### United States Department of Agriculture Animal and Plant Health Inspection Service July 2012 Regulatory Impact Analysis & Final Regulatory Flexibility Analysis
Final Rule APHIS

- 2009

- 0091 RIN 0579

- AD24 Traceability for Livestock Moving Interstate

Policy & Program Development Policy Analysis & Development1 

### Summary

APHIS is establish ing general traceability r egulations for livestock moving interstate. The purpose is to improve APHIS’ ability to trace livestock in the event disease is found

. In this analysis, we examine expected b enefits and costs of the rule in accordance with Executive Order s 12866 and 13563 . Benefits are expected to exceed the costs overall . Possible impacts on small entities are cons id ered in accordance with the Regulatory Flexibility Act. While the rule applies to cattle and bison, horses and other equine species, poultry, sheep and goats, swine, and captive cervids , the focus of this analysis is on expected economic effects for the beef and dairy cattle industries. These enterprises are likely to be most affected operationally by the rule. For the other species, APHIS wi ll largely maintain and build on the identification requirements of existing disease program regulations. Costs for cattle producers are estimated in terms of activities that will need to be conducted for official animal identification and issuance of an i nterstate certificate of veterinary inspection (ICVI) , or other movement documentation, for livestock moved interstate

. Incremental c osts incurred are expected to vary depending upon a number of factors, including whether an enterprise does or does not al ready use earta g s to identify individual cattle

. For many operators, costs of official animal identification and ICVIs will be similar , respectively, to costs associated with current animal identification practices and the inshipment documentation

current ly required by individual States

. Existing expenditures for these activities represent cost baselines for the private sector. To the extent that official animal identification and ICVI s will simply replace current requirements, the incremental costs of the rule for private enterprises will be minimal.2 There are two main cost components for the rule, using eartags to identify cattle and having certificates for cattle moved interstate. Approxima tely 20 percent of cattle are not currently eartagged as part of routine management practices , and an estimated 45 percent of cattle are identified for management purposes other than by using official identification. Annual incremental c osts of official i dentification for cattle enterprises are estimated to total from $ 12.5 million to $ 30.5 million , assuming producers who are not already using official identif ication will tag their cattle as an activity separate from other routine management practices. More likely, some producers who are not already using official eartags can be expected to combine tagging with other routine activities such as vaccinat ion or de

- worming, t hereby avoiding the costs associated with working cattle through a chute an additional time. Under this second scenario, the total incremental cost of official identification will range from $8.9 million to $19.7
million. All States currently require a certificate of veterinary inspection, commonly referred to as

a health certificate, for the in shipment from other States of breeder cattle and 48 States require a health certificate for feeder cattle. Annual incremental costs of the rule for ICVIs are e stimated to range between $2 million and $3.8 million

. If States currently requiring documentation other than ICVIs such as owner

- shipper statements or brand certificates continue to accept these documents in lieu of an ICVI, as permitted by this rule , the ICVI requirement in this rule will not result in any additional costs. The combined a nnual costs of the rule for cattle operations of official identification and movement documentation will range between $14.5 million and $34.3 million , assuming offici al identification will be undertaken separate ly from other routine management practices; or3 between $ 1 0 .9 million and $ 23.5 million , assuming that some producers will combine tagging with other routine management practices that require working cattle through a chute

. Currently, States and Tribes bear responsibilities for the collection , maintenance , and retrieval of data on interstate livestock movements. T hese responsibilities will be maintained under the rule, but the way they are administered will likely change

. Based on availability, Federal funding will be allocated to assist States and Tribes as necessary in automating data collection , maintenance , and retrieval to advance animal disease traceability

. Direct benefi ts of improved traceability include the public and private cost savings expected to be gained under the rule. Case studies for bovine tuberculosis, bovine brucellosis, and bovine spongiform encephalopathy (BSE) illustrate the inefficiencies currently often faced in tracing disease occurren ces due to inadequate animal identification and the potential gains in terms of cost savings that may derive from the rule.
B enefits of the traceability system are for the most part potential benefits that rest on largely unknown probabilit ies of disease occurrence and reaction s by domestic and foreign markets

. T he primary benefit of the regulations will be the enhanced ability of the United States

to regionalize and compartmentalize animal health issues more quickly , minimizing losses and enabling reest ablishment of foreign and domestic market access with minimum delay in the wake of an animal disease event. Having a traceability system in place will allow the United States to trace animal disease more quickly and efficiently, thereby minimizing not only the spread of disease but also the trade impacts an outbreak may have. The value of U.S. exports of live cattle in 2010 was $131.8 million, and the value of U.S. beef exports totaled $2.8 billion. The value of U.S. cattle and calf production in 2009 was $31.8 billion. For tagging cattle, t he estimated incremental costs of the4 rule for cattle enterprises

— between $1 4 .5 million and $ 3 4

. 3 million , assum ing official identification is a separately performed activity, and between $ 1 0 .9 million and $ 23.5 million , assuming official identification is combined by some operations with other routine management practices that require working cattle through a chute

— represent about one

- tenth of one percent of the value of domestic cattle and calf production . If there were an animal disease outbreak in the United States that affected our domestic and international beef markets, preservation of a very small propo rtion of these markets would justify estimated private sector costs attributable to the animal disease traceability program

. Most cattle operations in the United States are small entities

. USDA will ensure the rule’s workability and cost effectiveness b y collaborat ing in its implementation with representatives from States, Tribes, and affected industries

. In the table on the following page, we summarize expected benefits and costs of this rule.5 Summary table of expected benefits and costs of the animal disease traceability rule with respect to the cattle industry
Benefits

• More effective tracing of animal disease discoveries, that is, traces successfully accomplished more quickly than at present, with fewer private entities needing to be included in the traces; public resource savings.

• Reduced risk of disease spread following an animal disease discovery, including discoveries where the disease has a long latency period, due to timely location of all animals that may have been infected or exposed; prevention or mitigation of negative dome stic and international market impacts of disease occurrence.
Annual Costs Private Sector Official Identification ICVI Total

---------- Million Dollars

---------- Scenario 1, official identification undertaken separately from other management practices by producers not already using official ID 12.5 to 30.5 2.0 to 3.8 14.5 to 34.3

Scenario 2, official identification combined with other management practices by some producers not already using official ID 8.9 to 19.7 2.0 to 3.8 10.9 to 23.5

States Automation of data systems to provide electronic retrieval of ICVI data; incremental cost dependent on status of States’ existing animal disease traceability systems and availability of Federal funding. USDA expects that the States will match approximately 20 percent of Federal money provided to them, either through State funding or in

- kind contributions. U.S. Government $14.2 million in FY 2012, for IT assistance to States ($1.9 million), field implementation ($9.6 million), and program administration ($2.7 million).6 Table of Contents Summary

................................ ................................ ................................ ............................. 1 Introduction

................................ ................................ ................................ ......................... 8 The Need for Regulatory Action

................................ ................................ ..................... 8 Response to Comments

................................ ................................ ................................ ..... 11
Alternat ives to the Final Rule

................................ ................................ ....................... 19
U.S. Cattle Production

................................ ................................ ................................ ...... 21 Expected Costs

................................ ................................ ................................ .................. 22
Cattle Enterprises

................................ ................................ ................................ .......... 23 Animal identification and certification currently practiced

................................ ...... 23 Unit costs

................................ ................................ ................................ .................. 26 Total costs

................................ ................................ ................................ ................. 33 Interstate Movement of Horses and Poultry

................................ ................................ . 37 States and Tribes

................................ ................................ ................................ ........... 40 Federal Fu nding

................................ ................................ ................................ ............ 42 Rule Elements that will lessen the Cost Burden for Producers

................................ .... 43 Expected Benefits

................................ ................................ ................................ ............. 45 Private and Public Sector Cost Savings

................................ ................................ ........ 46 The trace process

................................ ................................ ................................ ....... 47 Current animal diseases of concern in cattle

................................ ............................. 53 Animal disease traceback investigations

................................ ................................ .. 56 Benefits of effective traceability to producers

................................ .......................... 617 Comparison to traceability for sheep and goats

................................ ........................ 63 Concluding observations

................................ ................................ ........................... 64 Market Effects of Improved Traceability

................................ ................................ ..... 65 Final Regulatory Flexibility Analysis

................................ ................................ ............... 68 Reason Action is Being Considered

................................ ................................ ............. 68 Objective of and Legal Basis for the Rule

................................ ................................ .... 69 Potentially Affected Small Entities

................................ ................................ ............... 69 Projected Reporting, Recordkeeping, and Other Compliance Requirements

............... 72 Duplication, Overlap, or Conflict with Existing Rules and Regulations

...................... 72 Alternatives to minimize Significant Economic Impacts of the Rule

........................... 73
References

................................ ................................ ................................ ......................... 748 

### Introduction

APHIS is establish ing general traceability r egulations for livestock moving interstate. Under this rule, unless specifically exempted, livestock moved interstate will have to be officially id entified and accompanied by an interstate certificate of veterinary inspection (ICVI)

or certain other docum entation. The purpose of this rule is to improve APHIS’ ability to trace livestock in the event disease is found

. In this analysis, we examine expected b enefits and costs of the rule in accordance with Executive Order s 12866 and 13563. Benefits are exp ected to exceed the costs overall . Possible impacts on small entities are cons id ered in accordance with the Regulatory Flexibility Act. The Need for Regulatory Action Preventing and controlling animal disease is the cornerstone of protecting American anim al agriculture. While ranchers and farmers work hard to protect their animals and their livelihoods, there is never a guarantee that their animals will be spared from disease. To support their efforts, the Animal and Plant Health Inspection Service (APHI S) of the U

. S

. D epartment of
A griculture (USDA) has promulgated regulations to prevent, control, and eradicate disease. Traceability does not prevent disease, but knowing where diseased and at

- risk animals are, where they have been, and when, is indispens ible in emergency response and in ongoing disease control and eradication programs. The United States does not currently have a n overarching animal disease traceability
program integrated to meet the needs of all species and disease programs

. Many of our animal disease program regulations , such as those for bovine tuberculosis and brucellosis, contain components of a traceability program, e.g., requirements for an animal moving interstate to be9 officially id entified and accompanied by document ation recording, among other things, the animal ’ s official id entification number and the locations from and to which it is being moved. Such requirements, however, do not apply to all livestock or to all interstate movements. This rulemaking is intended to ad dress animal disease traceability gaps in the regulations and enhance our ability to safeguard animal health

. We are particularly concerned with current inadequacies in disease tracing capabilities in the cattle industry. Previously, many cattle received official identification through USDA’s vaccination program for brucellosis, which require s that certain young female cattle and bison (aged 4 to 12 months) moving into and out of States or areas designated as Class B or Class C for brucellosis be vaccinat ed for the disease. These vaccinated calves must be permanently identified by means of a tattoo and either an official vaccination eartag or other official eartag if one is already attached to the animal (9 CFR part 78) . Our eradication efforts have been tremendously successful, and now all 50 States are brucellosis

- free. While this is certainly a positive development, it has resulted in a steep decline in the number of officially identified cattle. In 1988, when there were only 27 Class Free States and many more calves were subject to those requirements, 10 million calves were officially identified , but by 2010 that number had fallen to 3.1 million. As a result of decreasing levels of official identification in cattle , the time required to conduct disea se investigations is increasing. For example, investigations for bovine tuberculosis frequently now exceed 150 days , as USDA and State teams spend substantially more time and money in conducting tracebacks . The decreased level of official identification has resulted in an expansion of the scope of investigation s needed to identify suspect and exposed animals , requiring the testing of thousands of cattle that would otherwise not have needed to be tested.10 While the rule will apply to cattle and bison, horse s and other equine species, poultry, sheep and goats, swine, and captive cervids , the focus of this analysis is on expected economic effects for the beef and dairy cattle industries. These enterprises will be most affected operationally by the rule. For the other species, APHIS will largely maintain and build on the id entification requirements of existing disease program regulations, as discussed in the Supplemental Information to the rule

. Most p oultry m oved interstate is already officially id entified in accordance with the National Poultry Improvement Plan regulations or as agreed to by State animal health officials and the rule will allow for a group/lot id entification number to be used. Consequently, we do not expect that there will be large incremental costs associated with this provision for poultry farms already in compliance with NPIP. P oultry moved interstate to live bird markets will need to have an ICVI or other documentation as agreed to by th e shipping and receiving States

. For equines, this rule is consistent with current industry practices for identification related to testing for equine infectious anemia

. H orses and other equine s pecies moved interstate will be required to be accompanied by an ICVI or other interstate movement document, as agreed to by the States or Tribes involved in the movement. For swine , sheep and goats moved interstate, this rule will not change currently required official id entification devices

or me thods or movement documentation

. The rule has been developed in consideration of existing disease

- specific livestock movement regulations and of what was learned from the National Animal Id entification System (NAIS) . The latter was initiated in 2004 , as a means by which livestock producers could participate in national animal health safeguarding efforts

. A benefit

- cost study was commissioned by USDA, to comprehensively and quantitatively examine the program’s11 expected economic worth (NAIS Benefit

- Cost Research Team 2009)

. 1 Although the regulatory approach taken in this rule differs from prior implementation strategies, parts of the benefit

- cost study remain relevant and help inform our understanding of the cost s and benefit s of animal disease traceabil ity. Broad participation at p ublic meetings has underscored the need for USDA to continue to maintain close collaboration with States, Tribes, and producers in the development of this rule. Based on input from these entities, the animal disease traceabi lity program will rely on w id ely used and cost

- effective methods to id entify livestock moved interstate. The rule represents a flexible yet coordinated approach to animal disease traceability that will be outcome

- based, empowering States, Tribes, and pro ducers to determine the means of traceability that work best for them. 

