[Federal Register Volume 78, Number 101 (Friday, May 24, 2013)]
[Rules and Regulations]
[Pages 31367-31385]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-12366]



========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 
Prices of new books are listed in the first FEDERAL REGISTER issue of each 
week.

========================================================================


Federal Register / Vol. 78, No. 101 / Friday, May 24, 2013 / Rules 
and Regulations

[[Page 31367]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 60 and 65

[Document No. AMS-LS-13-0004]
RIN 0581-AD29


Mandatory Country of Origin Labeling of Beef, Pork, Lamb, 
Chicken, Goat Meat, Wild and Farm-Raised Fish and Shellfish, Perishable 
Agricultural Commodities, Peanuts, Pecans, Ginseng, and Macadamia Nuts

AGENCY: Agricultural Marketing Service (AMS), U.S. Department of 
Agriculture (USDA).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule amends the Country of Origin Labeling (COOL) 
regulations to change the labeling provisions for muscle cut covered 
commodities to provide consumers with more specific information and 
amends the definition for ``retailer'' to include any person subject to 
be licensed as a retailer under the Perishable Agricultural Commodities 
Act (PACA). The COOL regulations are issued pursuant to the 
Agricultural Marketing Act of 1946. The Agency is issuing this rule to 
make changes to the labeling provisions for muscle cut covered 
commodities to provide consumers with more specific information and 
other modifications to enhance the overall operation of the program.

DATES: This final rule is effective May 23, 2013. The requirements of 
this rule do not apply to covered muscle cut commodities produced or 
packaged before May 23, 2013.

FOR FURTHER INFORMATION CONTACT: Erin Morris, Deputy Associate 
Administrator, AMS, USDA, by telephone on 202/690-4024, or via email 
at: erin.morris@ams.usda.gov.

SUPPLEMENTARY INFORMATION: 

Background

    The Farm Security and Rural Investment Act of 2002 (2002 Farm Bill) 
(Pub. L. 107-171), the 2002 Supplemental Appropriations Act (2002 
Appropriations) (Pub. L. 107-206), and the Food, Conservation and 
Energy Act of 2008 (2008 Farm Bill) (Pub. L. 110-234) amended the 
Agricultural Marketing Act of 1946 (Act) (7 U.S.C. 1621 et seq.) to 
require retailers to notify their customers of the country of origin of 
covered commodities. Covered commodities include muscle cuts of beef 
(including veal), lamb, chicken, goat, and pork; ground beef, ground 
lamb, ground chicken, ground goat, and ground pork; wild and farm-
raised fish and shellfish; perishable agricultural commodities; 
macadamia nuts; pecans; ginseng; and peanuts. AMS published a final 
rule for all covered commodities on January 15, 2009 (74 FR 2658), 
which took effect on March 16, 2009. On March 12, 2013, AMS published a 
proposed rule to amend the country of origin labeling provisions for 
muscle cut covered commodities (78 FR 15645).

Executive Summary

Purpose of the Regulatory Action

    In June 2012, in a WTO case brought by Mexico and Canada, the WTO 
Appellate Body (AB) affirmed a previous WTO Panel's finding that the 
COOL requirements for muscle cut meat commodities were inconsistent 
with U.S. obligations under the WTO Agreement on Technical Barriers to 
Trade (TBT Agreement). In particular, the AB affirmed the Panel's 
determination that the COOL requirements were inconsistent with the TBT 
Agreement's national treatment obligation to accord imported products 
treatment no less favorable than that accorded to domestic products. 
The WTO Dispute Settlement Body (DSB) adopted its recommendations and 
rulings on July 23, 2012. The United States has until May 23, 2013, to 
comply with the WTO ruling.
    As a result of this action, the Agency reviewed the overall 
regulatory program and is issuing this rule, under the authority of the 
Agricultural Marketing Act (7 U.S.C. 1621 et seq.), to make changes to 
the labeling provisions for muscle cut covered commodities and certain 
other modifications to the program. The Agency expects that these 
changes will improve the overall operation of the program and also 
bring the current mandatory COOL requirements into compliance with U.S. 
international trade obligations.

Summary of the Major Provisions of the Regulatory Action in Question

    Under this final rule, origin designations for muscle cut covered 
commodities derived from animals slaughtered in the United States are 
required to specify the production steps of birth, raising, and 
slaughter of the animal from which the meat is derived that took place 
in each country listed on the origin designation. In addition, this 
rule eliminates the allowance for commingling of muscle cut covered 
commodities of different origins. These changes will provide consumers 
with more specific information about the origin of muscle cut covered 
commodities.

Costs and Benefits

    The costs of implementing these requirements will be incurred by 
intermediaries (primarily packers and processors of muscle cut covered 
commodities) and retailers subject to requirements of mandatory COOL. 
The Agency considers that the total cost of the rule is driven by the 
cost to firms of changing the labels and the cost some firms will incur 
to adjust to the loss of the flexibility afforded by commingling.
    The estimated number of firms that will need to augment labels for 
muscle cut covered commodities is 2,808 livestock processing and 
slaughtering firms, 38 chicken processing firms, and 4,335 retailers. 
This totals 7,181 firms that will need to augment the mandatory COOL 
information presented on labels for muscle cut covered commodities.
    Based on 2009 data, the Food Safety and Inspection Service (FSIS) 
estimated there were approximately 121,350 raw meat and poultry unique 
labels submitted by official establishments (i.e., establishments 
regulated by FSIS) and approved by the Agency (76 FR 44862). Assuming 
the upper bound estimate of 121,350 unique labels, the Agency estimates 
the midpoint cost of the final rule for this label change is $32.8 
million with a range of $17.0 million to $47.3 million.
    With regard to the elimination of commingling flexibility, which 
affects the beef and pork segments, the information submitted by 
commenters

[[Page 31368]]

confirms the Agency's understanding that the commingling flexibility is 
used by some packers, but that it is not possible to specify the extent 
to which packers are making use of the flexibility. Accordingly, the 
Agency made various assumptions and used several sources of data to 
estimate the range of commingling activity that might be occurring in 
the industry and the related range of costs that might be incurred from 
the elimination of commingling.
    The Agency estimates a potential range of commingling of U.S. and 
foreign-origin livestock by U.S. packers of five percent to 20 percent. 
The Agency considers that the data analyzed support the possibility 
that the extent to which packers are commingling is closer to the lower 
end than the higher end of the range. Midrange estimates of commingling 
are 12.5 percent for fed cattle and hogs.
    Estimated costs for the loss of commingling flexibility at the 
packer/processor level are $7.16 per head for cattle and $1.79 per head 
for hogs that are currently commingled. Estimated costs at the retail 
level are $0.050 per pound for beef and $0.045 per pound for pork 
muscle cuts derived from commingled livestock. For the beef segment, 
total costs for the loss of commingling flexibility to intermediaries 
and retailers are estimated to be $21.1 million, $52.8 million, and 
$84.5 million at the lower, midpoint, and upper levels. Similarly for 
the pork segment, total costs for the loss of commingling flexibility 
to intermediaries and retailers are estimated to be $15.0 million, 
$37.7 million, and $60.3 million at the lower, midpoint, and upper 
levels.
    Combining costs for label changes with costs from the elimination 
of commingling flexibility yields estimated total adjustment costs of 
$123.3 million at the midpoint and ranging from $53.1 million at the 
low end to $192.1 million at the high end. Given that the Agency 
believes that the current extent of commingling likely falls closer to 
the lower end than the higher end of the estimates, the estimated 
implementation costs narrow to a range of $53.1 to $137.8 million.
    The Agency believes that the incremental economic benefits from the 
labeling of production steps will be comparatively small relative to 
those that were discussed in the 2009 final rule.
    A complete discussion of the costs and benefits can be found under 
the Executive Order 12866 section.

Summary of Changes to the COOL Regulations

Definitions

    In the regulatory text for fish and shellfish (7 CFR part 60) and 
for all other covered commodities (7 CFR part 65), the definition for 
``retailer'' is amended to include any person subject to be licensed as 
a retailer under the Perishable Agricultural Commodities Act (PACA) of 
1930 (7 U.S.C. 499a(b)). This change more closely aligns with the 
language contained in the PACA regulation and clarifies that all 
retailers that meet the PACA definition of a retailer, whether or not 
they actually have a PACA license, are also covered by COOL.

Country of Origin Notification

Labeling Provisions for Muscle Cut Covered Commodities

    Under this final rule, all origin designations for muscle cut 
covered commodities slaughtered in the United States must specify the 
production steps of birth, raising, and slaughter of the animal from 
which the meat is derived that took place in each country listed on the 
origin designation. The requirement to include this information applies 
equally to all muscle cut covered commodities derived from animals 
slaughtered in the United States. This requirement will provide 
consumers with more specific information on which to base their 
purchasing decisions without imposing additional recordkeeping 
requirements on industry. The Agency considers these changes, which are 
discussed in detail below, consistent with the provisions of the 
statute.
Labeling Covered Commodities of United States Origin
    Under this final rule, the United States country of origin 
designation for muscle cut covered commodities is required to include 
location information for each of the three production steps (i.e., 
``Born, Raised, and Slaughtered in the United States''). The current 
COOL regulations permit the term ``harvested'' to be used in lieu of 
``slaughtered.'' This final rule retains that flexibility.
    In the case of chicken muscle cut covered commodities, the current 
COOL regulations define the term ``born'' as hatched from the egg. 
Therefore, under this final rule, the origin designations for chicken 
muscle cut covered commodities may use the term ``hatched'' in lieu of 
``born.''
Labeling Muscle Cut Covered Commodities of Multiple Countries of Origin 
(From Animals Slaughtered in the United States)
    Muscle cut covered commodities derived from multiple countries 
(from animals slaughtered in the United States) are those muscle cut 
covered commodities derived from animals that were born in another 
country (and thereby raised for a period of time in that country) and 
then, following importation, were further raised and slaughtered in the 
United States. Under this final rule, the origin designation for these 
muscle cut covered commodities must include location information for 
each of the three production steps (i.e., born, raised, and 
slaughtered). As stated above, there is some flexibility in the 
terminology that must be used with respect to referencing the 
production steps.
    As discussed in the preamble of the January 15, 2009, final rule 
and in the March 12, 2013, proposed rule, if animals are born and 
raised in another country and subsequently further raised in the United 
States, only the raising that occurs in the United States needs to be 
declared on the label, as it is understood that an animal born in 
another country will have been raised at least a portion of its life in 
that other country. Because the country of birth is already required to 
be listed in the origin designation, and to reduce the number of 
required characters on the label, the Agency is not requiring the 
country of birth to be listed again as a country in which the animal 
was also raised. Accordingly, under this final rule, the production 
step related to any raising occurring outside the United States may be 
omitted from the origin designation of these commodities (e.g., ``Born 
in Country X, Raised and Slaughtered in the United States'' in lieu of 
``Born and Raised in Country X, Raised and Slaughtered in the United 
States'').
    However, in the relatively rare situation where an animal was born 
and raised in the United States, raised in another country (or 
countries), and then raised and slaughtered in the United States, the 
label must indicate all countries which the production step related to 
raising occurred. In this rare case, the label could read ``Born and 
Raised in the United States, Raised in Country X, Slaughtered in the 
United States.''
    Finally, the origin designation for muscle cut covered commodities 
derived from animals imported for immediate slaughter as defined in 
Sec.  65.180 is required to include

[[Page 31369]]

