Cheeses and Related Cheese Products; Proposal to Permit the Use of Ultrafiltered Milk, 60751-60769 [05-20874]

Agencies

• Food and Drug Administration
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 70, Number 201 (Wednesday, October 19, 2005)]
[Proposed Rules]
[Pages 60751-60769]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-20874]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 133

[Docket No. 2000P-0586 (formerly Docket No. 00P-0586)]


Cheeses and Related Cheese Products; Proposal to Permit the Use 
of Ultrafiltered Milk

AGENCY: Food and Drug Administration, HHS.

ACTION: Proposed rule.

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SUMMARY: The Food and Drug Administration (FDA) is proposing to amend 
its regulations to provide for the use of fluid ultrafiltered milk (UF) 
in the manufacture of standardized cheeses and related cheese products. 
This action responds principally to two citizen petitions: One 
submitted by the American Dairy Products Institute (ADPI) and another 
submitted jointly by the National Cheese Institute (NCI), the Grocery 
Manufacturers of America, Inc. (GMA), and the National Food Processors 
Association (NFPA). FDA tentatively concludes that this action will 
promote honesty and fair dealing in the interest of consumers and, to 
the extent practicable, will achieve consistency with existing 
international standards of identity for cheeses and related cheese 
products.

DATES: Submit comments by January 17, 2006.

ADDRESSES: You may submit comments, identified by Docket No. 2000P-
0586, by any of the following methods:
Electronic Submissions
Submit electronic comments in the following ways:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Agency Web site: https://www.fda.gov/dockets/ecomments.

[[Page 60752]]

 Follow the instructions for submitting comments on the agency Web 
site.
Written Submissions
Submit written submissions in the following ways:
     FAX: 301-827-6870.
     Mail/Hand delivery/Courier [For paper, disk, or CD-ROM 
submissions]: Division of Dockets Management (HFA-305), Food and Drug 
Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852.
    To ensure more timely processing of comments, FDA is no longer 
accepting comments submitted to the agency by e-mail. FDA encourages 
you to continue to submit electronic comments by using the Federal 
eRulemaking Portal or the agency Web site, as described in the 
Electronic Submissions portion of this paragraph.
    Instructions: All submissions received must include the agency name 
and Docket Nos. or Regulatory Information Number (RIN) for this 
rulemaking. All comments received may be posted without change to 
https://www.fda.gov/ohrms/dockets/default.htm, including any personal 
information provided. For detailed instructions on submitting comments 
and additional information on the rulemaking process, see the 
``Comments'' heading of the SUPPLEMENTARY INFORMATION section of this 
document.
    Docket: For access to the docket to read background documents or 
comments received, go to https://www.fda.gov/ohrms/dockets/default.htm 
and insert the docket number(s), found in brackets in the heading of 
this document, into the ``Search'' box and follow the prompts and/or go 
to the Division of Dockets Management, 5630 Fishers Lane, rm. 1061, 
Rockville, MD 20852.

FOR FURTHER INFORMATION CONTACT: Ritu Nalubola, Center for Food Safety 
and Applied Nutrition (HFS-820), Food and Drug Administration, 5100 
Paint Branch Pkwy., College Park, MD 20740, 301-436-2371.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
    A. Petitions and Grounds
    1. The 1999 ADPI Petition
    2. The 2000 NCI/GMA/NFPA Joint Petition
    B. The Government Accountability Office (GAO) Report
    C. Comments to Petitions
    D. Forms of Milk Permitted as Basic Dairy Ingredients
    E. Temporary Marketing Permit (TMP)
II. The Proposal
    A. Legal Authority/Statutory Directive
    B. Options Considered
    C. Proposed Amendments
III. Executive Order 12866: Cost Benefit Analysis
    A. Need for Regulation
    B. Background and Current Industry Practices
    C. Regulatory Options
    D. Summary of Costs and Benefits
IV. Small Entity Analysis
V. Unfunded Mandates
VI. Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) 
Major Rule
VII. Federalism
VIII. Environmental Impact
IX. Paperwork Reduction Act of 1995
X. Comments
XI. References

I. Background

    The standards of identity for cheeses and related cheese products 
are specified in part 133 (21 CFR 133). The general provisions within 
part 133, in part, define ``milk'' and ``nonfat milk'' that may be used 
in the manufacture of cheeses and related cheese products. The 
definitions for ``milk'' and ``nonfat milk'' in Sec.  133.3(a) and (b), 
respectively, list different forms of milk and nonfat milk, including 
concentrated, reconstituted, and dried forms, that may be used in the 
making of cheeses and related cheese products. However, fluid or dried 
filtered forms of milk obtained through mechanical filtration of milk 
or nonfat milk are not included within these definitions. Therefore, 
while current regulations permit the use of concentrated, 
reconstituted, and dried forms of milk and nonfat milk as basic dairy 
ingredients, they do not provide for the use of fluid or dried filtered 
milk or fluid or dried filtered nonfat milk as basic dairy ingredients 
in standardized cheeses and related cheese products.
    Mechanical filtration technologies available for milk processing 
include microfiltration, ultrafiltration, nanofiltration, and reverse 
osmosis (Refs. 1 and 2). In all of these filtration methods, milk is 
passed over a series of semipermeable membranes with varying pore 
sizes. The portion of milk that passes through the membranes is 
referred to as the ``permeate,'' and the portion that does not pass 
through the membranes is referred to as the ``retentate.'' While the 
application of hydraulic pressure is the driving force for these 
membrane separation processes, the nature of the membrane itself (as 
well as the orientation of the components) controls which components of 
milk are separated into the permeate and which components are retained 
in the retentate during these filtration processes (Refs. 1 and 2). In 
a reverse osmosis (RO) filtration, the membrane pore size is such that 
all components other than water in the milk are retained. 
Nanofiltration uses membranes with pores that are larger than RO 
membranes, but smaller than those used in ultrafiltration. In milk 
processing, nanofiltration can be used to remove water as well as some 
soluble salts, yet retain all other components of milk (Refs. 1 and 2). 
Ultrafiltration retains macromolecules and particles larger than about 
0.001-0.02 micrometers, while microfiltration is designed to retain 
particles between about 0.10 micrometers to 5 micrometers (Ref. 1). 
While there is some overlap in membrane pore sizes and operating 
pressures used in ultrafiltration and microfiltration (Refs. 1 and 3), 
in dairy processing, ultrafiltration is typically used to retain all 
protein components of milk, including casein and whey proteins, while 
some of the lactose, minerals, and water soluble vitamins present in 
milk are lost along with water. Microfiltration, on the other hand, is 
primarily used for fat separation, bacterial removal, and casein 
concentration, with a resulting loss of whey proteins, lactose, 
minerals, and water soluble vitamins along with water (Refs. 1, 2, and 
3).

