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MANDATORY COUNTRY OF ORIGIN

LABELING, PART II

HEARING

BEFORE THE

SUBCOMMITTEE ON

LIVESTOCK AND HORTICULTURE

OF THE

COMMITTEE ON AGRICULTURE

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

OCTOBER 1, 2003

Serial No. 108–17

(

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

NICK SMITH, Michigan

TERRY EVERETT, Alabama

FRANK D. LUCAS, Oklahoma

JERRY MORAN, Kansas

WILLIAM L. JENKINS, Tennessee

GIL GUTKNECHT, Minnesota

DOUG OSE, California

ROBIN HAYES, North Carolina

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

TIMOTHY V. JOHNSON, Illinois

TOM OSBORNE, Nebraska

MIKE PENCE, Indiana

DENNIS R. REHBERG, Montana

SAM GRAVES, Missouri

ADAM H. PUTNAM, Florida

WILLIAM J. JANKLOW, South Dakota

MAX BURNS, Georgia

JO BONNER, Alabama

MIKE ROGERS, Alabama

STEVE KING, Iowa

CHRIS CHOCOLA, Indiana

MARILYN N. MUSGRAVE, Colorado

DEVIN NUNES, California

RANDY NEUGEBAUER, Texas

CHARLES W. STENHOLM, Texas,

Ranking Minority Member

COLLIN C. PETERSON, Minnesota

CALVIN M. DOOLEY, California

TIM HOLDEN, Pennsylvania

BENNIE G. THOMPSON, Mississippi

MIKE MCINTYRE, North Carolina

BOB ETHERIDGE, North Carolina

BARON P. HILL, Indiana

JOE BACA, California

RICK LARSEN, Washington

MIKE ROSS, Arkansas

ANI ́BAL ACEVEDO-VILA ́ , Puerto Rico

ED CASE, Hawaii

RODNEY ALEXANDER, Louisiana

FRANK W. BALLANCE, JR., NORTH

CAROLINA

DENNIS A. CARDOZA, California

DAVID SCOTT, Georgia

JIM MARSHALL, Georgia

EARL POMEROY, North Dakota

LEONARD L. BOSWELL, Iowa

KEN LUCAS, Kentucky

MIKE THOMPSON, California

MARK UDALL, Colorado

RICK LARSEN, Washington

LINCOLN DAVIS, Tennessee

PROFESSIONAL STAFF

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

KEVIN KRAMP, Chief Counsel

STEPHEN HATERIUS, Minority Staff Director

ELYSE BAUER, Communications Director

SUBCOMMITTEE ON LIVESTOCK AND HORTICULTURE

ROBIN HAYES, North Carolina, Chairman

RICHARD W. POMBO, California

Vice Chairman

DOUG OSE, California

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

TOM OSBORNE, Nebraska

MIKE PENCE, Indiana

ADAM H. PUTNAM, Florida

WILLIAM J. JANKLOW, South Dakota

MIKE ROGERS, Alabama

CHRIS CHOCOLA, Indiana

MARILYN N. MUSGRAVE, Colorado

MIKE ROSS, Arkansas

Ranking Minority Member

DENNIS A. CARDOZA, California

DAVID SCOTT, Georgia

COLLIN C. PETERSON, Minnesota

RODNEY ALEXANDER, Louisiana

KEN LUCAS, Kentucky

LEONARD L. BOSWELL, Iowa

MARK UDALL, Colorado

RICK LARSEN, Washington

JOE BACA, California

PAMILYN SCOTT, Subcommittee Staff Director

(II)

(III)

C O N T E N T S

Page

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

of Virginia, opening statement ............................................................................ 3

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

Carolina, opening statement ............................................................................... 1

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

Minnesota, opening statement ............................................................................ 2

Pomeroy, Hon. Earl, a Representative in Congress from the State of North

Dakota, prepared statement ................................................................................ 5

Ross, Hon. Mike, a Representative in Congress from the State of Arkansas,

opening statement ................................................................................................ 4

WITNESSES

Buckman, R. Kurt, director, Quality Systems Management, Birds Eye Foods,

Rochester, NY, on behalf of National Food Processors Association ................. 16

Prepared statement .......................................................................................... 79

Answers to submitted questions ...................................................................... 82

Connelly, John, president, National Fisheries Institute, Arlington, VA ............. 11

Prepared statement .......................................................................................... 47

Answers to submitted questions ...................................................................... 50

Kushner, Gary Jay, counsel, Grocery Manufacturers of America, Washington,

DC. 14

Prepared statement .......................................................................................... 51

Submitted material on behalf of the American Frozen Food Institute ........ 55

McClung, John, president, Texas Produce Association, Mission, TX .................. 9

Prepared statement .......................................................................................... 46

Place, Jerry M., president, Western Nut Company, Inc., Salt Lake City,

UT, on behalf of the Peanut and Tree Nut Processors Association, Snack

Food Association, National Confectioners Association, and American Peanut

Product Manufacturers, Inc. ............................................................................... 6

Prepared statement .......................................................................................... 41

Stuart, Mike, president, Florida Fruit and Vegetable Association, Orlando,

FL .......................................................................................................................... 7

Prepared statement .......................................................................................... 43

Answers to submitted questions ...................................................................... 45

Warren, Hugh, executive vice president, Catfish Farmers of America,

Indianola, MS ....................................................................................................... 13

Prepared statement .......................................................................................... 50

SUBMITTED MATERIAL

Brown, Reginald, Florida Tomato Exchange, statement ...................................... 86

Fresh Produce Association of the Americas, statement ....................................... 88

George, Boyd, chairman and chief executive officer, Alex Lee, Inc., statement . 84

(1)

MANDATORY COUNTRY OF ORIGIN LABELING,

PART II

WEDNESDAY, OCTOBER 1, 2003

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON LIVESTOCK AND HORTICULTURE, COMMITTEE ON AGRICULTURE, Washington, DC.

The subcommittee met, pursuant to call, at 1:02 p.m., in room

1300 of the Longworth House Office Building, Hon. Robin Hayes

(chairman of the subcommittee) presiding.

Present: Representatives Pombo, Ose, Osborne, Rogers,

Neugebauer, Goodlatte [ex officio] Ross, Cardoza, Scott, Peterson,

Alexander, Lucas and Boswell.

Staff present: Pam Scott, subcommittee staff director; Pete

Thomson, John Goldberg, Callista Gingrich, clerk; Claire Folbre,

Elyse Bauer, Teresa Thompson, Andy Baker, and Lisa Kelley.

OPENING STATEMENT OF HON. ROBIN HAYES, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH CAROLINA

Mr. HAYES. I would like to call this meeting to order, and ask

the witnesses to come to the firing line, I mean to the witness

table.

The hearing of the Subcommittee on Livestock and Horticulture

to review the mandatory country of origin labeling will come to

order.

I would like to thank, first, all of our witnesses for their willingness to participate in today’s subcommittee hearing to review the

mandatory country of origin labeling law included in 2002 farm

bill. As you all know, the full committee held a hearing to review

the law June 26, and Chairman Goodlatte mentioned then that the

subcommittee had an interest in holding further hearings on this

issue. Let me add at this point, your time and your energy and the

expense to be here is much appreciated. I know this is a difficult

process, but the information, the wisdom and insight that you

bring to this committee and to the Hill is very valuable and we listen carefully, and the things that you bring to our attention are the

reasons on the occasion that we craft sound policy that we do that.

Today’s hearing will focus on how the implementation of the law

could specifically affect the fruit, vegetable, fish and peanut industries. After the full committee hearing, I believe the livestock industry’s views are better understood, but I believe that other covered commodities need additional attention as to how they will be

affected. By now, most of us know the history of how country of oriVerDate 11-SEP-98 10:45 Feb 23, 2004 Jkt 091860 PO 00000 Frm 00004 Fmt 6633 Sfmt 6633 F:\DOCS\10817 HAGRI PsN: HAGRI
2

gin labeling became law, and how much time and effort the House

Agriculture Committee has put into this issue. The most recent action on country of origin labeling was the House agriculture appropriations bill for 2004, which includes a provision to delay implementation of the law for beef, lamb and pork for 1 year. During

House consideration of the appropriations bill, there was an attempt to remove this provision, but that amendment was defeated.

We are now anxiously awaiting for the Senate to complete their

version of an agriculture appropriations bill. Additionally, many of

us are eager for USDA to publish the proposed rule on how the industry and producers will have to comply with the law when it becomes mandatory on September 30, 2003. The sooner this rule can

be released, the more time it will give the industry to properly review it and make comments to USDA.

My understanding from USDA is that there will be a 60-day comment period after the rule is announced, which should be by the

end of October. Once it is published, the subcommittee welcomes

all comments of those who have an interest in these regulations,

and I would anticipate that the committee will hold additional

hearings. It is important that we keep the communication open as

this process continues.

Again, I thank the witnesses participating, and I look forward to

today’s testimony. We will enforce the 5-minute rule stringently—

that is the light system in front of you—and we do this not to restrain your testimony in any way, but to make sure that everyone

has the chance to fully participate. After the original witnesses testify, then we will have however many rounds of questions are necessary to cover the issues on the minds of our members. If you happen to have left something out of your opening statement, feel free,

in addition to answering the questions, concise as possible, but to

use that time to additionally clarify or expand on some ideas that

you may have already had. Along the same vein also, if you have

your written statement, we all can read that. I would suggest you

may want to use your time to talk about expanding on that, but

again, that choice is up to you.

We appreciate you being here. We welcome your interest and

your input, and at this time, I would like to turn to my friend Mr.

Collin Peterson from Minnesota, and to welcome Mr. Boswell, from

Iowa, to our hearing. Others will be coming and going. Don’t think

of that as any particular interest or lack thereof to you and the

subject. A lot of other things going on, and Rodney Alexander joins

us as well. Mr. Peterson.

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

Mr. PETERSON. Thank you, Mr. Chairman, and I want to thank

you for your leadership in calling this hearing.

As I assume everybody knows, I have been involved in this issue

to some extent and we have been doing considerable work on trying

to make the underlying statute more workable, if and when this

ever comes to fruition, and I have introduced a bill that has become

known as COOL Lite, which mostly focuses on meat issues, but I

just want to say to the witnesses, I think that it is likely that this

3

effort to delay this is going to fail, and that is part of why I introduced this bill. I think we need to start thinking about what happens if the attempt to delay this does fail and we end up with a

mandatory system.

Because the underlying statute, in my opinion, is not well-drafted, and we are going to end up with a problematic rule, I think,

if we use this underlying language for the basis for that rule, this

is not about food safety. Country of origin labeling is a marketing

issue So, I don’t think we need to make it as complicated as some

people want to make it. I don’t think we need to have third party

verification and all this sort of thing, because this is a marketing

issue. We are not talking about health and safety issues, and so

what I am trying to do is if, in fact, this is going to go ahead and

we are going to have a mandatory situation, that we make this as

workable as possible.

If you would look at my bill and if you have got some ideas that

would help your particular situation, I would welcome the input

from you, because I heard a rumor today that the USDA, even if

this goes ahead with the elimination of the funding, that they were

going to go ahead with this rule anyway and just make the producers pay for it, or the retailers. So, I think eventually, we are going

to have this one way or another, and what I am trying to do is do

it with as least cost and as least hassle to people as we can possibly do.

Mr. Chairman, I have an intelligence meeting at 2 o’clock, so I

am probably going to have to leave before we get to questions, and

I have got some written questions that I would like to submit to

the witnesses if that would be all right.

Mr. HAYES. No objection? So ordered.

Mr. PETERSON. I appreciate that, and I see the ranking member

is here, so I appreciate the——

Mr. HAYES. You have just been demoted back to your normal position.

Mr. PETERSON. That is right.

Mr. HAYES. I would like to welcome Ken Lucas from Kentucky,

and our full committee chairman, Mr. Goodlatte from Virginia has

joined us, so at this point, I am going to recognize Mr. Goodlatte

for any opening comments he might have.

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

OF VIRGINIA

The CHAIRMAN. Well, thank you, Mr. Chairman. I would like to

thank you very much for calling today’s hearing.

This is a very important issue, and I very much appreciate the

participation of all of our witnesses today. As I am sure everyone

already knows, the House Agriculture Committee has given a great

deal of attention to the issue of mandatory country of origin labeling. Most recently, the full committee conducted a hearing on June

26. Mr. Hayes has graciously taken up the reins and today, the

subcommittee will be focusing on some of the areas we did not complete cover in June, including fruits and vegetables, seafood and

peanuts. I have made no secret about the fact that I believe mandatory country of origin labeling is a bad idea for producers.

4

Today, as in previous meetings, markups, floor debates and hearings I have participated in, I expect that we will be faced with a

familiar dilemma. There is simply no consensus among our constituents about the value of mandatory of labeling. Inevitably, some

will oppose it and some will support it. I have observed this across

all commodities and regions of the country and it only adds to my

tremendous sense of foreboding about the law, which will be implemented 1 year from today. However, there does seem to be a growing consensus that the implementation of this particular law is

going to have adverse consequences for producers. These consequences have led to language in the agricultural appropriations

to delay implementation and to the introduction of legislation modifying the existing law. A recent GAO report on the subject raised

additional questions and provided very few answers. One thing

that I can assure you of is this: the House Agriculture Committee

will continue to give this issue close scrutiny and provide a forum

for the ongoing debate. I anticipate that the administration will

have completed the proposed final rule and economic analysis by

the end of this month. The committee will give this due consideration and chart a course from there.

Mr. Chairman, thank you very much for venturing forth in this

minefield, and I look forward to working very closely with you as

we attempt to address these issues.

Mr. HAYES. Thank you, Mr. Chairman, and also, we have been

joined by Coach Osborne on my left, and at this time, with the

proper warning, Mr. Ross, I have already made a side deal with the

catfish guy here. We are going to have a fish fry and then we are

going to put it on your tab. We thought that would be the right

thing to do.

But in response to your comments, Mr. Chairman, I reflect your

views as well, and in reading the testimony last night, and I want

to identify who it was to see if you all notice it, but one of the folks

that is in favor of this mandatory labeling, as you read through the

testimony, they are in favor of it, but they want the rule that

would make it mandatory all voluntary. So, that adds to the confusion. My friend and ranking member, Mr. Ross from Arkansas is

recognized.

OPENING STATEMENT OF HON. MIKE ROSS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ARKANSAS

Mr. ROSS. Thank you, Mr. Chairman, and on a side note, as a

result of the dumping of these so-called catfish from Vietnam,

which are no more related to a catfish, if you look at a species

chart, than a cat is to a cow, as a result of all of that, the price

of catfish is so low that we won’t be out a whole lot of money in

feeding everybody catfish, and that is an unfortunate note to make,

but I am sure we can arrange to have an old-fashioned catfish fry

here in Washington for the Members. I will even do the cooking.

Mr. Chairman, I would like to——

The CHAIRMAN. Would the gentleman yield?

Mr. ROSS. Yes, I will yield, Mr. Chairman.

The CHAIRMAN. Maybe we could solve the problem by having

mandatory accurate fish species labeling, as opposed to country of

origin.

5

Mr. ROSS. We actually got that passed last year. We now have

that, and those fish that are raised in cages in polluted rivers in

Vietnam can no longer be called catfish under Federal law. Mr.

Chairman, I would like to thank you for holding this hearing to

provide members of this subcommittee the opportunity to review

the mandatory country of origin labeling law and its effects on producers as well as retailers and everyone that falls in between.

As all of my colleagues are aware, the Farm Security and Rural

Investment Act was just passed last Congress, and the regulations

are still being finalized within the administration and it is my belief that the hearings that Chairman Hayes and his staff have outlined for the remainder of the 108th Congress at the request of

many members on both sides of the aisle are not only our duty with

respect to oversight, but also will be very productive. These discussions allow the membership of this subcommittee to hear the good

and the bad about the law, so that we can make adjustments as

needed and hopefully, at the end of the day, have what I call some

common sense brought to the table on this issue, and find a way

to make it work.

Again, I thank you, Mr. Chairman, for your time and attention

to this matter, and I look forward to working with you as we address this issue together in the coming days, and further, I appreciate the openness by which this hearing was formulated and I look

forward to hearing from the witnesses who have gathered here

today. Thank you, Mr. Chairman.

Mr. HAYES. Thank you, sir, and at this time, other statements

for the record may be included.

PREPARED STATEMENT OF HON. EARL POMEROY, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF NORTH DAKOTA

I appreciate the opportunity to submit my views regarding the implementation of

mandatory country of origin labeling by the U.S. Department of Agriculture. I believe the discussion of this issue is timely given the status of USDA’s rulemaking

and I commend the Chair and ranking member for holding this hearing.

When Congress passed the country of origin labeling provision in the 2002 farm

bill, the intent of the legislation was straightforward: provide consumers with clear,

simple information on where their food is grown or raised. This labeling provision

was an important victory for consumers and producers alike.

Consumers have demonstrated an interest in such information and their demand

for such information only continues to grow as world trade in agricultural products

increases. Consumers support country of origin labeling in overwhelming numbers,

86 percent by one account. This information should be easily acquired and provided.

However, while the intent of the legislation was simple, the implementation of the

regulation has been anything but. In fact, the regulations as issued by USDA strive

for a burdensome, costly system that succeeds only in turning supporters of labeling

into opponents of labeling.

I believe the August 2003 report by the General Accounting Office summed it up

well by pointing out that the assumptions underlying USDA’s $1.9 billion estimate

for the burden on industry are ‘‘questionable’’ and ‘‘not well supported.’’ In fact,

USDA estimated the record-keeping costs of complying at a much higher rate than

they estimated for other similar programs.

Additionally, the GAO Report countered the point raised by labeling opponents regarding our trade partner concerns over the policy. Specifically, GAO surveyed the

practices in 57 countries, which combined account for about 94 percent of US foreign

trading activity for food and animals. Of these 57 countries, 48 require country of

origin labeling for one or more of the commodities covered under the law as passed

by Congress under the farm bill. Our consumers in the United States deserve the

same information as that provided to consumers overseas.

6

I hope the hearing today sheds light on the issues raised in the GAO report and

furthers the committee’s understanding of the problems underlying the implementation of this legislation.

Mr. HAYES. I would like to identify by name and location our fine

panelists. First would be Jerry Place, president, Western Nut Company; Mike Stuart, Florida Fruit and Vegetable; John McClung,

Texas Produce Association; John Connelly, National Fisheries Institute; Hugh Warren, who is going to put a fish fry, with the Catfish Farmers; Mr. Gary Kushner, and Mr. Kurt Buckman. Mr.

Place, if you would begin, a welcome.

STATEMENT OF JERRY M. PLACE, PRESIDENT, WESTERN NUT

COMPANY, INC., ON BEHALF OF THE PEANUT AND TREE NUT

PROCESSORS ASSOCIATION, SNACK FOOD ASSOCIATION, NATIONAL CONFECTIONERS ASSOCIATION AND AMERICAN

PEANUT PRODUCT MANUFACTURERS, INC.

Mr. PLACE. Thank you, Mr. Chairman, and members of the subcommittee. My name is Jerry M. Place. I am the president of the

Western Nut Company, out of Salt Lake City, Utah. I am a member of the Board of Directors of the Peanut and Tree Nut Processors Association. I also appear today on behalf of the members

of the Snack Food Association, the National Confectioners Association and the American Peanut Product Manufacturers, Incorporated.

I come before you today because of the grave implications mandatory country of origin labeling requirements for peanuts will

have on our industry and, more particularly, small business such

as my own. Our company was founded in 1966. We are a familyowned small business that processes packages, shells, roasts and

salts, mixed nuts, and we distribute our products at whole, distributor and retail pricing.

We employ 30 to 35 full-time employees and that number explodes in excess of 250 employees during the fourth quarter of each

calendar year. It is difficult for me to believe that the closure of

small business operations such as our own was the intent of Congress when it included the mandatory country of origin labeling

provisions in the most recent farm bill. However, this will be the

likely outcome unless you in Congress correct the problem. Implementation of mandatory country of origin requirements is simply a

logistical and economic impossibility for a company our size and

would, in effect, put us out of business.

Even though we are small, we have in excess of 1,189 stock keeping units that contain nuts. Of this total, 520 SKUs contain peanuts. The heart of our business is centered around gourmet nuts

that are presented in a custom, award-winning package. Under a

mandatory country of origin labeling program, as currently contemplated by USDA, we would be required to pre-print each and

every one of our gift boxes in advance in every possible combination

of variations of country origin, including the United States. We do

not have adequate inventory space to house such a vast inventory

of packaging, and additionally, it would be virtually impossible for

us to track the movement of individual peanuts as they move

through our processing operation. I have enclosed with my written

statement one of our season 2003 retail catalogs that will give you

7

an idea of the complexity involved in providing appropriate labeling

for each different product.

One might say, well, simply buy domestic peanuts, and I want

to say, we do, but pray tell what do we do in a year, when the domestic peanut crop fails, as it has periodically done in the past, and

there is inadequate supply of domestic peanuts? Furthermore, how

would the small U.S. business nut processor compete price-wise

with imported packaged peanuts that carry a country of origin labeling of a nation where the peanuts were processed and packaged

rather than the actual origin of the peanut?

Some of the larger corporations in our industry may be able to

comply with the proposed regulations because they can push the

costs back on the grower or spread the cost over huge volume.

Other large corporations have simply stated that they are investigating the option of relocating to Ontario, Canada, or moving to

Mexico. Still others have indicated the possibility of exiting the

peanut business altogether and concentrating on almonds and

cashews. None of these are alternatives or an option for a company

our size. We would simply be out of business.

I think I speak for all of the little guys in our industry when I

say please reconsider this whole idea of mandatory country of origin labeling for peanuts. Why would it possibly be in the best interests of our nation to encourage large producers to leave the country, put small producers out of business and discourage new startup operations? And perhaps most importantly for Members of Congress who represent peanut-growing regions, what will all of this

to the peanut growers here in the United States? That is one question that I can answer with confidence. It means reduced returns

for producers and decreased customer demand for snack peanuts as

retail costs go up to pay for the mandatory labeling requirement.

In short, everyone loses, nobody wins. Does this economic or political sense? I think not.

In the most emphatic of terms, I respectfully ask you to move as

expeditiously as possible to correct this situation, so that we can

avoid the unintended but nevertheless adverse consequences of

mandatory country of origin labeling for peanuts.

Thank you very much.

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

of the hearing.]

Mr. HAYES. Thank you very much, Mr. Place. That is the reason

we have you all here, to convince yourself of the wisdom of the

chairman’s position. Just kidding. We do appreciate you being here.

Next, we have Mr. Michael Stuart, who has a differing point of

view, Florida Fruit and Vegetable Association. Welcome, Mr. Stuart. Thank you.

STATEMENT OF MICHAEL S. STUART, PRESIDENT, FLORIDA

FRUIT AND VEGETABLE ASSOCIATION

Mr. STUART. Thank you very much, Mr. Chairman. On behalf of

our producer members, I greatly appreciate the opportunity to

share our views with the subcommittee on implementation of the

country of origin labeling provisions of the 2002 farm bill. The labeling provisions for fruits and vegetables are sound in our opinion

8

and provide the Department of Agriculture sufficient flexibility to

create a workable set of regulations for the produce industry.

At the end of the day, however, the success or failure of the law

is going to depend greatly on whether the Department’s regulations

are flexible and workable, or draconian and costly. Over the past

several months, considerable controversy has developed over

COOL. Opponents have labeled the law fatally flawed and have

urged its repeal in Congress, and while the focus of the criticism

has been the law itself, in reality, it is the Department’s voluntary

guidelines that have generated most of the concern within the industry.

The guidelines were published by the Department in October

2002, just about a year ago, and they were highly prescriptive in

nature, and failed to recognize or take advantage of existing statutes such as the Perishable Agricultural Commodities Act, which

regulates transactions between produce sellers and buyers, or the

Tariff Act of 1930, which requires labeling of packaged products.

USDA’s cost estimates of the impact of the guidelines fueled the

controversy, by suggesting that the industry would be hit with a

$2 billion price tag. A recent GAO study questioned the assumptions used in the analysis, and further recommended that the Department collaborate with industry to identify existing programs as

alternatives for accomplishing many of the law’s requirements.

Over the last year, the Department has received hundreds, if not

thousands, of comments on how this law might be implemented in

a more reasonable fashion. We, and many other groups in the

produce industry have submitted a variety of comments to do just

that, and I would like just today to share a couple of those with

you.