information as to the location of the three production steps. However, 
the country of raising for animals imported for immediate slaughter as 
defined in Sec.  65.180 shall be designated as the country from which 
they were imported (e.g., ``Born and Raised in Country X, Slaughtered 
in the United States'').
Commingling
    This final rule eliminates the allowance for commingling of muscle 
cut covered commodities of different origins. As discussed in the March 
12, 2013, proposed rule, all origin designations are required to 
include specific information as to the place of birth, raising, and 
slaughter of the animal from which the meat is derived. Removing the 
commingling allowance lets consumers benefit from more specific labels.
Labeling Imported Muscle Cut Covered Commodities
    As stated in the March 12, 2013, proposed rule, under the current 
COOL regulations, imported muscle cut covered commodities retain their 
origin as declared to the U.S. Customs and Border Protection at the 
time the products entered the United States (i.e., Product of Country 
X) through retail sale.
    Under this final rule, these labeling requirements for imported 
muscle cut covered commodities remain unchanged. As is permitted under 
the current COOL regulations, the Agency will continue to allow the 
origin designation to include more specific information related to the 
three production steps, provided records to substantiate the claims are 
maintained and the claim is consistent with other applicable Federal 
legal requirements.
Labeling
    The current COOL regulations allow for a variety of ways that the 
origin information can be provided, such as placards, signs, labels, 
stickers, etc. Many retail establishments have chosen to use signage 
above the relevant sections of the meat case to provide the required 
origin information in lieu of or in addition to providing the 
information on labels on each package of meat. Under this final rule, 
the Agency will continue to allow the COOL notification requirements to 
be met by using signs or placards. For example, for meat derived from 
cattle born in Canada and raised and slaughtered in the United States, 
the signage could read ``Beef is from animals born in Canada, Raised 
and Slaughtered in the United States.''
    In terms of using labels and stickers to provide the origin 
information, the Agency recognizes that there is limited space to 
include the specific location information for each production step. 
Therefore, under this final rule, abbreviations for the production 
steps are permitted as long as the information can be clearly 
understood by consumers. For example, consumers would likely understand 
``brn'' as meaning ``born''; ``htchd'' as meaning ``hatched''; 
``raisd'' as meaning ``raised''; ``slghtrd'' as meaning ``slaughtered'' 
or ``hrvstd'' as meaning ``harvested''. In addition, the current COOL 
regulations allow for some use of country abbreviations, as permitted 
by Customs and Border Protection, such as ``U.S.'' and ``USA'' for the 
``United States'' and ``U.K.'' for ``The United Kingdom of Great 
Britain and Northern Island.'' This final rule retains that 
flexibility. To help educate consumers about the new requirements, the 
Agency will redesign its consumer brochures and use tools such as 
social media, etc.
Effective Date and Period of Education and Outreach
    The effective date of this regulation is May 23, 2013, and the rule 
is mandatory as of that date. As the Agency explains below, it would be 
impracticable and contrary to the public interest to delay the 
effective date of the rule beyond May 23, 2013.
    However, AMS understands that it may not be feasible for all of the 
affected entities to achieve 100% compliance immediately and that some 
entities will need time to make the necessary changes to achieve full 
compliance with the amended provisions for 100% of muscle cut covered 
commodities. Therefore, during the six month period following the 
effective date of the regulation, AMS will conduct an industry 
education and outreach program concerning the provisions and 
requirements of this rule. AMS has determined that this allocation of 
resources will ensure that the industry effectively and rationally 
implements this final rule.
    In addition, it is reasonable to allow time for the existing stock 
of muscle cut covered commodities labeled in accordance with the 2009 
COOL regulations that are already in the chain of commerce to clear the 
system. Therefore, the requirements of this rule do not apply to muscle 
cut covered commodities produced or packaged before May 23, 2013. The 
Agency believes that providing an education and outreach period and 
allowing existing stock to clear the chain of commerce is necessary to 
prevent retailer and supplier confusion and will help alleviate some of 
the economic burden on regulated entities.
    Finally, the Agency recognizes that for some period of time 
following the period of education and outreach, existing label and 
package inventories may provide less specific origin information (e.g., 
Product of Country X and the U.S.). As long as retail establishments 
provide the more specific information via other means (e.g., signage), 
the Agency will consider the origin notification requirements to have 
been met until these existing label and package inventories have been 
completely used.
Comments and Responses
    On March 12, 2013, the Agency published a proposed rule with a 30-
day comment period. AMS received 936 timely comments from consumers, 
retailers, producers, wholesalers, foreign governments, distributors, 
trade associations, and other interested parties. The majority of 
commenters registered their support or opposition to the rule without 
providing specific substantive guidance or information to modify the 
rule text.
    AMS received 453 comments, including four petitions signed by more 
than 40,000 individuals, which indicated that the proposed rule makes 
labels more informative for consumers. AMS also received 476 comments 
opposing the rule from numerous producer, packer, and international 
trading partner entities, as well as individual ranchers, packing 
companies and Foreign Government officials. The comments expressed 
opposition to the proposed rule due to concerns about the costs of 
implementation and the lack of quantifiable benefits to consumers. For 
the ease of the reader, the comments have been summarized by issue.
Executive Orders 13563 and 12866
    Summary of Comments: Numerous commenters stated their belief that 
the proposed rule should be withdrawn in light of Executive Order 
(E.O.) 13563--Improving Regulation and Regulatory Review. The 
commenters contended that they believe the costs of the rule outweigh 
the benefits and, therefore, the standard of the E.O. is not being met. 
Another commenter contended that the proposed rule does not comply with 
E.O. 12866 based on the commenter's belief that there is no explanation 
of the need for the rule; that the cost/benefit analysis lacks meaning; 
and that there is no explanation of how regulation is consistent with 
the statute.
    Agency Response: The Agency believes that the proposed rule and 
this final rule comply with both E.O. 13563

[[Page 31370]]

and E.O. 12866. The Act provides authority for the Secretary to 
promulgate regulations necessary to implement the COOL program. In 
addition, as explained previously, in order to implement mandatory 
country of origin labeling for certain meat products as required by 
statute, the Agency has made changes to the labeling provisions for 
muscle cut covered commodities. These changes provide consumers with 
more specific information and enhance the overall operation of the 
program. The Agency also expects that these changes will bring the 
mandatory COOL requirements into compliance with U.S. international 
trade obligations.
    The proposed rule contained an executive summary of the rule, which 
included a statement of need. The Agency has conducted a cost benefit 
analysis, as required, and has modified the analysis based on the 
comments received. As noted in a subsequent response below, the Agency 
believes that this final rule is consistent with the statute.
Miscellaneous
    Summary of Comments: Several commenters stated their belief that 
the proposed rule violates the First Amendment because it impermissibly 
compels commercial speech. The commenters argued that AMS has not 
stated an interest sufficient to require labeling of specific 
production steps as recommended in the proposed rule.
    Agency Response: The Agency disagrees. The Act directs that a COOL 
program be implemented that provides consumers with country of origin 
information on specified commodities, including muscle cuts of meat. It 
also provides authority for the Secretary to promulgate regulations 
necessary to implement the COOL program. The Agency believes that the 
Act provides the authority to amend the COOL regulations to require the 
labeling of specific production steps in order to inform consumers 
about the origin of muscle cuts of meat at retail.
    Summary of Comments: One commenter expressed concern that packers 
will need to maintain two label inventories--one for domestic use and 
one for export.
    Agency Response: The COOL regulations apply to only those products 
sold at covered domestic retail establishments. Because various 
countries presently have different labeling and other requirements for 
accepting products exported from the United States, packers already 
utilize different labels for products destined for export (as well as 
for products destined for food service) than for products destined for 
the domestic retail market.
World Trade Organization
    Summary of Comments: Several commenters expressed a wide range of 
views regarding the WTO dispute. Some commenters contended that the 
proposed rule will not bring the United States into compliance with its 
international trade obligations while other commenters contended that 
the proposed rule will satisfy U.S. trade obligations.
    Agency Response: The Agency considers that this rule brings the 
United States into compliance with its international trade obligations. 
In the COOL dispute, the WTO affirmed that WTO Members have the right 
to adopt country of origin labeling requirements, in that providing 
such information to consumers about the products they buy is a 
legitimate government objective. However, the WTO had concerns with 
specific aspects of the current COOL requirements. In particular, the 
WTO considered that the current COOL requirements imposed record 
keeping costs that appeared disproportionate to the information 
conveyed by the labels. This final rule addresses those concerns of the 
WTO.
Statutory Authority
    Summary of Commenters: Some commenters stated their belief that the 
proposed rule is not authorized by the statute. One commenter stated 
that the statute does not explicitly or implicitly allow USDA to 
require retailers to provide point of processing information; that the 
statute provides that labels must identify the origin of category C 
covered commodities as the country from which it was imported and the 
United States; and that, applying the whole statute rule, categories A 
and B must be labeled in the same manner as categories C and D.
    Agency Response: The Agency believes this rule is consistent with 
the statute and that the Act provides authority for the Secretary to 
promulgate regulations necessary to implement the COOL program. The 
statute contemplates four different labeling categories for meat, based 
on where the animal was born, raised, and/or slaughtered. This final 
rule preserves these four different labeling categories for meat and is 
consistent with the labeling criteria set forth in the statutory 
scheme.
Effective Date and Period of Education and Outreach
    Summary of Comments: Several commenters stated that the effective 
date of the rule should be delayed until it is known whether the WTO 
considers the final rule to be compliant with U.S international trade 
obligations. Other commenters recommended that the effective date 
should be the latter of 180 days after the WTO ruling or the 
publication of the final rule. Another commenter recommended that the 
effective date should be 18 months to 2 years after publication of the 
final rule. With regard to enforcement, another commenter stated their 
opinion that the industry needs 12-18 months to comply with the final 
rule due to livestock commitments. Another commenter suggested that 
companies need 12 months to work through existing inventory of labels.
    Agency Response: The effective date of this regulation is May 23, 
2013, and the rule is mandatory as of that date. As the Agency explains 
below, it would be impracticable and contrary to the public interest to 
delay the effective date of the rule beyond May 23, 2013.
    However, and as discussed previously, the Agency determined that an 
industry education and outreach program concerning the provisions and 
requirements of this rule is appropriate. The Agency believes that a 
six month period, as was provided for in the August 1, 2008, interim 
final rule (73 FR 45106) and the 2009 final COOL rule, is sufficient 
time for retailers and suppliers to become educated on and fully 
transition over to the new requirements of the final rule.
    Both during this six month period and beyond, the Agency will 
continue to educate retailers and suppliers on the Agency's compliance 
and enforcement procedures so that the regulated industries have clear 
expectations as to how the Agency will enforce this rule. With regard 
to working through existing packaging inventories, this final rule does 
not require covered commodities to be individually labeled with COOL 
information. As discussed previously, retailers can use placards and 
other signage to convey origin information. In addition, as also 
previously discussed, it is reasonable to allow time for the existing 
stock of muscle cut covered commodities labeled in accordance with the 
2009 COOL regulations that are already in the chain of commerce to 
clear the system. Therefore, the requirements of this rule do not apply 
to muscle cut covered commodities produced or packaged before May 23, 
2013.
Labeling
    Summary of Comments: Several commenters stated their belief that 
retailers and suppliers should not have

[[Page 31371]]

to list production step information for U.S. origin products. Other 
commenters stated their belief that requiring production step 
information is too onerous and that consumers do not desire this 
information. Another commenter stated that the rule will cause product 
labels to mislead consumers and referenced the Federal Meat Inspection 
Act (FMIA) (21 U.S.C. 601 et seq.). The commenter further stated that 
consumers will be confused by imported meat products bearing an 
``inspected & passed'' sticker. Another commenter recommended that 
chicken should be labeled ``hatched'' instead of ``born.'' This 
commenter as well as other commenters stated their opposition to having 
to use the term ``slaughtered.'' The commenters suggested alternatives 
to the term ``slaughtered'' that consumers may find more acceptable 
including ``harvested'' or ``processed.''
    Agency Response: Numerous comments received on this and previous 
COOL rulemaking actions indicate that there clearly is interest by 
certain U.S. consumers in the country of origin of food they purchase, 
including the production step information that retailers must provide 
pursuant to this final rule. The Agency also considers that providing 
this more specific information regarding the country in which each 
production step occurred is consistent with the COOL statute. The 
Agency further considers that the rule will bring the United States 
into compliance with its international trade obligations.
    In addition, current country of origin labeling for imported meat 
products follows pre-existing regulations, including those of the U.S. 
Customs and Border Protection, regarding the origin of imported 
products. Further, the ``inspected and passed'' sticker is applied 
under the FMIA by FSIS inspectors and does not relate to the COOL 
program. The Agency is not aware that the requirements set forth in the 
2009 final rule are causing any confusion among consumers related to 
meat products sold with the ``inspected and passed'' label. In any 
event, as noted above, this final rule does not change existing COOL 
labeling requirements for imported meat products nor does it alter the 
``inspected and passed'' sticker. As such, there is no reason to 
believe that this rule will cause confusion related to the ``inspected 
and passed'' sticker among consumers.
    With regard to chicken products, the current COOL regulations 
define the term ``born'' with respect to chicken as ``hatched.'' 
Accordingly, it is permissible to utilize the term ``hatched'' in 
origin designations for chicken products under this final rule. The 
Agency has included additional language in this preamble to clarify 
this point. With respect to the suggested alternatives that may be more 
acceptable to consumers, the 2009 COOL regulations permit the use of 
the term ``harvested'' in lieu of ``slaughtered.'' As discussed 
previously, this flexibility will continue to be allowed under this 
final rule.
Definition of Retailer
    Summary of Comments: One commenter provided extensive comments on 
both the definition of a retailer in the current COOL regulations and 
the definition of a retailer in the proposed rule. The commenter stated 
their belief that AMS should not use the definition that is contained 
in PACA regulations and further stated that AMS should develop its own 
definition. The commenter provided specific recommendations, including 
using a definition similar to the one used by the Supplemental 
Nutrition Assistance Program (SNAP), which is administered by USDA's 
Food and Nutrition Service. Another commenter stated their support for 
the proposed rule's definition change and indicated that the change 
will make the definition less ambiguous.
    Agency Response: The COOL statute defines the term ``retailer'' as 
having the meaning given the term in section 1(b) of the Perishable 
Agricultural Commodities Act of 1930 (7 U.S.C. 499a(b)). Therefore, the 
Agency does not have the authority to develop an alternative definition 
based on SNAP as it is not consistent with the COOL statute. As stated 
in the March 12, 2013, proposed rule, the Agency believes that the 
revised definition of a retailer more closely mirrors the definition in 
the PACA and agrees that this definition is less ambiguous. 
Accordingly, the Agency has not adopted the alternative 
recommendations.
Recordkeeping
    Summary of Comments: Several commenters stated that they were 
unclear as to whether current producer affidavits systems will satisfy 
the regulatory requirements of the proposed rule.
    Agency Response: The proposed rule did not alter the recordkeeping 
requirements of suppliers or retailers. Therefore, the use of 
affidavits for conveying origin information is still permitted under 
this final rule.
Raised
    Summary of Comments: Several commenters suggested that the Agency 
redefine the term ``raised'' to refer to the period of time 
encompassing a majority of an animal's life. The commenters further 
stated that compared to the retail value of beef, time spent in another 
country, i.e., country of birth, could be considered de minimus. 
Another commenter stated that retailers should be required to list all 
countries of raising. Lastly, one commenter asked for clarification of 
the phrase ``minimal raising,'' which was used in the proposed rule.
    Agency Response: The COOL regulations define the term ``raised'' as 
``the period of time from birth until slaughter or in the case of 
animals imported for immediate slaughter as defined in section 65.180, 
the period of time from birth until date of entry into the United 
States.'' The proposed rule did not recommend a change to this 
definition; therefore, the suggestion to modify the definition of the 
term ``raised'' is outside the scope of this rulemaking. With regard to 
the request to clarify the phrase ``minimal raising,'' that phrase does 
not appear in the COOL regulations, and the Agency believes that the 
language in the existing regulatory text provides readers with a clear 
definition of the term ``raising.'' Regarding the suggestion to require 
that all countries of raising be listed on the label, the Agency 
believes this final rule provides more specific information to 
consumers with regard to the place of raising in sufficient detail. 
However, the Agency has added language to this preamble to further 
explain the regulatory text in Sec.  65.300(e).
Miscellaneous
    Summary of Comments: Several commenters stated that the proposed 
rule runs counter to the shared U.S.-Canada vision of the Regulatory 
Cooperation Council (RCC) initiative.
    Agency Response: As explained previously, in order to implement 
mandatory country of origin labeling for certain meat products as 
required by statute in a manner consistent with U.S. WTO obligations, 
the Agency has made these changes to the labeling provisions for muscle 
cut covered commodities, which provide consumers with more specific 
information and enhance the overall operation of the program. The 
United States values its relationships with its trading partners and is 
committed to looking for ways to improve regulatory transparency and 
coordination with Canada as described in the RCC Joint Action Plan.
    Summary of Comments: Several commenters stated their opinion that 
there is no regulatory solution that will bring the United States into 
compliance

