, the earliest point at which

current testing methods can detect a positive case of BSE is 2 to 3 months before

the animal begins to demonstrate clinical signs. The incubation period for this disease—the time between initial infection and the manifestation of clinical signs—is

generally very long, on average about 5 years. As a result, there is a long period

during which testing an infected animal with the current methodology would not be

able to detect the disease and therefore testing would not be effective. This is especially likely if the animal is both young and clinically normal at the time samples

are obtained for testing. Most cattle that go to slaughter in the United States are

both young and clinically normal. Accordingly, a testing program that tested all

slaughter cattle would have negligible benefit from a public health standpoint.

In particular, it is the removal of specified risk materials from the human food

chain, along with the other safeguarding measures administered by USDA, that provide assurances of food safety. We are confident that these measures address potential public and animal health risks concerning BSE.

42. There appears to be continuing opposition among Japanese consumers to any U.S. beef imports. Why have USDA and the beef industry been

unable to convince the Japanese public that U.S. beef is safe?

Response: Japanese consumers lost confidence in the safety of beef after Japan’s

first BSE finding. Beef demand declined resulting in a reduction in imports. Largely

due to U.S. Meat Export Federation (USMEF) and USDA consumer-education programs and marketing efforts, Japanese consumer’s confidence in imported U.S. beef

began to rise resulting in increased imports until Japan banned U.S. beef imports

in December 2003. FAS/Tokyo and USMEF have produced a joint plan to again address consumer confidence and we are confident that Japanese consumers will return to demanding U.S. beef.

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43. What is your assessment of the Japanese view of the January 4th Canada border rule? For example, is it a help or a hindrance in the negotiations with them?

Response: The Minimal Risk Rule was an example to the rest of the world how

the United States relied upon science to set BSE import policy. While the Japanese

government has asked a number of questions regarding the minimal risk rule and

the subsequent court injunction, and Senate resolution to stop implementation of

the rule, there have been no indications by Japan that the rule or the court injunction have negatively affected negotiations.

44. USDA’s Foreign Agricultural Service has reported that lost U.S. beef

sales to Japan have been replaced by beef from other countries like Australia, and also by substitutes like pork and chicken. What specific actions

have USDA and the industry discussed to win back the Japanese market

for beef?

Response: The Japanese government has asked that USDA implement a risk communications plan to help ensure public acceptance of any agreement between the

U.S. and Japan on BSE. In response, the FAS office in Tokyo and the U.S. Meat

Export Federation (USMEF) have jointly produced a pre- and post-market opening

plan that focuses on the potential concerns and misperceptions about BSE to consumers, the media and political officials. Some examples of activities being planned

or already being implemented are editorials, offering trips to the United States for

journalists, seminars on BSE, and the dissemination of technical materials.

45–46. It is my understanding that Canadian animals imported to the

United States will have their Canadian Animal Identification numbers listed on the health certificate that accompanies their lot. I also understand

that within the year all Canadian cattle will be marked with RFID tags. In

states like New York, where an US-based RFID system is already operational, all that information from the Canadian RFID tag will presumably

be directly accessible to U.S. authorities. What efforts are underway to capture that valuable information in other border states that may lack their

own RFID program? How soon will the capacity be in place to interface nation-wide with this Canadian information on cattle entering from any port?

Response: (Questions 45–46) Under the final rule, all feeder cattle and feeder

sheep and goats imported from minimal-risk regions must be individually identified

by an official eartag of the country of origin. The eartag must be applied before the

animal’s arrival at the port of entry into the United States, meet U.S. eartag standards, and be traceable to the animal’s premises of origin. There will be a health certificate for each shipment of animals; the number on the eartag will be listed on

the health certificate. This health certificate will accompany the animals as they

move to the feedlot and/or to slaughter. This certificate, with the record of specific

individual identification, will allow us sufficient information to communicate with

our Canadian colleagues as necessary to access their records for tracebacks. Specifically in reference to BSE, it is important to note that since this is not a highly contagious disease, some of the time constraints in rapid traceback are not as critical.

USDA has relied on a long history of communication and cooperation with CFIA.

This cooperation has been evident in past animal disease investigations as

tracebacks occur back and forth across our border. We anticipate that this collaboration will continue in the future.

47. Canada already has a mandatory animal ID system in place. Why has

our animal ID system been delayed for 3 years when the pilot project FAIR

is working?

Response: The growing number of animal disease outbreaks around the world, the

threat of intentional introductions of foreign animal diseases, and the single detection of BSE in the United States in December 2003 has made the development of

a National Animal Identification System (NAIS) a top USDA priority. USDA is currently working on the first phase of implementation, which entails identifying and

registering premises that house animals. Such premises would include locations

where livestock and poultry are managed, marketed, or exhibited. APHIS has provided a Standardized Premises Registration System—or SPRS—to States that requested it. In addition, several other States are using compliant premises registration systems administered by a State and/or through a third party. APHIS will support the interface of all compliant systems with the premises number allocator and

premises information repository. The goal is to have all States operational for premises registration by mid-year 2005.

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In mid–2005, USDA plans to implement the animal identification number (AIN)

management system to administer the assignment of AINs to tag manufacturers

and to record the distribution of the animal numbers to a producer’s premises. Individual animal identification and tracking animal movements can then be implemented.

48. If a national animal ID program were in place, how might that improve prospects for reopening foreign markets to U.S. beef?

Response: The NAIS would allow for rapid tracing of animals in the event of an

outbreak, helping to limit the scope and expense of the outbreak and allowing us

to minimize impact on domestic and foreign markets. Additionally, the NAIS would

allow for the tracing of animals to specific regions, increasing the likelihood of opening trade to those parts of the country that are not affected.

49. The board of the National Cattlemen’s Beef Association recently proposed a national ID system which differs from that being developed by

USDA. Can you describe the differences and provide your view on whether

these differences will delay implementation of a program?

Response: NCBA has proposed a private animal ID system. USDA is receptive to

reviewing solutions offered by private entities, but only if we can be assured that

they will provide the same level of data access and completeness that our own system will be capable of, within the timeframes we are considering.