A. Petitions and Grounds

    FDA received two petitions requesting amendments to existing 
regulations to permit the use of filtered milk in the manufacture of 
standardized cheeses and related cheese products.
1. The 1999 ADPI Petition
    The ADPI filed a citizen petition (CP) on December 2, 1999 (Docket 
No. 1999P-5198 (formerly Docket No. 99P-5198); hereafter referred to as 
the ADPI petition) requesting that the FDA amend the definition of 
``milk,'' as provided in Sec.  133.3(a), to include fluid UF milk, 
thereby permitting the use of fluid UF milk in the manufacture of 
standardized cheeses and related cheese products specified in part 133. 
ADPI requested that Sec.  133.3(a) be amended to add that ``milk may be 
subjected to an ultrafiltration process that results in a fluid UF milk 
for use in the manufacture of cheese.'' In its petition, ADPI stated 
that the requested amendment would improve efficiencies in cheese 
manufacturing and result in benefits to consumers without alteration of 
cheese composition, characteristics, or flavor. FDA reviewed the ADPI 
petition and determined that it did not present reasonable grounds in 
accordance with 21 CFR 10.30 to support the requested amendment and, 
therefore, FDA closed

[[Page 60753]]

this petition. However, because the issues raised in the ADPI petition 
are clearly covered under a second citizen petition (Docket No. 2000P-
0586 (formerly Docket No. 00P-0586)/CP2, discussed in section I.A.2 of 
this document), FDA converted the ADPI petition into a comment to this 
second petition. ADPI was informed of FDA's action in a letter dated 
February 26, 2003.
2. The 2000 NCI/GMA/NFPA Joint Petition
    On June 13, 2000, FDA received a joint petition (Docket No. 2000P-
0586 (formerly Docket No. 00P-0586)/CP2; hereafter referred to as the 
NCI petition) from the NCI, the GMA, and the NFPA requesting an 
amendment of Sec.  133.3 to include ``filtered milk'' in the definition 
of ``milk'' and ``filtered skim milk'' in the definition of ``nonfat 
milk'' for use in standardized cheeses and related cheese products. The 
NCI petition also requested that a new subsection be added within Sec.  
133.3 to define ``filtered milk'' as:
    * * * the liquid milk product produced by a physical separation 
technique in which raw or pasteurized milk is passed over one or 
more semipermeable membranes to partially remove the water phase and 
its constituents, including water, lactose, whey proteins, and 
minerals. Either before or after filtration, fat may be separated to 
produce filtered skim milk. After filtration, water may be partially 
removed by means of evaporation to produce more concentrated forms 
of filtered milk.''
Based on this definition, FDA believes that the petitioners requested 
the agency to permit not only ultrafiltration (which typically does not 
result in a loss of whey proteins), but also other filtration 
techniques such as microfiltration and subsequent treatment to further 
concentrate the filtered product, in the manufacture of standardized 
cheeses and related cheese products. The petitioners withdrew a 
previous joint petition (Docket No. 2000P-0586 (formerly Docket No. 
00P-0586)/CP1) that requested amendments to permit both fluid and dried 
forms of filtered milk in the manufacture of standardized cheeses and 
related cheese products.
    In support of their requested amendments, the NCI, GMA, and NFPA 
(hereafter referred to as the petitioners) argued that the amendments 
requested in the NCI petition are consistent with established FDA 
policy. Some cheese standards, in addition to specifying a specific 
procedure for preparing the food, currently provide for the use of 
``any other procedure which produces a finished cheese having the same 
physical and chemical properties'' (see e.g., standard of identity for 
cheddar cheese in Sec.  133.113). The petitioners maintained that these 
``alternate make procedure'' provisions historically have provided the 
legal basis for the use of milk filtration and the resulting filtered 
milk in cheese making, regardless of whether the filtration occurs in 
the same plant as other cheese-making procedures or in a centralized 
filtration facility. The petitioners believe that FDA has previously 
acknowledged that the use of filtered milk to manufacture cheddar 
cheese is covered by the alternate make procedure provision of the 
standard of identity for cheddar cheese. Furthermore, the petitioners 
maintained that the requested amendments are fully consistent with the 
basis and rationale for amendments that FDA previously made to expand 
the scope of the forms of milk recognized as ``milk'' for cheese 
making. The petitioners stated that FDA authorized the use of certain 
forms of milk because these forms of milk may be used in place of fluid 
milk to produce a finished cheese that is equivalent physically and 
chemically to the traditional cheese made using fluid milk.
    In addition, the petitioners stated that mechanical filtration has 
been used in cheese manufacturing in the United States for the past 20 
years, and contended that the extensive use of filtration technologies, 
under the existing ``alternate make procedure'' provisions within some 
standards of identity for cheeses, has produced significant benefits by 
improving product consistency and yields and manufacturing efficiency; 
lowering milk refrigeration, hauling and whey disposal costs; expanding 
milk sourcing options; and enabling cheese makers to respond more 
effectively to regional disruptions in the fluid milk supply. The 
petitioners also stated that because mechanical filtration removes only 
those constituents that are removed by loss of whey in traditional 
cheese making, it functions simply to rearrange the steps in the cheese 
making process to permit the constituents to be removed earlier. The 
petitioners further contended that the long history and widespread use 
of filtration technology under the alternate make procedure provisions 
have clearly established the equivalence of cheese made from filtered 
milk and cheese made from other forms of milk explicitly permitted 
under Sec.  133.3.
    The petitioners also argued that cheese made with filtered milk is 
nutritionally equivalent to traditional cheese because mechanical 
filtration of milk using membranes with pore sizes between 0.0001 and 
0.20 microns removes the water phase constituents (water, soluble 
protein, lactose, minerals, and some water soluble vitamins) that 
otherwise would be removed in the traditional cheese-making process as 
whey. In fact, the petitioners argued, with respect to filtered milk in 
cheese, the retentate may actually contain slightly greater 
concentrations of valuable constituents (e.g., whey proteins) than the 
cheese curd that remains after loss of whey in traditional cheese 
making. The petitioners provided analytical data related to cheddar 
cheese to support their assertion that cheese made with filtered milk 
is not ``nutritionally inferior,'' as that term is defined in 21 CFR 
101.3(e)(4), to cheese made using traditional procedures.
    Finally, the petitioners argued that their proposed amendments are 
consistent with the Codex Alimentarius Commission (Codex) standard for 
cheese. The Codex standard for cheese (Standard A-6-1978, revised in 
January 1999) provides for the use of ``milk and/or products obtained 
from milk.'' The petitioners stated that the Codex standard encompasses 
mechanical filtration technology, provided the finished cheese meets 
applicable requirements for physical and chemical properties, which 
would include nutritional and organoleptic properties.

