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Rules and Regulations Federal Register

31367 

Vol. 78, No. 101 

Friday, May 24, 2013 

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

7 CFR Parts 60 and 65 

[Document No. AMS–LS–13–0004] 

RIN 0581–AD29 

Mandatory Country of Origin Labeling 

of Beef, Pork, Lamb, Chicken, Goat 

Meat, Wild and Farm-Raised Fish and 

Shellfish, Perishable Agricultural 

Commodities, Peanuts, Pecans, 

Ginseng, and Macadamia Nuts 

AGENCY: Agricultural Marketing Service 

(AMS), U.S. Department of Agriculture 

(USDA). 

ACTION: Final rule. 

SUMMARY: This final rule amends the 

Country of Origin Labeling (COOL) 

regulations to change the labeling 

provisions for muscle cut covered 

commodities to provide consumers with 

more specific information and amends 

the definition for ‘‘retailer’’ to include 

any person subject to be licensed as a 

retailer under the Perishable 

Agricultural Commodities Act (PACA). 

The COOL regulations are issued 

pursuant to the Agricultural Marketing 

Act of 1946. The Agency is issuing this 

rule to make changes to the labeling 

provisions for muscle cut covered 

commodities to provide consumers with 

more specific information and other 

modifications to enhance the overall 

operation of the program. 

DATES: This final rule is effective May 

23, 2013. The requirements of this rule 

do not apply to covered muscle cut 

commodities produced or packaged 

before May 23, 2013. 

FOR FURTHER INFORMATION CONTACT: Erin 

Morris, Deputy Associate Administrator, 

AMS, USDA, by telephone on 202/690– 

4024, or via email at: 

erin.morris@ams.usda.gov. 

SUPPLEMENTARY INFORMATION: 

Background 

The Farm Security and Rural 

Investment Act of 2002 (2002 Farm Bill) 

(Pub. L. 107–171), the 2002 

Supplemental Appropriations Act (2002 

Appropriations) (Pub. L. 107–206), and 

the Food, Conservation and Energy Act 

of 2008 (2008 Farm Bill) (Pub. L. 110– 

234) amended the Agricultural 

Marketing Act of 1946 (Act) (7 U.S.C. 

1621 et seq.) to require retailers to notify 

their customers of the country of origin 

of covered commodities. Covered 

commodities include muscle cuts of 

beef (including veal), lamb, chicken, 

goat, and pork; ground beef, ground 

lamb, ground chicken, ground goat, and 

ground pork; wild and farm-raised fish 

and shellfish; perishable agricultural 

commodities; macadamia nuts; pecans; 

ginseng; and peanuts. AMS published a 

final rule for all covered commodities 

on January 15, 2009 (74 FR 2658), which 

took effect on March 16, 2009. On 

March 12, 2013, AMS published a 

proposed rule to amend the country of 

origin labeling provisions for muscle cut 

covered commodities (78 FR 15645). 

Executive Summary 

Purpose of the Regulatory Action 

In June 2012, in a WTO case brought 

by Mexico and Canada, the WTO 

Appellate Body (AB) affirmed a 

previous WTO Panel’s finding that the 

COOL requirements for muscle cut meat 

commodities were inconsistent with 

U.S. obligations under the WTO 

Agreement on Technical Barriers to 

Trade (TBT Agreement). In particular, 

the AB affirmed the Panel’s 

determination that the COOL 

requirements were inconsistent with the 

TBT Agreement’s national treatment 

obligation to accord imported products 

treatment no less favorable than that 

accorded to domestic products. The 

WTO Dispute Settlement Body (DSB) 

adopted its recommendations and 

rulings on July 23, 2012. The United 

States has until May 23, 2013, to comply 

with the WTO ruling. 

As a result of this action, the Agency 

reviewed the overall regulatory program 

and is issuing this rule, under the 

authority of the Agricultural Marketing 

Act (7 U.S.C. 1621 et seq.), to make 

changes to the labeling provisions for 

muscle cut covered commodities and 

certain other modifications to the 

program. The Agency expects that these 

changes will improve the overall 

operation of the program and also bring 

the current mandatory COOL 

requirements into compliance with U.S. 

international trade obligations. 

Summary of the Major Provisions of the 

Regulatory Action in Question 

Under this final rule, origin 

designations for muscle cut covered 

commodities derived from animals 

slaughtered in the United States are 

required to specify the production steps 

of birth, raising, and slaughter of the 

animal from which the meat is derived 

that took place in each country listed on 

the origin designation. In addition, this 

rule eliminates the allowance for 

commingling of muscle cut covered 

commodities of different origins. These 

changes will provide consumers with 

more specific information about the 

origin of muscle cut covered 

commodities. 

Costs and Benefits 

The costs of implementing these 

requirements will be incurred by 

intermediaries (primarily packers and 

processors of muscle cut covered 

commodities) and retailers subject to 

requirements of mandatory COOL. The 

Agency considers that the total cost of 

the rule is driven by the cost to firms of 

changing the labels and the cost some 

firms will incur to adjust to the loss of 

the flexibility afforded by commingling. 

The estimated number of firms that 

will need to augment labels for muscle 

cut covered commodities is 2,808 

livestock processing and slaughtering 

firms, 38 chicken processing firms, and 

4,335 retailers. This totals 7,181 firms 

that will need to augment the 

mandatory COOL information presented 

on labels for muscle cut covered 

commodities. 

Based on 2009 data, the Food Safety 

and Inspection Service (FSIS) estimated 

there were approximately 121,350 raw 

meat and poultry unique labels 

submitted by official establishments 

(i.e., establishments regulated by FSIS) 

and approved by the Agency (76 FR 

44862). Assuming the upper bound 

estimate of 121,350 unique labels, the 

Agency estimates the midpoint cost of 

the final rule for this label change is 

$32.8 million with a range of $17.0 

million to $47.3 million. 

With regard to the elimination of 

commingling flexibility, which affects 

the beef and pork segments, the 

information submitted by commenters 

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31368 Federal Register / Vol. 78, No. 101 / Friday, May 24, 2013 / Rules and Regulations 

confirms the Agency’s understanding 

that the commingling flexibility is used 

by some packers, but that it is not 

possible to specify the extent to which 

packers are making use of the flexibility. 

Accordingly, the Agency made various 

assumptions and used several sources of 

data to estimate the range of 

commingling activity that might be 

occurring in the industry and the related 

range of costs that might be incurred 

from the elimination of commingling. 

The Agency estimates a potential 

range of commingling of U.S. and 

foreign-origin livestock by U.S. packers 

of five percent to 20 percent. The 

Agency considers that the data analyzed 

support the possibility that the extent to 

which packers are commingling is 

closer to the lower end than the higher 

end of the range. Midrange estimates of 

commingling are 12.5 percent for fed 

cattle and hogs. 

Estimated costs for the loss of 

commingling flexibility at the packer/ 

processor level are $7.16 per head for 

cattle and $1.79 per head for hogs that 

are currently commingled. Estimated 

costs at the retail level are $0.050 per 

pound for beef and $0.045 per pound for 

pork muscle cuts derived from 

commingled livestock. For the beef 

segment, total costs for the loss of 

commingling flexibility to 

intermediaries and retailers are 

estimated to be $21.1 million, $52.8 

million, and $84.5 million at the lower, 

midpoint, and upper levels. Similarly 

for the pork segment, total costs for the 

loss of commingling flexibility to 

intermediaries and retailers are 

estimated to be $15.0 million, $37.7 

million, and $60.3 million at the lower, 

midpoint, and upper levels. 

Combining costs for label changes 

with costs from the elimination of 

commingling flexibility yields estimated 

total adjustment costs of $123.3 million 

at the midpoint and ranging from $53.1 

million at the low end to $192.1 million 

at the high end. Given that the Agency 

believes that the current extent of 

commingling likely falls closer to the 

lower end than the higher end of the 

estimates, the estimated implementation 

costs narrow to a range of $53.1 to 

$137.8 million. 

The Agency believes that the 

incremental economic benefits from the 

labeling of production steps will be 

comparatively small relative to those 

that were discussed in the 2009 final 

rule. 

A complete discussion of the costs 

and benefits can be found under the 

Executive Order 12866 section. 

Summary of Changes to the COOL 

Regulations 

Definitions 

In the regulatory text for fish and 

shellfish (7 CFR part 60) and for all 

other covered commodities (7 CFR part 

65), the definition for ‘‘retailer’’ is 

amended to include any person subject 

to be licensed as a retailer under the 

Perishable Agricultural Commodities 

Act (PACA) of 1930 (7 U.S.C. 499a(b)). 

This change more closely aligns with 

the language contained in the PACA 

regulation and clarifies that all retailers 

that meet the PACA definition of a 

retailer, whether or not they actually 

have a PACA license, are also covered 

by COOL. 

Country of Origin Notification 

Labeling Provisions for Muscle Cut 

Covered Commodities 

Under this final rule, all origin 

designations for muscle cut covered 

commodities slaughtered in the United 

States must specify the production steps 

of birth, raising, and slaughter of the 

animal from which the meat is derived 

that took place in each country listed on 

the origin designation. The requirement 

to include this information applies 

equally to all muscle cut covered 

commodities derived from animals 

slaughtered in the United States. This 

requirement will provide consumers 

with more specific information on 

which to base their purchasing 

decisions without imposing additional 

recordkeeping requirements on 

industry. The Agency considers these 

changes, which are discussed in detail 

below, consistent with the provisions of 

the statute. 

Labeling Covered Commodities of 

United States Origin 

Under this final rule, the United 

States country of origin designation for 

muscle cut covered commodities is 

required to include location information 

for each of the three production steps 

(i.e., ‘‘Born, Raised, and Slaughtered in 

the United States’’). The current COOL 

regulations permit the term ‘‘harvested’’ 

to be used in lieu of ‘‘slaughtered.’’ This 

final rule retains that flexibility. 

In the case of chicken muscle cut 

covered commodities, the current COOL 

regulations define the term ‘‘born’’ as 

hatched from the egg. Therefore, under 

this final rule, the origin designations 

for chicken muscle cut covered 

commodities may use the term 

‘‘hatched’’ in lieu of ‘‘born.’’ 

Labeling Muscle Cut Covered 

Commodities of Multiple Countries of 

Origin (From Animals Slaughtered in 

the United States) 

Muscle cut covered commodities 

derived from multiple countries (from 

animals slaughtered in the United 

States) are those muscle cut covered 

commodities derived from animals that 

were born in another country (and 

thereby raised for a period of time in 

that country) and then, following 

importation, were further raised and 

slaughtered in the United States. Under 

this final rule, the origin designation for 

these muscle cut covered commodities 

must include location information for 

each of the three production steps (i.e., 

born, raised, and slaughtered). As stated 

above, there is some flexibility in the 

terminology that must be used with 

respect to referencing the production 

steps. 

As discussed in the preamble of the 

January 15, 2009, final rule and in the 

March 12, 2013, proposed rule, if 

animals are born and raised in another 

country and subsequently further raised 

in the United States, only the raising 

that occurs in the United States needs 

to be declared on the label, as it is 

understood that an animal born in 

another country will have been raised at 

least a portion of its life in that other 

country. Because the country of birth is 

already required to be listed in the 

origin designation, and to reduce the 

number of required characters on the 

label, the Agency is not requiring the 

country of birth to be listed again as a 

country in which the animal was also 

raised. Accordingly, under this final 

rule, the production step related to any 

raising occurring outside the United 

States may be omitted from the origin 

designation of these commodities (e.g., 

‘‘Born in Country X, Raised and 

Slaughtered in the United States’’ in 

lieu of ‘‘Born and Raised in Country X, 

Raised and Slaughtered in the United 

States’’). 

However, in the relatively rare 

situation where an animal was born and 

raised in the United States, raised in 

another country (or countries), and then 

raised and slaughtered in the United 

States, the label must indicate all 

countries which the production step 

related to raising occurred. In this rare 

case, the label could read ‘‘Born and 

Raised in the United States, Raised in 

Country X, Slaughtered in the United 

States.’’ 

Finally, the origin designation for 

muscle cut covered commodities 

derived from animals imported for 

immediate slaughter as defined in 

§ 65.180 is required to include 

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Federal Register / Vol. 78, No. 101 / Friday, May 24, 2013 / Rules and Regulations 31369 

information as to the location of the 

three production steps. However, the 

country of raising for animals imported 

for immediate slaughter as defined in 

§ 65.180 shall be designated as the 

country from which they were imported 

(e.g., ‘‘Born and Raised in Country X, 

Slaughtered in the United States’’). 

Commingling 

This final rule eliminates the 

allowance for commingling of muscle 

cut covered commodities of different 

origins. As discussed in the March 12, 

2013, proposed rule, all origin 

designations are required to include 

specific information as to the place of 

birth, raising, and slaughter of the 

animal from which the meat is derived. 

Removing the commingling allowance 

lets consumers benefit from more 

specific labels. 

Labeling Imported Muscle Cut Covered 

Commodities 

As stated in the March 12, 2013, 

proposed rule, under the current COOL 

regulations, imported muscle cut 

covered commodities retain their origin 

as declared to the U.S. Customs and 

Border Protection at the time the 

products entered the United States (i.e., 

Product of Country X) through retail 

sale. 

Under this final rule, these labeling 

requirements for imported muscle cut 

covered commodities remain 

unchanged. As is permitted under the 

current COOL regulations, the Agency 

will continue to allow the origin 

designation to include more specific 

information related to the three 

production steps, provided records to 

substantiate the claims are maintained 

and the claim is consistent with other 

applicable Federal legal requirements. 

Labeling 

The current COOL regulations allow 

for a variety of ways that the origin 

information can be provided, such as 

placards, signs, labels, stickers, etc. 

Many retail establishments have chosen 

to use signage above the relevant 

sections of the meat case to provide the 

required origin information in lieu of or 

in addition to providing the information 

on labels on each package of meat. 

Under this final rule, the Agency will 

continue to allow the COOL notification 

requirements to be met by using signs or 

placards. For example, for meat derived 

from cattle born in Canada and raised 

and slaughtered in the United States, 

the signage could read ‘‘Beef is from 

animals born in Canada, Raised and 

Slaughtered in the United States.’’ 

In terms of using labels and stickers 

to provide the origin information, the 

Agency recognizes that there is limited 

space to include the specific location 

information for each production step. 