50. When do you believe a national ID program will be in place?

Response: USDA is currently working on the first phase of implementation, which

entails identifying and registering premises that house animals. Such premises

would include locations where livestock and poultry are managed, marketed, or exhibited. APHIS has provided a Standardized Premises Registration System—or

SPRS—to States that requested it. In addition, several other States are using compliant premises registration systems administered by a State and/or through a third

party. APHIS will support the interface of all compliant systems with the premises

number allocator and premises information repository. The goal is to have all States

operational for premises registration by mid-year 2005.

In mid–2005, USDA plans to implement the animal identification number (AIN)

management system to administer the assignment of AINs to tag manufacturers

and to record the distribution of the animal numbers to a producer’s premises. Individual animal identification and tracking animal movements could be implemented

afterwards.

51. I am concerned that that feeder cattle and calf supplies outside

feedlots in Canada are currently at record levels and nearly double what

they were in 2002, a high-water mark year in terms of feeder and fed cattle

imports from Canada. What efforts has USDA made to identify and implement legal means to gradually resume trade with Canada so we can prevent a shock to the U.S. cattle marketplace and mitigate the very real potential for short-term economic harm to U.S. beef cattle producers?

Response: USDA’s risk assessment focused on the risk that opening the Canadian

border to specific animals and products would pose to animal and human health and

determined it to be of minimal risk. The major trade impact of the BSE minimal

risk rule when it goes into effect will be a resumption of imports of live cattle under

30 months old from Canada. On February 22, 2005, the Department released a revised forecast that 1.3 million head of Canadian cattle would enter the U.S. in 2005,

had the rule gone into effect on March 7, 2005. Such imports result from a buildup of cattle in Canada, lower cattle prices in Canada than in the U.S. and the reduced availability of U.S. cattle for U.S. meat packers. The increase in cattle outside

of feedlots in Canada would also be a key source of U.S. imports. As a result of the

imports, U.S. meat packers would be able to increase capacity utilization and reduce

operating costs.

The number of live cattle expected to be imported compares with 2004 U.S.

slaughter of 32.7 million head. In addition, in the 5 years prior to the finding of

BSE in Canada, the U.S. imported an average of 1.25 million head annually from

Canada, with 1.7 million head in 2002. So, the 1.3 million head of Canadian cattle

imports is about what was typically imported prior to the finding of BSE in Canada.

USDA estimates a 2.6-percent decline in fed cattle prices as a result of the live cattle imports but that decline is compared with no trade. Of course, no trade is abnormal. In addition, much of the price effect is already reflected in cattle futures market prices. Moreover, the negative effects on cattle prices will likely be at least partially offset by long-term gains resulting from expanded world trade.

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The estimate of cattle imports is uncertain and there are a number of factors that

could mitigate the flow of cattle from Canada. (1) the price spread between U.S. and

Canadian cattle had been narrowing, particularly in late February and early March;

(2) pasture and range conditions in Canada are good, which could cause producers

to keep cattle on pastures; (3) the value the U.S. dollar has been depreciating

against the Canadian dollar, thus increasing cattle producer returns in Canada

above the levels indicated by U.S. dollar prices; (4) Canadian meat packers have

stepped up their own buying, as evidenced in slaughter year-to-date in 2005, which

is up 11 percent in Canada; and (5) logistical problems such as limited transportation and higher costs due to the import regulations will increase import costs.

These five factors will act together as a disincentive to import.

52. Secretary Johanns, you recently stated that it was ‘‘not scientifically

consistent’’ to allow meat from older Canadian cattle—but not the cattle

themselves—to enter the United States. Why then did USDA regulators initially decide to include meat from older cattle in the January 4 rule? What

did your expert panels recommend with regard to this aspect of the rule?

Response: In the extension to the comment period published in April 2004, USDA

proposed allowing the importation of beef from Canada, regardless of the age of the

cattle from which it was derived, provided other specified mitigating conditions were

met, and invited comment on this change. The risk analyses support the conclusion

that certain tissues’specified risk materials, or SRMs—are considered at particular

risk of containing the BSE agent in infected animals and therefore should be prohibited from import. The SRMs can be safely excluded from meat and other products,

therefore these could be imported from animals of any age.

In February, however, Secretary Johanns announced a delay in the effective date

for allowing imports of meat from animals 30 months of age and over. This delay

was appropriate given that the ongoing investigations into finds of BSE in Canada

in older animals were not complete at that time. The delay also addressed public

comments that this part of the final rule does not reflect the evidence that beef from

animals 30 months and over processed in Canada has the same risk profile as beef

from Canadian animals 30 months and over processed in the United States. To address these concerns, Secretary Johanns directed USDA officials to develop a plan

to allow imports of animals 30 months and older for slaughter as well as beef from

over 30-month animals in resuming full trade with Canada.Neither the International BSE Review Team nor the Secretary’s Advisory Committee on Foreign Animal and Poultry Diseases provided USDA with an assessment of the risk levels associated with imported animals or animal products. Rather, these groups assessed

domestic mitigations against BSE, including enhanced surveillance and SRM removal.

53–54. When it announced the final rule to permit entry of Canadian cattle, USDA stated: ‘‘Ruminant-to-ruminant feed ban in place and effectively

enforced: Canada has had a ban on the feeding of ruminant proteins to

ruminants since August 1997.’’ (Emphasis added.)How does this assurance

that the ban is ‘‘effectively enforced’’ square with the fact that the last BSE

cow was born after this ban? If the recent USDA report is true and ‘‘the

Canadian feed ban is not substantially different than the U.S. feed ban,’’

how come the score is 4 to 0?

Response: (Questions 53–54) The cases identified in Canada reflect exposure that

happened either prior to the feed ban was implemented or shortly thereafter. Continued surveillance within Canada, specifically the lack of positive cases identified

in animals born quite some time after the implementation of the feed ban and the

lack of cases outside of a limited geographic area, contributes to the possibility that

the disease exposure was isolated and clustered. They also confirm the evidence that

the disease is not continuing to circulate within Canada, primarily because an effective feed ban is in place. While further investigations may eventually identify the

original source of introduction of the agent into Canada, it is also likely that they

will not be able to pinpoint specifics that happened many years ago.

