United States General Accounting Office

GAO Report to Congressional Requesters

June 1995 MEAT AND POULTRY

INSPECTION

Impact of USDA’s Food

Safety Proposal on

State Agencies and

Small Plants

GAO/RCED-95-228

GAO United States

General Accounting Office

Washington, D.C. 20548

Resources, Community, and

Economic Development Division

B-261674 

June 30, 1995

The Honorable Pat Roberts

Chairman

The Honorable E (Kika) de la Garza

Ranking Minority Member

Committee on Agriculture

House of Representatives

The Honorable Steve Gunderson

Chairman, Subcommittee on Livestock,

 Dairy, and Poultry

Committee on Agriculture

House of Representatives

In 1993, hamburger contaminated with the E. coli 0157:H7 bacteria on the

West Coast killed four children and caused hundreds of illnesses.

Subsequently, the U.S. Department of Agriculture announced that it would

move to a “farm to table” system of ensuring the safety of meat and poultry

products. As part of this effort, in February 1995, the Department’s Food

Safety and Inspection Service (FSIS) proposed that each meat and poultry

slaughter and processing plant adopt a system of preventive control for

food safety, known as the Hazard Analysis and Critical Control Points

(HACCP) system, under FSIS monitoring.1

 The HACCP proposal, now the

subject of public comments in the rulemaking process, would require all

meat and poultry plants, including plants where states are responsible for

inspection, to adopt systems for controlling food-safety hazards and

producing safe foods. Federal and state meat and poultry inspection

agencies would be required to take on some additional monitoring

activities under the HACCP proposal.

In January 1995, you requested that we (1) describe state meat and poultry

inspection programs, (2) provide information on the expected effects of

the Department’s proposed HACCP rule on state inspection programs, and

(3) discuss the likely effects of the HACCP rule on small plants.

Results in Brief The Food Safety and Inspection Service has two major programs with the

states for cooperative meat and poultry inspection: the Talmadge-Aiken

Program, which authorizes state inspectors to provide federal inspection

services in plants that sell their products in interstate commerce; and the

1

FSIS’ proposal was published in the Federal Register on February 3, 1995.

Page 1 GAO/RCED-95-228 USDA’s Proposal for Meat and Poultry Inspection
B-261674 

State-Federal Program, in which state inspectors perform all inspection

activities in plants that can only trade within the state. In fiscal year 1994,

the Food Safety and Inspection Service reimbursed the states about

$40 million—half of the states’ total costs—for their inspection programs’

activities.

In general, while supporting the concept of using hazard analysis and

critical control points, state inspection agency officials are concerned that

the proposed rule will increase the cost of state meat and poultry

inspections. In particular, they expect that incorporating the proposed rule

into their current inspection system will result in additional costs for

equipment, staff, and training. Food Safety and Inspection Service

officials, however, believe that the costs to the states will be minimal

because the Inspection Service plans to provide training and to pay for at

least half of the costs of adopting the new rule.

State inspection officials and industry representatives are also concerned

that the new rule, if enacted as proposed, will drive many small meat and

poultry processors out of business, mainly because of the cost of

performing microbial sampling and testing. The Food Safety and

Inspection Service acknowledges in its proposed rule that small plants will

be disproportionately affected by rule-related costs and asks for specific

comments on dealing with this issue.

Background By law, FSIS has overall responsibility for ensuring the safety of all meat

and poultry products sold in the United States. FSIS directly oversees plants

that slaughter and process meat and poultry traded in interstate

commerce. Generally, FSIS assigns federal inspectors to interstate trading

plants; however, under the Talmadge-Aiken Program, state inspectors

perform inspections in certain interstate trading plants. Since the

late-1960s, FSIS has also been responsible for plants that only trade in

intrastate commerce. These plants account for less than 1 percent of the

annual U.S. meat and poultry production. Under the State-Federal

Program, FSIS delegates inspection of plants that trade only in intrastate

commerce to those states that maintain inspection programs. FSIS monitors

these programs, which must be “equal to” the federal program. In general,

states with intrastate inspection programs began those programs prior to

FSIS’ assuming jurisdiction.2 FSIS shares half the cost of the state programs

with the states.

2

In 1967, the Federal Meat Inspection Act was amended to give FSIS authority over plants producing

meat for intrastate trade. In 1968, the Poultry Products Inspection Act was amended similarly.

Previously, plants selling meat or poultry intrastate were under state jurisdiction.