First, point of purchase notification should be simple and

straightforward. Congress identified a variety of notification methods that can be used at the discretion of the retailer. We have suggested that the regulations be similarly flexible in the terminology

used to denote origin. For example, the guidelines mandate that

grown in country X or produce of country Y be used. It is way too

prescriptive. In the regulations, we have recommended that the Department accept the listing or marking of the individual country

name or recognized abbreviation such as USA as being sufficient

to meet the requirements of the statute.

We also strongly support the Department incorporating a common sense approach in evaluating the effectiveness of the notification system selected by the retailer. The test should be whether the

consumer can make a reasonable decision regarding the country of

origin of the produce at the point of sale, not whether 100 percent

of the fruit is stickered.

Second, record-keeping isn’t required under the law. Again, the

law gives the Secretary the option of mandating a verifiable recordkeeping audit trail or not. The requirements contained in the

guidelines create a tremendous burden on the entire industry and

are unnecessary. Florida’s country of origin law has functioned well

since 1979 without a mandated record-keeping system, and we

don’t believe one is warranted here. However, in the event the Department elects to implement a record-keeping mandate, we have

suggested that it be based on the current requirements of PACA.

9

In addition, Florida’s law operates under the presumption of

truthfulness of the information provided to the point of retail sale.

The Department should take the same approach in developing regulations for COOL. There should be downstream liability for the

validity of origin information provided by a product’s supplier, as

is the case for misbranding currently under the PACA.

Mr. Chairman, in summary, FFEA believes COOL is a fundamentally sound law that will provide consumers with information regarding the country of origin of the produce they purchase

at retail supermarkets. In implementing the law, the Department

has the discretion to make it as simple or as difficult as possible

for the industry. We have urged them to take the simple approach.

We greatly appreciate the efforts the Department has made over

the last year to seek input from the industry on this issue, both

formally and informally, and through the Federal Register and

through listening sessions. We also appreciate the efforts of this

committee to hear the views of the industry. The suggestions made

by our organization and others have been well-spoken, and there

are numerous organizations within the fruit and vegetable industry

across this country that strongly support this law.

We are hopeful that the draft regulations will incorporate the

flexible, common-sense approach recommended by our industry,

and quite frankly, the sooner, the better.

Thank you.

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

of the hearing.]

Mr. HAYES. Thank you, sir. Next, Mr. McClung.

STATEMENT OF JOHN M. MCCLUNG, TEXAS PRODUCE

ASSOCIATION

Mr. MCCLUNG. Mr. Chairman, members of the subcommittee, my

name is John McClung, and I am the president of the Texas

Produce Association, headquartered in the Rio Grande Valley,

Texas.

I want to thank you and commend you for holding this hearing

today. The subject, obviously, is one that is probably as controversial as anything that has been before the fresh fruit and vegetable

industry in a long while, and we very much appreciate your attempt to figure out how best to deal with it.

On late August of just a few weeks ago, the Board of Directors

of the Texas Produce Association unanimously voted to attempt to

rescind the current country of origin law, thus reversing the position we had taken give or take a year and a half ago, and obviously, highlighting the change in thinking on the members’ part.

At the same time, we, of course, recognize that there is a Federal

rulemaking underway with the existing law, and that we all are

going to have to wait and see what comes out of USDA when that

regulation issues, and that any attempt to take action in the Congress probably would be premature until we know exactly what we

are dealing with. And in that regard, I might point out the Texas

industry’s posture is entirely consistent with the position of the national produce organization, the United Fresh Fruit and Vegetable

Association, that we should wait to see what USDA’s regulations

are going to be before informed decisions can be made on possible

10

additional actions, including seeking congressional intervention.

Nonetheless, my Board felt that the law as currently written is too

prescriptive to allow the U.S. Department of Agriculture to develop

regulations that are acceptable to the industry. We shall see if that

is true or not.

The members also felt that the basic premise of the law, that

U.S. consumers would prefer to buy domestically grown fruits and

vegetables if they only knew they were U.S. grown is contrary to

what we know about the variables that consumers most often use

in making their purchasing decisions. The only likely exception

would be when there is a food safety scare of some sort, and then

we generally lose the sector anyway.

And finally, the Board felt that the cost and disruption associated with compliance probably would outweigh any benefits. The

jury, again, is out on that matter until we can digest the regulations.

Interestingly, my association’s Board is made up largely of grower/shippers who, without exception, are also importers of Mexican

produce, and I would like to come back to the significance of that

in just a moment.

As I think we all know, the retail community has mounted an

enthusiastic campaign to convince their fruit and vegetable suppliers that country of origin labeling is a bad idea for a lot of reasons,

and while my shippers are well aware of that systematic, I don’t

think it looms over-large in my Board’s position. We are not, after

all, unaccustomed to being at odds on occasion with the buyers on

issues of mutual interest, and simply are hopeful that the differences will be thoroughly aired and where there is legitimacy to

the threats of upheaval, that the best possible resolution can be

reached.

I must add that some retailers are insisting on elaborate assurances of compliance with anticipated provisions of the law and regulations from their suppliers before the regulations are scheduled

to take effect and even before they are published. These demands

are, of course, impossible to comply with for the most part, but they

are more than mere irritants, as they often include audit requirements, hold harmless agreements and other provisions that are

simply unacceptable to the supply side, and one gets the clear impression that something more than buyer eagerness to comply with

the law is at play here.

The Texas industry’s view on country of origin labeling is obviously colored by a transitional role as a supplier of fresh fruits and

vegetables to the Nation. Just 20 years ago, Texas was, by most accounts, ranked as third largest producer of fruits and vegetables in

the United States, behind only California and Florida. By 2001,

when the Congress appropriated money for specialty crop grants,

and those dollars were distributed according to each State’s relative

rank as a supplier, Texas was tied for 10th with New York.

While many factors contributed to that decline in the State’s domestic ranking, arguably the most telling was and continues to be

pressure on domestic production from Mexico. Last year, some

180,000 semitrailer loads of produce entered the United States

from Mexico, just under 40 percent of them through Texas. Each

load is, give or take, 44,000 pounds. I don’t have to tell you that

11

is a lot of onions and cabbage and melons and mangoes and other

commodities. Texas producers and shippers, seeing the writing on

the wall, going back many years, are heavily involved in growing

and packing and marketing Mexican produce. Very few, if any, vegetable shippers, remain in Texas who are not sourcing in one way

or another from Mexico. As a result, while Texas production has

slipped, the State retains its rank as a top supplier to the rest of

the country, which is why I say we are going through a transition,

and one thing we know is that consumers don’t really care where

their commodities come from most of the time, so long as they are

of high quality, display well and priced right. These importers do

not impose country of origin labeling on the grounds that it will

cost them market share, but they generally do oppose it as an expensive and burdensome requirement of little or no practical value.

They particularly note that there is no evidence consumers are

clamoring to know where their produce comes from in most instances.

Clearly, the Congress is considering what it might do to fix this

law if, in fact, it proves to be hopelessly broken. It might well be

that converting to a voluntary program would be an option. In any

event, we do greatly appreciate the opportunity to be here today

and to work with you in the future as you deal with this issue.

Thank you very much.

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

Mr. HAYES. Thank you, sir. I feel badly making you talk so fast.

Get some oxygen out there to you. Next, we have Mr. John

Connelly, the president of the National Fisheries Institute. Welcome.

STATEMENT OF JOHN CONNELLY, PRESIDENT, NATIONAL

FISHERIES INSTITUTE

Mr. CONNELLY. Yes, Mr. Chairman. I noticed you wanted a fish

fry, and so if you promise to bring the catfish, I have some cod and

some shrimp here that I will add into the mix, and we will be

ready to go for a good fish fry.

By way of introduction, because NFI isn’t a typical association

that comes before the Agriculture Committee, the National Fishery

Institute represents folks that are in the aquaculture area of fishing, the wild capture area, but also importers, distributors and retailers. Our mission is to promote fish and seafood as a healthy

food choice that is good for your heart, weight loss, et cetera.

In addition to the written testimony we provided, I would like to

concentrate on three items. The first, we oppose mandatory country

of origin labeling primarily because of the reason that Mr. Peterson

raised. This is a marketing issue, and if it is a marketing issue,

the market should decide what should be done. There already are

requirements and rules within the FDA and FTC about what can

be labeled as American product. These cod filets right here, I just

happened to go to Safeway the other night and picked up some

fish, and this is labeled as a product of the United States, because

this company feels that it is in their competitive advantage to have

a product that is labeled as a product of the United States. It

meets all of the FDA and FTC requirements, so that is the market

12

at work. It is allowing the market to decide if the consumer is

going to want U.S. fish and seafood, and they will label it as such.

So, while we oppose mandatory country of labeling, we did want

to highlight two items within the existing voluntary guidelines that

may end up being the regulations coming out of USDA. The first

is the processed seafood issue and the second, how commingled or

blended products have a specific impact within the fish and seafood

world.

More than 85 percent of the fish and seafood we eat as American

consumers is processed in some way, that means shrimp is peeled,

or it is breaded or battered in some way. We already have existing

laws that dictate how those products have to be labeled. The Customs Bureau, the Customs Agency already dictate how things have

to happen.

This is a bag of shrimp from Thailand, and it is labeled as a

quality product of Thailand, because it has the requirements that

Customs has laid out for what has to be labeled for certain kinds

of products. So, this is already a product that is labeled according

to the Customs Department.

What we’re concerned about in processed seafood is a requirement that Customs will come up with and that USDA will come

up with, and if they are different, where does that put both the

consumer and the processor of the fish and seafood? What agency

should they comply with? If one says go ahead and label it and the

other says don’t label it, obviously we will put the American company, in this case, in a bad position. So our recommendation is to

stick with what the Customs Agency has already decided is protective of the American consumer. So, we would not suggest that we

have duplicative or conflicting regulations.

In the area of combined or commingled or blended products, we

believe that the voluntary guidelines demonstrate a lack of understanding of how a processing plant actually works. Anyone that

worked in a manufacturing facility when they were younger understands that volume is important for fish and sea, in that running

a plant all the time is very, very important, because that is the

safest way to run a plant. When you start something up or shut

it down, that tends to be where accidents happen.

Customers look at seafood and fish by size, by weight, by category, by cut, by quality. The last thing typically a consumer looks

at is where that fish came from. When you go and buy shrimp, you

are looking for a certain count of shrimp, certain size of shrimp.

Can you put it on the barbecue and have it cook up, or is it going

to fall through the slats? The first thing you look at is not probably

does this come from a certain area of the world. The way the USDA

guidelines now read or are concerned, if they are formed into regulation, is it will require companies to label products in order of the

percentage of the product coming from a certain country, and then

label it down from that. So, this product had a requirement that

had product of Thailand, Vietnam, U.S., Mexico, et cetera, and the

challenge there is that each time that mix of product is processed,

the company is going to have to stop the manufacturing process,

and that is an extraordinarily inefficient way to run your facility.

We think a much more effective way to get out of this, if we are

going to have to have mandatory country of labeling is to say that

13

product may contain fish or seafood from a number of countries,

rather than going through the very prescriptive manner of labeling

if by percentage or weight.

In summary, and if I oppose this country of origin labeling because it is duplicative, would be confusing to the public and it is

unnecessary, we submitted written testimony and we would just

like to highlight the processed and commingled issues.

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

Mr. HAYES. Thank you very much. Next, we have Mr. Hugh Warren, the executive vice president, Catfish Farmers of America.

STATEMENT OF HUGH WARREN, EXECUTIVE VICE PRESIDENT,

CATFISH FARMERS OF AMERICA

Mr. WARREN. Mr. Chairman, ranking member and members of

the subcommittee, I appreciate this opportunity to provide testimony in support of the country of origin labeling law.

I am Hugh Warren, and have been executive vice president of

the Catfish Farmers of America since 1989. CFA is a trade organization representing the interests of the farm-raised catfish industry

with current membership representing 40 States. Our producer

members, farmers, account for approximately 80 percent of the

total catfish production. Over the past two decades, the U.S. catfish

industry has grown from a relatively unknown segment of the U.S.

seafood industry to the Nation’s largest aquaculture industry, accounting for over 70 percent by volume and over 60 percent by

value, of all U.S. aquaculture production of fish. Because farmraised catfish has become a widely accepted food item throughout

much of the United States, the demand for catfish should continue

to increase as American consumers increasingly turn towards fish

as part of a safe and nutritious diet.

The implementation of COOL should prove a minor issue with

relatively no additional costs in the process of the marking of catfish. For the most part, the catfish industry already meets the

COOL requirements through such things as the mandatory Food

and Drug Administration’s hazard analysis critical central control

system for food safety. This HASSA plan requires processors of fish

and fisheries products to identify hazards that are recognized with

their products, and to help the companies then formulate control

strategies. The FDA has identified certain possible hazards in the

growing of catfish. The preferred method of control is for the processing plant to have on file a document updated each year by the

producer farmer, identifying the farm and producer on a guarantee

agreement form. This form certifies that the fish shipped to the

processor are hatched, raised and harvested in the United States.

By virtue of the process of being in the United States, the requirements for COOL in the United States are being met.

In addition, under the Code of Federal Regulations, the food labeling regulations requires the name and place of business of the

manufacturer, packer, or distributor of food to be identified on the

label. The statement of the place of business shall include the

street, city, State and zip code.

Many of the Nation’s trading partners already require their own

version of COOL. For example, the European Commission labeling

14

decision for seafood, a new labeling system for fish and fishery

products have been introduced by the European Commission. The

new rule, which has been in effect since January 2002, stipulates

that he label should have the following information on all fish

products at the retail counter, whether the product is foreign, cultivated, or caught in the wild in fresh or seawater. The country

where the fish underwent its final processing state and the commercial name of the species being used for local sales, along with

the common term used in each member State.

In an official state, the Commission reported that considering the

wide variety of species supplied, the EU considers it necessary to

provided consumers with at least the basic minimum of information on the characteristics of the aquaculture products. The new labeling rule based on the traceability procedure would impose additional responsibility on retailers, transporters and producers who

have to keep accurate records on these aspects so that the control

officials can trace back the origin of the product and keep better

control over quotas.

In the United States, the producers and the processors have

worked diligently to ensure that farm-raised catfish is safe, wholesome and is just plain good to eat. I cannot imagine why anyone

would want to hide the origin of their product and to deny the consumer an informed choice.

Thank you, Mr. Chairman, for allowing me to testify today, and

certainly, I look forward to answering any questions any of the

members might have.

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

Mr. HAYES. Does your issue get solved by Mr. Connelly’s comment, if he uses the Customs procedure there? Does that solve the

problem?

Mr. WARREN. That would certainly be a big help. However, I do

want to go back to Mr. Peterson’s comments about the burden of

third party verification. It would be hoped that a farmer’s signature to a statement that he indeed was the owner of these fish or

brood fish that were hatched and raised and grown without having

so much substantial background verification.

Mr. HAYES. Thank you, sir. Mr. Gary Kushner, counsel, Grocery

Manufacturers of America.

STATEMENT OF GARY JAY KUSHNER, COUNSEL, GROCERY

MANUFACTURERS OF AMERICA

Mr. KUSHNER. Thank you, Mr. Chairman and members of the

subcommittee, and good afternoon. My name is Gary Jay Kushner,

and I am pleased to testify today on behalf of the Grocery Manufacturers of America. I am also pleased to represent that the American Frozen Food Institute endorses my testimony.

I don’t want to jump ahead of Mr. Buckman, who is an old friend

and colleague, but I noticed that he will be testifying next on behalf

of the National Food Processors Association; and it is my honor to

sit beside him, because Birds Eye is also a very valued member of

GMA and AFFI. GMA has consistently opposed the additional mandatory country of origin labeling requirements imposed by the 2002

farm bill. Products for which country of origin labeling is approVerDate 11-SEP-98 10:45 Feb 23, 2004 Jkt 091860 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 F:\DOCS\10817 HAGRI PsN: HAGRI
15

priate are already labeled in accordance with Customs law and regulations. Additional labeling will do nothing to enhance the safety

of the domestic food supply or the health of consumers, but it will

complicate the processing and marketing of food products to the ultimate detriment of producers, consumers and food manufacturers

alike.

Presumably, this legislative mandate was intended to protect domestic producers of raw agricultural products, and perhaps, even

to provide American consumers with more information about some

of the products that they buy. Particularly as administered by the

U.S. Department of Agriculture, however, the farm bill’s requirements will result in a duplicate, confusing and costly labeling

scheme that will actually harm the very people that Congress

sought to help. Accordingly, GMA urges this subcommittee to support legislative efforts to amend the law by rescinding the country

of origin labeling mandate. At the very least, we ask that Congress

ensure strict oversight of USDA’s implementation of its new labeling authority to reduce unnecessary and unreasonable regulatory

burdens.

A summary review of USDA’s interim voluntary labeling guidelines illustrates precisely the kind of regulatory abuse that the

country of origin legislative mandate invites. Of significance, although Congress, in granting USDA this new authority, expressly

exempted processed foods from additional labeling, USDA’s guidelines interpret that exception so narrowly as to render it meaningless. For example, the guidelines require that frozen produce,

mixed frozen fruits and vegetables, frozen seafood and shelled,

roasted, packaged peanuts bear country of origin labeling. Not only

are these products, when imported, already labeled under Customs

law, but they are also considered processed under many other FDA

and USDA regulations. Specifically, FDA defines ‘‘processed food’’

to include ‘‘any raw agricultural commodity that has been subject

to processing, such as canning, cooking, freezing, dehydration and

milling.’’

USDA’s fruit and vegetable grading regulations similarly define

processed product to mean any ‘‘fruit, vegetable, or other food product which has been preserved by any recognized commercial process, including, but not limited to, canning, freezing, dehydrating,

drying . . .’’ There are numerous other FDA and USDA regulations

that similarly define processing as broadly and more broadly, much

more broadly, than it would be defined under USDA’s guidelines.

Country of origin labeling of these processed products is incompatible with historical regulatory precedent and potentially inconsistent with current labeling requirements. USDA’s unreasonably

narrow definition of processed food would also encourage processors

either to produce their products abroad or use only imported ingredients. Under USDA’s guidelines, for example, mixed, frozen

produce processed entirely outside the United States from foreign

origin produce need only bear the country of origin of the finished

product. Mixed, frozen produce that contains some U.S.-grown

produce, however, would have to state the origin of each raw ingredient. In other words, labeling would be much shorter, simpler and

frankly, cheaper, for a product fully processed abroad with no domestic ingredients. By restricting ingredient source, a processor

16

can also avoid frequent labeling changes and simplify record keeping, but in so doing, domestic producers will lose markets.

These are just a few of the unfortunate and probably unintended

consequences of the farm bill’s country of origin labeling mandate

as it will be administered by USDA. The only sure way to avoid

these results and to ensure that consumers continue to receive an

abundant and affordable supply of food labeled in a meaningful

manner is for Congress to amend the law to rescind these additional labeling requirements. Alternatively, and at the very least,

Congressional oversight over USDA’s implementation of its new

authority is urgent.

Thank you very much for this opportunity to testify and for the

subcommittee’s consideration.

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

Mr. HAYES. Thank you, Mr. Kushner, and next, our last panelist

will be Mr. Kurt Buckman, quality systems management for Birds

Eye Foods. Thank you, Mr. Buckman.

STATEMENT OF R. KURT BUCKMAN, DIRECTOR OF QUALITY

SYSTEMS MANAGEMENT, BIRDS EYE FOODS, ROCHESTER,

NEW YORK, ON BEHALF OF NATIONAL FOOD PROCESSORS

ASSOCIATION

Mr. BUCKMAN. Mr. Chairman, Mr. Ross and members of the subcommittee, I want to thank you for providing the opportunity for

me to comment on this matter. I am Kurt Buckman, director of

Quality Systems Management for Birds Eye Foods, which has

major facilities in California, Delaware, Georgia, Minnesota, New

York, Ohio, Pennsylvania, Texas, Washington and Wisconsin. I am

here representing the National Food Processors Association, of

which we are a member.

The approach USDA has taken to country of origin labeling is

unnecessarily burdensome and operationally impractical. The

guidelines would over-regulate by prescribing country of origin labeling rules for products already required to display such labeling,

creating the prospect for duplicative, confusing and even conflicting

requirements. The ultimate consequence I foresee is that by including processed products, farmers may ultimately be harmed by decreased demand for their products due to increased consumer

prices. NFPA urges the committee to reexamine these onerous,

counterproductive mandates and restructure the law enabling compliance with the intent without the unintended consequences.

I wish to briefly highlight several specific concerns. The food industry has an ongoing requirement for country of origin labeling

that predates the farm bill. Products of foreign origin, as determined by the U.S. tariff laws already are subject to country of origin labeling under comprehensive set of regulations administered

by the Customs Bureau. The USDA’s voluntary program covers

food categories that are clearly processed foods. These include frozen products, fruits, vegetables, processed peanuts. Frozen produce

is a processed product because it requires precise cutting, blending

of raw vegetables, steam blanching and freezing by technically sophisticated processes. Peanuts and mixed nut products and other

mixed snack food products also have undergone processing. USDA’s

17

guidance, given the statutory definitions used to identify covered

commodities, conflicts with the explicit exclusions for processed

food ingredients in the farm bill. I attribute this to the wording of

the Farm directed covered products to include perishable agricultural commodities, defined by USDA to include processed foods like

frozen foods.

Although the farm bill does not require records of verification at

farm level, it does contain fines and burdensome 2-year records

provisions at the retail level. Consequently, a cost and burdensome

chain of records showing origin must be created at every retail location. Several retailers, representing many others, having between

50 and 100 stores, have told me personally of a $5 million initial

cost and projected $2 to $3 million operating cost thereafter. It

makes no sense to assign retailers full legal accountability for notice of origin marking requirements for processed food products.

The labeling requirements under the farm bill are extremely

complicated and technologically difficult to achieve. Order of predominance rules in country of origin marking cannot be

operationalized. This will cause frequent and costly label changes

or extraordinary spending on sophisticated marking equipment, if

such equipment exists. For example, countries will be required to

be listed in order of predominance of the ingredient by weight of

the mixed product. Changes in the amount of the commodity for a

given country would require a reordering of the last and a new

label, even though there is no change in the originating countries.

And segregation throughout the distribution channel to retail sale.

These changes have costs leading to higher prices and decreased

demand for processed farm products, ultimately harming farmers.

The food industry must comply with the farm bill country of origin labeling requirements as of September 30, 2003. There simply

is not enough time for the processed food industry to meet this

deadline. The farm to market cycle is too long and required business process changes are complex. It is implicit that labeling or

record keeping requirements will be necessary on products packaged well before the date of the mandatory rule becomes effective.

To require labeling to be in place at the store level for such products had the effect of making the statute mandatory on the date

that it was enacted. Ultimately, our processed food industry will realize increased financial risk due to noncompliance, business disruption and costly enforcement penalties. Again, farmers will be

harmed by decreased demand in response to higher prices in covering costs.

Finally, no recognition is given to State or regional programs

that identify origins of foods. We believe that State and regional labeling programs are designed, or could be designed, to provide

proper documentation, that foods included in the program do, in

fact, originate from the State or region of the United States. For

example, labeling retail products, for instance, New York State apples, clearly communicates to the consumer that it refers to a geographic region in the United States.

In conclusion, the current requirements established by the farm

bill and USDA’s guidance are seriously flawed. Another look the

Public Law 170–171 is needed to exempt all processed foods and

18

USDA’s voluntary country of origin program should not become

mandatory without significant and substantial change.

Thank you for the opportunity to testify on this important issue,

and I would be pleased to answer any questions.

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

Mr. HAYES. Thank you, sir. Again, we appreciate your fine testimony, and my first question would be, now that you all have heard

the testimony, have you all come to agreement this is not that

great an idea, or do we need to go on with questions? OK. I just

need questions. One comment, then I am going to call on my ranking member to go first, and we will alternate back and forth in the

questioning process.

Several of you mention the fact that you wanted something that

was simple, understandable, flexible, realistic, common sense. This

is Washington, this is not Hometown, USA. I need to remind you

that early, and the law of unintended consequences is the most active law that we deal with in this town.

First, I want to call on my friend, Mr. Mike Ross, who is a ranking member from Arkansas for any questions he might have.

Mr. ROSS. How many can I ask?

Mr. HAYES. You have 5 minutes.

Mr. ROSS. Let me start, if I may, with Mr. Connelly, with NFI.