The feed ban in Canada was initially implemented in August 1997, with certain

actions grandfathered until October 1997. The last case, identified on January 11,

2005, was born approximately 6 months after the full implementation. As mentioned

previously, a complex feed ban that requires restructuring of various operations cannot be implemented instantly. As the necessary changes were being developed and

implemented, it is possible that some ruminant feed produced shortly after the feed

ban became contaminated with prohibited materials. In addition, it is also possible

that feed manufactured prior to the feed ban was still in use.

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On February 25, USDA released the final report of the feed ban technical team.

Overall, the technical team found that Canada has a robust feed ban inspection program, that overall compliance with the feed ban is good, and that the feed ban is

reducing the risk of transmission of BSE in the Canadian cattle population. The information provided by the U.S. team verifies the information cited in the risk analysis of the rule, and supports the conclusion in the risk analysis that the feed ban

is effective.

55–56. Until January, U.S. and Canadian authorities had asserted many

times that the feed ban in Canada became effective in August 1997. However, a BSE cow was born after the ban. Since then, the USDA now admits

in a report that the feed ban was allowed a phase-in period. Would it be

accurate to say that the feed ban did not take place in August 1997, but instead took place whenever the feed supplies in the market were exhausted?

And if so, why were Congress and the American public kept in the dark?

Response: (Questions 55–56) The proposed rule, final rule, and supporting risk

analyses state that the feed ban in Canada was implemented in August 1997. They

also provide general information about what Canada’s feed regulations include, and

some detail about compliance efforts and activities. The overall conclusion in the

risk analyses has been that the feed ban is effective.

The feed ban in Canada was initially implemented in August 1997, with certain

actions grandfathered until October 1997. Achieving full compliance with a feed ban

inevitably takes time, due to complexities of the regulations and the industries involved. Because of these complexities and the requirement that various operations

of feed companies be restructured, a feed ban cannot be implemented with 100 percent compliance instantly.

International authorities generally recognize that it may take 6 months or longer

to completely clear out any remaining feed from the old system after a feed ban is

implemented; USDA and Canadian officials believe that feed manufacturers abruptly discontinued formulating ruminant feed with prohibited material even though

they may not have discarded what was already produced. It also took some time

before the feed and livestock industries were fully meeting the record-keeping and

labeling requirements in the feed ban, and the requirements for preventing crosscontamination.

57. If the implementation of the feed ban was gradual and not immediate,

shouldn’t we resume trade gradually to avoid importing any cows that

were given contaminated feed after the ban?

Response: The final rule as published limits the import of live cattle to only those

for feeding or immediate slaughter, and all of these animals must be slaughtered

before they are 30 months of age. This effectively means that, at this time, animals

intended for import could not have been born before September 2002, or at least 5

years after the feed ban was implemented.

USDA remains confident that the requirements of the minimal-risk rule, in combination with the animal and public health measures already in place in the United

States and Canada, provide the utmost protection to both U.S. consumers and livestock. USDA also remains fully confident in the underlying risk assessment, developed in accordance with the OIE guidelines, and continues to believe that international trade in beef, founded on science-based regulations, should be re-established in an expeditious manner.

STATEMENT OF KEN BULL

Thank you Mr. Chairman and Mr. Peterson and members of the committee for

allowing me this opportunity to testify before you.

My name is Ken Bull, and I am the vice president for cattle procurement with

Cargill Meat Solutions, based in Wichita, Kansas.

I understand that I was invited to testify because of the unique position our firm

holds as one of two beef processors that have operations on both sides of the Canadian border.

My testimony today will speak primarily to three important concerns:

1. The absolute necessity that the United States continue its strict adherence to

science-based sanitary and phyto-sanitary factors in its trade dealings;

2. That market disruptions can and do seriously impact industry competitiveness

and structure;

3. That the North American livestock and meat sector is interdependent, and cannot be artificially divided along the 49th parallel or the Rio Grande River.

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First, I want to offer a few comments on the science of this animal disease.

There is near unanimous agreement in the scientific community that the BSE risk

in the United States and Canada is now extremely low, and will decline further over

time.

Experts believe the initial exposure was due to the importation and subsequent

rendering of at least one infected animal from Europe in the early 1990’s, years before feed control measures were implemented.

Scientists all agree that the most effective means to eradicating BSE is addressing it in the animal feed supply—something the United States, Canada and Mexico

have all taken steps to do. This action greatly reduced the potential for amplification of the disease and eliminated the potential for the kind of outbreak that has

been witnessed in Europe and Japan.

BSE is a disease that when found, is found primarily in much older animals. In

order for the disease to manifest in a younger animal the animal would have to

have received an extremely high dose of the infective agent.

The most effective means of protecting human health is to remove specified risk

materials, or SRM, from the human food supply. The U.S. and Canada implemented

this key step in a rapid manner after the first cases were detected in each country.

Further supporting this confidence is the fact that the brain and spinal cord, the

SRMs of higher infectivity, are not commonly consumed in the North America, and

many companies previously took steps to ensure cross contamination with meat

products did not occur.

U.S. and Canadian regulatory authorities are in the process of developing measures to enhance the existing animal feed controls. These steps are meant to speed

up the eradication of BSE from North America. It is critical that harmonized North

American measures be implemented in an environmentally sound and cost-effective

manner, otherwise implementation will take time, and opportunity for quick action

will be lost.

The U.S. and Canada have undertaken a very aggressive surveillance exercise,

targeting the older dead and disabled animal population where BSE is most likely

to be detected. To date we understand USDA has conducted over 250,000 tests since

the surveillance program was enhanced last year. Canada is testing proportionately

in the same range.

Moving on to trade considerations, please review these comparisons:

The U.S. has suffered for a generation now under the European ban of U.S. beef.

It is based on the non-scientific prohibition of growth promoting hormones. Those

that want to close the Canadian border by distorting science are guilty of the same

behavior as the EC.

The U.S. is now cut off from four of its top seven export markets (Japan, S. Korea,

Hong Kong, Taiwan) because foreign governments are not moving to a common understanding of the science of BSE. Our only large trading partners accepting U.S.

beef are Mexico and Canada.