B. The Government Accountability Office (GAO)\1\ Report
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    \1\ The GAO changed its name from the ``General Accounting 
Office'' in 2004.
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    The fiscal year (FY) 2000 FDA appropriations bill from the U.S. 
Senate requested the Comptroller General to conduct a study to 
determine the quantity and end use of UF milk imported into the United 
States and to submit a report describing the results of the study to 
Congress. In March 2001, GAO reported (hereafter referred to as ``the 
GAO report'' (Ref. 4)), in part, that: There are no specific data on UF 
milk imports because UF milk is classified under the broad category of 
``milk protein concentrates'' (MPC) by the U.S. Customs Service. GAO 
reported that imports in the broad category of MPC rose dramatically 
between 1990 and 1999 from about 800 to 45,000 metric tons, the primary 
reasons being the difference between U.S. and international prices of 
milk protein, especially nonfat dry milk (NFDM), and the market growth 
of nutritional supplements and other novel foods using MPC. GAO also 
reported that dry MPC imports are used in several foods other than 
cheeses, such as frozen desserts, bakery products, and sports and other 
nutritional supplement products. Some in the industry note that

[[Page 60754]]

economic disincentives have prevented domestic production of dry MPC. 
GAO noted that there are limited data on domestic production and use of 
fluid UF milk in cheese making but found that 22 dairy plants produce 
fluid UF milk used to make cheese within the plant, while 4 dairy farms 
in New Mexico and Texas produce fluid UF milk for transport to cheese 
plants in the Midwest. GAO also found that FDA and State contract 
inspectors reported no violations related to the use of imported UF 
milk or MPC in standardized cheese in FY 1999, whereas in FY 2000, two 
plants in Vermont were issued warning letters for using imported MPC in 
standardized cheese, and the plants subsequently discontinued this use.

C. Comments to Petitions

    FDA received a total of 58 letters and e-mails, each containing one 
or more comments, to the ADPI (subsequently converted to a comment to 
the NCI petition) and the NCI petitions. A large portion of the letters 
and e-mails received were from individual dairy farmers, organizations 
representing dairy farmers, and consumers. Nearly half of the comments 
opposed both the ADPI and NCI petitions, while the other half opposed 
the NCI petition alone without commenting on the ADPI petition. A few 
comments expressed support for the ADPI petition, but none of the 
comments supported the NCI petition. The primary concern expressed by 
the comments opposing either of the petitions appeared to be the 
potential economic impact of the use of imported milk ingredients, 
particularly dried forms of filtered milk or MPC, on U.S. dairy 
farmers. Some comments also expressed concern about the use of imported 
milk ingredients on the quality and safety of cheese.
    The organizations representing dairy farmers expressed strong 
opposition to both petitions and stated that the use of filtered milk 
would undoubtedly lower the quality of cheese products and greatly 
increase the flood of imports of subsidized MPC and filtered milk with 
the potential to jeopardize the safety of cheese products. They stated 
that the filtration process removes calcium and reduces the lactose 
content of milk and results in cheese that does not have the fullness 
of flavor of traditional cheese. They further maintained that changing 
the definition of milk to allow the use of liquid filtered milk would 
ultimately result in the use of dry filtered MPC and, therefore, they 
reiterated that even if only liquid filtered milk were allowed, while 
disallowing dry MPC, they would still be concerned about product 
quality degradation. In addition, they stated that changing the 
definition of milk could result in increased imports of filtered milk 
from Canada, displacing U.S. milk and causing a surplus. However, these 
comments did not provide any factual data or information that would 
lead FDA to believe that the use of fluid UF milk would impact the 
safety or quality of the product.
    Another comment, from an organization representing milk producers, 
unconditionally endorsed the ADPI petition, but strongly opposed the 
NCI petition, stating that the commenter does not support any change to 
Sec.  133.3(a) that alters which products are currently defined as 
``milk.'' This comment stated that the language in the NCI petition is 
sufficiently vague that it may be subject to interpretation such that 
it subsequently would allow dried forms of UF milk. The comment also 
stated that permitting only liquid forms of UF milk has general 
widespread support among different stakeholders, and argued that it is 
essential to establish a definition of ``liquid'' UF milk to mitigate 
potential misinterpretations regarding the use of dried MPC and provide 
clarity for enforcement. In this regard, the comment suggested that a 
limitation of 45 percent total solids be included in the definition of 
``liquid ultrafiltered milk,'' because a requirement of a maximum of 45 
percent total solids would allow for the use of UF technology while 
preserving the liquid state of the ultrafiltered product and preventing 
subsequent treatment for concentration beyond ultrafiltration.

D. Forms of Milk Permitted as Basic Dairy Ingredients

    The definitions of ``milk'' and ``nonfat milk'' in Sec.  133.3 do 
not provide for the use of filtered milk or filtered nonfat milk as 
basic dairy ingredients in standardized cheeses and related cheese 
products. In 1983, with respect to the use of the forms of milk that 
are permitted as basic ingredients in cheesemaking, FDA amended Sec.  
133.3 to define the class designations ``milk,'' ``nonfat milk,'' and 
``cream'' and provide for alternate forms of milk, nonfat milk, and 
cream, i.e., concentrated, dried, and reconstituted forms to be used in 
standardized cheeses and related cheese products (48 FR 2736, January 
21, 1983). In the proposed rule, FDA advised of its opinion that these 
alternate forms can be used to produce the same cheese as produced from 
fluid cow's milk (43 FR 42127 at 42128, September 19, 1978), which was 
the only form of milk permitted as the basic ingredient for cheese 
manufacture at that time. Filtered forms, however, are not included 
within ``milk'' or ``nonfat milk'' permitted in standardized cheeses 
and related cheese products.
    In the NCI petition, the petitioners argued that the alternate make 
procedure that is provided for in some cheese standards historically 
has provided the legal basis for the use of milk filtration and the 
resulting filtered milk as an ingredient in cheese making. FDA does not 
agree with the petitioners. The alternate make procedure provision 
provides for the use of ``any other procedure which produces a finished 
cheese having the same physical and chemical properties'' as the 
procedure specified in the standard. For example, the procedure for 
making blue cheese described in Sec.  133.106(a)(2) requires 
Penicillium roquefortii spores to be added to the curd. In a final 
rulemaking in 1983, in response to a comment that this requirement 
should be changed to permit the addition of spores to dairy ingredients 
rather than only to the curd, FDA noted that a change is not necessary 
because the procedure described in Sec.  133.106(a)(2) may be modified 
as provided for in Sec.  133.106(a)(1), which states that any other 
procedure may be used which produces a finished cheese having the same 
physical and chemical properties (48 FR 2736 at 2739). Rather than 
restricting the manufacturing procedure to the one specifically 
described in the standard, this provision allows manufacturers to use 
alternate manufacturing procedures, but not alternate ingredients, 
provided the alternate manufacturing procedure does not adversely 
affect the physical and chemical properties of the cheese. However, the 
alternate make procedure provision does not permit the use of dairy or 
other ingredients that are not specifically provided for in the cheese 
standard. Therefore, the alternate make provision of current cheese 
standards allows manufacturers to appropriately process the basic 
ingredient milk during the cheese-making process. For example, the 
ingredient milk may undergo an additional step of ultrafiltration prior 
to being introduced into the cheese vat in a single within-batch and 
within-plant production line for cheese making. In such a process, the 
ingredient that is introduced into the cheese-making process is milk. 
However, fluid UF milk purchased or brought in from another plant, even 
within the same company, that is then introduced into cheese making is 
considered an alternate ingredient because the ultrafiltration process 
is