Based on your testimony on page 2, Mr. Connelly, if country of origin labeling is not necessary for fish, because current law works so

well, why do we have to go to the trouble of inserting language in

the 2002 farm bill to prevent Vietnam from sending boxes of tra

and basa filets into the U.S. labeled as things like Cajun Delight

and Delta Fresh and I guess the followup would be, Mr. Connelly,

did you know that apparently, that are Cajuns that do not associate themselves with Vietnam and there are folks in the Delta that

do not associate themselves with Vietnam, and yet we had labeling

names like Cajun Delight and Delta Fresh, and wouldn’t this be

classified as what we would call down in south Arkansas and the

Delta as misleading?

Mr. CONNELLY. Mr. Ross, if there were a mislabeling of the product, there were laws on the books, FTC and FDA, dealing with seafood that—we should have a discussion with FDA and FTC, if you

believe the fish was mislabeled. However, this committee and Congress decided to actually legislatively require that the fish coming

in from Vietnam be labeled as tra and basa, and so you have actually solved the problem legislatively. I would leave it that.

Mr. ROSS. OK. So you are trying to say that you feel like there

was existing rules and regulations on the books to deal with this

mislabeling.

Mr. CONNELLY. Saying that through the Food and Drug Administration and the Federal Trade Commission, there are requirements

as to what can be labeled food of the United States, and the FDA,

the requirement is that it be truthful and not misleading in any

way, and then relies on the FDA to define what actually would be,

for fish and seafood, would be truthful or misleading, and if the

FDA had a difference of opinion, the we probably should have been

going to the FDA. But again, you have solved that problem legislatively in last year’s language, or 2 year’s ago language.

19

Mr. ROSS. But you would agree that if you were a consumer and

you were at the grocery store and you picked up a package called

Cajun Delight, you probably wouldn’t think of that being a product

of Vietnam. Or if you wouldn’t, that is fine. I am just curious.

Mr. CONNELLY. I am not a marketing person, so I don’t know,

but I try to put everything through the screen of my wife, who is

this woman raising four children here in Virginia. I personally

don’t think, and I have talked to her about it, she really doesn’t

care where a product comes from to a great extent, if it meets her

desire for quality, taste, ease of preparation, price, value, et cetera.

So, the first thing she is looking for is not where the product comes

from, but does it feed our family at a price that we can afford and

in a manner that we can convince our four children to eat a

healthy fish.

Mr. ROSS. Even my tie says made in USA, and just about everything that we as consumers purchase, we know where it comes

from, except the food that our children consume, but I will leave

it at that. Mr. Warren, what proof can the producer offer to processors to create a verifiable audit trail for USDA, in your opinion?

Mr. WARREN. Congressman, the several items I mentioned that

are already in existence about the fact that the FDA requires a

statement from the grower that has to do primarily with the first

critical control point in the system. Does the plant receive safe and

wholesome product? And this statement, and I have a copy of it attached to my testimony that does go for, recognizes the hazards

that want to be protected, and that farmer has to sign a statement.

Also, as in recognizing the language in COOL, many processing

plants are adding that line that they can verify that it is indeed,

in our case fish are hatched and raised and grown, and I will also,

listening to the testimony, certainly these other commodity groups

do have significant issues to discuss.

We are fortunate, I guess, in that we are looking at a home

grown industry. We do not deal in foreign fish being raised. We

raise our own domestic native species of fish. Our processing plants

process just channel catfish, and obviously, the burdens are much

less for our industry, since we don’t have the complications that

these other industries have discussed.

Mr. HAYES. Chairman Goodlatte.

The CHAIRMAN. Thank you, Mr. Chairman. Mr. Place, you point

out in your testimony that you can’t solve your problem by sourcing

U.S.-only peanuts because you have to go through the same regulatory process for U.S. peanuts as for foreign peanuts. I assume

that you would prefer a law like Florida’s, that doesn’t require labeling of domestic products.

Mr. PLACE. If I had my preference, I would prefer that we were

stricken from the law, that the word peanuts had simply not appeared there. The one point I would like to make is under the current law, and you can see the packaging that we use is very expensive, because we are trying to make the statement that we are providing to the customer the very best product that we can get and,

frankly, it is U.S.-grown peanuts. But under the law, we still have

to go and retool, because it doesn’t say a product of the United

States with regard to peanuts, so no matter what happens, we are

caught in a very difficult situation as a small business.

20

The CHAIRMAN. Thank you. Mr. Stuart, can you provide the committee with any economic studies that demonstrate that Florida’s

labeling law provides Florida producers with higher prices than

producers in neighboring States without these laws?

Mr. STUART. Mr. Chairman, I am not aware of any specific studies that have been done in Florida. I know that we are working on

some economic analysis right now, and the potential benefits of this

law to producers nationwide, but suffice it to say that there has

been a tremendous amount of support emanating from Florida over

the years for a national country of origin law, because in the marketplace, the salespeople and the owners, the growers of fruits and

vegetables in the State, have felt the State law has been extremely

beneficial to their operations, so while we don’t have a quantifiable

study that I can point to, it has been the producers in Florida that

have been very, very strongly behind the movement towards a national country of origin law.

The CHAIRMAN. But no evidence to suggest that what has been

done in Florida actually results in higher prices in Florida for producers.

Mr. STUART. I don’t have any empirical documentation to show,

no.

The CHAIRMAN. Mr. McClung, it seems to me that if I am a retailer, I have one of three options in dealing with increased costs,

regulatory burdens and legal liabilities that will be associated with

mandatory labeling. One, pay them myself, two, pass them on to

my customers, thereby making me less competitive, or three, imposing them on my suppliers in the form of lower prices. Which of

these do you think your customers will choose?

Mr. MCCLUNG. You are going to get me in trouble, Mr. Chairman. There is great concern that the cost of country of origin labeling will buck down to the supplier. Of course, ultimately, the consumer probably winds up paying the additional cost, for the most

part, over time. I think what you can be reasonably sure of is that

the retailer probably will not be the cost. It will be one of the other

two alternatives, or a combination thereof.

The CHAIRMAN. Thank you. Mr. Connelly, currently U.S. Customs’ J list exempts fresh seafood from the historical country of origin labeling mandate. What are the unique hurdles to maintaining

accurate labeling of fresh fish at the retail seafood counter that

have led to your being exempted from the Customs requirement?

Mr. CONNELLY. Mr. Chairman, I would ask you to think about

when you go to your own fresh fish market, either here, or back

in the district, whether it be a market or in a grocery store, fresh

fish is typically laid out on a bed of ice, brought out daily, et cetera.

Typically, you will have some scallops mixed in there, some shrimp,

other fish, obviously awfully difficult to label individual shrimp or

individual scallops as to where they were captured or brought in

from, so that is probably the most unique example.

The CHAIRMAN. Is there a difference, in terms of whatever right

to know the customer has between the two types of fish?

Mr. CONNELLY. I don’t know the answer to that.

The CHAIRMAN. I don’t see one, myself. I don’t see a difference.

Mr. Warren, the 2002 farm bill contained a provision prohibiting

any species of fish from being labeled as catfish, unless it was the

21

species of catfish raised in U.S. catfish, channel catfish. So, what

was formerly Vietnamese catfish is now Vietnamese basa or kurti.

I am sure I am not pronouncing that right. The products are therefore differentiated in the marketplace by name. Country of origin

labeling will not provide any additional market differentiation. So,

my question is, aren’t U.S. catfish already differentiated in the

marketplace by a statutory restriction on the term catfish, and

what additional differentiation would mandatory COOL provide?

Mr. WARREN. Well, I appreciate your question. We are in the

process of having our decisions challenged by the Vietnamese government, so I don’t want to get into an awful lot of comments, but

I would say I have confidence in the American consumer, that they

realize that our domestic industries have a myriad amount of regulatory issues that are confronted. We are growing food in water. I

think under the Joint Subcommittee on Aquaculture, there are 25

Federal agencies that have something to do with the growing of

catfish, and so I would like to take advantage of that sources of

oversight and regulatory concerns, and pass this on for the consumer’s information, and I would trust their judgment to make an informed decision one way or another, but I think that issue alone,

the public deserves to know that this is a product of their legislative, regulatory system, has produced a product that is probably

the safest and most healthy in the world.

The CHAIRMAN. What will you do to extend that information to

them? Will you conduct a media campaign, or a public relations

campaign of some kind to try to differentiate? Because I am not

sure that with most products, most people pay a whole lot of attention to that. In fact, the competing products many times appeal to

the American desire to have unique products from different parts

of the world, and try to differentiate themselves the other way, by

saying this is a fine Argentinean Black Angus grass-fed beef, or

some other product from some other part of the world, and I am

not at all sure that the American consumer that is attuned to buying so many products from so many different places finds it to be

automatically a disadvantage that something is from outside the

country. It seems to me that if you are going to make that case,

you are going to have to go to additional lengths to create the impression that there is a difference in the quality.

Mr. WARREN. Well, that is what our industry has been built in,

is promoting to the public the qualities and the controls and the

environment that our product is grown in. In fact, in the last 12

years, our advertising arm of the industry has spent over $50 million of farmers’ money, that have contributed to going out and, as

you are suggesting certainly, writing an advertising effort, promotional effort, to try to make, to promote the advantages of first,

eating fish, second, realize that one thing that is good about our

seafood industry is the diverse quality and quantities and different

kinds of seafood. I don’t eat catfish all the time myself, believe it

or not.

The CHAIRMAN. Well, let me follow up on that question. There is

a very, very, very good point. You spent $50 million promoting your

product, that is very good. How do you promote it with the consumer now to differentiate your product from a Vietnamese product?

22

Mr. WARREN. My instincts tell me that the way you promote your

product is you promote your good features.

The CHAIRMAN. When the customer goes to the store without

mandatory country of origin labeling, with all the money you have

spent, what are you telling them that causes them to buy your

product as opposed to the Vietnamese product?

Mr. WARREN. Well, I don’t get into that point, because actually,

each product should stand on its own. If these other products have

desirable traits, then they should promote those facts.

The CHAIRMAN. I understand that, but my question is you go to

the store, you have heard all about the money that you have spent

has told me all about the wonders of your product, and I want to

go and look for it, how do I know it is your product as opposed to

the——

Mr. WARREN. That is one reason I am excited about having this

country of origin labeling, is so that don’t have to go through those

hoops.

The CHAIRMAN. I understand, but what are you doing? What

hoops are you going through?

Mr. WARREN. Well, we are continuing to promote the positive aspects of our product.

The CHAIRMAN. But I hear about the positive aspects of the product. I go to the store, and you are not telling me how to differentiate. Is that right?

Mr. WARREN. Well, yes, and in fact, we got laws that said it is

not only a different species, it is a whole different family of fish.

It is like talking about yak and beef.

The CHAIRMAN. Look, I understand that, and we just made a

change in the law to help you in that regard. And presumably, you

will tell them to look for the label for catfish, and——

Mr. WARREN. We will, and we will not attack our competitors.

The CHAIRMAN. I am not asking you to attack them. I am just

asking you why it is we have to go one step further, when you are

already spending a large amount of money to promote your product

and your product is called by a different name than the product

that you are competing with.

Mr. WARREN. Well, believe it or not, some of the enforcement is

not as stringent as we would like.

The CHAIRMAN. And you think this enforcement will——

Mr. WARREN. This will be another brick, as we lay down our

wall, trying to protect our interests.

The CHAIRMAN. It might be a very expensive brick.

Mr. WARREN. Well, hopefully not. I understand, and certainly,

some industries, as I have heard here today, have a legitimate concern on that, but it just so happens, we, as I said, we are unique.

We are a completely domestic industry. We export very little. It is

just a fraction, and, here again, it is a homegrown industry using

native species and a single species processing system.

The CHAIRMAN. Well, I like catfish. I thank you very much, Mr.

Chairman.

Mr. HAYES. You all noticed the light went out. Do you know what

that means? That means I serve at the pleasure of the Chair. Ask

any question you want.

Mr. Pombo from California.

23

Mr. POMBO. Thank you, Mr. Chairman. Starting with Mr.

McClung if I can. You testified that previously, your organization

was in favor of country of origin, and now they have taken a position opposed to it. Can you delve a little bit more into why that

decision was made?

Mr. MCCLUNG. I would be pleased to. There was, early on, a belief that consumers would buy American, hopefully, if they knew

the product was grown in the United States, and that is essentially

why the Texas Board voted to support country of origin labeling.

But there has been a realization as time has gone on that the likelihood of that happening was not very great in our opinion, that

the consumer, we look at what has happened in Texas with imports. We see that the consumer is delighted with imports, if those

imports meet the criteria that the consumer establishes, and that

the country of origin does not seem to be a big variable in that

equation. Then we look at what the possible costs of this labeling

requirement would be, and what the disruption is between the supply side and the buyers, retailers in particular, and it seems to us

that on balance, it is not a desirable piece of legislation as it is currently written. I want to emphasize here that has nothing to do

with the consumer’s right to know. The consumer does have a right

to know, but the issue in our minds is that the consumer doesn’t

really care very much.

Mr. POMBO. You said that the cost was part of the factor in that

decision. What costs are you referring to?

Mr. MCCLUNG. There are a number of costs involved here. The

retail community is not happy about this law, as I am sure you

know, Mr. Pombo, and they are insisting on a number of steps from

the supply side on certification requirements, on third party independent audits, on the contractual language when they buy product

that absolves them of all responsibility if there are concerns later

about the accuracy of the country of origin, et cetera, and these

things all are expensive. There also is the indication from the buyers that if this law goes into effect the way it was originally written, and the way the USDA guidelines initially were released, that

there would be a shift in the buying patterns that retailers would

not be dealing, for example, would not feel themselves able to deal

consistently with small suppliers. How much of that is entirely

genuine, and how much of it is overstating the situation, I am not

sure, but the bottom line for my people is they look at it, they say

we don’t see that there is much in the way of benefits here, we do

see that there is a considerable potential downside and they reversed their position accordingly.

Mr. POMBO. You said that a number of your members have relationships with foreign companies and bring in produce into Texas,

repack and sell. Does that produce, under the regulations, under

the law the way it is structured right now, does that produce coming in from Mexico have to be labeled as being a product of Mexico?

Mr. MCCLUNG. Yes, sir. It does, to meet Customs requirements,

and now, to meet some of the Bioterrorism Act requirements, but

then when it is repacked, it does not necessarily, when it is broken

up once it is on the U.S. side, it does not necessarily have to

carry——

24

Mr. POMBO. But under COOL, under country of origin, it would

have to maintain its product——

Mr. MCCLUNG. Yes, sir. All items would have to be identified as

to country of origin.

Mr. POMBO. And the retailers are asking the producers to indemnify them on the fines and to guarantee that that product is truly

where you said it came from.

Mr. MCCLUNG. Yes.

Mr. POMBO. And you are now accepting, or being asked to accept

that responsibility. If that product is coming in from Mexico, how

do you know that it was produced in Mexico and it was not shipped

in there from Nicaragua or somewhere else, repacked and shipped

in to the United States, and now you have accepted the responsibility as to what the country of origin is, but you are not exactly sure

where it came from.

Mr. MCCLUNG. Well, most of the product that comes from Mexico, and I might add, from Central America as well, is produced

under some sort of a cooperative arrangement between the importer and/or the seller on the U.S. side and the producer in Mexico, because it has to meet production requirements, pesticide use

requirements, those sorts of things, so we have got a pretty good

idea that the product is not being trans-shipped through Mexico

from elsewhere, but even, I might point out, if it were, and we were

deceived as buyers in that regard, we still bear the legal responsibility under these indemnification requirements, if the retailer is

fined, we would have to assume that responsibility, if we agree to

those requirements.

Mr. POMBO. Mr. Chairman, if I may just ask one more question

of Mr. Connelly, it is my understanding on fish that if it is caught

on a U.S.-flagged vessel, it is U.S. product, and if it is caught by

a Canadian vessel or a Japanese vessel, that it becomes product of

that country, even if those ships are side by side, catching out of

the same fishery, the same fish. It just matters which flag that

ship happens to be flying on that day. How does that give the consumer any information that is worth anything to them under those

kind of rules?

Mr. CONNELLY. I would have to say that I don’t think that is

what the consumer wants to know, is what flag vessel caught a

fish, or a piece of seafood. That doesn’t provide a level of information that would be helpful, and to my wife, when she is at Safeway,

it is not going to help her make an informed decision of a product.

Mr. POMBO. But is it not misleading to the consumer to have one

tray of fish that says U.S. fish, because it was caught under a U.S.

flag, and another tray of fish that says Japanese fish because it

was caught under a Japanese flag, but both fish came from the

exact same fishery, the same school of fish. Is that not misleading

to the consumer?

Mr. CONNELLY. It would appear to be, but you start to get into

how fish is processed, and it is somewhat like Mr. Place’s example

of nuts, a lot of the fish that you eat doesn’t come from one specific

fishery. A processor might pull it in from three or four different

places, and it might be from some domestic product, some foreign

product, and when it is processed, it is in a fish stick, for instance,

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thing you get at McDonalds or something like that. Our concern,

frankly, in a situation like that is U.S. producers will look at that

and say, under the proposed guidelines, it would be less expensive

for us to actually have this processed in Mexico, where it is just

labeled now a product of Mexico, and it will come in as a single

product of Mexico, rather than trying to segregate it was a Japanese fish, it was a U.S. fish, it was a Chilean fish, it was a Chinese

fish, a Russian fish, why not just send it down to Mexico, process

it and bring it up here as a product of Mexico, and that is one of

the unintended consequences that I think the Chairman was referencing. And I think that is one of the points that Mr. Buckman

was trying to make on the processing side.

Mr. POMBO. Thank you very much.

Mr. HAYES. Thank you. What do you do if it is a migratory fish?

Mr. Ross.

Mr. ROSS. I think Mr. Pombo raises a good question, and I think

that is an example of how sometimes when we leave some of these

laws to be implemented through regulation, that we run into problems like this. It is not in the law that says that a flag flying will

determine the country of origin. It is actually the regulation that

has come out of the law from the Agency. The regulation established by the Agency that has given us that.

Mr. POMBO. If the gentleman would yield.

Mr. ROSS. Sure.

Mr. POMBO. Just for a second. It was actually in the law, and the

law was even more complicated than that, and we have wondered

from the beginning how it was going to be implemented, because

particularly with fish, I don’t see how in the world you ever do it.

Mr. ROSS. It is my understanding it was done by regulation. It

may very well be in the law. OK, you are right. It was in the law.

We were wrong. Well, that is stupid. We ought to take it out of the

law. I want to first go back to Mr. McClung, is that correct?

Mr. MCCLUNG. Yes, sir.

Mr. ROSS. When you stated for the record at this hearing that

the consumers don’t care where the product comes from that they

consume, that their children consume, what source were you citing?

Mr. MCCLUNG. Mr. Ross, what I was really referring to was that

we have become such significant importers through Texas of Mexican product, and our experience has been that as long as that product meets the consumer’s requirements in terms of quality and appearance and cost, that the consumer, the country of origin is of

no consequence to the consumer. It is an empirical observation. I

don’t have to data to cite for you. I believe there is some data that

food marketing institutes and others have, but I don’t have it.

Mr. ROSS. So that was basically an opinion.

Mr. MCCLUNG. It is an opinion based on our experience, sir, yes.

Mr. ROSS. OK. I won’t name the store, but one of the discount

dollar stores, if you walk into them today, into one of their stores,

almost all of the fruits and vegetables on the shelves say ‘‘Product

of Spain.’’ Sometimes, titles are misleading, so help me understand.

You are the president of the Texas Produce Association. To me,

that sounds like you are representing people who grow products in

the State of Texas. Is that correct?

26

Mr. MCCLUNG. The Association represents both importers of

product and domestic producers.

Mr. ROSS. Oh, so you are not here just representing Texas farmers.

Mr. MCCLUNG. No.

Mr. ROSS. OK. All right. That explains it a little bit more clear

for me, then, because I was confused. You have got product on the

shelf at these discount stores that say ‘‘Product of Spain,’’ and if

I was representing U.S. producers, it looks like to me I would be

proud of my farm families and want them to have on the can product of the United States of America, but if part of your revenue for

your association is coming from importers, then that helps me understand, your position a little bit. If I could go back to Mr. Warren

for a moment. Think with me, here, Mr. Warren, if you can. Do you

know of any program in place or records being maintained for seafood commodities to trace potential diseases or safety hazards, if

they were to occur in the United States, and if none, would you

consider a lack of these records a breach or a potential breach of

homeland security?

Mr. WARREN. I would hesitate to give a definite answer, because

I am not that knowledgeable across a wide range of different requirements, but I will answer the question, I would think certainly

knowing where a product comes from if a situation does develop,

then obviously, you have got a much quicker way to go to the

source.

Mr. ROSS. Let me ask you this. What effect does country of origin

labeling have, or will it have on the catfish industry? And, if you

could, share with me any positive or negative reactions to the implementation of country of origin labeling as it relates to the catfish

industry in the United States of America.

Mr. WARREN. Well, as we said, repeating myself, it is going to

be a minor cost to the industry, because in fact, the industry is already providing the information as required in the country of origin. It gives us an opportunity to identify our product, where it is

coming from, and the implication being—taking advantages of all

the positive things that we do to our product to help ensure its

safety and wholesomeness.

Mr. ROSS. Mr. Chairman, I think I am out of time. If I can have

a few more minutes now, or I can come back. Whatever pleasure

the Chair. Mr. Stuart, of Florida Fruit and Vegetable Association,

are your views coming from importers, too, or does that support

your revenue?

Mr. STUART. All domestic growers, Mr. Ross, and we are very

proud of it.

Mr. ROSS. OK, and as I understand it, you are supportive of this

legislation.

Mr. STUART. We are, and if I can add to the comment that my

good friend from Texas made, we have studies, and we do have

studies, Mr. Chairman, regarding consumer preferences on country

of origin labeling, and the industry’s own trade publication, The

Packer, at various times over the last several years, have conducted surveys into consumer preferences and desire for country of

origin labeling, and found the numbers to be rather substantial, in

the 70 to 80 percent range.

27

Mr. ROSS. Let me make sure I understand you. That’s 70 or 80

percent that don’t care where their food comes from?

Mr. STUART. No, of consumers that want to know the country of

origin of the product.

Mr. ROSS. Oh, they want to know?

Mr. STUART. Absolutely.

Mr. ROSS. Based on scientific studies, 70 to 80 percent want to

know, Mr. McClung, whose revenue stream comes from importers

says the consumer doesn’t care. I am a little confused here. Can

you help me?

Mr. STUART. Well, again, the surveys that are—and it is not just

The Packer, there have been other surveys that have been conducted over the last several years that have indicated that consumers do want to know the country of origin of their product. Is it

that the number one or number two item, price and quality, perhaps not. But they are interested in nutritional labels as well, and

that may not be at the top of the list either. Country of origin is

an important issue for some consumers. So, yes, in our minds, the

research that we have seen over the years, the labeling information

for country of origin is important to consumers.

Mr. ROSS. If I could go to Mr. Place. I am real interested in your

testimony, because I am a small business owner. I have got 12 employees back home. I know what it is like to meet a payroll every

Friday, and the last thing that I want this Congress to do is to hurt

small business, and I am confused and maybe you can help me

here, your testimony indicated that basically this law would probably put you out of business.

Mr. PLACE. That is my testimony, sir.

Mr. ROSS. And I am trying to figure out, I am hearing testimony

that it seems like those who are representing U.S. producers thinks

it is a good idea, and those who are representing importers thinks

it is a bad idea, and some of you testifying saying 70, 80 percent

of consumers want to know where their product’s coming from that

their small children consume and others of you say that the consumer doesn’t care. If the consumer does not care, and if at times,

you are not able to get all the peanuts and so forth and so on you

need to put into your product that you package and sell, I mean,

I guess what I am saying, if Mr. McClung is right, and the consumer doesn’t care, then why is it going to put you out of business

if you have to put on the can that it did come from Vietnam or

China?

Mr. PLACE. OK, let me address that issue this way, and I think

you will relate to it well. Generally speaking, small businesses

have to find a niche market in order to compete with those that

most of these gentlemen represent. Our niche market is in quality

products, where the package itself says we are providing them with

the very finest of whatever the product may be, so as we relate

that to peanuts, we purchase peanuts in any event, and as I mentioned to you, United States peanuts, but under the current regulation, we would be required to go back and retool all these boxes.