### Response to Comments
It was claimed by some commenters that the regulatory impact analysis published in conjunction with the August 2011 proposed rule (preliminary RIA ) grossly underestimated the economic cost that would be borne by U.S. cattle producers. Some commenters expressed the view that we did not properly account for the cost of Phase 2. The final rule provisions related to cattle will apply only to cattle over 18 months of age. Provisions for cattle under 18 months of age that were part of the planned Phase 2 are not included in this final rule. If USDA determines that there is a need to include cattle under 18 months of age in the animal disease traceability
program , action will be undertaken through a separate rulemaking.

1 Hereafter referred to as “the benefit

- cost study.”12 In t he preliminary RIA, we estimate d the additional costs expected to be incurred due to the provisions of the proposed rul e. We acknowledge d that a significant portion of the cattle indus try already use s some method of identification, as reported in the National Animal Health Monitoring System 2007 and 2008 surveys. W e noted that two

- thirds of the beef operations and 90 percent of dairy operations use some method of identification. Additionally, for beef operations, over 60 percent of the calves had some form of individual identification

. Consideration of these existing practices is important when estimating new costs that may be attributed to the traceability requirements, as w e be lieve that official eartags , in many cases, will likely be applied at the same time at which cattle are already being tagged or worked through chutes for other management purposes. Additionally, with an array of official eartags, producers may choose a si ngle eartag that meets both management and official identification needs. We expect the additional cost of official eartags will be small. Likewise , we believe that producers will continue to develop tagging practices that minimize the cost of applying of ficial eartags. Producers that are not able to tag their own cattle may find a tagging site to be the most practical option for meeting the official identification requirements . We believe that t he preliminary RIA accurately identified tagging cost s that may occur at tagging sites

. We acknowledge that our estimates for the number of animals moved interstate that would require official identification is based on several assumptions and that the estimation of costs involves many variables. Regarding ICVI costs, w e noted that most States already require ICVIs for many interstate movements . Thus, we do not believe the overall volume of ICVIs issued will increase significantly as a result of this rule . In th is final rule, the exemption that allowed other13 documentation to be used in lieu of an ICVI , provided that the shipping and receiving States or Tribes agreed, for cattle and bison under 18 months of age moving interstate has been extended

to cover all ages and classes of cattle and bi son . This revision will likely make the potential increase in the volume of ICVIs issued less than originally anticipated

. In the preliminary RIA,

w e did account for the costs associated with these documents that are currently not required in
two States for feeder cattle. Overall, w e believe that estimates used in the preliminary RIA are reasonably accurate in describing expected cost impacts for producers.
One commenter asserted that the likely cost of the proposed rule to producers would range fro m $1.2 billion to $1.9 billion. The commenter cited testimony before the U.S. International Trade Commission (ITC). We believe that the costs described in th at testimony include d activities not associated with the provisions of the proposed rule. The es timated costs per calf cited in the U.S. ITC testimony included $5 for tags, data management , and verification; $7 for working calves, tag placement, and documentation; and $8 for feedlot and harvest data collection and chute fees. The U.S. ITC testimony cited estimated losses due to shrinkage as $10 to $20 in lost income potential per calf. The U

. S

. ITC testimony was also based on an electronic animal identification system involving data management and verification activities at the producer level.
W e are not disputing the cost factors for the practices referenced in the U.S. ITC report. However, we do not believe they reflect management practices necessary for producers to comply with the identification requirements of the traceability rule and, the refore, do not believe those cost factors are applicable in our economic analysis. One commenter estimated the number of cattle moving interstate to be much higher than the 30 million estimated in the preliminary RIA. Our estimate of 30 million cattle moving14 interstate uses data published by the USDA National Agricultural Statistics Service (NASS) in “Meat Animals Production, Disposition, and Income Summary”. Commenters stated that we ignore d the cost to distribute official identificati on devices and collect and maintain data on people receiving them and animals moved with them. It was stated that we also ignore d the costs of official tags bearing the required emblem, the costs of replacing existing tag systems with official tags, the c osts of equipment to read the tags, the costs of configuring corrals and handling facilities to allow for collection of identification information, and the costs associated with technology problems when tags are not read. We included information in the pr eliminary RIA about the cost of the tags, the cost of the labor to work the cattle in chutes and apply the tags, and the cost of the ICVI whe n the official identification information is recorded. Since the U.S. Shield has been imprinted on the NUES tags o btained by APHIS for disease

- control programs for many years, we do not agree that the standardized use of the official eartag shield will increase the cost of official eartags. Th is rulemaking is designed to allow producers to use tags that do not requir e any electronic or special equipment to read the official eartags

. As described in the preliminary RIA, States and Tribes would bear responsibility for the collection, maintenance, and retrieval of data on interstate livestock movements. Federal funding , as available, would be allocated to assist States and Tribes in meeting program goals. Additionally, APHIS continues to provide information systems that States and Tribes may elect to use at no charge. Some commenters stated that we underestimated the cost to producers of the rulemaking because we did not factor in the costs of buying chutes in calculating the costs of tagging.15 As stated previously, i n the preliminary RIA , we attempted to determine o nly the costs and benefits that were associated with the provisions of the proposed rule. W hile w e included estimated costs for chute operations for tagging, w e did not include the entire costs of buying or renting chutes because we were only trying to de termine the costs associated with the rule. If an operation does not currently own equipment needed for tagging, such as chutes, we note that tagging may take place at an approved tagging site. We do realize that some operations may elect to purchase a c hute that will allow them to tag their own animals. However, we do not believe the investment in the chute will be made solely for applying the official eartags to the operation’s cattle. Rather, the chute is likely to be used for many other management p ractices. Therefore, we believe that analyzing the cost of tagging animals at tagging sites provides a more reliable basis for a reasonable estimate of producer costs for tagging animals than would including the entire costs of buying or renting chutes in such an estimate. Commenters stated that we did not adequately account for the added costs to producers, sale barns, veterinarians, and veterinary clinics that would be associated with our proposed ICVI requirements. As mentioned previously, many S ta tes already require ICVIs for interstate movements of livestock covered in the traceability rule. Therefore, we do not believe the volume of ICVIs issued is likely to change significantly. We did, however , attempt to account for an increase in these cost s to producers, which were projected to range from $2.0 million to $3.8 million. In th is final rule, as we have already noted, the exemption allowing the use of other documentation in lieu of ICVIs has been extended to all ages and classes of cattle and bison when agreed to by the receiving and shipping State s and Tribe s, thus limiting the increase in the number of ICVIs issued

. If sale barns and veterinarians are providing services associated with the rulemaking, we16 anticipate that they will charge an a ppropriate price for those services. Costs that could be incurred by producers as a result were estimated in the preliminary RIA. One commenter stated that our preliminary RIA grossly underestimated the costs of ICVIs for horse owners. Another stated t hat the increased costs for the ICVI would place a greater burden on the horse industry than on the cattle industry because horses move more regularly. The preliminary RIA included information about estimated costs for equines. We estimated the incremen tal cost of an ICVI for most horses moved interstate to range between $4.00 and $7.50, based on the cost of testing for EIA. We estimate d that the total additional cost for the equine industry could range from $8.8 million to $16.5 million, given the current number of EIA tests per year. Many commenters expressed concerns about the potential economic burdens on small producers and livesto ck markets, arguing that the rulemaking favored larger, vertically integrated entities. While APHIS is sensitive to these concerns, many commenters did not provide specific information to support these claims or provide traceability solutions that woul d be more cost effective. W hile larger, vertically integrated entities may realize economic benefits due to the size of their operation s, those benefits will result from market forces and are not due to specific
pro visions of this rulemaking. However, in this final rule , we did add exempt ions in response to comments from small poultry producers for certain movements , so as not to put such producers at a disadvantage. I n particular , we exempted from the official identification requirements chicks mov ing i nterstate from a hatchery to a poultry producer or redistributor.17 It was stated that the rulemaking would disadvantage U.S. producers because they would be required to meet our traceability requirements when moving cattle across State lines , while we would place no such requirement on foreign producers

. The official identification and documentation requirements for imported livestock are well established through 9 CFR part 93 and are not affected by this rulemaking. The requirements in part 93 are at least equivalent to those specified in this rulemaking, so domestic producers will not be placed at a competitive disadvantage.
It wa s stated that the proposed rule was unfair in that it would only regulate interstate movement. As a result, producers may choose to take cattle to in

- State markets that are farther away, thus incurring increased transportation costs, in order to avoid the cost and burden of the proposed requirements. Producers and markets located in the interiors of States may be given an unfair competitive advantage by not having to comply. We realize there are many factors that producers will consider when marketing their animals. While the cost of officially identifying animals moved interstate to a market may be considered, there are many other economic factors associated with marketing d ecisions, including, but not limited to, transportation costs and the availability of local and out

- of

- State buyers. Many commenters viewed the proposed traceability program as an unfunded mandate. For example, it was said that State agencies would hav e to build database storage, management, and retrieval systems, which could strain their budgets. It was suggested that we provide funds to help States modernize and upgrade their data systems and train people to use them. The preliminary RIA discussed t he estimated Federal funding available to support animal disease traceability. A significant portion of the budgeted funds are targeted to field18 implementation. However, APHIS has taken the position that it will not fund the development of duplicative in formation systems, as such investments cannot be justified. Rather, APHIS will provide information systems that the States and Tribes may use at no charge. If a State or Tribe elects to develop its own system, however, it will have to cover the cost. Fe deral funds, however, may be used for the overall administration of the local traceability activities. It was stated that o ur proposed traceability system would enhance the bargaining power of packers at the expense of producers. The commenters who expre ssed this view did not describe how the proposed rule would alter the relative bargaining power of packers at the expense of producers , and we are unable to determine how this point is applicable to the rulemaking

. Many commenters noted that our prelimina ry RIA did not include a cost analysis for poultry producers. The preliminary RIA note d that there would be no additional costs for poultry enterprises that participate in the N ational P oultry I mprovement P lan (NPIP)

. Participation by commercial poultry producers in NPIP is very high. As noted earlier, a primary concern about the cost of identifying individual birds, in particular chicks shipped from hatcheries, has been accounted for in the exemption from the official identification requirements for such poultry shipments. Likewise, it has been clarified that interstate movements to a custom slaughter facility are exempt from these traceability regulations. Poultry moved interstate to live bird markets would need to ha ve an ICVI or other documentation as agreed to by the States. States have the option of maintaining current requirements for movement documentation , in which case no additional costs will be incurred. It was stated by some commenters that t he preliminary RIA indicated that the primary benefits of this rulemaking would be to minimize losses and enable the reestablishment of19 foreign and domestic markets. This rationale was questioned. A commenter requested more detailed information on tuberculosis traceout s in the last 5 years and how animal identification has contributed to successful or unsuccessful traceouts. The commenter also requested data on foreign market access lost due to tuberculosis and brucellosis. Some other commenters stated that the discus sion of benefits focused too much on the benefits of exports. It was maintained that, while exporters would likely benefit from the proposed rule, the costs would mainly be borne by domestic producers and related businesses. The ability of U.S. producers to export affects all producers, even those who do not directly sell to an international market. Trade restrictions lead to product s intended for the export market being diverted to the domestic market. An increase in the supply of a product that otherw ise may have been exported on the domestic market may l ead to lower prices in the short

run. In the event that exports cannot be re

- established, the likely result is a smaller domestic herd. A commenter stated that since the potential cost

- benefit ratio o f the rule could not be determined, the costs should be borne by the Federal Government. The preliminary RIA provided our estimate of who would bear the costs and the amount of those costs. In cases where we cannot quantify benefits or costs, we have desc ribed those benefits and costs qualitatively. The benefits of an efficient system for tracing animal disease occurrences, as set forth in the proposed rule and in this document , would accrue directly to the livestock and meat industries and indirectly to other sectors of the economy.

Alternatives to the Final Rule The National Animal Identification System (NAIS) was one alternative to the rule considered by APHIS. Although more than 500,000 livestock producers took part in NAIS,20 these producers represent e d only 36 percent of livestock enterprises . This limited participation in the identification of livestock operations, which did not include animal identification, would have many omissions of records necessary to achieve timely traceability for an effecti ve
program . As USDA considered alternatives to NAIS, we collaborated with industry to obtain their input on what options for identification and traceability they felt would work the best. As a result, and in contrast to NAIS, the rule will require trac eability only for livestock moving interstate. It will also encourage the use of low

- cost technology, such as metal eartags, for identifying livestock. Moreover, while the rule lists methods and devices approved by APHIS for identifying species of livest ock covered by the rule, it will allow alternative means of identification , such as branding, as agreed upon by animal health officials in the shipping and receiving States or Tribes involved in an interstate movement. The rule also stands in contrast to NAIS in terms of providing an adaptable approach that embraces the strengths and expertise of States, Tribes, and producers, while being less federally dictated . States and Tribes will be able to establish systems for tracing the interstate movement of l ivestock that work best for them. APHIS intends through future rulemaking to establish performance standards for States and Tribes , but will not require a one

- size

- fits

- all approach. Within the animal disease traceability framework, APHIS also considered (i) fully implementing official identification for all cattle upon promulgation of the final rule , or (ii) phasing in official identification of cattle under 18 months of age only after certain traceability performance criteria for older cattle are first met

. Both of these alternative s were rejected

. Instead, the provisions of this final rule for cattle will only pertain to those cattle over 18 months21 of age. I f USDA determines that there is a need to include cattle under 18 months of age in the animal d isease traceability program, action will be undertaken through a separate rulemaking. 