[[Page 60755]]

used solely for the production of an ingredient that is subsequently 
used in cheese making. Therefore, in this case, the ingredient is fluid 
UF milk, not milk.
    In the NCI petition, the petitioners also stated that FDA has 
previously acknowledged that the use of filtered milk to manufacture 
cheddar cheese is covered by the alternate make procedure provision of 
the cheddar cheese standard, including when filtration occurs in a 
separate centralized facility. FDA clarifies that it has previously not 
objected to the use of fluid UF milk in cheddar cheese under specific 
circumstances. In 1996, FDA granted temporary permission to Bongards 
Creamery in Minnesota to manufacture cheddar cheese using fluid UF milk 
that is produced on a farm in New Mexico. That permission was granted 
on a limited basis in response to a request from the T.C. Jacoby & 
Company, Inc., to run a testing program at Bongards Creamery during a 
pilot period to demonstrate that the finished cheddar cheese made with 
fluid UF milk as an ingredient has the same physical and chemical 
characteristics as traditional cheddar cheese (Ref. 5). In its response 
to T.C. Jacoby & Company, Inc., FDA stated that based on its 
understanding that ``cheddar cheese produced with the retentate that 
results when milk is subjected to processing in a ultrafiltration 
system is nutritionally equivalent to and is physically and chemically 
identical'' to cheddar cheese prepared by the standardized procedure, 
it would not object to the use of fluid UF milk in the manufacture of 
cheddar cheese at Bongards Creamery on the limited basis described by 
T.C. Jacoby & Company, Inc. (Ref. 6).
    Subsequently, FDA stated its interpretation of the cheese standards 
that, as written, they do not allow for the use of UF milk as an 
ingredient (Ref. 7). FDA reaffirms that the use of filtered milk, dried 
or fluid, including fluid UF milk, as an ingredient is not covered 
under the alternate make procedures provided for in certain 
standardized cheeses. However, while FDA has considered the use of UF 
milk in standardized cheeses, it has stated that it would not object to 
the experimental use of fluid UF milk as an ingredient in cheddar and 
mozzarella cheeses (Ref. 7) and that enforcement regarding the use of 
UF milk as an ingredient in Swiss cheese is not a priority (Ref. 8).
    Substances commonly referred to as MPC are also not permitted as 
ingredients in standardized cheeses. While there is no current FDA 
regulation that defines ``MPC'' and this term does not appear to have a 
standard definition within the industry, the term ``MPC'' is generally 
used to refer to dried forms of filtered milk and dried blends and 
coprecipitates of milk proteins (Ref. 9). The existing standards of 
identity in part 133 do not list MPC as a permitted optional ingredient 
in the manufacture of standardized cheeses or related cheese products. 
Ingredients that are not specifically provided for by the standard 
cannot be used in the manufacture of a food named with the standardized 
term. FDA reiterated this statement in 1983 when FDA amended the 
standards for nine natural cheeses to bring them into closer 
conformance with the recommended Codex standards for those cheeses (48 
FR 2736). FDA advised that dairy ingredients that may be used in 
manufacture of standardized cheeses are specifically listed in the 
individual standards, and that milk-derived ingredients other than 
those specifically provided for may not be used in these cheeses (48 FR 
2736 at 2737). In addition, specific to the use of caseinates in 
standardized cheeses, FDA previously addressed comments on the use of 
caseinates in previous rulemakings (48 FR 2736 at 2737 and 58 FR 2431 
at 2439, January 6, 1993), and advised that caseinates are not among 
the dairy ingredients provided for use in the manufacture of 
standardized cheeses in part 133 and, therefore, cannot be used. FDA 
reaffirms that ingredients other than those specifically provided for 
by the individual standards cannot be used in the making of 
standardized cheeses and related cheese products.
    Therefore, under the current regulations, use of filtered milk, 
including fluid UF milk, as an ingredient in a cheese whose applicable 
standard(s) does not provide for its use would constitute a deviation 
from the standard, and such cheese cannot be named by the standardized 
term. However, under the provisions of 21 CFR 130.17, food 
manufacturers may request from FDA a temporary marketing permit (TMP) 
to market a food that is named by the standardized term but that 
deviates from its standard of identity.

E. Temporary Marketing Permit (TMP)

    On August 1, 2002, FDA received an application from Wells' Dairy, 
Inc. (Wells' Dairy), for a TMP for the use of UF milk in the 
manufacture of cottage cheese. In the Federal Register of December 9, 
2004 (69 FR 71418), FDA announced the issuance of a TMP to Wells' Dairy 
to market test cottage cheese that deviates from the standard of 
identity for cottage cheese in that the product is formulated using 
fluid UF skim milk. For the purpose of this TMP, fluid UF skim milk was 
described as ``the product obtained by subjecting skim milk to a 
physical separation process called ultrafiltration using a membrane 
with a pore size of 10,000 Daltons (Da) molecular weight cut-off 
(MWCO), resulting in the partial loss of lactose, minerals, water-
soluble vitamins, and water present in skim milk.'' The TMP also 
specified that the casein-to-whey protein ratio of skim milk is not 
altered during the ultrafiltration process and that the moisture 
content of fluid UF skim milk is about 80 percent. The TMP permitted 
the addition of such fluid UF skim milk to skim milk at a level needed 
to increase the total solids of the cheese milk (or final milk used to 
make cheese) by 5 to 25 percent, and required fluid UF skim milk to be 
declared in the ingredient statement of the finished cottage cheese as 
``ultrafiltered skim milk.'' The purpose of the permit was to allow 
Wells' Dairy to measure consumer acceptance of the product, identify 
mass production problems, and assess commercial feasibility. The permit 
provided for the temporary market testing of 15 million pounds (lb) 
(6.8 million kilograms) of the test product for a period of 15 months.

II. The Proposal

A. Legal Authority/Statutory Directive

    Section 401 of the Federal Food, Drug, and Cosmetic Act (the act) 
(21 U.S.C. 341)) directs the Secretary of Health and Human Services 
(the Secretary), to issue regulations fixing and establishing 
reasonable definitions and standards of identity, quality, or fill of 
container whenever such action will promote honesty and fair dealing in 
the interest of consumers. Section 701(e) of the act (21 U.S.C. 371(e)) 
directs the Secretary to publish a proposal for the amendment or repeal 
of any definition and standard of identity under section 401 of the act 
for any dairy product (e.g., cheese) that is based on a petition of any 
interested persons showing reasonable grounds.