[[Page 31372]]

with its international trade obligations. The commenters further stated 
that the United States should seek a legislative change.
    Agency Response: As discussed above, the Agency considers that this 
final rule constitutes compliance with the WTO DSB's recommendations 
and rulings.
    Summary of Comments: One commenter suggested that the Agency should 
expand the civil rights review statement to ensure that it is as broad 
as possible. The commenter specifically requested that the Agency 
remove the phrase ``. . . on minorities, women, or persons with 
disabilities'' from the statement.
    Agency Response: USDA prohibits discrimination in all its programs 
and activities on the basis of race, color, national origin, age, 
disability, and where applicable, sex (including gender identity and 
expression), marital status, familial status, parental status, 
religion, sexual orientation, political beliefs, genetic information, 
reprisal, or because all or part of an individual's income is derived 
from any public assistance program. The Agency has modified the civil 
rights review statement as the commenter suggested by removing the 
phrase in question and using ``protected groups'' in its place.
Alternatives
    Summary of Comments: A number of commenters suggested alternatives 
to the proposed rule, including: COOL should be voluntary; country of 
origin should be where an animal is processed; and COOL should be based 
on substantial transformation (recognizing need for statutory change). 
Another commenter suggested that the enforcement of COOL should be 
reduced and gave several specific examples.
    Agency Response: The alternative labeling programs suggested by the 
commenters are not authorized by the COOL statute, which provides for a 
mandatory COOL program and four distinct categories of origin 
designations for muscle cut covered commodities. Accordingly, these 
suggestions are not adopted. With regard to the suggestions to reduce 
the enforcement of the COOL program, this is not within the scope of 
this rulemaking. The Agency notes, however, that it plans to review its 
current enforcement procedures to determine if changes should be made.
    Summary of Comments: A number of commenters provided 
recommendations that are outside the scope of the proposed rule, 
including: Food establishments should be covered because 48% of 
spending on food occurs at restaurants; the definition of processed 
should be narrowed such that more products are covered; turkey should 
be a covered commodity; the definition of ground beef should be 
narrowed; COOL is not food safety related and the Agency should clarify 
that mislabeling will not result in a recall; the Agency should 
disallow the 60-day inventory allowance for ground meat; the Agency 
should remove the burden on producers of requiring affidavits.
    Agency Response: Because these recommendations are outside the 
scope of this rulemaking, they will not be considered.

Costs and Benefits

Proposal Adds Significant Costs
    Summary of Comments: Several commenters stated their belief that 
the recordkeeping and verification processes necessitated by the 
proposed rule will be more onerous, disruptive, and expensive than the 
current regulations. The commenters further contended that the costs of 
new labels and printers and other equipment, together with increased 
needs to segregate livestock and the need to make new investments in 
trucks, processing lines and coolers will add cost to all segments of 
the production chain.
    Other commenters agreed with the Agency's estimates contained in 
the proposed rule and noted that the incremental cost associated with 
the proposed labeling changes is only a slight increase over the 
initial COOL compliance cost estimates contained in the final rule 
implementing the program. One commenter noted that the proposed rule 
does not require the collection of additional information and that the 
primary added costs are associated with changing the labels. Another 
commenter pointed out that there will be no additional recordkeeping 
requirements as a result of the proposed rule and that additional 
labeling costs are concentrated almost entirely at the retail level.
    Agency Response: As discussed further in the Regulatory Impact 
Analysis (RIA), the Agency agrees that there will be additional costs 
associated with this final rule, although only those muscle cut covered 
commodities subject to COOL requirements will be affected by the 
changes in this final rule. Those costs will be incurred by processors 
and retailers as they adjust to the loss of commingling flexibility and 
to the new labeling requirements in this final rule. It is necessary, 
however, to ensure label information accurately reflects the origin of 
muscle cut covered commodities in accordance with the intent of the 
statute while complying with U.S. WTO obligations.
    That said, the Agency does not agree that additional recordkeeping 
or verification processes will be required to transfer information from 
one level of the production and marketing channel to the next. There 
are no recordkeeping requirements beyond those currently in place, and 
the Agency believes that the information necessary to transmit 
production step information is already maintained by suppliers in order 
to comply with the current COOL regulations. As with the current 
mandatory COOL program, this final rule contains no requirements for 
firms to report to USDA. Compliance audits will continue to be 
conducted at firms' places of business.
    In addition, the Agency has sought to minimize the cost to industry 
at each step of the marketing process. For example, the Agency has 
clarified that retailers may continue to utilize existing label and 
package inventories, as long as retail establishments convey the more 
specific information concerning the location where the production steps 
occurred via other means (e.g., signage). This will reduce the costs of 
switching over to the new labels. The Agency further recognizes that 
there is limited space to include the specific location information for 
each production step. Therefore, to reduce the potential need for new 
printers and other equipment, under this final rule, abbreviations for 
the production steps are permitted as long as the information can be 
clearly understood by consumers. The Agency also notes many retail 
establishments have chosen to use signage above the relevant sections 
of the meat case to provide the required origin information in lieu of 
or in addition to providing the information on labels on each package 
of meat.
    The Agency further considers it reasonable to allow time for the 
existing stock of muscle cut covered commodities labeled in accordance 
with the 2009 COOL regulations that are already in the chain of 
commerce to clear the system. Therefore, the requirements of this rule 
do not apply to muscle cut covered commodities produced or packaged 
before May 23, 2013.
    Finally, while the requirements of this rule are mandatory as of 
the effective date, because AMS understands that it may not be feasible 
for all of the affected entities to achieve 100% compliance immediately 
and that some entities will need time to make the necessary changes to 
achieve full compliance with the amended provisions for 100% of

[[Page 31373]]

muscle cut covered commodities, AMS will conduct an industry education 
and outreach program concerning the provisions and requirements of this 
rule during the six month period following the effective date of the 
regulation, as was provided for in the 2008 interim rule and the 2009 
final rule. AMS has determined that this allocation of enforcement 
resources will ensure that the industry effectively and rationally 
implements this final rule. With regard to costs related to the 
elimination of commingling flexibility, the Agency has responded to 
these issues in a subsequent response below.
Processors' Cost of Segregation
    Summary of Comments: Numerous commenters provided statements on the 
costs of segregating livestock they believe will be necessitated by the 
proposed rule. These commenters explained how, in their opinion, the 
labeling changes will require additional livestock and meat segregation 
and record keeping that will increase costs to the industry that must 
be absorbed by livestock producers, feedlots, shippers, meat packers, 
processors, retailers and consumers.
    One commenter stated that the segregation of cattle and beef 
carcasses within the packing plant requires unique operational 
procedures. The commenter further contended that current packing plants 
were neither designed for nor constructed in a manner to allow for 
efficiency in the segregation of cattle and beef.
    Several commenters stated their belief that the costs of 
segregating livestock would adversely affect their businesses due to 
the need to increase hiring and worker hours as well as make large 
capital investments to accommodate the demands of segregation. In 
addition, the commenters stated that they would experience an increase 
in maintenance costs for contracted information technology services to 
track the additional information required by the proposed rule in 
company databases.
    Another commenter presented an analysis showing how eliminating 
commingling would significantly impact slaughter and processing 
facilities now using commingling flexibility, as well as the rest of 
the downstream supply chain. The commenter contended that increased 
annual operating costs for the fed cattle and hog processing industries 
would range from $97.9 to $132.6 million due to the elimination of 
commingling. The commenter opined that the prohibition on commingling 
could have an even greater adverse impact on smaller packers, providing 
one example of a very small cattle slaughter company (fewer than 100 
employees) that currently commingles production. According to the 
commenter's estimate, elimination of commingling would impose an 
additional $275,000 in costs annually on this company, which is 
approximately the company's annual profit.
    Another commenter stated that there would be significant costs 
resulting from the need to reconfigure processing plants to segregate 
product by origin for those plants currently commingling. The commenter 
stated that estimates of capital costs for beef slaughter and 
processing operations ranged from $20 to $50 million and from $12 
million to $25 million for hog slaughter and processing operations for 
those plants currently commingling.
    Other commenters stated that the proposed rule will add only modest 
costs to the industry. The commenters pointed out that, as noted in the 
2009 COOL regulations, segregating animals by origin can be 
accomplished through processes that are essentially the same as those 
that firms already use to sort animals by weight, grade, and other 
factors. In addition, the commenters stated that strengthening the 
origin labels in this manner can be achieved without imposing 
significant additional recordkeeping or verification requirements, as 
producers are already required to track the origin of animals from 
which meat is derived.
    Agency Response: As previously discussed, no additional 
recordkeeping is required by this final rule, and no new processes need 
be developed to transfer information from one level of the supply chain 
to the next. The information necessary to transmit production step 
information should already be maintained by suppliers in order to 
satisfy the 2009 COOL regulations.
    With respect to additional operational costs anticipated from the 
elimination of the commingling flexibility, the Agency has modified its 
analysis to account for these estimated costs. As noted by commenters, 
the elimination of this flexibility may require adjustments to plant 
operations, line processing, product handling, storage, transportation, 
and distribution for those companies that commingle. As discussed in 
the RIA, commenters to the proposed rule submitted anecdotal 
information indicating that commingling flexibility is used by some 
packers. However, the information provided was insufficient to enable 
the Agency to determine the extent to which industry is making use of 
commingling flexibility. As discussed in the RIA, the Agency estimates 
that the current use of the flexibility likely falls within a range of 
five to 20 percent of the production of beef and pork muscle cut 
covered commodities, although it is likely that the extent to which 
packers are commingling is closer to the lower end than the higher end 
of the range.
    As also discussed in the RIA, the Agency estimates that adjustment 
costs due to elimination of commingling will range between $19.0 
million and $76.3 million in the processing sector and between $17.1 
million and $68.5 million in the retail sector (see table 3). The 
Agency believes these estimates, however, are likely to overstate 
actual adjustment costs over time. The Agency anticipates that 
intermediaries will develop ways to minimize down time and processing 
line changes and that, ultimately, a mix of solutions will be 
implemented by industry participants to effectively meet the 
requirements of the final rule. Over the long run, the Agency believes 
that initial adjustment costs are not likely to persist and that firms 
will continue to seek methods for efficient production and marketing of 
the affected products.
Processors' Ability To Source Animals
    Summary of Comments: Several commenters discussed the sourcing of 
animals and the impact the proposed changes will have on these 
practices. The commenters contended that animals from other countries 
are used to supplement domestic sources, often on a seasonal basis, and 
that the proposed rule's new requirements may add sufficient burden 
that this form of sourcing is no longer economically viable.
    One commenter stated concern that his business will suffer because 
current customers will no longer purchase his company's meat products, 
which are sometimes sourced from Canadian cattle, because the customers 
will now have to change all of their labeling. Two commenters stated 
that the proposed rule gives an unfair advantage to those producers who 
do not rely on Canadian pigs. A commenter suggested this would create 
incentives for U.S. processors to use U.S. livestock over imported 
livestock. Another commenter contended the proposed rule's new 
requirements would cause the processing industry in Canada to expand at 
the expense of jobs in the United States.
    Agency Response: All labels for muscle cut covered commodities 
produced in the United States must bear information related to the 
location of birth, raising, and slaughter. Therefore, all affected 
retailers and packers will