### U.S. Cattle Production
Cattle production is one of the most important industries in the United States, generating $43.8 billion in cash receipts during 2009 (USDA NASS 20 10a). The structure of the cattle industry continues to change, with a greater proportion of cattle being raised on fewer and larger farms. The total number of cattle operations in the United States in 2009 was 950,000, of which 753,000 were cow

- calf ope rations. During the last 20 years, the number of all cattle operations in the United States has fallen 28 percent, while beef cow operations have declined by 21 percent. Over this period, the average number of cattle per operation has increased by 36 per cent to nearly 100 head for all cattle operations. In 2009, operations with 500 or more head accounted for 47.7 percent of the total cattle inventory, compared to 38.0 percent in 1999. Although the total cattle inventory fell by 15 percent between 1979 an d 2009, commercial beef production grew by 22 percent. The decline in cattle inventory has been offset by a 23 percent increase in the average dressed weight of federally inspected cattle. The dairy industry in the United States has also undergone signi ficant structural change (USDA NASS 2010b). Total milk cow operations have declined significantly, while the number of large operations has increased. There were 65,000 milk cow operations in 2009, compared to 97,460 in 2001, a decline of 33 percent in 8 years . Despite the large decrease in milk cow operations during this time period, milk cow numbers rose 1 percent ( to 9.2 million head in 2009) and milk production increased by 15 percent ( to 189,320 million pounds in 2009).
Between 2001 and 2009 , the nu mber of dairy operations with 500 or more head increased by 20 percent, from 2,795 to 3,350 establishments . The number of enterprises with 2,000 or22 more head showed the greatest percentage increase (128 percent), rising from 325 to 740 operations. While the number of larger operations has grown , smaller operations have declined in number. Operations with fewer than 500 head fell from 94,665 in 2001 , to 61,650 in 2009, a decline of 35 percent. P roduction per cow for both larger and smaller operations con tinues to increase as lower

- producing cows are culled from herds and less efficient operations exit the industry. In sum, greater concentration and operational efficiencies characterize both the beef and dairy cattle industries. In this environment, oper ators rely increasingly on interstate movement of their livestock to achieve their marketing objectives. The traceability requirements will further assur e market participants that disease outbreaks can be contained without undue delay , minimizing market d isruptions domestically and internationally

. 

### Expected Costs
We address expected costs of the rule for the primary private and public entities that will be affected: cattle enterprises , equine and poultry enterprises, States and Tribes, and the Federal
g overnment. With respect to cattle producers , we provide general estimates of the cost s of principal activities that will be required. For many operators, costs of official animal identification and interstate movement documentation under the rule will be much the same , respectively, as the costs associated with current herd management practices involving eartagging and State

- required inshipment documentation

. Incremental costs for most equine and poultry enterprises are expected to be minimal due to current identification requirements related to, respectively, testing for equine infectious anemia and National Poultry Improvement Plan movement documentation

. The vast majority of the commercial poultry industry participates in
NPIP. We address concerns raised by backyard poultry growers by exempting chicks that move23 interstate from hatcheries, and clarify that all livestock moved to custom slaughter are exempt. These adjustments ensure that the rule will result in minimal cost, if an y, to the backyard poultry
growers. Impacts of the rule for States and Tribes are considered in terms of the need to upgrade data maintenance and retrieval capabilities in order to carry out the activities needed to trace livestock

. Lastly, p reliminary p rojections are presented of Federal funding that will be needed to implement the rule.
Cattle Enterprises Unless specifically exempted, livestock moved interstate will have to be officially identified and accompanied by an ICVI or other acceptable docume ntation. Types of official individual animal identification numbers and group/lot identification numbers ( GIN ) are specified in the Animal Disease Traceability General Standards document that accompanies this rule. Cattle and bison required to be officia lly identified for interstate movement will be identified with either a n official eartag or a GIN when appropriate

. **Animal identification and certification currently practiced**
An indication of the prevalence of current animal identification practices for adult cattle is provided in APHIS surveillance data for 2009 and 2010. Of a total of 156,952 cattle included in the survey (45,489 beef and 111,463 dairy), 46 percent had some form of an official USDA identification eartag (35 percent of beef cattle and 50 percent of dairy cattle surveyed). In addition, the survey noted a number of other types of identification used, including owner eartags, back tags, slaughter tracking eartags, and FSIS condemna tion eartags. Recent surveys by APHIS Veterinary Services, National Animal Health Monitoring System (NAHMS) regarding herd management practices of beef and dairy cattle producers also provide information on operators’ current animal health monitoring and r ecordkeeping. The24 NAHMS cow - calf survey ( USDA APHIS 2008) found that two

- thirds of operations used some form of indiv id ual animal identification on at least some cows, and nearly 80 percent of cows had some form of indiv id ual identification . Plastic eart ags were the most common single type of indiv id ual cow identification for operations and indiv id ual cows (50.4 and 57.5 percent, respectively). Electronic identification or microchips were used on 0.8 percent of operations and 1.2 percent of indiv id ual co ws. The proportion of cow - calf operations that used any form of indiv id ual animal identification ranged from 59.3 percent of operations with 1 to 49 cows , to 89.1 percent of operations with 200 cows or more. Plastic eartags were the most common type of in div id ual animal identification across all herd sizes. Nearly half of cow - calf operations (46.7 percent) used some form of indiv id ual animal identification on at least some calves, and 64.8 percent of calves had some form of indiv id ual identification . The most common type of indiv id ual calf identification was a plastic eartag for operations (37.7 percent) and indiv id ual calves (50.2 percent). Electronic identification or microchip responder s were used for calves on 0.7 percent of operations and 2.9 percent of indiv id ual calves. About 4 0 percent of cow - calf operations with 1 to 49 cows used indiv id ual animal identification on at least some calves, compared with about 6 0 to 70 percent of operations in the other herd

- size categories. As with cows, a plastic e artag was the most common type of indiv id ual animal identification for calves across all herd sizes. The NAHMS dairy survey (USDA APHIS 2007) found that over 90 percent of dairy operations used some form of indiv id ual animal identification , and almost all cows (97.4 percent) had some form of indiv id ual animal identification . Most operations (86.5 percent) used25 eartags on cows as a form of indiv id ual identification , and most cows (94.0 percent) had indiv id ual eartags. Various methods of electronic identifi cation were used on 4.1 percent of dairy operations, accounting for 9.0 percent of cows. On operations that used indiv id ual animal identification , evaluating milk production and genetic improvements were the two most common

reasons given (38.1 and 30.4 percent of operations, respectively). These statistics on current animal identification practices support the expectation that incremental costs of official animal identification will be minimal for the majority of cattle enterprises. We are unable to determine the number of cattle for which official identification will be required. Relevant sources (Shields and Mathews 2003, USDA NASS 2010c) do not provide information on interstate livestock movements specific to the categories of cat tle that will be directly affected by the rule. Livestock m arketing information include s animals shipped to slaughter. While data on States’ inshipments exclude animals brought into a State for immediate slaughter, they include feeder cattle, which will be exempted from the identification requirements. In 2009, inshipments totaled 19,790,000 head ; the N ation’s cattle and calf inventory totaled 93,701,200 head on January 1, 2010. We note that this estimate includ es beef cattle younger than 18 months and exclud es cattle moved interstate directly to slaughter. Under current regulations, animals are usually r equired to be accompanied by a shipper

statement or health certificate when moving interstate. An APHIS or State representative or accredited veterin arian responsible for issuing a certificate of veterinary inspection must forward a copy of the certificate to the State animal health official in either the State of origin or the State of destination. Many States also require entry permits, which can be oral or written.26 An ICVI , like animal health certificates currently required in the CFR, is to have the following information: c ertificate number , s pecies , n umber of animals , p urpose of movement ,

a ddress at which the animals were loaded for interstate movement , d estination address , n ames of the consignor and the consignee and their addresses if different from above , and o fficial identification number of each animal or group of animals moved that is required to be officially identified ( or if the sending and receiving States /Tribes have agreed upon an alternative form of identification, a record of that identification )

. If animals moving under a GIN also have individual official identification, only the GIN will have to be listed on the ICVI. All States already require a certificate of veterinary inspection for breeding cattle received from other States, with the information required including, as a minimum, the items described above for an ICVI. The ICVI requirements will simply replace existing interst ate movement documentation requirements. Currently 48 States use ICVIs for feeder cattle.
**Unit costs** The Federal government will supply metal eartags and eartag applicators to States or Tribes free

- of

- charge for distribution to cattle operations , if res ources allow

. 2 An eartag applicator can last for several years. Table 1 shows the incremental, or additional, costs of official animal identification for e nterprises that either do or do not already identify animals using ear tag s as a part of their routine management practices

. For producers currently using official identification, there will be no additional cost. Approximately 35 percent of beef cattle currently have official identification. These producers are referred to as Group 1 in Table 1.

2 The FY 2012 President’s Budget requests funding to pay for the eartags. The cost of an eartag is about 10 cents. An estimated 30 million cattle are shipped interstate per year , including 19.5 million that are shipped without official identification (see table 3). We therefore estimate the total cost of official eartags needed because of the rule to be $3.0 million per year. This cost will be offset to some extent by reduced costs to animal disease programs that currently pay for tags for cattle. If in the futur e, federally appropriated funds were not available to purchase these additional eartags, those producers not currently using official identification will purchase eartags, which will increase total producer costs by about $1.95 million.27 An estimated 45 percent of beef cattle have some type of identification for management purposes other than official identification. These producers are referred to as Group 2 in Table 1. T he only additional costs for producers who a re already tagging their cattle, but not using official identification, will be the labor required to attach the official animal identification during the same tagging event . As shown in table 1, this incremental cost is estimated to be $0.18 per head.
C hute operation costs, as well as costs of shrinkage and possible human or animal injury, are costs that the producer will bear in any case. Management style, working weights, and other factors can contribute to variations in costs, including shrinkage cos ts, from operation to operation. The age at which cattle are identified using eartags, for those operations that do so, varies from one enterprise to the next. For management purposes, s ome producers tag young calves or heifers just before they are bred, while other producers do not tag their cattle until they are nearly ready for sale. O perations that tag calves at birth will have considerably lower costs associated with shrink age compared to operations that tag their cattle just before the time of sale

. The rule does not specify at what age cattle will need to be officially identified, only that it be accomplished prior to interstate movement for those animals that will require official identification. Official identification could provide additional b enefits to an operator, depending on the type of managerial information included on the eartag beyond the requirements set forth in the Animal Disease Traceability General Standards document

. For the remaining 20 percent of cattle that will not be eartag ge d if it were not required by the rule , the chute operation costs and the costs of shrinkage and possible injury (as well as the cost to attach the eartag) are fully attributable to the rule. These producers are referred to as Group 3 in Table 1. The cos t per head of official animal identification is estimated to range28 between $1.68 and $4.68. T he cost of tag ging may be somewhat underestimated, since some period of time (5 to 1 5 minutes set

- up time ) will be needed to prepare for tag ging

. These cost estimates represent the cost if tagging were carried out independent of other cattle management activities. In practice, producers could choos e to combin e tagging with routine activities such as vaccinating or de

- worming cattle. By combining t agging with other activities, producers will incur costs similar to Group 2 producers , $0.18 per head. We anticipate that a significant portion of Group 3 producers will choose to change their management activities in this manner

.29 Table 1. Estimated p roducer incremental cost of official animal identification for cattle Group 1: Incremental cost if official identification is currently used 1 Group 2: Incremental cost when incorporated into routine management practices 2 Group 3: Incremental cost when not incorporated into routine management practices 3 Per Head Metal eartag 4 Zero Zero Zero Eartag applicator 5 Zero Zero Zero Chute operation 6 Zero Zero $1.00 to $2.50 Labor to attach the eartag 7 Zero $0.18 $0.18 Shrinkage and injury 8 Zero Zero $0.50

- $2.00 Total Zero $0.18 $1.68 to $4.68 1 Estimated to comprise 35 percent of beef cattl e . 2 Estimated to comprise 45 percent of beef cattl e . 3 Estimated to comprise 20 percent of beef cattl e . 4 Metal tags with numbers conforming to the National Uniform Eartagging System (NUES) will be provided at the direction of State and Tribal animal health officials. 5 Eartag applicators will also be provided to producers for NUES tags. 6 Based on data pres ented in the benefit

- cost study. For establishments that do not routinely eartag livestock, tagging may take place at an approved tagging site. 7 Based on a median farm worker’s hourly wage (farm and ranch animals) of $10.42, and assuming 1 minute is req uired to tag 1 animal (U.S. Department of Labor, http://www.bls.gov/oes/2009/may/oes452093.htm ). 8 Assumed upper - bound shrinkage cost is $1.90, based on a weight loss of about 0.2 percent, or ab out 2.5 pounds for a cow weighing 1,270 pounds, and a price of $950 ( http://www.ams.usda.gov/mnreports/gl_ls132.txt ). Potential injury costs comprise the balance of this cost category. A rang e of $0.50 to $2.00 is used, allowing for subsequent gain by livestock on feed. Shrinkage may be less of an issue for replacement breeding stock, but potential injury costs will be an issue in all instances.

The rule will establish the ICVI as the primary document for the interstate movement of livestock. Other documentation for interstate movement, as agreed upon by two or more States/Tribes, will be acceptable. The rule will also define the minimum information required to be on an ICVI , as described above

.30 An ICVI will be issued only by a State, Federal, or accredited veterinarian. A copy of the ICVI (or other interstate movement document used in lieu of an ICVI or permit) will be required to be forwarded by the veter inarian to the State animal health official of the State of origin within 5 working days. The State of origin, then, will be required to forward a copy of the ICVI to the State of destination within 5 working days. Table 2 compares the incremental cost of acquiring an ICVI by enterprises that are already using certificates of veterinary inspection for moving cattle interstate other than for immediate slaughter and enterprises that are not doing so. For the former group, the incremental cost may be additio nal charges by the veterinarian who is issuing the ICVI, if more time is required than when currently certifying livestock for interstate movement to meet States’ requirements

. Currently all 50 States require a certificate of veterinary inspection for bre eder cattle and 48 States require one for feeder cattle. We estimate the incremental cost per head to range between zero and $1.00. For operations that will not otherwise have cattle certified for interstate movement, there will be the chute operation cos ts and the costs of shrinkage and possible injury for animals that will need individual animal identification recorded on the ICVI , as well as the costs of a n accredited veterinarian. We estimate the incremental cost per head to range between $4.00 and $ 7

. 5 0 for cattle that need individual official identification recorded and between $1.00 and $3.00 for animals not required to have their identification recorded

. C attle and bison under 18 months of age ( ex cluding sexually intact dairy cattle, cattle and b ison used for rodeo , exhibition, or recreational purposes ) will not need to be identified, but will still require an ICVI for interstate movement . The ICVI will state the number and type of31 animals (e.g., 40 mixed steers and heifers) and include a statement such as, "No official identification required at this time."