B. Options Considered

    FDA considered several options in response to the two petitions, 
including the following: (1) Denying the two petitions, (2) proposing 
to permit the use of all fluid forms of filtered milk, (3) proposing to 
permit the use of all fluid and dried forms of filtered milk, and (4) 
proposing to permit the use of fluid UF milk. FDA concluded that the 
first option would not be appropriate given that the NCI petition 
includes within its scope allowing the use of UF milk in standardized 
cheeses, which FDA

[[Page 60756]]

tentatively concludes, for reasons discussed under option 4, should be 
permitted.
    The second option, to provide for the use of all fluid forms of 
filtered milk in standardized cheeses, was also determined to be 
inappropriate. Standards of identity regulations establish the name of 
the food, which identifies and describes the food's basic nature (43 FR 
42118 at 42120, September 19, 1978). As FDA discussed in 1950 during 
the establishment of the cheese standards of identity, the starting 
point for all varieties of cheese is milk. In preparing milk for use in 
cheese making, adjustments may be made by adding or removing milk fat 
in the form of cream, fresh skim milk, NFDM solids, or concentrated 
skim milk so that the ratio of milk fat to the nonfat milk solids is at 
a desired level (15 FR 5656 at 5657, August 24, 1950). FDA reiterates 
its longstanding interpretation that a basic nature of cheese is that 
it is a food made using milk as the starting ingredient. Proposing to 
allow the use of all fluid forms of filtered milk in standardized 
cheeses was rejected because some forms of filtration concentrates are 
specific individual components of milk resulting in a retentate that is 
no longer milk. For example, microfiltration can be used to separate 
whey proteins along with lactose, minerals, and water-soluble vitamins 
from milk resulting in the concentration of casein fractions. FDA 
tentatively believes that such products that are merely concentrates of 
certain individual milk components are not milk. The use of individual 
components of milk, such as specific milk proteins, as the basic or 
starting ingredient in cheese is not consistent with the basic nature 
of cheese in that cheese is a food prepared using milk, not specific 
individual components of milk. Moreover, as FDA previously noted, when 
providing flexibility for use of advances in food technology, food 
standards should ensure that the basic nature of the food remains 
essentially the same (60 FR 67492 at 67499, December 29, 1995). FDA 
tentatively concludes that allowing for the use of technologies that 
could potentially result in the use of a specific component of milk as 
the starting ingredient of cheese would seem to violate the intent of 
the cheese standards of identity to preserve the basic nature of 
cheese.
    In the NCI petition, the petitioners also stated that because 
mechanical filtration removes only those constituents that are removed 
by loss of whey in traditional cheese making, it functions simply to 
rearrange the steps in the cheese-making process to permit the 
constituents to be removed earlier. FDA believes that food standards 
should provide for flexibility in manufacturing procedures and 
ingredients, provided that the basic nature and essential 
characteristics of the food are preserved. In determining which 
filtered products are appropriate for use as ingredients in cheeses, 
FDA considered how the use of a type of filtered milk affects the basic 
nature and essential characteristics of cheese. While filtration 
selectively and variably removes different constituents of milk that 
are lost, to varying degrees, during the whey removal process in the 
traditional cheese-making process, we do not agree that this fact can 
form a sufficient basis to support the use of all forms of fluid 
filtered milk as ingredients. Some forms of filtration result in 
retentates that are specific individual components of milk and are no 
longer milk. In addition, research suggests that milk that is 
concentrated to higher levels of protein is not suited for use in all 
types of cheeses, with adverse effects on quality being reported 
particularly in the case of hard and semi-hard cheeses (Refs. 1, 10, 
and 11). Moreover, FDA believes that in determining the appropriateness 
of different forms of filtered milk as ingredients in cheese a primary 
criterion, based on a fundamental principle of food standards, is 
whether the use of the filtered milk ensures the integrity of the 
standardized cheese--its basic nature and essential characteristics. As 
explained in the previous paragraph, FDA tentatively concludes that the 
use of a product of microfiltration as the starting ingredient of 
cheese is not consistent with the basic nature of cheese. Therefore, we 
do not agree that it is appropriate to provide for the use of all types 
of fluid filtered milk nor do we agree that the argument about the 
``rearrangement'' of the steps of cheese making (as described by the 
petitioners) sufficiently supports the appropriateness of the use of 
all forms of fluid filtered milk an ingredient.
    A third option that was also considered inappropriate was to 
provide for all filtered milk, including both fluid and dried forms. 
Under this option, substances such as MPC, dry microfiltered (MF) milk, 
and caseins would be permissible in standardized cheeses or related 
cheese products. FDA's concerns regarding the use of all fluid filtered 
milk, which are stated in the two previous paragraphs, also apply to 
the use of dried filtered milks. Allowing for the use of technologies 
that could potentially result in the use of specific components of 
milk, such as caseins, rather than milk, as the starting ingredient of 
cheese would be inconsistent with the basic nature of cheese.

C. Proposed Amendments

    Based on all the information available, including the information 
presented by the two petitions and the comments received thus far, FDA 
is proposing to amend the definitions of ``milk'' and ``nonfat milk'' 
in Sec.  133.3 to do the following: (1) Provide for ultrafiltration of 
milk and nonfat milk and (2) define UF milk and nonfat milk as raw or 
pasteurized milk or nonfat milk that is passed over one or more 
semipermeable membranes to partially remove water, lactose, minerals, 
and water-soluble vitamins without altering the casein-to-whey protein 
ratio of the milk and resulting in a liquid product. FDA is also 
proposing that the name of such treated milk is ``ultrafiltered milk'' 
or ``ultrafiltered nonfat milk,'' as appropriate. Consequently, when 
this type of milk is used, it would be declared in the ingredient 
statement of the finished food as ``ultrafiltered milk'' or 
``ultrafiltered nonfat milk.''
    First, providing for the use of fluid UF milk is consistent with 
the basic nature of cheese in that the starting ingredient is milk. 
During the process of ultrafiltration, some of the lactose, soluble 
salts, and water-soluble vitamins of milk pass through the membranes 
and are removed, while protein, fat, fat-soluble vitamins, and some of 
the insoluble salts are retained. Therefore, unlike microfiltration, 
ultrafiltration does not result in the separation of specific fractions 
of milk proteins.
    Second, FDA tentatively concludes that fluid UF milk can be used in 
standardized cheeses while maintaining the essential characteristics of 
these cheeses specified in the individual standards of identity in part 
133. Scientific literature suggests that fluid UF milk, especially at 
low concentration factors, can be used in different cheeses (including 
soft, semi-hard, hard, and direct-acidified cheeses and process cheese) 
without adversely affecting the physical, chemical, or organoleptic 
properties of the cheese (Refs. 1, 2, and 11 through 20; Appendix F of 
the NCI petition). This appears to be especially true with soft cheeses 
such as cottage cheese (Refs. 1, 14, and 15) and some direct-acidified 
cheeses (Ref. 12). Specifically with respect to cottage cheese, as 
noted in section I.E of this document, FDA reviewed relevant scientific 
information related to the use of fluid UF milk as an ingredient and 
determined that fluid UF milk may be used in cottage cheese without