These circumstances are really no different than other agricultural trade blocking

efforts like our challenges exporting poultry to Russia, genetically enhanced soybeans and corn to Europe and elsewhere.

We fought for years to gain market access for beef to Japan and our fear is that

any perpetuation of faulty science anywhere can cost us the market that is so important to the economy of a trade dependent industry.

The U.S. (and North American) industry will prosper or whither with our success

in growing trade. And trade is a two way street.

There has been no more powerful example of trade distorting non-scientific actions than the Japanese beef ban in December 2003. Here the United States stood,

with a single cow found to have BSE, and an aggressive, globally recognized (and

then strengthened) surveillance system. Japan had nearly a dozen cases by that

date and no system of high-risk animal surveillance. The leverage from these facts

has yet to be made convincingly to the Japanese.

Moving on to the market impacts as the committee probably knows, U.S. cattle

markets have remained exceptionally strong for the past year and a half. Part of

this is because of the border closure. Low cattle supplies and high demand have a

way of ensuring high prices. On the consumer demand side we must give a lot of

credit to the administration’s handling of the BSE situation. NCBA polling data

shows that knowledge of BSE is the highest on record—but at the same time, consumer confidence in the safety of beef is also at its highest. No other BSE affected

region of the world has experiences this. Canadian polling shows the same results

for that country. This shows the power of excellent risk communication.

But what the committee may not yet have focused on is that there has been a

quiet, yet substantial change going on in the processing industry that doesn’t bode

well for the entire sector.

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As Canada has been isolated, in order to process a large supply of fed-cattle that

otherwise would have come south to places like Washington, Utah, and Colorado,

Canadian processors have now added about 5,000 head of packing capacity per day,

or 30,000 head per week.

You may have read that there are many U.S. plants particularly in the Pacific

Northwest that have already had lay-offs, even cutting entire shifts in their plants.

While we have been impacted by the supply situation we haven’t been hurt quite

as badly as plants in deficit cattle production regions that rely more heavily on Canadian fed cattle. Thus far we have slowed our line speeds, running less efficiently,

but keeping our workforce in place.

What I have described are substantial structural changes that the committee

must study and fully understand because they have serious and lasting implications

for the entire North American industry.

The North American beef sector is not limitless in its ability to grow. Our growth

will come only from two sources: increased domestic consumption, and increased

trade. I can say with great certainty that neither of these growth avenues will absorb the kind of packing plant capacity expansion we have seen. When trade returns

to some sense of normality, there will be excess capacity left somewhere. Less efficient capacity may find it challenging to compete with the newer, more efficient operations that have been built.

Unlike the case with fed cattle, of particular concern to Cargill is our mature animal processing business in the United States. We greatly share the concern that my

fellow panelist from Wisconsin will address. We operate large mature cattle plants

in Pennsylvania and Wisconsin that greatly depend on a stable supply of animals

from Canada to operate at capacity and with efficiency. As you probably know the

supply of cattle in these regions is limited, and the need for Canadian animals is

critical to us and our employees.

Finally, speaking to the concept of the North American market place, the committee must recognize that prior to BSE, Mexico was the second largest market for U.S.

beef. Today Mexico is by far our top export market. Canada, prior to BSE was our

fourth largest market, and today it is our second largest.

Another fact to consider: Cargill’s Schuyler, Nebraska beef plant is more than

1000 miles closer to the Canadian population centers of Toronto and Montreal than

is our High River, Alberta plant. This distance is quite significant considering the

cost of refrigerated highway transportation. The point I am trying to make is that

without trade distortions, both U.S. and Canadian industry stakeholders stand to

gain when markets are served in their most efficient manner.

One final point - with regard to Mexico we export nearly three times as much beef

to Mexico as we import in cattle. So as you can see the entire NAFTA market is

the backbone of our beef industry.

Again, I appreciate the opportunity to appear before you again, and I would welcome any questions.

STATEMENT OF JIM MCADAMS

Chairman Goodlatte, Ranking Member Peterson, Members of the House Committee on Agriculture:

I am Jim McAdams, president of the National Cattlemen’s Beef Association. I am

a cattle producer from Texas and am honored to be here today to testify in front

of this committee.

Bovine Spongiform Encephalopathy (BSE) has been a priority issue for our Nation’s cattle producers since the disease was first diagnosed in the United Kingdom

in the mid 1980’s. Based upon the science that has been developed over the past

two decades, our nation has implemented safeguards which protect the health of our

cattle and the safety of our consumers. These safeguards include import bans, surveillance programs, feed bans, and the removal of specified risk materials (SRMs)

from the food chain.

These safeguards have indeed served their purpose. Over the past 15 years, our

country has tested almost 325,000 cattle and not found a single case of BSE in a

domestically produced animal. In the past year alone, we have tested nearly 250,000

cattle without a single positive case. These test results illustrate the effectiveness

of the science-based procedures our nation has implemented. Consumers understand

and appreciate the steps that have been taken. In a recent independent survey conducted by the beef checkoff program, 97 percent of the people surveyed heard about

BSE in the media over the past month. Despite the attention, consumer confidence

in the safety of beef remains at 93 percent, the highest ever. Beef sales in the marketplace echo this survey, as evidenced by double-digit growth in the demand for

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beef. With confidence numbers at record highs, it is disturbing that some attempt

to undermine the science that forms the basis of our BSE protection system, a system responsible for the strong confidence consumers have in our product.

When the UK first diagnosed BSE in its cattle, not much was known about the

disease. In the absence of a scientific understanding of BSE, the world adopted a

zero tolerance policy. Trade in any product that could possibly carry BSE was disallowed. Ceasing all trade in products from cattle from countries with BSE became

the de facto global standard for trade. Over the intervening years, however, a body

of science developed that shed light and knowledge on the disease. The development

of this science helped inform Congress, USDA, FDA, other regulatory agencies, our

industry and scientific experts around the world, and led to the firewalls that have

been erected. This body of science improved the world’s understanding of BSE so

that rules and regulations on BSE can now evolve.

