```
Dairy Products: Imports, Domestic Production, and Regulation of
Ultra-filtered Milk (Letter Report, 03/05/2001, GAO/GAO-01-326).

Milk is primarily composed of protein, fat, lactose, water, minerals,
and vitamins. The ultra-filtration process for milk, developed in the
1970s, removes most of the fluid components, leaving a high
concentration of milk protein that allows cheese and other manufacturers
to produce their products more efficiently. No specific data on amount
of ultra-filtered milk imports exists because these imports fall under
the broader U.S. Customs Service classification of milk protein
concentrate. Exporters of milk protein concentrates face minimal U.S.
import restrictions, and the Food and Drug Administration (FDA) believes
the milk protein concentrates pose minimal safety risks. Similarly,
there is little data on the amount and use of domestically produced
ultra-filtered milk in U.S. cheese making plants. According to the
Department of Agriculture and state sources, a total of 22 dairy plants
nationwide and 5 large dairy farms in New Mexico and Texas produce
ultra- filtered milk. The plants primarily produce and use
ultra-filtered milk in the process of making cheese. The five farms
transport their product primarily to cheese-making plants in the
Midwest, where most is used to make standardized cheeses. FDA relies on
its own inspections, and those it contracts with 37 states, to enforce
its standards of identity regulations. In addition to these federally
funded inspections, some states conduct their own inspections of cheese
plants for compliance with standards of identity requirements under
state law.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GAO-01-326
     TITLE:  Dairy Products: Imports, Domestic Production, and
	     Regulation of Ultra-filtered Milk
      DATE:  03/05/2001
   SUBJECT:  Import restriction
	     Dairy industry
	     Dairy products
	     Importing
	     Consumer protection
IDENTIFIER:  North American Free Trade Agreement
	     New Zealand
	     Ireland
	     Germany
	     Australia
	     Netherlands
	     Canada
	     Vermont
	     Wisconsin

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GAO-01-326

Report to Congressional Requesters

United States General Accounting Office

GAO

March 2001 DAIRY PRODUCTS Imports, Domestic Production, and Regulation of
Ultra- filtered Milk

Page i GAO- 01- 326 Ultra- Filtered Milk Letter 1

Appendix I Cheeses and Related Cheese Products Covered by FDA's Standards of
Identity Regulations 19

Appendix II Use of Ultra Filtration in the Cheese- making Process 22

Appendix III U. S. Imports of Milk Protein Concentrates by Country, 1990-
1999 26

Appendix IV Types, Composition, and Suggested Uses of Dry Milk Protein
Concentrates 28

Appendix V Types and Composition of Wet Ultra- filtered Milk 30

Appendix VI Comments From the Food and Drug Administration 31

Tables

Table 1: Cheeses and Related Cheese Products Covered by FDA's Standards of
Identity Regulations 19 Table 2: U. S. Imports of Milk Protein Concentrates
by Country,

1990- 1999 26 Table 3: Types, Composition, and Suggested Uses of Dry Milk

Protein Concentrates 28 Table 4: Types and Composition of Wet Ultra-
filtered Milk 30

Figures

Figure 1: Trend in Milk Protein Concentrate Imports to the United States for
Six Major Exporting Countries and Others, 1990- 1999 6 Contents

Page ii GAO- 01- 326 Ultra- Filtered Milk

Figure 2: Comparison of Milk Protein Concentrate Imports, 1995 vs. 1999 7
Figure 3: The Concept of Ultra Filtration 23 Figure 4: The Cheese- making
Process 25

Abbreviations AMS Agricultural Marketing Service FDA Food and Drug
Administration MPC milk protein concentrates USDA U. S. Department of
Agriculture

Page 1 GAO- 01- 326 Ultra- Filtered Milk

March 5, 2001 Congressional Requesters Milk is primarily composed of
protein, fat, lactose, water, minerals, and vitamins. The ultra- filtration
process for milk, developed in the 1970s, removes most of the fluid
components, leaving a high concentration of milk protein that allows cheese
and other manufacturers to produce their products more efficiently. Ultra-
filtered milk is also a common ingredient in high- protein sports drinks,
energy bars, and nutrition supplements. It comes in two forms: (1) a dry
powder, which is currently all imported and (2) a thick liquid, referred to
as “wet,” which is produced domestically. Dry ultra- filtered
milk imports enter the United States under the U. S. Customs Service's
broader classification of milk protein concentrates, which includes similar
products made by other processes, such as blending nonfat dry milk with
highly concentrated milk proteins. U. S. milk producers have expressed
concern that imported ultra- filtered milk may displace domestically
produced milk used to make cheese.

For regulatory purposes, cheese products fall into two broad categories-
standardized and nonstandardized cheese. The Food and Drug Administration
(FDA) regulates certain cheeses- such as cheddar or mozzarella- through its
“standards of identity” regulations to ensure that they meet
specifications for ingredients and characteristics. (See app. I for a list
of standardized cheeses and related cheese products.) FDA officials stated
that ultra filtration of milk is an acceptable in- plant procedure during
the manufacture of cheese. However, the use of ultra- filtered milk as a
starting ingredient to make cheese is not allowed by FDA's “standards

of identity” regulations. In 1996, FDA allowed an exception to its
standard for a pilot project producing ultra- filtered milk on a farm in New
Mexico for shipment to one cheese plant in Minnesota. FDA does not specify
the ingredients and characteristics of nonstandardized cheese products, such
as pizza cheese. Producers of nonstandardized cheese products may use wet or
dry ultra- filtered milk as ingredients.

To address U. S. dairy producers' concerns about the use of ultra- filtered
milk, you requested that we provide information on (1) trends in
ultrafiltered milk imports, including federal trade restrictions on these
imports; (2) the use of domestically produced ultra- filtered milk in U. S.
cheese making; and (3) FDA's and the states' efforts to enforce FDA's
standards of identity regulations, particularly the use of ultra- filtered
milk in cheese production. To obtain this information, we interviewed
officials and

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 01- 326 Ultra- Filtered Milk

obtained data from FDA; the U. S. Department of Agriculture (USDA); the U.
S. Customs Service; industry trade associations; domestic and foreign dairy
companies; and agricultural academicians. We also obtained information from
state officials in Vermont and Wisconsin about their efforts to inspect
cheese- making plants and the extent to which they coordinate their efforts
with FDA.

No specific data on the amount of ultra- filtered milk imports exists
because these imports fall under the broader U. S. Customs Service's
classification of milk protein concentrates. However, milk protein
concentrate imports grew rapidly from 1990 to 1999- from 805 to 44,878
metric tons- and nearly doubled between 1998 and 1999. Six countries- New
Zealand, Ireland, Germany, Australia, the Netherlands, and Canada- accounted
for 95 percent of the imports in 1999. Exporters of milk protein
concentrates face few U. S. import restrictions: no quotas limiting the
import quantity, low duties, and a broadly defined classification under
which these products are imported that includes concentrates of any type if
they contain 40- to 90- percent milk protein. FDA believes the milk protein
concentrates pose minimal safety risks.

Similarly, there is little data on the amount and use of domestically
produced wet ultra- filtered milk in U. S. cheese- making plants. According
to USDA and state sources, a total of 22 dairy plants nationwide and 4 large
dairy farms in New Mexico and Texas produce wet ultra- filtered milk. The
plants primarily produce and use the ultra- filtered milk in the process of
making cheese. The four farms transport their product primarily to cheese-
making plants in the Midwest, where most is used to make standardized
cheeses.