Table 2. Estimated producer incremental cost of interstate certificate of veterinary inspection (ICVI) for cattle Incremental cost for enterprises already utilizing certificates of veterinary inspection for moving cattle interstate other than for immediate slaughter Incremental cost for enterprises not already utilizing certificates of veterinary inspection for moving cattle interstate other than for immediate slaughter Per Head Issuance of ICVI, including recording of the animal’s official identification number 1 Zero to $1.00 $1.00 to $3.00
Chute operation 2 Zero $1.00 to $2.50 Shrinkage and injury 3 Zero $0.50

- $2.00 Total Zero to $1.00 $1.00 to $7.50 1 Issued by an APHIS representative, State or Tribal representative, or accredited veterinarian. 2 Based on data presented in the benefit

- cost study. This cost only applies to cattle that will need to have individual animal identification recorded on the ICVI. 3 Assumed upper - bound shrinkage cost is $1.90, based on a weight loss of about 0.2 percent, or about 2.5 pounds for a cow weighing 1,270 pounds, and a price of $950 ( http://www.ams.usda.gov/mnreports/gl _ls132.txt ). Potential injury costs comprise the balance of this cost category. This cost only applies to cattle that will need to have individual animal identification recorded on the ICVI. A range of $0.50 to $2.00 is used, allowing for subsequent gai n by livestock on feed. Shrinkage may be less of an issue for replacement breeding stock, but potential injury costs will be an issue in all instances.

The unit costs shown in tables 1 and 2 are generalized but indicative of their likely magnitude. Importantly, there are economies of size for both animal identification and ICVI activities. C osts per head will decrease as the numbers of animals officially identified and for which ICVIs are issued increase. Cattle enterprises range widely in the equi pment that they will have available for the animal restraint necessary for eartagging and recording animal32 identification for the issuance of an ICVI. Larger operations that regularly tag cattle for management purposes are more likely to have permanent ch utes, and smaller operations may make use of portable chutes or take their cattle to a tagging site when it is necessary to acquire a movement certificate

. If States currently requir e documentation other than ICVIs such as owner

shipper statements or bran d certificates and continue to accept these documents in lieu of an ICVI, as permitted by this rule, the ICVI requirement in this rule will not result in any additional

costs. As mentioned , USDA will bear the cost of the eartags and the eartag applicators as resources allow

. The 10

- cent metal eartags reflect USDA’s intent to rely on low

- cost technology

. A lthough the metal tags are inexpensive, they are more labor

- intensive than electronic systems when reading and recording animal identification data. De pending on an operator’s management objectives, a different type of eartag, including ones that support automated data capture , may be chosen. Unit charges for the services of a n accredited veterinarian for issuing an ICVI will vary , depending on the num ber of ICVIs issued at a particular location and the travel time required. The incremental cost range s shown in table 2 , up to $1.00 for enterprises already using certificates of veterinary inspection for moving non

- slaughter cattle interstate and from $1 .00 to $3.00 for enterprises not already doing so , represent the additional inspection and ICVI recording costs that may be charged in most instances. Costs of retagging of cattle moved interstate will be much the same as the tagging costs shown in table 1. A State or Tribal animal health official or an area veterinarian

- in

- charge can authorize the replacem ent of lost eartags or ones that ha ve deteriorated or are otherwise not usable. To facilitate traceback, records will need to be kept when official i dentification devices33 are replaced under such circumstances. We ob s erve that since most beef cattle under 18 months will be exempt from the traceability regulations , the need to retag cattle received by backgrounding operations may be relatively infrequent. 3 Producers with only several head of cattle have various options to align with the identification requirements and to minimize their costs. Some may elect to officially tag calves at a young age when tagging can be done before a chute and corrals are needed to work the animals. When calves are older, many producers will likely officially identify their calves when they work the animals for other routine management practices such as vaccinating or de

worming. Pro ducers that sell at markets within their State can determine if they want to assume the responsibility of having their cattle eligible for interstate movement. If so, producers unable to tag their own animals may have calves tagged at a market that provid es tagging services. The tagging and related marketing arrangements provided by auctions and markets to consigners will likely vary among regions of the country.

**Total costs** Enterprises having the estimated 35 percent of cattle currently official identifi ed will not incur any additional costs of tagging. Operators having t he estimated 45 percent of cattle currently identified with some type of tag other than official identification will incur an estimated cost of $0.18 per head. The remaining 20 percent of operations that do not currently use ear tag s will incur an estimated cost of $1.68 to $4.68 per head. As an example, i f an operator were to move 20 head interstate, there will be no additional identification cost if the cattle are already

3 Backgrounding re fers to an intermediate stage of beef production that lasts for several months before the cattle are moved to a feedlot. During the backgrounding period

— when the animals eat roughage and/or light energy rations or graze pasture (native grass or winter whe at)

— producers decide when to place them in feedlots to fatten for slaughter, based on market conditions and forage availability.34 officially id entified. If they would normally be tagged but not officially identified, the total incremental cost is estimated to be $3.60 for a herd of 20 head

. If the operator would not otherwise tag the cattle as a routine management practice, then the total incremental cost of official identification is estimated to range from $ 3 3.60 to $ 93 .60 for the 20

- head herd

. The latter group of o perators could improve the health and value o f their herds by conducting other management practices that require using a chute, such as vaccinating and de

- worming, at the same time that the cattle are officially identified

. For the same example, i f the 20 head of cattle were already being moved inte rstate with a certificate of veterinary inspection, then the total incremental ICVI cost is estimated to range from between zero and $2 0. If the cattle will not need a certificate of vet er inary inspection for interstate movement if it were not for the rul e , the total incremental cost will range between an estimated $20 and $150. The high

- cost estimate will be incurred only if animals need to be worked in a chute specifically for the purpose of issuing an ICVI. Clearly, expected impacts of the rule depend on current identification practices and movement documentation. These costs could be different for cattle moved from and to States or Tribes that accept documentation other than ICVIs

. About 74 million cattle and calves were sold in 2007. A pproximatel y 20 million head move interstate as breeding animals and feeders. Only a portion of the 20 million head will be affected by this rule, because c attle under 18 months of age will not require official identification. Conservatively, however, we include the full 20 million head in our cost calculations , given the uncertainty surrounding these statistics

. We do not have information on the number of cattle moved interstate directly to slaughter, but estimate it to be about 10 million head , based upon USDA NASS “ Meat Animals Production, Disposition, and Income 200935 Summary ” data

. Thus, a total of 30 million head or about 40 percent of cattle and calves sold are assumed to move interstate. Based on this quantity, we estimate total costs of official identif ication.

Table 3 shows the estimated total costs if all producers were to continue current management practices. For the operations already using official identification, there will be no additional animal identification cost attributable to this rule. For the 45 percent of operations using some tagging method but not using official identification, we estimate the incremental cost of tagging to be $ 2.4 million. For the 20 percent of operations that do not currently use any tags, we estimate the increm ental cost of tagging will range from $10.0 million to $ 2 8. 1 million if they were to conduct tagging as an activity separate from other routine management practices

. Total annual costs of official identification for cattle are estimated to range between $ 12.5 million and $ 30.5 million.

Table 3. Estimated costs of official identification with current management practices Estimated Number of Cattle Moving Interstate Incremental Cost, Low Estimate 1 Incremental Cost, High Estimate
Using Official ID 1 0 , 50 0,000 $0 $0 Tagging but not using official ID 1 3, 50 0,000 $ 2 , 43 0,000 $ 2 , 43 0,000 Not tagging 6 , 00 0,000 $10,080,000 $ 2 8, 08 0,000 Total 30 , 0 00,000 $12,510,000 $ 30 , 51 0,000
1 The incremental costs are those costs of official identification that are attributed to this rule. Table 4 shows the estimated total cost of official identification with modified management practices. As disc ussed in the Unit Costs section , a significant portion of the36 producers who are currently not tagging can reduce the cost of tagging by combining it with other routine cattle management activities. Under modified management practices, producers will choose to combine tagging with other routine activi ties such as vaccinating or de

- worming cattle , thereby avoiding the costs associated with working cattle through a chute an additional time. After considering public comments, we have increased the estimated cost of this second scenario in this Final Regu latory Impact Analysis. We recognize that all producers may not combine tagging with other management activities and therefore some will continue to incur higher costs.

Table 4. Estimated costs of official identification with modified management practice s Estimated Number of Cattle Moving Interstate Incremental Cost , L ow E stimate 1 Incremental Cost, H igh

E stimate Using Official ID 10,500,000 $0 Tagging but not using official ID 13,500,000 $2,430,000 Not currently tagging Incorporate Tagging 2,400,000 $432,000 $432,000 Use tagging service 3,600,000 $6,048,000 $16,848,000 Total 30,000,000 $8,910,000 $19,710,000
1 The incremental costs are those costs of official identification that are attributed to this rule.

The additional cost of ICVIs in a traceability system will be minimal because all 50 States currently require a certificate of veterinary inspection for breeder cattle and 48 States require a certificate of veterinary inspection for feeder cattle. The ru le will impose no additional37 costs for an ICVI for breeder animals, which make up about 56 percent of the national herd (2007 Census of Agriculture). For feeder cattle moving to any State other than California or Texas, there will be no additional cost fo r ICVIs. Approximately two million cattle are move d into California and Texas. If cattle shipped into these two States required an ICVI, the additional

cost will range from an estimated $2.0 million to $3.8 million, if the individual animal
identificatio n number is recorded. We anticipate that States not currently requiring ICVIs may continue to accept other documentation such, as owner

- shipper statements or brand certificates, as permitted by this rule , in which case there will be no additional costs for movement documentation. However, we include these possible additional costs of movement documentation in our private

- sector total cost estimates. As stated previously, cattle and bison under 18 months of age (excluding sexually intact dairy cattle, cattle and bison used for rodeo , exhibition, or recreational purposes) will not need to be identified, but will still require an ICVI for interstate movement . The ICVI will state the number and type of animals (e.g., 40 mixed steers a nd heifers) and include a statement such as, "No official identification required at this time." The combined annual costs of the rule for cattle operations of official identification and movement documentation are estimated to range between $14.5 million and $34.3 million, assuming official identification will be undertaken separately from other routine management practices; or between $ 1 0 .9 million and $ 23.5 million, assuming that some tagging will be combined with other routine management practices that require working cattle through a chute.
Interstate Movement of Horses a nd Poultry There are approximately 4.3 million on

- farm horses and other equines (2007 Census of Agriculture). USDA does not count horses and other equine species on nonfarm operations. The38 American Horse Council Foundation published an estimate of the U.S. horse inventory for 2003 based on a survey conducted by Deloitte Consulting, LLC. The Deloitte estimate was a total of
9 .2 million horses. 4 Among livestock, horses are unique in that they live longer, are generally more valuable, and are transported interstate more often. Many horses are routinely identified for breed registries, horse identification services, or to ensur e the integrity of the racing industry. There are approximately 2.2 million tests conducted annually for equine infectio u s anemia (EIA). Testing for EIA is a State requirement for all interstate movement and in some States for intrastate movement as wel l. Horses must be identified on the requisite EIA test

related paperwork. When horses move interstate to attend shows or exhibitions, registration is required upon entry. Accordingly, event officials are able to track horses moving interstate to the far m of origin. In this rule, h orses and other equines moved interstate will be required to be accompanied by an ICVI or other interstate movement document, as agreed to by the States or Tribes involved in the movement. Because horses moving interstate must already be tested for EIA and be identified in the test

- related paperwork, the change from current to the requirements will be relatively small. In some cases the additional cost may be zero. In other cases, the additional cost of the ICVI may range fro m an estimated $4.00 to $7.50. If 2.2 million additional ICVIs were issued in addition to the EIA paperwork, the total additional cost could range from $8.8 million to $16.5 million. The 2007 Census of Agriculture estimates the market value of horses
and equines sold to total $2 billion. This understates the total value of horses and other equine species since it only considers those animals sold.