The Office of International Epizootics (OIE), the world organization for animal

health created within the World Trade Organization (WTO), has multiple chapters

in its code dealing with BSE. The OIE code has evolved over the years to reflect

the growing body of science on BSE. Nonetheless, in 2002 and 2003, NCBA was increasingly concerned that many countries did not recognize the OIE code for trade

in beef for countries that represented minimal risk for BSE. Our members’ concern

was that a single case of BSE could jeopardize our export markets—despite the wide

array of safeguards our nation has implemented to keep our Nation’s systems robust

against BSE.

In May 2003, Canada confirmed its first domestic case of BSE. Immediately, what

we feared might happen to U.S. producers happened to Canada, a complete and

total loss of all export markets. On behalf of cattle producers in the United States,

NCBA spent much of the latter part of 2003 trying to amend the OIE code on countries that were deemed to be at a minimal risk for BSE to prevent what happened

in Canada from happening to us. In December 2003, a cow of Canadian origin was

diagnosed with BSE in the United States. Because of the nature of the OIE code,

and the global BSE policies that existed at the time, our producers were forced

under the yoke which others had been forced to bear—a yoke created during a time

when fear—not science—drove global BSE policies. Because global BSE policies did

not reflect the science, we lost our export markets and U.S. producers have lost

$175 on every animal sold in the United States. Total cumulative losses to U.S. cattle producers now number $4.8 billion in lost exports alone.

It is with this historical context in mind that NCBA members adopted in August

2004, a policy calling for the normalization of global beef trade based upon sound

science—so that our exports could resume. We are all in the midst of an historic

shifting of global trade policy from one of fear to one of sound science. Transitions

like this are not easy, and our members have struggled to develop policy that reflects all of the changes taking place.

This hearing was called to discuss the rule declaring Canada as a minimal risk

country. The USDA rule is broadly consistent with our policy of normalizing trade

and establishing a fully informed global trading standard based on science. However, the announcement and publication of this rule has been met by strong concerns from our members across the country. USDA’s statement that 2 million head

of Canadian cattle could enter the United States created the impression among U.S.

producers that a wall of cattle would descend upon U.S. markets. In the days following the announcement of this rule, Canada announced two additional cases of BSE.

This convergence of events—the publication of the rule, the USDA statement about

2 million head of cattle, and two new BSE cases in Canada—have proven controversial.

In the days following the announcement of these events, our organization faced

many questions from our members. These concerns centered on three key areas: 1)

The economic impact on U.S. producers based upon USDA’s estimate of cattle that

could enter the United States; 2) The importance of regaining our export markets

prior to the border reopening to prevent a situation of more imports without having

access to our traditional export markets; and 3) Concerns about Canadian compliance with its BSE prevention activities in light of the two new BSE cases.

To address these concerns, our Executive Committee put in place a number of action steps. Perhaps the most significant was the creation of a team of NCBA members that went to Canada to see Canada’s BSE prevention activities first hand. The

Trade Team report is attached to this testimony in its entirety. In summary, our

trade team concluded:

• USDA’s estimate of 2 million head of cattle that could enter the United States

was overstated because USDA did not include the fact that Canadian processing has

increased 22 percent since 2003. Instead, based upon first hand inspections and reVerDate 11-SEP-98 10:17 Sep 01, 2005 Jkt 023048 PO 00000 Frm 00093 Fmt 6633 Sfmt 6633 F:\DOCS\109-1 HAGRI PsN: HAGRI
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views of more current data, the number of cattle that could possibly enter the

United States is closer to 900,000 head, about half of what USDA estimated.

• The trade team was comfortable with what they saw relative to compliance with

Canada’s feed ban.

• Canada must move forward with removing Blue Tongue and Anaplasmosis restrictions on the movement of all U.S. cattle into Canada. These restrictions are not

necessary; and

• Significant structural changes have occurred in Canada’s processing sector

which, in the long-term, could shift beef production into Canada at the expense of

the United States.

Our membership met during our annual convention in San Antonio, Texas, during

the first week of February and had extensive discussions about the USDA rule. The

trade team report figured heavily in that debate. During the meeting, our membership adopted a directive on the issue that delineated certain criteria that must be

met before the implementation of the rule. These include:

Prohibit the importation of cattle and beef products from cattle more than 30

months of age,

Assurance that all Canadian firewalls to prevent BSE, specifically adherence to

its feed ban, are functioning properly,

No feeder cattle may be imported until agreement is reached on harmonization

of animal health standards, especially bluetongue and anaplasmosis,

Movement of Canadian cattle into the United States must be managed to minimize market disruptions,

Fed cattle imported for immediate slaughter must be certified to be less than 30

months of age at the time of importation,

Ban the use of fetal bovine serum from heifers imported for immediate slaughter,

USDA grades and stamps are not allowed on any imported beef product,

Feeder cattle must be branded with a ‘‘CAN’’, individually identified with an ear

tag, certified to be less than 30 months of age at time of slaughter, shipped in sealed

trucks from the border directly to an approved feedlot and moved directly in sealed

trucks to slaughter,

Feeder heifers imported into the United States from Canada must be spayed,

USDA must work with our primary trading partners to ensure that expanded export access for U.S. beef is not in any way jeopardized by expanded importation of

cattle and beef from Canada, and

The administration must reach an agreement to re-establish beef and beef byproduct trade with Japan, Korea, and Mexico and apply economic sanctions if necessary.

Significant progress has been made on most of these items. USDA has already

made the decision to delay the implementation of the part of the rule dealing with

meat from cattle over 30 months of age. We are appreciative of the swift action

taken by USDA Secretary Mike Johanns to delay this portion of the rule. We are

expecting reports in the next two weeks from USDA on Canada’s compliance with

its feed regulations and SRM removal regulations. The Canadian Food Inspection

Agency (CFIA) has resolved the Anaplasmosis and Blue Tongue issue with feeder

cattle and we expect CFIA to modify its current regulations on these diseases for

cattle of all ages as trade is resumed. Our directive specifically requests that cattle

be permanently identified and processed before 30 months of age. These items are

specifically contained in USDA’s rule. We are discussing with USDA and FDA the

portion of the directive dealing with fetal blood serum and the spaying of heifers.