FDA relies on its own inspections, and those it contracts with 37 states, to
enforce its standards of identity regulations. In addition to these
federally funded inspections, some states conduct their own inspections of
cheese plants for compliance with standards of identity requirements under
state law. In fiscal year 1999, FDA and state contract inspectors reported
no violations surrounding the use of imported ultra- filtered milk or milk
protein concentrates in making standardized cheese. FDA inspected nine
cheese plants in fiscal year 1999 for compliance with food labeling and
economic regulations, which generally would include the standards of
identity for cheese. None of these inspections were done exclusively to
check for compliance with standards of identity for cheese. Similarly,
states conducting inspections on FDA's behalf in fiscal year 1999 did not
exclusively monitor compliance with standards for cheese. In 2000, Results
in Brief

Page 3 GAO- 01- 326 Ultra- Filtered Milk

Vermont state inspectors found that two cheese plants were using imported
milk protein concentrates to make standardized cheeses in violation of
federal and state regulations. The state issued warning letters, and the
plants discontinued this practice.

We provided a draft of this report to FDA for its review and comment. FDA
generally agreed with the draft and provided some specific comments, which
we have incorporated where appropriate.

Ultra- filtration technology separates the components of milk according to
their size by passing milk under pressure through a thin porous membrane.
Specifically, ultra filtration allows the smaller lactose, water, mineral,
and vitamin molecules to pass through the membrane, while the larger protein
and fat molecules- key components for making cheese- are retained and
concentrated. 1 (See app. II for further explanation of ultra filtration and
its use in the cheese- making process.) Although ultrafiltration equipment
is expensive, it creates an ingredient well suited for making cheese and
other food products requiring a high milk protein content. In addition, the
removal of water and lactose reduces the volume of milk, and thereby lowers
its transportation and storage costs. All ultrafiltered milk imported into
the United States in 2000 was in a dry powder form.

The U. S. Customs Service's milk protein concentrates classification
includes processed milk products containing between 40 percent and 90
percent protein. Imported powdered milk products with less than 40 percent
protein are usually classified as nonfat dry milk and are subject to a
tariff- rate quota that limits the amount that can be imported at a low
tariff rate. In addition to ultra- filtered milk products, the milk protein
concentrate classification includes concentrates made through other
processes, such as blending nonfat dry milk with highly concentrated
proteins. These products are often tailored to a specific use in products
requiring a protein ingredient.

FDA's standards of identity regulations permit cheese manufacturers under
the "alternate make" provisions to use ultra filtration as an acceptable
procedure during the cheese- making process. Consequently, milk that has
been ultra- filtered as an integral part of the cheese- making

1 Depending on the intended use of the ultra- filtered milk product, the fat
in whole milk may be removed before filtration. Background

Page 4 GAO- 01- 326 Ultra- Filtered Milk

process is acceptable as a component of a standardized cheese, according to
FDA. In 1999 and 2000, organizations representing cheese makers petitioned
FDA to amend its cheese standards to expand its definition of milk to
include wet ultra- filtered milk. The industry petitioners requested
permission to use wet ultra- filtered milk from external sources as an
ingredient in standardized cheeses because it would increase the efficiency
of cheese manufacturing and would explicitly recognize filtered milk
products as interchangeable with other forms of milk. One of the industry
petitioners, who had also asked FDA to allow the use of the dry ultra-
filtered milk in standardized cheeses, later withdrew this part of the
request when U. S. milk producers raised concerns that increased imports
might displace domestic milk products. FDA has not yet acted on the
petitions.

Specific data on U. S. imports of ultra- filtered milk do not exist because
these imports are included in the broader classification of milk protein
concentrates. 2 Milk protein concentrate imports increased 56- fold from
1990 to 1999. In 1999, they came primarily from New Zealand, Ireland,
Germany, Australia, the Netherlands, and Canada. Milk protein concentrates
are used as ingredients in cheese, frozen desserts, bakery products, and
sports and other nutritional supplement products. The United States has no
quota restrictions on milk protein concentrate imports, and duties are low.
FDA officials told us that these imports pose little food safety risk and
therefore receive minimal monitoring.

U. S. milk protein concentrate imports grew from 805 metric tons in 1990 to
7,288 metric tons in 1995 to 44,878 metric tons in 1999 (see fig. 1).
Imports almost doubled in 1999 alone. The volume of imported milk protein in
these concentrates was approximately equivalent to 0.8 percent to 1.8
percent of the total U. S. production of milk protein in 1999. 3 The
estimate's range reflects the fact that imported milk protein concentrates
may

2 The classification number 0404.90. 10 in the Harmonized Tariff Schedule of
the United States, Annotated is intended for nonfat varieties of milk
protein concentrate, U. S. Customs Service officials said. No imports were
reported in classification number 0404. 90.30, which is for milk protein
concentrates made from whole milk, i. e., including fat.

3 This estimate is based on USDA's National Agricultural Statistics
Service's estimate that U. S. dairy farms produced 162. 7 billion pounds of
milk in 1999 and assumes that, on average, about 3 percent of milk is true
protein and that the protein reported in milk protein concentrates is true
protein. U. S. Imports of Milk

Protein Concentrates, Including Dry Ultrafiltered Milk, From 1990 Through
1999

Milk Protein Concentrate Imports Rose Rapidly During the 1990s

Page 5 GAO- 01- 326 Ultra- Filtered Milk

contain between 40- and 90- percent protein. The U. S. Customs Service does
not collect data on the protein percentage of milk protein concentrate
imports.

Page 6 GAO- 01- 326 Ultra- Filtered Milk

Figure 1: Trend in Milk Protein Concentrate Imports to the United States for
Six Major Exporting Countries and Others, 1990- 1999

Quantity in metric tons Source: Import quantities as compiled by the U. S.
Census Bureau from the U. S. Customs Service data.

The total number of countries exporting milk protein concentrates to the
United States grew from 4 to 16 from 1990 to 1999. (See app. III.) Australia
was the only country to export milk protein concentrates in each of the 10
years. Figure 2 shows the growth in imports for each major exporter and
other countries from 1995 to 1999. The share of imports among the six
largest exporting countries rose from 75 to 95 percent during this 5- year
period. Although the U. S. Customs Service does not categorize its data on

0 5,000

10,000 15,000

20,000 25,000

30,000 35,000

40,000 45,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 New Zealand

Ireland Germany Australia Netherlands Canada Other countries

Page 7 GAO- 01- 326 Ultra- Filtered Milk

milk protein concentrate imports according to the manufacturing process
used, representatives of Australian and New Zealand exporters assured us
that their milk protein concentrate exports were all made using ultra
filtration. Conversely, Canadian government officials said all of their
country's milk protein concentrate exports to the United States are made by
blending milk proteins.

Figure 2: Comparison of Milk Protein Concentrate Imports, 1995 vs. 1999

Quantity in metric tons Source: Import quantities as compiled by the U. S.
Census Bureau from U. S. Customs Service data.

U. S. and foreign industry executives told us that U. S. milk protein
concentrate imports rose rapidly in recent years primarily because of (1)
the relationship between the U. S. and international prices of milk protein,
especially nonfat dry milk, and (2) the growth of the U. S. nutritional
foods industry and many other new products using milk protein concentrates.