Therefore, under this final rule, 

abbreviations for the production steps 

are permitted as long as the information 

can be clearly understood by 

consumers. For example, consumers 

would likely understand ‘‘brn’’ as 

meaning ‘‘born’’; ‘‘htchd’’ as meaning 

‘‘hatched’’; ‘‘raisd’’ as meaning ‘‘raised’’; 

‘‘slghtrd’’ as meaning ‘‘slaughtered’’ or 

‘‘hrvstd’’ as meaning ‘‘harvested’’. In 

addition, the current COOL regulations 

allow for some use of country 

abbreviations, as permitted by Customs 

and Border Protection, such as ‘‘U.S.’’ 

and ‘‘USA’’ for the ‘‘United States’’ and 

‘‘U.K.’’ for ‘‘The United Kingdom of 

Great Britain and Northern Island.’’ This 

final rule retains that flexibility. To help 

educate consumers about the new 

requirements, the Agency will redesign 

its consumer brochures and use tools 

such as social media, etc. 

Effective Date and Period of Education 

and Outreach 

The effective date of this regulation is 

May 23, 2013, and the rule is mandatory 

as of that date. As the Agency explains 

below, it would be impracticable and 

contrary to the public interest to delay 

the effective date of the rule beyond 

May 23, 2013. 

However, AMS understands that it 

may not be feasible for all of the affected 

entities to achieve 100% compliance 

immediately and that some entities will 

need time to make the necessary 

changes to achieve full compliance with 

the amended provisions for 100% of 

muscle cut covered commodities. 

Therefore, during the six month period 

following the effective date of the 

regulation, AMS will conduct an 

industry education and outreach 

program concerning the provisions and 

requirements of this rule. AMS has 

determined that this allocation of 

resources will ensure that the industry 

effectively and rationally implements 

this final rule. 

In addition, it is reasonable to allow 

time for the existing stock of muscle cut 

covered commodities labeled in 

accordance with the 2009 COOL 

regulations that are already in the chain 

of commerce to clear the system. 

Therefore, the requirements of this rule 

do not apply to muscle cut covered 

commodities produced or packaged 

before May 23, 2013. The Agency 

believes that providing an education 

and outreach period and allowing 

existing stock to clear the chain of 

commerce is necessary to prevent 

retailer and supplier confusion and will 

help alleviate some of the economic 

burden on regulated entities. 

Finally, the Agency recognizes that 

for some period of time following the 

period of education and outreach, 

existing label and package inventories 

may provide less specific origin 

information (e.g., Product of Country X 

and the U.S.). As long as retail 

establishments provide the more 

specific information via other means 

(e.g., signage), the Agency will consider 

the origin notification requirements to 

have been met until these existing label 

and package inventories have been 

completely used. 

Comments and Responses 

On March 12, 2013, the Agency 

published a proposed rule with a 30-day 

comment period. AMS received 936 

timely comments from consumers, 

retailers, producers, wholesalers, foreign 

governments, distributors, trade 

associations, and other interested 

parties. The majority of commenters 

registered their support or opposition to 

the rule without providing specific 

substantive guidance or information to 

modify the rule text. 

AMS received 453 comments, 

including four petitions signed by more 

than 40,000 individuals, which 

indicated that the proposed rule makes 

labels more informative for consumers. 

AMS also received 476 comments 

opposing the rule from numerous 

producer, packer, and international 

trading partner entities, as well as 

individual ranchers, packing companies 

and Foreign Government officials. The 

comments expressed opposition to the 

proposed rule due to concerns about the 

costs of implementation and the lack of 

quantifiable benefits to consumers. For 

the ease of the reader, the comments 

have been summarized by issue. 

Executive Orders 13563 and 12866 

Summary of Comments: Numerous 

commenters stated their belief that the 

proposed rule should be withdrawn in 

light of Executive Order (E.O.) 13563— 

Improving Regulation and Regulatory 

Review. The commenters contended 

that they believe the costs of the rule 

outweigh the benefits and, therefore, the 

standard of the E.O. is not being met. 

Another commenter contended that the 

proposed rule does not comply with 

E.O. 12866 based on the commenter’s 

belief that there is no explanation of the 

need for the rule; that the cost/benefit 

analysis lacks meaning; and that there is 

no explanation of how regulation is 

consistent with the statute. 

Agency Response: The Agency 

believes that the proposed rule and this 

final rule comply with both E.O. 13563 

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31370 Federal Register / Vol. 78, No. 101 / Friday, May 24, 2013 / Rules and Regulations 

and E.O. 12866. The Act provides 

authority for the Secretary to 

promulgate regulations necessary to 

implement the COOL program. In 

addition, as explained previously, in 

order to implement mandatory country 

of origin labeling for certain meat 

products as required by statute, the 

Agency has made changes to the 

labeling provisions for muscle cut 

covered commodities. These changes 

provide consumers with more specific 

information and enhance the overall 

operation of the program. The Agency 

also expects that these changes will 

bring the mandatory COOL 

requirements into compliance with U.S. 

international trade obligations. 

The proposed rule contained an 

executive summary of the rule, which 

included a statement of need. The 

Agency has conducted a cost benefit 

analysis, as required, and has modified 

the analysis based on the comments 

received. As noted in a subsequent 

response below, the Agency believes 

that this final rule is consistent with the 

statute. 

Miscellaneous 

Summary of Comments: Several 

commenters stated their belief that the 

proposed rule violates the First 

Amendment because it impermissibly 

compels commercial speech. The 

commenters argued that AMS has not 

stated an interest sufficient to require 

labeling of specific production steps as 

recommended in the proposed rule. 

Agency Response: The Agency 

disagrees. The Act directs that a COOL 

program be implemented that provides 

consumers with country of origin 

information on specified commodities, 

including muscle cuts of meat. It also 

provides authority for the Secretary to 

promulgate regulations necessary to 

implement the COOL program. The 

Agency believes that the Act provides 

the authority to amend the COOL 

regulations to require the labeling of 

specific production steps in order to 

inform consumers about the origin of 

muscle cuts of meat at retail. 

Summary of Comments: One 

commenter expressed concern that 

packers will need to maintain two label 

inventories—one for domestic use and 

one for export. 

Agency Response: The COOL 

regulations apply to only those products 

sold at covered domestic retail 

establishments. Because various 

countries presently have different 

labeling and other requirements for 

accepting products exported from the 

United States, packers already utilize 

different labels for products destined for 

export (as well as for products destined 

for food service) than for products 

destined for the domestic retail market. 

World Trade Organization 

Summary of Comments: Several 

commenters expressed a wide range of 

views regarding the WTO dispute. Some 

commenters contended that the 

proposed rule will not bring the United 

States into compliance with its 

international trade obligations while 

other commenters contended that the 

proposed rule will satisfy U.S. trade 

obligations. 

Agency Response: The Agency 

considers that this rule brings the 

United States into compliance with its 

international trade obligations. In the 

COOL dispute, the WTO affirmed that 

WTO Members have the right to adopt 

country of origin labeling requirements, 

in that providing such information to 

consumers about the products they buy 

is a legitimate government objective. 

However, the WTO had concerns with 

specific aspects of the current COOL 

requirements. In particular, the WTO 

considered that the current COOL 

requirements imposed record keeping 

costs that appeared disproportionate to 

the information conveyed by the labels. 

This final rule addresses those concerns 

of the WTO. 

Statutory Authority 

Summary of Commenters: Some 

commenters stated their belief that the 

proposed rule is not authorized by the 

statute. One commenter stated that the 

statute does not explicitly or implicitly 

allow USDA to require retailers to 

provide point of processing information; 

that the statute provides that labels must 

identify the origin of category C covered 

commodities as the country from which 

it was imported and the United States; 

and that, applying the whole statute 

rule, categories A and B must be labeled 

in the same manner as categories C and 

D. 

Agency Response: The Agency 

believes this rule is consistent with the 

statute and that the Act provides 

authority for the Secretary to 

promulgate regulations necessary to 

implement the COOL program. The 

statute contemplates four different 

labeling categories for meat, based on 

where the animal was born, raised, and/ 

or slaughtered. This final rule preserves 

these four different labeling categories 

for meat and is consistent with the 

labeling criteria set forth in the statutory 

scheme. 

Effective Date and Period of Education 

and Outreach 

Summary of Comments: Several 

commenters stated that the effective 

date of the rule should be delayed until 

it is known whether the WTO considers 

the final rule to be compliant with U.S 

international trade obligations. Other 

commenters recommended that the 

effective date should be the latter of 180 

days after the WTO ruling or the 

publication of the final rule. Another 

commenter recommended that the 

effective date should be 18 months to 2 

years after publication of the final rule. 

With regard to enforcement, another 

commenter stated their opinion that the 

industry needs 12–18 months to comply 

with the final rule due to livestock 

commitments. Another commenter 

suggested that companies need 12 

months to work through existing 

inventory of labels. 

Agency Response: The effective date 

of this regulation is May 23, 2013, and 

the rule is mandatory as of that date. As 

the Agency explains below, it would be 

impracticable and contrary to the public 

interest to delay the effective date of the 

rule beyond May 23, 2013. 

However, and as discussed 

previously, the Agency determined that 

an industry education and outreach 

program concerning the provisions and 

requirements of this rule is appropriate. 

The Agency believes that a six month 

period, as was provided for in the 

August 1, 2008, interim final rule (73 FR 

45106) and the 2009 final COOL rule, is 

sufficient time for retailers and 

suppliers to become educated on and 

fully transition over to the new 

requirements of the final rule. 

Both during this six month period and 

beyond, the Agency will continue to 

educate retailers and suppliers on the 

Agency’s compliance and enforcement 

procedures so that the regulated 

industries have clear expectations as to 

how the Agency will enforce this rule. 

With regard to working through existing 

packaging inventories, this final rule 

does not require covered commodities 

to be individually labeled with COOL 

information. As discussed previously, 

retailers can use placards and other 

signage to convey origin information. In 

addition, as also previously discussed, it 

is reasonable to allow time for the 

existing stock of muscle cut covered 

commodities labeled in accordance with 

the 2009 COOL regulations that are 

already in the chain of commerce to 

clear the system. Therefore, the 

requirements of this rule do not apply 

to muscle cut covered commodities 

produced or packaged before May 23, 

2013. 

Labeling 

Summary of Comments: Several 

commenters stated their belief that 

retailers and suppliers should not have 

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Federal Register / Vol. 78, No. 101 / Friday, May 24, 2013 / Rules and Regulations 31371 

to list production step information for 

U.S. origin products. Other commenters 

stated their belief that requiring 

production step information is too 

onerous and that consumers do not 

desire this information. Another 

commenter stated that the rule will 

cause product labels to mislead 

consumers and referenced the Federal 

Meat Inspection Act (FMIA) (21 U.S.C. 

601 et seq.). The commenter further 

stated that consumers will be confused 

by imported meat products bearing an 

‘‘inspected & passed’’ sticker. Another 

commenter recommended that chicken 

should be labeled ‘‘hatched’’ instead of 

‘‘born.’’ This commenter as well as other 

commenters stated their opposition to 

having to use the term ‘‘slaughtered.’’ 

The commenters suggested alternatives 

to the term ‘‘slaughtered’’ that 

consumers may find more acceptable 

including ‘‘harvested’’ or ‘‘processed.’’ 

Agency Response: Numerous 

comments received on this and previous 

COOL rulemaking actions indicate that 

there clearly is interest by certain U.S. 

consumers in the country of origin of 

food they purchase, including the 

production step information that 

retailers must provide pursuant to this 

final rule. The Agency also considers 

that providing this more specific 

information regarding the country in 

which each production step occurred is 

consistent with the COOL statute. The 

Agency further considers that the rule 

will bring the United States into 

compliance with its international trade 

obligations. 

In addition, current country of origin 

labeling for imported meat products 

follows pre-existing regulations, 

including those of the U.S. Customs and 

Border Protection, regarding the origin 

of imported products. Further, the 

‘‘inspected and passed’’ sticker is 

applied under the FMIA by FSIS 

inspectors and does not relate to the 

COOL program. The Agency is not 

aware that the requirements set forth in 

the 2009 final rule are causing any 

confusion among consumers related to 

meat products sold with the ‘‘inspected 

and passed’’ label. In any event, as 

noted above, this final rule does not 

change existing COOL labeling 

requirements for imported meat 

products nor does it alter the ‘‘inspected 

and passed’’ sticker. As such, there is no 

reason to believe that this rule will 

cause confusion related to the 

‘‘inspected and passed’’ sticker among 

consumers. 

With regard to chicken products, the 

current COOL regulations define the 

term ‘‘born’’ with respect to chicken as 

‘‘hatched.’’ Accordingly, it is 

permissible to utilize the term 

‘‘hatched’’ in origin designations for 

chicken products under this final rule. 

The Agency has included additional 

language in this preamble to clarify this 

point. With respect to the suggested 

alternatives that may be more acceptable 

to consumers, the 2009 COOL 

regulations permit the use of the term 

‘‘harvested’’ in lieu of ‘‘slaughtered.’’ As 

discussed previously, this flexibility 

will continue to be allowed under this 

final rule. 

Definition of Retailer 

Summary of Comments: One 

commenter provided extensive 

comments on both the definition of a 

retailer in the current COOL regulations 

and the definition of a retailer in the 

proposed rule. The commenter stated 

their belief that AMS should not use the 

definition that is contained in PACA 

regulations and further stated that AMS 

should develop its own definition. The 

commenter provided specific 

recommendations, including using a 

definition similar to the one used by the 

Supplemental Nutrition Assistance 

Program (SNAP), which is administered 

by USDA’s Food and Nutrition Service. 

Another commenter stated their support 

for the proposed rule’s definition 

change and indicated that the change 

will make the definition less ambiguous. 

Agency Response: The COOL statute 

defines the term ‘‘retailer’’ as having the 

meaning given the term in section 1(b) 

of the Perishable Agricultural 

Commodities Act of 1930 (7 U.S.C. 

499a(b)). Therefore, the Agency does not 

have the authority to develop an 

alternative definition based on SNAP as 

it is not consistent with the COOL 

statute. As stated in the March 12, 2013, 

proposed rule, the Agency believes that 

the revised definition of a retailer more 

closely mirrors the definition in the 

PACA and agrees that this definition is 

less ambiguous. Accordingly, the 

Agency has not adopted the alternative 

recommendations. 

Recordkeeping 

Summary of Comments: Several 

commenters stated that they were 

unclear as to whether current producer 

affidavits systems will satisfy the 

regulatory requirements of the proposed 

rule. 

Agency Response: The proposed rule 

did not alter the recordkeeping 

requirements of suppliers or retailers. 

Therefore, the use of affidavits for 

conveying origin information is still 

permitted under this final rule. 

Raised 

Summary of Comments: Several 

commenters suggested that the Agency 

redefine the term ‘‘raised’’ to refer to the 

period of time encompassing a majority 

of an animal’s life. The commenters 

further stated that compared to the retail 

value of beef, time spent in another 

country, i.e., country of birth, could be 

considered de minimus. Another 

commenter stated that retailers should 

be required to list all countries of 

raising. Lastly, one commenter asked for 

clarification of the phrase ‘‘minimal 

raising,’’ which was used in the 

proposed rule. 