Page 2 GAO/RCED-95-228 USDA’s Proposal for Meat and Poultry Inspection
B-261674 

FSIS’ current inspection activities differ somewhat for slaughtered and

processed products. At slaughter plants, FSIS is required by law to perform

antemortem and postmortem inspections of each animal slaughtered, and

federal inspectors are stationed in plants to inspect each animal and

carcass by sight, touch, and smell for disease, abnormalities, and

contamination (organoleptic inspection). Inspectors also sample carcasses

for certain types of microbial and chemical contamination. For processed

meat and poultry products, FSIS inspects all processing plants at least daily.

FSIS inspectors target inspection activities in processing plants according

to the product’s riskiness and the plant’s compliance history. Inspectors

use an automated system—Performance Based Inspection System

(PBIS)—designed specifically for FSIS to determine which products to

inspect or other inspection tasks to perform.

FSIS is proposing to change how it ensures meat and poultry safety by

requiring plants to implement HACCP systems designed to identify and

prevent microbial and other hazards in food production. The HACCP

concept includes systematic steps to prevent problems from occurring and

to correct deviations as soon as they are detected. A HACCP system consists

of seven principles that plants must incorporate into their operations:

hazard analysis, critical control point identification, establishment of

critical limits, monitoring procedures, corrective actions, recordkeeping,

and verification procedures.

FSIS is proposing to phase in HACCP requirements throughout the regulated

industry over 3 years, with small plants implementing HACCP systems

during the final phase. For the purposes of the HACCP proposal, FSIS has

defined a small plant as an establishment with annual sales of less than

$2.5 million. About 17 percent of all slaughter and 42 percent of all

processing plants in the United States would be classified as small; also,

FSIS considers all state-regulated establishments to be small plants.

Industry would bear most of the cost to develop and implement HACCP

systems.

As part of the proposed HACCP rule, FSIS plans to require that plants adopt

near-term initiatives to help them make the transition to HACCP systems.

The near-term initiatives—standard operating procedures for sanitation,

antimicrobial washes for carcasses, prompt and continuous chilling of

products, and microbial testing—must be in place 90 days after the rule’s

adoption. Slaughter plants and ground-meat and ground-poultry

processors must adopt all of the near-term intiatives. Other types of plants,

such as those producing fully cooked products, will only be required to

Page 3 GAO/RCED-95-228 USDA’s Proposal for Meat and Poultry Inspection
B-261674 

implement the sanitation procedures. The near-term initiatives will be, for

the most part, incorporated into the plants’ HACCP systems.

Details of how FSIS inspectors’ activities will change under the HACCP rule

have not been made final. Because of the legal requirement for a

carcass-by-carcass inspection, FSIS inspectors will continue antemortem

and postmortem inspections of each animal slaughtered. Inspectors would

have some new duties for monitoring plants’ implementation of HACCP

systems, such as overseeing plants’ critical control point monitoring and

microbial testing. State inspection activities would change similarly.

States’ and FSIS’

Cooperation for

Inspections

Under cooperative agreements with 27 states, FSIS uses state inspection

programs to help ensure that meat and poultry from these states meet

federal standards. State inspection programs must be at least “equal to”

the federal programs. FSIS determines whether state programs qualify

through an extensive process that includes performance plans, feedback

from FSIS supervisors, and documentation in annual reports. The

cooperative agreements cover the two major meat and poultry inspection

programs: the Talmadge-Aiken and the State-Federal programs. They cost

FSIS about $40 million for fiscal year 1994. (See app. I for information about

individual state meat and poultry inspection programs.)

Currently, 10 states participate in the Talmadge-Aiken Program. Under this

program, state inspectors carry out federal inspection duties in 258 plants

that meet all federal requirements and thereby qualify to sell their meat

and poultry products in interstate commerce. Talmadge-Aiken plants are

generally small and in remote locations, where it is not economical for FSIS

to maintain full-time federal inspection services. FSIS reimburses the states

for half of the cost of the activities they perform for the federal

government.

Under the State-Federal Program, 27 states operate their own meat and

poultry inspection programs. By law, plants inspected by the states are not

eligible to trade in interstate commerce, since they comply with state,

rather than federal, requirements. Through the State-Federal Program, FSIS

oversees state regulation of the production activities of the 2,890 plants

that are authorized to trade only within state. FSIS provides

assistance—such as training and/or laboratory services—to the state

agencies and monitors the states’ inspection activities. The states are

reimbursed for up to half of their costs to maintain inspection programs in

these plants, which, like the Talmadge-Aiken plants, are generally small

Page 4 GAO/RCED-95-228 USDA’s Proposal for Meat and Poultry Inspection
B-261674 

and in remote locations. In fiscal year 1994, FSIS reimbursed the states

$39.7 million for the State-Federal and Talmadge-Aiken inspection

activities combined.3

In addition to the Talmadge-Aiken and State-Federal inspection activities,

state inspectors are sometimes temporarily assigned to federal inspection

duties, and federal inspectors to state duties, when it makes economic

sense to do so. Each level of government is fully reimbursed for the cost of

the cross-utilization.