[[Page 31374]]

have to change their labeling practices to conform to this final rule, 
regardless of the origin of the animal from which their muscle cut 
covered commodities are derived. Accordingly, while the industry will 
incur costs for augmenting the label, those particular costs will be 
borne by all industry participants, regardless of their sourcing 
decisions.
    With regard to commingling, the Agency recognizes that those 
packers that are commingling will incur additional costs in complying 
with this rule. However, removing the commingling allowance lets 
consumers benefit from more specific and detailed labels. Moreover, 
given that the current COOL requirements already compel retailers to 
differentiate muscle cut commodities based on origin, the Agency does 
not believe there is a sufficient basis to definitively conclude that 
this rule, which continues to require retailers to make that same 
differentiation based on origin (albeit with more specific labels), 
will affect purchasing decisions of industry participants or give an 
unfair advantage to any particular participants.
Retailers' and Wholesalers' Costs
    Summary of Comments: Some commenters discussed the additional cost 
related to retraining associates at their stores, replacing scales, and 
upgrading distribution systems to allow for the tracking of COOL 
related information for invoices and manifests.
    Several commenters stated that the proposed rule will require 
retailers to double the number of words on the retail label. For 
example, a product currently labeled ``Product of the US'' would have 
to be labeled ``Born, Raised and Slaughtered in the US.'' Those 
commenters also contended that the more likely result will be that 
retailers will make an economic decision to purchase only meat from 
animals born, raised and slaughtered in the U.S. to reduce their risk 
of inadvertently not complying with this rule. An additional commenter 
made the point that one of the reasons the current scale systems have 
less space remaining is due to the implementation of mandatory meat 
nutrition labeling.
    One commenter stated their opinion that certain retailers repack 
muscle cuts and that the revised labeling requirements would impose an 
additional layer of complexity and cost from redoing labels, 
maintaining more complex records and recordkeeping systems, buying new 
equipment and software, and employee training.
    Another commenter that supplies independent stores indicated that 
the commenter's present software will not allow it to comply with the 
new rule, and that its stores will need new equipment or must use a 
second label.
    Another commenter stated that the COOL law currently imposes 
enormous burdens on the supermarket industry and specifically the 
wholesale industry. The commenter believed that should the proposed 
rule be adopted, packers will need to document the country or countries 
with ``all of the production steps'' on the master case and bill of 
lading and will need to validate proper COOL labeling prior to selling 
product to their customers. The commenter contended that this will 
create another step in their receiving process at the warehouse.
    An industry association stated that the proposed rule makes 
substantial changes to COOL requirements that will result in market and 
supply dislocations and will adversely affect jobs, business 
operations, and international trade. The commenter stated that a large 
volume of product is still subject to costly labeling in retail stores 
and reported that costs would vary, depending on whether retailers 
could accommodate the additional language required by the proposed rule 
on current label sizes and existing printers. The commenter also noted 
the cost of liquidating old labels.
    Another commenter stated that because imported products will now 
have to be separated under the proposal, the cost of U.S. products sold 
to supermarkets will go up, and imported product will be sold through 
foodservice channels like restaurants where it will not have to be 
labeled and likely will be sold at a cheaper price.
    Agency Response: The Agency recognizes that additional costs will 
be borne by industry participants. Estimates of those costs include 
adjustment costs to processors and retailers due to losing the 
flexibility to commingle muscle cut covered commodities for purposes of 
COOL. In addition, the estimated costs include adjustments due to the 
need to change the labels currently in place. As discussed in further 
detail in a prior response, the Agency has, to its best ability, sought 
to minimize the cost to industry at each step of the marketing process, 
including allowing abbreviations to be used on the new labels.
    The Agency further notes that the existing COOL regulations already 
require retailers to maintain records and other documentary evidence 
upon which they have relied to establish a covered commodity's country 
or countries of origin. Similarly, any person directly or indirectly 
engaged in the business of supplying a covered commodity to a retailer, 
including wholesalers, must make available information to the buyer 
about the country(ies) of origin of the covered commodity. Thus, to 
comply with existing COOL regulations, wholesalers must already have 
distribution systems to allow for the tracking of COOL-related 
information for invoices and manifests and receiving procedures to 
verify the origin information received from packers and processors. 
This final rule does not alter those requirements, and, accordingly, no 
new records are required of retailers or wholesalers. As such, the 
Agency does not agree that a retailer using a mixed origin label would 
be more likely to find itself inadvertently out of compliance with this 
rule than it would when using a mixed origin label under the 2009 COOL 
regulations.
Producer Impacts
    Summary of Comments: Many commenters expressed concern that U.S. 
cattle producers are facing burdens that adversely impact profitability 
and the viability of their operations. Concerns include the continuing 
drought conditions across much of the country's cattle producing areas. 
These commenters observed that drought-induced liquidation of cattle 
has driven the national beef herd down to the lowest cattle numbers in 
60 years. As a result, the commenters asserted that the beef industry 
must continue to use other feeder cattle procurement possibilities.
    One commenter asserted that without these added imported animals in 
the U.S. herds, the United States would face a large shortage because 
of the shrinking supply in the United States. The commenter stated that 
it ships Canadian-sourced cattle an extra 300 miles to a plant that 
processes Canadian cattle, even though the company is located only 45 
miles away from a plant owned by the same processing company that does 
not process Canadian cattle. The commenter also suggested that the beef 
produced from imported Mexican feeder cattle should be treated as U.S. 
beef, since the value of the imported animal is relatively minimal 
compared to the retail value of the beef from the finished animal once 
it undergoes substantial transformation into fed beef in the United 
States.
    One commenter expressed concerns about the effects of any trade 
retaliation that might be implemented by either Mexico or Canada. The 
commenter was also concerned that retailers may decide to reduce or 
eliminate sales of pork rather than implement systems necessary to 
comply with the proposed labeling requirements.

[[Page 31375]]

    One commenter stated that its members support the rule change and 
are already very well versed with providing affidavits at point of sale 
and other documentation to verify the origin of their livestock as 
needed in order to assure supplier and retailer compliance with COOL. 
The organization does not have concerns that this rule will cause 
members any additional hardships.
    Another commenter stated that the only industry actor that cannot 
pass along the costs of doing business in the meat sector is the 
livestock producer. The commenter stated that compared to the impact 
that drought has had on feed costs for beef producers, the cost of 
labeling for food retailers is negligible and that the revised labeling 
requirements will provide necessary information to consumers.
    Agency Response: USDA recognizes the hardship imposed on the U.S. 
livestock industry due to the recent drought and has addressed this 
issue to the greatest extent possible through authorized means. The 
drought has also reduced the size of the Mexican cattle herd and made 
fewer animals available for export to the United States.
    The Agency recognizes that additional costs will be borne by 
industry participants as they comply with the requirements of this 
final rule. However, the Agency believes it is necessary to ensure 
label information more accurately reflects the origin of muscle cut 
covered commodities in accordance with the intent of the statute while 
complying with U.S. WTO obligations. As the Agency has noted, the 
requirement to include this information will apply equally to all 
muscle cut covered commodities derived from animals slaughtered in the 
United States, regardless of where the animal was born or raised. The 
Agency does not believe that these requirements will prevent the U.S. 
industry from continuing to purchase animals from Canada or Mexico.
    With regard to costs borne by the U.S. industry, and as discussed 
in a prior response, the Agency has sought to minimize the cost to 
industry at each step of the marketing process. This final rule does 
not lessen any existing flexibility in how required country of origin 
information is currently conveyed along the supply chain. The Agency's 
goal is to enable firms to implement the requirements of this final 
rule with the least possible disruption to cost-efficient production 
methods.
Rural Economy/Miscellaneous
    Summary of Comments: Some commenters expressed concern about the 
state of the economy, particularly the rural economy, and the impact 
the rule might have regarding loss of jobs. For example, one commenter 
stated that with around 2,000 employees in a typical meat processing 
plant, it is important not to jeopardize these jobs. Another commenter 
expressed concern about the elimination of thousands of jobs in rural 
America at a time when jobs are badly needed.
    Agency Response: USDA supports strong rural economies. Through 
various programs, including USDA's Rural Development, the USDA provides 
assistance to rural communities. USDA also supports the creation of 
jobs in this industry, including through the opening of foreign markets 
for U.S. agricultural exports, including beef and pork. For example, in 
January, USDA and the United States Trade Representative announced that 
the United States and Japan have agreed on new terms and conditions 
that pave the way for expanded exports of U.S. beef and beef products 
to Japan. Under these new terms, which are now in effect, Japan now 
permits the importation of beef from cattle less than 30 months of age, 
compared to the previous limit of 20 months, among other steps. It is 
estimated that these important changes will result in hundreds of 
millions of dollars in exports of U.S. beef to Japan in the coming 
years.
    That said, the Agency recognizes that additional costs will be 
borne by industry participants as a result of this final rule. However, 
the Agency believes it is necessary to ensure label information more 
accurately reflects the origin of muscle cut covered commodities in 
accordance with the intent of the statute while complying with U.S. WTO 
obligations. At the same time, as discussed in a prior response, the 
Agency has sought to minimize the cost to industry at each step of the 
marketing process. As previously stated, the Agency's goal is to enable 
firms to implement the requirements of this final rule with the least 
possible disruption to cost-efficient production methods. This final 
rule does not lessen existing flexibility in how required country of 
origin information is currently conveyed along the supply chain.
Benefits
    Summary of Comments: Some commenters expressed their support for 
the proposed rule on the grounds that the proposed labeling 
requirements provide consumers with information they need to make 
informed choices about the source of food and how it was raised. The 
commenters stated that there is increased consumer demand to know where 
and how food is produced.
    Some commenters stated that consumer confidence benefits can accrue 
just as a result of having the information available, even if the 
consumers do not read the labels' information. In the opinion of some 
commenters, mandatory labels address concerns of market failure and 
fraudulent labeling and help investigators trace-back foodborne illness 
outbreaks. A commenter referenced a 2005 survey that found that nearly 
two-thirds of consumers (60 percent) preferred country of origin 
labeling to be administered by a government policy rather than by 
companies marketing the meat.
    Some commenters stated their belief that consumers can 
differentiate various attributes of competing products and will 
increase demand, and price, for those attributes they view favorably, 
including the perceived higher quality of meat derived from animals 
born, raised and slaughtered in one country rather than another 
country.
    Other commenters provided additional rationale and references to 
studies indicating consumers benefit from food origin information. The 
commenters noted there have been numerous polls and studies 
demonstrating that consumers value origin information regarding the 
food that they buy, including meat, including a national poll in 2007 
that found that 94 percent of those surveyed believed that consumers 
have a right to know the country of origin of the foods that they 
purchase, and 85 percent of consumers say knowing where their food 
comes from is important.
    Commenters also referenced a study showing that consumers are 
willing to pay more for a more precise, country-specific label than for 
a less precise, mixed-origin label. The commenters noted that mixed-
origin labels may be affixed to exclusively U.S. origin product due to 
the commingling flexibilities in the current program and that 
eliminating the commingling flexibility and ensuring that single-origin 
product is accurately labeled will therefore benefit consumers who 
value being able to purchase products with more precise label 
information.
    Other commenters noted that the Agency did not offer an estimate of 
any additional benefits from the proposed rule, noting only that the 
Agency had ``been unable to quantify incremental economic benefits from 
the proposed labeling of production steps . . . .'' These commenters 
shared a belief that the Agency's analysis is consistent with recent 
work on COOL, which has generally failed to document any demand-side 
benefits from the program.

[[Page 31376]]

    Numerous commenters stated that there is little evidence that 
consumers benefit from country of origin labeling and referred to a 
recent study by Kansas State University and Oklahoma State University 
\1\ which found no demand increase following the implementation of the 
mandatory COOL program in spite of previous research suggesting 
consumers would pay more for products carrying origin information. The 
study concluded that consumers do not value meat products carrying 
Product of United States labels over those with Product of North 
America labels and that economic gains would occur by utilizing the 
latter, less expensive, labeling requirement.
---------------------------------------------------------------------------

    \1\ Tonsor, Lusk et al. Mandatory Country of Origin Labeling: 
Consumer Demand Impact, November 2012 http://www.agmanager.info/livestock/policy/Tonsor_KSU_FactSheet_MCOOL_11-13-12.pdf.
---------------------------------------------------------------------------

    One commenter stated their belief that there is no evidence that 
consumers base their buying decisions on the source information 
currently available through the COOL program. The commenter stated that 
the market has demonstrated and fulfilled the existing limited demand 
for such information through the success of local production systems, 
farmers markets, source-verified programs and ``USA'' branded programs. 
The commenter believed that there is a strong argument that the 
promulgation of this rule will actually erode these market-driven, 
premium source-verified programs because it will erode the 
differentiation they currently own in the marketplace.
    One commenter asserted that the Agency has failed to quantify the 
benefits arising from the promulgation of the proposed rule and that 
the costs of the proposed rule clearly outweigh any benefits. The 
commenter cited a study of shrimp purchases \2\ which found no 
difference between consumer purchases before the implementation of COOL 
and those after it went into effect, quoting from a USDA publication 
\3\ that ``the implications of the research suggest that price is a 
more important determinant of buyer behavior than COOL, a finding 
consistent with various consumer surveys.''
---------------------------------------------------------------------------

    \2\ ``Do Consumers Respond to Country-of-Origin Labeling?'' by 
Fred Kuchler, Barry Krissoff, and David Harvey, in Journal of 
Consumer Policy, 2010, Vol. 33, pp. 323-337.
    \3\ http://www.ers.usda.gov/amber-waves/2012-june/consumers-appear-indifferent.aspx.
---------------------------------------------------------------------------

