Removal of Mandatory Country of Origin Labeling Requirements for Beef and Pork Muscle Cuts, Ground Beef, and Ground Pork, 10755-10761 [2016-04609]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 81, Number 41 (Wednesday, March 2, 2016)]
[Rules and Regulations]
[Pages 10755-10761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-04609]



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Federal Register / Vol. 81, No. 41 / Wednesday, March 2, 2016 / Rules 
and Regulations

[[Page 10755]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 65

[Document No. AMS-LPS-16-0002]
RIN 0581-AD29


Removal of Mandatory Country of Origin Labeling Requirements for 
Beef and Pork Muscle Cuts, Ground Beef, and Ground Pork

AGENCY: Agricultural Marketing Service (AMS), USDA.

ACTION: Final rule.

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SUMMARY: This final rule amends the Country of Origin Labeling (COOL) 
regulations to remove muscle cut beef and pork, and ground beef and 
pork from mandatory COOL requirements. The COOL regulations are issued 
pursuant to the Agricultural Marketing Act of 1946 (Act). The Agency is 
issuing this rule to conform with amendments to the Act contained in 
the Consolidated Appropriations Act, 2016.

DATES: This final rule is effective on March 2, 2016.

FOR FURTHER INFORMATION CONTACT: Julie Henderson, Director, COOL 
Division, AMS, USDA by telephone on 202/720-4486 or via email at 
COOL@ams.usda.gov; or Erin Morris, Associate Administrator, AMS, USDA, 
by telephone on 202/690-4024, or via email at: 
erin.morris@ams.usda.gov.

SUPPLEMENTARY INFORMATION:

Executive Summary

Purpose of the Regulatory Action

    The Consolidated Appropriations Act, 2016 amended the Act to remove 
muscle cut beef and pork, and ground beef and pork from COOL 
requirements in order to bring the United States into compliance with 
its international trade obligations. The Agency is issuing this rule to 
conform to these amendments.

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 included 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 May 23, 2013, AMS issued a 
final rule to amend the country of origin labeling provisions for 
muscle cut covered commodities (78 FR 31367). The Consolidated 
Appropriations Act, 2016 (Pub. L. 114-113) amended the Act to remove 
mandatory COOL requirements for muscle cut beef and pork, and ground 
beef and pork. The Agency is issuing this rule to conform to these 
statutory amendments.

Summary of the Major Provisions of the Regulatory Action in Question

    Under this final rule, beef and pork muscle cuts and ground beef 
and pork are removed from the list of covered commodities subject to 
the COOL regulation. Accordingly, changes have been made to the 
relevant Code of Federal Regulations (CFR) sections, including 
definitions, country of origin notification, and recordkeeping.

Costs and Benefits

    The estimated economic benefits associated with this final rule, 
previously assessed as costs, are likely to be significant. The 
estimated benefits for producers, processors, wholesalers, and 
retailers of previously covered beef and pork products are difficult to 
assess, as they are essentially the converse of the costs attributed to 
the 2009/2013 rules.. However, the benefits from incremental cost 
savings are likely to be less than the cumulative impact of these 
rules, $1.8 billion, as affected firms have adjusted their operations 
to accommodate COOL requirements more efficiently since implementation 
of the initial COOL measure in 2009, and the amended measure in 2013. A 
complete discussion of the cost and benefits can be found under the 
Executive Order 12866 section.

Summary of Changes to the COOL Regulations

    This rule removes certain mandatory COOL requirements from 
retailers (as defined by the law and regulations) and their suppliers. 
Retailers are no longer required by the rule to provide country of 
origin information for the beef and pork that they sell, and firms that 
supply beef and pork to these retailers no longer must provide them 
with this information. In addition, firms in the supply chain for beef 
and pork are also relieved from the requirements associated with 
mandatory COOL, from cattle and hogs downstream to muscle cut and 
ground beef and pork sold at covered retail establishments.