Effect of HACCP on

State Inspection

Programs

Because state meat and poultry inspection programs must be “equal to”

the federal program, FSIS’ HACCP proposal would require state inspection

agencies to adopt inspection and monitoring activities comparable to

those used by FSIS. States would have to make two principal changes to

their programs: (1) adopt an automated performance- and risk-based

system, such as PBIS, as a tool that would enable them to schedule and

monitor inspections and plants’ compliance with the HACCP rule and

(2) have inspectors implement HACCP monitoring procedures, including

overseeing plants’ critical control point monitoring and microbial testing.

With the first change, it would be necessary for state inspection agencies

to implement PBIS or a similar automated system designed to (1) allocate

and schedule state inspection resources according to risk; (2) document

statewide inspection results to determine industry’s performance overall;

(3) document the performance and corrective actions taken by individual

plants; and (4) initiate actions to address repeated deficiencies in a plant,

such as withdrawing inspection privileges. The new system would require

computer equipment and software and staff trained to operate it.

Under the second change, the state inspection agencies would need to

monitor the microbial testing and other HACCP procedures performed by

the plants. The HACCP monitoring would require that state inspectors be

trained in the appropriate procedures; also, some additional laboratory

costs would probably be incurred to monitor the plants’ microbial testing.

According to FSIS’ Director of Federal-State Relations, 15 of the 27 states

have received the PBIS software and related training.4

 Currently, one of

3

It is not possible to separate accurately the costs of the Talmadge-Aiken and State-Federal programs

because the states and FSIS track cooperative program funds in total.

4

As part of the requirement for states to have inspection systems equal to FSIS’, FSIS is requiring that

each state adopt an automated system such as PBIS by September 1996. The states must meet this

requirement whether or not the HACCP rule is implemented.

Page 5 GAO/RCED-95-228 USDA’s Proposal for Meat and Poultry Inspection
B-261674 

these states is using PBIS fully, and the rest are beginning to use it. Most of

the remaining 12 states use a PBIS forerunner, which may or may not be

automated. The earlier system considers plants’ past performance but not

product’s riskiness in scheduling inspections and is less effective in

recording inspection results. FSIS plans to furnish PBIS software and

training to these states as soon as they have the equipment and staff to use

it.

FSIS officials estimate that at least eight states will need PBIS inspector

training. Inspectors in some states are already familiar with PBIS field

techniques, having used PBIS to perform federal inspection duties under the

Talmadge-Aiken Program and through cross-utilization activities. FSIS has

queried the states about their inspector training needs and will plan PBIS

training when the states have responded. Furthermore, FSIS plans to offer

relevant training for state inspectors after the HACCP rule is adopted.

In February 1995, the National Association of State Departments of

Agriculture’s (NASDA) Director of Legislative and Regulatory Affairs asked

the 27 state inspection agency directors about the expected effects of

complying with FSIS’ HACCP proposal. The state directors generally

supported the HACCP concept; however, of the 22 state directors who

responded, 19 expected additional costs for training, computer hardware

and software, or laboratory analysis. Start-up cost estimates ranged from

minimal to $54,000 per state and the longer-term cost estimates ranged

from a savings to an additional $1.3 million per year per state. According

to the President of the National Association of State Meat and Food

Inspection Directors,5

 the larger state programs with automated inspection

programs can generally expect to make the fewest changes and to absorb

the additional costs most easily. In responding to NASDA’s questions,

several of the state directors expressed concern about how to pay for any

cost increase in light of their already strained state budgets, and some

were concerned that the states will be forced to turn their inspection

programs over to FSIS.

FSIS officials do not believe that the switch to HACCP systems will be costly

for the state inspection agencies. They acknowledge that assistance in

adopting PBIS is needed, and, to help provide this, FSIS is providing each

state with the software and training. Also, FSIS officials expect that PBIS will

help the states reallocate their inspection resources more effectively.

Furthermore, FSIS plans to pay for at least half of the cost of retraining the

5

All state meat and poultry inspection agency directors are members of the National Association of

State Meat and Food Inspection Directors, which is a subgroup of and is represented by NASDA.