4 The large difference between the USDA

- NASS estimate and the Deloitte estimate derives from differing list

development procedures and adjustment procedures for missing data.39 In 2009, total U.S. production of broiler meat was 35.5 billion pounds with a retail value of $44 billion. Poultry moved interstate will be required to be accompanied by an ICVI unless

t hey are from a flock participating in the N ational P oultry I mprovement P lan (NPIP) and are accompanied by the documentation required under the NPIP regulations or the y are moved directly to a recognized slaughtering establishment. A n ICVI will not be needed if t he poultry are moved from the farm of origin for veterinary medical examination, treatment, or diagnostic purposes and either returned to the farm of origin without chang e in ownership or euthanized and disposed of at the veterinary facility. The documentation requirement will not result in any additional costs for poultry enterprises that participate in NPIP. Poultry mov ed interstate to live bird markets (LBM) will

nee d to have an ICVI or other documentation as agreed to by the States. Live bird markets are concentrated in the Northeast, specifically in New York and New Jersey. There are about 109
LBM ’s in New York and New Jersey with 191 suppliers located in 12 diffe rent States. Both New York and New Jersey currently require movement documentation for poultry moving to live bird markets. Southern California has the second biggest concentration of LBM ’s . There are about 35 LBM in s outhern California and fewer than 5 0 in the entire S tate. It is estimated that there are 12 to 15 producers who supply poultry for LBM in s outhern California. Other areas of the country have few live bird markets. The period of highest LBM demand is from November through February. In N ew York and New Jersey, approximately 700,000 birds circulate through the market during that time. By comparison, the s outhern California LBM handle s about 30,000 birds in that same time. During

non - peak months, the daily population of birds in Southern California LBM is approximately 8,300 live birds ( Cardona et al. 2009 )

.40 APHIS does not have an estimate of the possible costs of the rule for enterprises that move poultry interstate to the live bird markets if ICVIs were to be required

. If New York and New Jersey maintain current require ments for movement documentation , the rule will not result in additional costs

. States and Tribes Expected costs of the rule for States and Tribes are related to changes in their animal disease traceabili ty activities. States and Tribes bear responsibilities for the collection , maintenance , and retrieval of data on interstate livestock movements. While these responsibilities will be maintained under the rule, the way they are administered will likely cha nge . Federal funding , as available, will be allocated to assist States and Tribes in making the necessary data collection , maintenance , and retrieval advancements

. Under the rule, after receiving a copy of an ICVI forwarded by the APHIS or State representative or accredited veterinarian who issued it, t he State animal health official of the State of origin will be required to then forward a copy to the State animal health official of the State of destination within 5 working days. The 5

- day limit for forwarding is intended to facilitate a traceback and/or trace forward investigation if an animal moved interstate in accordance with the regulations were found to be suspect or affecte d

. This rule will require that a ny State, Tribe, accredited veterin arian, or other person or entity who distributes official identification devices maintain for a minimum of 5 years a record of the names and addresses of anyone to whom the devices were distributed. We will also require that approved livestock facilities keep for a minimum of 5 years any ICVIs or alternate documentation used in lieu of an ICVI, for covered livestock that enter the facilities. The 5

- year requirement for maintaining records of official identification devices and ICVIs or other animal41 moveme nt documents is necessary because certain animal diseases, such as tuberculosis and bovine spongiform encephalopathy, have very long latency or incubation periods, which can make traceback efforts quite challenging. Such diseases may not manifest themselv es until several years after it was officially identified and/or moved interstate. The recordkeeping requirements will enhance our ability to conduct traceback investigations of infected and exposed animals, even in cases where the disease that the anima l has contracted or been exposed to has a very long latency period. Current bovine tuberculosis regulations require dealers who purchase, deal in, or sell cattle or bison; or who act as a commission representative or broker; or who operate and conduct

an auction in which cattle or bison are sold to maintain records for a period of 5 years. 5 Because they have an existing recordkeeping system, we do not anticipate significant costs for maintaining a record of ICVIs or alternate documentation . We anticipate that accredited veterinarians will charge a price for their services that is adequate to cover the cost of any recordkeeping they do with respect to distribution of official identification devices. Federal funding (described below) will be available to States and Tribes to develop and implement an animal traceabil i ty approach. These funds may be used to enhance recordkeeping if needed. Improvement by States and Tribes of their animal disease traceability capabilities, as envisioned, wi ll require resources to increasingly automate their data systems to provide electronic retrieval of ICVI data , which will result in major advances in animal disease management. Data

- entry costs will be incurred, but system s will be able to better facilita t e the rapid retrieval of animal movement information, in contrast to the relatively inefficient , paper based process that is now found in many States.

5 USDA APHIS 91

- 45

- 011 Bovine Tuberculosis Eradication Uniform Methods and Rule s, Effective January 1, 2005, pg. 11

- 12.42 Federal resources will be used to fund cooperative agreements with States and Tribes to implement the an imal disease traceability plan. USDA expects that the States will match approximately 20 percent of the funds provided to them either through funds or in

- kind contributions. For FY 2012, the projected appropriated Federal funding is $14.2 million (table 5)

. Of this amount $1.9 million is for information technology and $9.6 million is for field implementation. A 20

- percent share from the States will be about $2. 3 million. These funds will finance information technology imp r ovements , field impleme ntation, and program administration. With Federal assistance, gains from increased efficiencies of animal disease traceability by States and Tribes are expected to outweigh State

- and Tribe

- incurred costs

. In accordance with the Paperwork Reduction Act, the preamble to the rule describes the information collection or recordkeeping requirements contained in the rule. The se requirements will be primarily borne by State, Tribal, and territorial animal health o fficials; accredited veterinarians; livestock market operators; and harvest facility employees. The Paperwork Reduction Act section estimates the time required to meet the requirements of the rule and asks for public comment. Federal Funding Table 5 shows the estimated Federal spending plan to develop and implement the animal disease traceability approach for fiscal year 2012 , which includes carryover funding from previous years . These estimates are Federal costs only , and a significant portion of these f unds will be prov id ed to the States and Tribes. As mentioned , USDA expects that the States will match approximately 20 percent of the funds prov id ed to them either through funds or in

- kind contributions. This assumption is based on contributions of State s toward current and past cooperative agreements in support of animal disease traceability.43 Table 5 . Projected Federal appropriated funding for supporting animal disease traceability activities, fiscal year 2012 FY 2012 System funding (information technology) $1,900,000 Field implementation $9,611,600 Program administration $2,729,400 Total $14,241,000 Among implementation costs will be the recording of animal identification numbers retired at slaughter. In estimating this cost, we assume eartag numbers will be entered at a federally funded central tag processing center. APHIS estimates the cost of tag retirement and data entry will be about $0. 24 per tag. The aggregate cost is estimated to be $ 1.7 million per
year. 6
Rule Elements that will l essen the Cost Burden for Producers E nterprises that move their cattle interstate will bear certain costs when the rule becomes final , although, as noted, incremental costs for many operations may well be minimal . We identify here several elements of the rule that will further lessen the cost burden. A central tenet of the regulatory philosophy that underlies this rule

— namely, allowing States, Tri bes, and producers to find and use the approaches to traceability that work best for them

— will enable entities to seek and employ low

- cost means of achieving the rule’s objectives. For example, any

two or more States or Tribes will be allowed to agree upon and use a ny form of animal identification for interstate movement of cattle under the regulations

. The collaborative manner in which the rule’s implementation is intended to advance will also help to minimize operational burdens . A n advisory group that includes representation from

6 The cost of $0.24 is for manual data entry with double entries to reduce errors. The estimated number of tags retired each year is 7 million , including slaughtered and rendered cattle.44 APHIS, States, Tribes, and industry will offer recommendations on is sues relating to traceability and provid e feedback on the effectiveness of various elements of the traceability program. In addition to ind ividual identification of cattle and bison by means of official eartags, the rule will allow for the use of a group/lot identification number (GIN) when cattle or bison are eligible for interstate movement using group/lot identification. It will not be ne cessary to have the GIN attached to each animal, a provision in keeping with the rule’s emphasis on allowing for maximum regulatory flexibility. The cost burden will also be lessened by the phase

- in of the rule’s newly

- defined identification numbers and sy stems and their similarity to existing numbers and systems. For example, t he animal identification number ( AIN ) definition is similar to that in existing regulations. APHIS will phase

- out existing AIN formats in order to achieve greater standardization o f this numbering system, while providing producers with adequate notice of the change so they can work through existing inventories of eartags. This requirement will apply only to animals tagged one year or more after the effective date of the final rule

. P roducers will not have to retag animals that had been officially identified using the USA or manufacturer's code AIN prior to that date. Existing regulations allow for the use of premises

- based numbering systems on official eartags. Numbering system s using a premises identification number and a producer's production numbering system will continue to be allowed under th e rule, but APHIS will expand the range of allowable location identifiers by defining a location

- based numbering system

. T here are t wo situations that are exempt from the traceability requirements: m ovement entirely within Tribal land that straddles a State line and the Tribe has a separate traceability system from the States in which its lands are located; and movement to a custom slaughter45 facility in accordance with Federal and State regulations for preparation of meat for personal consumption

. There are also several instances in which cattle and bison could be moved interstate without an ICVI. These situations incl ude:

• M ove ment as part of a commuter herd 7 with a copy of the commuter herd agreement ;

• Movement directly from one State through another State and back to the original State ; or

• Movement to an approved tagging site, provided that the cattle and bison are off icially identified there before they are commingled with cattle and bison from other premises. 

### Expected Benefits
The purpose of the rule is to improve livestock traceability in the event that disease is found. Benefits of improved tracing capabilities wil l extend to private producers in terms of the health of their own animals and the preservation of domestic and international markets. States, Tribes, and the Federal government will benefit from reduced animal disease management expenditures when there is a disease outbreak, as well as through general gains to the economy that derive from the establishment of improved animal health safeguards. In the first section that follows, we examine the direct benefits of improved traceability by considering public a nd private cost savings expected under the rule. The tracing process is described. Given the variety of diseases traced, case studies are presented to illustrate the types

7 In this rule, a commuter h erd is defined as a herd of cattle or bison moved interstate during the course of normal livestock management operations and without change of ownership directly between two premises, as provided in a commuter herd agreement. A commuter herd agreement is defined as a written agreement between the owner(s ) of a herd of cattle or bison and the animal health officials for the States and/or Tribes of origin and destination specifying the conditions required for the interstate movement from one premises to anot her in the course of normal livestock management operations and specifying the time period, up to 1 year, that the agreement is effective. A commuter herd agreement will be subject to annual renewal. Meeting commuter

- herd requirements in lieu of official identification requirements will still provide adequate traceability in our view.46 of costs currently borne , their magnitudes , and potential savings. Due to the lack of specific information on economy

- wide disease spread and impacts, the case studies illustrate the disease spread and economic impacts for selected instances where reliable information is available. A second section highlights the market

- related gains expected to be attributable to the rule. Improved animal disease traceability will help ensure that negative domestic and international market reactions to animal disease occurrence s are minimized through efficient and quickly concluded epi demiological investigation s . Private and Public Sector Cost Savings The time required to trace an animal’s history of movement when there is disease discovery can largely determine the private and public costs that may be incurred. The traceability regu lations will help to significantly reduce the amount of time needed to fully identify the number and location of animals that have been in contact with a n infected animal. The longer it takes to complete the epidemiolog ical investigation, the greater the number of entities and animals affected and the greater the geographical scope of an outbreak . It is critical that the tracing of animal movements be accomplished as quickly as possible. Three cattle diseases are described and specific occurrences are used t o demonstrate the benefit s of traceability that will result from the rule. Specific disease occurrences are used to depict actual instances in which the tracing capability was hindered due to a lack of information required by epidemiologists when co nducting disease investigations. This is not to suggest that all disease investigations are inefficient due to a lack of information , but to reflect how these investigations become more complicated and affect more producers when good information is

not re adily available. Most concerning are outcomes when an investigation cannot quantify or specifically account for all at

- risk livestock.47 The specific characteristics of diseases lead to differences among epidemiological investigations . Knowing t he history of the animal is critical when dealing with a highly contagious disease, in particular its prior locations and contacts with other animals

. The type of information and its completeness a ffect how the disease investigation is conducted . Complete informati on can help animal health officials to minimize the number of herds tested

. When information is limited or vague, the testing of herds is expanded to ensure all possible herds are included

. When the herd owner cannot provide information indicating the so urce herd of an animal of concern , the herds of all potential suppliers of the subject animal must be tested

. Numbers of animals needing to be tested can rapidly multiply as all potential sources are considered

. With official identification and good records , tracing can be restricted to a specific herd (s)

. **The trace process** In order to fully appreciate the costs and benefits of animal disease traceability, it is important to understand how a trace is conducted and the critical points that de termine the length of time a trace will take. Time is the critical factor in a disease investigation. The more time it takes, the more herds and animals become infected or exposed, the more man

- hours are needed to respond, and the more the industry suffe rs from the loss or delay of sales. Illustration 1 depicts a flow chart for a “typical” disease traceback of an infected animal from the point of slaughter. Keep in mind that there are myriad variables in tracing and every trace is unique. This illustra tion is intended to give the reader a basic understanding of the steps that are taken in a trace process that involves the cooperative efforts of State, Tribes, and Federal agencies

. The box at the top left represents an animal at an abattoir. At the plan t, animal health officials spend a good deal of time collecting information and matching the information with48 samples that were positive. Records of the animals that were killed are examined, including physical descriptions of the live animals, carcass we ights, body scores, the order in which the animals were processed, and prices paid. One of the key pieces of information is the approved USDA backtag. This is very important in tracing animals to the last herd of residence and allows the investigation to proceed towards the herd of origin. Most adult animals presented for slaughter within one week of tagging have official backtags at the time of slaughter. If the movement to slaughter takes more than a week, the majority of the backtags are lost. Yet, the value of backtags is apparent, as an estimated 90 percent of adult animals arrive at slaughter with USDA approved backtags. When an official USDA backtag is correlated with the animal of interest, the investigators can quickly identify the livestock mark et or dealer that supplied the animal to the abattoir. If the backtag is not available, abattoir records are used to try to determine who supplied the animal. If the animal of interest was part of a group of animals from a single source that were penned t ogether and slaughtered at the same time, the whole group can be traced back to the supplier. If the animal was commingled with animals from a variety of sources, the investigation must consider multiple potential suppliers. At the livestock market or dea ler, the time required to determine who the consignor of the animal was and where the animal resided prior to sale depends on the availability of appropriate records. If weight tickets, sales slips, and records of origin, identification, and destination a re available, it can take one hour or less to complete the visit if a backtag is available, and a few hours if not. Currently, markets are required to maintain records of livestock transactions for 2 years. Some of our traces involve movements through ma rkets that took place more than 2 years prior. If the market records are not available or incomplete, the investigator may need to49 examine additional records and go to other sources of information including banks, post offices, county assessor offices, br and inspection offices, and law enforcement. In this case, the last herd of residence is found only after days, weeks, or not at all. Another critical piece of information to aid in a disease investigation is the official eartag. If available, the eartag number can be traced to the herd in which the tag was applied and allow the investigation to proceed towards the animal’s place of termination . The length of time required varies from minutes to days depending on how the records of official eartags are

m aintained. Regardless of how the records are kept, the information provides another means of locating additional herds that may be affected. When an animal has both an approved backtag and an official eartag, an investigation can proceed from two differe nt directions simultaneously and reduce the total time required by half. When animals are tested for official disease control program purposes, an official eartag is required and recorded on the test chart. Similarly, when adult animals are moved intersta te, the official eartag is typically recorded on an ICVI. Examination of these types of records may identify additional herds in which the animal of interest resided.50 Illustration 1. Cooperative Federal, State, Tribal t racing with o fficial identifica tion , b acktag, and r ecords

