Mandatory Country of Origin Labeling:

1. Mandatory Country of Origin Labeling: Tom Stenzel Deborah White Robert Guenther SVP & CLO United Fresh Produce Assn Food Marketing Institute

2. September 30, 2008: only 50, 49, 48 … days away • We’re all in this together • Retailers obligated to consumers • Suppliers obligated to retailers • Market forces will respond • Everyone will be subject to • Recordkeeping • Penalties • Costs

3. Implementation • 2002 Farm Bill provisions + 2008 Farm Bill amendments • Interim Final Rule (August 1, 2008) • Comments due September 30, 2008 • Effective September 30, 2008 • Applies to covered commodities produced or packaged after September 30, 2008 • For produce, “produced” = harvested • USDA: 6 months of education and outreach

4. Basic Requirements

5. Statute • Requires retailers to inform consumers of the country of origin of all “covered commodities” [Section 282(a)(1)] • Requires anyone “engaged in the business” of supplying a covered commodity to a retailer to provide CoO [Section 282(e)]

6. Does the law apply? • Is the product sold by a “retailer”? • Is the product a “covered commodity”?

7. Step 1: Retail Labeling • “Retailer,” as defined by PACA • Invoice cost of perishable agricultural commodities > $230,000 per calendar year • “Food Service” exemption • Rule exempts restaurants, cafeterias, saloons, taverns, … salad bars, delis, and “other food service enterprises located within retail establishments that provide ready to eat foods that are consumed either on or outside the retailer’s premises.”

8. Step 2: Covered Commodities • “Perishable Agricultural Commodities” • “Fresh and frozen fruits and vegetables of every kind and character” • Also… • Seafood (fresh and frozen) • Meat (beef, pork, lamb, chicken, goat) • Peanuts, macadamia nuts, pecans [no other nuts] • Ginseng

9. “Processed” Exclusion • “Ingredient in a processed food item” is excluded from the requirement for country of origin labeling • Two-pronged definition: either • “Specific processing resulting in change of character” such as: • Cooking (frying, broiling, grilling, boiling, steaming, baking, roasting) • Curing (salt- or sugar-curing, drying) • Smoking (hot or cold) • Restructuring (emulsified, extruded) OR • Combining with at least one other covered commodity or substantive food component • Addition of water, salt or sugar to prepare for consumption NOT sufficient

10. Examples of “Processed” Produce Products • Bag of frozen peas and carrots • Separately, each would be a covered commodity • Chocolate covered strawberry • Roasted peanuts • Caramel, chocolate and pecan candy bar • Eggplant parmagiana • Fruit medley with melons, bananas, & cherries • What about mix of watermelon and cantaloupe? • Mixed berries? • Salad mix with lettuce + carrots • What about romaine + red leaf?

11. Origin Designation

12. United States Origin • Statutory standard • “Exclusively produced in the United States” • Interim final rule • “From products produced in the United States” • “Produced” = “grown” for purposes of perishable ag. comm. + covered nuts/ginseng • If subsequently processed outside US, product can maintain US origin IF • Identity of the product is maintained • Substantiating records

13. Imported Produce • If grown outside U.S., retains origin declared to CBP, assuming no “substantial transformation” in U.S. • Difficult to imagine steps sufficient to effect “substantial transformation” that would not render the produce “processed” and, therefore, not subject to COOL

14. State, Local, Regional • Negotiated into 2008 Farm Bill to permit for United States produce • Expressly allows state, local or regional labeling • Only for covered produce, peanuts, pecans, macadamia nuts and ginseng • USDA extended to permit state, local or regional labeling for imported produce • Retailers need to decide whether to use

15. Mechanics

16. Markings • Wide range of labeling alternatives • Label, placard, sign, stamp, band, twist tie, pin tag • PLU stickers allowed • USDA urges retailers to post sign in addition to PLU stickers • Will address “stickering efficacy” through enforcement tools • “Conspicuous” location • Legible, but no prescribed fonts • Abbreviations rarely accepted • Only US, UK and “Luxemb” • Symbols and flags alone are NOT sufficient