According to these executives, international milk prices were below U. S.
milk prices in recent years, giving U. S. dairy food manufacturers a
financial incentive to substitute imported milk protein concentrates for
domestic milk in products such as nonstandardized cheese. This price
differential primarily stimulated U. S. imports of milk protein concentrates
having lower percentages of protein- between 40 and 56 percent. More
recently, U. S. demand for these milk protein concentrates has decreased,
according to an Australian exporter, because the international price of milk
protein is near the U. S. price.

0 2,000

4,000 6,000

8,000 10,000

12,000 14,000

16,000

1995 1999

New Zealand Ireland

Germany Australia

Netherlands Canada

Other countries

Page 8 GAO- 01- 326 Ultra- Filtered Milk

The strong growth of the U. S. nutritional foods industry has created new
demand for high- protein milk protein concentrates that are 70- to 85-
percent protein. Representatives of Australia and New Zealand exporters told
us that this industry grew out of extensive research and development to
create nutritional supplements for athletes, the elderly, and health
conscious individuals. Milk protein concentrates provide an important source
of protein in these nutritional products. Because high- protein milk protein
concentrates are often customized for use in specific end products, their
producers and exporters can sell them at higher prices than the equivalent
amount of domestic milk protein, the exporters said. Despite their higher
prices, the demand for these specialized high- protein products in the
United States is strong. Industry executives noted that high- protein milk
protein concentrate imports have not displaced domestic milk supplies
because they are filling the growing demand for new nutritional products. In
addition, a trade association representative and an academic expert noted
that economic disincentives have prevented U. S. production of dry milk
protein concentrates.

Federal agencies and industry trade associations do not collect data on U.
S. companies' use of imported milk protein concentrates because this
information is considered proprietary. According to milk protein concentrate
exporters, U. S. cheese, frozen dessert, bakery, and nutritional foods
industries primarily use the dry milk protein concentrate imports. In
particular, dry milk protein concentrates containing lower levels of
protein- 42 to 56 percent- can be added to the raw milk used to make cheese,
ensuring a consistent composition regardless of the seasonal variations in
milk. Various concentrations of milk protein are also used in ice cream 4
and other frozen desserts, bakery and confection products, and
nonstandardized cheese. Milk protein concentrates containing higher protein
levels- 70 to 85 percent- are chiefly used in sport-, adult-, and hospital-
nutrition products. Concentrates containing 90- percent protein are
especially useful for manufacturers seeking lactose- and sugar- free claims
for their products, according to a major exporter. (See app. IV for more
details on the composition and uses of dry milk protein concentrate imports
provided by some exporters.)

4 FDA's standard of identity regulations for ice cream specifically provide
for the use of milk protein concentrate as an ingredient (see 21 C. F. R.,
part 135). Imported Milk Protein

Concentrates Are Used in Many Food Products

Page 9 GAO- 01- 326 Ultra- Filtered Milk

The U. S. Customs Service and FDA share responsibility for monitoring milk
protein concentrate imports for compliance with trade or food safety
requirements. Unlike nonfat dry milk imports, which have less than a 40
percent protein content, the United States does not use a tariff- rate quota
to restrict the quantity of milk protein concentrate imports. The United
States imposes a duty of $0.0037 per kilogram 5 on all milk protein
concentrate imports except Canadian imports, which are duty- free under the
North American Free Trade Agreement. The milk protein concentrates
classification, which is intended to include all nonfat dry milk powder
containing between 40 and 90 percent protein regardless of its method of
production, allows a broad range of milk protein concentrates to enter the
United States, according to the U. S. Customs Service. 6

FDA and USDA's Food Safety and Inspection Service are responsible for
ensuring that imported food products are safe, wholesome, and properly
labeled. 7 FDA and USDA work with the U. S. Customs Service to ensure the
safety of imported food products by monitoring and testing samples of
imported foods. Customs uses a computer system containing information
provided by the milk protein concentrate importers and FDA- developed
screening criteria to determine which shipments may be automatically
released and which should be subjected to inspection or laboratory testing.
8 Products such as milk protein concentrates, which are believed to pose
minimal safety risks, are frequently released automatically. FDA annually
inspects or conducts laboratory analyses on less than 2 percent of all types
of imported food shipments. FDA officials told us that they have little
concern about the safety of dry milk protein concentrates because the
products are treated with heat during pasteurization and drying, which kills
pathogens.

In addition to screening milk protein concentrate imports, the United States
has agreements with Australia, Belgium, Denmark, France, Ireland, the
Netherlands, New Zealand, Norway, and Sweden regarding dry milk

5 Duties would be higher for countries that do not have normal trade
relations; however, the United States does not import milk protein
concentrates from any of these countries. 6 Milk protein concentrates are
classified in section 0404. 90.10 of Chapter 4 of the Harmonized Tariff
Schedule of the United States, Annotated.

7 USDA's Food Safety and Inspection Service has jurisdiction over meat,
poultry, and some egg products, while FDA regulates all other foods. 8 See
Food Safety: Federal Efforts to Ensure the Safety of Imported Foods Are
Inconsistent and Unreliable (GAO/ RCED- 98- 103, April 30,1998) for more
details. Exporters of Milk Protein

Concentrates to the United States Face Few Restrictions

Page 10 GAO- 01- 326 Ultra- Filtered Milk

and milk protein imports. The agreements are to ensure that these countries
adhere to FDA's food safety regulations, thereby minimizing the need for FDA
to inspect these imports. No country has reached a broader agreement with
the United States that their entire food safety system is equivalent to the
United States thus enabling FDA to apply fewer resources to screening their
imports. Dairy products, including milk protein concentrate products, will
be subject to a not- yet- implemented

“veterinary equivalency agreement” with the European Union and
its 15 member countries. This agreement would provide a framework for the
future equivalence of the European Union.

Many U. S. cheese plants produce and use wet ultra- filtered milk to make
standardized and nonstandardized cheeses, according to industry executives.
However, federal and industry sources could not provide data on the amount
of wet ultra- filtered milk produced domestically or on its use. USDA and
state officials told us that 22 dairy manufacturing plants nationwide and 4
large dairy farms in New Mexico and Texas have the capacity to make wet
ultra- filtered milk. Most of the ultra- filtered milk is used within the
dairy manufacturing plants to make cheese, although some is transported to
other plants for use. The milk concentrated at on- farm ultra- filtration
plants is transported mainly to cheese plants in the Midwest to make
standardized cheese or other products.

Data are not routinely collected on the amount of ultra- filtered milk
produced by U. S. cheese plants or other food processors for internal use or
for shipment elsewhere, according to USDA and FDA officials and industry
executives. USDA's Agricultural Marketing Service (AMS) staff, which
oversees the administration of milk marketing in 11 regions across the
United States, collects data on the intended use of the milk but not on
intermediate products, such as ultra- filtered milk, that are often produced
and used in making cheese. Similarly, AMS staff said that ultra- filtered
milk produced in one plant for use in another is included with other bulk
milk products and not tracked separately.

Trade association executives told us that they have no data on the amount of
wet ultra- filtered milk U. S. dairy manufacturing plants produced and used.