Illustration 2 shows that, without an official eartag, the only route for an investigation to take is through the livestock market. If records are not available, the source herd may never be found. Even if the herd is found, the time required to conduct the trace is expected to be at least twice what it would be if there were an official eartag because tracing forward from the source is not possible. It is clear that additional investigation routes through the use of eartag records and internal databases are essential.51 Illustration 2. Cooperative Federal, State, Tribal t racing without o fficial identification and r ecords

To summarize, the critical points in the investigation include:
1. Is an official backtag available?

a. If “yes” i. The time to trace to the market is minimal. ii. An investigative route to the last herd of residence is possible iii. The time at the market determining the last herd of residence is less than an hour. b. If “no” i. The time to trac e to the market is longer. ii. The time at the market is at least several hours.
2. Is an official eartag available?

a. If “yes” i. A n investigative route to the herd where the tag was applied is available52 ii. A n investigative route to additional herds via internal database records is available. b. If “no” these routes are not available and the time to conduct the trace could be doubled.
3. Are good market records available?

a. If “yes” the time at the market is less than an hour. b. If “no” the time at the market is hours and o ther external sources of information may be required increasing the time to days or weeks.
4. Are records of official eartag distribution, official tests, and ICVIs easily searchable?

a. If “yes” the time to find additional herds may be minutes or hours.
b. If “no” the time to find additional herds may be hours, days, or weeks.

The rule will require all cattle over 18 months in interstate movement with some exceptions to be identified with official eartags. This will lead to an increase in the number of cattle with official identification at slaughter and provide animal disease investigators with the traceability route to additional herds. This addresses critical point #2. One exception in the initial phase of implementing the rule is to allow USDA

- approved backtag s in lieu of official eartags for cattle moving direc tly to slaughter. This approach will help facilitate the use of backtags so cattle arriving at slaughter can be traced to the last herd of residence. This addresses critical point #1. The rule has a re cordkeeping requirement of 5 years for markets and slaughter establishments. The current requirement is 2 years. Cattle have a life span of several years. The new requirement will allow for more tracing information to be reported. This addresses critical point #3.53 The rule includes the requirement for States and Tribes to maintain a record of official eartag distribution for at least 5 years. That will help our disease investigators quickly determine the herd in which an animal of interest was id entified. Similarly, the rule will require States and Tribes to maintain a record of ICVIs issued for 5 years. These two requirements will address critical point #4.

Current animal diseases of concern in cattle Tuberculosis Tuberculosis (TB) is a disease of concern today and provides a good reference to demonstr ate the need for traceability. TB is a contagious disease of both animals and humans. Bovine TB can be transmitted from livestock to humans and other animals. No other TB
organ ism has as great a host range as bovin e TB, which can infect all warm

- blooded vertebrates. Bovine TB has affected animal and human health since antiquity. Once the most prevalent infectious disease of cattle and swine in the United States, bovine TB caus ed more losses among U.S. farm animals in the early part of the 20 th century than all other infectious diseases combined. TB eradication efforts have been quite successful in the United States. Still, since 2002 the United States has spent over $ 200 milli on on indemnities and control activities for diseased or suspect cattle and that amount is expected to rise as eradication efforts continue. In Michigan, the disease has seriously affected the State’s livestock industry. The projected impact of the disea se on Michigan’s producers is estimated at $121 million over 10 years. In fiscal year (FY) 2010, 13 TB

- affected cattle herds were confirmed in the United States.
TB

- affected herds were identified in Colorado (2), Kentucky (1), Michigan (5), Mississippi (1), Nebraska (1), Ohio (1), and South Dakota (2). The States of Kentucky , Mississippi, Ohio and South Dakota held accredited free status for TB for over 20 years. All affected herds identified54 in FY 2010 were depopulated with F ederal indemnity except for two beef herds in Michigan that are undergoi ng test

- and

- remove herd plan s. The Ohio herd was detected during a dispersal sale and is no longer in existence. From October 2010 through March 2011, six TB

- affected cattle herds were confirmed in the United States. TB

- affected herds were identified in Colorado (4), Indiana (1), a nd Michigan (1). All the affected herds in Color ado have been depopulated with F ederal indemnity, and the disposition of the herds in Indiana and Michigan are pending. The epidemiological investigation of animals found infected at slaughter is still the m ain method that is used to locate TB herds. Traceback investigations are conducted from the slaughter plant.
Brucellosis Brucellosis is a contagious disease, caused by bacteria of the genus Brucella that affects both animals and humans. The disease mainl y affects cattle, bison, and swine; however, goats, sheep, horses, and humans are susceptible as well. In its principal animal hosts, it causes loss of young through spontaneous abortion or birth of weak offspring, reduced milk production, and infertility . There is no economically feasible treatment for brucellosis in livestock. In humans, brucellosis initially causes flu

- like symptoms, but the disease may develop into a variety of chronic conditions, including arthritis. Humans can be treated for bruce llosis with antibiotics. All 50 States have been officially classified Class Free for bovine brucellosis since July 2009, despite recent detections in a few States. D uring FY 2011, brucellosis was detected in four domestic cattle and bison herds in two St ates in the Greater Yellowstone Area (GYA)

— two affected cattle herds and one affected privately owned bison herd in Wyoming, and one affected privately owned bison herd in Montana. All four herds are under quarantine with affected

- herd plans, and intensiv e epidemiological investigations, including testing of area herds, are in55 progress. No epidemiological links have been identified among these herds. Brucellosis

affected wild elk may be the most likely source of infection for these herds. In late January 2011 , Texas disclosed a brucellosis

- affected cattle herd, the first detection of brucellosis in a cattle herd in Texas in over 5 years. This herd was depopulated, and a thorough epidemiological investigation is in progress. The GYA remains our primary f ocus for brucellosis in livestock because the disease is endemic in GYA wild elk and bison. There is no indication that brucellosis has spread outside the GYA. Bovine Spongiform Encephalopathy Bovine spongiform encephalopathy (BSE), widely referred to as "mad cow disease," is a chronic degenerative disease affecting the central nervous system of cattle. BSE is a progressive and fatal neurological disease of cattle caused by an unconventional transmissible agent. BSE belongs to the family of diseases know n as transmissible spongiform encephalopathies. The incubation period (the time from when an animal becomes infected until it first shows disease signs) averages 4 to 6 years, although the period can be longer or shorter. Following the onset of clinical s igns, the animal's condition deteriorates until it either dies or is destroyed. The process of deterioration usually takes from 2 weeks to 6 months. Currently, there is no test to detect the disease in live cattle; veterinary pathologists confirm BSE by postmortem microscopic examination of brain tissue or by the detection of abnormal prions in brain tissue.
Four cases of BSE have been detected in the United States. The first case was in a cow in Washington State in 2003 that had been imported from Can ada. BSE was subsequently detected in a 12

- year - old beef cow in Texas in 2005 , and in a 10

- year - old beef cow in Alabama in 2006. Both of these indigenous cases were animals born before the feed ban implemented by the U.S. Food and Drug Administration in 199 7

. On April 24, 2012, USDA confirmed the nation’s fourth56 case of BSE in an animal that was sampled for the disease at a rendering facility in central California. APHIS conducted BSE enhanced surveillance from 2004 to 2006. More than 830,000 samples w ere tested. This was a one

- time effort to detect BSE at a very low

- level and to provide information about prevalence. The results indicated that the prevalence of BSE in the United States was low

— less than 1 infected animal per million based on a populat ion of 42 million adult cattle. 8 The ongoing BSE surveillance program was launched in 2006 and has continued. The goal of this program is not only to meet the World Organization for Animal Health (OIE) benchmark of detecting 1 case of BSE in 100,000 adult cattle with 95 percent confidence, but also to meet the higher U.S. standard of detecting 1 case of BSE in 1 million adult cattle with 95 percent confidence. Populations of cattle at higher risk for BSE have been targeted for surveillance, including but not limited to animals with central nervous system (CNS) signs and animals over 30 months of age condemned ante mortem at slaughter for CNS signs. More than 40,000 samples have been collected and tested in each year of the ongoing BSE surveillance
program . This sampling strategy has far exceeded the level of testing required to meet OIE and U.S. internal surveillance goals. 9 **Animal disease traceback investigations** The following three table s summarize specific investigations for TB, brucellosis, and
BSE o ccurrences.

8 http://www.aphis.usda.gov/publications/animal_health/content/printable_version/fs_BSE_ongoing_vs.pdf 9 http://www.aphis.usda.gov/newsroom/hot_issues/bse/surveillance/ongoing_surv_results.shtml57 Table 5. Bovine tuberculosis Date Investigation Opened: March 2010 Investigation Status: Ongoing Incident An adult cow (approximately 3.5 years ) was slaughtered. The animal was part of a consignment from an auction market two days prior. On post mortem examination, the FSIS inspectors noticed lesions suggestive of a TB infection. The carcass was retained, tissues were collected, and tests were conducted. Four days later, National Veterinary Services Laboratories published a histopatholo gy analysis with the diagnosis of Mycobacteriosis

- compatible. The herd that marketed the animal before slaughter was found to be infected with TB. Method of Identification The only identification available on the infected animal was a backtag collected at slaughter that had been applied at the auction market. Methods of Tracing The auction market back tag was used to determine the consignor and in turn, the last farm location of the infected cow (or the index herd)

. Herd records of the index herd were examined for the two

- year period prior to the detection of infection to determine what animals had left the farm. Three markets were the primary means for the owner to dispose of his cull animals. As a result, most of the adult animals that left this he rd were identified by a backtag that had been applied at one of the three livestock markets

. Herd records, while limited , where used to help determine movement of young animals sold from the herd. Investigative Summary The index herd consisted of approx imately 900 animals

. A caudal fold test was conducted on some of the animals: 48/168 (29 percent) heifers and 165/498 ( 3 3 percent ) cows were positive

. A gamma interferon test was conducted on 165 heifers, and 105 of them were positive

. The herd was depopulated and samples were tested, confirming the previous tests

. A thorough review of available herd records determined that a total of 1 , 627 adult animals left the index herd as culls being sold at one of the three auction markets during the previou s two

- year period

. Using the backtags applied at the markets, 1,505 (92.5 percent) adult animals reported slaughte red out of State were verified. The other 122 (7.5 percent) adult animals were only reported as slaughtered , but could not be verified due t o lack of permanent identification

. Without verification, the possibility remains that some of the 122 adult animals may have been diverted from slaughter channels back to a farm. Epidemiological tracing was conducted using the animal identification information recorded on the herd test chart to determine where animals that entered the herd came from. Official eartags from 5 States were noted. Subsequent tracing through those Stat es provided evidence of animals of interest having been in 5 additional States for a total of 10 States. Due to limited records, it was difficult to determine the locations of breeding and feeding animals from the index herd. The tracing of one - to five

- day

- old calves proved to be much different. Owner records indicated that 259 calves had been sold from the premises during the two previous years, and they all lacked any type of identification. The movements were documented on a brand inspection form co mpleted by the owner and did not contain addresses, descriptions and in many cases, the total number of animals removed from the premises on a specific date. The brand authority intended for producers to utilize tracking methods on these animals and to re cord them; however, this was not the case. In total, 57 of the 259 calves (22 percent) were located at other farms

. These calves were disposed of and tested for TB. Five of the 57 calves each located on a different farm were found to be positive for TB . This resulted in those five farms being declared infected premises and subsequently depopulated.58 To date, the investigation has involved 426 locations in 12 States with 6 infected premises found.