17. Declaration • Three options • Statement • “Product of US” • Origin name only • E.g., PLU stickers • Checkbox (that conforms with other labeling requirements) • Bag of frozen fruit

18. “Commingled” Products • Single type of produce sourced from multiple countries • Covered commodities of the same type presented for retail sale in a consumer package that have been prepared from raw material sources having different origins • Examples • Bag of strawberries from multiple countries • Bag of frozen peas from multiple countries

19. “Commingled” Products • Must be labeled in accordance with existing Federal labeling requirements

20. Bulk Containers • May contain covered commodities from more than one country of origin. • All possible countries of origin must be listed. • Issues • PLU stickers on some product in mixed bin indicate one country + sign for another country • Resolve with records?

21. Remotely Purchased Product • Internet sales or home delivery • Retailer can provide origin information on sales or delivery vehicle • Provision included in seafood IFR in response to comments

22. Recordkeeping

23. 2008 Amendments • 2008 Farm Bill deleted 2002 Farm Bill record provisions and replaced with following • USDA may audit “any person that prepares, stores, handles, or distributes a covered commodity for retail sale” 2. Anyone audited required to verify CoO declaration. Sec. 282(d)(1), (2) 3. USDA prohibited from requiring records “other than those maintained in the course of the normal conduct of business” • Records maintained in the “normal conduct of the business” • Deemed sufficient for verification • E.g., import documents, producer affidavits

24. General • Who is affected? • Retailers • Wholesalers • Re-packers • Growers • General requirements • Legible • Electronic or hard copy • Maintained at any location, provided can be retrieved within 5 business days • One year retention period for records identifying suppliers

25. Retailer Records 1. Records to substantiate claims made at retail • For pre-labeled, consumer-ready products, no additional store level record required • Ex. Bag of frozen carrots • For products that aren’t pre-labeled by the supplier: • Need record that identifies supplier, covered commodity and CoO • May be kept at any location • Must be produced within 5 business days of request • Challenge: • If the retailer receives a case of bulk string beans with the origin on the box, retailer will either be required to keep the box until the beans are sold or obtain an alternate record of CoO, such as the supplier invoice or an extra record in each case • When is produce “pre-labeled”? PLU stickers??

26. Retailer Records 2. Records to identify supplier must be maintained for 1 year from date of origin declaration at retail • Covered commodity + Supplier + CoO (for products not “pre-labeled”)

27. Intermediary Suppliers (such as Wholesalers) • Obligation to inform recipient of CoO of covered commodity • On product, master shipping container or document that accompanies the product thru retail sale • Record to establish and identify immediate previous source and immediate subsequent recipient • Maintain for 1 year from date of transaction • Issues • Degree of accuracy • Traceback vs trace forward

28. Initiating Suppliers (e.g., Growers) • Same as intermediary suppliers + • Must possess or have legal access to records necessary to substantiate claim

29. Importers of Record • Records must: • Provide clear product tracking from the port of entry to the immediate subsequent recipient AND • Accurately reflect the country of origin of the item as identified in relevant CBP entry documents • Be maintained for one year

30. Enforcement

31. Audits • Set by USDA HQ • Sites picked • Forms (samples from seafood on FMI’s website) • Conducted by states under MOU’s • Results sent back to USDA HQ • Action taken only by USDA

32. Liability “Harmonized” • Single standard applicable to all • Notice + 30 day opportunity to cure • Secretary must find: • No good faith effort to comply • Continue to willfully violate statute with respect to violation about which received notice • $1,000 fine

33. Implementation Timing • IFR effective September 30, 2008 • Products produced or packaged before September 30, 2008, not subject to IFR • Comments due September 30, 2008 • Industry education/outreach – 6 months • Practicalities of USDA enforcement apparatus

34. Questions… Contact Info: Ag Marketing Service, USDA cool@usda.gov Robert Guenther Deborah White 202.303.3400 202.220.0614 rguenther@unitedfresh.orgdwhite@fmi.org