Our negotiators have assured us that this rule will not negatively impact our ability to regain key export markets such as Japan. We are appreciative of the aggressive action taken by the administration and by many Members of Congress to help

our industry regain access to the Japanese market. However, we continue to be disappointed with Japan’s inability to set a date when trade will resume. Our industry

needs continued strong action at all levels of our Government—from the President,

to cabinet members, to diplomatic personnel, to Members of Congress—to apply the

pressure needed to reopen this vital market. To apply the most pressure necessary,

the administration and Congress should consider all options including economic

sanctions.

The BSE policies of our country are based upon science and the OIE guidelines,

as they should be. We support our Government’s decision to follow the facts and the

science but we expect our Government to ensure that we are not treated unfairly

in the international marketplace. If our trading partners do not follow the science,

do not negotiate in good faith, and do not follow the rules, then we expect our Government to defend us to the fullest and take the necessary steps to maintain fair

trade.

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The members of this committee should know several key facts about BSE. Prevailing science holds that BSE is not found in muscle meat of cattle. All meat is safe

from BSE. The OIE code is a list of guidelines not requirements. Each country

maintains the sovereign right to implement the guidelines in a manner that they

deem necessary. NCBA points this out because over the past several weeks, irresponsible comments have been made about the safety of beef. NCBA maintains a

fact-based approach in dealing with BSE. We recognize that our members have economic concerns about this rule and we are working expeditiously to lessen the impact and provide more economic opportunities by reopening export markets. We believe these challenges are best solved by negotiating solutions based on the facts.

Undermining the science upon which our consumer confidence is based and questioning the safety of our product, is a disservice to hard working cattle producers

and misleading to consumers and could ultimately do irreparable harm to our livelihood. For this reason, my written testimony includes a list of quotes from leading

scientists who reinforce the points I have made today regarding BSE, beef safety

and trade policy.

Thank you for the opportunity to appear before you today, and I look forward to

your questions.

STATEMENT OF CARL KUEHNE

Mr. Chairman and members of the committee, thank you for the opportunity to

testify today. My name is Carl Kuehne and I am the owner and chief executive officer of American Foods Group, with headquarters in Green Bay, Wisconsin. My company is also a member of an ad hoc coalition called the Meat Equity Alliance for

Trade Fairness. MEAT Fairness comprises 13 smaller and mid-size companies who

harvest older cattle and therefore are directly affected by the import regulation of

over-thirty-month (OTM) cattle and the meat from those same animals.

Like the other members of the MEAT Fairness coalition, my company favors an

open border with Canada. The importance of trade to the entire beef industry has

grown in recent decades, and one of the fruits of past trade agreements has been

the development of a North American market where cattle and beef have moved

freely across borders in response to market-based signals.

A primary goal that we all share is to maintain consumer confidence in our beef

products. Consumers have reacted to the North American BSE cases by demonstrating with their pocketbooks that they retain confidence in our food safety system and

our industry’s ability to deliver a safe product. Our Government must continue to

maintain the consumer’s confidence by basing its actions on science, not emotion or

fear.

I mentioned that my segment of the meat industry favors an open border. When

the border is not open, we feel the consequences acutely. Like other firms who harvest older cattle, we have already been adversely affected by the inability to procure

Canadian cattle. We believe the available scientific evidence supports the designation of Canada as a minimal-risk country for BSE, and normal trade should be resumed as soon as possible. We believe Canada’s rules and procedures are consistent

with guidelines of the World Animal Health Organization (OIE), and this compliance with international standards provides additional confidence in Canada’s minimal-risk status.

Of course, it is critical that trade be resumed in a rational rather than an irrational fashion. Like many others throughout the U.S. industry, we were troubled by

the U.S. Department of Agriculture’s final rule when it was published on January

4, since it permitted imports of OTM beef but not OTM cattle. That dichotomy

would create a perverse but powerful incentive to harvest OTM cattle in Canada

rather than the United States, to the significant economic detriment of U.S. packers

and producers alike.

We appreciate Secretary Johanns’s action to temporarily delay the effective date

of that portion of the rule that would have permitted OTM beef. Likewise, we feel

it is now critically important to move forward without delay to create a regulatory

structure that will allow both OTM cattle and OTM beef to enter the United States

at the same time.

USDA has extensively studied the risks posed by minimal-risk regions like Canada. This exhaustive scientific work shows that Canadian beef and cattle are safe.

Both the United States and Canada have implemented a series of safeguards to

minimize the risk of BSE in cattle, the most important being the implementation

of feed bans in 1997 and provisions governing the removal and disposition of specified risk materials (SRMs). When the border is re-opened, we can begin to restore

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equilibrium to a market that has been in turmoil since May 2003, when the discovery of a BSE-positive Canadian cow led to closure of the border.

Secretary Johanns acted appropriately in delaying implementation of the rule

with respect to OTM beef imports. In light of the discovery of two BSE-infected cows

in Canada after the final rule was published, it is certainly prudent to complete investigations into these cases and assess the adequacy of Canada’s feed ban and

other protective measures. Once that assessment is completed, the Department

should move as expeditiously as possible to re-open the border to all cattle and beef.

Had it remained in place, the disparate treatment of OTM cattle and beef would

have had a devastating economic impact on our industry, already struggling with

capacity utilization issues because of the prolonged inability to import Canadian cattle. To understand this economic impact, it is important to know how our part of

the meat packing industry is structured, and differentiate it from the portion of the

industry that harvests fed cattle.

The meat packing industry is not monolithic, and small to mid-sized companies

still play an important part, especially in the harvest of non-fed animals. We are

all used to hearing about the dominance of a few extremely large companies, but

those statistics pertain to the harvest of fed cattle calves placed in a feedlot and

harvested at a relatively young age.

The segment of the industry that harvests older ‘‘non-fed’’ animals is much less

concentrated. According to data published by Cattle Buyers Weekly and other

sources, 28 companies operate facilities in 18 states to harvest non-fed beef, and 24

of these have only a single location to produce non-fed beef, while the remaining

four have between two and six locations. A list of these companies is attached to

my testimony.