Agency Response: The COOL 

regulations define the term ‘‘raised’’ as 

‘‘the period of time from birth until 

slaughter or in the case of animals 

imported for immediate slaughter as 

defined in section 65.180, the period of 

time from birth until date of entry into 

the United States.’’ The proposed rule 

did not recommend a change to this 

definition; therefore, the suggestion to 

modify the definition of the term 

‘‘raised’’ is outside the scope of this 

rulemaking. With regard to the request 

to clarify the phrase ‘‘minimal raising,’’ 

that phrase does not appear in the 

COOL regulations, and the Agency 

believes that the language in the existing 

regulatory text provides readers with a 

clear definition of the term ‘‘raising.’’ 

Regarding the suggestion to require that 

all countries of raising be listed on the 

label, the Agency believes this final rule 

provides more specific information to 

consumers with regard to the place of 

raising in sufficient detail. However, the 

Agency has added language to this 

preamble to further explain the 

regulatory text in § 65.300(e). 

Miscellaneous 

Summary of Comments: Several 

commenters stated that the proposed 

rule runs counter to the shared U.S.- 

Canada vision of the Regulatory 

Cooperation Council (RCC) initiative. 

Agency Response: As explained 

previously, in order to implement 

mandatory country of origin labeling for 

certain meat products as required by 

statute in a manner consistent with U.S. 

WTO obligations, the Agency has made 

these changes to the labeling provisions 

for muscle cut covered commodities, 

which provide consumers with more 

specific information and enhance the 

overall operation of the program. The 

United States values its relationships 

with its trading partners and is 

committed to looking for ways to 

improve regulatory transparency and 

coordination with Canada as described 

in the RCC Joint Action Plan. 

Summary of Comments: Several 

commenters stated their opinion that 

there is no regulatory solution that will 

bring the United States into compliance 

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with its international trade obligations. 

The commenters further stated that the 

United States should seek a legislative 

change. 

Agency Response: As discussed 

above, the Agency considers that this 

final rule constitutes compliance with 

the WTO DSB’s recommendations and 

rulings. 

Summary of Comments: One 

commenter suggested that the Agency 

should expand the civil rights review 

statement to ensure that it is as broad as 

possible. The commenter specifically 

requested that the Agency remove the 

phrase ‘‘. . . on minorities, women, or 

persons with disabilities’’ from the 

statement. 

Agency Response: USDA prohibits 

discrimination in all its programs and 

activities on the basis of race, color, 

national origin, age, disability, and 

where applicable, sex (including gender 

identity and expression), marital status, 

familial status, parental status, religion, 

sexual orientation, political beliefs, 

genetic information, reprisal, or because 

all or part of an individual’s income is 

derived from any public assistance 

program. The Agency has modified the 

civil rights review statement as the 

commenter suggested by removing the 

phrase in question and using ‘‘protected 

groups’’ in its place. 

Alternatives 

Summary of Comments: A number of 

commenters suggested alternatives to 

the proposed rule, including: COOL 

should be voluntary; country of origin 

should be where an animal is processed; 

and COOL should be based on 

substantial transformation (recognizing 

need for statutory change). Another 

commenter suggested that the 

enforcement of COOL should be 

reduced and gave several specific 

examples. 

Agency Response: The alternative 

labeling programs suggested by the 

commenters are not authorized by the 

COOL statute, which provides for a 

mandatory COOL program and four 

distinct categories of origin designations 

for muscle cut covered commodities. 

Accordingly, these suggestions are not 

adopted. With regard to the suggestions 

to reduce the enforcement of the COOL 

program, this is not within the scope of 

this rulemaking. The Agency notes, 

however, that it plans to review its 

current enforcement procedures to 

determine if changes should be made. 

Summary of Comments: A number of 

commenters provided recommendations 

that are outside the scope of the 

proposed rule, including: Food 

establishments should be covered 

because 48% of spending on food 

occurs at restaurants; the definition of 

processed should be narrowed such that 

more products are covered; turkey 

should be a covered commodity; the 

definition of ground beef should be 

narrowed; COOL is not food safety 

related and the Agency should clarify 

that mislabeling will not result in a 

recall; the Agency should disallow the 

60-day inventory allowance for ground 

meat; the Agency should remove the 

burden on producers of requiring 

affidavits. 

Agency Response: Because these 

recommendations are outside the scope 

of this rulemaking, they will not be 

considered. 

Costs and Benefits 

Proposal Adds Significant Costs 

Summary of Comments: Several 

commenters stated their belief that the 

recordkeeping and verification 

processes necessitated by the proposed 

rule will be more onerous, disruptive, 

and expensive than the current 

regulations. The commenters further 

contended that the costs of new labels 

and printers and other equipment, 

together with increased needs to 

segregate livestock and the need to make 

new investments in trucks, processing 

lines and coolers will add cost to all 

segments of the production chain. 

Other commenters agreed with the 

Agency’s estimates contained in the 

proposed rule and noted that the 

incremental cost associated with the 

proposed labeling changes is only a 

slight increase over the initial COOL 

compliance cost estimates contained in 

the final rule implementing the 

program. One commenter noted that the 

proposed rule does not require the 

collection of additional information and 

that the primary added costs are 

associated with changing the labels. 

Another commenter pointed out that 

there will be no additional 

recordkeeping requirements as a result 

of the proposed rule and that additional 

labeling costs are concentrated almost 

entirely at the retail level. 

Agency Response: As discussed 

further in the Regulatory Impact 

Analysis (RIA), the Agency agrees that 

there will be additional costs associated 

with this final rule, although only those 

muscle cut covered commodities subject 

to COOL requirements will be affected 

by the changes in this final rule. Those 

costs will be incurred by processors and 

retailers as they adjust to the loss of 

commingling flexibility and to the new 

labeling requirements in this final rule. 

It is necessary, however, to ensure label 

information accurately reflects the 

origin of muscle cut covered 

commodities in accordance with the 

intent of the statute while complying 

with U.S. WTO obligations. 

That said, the Agency does not agree 

that additional recordkeeping or 

verification processes will be required 

to transfer information from one level of 

the production and marketing channel 

to the next. There are no recordkeeping 

requirements beyond those currently in 

place, and the Agency believes that the 

information necessary to transmit 

production step information is already 

maintained by suppliers in order to 

comply with the current COOL 

regulations. As with the current 

mandatory COOL program, this final 

rule contains no requirements for firms 

to report to USDA. Compliance audits 

will continue to be conducted at firms’ 

places of business. 

In addition, the Agency has sought to 

minimize the cost to industry at each 

step of the marketing process. For 

example, the Agency has clarified that 

retailers may continue to utilize existing 

label and package inventories, as long as 

retail establishments convey the more 

specific information concerning the 

location where the production steps 

occurred via other means (e.g., signage). 

This will reduce the costs of switching 

over to the new labels. The Agency 

further recognizes that there is limited 

space to include the specific location 

information for each production step. 

Therefore, to reduce the potential need 

for new printers and other equipment, 

under this final rule, abbreviations for 

the production steps are permitted as 

long as the information can be clearly 

understood by consumers. The Agency 

also notes many retail establishments 

have chosen to use signage above the 

relevant sections of the meat case to 

provide the required origin information 

in lieu of or in addition to providing the 

information on labels on each package 

of meat. 

The Agency further considers it 

reasonable to allow time for the existing 

stock of muscle cut covered 

commodities labeled in accordance with 

the 2009 COOL regulations that are 

already in the chain of commerce to 

clear the system. Therefore, the 

requirements of this rule do not apply 

to muscle cut covered commodities 

produced or packaged before May 23, 

2013. 

Finally, while the requirements of this 

rule are mandatory as of the effective 

date, because AMS understands that it 

may not be feasible for all of the affected 

entities to achieve 100% compliance 

immediately and that some entities will 

need time to make the necessary 

changes to achieve full compliance with 

the amended provisions for 100% of 

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muscle cut covered commodities, AMS 

will conduct an industry education and 

outreach program concerning the 

provisions and requirements of this rule 

during the six month period following 

the effective date of the regulation, as 

was provided for in the 2008 interim 

rule and the 2009 final rule. AMS has 

determined that this allocation of 

enforcement resources will ensure that 

the industry effectively and rationally 

implements this final rule. With regard 

to costs related to the elimination of 

commingling flexibility, the Agency has 

responded to these issues in a 

subsequent response below. 

Processors’ Cost of Segregation 

Summary of Comments: Numerous 

commenters provided statements on the 

costs of segregating livestock they 

believe will be necessitated by the 

proposed rule. These commenters 

explained how, in their opinion, the 

labeling changes will require additional 

livestock and meat segregation and 

record keeping that will increase costs 

to the industry that must be absorbed by 

livestock producers, feedlots, shippers, 

meat packers, processors, retailers and 

consumers. 

One commenter stated that the 

segregation of cattle and beef carcasses 

within the packing plant requires 

unique operational procedures. The 

commenter further contended that 

current packing plants were neither 

designed for nor constructed in a 

manner to allow for efficiency in the 

segregation of cattle and beef. 

Several commenters stated their belief 

that the costs of segregating livestock 

would adversely affect their businesses 

due to the need to increase hiring and 

worker hours as well as make large 

capital investments to accommodate the 

demands of segregation. In addition, the 

commenters stated that they would 

experience an increase in maintenance 

costs for contracted information 

technology services to track the 

additional information required by the 

proposed rule in company databases. 

Another commenter presented an 

analysis showing how eliminating 

commingling would significantly 

impact slaughter and processing 

facilities now using commingling 

flexibility, as well as the rest of the 

downstream supply chain. The 

commenter contended that increased 

annual operating costs for the fed cattle 

and hog processing industries would 

range from $97.9 to $132.6 million due 

to the elimination of commingling. The 

commenter opined that the prohibition 

on commingling could have an even 

greater adverse impact on smaller 

packers, providing one example of a 

very small cattle slaughter company 

(fewer than 100 employees) that 

currently commingles production. 

According to the commenter’s estimate, 

elimination of commingling would 

impose an additional $275,000 in costs 

annually on this company, which is 

approximately the company’s annual 

profit. 

Another commenter stated that there 

would be significant costs resulting 

from the need to reconfigure processing 

plants to segregate product by origin for 

those plants currently commingling. 

The commenter stated that estimates of 

capital costs for beef slaughter and 

processing operations ranged from $20 

to $50 million and from $12 million to 

$25 million for hog slaughter and 

processing operations for those plants 

currently commingling. 

Other commenters stated that the 

proposed rule will add only modest 

costs to the industry. The commenters 

pointed out that, as noted in the 2009 

COOL regulations, segregating animals 

by origin can be accomplished through 

processes that are essentially the same 

as those that firms already use to sort 

animals by weight, grade, and other 

factors. In addition, the commenters 

stated that strengthening the origin 

labels in this manner can be achieved 

without imposing significant additional 

recordkeeping or verification 

requirements, as producers are already 

required to track the origin of animals 

from which meat is derived. 

Agency Response: As previously 

discussed, no additional recordkeeping 

is required by this final rule, and no 

new processes need be developed to 

transfer information from one level of 

the supply chain to the next. The 

information necessary to transmit 

production step information should 

already be maintained by suppliers in 

order to satisfy the 2009 COOL 

regulations. 

With respect to additional operational 

costs anticipated from the elimination of 

the commingling flexibility, the Agency 

has modified its analysis to account for 

these estimated costs. As noted by 

commenters, the elimination of this 

flexibility may require adjustments to 

plant operations, line processing, 

product handling, storage, 

transportation, and distribution for 

those companies that commingle. As 

discussed in the RIA, commenters to the 

proposed rule submitted anecdotal 

information indicating that 

commingling flexibility is used by some 

packers. However, the information 

provided was insufficient to enable the 

Agency to determine the extent to 

which industry is making use of 

commingling flexibility. As discussed in 

the RIA, the Agency estimates that the 

current use of the flexibility likely falls 

within a range of five to 20 percent of 

the production of beef and pork muscle 

cut covered commodities, although it is 

likely that the extent to which packers 

are commingling is closer to the lower 

end than the higher end of the range. 

As also discussed in the RIA, the 

Agency estimates that adjustment costs 

due to elimination of commingling will 

range between $19.0 million and $76.3 

million in the processing sector and 

between $17.1 million and $68.5 

million in the retail sector (see table 3). 

The Agency believes these estimates, 

however, are likely to overstate actual 

adjustment costs over time. The Agency 

anticipates that intermediaries will 

develop ways to minimize down time 

and processing line changes and that, 

ultimately, a mix of solutions will be 

implemented by industry participants to 

effectively meet the requirements of the 

final rule. Over the long run, the Agency 

believes that initial adjustment costs are 

not likely to persist and that firms will 

continue to seek methods for efficient 

production and marketing of the 

affected products. 

Processors’ Ability To Source Animals 

Summary of Comments: Several 

commenters discussed the sourcing of 

animals and the impact the proposed 

changes will have on these practices. 

The commenters contended that 

animals from other countries are used to 

supplement domestic sources, often on 

a seasonal basis, and that the proposed 

rule’s new requirements may add 

sufficient burden that this form of 

sourcing is no longer economically 

viable. 

One commenter stated concern that 

his business will suffer because current 

customers will no longer purchase his 

company’s meat products, which are 

sometimes sourced from Canadian 

cattle, because the customers will now 

have to change all of their labeling. Two 

commenters stated that the proposed 

rule gives an unfair advantage to those 

producers who do not rely on Canadian 

pigs. A commenter suggested this would 

create incentives for U.S. processors to 

use U.S. livestock over imported 

livestock. Another commenter 

contended the proposed rule’s new 

requirements would cause the 

processing industry in Canada to 

expand at the expense of jobs in the 

United States. 

Agency Response: All labels for 

muscle cut covered commodities 

produced in the United States must bear 

information related to the location of 

birth, raising, and slaughter. Therefore, 

all affected retailers and packers will 

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have to change their labeling practices 

to conform to this final rule, regardless 

of the origin of the animal from which 

their muscle cut covered commodities 

are derived. Accordingly, while the 

industry will incur costs for augmenting 

the label, those particular costs will be 

borne by all industry participants, 

regardless of their sourcing decisions. 

With regard to commingling, the 

Agency recognizes that those packers 

that are commingling will incur 

additional costs in complying with this 

rule. However, removing the 

commingling allowance lets consumers 

benefit from more specific and detailed 

labels. Moreover, given that the current 

COOL requirements already compel 

retailers to differentiate muscle cut 

commodities based on origin, the 

Agency does not believe there is a 

sufficient basis to definitively conclude 

that this rule, which continues to 

require retailers to make that same 

differentiation based on origin (albeit 

with more specific labels), will affect 

purchasing decisions of industry 

participants or give an unfair advantage 

to any particular participants. 