Page 6 GAO/RCED-95-228 USDA’s Proposal for Meat and Poultry Inspection
B-261674 

inspectors for the new HACCP monitoring duties, which is the usual training

reimbursement under the cooperative agreements.

Effect of HACCP on

Small Plants

FSIS chose to define small plants broadly—as those with less than

$2.5 million in annual sales—to allow as many of the plants as possible the

full 3 years to implement HACCP systems. Both FSIS and the President of the

National Association of Meat and Food Inspection Directors believe that

virtually all of the 2,890 plants that trade only within their state would

qualify as small plants. In addition, 2,234 federally inspected plants would

be considered small. In total, they account for about 57 percent of the

plants in the industry, yielding less than 1 percent of the annual slaughter

and processed meat and poultry production.

The effect of the HACCP rule varies according to the activities the plant

carries out. For example, for small plants under the HACCP rule’s near-term

initiatives, meat slaughtering would be the single activity with the highest

cost increases because it requires all of the near-term interventions.6

Conversely, the extra costs for near-term processing activities would be

the cheapest, because they require only sanitation procedures. When

HACCP is fully implemented, the changes to certain processing activities

that FSIS classifies as difficult will be the most expensive because these

activities generally have more critical control points and related costs,

such as those for recordkeeping. The changes to meat slaughtering will be

the cheapest because it has few critical control points and related costs.

An individual plant may perform any number of the activities on a given

day. According to the President of the National Association of State Meat

and Food Inspection Directors, small plants probably perform two to three

activities on 2 to 3 days of each week. For example, FSIS estimates that a

small plant engaged in one processing activity, such as grinding meat or

poultry, would spend about $50,000 more during the first 4 years of the

rule’s implementation (3 years for near-term initiatives and 1 year for

HACCP start-up costs). Additional annual costs thereafter would be about

$12,000. A plant that slaughters only cattle would spend about $52,000

more during the first 4 years and an addtional $12,000 annually thereafter.

Plants performing more than one activity, for example, slaughtering and

grinding beef, will have higher increased costs because of the additional

activities.

6

Plants performing multiple meat-slaughtering activities (e.g., for cattle, hogs, sheep, etc.) will incur

the highest near-term costs.

Page 7 GAO/RCED-95-228 USDA’s Proposal for Meat and Poultry Inspection
B-261674 

Most state inspection agency directors expressed concern that many small

meat and poultry plants in their state will not be able to afford to comply

with the HACCP requirements, especially the cost of microbial testing.

Because the plants produce small volumes of products, for example, 100

pounds of ground beef per day, the fixed daily cost of microbial testing

will increase small plants’ prices per pound of product much more than

the prices of larger-volume plants, making it difficult for the small plants

to price their products competitively. Also, many of the small plants are

“mom and pop” operations with a limited number of employees and

manual recordkeeping systems. These plants may not be able to afford the

training, additional staff, and equipment needed to monitor and document

the critical control points called for in the HACCP rule.

A number of owners of small plants expressed concerns about the cost of

complying with the HACCP rule during a recent public meeting scheduled by

FSIS.

7

 In general, they are worried about going out of business because of

the increased cost of implementing the HACCP rule. Also, some expressed

concern that, as plants in rural areas close, more slaughtering activities

will be performed illegally or privately on farms under uncontrolled

sanitary conditions. Furthermore, they believe that they currently have

adequate controls over their products’ safety—because they know their

customers, often by first names, they would know if the products caused

illness. One owner of a small plant summarized the comments of several

by saying that he would not produce bad products for his friends and

family.

A Texas A&M University study issued in April 1995 recognizes that small

plants will be disproportionately affected by the implementation of the

HACCP rule.8 FSIS is also concerned about the effect of the rule on small

plants. As part of the public comment process for the proposal, FSIS has

asked for suggestions on how to ease the burden that the cost of HACCP

systems would place on small plants and offered additional informational

sessions. In this regard, FSIS plans to provide technical assistance, such as

generic HACCP plans, that small plants can use.

7

FSIS scheduled the meeting in Kansas City, Kansas, as an opportunity to present details about the

costs of the rule for small plants and to allow the owners of small plants a chance to ask questions and

air their concerns.

8

Reforming Meat and Poultry Inspection: Impacts of Policy Options, Institute for Food Science and

Engineering Center, Center for Food Safety, Texas A&M University System (College Station, Texas:

Apr. 1995).