Cost The disease investigation resulted in the depopu lation of 1,139 animals on 6 infected premises including the index premises. USDA has paid $741, 700 to producers for destroyed animals involved in this investigation. There were additional dollars paid for trucking and disposal that were not available. Estimated testing cost s exceed $2 million. It is estimated that this incident required an Animal Health Technician’s time two days per week for the past year. This time could easily have been reduced by 50 percent with adequate identification and records. Testing costs in thi s case will exceed $2 million. We believe improved traceability as a result of the rule will reduce costs by between $600,000 and $1 million. Impact As of March 2011, this incident was still ongoing. There were 426 different locations investigated with approximately 10 percent of the locations having herds that were tested for TB

. In some cases, the tracing was stopped due to the lack of adequate identification and movement records. This i s unfortunate because of the nature of this aggressive strain of TB, and the fact that infected herds were found. There are still 122 cull breeding animals that are unaccounted for. We do not know if they were slaughtered as expected or if they returned to a livestock operation . The un certainty undermines the credibility of traceabil i ty efforts

. Only 57 of the 259 calves (22 percent) were successfully traced, but they led to 5 infected premises. The inability to trace the remaining 198 calves causes serious concern and beg s the questions: “W hat happened to the other 198 calves (88 percent), how many infected premises are left undetected, and h ow far has the infection spread ? ” While the cost of t he investigation to date is significant, the inability to answer these questions quickly and accurately means sizable additional negative impacts as well as higher associated costs are likely to result from this case

. Comparison with Rule on Traceabili ty The rule will require the identification of all dairy cattle moving interstate, regardless of age. Adult dairy cattle will be required to have the official eartags recorded on an ICVI. Producer and livestock markets will be required to keep a copy of movement records for 5 years fo r all animals moving interstate. The amount of official identification and tracing information will increase significantly due to these activities. There has been an average of 31 positive cases for the past 5 years. On average, one million animals are tested annually for TB. If testing for TB could be better targeted to the herds that had actual contact with animals of interest provided by identification and records , the system will be more accurate and efficient. Only the known herds of interest will need to be tested. If the number of animals tested was reduced, we estimate the government and producer sectors’ combined dollar savings associated with the testing alone will be betw een $1.17 million (25% reduction in testing) and $3.51million (75% reduction in testing) annually. ( State and Federal costs are shown below; producer costs are detailed in Table 8. ) An animal disease traceability program allows for a more efficient use of resources as herds are tested based on clear documentation of their connection to the index animal. USDA or State employees perform most of the testing. As a result of fewer herd s /animals tested, resource efficiencies are gained, and these employees will be available to fill mission critical activities in other areas. The potential values of these efficiencies are59 summarized in the following table based at differing levels of projected reductions in the number of animals requiring testing for TB.
Co sts to State s and the Federal Government Average number of TB trace tests per year 10 260,000 Average cost per head to test (requires handling animals twice) $10.00 11 Estimated cost of TB testing (State and Federal) $2,600,000 Value associated with reduced number of animals requiring testing due to improved animal disease traceability 25% reduction $650,000 50% reduction $1,300,000 75% reduction $1,950,000

Table 6

. Bovine brucellosis Date Investigation Opened: January 2011 Investigation Status: Ongoing Incident Due to targeted animal disease surveillance, an adult bull at processing, moved interstate to an abattoir , was determined to be a reactor for bovine brucellosis. A disease investig ation was initiated due to the classification of the official blood test

. Method of Identification The animal lacked an official animal identification number at the time of sampling

. The bull was identified by carcass tag number on the slaughter plant kill sheet and associated with an owner. Methods of Tracing Kill sheet information provided at the abattoir served as the sole basis for conducting the investigation

. In this case, the animal ’s owner was also th e feedlot owner where the animal was in residence prior to processing. Investigative Summary The investigation involved 155 bulls from two pens in one out

- of

- State feedlot that sourced animals from two different livestock markets in two additional States. As noted, the bulls had no official identification at processing and, correspondingly, the feedlot had no list of official animal identification for these animals

. Brand inspection records retained by the feedlot accounted for 57 dif ferent brands for 149 of the bulls and 6 animals with no brands

. Feedlot records indicated the 155 animals could have been sourced from 4 different livestock markets

. As a result, the 4 involved livestock markets have identified 40 potential source locat ions in one State and another 17 potential source locations in yet another State. Because the five involved States ( one State was mistakenly involved initially) are large beef

- producing States, and with an assumption of 125 head herd size, the investigati on will potentially involve testing at least 7,100 head of cattle for bovine brucellosis . The investigation remain ed open as of March 23, 2011. Cost Final costs have not been tabulated as the investigation is ongoing. With an estimated $20 per head test ing and personnel costs, this investigation will cost near ly $150,000, assuming no additional positives are found . This estimate does not include producer costs

. If the reactor animal had been officially identified and the number recorded at the time of processing, the investigation could have been more focused with a potential cost savings of $120,000.

10 USDA, APHIS, Veterinary Services data for 2010. 11 Based on funds paid for fee

- basis testing.60 Impact More herds than needed were tested and the cost of testing alone is significant. The added cost to producers may be even greater in terms of gathering the herd to be tested and restricted opportunities to conduct business as usual. Comparison with Rule on Traceability The rule will require cattle 18 months

- of

- age and older to be off icially identified and accompanied by an ICVI when moved interstate. This will provide the tools to accurately and efficiently investigate the incident and conclude it with minimal impact to producers and taxpayers. On average, 477 brucellosis reactor ca ttle have been identified annually for the past 5 years in the United States. Approximately 25 percent, or 120, of these cases require a similar degree of investigation to this case. Based upon BSE surveillance data referenced in t able 9 of this document, approximately 60 percent of adult cattle lack official identification. It is estimated that 72 comparable brucellosis investigations are conducted annually without information readily available for effective and efficient official anima l identification. This example shows an investigation that had potential costs savings of $120,000. Conservatively assuming that 72 comparable investigations could save half that amount , the estimated savings would be $4.32 million (72*$60,000). Additio nal savings to the cattle industry as well as States and Tribes will also be realized, s hould official identification of adult cattle be routine . T he benefit to bovine brucellosis disease investigations for the cattle industry, States and Tribes, and USDA could easily exceed $5 million annually.

Table 7. Bovine spongiform encephalopathy Date Investigation Opened: March 15, 2006 Investigation Status: Closed May 1, 2006 Incident A confirmed positive of a previously inconclusive bovine spongiform encephalopathy (BSE) sample from a 10

- year - old cow in Alabama was made on March 15, 2006. The goal of the epidemiological investigation was to locate at

- risk animals besides the index cow :
• Two most recent progeny of the index cow

• Birth cohorts of the index cow that were born and raised on the same farm (herd of origin) 1 year before and 1 year after the index cow was born. Method of Identification • No official identification

• No tattoo, no management eartag, and no brand

• Other alternatives used:

− Color

– Red

− Age

– Estimated to be 10

- years - old

− Sale weight when purchased by index herd Methods of Tracing The process of tracing the animals of interest was based on interviews with current and previous owners, stockyard sales records, phenotype, age, stage of pregnancy, and deoxyribonucleic acid (DNA) genetic matching. Investigative Summary The positive co w had no tattoo, no eartag, and no brand. Thirty

- seven farms were investigated (involving the use of DNA), to identify a herd of origin. This included two farms where the index cow resided, and 35 other farms that might have supplied the index cow to the farms where the index case resided. The index case did not have unique or permanent identification, and its size and color are common in the southern United States. Due to the unremarkable appearance of solid red cows, it is not easy for owners to reme mber individual animals. In the southern United61 States, it is common business practice to buy breeding age cows and keep them for several years while they produce calves. Most calves produced are sold the year they are born, whereas breeding cows are oft en sold when there is a lapse in breeding, which can occur multiple times in a cow’s life. For these reasons, USDA could not locate the herd of origin and the inconclusive investigation was closed after 48 days.

Cost The estimated cost of the investigation was $40,000. This included State and Federal field resources to conduct interviews, review records with herd owners and market operators, travel, and DNA testing. Impact While the overall market impact cannot be d efined, this case reflects the inability of the United States to trace the movement history and herd where the animal at a young age was exposed to the disease. Comparison with Rule on Traceability An official identification tag from the index animal wo uld have facilitated traceability, with minimal interviewing, to the farm of tagging within one day with cooperative participation

. As described in the discussion of priva te sector costs of the rule, the estimated cost of an identification tag is $0.18 pe r animal for producers that already tag and $ 1.68 to $ 4.68 for producers who do not tag their animals. This incremental cost includes all associated costs of working an animal merely for tagging purposes. Many operators already tag their cattle as part o f routine management activities.

**Benefits of effective traceability to producers** As discussed above, disease investigation s that lack complete information and official animal identification are frequently e xpanded to involve more herds than will otherwise be
necessary. This practice ensure s the farm location that might have held the subject animal or other potentially exposed animals can be “ruled out” as being infected. More complete records and official animal identification allow investigations to focus on specific locations that are known to have had the animal of concern. In lieu of complete information, animal health official s must broadly “blanket” their herd revie ws and testing to all possible locations. As the investigation broadens in scope to ensure the disease occurrence is fully examined, more producers are required to have their herds involved in the investigation. Producers that are included in a disease investigation incur disruption to their operation and have associated costs, including:62 • Time spent with animal health officials to review records needed for the investigation as well as locating historic records called for during the investigation.

• Assembl ing the herd for testing. This includes labor costs, time, and the inconvenience of testing when other critical farming operations need to be done.

• Costs associated with testing. These include shrink age , injury, loss of production (especially in dairy he rds), and labor. The costs are double for TB because each herd test involves handling the animals twice in a 72

- hour period. Generalized private sector costs of TB and brucellosis testing and potential cost savings due to improved traceability are summari zed in table 8

.

12 USDA, APHIS, Veterinary Services data for 2010. 13 Based on estimated chute costs to producers of $1.68 to $4.68 per head, times two because each animal must be handled twice. 14 USDA, APHIS, Veterinary Services data for 2010. Table 8. Summary of producer costs for TB and brucellosis testing and potential savings from improved traceability Bovine Tuberculosis Average number of TB trace tests per year 12 260,000 Average cost of p roducers’ time, labor, etc. (per animal) $ 6 .00 13 Cost of TB testing $ 1 , 56 0,000 Value associated with reduced number of animals requiring testing due to improved animal disease traceability 25% reduction $ 39 0,000 50% reduction $ 78 0,000 75% reduction $ 1, 17 0,000
Bovine Brucellosis Average number of brucellosis trace tests per year 14 252,000 Average cost of p roducers ’ time, labor , etc. (per animal) $ 3 .00 Cost of brucellosis testing $ 756 ,000 Value associated with reduced number of animals requiring testing due to improved animal disease traceability 25% reduction $ 189 ,000 50% reduction $ 378 ,000 75% reduction $ 567 ,00063 In addition, there are other costs that are difficult to value, such as the l oss of revenue when there is a "hold order" in place preventing the movement of animals into or out of a herd while a test is pending. This can delay the sale of calves, breeding stock or fed cattle, resulting
in additional f eed costs and missed opportunities to take advantage of favorable market conditions

. **Comparison to traceability for sheep and goats** The benefit of traceability, achieved primarily through official identification, is well demonstrated in the sheep and goat industry. In September 2001, the scrapie regulations were revised to require the official identification of sheep and goats not in slaughter channels (except low

- risk commercial goats) and any sheep over 18 months

- of

- age in interstate commerce. In addition, the revision required States t o implement and enforce official identification of most sheep and goats upon change of ownership in intrastate commerce. Official identification means to apply an official identification number to an animal using an approved device or method. It also req uires creating and maintaining (for 5 years) a record linking the identification number to the owner of the flock of origin/birth of the animal, if other than the person to whom the official identification numbers were issued. APHIS maintains a database i n which tag manufacturers enter the distribution records for official eartags. Most eartags are distributed directly from the tag manufacturer to the end

- user. Some tags are redistributed by State or Federal offices who record the end

- user in the databas e. Since implementation of the Federal identification requirements for sheep and goats, only 12 percent of the positive animals identified through slaughter surveillance that did not have official identification were successfully traced to the flock of o rigin , whereas 94 percent of the64 positive animals that were officially identified were successfully traced to the flock of origin. In FY 2010, estimates indicate that 93 percent of all mature sheep were officially identified when they arrived at slaughter establishments. As a result of our ability to effectively traceback diseased animals, scrapie prevalence has decreased from 0.2 percent in 2002

- 2003 to 0.03 percent in FY 2010, a decrease of 85 percent. **Concluding observations** Official animal identification provides key information result ing in improved traceability. The low level of official identification in the cattle industry is well

- documented. For example,
2007

- 2011 data from b ovine spongiform encephalopathy (BSE) surveillance, summarized in table
9 , show that on average less than
40 percent of the animals had an official identification eartag. These data findings are similar to those from USDA APHIS (2008) that indicate that 41 percent of beef cattle and 16 percent of beef calves are identified with an official eartag.
T he current lo w level of official identification in the cattle sector often impedes tracing capability. In comparison, successful traceability in the sheep industry is a direct result of high levels of official identification. The objective of the rule is to improve traceability, in particular, in the cattle industry. While the rule will only require official identification for animals moving interstate, it is likely that many livestock enterprises will routinely officially identify all of their animals in Table 9

. Summary of BSE Surveillance Samples

Year Number of Cattle Sampled Number of Cattle with Official Identification Eartags Percent of Cattle with Official Identification Eartags 2 007 13,192 4,684 36 percent 2 008 44,855 18,429 41 percent 2 009 45,499 18,217 40 percent 2 010 45,251 17,102 38 percent 2 011 8,155 2,840 35 percent 2007

- 2011 156,952 61,272 39 percent65 anticipati on of future, out

- of

- State marketing opportunities. As a result, we anticipate the level of official identification increasing significantly in the cattle sector. Market Effects of Improved Traceability There are also benefits to improved animal traceability if barriers to trade exist or if such barriers would be erected in the case of an animal disease outbreak contingent on there not being such traceability requirements in place. Animal diseases occur unexpectedly. Th is lack of predictability prevents a straightforward evaluation of the benefits of the traceability regulations. A recent study from Kansas State University points out that export restrictions due to the discovery of a single cow with bovine spongiform encephalopathy (BSE) in 200 4 resulted in losses to the U

. S

. beef industry ranging from $3.2 billion to $4.7 billion in 2004. 15 They argue that cattle traceability would limit the amount of time market access is lost following an outbreak of some disease. Similar findings presented in a study by researchers at Montana State University, Kansas State University, and Colorado State University, illustrate the magnitude of the potential trade benefits by comparing hypothetical consequences of a disease outbreak under different animal iden tification capabilities. 16 That study found that preventing the loss of exports to a large beef importing country such as South Korea (approximately 7% of U

. S

. beef export demand), could result in long

- term losses to the beef sector of nearly $70 million a nnually.