We have already retooled twice in order to comply with the regulations pertaining to what the ingredients are. It is a very expensive

proposition for us.

28

Now, the next item that I would say to you, they mentioned some

words such as it would be problematic, it would be burdensome.

For me, it is catastrophic because of my size. I cannot continue to

do this and we had a lot of the boxes already printed because I

have to do them in such large quantities, and for that very reason,

if you look at our box, this lid will fit on six SKUs because I can’t

afford to print it in all six, with all six recipes on a separate box.

Then when we talked about peanuts, and they say people want

to purchase a product that says a product of the United States,

when you put them in a mixed nuts, typically, we have got nuts

in there that are not even grown anywhere in the United States,

and to suggest to me that a consumer is going to read through that

entire label to find out that the peanuts came from the United

States is just utterly absurd. Nobody here raises cashews, as far as

I know. What about Brazil nuts, and they all go into mixed nuts.

The other item that I would mention to you that is very disconcerting to me is, on its surface, it would seem to me, as was

mentioned by Mr. Kushner, FDA and USDA already have a definition that talks about cooked products, their definition of processed

food items, and yet, under the definition that is being used by agriculture, nuts that we shell, we roast, we put different ingredients

on such as salt, corn syrup, we flavor them, they say that does not

materially change the product and it is still subject to this law, and

the best example I can give you is they exempt peanut butter. You

come to my factory store, walk in, do you know how you get peanut

butter from me? You walk out on the shelf, you take the peanuts

off the shelf that I have that are shelled, they are roasted, they are

salted. You can buy them also with honey roast on them, you give

them to me or one of my employees, we put them in a mill, which

would be similar to putting them in your blender at home. I run

it through this mill, put a jar under it, slap the label on it, now

it is peanut butter and it is exempt, and I think this goes to the

Chairman’s statement of how absurd some of the regulations are

that come out of Washington.

Unfortunately, small business does not have adequate voice in

Washington because as you know, with the description you just

gave, we have to focus like a laser on the everyday operation of our

business, and we frankly don’t have time to be here in Washington

seeing after these interests, unless it raises such a high level of interest on our part and may put us out of business can we afford

to be here, either time-wise or financially. I hope that answers your

question.

Mr. ROSS. So, your nuts may come from different places each

time, and each time they come from somewhere else, you are saying you have to——

Mr. PLACE. Every peanut that we have purchased since 1966, as

far as I know, has come from the United States, and the United

States peanut, at least at the point where I am sitting here with

you, is recognized as producing the finest peanuts that have been

available here. I am not an expert to be able to say where they

would come from or what their quality would be in the future. I

can say unequivocally that the product out of China is not going

to compete with the best product that we produce in the United

States.

29

Mr. ROSS. Well, if you are using U.S. peanuts, why is it you are

having to keep retooling or reprinting your boxes? It is a pretty box

by the way. It is very attractive.

Mr. PLACE. Under the current regulation that shouldn’t apply to

us, I have to reprint all the boxes right now, because I have to now

add the word United States, which is utterly absurd in mixed nuts.

Our preference would be OK, if you are going to have it say country other than the United States, perhaps someone could make an

argument that that has some validity, but to propose that we go

back and redo all our boxes so that they say a product of the

United States is the very thing that drives small business out of

business, and I am sure that the members of this committee are

fully aware that even though each one of us only contribute a drop

to the Nation’s economy, together as a whole, small business represents over 90 percent of all the corporations in America. We employ more than 30 or 40 percent of all the employees, and we generate at least 30 to 40 percent of all of the revenue that individuals

take home in their paychecks, and yet, we cannot come as a united

voice, because we are all so small.

Mr. ROSS. Let me, in closing—and let me thank you for creating

jobs and doing the things that you do, and that is why we are having these hearings. We want to find ways, I mean, the purpose for

this law was to help American businesses. It was not to hurt.

Mr. PLACE. Well, the irony of the statement that you just made

is that when I started in business in 1972 is when I personally

started, I was put into business by a Small Business Administration loan, and I think it would be an absolute irony that an unintended law that is passed by the same body that provided me a

start in business put the stake through my heart.

Mr. ROSS. One last thing, and that is why, again, why we are

having these hearings. We need to know how the fact that you tell

consumers that your product is from America is going to hurt you,

and it is interesting to hear from you. Instead of just throwing all

the boxes away that you have got, I see stuff all the time, on the

bottom of something, just a little bitty sticker that says made in

China or made in Taiwan or made in Hong Kong. Couldn’t you just

get some little stickers to stick on those pretty boxes instead of

throwing them all away?

Mr. PLACE. Well, I think what I would have to do is send this

box around so you could see the problem that is created. The problems that were created through the request or, ultimately, laws

that required us to put every single thing that is in the ingredient

label, and I might say, one thing that did help small business when

you came out with the ingredient requirements was that you did

provide an exemption for extremely small businesses and the exemption was centered around the quantity of a particular SKU that

was produced.

Our company has never reached the point where any single SKU

met the minimum, and so each year, we would go through this convoluted process of filing with the regulatory party, and continuing

our exemption, but because of the marketplace, as we gradually

reached the point where it was necessary to retool, then of course,

we have added to the box, because we are trying to say it is a qualVerDate 11-SEP-98 10:45 Feb 23, 2004 Jkt 091860 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 F:\DOCS\10817 HAGRI PsN: HAGRI
30

ity product, the consumer expects us to meet the highest quality

standards of whatever product it is they are purchasing.

Mr. ROSS. Thank you. And I have purchased your products in the

past, and I will in the future, and if you want to just stick a little

label on a box instead of throwing it away and tell me where it

came from, that would be fine with me.

Mr. PLACE. Well, the problem that we have, it may not be fine

with those that are determining the regulation, because if you will

read it, it requires type size, location, which panel it is on and to

this point, they haven’t allowed us to put anything on the bottom.

Mr. HAYES. Chairman Goodlatte.

The CHAIRMAN. Thank you, Mr. Chairman. I have no further

questions. I thank the panel for their very valuable contribution

today.

Mr. HAYES. Mr. Ross, back to you. I have got a couple questions.

If you want to organize your notes just a minute. Mr. Stuart, you

have got a voluntary program in Florida. It apparently is working

very well. Why do we not pursue that course around the country

instead of, again, coming to Washington for relief, where relief is

rare indeed?

Mr. STUART. Mr. Chairman, the law in Florida is not voluntary.

It is a mandatory requirement.

Mr. HAYES. All right. Now, we will get into the whole process of

parsing words. It is mandatory to you, we look at it kind of as voluntary up here, because of the number and the flexibility and all

of the different things you don’t have to do in the Florida law, compared to what, and again, we haven’t seen what USDA says, it

would seem to me that if you go for the flexibility that I like, the

simplicity, and all those things, this is not the place, history says

you are going to find that kind of relief.

All of our discussion today, as valuable as it is, is going to probably change at least a little bit when USDA issues that rule, and

we will continue that conversation at this point, but it does seem

like, and again, going back, if I can find it, you have made some

excellent points in your testimony about the fact that we need to

use the term ‘‘may’ instead of ‘‘shall’’ on page 2, on page 3, may

require verifiable record keeping. Then we go over to page 4, blended products, kind of exempt that. Purchase notification, simple and

straightforward, so the wisdom in what you are saying, to me

translates into voluntary, rather than Federal mandatory. No

downstream liability on page 5 for validity of information.

Mr. STUART. Well, Mr. Chairman, if I can try and answer some

of those questions.

Mr. HAYES. Sure.

Mr. STUART. I didn’t write them all down, but going back to the

Florida law, the Florida law is very specific that retailers must provide country of origin information to consumers in their stores.

That is where the law is similar.

Where the law is dissimilar between the State and Federal law

is the fact that it does not apply to domestic products, so only imported products are covered under the Federal law. In other areas,

such as the enforcement mechanism, the fines, the requirement on

retailers, it is indeed a mandatory law. What I was citing in terms

of using the term may in my testimony is I was citing the actual

31

language of the law. The law is flexible, the way we read it, looking

at it, the terminology used in the law specifically says may when

it comes to record keeping. It certainly says may when it comes to

the fining authority that the Congress has given the Secretary of

Agriculture.

So, what we have argued and what I have tried to convey in my

testimony is that within the law, USDA has sufficient flexibility to

write a regulation that can make this law as non-burdensome as

possible. In our opinion, it is all about the rule, and I think Mr.

McClung has essentially said the same thing. Until we see what

the final rule looks like, and we haven’t even seen a proposed rule

yet. We have seen a voluntary guideline that has created a lot of

the consternation in the industry. If you listen to a lot of the testimony that you have heard here today, a lot of the concerns that

have echoed by just about every member of this panel has focused

on provisions in the voluntary guidelines. If the rules come out in

a manner that is flexible for the industry, it provides basically, reaction to the spirit of the law, I think ultimately this law is

implementable in a fashion that will as least burdensome and least

costly as possible to all segments of the industry that are impacted

by this.

Mr. HAYES. I am not trying to put you on the spot. I am not trying to give you a hard time.

Mr. STUART. No. No, that is fine. This to me is the essence of the

conversation.

Mr. HAYES. That is fine, we just don’t typically do that kind of

thing when we make laws up here. Just a little bit of history, we

had an extensive discussion in this committee on the issue, and we

decided in the committee and I think there is probably more expertise here than there is in the full House of Representatives, we decided even though there were reasons for and against, that it would

be better not to get into that business. It went to the floor, you see

how many members there are in this committee, and on the floor,

someone else introduced it, and quoting from The Packer, some of

you all may have seen it, this is about a recent fruit and vegetable

meeting, the bottom line is this. Do the benefits outweigh the costs

or vice versa? This is no time for exaggeration or hysteria, but for

reasoned and careful analysis.

All I am saying, and I would just as soon you didn’t quote me,

sometimes reason prevails in committee and hysteria breaks out on

the floor, but again, here is something else important, talking

about fruits and vegetables. Our industry’s first priority must be

shaping the regulations that will implement this law to be as practical and least costly as possible, even though those who advocate

repeal must be aware that changing any law is inherently more difficult than shaping regulations and can never be a sure thing. I

think that is very good wisdom for all of us to follow, and——

Mr. STUART. Chairman Hayes, if I may?

Mr. HAYES. Yes, sir.

Mr. STUART. I think that is exactly what I was trying to convey,

once again, is that the industry’s focus needs to be on shaping a

rule that makes sense for this industry. Again, and I hate to be repetitive, but the law provides the Department the flexibility to do

that.

32

Mr. HAYES. We will have to—and again, not to be argumentative,

we will see what they have. There is such a diversity of interests

and products and ideas, migratory fish, the stationary peanuts and

on and on, so let us see, I have got so many papers, are you ready,

Mr. Ross, with another question, while I try and relocate my own?

Mr. ROSS. Mr. Chairman, I just want to thank the panel for coming today and sharing their views with us, and I can’t thank you

enough for your expert testimony, all of you, regardless of where

you are on this issue. I am not sure where I am. I am somewhere

in the middle on this in terms of I think consumers have a right

to know where their food comes from. If we know everything else,

where our clothes come from, and our watches and just about everything we purchase, I want to make it clear that as we move forward with these hearings, that we are having them for a reason,

and that is we want, very much, to find a way to make this work.

Now, when I say make it work, make it work for American consumers, and to make it work for American businesses, and I think

all of you have shed some light on that today, which will be helpful

to us as we try to take what, I guess, has become a controversial

law and try to make some common sense out of it. I don’t think

there is anyone in this room put aside who you represent and

where your money comes from, I don’t think there is anyone in this

room that really believes that the American people have the right

to know where the food that their children and grandchildren is

consuming is coming from.

Now, that is an easy statement to make and it sounds good, and

getting from that statement to implementing it in a way that does

not put Mr. Place out of business is definitely a challenge as we

move forward with these hearings, but that, the end result, that I

think, I know that I want is simply for consumers to be able to

know where their food comes from, just as they know where their

clothing comes from, and if consumers really don’t care, then I

think we have all wasted a whole lot of time. Although I was

pleased to learn from Mr. Stuart that he has scientific evidence to

back up that 70 or 80 percent of consumers do care. And if there

is other studies out there to indicate anything different, I wish you

would share them with me personally and with this committee.

I think it is important that we see all studies that are available

on this issue, as we move forward, and for those of you here representing foreign interests, I think foreign interests should be very

concerned, because personally, I do believe consumers care, and

consumers are a lot quicker to go down to a dollar store and buy

a product made in China than they are to go to the grocery store

and purchase a product for their children or grandchildren to eat

that comes from some Third World developing country.

Mr. Chairman, I guess that was more of a comment than a question. I have no other questions.

Mr. HAYES. Thank you, sir. Gentlemen, we have been joined by

the gentleman from Georgia, Mr. David Scott. I hate to throw everything in your lap. Would you like to ask these fine panelists a

question, David?

Mr. SCOTT. Mr. Chairman, I think that the testimony was wellspoken. I apologize. I had about three or four emergencies all at

the same time. So, no questions.

33

Mr. HAYES. Well, we appreciate you coming. A couple questions,

Mr. Stuart or Mr. McClung, Mr. Kushner, or Mr. Buckman. We

heard today that existing PACA records would suffice in complying

with the law. Can you tell me what specific information is on the

records that would enable retailers and suppliers to meet the requirements of country of origin labeling? I think I understand the

question.

Mr. STUART. Mr. Hayes, let me try and answer it, if I can, for

you.

Mr. HAYES. Let me get them to answer first.

Mr. STUART. OK.

Mr. HAYES. I will come back to you with another one, you can

work on that one, too. Mr. Buckman.

Mr. BUCKMAN. I would like you to repeat your question, please,

to be clear about it.

Mr. HAYES. OK. I have heard today that PACA records would

suffice in complying with the law. Can you tell me what specific information is on those records that would enable retailers and suppliers to meet the requirements of country of origin label. What is

in the PACA law now that would be the same?

Mr. BUCKMAN. Certainly. Within the current PACA regulations,

if in the transaction between a buyer and a seller, PACA licensees,

country of origin is declared, the processor or supplier must be able

to provide documentation under PACA to the Agency on review to

substantiate the country of origin.

The issue that needs to be considered here is that the proposed

guidelines, and whatever the final guidelines, and the final rule are

issued by USDA, presently, with the forward retail records provisions, creates complexity that retailers do not have the capability

of complying with. At present, under the Customs Act, there is a

much simpler approach to country of origin declaration, which I believe presently addresses the issues of catfish from Vietnam and

other foreign products coming in to the country.

Mr. HAYES. OK, do you want to take a whack at that, Mr. Stuart?

Mr. STUART. Certainly, Mr. Chairman. For the fruit and vegetable, for the perishable agricultural commodities covered under

PACA, any information that is conveyed between a seller and a

buyer as part of that transaction, and that can include everything

from the quality of the product, the price of the product, the grade

of the product, the count, all of that information is required to be

factual under PACA, so if, in the process of going through a transaction, a seller conveys information to the buyer as to the country

of origin of that product, that information has to be valid or there

are penalties under PACA that apply here. PACA currently requires records to be maintained by all licensees for 2 years.

So, essentially what we are suggesting is under PACA, there is

no need for an additional record keeping system, at least for fruit

and vegetable industry folks that are involved with this law, if that

information were to be conveyed through the distribution channels

from the grower/shipper level all the way through to the retailer.

Mr. HAYES. Well, it seems logical that if there are going to be accurate labeling claims, a verifiable record keeping system is necessary from the producers to the retailers. What is the point in

34

having a law that mandates country of origin labeling if there is

no required record keeping to justify the claim, which would go

back to your comment about if it is voluntary, then it is much better.

Mr. STUART. Well, again, I have never suggested that it be voluntary, but if the information is conveyed from the seller to the

buyer under PACA in some format, then that information has to

be correct. What I suggested in my testimony is that in Florida,

there is no requirement for record keeping. We don’t see that it is

necessary here, but should USDA require it, which they clearly

have discretion to do under the law, it could be handled under

PACA, and no additional burden of record keeping would be needed, essentially because PACA already requires those records. And

I might also say that PACA does not require those records to be

kept for 2 years by the retailer at each individual location. It would

just be at the location of their choosing, and we fully support that.

Mr. HAYES. Mr. McClung, there is a little bit of a confusion in

my mind. Now, Mr. Ross, apparently, is under the impression, and

I am not sure it is right or not, you represent Texas, but do you

have dues-paying members of your association who are from Mexico and other countries, or just producers in other countries that

send produce through your association?

Mr. MCCLUNG. The latter, Mr. Chairman. I don’t have members

in Mexico, but many of my members—the produce industry in

Texas is concentrated in the Rio Grande Valley just across the border from Mexico. Many of my members are shippers who source

both in Texas and from Mexico, and many of them are producers

as well.

Mr. HAYES. OK. That didn’t seem to be the impression that you

had. He is not getting any money from Mexico for his Association.

He is getting from Mexico produce.

Mr. ROSS. Let me ask this question.

Mr. HAYES. To produce revenue.

Mr. ROSS. Let me ask this question to make sure I—maybe to

clarify for both of us. Do you have members who import fruits and

vegetables from other countries?

Mr. MCCLUNG. Yes, sir.

Mr. ROSS. Thank you. Mr. Connelly said that consumers don’t

care where their food comes from, that their little babies consume.

Do you agree with that?

Mr. MCCLUNG. Let me clarify that point, and if you ask me for

data, I don’t have it. I agree with Mike Stuart that consumers say

on surveys that they care where food comes from, but in practice,

what goes into a consumer purchasing decision is a fairly complex

matter. They are looking at the product, they are trying to judge

quality with their eyes, they are looking at the cost. Those concerns

are more important to them than the origin of the product, so while

they will tell you that they care about where it comes from, they

don’t use where it comes from, provided the more important criteria are met in their minds, to make their purchasing decision. I

hope I am not making it overly complex, but I believe that is what

the difference is.

Mr. ROSS. I mean it seems to me that those who are representing

produce that is being grown in America seem to want this law, and

35

those who are importing product from other countries that may or

may not have been grown with pesticides that were banned here

10 years ago, seem like they are opposed to country of origin labeling. I am just trying to get to the root of it here. It would seem

to me that the only logical reason, and tell me if I am wrong, it

would seem to me that the importers of produce are opposed to it,

because they really do think consumers do care, and they don’t

want to have to say that it is from a Third World developing country and so forth and so on.

Mr. MCCLUNG. I have growers in my organization, Mr. Ross, who

are strictly domestic producers in Texas, and they are split on this

issue. There are those who think that there is a benefit to them

in mandatory country of origin labeling, and there are those who

think that the costs and the difficulties in dealing with their buyers

outweigh the benefits, and I think that, as Mike and I have both

testified earlier today, until we know exactly what the regulations

are, it is very hard to get at the truth of that matter. The importers

are not very concerned about having to label as to country of origin.

They have been, in the first place, a lot of times, you go to the grocery store, and the onions, or the watermelons, or the cabbage, or

whatever it happens to be, tomatoes, very often are labeled as to

country of origin voluntarily now. Lots of times you know where it

is from, and that does not seem to have a great impact on the buying decision, if the product is attractive to the consumers.

So, it is not that my importers are put off by the requirement for

COOL labeling because they think they will lose market share. It

is because they don’t want the cost associated and the legal requirement associated with it.

Mr. HAYES. We have been joined by Mr. Randy Neugebauer of

the great State of Texas. Mr. Neugebauer, would you like to question our panel of experts?

Mr. NEUGEBAUER. Thank you, Mr. Chairman. And I would apologize if this is a redundant question, but I think the thing that has

been brought up about the COOL issue is that some of the proponents of that have tried to paint it as a safety issue, and others

have tried to say that it is a—as you were saying a while ago, it

was a consumer issue, but I would be interested to the panel, it

doesn’t appear to me that the way the legislation is written today,

that it really provides any additional safety to food products over

what is currently in place by some other regulations.

Mr. KUSHNER. Mr. Chairman, I would like to respond to that

question. It is clear, and there has been no meaningful debate, that

this is not a safety issue. There is nothing about mandatory country of origin labeling that would enhance safety at all. All food

products that are sold in the United States, whether imported or

produced domestically, and sold in interstate commerce are subjected to the same food safety requirements. A product that is adulterated, as that term is defined—and it is very broadly defined in

all of the laws that govern food processing—applies the same to

any product sold in U.S. commerce regardless of its origin and subjects that food to regulatory action by FDA or the Department of

Agriculture as appropriate.

I also have been thinking about a question that Mr. Ross asked

at the beginning of the hearing regarding an apparent representaVerDate 11-SEP-98 10:45 Feb 23, 2004 Jkt 091860 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 F:\DOCS\10817 HAGRI PsN: HAGRI
36

tion of geographic origin. As I understand Mr. Ross’s question a Vietnamese product’s label implied that the product was a Cajun seafood. I am not an expert in seafood, but as I understand the country of origin labeling provisions and the history of them they were

enacted for a very discrete purpose, that is to close what some perceive to be a regulatory gap for products on the so-called J list, the

Customs list under which certain products, including fresh produce,

are exempt from labeling when particular sold at retail. The legislative history makes it very clear that the sponsors recognized that

most products that are sold in the United States are subjected to

country of origin labeling.

There is an abundance of law already on the books in the United

States, administered by the Food and Drug Administration and the

Department of Agriculture, again depending upon the product at

issue, that prevents labeling that is false or misleading in any particular. That is a very broad prohibition. The statutes prohibit representations that would render a product misbranded subject a food

to regulatory action. There is a specific regulation, as I recall, that

prohibits false or misleading representations of geographic origin.

Therefore, even in the absence of country of origin labeling, or in

spite of it, if a claim is made about the geographic origin of a product, and the claim is flase or misleading, that product is subject to

regulatory action and the producer and distributor of that product

are subject to potential criminal action under existing law. That

has been the case for 100 years.

Mr. NEUGEBAUER. One of the other questions would be, those

that are proponents say, well, some of the produce, for example,

that is imported into the United States is not subject to the same

regulations as produce grown in the United States, for example,

that certain chemicals in fertilizers that are used in other countries, we do not allow those to be used, and so that way, the consumer would know that if it was a USA grown produce that they

would be getting produce that was under the same rules for certain

chemicals used in agriculture. What is your response to that?

Mr. MCCLUNG. Now, this is an issue that goes back many years,

as I think you probably know, Mr. Neugebauer. Basically, it works

like this. There are, it is true, that it is possible in some countries

to use chemicals that are not used in the United States. Often, that

is because they have pest problems that we don’t have in the

United States, but regardless, it is true. However, they are required to meet the same residue requirements, for product that is

imported into the United States, as domestic product has to meet.

In some instances where there are products that are used elsewhere that are not used in the United States, the FDA, or EPA

sets, FDA sets import requirements, residue levels, but if the issue

is that the product is not safe, or is less safe, than product from

the United States, then I don’t believe that the regulatory agencies

would stand for that, and I defy anyone to indicate that that is

really true.

Mr. NEUGEBAUER. Yes, sir.

Mr. STUART. If I might add to that, and John is right, the one

caveat to that I would like to just throw out for discussion, and this

somewhat goes to the food safety issue, but it is really not a food

safety issue. It is a marketing issue, and it goes to product differenVerDate 11-SEP-98 10:45 Feb 23, 2004 Jkt 091860 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 F:\DOCS\10817 HAGRI PsN: HAGRI
37

tiation. We have had instances in the fruit and vegetable industry

going back for the past 10 or 12, 15 years, where there have been

incidents that certain commodities have had food safety problems

related to the mostly microbial food safety problems that have impacted a specific commodity. When that food safety issue hits the

media and people become aware of it, there is no way, at the current time, for consumers to be able to go into a supermarket and

differentiate products between U.S. or foreign products, or foreign

products from U.S. products.

One of the benefits of labeling, and I think we need to recognize,

is that for this industry, to the degree that if a food safety issue

does arise and becomes a public issue and affects the marketplace,

again affects the marketplace, consumers will have the ability to

differentiate between a foreign product and a U.S. product, or between foreign products, which could help mitigate the potential

damage to domestic or imported product, depending on what the

specific situation might be.

Mr. NEUGEBAUER. But does that necessarily have to have a

label? I mean, for example, we are going through that issue right

now with, the Canadian beef and U.S. beef, but w have temporarily

suspended the importation of that, but where would labeling have

impacted that process?