[[Page 60757]]

adversely affecting the essential physical or chemical characteristics, 
including nutritional composition and organoleptic properties of 
cottage cheese. FDA issued a TMP to Wells' Dairy to market test cottage 
cheese that deviates from the standard of identity for cottage cheese 
in that the product is formulated using fluid UF skim milk (69 FR 
71418).
    FDA notes, however, that the scientific literature also includes 
some reports of adverse effects from the use of fluid UF milk on the 
texture and development of flavor and aroma of certain cheeses, 
particularly in semi-hard and hard cheeses and with the use of fluid UF 
milk at higher concentration factors (Refs. 1, 11, 17, and 21 through 
24). FDA points out that the use of fluid UF milk must not adversely 
affect the physical or chemical characteristics of the cheese. The 
cheese standards of identity ensure the integrity of the cheese by 
setting limits on its fat, milk solids-not-fat, and moisture content. 
In addition, FDA considers nutritional equivalency and organoleptic 
properties of the cheese among other factors to determine whether the 
essential characteristics of the cheese are maintained. Providing for 
the use of fluid UF milk does not preclude a standardized cheese from 
meeting the existing requirements within the applicable individual 
standard(s) of identity in part 133. Rather, the use of fluid UF milk 
would be optional and any cheese made using fluid UF milk would have to 
meet all the requirements, including the physical and chemical 
characteristics, specified in the applicable individual standard(s) of 
identity.
    Third, FDA anticipates that providing for the use of fluid UF milk 
would enable cheese manufacturers to benefit from advances in milk 
filtration technology and provide them with greater flexibility in 
cheese making, while preserving the basic nature and essential 
characteristics of standardized cheese. Further, using ultrafiltration 
technology may result in better retention of milk proteins and greater 
cheese yields as well as more uniform product quality (Ref. 1). In 
addition, the petitioners claimed that using fluid filtered milk 
(including fluid UF milk) helps manage seasonal imbalances in milk 
supplies and demand for cheese, and reduces the costs associated with 
bulk milk distribution, resulting in cost savings that ultimately could 
be passed on to consumers. Furthermore, declaring fluid UF milk in the 
ingredient statement of the cheese as ``ultrafiltered milk'' or 
``ultrafiltered skim milk,'' as appropriate, would enable consumers to 
identify cheeses made with milk that has undergone ultrafiltration.
    Finally, providing for the use of fluid UF milk would bring the 
standards of identity for cheeses in closer conformity with the 
international standards adopted by Codex and facilitate increased 
harmonization. In response to the ADPI and NCI petitions, FDA 
considered the relevant Codex standards for cheeses and related cheese 
products. Specifically, FDA reviewed the Codex standards for cheese 
(Codex Stan A-6), cheeses in brine (group standard) (Codex Stan 208), 
cottage cheese including creamed cottage cheese (Codex Stan C-16), 
cream cheese (Codex Stan C-31), extra hard grating cheese (Codex Stan 
C-35), unripened cheese including fresh cheese (group standard) (Codex 
Stan 221), named variety process(ed) cheese and spreadable process(ed) 
cheese (Codex Stan A-8(a)), process(ed) cheese and spreadable 
process(ed) cheese (Codex Stan A-8(b)), process(ed) cheese preparations 
(Codex Stan A-8(c)), and whey cheeses (Codex Stan A-7) (Refs. 25-34). 
FDA notes that several Codex standards such as the standard for cheese, 
group standard for cheeses in brine, and group standard for unripened 
cheese including fresh cheese all permit the use of ``milk and/or 
products obtained from milk,'' which encompasses fluid UF milk, as the 
raw material in the manufacture of theses cheeses, provided the 
finished cheese meets the relevant physical and chemical properties. 
Additionally, the Codex standard for whey cheeses provides for the 
addition of ``raw materials of milk origin,'' including fluid UF milk. 
Providing for the optional use of fluid UF milk as a basic dairy 
ingredient in cheeses would be consistent with, although not as 
expansive as, the provisions of some Codex standards.
    In a recent proposed rule (70 FR 29214, May 20, 2005) (the food 
standards proposal), FDA and FSIS proposed a set of general principles 
that define how modern food standards should be structured. The 
agencies also proposed that, if finalized, the agencies will require 
that a CP for establishing, revising, or eliminating a food standard be 
submitted in accordance with these general principles. Conversely, the 
agencies proposed that they may find deficient a petition to establish, 
revise, or eliminate a food standard that does not follow these general 
principles. FDA believes that the action proposed here to provide for 
the use of fluid UF milk as an ingredient in standardized cheeses and 
related cheese products is consistent with the general principles 
proposed in the food standards proposal.
    For the reasons explained previously in this section, FDA 
tentatively concludes that providing for the use of fluid UF milk only, 
rather than for the use of all fluid filtered milk (as requested by the 
NCI petition), would promote honesty and fair dealing in the interest 
of consumers by providing greater flexibility in cheesemaking while 
preserving the basic nature and essential characteristics of the food. 
Therefore, FDA proposes to amend the definitions of ``milk'' and 
``nonfat milk'' within Sec.  133.3 to do the following: (1) Provide for 
ultrafiltration of milk and nonfat milk and (2) define UF milk and 
nonfat milk as raw or pasteurized milk or nonfat milk that is passed 
over one or more semipermeable membranes to partially remove water, 
lactose, minerals, and water-soluble vitamins without altering the 
casein-to-whey protein ratio of the milk and resulting in a liquid 
product. FDA also proposes that the name of such treated milk is 
``ultrafiltered milk'' or ``ultrafiltered nonfat milk,'' as 
appropriate. Consequently, when this type of milk is used, it would be 
declared in the ingredient statement of the finished food as 
``ultrafiltered milk'' or ``ultrafiltered nonfat milk.''
    FDA seeks comment on the appropriateness of the proposed 
amendments, including the provision to permit the use of fluid UF milk 
and fluid UF nonfat milk. The proposed amendments would allow for 
optional ultrafiltration of the starting ingredient, milk or nonfat 
milk, used in cheese manufacturing. Under these proposed amendments, 
whether a manufacturer uses fluid UF milk is optional and entirely up 
to the manufacturer.
    FDA also seeks comment on the appropriateness of the proposed 
definition of ultrafiltration. With respect to the requirement for an 
unaltered casein-to-whey protein ratio during ultrafiltration, FDA 
acknowledges that some loss of small molecular weight whey proteins may 
occur during ultrafiltration of milk with the extent of loss partially 
dependent on the nature of the membrane and the orientation of the 
molecules in milk (which may be influenced by the treatment of milk 
prior to or during ultrafiltration). While casein and most whey 
proteins are retained in the retentate, proteose-peptones with low 
molecular weights may be lost in the permeate. Proteose-peptones have a 
molecular weight between 4,100 and 20,000 Da (Ref. 35). Because there 
is expected to be free cross-flow of these proteins across the 
membranes, the loss of the very low