    Agency Response: As discussed more fully in the RIA, the many 
comments the Agency has received noting the proposed rule's benefits to 
consumers reinforce the Agency's original conclusion that implementing 
the proposed label changes will in fact benefit consumers. These 
comments demonstrate that there is interest by certain U.S. consumers 
in information disclosing the countries of birth, raising, and 
slaughter on muscle cut product labels. Specifying the production step 
occurring in each country listed on meat labels and eliminating the 
commingling flexibility as required by this final rule will benefit 
consumers by providing them with more specific information on which to 
base their purchasing decisions. The Agency does not agree that this 
rule will negatively impact the value of premium source-verified 
programs. The 2009 COOL regulations already differentiate covered 
muscle cut commodities based on origin. This final rule ensures that 
the labels will provide the consumers more specific information. 
Premium source-verified programs are thereby unaffected by this rule.
    The Agency acknowledges that an empirical finding of a change in 
demand due to COOL would support the conclusion that consumers act on 
the information provided through COOL. Conversely, however, the Agency 
does not concur that an empirical finding of no change in demand 
implies that consumers do not value the information or that there are 
no benefits from providing the information; it may instead imply that 
the economic benefits are positive but too small to be measurable in a 
general-population study. The purpose of COOL is to provide consumers 
with information upon which they can make informed shopping choices. 
The availability of COOL information does not imply that there will 
necessarily be any change in aggregate consumer demand or in demand for 
products of one origin versus others.
    Comments received on the proposed rule do not alter the Agency's 
conclusion that the expected benefits from implementing mandatory COOL 
requirements remain difficult to quantify and that the incremental 
economic benefits of this final rule will be comparatively small 
relative to those afforded by the current COOL requirements.
Regulatory Flexibility Analysis
    Summary of Comments: The effects of the proposed rule on small meat 
plants were described by several commenters including trade 
associations and individual plant operators. As noted previously, one 
commenter stated that the prohibition on commingling could have an even 
greater adverse impact on smaller packers, providing one example of a 
very small cattle slaughter company (fewer than 100 employees) that 
currently commingles production. According to the commenter's estimate, 
elimination of commingling would impose an additional $275,000 in costs 
annually on this company, which is approximately the company's annual 
profit.
    A commenter stated that many small and very small establishments 
will need to expand their infrastructure and hire more employees to 
maintain segregation of carcasses on the slaughter floor and of product 
in the coolers. One commenter summarized that small meat processing 
firms estimated their costs to implement the revisions will range from 
$5,000 on the low end to tens of thousands of dollars on the high end. 
Several small-scale, local and regional packing plants commented 
individually and collectively that they do not have the flexibility to 
segregate and label three different sources of cattle, create different 
product categories for each (potentially adding 600 times the number of 
product codes), and segregate the customers as well. The commenters 
stated that there will be a significant advantage to the larger packing 
companies that can isolate different categories of consolidation of the 
industry. The commenters claimed that the vast majority of plants, 
particularly the small to medium size plants, that purchase cattle from 
different origins apply the commingling practice. Commenters stated 
that smaller plants will be forced out of business because of their 
inability to utilize all sources of the cattle supply, leading to more 
consolidation and packer concentration with significant negative 
impacts on suppliers and customers.
    One beef packer commented that 2009 COOL regulations forced its 
customers to accept two SKUs of every item the company sold to them, 
one labeled Product of USA and the other labeled Product of USA, 
Mexico. The commenter stated that several of the smaller independent 
grocery customers indicated that they simply could not handle that many 
SKUs in their distribution warehouses and in their invoicing and record 
keeping systems. These retailers told the commenter to choose one or 
the other or they would have to find other suppliers. The commenter 
stated that the proposed rule requires even more segregation and even 
more duplication of labels and SKUs, noting that this may be possible 
for a large packer and a large retailer but it is extremely difficult 
and restrictive for a small operator.
    Agency Response: As previously discussed, no additional 
recordkeeping is required by this final rule. Processes currently in 
place to transfer

[[Page 31377]]

information from one level of the supply chain to the next should be 
sufficient to accommodate the additional requirements of this rule. 
With respect to additional operational costs anticipated from the 
elimination of the commingling flexibility, the Agency has modified its 
analysis to account for these estimated costs. Over the long run, the 
Agency believes that initial adjustment costs are not likely to persist 
and that firms will continue to seek methods for efficient production 
and marketing of the affected products.
    The Agency notes that comments referencing changes and adjustments 
to production and marketing practices already in place to comply with 
the 2009 COOL requirements should not be ascribed to the amendments set 
forth in this final rule.
    With regard to commingling, the Agency recognizes that those 
packers that may currently be commingling will incur additional costs 
in complying with this rule. However, removing the commingling 
allowance lets consumers benefit from more specific and detailed 
labels. That said, there is no clear indication that adjustment will be 
more difficult for smaller versus larger packers. As noted in the 
comments and responses to the economic impact analysis, packers already 
have systems in place for handling and sorting livestock and resultant 
muscle cuts according to various criteria such as grade, weight, and 
other factors. Adjustment to the final rule should be able to be 
accomplished in a similar manner.

Executive Order 12866 and Executive Order 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives, and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This final rule has been designated as an ``economically 
significant regulatory action'' under section 3(f) of Executive Order 
12866, and, therefore, has been reviewed by the Office of Management 
and Budget (OMB).
    Regulations must be designed in the most cost-effective manner 
possible to obtain the regulatory objective while imposing the least 
burden on society. This final rule amends the COOL regulations (1) by 
changing the labeling provisions for muscle cut covered commodities to 
provide consumers with more specific information and (2) by amending 
the definition for ``retailer'' to include any person subject to be 
licensed as a retailer under PACA to enhance the overall operation of 
the program and to bring the COOL requirements into compliance with the 
United States' WTO obligations.

Statement of Need

    Justification for this final rule remains unchanged from the 2009 
final rule. This rule, as with the 2009 final rule, is the result of 
statutory obligations to implement the COOL provisions of the 2002 and 
2008 Farm Bills. There are no alternatives to federal regulatory 
intervention for implementing this statutory directive.
    The COOL provisions of those laws changed federal labeling 
requirements for muscle cuts of beef, pork, lamb, goat, and chicken; 
ground beef, ground pork, ground lamb, ground goat, and ground chicken; 
wild and farm-raised fish and shellfish; perishable agricultural 
commodities; ginseng; peanuts; macadamia nuts; and pecans (hereafter, 
covered commodities). As described in the 2009 final rule, the 
conclusion remains that there does not appear to be a compelling market 
failure argument regarding the provision of country of origin 
information.
    Comments received on the 2009 final rule and previous requests for 
comments elicited no evidence of significant barriers to the provision 
of this information other than private costs to firms and low expected 
returns. Thus, from the point of view of society, such evidence 
suggests that market mechanisms could ensure that the optimal level of 
country of origin information would be provided to the degree valued by 
consumers.

Analysis of Benefits and Costs

    As set forth in the initial analysis of benefits and costs, the 
baseline for this analysis is the present state of the beef, chicken, 
goat, lamb and pork industries, which have been subject to the 
requirements of mandatory COOL (7 CFR parts 60 and 65) since the 
effective date of the final rule on March 16, 2009.
    Benefits: Comments on the initial regulatory impact analysis for 
the proposed rule (78 FR 15647) as well as on previous COOL rulemaking 
actions, reinforce the Agency's conclusion that the final rule's 
amendments to the COOL labeling requirements will benefit consumers. 
Numerous comments supported the proposed rule and confirmed that 
certain U.S. consumers value the designation of the countries of birth, 
raising, and slaughter on meat product labels. These attributes of meat 
products are credence attributes, meaning that otherwise consumers 
would not be able to obtain information on or verify by inspection of 
the product at the point of purchase. Economic theory shows that 
unregulated markets may undersupply information on such credence 
attributes. Specifying the production step occurring in each country 
listed on meat labels as provided in this rule will provide additional 
benefits by providing more specific information on which consumers can 
base their purchasing decisions. Furthermore, information on the 
production steps in each country may embody latent (hidden or 
unobservable) attributes, which may be important to individual 
consumers and result in additional but hard to measure benefit 
increases. The Agency, however, has not been able to quantify this 
benefit, as singling out the value of those additional latent 
attributes and the resultant consumer benefit increases would require 
complicated modeling techniques that none of the available studies 
utilized.
    The final rule also eliminates the allowance for commingling of 
muscle cut covered commodities of different origins. As discussed 
above, the rule requires all origin designations to include specific 
information as to the place of birth, raising, and slaughter of the 
animal from which the meat is derived and no longer allows a single 
mixed origin label to be used on muscle cuts derived from animals of 
different origins commingled during a single production day. Removing 
the commingling allowance will benefit consumers by resulting in more 
specific labels.
    The Agency observes that the comments it has received on the 
proposed rule reinforce the Agency's conclusion that the expected 
benefits from implementing the final rule's amendments to the existing 
COOL labeling requirements are difficult to quantify, as no commenters 
provided quantified assessments of the benefits. Moreover, the comments 
received do not alter the Agency's conclusion that the incremental 
economic benefits from the labeling of production steps will be 
positive, but likely will be comparatively small relative to those 
already afforded by the 2009 COOL final rule.
    Costs: A number of commenters directly addressed or provided 
information related to the Agency's estimated costs of the proposed 
rule. Most of these commenters asserted that

[[Page 31378]]

the Agency underestimated implementation costs, mainly by omitting 
costs associated with activities that commenters said would be required 
to comply with the proposed amendments to the current COOL regulations. 
The revised cost estimates below take into account these comments.
    The Agency believes that there are two primary cost drivers that 
will be incurred as firms adjust to the amendments to the 2009 COOL 
regulations. First, muscle cut covered commodity COOL information will 
need to be augmented to provide the additional specific origin 
information required by this rule. Second, those firms currently using 
the flexibility afforded by commingling livestock of more than one 
origin on a single production day will need to adjust to the new 
requirement to provide origin information on the birth, raising, and 
slaughter of the muscle cut covered commodities derived from livestock 
of each origin. Moreover, the new requirements preclude the use of 
commingling flexibility.
    With respect to commingling, the initial analysis of costs sought 
``comment and data regarding the extent to which the flexibility 
afforded by commingling on a production day is used to designate the 
country of origin under the current COOL program and the potential 
costs, such as labor and capital costs, which may result from the loss 
of such flexibility'' (78 FR 15648). Such flexibility is relevant to 
the beef and pork industries in the United States. Both feeder and 
slaughter cattle and hogs are imported from Canada, while mainly feeder 
cattle are imported from Mexico.
    As noted by several commenters, commingling may allow some packers 
with reliable access to U.S. and foreign-origin livestock to produce 
products with a single country of origin label, such as ``Product of 
the U.S. and Canada'' or ``Product of the U.S. and Mexico.'' Several 
commenters stated that packers can currently take advantage of the 
commingling flexibility to label all of their production with the same 
COOL label information every day, even if the animals processed each 
day are of different origins, so long as the packers can ensure that 
they process animals of the declared mix of origins every production 
day. The commenters stated that, in those cases, there may be no need 
for segregation, sorting, additional labels, and other processes that 
would otherwise be required to provide COOL information.
    In the case of lamb, chicken, and goat meat, imports of live 
animals for feeding and slaughter in the United States are 
inconsequential for purposes of this regulatory impact analysis, due to 
being of negligible quantities.\4\ Thus, the following discussion 
addresses the potential impacts of the loss of commingling flexibility 
on the beef and pork sectors only.
---------------------------------------------------------------------------

    \4\ In 2012, over 8.4 billion broilers were produced in the 
United States (USDA, NASS. Poultry--Production and Value, 2012 
Summary. April 2013.). However, only 4.2 million chickens other than 
breeding stock were imported into the United States (USDA FAS. GATS 
Global Agricultural Trade System Online. http://www.fas.usda.gov/gats/Default.aspx), constituting just 0.05 percent of U.S. broiler 
production. The FAS data also show that only 2,569 sheep and 316 
goats were imported into the United States in 2012.)
---------------------------------------------------------------------------

    Commenters to the notice of proposed rulemaking submitted anecdotal 
information that confirmed that commingling flexibility is used by some 
packers. However, the information submitted was not sufficient to allow 
the Agency to determine the extent to which industry is making use of 
commingling flexibility. Therefore, to develop a range of estimates of 
the extent to which the beef and pork subsectors may potentially use 
commingling flexibility under the current COOL regulations (Table 1), 
the Agency made various assumptions and used several sources of data to 
examine the cost implications of ending the commingling activity that 
might be occurring in the industry.

                  Table 1--Range of Estimated Potential Current Use of Commingling Flexibility
----------------------------------------------------------------------------------------------------------------
                                                                       Lower         Midpoint          Upper
                             Segment                                 (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Beef............................................................               5            12.5              20
Pork............................................................               5            12.5              20
----------------------------------------------------------------------------------------------------------------

    The lower-bound estimate is derived from the position of certain 
U.S. industry actors as well as the complainants in the WTO dispute 
that the proportion of beef and pork that carries the U.S.-origin label 
is close to 90 percent.\5\ Given that imported livestock represent 
about eight percent of fed steer and heifer slaughter and just over 
five percent of barrow and gilt slaughter in recent years, and assuming 
that some portion of these animals are segregated and labeled 
accordingly, the Agency adopts five percent as a plausible lower-bound 
estimate of the portion of total production that may be commingled.\6\ 
For the upper bound of commingling, 20 percent is adopted for both beef 
and pork and is derived from mandatory COOL retail record reviews that 
were conducted in 2012. Although the sampling plan for retail 
compliance reviews is not constructed so as to allow generalization to 
the entire amount of beef and pork muscle cut covered commodities 
according to different label types, there are randomization procedures 
used to select the stores and items for record reviews. Thus, for 
purposes of establishing an upper bound on the current extent to which 
commingling flexibility may currently be used, the proportions of 
different label types found in the sample of retail record reviews 
provides a source of empirical evidence of the proportions that may be 
found in the population of retailers subject to the COOL requirements. 
Of 1,472 retail record reviews for beef and 1,652 for pork, 80 percent 
were of single-country origin and by definition, could not be the 
result of commingling. The remaining 20 percent of items reviewed had 
either two or more countries of origin or were unlabeled. At the most, 
then, 20 percent of the production could potentially be commingled, 
which implies the technically possible but highly unlikely assumption 
that every item with more than one country of origin plus all items 
without country of origin information are the result of commingling.
---------------------------------------------------------------------------

    \5\ See Panel Reports, United States--Certain Country of Origin 
Labelling (COOL) Requirements, WT/DS384/R/WT/DS386/R, adopted 23 
July 2012, paras. 7.361, 7.370.
    \6\ This lower bound estimate is consistent with estimates of 
U.S. industry in 2009 as well as the complaining parties in the WTO 
dispute. See US--COOL (Panel), para. 7.365.
---------------------------------------------------------------------------

    Given that the assumption underlying the higher end estimate is 
highly unlikely, the extent to which the industry is commingling likely 
falls closer to the lower end than the higher end of the estimated 
range of commingling.