Mr. STUART. Well, if, for example, there was a microbial contamination issue that applied to a particular domestic or imported commodity, and consumers had no ability to distinguish, which they

don’t now, at retail, when they purchase those commodities, the

downstream impact to the industries tends to be across all commodities, and if you have domestic producers that are shipping that

commodity into marketing channels at the same time imported

product is moving into those domestic channels, what tends to happen is consumers don’t purchase any of them, and if there were

some way to distinguish in the marketplace between a domestic

and a foreign product, or a foreign or domestic product, and again,

I am not pointing at either one, I am just saying consumers would

have the ability to make that distinction.

Mr. NEUGEBAUER. Mr. Chairman, thank you.

Mr. HAYES. One more question, Mr. Stuart, while we have got

you wound up. If we got a Florida law, why do we need a Washington law? In your case.

Mr. STUART. Well, I think that—as I attempted to answer the

question of the chairman earlier, our producers have found it beneficial in Florida. They believe that the broader application of that

law at the national law would be beneficial as well to all producers

in the United States Less than 10 percent to 15 percent of the

produce that is grown in Florida stays in Florida. It is shipped

throughout the United States and in some cases in international

markets.

Mr. HAYES. Follow up, Mr. Kushner, so you don’t think there is

a safety issue here at all.

Mr. KUSHNER. I don’t think this is a safety issue at all, certainly

not one that is addressed by country of origin labeling. The laws

are already comprehensive and quite adequate. In fact, the discussion that we have just had about the hypothetical or the theoretical

microbial problem with fruit or vegetables underscores the wisdom

38

behind Congress adopting a processed food exemption. All processing facilities in the United States, regardless of where their raw

materials have come from, are subjected to FDA and USDA oversight, in some cases continuous USDA inspection. In all cases,

these plants and the products they produce, are subject to FDA and

USDA regulatory requirements governing sanitation, food safety,

labeling and the like. I just can’t anticipate with respect to processed foods or even with raw commodities, that would be addressed

by country of origin labeling.

Mr. ROSS. Grocery Manufacturers of America, what is that?

Mr. KUSHNER. GMA is a trade association of the Nation’s manufacturers of food products and other products sold at the grocery

store, the association has a very diverse membership including

large food processors and some very, very small food processors,

many of which import raw commodities and process them in plants

throughout the United States; some of them process products in facilities around the world export them.

Mr. ROSS. Would Spam be an example?

Mr. KUSHNER. That would be an example of a product is produced by Hormel Foods. I think Hormel is a GMA member. Spam

is a processed meat product.

Mr. ROSS. First of all, do you think that the FDA should have

enforced the labeling law on the Cajun Delight label from Vietnam?

Mr. KUSHNER. Respectfully, I don’t know the issue, but certainly,

the first thing I would have looked at is the label and the context

in which the claim was made. If it appeared that the labeling was

false or misleading in any particular, or more specifically, if a false

representation of geographic origin was made, either expressly or

by implication, I would have asked FDA to take action against the

product under the Federal Food, Drug, and Cosmetic Act, not

under any new labeling requirements.

Mr. ROSS. So what if we got some product that is being shipped

here, say, from Moldova, and the country of Moldova has shipped

some tomatoes to the United States of America, and it is later determined that some pesticide that has been banned here for the

last 10 or 15 years was used there, and we now know it causes cancer, and people are going to start dying. If we had a country of origin labeling, couldn’t we at least be able to define the country of

origin as a means for safety to throw away those tomatoes instead

of throwing away all the tomatoes in the world that are in America?

Mr. KUSHNER. Well, that is assuming, of course, that we make

this determination pretty quickly, because raw agricultural commodities lose their identity fairly soon after they enter the country,

but FDA does issue import detention alerts all the time. When

there is a specific problem identified in a particular country, because of a pesticide that is either illegal in the United States or

that maybe has never been considered but has been found to be unsafe, or some other unsafe condition, FDA will prevent the product

from entering the country in the first place. I think FDA will use

its detention authority even more aggressively in light of the new

bioterrorism regulations that will soon go into effect.

Mr. ROSS. Mr. Warren, will this law help keep your catfish farmers in business, or is it going to put them out of business?

39

Mr. WARREN. No, I don’t think the law is that dramatic to our

industry, as the chairman of the Agriculture Committee has commented. We do have existing legislation that can be helpful. Certainly, this would be another helpful tool.

Mr. ROSS. So, it is not going to hurt you?

Mr. WARREN. It should not.

Mr. ROSS. Mr. Place, your testimony is it is going to hurt you.

Mr. PLACE. One more time, my testimony is that it puts our company in peril.

Mr. ROSS. OK, Mr. Stuart, you say it is going to help your producers in Florida.

Mr. STUART. Yes, sir.

Mr. ROSS. Mr. McClung, you say it is going to hurt the majority,

although not all of your producers in Texas.

Mr. MCCLUNG. Yes, sir.

Mr. ROSS. And Mr. Connelly, you still don’t believe the consumer

cares.

Mr. CONNELLY. Well, I think I said that my wife doesn’t care.

Mr. ROSS. OK.

Mr. CONNELLY. I would also say to Mr. Stuart’s comment in

going to the word, the Chairman talked about parsing words, I

think it is important to look at what a study says people will want

and what people will pay for. There is all kinds of green labeling

out there, where everyone says yes, I want green labeling, I want

green labeling, but when they are asked to pay 3, 5, 10 percent

more, they won’t do it, so I think it is important to look at the actions of the pocketbook rather than what a survey says.

Mr. ROSS. And Mr. Kushner basically doesn’t think safety is an

issue, and Mr. Buckman, I am sorry, but I can’t nail you down on

anything right now, but I have learned a lot today, and we have

got an awful lot of varying opinions on this, obviously, and this is

just one of many hearings we will be having and believe me, I as

much as anyone want to find a way to make this work. We are not

trying to put anybody out of business, at least not if it is an American company.

Mr. HAYES. Thank you, Mr. Ross. Let me explain to the panel

what you have just described. You have just described what a great

job the staff, Pam and others, have done in putting a panel together that reflects a whole host of different opinions. Now, my last

question for you is do any members of the panel have a question

for Mr. Ross, since he came in after I did, or me either, for that

matter? Seriously. And Mr. Place, you had your hand up.

Mr. PLACE. Let me see if I can squeeze this in as in the form of

a question, and that is that I think we stand at a crossroads, Mr.

Ross, in relationship to peanuts. We ask ourselves, and I would ask

you, who do you believe is the main competitor with peanuts in the

snack food industry. May I answer to that for you?

What I am alluding to is that peanuts compete with all the extruded type products, such as Cheez-Its and Niblets and all the

other things that are out there. We stand at a crossroads, because

peanuts have received so much positive feedback, but the only

thing that is inhibiting a vast increase in peanut sales is their

price as compared to these other so-called snack foods, and they

stand in the envious position of being able to say, well, there is at

40

least four diets out there right now that are touted to be healthy,

help us reduce weight and peanuts are the thing to eat as a snack

food.

Furthermore, there are numerous health studies that show that

it is beneficial, reducing heart attack, it reduces cholesterol. They

stand at a point where if they can keep their price down, it will

be extremely beneficial to the farmer, the producer and the retailer, and yet, this regulation will be foisted upon them and they

will be force to increase their prices.

Mr. HAYES. Thank you. I was supposed to ask him what his opinion is and that makes it a question. Anybody else got a question?

Mr. Buckman.

Mr. BUCKMAN. Yes, I will try one here. As I have listened patiently, I think I have observed, Mr. Ross, that you recognize that

the naming of the flag vessel for fish origin may not provide meaningful information to consumers purchasing fish. That points to

some willingness on your part to look at the complications of this

bill. From your standpoint, in my reading of the regulation, it appears that the intent was to exempt processed foods from this regulation. Was that your understanding?

Mr. ROSS. I am not sure I am prepared to fully answer that right

now, I mean, in terms of processed foods. It would probably depend

on how you define processed foods. I think the point I was making

earlier is when we think of country of origin labeling, we think of

consumers having the right to know where the food is coming from

that their children or grandchildren are going to consume. And it

is a very complicated issue, I mean, Mr. McClung is here speaking

against the bill. He indicated in his testimony he has got members

that actually support the bill. National cattlemen are against this

thing. The Arkansas cattlemen are for this thing. We have got people all over the place on both sides of the aisle on this thing.

Like a lot of things in government, I think the intent was good

and I think by the time the final product came out of conference

committee, it was all screwed up, and that is the purpose for this

hearings and why I think we need to continue to try and find a

way to make this thing work, and if we can’t, just give me country

of origin labeling on catfish and I will leave everybody alone.

Mr. CONNELLY. Mr. Chairman.

Mr. HAYES. Mr. Connelly.

Mr. CONNELLY. When we have talked about right to know, it is

interesting that beef is involved, peanuts, fruit and vegetables, fish,

et cetera, but poultry was not included, and poultry is certainly

consumed at a much higher rate than seafood, unfortunately, not

as high as beef, but if it is consumer right to know, it seems odd

to leave a fairly significant protein mix out of the equation.

Mr. HAYES. We are heading down the home stretch. Anybody else

want to take a shot here?

Mr. MCCLUNG. Well, I will. If I might, once again, depending on

what comes out of USDA when they release the regulations, do you

all believe it is reasonable that we could come back and try and

fix this, some obvious problems with this legislation? For example,

the certification requirement and the third party audit business

which Mr. Peterson has tried to get out through the bill that he

41

has introduced, but I would like to know your opinion of the political likelihood of remedial legislation if we need it.

Mr. HAYES. Well, the 60-day comment period is crucial, and I

would encourage and very strongly ask you all to take part in that

process. Again, the uncertainty of not knowing what USDA is going

to come out with—puts us all in a little bit of an awkward position,

and as soon as we—and we are anxious to get our hands on it as

you are to see where we really stand, and then, I think we will be

much better prepared to deal with that. But again, if there are no

further comments, we are genuinely and sincerely appreciate of you

taking your time and coming to spend some time with us here in

Washington. Thank you very much for your testimony, and 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.

The hearing of the Subcommittee on Livestock and Horticulture

is adjourned. Thank you all.

[Whereupon, at 3:15 p.m., the subcommittee was adjourned.]

[Material submitted for inclusion in the record follows:]

STATEMENT OF JERRY M. PLACE

Mr. Chairman and members of the subcommittee:

My name is Jerry M. Place and I am president of the Western Nut Company, Inc.,

a Utah corporation. As a member of the Board of Directors of the Peanut & Tree

Nut Processors Association, I represent the 151 members of the organization whose

primary objective is to improve and advance our industry. I also appear today on

behalf of the members of the Snack Food Association, the National Confectioners

Association, and the American Peanut Product Manufacturers, Inc., who manufacture and sell snack nut products.

Three weeks ago if someone had told me that I would be sitting before a subcommittee of the United States House of Representatives, I would have told them

they were ‘‘nuts’’. But here I am. I appreciate that fact that you have set aside time

to take testimony regarding country of origin labeling for certain commodities, especially peanuts.

I come before you today because of the grave implications mandatory country of

origin labeling requirements, which are scheduled to take effect on September 30,

2004, will have on our industry and more particularly, small businesses such as my

own. Our factory and primary store is located near the heart of downtown Salt Lake

City, Utah. The company was founded in 1966 and has seen steady growth since

its inception. We are a family owned small business that processes, packages and

sells roasted, salted and mixed nuts at distributor, wholesale, and retail pricing.

During the holiday season we sell our product at retail in all regional malls in

the state of Utah and in several Idaho locations. Additionally, we have built a substantial loyal customer base through our catalog and website marketing. We have

repeat customers in every state and the company continues to grow at a moderate

but steady pace. In the more than thirty seven years of our existence we have prospered in both good and bad economic times.

We employ 30 to 35 full time employees and that number explodes to in excess

of 250 employees during the fourth quarter of each calendar year. Our annual revenue is slightly less than $6 million. Our annual gross payroll is in excess of

$800,000. I realize this is a tiny drop in the bucket of this Nation’s economy, but

it is our drop and it is everything to my employees, their families, my family, and

me.

The nature of small business is such that each owner or entrepreneur must focus

like a laser on daily operations in the industry in which he or she is invested. For

most of us there is no such thing as a forty-hour workweek or a real day off. And

we are genuinely hard-pressed to take time away from our business to lobby Congress. Why do we work as hard as we do? Primarily because we love our work and

the benefit it affords our employees, our families and us.

I find it somewhat ironic that my first real venture into business was facilitated

by a Federal program, namely a Small Business Administration loan. Now some

42

thirty-five years later the company I own with my two brothers-in-law is being

placed in potential peril by a new Federal mandate—country of origin labeling for

peanuts. I guess the Federal Government does ‘‘giveth and taketh away.’’

It is difficult to believe that the closure of small business operations such as ours

was the intent of Congress when it included the mandatory country of origin labeling provisions in the most recent farm bill. However, this will be the likely outcome

unless you in Congress correct the problem.

Based on the voluntary guidelines that USDA has already published, we anticipate that the mandatory country of origin program that will take effect in late 2004

will cover snack peanuts. I find this very hard to understand in light of the statutory exemption that Congress provided for ‘‘processed food items’’. Now I am no lawyer, but I do think I can understand the plain meaning of the term ‘‘processed food

item’’. And if shelling, roasting and adding ingredients do not result in a processed

food product that is materially changed from a raw in-shell peanut, then I certainly

would like to know what it is that we do every day at our processing plant.

Implementation of mandatory country of origin requirements is simply a logistical

and economic impossibility for a company of our size and would in effect put us out

of business. Though we are small, we have in excess of 1,189 ‘‘stock keeping units’’

(SKU) that contain nuts. Of this total, 520 SKUs contain peanuts. The heart of our

business is centered around gourmet nuts that are presented in custom award winning packaging. Under a mandatory country of origin labeling program as currently

contemplated by USDA, we would be required to pre-print each and every one of

our gift boxes in advance in every possible combination of various countries of origin. We do not have adequate inventory storage space to house the proposed packaging inventory. Additionally, it would be virtually impossible to track the movement

of individual peanuts as they move through our processing operation from receiving,

through processing, on to packaging where the appropriately labeled box would have

to be to receive the product. I have enclosed with this testimony one of our holiday

season 2003 retail catalogues that will give you an idea of the complexity involved

in providing appropriate labels for each different product. I’m also submitting for

the hearing record copies of comments filed earlier this year that the Peanut and

Tree Nut Processors Association and the Snack Food Association jointly submitted

to USDA, which explains in more detail our view that roasted and shelled peanuts

constitute a ‘‘processed food item’’.

One might say, ‘‘simply purchase domestic peanuts’’. We do. But that is no solution for me because we have to provide country of origin labeling for U.S. peanuts

too. And pray tell, what do we do in a year when the domestic peanut crop fails,

as it has periodically in the past, and there is inadequate supply? Furthermore, how

would the small U.S.-based nut processor compete price wise with imported prepackaged products that carry a country of origin label of the Nation where the peanut was processed and packaged rather than the actual origin of the peanut? That

is exactly the position my company will be put in if the farm bill’s country of origin

labeling requirements for peanuts are not altered.

Some of the larger corporations in our industry may be able to comply with the

proposed regulations because they can push the cost back on the grower or spread

the cost over a huge volume. Other large corporations have simply said that they

are investigating the option of relocating to Ontario, Canada or Mexico. Still others

have indicated the possibility of exiting the peanut business altogether and concentrating on almonds or cashews. None of these alternatives is an option for a company of our size. We would simply be out of business!

I think I speak for all the little guys in our industry when I say please reconsider

this whole idea of mandatory country of origin labeling for peanuts. Why would it

be in the best interest of our nation to encourage large processors to leave the country, put the small processors out of business and discourage new start-up operations? And perhaps most importantly for members of Congress who represent peanut-growing regions, what will all this mean for peanut growers here in the U.S.?

That is one question I can answer with confidence. It means reduced returns for

producers, and decreased consumer demand for snack peanuts as retail costs go up

to pay for mandatory labeling.

In short, everybody loses—nobody wins. Does this make economic or political

sense? I think not.

In the most emphatic of terms I respectfully ask you to move as expeditiously as

possible to correct this situation so that we can avoid the unintended but nevertheless adverse consequences of mandatory country of origin labeling for peanuts.

Thank you for your attention and consideration of this important matter.

43

STATEMENT OF MICHAEL STUART

On behalf of its producer members, Florida Fruit & Vegetable Association (FFVA)

appreciates the opportunity to share its views with the subcommittee on implementation of the country of origin labeling (COOL) provisions contained in the Farm Security and Rural Investment Act of 2002 (farm bill). FFVA strongly supports mandatory country of origin labeling of fruits and vegetables, and over the past several

months has provided both formal and informal input to the U.S. Department of Agriculture (Department) as it formulates labeling regulations to implement the law.

Mandatory origin labeling for produce will be an important tool for giving U.S.

consumers the chance to make a more informed choice about the foods they buy.

It is the same information that consumers in many other countries enjoy, as was

recently reported by the General Accounting Office. National surveys consistently

show overwhelming consumer support for origin labeling of produce. Just as important is the support from producers. Mandatory origin labeling ensures that their

products have a consistent identity in a crowded marketplace. Further, it makes it

easier for consumers to identify and purchase domestically grown fruits and vegetables.

The farm bill labeling provisions for fruits and vegetables is sound in our opinion,

and provides the Department sufficient flexibility to create a workable set of regulations for the produce industry. We do not believe it was Congress’ intent to create

an untenable burden for producers of covered commodities, or their customers at retail. Congress did not intend that the Department create unnecessary and unworkable rules that would add needless cost to the food production and distribution system in the United States. At the end of the day, however, the success or failure of

the law will depend greatly on whether the Department’s regulations are flexible

and workable, or draconian and costly.

Over the past several months, considerable controversy has developed over COOL.

Opponents have labeled the law ‘‘fatally flawed,’’ and have urged its repeal in Congress. And while the focus of the criticism has been the law itself, in reality it is

the Department’s ‘‘voluntary guidelines’’ (guidelines) that have generated most of

the concern within the industry. A recent editorial from the Packer addresses why

overreaction and exaggeration by retailers and others is unnecessary and inappropriate. (Attachment I)

The guidelines were published by the Department in October, 2002—just over 4

months after the law’s passage. They were highly prescriptive in nature, and created a significant record-keeping burden for businesses throughout the distribution

chain—from producers to retailers. For the produce industry, the guidelines failed

to recognize or take advantage of existing statutes such as the Perishable Agricultural Commodities Act (PACA), which regulates transactions between sellers and

buyers, or the Tariff Act of 1930, which requires labeling of imported packaged products. USDA’s cost estimates of the impact of the guidelines exacerbated the controversy by suggesting that the industry would be hit with a $2 billion price tag.

A recent General Accounting Office (GAO) study questioned the assumptions used

by the Department in its analysis, and further recommended that it collaborate with

industry to identify existing programs as alternatives for accomplishing many of the

law’s requirements. (Attachment II) FFVA has consistently recommended this approach to USDA.

The record-keeping mandate in the guidelines, while rooted in the law, is not required by it. The statute states: ‘‘The Secretary may require a verifiable recordkeeping audit trail that will permit the Secretary to verify compliance.’’ Since the

language says ‘‘may’’ as opposed to ‘‘shall,’’ Congress specifically left the decision on

record keeping to the Department. It is not bound to require record keeping at all

and as we suggested, modest ‘‘tweaking’’ of existing regulations is all that is needed

to implement this new law. Similarly, in the area of enforcement—another controversial issue—the statute states: ‘‘If the Secretary determines that the retailer

has willfully violated [the act], after providing notice and an opportunity for a hearing, the Secretary may fine the retailer in an amount of not more than $10,000 for

each violation.’’ And then only for intentional violations after an opportunity for a

hearing. The law does not mandate the maximum fine for each violation, as some

opponents would lead you to believe. The Department clearly has broad discretion

in creating an enforcement matrix that penalizes only the most egregious offenders

who consistently and intentionally violate the law.

In the comment period following the release of the guidelines, FFVA submitted

both written and oral comments to the Department suggesting ways to improve

them developing a more workable, flexible, and less burdensome mandatory regulation. The following is a summary of those recommendations.

44

The Department should develop separate regulations for each covered commodity

specified in the Act.

While the Act’s principal goal is simple and straightforward (i.e. providing country

of origin information to consumers), we believe the Department should recognize

that each covered commodity has different production, distribution, and handling

systems. Further, they are each regulated under a different set of laws. We have

suggested that the Department provide separate sets of regulatory requirements

under the law depending on the nature of the specific covered commodity.

Point of purchase notification should be simple and straightforward.

The statute identifies a wide array of notification methods that can be used at

the discretion of the retailer. These include, label, stamp, mark, placard, or other

clear and visible signs on the covered commodity or on the package, display, holding

unit or bin containing the commodity at the point of final sale to the consumers.

Congress wisely left it to the retailer to determine how best to assure that such information is provided. Thus, the retailer has maximum flexibility in fulfilling the

law’s requirements.

We have suggested to the Department that the regulations be similarly flexible

in the terminology used to denote origin. The guidelines mandate that terms such

as ‘‘Grown in Country X’’ or ‘‘Produce of Country Y’’ be used. This is too prescriptive.

In the regulations, we have recommended that the Department accept the listing

or marking of the individual country name, or recognized abbreviation (i.e. United

States or USA) as being sufficient to meet the requirements of the statute.

FFVA also strongly supports the Department incorporating a common sense approach in evaluating the effectiveness of the notification system selected by a retailer. For example, if the retailer has a bin or display of fruit, and a significant

amount of the fruit is individually labeled with the country of origin, then the Department should not require additional labeling of the fruit even if some are missing

a label. The test of the sufficiency of the notification method should be whether the

consumer could make a reasonable decision regarding the country of origin of the

produce at the point of sale. It is recognized that labels can fall off in transit. The

retailer should not be penalized if such a situation has occurred.

Labeling of mixed or blended produce should simply list all the countries of origin

of the commodities included in the blended product.

The guidelines require blended products, such as bagged salad, list each commodity component by country and predominance of weight, value or other measurement.

The law does not require such detail. We have suggested that a simple declaration

of the country of origin of the combined components be sufficient. For blended products containing imported components, origin-labeling requirements should mirror

the declarations mandated by the Tariff Act of 1930.

We believe the Department should not use the general authority under COOL to

improperly expand the regulatory requirements of the law or its scope. The Department does not need to incorporate into the regulation any provisions beyond those

necessary to assure appropriate implementation of the law’s requirements.

Record keeping is not necessary; but, if it is required in the regulations, should

be based on the existing requirements of the PACA. These on-going requirements

are well known to growers, shippers and retailers.

Again, COOL states that the Secretary may (emphasis added) require the maintenance of a verifiable record-keeping audit trail. The requirements contained in the

guidelines create a tremendous burden on the entire industry, and are unnecessary.

Florida’s Country of Origin law has functioned well since 1979 without a mandated

record-keeping system. Florida’s law operates under the presumption of truthfulness

of the information provided to the point of retail sale. However, in instances when

false information is printed on the container, existing Federal and state law provides remedies that adequately address those situations. The Department should

take the same approach in developing regulations for COOL. There should be no

downstream liability for the validity of information provided by a product supplier.

In the event the Department should elect to utilize its discretion under the statute and implement a record-keeping mandate, we have suggested that it should be

based on the current requirements of the PACA. Under PACA, retailers and suppliers are already required to maintain certain information and records associated

with each produce transaction. This system is very familiar to all persons who operate responsibly in the buying and selling of produce. It seems a rather simple matter for the Department to acknowledge the existence of the current regulatory

scheme, and refrain from creating an additional burden.

FFVA believes COOL is a fundamentally sound law that will provide consumers

with information regarding the origin of the produce they purchase at retail supermarkets. In implementing the law, the Department has discretion to make it as simVerDate 11-SEP-98 10:45 Feb 23, 2004 Jkt 091860 PO 00000 Frm 00047 Fmt 6633 Sfmt 6633 F:\DOCS\10817 HAGRI PsN: HAGRI
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ple or as difficult as possible for the industry. We have urged them to take the simple approach.

We greatly appreciate the efforts the Department has made to seek input from

the industry on this issue—both formally and informally. The suggestions made by

our organization have been made by many others, as well. We are hopeful that the

draft regulations will be released soon, and will incorporate the flexible common

sense approach recommended by the industry.

ANSWERS TO SUBMITTED QUESTIONS

In several of your testimonies the definition of processed food was discussed. Has your industry looked at a possibilities that would change the

definition of processed food in order to be more efficient and workable in

your industry, but that doesn’t include ground meat into the exemption of

the law?