Trade association staff said that manufacturers would probably not respond
to a request for such data because the information is considered proprietary
and because of concern surrounding the petitions to use wet ultra- filtered
milk now before FDA. Executives involved with the relatively Ultra- filtered
Milk

Produced in the United States and Used in Standardized Cheeses

Government and Industry Do Not Collect Data on Ultra- filtered Milk
Production

Page 11 GAO- 01- 326 Ultra- Filtered Milk

new on- farm production of ultra- filtered milk provided overall annual
production data, which are discussed below.

Many U. S. cheese- making plants have adopted ultra filtration of milk as
part of the cheese- making process under the provisions in FDA's standards
of identity regulations allowing for “alternate make” procedures
for many of the standardized cheese and related cheese products. The
“alternate

make” procedures accommodate innovation by allowing these standardized
cheeses to be made by any procedure that produces a finished cheese having
the same physical and chemical properties as the cheese prepared by the
traditional process. Filtration removes the liquid components of milk that
would otherwise be removed in the traditional process when whey is separated
from cheese curd. Proponents of ultra filtration state that the cheese
produced is also nutritionally equivalent. The goal of ultra- filtered milk
producers is to create the ideal combination of milk solids (i. e., protein
and fat) for the particular style of cheese.

AMS' milk marketing staff provided a list of milk processing plants that
have ultra- filtration equipment for milk in the 47 states covered at least
in part by federal milk market orders. 9 Three states- California, Alaska,
and Hawaii- are not covered by federal regulation. We contacted officials in
California- a large dairy state that regulates its dairy industry
separately- to acquire similar information. The 48 states reported a
combined total of 22 dairy manufacturing plants with ultra- filtration
equipment for milk. AMS and California officials reported that at least five
of these plants transported a portion of their ultra- filtered milk product
to other plants. They further stated that it was possible for cheese makers
to use their ultra- filtration equipment to concentrate the whey byproduct
from the cheese- making process rather than to concentrate the milk entering
the cheese- making process. AMS officials said that, to the extent they were
aware, the transportation of ultra- filtered milk between manufacturing
plants typically involved transfers between facilities of the same company.

The American Dairy Products Institute and the National Cheese Institute of
the International Dairy Foods Association have petitioned FDA to amend its
standards of identity for cheese to include wet ultra- filtered milk

9 The federal milk market orders are a system of regulation administered by
AMS that aims to benefit producers and consumers by establishing and
maintaining orderly marketing conditions and assuring adequate supplies of
milk. Ultra Filtration of Milk Is

Part of the Cheese- making Process in Many Plants

Page 12 GAO- 01- 326 Ultra- Filtered Milk

in the definition of milk allowed in standardized cheese. According to the
American Dairy Products Institute, ultra- filtration makes cheese
manufacturing more efficient using new technology and may benefit consumers
if cost savings are passed on. It also allows more efficient movement of
milk from areas with an excess of fluid milk to areas with an insufficient
supply, the American Dairy Products Institute said. The National Cheese
Institute noted that the “alternate make procedure,” already
included in the regulations for some of the standardized cheeses, provides a
legal basis for the use of filtered milk in the manufacture of standardized
cheese. However, the institute wants to see the standards amended to
explicitly recognize ultra- filtered milk in the standards' definition of
milk. By explicitly recognizing ultra- filtered milk as milk for cheese
manufacturing, FDA would allow manufacturers to use ultrafiltered milk in
the standardized cheeses that do not include “alternate

make procedure” provisions. The National Cheese Institute states that
the greater use of ultra- filtered milk would help manage seasonal
imbalances in the milk supply in various regions and in the demand for
cheese. The institute said the lower hauling costs for filtered milk have
enabled cheese makers to buy milk from distant regions and meet their needs
for manufacturing, especially when regional milk supplies are disrupted by
adverse conditions. FDA said it has exercised enforcement discretion on
ultra- filtered milk, and has not enforced the standards of identity against
cheese plants that use wet ultra- filtered milk produced outside of their
plants.

In 1996, T. C. Jacoby & Co., a St. Louis broker of dairy products, requested
that FDA allow the use of ultra- filtered milk from an on- farm
ultrafiltration plant in New Mexico to Bongards Creamery of Bongards,
Minnesota, to make cheddar cheese. The broker also raised the issue of how
to label the cheese to indicate the ultra- filtered milk ingredient in the
final cheese product. FDA responded that the ultra- filtered milk could be
used by Bongards to make cheddar cheese as long as the cheese was
nutritionally, physically, and chemically the same as cheese produced
traditionally. FDA allowed the label of the cheddar cheese to state that

“milk” was an ingredient, provided that the cheddar cheese
manufactured from it is equivalent. FDA allowed a pilot project for one farm
and one cheese plant. The joint venture involving Jacoby & Co. subsequently
expanded its production of ultra- filtered milk to three additional farms
and its sales to manufacturers in Idaho, Illinois, Iowa, Minnesota, North
Dakota, Ohio, Pennsylvania, South Dakota, and Wisconsin. FDA is considering
the petitions but has taken no action to revise its standards of identity to
reflect this use of ultra- filtered milk. On- Farm Ultra Filtration

Opens Distant Markets to Southwestern Dairies

Page 13 GAO- 01- 326 Ultra- Filtered Milk

The joint venture's dairy, Select Milk Producers Inc., ultra- filters
unheated whole raw milk on three farms in New Mexico and one in Texas. The
process reduces the volume and weight of the whole milk the dairy starts
with and reduces transportation costs for shipping it to manufacturers. The
joint venture, which first sold wet ultra- filtered milk in 1997, reported
sales of approximately 150 million pounds of ultra- filtered milk in 2000,
mainly for making standardized cheeses.

On- farm ultra filtration of milk removes two- thirds of the liquid
components of the milk- mainly water- to greatly reduce the costs to
transport the ultra- filtered milk to market. For example, company officials
noted one shipment for which the costs were reduced from $4.50 per
hundredweight of milk to $1.20 for the remaining filtered milk. They added
that this cost advantage is justified only for long- distance hauling,
however, because the capital costs for installing ultra- filtration
equipment are high. (See app. V for the composition of the various
concentrates of wet ultra- filtered milk.)

FDA relies on its own inspections and those conducted by the states under
contract or partnership agreements to enforce its standards of identity
regulations in about 1,000 cheese- making plants across the country. In
fiscal year 1999, FDA inspected nine cheese- making plants for compliance
with food labeling and economic regulations, which include checking
compliance with the standards of identity for cheese. None of these
inspections were done exclusively to monitor for compliance with standards
of identity, and data indicating the number of these inspections that
actually covered the standards of identity were not available. Similarly,
the states conducting inspections on FDA's behalf did not exclusively
inspect for the identity standards for cheese. In fiscal year 1999, FDA and
state inspectors reported no violations for the use of imported ultra-
filtered milk or milk protein concentrates to make standardized cheese. In
addition, states conduct their own inspections of cheese plants for
compliance with standards of identity requirements under state law. For
example, in 2000, Vermont inspectors found two cheese plants using imported
milk protein concentrates to make standardized cheeses in violation of
federal and state regulations. Vermont issued warning letters and the plants
discontinued this use.