15 Shroeder, T.C. and G. T. Tonsor (2011) “Cattle Identification and Traceability : Implications for United States Beef Exports,” Kansas State University Report (September, available online at http://krex.k

state.edu/dspace/bitstream/2097/13089/1/CattleIDSchroederTonsor.pdf ). 16 Brester, G., K. Dhuyvetter, D. Pendell, T. Shroeder, and G. Tonsor. 2011. “Economic Assessment of Evolving Red Meat export Market Access Requirements for Traceability of Livestock and Meat,” U.S. Meat Export Federation Report (March; available online at http://www.usmef.org/downloads/USMEF

- Final

- Project

- Report

Ton sor - et

- al.

- 03.30.20111.pdf ).66 Another study by some of the same authors in 2007 simulated the trade impacts of an outbreak of f oot and m outh disease in Kansas. 17 In this simulation, the number of animals destroyed decreased as the level of tracing and surveillance increased. The amount of time to eradicate the disease was also reduced with improved traceability. It was estimated that with 90

- percent traceability, producer surplus would be $4.5 billion (present value over 10 years) larger
than if there were 30

- percent tracea bility. The benefits primarily derive from access to beef export markets expected to become more restricted if 30

- percent traceability prevailed. The study also found that consumer surplus would be less with 90

- percent traceability than if there
were 30

- percent traceability, by about $800 million (present value over 10 years). The reason is
that under 30

- percent traceability, beef that would have been exported had there not been a FMD discovery remains on the domestic market, depressing prices and increa sing consumer surplus. The analysis concludes that the net benefit or societal gain of having 90

- percent traceability as compared to 30

- percent traceability if there were a contained FMD outbreak in Kansas, based on the model’s assumptions, could total $3 .7 billion (present value over 10 years). While such studies do not specifically model conditions that may exist under the rule , they do provide indication s of the magnitude of potential trade benefits that are expected to derive from having a traceability program in place when there is a disease outbreak. As pointed

out in the b enefit

- c ost study , the benefits of a traceability system are for the most part potential benefits that rest on largely unknown probabilit ies of disease occurrence . Having a traceab ility system in place will allow the United States to trace animal disease more quickly and efficiently, thereby minimizing not only the spread of disease but also the trade

17 Schroeder, T.C., and D.L. Pender (2007) “Value of Animal Traceability Systems in Managing Contagious Animal Diseases,” Report to the Program of research on Economics of Invasive Species Management (October, available online a t http://krex.k

- state.edu/dspace/bitstream/2097/4166/1/SchroederTraceability2007.pdf ).67 impacts an outbreak may have. Major beef

- exporting competitors of the United Stat es, including Australia, Brazil, and Canada, have traceability systems. The value of U.S. exports of live cattle in 2010 was $131.8 million, and the value of U.S. beef exports totaled $2.8 billion. The value of U.S. cattle and calf production in 2009 was $31.8
billion. 18 A nnual incremental costs of the rule for cattle enterprises are estimated to be between $14.5 million and $34.3 million, assuming official identification will be undertaken separately from other routine management practices; or between $1 0 .9 million and $23.5 million, assuming that some tagging will be combined with other routine management practices that require working cattle through a chute. The upper range of these costs represent about one

- tenth of one percent of the value of domestic cattle and calf production. In other words, if there were an animal disease outbreak in the United States that affected our domestic and international beef markets, preservation of a very small proportion of these markets would justify estimated private

sector costs attributable to the animal disease traceability program.
T he primary benefit of the regulations will be the enhanced ability of producers, State and Tribes, and the Federal government to regionalize and compartmentalize animal health issues mo re quickly , minimizing losses and enabling reestablishment of foreign and domestic market access with minimum delay in the wake of an animal disease event. Benefits Summary
The three case studies presented illustrate how the Federal government, States and Tribes, and producers can directly benefit from the animal disease traceability system. For producers affected by a disease traceback, the traceability system will mean that fewer tests will nee d to be carried out (and therefore fewer animals will need to be worked through a chute) and livestock

18 http://www.ers.usda.gov/news/BSECoverage.htm68 sales and other farm operations will not be disrupted. Under the traceability system, there will be an increased likelihood that all exposed animals wil l be found. Tracebacks that cannot be successfully concluded because of incomplete records contribute to uncertainty about supply and prices. In addition to the direct benefits to producers, the traceability system will provide added assurance that APH IS has the capability to respond to a foreign animal disease outbreak such as foot and mouth disease quickly and efficiently

. As described in the foregoing example, effects for producers due to changes in prices and international market access could be dr amatic, in this scenario resulting in a $3.7 billion net benefit to society because of improved animal disease traceability. 

### Final Regulatory Flexibility Analysis
The Regulatory Flexibility Act requires agencies to evaluate the potential effects of thei r final rules on small businesses, small organizations and small governmental jurisdictions. Section 603 of the Act requires agencies to prepare and make available for public comment a final regulatory flexibility analysis that describes expected impacts of a rule on small entities. Reason Action is Being Cons id ered APHIS enacts regulations to prevent, control, and eradicate diseases of livestock (including poultry), thereby increasing foreign and domestic conf id ence in the safety of U.S. farm

- raised anima ls and their products. Many animal disease program regulations, such as those for bovine tuberculosis and brucellosis, contain components of a traceability program, e.g., requirements for certain animals moving interstate to be officially id entified and a ccompanied by documents recording, among other things, the animals' official id entification numbers and the locations from and to which they are being moved. However, the United States does not69 currently have an overarching animal disease traceability pro gram integrated to meet the needs of all species and disease programs. This rulemaking is intended to address animal disease traceability gaps in the regulations and enhance our ability to safeguard animal health. Objective of and Legal Basis for the Rule This rule will establish minimum traceability requirements, namely, official id entification of livestock moved interstate unless specifically exempted and issuance of an interstate certificate of veterinary inspection (ICVI) or other acceptable movement d ocumentation. The rule reflects a flexible yet coordinated approach that will enable States, Tribes, and livestock producers to use means of traceability that work best for them. The objective is to improve APHIS’ ability to trace livestock in the event disease is found. In accordance with the Animal Health Protection Act (7 U.S.C. 8301 et seq.), the Secretary of Agriculture has the authority to promulgate regulations to prevent the introduction into the United States or dissemination of any pest or dise ase of livestock. Potentially Affected Small Entities As explained in the Supplemental Information for this rule, APHIS expects the cattle
in d ustry will be the livestock sector principally affected by this rule

. Cattle enterprises that move cattle interstate will be directly affected.
E xisting animal id entification requirements for the interstate movement of farm

- raised animals largely satisfy the official animal identification and ICVI requirements. Cattle moving interstate are often required to be accompanied by a health certificate under current regulations.
Some diseases require specific statements and tests as part of the certificate . In addition, nearly all States require a c ertificate of v eterinary i nspection for breeder and feeder cattle entering from another State.70 Table 10 shows cattle industries that will be affected by the rule, as categorized by the North American Industry Classification System, and sales and employment information that under scores the prevalence of small entities among establishments that comprise these industries

. We note that numbers of establishments shown include ones that may not be directly affected by the rule, in particular, those that do not move cattle interstate.

Table 10 . Small

- entity representation in cattle sector industries that may be affected by the rule, 2007 Industry (NAICS code) Number of Establishments SBA Small

Entity Size Standard Average Value of Establishments’ Annual

Sales 1 Number of Establishments with fewer than 100 Employees Beef cattle ranching and farming (112111) 656,475 < $750,000 annual receipts $43,197
Dairy cattle and milk production (112120) 57,318 < $750,000 annual receipts $611,773

Cattle feedlots (112112) 31,065 < $2,500,0000 annual receipts $977,048 Animal (except poultry) slaughtering (311611) 1,597 < 500 employees 1,466
Rendering and meat byproduct processing (311613) 228 < 500 employees 208
Sources: USDA NASS, 2007 Census of Agriculture, http://www.agcensus.usda.gov/Publications/2007/Full_Report/Volume_1,_Chapter_1_US/st99_1 _062_062.pdf; U.S. Census Bureau, 2007 Economic Census, http://factfinder.census.gov/servlet/IBQTable?_bm=y&

- geo_ id =&

- ds_name=EC0731I1&

- _lang=en. 1 Includes government payments.71 The Census of Agriculture allows further examination of small entities that could be affected by the rule, namely, small family cattle enterprises and cattle enterprises for which one or more of the principal operators belong to a socially disadvantaged group. Small family farms are defined by USDA as family farms with gross sales of less than $250,000 (USDA ERS 2010)

. (Any farm where the operator and persons related to the operator own a majority of the business is cons id ered a family farm. ) In 2007, nearly 88 percent of farms with cattle and calf inventories were small family farms. Small family farms are further div id ed into retirement farms (operators reporting they are retired), res id ential/ lifestyle farms (operators reporting a major occupation other than farming), and farming

- occupation farms (operators reporting farming as their major occupation). Farming

occupation farms are classified as low

- sales small famil y farms (sales less than $100,000) and high

- sales small family farms (sales between $100,000 and $249,999). A fifth category of small family farms are limited resource farms, which have sales of not more than $100,000 and a total
household income at or be low the national poverty level for a family of four, or less than 50 percent of county median household income. The Census of Agriculture indicates that in 2007, 40 percent of small family cattle operations were residential/lifestyle farms. With regard to the other categories of small family cattle enterprises, over one

- fourth of the owners reported that they had already retired, limited resource farms and the low

- sales farming

- occupation farms each comprised about 15 percent of the operations, and about 6 percent were high

- sales farming

- occupation farms. Socially disadvantaged groups are ones that historically have been subjected to bias and
pr e judice. They include women, persons of Hispanic origin, American Indians or Alaska Natives, Asians, African Am ericans, and Native Hawaiians or other Pacific Islanders

. These72 farm operators, themselves, may not have experienced bias or prejudice, but they identify with one or more of these gender, ethnic, and racial groups. For more than 8 percent of cattle operat ions in 2007, the principal operator was a woman. About 5 percent of cattle operations had a person of Hispanic heritage and/or an American Indian or Alaskan native as one of their top

- three operators. Fewer than 2 percent of cattle operations have an Af rican

- American as a top

- three operator. Most cattle enterprises are small family farms

. As is true for other cattle operations, incremental costs of the rule for these farms will depend upon whether official animal
i dentification will be incorporated into ongoing, routine management practices, and whether the enterprise is already moving cattle interstate other than for immediate slaughter

. Projected Reporting, Recordkeeping, and Other Compliance Requirement s Reporting and recordkeepi ng requirements associated with the rule are discussed in the rule under the heading "Paperwork Reduction Act." APHIS will require that a ny State, Tribe, accredited veterinarian, or other person or entity who distributes official id entification devices

ma intain for a minimum of 5 years a record of the names and addresses of anyone to whom the devices were distributed. APHIS will also require that approved livestock facilities keep for a minimum of 5 years paper or electronic records of any ICVIs or altern ate documentation used in lieu of an ICVI for livestock that enter the facility on or after the effective date of this rule

. If an animal lose s an official identification device and need s a new one, the person applying the new

one will have to record information about the event and maintain the record for 5 years

. Duplication, Overlap , or Conflict with Existing Rules and Regulations APHIS has not id entified any duplication, overlap, or conflict of the rule with other Federal rules.73 Alternatives to minimize Significant Economic Impacts of the Rule APH IS has developed this rule intent on minimizing costs that the private sector may bear. Incremental costs of official animal identification will be minimal for many cattle operations that will incor porate this activity into current herd management practices involving eartagging . Similarly, current movement documentation required by nearly all States for inshipments of breeding and feeder cattle is much the same as the ICVI ; incremental costs for
ope rations that already move cattle interstate other than for immediate slaughter will be minimal

. The collaborative manner in which the rule’s implementation is intended to advance, with representatives from States, Tribes, and the affected industries advising APHIS on the effectiveness of various elements of the traceability program , is also expected to help minimize operational burdens.74 

### References Cardona, C., K. Yee, and T. Carpenter 2009. “Are live bird markets reservoirs of avian influenza?” Poultry Science 88:856

- 959. NAIS Benefit

- Cost Research Team 2009. Benefit

- Cost Analysis of the National Animal Id entification System , 2009 http://www.aphis.usda.gov/traceability/downloads/Benefit_Cost_Analysis.pdf Shields, Dennis, and Ken neth Mathews, Jr. 2003. Interstate Livestock Movements, USDA ERS, LDP

- M

- 108

- 01, June 2003. http://www.ers.usda.gov/publications/ldp/jun03/ldpm10801/ldpm10801.pdf
U SDA APHIS 2007. Dairy 2007 , Part I: Reference of Dairy Cattle Health and Management Practices in the United States , 2007

. Veterinary Services, National Animal Health Monitoring System , October 2007. http://www.aphis.usda.gov/animal_health/nahms/dairy/downloads/dairy07/Dairy07_dr_PartI.pdf
USDA APHIS 2008. Beef 2007

- 08, Part 1: Reference of Beef C ow - calf Management Practices in the United States 2007

- 08

. Veterinary Services, National Animal Health Monitoring System , October 2008. http://www.aphis.usda.gov/animal_health/nahms/beefcowcalf/downloads/beef0708/Beef0708_dr _PartI_rev.pdf
USDA ERS 2010. Structure and Finances of U.S. Farms: Family Farm Report, 2010 edition , EIB

- 66, July 2010. http://www.ers.usda.gov/Publications/EIB66 /EIB66.pdf USDA NASS 2010a. Overview of the United States Cattle Industry , released December 17, 2010. http://usda.mannlib.cornell.edu/usda/current/USCatSup/USC atSup

- 12

- 17

- 2010.pdf USDA NASS 2010b. Overview of the United States Dairy Industry , released September 22, 2010

. http://usda.mannlib.cornell.edu/usda/current/USDairyIndus/USDairyIndus

- 09

- 22

- 2010.pdf USDA NASS 2010c. Meat Animals Production, Disposition, and Income, 2009 Summary, Mt An 1

- 1 (10), April 2010. http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1101