Retailers’ and Wholesalers’ Costs 

Summary of Comments: Some 

commenters discussed the additional 

cost related to retraining associates at 

their stores, replacing scales, and 

upgrading distribution systems to allow 

for the tracking of COOL related 

information for invoices and manifests. 

Several commenters stated that the 

proposed rule will require retailers to 

double the number of words on the 

retail label. For example, a product 

currently labeled ‘‘Product of the US’’ 

would have to be labeled ‘‘Born, Raised 

and Slaughtered in the US.’’ Those 

commenters also contended that the 

more likely result will be that retailers 

will make an economic decision to 

purchase only meat from animals born, 

raised and slaughtered in the U.S. to 

reduce their risk of inadvertently not 

complying with this rule. An additional 

commenter made the point that one of 

the reasons the current scale systems 

have less space remaining is due to the 

implementation of mandatory meat 

nutrition labeling. 

One commenter stated their opinion 

that certain retailers repack muscle cuts 

and that the revised labeling 

requirements would impose an 

additional layer of complexity and cost 

from redoing labels, maintaining more 

complex records and recordkeeping 

systems, buying new equipment and 

software, and employee training. 

Another commenter that supplies 

independent stores indicated that the 

commenter’s present software will not 

allow it to comply with the new rule, 

and that its stores will need new 

equipment or must use a second label. 

Another commenter stated that the 

COOL law currently imposes enormous 

burdens on the supermarket industry 

and specifically the wholesale industry. 

The commenter believed that should the 

proposed rule be adopted, packers will 

need to document the country or 

countries with ‘‘all of the production 

steps’’ on the master case and bill of 

lading and will need to validate proper 

COOL labeling prior to selling product 

to their customers. The commenter 

contended that this will create another 

step in their receiving process at the 

warehouse. 

An industry association stated that 

the proposed rule makes substantial 

changes to COOL requirements that will 

result in market and supply dislocations 

and will adversely affect jobs, business 

operations, and international trade. The 

commenter stated that a large volume of 

product is still subject to costly labeling 

in retail stores and reported that costs 

would vary, depending on whether 

retailers could accommodate the 

additional language required by the 

proposed rule on current label sizes and 

existing printers. The commenter also 

noted the cost of liquidating old labels. 

Another commenter stated that 

because imported products will now 

have to be separated under the proposal, 

the cost of U.S. products sold to 

supermarkets will go up, and imported 

product will be sold through 

foodservice channels like restaurants 

where it will not have to be labeled and 

likely will be sold at a cheaper price. 

Agency Response: The Agency 

recognizes that additional costs will be 

borne by industry participants. 

Estimates of those costs include 

adjustment costs to processors and 

retailers due to losing the flexibility to 

commingle muscle cut covered 

commodities for purposes of COOL. In 

addition, the estimated costs include 

adjustments due to the need to change 

the labels currently in place. As 

discussed in further detail in a prior 

response, the Agency has, to its best 

ability, sought to minimize the cost to 

industry at each step of the marketing 

process, including allowing 

abbreviations to be used on the new 

labels. 

The Agency further notes that the 

existing COOL regulations already 

require retailers to maintain records and 

other documentary evidence upon 

which they have relied to establish a 

covered commodity’s country or 

countries of origin. Similarly, any 

person directly or indirectly engaged in 

the business of supplying a covered 

commodity to a retailer, including 

wholesalers, must make available 

information to the buyer about the 

country(ies) of origin of the covered 

commodity. Thus, to comply with 

existing COOL regulations, wholesalers 

must already have distribution systems 

to allow for the tracking of COOLrelated information for invoices and 

manifests and receiving procedures to 

verify the origin information received 

from packers and processors. This final 

rule does not alter those requirements, 

and, accordingly, no new records are 

required of retailers or wholesalers. As 

such, the Agency does not agree that a 

retailer using a mixed origin label 

would be more likely to find itself 

inadvertently out of compliance with 

this rule than it would when using a 

mixed origin label under the 2009 

COOL regulations. 

Producer Impacts 

Summary of Comments: Many 

commenters expressed concern that U.S. 

cattle producers are facing burdens that 

adversely impact profitability and the 

viability of their operations. Concerns 

include the continuing drought 

conditions across much of the country’s 

cattle producing areas. These 

commenters observed that droughtinduced liquidation of cattle has driven 

the national beef herd down to the 

lowest cattle numbers in 60 years. As a 

result, the commenters asserted that the 

beef industry must continue to use other 

feeder cattle procurement possibilities. 

One commenter asserted that without 

these added imported animals in the 

U.S. herds, the United States would face 

a large shortage because of the shrinking 

supply in the United States. The 

commenter stated that it ships 

Canadian-sourced cattle an extra 300 

miles to a plant that processes Canadian 

cattle, even though the company is 

located only 45 miles away from a plant 

owned by the same processing company 

that does not process Canadian cattle. 

The commenter also suggested that the 

beef produced from imported Mexican 

feeder cattle should be treated as U.S. 

beef, since the value of the imported 

animal is relatively minimal compared 

to the retail value of the beef from the 

finished animal once it undergoes 

substantial transformation into fed beef 

in the United States. 

One commenter expressed concerns 

about the effects of any trade retaliation 

that might be implemented by either 

Mexico or Canada. The commenter was 

also concerned that retailers may decide 

to reduce or eliminate sales of pork 

rather than implement systems 

necessary to comply with the proposed 

labeling requirements. 

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One commenter stated that its 

members support the rule change and 

are already very well versed with 

providing affidavits at point of sale and 

other documentation to verify the origin 

of their livestock as needed in order to 

assure supplier and retailer compliance 

with COOL. The organization does not 

have concerns that this rule will cause 

members any additional hardships. 

Another commenter stated that the 

only industry actor that cannot pass 

along the costs of doing business in the 

meat sector is the livestock producer. 

The commenter stated that compared to 

the impact that drought has had on feed 

costs for beef producers, the cost of 

labeling for food retailers is negligible 

and that the revised labeling 

requirements will provide necessary 

information to consumers. 

Agency Response: USDA recognizes 

the hardship imposed on the U.S. 

livestock industry due to the recent 

drought and has addressed this issue to 

the greatest extent possible through 

authorized means. The drought has also 

reduced the size of the Mexican cattle 

herd and made fewer animals available 

for export to the United States. 

The Agency recognizes that additional 

costs will be borne by industry 

participants as they comply with the 

requirements of this final rule. However, 

the Agency believes it is necessary to 

ensure label information more 

accurately reflects the origin of muscle 

cut covered commodities in accordance 

with the intent of the statute while 

complying with U.S. WTO obligations. 

As the Agency has noted, the 

requirement to include this information 

will apply equally to all muscle cut 

covered commodities derived from 

animals slaughtered in the United 

States, regardless of where the animal 

was born or raised. The Agency does not 

believe that these requirements will 

prevent the U.S. industry from 

continuing to purchase animals from 

Canada or Mexico. 

With regard to costs borne by the U.S. 

industry, and as discussed in a prior 

response, the Agency has sought to 

minimize the cost to industry at each 

step of the marketing process. This final 

rule does not lessen any existing 

flexibility in how required country of 

origin information is currently conveyed 

along the supply chain. The Agency’s 

goal is to enable firms to implement the 

requirements of this final rule with the 

least possible disruption to cost-efficient 

production methods. 

Rural Economy/Miscellaneous 

Summary of Comments: Some 

commenters expressed concern about 

the state of the economy, particularly 

the rural economy, and the impact the 

rule might have regarding loss of jobs. 

For example, one commenter stated that 

with around 2,000 employees in a 

typical meat processing plant, it is 

important not to jeopardize these jobs. 

Another commenter expressed concern 

about the elimination of thousands of 

jobs in rural America at a time when 

jobs are badly needed. 

Agency Response: USDA supports 

strong rural economies. Through various 

programs, including USDA’s Rural 

Development, the USDA provides 

assistance to rural communities. USDA 

also supports the creation of jobs in this 

industry, including through the opening 

of foreign markets for U.S. agricultural 

exports, including beef and pork. For 

example, in January, USDA and the 

United States Trade Representative 

announced that the United States and 

Japan have agreed on new terms and 

conditions that pave the way for 

expanded exports of U.S. beef and beef 

products to Japan. Under these new 

terms, which are now in effect, Japan 

now permits the importation of beef 

from cattle less than 30 months of age, 

compared to the previous limit of 20 

months, among other steps. It is 

estimated that these important changes 

will result in hundreds of millions of 

dollars in exports of U.S. beef to Japan 

in the coming years. 

That said, the Agency recognizes that 

additional costs will be borne by 

industry participants as a result of this 

final rule. However, the Agency believes 

it is necessary to ensure label 

information more accurately reflects the 

origin of muscle cut covered 

commodities in accordance with the 

intent of the statute while complying 

with U.S. WTO obligations. At the same 

time, as discussed in a prior response, 

the Agency has sought to minimize the 

cost to industry at each step of the 

marketing process. As previously stated, 

the Agency’s goal is to enable firms to 

implement the requirements of this final 

rule with the least possible disruption to 

cost-efficient production methods. This 

final rule does not lessen existing 

flexibility in how required country of 

origin information is currently conveyed 

along the supply chain. 

Benefits 

Summary of Comments: Some 

commenters expressed their support for 

the proposed rule on the grounds that 

the proposed labeling requirements 

provide consumers with information 

they need to make informed choices 

about the source of food and how it was 

raised. The commenters stated that there 

is increased consumer demand to know 

where and how food is produced. 

Some commenters stated that 

consumer confidence benefits can 

accrue just as a result of having the 

information available, even if the 

consumers do not read the labels’ 

information. In the opinion of some 

commenters, mandatory labels address 

concerns of market failure and 

fraudulent labeling and help 

investigators trace-back foodborne 

illness outbreaks. A commenter 

referenced a 2005 survey that found that 

nearly two-thirds of consumers (60 

percent) preferred country of origin 

labeling to be administered by a 

government policy rather than by 

companies marketing the meat. 

Some commenters stated their belief 

that consumers can differentiate various 

attributes of competing products and 

will increase demand, and price, for 

those attributes they view favorably, 

including the perceived higher quality 

of meat derived from animals born, 

raised and slaughtered in one country 

rather than another country. 

Other commenters provided 

additional rationale and references to 

studies indicating consumers benefit 

from food origin information. The 

commenters noted there have been 

numerous polls and studies 

demonstrating that consumers value 

origin information regarding the food 

that they buy, including meat, including 

a national poll in 2007 that found that 

94 percent of those surveyed believed 

that consumers have a right to know the 

country of origin of the foods that they 

purchase, and 85 percent of consumers 

say knowing where their food comes 

from is important. 

Commenters also referenced a study 

showing that consumers are willing to 

pay more for a more precise, countryspecific label than for a less precise, 

mixed-origin label. The commenters 

noted that mixed-origin labels may be 

affixed to exclusively U.S. origin 

product due to the commingling 

flexibilities in the current program and 

that eliminating the commingling 

flexibility and ensuring that singleorigin product is accurately labeled will 

therefore benefit consumers who value 

being able to purchase products with 

more precise label information. 

Other commenters noted that the 

Agency did not offer an estimate of any 

additional benefits from the proposed 

rule, noting only that the Agency had 

‘‘been unable to quantify incremental 

economic benefits from the proposed 

labeling of production steps . . . .’’ 

These commenters shared a belief that 

the Agency’s analysis is consistent with 

recent work on COOL, which has 

generally failed to document any 

demand-side benefits from the program. 

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31376 Federal Register / Vol. 78, No. 101 / Friday, May 24, 2013 / Rules and Regulations 

1Tonsor, Lusk et al. Mandatory Country of Origin 

Labeling: Consumer Demand Impact, November 

2012 http://www.agmanager.info/livestock/policy/ 

Tonsor_KSU_FactSheet_MCOOL_11-13-12.pdf. 

2 ‘‘Do Consumers Respond to Country-of-Origin 

Labeling?’’ by Fred Kuchler, Barry Krissoff, and 

David Harvey, in Journal of Consumer Policy, 2010, 

Vol. 33, pp. 323–337. 

3http://www.ers.usda.gov/amber-waves/2012- 

june/consumers-appear-indifferent.aspx. 

Numerous commenters stated that 

there is little evidence that consumers 

benefit from country of origin labeling 

and referred to a recent study by Kansas 

State University and Oklahoma State 

University 1 which found no demand 

increase following the implementation 

of the mandatory COOL program in 

spite of previous research suggesting 

consumers would pay more for products 

carrying origin information. The study 

concluded that consumers do not value 

meat products carrying Product of 

United States labels over those with 

Product of North America labels and 

that economic gains would occur by 

utilizing the latter, less expensive, 

labeling requirement. 

One commenter stated their belief that 

there is no evidence that consumers 

base their buying decisions on the 

source information currently available 

through the COOL program. The 

commenter stated that the market has 

demonstrated and fulfilled the existing 

limited demand for such information 

through the success of local production 

systems, farmers markets, sourceverified programs and ‘‘USA’’ branded 

programs. The commenter believed that 

there is a strong argument that the 

promulgation of this rule will actually 

erode these market-driven, premium 

source-verified programs because it will 

erode the differentiation they currently 

own in the marketplace. 

One commenter asserted that the 

Agency has failed to quantify the 

benefits arising from the promulgation 

of the proposed rule and that the costs 

of the proposed rule clearly outweigh 

any benefits. The commenter cited a 

study of shrimp purchases 2 which 

found no difference between consumer 

purchases before the implementation of 

COOL and those after it went into effect, 

quoting from a USDA publication 3 that 

‘‘the implications of the research suggest 

that price is a more important 

determinant of buyer behavior than 

COOL, a finding consistent with various 

consumer surveys.’’ 

Agency Response: As discussed more 

fully in the RIA, the many comments 

the Agency has received noting the 

proposed rule’s benefits to consumers 

reinforce the Agency’s original 

conclusion that implementing the 

proposed label changes will in fact 

benefit consumers. These comments 

demonstrate that there is interest by 

certain U.S. consumers in information 

disclosing the countries of birth, raising, 

and slaughter on muscle cut product 

labels. Specifying the production step 

occurring in each country listed on meat 

labels and eliminating the commingling 

flexibility as required by this final rule 

will benefit consumers by providing 

them with more specific information on 

which to base their purchasing 

decisions. The Agency does not agree 

that this rule will negatively impact the 

value of premium source-verified 

programs. The 2009 COOL regulations 

already differentiate covered muscle cut 

commodities based on origin. This final 

rule ensures that the labels will provide 

the consumers more specific 

information. Premium source-verified 

programs are thereby unaffected by this 

rule. 