FDA reported that its own inspections of cheese- making plants for
compliance with FDA's food labeling and economic regulations, which include
the standards of identity for cheese, are relatively infrequent. In FDA and
State

Entities Cooperate to Conduct a Limited Number of Cheese Plants Inspections

FDA Performs Few Cheese Standards Inspections

Page 14 GAO- 01- 326 Ultra- Filtered Milk

fact, they accounted for 9 of the total 499 domestic inspections for
composition, standards, labeling, and economics regulations in all types of
food manufacturing plants during fiscal year 1999. FDA said none of the nine
inspections in cheese plants was done specifically to check for compliance
with standards of identity on cheese. FDA also said that the agency devoted
0.7 staff year during fiscal year 1999 to FDA's food labeling and economic
regulations for cheese.

However, FDA reported that its inspectors and state inspectors working for
FDA in fiscal year 1999, inspected about 300 of approximately 1,000 cheese-
making plants throughout the United States for a variety of other purposes.
FDA inspected 108 plants on its own. FDA officials said that states
inspected 65 cheese plants under partnership agreements, 125 cheese plants
under 37 contracts, and 2 under both a state partnership and contract.
Overall, FDA reported inspections of about 3,500 of about 22,000 food
manufacturing plants in fiscal year 1999.

To increase the number of inspections of food manufacturing firms, FDA has
contracts or forms partnerships with state agencies to help carry out
monitoring responsibilities relating to food safety and quality. FDA
provides its compliance policies and inspection guidelines to state
inspectors and sometimes conducts joint inspections with state inspectors.
In addition, states such as Wisconsin and Vermont have adopted FDA's cheese
standards of identity as their own standards under state law.

In fiscal year 2000, FDA had contracts with 37 states to cover food
inspections. Under these contracts, FDA paid states to conduct and report on
food inspections of all types. State officials then inspected locations
under the state or FDA authority. The number of completed inspections to
check for compliance with the standards of identity for cheese, however, was
not available. Officials at Wisconsin's Department of Agriculture, Trade,
and Consumer Protection told us they worked closely with FDA on contracted
inspections, meeting annually with FDA officials to plan and coordinate
their inspection efforts to avoid duplication. At these meetings, FDA
provides state authorities with a list of the dairy establishments for
Wisconsin inspectors to visit during the year. In addition, for each
inspection done under its contract with FDA, Wisconsin inspectors complete a
FDA inspection report describing the inspection results. Wisconsin officials
reported that they did 82 inspections under the contract with FDA in fiscal
year 1999 and 62 in fiscal year 2000. FDA and States Cooperate

to Monitor Food Safety

Page 15 GAO- 01- 326 Ultra- Filtered Milk

Wisconsin officials told us that the state had 142 cheese- making plants in
1999 that produced many types of cheese. Wisconsin dairy inspectors check
cheese plants for safety and sanitation, food composition and labeling
regulations-- including standards of identity-- and to collect product
samples. Wisconsin officials said their inspectors make on- site visits to
cheese plants on a semiannual basis, taking a total of 36 samples each year
for laboratory analysis of microbes, moisture content, and comparison of
ingredients with FDA and Wisconsin standards. Wisconsin estimated that it
expended 3.1 and 2.8 staff years in fiscal years 1999 and 2000 respectively,
on routine inspections of cheese plants, not including nonroutine and
contract inspections. State officials did not have the data to estimate the
time spent specifically on standards of identity.

FDA and the states also have 15 partnership agreements related to FDA's
regulation of dairy products. Under these partnerships, FDA and the states
(or food- related organizations) collaborate on such efforts as training
inspectors and sharing test results. FDA does not fund activities carried
out by states under its partnership agreements, and the states bear the
responsibility for handling any violations.

In addition to these efforts, the states conduct their own inspections under
state law, which can include the standards of identity. For example, both
Vermont and Wisconsin routinely inspect plants for compliance with state
laws and regulations, and both have adopted FDA's standards of identity as
part of their states' food safety and quality laws.

Vermont officials told us that the state has no formal working relationship,
such as a partnership or a contract, with FDA relating to dairy inspections.
However, Vermont's dairy inspectors coordinate with FDA on dairy matters.
Vermont officials stated that about 2.0 staff years are used annually to
inspect about 40 dairy plants, 28 of which are cheese making. Vermont's
officials inspect the dairy plants for sanitation and cheese standards of
identity and to collect samples. Tests of samples for microbes and animal
drugs are done about once a month at the larger dairy plants. The inspectors
visit the dairy plants on a quarterly basis and the larger plants about 20
times per year, according to Vermont officials.

FDA and the two states we contacted- Vermont and Wisconsin-- report few
violations of FDA's cheese standards of identity. In fiscal year 1999, FDA
reported that no violations involving the use of ultra- filtered milk in
standardized cheese in federal and the contracted state inspections.
Likewise, Wisconsin officials told us that they had found no cheese FDA and
the States Report

Few Violations of Cheese Standards of Identity

Page 16 GAO- 01- 326 Ultra- Filtered Milk

standards of identity violations relating to the use of ultra- filtered milk
in cheese in the past few years. They did report a December 2000 incident in
which a cheese plant was found to be using milk protein concentrate in
nonstandardized ricotta cheese. While the use of the ingredient was not a
violation of state or federal standards, the product's label did not
identify the ingredient as required by law. The plant stopped using the milk
protein concentrate until the label could be corrected, state officials
reported.

In 2000, Vermont inspectors found two cheese plants using imported milk
protein concentrate to make cheeses covered by FDA's standards of identity
in violation of federal and state law. Vermont officials wrote letters to
the plants warning that this ingredient was not permitted by the standards.
Vermont officials said the plants discontinued its use and the cases were
closed.

We provided FDA with a draft of this report for its review and comment. FDA
generally agreed with the report and provided some specific comments, which
we have incorporated into the report as appropriate. FDA's comments and our
responses are in appendix VI.

To identify the trends in ultra- filtered milk imports into the United
States between 1990 and 1999, we obtained data compiled by the U. S. Census
Bureau from the U. S. Customs Service on annual imports of milk protein
concentrates, which includes ultra- filtered milk. To identify any quantity,
tariff, or other trade restrictions applicable to imported ultra- filtered
milk, we reviewed the U. S. Harmonized Tariff Schedule and interviewed USDA,
Customs, and FDA officials and representatives of domestic and foreign dairy
trade associations and reviewed relevant reports and publications. To
identify the uses of dry ultra- filtered milk and milk protein concentrates
in the manufacture of cheese and other products in the United States, we
obtained information from trade association representatives, domestic and
foreign company executives, and federal officials.

To identify the use of domestically produced ultra- filtered milk in the
manufacture of cheese and other food products in the United States, we
reviewed relevant FDA standards of identity and other regulations and
available published reports. We also interviewed USDA officials; California,
Vermont, and Wisconsin state officials; trade association representatives;
company executives; and academicians. Agency Comments

Scope and Methodology

Page 17 GAO- 01- 326 Ultra- Filtered Milk

To identify FDA's and state agencies' efforts to enforce the federal
standards of identity regulations, particularly the use of ultra- filtered
milk in cheese production, we interviewed officials of USDA, FDA, Wisconsin,
and Vermont regarding the extent of their activities and amount of staff
resources used to monitor the standards. We conducted our review from August
2000 through February 2001 in accordance with generally accepted government
auditing standards.