[[Page 60758]]

molecular weight proteose-peptones may be small and, therefore, as 
noted in published reviews, the casein-to-whey protein ratio of milk 
would not be significantly altered during ultrafiltration (Refs. 36 and 
37). Studies also have demonstrated complete retention of whey proteins 
and a relatively constant casein-to-whey protein ratio in milk that has 
been ultrafiltered to increasing volume concentration (Refs. 13, 38, 
and 39). The information presented by Wells' Dairy, Inc., as part of 
its TMP submission also demonstrates that there is minimal, 
insignificant loss of true protein in the ultrafiltration permeate 
resulting in an ultrafiltered retentate with its casein-to-whey protein 
ratio intact (Docket No. 2004P-0519; 69 FR 71418).
    FDA notes that a comment received in response to the two petitions 
suggested that any definition of ultrafiltration also include a 
requirement that the fluid UF milk must contain a maximum of 45 percent 
total solids (or a minimum moisture content of 55 percent). The comment 
stated that this requirement is necessary to define ``liquid'' UF milk 
and preclude any treatment following ultrafiltration to further 
concentrate UF milk. However, the comment did not provide any 
supporting information or data on the appropriateness of this minimum 
level of moisture. In the proposed definition of UF milk, FDA is not 
proposing a requirement related to minimum moisture content of UF milk; 
however, the proposed definition states that UF milk is a liquid 
product. FDA seeks comment on whether there is a need for an added 
measure to ensure the liquid nature of this ingredient and/or to 
preclude any subsequent treatment following ultrafiltration to further 
concentrate the fluid UF milk. If so, does a minimum moisture content 
requirement sufficiently address this concern and what is an 
appropriate minimum level of moisture?
    FDA also seeks comment on the need for, and appropriateness of, the 
following: (1) Not permitting other forms of mechanical filtration, 
such as microfiltration; and (2) the requirement that the casein-to-
whey protein ratio remain unaltered during ultrafiltration and the 
feasibility of such a requirement for compliance and enforcement 
purposes. If the requirement that the casein-to-whey protein ratio 
remain unaltered is not appropriate, FDA seeks information on what 
constitutes an acceptable variation of this ratio during 
ultrafiltration of milk so that FDA may determine appropriate criteria 
for purposes of enforcement.
    In response to the petitions, FDA received some comments that 
opposed the use of any filtered milk, citing product safety and quality 
concerns; however, these comments did not provide any scientifically 
sound and valid data to support their objections specifically with 
regard to fluid UF milk. At this time, FDA does not have any 
information that raises food safety concerns with the use of fluid UF 
milk in standardized cheeses. FDA specifically requests that any 
comments that address the technical aspects of these proposed 
provisions include sound scientific and factual data or information 
that support the positions presented in the comments. For example, are 
there analytical data or other information that would support a 
determination that standardized cheeses made using fluid UF milk, as 
defined in this proposed rule, are potentially unsafe or are 
nutritionally inferior? Are there scientific data or information that 
demonstrate that the use of fluid UF milk, as defined in this proposed 
rule, adversely affects the physical, chemical, or sensory 
characteristics of a particular standardized cheese or cheese product 
or that would support the determination that the use of fluid UF milk 
is not appropriate in a particular standardized cheese or cheese 
product?

III. Executive Order 12866: Cost Benefit Analysis

    FDA has examined the economic implications of this proposed 
amendment for part 133 as required by Executive Order 12866. Executive 
Order 12866 directs agencies to assess all costs and benefits of 
available regulatory alternatives and, when regulation is necessary, to 
select regulatory approaches that maximize net benefits (including 
potential economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity). Executive Order 12866 
classifies a rule as significant if it meets any one of a number of 
specified conditions, including: Having an annual effect on the economy 
of $100 million, adversely affecting a sector of the economy in a 
material way, adversely affecting competition, or adversely affecting 
jobs. A regulation is also considered a significant regulatory action 
if it raises novel legal or policy issues. FDA has determined that this 
proposed rule is a significant regulatory action as defined by 
Executive Order 12866.

A. Need for Regulation

    Under current standards of identity for cheese and cheese products, 
the definitions of ``milk'' and ``nonfat milk'' do not encompass 
``filtered milk''. As a result, while these definitions list milk, 
nonfat milk, and the different forms (including concentrated, 
reconstituted, and dried) that can be used in making standardized 
cheeses, they do not explicitly permit the use of filtered milk as an 
ingredient in standardized cheeses. The use of filtered milk in cheese 
making provides greater flexibility and potential cost savings to 
cheese producers while still preserving the basic nature and essential 
characteristics of the food. FDA tentatively concludes that revision of 
the standard is needed to promote honesty and competition in the 
interest of consumers and to allow dairy producers to utilize a safe 
and effective technology.

B. Background and Current Industry Practices

    The sources for this analysis were compiled from food research and 
chemistry journals, milk and cheese industry publications, U.S. 
Department of Agriculture (USDA) data and reports, other government 
agency reports, and expert opinions. Sources cited in this text refer 
to the specific passage or data reported, but all sources found at the 
end of the document were used to formulate the basis of the analysis.
    The standardization of casein and fat content in milk is a common 
practice in cheese production that improves the consistency of the 
final products, reduces the volatility of total milk ingredient costs, 
and increases the amount of cheese produced per vat (Ref. 9). Not all 
cheese producers standardize their milk, but the amount of protein, 
specifically in the form of casein, present in milk for cheese 
production is the single largest factor affecting cheese yield. 
Condensed skim milk and NFDM are widely used to increase the amount of 
casein in cheese milk (Refs. 9 and 40). In 2001, the dairy industry 
purchased 621 million lb of NFDM, 67.5 percent of all domestic sales of 
NFDM. The use of NFDM in hard cheeses made up 43.3 percent of the total 
amount purchased by the dairy industry, and cottage and cream cheeses 
accounted for an additional 6.2 percent (Ref. 41).
    By adding condensed milk or NFDM the cheese producer is adding 
lactose and minerals that must later be removed from the curd at a 
greater rate than the casein that provides the benefits (Ref. 40). 
Ideally, cheese producers would standardize their cheese milk with a 
higher concentration of protein without adding components that later 
have to be removed. The key components of milk products used in cheese 
making are listed in table 1 of this document.

[[Page 60759]]



                                     Table 1.--Composition of Milk Products
----------------------------------------------------------------------------------------------------------------
                                     Nonfat Dry    Fluid UF Milk   Dry UF Milk     Fluid MF     Isolated Casein
     Component\1\        Milk (%)     Milk (%)          (%)            (%)        Milk (%)\2\         (%)
----------------------------------------------------------------------------------------------------------------
Protein                       3.3          36     4.48-11.94      42-80                  7.9   89-94
----------------------------------------------------------------------------------------------------------------
Fat                           3.65          0.8   5.51-14.68      1-2.5                 10.5   1.5\3\
----------------------------------------------------------------------------------------------------------------
Lactose                       4.75         52     4.59-3.68       46-4.1                 4.7   0-0.2\3\
----------------------------------------------------------------------------------------------------------------
\1\ Percentages compiled from the Wisconsin Center for Dairy Research and the Wisconsin Milk Marketing Board
  White Paper (2001), Fassbender (2001), Innovations in Dairy (2001), and GAO (2001).
\2\ As in the case of fluid UF milk, the composition of fluid MF milk can vary but we were unable to find a
  range of values of protein, fat, and lactose content of fluid MF milk in the literature.
\3\ Maximum values.