The Agency acknowledges that an 

empirical finding of a change in demand 

due to COOL would support the 

conclusion that consumers act on the 

information provided through COOL. 

Conversely, however, the Agency does 

not concur that an empirical finding of 

no change in demand implies that 

consumers do not value the information 

or that there are no benefits from 

providing the information; it may 

instead imply that the economic 

benefits are positive but too small to be 

measurable in a general-population 

study. The purpose of COOL is to 

provide consumers with information 

upon which they can make informed 

shopping choices. The availability of 

COOL information does not imply that 

there will necessarily be any change in 

aggregate consumer demand or in 

demand for products of one origin 

versus others. 

Comments received on the proposed 

rule do not alter the Agency’s 

conclusion that the expected benefits 

from implementing mandatory COOL 

requirements remain difficult to 

quantify and that the incremental 

economic benefits of this final rule will 

be comparatively small relative to those 

afforded by the current COOL 

requirements. 

Regulatory Flexibility Analysis 

Summary of Comments: The effects of 

the proposed rule on small meat plants 

were described by several commenters 

including trade associations and 

individual plant operators. As noted 

previously, one commenter stated that 

the prohibition on commingling could 

have an even greater adverse impact on 

smaller packers, providing one example 

of a very small cattle slaughter company 

(fewer than 100 employees) that 

currently commingles production. 

According to the commenter’s estimate, 

elimination of commingling would 

impose an additional $275,000 in costs 

annually on this company, which is 

approximately the company’s annual 

profit. 

A commenter stated that many small 

and very small establishments will need 

to expand their infrastructure and hire 

more employees to maintain segregation 

of carcasses on the slaughter floor and 

of product in the coolers. One 

commenter summarized that small meat 

processing firms estimated their costs to 

implement the revisions will range from 

$5,000 on the low end to tens of 

thousands of dollars on the high end. 

Several small-scale, local and regional 

packing plants commented individually 

and collectively that they do not have 

the flexibility to segregate and label 

three different sources of cattle, create 

different product categories for each 

(potentially adding 600 times the 

number of product codes), and segregate 

the customers as well. The commenters 

stated that there will be a significant 

advantage to the larger packing 

companies that can isolate different 

categories of consolidation of the 

industry. The commenters claimed that 

the vast majority of plants, particularly 

the small to medium size plants, that 

purchase cattle from different origins 

apply the commingling practice. 

Commenters stated that smaller plants 

will be forced out of business because 

of their inability to utilize all sources of 

the cattle supply, leading to more 

consolidation and packer concentration 

with significant negative impacts on 

suppliers and customers. 

One beef packer commented that 2009 

COOL regulations forced its customers 

to accept two SKUs of every item the 

company sold to them, one labeled 

Product of USA and the other labeled 

Product of USA, Mexico. The 

commenter stated that several of the 

smaller independent grocery customers 

indicated that they simply could not 

handle that many SKUs in their 

distribution warehouses and in their 

invoicing and record keeping systems. 

These retailers told the commenter to 

choose one or the other or they would 

have to find other suppliers. The 

commenter stated that the proposed rule 

requires even more segregation and even 

more duplication of labels and SKUs, 

noting that this may be possible for a 

large packer and a large retailer but it is 

extremely difficult and restrictive for a 

small operator. 

Agency Response: As previously 

discussed, no additional recordkeeping 

is required by this final rule. Processes 

currently in place to transfer 

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Federal Register / Vol. 78, No. 101 / Friday, May 24, 2013 / Rules and Regulations 31377 

information from one level of the supply 

chain to the next should be sufficient to 

accommodate the additional 

requirements of this rule. With respect 

to additional operational costs 

anticipated from the elimination of the 

commingling flexibility, the Agency has 

modified its analysis to account for 

these estimated costs. Over the long run, 

the Agency believes that initial 

adjustment costs are not likely to persist 

and that firms will continue to seek 

methods for efficient production and 

marketing of the affected products. 

The Agency notes that comments 

referencing changes and adjustments to 

production and marketing practices 

already in place to comply with the 

2009 COOL requirements should not be 

ascribed to the amendments set forth in 

this final rule. 

With regard to commingling, the 

Agency recognizes that those packers 

that may currently be commingling will 

incur additional costs in complying 

with this rule. However, removing the 

commingling allowance lets consumers 

benefit from more specific and detailed 

labels. That said, there is no clear 

indication that adjustment will be more 

difficult for smaller versus larger 

packers. As noted in the comments and 

responses to the economic impact 

analysis, packers already have systems 

in place for handling and sorting 

livestock and resultant muscle cuts 

according to various criteria such as 

grade, weight, and other factors. 

Adjustment to the final rule should be 

able to be accomplished in a similar 

manner. 

Executive Order 12866 and Executive 

Order 13563 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives, and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. This final 

rule has been designated as an 

‘‘economically significant regulatory 

action’’ under section 3(f) of Executive 

Order 12866, and, therefore, has been 

reviewed by the Office of Management 

and Budget (OMB). 

Regulations must be designed in the 

most cost-effective manner possible to 

obtain the regulatory objective while 

imposing the least burden on society. 

This final rule amends the COOL 

regulations (1) by changing the labeling 

provisions for muscle cut covered 

commodities to provide consumers with 

more specific information and (2) by 

amending the definition for ‘‘retailer’’ to 

include any person subject to be 

licensed as a retailer under PACA to 

enhance the overall operation of the 

program and to bring the COOL 

requirements into compliance with the 

United States’ WTO obligations. 

Statement of Need 

Justification for this final rule remains 

unchanged from the 2009 final rule. 

This rule, as with the 2009 final rule, is 

the result of statutory obligations to 

implement the COOL provisions of the 

2002 and 2008 Farm Bills. There are no 

alternatives to federal regulatory 

intervention for implementing this 

statutory directive. 

The COOL provisions of those laws 

changed federal labeling requirements 

for muscle cuts of beef, pork, lamb, goat, 

and chicken; ground beef, ground pork, 

ground lamb, ground goat, and ground 

chicken; wild and farm-raised fish and 

shellfish; perishable agricultural 

commodities; ginseng; peanuts; 

macadamia nuts; and pecans (hereafter, 

covered commodities). As described in 

the 2009 final rule, the conclusion 

remains that there does not appear to be 

a compelling market failure argument 

regarding the provision of country of 

origin information. 

Comments received on the 2009 final 

rule and previous requests for 

comments elicited no evidence of 

significant barriers to the provision of 

this information other than private costs 

to firms and low expected returns. Thus, 

from the point of view of society, such 

evidence suggests that market 

mechanisms could ensure that the 

optimal level of country of origin 

information would be provided to the 

degree valued by consumers. 

Analysis of Benefits and Costs 

As set forth in the initial analysis of 

benefits and costs, the baseline for this 

analysis is the present state of the beef, 

chicken, goat, lamb and pork industries, 

which have been subject to the 

requirements of mandatory COOL (7 

CFR parts 60 and 65) since the effective 

date of the final rule on March 16, 2009. 

Benefits: Comments on the initial 

regulatory impact analysis for the 

proposed rule (78 FR 15647) as well as 

on previous COOL rulemaking actions, 

reinforce the Agency’s conclusion that 

the final rule’s amendments to the 

COOL labeling requirements will benefit 

consumers. Numerous comments 

supported the proposed rule and 

confirmed that certain U.S. consumers 

value the designation of the countries of 

birth, raising, and slaughter on meat 

product labels. These attributes of meat 

products are credence attributes, 

meaning that otherwise consumers 

would not be able to obtain information 

on or verify by inspection of the product 

at the point of purchase. Economic 

theory shows that unregulated markets 

may undersupply information on such 

credence attributes. Specifying the 

production step occurring in each 

country listed on meat labels as 

provided in this rule will provide 

additional benefits by providing more 

specific information on which 

consumers can base their purchasing 

decisions. Furthermore, information on 

the production steps in each country 

may embody latent (hidden or 

unobservable) attributes, which may be 

important to individual consumers and 

result in additional but hard to measure 

benefit increases. The Agency, however, 

has not been able to quantify this 

benefit, as singling out the value of 

those additional latent attributes and the 

resultant consumer benefit increases 

would require complicated modeling 

techniques that none of the available 

studies utilized. 

The final rule also eliminates the 

allowance for commingling of muscle 

cut covered commodities of different 

origins. As discussed above, the rule 

requires all origin designations to 

include specific information as to the 

place of birth, raising, and slaughter of 

the animal from which the meat is 

derived and no longer allows a single 

mixed origin label to be used on muscle 

cuts derived from animals of different 

origins commingled during a single 

production day. Removing the 

commingling allowance will benefit 

consumers by resulting in more specific 

labels. 

The Agency observes that the 

comments it has received on the 

proposed rule reinforce the Agency’s 

conclusion that the expected benefits 

from implementing the final rule’s 

amendments to the existing COOL 

labeling requirements are difficult to 

quantify, as no commenters provided 

quantified assessments of the benefits. 

Moreover, the comments received do 

not alter the Agency’s conclusion that 

the incremental economic benefits from 

the labeling of production steps will be 

positive, but likely will be 

comparatively small relative to those 

already afforded by the 2009 COOL final 

rule. 

Costs: A number of commenters 

directly addressed or provided 

information related to the Agency’s 

estimated costs of the proposed rule. 

Most of these commenters asserted that 

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31378 Federal Register / Vol. 78, No. 101 / Friday, May 24, 2013 / Rules and Regulations 

4 In 2012, over 8.4 billion broilers were produced 

in the United States (USDA, NASS. Poultry— 

Production and Value, 2012 Summary. April 2013.). 

However, only 4.2 million chickens other than 

breeding stock were imported into the United States 

(USDA FAS. GATS Global Agricultural Trade 

System Online. http://www.fas.usda.gov/gats/ 

Default.aspx), constituting just 0.05 percent of U.S. 

broiler production. The FAS data also show that 

only 2,569 sheep and 316 goats were imported into 

the United States in 2012.) 

5See Panel Reports, United States—Certain 

Country of Origin Labelling (COOL) Requirements, 

WT/DS384/R/WT/DS386/R, adopted 23 July 2012, 

paras. 7.361, 7.370. 

6This lower bound estimate is consistent with 

estimates of U.S. industry in 2009 as well as the 

complaining parties in the WTO dispute. See US— 

COOL (Panel), para. 7.365. 

the Agency underestimated 

implementation costs, mainly by 

omitting costs associated with activities 

that commenters said would be required 

to comply with the proposed 

amendments to the current COOL 

regulations. The revised cost estimates 

below take into account these 

comments. 

The Agency believes that there are 

two primary cost drivers that will be 

incurred as firms adjust to the 

amendments to the 2009 COOL 

regulations. First, muscle cut covered 

commodity COOL information will need 

to be augmented to provide the 

additional specific origin information 

required by this rule. Second, those 

firms currently using the flexibility 

afforded by commingling livestock of 

more than one origin on a single 

production day will need to adjust to 

the new requirement to provide origin 

information on the birth, raising, and 

slaughter of the muscle cut covered 

commodities derived from livestock of 

each origin. Moreover, the new 

requirements preclude the use of 

commingling flexibility. 

With respect to commingling, the 

initial analysis of costs sought 

‘‘comment and data regarding the extent 

to which the flexibility afforded by 

commingling on a production day is 

used to designate the country of origin 

under the current COOL program and 

the potential costs, such as labor and 

capital costs, which may result from the 

loss of such flexibility’’ (78 FR 15648). 

Such flexibility is relevant to the beef 

and pork industries in the United States. 

Both feeder and slaughter cattle and 

hogs are imported from Canada, while 

mainly feeder cattle are imported from 

Mexico. 

As noted by several commenters, 

commingling may allow some packers 

with reliable access to U.S. and foreignorigin livestock to produce products 

with a single country of origin label, 

such as ‘‘Product of the U.S. and 

Canada’’ or ‘‘Product of the U.S. and 

Mexico.’’ Several commenters stated 

that packers can currently take 

advantage of the commingling flexibility 

to label all of their production with the 

same COOL label information every day, 

even if the animals processed each day 

are of different origins, so long as the 

packers can ensure that they process 

animals of the declared mix of origins 

every production day. The commenters 

stated that, in those cases, there may be 

no need for segregation, sorting, 

additional labels, and other processes 

that would otherwise be required to 

provide COOL information. 

In the case of lamb, chicken, and goat 

meat, imports of live animals for feeding 

and slaughter in the United States are 

inconsequential for purposes of this 

regulatory impact analysis, due to being 

of negligible quantities.4 Thus, the 

following discussion addresses the 

potential impacts of the loss of 

commingling flexibility on the beef and 

pork sectors only. 

Commenters to the notice of proposed 

rulemaking submitted anecdotal 

information that confirmed that 

commingling flexibility is used by some 

packers. However, the information 

submitted was not sufficient to allow 

the Agency to determine the extent to 

which industry is making use of 

commingling flexibility. Therefore, to 

develop a range of estimates of the 

extent to which the beef and pork 

subsectors may potentially use 

commingling flexibility under the 

current COOL regulations (Table 1), the 

Agency made various assumptions and 

used several sources of data to examine 

the cost implications of ending the 

commingling activity that might be 

occurring in the industry. 

TABLE 1—RANGE OF ESTIMATED POTENTIAL CURRENT USE OF COMMINGLING FLEXIBILITY

Segment Lower 

(percent) 

Midpoint 

(percent) 

Upper 

(percent) 

Beef .............................................................................................................................................. 5 12.5 20 

Pork .............................................................................................................................................. 5 12.5 20 

The lower-bound estimate is derived 

from the position of certain U.S. 

industry actors as well as the 

complainants in the WTO dispute that 

the proportion of beef and pork that 

carries the U.S.-origin label is close to 

90 percent.5 Given that imported 

livestock represent about eight percent 

of fed steer and heifer slaughter and just 

over five percent of barrow and gilt 

slaughter in recent years, and assuming 

that some portion of these animals are 

segregated and labeled accordingly, the 

Agency adopts five percent as a 

plausible lower-bound estimate of the 

portion of total production that may be 

commingled.6 For the upper bound of 

commingling, 20 percent is adopted for 

both beef and pork and is derived from 

mandatory COOL retail record reviews 

that were conducted in 2012. Although 

the sampling plan for retail compliance 

reviews is not constructed so as to allow 

generalization to the entire amount of 

beef and pork muscle cut covered 

commodities according to different label 

types, there are randomization 

procedures used to select the stores and 

items for record reviews. Thus, for 

purposes of establishing an upper 

bound on the current extent to which 

commingling flexibility may currently 

be used, the proportions of different 

label types found in the sample of retail 

record reviews provides a source of 

empirical evidence of the proportions 

that may be found in the population of 

retailers subject to the COOL 

requirements. Of 1,472 retail record 

reviews for beef and 1,652 for pork, 80 

percent were of single-country origin 

and by definition, could not be the 

result of commingling. The remaining 

20 percent of items reviewed had either 

two or more countries of origin or were 

unlabeled. At the most, then, 20 percent 

of the production could potentially be 

commingled, which implies the 

technically possible but highly unlikely 

assumption that every item with more 

than one country of origin plus all items 

without country of origin information 

are the result of commingling. 