The statute appears to give USDA broad discretion to define the scope of commodities affected by the ‘‘ingredients in a processed food item’’ exclusion. The Department’s first attempt at delineation between covered and non-covered commodities

under this exclusion is contained in the Voluntary Guidelines. Overall, we support

the Department’s definitions in the guidelines, but disagree strongly with the methodology used to prescribe labeling requirements (see response to question No. 3).

Mr. Stuart in your testimony you said that the Department should not

use the general authority under COOL to improperly expand the regulatory requirements of the law or its scope.— Can you expand on that statement? As you may know my COOL Lite bill, H.R. 3083 requires the Secretary to use existing records, which I believe is one of your examples.

What are others?

There are numerous laws impacting the sale and distribution of perishable agricultural products. Two laws are particularly important in relation to COOL—the

Perishable Agricultural Commodities Act (PACA) and the Tariff Act of 1930.

PACA requires that any information conveyed by a seller to a buyer in a transaction be factual. So, for example, if I (as a grower/shipper) sell you (a retailer)

1,000 cartons of tomatoes and state that they are grown in the USA, then I am accountable under PACA that the information is accurate. If you (as a retailer) rely

on the origin information provided by me to comply with the statute, there should

be no enforcement liability to you if the information I provided is inaccurate. I

would be in violation of PACA. This was the case even before the enactment of

COOL. COOL merely requires that the consumer be able to determine the product’s

country of origin. There is no need under COOL to establish an additional liability

for the retailer in this case. PACA’s enforcement mechanisms, as well as the flexible

penalties established in the COOL statute, are more than sufficient. Furthermore,

both you and I, as licensees under the PACA, must keep all pertinent records of

the transaction for a period of two years. Therefore, there is no need under the

COOL regulations to impose additional record keeping burdens on suppliers or retailers.

Under current Customs regulations, a consumer-ready package must provide

country of origin information if imported products are contained in it. Packaged

salad firms, for example, are required by current regulations to show the country

of origin if the package contains any imported components. Customs regulations do

not, however, require a detailed listing of the origin of each individual component

by prominence of weight or other factors, as is the case with the voluntary guidelines for COOL. In our opinion, the guidelines far exceed the requirements and

scope of the law. The Department should adopt the basic labeling principal in Customs regulations and apply it to the COOL regulation.

In the testimony provided today there was a concern raised about the

current legislation that would require ingredients to be identified according to weight, how would alphabetical be better if they are still required

to be listed?

Again, FFVA has recommended to the Department that they adopt the approach

already contained in Customs regulations and apply it to the COOL regulation. This

would only necessitate listing countries of origin of the components of the blended

product. Thus current requirements already in place and already used by the trade

would be sufficient to implement COOL.

According to testimony delivered by General Counsel, U.S. Department of

Agriculture, Nancy Bryson on June 26, 2003: ‘‘I would like to point out because of the way the statute is written, the requirement on retailers to do

46

country of origin labeling on September 30, 2004, is not really affected by

the suspension of appropriations. We are not going to be writing our regulations. But if you look at the statute, our requirement to write regulations

is separate and apart from the requirement that the retailers provide the

information on September 30, 2004.’’ Since the retailers are going to be held

liable to a law that may not be funded what avenues are being perused to

change the existing legislation?

We believe Congress should not prohibit the Department from writing regulations

to implement COOL by suspending appropriations. We believe the USDA can and

should use existing statutes and regulations and common sense in designing the

final regulation. Additional legislation should not be needed if the USDA follows

this approach.

STATEMENT OF JOHN M. MCCLUNG

Mr. Chairman, members of the subcommittee, my name is John McClung. I’m

president of the Texas Produce Association, headquartered in the Rio Grande Valley

of South Texas. I want to thank you for holding this hearing today on what we all

know is one of the most controversial issues to face the produce industry in some

years—Country-of-Origin labeling—and for giving me the opportunity to appear before you today to explain the Texas industry’s position.

On August 22, the Board of Directors of the Texas Produce Association unanimously voted to attempt to rescind the current Country-of-Origin law, thus reversing a position taken over a year and a half ago. The 17 members of the board took

this action fully recognizing that we currently have a Federal law that is undergoing

rulemaking, so any vigorous attempt to void that law would be premature until the

pending regulations issue and we have an opportunity to evaluate their impact.

In this regard the Texas industry’s posture is entirely consistent with the position

of the national produce organization, the United Fresh Fruit and Vegetable Association, that we should wait to see USDA’s regulations before informed decisions can

be made on possible additional actions, including seeking Congressional intervention.

Nonetheless, the board felt that the law as currently written might well be too

prescriptive to allow the U.S. Department of Agriculture to develop regulations that

are acceptable to the industry. We shall see. The members also felt that the basic

premise of the law: that U.S. consumers would prefer to buy domestically grown

fruits and vegetables if they only knew they were U.S. grown, is contrary to what

we know about the marketplace and the variables consumers most often use in

making their purchasing decisions. The only likely exception would be when there

is a food safety scare of some sort, and then we generally loose the sector, anyway.

And finally, they felt that the cost and disruption associated with compliance probably will outweigh any benefits. Again, the jury is out on this matter until we can

digest the regulations.

Interestingly, the association board is made up largely of grower/shippers who,

without exception, also are importers of Mexican produce. I’ll come back to the significance of that point in a moment.

As I think we all know, the retail community has mounted an enthusiastic campaign to convince their fruit and vegetable suppliers that country-of-origin is a bad

idea for a lot of reasons, and while my shippers are well aware of that systematic

effort, I do not think it looms overlarge in the Texas association’s position. We are

not unaccustomed to being at odds on occasion with the buyers on issues of mutual

interest, and simply are hopeful that the differences will be thoroughly aired and

that where there is legitimacy to the threats of upheaval the best possible resolution

will be reached.

I must add that some retailers are insisting on elaborate assurances of compliance

with anticipated provisions of the law and regulations from their suppliers before

the regulations are scheduled to take effect, and even before they are published.

These demands are, of course, impossible to comply with. But they are more than

an irritant as they often include audit requirements, hold-harmless agreements, and

other provisions that are unacceptable to suppliers. One gets the impression that

something more than buyer eagerness to comply with the law is at play here.

The Texas industry’s view on country-of-origin labeling is obviously colored by our

transitional role as a supplier of fresh fruits and vegetables to the nation. Just 20

years ago, Texas by most accounts ranked as third largest producer of produce in

the U.S., behind only California and Florida. But in 2001, when the Congress appropriated money for ‘‘specialty crop’’ grants, and those dollars were distributed accordVerDate 11-SEP-98 10:45 Feb 23, 2004 Jkt 091860 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 F:\DOCS\10817 HAGRI PsN: HAGRI
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ing to each State’s relative rank as a supplier, Texas was tied for tenth place with

New York. While many factors contributed to that decline in the State’s ranking,

arguably the most telling was—and continues to be—pressure on domestic production from Mexico. Last year, some 180,000 semitrailer loads of produce entered the

U.S. from Mexico, just under 40 percent of them through Texas. Each load is giveor-take 44,000 pounds. I don’t have to tell you that that’s a lot of onions, cabbage,

melons, mangos, tomatoes, and other commodities.

Texas producers and shippers, seeing the writing on the wall going back many

years, are heavily involved in growing, packing and marketing Mexican produce.

Very few if any vegetable shippers remain in Texas who are not sourcing, one way

or another, from Mexico. As a result, while Texas production has slipped the state

retains its rank as a top supplier to the rest of the country, which is why I say we

are going through a transition. And one thing we know is that consumers really

don’t care where their commodities come from, so long as they are of high quality,

display well, and are priced right. These importers do not oppose country-of-origin

labeling on the grounds it will cost them market share, but they generally do oppose

it as an expensive and burdensome requirement of little or no practical benefit.

They particularly note that there is no evidence consumers are clamoring to know

where their produce originates most of the time.

Clearly the Congress is considering what it might do to fix this law if, in fact,

it proves to be hopelessly broken. It might well be that converting to a voluntary

program would be an option. In any event, we greatly appreciate the opportunity

to work with you as time goes on. This concludes my testimony. Thank you.

STATEMENT OF JOHN CONNELLY

Chairman Hayes, Congressman Ross, and distinguished members of the subcommittee, my name is John Connelly, president of the National Fisheries Institute

(NFI). Thank you for the opportunity to explain unique implications for the fish and

seafood industry of Subtitle D of the 2002 farm bill requiring mandatory country

of origin labeling of fish and seafood products at the retail level.

The National Fisheries Institute is the national trade association for the diverse

fish and seafood industry of the United States. The NFI is a ‘‘water to table’’ organization representing fishing vessel owners & aquaculturalists, processors, importers,

exporters, distributors, retailers, and seafood restaurants. Our members are committed to providing consumers with safe, sustainable, and diverse seafood choices. NFI

is the leading voice for promoting seafood as the daily protein food of choice for feeding the world. The nearly 700 members of the NFI are involved in the vast majority

of the seafood consumed in the United States.

Mr. Chairman, the United States had a mandatory country of origin labeling program for food prior to the 2002 farm bill. The Tariff Act of 1936 requires all imported food to be labeled as to country of origin to the point of the ‘‘ultimate purchaser’’, with a notable exception under the so-called J list for products difficult if

not impossible to individually label—such as whole fresh fish. The U.S. Customs

Service interprets the ultimate purchaser to be either the retail consumer or the

person who subjects the imported good to a ‘‘substantial transformation’’ such that

the final product is fundamentally different from the imported good.

Fish and seafood items imported in retail-ready packaging are therefore already

labeled as to country of origin. Those products that undergo a substantial transformation in the United States are not required to be labeled as a foreign good since

such labeling would unfairly deny the investment of U.S. labor and capital in the

production of the final product. Nor are such products eligible to be labeled as Products of the United States as Federal Trade Commission rules require ‘‘Products of

the United States’’ to be 100 percent U.S. goods. Foreign goods therefore are not

masquerading as U.S. goods in the marketplace or if they are, they do so in violation of existing requirements. This requirement will have the perverse consequence

of potentially driving fish and seafood processing out of the United States. If a company that mixes a variety of products in the U.S. will now be required to go through

the significantly increased costs of segregating all the their products by country,

then we run the real risk of that company siting their final processing facility in

a single country and having that country be the ‘‘country of origin.’’

In addition, domestic fish and seafood producers who wish to label their products

as ‘‘Product of the USA’’ may voluntarily do so consistent with Federal Trade Commission and Food and Drug Administration rules. Unlike meat, domestic fish and

seafood does not need a regulatory program, either voluntary or mandatory, to proclaim their products are ‘‘Made in the USA’’. Fish and seafood are generally regulated by the Food & Drug Administration (FDA). The Food, Drug, & Cosmetic Act

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(FDCA) requires all food labeling to be ‘‘truthful and not misleading’’. Fraudulent

country of origin claims therefore can be enforced against by the FDA. In addition,

the Federal Trade Commission has rules for declaring that products are ‘‘Made in

the USA’’ that requires such products to be 100 percent U.S.-origin content and

could also enforce against fraudulent country of origin claims.

It is for these reasons that the NFI believes that Subtitle D of the 2002 farm bill

was unnecessary and unwarranted.

We are now deeply concerned about the manner in which the Department of Agriculture is implementing Subtitle D. If the voluntary guidelines issued by the USDA

this year are any indication of the mandatory regulations, the program will be extremely onerous and impractical. While there may be some flexibility under the

statutory language for the USDA to exercise its discretion in developing final regulations, we are concerned that many aspects of the program are strictly dictated by

the statute.

I would like to focus on five key issues that pose considerable challenges for the

fish and seafood industry.

PROCESSED FOOD EXEMPTION

The farm bill exempts ‘‘ingredients in a processed food item’’ from mandatory

country of origin labeling. In the voluntary guidelines, USDA has interpreted this

exemption in a manner inconsistent with, and often contradictory to, current Customs concepts of ‘‘substantial transformation’’. This is leading to considerable confusion in the marketplace about whether products have to be labeled or not. If a product is covered under Customs rules but exempt under USDA rules, does it have to

be labeled? And vice-versa?

To highlight this inconsistency, I would like to provide two examples: cooked

shrimp and filleted hoki (a New Zealand finfish). Under Customs rules it has been

determined that cooking imported shrimp does not constitute substantial transformation. Therefore, a U.S. processor who cooks imported raw shrimp must continue to label the product with a foreign country of origin. USDA, however, is proposing to exempt all cooked products under the processed food exemption On the

other hand, Customs has determined that importing whole, headed and gutted hoki

and filleting it here in the US does constitute substantial transformation, exempting

such product from labeling. USDA is proposing to require labeling of such product.

It would seem prudent, therefore, for the USDA to develop a definition for ‘‘ingredients in a processed food item’’ that is as consistent as possible with US Customs

‘‘substantial transformation’’ standard—a standard that fish and seafood companies

understand and already comply with.

LABELING OF COMMINGLED AND BLENDED PRODUCTS

Currently the USDA is proposing that retail products that contain commingled or

blended ingredients from multiple countries of origin be labeled as to country of origin by order of predominance by weight. In addition, the USDA is proposing that

facilities that source similar raw material from multiple countries of origin, such as

raw shrimp, must maintain verifiable segregation plans to keep the products from

different countries separate from one another.

These proposals are utterly impractical and fail to recognize the fundamental nature of the production process. Facilities are run as efficiently as possible to produce

a product for the consumer based on such criteria as quality, value, and price. In

the case of shrimp, product from multiple countries of origin may be commingled

at the bulk level to achieve the desired criteria. While maintaining a segregation

plan throughout the production process may be possible, it is certainly not practical.

It will require either the creation of redundant processing capabilities and/or the

shutting down of the production process between batches of differing origin product

in order to maintain the degree of segregation and ultimate labeling that USDA is

proposing.

I believe these proposals stem from a concern at USDA that some may choose to

add a de minimus amount of U.S.-origin product and then list the United States

first in a list of countries of origin on the package. While this is a legitimate concern, the issue can easily be remedied by simply requiring an alphabetical listing

of multiple countries of origin.

Further, the combination of multiple origin raw materials is dynamic and constantly changing. This will require seafood producers to maintain significantly more

diverse inventories of packaging materials in order to comply with law. Not only

does this add considerable logistical challenges to operations, it will also increase

costs as packaging materials will need to be ordered in smaller batches and therefore greater costs. These costs could be considerably reduced if USDA would allow

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a ‘‘May Contain’’ label listing multiple countries of origin or a table where the relevant countries of origin could be checked or marked.

RECORD-KEEPING REQUIREMENTS

Subtitle D authorizes the USDA to require a verifiable recordkeeping audit trail

at all levels of the supply chain to verify country of origin claims. USDA is proposing that all levels in the supply chain maintain complete records of the downstream

history of the product all the way to the level of the domestic grower (and presumably individual fishermen for wild-caught seafood which, of course, isn’t grown) or

the country of origin declared to Customs at time of entry.

Not only is it an incredibly excessive record-keeping requirement to expect everyone in the supply chain to maintain such complete histories of the product, the

record-keeping burden falls far greater on domestic producers than on imported

goods. Imported food must be accompanied by records throughout the supply chain

that simply verify that the product comes from the country declared to Customs at

time of entry. Domestic food must be accompanied by records that, presumably,

identify the individual fishermen or grower of the product. This is virtually impossible. Fish and seafood products from dozens, in some cases hundreds of fishermen

can be commingled in a fresh bulk form by primary seafood processors. There is

simply no way to verify which fish came from which boat. Even in aquaculture operations, processing plants source fish from literally dozens of farms on any given day,

commingling the fish from multiple farms not only at the plant, but on the truck

picking up the fish at the farm gate.

The level of recordkeeping being proposed is simply impossible.

WILD VS. FARM-RAISED

In addition to country of origin, Subtitle D will require all fish and seafood products to be labeled as either ‘‘wild’’ or ‘‘farm-raised’’ even for products where this is

only one kind (i.e. there is no such thing as farm-raised swordfish). Notwithstanding

the obvious additional logistical and record-keeping burdens this requirement will

impose on fish and seafood, the distinction between ‘‘wild’’ and ‘‘farm-raised’’ also

present challenges.

For example, fishermen are now harvesting small bluefin tuna alive, releasing

them into open-ocean net pens where they are grown and fattened on a highly nutritious diet before being harvested. Are such tuna ‘‘wild’’ or ‘‘farm-raised’’?

This issue is particularly problematic for coastal shellfish. Many coastal shellfish

operations involve the staking, claiming, leasing, outright ownership, or other form

of reservation for exclusive use of shellfish beds in open water systems. The fact

that the production from these beds is harvested from these open water systems

could suggest that these products fall under the definition of ‘‘wild’’ shellfish. However, the fact these beds have been reserved for exclusive use in some manner may

suggest that they have been removed from the ‘‘wild’’ domain and the products

therefore considered ‘‘farm-raised’’.

In addition, some of these shellfish beds may be cultivated, manipulated, or otherwise developed with aquaculture-based practices further suggesting the products are

‘‘farm-raised’’. Yet again, municipalities or other ‘‘public’’ entities conduct some of

this cultivation for the benefit of a public fishery thereby suggesting the products

are ‘‘wild’’.

Without substantially greater regulatory guidance from the USDA than that proposed in the guidelines, the distinction between ‘‘wild’’ and ‘‘farm-raised’’ will remain

unclear for the producing communities, an untenable situation especially given the

potential fines and penalties mislabeling could lead to.

EXCESSIVE FINES & PENALTIES

Subtitle D authorizes the USDA to impose fines up to $10,000 per day per violation for mislabeled goods. These fines may be applied throughout the supply chain.

While retailers may only be fined for willful violations, the rest of the supply chain

may be subject to these onerous fines simply for making mistakes in what is an incredibly complicated system. This level of liability seems excessive and unwarranted. In fact, the threat of fines is so great the supply chain from the top down

is already seeking to indemnify itself from fines over mislabeling that it feels it has

little control over. That is, the individual fisherman or fish farmer will be the only

one that cannot pass the liability down the line. Subtitle D should be amended to

either lessen the level of the fines or target them towards intent so that willful violators are the ones at greatest risk.

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Mr. Chairman, thank you for the opportunity to testify today. I would be pleased

to answer any questions members of the subcommittee may have.

ANSWERS TO SUBMITTED QUESTIONS

In several of your testimonies the definition of processed food was discussed. Has your industry looked at a possibilities that would change the

definition of processed food in order to be more efficient and workable in

your industry, but that doesn’t include ground meat into the exemption of

the law?

The National Fisheries Institute (NFI) believes that an ingredient in a processed

food item should be defined in such a way as to be entirely consistent with the concept of substantial transformation under U.S. Customs Service requirements for

country of origin labeling under the Trade Act of 1936. Such consistency will help

eliminate confusion throughout the supply chain and marketplace.

In addition, the substantial transformation standard of US Customs is an inherently fair standard, ensuring that products that have considerable investments of

US capital and labor in their production are not required to be labeled as foreign

goods.

In the testimony provided today there was a concern raised about the

current legislation that would require ingredients to be identified according to weight, how would alphabetical be better if they are still required

to be listed?

Alphabetical listing would allow facilities that commingle similar products from

multiple countries or origin to continue to do so without needing to implement onerous and costly verifiable segregation plans to identify the relative contribution of

these multiple sources to final products. At the same time, an alphabetical listing

largely addresses concerns that a processor might use a de minimus quantity of US

material in an attempt to list the US first in a listing of multiple countries of origin

as most countries come before the US in any alphabetical listing.

NFI believes that American consumers could also be informed about package contents by allowing a label that states, ‘‘This package may contain products from X,

Y, or Z country.’’

According to testimony delivered by General Counsel, U.S. Department of

Agriculture, Nancy Bryson on June 26, 2003: ‘‘I would like to point out because of the way the statute is written, the requirement on retailers to do

country of origin labeling on September 30, 2004, is not really affected by

the suspension of appropriations. We are not going to be writing our regulations. But if you look at the statute, our requirement to write regulations

is separate and apart from the requirement that the retailers provide the

information on September 30, 2004.’’ Since the retailers are going to be held

liable to a law that may not be funded what avenues are being perused to

change the existing legislation?

The NFI strongly supports any and all efforts to repeal or delay implementation

of Subtitle D of the 2002 farm bill. The NFI believes any such efforts should apply

to all covered commodities as they all have serious implementation challenges.

STATEMENT OF HUGH WARREN

Mr. Chairman, ranking member and members of the subcommittee, I appreciate

the opportunity to provide testimony in support of the Country-of-Origin Labeling

Law.

I am Hugh Warren and have been executive vice president of Catfish Farmers of

America, Inc., (CFA) since 1989. Founded in 1968, CFA is the trade organization

representing the interests of the farm-raised catfish industry with current membership representing forty states. Producer members account for approximately 85 percent of total catfish production.

Over the past two decades, the U.S. catfish industry has grown from a relatively

unknown segment of the U.S. seafood industry to the Nation’s largest aquaculture

industry, accounting for over 70 percent by volume and over 60 percent by value

of all U.S. aquaculture production of fish. Because farm-raised catfish has become

a widely accepted food item throughout much of the U.S., (2002 production of 650

million lbs.), the demand for catfish should continue to increase as American consumers increasingly turn toward fish as part of a safe and nutritious diet.

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The implementation of COOL should prove a minor issue with relatively no additional cost in the processing and marketing of catfish. For the most part, the catfish

industry already meets the COOL requirements through the mandatory Food and

Drug Administration’s (FDA) Hazard Analysis Critical Central Point (HACCP) systems for food safety. This HACCP plan requires processors of fish and fisheries

products to identify hazards that are recognized with their products, and help them

formulate control strategies.

The FDA has identified certain possible hazards in the growing of catfish. The

preferred method of control is for the processing plant to have on file a document,

updated each year by the producer, identifying the farm and producer on a guaranty

agreement form.

This form certifies that fish shipped to the processor are hatched, raised, and harvested in the United States. By virtue of the processor being in the United States

the requirements for COOL in the United States have been met.

In addition, under the Code of Federal Regulations, Food Labeling Regulations,

April 1994, requires the name and place of business of manufacturer, packer or distributor of food to be identified on the label. The statement of the place of business

shall include the street, city, state and zip code address.

Many of the Nation’s trading partners already require their own version of COOL.

For example, European Commission Labeling Decision for Seafoods: A new labeling

system for fish and fishery products has been introduced by the European Commission. The new rule, which has been in effect since January 2002, stipulates that the

label should have the following information on all fish products at the retail counter:

• Whether the product is farmed, cultivated or caught in the wild in fresh or seawater.

• The country where the fish underwent its final processing state and

• The commercial name of the species being used for local sales along with the

common term used in each member state. The scientific name is optional and can

be displayed if the producer desires.

In an official statement, the Commission reported that considering the wide variety of species supplied, the EU considers it necessary to provide consumers with at

least the basic minimum of information on the characteristics of aquaculture products. The new labeling rule, based on the traceability procedure, would impose additional responsibility on retailers, transporters and producers who have to keep accurate records on these aspects so that the officials can trace back the origin of the

product and keep better control over quotas.

In the United States, producers and processors have worked diligently to ensure

that farm-raised catfish is safe, wholesome, and is just plain good to eat. I cannot

imagine why anyone would want to hide the origin of their product and deny the

consumer an informed choice.

Thank you Mr. Chairman for allowing me to testify today. I will be happy to answer any questions you or members of the committee might have.

STATEMENT OF GARY JAY KUSHNER

Good afternoon. My name is Gary Jay Kushner. On behalf of the member companies of the Grocery Manufacturers of America, Inc. I appreciate this opportunity to

testify before the subcommittee on Livestock & Horticulture regarding the mandatory country of origin labeling law enacted as part of the Farm Security and Rural

Investment Act of 2002.

GMA is the world’s largest association of food, beverage and consumer product

companies. With U.S. sales of more than $500 billion, GMA members employ more

than 21⁄2 million workers in all 50 States. The organization applies legal, scientific

and political expertise from its member companies to vital food, nutrition and public

policy issues affecting the industry. Led by a board of 42 chief executive officers,

GMA speaks for food and consumer product manufacturers and sales agencies at the

state, Federal and international levels on legislative and regulatory issues. The association also leads efforts to increase productivity, efficiency and growth in the

food, beverage and consumer products industry.