[[Page 31379]]

    The second step in estimating the impact of the elimination of 
commingling flexibility is to determine the cost of the change. A 
number of commenters provided information regarding the costs 
associated with the loss of the flexibility afforded by the current 
allowance of commingling multiple countries of origin on a production 
day. As noted by commenters, the loss of commingling flexibility means 
that muscle cut covered commodities of different production step 
origins will need to be separately labeled with their specific 
production step information to make the information available to 
retailers. Commenters pointed out a number of costs that would be 
incurred to accommodate this requirement. For instance, packers 
indicated that there would be decreased processing plant efficiency due 
to an increased number of changes from processing carcasses of one 
origin to another. For each change, commenters indicated that there is 
downtime of processing plant labor and capital that runs from $750 to 
$900 per minute in large beef and pork processing facilities. 
Commenters also indicated that there would be additional stock keeping 
units (SKUs) to distinguish differently labeled products, and that the 
additional SKUs would require reconfiguration of slaughter and 
processing facilities to segregate animals in pens and products in 
coolers. Retailers likewise indicated that there would be additional 
costs associated with an increase in the potential number of origins 
due to the loss of commingling flexibility at the processor level and 
the requirement to provide information on the country of birth, 
raising, and slaughter.
    As noted by several commenters, the mandatory COOL proposed rule 
published in October 2003, did not provide for commingling of muscle 
cut covered commodities (68 FR 61944). Thus, the regulatory impact 
analysis (hereafter, 2003 RIA (68 FR 61952)) accounted for the fact 
that animals and products would need to be segregated to enable 
labeling of muscle cut covered commodities by country of origin. Among 
other changes from the 2003 proposed rule, the mandatory COOL final 
rule published in January 2009, provided that muscle cut covered 
commodities could be commingled in a single production day.\7\ Thus, 
the regulatory impact analysis (hereafter, 2009 RIA (74 FR 2682)) 
accounted for the expectation that some degree of commingling according 
to these two provisions would occur, with the resultant costs estimated 
to be lower than would be the case without the flexibility of 
commingling.
---------------------------------------------------------------------------

    \7\ As discussed in the 2009 final rule, USDA considers that 
commingling typically takes place in two different scenarios. First, 
muscle cut covered commodities derived from animals born, raised, 
and slaughtered in the United States that are commingled during a 
production day with muscle cut covered commodities derived from 
animals that were raised and slaughtered in the United States, and 
were not derived from animals imported for immediate slaughter, 
could be designated as, for example, Product of the United States, 
Country X, and (as applicable) Country Y. Second, muscle cut covered 
commodities derived from animals that are born in Country X or 
Country Y, raised and slaughtered in the United States, that are 
commingled during a production day with muscle cut covered 
commodities that are derived from animals that are imported into the 
United States for immediate slaughter, could be designated as 
Product of the United States, Country X, and (as applicable) Country 
Y.
---------------------------------------------------------------------------

    Despite receiving anecdotal evidence from commenters on costs of 
specific activities associated with adjustment to the loss of 
commingling flexibility, the information was not suitable for compiling 
into industry-wide total cost estimates. However, with appropriate 
adjustments, comparing estimated costs from the 2003 RIA (no 
commingling) to the estimated costs from the 2009 RIA (commingling 
allowed) provides a basis for estimating the portion of the adjustment 
costs of this final rule that arise from the disallowance of 
commingling. The 2003 RIA presented lower-range and upper-range 
estimates of implementation costs for affected producer, intermediary, 
and retailer segments. The upper-range estimates were derived from 
available studies, comments on guidelines for interim voluntary COOL 
(67 FR 63367), and institutional knowledge of the industries subject to 
the proposed rule. The 2003 proposed rule did not allow for commingling 
of covered beef, pork, and lamb muscle cut covered commodities.
    The 2009 RIA presented estimates of implementation costs for the 
requirements of the COOL final rule. In deriving cost estimates for the 
2009 RIA, the underlying assumptions were adjusted to reflect changes 
in the requirements from the proposed rule to the final rule. Most 
importantly for purposes of deriving cost estimates for muscle cut 
covered commodities, the 2009 RIA assumed that commingling on a 
production day would be permitted. Thus, per-unit incremental 
implementation costs were lowered from the upper-range estimates 
presented in the 2003 RIA. As a result, differences between the 2003 
RIA estimates and the 2009 RIA estimates mainly represent expected 
marginal cost impacts of the loss of commingling flexibility (Table 2).

         Table 2--Estimated Implementation Costs per Affected Industry Segment Adjusted to 2012 Dollars
----------------------------------------------------------------------------------------------------------------
                                                     Beef                                   Pork
              Segment              -----------------------------------------------------------------------------
                                      2003 RIA     2009 RIA    Difference    2003 RIA     2009 RIA    Difference
----------------------------------------------------------------------------------------------------------------
Intermediary ($/head).............        20.00        12.84         7.16         5.00         3.21         1.79
Retailer ($/pound)................        0.125        0.075        0.050        0.088        0.043        0.045
----------------------------------------------------------------------------------------------------------------

    In the 2003 RIA, upper-range implementation costs for 
intermediaries (primarily packers and processors) in the beef segment 
were estimated at $0.02 per pound of carcass weight. Assuming an 800 
pound average carcass weight for steers and heifers, the cost per pound 
estimate translates into $16.00 per head, or $20 per head after 
adjusting to 2012 dollars using a Consumer Price Index (CPI) inflation 
factor of 1.25 (see Table 2). In the 2009 RIA, the implementation cost 
for beef segment intermediaries was estimated at $0.015 per pound or 
$12.00 per head, which was considered a best estimate. Adjusting to 
2012 dollars using a CPI inflation factor of 1.07 results in an 
estimate of $12.84 per head. Consequently, in 2012 dollars, the 
difference between the 2003 RIA estimate and the 2009 RIA estimate for 
beef segment intermediaries is $7.16 per head, which represents 
potential adjustment costs due to the loss of commingling 
flexibilities. Similar calculations apply at the retail level for the 
beef segment, where the upper-range of costs were estimated at $0.10 
per pound in the 2003 RIA and a best estimate of $0.07 per pound in the 
2009 RIA. The resulting difference in retailer costs for the beef 
segment is $0.050 per

[[Page 31380]]

pound in 2012 dollars, which represents adjustment costs to affected 
retailers that no longer can market commingled meat cuts.
    The same procedures that were applied to the beef segment were 
applied to the pork segment to arrive at estimated marginal impacts of 
the loss of commingling flexibility, also shown in Table 2. The 
relevant figures are $0.02 per pound for pork segment intermediaries in 
the 2003 RIA, which converts to $4.00 per head assuming an average 200 
pound carcass weight for barrows and gilts. In the 2009 RIA, the 
intermediary estimate was $0.015 per pound or $3.00 per head. Adjusted 
to 2012 dollars, the difference between the 2003 RIA and 2009 RIA cost 
estimates for intermediaries in the pork segment is $1.79 per head. At 
the retail level in the pork segment, costs were estimated at $0.07 per 
pound in the 2003 RIA and $0.04 per pound in the 2009 RIA. The 
difference translates to $0.045 per pound adjusted to 2012 dollars.
    The final step in estimating the potential costs of the loss of 
commingling flexibility is to apply the estimated costs per unit to the 
relevant measure of production. At the intermediary level for the beef 
segment, the starting point begins with estimated slaughter of 33.0 
million head of cattle in 2012.\8\ Given that steers and heifers made 
up 78.4 percent of total Federally inspected cattle slaughter,\9\ total 
commercial slaughter of steers and heifers is estimated at 25.8 million 
head. Only steer and heifer slaughter is examined, as the amended 
labeling requirements only apply to muscle cuts (e.g., steaks and 
roasts). While a small amount of muscle cuts of cows are marketed at 
retail, most beef derived from cows (and bulls) is used for grinding or 
other further processed items. Muscle cuts from cows typically are 
marketed through hotel, restaurant, or institutional channels or are 
further processed such that COOL requirements no longer apply.
---------------------------------------------------------------------------

    \8\ USDA National Agricultural Statistics Service. Livestock 
Slaughter. January 2013. http://usda01.library.cornell.edu/usda/nass/LiveSlau//2010s/2013/LiveSlau-01-24-2013.pdf.
    \9\ Ibid.
---------------------------------------------------------------------------

    The total number of head of steers and heifers is then multiplied 
by the lower, midpoint, and upper ranges of potentially affected 
animals (or five, 12.5, and 20 percent from above) to arrive at the 
range of potential adjustment costs shown in Table 3. Specifically, the 
estimated number of commingled steers and heifers is 1.3 million head 
at the lower bound, 3.2 million head at the midpoint, and 5.2 million 
head at the upper bound. Note that within each scenario, different 
mixes of U.S.-origin cattle versus foreign-origin cattle are possible 
and the actual mix is undetermined.

                       Table 3--Estimated Affected Quantities and Costs of the Loss of Commingling Flexibility by Industry Segment
                                                                      [In millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Lower bound                      Midpoint                       Upper bound
                                                         -----------------------------------------------------------------------------------------------
                                                               Beef            Pork            Beef            Pork            Beef            Pork
--------------------------------------------------------------------------------------------------------------------------------------------------------
Intermediary
    Head................................................             1.3             5.5             3.2            13.7             5.2            22.0
    Segment Cost........................................            $9.2            $9.8           $23.1           $24.6           $37.0           $39.3
Retailer
    Pounds..............................................           237.6           116.5           594.0           291.3           950.4           570.2
    Segment Cost........................................           $11.9            $5.2           $29.7           $13.1           $47.5           $21.0
                                                         -----------------------------------------------------------------------------------------------
        Total Cost......................................           $21.1           $15.0           $52.8           $37.7           $84.5           $60.3
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Multiplying the number of head in Table 3 by the estimated cost per 
head of $7.16 shown in Table 2 yields beef segment intermediary costs 
of $9.2 million, $23.1 million, and $37.0 million at the lower, 
midpoint, and upper levels. These are industry-wide total costs that 
are expected to be borne primarily by beef packers and processors that 
currently commingle domestic and foreign-origin cattle under a single 
COOL declaration. Those costs represent activities such as segregation, 
sorting, breaks or changes in processing lines from one COOL category 
to another, additional labels, and other activities above and beyond 
those required for compliance with current COOL regulations.
    Costs of the loss of commingling flexibility for pork segment 
intermediaries are calculated in a similar manner to that used for the 
beef segment. In 2012, U.S. commercial hog slaughter was 113.0 million 
head. Of Federally inspected slaughter, 97.0 percent was barrows and 
gilts, resulting in an estimated commercial slaughter of 109.8 million 
barrows and gilts. Meat derived from sows and boars is used for further 
processed products and is not marketed as muscle cuts that would be 
subject to COOL requirements. Table 3 shows the estimated number of 
commingled barrows and gilts to be 5.5, 13.7, and 22.0 million head at 
the lower, midpoint, and upper levels. After multiplying by the per-
head cost estimate of $1.79, expected costs due to the loss of 
commingling flexibility for pork muscle cut covered commodities at the 
intermediary level are estimated to be $9.8 million at the lower bound, 
$24.6 million at the midpoint, and $39.3 million at the upper bound.
    The anticipated cost at the retail level due to the loss of 
commingling flexibility can be computed in a manner similar to that 
applied at the intermediary level. Adjustment costs for retailers 
currently marketing commingled beef and pork muscle cut covered 
commodities stem from activities that may be associated with switching 
from handling a stream of commingled products carrying the same COOL 
information to dealing with products that may carry two or more 
distinct origin labels due to the disallowance of commingling 
flexibility and the requirement for more specific information on the 
place of birth, raising, and slaughter. As at the intermediary level, 
retailers may incur additional costs for segregation, breaks or changes 
in retail scale weighing and printing from one COOL category to 
another, additional labels, and other activities above and beyond those 
required for compliance with current COOL regulations.
    Estimating the quantity of beef and pork products that may be 
commingled at the retail level differs from the process applied at the 
intermediary

[[Page 31381]]

level. At the intermediary (packer/processor) level, conveying COOL 
information begins with entire animals and subsequently carcasses. 
Thus, the marginal costs of the loss of commingling flexibility are 
estimated on a per-head basis. In the case of retailers, however, only 
those muscle cut covered commodities subject to COOL requirements may 
potentially be affected by the loss of commingling flexibility. For 
both beef and pork, estimated retail quantities begin with the 
estimated quantities shown in Table 2 of the 2009 RIA. The retail 
quantities from the 2009 RIA--8.2 million pounds of beef and 2.3 
million pounds of pork--reflect the volume of product estimated to be 
subject to COOL requirements at retailers subject to the regulations. 
Further, the retail quantities are adjusted to account for processed 
products that are exempt from COOL requirements, such as marinated beef 
tenderloin or cooked ham. The retail quantities are then further 
adjusted to estimate the quantity of muscle cut covered commodities. 
For beef, 58 percent of the retail weight is estimated to be sold as 
cuts,\10\ and then the factors of five, 12.5, and 20 percent are 
applied to arrive at the lower, midpoint, and upper estimates shown in 
Table 3. For pork, no further adjustment is applied to the retail 
weight, but the factors of five, 12.5, and 20 percent are applied to 
arrive at the lower, midpoint, and upper estimates.
---------------------------------------------------------------------------

    \10\ http://www.beefusa.org/CMDocs/BeefUSA/Resources/Statistics/averageannualpercapitaconsumptionbeefcutsandgroundbeef559.pdf.
---------------------------------------------------------------------------

