Multi-Billion Dollar Paperwork Cost for Country-of-Origin Labeling Law Demands a Search for Alternatives; New Government Estimates Show That Cost Burden Falls on All Food Industry Segments and Ultimately on Consumers

WASHINGTON, DC — November 25, 2002 — “The $2 billion price tag just for the paperwork required by the new country-of-origin labeling law demands that we search for more cost-effective alternatives,” said Tim Hammonds, president and CEO of the Food Marketing Institute (FMI). He was commenting on the record-keeping cost estimates for labeling meat, produce, seafood and peanuts issued recently by the federal Agricultural Marketing Service and Office of Management and Budget.

“These unacceptable costs,” he said, “are borne by the entire supply chain — starting with $1 billion for farmers, ranchers and fishermen and another billion for packers, wholesalers and retailers. Much of the burden will fall ultimately on consumers in higher costs for the hundreds of products that must be labeled in this program.”

Record-Keeping Costs Are the Proverbial Tip of Regulatory Iceberg

“Most unsettling,” Hammonds said, “is that paperwork is only the proverbial tip of this regulatory iceberg.” These estimates, he said, do not include the cost to:

• Overhaul the entire supply chain for each meat, seafood, fruit, vegetable and peanut item required to be labeled to segregate products according to the country of origin.

• Audit farmers, ranchers and fishermen, and each subsequent segment in the food supply chain to verify that they comply with the program.

• Design and print country-of-origin labels, shelf tags and placards.

• Attach the labels to pallets, cartons and individual items.

• Train employees how to maintain the program.

• Pay $10,000 fines for each violation.

• Enforce the law by the U.S. Department of Agriculture and Food and Drug Administration.

“Country-of-origin labeling really breaks down for the large quantities of beef and produce that are multinational in their origin, processing and packaging,” Hammonds said. “Ever since the North American Free Trade Agreement was ratified in 1993, cattle and produce have moved freely among Canada, Mexico and the U.S.

The guidelines require that all fresh meat products have labels defining the country of breeding, birth, slaughter and processing for every animal in the product — all tracked and labeled in order of predominance. In addition to this, the U.S. Department of Agriculture has a program that will charge producers for audits to verify the accuracy of their information.”

“Meat labeling will be the most difficult to manage and most confusing to consumers. A simple package of hamburger combining meat from suppliers in two or more countries, he said, could be labeled: beef (born in U.S., raised in Canada, slaughtered in U.S.), beef (born and raised in Mexico, slaughtered in U.S.), beef (product of Australia). “It is hard to imagine more useless consumer information on a food label.

“It is quite likely that once all sectors of the industry face the challenge of implementing the labeling mandate, they will be overwhelmed by the costs, the paperwork and the penalties the law imposes. Let’s act now before the food industry crashes into this iceberg.”

Under the law, labeling is voluntary for the first two years. It becomes mandatory after September 30, 2004.