The American Frozen Food Institute (AFFI) also endorses the testimony I am giving here today. AFFI’s more than 500 member companies are responsible for approximately 90 percent of the frozen food processed annually in the United States,

valued at more than $60 billion. AFFI members are located throughout the country

and are engaged in the manufacture, processing, transportation, distribution, and

sales of products nationally and internationally.

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GMA OPPOSES MANDATORY COUNTRY OF ORIGIN LABELING

GMA has consistently opposed additional country of origin labeling requirements,

like those enacted as part of the 2002 farm bill. Additional mandatory country of

origin labeling requirements do nothing to enhance the safety of the domestic food

supply or the health of American consumers. Yet they involve increased costs for

producers, manufacturers, retailers, and consumers, and undermine efforts to expand international markets for U.S. products. GMA maintains that position today

and urges the subcommittee to support modification of the country of origin labeling

provisions in the farm bill to provide for a voluntary, USDA-administered country

of origin program that is market oriented and consumer friendly.

A voluntary system would enhance consumer choice but avoid the tremendous

costs and uncertainties that mandatory country of origin labeling will bring. The

very serious concerns GMA has expressed with respect to USDA’s apparent plans

for implementing mandatory country of origin labeling, as reflected in the Department’s October 2002 voluntary guidelines, only underscore the need to move to a

voluntary system.

GMA HAS URGED USDA TO BRING ITS GUIDELINES INTO COMPLIANCE WITH THE LAW

Together with AFFI, the National Food Processors Association, and the National

Fisheries Institute, GMA submitted comments to USDA on the Department’s

‘‘Guidelines for the Interim Voluntary Country of Origin Labeling of Beef, Lamb,

Pork, Fish, Perishable Agricultural Commodities, and Peanuts’’. In those comments,

GMA recommended several changes to the guidelines that USDA should adopt prior

to promulgating binding regulations in order to comply with the law and historical

regulatory precedent.

Most of the changes GMA recommended focused on USDA’s interpretation of the

exemption in the law for processed food items. Congress wisely included this exemption from the definition of ‘‘covered commodity,’’ in recognition of the complexities

already involved in labeling processed foods.

Rather than interpreting the processed foods exemption in a manner consistent

with its common sense, plain meaning, USDA insists on an extremely narrow interpretation. Specifically, USDA interprets the exemption to apply only where (1) the

processed food item is a combination of ingredients that result in a product with

a different identity from the covered commodity (e.g., raw salmon in sushi or peanuts in a candy bar); or (2) the covered commodity has undergone a ‘‘material

change’ so that its character is substantially different from that of the covered commodity.

USDA’S INTERPRETATION OF ‘‘PROCESSED FOODS’’ IS INCONSISTENT WITH PRECEDENT

USDA’s interpretation of the exemption is so narrow that it directly contradicts

definitions of ‘‘processing’’ and ‘‘processed foods’’ used throughout Federal laws and

regulations applied to foods. It also contravenes the stated intent of the sponsors

of the country of origin labeling legislative provisions.

The Federal Food, Drug, and Cosmetic Act, which governs the production, processing, and labeling of virtually all foods other than meat and poultry, defines ‘‘processed food’’ as ‘‘any food other than a raw agricultural commodity and includes any

raw agricultural commodity that has been subject to processing, such as canning,

cooking, freezing, dehydration, and milling.’’ 21 U.S.C. §—321(gg). USDA has consistently used similar language in defining ‘‘processing’’ and ‘‘processed food’’ in connection with the many food related programs it administers. For example, USDA

regulations governing its voluntary fruit and vegetable grading programs define

‘‘processed product’’ to mean:

any fruit, vegetable, or other food product covered under the regulations in this

part which has been preserved by any recognized commercial process, including, but

not limited to canning, freezing, dehydrating, drying, the addition of chemical substances, or by fermentation.

7 C.F.R. §—52.2.

USDA’S INTERPRETATION IS INCONSISTENT WITH LEGISLATIVE INTENT

There is no legislative history to support USDA’s extremely narrow interpretation

of the processed food item exclusion. Indeed, statements by the law’s chief sponsors

reveal that the farm bill provisions were intended only to extend country of origin

labeling to those commodities not currently required to bear such labeling under the

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marked, ‘‘virtually everything bears its place of origin except for produce. I believe

that consumers want this to change.

USDA’s interpretation of the processed food item exemption results in a mandatory labeling program that goes well beyond those boundaries. Frozen produce and

shelled, roasted, and packaged peanuts—two items already subject to country of origin marking under the tariff laws—must comply with a second and potentially incompatible labeling requirement administered by USDA.

USDA’S INTERPRETATION WILL HARM DOMESTIC PRODUCERS

By subjecting these and other processed foods to this extra mandatory country of

origin labeling scheme, USDA will only exacerbate the costs of an already very expensive measure for the entire food industry, from farm to table. GMA fully expects

domestic producers, as well as processors and retailers, to suffer as a result of mandatory country of origin labeling. In the frozen produce industry, processors will

have every motivation to limit suppliers to simplify compliance with the program’s

record keeping and audit requirements. Relationships with some domestic suppliers

will no doubt be discontinued.

Moreover, many processors of mixed frozen produce (e.g., vegetable stir fry, fruit

salad) likely will move to eliminate domestic sources entirely because, ironically, as

interpreted by USDA, mandatory country of origin labeling actually favors foreign

producers. Under USDA’s guidelines, mixed frozen produce produced entirely outside the U.S. from foreign origin produce need only bear the country of origin as

determined by the tariff laws. Mixed frozen produce that contains at least some

produce grown in the U.S., however, must bear labeling that provides origin information for each raw material and does so in descending order of predominance by

weight.

COMPLIANCE WITH ADDITIONAL USDA COUNTRY OF ORIGIN LABELING REQUIREMENTS

WILL BE COSTLY AND BURDENSOME

Even for those producers who retain their full customer base, costs will rise.

Country of origin labeling compliance will necessitate expenditures on additional

labor, modified product segregation systems, record keeping, and audits. Again,

GMA urges the subcommittee to act to prevent these surely unintended but enormously costly consequences.

IF CONGRESS DOES NOT ACT TO REVOKE USDA’S COUNTRY OF ORIGIN LABELING

MANDATE, THE SCHEME MUST BE SUBSTANTIALLY MODIFIED

The legal and statutory basis for GMA’s consistent opposition to mandatory country of origin labeling administered by USDA as reflected in the Department’s guidelines is stated in great detail in our comments to USDA. In short, GMA continues

to believe that additional country of origin labeling is unnecessary and imprudent.

If Congress does not act to revoke USDA’s mandate, however, the scheme developed

by the Department must be substantially modified before final regulations are

adopted. A brief synopsis of GMA’s recommendations follows.

• Final regulations should not apply to any peanut products other than in-shell

peanuts sold in bulk at retail: Shelled, roasted and salted peanuts are clearly ‘‘processed’’ and should be exempt under the processed food item exemption. Moreover,

these peanuts are already required to bear country of origin information under the

tariff laws; subjecting them to mandatory country of origin labeling would be duplicative, costly, and unnecessary.

• Mixed processed food products (e.g., mixed frozen fruits and vegetables) should

be clearly excluded from the final regulations: Mixed processed products, by definition, fall within the plain language of the processed food item exemption. USDA,

in addressing mixed processed food products in its voluntary guidelines, adopted an

impermissibly narrow interpretation of this exclusion.

• Frozen produce and frozen seafood should be excluded from the final regulations. Frozen produce and frozen seafood, already subject to country of origin labeling under the tariff laws, fall within the plain meaning of the exclusion for an ingredient in a processed food item and should be excluded from the final regulations.

• The requirement in USDA’s guidelines to display the country where processing

occurred should be deleted. Under USDA’s guidelines, additional label information,

beyond country of origin, must be provided in certain cases. This requirement goes

beyond the statute and exceeds USDA’s authority.

• USDA should not require multiple countries of origin to be listed in order of predominance by weight. Under USDA’s guidelines, ‘‘commingled fungible goods’’ must

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ment appears in the 2002 farm bill. If incorporated in the final regulations, this provision would necessitate frequent and costly labeling changes, and add substantially

to the compliance burden for the U.S. food industry.

SUMMARY

GMA has consistently opposed country of origin labeling as mandated by the farm

bill. At the very least, the concerns that we have raised in comments with USDA

and in our testimony today illustrate the need for aggressive oversight of USDA’of

the 2002 farm bill country of origin labeling requirements.

GMA continues to believe, however, that this subcommittee would best serve the

interests of American producers, processors, retailers, and consumers by abandoning

the requirements enacted in the 2002 farm bill and adopting a voluntary program.

A voluntary approach to country of origin labeling would eliminate the numerous

unintended consequences of the current law, yet create a market-oriented system

that provides origin information to interested consumers.

GMA looks forward to working with the subcommittee as it reviews the implementation of country of origin labeling and considers statutory changes. Thank you

for this opportunity to testify and for your consideration.

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STATEMENT OF KURT BUCKMAN

Mr. Chairman, Ranking Member Ross and members of the subcommittee. I want

to thank you for providing an opportunity to comment upon this matter.

I am Kurt Buckman, director of Quality Systems Management for Birds Eye

Foods, which has major facilities in California, Georgia, Minnesota, New York, Ohio,

Pennsylvania, Texas, and Washington and Wisconsin State. I am here representing

the National Food Processors Association, of which Birds Eye Foods is a member.

NFPA is the voice of the U.S. food processing industry on scientific and public policy

issues involving food safety, food security, nutrition, technical and regulatory matters and consumer affairs, and its members produce processed and packaged fruit,

vegetable, and grain products, meat, poultry, and seafood products, snacks, drinks

and juices, or provide supplies and services to food manufacturers.

I am here to address specific concerns that the food processing industry has with

USDA’s country of origin labeling requirements and Public Law 170–171. Under the

farm bill, the approach USDA has taken to country of origin labeling would be unnecessarily burdensome and operationally impractical for both processors and retailers. The Guidelines would over-regulate by prescribing country of origin labeling

rules for products already required to display such labeling, creating the prospect

of duplicative, confusing, and even conflicting requirements.

NFPA urges Congress to reexamine of these onerous and ultimately counter productive mandates and restructure the law enabling compliance with the intent without the unintended consequences. Under the farm bill, the approach USDA has

taken in its recently proposed Guidelines, if issued, as binding regulations, would

be administratively unsound and, NFPA believes, legally impermissible. The Guidelines would over-regulate by prescribing country of origin labeling rules for products

already required to display such labeling, creating the prospect of duplicative, confusing, and even conflicting regulations.

I wish to briefly highlight several specific concerns:My comments today outline

our concerns and some of the issues that must be considered in addressing the country of origin labeling requirements of the current voluntary program issued by

USDA that will soon be mandatory.

The food industry has an ongoing requirement for country of origin labeling that

predates the farm bill. Products of foreign origin , as determined under the US tariff

laws, already are subject to country of origin labeling under a comprehensive set

of regulations administered by the Customs Bureau. These regulations, codified at

19 C.F.R. part 134, interpret and administer the country of origin labeling requirement established by section 304 of the Tariff Act of 1930.

For example, Customs’ regulations expressly require that packages of foreign-origin frozen produce be labeled so that the country of origin will be known by the ultimate purchaser of the product.

The statute includes items that are already covered under existing laws. These

include frozen products, fruits and vegetables and processed peanuts. Frozen

produce is a processed product because it requires precise cutting and blending of

raw vegetables, steam blanching, and freezing by a technically sophisticated process.

Peanuts in mixed nut products and other mixed snack food products also have undergone processing. USDA’s guidance, given the statutory definitions used to identify covered commodities, conflicts with the explicit exclusion for processed food ingredients in the farm bill. I attribute this to wording in Public Law 107–171 direct

that covered commodities include perishable agricultural commodities, defined by

USDA to include processed foods like frozen foods and peanuts.

Bagged salads are also subject to the USDA country of origin labeling requirements. However, bagged salads are composed of processed ingredients, are subject

to existing country of origin labeling requirements, and should not be subject to additional labeling mandates.

FRESH AND FROZEN FRUITS AND VEGETABLES.

The statute reference to Perishable Agricultural Commodity is too broad and includes frozen packaged fruits and vegetables, which are covered by Bureau of Customs and Border Protection country of origin marking. Section 304 (Customs) and

the implementing regulations expressly require that packages of foreign-origin frozen produce be labeled in a conspicuous place as legibly, indelibly, and permanently

as the nature of the article (or container) will permit in such manner as to indicate

to an ultimate purchaser in the United States the English name of the country of

origin of the article. We believe it is important to delete the definition’s reference

to frozen fruits and vegetables in order to be consistent with current law or for

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USDA regulations for this product to be identical with existing Customs requirements.

PERISHABLE AGRICULTURAL COMMODITY

The definition of ‘‘Perishable Agricultural Commodity’’ should be interpreted to

read as follows:

‘‘Perishable Agricultural Commodity’’ means fresh fruits and vegetables of every

kind and character where the original character has not been changed (for example

fresh green beans would be covered, frozen or canned green beans would not; fresh

oranges would be included, frozen concentrated orange juice would not).

Although the farm bill does not require records and verification at the farm level,

it does contain a stiff penalty provision and burdensome 2-year records provision at

the retail level for non-compliance. It makes no sense to assign retailers full legal

accountability for notice of country of origin marking for processed foods. Consequently a costly and burdensome chain of records showing origin must be created

at every retail location. Several retailers, having with between 50 and 100 stores,

have told me of a $5 million initial cost. The retailer, quite logically, will seek verification from the suppliers concerning whether the commodity is covered by the

statute and, if so, that the supplier has adequate records to verify the country of

origin information supplied to the retailer. (many are requesting third party verification be provided). The supplier, in turn, will expect to receive assurance from

their supplier through the distribution chain to the ultimate provider (grower or importer) of the product.and $2 to $3 million expected annual operating cost increases

thereafter.

Conflict NFPA recognizes that the Bureau of Customs and Border Protection has

jurisdiction over the country of origin marking requirements for imported products

at port of entry as well as the labeling of packaged products offered for sale in the

United States and containing imported ingredients including those repackaged in

the U.S. The labeling requirements established by the farm bill raise problems for

food processors in determining what labeling requirements apply to specific products.Congress should recognize Bureau of Customs and Border Protection jurisdiction and permit Customs rulings on such marking to continue in place or adopt regulations identical to those provided for by such Customs rulings. For packaged food

products, this Customs’ requirement is that means the package bears a statement

Product of Country X with X representing the country in which the product was prepared and packaged in its final form. This statement would not satisfy the farm bill

provision because the country in which processing occurred would also need to be

stated, if different from the country of origin.

Another area of confusion between the USDA and Customs programs concerns

what is meant by substantial transformation. It will be difficult to determine what

the resulting required label statement would be. With regard to those parts of the

proposed regulations that turn upon the conclusion that a product has been substantially transformed, we believe that the final rules should be made consistent with

the long-standing interpretation of substantial transformation of product as determined by the Bureau of Customs and Border Protection. Under the new USDA rule

With respect to the label statement in this section Grown and packed in Country

X and Processed in the United States, applies however that would be required under

the USDA program as we believe the current labeling permitted by Customs Product of Country X applies is sufficient to inform the consumer of the origin of the

product. Under Customs requirements or not at all if substantially transformed We

agree that an additional voluntary declaration Processed in the United States may

be provided for fruits and vegetables, and request that it be made voluntary for seafood. .

The labeling requirements under the farm bill are extremely complicated and

technologically difficult to achieve. an d will Order of predominance rules for country of origin marking cannot be operationalized. This will cause frequent and costly

label changes or extraordinary spending on sophisticated marking equipment, if

such equipment exists, providing with minimal benefit to consumers. For commingled fungible goods, USDA’s voluntary guidelines require that the example, countries will be required to be listed in the order of their predominance of the ingredient by weight in a mixed product, even though no such requirement appears in Subtitle D. Blending technology in frozen processed foods is volumetric and percentages

of components do vary among bags creating an untenable percentage marking scenario. Changes in the amount of a commodity from a given country could require

a reordering of the list and a new label, even though there is no change in the originating countries. The requirement to disclose this level of detail in country of origin

81

information, which is of dubious value to the consumer, will greatly complicate the

record-keeping and other compliance-related burdens on the U.S. food industry and

require frequent, and costly, labeling changes. Any reference to listing of countries

in order of predominance should be removed from the final document.

Example of how this could affect birdseye and the cost of making a label change:

We disagree with the proposed requirement that the source of each individual item

be identified and that the sources be identified in order of predominance by weight.

The proposed interpretation could require a statement for mixed frozen peas and

carrots each from country X and Y where X= Mexico and Y = Guatemala.

Peas from Mexico, Carrots From Guatemala, Carrots from Mexico, and Peas From

Guatemala, Processed in the United States.

The requirement will create an unreasonably complex and likely unworkable labeling and recordkeeping nightmare for each product code lot while diverting resources from important food safety and security issues. Minor variations in the

quantity of each item for individual code lots can require a new label. We believe

an appropriate label statement Product of Mexico and Guatemala or Product of Guatemala and Mexico with no requirement for addressing the individual components

or the order of predominance of individual ingredients will provide the purchaser

with adequate information concerning the origin of the product and meet the intent

of the law and the requirements of the current Bureau of Customs and Border Protection regulations for imported product under the Tariff Act of 1930 which apply

to this product

The food industry is currently faced with complying with the farm bill country of

origin labeling requirements on September 30, 2004. As of today, we have neither

final guidance nor regulations. Retailers are unprepared to meet mandatory 2 year

records requirements at retail stores and this is further hindered by absence of

standardized records systems to meet this new and as of yet undefined requirement.

We can expect that products covered by the country of origin requirements will

are entering commerce now, before products entering the channels of trade before

mandatory requirements become effective. Covered foods and offered for retail on

the grocery store shelves come September 30 will not all have been packaged that

were not under industry programs to satisfy the USDA country of origin labeling

requirements. We face financial risk due to non-compliance, business disruption,

and costly enforcement penalties. Without consideration being given to products entering the channels of trade before mandatory requirements become effective, we are

faced with the threat of non-compliance, business disruption, and costly enforcement

penalties.

The statute does not make clear to USDA that it should not impose that labeling

or recordkeeping requirements will be necessary on products packaged before the

date the mandatory rules become effective. We believe it was Congress’ intent to require the agency to have a final rule in place by September 30, 2004 and to provide

for a reasonable compliance phase in period. However, USDA has indicated it interprets the statute as written to mean all products must be in compliance by that

date. To require labeling to be in place at the store level for such products will have

the effect of making the statute mandatory on the day it was enacted.

Finally, NFPA believes it reasonable and practical to provide that packaged covered commodities in the channels of commerce prior to the promulgation of any final

rule be permitted to continue in commerce. Product that has entered the food chain

(e.g., packaged frozen peas) and which otherwise complies with existing regulations

(including existing country of origin marking requirements for packaged goods), but

that may be at variance with any final rule issued by USDA, should be permitted

to continue to proceed through the food chain to retail sale without the need to

relabel or repackage the product. Congress has the responsibility to direct that

USDA recognize that the Bureau of Customs and Border Protection subject to country of origin marking requirements establish imported packaged produce.

No recognition is given to State or regional programs that identify the origins of

foods. We believe our position that State and regional labeling programs are designed or could be designed to provide proper documentation that the fresh fruit or

foods included in the program does, in fact, originate in that State or region of the

United States. and For example, the labeling of the product at retail Washington

State Apples clearly communicates to the consumer that it refers to a geographic

region in the United States. We request that Congress direct USDA to work with

State and regional groups so that such programs can be recognized as compliant.

In conclusion, the current statute requirements as contained in the by the farm

bill and USDA’s guidance are seriously flawed. Another look at Public Law 170–171

is in needed to exempt all processed foods and the USDA’s current voluntary country of origin program should not become mandatory without significant and substantial change.

82

Thank you for the opportunity to testify on this important issue, and I would be

pleased to answer any questions you have.

ANSWERS TO SUBMITTED QUESTIONS

1. In several of your testimonies the definition of processed food was discussed. Has your industry looked at any possibilities that would change the

definition of processed food in order to be more efficient and workable in

your industry, but that doesn’t include ground meat into the exemption of

the law?

The issue is retaining the requirement for ground beef while exempting other

packaged products. The Bureau of Customs and Border Protection (CBP) requires

country of origin marking on all packaged produce including raw agricultural commodities. The only exemption was for unpackaged produce at retail.

The Federal Food Drug and Cosmetic Act Section 201 contains the following definitions:

(r) The term ‘‘raw agricultural commodity’’ means any food in its raw or natural

state, including all fruits that are washed, colored, or otherwise treated in their

unpeeled natural form prior to marketing.

(gg) The term ‘‘processed food’’ means any food other than a raw agricultural commodity and includes any raw agricultural commodity that has been subject to processing, such as canning, cooking, freezing, dehydration, or milling.

We suggest:

‘‘Processed Food’’ means any food other than a raw agricultural commodity and

includes any raw agricultural commodity that has been subject to processing, such

as canning, cooking, freezing, dehydration, or milling that is presented in packaged

form including cut and packaged fresh produce.

2. In the testimony provided today there was a concern raised about the

current legislation that would require ingredients to be identified according to weight, how would alphabetical be better if they are still required

to be listed?

The Bureau of Customs and Border Protection (CBP) permits the declaration of

multiple countries of origin to appear in any order. Requiring they appear in alphabetical order without reference to the individual ingredients for multi-ingredient

products would be no more difficult than the current CBP requirement. In addition,

some provision should be made for product packaged before the effective date as

well as allowing existing label stocks to be utilized as long as all foreign countries

with a food/ingredient present in the product were listed on the package.

Alphabetical listing of countries would be better than listing according to weight

for three principal reasons. First, as already mentioned it is similar to that required

by CBP and thus would not mandate additional packaging. Second, if the rationale

for the COOL requirement is to provide consumers with information on the origin

of the ingredients used in their food products, then listing the countries in alphabetical order (Including the USA, see last paragraph) will accomplish this. Third, if

there should ever be changes in production cycles due to weather conditions or product formulations (i.e. recipes), whereby the weight of an identical ingredient from

Countries A, B, and C in the final product changed, the label for that final product

could continue to be used, and a revised label based on weight of ingredient would

not be necessary. This is positive from a variety of resource standpoints (cost and

solid waste savings to name a few).

As alluded to in the above paragraph, because the law will require the declaration

of any United States origin component there is a need to permit the use of existing

label stock that do not bear the USA designation for some phase-in period. Preparation of new labels with countries in alphabetical order should be no more difficult

than the current requirement—in some instances an additional country will need

to be listed (i.e., USA).

3. In several of your testimonies the definition of processed food was discussed. Has your industry looked at a possibilities that would change the

definition of processed food in order to be more efficient and workable in

your industry, but that doesn’t include ground meat into the exemption of

the law?

Response: It was stated by my testimony frozen foods are processed by technologically sophisticated processes to covert raw perishable produce to a stable, preserved form. In the case of perishable vegetables we do this by a number of steps

that include washing, cleaning, inspecting, blanching with heat, cooling and freezVerDate 11-SEP-98 10:45 Feb 23, 2004 Jkt 091860 PO 00000 Frm 00085 Fmt 6633 Sfmt 6633 F:\DOCS\10817 HAGRI PsN: HAGRI
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ing. It would be helpful if the farm bill were modified to replace the term perishable

agricultural commodity with raw produce. In doing so the scope of the farm bill

country of origin marking would be narrowly to assure that mixed processed products are outside the scope of subtitle D, section 281(2)(B) of the statute. It would

delete any requirement to declare the country in which processing occurred. It

would exclude from scope all frozen produce, frozen seafood, processed peanuts,

muscle or ground cuts of beef, lamb and pork.

4. In the testimony provided today there was a concern raised about the

current legislation that would require ingredients to be identified according to weight, how would alphabetical be better if they are still required

to be listed?

Identification of country of origin by alphabetical order may be an overly complex

remedy. Consumers interested in country of origin marking would be provided sufficient information if the package declared the countries of origin in any order. In

short, one might ask; if a consumer wishes to purchase based on product country

of origin marking what difference does the order of country declaration make? Alphabetical ordering provides no increased meaning than a random order list for

blended foods. While alphabetizing simplifies the decision process as to how to set

the order, it adds another meaningless point of regulation where marketers will

need to verify compliance. The committee is advised to keep it simple. It is sufficient

to declare the countries in random order.