    The retail quantity estimates for beef and pork are multiplied by 
the respective per-pound cost estimates of $0.050 and $0.045 to 
calculate the anticipated cost to retailers for the loss of commingling 
flexibility. Summing the intermediary and retailer costs yields the 
total cost estimates shown in the bottom row of Table 3. The total 
estimated costs for the loss of commingling flexibility range from 
$15.0 million at the lower end for pork to $84.5 million at the upper 
end for beef.
    Total costs for adjustment to this rule are estimated as the sum of 
costs for label changes and costs associated with the elimination of 
the provision that allows for commingling. While some comments 
suggested that costs of changing labels would be higher than estimated 
in the regulatory impact analysis for the proposed rule, others 
suggested that costs of changing labels would be within the range 
estimated in the proposed rule.
    As discussed previously, the 2009 COOL regulations allow for a 
variety of ways that origin information can be provided, such as 
placards, signs, labels, stickers, etc. Many retail establishments have 
chosen to use signage above the relevant sections of the meat case to 
provide the required origin information in lieu of or in addition to 
providing the information on labels on each package of meat. Under this 
final rule, the Agency will continue to allow the COOL notification 
requirements to be met, including the requirement to provide the 
location where the production steps occurred, by using signs or 
placards. For example, for meat derived from cattle born in Canada and 
raised and slaughtered in the United States, the signage could read 
``Beef is from animals born in Canada, Raised and Slaughtered in the 
United States.'' Further, the Agency recognizes that for some period of 
time following the period of education and outreach, existing label and 
package inventories will include less specific origin information 
(e.g., Product of Country X and the U.S.) As long as retail 
establishments provide the more specific information via other means 
(e.g., signage), the Agency will consider the origin notification 
requirements to have been met. This ability to use in-store signage is 
expected to reduce transition costs from the current COOL requirements 
to the more specific information required by this rule.
    With respect to changing current COOL label information, in the 
initial regulatory impact analysis, cost estimates provided in a March 
2011, Food and Drug Administration (FDA) report \11\ were used to 
estimate the cost of adding the production step information to 
currently required COOL labels for muscle cut covered commodities.
---------------------------------------------------------------------------

    \11\ Model to Estimate Costs of Using Labeling as a Risk 
Reduction Strategy for Consumer Products Regulated by the Food and 
Drug Administration, FDA, March 2011 (Contract No. GS-10F-0097L, 
Task Order 5).
---------------------------------------------------------------------------

    Under the FDA model, one-time costs for a coordinated label change 
are assumed to involve only administrative labor costs and 
recordkeeping. However, as discussed in the regulatory impact analysis 
for the proposed rule, no additional recordkeeping costs are 
anticipated from this rule. Assuming an upper bound estimate of 121,350 
unique labels, the Agency estimated the midpoint cost at $32.8 million 
with a range of $17.0 to $47.3 million in the proposed rule.
    Table 4 shows the total estimated adjustment costs for the 
amendments to the labeling requirements for muscle cut covered 
commodities. The estimates are presented as a matrix spanning the range 
of estimated costs of modifying existing labels cross-tabulated with 
the range of estimated costs resulting from the loss of the flexibility 
to commingle more than one specific birth, raising, and slaughter 
origin. The total adjustment costs calculated by adding the labeling 
costs at the lower, midpoint, and upper range ($17.0, $32.8, and $47.3 
million, respectively) to the commingling costs at the lower, midpoint, 
and upper range ($36.1, $90.5, and $144.8 million, respectively).

                                     Table 4--Estimates of Adjustment Costs
                                                [Million dollars]
----------------------------------------------------------------------------------------------------------------
                                                            Loss of commingling flexibility
              Label cost              --------------------------------------------------------------------------
                                             Lower  36.1             Midpoint  90.5            Upper  144.8
----------------------------------------------------------------------------------------------------------------
Lower 17.0                                                53.1                    107.5                    161.8
Midpoint 32.8                                             68.9                    123.3                    177.6
Upper 47.3                                                83.4                    137.8                    192.1
----------------------------------------------------------------------------------------------------------------

    Total costs are estimated to range from $53.1 million at the low 
end to $192.1 million at the high end. Comparatively, implementation 
costs for intermediaries and retailers for beef, pork, lamb, goat, and 
chicken covered commodities for the current COOL requirements were 
estimated to total $1,334.0 million in the 2009 RIA, or

[[Page 31382]]

$1,427.4 million in 2012 dollars. Adjustment costs for the amendments 
to the current labeling requirements for these commodities are thus 
estimated at 3.7 to 13.5 percent of the initial COOL adjustment costs 
for intermediaries and retailers.
    The likely range of adjustment costs can be narrowed to some extent 
from the wide range shown Table 4. In terms of commingling flexibility, 
the true, but unknown, percentages of beef and pork muscle cut covered 
commodities that are currently produced and marketed through retailers 
subject to COOL requirements are unlikely to be at the upper range of 
estimates. The upper range estimates imply that one in five beef and 
pork muscle cut items are commingled. While technically possible, that 
is unlikely, because it requires the assumption that every item in the 
COOL record review in 2012 having more than one country of origin plus 
all items without country of origin information would have been the 
result of commingling. This assumption is unrealistic and not 
consistent with numerous comments received on the proposed rule as well 
as comments of industry on the effect that the 2009 final rule has had 
on the industry.\12\ Considering only the lower to midpoint estimates 
for commingling narrows the estimated adjustment costs to a range of 
$53.1 to $137.8 million.
---------------------------------------------------------------------------

    \12\ See US--COOL (Panel), paras. 7.361-7.365.
---------------------------------------------------------------------------

    Furthermore, over time those costs are expected to fall as packing 
facilities develop procurement arrangements that are tailored to the 
loss of commingling. Similarly, retailers' additional labeling costs 
and adjustment costs for separately providing information on different 
origin products will diminish over time. Thus, initial adjustment costs 
are expected to fall over time.
    The greater the extent to which individual packers, processors, and 
retailers use commingling flexibility, the higher is the expected cost 
of adjustment due to the loss of that flexibility. Packers and 
processors located nearer to sources of imported cattle and hogs may be 
commingling to a greater extent than others.

Regulatory Flexibility Analysis

    This rule has been reviewed under the requirements of the 
Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.). The purpose of 
the RFA is to consider the economic impact of a rule on small 
businesses and evaluate alternatives that would accomplish the 
objectives of the rule without unduly burdening small entities or 
erecting barriers that would restrict their ability to compete in the 
marketplace. The Agency believes that this rule will have a relatively 
small economic impact on a substantial number of small entities. As 
such, the Agency has prepared the following regulatory flexibility 
analysis of the rule's likely economic impact on small businesses 
pursuant to section 603 of the RFA. Section 604 of the RFA requires the 
Agency to provide a summary of the significant issues raised by public 
comments in response to the initial regulatory flexibility analysis. 
The Comments and Responses section includes the comments received on 
the initial RFA and provides the Agency's responses to the comments.
    As mentioned in the summary above, this rulemaking was contemplated 
after the Agency reviewed the overall regulatory program in light of 
the WTO's finding that the current COOL requirements are inconsistent 
with U.S. WTO obligations. The objective of this rulemaking is to amend 
current mandatory COOL requirements to provide consumers with 
information on the country in which productions steps occurred for 
muscle cut covered commodities, thus fulfilling the program's objective 
of providing consumers with information on origin in a manner 
consistent with the COOL statute and U.S. international trade 
obligations. The legal basis for the mandatory COOL regulations is 
Subtitle D of the Agricultural Marketing Act of 1946 (Act) (7 U.S.C. 
1638, et seq.).
    Under preexisting Federal laws and regulations, origin designations 
for muscle cut covered commodities need not specify the production 
steps of birth, raising, and slaughter of the animals from which the 
cuts are derived. Thus, the Agency has not identified any Federal rules 
that would duplicate or overlap with this rule.
    We do not anticipate that additional recordkeeping will be required 
or that new systems will need to be developed to transfer information 
from one level of the production and marketing channel to the next. 
However, information available to consumers at retail will need to be 
augmented to include information on the location in which the three 
major production steps occurred. Therefore, the companies most likely 
to be affected are packers and processors that produce muscle cut 
covered commodities and retailers that sell them.
    There are two measures used by the Small Business Administration 
(SBA) to identify businesses as small: Sales receipts or number of 
employees.\13\ In terms of sales, SBA classifies as small those grocery 
stores with less than $30 million in annual sales (13 CFR 121.201). 
Warehouse clubs and superstores with less than $30 million in annual 
sales are also defined as small. SBA defines as small those 
manufacturing firms with less than 500 employees and wholesalers with 
less than 100 employees.
---------------------------------------------------------------------------

    \13\ Small Business Administration. http://www.sba.gov/sites/default/files/files/Size_Standards_Table(1).pdfhttp://www.sba.gov/sites/default/files/files/Size_Standards_Table(1).pdf.
---------------------------------------------------------------------------

    While there are many potential retail outlets for the covered 
commodities, food stores, warehouse clubs, and superstores are the 
primary retail outlets for food consumed at home. In fact, food stores, 
warehouse clubs, and superstores account for 75.6 percent of all food 
consumed at home.\14\ Therefore, the number of these stores provides an 
indicator of the number of entities potentially affected by this rule. 
The 2007 Economic Census \15\ shows there were 4,335 supermarkets and 
grocery stores (not including convenience stores), warehouse clubs, and 
superstore firms operated for the entire year with annual sales 
exceeding $5,000,000 (Table 5). We assume that stores with overall 
sales above this threshold would be most likely to be subject to the 
PACA and therefore subject to mandatory COOL and the proposed 
amendments. We recognize that there may be retail firms, particularly 
smaller retail firms, subject to PACA but that do not actually hold a 
PACA license. Therefore, a lower annual sales threshold may be 
appropriate for estimating the number of retailers subject to PACA. 
However, the $5,000,000 threshold provides estimated firm and 
establishment numbers that are generally consistent with the PACA 
database listing licensed retailers.
---------------------------------------------------------------------------

    \14\ ERS, USDA. Food CPI, Prices and Expenditures: Sales of Food 
at Home by Type of Outlet. http://www.ers.usda.gov/Briefing/CPIFoodAndExpenditures/Data/table16.htmhttp://www.ers.usda.gov/Briefing/CPIFoodAndExpenditures/Data/table16.htm.
    \15\ U.S. Census Bureau. 2007 Economic Census. Retail Trade 
Subject Series. Establishment and Firm Size. EC0744SSSZ4 and 
EC0744SSSZ1. Issued January 2013.

[[Page 31383]]



                            Table 5--Estimated Number of Affected Entities, Share of Firms by Size, and Cost of Rule Revision
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  Share of     Cost of
              NAICS code                       NAICS description         Enterprise size criteria   Number of      Number of      firms by       rule
                                                                                                      firms     establishments     size %      revision
--------------------------------------------------------------------------------------------------------------------------------------------------------
311611................................  Animal (except Poultry)         <500 Employees...........        1,504          1,518          97.6   $5,165,754
                                         Slaughtering.                  500+ Employees...........           37            115           2.4   27,874,505
                                                                        Total....................        1,541          1,633   ...........   33,040,259
311612................................  Meat Processed from Carcasses.  <500 Employees...........        1,203          1,232          94.9    6,745,200
                                                                        500+ Employees...........           64            173           5.1   10,902,633
                                                                        Total....................        1,267          1,405   ...........   17,647,833
311615................................  Chicken Processing............  <500 Employees...........            2            N/A           5.3          N/A
                                                                        500+ Employees...........           36            N/A          94.7          N/A
                                                                        Total....................           38            156   ...........      153,504
445110................................  Supermarkets and Other Grocery  <$50,000,000 Sales.......        4,106          6,050          95.0   14,536,907
                                         (except Convenience) Stores,   $50,000,000+ Sales.......          217         19,846           5.0   47,685,862
                                         Sales >$5,000,000.             Total....................        4,323         25,896   ...........   62,222,770
452910................................  Warehouse Clubs and             <$50,000,000 Sales.......            0              0           0.0  ...........
                                         Supercenters.                  $50,000,000+ Sales.......           12          4,260         100.0   10,235,905
                                                                        Total....................           12          4,260   ...........   10,235,905
���������������������������������������
    Grand Total.......................  ..............................  .........................        7,181         33,350   ...........  123,300,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Numbers may not sum due to rounding.
SOURCE: 2007 County Business Patterns and 2007 Economic Census.

