Country of Origin Labeling…the Biggest Challenge

[farmers_son]

11.may.07
George Morris Centre
Kevin Grier and Larry Martin

Country of Origin Labeling (COOL) is to be put into practice in the United States by October 1, 2008. House Ag Committee chair Collin Peterson says that implementation is inevitable on or before that date. This is likely to have major negative ramifications for the Canadian cattle and hog industries.
Essentially, COOL requires that all fresh pork and beef sold at retail in the US be labeled as to the country of its origin. For a product to be labeled as product of theUnited States, it would need to be produced from an animal that was born, raised and processed in the United States. All other permutations and combinations would need to be put on the label. For example, if a pork chop came from a hog that was born in Canada, but finished and killed in the US, the label would need to say: born inCanada, raised and processed in the United States. An Eye of Round roast might have the following on the label: born and raised in Canada, processed in the United States. In that case, of course, the roast would have been from a steer or heifer born in Canada, fed in Canada but shipped south for slaughter. Don’t even ask about hamburger. Needless to say this will involve multiple labels, which will increase costs through the chain. COOL for seafood is already in place in the US and it has proven to be far more costly for retailers than the original USDA estimates.
Fresh meat products from Canada sold in the US would simply need to be labeled as product of Canada. Processed products such as bacon or baloney are not included in COOL, nor are chicken or products sold at foodservice. There are fines ($10,000 per occurrence) included in the legislation for those who get caught with mislabeled product.
COOL was passed as part of the 2002 Farm Bill. Significant battles since that time have delayed the implementation of COOL for livestock and meat twice, with the current effective date being September 2008. There was some speculation that if the Republicans had held Congress in last November’s elections, implementation could have been further delayed or even quashed. With the Democrats now in control of Congress, however, COOL is suddenly a big priority. COOL will be implemented. There aren't the votes in Congress to delay it another year or more. It is due to be implemented October 1, 2008. Nevertheless, the law might change before then as House Agriculture Committee chair Collin Peterson, D-Minn., wants both COOL and mandatory cattle identification. This is a clever move on his part. He and the industry might be able to work together to get some derogation on ground beef and Canadian/Mexican cattle that are substantially raised/processed in the U.S.
In 2003 and 2004, when COOL first raised its head, the George Morris Centre did a great deal of research on behalf of hog industry organizations, like Manitoba Pork, regarding the impacts of the legislation. The bottom line of the research was that US packers would need to segregate, sort, control and account for Canadian livestock that they purchase. They would also need to segregate and label the meat from these animals separately from other meats.
Needless to say, handling Canadian livestock would increase risks of mislabeling by US packers. More importantly, handling Canadian livestock would be more costly than running a plant without Canadian livestock. For example, the 2004 George Morris Centre research estimates indicated that handling Canadian hogs would cost packers an extra $5-10/head. Other estimates of extra Canadian cattle costs were much higher. These extra costs and risks mean one of two things: US packers won’t bother buying Canadian livestock, or US packers will discount bids on Canadian livestock by the amount of the added costs and risks. Some packers simply said they could not take the risk or the added costs of buying Canadian cattle. Other packers said they would need to pay less for Canadian cattle due to higher costs. More than 160,000 hogs and 20,000 cattle cross the border each week. That amounts to about one third of total livestock marketings in Canada, which means that livestock prices inCanada will decline as soon as the legislation is enforced.
The George Morris Centre research concluded that COOL is nothing less than a non-tariff barrier to trade. That, of course, is exactly what its proponents, mostly US cattle producers, intended when they pushed for the legislation.
This legislation has the potential to exert a very damaging impact on the Canadian livestock industry. It will result in lower prices in Canada and will accelerate producer attrition and the decline in herd sizes for both cattle and hogs. Those who see the glass as half full will point to the fact that more livestock will be processed in Canada, which is true, but will only be due to problems in the livestock sector directly resulting from the implementation of COOL. The benefits to processors will be short run as the livestock sector declines.
Canadian livestock producers are not alone in facing negative consequences resulting from COOL. US cattle feeders, hog finishers, packers and retailers will all be worse off as a result of COOL. Not only will they face higher, non productive costs, but they depend on Canadian cattle. In addition, the US benefits from livestock imports due to the fact that all the value-adding and jobs occur there, not in Canada.
The Canadian livestock industry is facing many challenges now, perhaps no greater of which exists than COOL. The Canadian livestock and meat industries need to work together to fight against COOL in the international trade arena. There are some potential opportunities worthy of further investigation:
COOL could offer an advantage to the Canadian packing industry: it will incur no new costs for products labeled Product of Canada. The problem lies in the traditional pricing mechanism: since the cost of procurement by US packers will rise for Canadian hogs and cattle, US packers will bid prices down to reflect that cost. In the normal competitive model, Canadian packers would also bid Canadian prices down to meet the competition. So, Canadian packers would have the same cost of their raw material and would not face the segregation and labeling costs of their US competitors. Moreover, the very fact that COOL will differentiate product of Canada gives the opportunity to build a brand reputation. This is further detailed below.
However, this will eventually catch up to Canadian packers as some producers will find alternatives to raising hogs and reduce the supply to packers. This will result in higher costs of unused capacity for packers. An alternative is to find a way to share risk and benefit with others in the value chain by sharing gross returns on the basis of producers’ and packers’ contributions to final value over time. This will be more of a challenge for pork than for beef in the short term becauseCanada has excess slaughter capacity for cattle, but too little for hogs.
A variation on the foregoing, with or without a value chain component, is for the industry to focus on branding. Never before has Canadian product been labeled conspicuously, and with a potential cost advantage over its US competitors. This yields the opportunity for Canadian companies to more easily establish brand value propositions. It may be a place for both public and private investment, especially if WTO clarifies what constitutes legitimate market development assistance and export subsidy.
One supposes there may be an opportunity for a trade dispute with the US, either on the basis that COOL is in violation of the Sanitary and Phyto- sanitary provisions of the WTO, or that COOL is discriminatory against Canada because other exporters of pork to the US do not face the same restrictions.
This reasoning would seem to suggest, therefore, that Canada should take major steps to gain access to alternative markets through negotiations at the WTO.