My company harvests both fed and non-fed beef, but most other firms in our industry do not. Those companies that are solely dedicated to older cattle would have

been especially hard-hit by the initial form of the final rule on Canada, which would

have permitted OTM beef imports but not OTM cattle.

These impacts have been quantified in a study by Informa Economics, Inc., which

estimated that permitting OTM beef but not OTM cattle would have cost our segment of the packing industry $159 million over 12 months, and reduced income to

U.S. cow producers by $332 million in the same period. A copy of this study is attached to my testimony.

I have a high degree of confidence in the Informa study, and USDA officials with

whom we have spoken have agreed. But there is a harsh reality that no study of

this type can fully measure: If the final rule were to go into effect as published in

December, some of the companies in our industry simply would not make it. The

short-term impact of huge quantities of competing OTM beef at the same time that

these companies would be prohibited by their own government from obtaining supplies of OTM cattle would be so great that some firms would be forced to close and

exit the business.

Either plants would be permanently shut down, with the resulting loss of thousands of jobs in largely rural communities where alternate employment options may

be few or the plants would move into stronger hands, with larger companies swallowing smaller ones and the meat industry becoming that much more concentrated.

Neither of those prospects is a happy one. In fact, the more likely scenario is perhaps the one in which U.S. plants shut down and Canadian plants take their place.

According to a report from a National Cattlemen’s Beef Association trade team, Canadian slaughter capacity expanded 22 percent in 2004 and is projected to increase

each year through 2007. According to NCBA, ‘‘as many as 25 plants [are] either

being expanded, in the process of being constructed, or on the drawing board ... .’’

Lest my rhetoric sound alarmist, let me simply refer you to USDA’s own analysis

of its final rule, as published in the January 4, 2005, Federal Register: ‘‘As of midNovember 2004, a Canadian packer could buy a cow for about US $17 per hundredweight and sell the processing-grade beef for about US $123 per hundredweight’’ In

the United States, the cow would cost a packer about $55 per hundredweight and

the beef would sell for about $125 a hundredweight.

The numbers have changed somewhat since this analysis was written, but the

fundamental economic incentive has not. Older cows are much cheaper in Canada

than in the United States. This price disparity is a logical outcome of the large

buildup in Canadian cow supplies since its trade was largely cut off in the wake

of its initial BSE case.

As a result of the price disparity, there is every economic incentive to harvest

older cattle in Canada, and ship the meat to the United States. Simultaneous entry

of both cattle and beef would tend to restore the two markets to equilibrium because

the additional demand for older Canadian cattle would tend to raise their relative

price compared to U.S. animals of a similar age.

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But that was not what the final rule stipulated. Instead, the final rule would have

heightened the economic incentive to move capacity to Canada by permitting OTM

meat imports but not OTM cattle imports. No segment of the U.S. meat packing industry favored this blatant inequity, but it is the smaller and mid-size companies

in MEAT Fairness who would have been devastated. Unlike two of the largest U.S.

meat packers, the members of MEAT Fairness do not operate facilities in Canada.

These companies carry out all their activities in the United States, but some of

them would not survive the regulations for Canadian imports as written.

Even under the current trade restrictions, our industry has been hurt and many

opportunities have been missed. My company entered into a joint venture with the

Iowa Quality Beef Supply Cooperative, a group of producers, to form Iowa Quality

Beef LLC and harvest both fed and non-fed beef. The plant began operations in July

2003. Unfortunately, as a direct result of the Canadian BSE cases and resultant

trade disruptions, our venture was compelled to cease operations in August 2004.

Once again, we thank Secretary Johanns for recognizing the need for a prudent

review of the portion of the rule that treats OTM beef differently from OTM cattle.

We must reiterate, however, that it is absolutely imperative that OTM cattle and

beef access remain on the same track. It makes no sense to treat them separately.

Under no circumstances should USDA allow regulatory drift to bring us all back to

the situation we faced just a few weeks ago the prospect of a flood of OTM beef that

would hurt producers and packers alike, without any offsetting access to OTM cattle. Mr. Chairman, I respectfully urge this committee to insist that USDA avoid

such an inequitable, devastating result.

A moment ago, I said OTM cattle and beef should remain on the same track. We

believe that this common track must lead to an open market. We are not in favor

of keeping the border closed. And we believe, from discussions with USDA officials,

that most of the necessary preparatory work for a regulation to permit OTM cattle

imports has already been done.

Therefore, we urge USDA in the strongest terms to move immediately toward a

regulatory outcome that will recognize the safety of both OTM beef and OTM cattle.

There is no basis to suggest. as some read the final rule to do, that OTM beef from

Canada is safer than beef produced in the United States. That is nonsense. And if

the risk is the SRMs, as some have suggested, then again I challenge anyone to tell

this committee that SRM removal is somehow safer in Canada than in the United

States. Once again, that is nonsense. And finally, if the concern is that somehow

SRMs from cattle harvested here might enter the feed chain (despite our well-enforced feed ban), I would only remind you that this risk would also exist in Canada.

I have been speaking today for my own company, but the other members of MEAT

Fairness would have similar things to say. They are geographically diverse, with operations in Wisconsin, California, South Carolina, Texas, Georgia, Minnesota, Nebraska, Washington, Nebraska and South Dakota. They take pride in producing

high-quality, safe products while supplying skilled jobs in mostly rural areas.

These companies are not used to asking for help from Congress, but they do have

a request today. Mr. Chairman, we respectfully ask that this committee advocate

immediate, science-based regulatory action to restore normal trade between the

United States and Canada for both OTM beef and OTM cattle. This step will also

be critical to restoring all our trading relationships worldwide, not only in the highly

publicized Japanese market but in other critically important markets like South

Korea, Hong Kong and Taiwan.

Taking action based on science will also be the best way to maintain consumer

confidence in beef. In taking this regulatory action, it is critical that beef and cattle

move on the same track, and also critical that they move quickly.

Thank you again for the opportunity to testify. I would be happy to respond to

your questions.

STATEMENT OF THE AMERICAN FARM BUREAU FEDERATION

The American Farm Bureau Federation respectfully submits our views to the

committee as it considers the resumption of beef and live cattle trade with Canada.

