COOL compliance: the devil is in the details.

"If you like laws and sausage, you should never watch either one being made." Otto Von Bismarck

Bismarck may have rethought his comment had he read the federal mandate that calls for the creation of a mandatory country-of-origin-labeling program. To compare the science of sausage making to the ambiguity of lawmaking is an insult to sausage processors everywhere.

No matter what your opinion of COOL, there is no doubt it is a poorly written law. Its language has left officials with the U.S. Department of Agriculture's Agricultural Marketing Service scrambling to develop a final rule that provides consumers with the knowledge of where some retail food items are coming from, prevents fraud and complies with the specific language contained within the law. The AMS has until Sept. 30, 2004, to issue a final rule, and as agency officials have crisscrossed the country conducting "listening sessions," they have gotten an earful.

"This law is simply a thinly veiled non-tariff trade barrier that imposes a duty on retailers and packers to provide accurate country-of-origin information and imposes a substantial regulatory burden on packers and retailers if the producer's information is wrong, either through negligence or through fraud," says Mark Dopp, senior vice president of regulatory affairs and general counsel for the American Meat Institute in Arlington, Va.

According to Jon Caspers, president of the National Pork Producers Council, based in Des Moines, Iowa, and a producer from Swaledale, Iowa, "It is increasingly becoming clear that the country-of-origin-labeling guidelines as currently drafted are wholly inadequate and are going to be very costly for pork producers. It is our belief the costs, including the liability issues of participating in this program, far outweigh any benefits."

COOL started as an idea to enhance the value of select U.S.-produced foodstuffs sold at the retail level. The logic of the idea revolves around the notion that consumers will pay, perhaps a premium, for products "made in the U.S.A." Unfortunately, the component of the law that calls for retailers and food processors to be fined up to $10,000 for each violation has caused these companies to put programs in place to protect themselves. Suddenly, what appeared to be a good idea has started to reveal its dark side.

Price of compliance

Speaking before the Senate Agriculture Committee's subcommittee on marketing, inspection and promotion, William Hawks, undersecretary for the AMS marketing and regulatory program, outlined the scope of what complying with COOL's voluntary guidelines would entail.

"Even with a modest level of participation by retailers in the voluntary program, the need for record keeping by suppliers could expand to virtually the entire population of producers, processors and distributors," he said. "Early in their production process, few covered commodities are produced for a specific market. Rather, the decision on how a commodity is ultimately marketed to consumers is typically made far from the point of production.

"For example, even in a relatively simple situation where a calf is born and raised on a farm in Virginia, finished in a feedlot in Texas and slaughtered and processed by a Kansas packing plant, record keeping will need to be maintained to establish country of origin. In each of these steps, the animal is owned and managed by different parties. The decision on how the component cuts of this animal are marketed is made at the packing plant in Kansas. Seldom, if ever, will all of the cuts from one animal be marketed to a single retail outlet. The strip loins and ribs could be marketed in the foodservice sector while the round cuts are destined for retail. To provide the required country-of-origin-claim information for covered commodities sold at retail, the entire production system must have appropriate record keeping in place."

Trickledown lawmaking

In anticipation of what the final law will contain, retailers are putting the burden of compliance on packers and processors, and they, in turn, are putting the burden of compliance on producers.

Here is where the concept of COOL being a "poorly written law" comes into play. As part of the 2002 Farm Bill, lawmakers forbade the AMS from implementing a traceability program to ensure compliance with the law. "The law prohibits the Secretary (of Agriculture) from establishing a mandatory identification system to verify the country of origin of a covered commodity," Hawks said. "Therefore, retailers and their suppliers must maintain records that verify the country of origin for covered commodities."

Complying with COOL is going to have an impact on every stage of the production process. The law is designed to create a paper trail USDA officials can use to ensure compliance. "It is apparent that COOL will require the maintenance of records sufficient to verify claims of origin," Hawks said. "As many as two million farmers, ranchers and fishermen could be affected. An estimated 100,000 food handlers (packers, processors, importers, wholesalers and distributors) could be impacted. At the retail level, 4,200 businesses operating some 31,000 retail outlets will be involved."

Producers are going to have to verify for packers and retailers that their livestock have been born, raised and slaughtered in the United States. Packers are going to have to make sure that producers are complying with the law. Retailers are not only going to have to ensure that what packers and producers are telling them is true, but they also are going to have to have the paperwork on hand to back up their claims.

Ironically, it is the retailers and food processors that face the penalties for noncompliance. If they are audited by the USDA and found to be in willful violation of the law, they will face fines up to $10,000. Food processors supplying retailers can also be held accountable if they are found to be in violation of the law.

To ensure compliance, companies like Swift & Co. in Greeley, Colo., and Hormel Foods Corp. in Austin, Minn., began informing their suppliers earlier this year of what their expectations will be once the mandatory law goes into effect. To sell livestock to Swift, for example, producers will have to provide third-party-verified documentation proving where livestock were born and raised. Producers will also have to sign a document for each truckload of livestock sold to verify that they comply with the law.

Swift will also conduct random audits of suppliers to ensure they are in compliance with the law. Compliance will require that a USDA-certified third party audit each producer's record-keeping system. Finally, if Swift is fined for noncompliance, the fine will be assessed to the producer who supplied the livestock.

Producer groups that have championed the COOL concept do not see why third-party verification is necessary. In response to the packing industry's requirements, they have turned to the Grain Inspection, Packers and Stockyards Administration for clarification of whether the requirements are a violation of the Packers and Stockyards ACt. GIPSA officials have noted that "the P&S Act does not prohibit packers from discriminating between producers. The law prohibits packers from discriminating unjustly. Treating producers differently, by itself, is not a violation of the P&S Act. If a packer has a reasonable business justification for treating similarly situated producers differently, and if the differences are reasonable, the packer has not violated the act."

The waiting game

The final COOL rule is months away from publication, and until procedures for complying with the law are published, the effect of the law remains uncertain. At this stage, it is safe to say participants within the farm-to-table production process are attempting to limit their liability under the law as much as possible.

Retailers, packers and processors are putting programs in place to help them comply with the forthcoming law. According to Gary May, an extension program specialist at Iowa State University in Ames, Iowa, producers should start doing the same by talking to packers about their plans for implementing COOL; begin developing on-farm record-keeping systems; be able to match bill of sale, health papers or birth records with inventory and sales; ask for similar information on purchased animals; explore documentation systems offered by suppliers and organizations; and stay tuned.

Keith Nunes

MEAT&POULTRY magazine