    The 2007 Economic Census data provide information on the number of 
food store firms by sales categories. Of the 4,335 food store, 
warehouse club, and superstore firms with annual sales of at least 
$5,000,000, an estimated 4,106 firms had annual sales of less than 
$50,000,000, which is higher than the threshold for the SBA definition 
of a small firm. The Economic Census data do not provide a breakout at 
the $30,000,000 SBA threshold, which means that the estimated number of 
small businesses likely is an overestimate.
    We estimate that 33,350 establishments owned by 7,181 firms will be 
either directly or indirectly affected by this rule (Table 5). Of these 
establishments/firms, we estimate that 6,849 qualify as small 
businesses. The midpoint total direct incremental costs are estimated 
for the rule at approximately $123.3 million with a range of $53.1 
million to $192.1 million. The direct incremental costs of the rule are 
the result of revisions in labeling of muscle cut covered commodities. 
At the total estimated midpoint cost of $123.3 million, $26.4 million 
would be estimated to be costs borne by small businesses based on the 
calculations explained below. As also explained below, implementation 
costs are not expected to be the same for all establishments.
    The average cost for each retail establishment is calculated 
assuming an average label cost per establishment of approximately $984 
plus and an average cost for loss of commingling of approximately 
$1,419 for a total of $2,403. The average label cost for retailer as 
well as packer and processor establishments is the total midpoint label 
cost of $32.8 million divided by the total of 33,350 establishments. 
The average cost per retail establishment for the loss of commingling 
is the total midpoint cost of $42.8 million for all retailers divided 
by 30,156 retail establishments. Assuming the same average 
implementation cost of approximately $2,403 for all retail 
establishments, small retailers' portion of these costs would be 
estimated at approximately $14.5 million. However, small retail 
establishments are expected to incur substantially lower implementation 
costs due to lower volumes and varieties of muscle cut covered 
commodities typically marketed at such operations.
    Any manufacturer that supplies retailers or wholesalers with a 
muscle cut covered commodity will be required to provide revised 
country of origin information to retailers so that the information can 
be accurately supplied to consumers. Of the manufacturers potentially 
affected by the rule, SBA defines those having less than 500 employees 
as small.
    The 2007 Economic Census \16\ provides information on manufacturers 
by employment size. For livestock processing and slaughtering there is 
a total of 2,808 firms (Table 5). Of these, 2,707 firms have less than 
500 employees. This suggests that 96 percent of livestock processing 
and slaughtering operations would be considered as small firms using 
the SBA definition. For chicken processing there are a total of 38 
firms, only two of which are classified as small. Thus, only five 
percent of the chicken processors are small businesses.
---------------------------------------------------------------------------

    \16\ U.S. Census Bureau. 2007 Economic Census. Historical Data 
Tabulations by Enterprise Size. 2007 Annual Tabulations: U.S., All 
Industries. http://www.census.gov/econ/susb/data/susb2007.html.
---------------------------------------------------------------------------

    As with retailers above, the average cost for each packer/processor 
establishment is calculated assuming an average label cost per 
establishment of approximately $984 plus and an average cost for loss 
of commingling. The average label cost for packer and processor 
establishments is calculated as previously explained for retail 
establishments. However, the average cost per packer/processor 
establishment for the loss of commingling is calculated using 
additional information that relates to the size of establishments. 
Estimated receipts from the 2007 Economic Census are used as a proxy 
for the relative throughput of livestock slaughtering and meat 
processing establishments. For instance, small livestock slaughtering 
enterprises had 7.7 percent of total receipts of $104.7 billion for 
animal slaughtering (NAICS code 311611) and meat processing (NAICS code 
311612) combined. Large livestock slaughtering enterprises had 58.2 
percent of the combined receipts, while shares were 11.6 percent for 
small meat processors and 22.5 percent for large meat processors. These 
percentages are then applied to the total midpoint cost of $47.7 
million for the loss of commingling for all packers and processors. The 
resulting values are then divided by the number of establishments to 
estimate the cost per establishment resulting from the loss of 
commingling flexibility. For livestock slaughtering, the estimated 
costs are $2,420 for small establishments and

[[Page 31384]]

$241,403 for large establishments. For meat processing, the estimated 
costs are $4,491 for small establishments and $62,038 for large 
establishments. Adding in the average estimated label cost of $984 
yields total estimated costs of $3,403 per small livestock slaughtering 
establishment and $242,387 per large establishment. Similarly, the 
total estimated costs are $5,475 per small meat processing 
establishment and $63,021 per large establishment. Based on these 
average estimated implementation costs, small packer and processor 
costs under the rule are estimated at about $11.9 million. However, the 
cost of the loss of commingling flexibility is expected to be mostly 
concentrated among those facilities that currently commingle domestic 
and foreign-origin cattle or hogs. The number of small slaughtering and 
processing establishments that currently commingle is expected to be 
considerably fewer than the total number of small establishments.
    Alternatives considered: Section 603 of the RFA requires the Agency 
to describe the steps taken to minimize any significant economic impact 
on small entities including a discussion of alternatives considered. 
The law explicitly identifies those retailers required to provide their 
customers with country of origin information for covered commodities 
(namely, retailers subject to PACA). Thus, the amendments are 
consistent with the requirements of the Act in terms of who is subject 
to the final rule.
    The change in the definition of a retailer will not have a 
substantial effect on the number of retailers subject to COOL 
requirements. The PACA program continually monitors the retail industry 
for firms that may meet the threshold for PACA licensing and seeks to 
enforce compliance with those requirements. Thus, those retailers that 
are required to hold a PACA license should, in fact, be licensed 
separate and apart from any COOL program requirements.
    The Agency considered other alternatives including taking no action 
or providing less information than was required under the 2009 COOL 
regulations. These alternatives would not achieve the purpose of this 
action.
    As with the current mandatory COOL program, this final rule 
contains no requirements for firms to report to USDA. Compliance audits 
will be conducted at firms' places of business. There are no 
recordkeeping requirements beyond those currently in place, and the 
Agency believes that the information necessary to transmit production 
step information largely is already in place within the affected 
industries.
    As stated in the RFA of the COOL final rule published in January 
2009 (74 FR 2693), the COOL program provides the maximum flexibility 
practicable to enable small entities to minimize the costs on their 
operations. While the allowance for commingling has been removed from 
this final rule, the Agency is providing other labeling flexibilities.
    The 2009 COOL regulations allowed for a variety of ways that the 
origin information can be provided, such as placards, signs, labels, 
stickers, etc. Many retail establishments have chosen to use signage 
above the relevant sections of the meat case to provide the required 
origin information in lieu of or in addition to providing the 
information on labels on each package of meat. Under this final rule, 
the Agency will continue to allow the COOL notification requirements to 
be met, including the requirement to provide the location where the 
production steps occurred, by using signs or placards. For example, for 
meat derived from cattle born in Canada and raised and slaughtered in 
the U.S., the signage could read ``Beef is from animals born in Canada, 
Raised and Harvested in the U.S.'' Further, the Agency recognizes that 
for some period of time following the period of education and outreach, 
existing label and package inventories will include less specific 
origin information (e.g., Product of Country X and the U.S.) As long as 
retail establishments provide the more specific information via other 
means (e.g., signage), the Agency will consider the origin notification 
requirements to have been met.
    In addition, small packers, processors, and retailers are expected 
to produce and stock a smaller number of unique muscle cut covered 
commodities compared to large operations. Thus, adjustment costs for 
small establishments likely will be substantially lower than the 
estimated midpoint average of approximately $3,700 assuming the same 
average cost for all establishments regardless of type or size.

Executive Order 13175

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, Consultation and Coordination with Indian Tribal 
Governments. The review reveals that this regulation will not have 
substantial and direct effects on Tribal governments and will not have 
significant Tribal implications.

Paperwork Reduction Act

    Pursuant to the Paperwork Reduction Act (PRA) (44 U.S.C 3501-3520) 
the information collection provisions contained in this collection 
package are currently approved by OMB under Control Number 0581-0250. 
On December 4, 2012, AMS published a notice and request for comment 
seeking OMB approval to renew and revise this information collection. 
The comment period closed on February 4, 2013. This final rule does not 
change any of the recordkeeping provisions.

Executive Order 12988

    The contents of this rule were reviewed under Executive Order 
12988, Civil Justice Reform. This rule is not intended to have a 
retroactive effect. States and local jurisdictions are preempted from 
creating or operating country of origin labeling programs for the 
commodities specified in the Act and these regulations. With regard to 
other Federal statutes, all labeling claims made in conjunction with 
this regulation must be consistent with other applicable Federal 
requirements. There are no administrative procedures that must be 
exhausted prior to any judicial challenge to the provisions of this 
rule.

Civil Rights Review

    AMS considered the potential civil rights implications of this rule 
on protected groups to ensure that no person or group shall be 
discriminated against on the basis of race, color, national origin, 
gender, religion, age, disability, sexual orientation, marital or 
family status, political beliefs, parental status, or protected genetic 
information. This review included persons that are employees of the 
entities that are subject to these regulations. This rule does not 
require affected entities to relocate or alter their operations in ways 
that could adversely affect such persons or groups. Further, this rule 
will not deny any persons or groups the benefits of the program or 
subject any persons or groups to discrimination.

Executive Order 13132

    This rule has been reviewed under Executive Order 13132, 
Federalism. This Order directs agencies to construe, in regulations and 
otherwise, a Federal statute to preempt State law only where the 
statute contains an express preemption provision or there is some other 
clear evidence to conclude that the Congress intended preemption of 
State law, or where the exercise of State authority conflicts with the 
exercise of Federal authority under the Federal statute. This program 
is required by the

[[Page 31385]]

2002 Farm Bill, as amended by the 2008 Farm Bill.
    In the January 15, 2009, final rule, the Federalism analysis stated 
that to the extent that State country of origin labeling programs 
encompass commodities that are not governed by the COOL program, the 
States may continue to operate them. It also contained a preemption for 
those State country of origin labeling programs that encompass 
commodities that are governed by the COOL program. This final rule does 
not change the preemption. With regard to consultation with States, as 
directed by the Executive Order 13132, AMS previously consulted with 
the States that have country of origin labeling programs. AMS has 
cooperative agreements with all 50 States to assist in the enforcement 
of the COOL program and has communications with the States on a regular 
basis.
    It is found and determined that good cause exists for implementing 
this final rule May 23, 2013. This rule has been determined to be a 
major rule for purposes of the Congressional Review Act (5 U.S.C. 801 
et seq.); however, the Agency finds that under 5 U.S.C. 808(2) good 
cause exists to waive the 60-day delay in the effective date for two 
reasons. First, and as discussed above, on July 23, 2012, the DSB 
adopted its recommendations and rulings, finding certain COOL 
requirements to be inconsistent with U.S. WTO obligations. A WTO 
arbitrator determined that the reasonable period of time for the United 
States to comply with the DSB recommendations and rulings is ten 
months, meaning that the United States must comply with the 
recommendations and rulings by May 23, 2013. If the United States does 
not bring the rule into effect by this date, the complaining parties in 
the WTO dispute, Canada and Mexico, may seek to exercise their rights 
to suspend application to the United States of WTO concessions or other 
obligations equivalent to the trade benefits they have lost as a result 
of the inconsistent COOL requirements. If so authorized, Canada and 
Mexico could take action that adversely affects U.S. interests (e.g., 
increasing tariffs on U.S. goods). Second, and as also discussed above, 
changes to the labeling provisions for muscle cut covered commodities, 
which will provide consumers with more specific information with regard 
to muscle cut covered commodities, and the other modifications to the 
regulations will enhance the overall operation of the program. For 
these same reasons, pursuant to 5 U.S.C. 553, it is found and 
determined that good cause exists for not postponing the effective date 
of this rule until 30 days after publication in the Federal Register. 
Accordingly, this rule will be effective May 23, 2013.

List of Subjects

7 CFR Part 60

    Agricultural commodities, Fish, Food labeling, Reporting and 
recordkeeping requirements.

7 CFR Part 65

    Agricultural commodities, Food labeling, Meat and meat products, 
Macadamia nuts, Peanuts, Pecans, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, 7 CFR parts 60 and 65 
are amended as follows:

PART 60--COUNTRY OF ORIGIN LABELING FOR FISH AND SHELLFISH

0
1. The authority citation for part 60 continues to read as follows:

    Authority:  7 U.S.C. 1621 et seq.



0
2. Section 60.124 is revised to read as follows:


Sec.  60.124  Retailer.

    Retailer means any person subject to be licensed as a retailer 
under the Perishable Agricultural Commodities Act of 1930 (7 U.S.C. 
499a(b)).

PART 65--COUNTRY OF ORIGIN LABELING OF BEEF, PORK, LAMB, CHICKEN, 
GOAT MEAT, PERISHABLE AGRICULTURAL COMMODITIES, MACADAMIA NUTS, 
PECANS, PEANUTS, AND GINSENG

0
3. The authority citation for part 65 continues to read as follows:

    Authority:  7 U.S.C. 1621 et seq.


0
4. Section 65.240 is revised to read as follows:


Sec.  65.240  Retailer.

    Retailer means any person subject to be licensed as a retailer 
under the Perishable Agricultural Commodities Act of 1930 (7 U.S.C. 
499a(b)).

0
5. Section 65.300 paragraphs (d), (e), and (f) are revised to read as 
follows:


Sec.  65.300  Country of origin notification.

* * * * *
    (d) Labeling Covered Commodities of United States Origin. A covered 
commodity may bear a declaration that identifies the United States as 
the sole country of origin at retail only if it meets the definition of 
United States country of origin as defined in Sec.  65.260. The United 
States country of origin designation for muscle cut covered commodities 
shall include all of the production steps (i.e., ``Born, Raised, and 
Slaughtered in the United States'').
    (e) Labeling Muscle Cut Covered Commodities of Multiple Countries 
of Origin from Animals Slaughtered in the United States. If an animal 
was born and/or raised in Country X and/or (as applicable) Country Y, 
and slaughtered in the United States, the resulting muscle cut covered 
commodities shall be labeled to specifically identify the production 
steps occurring in each country (e.g., ``Born and Raised in Country X, 
Slaughtered in the United States''). If an animal is raised in the 
United States as well as another country (or multiple countries), the 
raising occurring in the other country (or countries) may be omitted 
from the origin designation except if the animal was imported for 
immediate slaughter as defined in Sec.  65.180 or where by doing so the 
muscle cut covered commodity would be designated as having a United 
States country of origin (e.g., ``Born in Country X, Raised and 
Slaughtered in the United States'' in lieu of ``Born and Raised in 
Country X, Raised in Country Y, Raised and Slaughtered in the United 
States'').
    (f) Labeling Imported Covered Commodities. (1) Perishable 
agricultural commodities, peanuts, pecans, ginseng, macadamia nuts and 
ground meat covered commodities that have been produced in another 
country shall retain their origin, as declared to U.S. Customs and 
Border Protection at the time the product entered the United States, 
through retail sale.
    (2) Muscle cut covered commodities derived from an animal that was 
slaughtered in another country shall retain their origin, as declared 
to U.S. Customs and Border Protection at the time the product entered 
the United States, through retail sale (e.g., ``Product of Country 
X''), including muscle cut covered commodities derived from an animal 
that was born and/or raised in the United States and slaughtered in 
another country. In addition, the origin declaration may include more 
specific location information related to production steps (i.e., born, 
raised, and slaughtered) provided records to substantiate the claims 
are maintained and the claim is consistent with other applicable 
Federal legal requirements.
* * * * *

    Dated: May 20, 2013.
Rex A. Barnes,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2013-12366 Filed 5-23-13; 8:45 am]
BILLING CODE 3410-02-P