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Food & Beverage Industry

USDA says costly mandatory COOL has few benefits

Food & Drink Weekly, Oct 27, 2003

The mandatory country-of-origin labeling (COOL) provisions of the 2002 farm bill will be costly to implement and will result in few benefits to consumers, according to a USDA regulatory impact assessment (RIA). In their evaluation, USDA economists and analysts concluded that the first-year costs of the program could run as high as $3.9 billion. The RIA was part of a package the department forwarded to the White House Office of Management and Budget for approval.

An RIA usually is a separate document, but in this case, the cost-benefit analysis is part of the overall proposed rule. Sources say it runs around 50 pages of the 200-page document. The cost-benefit analysis was submitted as part of the docket sent to OMB's Office of Information and Regulatory Affairs (OIRA).

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The high-end first-year costs of up to $3.9 billion include paperwork costs of $500 million to $600 million, according to USDA calculations. A government source says the report also has a low-end estimate of projected first-year costs, which reportedly is just under $500 million.

As would be expected, the report says that five- and ten-year costs would be much less per year than first-year costs. USDA researchers relied on work from other analysts on this topic, with the report citing several studies throughout the cost-benefit analysis. The USDA analysis eventually will be released to the public via the Federal Register.

The cost-benefit analysis says benefits from mandatory COOL are hard to quantify, largely because there is little evidence to support actual benefits, according to a government contact who has seen the report. Another government contact said, "The analysis suggests food retailers would not be able to pass along implementation costs to the consumer via higher food prices. Research reports conclude there is very little evidence that people are willing to pay more for COOL." Mandatory COOL will affect just under 1.5 million farmers, food handlers and retail establishments, according to the cost-benefit analysis. There reportedly is no breakdown of specific costs for each individual sector, such as meat and meat products or fruits and vegetables.

Opponents of mandatory COOL for meat, produce and fish will want the Bush administration to release its proposed regulations and the cost-benefit analysis as soon as possible, and certainly before Congress takes up the agricultural appropriations bill for fiscal 2004. Supporters of mandatory COOL likely will cite the low-end cost estimates, or they might draw attention to the fact that USDA significantly lowered its estimated paperwork costs from the previous projection of $1.9 billion to $500 million to $600 million.

When COOL becomes mandatory next September, the law places the responsibility for labeling on the retailers at the final point of sale (restaurants and foodservice are exempt). The law also provides for fines of up to $10,000 for violations of the COOL law and allows USDA to require "that any person that prepares, stores, handles, or distributes a covered commodity for retail sale maintain a verifiable record keeping audit trail that will permit [USDA] to ensure compliance with the regulations ..." In addition, the law provides that "Any person engaged in the business of supplying a covered commodity to a retailer shall provide information to the retailer indicating the country of origin of the covered commodity."

Food & Beverage Industry

USDA says costly mandatory COOL has few benefits

Food & Drink Weekly, Oct 27, 2003

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