Page 8 GAO/RCED-95-228 USDA’s Proposal for Meat and Poultry Inspection
B-261674 

Agency Comments We provided a draft of this report to FSIS. We met with two FSIS associate

administrators and other relevant FSIS officials, who generally agreed with

the contents of the draft. The officials suggested that the report include

two additional clarifying points. First, they said that the report should note

that FSIS is requiring that state inspection agencies adopt PBIS or a similar

automated system, notwithstanding action on the proposed HACCP rule.

The FSIS officials acknowledged that, while PBIS is not a requirement of the

HACCP rule per se, such a system is a necessary prerequisite to the rule’s

implementation. Second, while agreeing that meat slaughtering is the

single activity that will have the highest increase in cost under the

near-term initiatives for small plants, the officials said that it was

important to recognize that plants performing multiple meat-slaughtering

activities will face the highest increased costs under the near-term

initiatives. They believe that this is an important point, since many small

plants perform multiple meat-slaughtering activities. We have included

these clarifying points in the report.

Scope and

Methodology

In developing information for this report, we spoke with and obtained

documentation from FSIS and Economic Research Service officials, state

inspection agency directors and representatives, industry association

officials, selected owners of small plants, and other officials in industry

and academia who are familiar with the industry and with issues related to

meat and poultry inspection. Furthermore, we attended FSIS-sponsored

conferences in Philadelphia, Washington, and Kansas City concerning the

proposed HACCP rule. We also reviewed selected public comments on the

proposal.

We conducted our work between January and June 1995 in accordance

with generally accepted government auditing standards.

We are sending copies of this report to appropriate congressional

committees; interested Members of Congress; the Secretary of Agriculture;

the Under Secretary for Food Safety; and other interested parties. Copies

are available on request.

Page 9 GAO/RCED-95-228 USDA’s Proposal for Meat and Poultry Inspection
B-261674 

Please contact me at (202) 512-5138 if you or your staff have any questions.

Major contributors to this report are listed in appendix II.

John W. Harman

Director, Food and

 Agriculture Issues

Page 10 GAO/RCED-95-228 USDA’s Proposal for Meat and Poultry Inspection
Page 11 GAO/RCED-95-228 USDA’s Proposal for Meat and Poultry Inspection
Appendix I 

States With Cooperative Meat and Poultry

Inspection Programs, 1994

State

StateFederal

Program

No. of

Plants

TalmadgeAiken

Program

No. of

Plants

Cost to

FSIS in

FY 1994

Alabama Yes 79 Yes 19 $1,146,281

Alaska Yes 14 No 0 314,850

Arizona Yes 66 No 0 471,475

Delaware Yes 4 No 0 198,803

Florida Yes 138 No 0 2,095,602

Georgia Yes 91 Yes 49 2,391,944

Hawaii Yes 46 Yes 11 1,279,744

Illinois Yes 358 Yes 31 4,183,294

Indiana Yes 121 Yesa 6 1,696,088

Iowa Yes 149 No 0 921,651

Kansas Yes 155 No 0 1,333,113

Louisiana Yes 100 No 0 1,613,279

Mississippi Yes 55 Yes 16 994,325

Montana Yes 35 No 0 294,724

New Mexico Yes 37 No 0 388,400

N. Carolina Yes 169 Yes 53 2,779,914

Ohio Yes 271 No 0 4,171,010

Oklahoma Yes 83 Yes 15 1,469,952

S. Carolina Yes 110 No 0 1,044,320

S. Dakota Yes 56 No 0 403,909

Texas Yes 340 Yes 24 4,791,351

Utah Yes 30 Yes 10 682,986

Vermont Yes 14 No 0 241,961

Virginia Yes 31 Yes 24 1,255,747

W. Virginia Yes 32 No 0 560,085

Wisconsin Yes 272 No 0 2,761,304

Wyoming Yes 34 No 0 252,217

Total 27 2890 11 258 $39,738,329

aIndiana withdrew from the Talmadge-Aiken Program in 1995.

Page 12 GAO/RCED-95-228 USDA’s Proposal for Meat and Poultry Inspection
Appendix II 

Major Contributors to This Report

Resources,

Community, and

Economic

Development

Division, Washington,

D.C.

Edward M. Zadjura, Assistant Director

Karla J. Springer, Project Leader

John M. Nicholson, Jr., Senior Evaluator

Carol Herrnstadt Shulman, Communications Analyst

(150638) Page 13 GAO/RCED-95-228 USDA’s Proposal for Meat and Poultry Inspection
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