Given that the assumption underlying 

the higher end estimate is highly 

unlikely, the extent to which the 

industry is commingling likely falls 

closer to the lower end than the higher 

end of the estimated range of 

commingling. 

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Federal Register / Vol. 78, No. 101 / Friday, May 24, 2013 / Rules and Regulations 31379 

7As discussed in the 2009 final rule, USDA 

considers that commingling typically takes place in 

two different scenarios. First, muscle cut covered 

commodities derived from animals born, raised, 

and slaughtered in the United States that are 

commingled during a production day with muscle 

cut covered commodities derived from animals that 

were raised and slaughtered in the United States, 

and were not derived from animals imported for 

immediate slaughter, could be designated as, for 

example, Product of the United States, Country X, 

and (as applicable) Country Y. Second, muscle cut 

covered commodities derived from animals that are 

born in Country X or Country Y, raised and 

slaughtered in the United States, that are 

commingled during a production day with muscle 

cut covered commodities that are derived from 

animals that are imported into the United States for 

immediate slaughter, could be designated as 

Product of the United States, Country X, and (as 

applicable) Country Y. 

The second step in estimating the 

impact of the elimination of 

commingling flexibility is to determine 

the cost of the change. A number of 

commenters provided information 

regarding the costs associated with the 

loss of the flexibility afforded by the 

current allowance of commingling 

multiple countries of origin on a 

production day. As noted by 

commenters, the loss of commingling 

flexibility means that muscle cut 

covered commodities of different 

production step origins will need to be 

separately labeled with their specific 

production step information to make the 

information available to retailers. 

Commenters pointed out a number of 

costs that would be incurred to 

accommodate this requirement. For 

instance, packers indicated that there 

would be decreased processing plant 

efficiency due to an increased number 

of changes from processing carcasses of 

one origin to another. For each change, 

commenters indicated that there is 

downtime of processing plant labor and 

capital that runs from $750 to $900 per 

minute in large beef and pork 

processing facilities. Commenters also 

indicated that there would be additional 

stock keeping units (SKUs) to 

distinguish differently labeled products, 

and that the additional SKUs would 

require reconfiguration of slaughter and 

processing facilities to segregate animals 

in pens and products in coolers. 

Retailers likewise indicated that there 

would be additional costs associated 

with an increase in the potential 

number of origins due to the loss of 

commingling flexibility at the processor 

level and the requirement to provide 

information on the country of birth, 

raising, and slaughter. 

As noted by several commenters, the 

mandatory COOL proposed rule 

published in October 2003, did not 

provide for commingling of muscle cut 

covered commodities (68 FR 61944). 

Thus, the regulatory impact analysis 

(hereafter, 2003 RIA (68 FR 61952)) 

accounted for the fact that animals and 

products would need to be segregated to 

enable labeling of muscle cut covered 

commodities by country of origin. 

Among other changes from the 2003 

proposed rule, the mandatory COOL 

final rule published in January 2009, 

provided that muscle cut covered 

commodities could be commingled in a 

single production day.7 Thus, the 

regulatory impact analysis (hereafter, 

2009 RIA (74 FR 2682)) accounted for 

the expectation that some degree of 

commingling according to these two 

provisions would occur, with the 

resultant costs estimated to be lower 

than would be the case without the 

flexibility of commingling. 

Despite receiving anecdotal evidence 

from commenters on costs of specific 

activities associated with adjustment to 

the loss of commingling flexibility, the 

information was not suitable for 

compiling into industry-wide total cost 

estimates. However, with appropriate 

adjustments, comparing estimated costs 

from the 2003 RIA (no commingling) to 

the estimated costs from the 2009 RIA 

(commingling allowed) provides a basis 

for estimating the portion of the 

adjustment costs of this final rule that 

arise from the disallowance of 

commingling. The 2003 RIA presented 

lower-range and upper-range estimates 

of implementation costs for affected 

producer, intermediary, and retailer 

segments. The upper-range estimates 

were derived from available studies, 

comments on guidelines for interim 

voluntary COOL (67 FR 63367), and 

institutional knowledge of the 

industries subject to the proposed rule. 

The 2003 proposed rule did not allow 

for commingling of covered beef, pork, 

and lamb muscle cut covered 

commodities. 

The 2009 RIA presented estimates of 

implementation costs for the 

requirements of the COOL final rule. In 

deriving cost estimates for the 2009 RIA, 

the underlying assumptions were 

adjusted to reflect changes in the 

requirements from the proposed rule to 

the final rule. Most importantly for 

purposes of deriving cost estimates for 

muscle cut covered commodities, the 

2009 RIA assumed that commingling on 

a production day would be permitted. 

Thus, per-unit incremental 

implementation costs were lowered 

from the upper-range estimates 

presented in the 2003 RIA. As a result, 

differences between the 2003 RIA 

estimates and the 2009 RIA estimates 

mainly represent expected marginal cost 

impacts of the loss of commingling 

flexibility (Table 2). 

TABLE 2—ESTIMATED IMPLEMENTATION COSTS PER AFFECTED INDUSTRY SEGMENT ADJUSTED TO 2012 DOLLARS

Segment 

Beef Pork 

2003 RIA 2009 RIA Difference 2003 RIA 2009 RIA Difference 

Intermediary ($/head) ....................................................... 20.00 12.84 7.16 5.00 3.21 1.79 

Retailer ($/pound) ............................................................ 0.125 0.075 0.050 0.088 0.043 0.045 

In the 2003 RIA, upper-range 

implementation costs for intermediaries 

(primarily packers and processors) in 

the beef segment were estimated at 

$0.02 per pound of carcass weight. 

Assuming an 800 pound average carcass 

weight for steers and heifers, the cost 

per pound estimate translates into 

$16.00 per head, or $20 per head after 

adjusting to 2012 dollars using a 

Consumer Price Index (CPI) inflation 

factor of 1.25 (see Table 2). In the 2009 

RIA, the implementation cost for beef 

segment intermediaries was estimated at 

$0.015 per pound or $12.00 per head, 

which was considered a best estimate. 

Adjusting to 2012 dollars using a CPI 

inflation factor of 1.07 results in an 

estimate of $12.84 per head. 

Consequently, in 2012 dollars, the 

difference between the 2003 RIA 

estimate and the 2009 RIA estimate for 

beef segment intermediaries is $7.16 per 

head, which represents potential 

adjustment costs due to the loss of 

commingling flexibilities. Similar 

calculations apply at the retail level for 

the beef segment, where the upper-range 

of costs were estimated at $0.10 per 

pound in the 2003 RIA and a best 

estimate of $0.07 per pound in the 2009 

RIA. The resulting difference in retailer 

costs for the beef segment is $0.050 per 

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31380 Federal Register / Vol. 78, No. 101 / Friday, May 24, 2013 / Rules and Regulations 

8USDA National Agricultural Statistics Service. 

Livestock Slaughter. January 2013. http:// 

usda01.library.cornell.edu/usda/nass/LiveSlau// 

2010s/2013/LiveSlau-01-24-2013.pdf. 

9 Ibid. 

pound in 2012 dollars, which represents 

adjustment costs to affected retailers 

that no longer can market commingled 

meat cuts. 

The same procedures that were 

applied to the beef segment were 

applied to the pork segment to arrive at 

estimated marginal impacts of the loss 

of commingling flexibility, also shown 

in Table 2. The relevant figures are 

$0.02 per pound for pork segment 

intermediaries in the 2003 RIA, which 

converts to $4.00 per head assuming an 

average 200 pound carcass weight for 

barrows and gilts. In the 2009 RIA, the 

intermediary estimate was $0.015 per 

pound or $3.00 per head. Adjusted to 

2012 dollars, the difference between the 

2003 RIA and 2009 RIA cost estimates 

for intermediaries in the pork segment 

is $1.79 per head. At the retail level in 

the pork segment, costs were estimated 

at $0.07 per pound in the 2003 RIA and 

$0.04 per pound in the 2009 RIA. The 

difference translates to $0.045 per 

pound adjusted to 2012 dollars. 

The final step in estimating the 

potential costs of the loss of 

commingling flexibility is to apply the 

estimated costs per unit to the relevant 

measure of production. At the 

intermediary level for the beef segment, 

the starting point begins with estimated 

slaughter of 33.0 million head of cattle 

in 2012.8 Given that steers and heifers 

made up 78.4 percent of total Federally 

inspected cattle slaughter,9 total 

commercial slaughter of steers and 

heifers is estimated at 25.8 million head. 

Only steer and heifer slaughter is 

examined, as the amended labeling 

requirements only apply to muscle cuts 

(e.g., steaks and roasts). While a small 

amount of muscle cuts of cows are 

marketed at retail, most beef derived 

from cows (and bulls) is used for 

grinding or other further processed 

items. Muscle cuts from cows typically 

are marketed through hotel, restaurant, 

or institutional channels or are further 

processed such that COOL requirements 

no longer apply. 

The total number of head of steers and 

heifers is then multiplied by the lower, 

midpoint, and upper ranges of 

potentially affected animals (or five, 

12.5, and 20 percent from above) to 

arrive at the range of potential 

adjustment costs shown in Table 3. 

Specifically, the estimated number of 

commingled steers and heifers is 1.3 

million head at the lower bound, 3.2 

million head at the midpoint, and 5.2 

million head at the upper bound. Note 

that within each scenario, different 

mixes of U.S.-origin cattle versus 

foreign-origin cattle are possible and the 

actual mix is undetermined. 

TABLE 3—ESTIMATED AFFECTED QUANTITIES AND COSTS OF THE LOSS OF COMMINGLING FLEXIBILITY BY INDUSTRY

SEGMENT

[In millions] 

Lower bound Midpoint Upper bound 

Beef Pork Beef Pork Beef Pork 

Intermediary 

Head ................................................. 1.3 5.5 3.2 13.7 5.2 22.0 

Segment Cost ................................... $9.2 $9.8 $23.1 $24.6 $37.0 $39.3 

Retailer 

Pounds .............................................. 237.6 116.5 594.0 291.3 950.4 570.2 

Segment Cost ................................... $11.9 $5.2 $29.7 $13.1 $47.5 $21.0 

Total Cost .................................. $21.1 $15.0 $52.8 $37.7 $84.5 $60.3 

Multiplying the number of head in 

Table 3 by the estimated cost per head 

of $7.16 shown in Table 2 yields beef 

segment intermediary costs of $9.2 

million, $23.1 million, and $37.0 

million at the lower, midpoint, and 

upper levels. These are industry-wide 

total costs that are expected to be borne 

primarily by beef packers and 

processors that currently commingle 

domestic and foreign-origin cattle under 

a single COOL declaration. Those costs 

represent activities such as segregation, 

sorting, breaks or changes in processing 

lines from one COOL category to 

another, additional labels, and other 

activities above and beyond those 

required for compliance with current 

COOL regulations. 

Costs of the loss of commingling 

flexibility for pork segment 

intermediaries are calculated in a 

similar manner to that used for the beef 

segment. In 2012, U.S. commercial hog 

slaughter was 113.0 million head. Of 

Federally inspected slaughter, 97.0 

percent was barrows and gilts, resulting 

in an estimated commercial slaughter of 

109.8 million barrows and gilts. Meat 

derived from sows and boars is used for 

further processed products and is not 

marketed as muscle cuts that would be 

subject to COOL requirements. Table 3 

shows the estimated number of 

commingled barrows and gilts to be 5.5, 

13.7, and 22.0 million head at the lower, 

midpoint, and upper levels. After 

multiplying by the per-head cost 

estimate of $1.79, expected costs due to 

the loss of commingling flexibility for 

pork muscle cut covered commodities at 

the intermediary level are estimated to 

be $9.8 million at the lower bound, 

$24.6 million at the midpoint, and $39.3 

million at the upper bound. 

The anticipated cost at the retail level 

due to the loss of commingling 

flexibility can be computed in a manner 

similar to that applied at the 

intermediary level. Adjustment costs for 

retailers currently marketing 

commingled beef and pork muscle cut 

covered commodities stem from 

activities that may be associated with 

switching from handling a stream of 

commingled products carrying the same 

COOL information to dealing with 

products that may carry two or more 

distinct origin labels due to the 

disallowance of commingling flexibility 

and the requirement for more specific 

information on the place of birth, 

raising, and slaughter. As at the 

intermediary level, retailers may incur 

additional costs for segregation, breaks 

or changes in retail scale weighing and 

printing from one COOL category to 

another, additional labels, and other 

activities above and beyond those 

required for compliance with current 

COOL regulations. 

Estimating the quantity of beef and 

pork products that may be commingled 

at the retail level differs from the 

process applied at the intermediary 

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10http://www.beefusa.org/CMDocs/BeefUSA/

Resources/Statistics/averageannualpercapita

consumptionbeefcutsandgroundbeef559.pdf. 

11Model to Estimate Costs of Using Labeling as 

a Risk Reduction Strategy for Consumer Products 

Regulated by the Food and Drug Administration, 

FDA, March 2011 (Contract No. GS–10F–0097L, 

Task Order 5). 

level. At the intermediary (packer/ 

processor) level, conveying COOL 

information begins with entire animals 

and subsequently carcasses. Thus, the 

marginal costs of the loss of 

commingling flexibility are estimated on 

a per-head basis. In the case of retailers, 

however, only those muscle cut covered 

commodities subject to COOL 

requirements may potentially be 

affected by the loss of commingling 

flexibility. For both beef and pork, 

estimated retail quantities begin with 

the estimated quantities shown in Table 

2 of the 2009 RIA. The retail quantities 

from the 2009 RIA—8.2 million pounds 

of beef and 2.3 million pounds of pork— 

reflect the volume of product estimated 

to be subject to COOL requirements at 

retailers subject to the regulations. 

Further, the retail quantities are 

adjusted to account for processed 

products that are exempt from COOL 

requirements, such as marinated beef 

tenderloin or cooked ham. The retail 

quantities are then further adjusted to 

estimate the quantity of muscle cut 

covered commodities. For beef, 58 

percent of the retail weight is estimated 

to be sold as cuts,10 and then the factors 

of five, 12.5, and 20 percent are applied 

to arrive at the lower, midpoint, and 

upper estimates shown in Table 3. For 

pork, no further adjustment is applied to 

the retail weight, but the factors of five, 

12.5, and 20 percent are applied to 

arrive at the lower, midpoint, and upper 

estimates. 

