Customs Update: Indigestion From Labeling Rules
Published in the Journal of Commerce, Sept. 26, 2003

While most of us were focused on the reorganization at the Department of Homeland Security and/or the Food Drug Administration regulations arising out of the bioterrorism bill, yet one more law of unintended consequences snuck through - the country of origin labeling requirements of the 2002 Farm Bill. Labeled "COOL," these rules are anything but.

As is often the case, COOL is well-meaning, intending to give consumers knowledge about where their food is grown and processed. However, the devil is always in the details, and, boy, are there a lots of not so little devils in this one!

COOL impacts muscle cuts of beef, lamb and pork; ground beef, lamb and pork; farm-raised fish, wild fish, perishable agricultural commodities and peanuts. If the product is an ingredient in a processed food, it is exempt (more on this below). Restaurants, cafeterias, lunch rooms, food stands, saloons, taverns, bars, lounges and similar facilities which sell food to the public are exempt, leaving the burden to fall on retailers.

A company qualifies as a retailer provided it sells a cumulative invoice value of more than $230,000 yearly of perishable agricultural products, which exempts butcher shops, fish markets and small grocery stores. Those which remain are required to inform customers at the final point of sale of the country of origin of what is called the "covered commodity." The law goes on to define when a food stuff (covered commodity) may be labeled of U.S. origin and when it may not; more on this later, too. Regardless of its origin, the food stuff must be labeled, stamped, marked, placarded, or otherwise bear a clear and visible sign on the product or on the package, display, holding unit or bin at the final point of sale. If the product is already labeled for retail sale, the COOL must be on the package. The law also requires an audit verification system supported by record keeping and records must be kept for a period of two years.

The law goes into effect on Sept. 30, 2004, although voluntary guidelines are currently in place. Once mandatory, if there is a violation, the retailer will have 30 days to cure and faces a fine of not more than $10,000 for each violation if it fails to do so.

So now let's turn to those pesky details. Whether meat, fish or produce, a product may only be considered as U.S. origin if everything that was done to it occurred in the U.S., e.g. born, raised, slaughtered, harvested, etc. There are some notable exceptions. For example, beef, lamb and pork may transit Canada for no more than 60 days and still qualify.

Those required to keep records will include any person "who prepares, stores, handles, or distributes a covered commodity for retail sale" which includes producers, growers, handlers, packers, processors and importers, all of whom are mandated to provide the details required by retailers. The obligation is on the retailer to have the audit records at the place of final sale but records from suppliers may be stored at individual locations or be centralized. Further, if the retailer has both imported and domestic foodstuff, "a verifiable segregation plan must be in place" which clearly tracks the imported food stuff from port of entry forward.

At this juncture, there is little support to make COOL mandatory except it is required by law. Much of the dispute centers on the cost of the program, the perceived unfair advantage given to the poultry business (turkeys and chickens are exempt) and the general unease about whether consumers are really willing to pay the cost increase which will undoubtedly result from what everyone agrees is an additional burden (although the amount of that burden is in great dispute) on retailers.

COOL is clearly one more example of there are just too many changes going on in Washington which, although well-intended, are not necessarily well thought-out. Agriculture places the burden on retailers at over $1 billion yearly, while consumer advocates say it will be only a few cents a pound. As always, the truth is undoubtedly somewhere in the middle, but do you want to pay for it at the grocery check-out counter?