[coppertop]

Thanks from this 'mom' !! My wonderful Mom has been gone for 15 years, but there isn't a day I don't remember something she said, or some kind selfless act she did over the years.

[kato]

I read through the bill, and what I gathered was that just because an animal was not identified as imported it did not automatically mean it was American. U.S. producers are also required to provide a paper trail that can be audited to prove that the animal was American. I don't think too many know that. They're going to get mandatory ID whether they want it or not.

[wilagro]

It probably wasn't a very happy day for all of the mothers in Edmonton and Calgary in rental units who got their new rent increases of anywhere from 50 to 100 percent. Renters in smaller cities are affected as well. If this continues for long I am expecting an exodus of families to small urban and rural areas where rents have not increased as much. If Stelmach and his government continue to stall on rent controls, watch the run on food banks and clothing depots as well.

I would suggest that we all contact our local MLA and bloody well protest the lack of action re: rent control of some description. There is a lot of stress building up and the weakest and poorest segment of our society are being unfairly treated when they shouldn't have to be saddled with the result of our real estate and economic boom.

[coppertop]

wilagro, I have several comments on rent control, affordable housing etc.
For those on fixed incomes that have seen their utilities, taxes if they are a homeowner, and cost of living increase a lot more than their increase in salaries or pensions , I have a great deal of sympathy.
Many families are having a tough time making ends meet, but some are making choices about where to spend their money ( eg smoking, etc.) then expecting the government to assist them.

I think what needs to happen is the government to work with municipalities to utilize some of the numerous municipal reserve lands in cities and towns for lower cost housing. There was a program back in the Lougheed era that provided a significant loan for a down payment, which could be paid back over many years. This in my view, would allow people to get into a home of their own, with the payments likely cheaper than current rent.

Believe me, there are very few rental properties in any town in rural AB. that is near a resource based area. Our local newspaper today is carrying a story about a young couple who have been given notice that a dumpy old apartment building in our local town is being sold as condo's and they have six months to either come up with the money to buy a unit or relocate. The notice arrived just prior to the new legislation requiring one year's notice to convert existing apartments to condos.

Municipalities can do their part by relaxing regulations regarding basement suites as well. Many people whose kids are no longer living at home could remodel their basement and have a rental suite at not a significant capital outlay.

At this point the opposition is pulling out all stops to make a case for rent controls but I don't think that is the answer. In Edmonton many apartment buildings are being converted to condo's and if there were rent controls I can see that happening a lot more.

Some landlords are greedy, but landlords are seeing their input costs rise as well, plus the fact that many rental units are damaged by tenants which is a huge cost, which of course, is passed on to all renters.