The retail quantity estimates for beef 

and pork are multiplied by the 

respective per-pound cost estimates of 

$0.050 and $0.045 to calculate the 

anticipated cost to retailers for the loss 

of commingling flexibility. Summing 

the intermediary and retailer costs 

yields the total cost estimates shown in 

the bottom row of Table 3. The total 

estimated costs for the loss of 

commingling flexibility range from 

$15.0 million at the lower end for pork 

to $84.5 million at the upper end for 

beef. 

Total costs for adjustment to this rule 

are estimated as the sum of costs for 

label changes and costs associated with 

the elimination of the provision that 

allows for commingling. While some 

comments suggested that costs of 

changing labels would be higher than 

estimated in the regulatory impact 

analysis for the proposed rule, others 

suggested that costs of changing labels 

would be within the range estimated in 

the proposed rule. 

As discussed previously, the 2009 

COOL regulations allow for a variety of 

ways that origin information can be 

provided, such as placards, signs, labels, 

stickers, etc. Many retail establishments 

have chosen to use signage above the 

relevant sections of the meat case to 

provide the required origin information 

in lieu of or in addition to providing the 

information on labels on each package 

of meat. Under this final rule, the 

Agency will continue to allow the 

COOL notification requirements to be 

met, including the requirement to 

provide the location where the 

production steps occurred, by using 

signs or placards. For example, for meat 

derived from cattle born in Canada and 

raised and slaughtered in the United 

States, the signage could read ‘‘Beef is 

from animals born in Canada, Raised 

and Slaughtered in the United States.’’ 

Further, the Agency recognizes that for 

some period of time following the 

period of education and outreach, 

existing label and package inventories 

will include less specific origin 

information (e.g., Product of Country X 

and the U.S.) As long as retail 

establishments provide the more 

specific information via other means 

(e.g., signage), the Agency will consider 

the origin notification requirements to 

have been met. This ability to use instore signage is expected to reduce 

transition costs from the current COOL 

requirements to the more specific 

information required by this rule. 

With respect to changing current 

COOL label information, in the initial 

regulatory impact analysis, cost 

estimates provided in a March 2011, 

Food and Drug Administration (FDA) 

report 11 were used to estimate the cost 

of adding the production step 

information to currently required COOL 

labels for muscle cut covered 

commodities. 

Under the FDA model, one-time costs 

for a coordinated label change are 

assumed to involve only administrative 

labor costs and recordkeeping. However, 

as discussed in the regulatory impact 

analysis for the proposed rule, no 

additional recordkeeping costs are 

anticipated from this rule. Assuming an 

upper bound estimate of 121,350 unique 

labels, the Agency estimated the 

midpoint cost at $32.8 million with a 

range of $17.0 to $47.3 million in the 

proposed rule. 

Table 4 shows the total estimated 

adjustment costs for the amendments to 

the labeling requirements for muscle cut 

covered commodities. The estimates are 

presented as a matrix spanning the 

range of estimated costs of modifying 

existing labels cross-tabulated with the 

range of estimated costs resulting from 

the loss of the flexibility to commingle 

more than one specific birth, raising, 

and slaughter origin. The total 

adjustment costs calculated by adding 

the labeling costs at the lower, 

midpoint, and upper range ($17.0, 

$32.8, and $47.3 million, respectively) 

to the commingling costs at the lower, 

midpoint, and upper range ($36.1, 

$90.5, and $144.8 million, respectively). 

TABLE 4—ESTIMATES OF ADJUSTMENT COSTS

[Million dollars] 

Label cost 

Loss of commingling flexibility 

Lower 

36.1 

Midpoint 

90.5 

Upper 

144.8 

Lower 17.0 53.1 107.5 161.8 

Midpoint 32.8 68.9 123.3 177.6 

Upper 47.3 83.4 137.8 192.1 

Total costs are estimated to range 

from $53.1 million at the low end to 

$192.1 million at the high end. 

Comparatively, implementation costs 

for intermediaries and retailers for beef, 

pork, lamb, goat, and chicken covered 

commodities for the current COOL 

requirements were estimated to total 

$1,334.0 million in the 2009 RIA, or 

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12See US—COOL (Panel), paras. 7.361–7.365. 

13Small Business Administration. http://www.

sba.gov/sites/default/files/files/Size_Standards_

Table(1).pdfhttp://www.sba.gov/sites/default/files/

files/Size_Standards_Table(1).pdf. 

14ERS, USDA. Food CPI, Prices and 

Expenditures: Sales of Food at Home by Type of 

Outlet. http://www.ers.usda.gov/Briefing/CPIFood

AndExpenditures/Data/table16.htmhttp://www.ers.

usda.gov/Briefing/CPIFoodAndExpenditures/Data/

table16.htm. 

15U.S. Census Bureau. 2007 Economic Census. 

Retail Trade Subject Series. Establishment and Firm 

Size. EC0744SSSZ4 and EC0744SSSZ1. Issued 

January 2013. 

$1,427.4 million in 2012 dollars. 

Adjustment costs for the amendments to 

the current labeling requirements for 

these commodities are thus estimated at 

3.7 to 13.5 percent of the initial COOL 

adjustment costs for intermediaries and 

retailers. 

The likely range of adjustment costs 

can be narrowed to some extent from 

the wide range shown Table 4. In terms 

of commingling flexibility, the true, but 

unknown, percentages of beef and pork 

muscle cut covered commodities that 

are currently produced and marketed 

through retailers subject to COOL 

requirements are unlikely to be at the 

upper range of estimates. The upper 

range estimates imply that one in five 

beef and pork muscle cut items are 

commingled. While technically 

possible, that is unlikely, because it 

requires the assumption that every item 

in the COOL record review in 2012 

having more than one country of origin 

plus all items without country of origin 

information would have been the result 

of commingling. This assumption is 

unrealistic and not consistent with 

numerous comments received on the 

proposed rule as well as comments of 

industry on the effect that the 2009 final 

rule has had on the industry.12

Considering only the lower to midpoint 

estimates for commingling narrows the 

estimated adjustment costs to a range of 

$53.1 to $137.8 million. 

Furthermore, over time those costs are 

expected to fall as packing facilities 

develop procurement arrangements that 

are tailored to the loss of commingling. 

Similarly, retailers’ additional labeling 

costs and adjustment costs for 

separately providing information on 

different origin products will diminish 

over time. Thus, initial adjustment costs 

are expected to fall over time. 

The greater the extent to which 

individual packers, processors, and 

retailers use commingling flexibility, the 

higher is the expected cost of 

adjustment due to the loss of that 

flexibility. Packers and processors 

located nearer to sources of imported 

cattle and hogs may be commingling to 

a greater extent than others. 

Regulatory Flexibility Analysis 

This rule has been reviewed under the 

requirements of the Regulatory 

Flexibility Act (RFA) (5 U.S.C. 601 et 

seq.). The purpose of the RFA is to 

consider the economic impact of a rule 

on small businesses and evaluate 

alternatives that would accomplish the 

objectives of the rule without unduly 

burdening small entities or erecting 

barriers that would restrict their ability 

to compete in the marketplace. The 

Agency believes that this rule will have 

a relatively small economic impact on a 

substantial number of small entities. As 

such, the Agency has prepared the 

following regulatory flexibility analysis 

of the rule’s likely economic impact on 

small businesses pursuant to section 

603 of the RFA. Section 604 of the RFA 

requires the Agency to provide a 

summary of the significant issues raised 

by public comments in response to the 

initial regulatory flexibility analysis. 

The Comments and Responses section 

includes the comments received on the 

initial RFA and provides the Agency’s 

responses to the comments. 

As mentioned in the summary above, 

this rulemaking was contemplated after 

the Agency reviewed the overall 

regulatory program in light of the 

WTO’s finding that the current COOL 

requirements are inconsistent with U.S. 

WTO obligations. The objective of this 

rulemaking is to amend current 

mandatory COOL requirements to 

provide consumers with information on 

the country in which productions steps 

occurred for muscle cut covered 

commodities, thus fulfilling the 

program’s objective of providing 

consumers with information on origin 

in a manner consistent with the COOL 

statute and U.S. international trade 

obligations. The legal basis for the 

mandatory COOL regulations is Subtitle 

D of the Agricultural Marketing Act of 

1946 (Act) (7 U.S.C. 1638, et seq.). 

Under preexisting Federal laws and 

regulations, origin designations for 

muscle cut covered commodities need 

not specify the production steps of 

birth, raising, and slaughter of the 

animals from which the cuts are 

derived. Thus, the Agency has not 

identified any Federal rules that would 

duplicate or overlap with this rule. 

We do not anticipate that additional 

recordkeeping will be required or that 

new systems will need to be developed 

to transfer information from one level of 

the production and marketing channel 

to the next. However, information 

available to consumers at retail will 

need to be augmented to include 

information on the location in which 

the three major production steps 

occurred. Therefore, the companies 

most likely to be affected are packers 

and processors that produce muscle cut 

covered commodities and retailers that 

sell them. 

There are two measures used by the 

Small Business Administration (SBA) to 

identify businesses as small: Sales 

receipts or number of employees.13 In 

terms of sales, SBA classifies as small 

those grocery stores with less than $30 

million in annual sales (13 CFR 

121.201). Warehouse clubs and 

superstores with less than $30 million 

in annual sales are also defined as 

small. SBA defines as small those 

manufacturing firms with less than 500 

employees and wholesalers with less 

than 100 employees. 

While there are many potential retail 

outlets for the covered commodities, 

food stores, warehouse clubs, and 

superstores are the primary retail outlets 

for food consumed at home. In fact, food 

stores, warehouse clubs, and superstores 

account for 75.6 percent of all food 

consumed at home.14 Therefore, the 

number of these stores provides an 

indicator of the number of entities 

potentially affected by this rule. The 

2007 Economic Census 15 shows there 

were 4,335 supermarkets and grocery 

stores (not including convenience 

stores), warehouse clubs, and superstore 

firms operated for the entire year with 

annual sales exceeding $5,000,000 

(Table 5). We assume that stores with 

overall sales above this threshold would 

be most likely to be subject to the PACA 

and therefore subject to mandatory 

COOL and the proposed amendments. 

We recognize that there may be retail 

firms, particularly smaller retail firms, 

subject to PACA but that do not actually 

hold a PACA license. Therefore, a lower 

annual sales threshold may be 

appropriate for estimating the number of 

retailers subject to PACA. However, the 

$5,000,000 threshold provides estimated 

firm and establishment numbers that are 

generally consistent with the PACA 

database listing licensed retailers. 

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16U.S. Census Bureau. 2007 Economic Census. 

Historical Data Tabulations by Enterprise Size. 2007 

Annual Tabulations: U.S., All Industries. http:// 

www.census.gov/econ/susb/data/susb2007.html. 

TABLE 5—ESTIMATED NUMBER OF AFFECTED ENTITIES, SHARE OF FIRMS BY SIZE, AND COST OF RULE REVISION

NAICS code NAICS description Enterprise size criteria Number of 

firms 

Number of 

establishments 

Share of 

firms by 

size % 

Cost of rule 

revision 

311611 .......................... Animal (except Poultry) Slaughtering.<500 Employees ...........

500+ Employees ...........

Total ..............................

1,504 

37 

1,541 

1,518 

115 

1,633 

97.6 

2.4 

....................

$5,165,754 

27,874,505 

33,040,259 

311612 .......................... Meat Processed from Carcasses.<500 Employees ...........

500+ Employees ...........

Total ..............................

1,203 

64 

1,267 

1,232 

173 

1,405 

94.9 

5.1 

....................

6,745,200 

10,902,633 

17,647,833 

311615 .......................... Chicken Processing ................... <500 Employees ...........

500+ Employees ...........

Total ..............................

2 

36 

38 

N/A 

N/A 

156 

5.3 

94.7 

....................

N/A 

N/A 

153,504 

445110 .......................... Supermarkets and Other Grocery (except Convenience) 

Stores, Sales >$5,000,000.

<$50,000,000 Sales .....

$50,000,000+ Sales .....

Total ..............................

4,106 

217 

4,323 

6,050 

19,846 

25,896 

95.0 

5.0 

....................

14,536,907 

47,685,862 

62,222,770 

452910 .......................... Warehouse Clubs and Supercenters.<$50,000,000 Sales .....

$50,000,000+ Sales .....

Total ..............................

0 

12 

12 

0 

4,260 

4,260 

0.0 

100.0 

....................

....................

10,235,905 

10,235,905 

Grand Total ........... .................................................... ....................................... 7,181 33,350 .................... 123,300,000 

Numbers may not sum due to rounding. 

SOURCE: 2007 County Business Patterns and 2007 Economic Census. 

The 2007 Economic Census data 

provide information on the number of 

food store firms by sales categories. Of 

the 4,335 food store, warehouse club, 

and superstore firms with annual sales 

of at least $5,000,000, an estimated 

4,106 firms had annual sales of less than 

$50,000,000, which is higher than the 

threshold for the SBA definition of a 

small firm. The Economic Census data 

do not provide a breakout at the 

$30,000,000 SBA threshold, which 

means that the estimated number of 

small businesses likely is an 

overestimate. 

We estimate that 33,350 

establishments owned by 7,181 firms 

will be either directly or indirectly 

affected by this rule (Table 5). Of these 

establishments/firms, we estimate that 

6,849 qualify as small businesses. The 

midpoint total direct incremental costs 

are estimated for the rule at 

approximately $123.3 million with a 

range of $53.1 million to $192.1 million. 

The direct incremental costs of the rule 

are the result of revisions in labeling of 

muscle cut covered commodities. At the 

total estimated midpoint cost of $123.3 

million, $26.4 million would be 

estimated to be costs borne by small 

businesses based on the calculations 

explained below. As also explained 

below, implementation costs are not 

expected to be the same for all 

establishments. 

The average cost for each retail 

establishment is calculated assuming an 

average label cost per establishment of 

approximately $984 plus and an average 

cost for loss of commingling of 

approximately $1,419 for a total of 

$2,403. The average label cost for 

retailer as well as packer and processor 

establishments is the total midpoint 

label cost of $32.8 million divided by 

the total of 33,350 establishments. The 

average cost per retail establishment for 

the loss of commingling is the total 

midpoint cost of $42.8 million for all 

retailers divided by 30,156 retail 

establishments. Assuming the same 

average implementation cost of 

approximately $2,403 for all retail 

establishments, small retailers’ portion 

of these costs would be estimated at 

approximately $14.5 million. However, 

small retail establishments are expected 

to incur substantially lower 

implementation costs due to lower 

volumes and varieties of muscle cut 

covered commodities typically 

marketed at such operations. 