5. According to testimony delivered by General Counsel, U.S. Department

of Agriculture, Nancy Bryson on June 26, 2003: ‘‘I would like to point out

because of the way the statute is written, the requirement on retailers to

do country of origin labeling on September 30, 2004, is not really affected

by the suspension of appropriations. We are not going to be writing our

regulations. But if you look at the statute, our requirement to write regulations is separate and apart from the requirement that the retailers provide

the information on September 30, 2004.’’ Since the retailers are going to be

held liable to a law that may not be funded what avenues are being perused to change the existing legislation?

Elimination of funding does not resolve the legal requirement established by the

farm bill for country of origin marking. And clearly, this legislation has evoked

strong response from many industry participants. USDA listening sessions, direct

appeals made to congressional delegations and testimony before this committee have

echoed all positions; pro - mandatory, con - mandatory and pro - voluntary country

of origin marking. In addition there are numerous initiatives before the industry

that may better consume market resources such as national food security, food allergen labeling and other food safety and public health initiatives. Prior existing country of origin rules under the 1930 Tariff Act had already established a meaningful

country of origin marking requirement. It would be best for our industry if congress

passed an authorizing law exempting segments of the food industry that have voiced

strong opposition to inclusion under the law, namely frozen fruits and vegetables,

meats and meat products and peanuts. Alternatively, the raw produce could be

brought under country of origin requirements at retail sale, in greater alignment

with the intent of prior legislative initiatives on Country of Origin Labeling in the

past.

Thank you for this opportunity to offer additional comments to the committee.

One additional comment is offered with respect to consumer research on country of

origin marking is offered. According to longitudinal surveys conducted by the American Frozen Food Institute in 1996 and 2003.

Please note: ‘‘A consumer survey conducted independently for AFFI in January

2003 found respondents were concerned about the potential consequences of the new

regulations; with 42 percent selecting as their top concern the potential loss of jobs

due to processors or manufacturers’ relocating outside of the United States. Only

six percent indicated they we not concerned about stated potential consequences—

including increased prices for frozen fruits and vegetables due to higher production

costs, loss of jobs, and increased incentive to source fruits and vegetables for freezing from outside the United States. The results of the survey are consistent with

steadily building anecdotal evidence that the new requirements in practice are not

as attractive as some once considered them to be in theory.’’1

1 Bill of Unintended Consequences: How a New Country of Origin Marking Regulation Would Harm American Food and Agriculture, American Frozen Food Institute, February 25, 2003

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‘‘Opinion Research Corporation conducted an independent nationwide survey for

AFFI in January 2003 regarding factors that affect purchasing decisions related to

frozen fruits and frozen vegetables. Less than one percent of respondents stated a

response related to ‘country where a product is from’ as a main factor. Significantly,

this is the same result revealed by an identical survey fielded by the same company

for AFFI in 1996. Between 1996 and 2003, there has been ongoing public debate

about country of origin marking proposals offered by members of Congress and federal agencies. Advocates of changes in country of origin marking requirements have

waged aggressive campaigns in the media. Still, amid an onslaught of publicity, less

than one percent of respondents consider county of origin as important to their purchasing decisions when it comes to frozen produce.

Additional consumer research is also published providing insight into concerns

held by the majority of consumers about the unintended consequences of farm bill

country of origin marking requirements.

5. The Government has proposed additional labeling requirements for

frozen fruits and vegetables. Which of the following possible consequences

of these regulations is MOST troubling to you?

33 percent Increased prices for frozen fruits and vegetables due to higher production costs

42 percent Loss of jobs due to processors or manufacturers relocating outside

of the United States

16 percent Increased incentive to source fruits and vegetables for freezing outside of the United States

6 percent None of these/Not concerned

3 percent Don’t know

A copy of this white paper is included for your consideration.

The position of Birds Eye Foods is that the requirements set forth by the farm

bill and detailed by the USDA in the proposed country of origin marking rules unnecessarily replace the requirements of the 1930 Tariff Act. I ask, on behalf of my

company, my industry and our retailer stakeholders, that frozen processed products

be exempt and left under the 1930 Tariff Act requirements for country of origin

marking requirements.

STATEMENT OF BOYD GEORGE

Mr. Chairman and members of the subcommittee, thank you for the opportunity

to supplement the record on the hearing for mandatory country of origin labeling

for horticulture and livestock. My name is Boyd L. George, chairman and CEO of

Alex Lee, Inc. Our company began in North Carolina in 1931 with seven employees

and today we have more than 9600 employees. We are a privately owned holding

company for three southeastern food retailing and distribution companies. These

companies are Merchants Distributors, Inc., a wholesale food distributor; Lowe’s

Food Stores, Inc., a retail supermarket chain and Institution Food House, a

foodservice distributor. Merchants Distributors, Inc. supplies over 650 grocery stores

in 8 states. Lowe’s Food Stores, Inc. currently operates 108 supermarkets in North

Carolina and Virginia. Institution Food House serves 5200 restaurants, hospitals,

schools, and nursing homes in North Carolina, South Carolina, Virginia, and Georgia.

The mandatory country of origin labeling that has been passed into law has some

fundamental flaws. The preliminary regulations that USDA is set to issue will not

solve the problems identified by country of origin labeling legislation. The law itself

needs to be eliminated or significantly revised.

Country of origin labeling places the burden for labeling on retailers, the final

link in the supply chain. Specifically, the country of origin legislation requires retailers to keep detailed records by item and store for every covered commodity received

in the store for two years. The legislation provides that for any error in labeling or

record keeping the retailer can be fined an amount up to $10,000. Retailers and

wholesalers are simply not in a position to accurately determine country of origin.

They basically have no way to trace, audit, or track down the origin and processing

of the items that are covered by this law. For labeling to be accurate and effective,

it must occur at the grower or rancher level. Clearly, this makes the most sense,

because suppliers are the ones who know the origin of these products and how they

are processed.

Despite the fact that there is little evidence that consumers are interested in

knowing this information, country of origin labeling is still being imposed. Alex Lee

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has never received a letter or request asking us to supply country of origin information. There is no evidence that consumers will pay extra for this data. The origins

of this law did not come from consumer demands, but consumers will end up having

to pay for it. The International Food Information Council performed an open-ended

survey of 1000 consumers in April 2003 to find out what was on customers’ minds

without initially prompting them. When they were asked if they could come up with

information that was not currently on food labels, only four out of 1000 brought up

country of origin labeling. Evidently, country of origin labeling is not something on

the minds of consumers. If our customers wanted country of origin labeling, we

would provide it for them. Let the marketplace demand what information it wants.

Additionally, country of origin labeling threatens to seriously disrupt supply

chains and relationships that have been developed over decades to provide consumers with quality, selection, and low prices. Starting on September 30, 2004, wholesalers and retailers will not be able to sell any covered commodities unless their entire life cycle has been fully documented. Even in the absence of USDA regulations,

wholesalers and retailers that have not started to make the changes necessary to

implement country of origin labeling, are already behind. Cattle ranchers needed to

start the documentation process of the life cycle of their cattle six months ago in

order to comply with the September 30, 2004 deadline, since eighteen months is the

average period to go from birth to market.

Merchants Distributors supplies over 650 grocery stores in eight southeastern

states. Approximately, 120 of our smaller independent stores currently do not have

the technology to scan groceries through the front end of their stores. An example

is Roger’s Bestway, owned by Roger Shuck, in the mountains of the small country

town of Danese, West Virginia. This is not the typical 50,000 square foot supermarket where you might be accustomed to grocery shopping. Instead, picture a

small 20,000 square foot community-supported store with a pickle barrel on the floor

and local grown produce displays. If Roger is going to comply with the law and keep

country of origin labeling documentation, it would involve new systems at the front

end, a computer, scanner, new invoicing procedures, extra retail merchandising

space, new receiving documents, and a data archiving system to store 2 years worth

of country of origin information. Even for a large modern grocery store, this is a

logistical nightmare. A Lowes Foods Produce department has over 600 SKUs (stock

keeping units) at any one time. The identity and source of these produce items

changes weekly, determined by growing seasons and availability. At only one time,

Lowes Foods could have as many as 10 different varieties of apples displayed for

our customers to select. Just keeping the apple varieties separated and properly

signed is problematic. Requiring that each variety also identify the country of origin

and requiring records be kept for every type and its origin for two years is a monumental task.

Our customers at Lowes Foods express that they are more interested in buying

regional produce, fruits and vegetables grown in their home state, than produce that

may or may not be grown in the United States. Small local farmers and ranchers,

who play an important role in our sourcing, will be disadvantaged by country of origin labeling. We feel we can offer our customers the best quality produce such as

Perry Lowe Orchards in Moravian Falls, North Carolina. Perry Lowe Orchards is

a small local farmer where Lowes Foods purchases apples for some of our stores in

the western part of the state. Currently, we are at the peak harvest of North Carolina apples, which runs from mid August through October. North Carolina ranks

seventh in apple production in the United States and has over 200 commercial apple

operations comprised of 9,000 acres of apple orchards. Perry Lowe Orchards is active in the local community and provides apple tours for schools and other small

groups in the fall in the mountains of North Carolina. The owners, Perry and Shirley Lowe, will be at a tremendous disadvantage over larger apple growers in the

technology department. Presently, they do not sticker their apples and they provide

our Lowes Food Stores with handwritten invoices, not an electronic copy. Obviously,

the country of origin labeling requirements will be exceedingly difficult for Perry

Lowe Orchards to find the resources to become compliant.

As you can see from this example, the smaller growers will be hurt more than

the larger more vertically integrated suppliers, since they do not have the infrastructure and technology in place to comply with this law. This law was meant to

protect the small producers, ranchers, and farmers and this is precisely who the law

will hurt the most. In order to limit liability, wholesalers and retailers will have to

source only from those who can afford to implement the extensive systems necessary

to document country of origin. Small ranchers and growers will be less likely than

larger concerns to afford these changes. The end result will likely be further consolidation in the agriculture industry. Although the intent of the legislation was to give

favorable treatment to domestic producers, the effect is to require retailers and disVerDate 11-SEP-98 10:45 Feb 23, 2004 Jkt 091860 PO 00000 Frm 00088 Fmt 6633 Sfmt 6633 F:\DOCS\10817 HAGRI PsN: HAGRI
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tributors to maintain unreasonable audit trails. Additionally, country of origin labeling threatens state and local origin marketing programs that have been designed

to promote local products such as ‘‘Idaho Potatoes’’ or ‘‘California Grown’’. Local origin stickers are not sufficient to meet the requirements of the law since a ‘‘Product

of the USA’’ sticker must be used. The law encourages wholesalers and retailers to

favor pre-packaged products that are already labeled. Since seafood is harvested

from all over the world, the supply chain is complicated. Country of origin labeling

will even affect how seafood and meat is displayed in the case. Some examples

would be separating and properly signing all the products by the country of origin.

The typical service staff in meat and seafood departments will be challenged with

keeping swordfish from Spain and swordfish from Costa Rica separate.

In conclusion, country of origin labeling will lead to massive disruptions in the

supply chain and will significantly raise costs. The costs are estimated at several

millions for implementation, technology, and labor to support the country of origin

labeling law. Will Alex Lee pass on the supply chain costs downstream through

higher prices to our end consumer or take it out of our operating profits, thereby

limiting our ability to grow? Clearly the value (if any) obtained by this legislation

is greatly outweighed by the cost to consumers. Should country of origin labeling

be desired by consumers, let the market decide. Unnecessary record keeping and

fines that only add costs to the consumer should not be mandated.

STATEMENT OF REGINALD L. BROWN

The Florida Tomato Exchange (Exchange) represents a substantial portion of the

winter tomato production in Florida and in the United States during that time. The

Exchange has been working on country of origin labeling for fruits and vegetables

since the 1970’s. We support the law as written.

The law has only two requirements: 1.) retailers must clearly identify fruits and

vegetables with their country of origin; and, 2.) the retailer’s immediate supplier

must provide the retailer with the country of origin information of the produce it

is supplying to the retailer. We hope this Committee will not take any action until

the Department of Agriculture until the proposed regulations are issued by the Department of Agriculture, and then, only if the regulations are burdensome and unworkable. We are convinced that will not be the case.

The Exchange fully supports and endorses the testimony and submission of the

Florida Fruit and Vegetable Association. We agree that the law is simple and that

Congress did not intend that the implementing regulations be complicated, inflexible, or burdensome to anyone in our industry. We are hopeful that the Department

of Agriculture staff has heard our pleas (and those many others) that the regulations need to flexible and should not create unnecessary paperwork or cost for anybody. And, we are hopeful that the Department will issue proposed regulations as

soon as possible because we believe these regulations will be substantially different

than the voluntary guidelines issued last year, that have been the basis for many

criticisms and concerns.

Our growers main competition in the U.S. marketplace comes from Mexico and

we are constantly aware of our competitive position in the U.S. market vis-a-vis

Mexican imports. Because this is such a sensitive issue, we have been keenly interested in making sure that the playing field is as level as is possible. Labeling imported tomatoes or their containers, we believe, is important because it gives consumers a choice between U.S grown tomatoes and imported tomatoes. That is why

we supported country of origin labeling in Florida which was enacted in 1979. That

law was implemented by the state and it has worked well because it was kept simple. Congress has passed a simple straight-forward law and its implementing regulations must be kept simple as well.

We strongly believe that there should be separate rules for perishable agricultural

commodities as well as for the other covered commodities. The Department already

makes distinctions between perishable commodities and other commodities. In addition, the labeling law itself and its history in the House makes it clear that perishable agricultural commodities (fruits and vegetables) should be defined and enforced

under the Perishable Agricultural Commodities Act (PACA). It already is a violation

of PACA to mislabel the country of origin. And, more fundamentally, the perishable

agricultural commodities industry is clearly distinct from other covered commodities. Production, distribution, processing, transportation, and even record keeping

systems are all different than those for other commodities.

Accordingly, in the case of fruits and vegetables, separate regulations adopting

the PACA regulations are more than adequate to meet the requirements of the labeling law. We strongly recommend that the Department adopt regulations that fit

87

this existing system of regulation of the perishable agricultural industry. Using a

system already in place requires minimal change and minimal disruption to a system that require retention of documents and an automatic audit trail of the commodity from port of entry and from the domestic shipper to the retail outlet.

We also recommend that labeling at the retail level be simple, clear and efficient.

Any sticker, tag, placard or other method of identification that provides the country

of origin of the commodity should suffice. Further, with regard to mixed or blended

fruits and vegetables, for the purposes of labeling, we strongly recommend that all

countries of origin of the produce be identified. To require anything more is to exceed the mandate of the law. However, for the law to be effective that commodities

from different countries should be segregated at all times.

In addition to our call for regulations that pertain only to fruits and vegetables,

we note that for record keeping purposes this means that no record keeping requirements should be required of the industry beyond what the PACA requires. The Department knows exactly what documents are required to be kept under PACA and

that these documents must be kept for two years after each transaction. All persons

in the chain of sales of fruits and vegetables, from producer or importer to retailer,

must and do keep records of each transaction. Such documentation already in existence is sufficient to meet the requirements of the law. There is no need and no justification for going beyond what is required pursuant to PACA.

Lastly, it is important to note that the law requires the supplier to the retailer

to provide the retailer with information indicating the country of origin of the product. The law was written in such a way that the only clear way of reading it is that

the supplier referred to in the law is the immediate supplier to the retailer. There

is no one, no other supplier, who provides the product directly to the retailer. Thus,

only this last supplier to the retailer has the obligation under the law to provide

country of origin labeling information to the retailer. And, it is important to note

that the labeling law does not require this supplier or any other supplier to maintain records concerning the country of origin. All the law requires is for the immediate supplier to the retailer to provide country of origin information to the retailer.

In addition, while the only punishment provided by the law is on the retailer, the

law does not require that the Department impose the maximum penalty on a retailer each time there is a violation. Moreover, because the law only deals with willful violations, it is likely there will be few, if any, fines actually imposed on the retailers. And, in this case, the retailers have already have indemnity agreements

with their suppliers requiring the suppliers to pay for the fine if the product is mislabeled at retail and the retailer incurs a fine.

The law does not penalize the immediate supplier to the retailer for not providing

country of origin labeling information to the retailer or for providing incorrect labeling information to the retailer. And, there is no penalty provided in the law for the

immediate supplier to the retailer or any supplier to maintain records on the country of origin. Notwithstanding the foregoing, if the Department determines that it

is necessary to require record keeping, as we have stated above, we believe this situation can be fairly and adequately addressed by adoption of the PACA record keeping requirements for fruits and vegetables. As for passing on the country of origin

information, suppliers should be required only to pass on labeling information by

any means available, such as putting this information on the carton, the bill of lading, shipping manifest, or other document of electronic communication. Once that

is done, then the PACA takes over and the information provided must be accurate.

Again, because of PACA and its regulation of the entire industry, it is critical that

Department adopt regulations specifically tailored to the fruit and vegetable industry.

The Florida Tomato Exchange believes the labeling provisions in the farm bill are

good for our tomato growers and for other growers as well. We believe American

consumers, if given the opportunity, will buy American. The law is fair since most

of our trading partners also require such labeling of our exports to their countries.

And, we believe the Department’s final regulations will be simple, flexible, and

workable.

The Florida Tomato Exchange has a long history in the struggle to get a country

of origin labeling bill passed. It is now the law of the land and it needs to be implemented properly and efficiently. We believe this Committee should wait until the

proposed regulations are issued to see how the Department has responded to the

criticisms and recommendations made over the last year. Any other action is premature.

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FRESH PRODUCE ASSOCIATION OF THE AMERICAS

General philosophical, and practical, opposition—The Fresh Produce Association

of the Americas (FPAA), of Nogales, Arizona, is opposed to mandatory country of

origin labeling in principle and for a number of practical reasons. FPAA is not opposed to voluntary COOL and, in fact, many of its members already have voluntary

COOL for marketing reasons.

There is a long history of vigorous competition between Mexican fresh produce

and American domestic produce during the winter months. The competition often

has been acrimonious, with domestic interests trying various legislative and other

tactics to halt or suppress Mexican competition. During these aggressive efforts carried out by domestic farm interests in the media and in Congress, there has been

a well-recognized and -established pattern of denigrating the Mexican competition

with various insidious and vicious charges of illegal use of pesticides, microbial contamination, packaging differences, etc. All of them have been shown to be false, misleading, or incredible exaggerations.

Nevertheless, such charges affect consumer confidence. As result of the these nonmarket battles, FPAA has become very sensitized to the underlying potential and

possibilities for what we would call ‘‘label and libel.’’ Once identified by mandatory

COOL, insinuations can be directed at that produce. Without mandatory COOL, one

type of fruit or vegetable looks pretty much like any other of its kind. Mandatory

COOL, therefore, can be misused as a predatory competitive tool. That is why FPAA

is opposed to mandatory—but not to voluntary—COOL on principle.

FPAA recognizes the benefits of branding for grower, producer, shipper, state, region, or country. With proper marketing strategies, voluntary regional or country labeling can provide definite advantages.

Imports are already marked for COOL—Every carton, container, or box used to

import fruits and vegetables is marked for country of origin. COOL is already mandated by U.S. Customs law, but not at the retail level.

Consumers should be given COOL for all foods, everywhere—If COOL is purely

a matter of providing information to the consumer, it should apply to ALL foods,

including poultry. In addition, mandatory COOL should apply to restaurants as well

as to all retail stores. Under the current law, a fruit must be labeled for COOL in

a minority of retail stores (i.e., only those subject to PACA), but the same fruit if

served in a restaurant does not need to be labeled.

Studies do not show consumers want COOL information at top of list—In fact,

studies show that consumers do not list COOL high on their list of desirable information. Consumers ask for COOL only when asked if they want that information.

If given a multiple choice list, consumers place COOL towards the bottom of the factors they use in making purchasing decisions. The importance of COOL, therefore,

depends on the way a survey/poll question is asked, e.g., ‘‘What factors do you use

in your shopping decision?’’ vs. ‘‘Do you want COOL?’’ (Studies were done by the

Food Marketing Institute and also by The Packer publication.)

Costs and difficulties of mandatory COOL to domestic produce—It is important

for everyone to remember that mandatory COOL applies to domestic as well as imported fruits and vegetables. While in a supermarket, one might conclude that nonlabeled produce is domestic while the labeled ones are imported, that is not what

the law dictates. The law says ALL fruits and vegetables must be labeled at the

retail level. The costs and difficulties of meeting the terms of mandatory COOL are

much greater for the domestic industry than for importers. Imports are already labeled.

Everything is not labeled...there are exceptions for bulk-shipped items—Proponents say imported clothing, shoes, dishes, etc. are all labeled for COOL. Individual fruits and vegetables, therefore, should be labeled. It is important to remember

that there are numerous bulk-shipped imports that are not individually labeled because the import container is labeled or because the individual items are too small

to label. For example, if common nails are purchased in a box, they are labeled for

COOL. Similarly, a box of Mexican tomatoes is clearly labeled for COOL. If common

nails are bought in small quantities, each nail is not labeled; likewise, individual

fruits or vegetables are not labeled because the import carton is labeled. The Tariff

Act of 1930 created the J-list to deal with the realities of retail trade so that small

items from bulk shipments need not be labeled individually, e.g., individual stalks

of asparagus or each grape or every banana.

If there is no exemption for bulk shipments, everything then will have to be put

in small, containers—pre-packaged with predetermined weight and/or quantity—to

meet the COOL requirement. The result will be greatly limited shopping choices for

consumers and much higher costs to consumers than any perceived benefits to them

or anyone else.

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PACA will be gutted—It is correct that the PACA law requires the same sorts of

information that will be required under COOL. Unfortunately PACA does not apply

to peanuts, meats or fish. Recordkeeping and other requirements of PACA provide

no help to those who do not deal in perishable fresh produce. Even for fresh

produce, there is no current PACA requirement to identify the country of origin on

the paper invoice. It is in fact, a new burden on the industry to modify current invoices and bills of lading to create a paper trail under the existing documentation

required by PACA.

Furthermore, it should be noted that PACA is funded by user fees. Since COOL

will involve PACA, it will need additional funding to implement COOL. Without significant increase in PACA funding and personnel, PACA will run out of funds to

carry out its primary task of assisting the fresh produce industry.

Importers do not oppose COOL—It is not true to categorically say importers oppose COOL while domestic interests favor COOL. Since fresh produce is already labeled for COOL, there is very little that importers have to do to meet COOL requirements. As fresh produce do not migrate or move around, and certainly are not

raised in one country then harvested in another, the task of COOL labeling is relatively simple.

Some importers express great skepticism of COOL because they already are subject to many rules and see the costs associated with them. They see that COOL will

be yet another rule that adds costs without providing any real benefits to consumers.

It is important to keep in mind that the primary burden of meeting mandatory

COOL requirements is almost completely on American businesses—primarily on retailers but also meat packers, fish processors, etc. Many American businesses probably do not yet fully recognize the burdens and costs that will be placed on them

by mandatory COOL.

COOL is not a tool for food safety—Reference was made to the use of COOL to

distinguish food in case of recalls or alerts. It should be noted that ALL sales of

raspberries declined dramatically after a FDA alert on imported raspberries from

Guatemala. Even though raspberries are packed in retail boxes that are individually

marked for country of origin, many consumers stopped buying ALL raspberries.

COOL did not help to isolate and save the domestic producer. The experience also

demonstrates that consumers do not look at COOL labels and do not pay much attention to origin.

There will be an endless requirement for additional labeling—The argument for

mandatory COOL logically would have to conclude that if consumers want as much

information as possible, and have a right to get them, there should be more mandatory labels. For example, consumers say they like recipes, nutrition labeling, and

‘‘green’’ labeling. If labeling is always about the consumers’ right to get ever-increasing amounts of information, then there would have to be labeling for the information already cited, as well as, for pesticide use, use of child labor, environmental impact, etc. A slavish adherence to dubious consumer-rights could lead to completely

illogical ends.

Mandatory COOL is a bad idea, whereas voluntary COOL has potential for great

dividends for everyone concerned. With properly drafted guidelines and standards,

voluntary COOL can help retailers, as well as farmers and producers. Voluntary

COOL can be a strong marketing tool that provides important information to consumers without handicapping retailers or producers, and without costing enormous

amounts of money that do not bring any direct or tangible returns.

We urge the Agriculture Committee to consider remedial legislation that will

mandate the creation of a strong voluntary COOL program while removing the requirement for mandatory COOL at the retail level.

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