[farmers_son]

I understood the same. U.S. producers will have to create the paper trail to prove U.S. origin otherwise they are excluded just like Canadian or Mexican cattle. I see MCOOL as just another means whereby U.S. packers can discount cattle, whether Canadian or U.S., that could not or would not create the paper trail. The packers will successfully pit U.S. producer against Canadian producer in order to drive down the price of live cattle in both countries. Divide and conquer.

I noted the comment that Canada should seek to find non U.S. exports. However if our live cattle price is derived from the U.S. live price with a MCOOL deduction to ensure packer profitability, then that is the price we will get paid for our live cattle no matter where the beef actually ends up going.

[Willowcreek]

6/4/2007 2:56:00 PM


R-CALF: AMI Misleads Congress, Consumers On COOL



Washington, D.C. – In a recent letter to Rep. Rosa DeLauro, D-Conn., and Sen. Herb Kohl, D-Wis., from the American Meat Institute (AMI), AMI makes several decisively false claims about country-of-origin labeling, a law established in the 2002 Farm Bill that has yet to be implemented because of political pressure by multinational packers, processors and retailers. R-CALF USA, in turn, sent a letter to DeLauro and Kohl to counter AMI’s false claims.



The AMI letter asks, “If mandatory country-of-origin labeling were truly a food safety issue, should not all food products be covered through commerce?”



“The answer is ‘yes’, but for more than food safety reasons,” said R-CALF USA President/Region VI Director Max Thornsberry. “COOL provides consumers with basic information about where their food is produced, and consumers deserve this information to use as they see fit.”



AMI’s letter also states that “to assert that any country-of-origin labeling regime would have an impact on food safety or the integrity of a food product is absurd,” – a decisively false claim.



“The U.S. Department of Agriculture (USDA) itself has recently imposed COOL requirements on certain countries, such as Uruguay,” Thornsberry pointed out. “Fresh, chilled or frozen beef coming to the U.S. from Uruguay must be certified as originating only from cattle that are born, raised and slaughtered in Uruguay – the very same standards adopted by the COOL law for food products eligible to bear the USA label.



“There you go – straight from USDA – food safety and COOL do go hand-in-hand as a practiced and proven means of ensuring food safety and food product integrity,” he continued. “USDA implemented this origin-based food safety standard for Uruguay because of concerns related to foot-and-mouth disease (FMD). Only with origin information can verification be made that the final food product underwent the food production practices of a particular country’s food production regime.”



R-CALF USA’s letter also states: “The recent melamine contamination problem further demonstrates that food production practices within a particular country impact food safety and food product integrity.”



AMI also claims there are 34 countries eligible to ship meat to the U.S., and that each of those countries’ food safety inspection systems must be USDA-certified to be considered equivalent to the federal food safety inspection system in the United States.



“While this claim is accurate in terms of what the current law requires, it has been proven decisively false in practice,” Thornsberry noted. “A December 2005 report by USDA’s Office of Inspector General (OIG) revealed that Canadian plants were allowed to circumvent U.S. equivalency requirements for nearly two years – a perfect example of how COOL would afford consumers an additional level of protection against breaches in foreign food safety inspection systems.”



Additionally, AMI claims that COOL supporters “have, for too long, been mischaracterizing the mandatory labeling requirements that currently exist in this country…FSIS has had, for many years, mandatory country-of-origin labeling requirements for red meat that enters the U.S.”



This claim also is accurate in terms of what the law requires, but it, too, has been proven decisively false in practice. An August 2003 General Accounting Office revealed the COOL information was not being maintained on imported meat as required by the Tariff Act of 1930, which requires imported products to maintain its import identity through to the ultimate purchaser.



“Again, you see the disparity between what current laws require and what actually is being practiced,” Thornsberry said. “The key here is that the 2002 COOL law remedies these problems whereby country-of-origin labels are not being properly passed on to consumers by packers, processors and retailers. The 2002 COOL law expressly requires that ‘a retailer of a covered commodity shall inform consumers, at the final point of sale of the covered commodity to consumers, of the country of origin of the covered commodity.’”



AMI also claims that the 2002 COOL law is noncompliant with the World Trade Organization (WTO) and the North American Free Trade Agreement (NAFTA) – again, a decisively false – and baseless – claim.



“In fact, AMI itself discredits this claim by stating that USDA’s Food Safety and Inspection Service (FSIS) has had, for many years, mandatory country-of-origin labeling requirements for red meat that enters the U.S.,” Thornsberry asserted. “The 2002 COOL law merely preserves this label for the benefit of consumers after imported product enters the U.S., and it requires that domestic products be similarly labeled.”