Any manufacturer that supplies 

retailers or wholesalers with a muscle 

cut covered commodity will be required 

to provide revised country of origin 

information to retailers so that the 

information can be accurately supplied 

to consumers. Of the manufacturers 

potentially affected by the rule, SBA 

defines those having less than 500 

employees as small. 

The 2007 Economic Census 16

provides information on manufacturers 

by employment size. For livestock 

processing and slaughtering there is a 

total of 2,808 firms (Table 5). Of these, 

2,707 firms have less than 500 

employees. This suggests that 96 

percent of livestock processing and 

slaughtering operations would be 

considered as small firms using the SBA 

definition. For chicken processing there 

are a total of 38 firms, only two of which 

are classified as small. Thus, only five 

percent of the chicken processors are 

small businesses. 

As with retailers above, the average 

cost for each packer/processor 

establishment is calculated assuming an 

average label cost per establishment of 

approximately $984 plus and an average 

cost for loss of commingling. The 

average label cost for packer and 

processor establishments is calculated 

as previously explained for retail 

establishments. However, the average 

cost per packer/processor establishment 

for the loss of commingling is calculated 

using additional information that relates 

to the size of establishments. Estimated 

receipts from the 2007 Economic Census 

are used as a proxy for the relative 

throughput of livestock slaughtering and 

meat processing establishments. For 

instance, small livestock slaughtering 

enterprises had 7.7 percent of total 

receipts of $104.7 billion for animal 

slaughtering (NAICS code 311611) and 

meat processing (NAICS code 311612) 

combined. Large livestock slaughtering 

enterprises had 58.2 percent of the 

combined receipts, while shares were 

11.6 percent for small meat processors 

and 22.5 percent for large meat 

processors. These percentages are then 

applied to the total midpoint cost of 

$47.7 million for the loss of 

commingling for all packers and 

processors. The resulting values are 

then divided by the number of 

establishments to estimate the cost per 

establishment resulting from the loss of 

commingling flexibility. For livestock 

slaughtering, the estimated costs are 

$2,420 for small establishments and 

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31384 Federal Register / Vol. 78, No. 101 / Friday, May 24, 2013 / Rules and Regulations 

$241,403 for large establishments. For 

meat processing, the estimated costs are 

$4,491 for small establishments and 

$62,038 for large establishments. 

Adding in the average estimated label 

cost of $984 yields total estimated costs 

of $3,403 per small livestock 

slaughtering establishment and 

$242,387 per large establishment. 

Similarly, the total estimated costs are 

$5,475 per small meat processing 

establishment and $63,021 per large 

establishment. Based on these average 

estimated implementation costs, small 

packer and processor costs under the 

rule are estimated at about $11.9 

million. However, the cost of the loss of 

commingling flexibility is expected to 

be mostly concentrated among those 

facilities that currently commingle 

domestic and foreign-origin cattle or 

hogs. The number of small slaughtering 

and processing establishments that 

currently commingle is expected to be 

considerably fewer than the total 

number of small establishments. 

Alternatives considered: Section 603 

of the RFA requires the Agency to 

describe the steps taken to minimize 

any significant economic impact on 

small entities including a discussion of 

alternatives considered. The law 

explicitly identifies those retailers 

required to provide their customers with 

country of origin information for 

covered commodities (namely, retailers 

subject to PACA). Thus, the 

amendments are consistent with the 

requirements of the Act in terms of who 

is subject to the final rule. 

The change in the definition of a 

retailer will not have a substantial effect 

on the number of retailers subject to 

COOL requirements. The PACA 

program continually monitors the retail 

industry for firms that may meet the 

threshold for PACA licensing and seeks 

to enforce compliance with those 

requirements. Thus, those retailers that 

are required to hold a PACA license 

should, in fact, be licensed separate and 

apart from any COOL program 

requirements. 

The Agency considered other 

alternatives including taking no action 

or providing less information than was 

required under the 2009 COOL 

regulations. These alternatives would 

not achieve the purpose of this action. 

As with the current mandatory COOL 

program, this final rule contains no 

requirements for firms to report to 

USDA. Compliance audits will be 

conducted at firms’ places of business. 

There are no recordkeeping 

requirements beyond those currently in 

place, and the Agency believes that the 

information necessary to transmit 

production step information largely is 

already in place within the affected 

industries. 

As stated in the RFA of the COOL 

final rule published in January 2009 (74 

FR 2693), the COOL program provides 

the maximum flexibility practicable to 

enable small entities to minimize the 

costs on their operations. While the 

allowance for commingling has been 

removed from this final rule, the Agency 

is providing other labeling flexibilities. 

The 2009 COOL regulations allowed 

for a variety of ways that the origin 

information can be provided, such as 

placards, signs, labels, stickers, etc. 

Many retail establishments have chosen 

to use signage above the relevant 

sections of the meat case to provide the 

required origin information in lieu of or 

in addition to providing the information 

on labels on each package of meat. 

Under this final rule, the Agency will 

continue to allow the COOL notification 

requirements to be met, including the 

requirement to provide the location 

where the production steps occurred, by 

using signs or placards. For example, for 

meat derived from cattle born in Canada 

and raised and slaughtered in the U.S., 

the signage could read ‘‘Beef is from 

animals born in Canada, Raised and 

Harvested in the U.S.’’ Further, the 

Agency recognizes that for some period 

of time following the period of 

education and outreach, existing label 

and package inventories will include 

less specific origin information (e.g., 

Product of Country X and the U.S.) As 

long as retail establishments provide the 

more specific information via other 

means (e.g., signage), the Agency will 

consider the origin notification 

requirements to have been met. 

In addition, small packers, processors, 

and retailers are expected to produce 

and stock a smaller number of unique 

muscle cut covered commodities 

compared to large operations. Thus, 

adjustment costs for small 

establishments likely will be 

substantially lower than the estimated 

midpoint average of approximately 

$3,700 assuming the same average cost 

for all establishments regardless of type 

or size. 

Executive Order 13175 

This rule has been reviewed in 

accordance with the requirements of 

Executive Order 13175, Consultation 

and Coordination with Indian Tribal 

Governments. The review reveals that 

this regulation will not have substantial 

and direct effects on Tribal governments 

and will not have significant Tribal 

implications. 

Paperwork Reduction Act 

Pursuant to the Paperwork Reduction 

Act (PRA) (44 U.S.C 3501–3520) the 

information collection provisions 

contained in this collection package are 

currently approved by OMB under 

Control Number 0581–0250. On 

December 4, 2012, AMS published a 

notice and request for comment seeking 

OMB approval to renew and revise this 

information collection. The comment 

period closed on February 4, 2013. This 

final rule does not change any of the 

recordkeeping provisions. 

Executive Order 12988 

The contents of this rule were 

reviewed under Executive Order 12988, 

Civil Justice Reform. This rule is not 

intended to have a retroactive effect. 

States and local jurisdictions are 

preempted from creating or operating 

country of origin labeling programs for 

the commodities specified in the Act 

and these regulations. With regard to 

other Federal statutes, all labeling 

claims made in conjunction with this 

regulation must be consistent with other 

applicable Federal requirements. There 

are no administrative procedures that 

must be exhausted prior to any judicial 

challenge to the provisions of this rule. 

Civil Rights Review 

AMS considered the potential civil 

rights implications of this rule on 

protected groups to ensure that no 

person or group shall be discriminated 

against on the basis of race, color, 

national origin, gender, religion, age, 

disability, sexual orientation, marital or 

family status, political beliefs, parental 

status, or protected genetic information. 

This review included persons that are 

employees of the entities that are subject 

to these regulations. This rule does not 

require affected entities to relocate or 

alter their operations in ways that could 

adversely affect such persons or groups. 

Further, this rule will not deny any 

persons or groups the benefits of the 

program or subject any persons or 

groups to discrimination. 

Executive Order 13132 

This rule has been reviewed under 

Executive Order 13132, Federalism. 

This Order directs agencies to construe, 

in regulations and otherwise, a Federal 

statute to preempt State law only where 

the statute contains an express 

preemption provision or there is some 

other clear evidence to conclude that 

the Congress intended preemption of 

State law, or where the exercise of State 

authority conflicts with the exercise of 

Federal authority under the Federal 

statute. This program is required by the 

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Federal Register / Vol. 78, No. 101 / Friday, May 24, 2013 / Rules and Regulations 31385 

2002 Farm Bill, as amended by the 2008 

Farm Bill. 

In the January 15, 2009, final rule, the 

Federalism analysis stated that to the 

extent that State country of origin 

labeling programs encompass 

commodities that are not governed by 

the COOL program, the States may 

continue to operate them. It also 

contained a preemption for those State 

country of origin labeling programs that 

encompass commodities that are 

governed by the COOL program. This 

final rule does not change the 

preemption. With regard to consultation 

with States, as directed by the Executive 

Order 13132, AMS previously consulted 

with the States that have country of 

origin labeling programs. AMS has 

cooperative agreements with all 50 

States to assist in the enforcement of the 

COOL program and has 

communications with the States on a 

regular basis. 

It is found and determined that good 

cause exists for implementing this final 

rule May 23, 2013. This rule has been 

determined to be a major rule for 

purposes of the Congressional Review 

Act (5 U.S.C. 801 et seq.); however, the 

Agency finds that under 5 U.S.C. 808(2) 

good cause exists to waive the 60-day 

delay in the effective date for two 

reasons. First, and as discussed above, 

on July 23, 2012, the DSB adopted its 

recommendations and rulings, finding 

certain COOL requirements to be 

inconsistent with U.S. WTO obligations. 

A WTO arbitrator determined that the 

reasonable period of time for the United 

States to comply with the DSB 

recommendations and rulings is ten 

months, meaning that the United States 

must comply with the recommendations 

and rulings by May 23, 2013. If the 

United States does not bring the rule 

into effect by this date, the complaining 

parties in the WTO dispute, Canada and 

Mexico, may seek to exercise their rights 

to suspend application to the United 

States of WTO concessions or other 

obligations equivalent to the trade 

benefits they have lost as a result of the 

inconsistent COOL requirements. If so 

authorized, Canada and Mexico could 

take action that adversely affects U.S. 

interests (e.g., increasing tariffs on U.S. 

goods). Second, and as also discussed 

above, changes to the labeling 

provisions for muscle cut covered 

commodities, which will provide 

consumers with more specific 

information with regard to muscle cut 

covered commodities, and the other 

modifications to the regulations will 

enhance the overall operation of the 

program. For these same reasons, 

pursuant to 5 U.S.C. 553, it is found and 

determined that good cause exists for 

not postponing the effective date of this 

rule until 30 days after publication in 

the Federal Register. Accordingly, this 

rule will be effective May 23, 2013. 

List of Subjects 

7 CFR Part 60 

Agricultural commodities, Fish, Food 

labeling, Reporting and recordkeeping 

requirements. 

7 CFR Part 65 

Agricultural commodities, Food 

labeling, Meat and meat products, 

Macadamia nuts, Peanuts, Pecans, 

Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, 7 CFR parts 60 and 65 are 

amended as follows: 

PART 60—COUNTRY OF ORIGIN 

LABELING FOR FISH AND SHELLFISH 

■ 1. The authority citation for part 60 

continues to read as follows: 

Authority: 7 U.S.C. 1621 et seq. 

■ 2. Section 60.124 is revised to read as 

follows: 

§ 60.124 Retailer. 

Retailer means any person subject to 

be licensed as a retailer under the 

Perishable Agricultural Commodities 

Act of 1930 (7 U.S.C. 499a(b)). 

PART 65—COUNTRY OF ORIGIN 

LABELING OF BEEF, PORK, LAMB, 

CHICKEN, GOAT MEAT, PERISHABLE 

AGRICULTURAL COMMODITIES, 

MACADAMIA NUTS, PECANS, 

PEANUTS, AND GINSENG 

■ 3. The authority citation for part 65 

continues to read as follows: 

Authority: 7 U.S.C. 1621 et seq. 

■ 4. Section 65.240 is revised to read as 

follows: 

§ 65.240 Retailer. 

Retailer means any person subject to 

be licensed as a retailer under the 

Perishable Agricultural Commodities 

Act of 1930 (7 U.S.C. 499a(b)). 

■ 5. Section 65.300 paragraphs (d), (e), 

and (f) are revised to read as follows: 

§ 65.300 Country of origin notification. 

* * * * * 

(d) Labeling Covered Commodities of 

United States Origin. A covered 

commodity may bear a declaration that 

identifies the United States as the sole 

country of origin at retail only if it meets 

the definition of United States country 

of origin as defined in § 65.260. The 

United States country of origin 

designation for muscle cut covered 

commodities shall include all of the 

production steps (i.e., ‘‘Born, Raised, 

and Slaughtered in the United States’’). 

(e) Labeling Muscle Cut Covered 

Commodities of Multiple Countries of 

Origin from Animals Slaughtered in the 

United States. If an animal was born 

and/or raised in Country X and/or (as 

applicable) Country Y, and slaughtered 

in the United States, the resulting 

muscle cut covered commodities shall 

be labeled to specifically identify the 

production steps occurring in each 

country (e.g., ‘‘Born and Raised in 

Country X, Slaughtered in the United 

States’’). If an animal is raised in the 

United States as well as another country 

(or multiple countries), the raising 

occurring in the other country (or 

countries) may be omitted from the 

origin designation except if the animal 

was imported for immediate slaughter 

as defined in § 65.180 or where by doing 

so the muscle cut covered commodity 

would be designated as having a United 

States country of origin (e.g., ‘‘Born in 

Country X, Raised and Slaughtered in 

the United States’’ in lieu of ‘‘Born and 

Raised in Country X, Raised in Country 

Y, Raised and Slaughtered in the United 

States’’). 

(f) Labeling Imported Covered 

Commodities. (1) Perishable agricultural 

commodities, peanuts, pecans, ginseng, 

macadamia nuts and ground meat 

covered commodities that have been 

produced in another country shall retain 

their origin, as declared to U.S. Customs 

and Border Protection at the time the 

product entered the United States, 

through retail sale. 

(2) Muscle cut covered commodities 

derived from an animal that was 

slaughtered in another country shall 

retain their origin, as declared to U.S. 

Customs and Border Protection at the 

time the product entered the United 

States, through retail sale (e.g., ‘‘Product 

of Country X’’), including muscle cut 

covered commodities derived from an 

animal that was born and/or raised in 

the United States and slaughtered in 

another country. In addition, the origin 

declaration may include more specific 

location information related to 

production steps (i.e., born, raised, and 

slaughtered) provided records to 

substantiate the claims are maintained 

and the claim is consistent with other 

applicable Federal legal requirements. 

* * * * * 

Dated: May 20, 2013. 

Rex A. Barnes, 

Associate Administrator, Agricultural 

Marketing Service. 

[FR Doc. 2013–12366 Filed 5–23–13; 8:45 am] 

BILLING CODE 3410–02–P 

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