Country Of Origin Labeling Overview

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Country Of Origin Labeling Overview Livestock
Industry Impacts

• April, 2003
• Darrell R. Mark, Ph.D.
• Extension Ag Economist
• University of Nebraska
• http//agecon.unl.edu/mark

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Why Where Was COOL Started?

• Initiated By Livestock Producers Who Believed It
  Would Improve Demand For Domestically Produced
  Meat
  
• Farm Bill, Title X, Modified Agricultural
  Marketing Act of 1946
  
• Voluntary COOL Started Oct 11, 2002
• Mandatory COOL Starts Sep 30, 2004

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What Is COOL?

• Retailers Must Inform Consumers Of The Country Of
  Origin Of Covered Commodities At Final Point Of
  Sale

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Covered Commodities

• Muscle Cuts Of Beef, Pork, Lamb
• Ground Beef, Pork, Lamb
• Farm-Raised Wild Fish
• Peanuts
• Perishable Ag Commodities
• Fresh Frozen Fruits Vegetables

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Exemptions To Covered Commodities

• Ingredients In Processed Food Products
• Ham, Bacon, Fresh Pork Sausage, Bratwurst
• Food Service Establishments
• Restaurants
• Retailers With Less Than 230,000/Year In Fruit
  Vegetable Sales
  
• Butcher Shops, Fish Markets, Small Grocers

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Exemptions To Covered Commodities

• Estimated 30-40 Of Beef Pork Consumption
  Occurs In Food Service Est.
  
• Processed Prepared Meat Products Are Increasing
  Popular
  
• A Substantial Amount Of Meat
• Wont Be Labeled

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Not Covered Commodities

• Poultry
• Chickens
• Turkeys
• Eggs

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To Be U.S. Origin

• Meat Must Be Exclusively From Animals
• Born In U.S.
• Raised In U.S.
• Slaughtered In U.S.
• And Will Be Labeled As Such

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Example Labels -- For Animals Born, Raised,
Slaughtered In U.S.

• Country Of Origin United States
• Product Of The United States
• Produced In The United States
• Product Of USA

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Example Labels For Animals Not
Born/Raised/Slaughtered In U.S.

• For Pork From Hogs That Were
• Born In Canada
• Raised In Canada
• Slaughtered In Canada
• Label May Read
• Product Of Canada

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Example Labels For Animals Not
Born/Raised/Slaughtered In U.S.

• For Beef From Cattle That Were
• Born In Mexico
• Raised In U.S.
• Slaughtered In U.S.
• Label May Read
• From Cattle Born In Mexico And Raised
  Slaughtered In The U.S

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Example Labels For Animals Not
Born/Raised/Slaughtered In U.S.

• For Mixed/Blended Meat Of Multiple Origins,
  Origin Must Be Labeled In Order Of Prominence By
  Weight
  
• Product Of Canada, From Hogs Born Raised In
  Canada Slaughtered In The U.S., And Product Of
  U.S.

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Notification To Consumers At Retail Outlet

• Label Or Sign On Covered Commodity Or On Package,
  Display, Or Case
  
• Required For Internet Sales Too
• Some Retailers May
• Sell Only Covered Commodities Originating From
  One Source (U.S. Or Elsewhere)
  
• Need Additional Coolers Or Displays

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State Programs Arent COOL
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COOL Is NOT

• Assurance Of Food Safety
• There Are NO Safety Standards Or Guidelines In
  The COOL Regulation
  
• Does Not Replace USDA Meat Inspection
• However, Some Consumers May Associate Knowing The
  Origin Of Meat With Safety

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No Mandatory ID System

• COOL Legislation Specifically Forbids The
  Secretary From Creating A Mandatory National
  Identification System
  
• Secretary May Use Existing Programs
• Vertical Alliances May Have An Advantage
• Retailers Or Others Could Mandate An ID System

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COOL Verification

• 3rd Party Verification Is Inevitable
• Driven From Retailer Back To Packers Producers
• Records Must Be Kept For Two Years
• Who Will Be Your 3rd Party Verifier?
• Its Not Yet Clear Who Can Do This, Possibly
• Veterinarians?
• Producer Alliances Or Cooperatives?
• Business With Technology For Identification?

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Enforcement

• Secretary of Agriculture Enforces COOL
• Retailer Is Responsible
• Violations
• Secretary Notifies Retailer
• Retailer Gets 30 Days To Comply
• Willful Violations After 30 Days Result In
  10,000 Fine For Each Violation
  
• Each Day Is A Violation
• Others In The Supply Chain Could Be Held
  Responsible, Either By USDA Or Purchasers Of
  Their Product

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COOL Isnt Likely To Go Away

• Legislative Repeal?
• Not Likely
• Ag Marketing Service, USDA, Appears To Be
  Committed To COOL
  
• Early Proponents Have Become Less Vocal, But COOL
  Is Becoming A Consumer Issue
  
• We Cant Now Tell Consumer That We Dont Want To
  Tell Them Where Their Food Comes From

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Impacts Economic Assessments
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So Why Hasnt Voluntary COOL Taken Off?The
Costs Probably Outweigh The Benefits

