With the recent implementation of mandatory country of origin labeling (COOL) on many produce and meat products sold in the United States, American consumers are seeing new signs and labels on the food in their grocery stores.
Although Congress first instituted COOL as part of the Farm Security and Rural Investment Act of 2002 (the 2002 Farm Bill), products other than seafood have only recently been subject to its mandatory labeling requirements. As of October 1, 2008, a wide variety of retail food products must carry country of origin labeling, including meat products such as beef, chicken, pork, goat and ground meat, fresh and frozen fruits and vegetables, certain nuts and ginseng.
Consumers may be surprised, however, at what products are not covered by the COOL regulations. For example, any regulated meat product that is processed does not have to provide country of origin information. The definition of processing is extremely broad. Not only does it encompass cooked, cured and smoked products, but also marinated chicken, meatballs in sauce, breaded pork loins and many other foods. Thus, a consumer may go into the meat department of his grocery store and find country of origin labeling on one chicken breast in the meat counter, but not the marinated chicken breast right next to it. It is estimated that only 30 percent of meat consumed in the U.S. will actually be regulated by COOL. In addition, restaurants, other food service industries and small retail locations are not required to provide information under COOL rules.
COOL Requirements
On its face, the COOL requirements seem simple enough: Identify the country from which the product comes. As always, however, the devil is in the details, and the new regulations pose a variety of challenges for retailers and meat processors as well as individuals and businesses further down the production and consumption chain. The regulations require, for example, that supporting country of origin information be readily obtainable for a year. This rule means increased paperwork and attention to the paper trail for processors, retailers, producers, feedlots and animal auction houses, among others. Birth records, sale receipts, purchase invoices and other similar documents will suffice to prove an animal's country of origin. For producers who do not have these records, information contained in a signed affidavit will be acceptable to prove an animal's origin.
In addition to the challenge of determining and tracking the origin of all animals entering the plant on every shift of every day, meat processors face the challenge of the label itself and the information it must contain. COOL requirements encompass an animal's country of birth in addition to the country in which it was raised or fed out, the country in which it was slaughtered, and the country in which it was processed. For example, a pork roast from a hog born in Canada but raised, slaughtered and processed in the United States would be required to have a label indicating that it was a product of both Canada and the U.S.
Processors have taken different approaches to address the issues posed by this requirement. Some have announced that they will switch their production and purchases to use only animals born, raised and processed in the United States. Others are attempting to coordinate purchases and shifts so that the same label can be used for the entire shift or even the entire day. And yet other companies have announced plans to use a more generic "North American" label for all items leaving their facilities, identifying them as products of the "United States, Mexico, Canada." The rationale for using this label is that on various days there may be animals going through the plant that may be traced back to Mexico or Canada. The use of a North American label on all products might therefore save the processor the time and expense of attempting to micromanage production and sort these animals on a daily or even shift-by-shift basis.
But the North American label has raised a number of red flags. The United States Department of Agriculture (USDA), for example, contends that this practice violates the spirit of the COOL regulations by failing to provide consumers the very information the law is intended to provide—namely, the actual country or countries from which the product originates. Several members of Congress agree, and there may be an effort to amend the regulations in the future. For its part, the USDA has said processors should not use the generic North American label unless there is actually at least one animal processed each day that in some way originates from each country.
Cost and Enforcement Concerns
The use of the North American label also raises a number of issues related to enforcement of COOL. The first six months of experience with a wider array of covered foods will be key in determining how the USDA will interpret and enforce the myriad regulations related to COOL. The inauguration of a new president and the installation of a new administration in January may also complicate the process. Depending on the new administration's perception of COOL, the USDA's interpretation of the regulations may change, perhaps dramatically, after only a few months. There are also concerns related to the USDA's enforcement budget, as the products now subject to COOL requirements have greatly increased. The USDA's enforcement budget, however, remains the same as it was before October 1, 2008, when only seafood and fish were regulated.
In addition, consumer demand for COOL—and the willingness of consumers to pay for it—also remains largely unknown. As is often the case with business regulation, the actual costs of COOL, from producers to retailers, will largely be passed along to consumers. Initial estimates predict that implementation will cost producers, processors and retailers approximately $2.5 billion during just the first year of full implementation of COOL. Such estimates may be low, however, if experience is any guide, as the actual costs of implementing COOL only for seafood and fish were approximately five to ten times higher than initial estimates. The first six months of experience will allow the industry to better gauge implementation costs and demonstrate how much of these increased costs will be passed along to consumers. Only time will show whether, in the face of increased prices, consumers will demand U.S.-only products.
Assessing COOL's Impact—Potential Changes Ahead
While some supporters of COOL tout it as a food safety regulation, others contend it is nothing more than a protectionist regulation. The truth of the matter likely lies somewhere between, and may evolve as implementation of the new regulations is evaluated. Producers and companies in Mexico and Canada will be closely watching the implementation process, as there are concerns that COOL regulations may lead to violations of NAFTA and a decrease in animal sales between those countries and the United States. In fact, Canada took its concerns to the World Trade Organization (WTO) in December 2008. Canada contends that the U.S.'s COOL regulations create undue trade restrictions on Canadian exporters and is requesting formal dispute resolution through the WTO.
Legislation has also been introduced to expand COOL to dairy products, largely in response to the discovery in China of melamine in powdered milk and other dairy products. This contaminant has had a devastating effect in China and other countries where those products were sold, causing a number of deaths and hundreds of illnesses. Many Chinese dairy products and foods have also been pulled from store shelves. However, for COOL to apply to dairy products in the United States and address concerns like those occurring in China, the definition of applicable products will need to be very different than it is now. If, like meat and other products, only unprocessed dairy products were required to conform to COOL regulations, the very products that killed Chinese infants and caused worldwide concern, such as powdered milk, would not even be regulated.
The first months of broad experience with COOL will be vastly important to the food industry at all levels as the impact of COOL regulations are assessed and potential changes and additions to the law are considered. The level of enforcement will play a major role in assessing the regulations and their effectiveness, as will the actions of consumers.