IATP Comment on "Product of U.S.A." Food Labeling

Aug 2, 2018

IATP submitted the following letter to USDA in support of a petition to change current labeling rules

August 2, 2018
U.S. Department of Agriculture
Food Safety and Inspection Service (FSIS)
Docket ID: FSIS-2018-0024 - https://www.regulations.gov/docket?D=FSIS-2018-0024

The Institute for Agriculture and Trade Policy (IATP), a non-profit 501(c)(3) organization based in Minneapolis, Minnesota, appreciates the opportunity to comment in support of a petition to change current rules for labeling foods as “Product of U.S.A.” IATP is a 32-year-old organization that provides research and analysis on policy that supports family farmers and thriving rural communities, and protects the environment and public health.

IATP strongly supports the petition’s proposed changes to the FSIS Food Standards and Labeling Policy Book to state that products may bear the phrase ‘Product of U.S.A.’ “…[i]f it can be determined that significant ingredients having a bearing on consumer preference, such as meat, vegetables, fruits, dairy products, etc., are of domestic origin (minor ingredients such as spices or flavorings are not included).” IATP has long supported mandatory Country of Origin Labeling for food products, including meat.¹ This comment concerns only the voluntary use of the “Product of U.S.A” labeling language as it pertains to beef.

Currently, beef that is born, raised and slaughtered in another country, but processed in the U.S. can be labeled as “Product of U.S.A.” This practice is misleading for consumers, particularly those that want to purchase U.S. raised beef. This misleading label also serves to discriminate economically against U.S. ranchers selling into the fast-growing grass-fed beef market. An estimated 70-80 percent of grass-fed beef on the U.S. market is imported, with an undetermined portion deceptively labeled as “Product of U.S.A.” The grass-fed beef market is critical for U.S. ranchers who routinely struggle to be paid above their cost of production. In addition, sustainable grass-fed systems can provide environmental² and health benefits³.

The Importance of the Grass-fed Beef Sector

The grass-fed beef sector is one of the fastest-growing segments of the food industry. Grass-fed beef distinguishes itself from conventional beef at the finishing stage. Most cattle in the U.S. are grass-fed through their first 9-15 months, and then finished on grain to fatten them up quickly. Grass-fed cattle stay on grass, take longer to finish and are often slaughtered between 20-28 months.

U.S. consumers are seeking out grass-fed beef for a variety of reasons, including health. Grass-fed beef has a significantly better omega-6 to omega-3 fatty acid ratio, a higher concentration of conjugated linoleic acids (CLAs) and higher levels of antioxidants.⁴ In addition, sustainably raised grass-fed beef can have a lower risk of E. coli infection and antibiotic-resistant bacteria.⁵

Retail sales of grass-fed beef are doubling each year, growing from $17 million in 2012 to $272 million in 2016, according to a 2017 report by the Stone Barn Center for Food and Agriculture, and the investor firms Armonia, Bonterra Partners and SLM Partners.⁶ According to Beef Magazine, grass-fed now makes up seven percent of total beef sales, growing between 25 and 30 percent per year. Some of the bigger players in the meat industry like JBS, Perdue and Cargill have invested in the grass-fed sector. The world’s largest beef company, Brazilian-owned JBS, has operations in Australia among other countries that enable it to be a major grass-fed importer into the U.S.⁷ Cargill also has significant grass-fed beef investments in Australia to import grass-fed beef.⁸

One hundred percent grass-fed beef sold under a third-party certified label can offer ranchers up to a 50 percent premium for those who sell directly, and up to 25 percent for those who sell into supply chains, according to the Stone Barn Center. There are an estimated 3,900 U.S. grass-fed cattle producers, up from just 100 in 1998, according to the Center.

Today, U.S. cattle producers are under extreme market pressure. Four companies, Cargill, Tyson, JBS and National Beef, control over 80 percent of the cattle market. All four of these multinational corporations depend on imported meat and meat products for their supply chain.

There is no certified USDA system for grass-fed beef and dairy. The USDA had begun developing grass-fed standards in 2006, but even after extensive public input and consultations with farmers, the agency decided to withdraw the rule in 2016.⁹ There is also no mandatory Country of Origin Labeling for meat. While a requirement to establish rules for mandatory COOL was first approved in the 2002 Farm Bill, COOL has faced a series of domestic legal challenges and two trade disputes at the World Trade Organization (WTO). Both WTO dispute rulings determined that U.S. rules on COOL implementation constituted a barrier to trade. Congress elected to repeal mandatory COOL at the end of 2015, and USDA finalized the repeal in February 2016.¹⁰ The result is consumers must rely on companies to voluntarily share information about what country the animal that produced their meat was born, raised and processed.

Allen Williams, a 6th-generation rancher and founding partner of Grass Fed Insights, a leading consulting group on grass-fed beef, says U.S. producers owned more than 60 percent of the value of domestic grass-fed market in 2014. Following the COOL repeal, American ranchers’ share had plunged to just 20 to 25 percent by 2017, according to the Stone Barn Center. Today, estimates are that U.S. producer sales comprise only about 15 percent of the U.S. grass-fed market—and that share is rapidly shrinking under an avalanche of grass-fed imports.¹¹

Australia, Canada and New Zealand were the top three sources of beef imports into the U.S. in 2014-2015. Australia and New Zealand are home to grass-fed beef production systems, because the cattle can stay on grass year-round due to the moderate climate. Much of the grass-fed exports from Australia and New Zealand include final processing in the U.S., according to the USDA.¹² Such processing would allow that beef to be labeled “Product of U.S.A”, under current rules.

Current labeling loophole misleads consumers

Polls have repeatedly shown that American consumers want to know where their food comes from, and want to support U.S.-produced food. A 2010 Consumer Reports poll found that 93 percent of Americans want Country of Origin Labeling on their meat.¹³ A 2016 survey by Consumer Reports found that 74 percent want to know the state of origin of their food.¹⁴ According to the Food Marketing Institute, “Consumers are looking for the story of meat, and special attributes are seeing growing shopper uptake and sales. Shoppers increasingly seek transparency into meat/poultry ingredients and production practices, fueling double-digit growth for organic, antibiotic/hormone-free, grass-fed and other special attributes.”¹⁵ The USDA should support what consumers are demanding, rather than allowing imported product to be labeled “Product of the U.S.A.”

USDA’s Responsibility to Act

Both the Federal Meat Inspection Act (FMIA) and FSIS regulations clearly establish that meat and meat product labels must not mislead the consumer, nor must they be false. FMIA states that meat or meat food products shall be “misbranded” if its “labeling is false or misleading in any particular.”¹⁶ The current FSIS policy on labeling “Product of U.S.A.” must be clarified to comply with the federal law ensuring U.S. consumers are not misled or deceived.

American consumers want to support a vibrant grass-fed beef system produced by U.S. ranchers. A clarified rule that makes clear only U.S. born, raised and processed beef can be labeled “Product of U.S.A” will help them do that.

Thank you for your consideration of these comments.