We are sending copies of this report to the congressional committees with
jurisdiction over dairy products; the Honorable Ann M. Veneman, Secretary of
Agriculture; the Honorable Dr. Bernard Schwetz, Acting Commissioner of the
Food and Drug Administration; the Honorable Charles W. Winwood, Acting
Commissioner, U. S. Customs Service; the Honorable Mitchell E. Daniels, Jr.,
Director of the Office of Management and Budget; and other interested
parties. We will make copies available to others on request.

If you have any questions about this report, please contact me or Richard
Cheston, Assistant Director, at (202) 512- 3841. Key contributors to this
report were Diana P. Cheng, Jonathan S. McMurray, John P. Scott, and Richard
B. Shargots.

Lawrence J. Dyckman Director, Natural Resources

and Environment

Page 18 GAO- 01- 326 Ultra- Filtered Milk

List of Requesters The Honorable Joe Skeen House of Representatives

The Honorable David R. Obey House of Representatives

The Honorable Tammy Baldwin House of Representatives

The Honorable Russell D. Feingold United States Senate

The Honorable James M. Jeffords United States Senate

The Honorable Herb Kohl United States Senate

Appendix I: Cheeses and Related Cheese Products Covered by FDA's Standards
of Identity Regulations

Page 19 GAO- 01- 326 Ultra- Filtered Milk

Table 1 below shows the cheeses and related cheese products by section
number covered by the Food and Drug Administration's (FDA) Standards of
Identity regulations (21 C. F. R., Part 133, Subpart B). Because these
regulations do not identify ultra- filtered milk as an approved ingredient,
manufacturers of standardized cheeses and related cheese products cannot use
ultra- filtered milk that is produced outside the cheese- making plant. (FDA
has allowed an exception to this for a pilot project producing ultra-
filtered milk on a farm in New Mexico for use in a Minnesota cheese plant.)
If milk protein concentrates are used in a cheese product, then the product
cannot bear the name of a standardized product, which is listed below.
However, milk protein concentrates can be used as ingredients for
nonstandardized cheese products not listed, such as feta cheese and pizza
cheese. FDA also has standards of identity for many other product types,
including milk and cream, frozen desserts, bakery, macaroni and noodles, and
frozen vegetables.

Table 1: Cheeses and Related Cheese Products Covered by FDA's Standards of
Identity Regulations

Section Cheese

133.102 Asiago fresh and asiago soft cheese 133.103 Asiago medium cheese
133.104 Asiago old cheese 133.106 Blue cheese 133.108 Brick cheese 133.109
Brick cheese for manufacturing 133.111 Caciocavallo siciliano cheese 133.113
Cheddar cheese 133.114 Cheddar cheese for manufacturing 133.116 Low sodium
cheddar cheese 133.118 Colby cheese 133.119 Colby cheese for manufacturing
133.121 Low sodium colby cheese 133.123 Cold- pack and club cheese 133.124
Cold- pack cheese food 133.125 Cold- pack cheese food with fruits,
vegetables, or meats 133.127 Cook cheese, koch kaese 133.128 Cottage cheese
133.129 Dry curd cottage cheese 133.133 Cream cheese 133.134 Cream cheese
with other foods 133.136 Washed curd and soaked curd cheese 133.137 Washed
curd cheese for manufacturing 133.138 Edam cheese

Appendix I: Cheeses and Related Cheese Products Covered by FDA's Standards
of Identity Regulations

Appendix I: Cheeses and Related Cheese Products Covered by FDA's Standards
of Identity Regulations

Page 20 GAO- 01- 326 Ultra- Filtered Milk

Section Cheese

133.140 Gammelost cheese 133.141 Gorgonzola cheese 133.142 Gouda cheese
133.144 Granular and stirred curd cheese 133.145 Granular cheese for
manufacturing 133.146 Grated cheeses 133.147 Grated American cheese food
133.148 Hard grating cheeses 133.149 Gruyere cheese 133.150 Hard cheeses
133.152 Limburger cheese 133.153 Monterey cheese and Monterey jack cheese
133.154 High- moisture jack cheese 133.155 Mozzarella cheese and scamorza
cheese 133.156 Low- moisture mozzarella and scamorza cheese 133.157 Part-
skim mozzarella and scamorza cheese 133.158 Low- moisture part- skim
mozzarella and scamorza cheese 133.160 Muenster and munster cheese 133.161
Muenster and munster cheese for manufacturing 133.162 Neufchatel cheese
133.164 Nuworld cheese 133.165 Parmesan and reggiano cheese 133.167
Pasteurized blended cheese 133.168 Pasteurized blended cheese with fruits,
vegetables, or meats 133.169 Pasteurized process cheese 133.170 Pasteurized
process cheese with fruits, vegetables, or meats 133.171 Pasteurized process
pimento cheese 133.173 Pasteurized process cheese food 133.174 Pasteurized
process cheese food with fruits, vegetables, or meats 133.175 Pasteurized
cheese spread 133.176 Pasteurized cheese spread with fruits, vegetables, or
meats 133.178 Pasteurized neufchatel cheese spread with other foods 133.179
Pasteurized process cheese spread 133.180 Pasteurized process cheese spread
with fruits, vegetables, or meats 133.181 Provolone cheese 133.182 Soft
ripened cheeses 133.183 Romano cheese 133.184 Roquefort cheese 133.185
Samsoe cheese 133.186 Sap sago cheese 133.187 Semisoft cheeses 133.188
Semisoft part- skim cheeses 133.189 Skim milk cheese for manufacturing
133.190 Spiced cheeses

Appendix I: Cheeses and Related Cheese Products Covered by FDA's Standards
of Identity Regulations

Page 21 GAO- 01- 326 Ultra- Filtered Milk

Section Cheese

133.191 Part- skim spiced cheeses 133.193 Spiced, flavored standardized
cheeses 133.195 Swiss and emmentaler cheese 133.196 Swiss cheese for
manufacturing

Appendix II: Use of Ultra Filtration in the Cheese- making Process

Page 22 GAO- 01- 326 Ultra- Filtered Milk

Cheese making combines an ancient art with scientific knowledge to
manufacture uniform products by removing water and retaining the desirable
solids in milk. Prior to making cheese, cheese makers test the quality of
the milk. Then they may adjust for seasonal variations in the composition of
milk, specifically milk proteins, to ensure that uniform milk is used to
manufacture consistent cheese throughout the year. Traditionally, cheese
makers use nonfat dry milk or liquid condensed milk as the chief ingredient
to adjust the milk proteins but these have limitations due to the lactose
content in these forms of milk. Ultra- filtered milk provides cheese makers
with an alternative product for this purpose.

Ultra- filtered milk concentrates the proteins by removing the water and
lactose in milk, permitting greater efficiency in cheese making. Because the
starting ingredients contain less liquid, the volume of whey (primarily
water, lactose, whey proteins, and minerals) removed during cheese making is
reduced and less effort and time are spent to expel the liquid from the
cheese curds leading to its transformation into cheese. Figure 3 is a
simplified diagram of the ultra- filtration process that enlarges a portion
of the process to show how milk components are separated. Appendix II: Use
of Ultra Filtration in the

Cheese- making Process The Process of Ultra Filtration

Appendix II: Use of Ultra Filtration in the Cheese- making Process

Page 23 GAO- 01- 326 Ultra- Filtered Milk

Figure 3: The Concept of Ultra Filtration

In ultra filtration, a filter (membrane with minute pores) retains the
larger molecules (fat and protein) and allows the smaller molecules (water,
lactose, and some minerals) to pass through. Although vitamins are a
component in milk, they are not shown in the figure because they are found
within the fat and water components. 1 Ultra filtration is not 100percent
efficient because some milk flows parallel to the filter pushed by pressure
and not all of the milk comes in contact with the filter. Therefore, wet
ultra- filtered milk will contain some water, lactose, and minerals.