USDA published a final rule on the classification of minimal-risk BSE countries

in the January 4 Federal Register. The rule also designated Canada a minimal-risk

region with resumption of some live cattle and expanded beef trade eligible to begin

on March 7, 2005. AFBF supports the rule, with the amendment to exclude beef

from cattle over 30 months of age.

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BACKGROUND

In 1997, USDA increased the number of countries and products under import restrictions due to Bovine Spongiform Encephalopathy (BSE). This was a sound action

in response to findings that BSE was the most likely cause of variant CreutzfeldtJakob disease (vCJD) and that the cattle populations in more countries of Europe

were exposed to the agent than previously thought. However, it is appropriate to

reconsider that regulation due to a significant improvement in science that allows

the definition of products that pose a risk with far more accuracy. In addition, there

are several diagnostic tests that allow a more accurate picture of the prevalence of

BSE in each country.

A segment of the cattle population in North America has been exposed to the BSE

agent. Sound science dictates USDA should not completely open our borders allowing undue exposure to the American public and the U.S. cattle herd. However,

USDA should review regulations periodically to ensure that they are appropriate

given the risk picture both domestically and with our trading partners. USDA must

continue to monitor the changing science and world situation in regards to BSE to

prevent additional risks. Farm Bureau has long supported using sound science as

a basis for reopening our markets to ensure continued consumer confidence. We believe that philosophy is most applicable to the current world BSE situation. Border

closings and openings need to be based on sound science, with the foremost goal of

protecting animal and food safety.

CANADA’S DESIGNATION AS MINIMAL RISK

We support the use of sound science and OIE guidance in classifying countries

as minimal risk regions for BSE. Specifically, Farm Bureau agrees with USDA’s assessment of Canada as a minimal risk country and supports allowing additional

products and certain live animals into the United States. In providing documentation for USDA’s evaluation of its risk status, Canada has shown that its BSE-prevention standards are equivalent to our own domestic firewalls, including:

• Prohibition of specified risk materials in human food;

• Import restrictions sufficient to minimize exposure to BSE. Since 1990, Canada

has maintained stringent import restrictions preventing the entry of live ruminants

and ruminant products, including rendered protein products, from countries that

have found BSE in native cattle or that are considered to be at significant risk for

BSE;

• Surveillance for BSE at levels that meet or exceed international guidelines. Canada has conducted active surveillance for BSE since 1992 and exceeded the level

recommended in international guidelines for at least the past 7 years. Canada has

increased surveillance, especially in regions where exposure is known to have occurred, to establish that the prevalence of the disease is extremely low;

• Ruminant-to-ruminant feed ban in place and effectively enforced. Canada has

had a ban on the feeding of ruminant proteins to ruminants since August 1997, with

compliance monitored through routine inspections; and

• Appropriate epidemiological investigations, risk assessment, and risk mitigation

measures imposed as necessary. Canada has conducted extensive investigations of

BSE cases and has taken additional risk mitigation measures in response to these

cases.

IMPLEMENTATION OF THE CANADIAN RULE

As March 7 approaches and live cattle trade resumes, we will work with USDA

to ensure that a return to normalized trade with Canada will proceed in an orderly

manner. We commend USDA for cooperating both internally—with the Animal and

Plant Health Inspection Service (APHIS), Food Safety and Inspection Service

(FSIS), and economic offices—and externally, with the Department of Homeland Security and accredited veterinarians, to make the resumption of trade as smooth as

possible.

The guidance documents USDA has made available to producers, processors and

animal health professionals have made the process transparent, and have clearly

outlined the requirements and expectations associated with the importation of either live cattle under 30 months of age or additional beef products from those

younger, low-risk animals. This educational effort will be increasingly beneficial as

transportation pathways are reestablished and trade across the border increases in

the weeks after March 7. The telephone hotline that has been established will enable potential problems to be handled before they occur, providing information on

a case-by-case basis from import/export specialists at APHIS.

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We urge USDA to continue to communicate the status of trade with the industry

after March 7. From an economic perspective, as well as to evaluate the successful

implementation of the rule in maintaining the speed of commerce, it is critical to

understand how trade is proceeding.

ECONOMIC IMPACT

Resuming trade with Canada is not likely to have a significant impact on the total

supply of cattle in the United States, as the total number of fed cattle projected to

be imported will increase the domestic supply by less than three percent. While

there will be a short-term price decline due to the increased supply of cattle, this

impact is outweighed by the long-term effect of moving toward more normalized cattle trade with Canada. Reestablishing fed cattle with Canada will lead to increased

liquidity within the U.S. fed cattle market, which would likely result in an overall

reduction in market price volatility.

Reopening the Canadian border to cattle trade on March 7 will yield greater market access for U.S. cattle feeders. Recent months have seen a number of U.S. meat

packing plants cease operations or limit production time due to the fact that they

cannot operate efficiently or fully utilize capacity with the limited domestic fed cattle supply. As meat packers shut down or scale back operations, there is a decrease

in the potential pool of cattle buyers that results in a reduction in price competition

for fed cattle. Further, meat packing plant closures may generate increased costs

of production for American cattle feeders as feeders are faced with additional trucking costs and shrinkage losses from transporting cattle to more distant packing facilities.

While AFBF supports the resumption of trade with Canada, it is critical that

trade be re-introduced in a manner that will provide the least possible disruption

to U.S. and Canadian cattle markets. Live cattle trade should marginally increase

over time in order to reduce the potential for any large-scale surge in trade that

would create unnecessary price volatility within the U.S. cattle markets. Farm Bureau supports the USDA rule on resumption of cattle and beef trade as currently

amended. Allowing importation of beef from cattle over 30 months of age without

also allowing for the importation of live cattle over 30 months of age would create

inequity in the cull cow and bull slaughter market that forces undue price pressures

on U.S. meat packers slaughtering cull cows and bulls. Therefore, importation of

beef from Canadian cattle over 30 months of age should be resumed at the same

time as trade in live cattle over 30 months of age and at a point in time after sufficient scientific testing has been performed to assure the safety of importing cattle

and beef over 30 months of age.

We appreciate the opportunity to provide the committee with input, and your consideration of our position as the Canadian minimal-risk BSE rule is implemented.

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