• Though The Benefits And Costs Of The Voluntary
  Program Are Difficult To Quantify, The Agency
  Believes That Retailers Will Only Choose To
  Participate If The Benefits Outweigh The Costs.
• Ag Marketing Service, USDA

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Cost Estimates

• AMS ? 1.97 Billion For Recordkeeping
• This Is For All Covered Commodities
• Does Not Cover Other Costs To The Industries, Or
  Impacts On Markets Or Trade

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Cost Estimates

• COOL With A Traceback System ? 1.02 Billion For
  Pork Industry
  
• 10 Increase In Farm Costs, or 10.22/hd
• Plus Loss Of Export Business

Source Hayes and Meyer
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Potential Benefits COOL

• Increased Demand
• Market Share
• U.S. Already Has 90 Of Domestic Beef Pork
  Market, So Little To Gain
  
• Higher Price
• Little Research To Suggest Consumers Will Pay For
  Country Of Origin Information

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Consumer Willingness-To-Pay For U.S. Certified
Beef

• Loueiro Umberger Found That A Select Group of
  Consumers, In A Survey Conducted In Grocery
  Stores Would
  
• Pay 183.77 Per Year For Mandatory COOL
• Pay 1.53/lb. More For Steak
• 0.70/lb. More For Hamburger

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Consumer Willingness-To-Pay For U.S. Certified
Beef

• Umberger et al. Used An Experiment A Select
  Group Of Consumers Found
  
• 73 Were Willing To Pay A Premium Beef Labeled
  For Country Of Origin
  
• 11 Premium For Steak
• 24 Premium For Hamburger
• These Consumer Were Willing To Pay A 19 Premium
  For Steak Labeled U.S. Guaranteed Born Raised
  In U.S. When Given The Alternative Of A Steak
  With No Label

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Other Potential Benefits

• Consumers Can Choose Between Domestic Foreign
  Food
  
• They Have This Choice With Cars, Clothes, etc.
• Do They All Choice Domestic?
• Packers/Processors Can Choose Between Domestic
  Production Imports
  
• Probably Not Legal At Processor Level

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Potential Problems

• World Trade Organization Violations
• Retaliations By Foreign Competitors
• Foreign Competitors Becoming Better At COOL Than
  We Are
  
• Verification System Isnt Clear Yet
• Packers Transaction Costs Increase, So They Buy
  From Fewer Producers

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Potential Problems

• Packers Will Segregate Plants Or Shifts
• Increases Their Costs Producers Costs
• Retailers Will Move To Case-Ready
• Already Seeing A Shift To This
• Retail Pork Beef Price Could Increase Relative
  To Poultry, And Poultry Demand Increase
  
• Costs Likely To Exceed Benefits

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Possible Effects

• Unverified Meat Will Go To HRI Or Export
• High Value Markets, But Blended/Mixed Product
  Will Be Hardest To Verify
  
• Audit Trail (Or Traceback) Expose Producers To
  Other Liabilities
  
• Food Safety
• Canada Increases Packing Capacity Exports Pork
  Instead of Hogs
  
• U.S. Pork Exports Decline

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Possible Effects

• Pork Beef Demand Improve
• Pork Beef Demand Decline
• Some U.S. Producers Quit
• Some U.S. Packers Go Out Of Business

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Livestock Producers Alternatives

• Stick Your Head In The Sand Hope This Goes
  Away
  
• Not Likely To Go Away
• Your Buyer Wont Allow
• You To Do Nothing Because
• Your Buyer Has To Do Something

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Requirements For Hogs Born In Dec 2003 Calves
Born Now 1. Have 3rd Party Verified Documenta
tion Proving Where Animals Were Born Raised.
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Requirements For Hogs Born In Dec 2003 Calves
Born Now 2. Sign An Affidavit For Each Load St
ating There Is A 3rd Party Verified Audit Trail
Identifies Hogs Origin.
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Requirements For Hogs Born In Dec 2003 Calves
Born Now 3. Swift Co. Will Conduct Random Pr
oducer Checks To Verify Audit Trail.
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Requirements For Hogs Born In Dec 2003 Calves
Born Now 4. Swift Co. Will Pass Any Fine/Pen
alty It Receives To Party Responsible.
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Liability For COOL Accuracy

• Will Be Passed Down The Supply Chain, Likely
  Through A Series Of Affidavits Or Contracts
  
• These Would Require The Supplier Of The Product
  To Provide Country Of Origin Information
  Confirm That The Information Can Be Verified
  
• The Ultimate Responsibility For Determining
  Documenting Country Of Origin Will Be For
  Livestock Producers

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Livestock Producers Alternatives

• Be The COOL-est Producer
• Be The First
• Be The Most Accurate
• Become Packers Preferred Supplier

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What Should Producers Do Now?

• Document Location Of Birth For Livestock Born On
  Farms Ranches, Along With Other Production
  Records
  
• Retain These Records For At Least 2 Years
• Be Ready To Make Them Available When Selling The
  Livestock
  
• Obtain Country Of Origin Information,
  Documentation, Verification (If Possible) For
  Livestock Purchases

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More Information

• http//agecon.unl.edu/mark/cool.htm