Because of practical limitations on the amount of ultra- filtered milk that
can be used in making cheese, ultra- filtered milk is normally used to
supplement skim or whole milk used to make cheese. Cheese- making experts
said that the majority of cheese vats in U. S. plants are not

1 Milk fat holds the fat- soluble vitamins (A, D, E, and K). The water-
soluble vitamins are the B complex (i. e., riboflavin, thiamin, and niacin)
and C vitamins.

W L

M Protein

Fat Fat Protein Lactose Water Minerals

W W

W W

W W

W W

W W W

W W W

W W W

W W W

W W

W W L

L L

L L L

L L

L L

L L

L L

L L

L L

L L

M M

M M

M M Protein

Fat Fat Fat

Fat Fat

M M

M M M Protein

Protein Protein Protein

Fat Fat

Flow of the components removed from ultra-filtered milk Components retained
in ultra-filtered milk Components removed from ultra-filtered millk

Filter Protein Protein

M M

M M

M M

M

Appendix II: Use of Ultra Filtration in the Cheese- making Process

Page 24 GAO- 01- 326 Ultra- Filtered Milk

designed to use only ultra- filtered milk, which is thicker than skim or
whole milk. A high proportion of ultra- filtered milk would cause the
equipment to malfunction. In addition, because highly concentrated
ultrafiltered milk is not nutritionally equivalent to fluid milk, it could
not be used as the sole ingredient in cheese. If cheese were made entirely
from ultra- filtered milk, its texture, composition, and other
characteristics would be different from cheese made traditionally. Although
experts believe that these limitations can be addressed, the limitations
currently prevent cheese makers from making cheese entirely from ultra-
filtered milk at a concentration greater than “2X” in which half
of the water is removed leaving twice as many solids (fat and protein) as
compared to whole milk.

Figure 4 shows a flowchart of the cheese- making process. Ultra- filtered
milk can be used to maintain consistent levels of fat and protein components
in the raw milk used to make cheese, ensuring that cheese quality is the
same throughout the year. It can also be used in larger quantities to
increase the total solids (fat and proteins) in the raw milk, resulting in
larger yields. Cheese making involves transforming milk proteins into solid
lumps (curds), separating the curds' solids from the liquid (whey), shaping
or pressing these curds into molds, and aging the shaped curds. The Cheese-
making

Process

Appendix II: Use of Ultra Filtration in the Cheese- making Process

Page 25 GAO- 01- 326 Ultra- Filtered Milk

Figure 4: The Cheese- making Process

1 Ultra- filtered milk can be used to supplement the fat and proteins in
milk or to ensure that the components of milk for making cheese are
consistent. 2 Curds consist mainly of milk proteins that solidify in the
process and become the foundation for the

final cheese product.

Milk (protein, fat, lactose, water, and

minerals)

Ultra Filtration Process 1

(milk passed through filter) Components removed: lactose, minerals, water

Components retained: proteins, fat, some water, minerals, and lactose

Cheese made from pasteurized milk may be aged, but is not required

The liquid (whey) is removed

Cheese-making Process

For some varieties of cheese, milk is pasteurized to kill harmful pathogens

Starter and enzymes are added to acidify the milk and to form a soft curd 2

Salt is added to provide flavor and help preserve the cheese Starting
ingredients - milk and

ultra-filtered milk, if used The curd is cut and the temperature is

raised firming the curd and releasing the liquid

Cheese is finished and wrapped for final sale Cheese is molded into desired

shapes and pressed Some cheeses made from unpasteurized milk, such as swiss

cheese, are stored and aged for at least 60 days

Appendix III: U. S. Imports of Milk Protein Concentrates by Country, 1990-
1999

Page 26 GAO- 01- 326 Ultra- Filtered Milk

Table 2 shows U. S. imports of milk protein concentrates between 1990 and
1999. Between 1990 and 1994, U. S. imports of milk protein concentrates
increased 15- fold, and the number of suppliers grew from 4 countries to 11
countries. From 1995 to 1999, U. S. imports of milk protein concentrates
increased 6- fold. Over the 10- year period, U. S. imports of milk protein
concentrates increased 56- fold. Australia is the only country that exported
milk protein concentrates to the United States in each year during this
10year period.

Table 2: U. S. Imports of Milk Protein Concentrates by Country, 1990- 1999
Quantity in metric tons

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 North America

Canada 488 0 0 65 990 340 1,303 1,016 1,957 3,420

South America

Argentina 0 0 0 0 0 218 163 36 0 0

European Union

Sweden 45 0 1, 171 3,491 3,492 722 703 663 39 98 Denmark 0 0 0 0 0 61 18 14
92 80 United Kingdom 0 0 422 0 369 0 20 0 19 66 Ireland 0 0 59 0 0 525 3,103
3,922 7,305 9,775 Netherlands 0 494 202 94 34 24 0 26 912 4,560 Belgium-
Luxembourg 0 0 0 0 0 0 58 0 20 19 France 0 0 5 193 0 5 44 306 0 339 Germany
0 0 1,445 851 3,617 1,407 1,881 1,175 1,445 5,261 Austria 0 17 0 292 181 36
48 0 0 0 Spain 0 0 0 21 892 408 153 0 0 0 Italy 0 00 00 002000

Other Western Europe

Switzerland 0 00 00 000052

Eastern Europe

Hungary 17 0 369 0 170 153 162 168 395 416 Poland 0 0 20 470 331 237 700 519
2,720 875 Estonia 0 0 0 0 0 0 0 60 180 300 Lithuania 0 0 0 0 0 0 20 100 19
49

Africa

Republic of South Africa 0 0 0 0 0 0 0 0 224 0

Asia

Taiwan 0 00 00 0001120

Oceania

Australia 255 238 85 342 455 152 1,036 1,141 2,246 4,967 New Zealand 0 373
158 0 1, 477 3,000 4,905 7,831 11,243 14,601

Total 805 1,122 3,936 5,819 12,008 7, 288 14,317 16,997 28,928 44,878

Appendix III: U. S. Imports of Milk Protein Concentrates by Country, 1990-
1999

Appendix III: U. S. Imports of Milk Protein Concentrates by Country, 1990-
1999

Page 27 GAO- 01- 326 Ultra- Filtered Milk

Note: One metric ton is equal to 2,204. 6 pounds or 1,000 kilograms. Source:
Imports reported for classification number 0404.90.10 of the Harmonized
Tariff Schedule of the United States, Annotated, as compiled by the U. S.
Census Bureau from the U. S. Customs Service data.

Appendix IV: Types, Composition, and Suggested Uses of Dry Milk Protein
Concentrates

Page 28 GAO- 01- 326 Ultra- Filtered Milk

Table 3 provides a general overview of the milk protein concentrate (MPC)
products made from skim milk and their suggested uses, as provided by their
distributors. It is not a comprehensive list because the uses for milk
protein concentrate are reportedly expanding and developing, and only a few
of the exporters we contacted opted to provide this information. Milk
protein concentrates are typically described by their approximate protein
content expressed as a percentage. For example, MPC 42 contains 42 percent
protein based on dry weight. The other components in the product vary
depending on its producer and customization of the products to meet customer
specifications.