    Table 1 of this document, reflects the fact that UF milk can be 
concentrated to a greater or lesser extent to meet the needs of 
different manufacturing processes. For some cheeses, the UF milk can be 
highly concentrated then mixed with cream to produce a liquid 
``precheese'' with the same gross composition as the final cheese. It 
has been shown that this precheese can be used in continuous process 
cheese making without the use of vats (Refs. 10 and 42). Some soft 
cheeses, processed cheese, and direct acidified cheese, particularly 
those made from goat's and sheep's milk, have been reported to be 
successfully produced using highly concentrated UF milk (Refs. 12, 13, 
and 43). However, the high concentration of the retentate may affect 
some properties of the milk and require specially designed equipment 
(Ref. 2).
    More widely accepted for the common styles of cheese consumed in 
the United States appears to be the use of lower concentrations of UF 
milk to standardize the protein concentration in cheese milk to produce 
higher final cheese yields (Refs. 4, 10, and 44). Low concentration UF 
milk replaces a percentage of milk, usually between 10 and 20 percent, 
to provide a higher level of casein in the cheese milk without the 
addition of lactose and minerals (Ref. 40). Most of the benefits of 
using UF milk are from standardizing the protein concentrations while 
still allowing conventional cheese-making equipment to be used, or 
easily adapted for use (Ref. 10). Other uses include UF milk 
replacement to eliminate the natural seasonal variation in milk 
quality, improving the consistency of cheese (Ref. 9).
    For the purpose of the economics analysis, and without making any 
declarations about what FDA believes is technically sufficient, we use 
a low concentration of UF milk with approximately 10 percent 
replacement as the appropriate reference for 80 percent of all cheese 
made in the United States. This is based on research that suggests that 
low concentration replacement has been successfully used in Cheddar and 
Mozzarella cheeses (Refs. 1 and 9), whereas continuous process cheese-
making from high concentration UF milk was not (Ref. 9). These two 
cheeses alone made up two-thirds of domestic cheese production in 2002 
with Swiss and other American cheeses, making up an additional 13 
percent (Ref. 45). If this proposed rule is finalized, all standardized 
cheese made in the United States, regardless of the variety and 
including those that implement UF technology, must continue to meet the 
physical and chemical properties specified in the standard.
    Amending the standard of identity of cheese has the potential to 
affect two related sectors of the dairy industry: Dairy processors and 
cheese producers. Milk is produced on dairy farms daily, with the 
volume and composition varying both seasonally and daily. The milk is 
picked up from dairy farms and transported by milk haulers to 
cooperatives or proprietary operations for distribution or further 
processing. Large dairy farms may encompass production, processing, and 
even hard-product manufacturing facilities all at one site, whereas 
other dairy farms may belong to a cooperative or sell their milk to a 
proprietary operation that processes or further distributes the milk at 
its own discretion. Except in the cases of large operations, dairy 
farms do not usually process their own milk. Therefore, while there are 
almost 92,000 dairy operations (an operation is a place with one or 
more milk cows; a farm may include more than one operation) in the 
United States (Ref. 46), the unit of measurement for purchasing UF 
technology is the dairy processor who collects milk from one or more 
dairy operations. In addition to making the capital investment in UF 
technology, dairy processors would benefit from the decreased costs for 
transporting and storing UF milk during shipment to cheese producers.
    Cheese producers, while not the direct purchasers of UF technology, 
would still be affected by the changes in the definition of milk in 
standardized cheese if they choose to replace some of their ingredient 
milk with UF milk. Many of the benefits of using UF milk in cheese 
accrue to the cheese producers directly, including, e.g., higher cheese 
yields and increased production efficiency as well as a greater ability 
to eliminate the natural variation in their milk supplies, and reduced 
storage costs.
    Dairy processors and cheese producers are not mutually exclusive 
categories. A dairy processor is a manufacturer of dairy products made 
using milk as the main dairy ingredient. Therefore, cheese producers 
are all dairy processors, but not all dairy processors produce cheese. 
In 2002 there were 403 cheese plants and 1,153 dairy processors in the 
United States (Ref. 45). Some dairy processors either manufacture 
cheese directly or manufacture dairy products that are sold to cheese 
producers. However, some dairy processors produce no cheese products or 
ingredients whatsoever, and instead, produce a variety of other dairy 
products including fluid milk, butter, ice cream, and whey products. It 
is also worth noting that dairy processors include cooperatives. In 
1997 there were 226 dairy cooperatives that ranged in primary function 
from bargaining-only to hard-product manufacturing and fluid processing 
(Ref. 47).
    We measure benefits as the net decrease in the cost of producing 
cheese. These benefits accrue from all types of protein-
standardization; however, the extent of the benefits will vary 
depending on the milk product used. These benefits lead to cost savings 
that could be passed along to consumers if the market is opened to a 
larger number of dairy producers within the industry and competition 
among cheese producers is enhanced. When only those milk processors 
that are large

[[Page 60760]]

enough to incorporate UF technology in legitimate alternate-make 
procedures (i.e., within plant and within batch) are allowed to use the 
cost-saving technology in standardized cheeses, they will be able to 
sell their goods at the market price, which is based on competition 
among firms with higher production costs. If, however, the market is 
broadened so that all firms, large and small, are able to use the cost-
saving technology, competition among these firms should bid down the 
market price of cheese, passing the savings on to consumers.
    We measure the costs of using filtered milk to make standardized 
cheese as losses to consumers who prefer cheese made under the existing 
milk definitions, domestic and international market adjustments, and 
government purchases required under USDA's Commodity Credit Corp., 
program. Increases in government purchases of dairy products will not 
incur unless the market prices of specific products fall below the 
government floor prices.

C. Regulatory Options

    We analyze several options for amending the standards of identity 
for cheeses and cheese products. Option 1 would amend the definition of 
milk in the standards of identity for cheeses to allow fluid UF milk to 
be used. Option 2 would allow fluid UF milk and dry UF milk. Option 3 
would amend the definition of milk in the standards of identity for 
cheese to allow all filtration methods that resulted in a fluid milk 
product to be used in cheese production. Option 4 would allow all 
filtration methods that resulted in fluid or dry milk products to be 
used. Option 5 would allow all milk or products obtained from milk to 
be used in cheese production, in concert with the Codex general 
standard for cheese.
    We estimate the benefits and costs of the regulatory option 
compared with the benefits and costs of a baseline. The baseline 
reflects the state of the industry before any new regulation is put in 
place. Therefore, in this analysis the baseline is leaving the standard 
of identity for cheese unmodified, i.e., milk, nonfat milk, and the 
concentrated, reconstituted, and dried forms of milk and nonfat milk 
are the only basic ingredients allowed in the production of 
standardized cheese. Due to the ``extensive use of nonfat dry milk 
(NFDM) as an ingredient for cheese manufacture in the United States'' 
(Ref. 9), the baseline assumes NFDM is used as the sou