Table 3: Types, Composition, and Suggested Uses of Dry Milk Protein
Concentrates Product

Producer/ distributor (MPC country of origin) Composition a

(percent) Suggested uses b

Murray Goulburn Co- operative Co. Limited (Australia) 42.0 protein

2.0 fat 8.0 ash 45.5 lactose MPC 42

The Milky Whey, Inc. (Europe and New Zealand) 42.0 protein

1.0 fat 7.5 ash 45.5 lactose

Frozen deserts, nonfat dry milk replacement, bakery and confection
applications, and cheese milk standardization.

MPC 50 Murray Goulburn Co- operative Co. Limited (Australia) 49.8 protein

1.5 fat 8.0 ash 35.5 lactose

Frozen deserts, nonfat dry milk replacement, bakery and confection
applications, and cheese milk standardization.

NZMP (North America) Inc. (New Zealand) 56.0 protein 1.2 fat 8.0 ash 31.0
lactose MPC 56

Murray Goulburn Co- operative Co. Limited (Australia) 55.8 protein

1.5 fat 8.5 ash 30.5 lactose

Frozen deserts, nutritional beverage powders, bakery and confection
applications, nonstandardized cheese products, and cheese milk
standardization.

NZMP (North America) Inc. (New Zealand) 71.0 protein 1.0 fat 7.0 ash 17.0
lactose MPC 70

Murray Goulburn Co- operative Co. Limited (Australia) 69.8 protein

2.0 fat 8.5 ash 15.5 lactose

Sports nutrition drinks and bars, aged care products, hospital
rehabilitation products, and pasteurized process cheese products.

MPC 75 Murray Goulburn Co- operative Co. Limited (Australia) 74.8 protein

2.0 fat 8.5 ash 10.5 lactose

Sports nutrition drinks and bars, aged care products, and hospital
rehabilitation products.

Appendix IV: Types, Composition, and Suggested Uses of Dry Milk Protein
Concentrates

Appendix IV: Types, Composition, and Suggested Uses of Dry Milk Protein
Concentrates

Page 29 GAO- 01- 326 Ultra- Filtered Milk

Product Producer/ distributor

(MPC country of origin) Composition a (percent) Suggested uses b

MPC 80 Murray Goulburn Co- operative Co. Limited (Australia) 79.8 protein

2.5 fat 8.5 ash 5.5 lactose

Sports nutrition drinks and bars, aged care products, and hospital
rehabilitation products.

MPC 85 Murray Goulburn Co- operative Co. Limited (Australia) 84.8 protein

2.5 fat 8.5 ash 0.5 lactose

Sports nutrition drinks and bars, aged care products, and hospital
rehabilitation products.

MPC 90 NZMP (North America) Inc. (New Zealand) 86.7 protein 1.6 fat 7.1 ash
1.0 lactose

Products with a lactose- and sugar- free claim, nutritional foods,
beverages, and frozen deserts.

Note: While the producers or distributors offer these MPC products, they did
not state whether all are currently exported to the United States. a The fat
and ash levels listed are maximum levels; protein is listed at a minimum
level; and lactose is

given as an approximate value. Ash is an industry term for minerals, such as
calcium and phosphorous. b Producers stated that the exact uses for each
product are dependent on the manufacturing

processes and the characteristics of the protein and minerals contained in
the particular MPC product.

Sources: Murray Goulburn Co- operative Co. Limited, Australia; NZMP (North
America) Inc.; and The Milky Whey, Inc.

Appendix V: Types and Composition of Wet Ultra- filtered Milk

Page 30 GAO- 01- 326 Ultra- Filtered Milk

Table 4 provides the composition of various concentrations of wet
ultrafiltered milk made from whole milk. 1 The composition of ultra-
filtered milk depends on the composition of the raw milk, which may vary
depending on the season in which the milk was produced. 2 Because ultra
filtration removes liquids and concentrates the protein and fat components
of milk, the table indicates the degree to which solids are concentrated.
For example, in a “2X” concentration, half of the water is
removed leaving twice as many solids (i. e. fat and protein) compared with
whole milk.

Table 4: Types and Composition of Wet Ultra- filtered Milk Concentration of
ultra- filtered milk products Composition of ultra- filtered whole milk

products (percent) a

1.5X 4.48 protein 5.51 fat 0.95 ash 4.59 lactose 2 X 5.97 protein

7.34 fat 1.18 ash 4.41 lactose 2.5X 7.47 protein

9.18 fat 1.40 ash 4.23 lactose 3 X 8.96 protein

11.01 fat 1.63 ash 4.04 lactose 3.5X 10.45 protein

12.85 fat 1.86 ash 3.86 lactose 4 X 11.94 protein

14.68 fat 2.09 ash 3.68 lactose a These percentages are based on the weight
in the resulting concentrate.

Source: Northeast Dairy Foods Research Center, Cornell University.

1 Ultra- filtered milk can also be made from skim milk. 2 These calculations
were made assuming the following whole milk composition (in percents): 2.
9862 for true protein; 3.6700 for fat; 0.7159 for ash; and 4.7776 for
lactose. True protein is the measurement of the protein content only and
does not contain any nonprotein nitrogen, which is of no value in making
cheese. Appendix V: Types and Composition of Wet

Ultra- filtered Milk

Appendix VI: Comments From the Food and Drug Administration

Page 31 GAO- 01- 326 Ultra- Filtered Milk

Appendix VI: Comments From the Food and Drug Administration

Appendix VI: Comments From the Food and Drug Administration

Page 32 GAO- 01- 326 Ultra- Filtered Milk

See comment 1. See comment 2.

See comment 3.

Appendix VI: Comments From the Food and Drug Administration

Page 33 GAO- 01- 326 Ultra- Filtered Milk

The following are GAO's comments on the Food and Drug Administration's
written response to our draft report dated February 2, 2001.

1. We have substituted these sentences as suggested. 2. We have added
language to the footnote and to appendix V to explain

that we are referring to the amount of “true” protein in whole
milk, which is approximately 3 percent. While some sources in literature
cite the higher value of “crude” protein, we feel
“true” protein is the best value to use in our example.
According to academic experts, the total or “crude” protein in
milk that FDA refers to is estimated from measuring the total nitrogen
content of milk. The total amount of nitrogen comes from both protein and
non- protein sources. The experts noted that the measurement of
“crude” protein is inaccurate because test equipment does not
measure the amount of non- protein nitrogen precisely. By testing for
“true” protein only, which electronic testing equipment can
accurately detect, this measurement error is corrected. In addition, USDA's
AMS, in its 1999 decision on milk market order reform, stated that the use
of total or “crude” protein measurement overstates the amount of
protein in milk by the amount of non- protein nitrogen, which has little or
no effect on dairy product yields. Therefore, AMS decided that milk should
be priced under federal milk orders on the basis of its true protein
content.

3. We have revised the sentence as suggested. GAO's Comments

(150292)

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