Definitions

    The definitions of beef (Sec.  65.110), ground beef (Sec.  65.155), 
ground pork (Sec.  65.175), and pork (Sec.  65.215) are removed from 
the regulation. The definition of the term covered commodity (Sec.  
65.135(a)(1) and (2)) is amended to remove references to beef, pork, 
ground beef, and ground pork. The definitions of production step (Sec.  
65.230), raised (Sec.  65.235) and United States country of origin 
(Sec.  65.260(a)) are amended to remove references to beef and pork. In 
addition, the definition of a processed food item (Sec.  65.220) is 
amended to remove the example of teriyaki flavored pork loin.

Country of Origin Notification

    Country of origin notification (Sec.  65.300(h)) is amended to 
remove references to ground beef and ground pork.

Recordkeeping

    Responsibilities of suppliers (Sec.  65.500(b)(1)) is amended to 
remove references to beef, pork, and cattle.

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

[[Page 10756]]

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. The purpose of this rule is to amend the COOL 
regulation to remove beef and pork products from the list of covered 
commodities as required by the Consolidated Appropriations Act, 2016. 
As a result, the rulemaking represents a deregulatory action, and the 
logical approach for the economic analysis is to reverse the previous 
assessment for those portions of the analysis relating to beef and 
pork.
    The estimated economic benefits associated with this final rule, 
previously assessed as costs, are likely to be significant. The 
estimated benefits for producers, processors, wholesalers, and 
retailers of previously covered beef and pork products are as much as 
$1.8 billion in cost avoidance. However, the benefits from incremental 
cost savings are likely to be less than this upper bound, as affected 
firms have adjusted their operations to accommodate COOL requirements 
more efficiently since implementation of the initial COOL measure in 
2009, and the amended measure in 2013.
    The costs of this rule are the loss in benefits to consumers who 
desired such country of origin information for muscle cut beef and 
pork, and ground beef and pork products sold at retail. As discussed in 
previous rulemakings, these costs are difficult to determine 
quantitatively. The original rulemaking did not estimate a quantitative 
value of these preferences but noted their existence. USDA found that 
the lack of voluntary country of origin labeling programs, including 
labeling for beef and pork products, was evidence that consumers did 
not have strong enough preferences to support price premiums sufficient 
for firms in the supply chain to recoup the costs of labeling.

Statement of Need

    Justification for this final rule is to conform to changes made to 
COOL provisions by the Consolidated Appropriations Act, 2016. There are 
no alternatives to federal regulatory intervention for implementing 
this statutory directive.
    The COOL provisions of the Act changed federal labeling 
requirements to remove muscle cuts of beef and pork and ground beef and 
ground pork from the list of covered commodities for the COOL 
regulation.

Analysis of Benefits and Costs

    The baseline for this analysis is the present state of the affected 
industries with mandatory COOL.
    Benefits: The benefits of the rule removing beef and pork products 
from mandatory COOL are the reduction in costs to those affected 
parties associated with meeting the rule requirements. This includes 
implementation costs related to capital, labor, and other inputs. 
Following the economic analysis from previous rulemaking (74 FR 2658; 
78 FR 31367), the overall impact of the cost savings to directly 
affected firms will be an increase in economic activity resulting in an 
overall net benefit (benefits minus costs) from this rulemaking.
    Number of firms and number of establishments affected: This rule is 
estimated to directly or indirectly affect approximately 1,027,204 
establishments owned by approximately 992,781 firms. Table 1 provides 
estimates of the affected firms and establishments.
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    \1\ NASS, USDA. 2012 Census of Agriculture.
    \2\ Ibid.
    \3\ Grain Inspection, Packers and Stockyards Program, USDA. 
Market Agencies Buying on Commission and Dealers. December 2015. 
https://gipsa.usda.gov/psp/regulated/dealersBOC_list.pdf.: Grain 
Inspection, Packers and Stockyards Program, USDA. Registered and 
Bonded Market Agencies Selling Livestock on Commission. December 
2015. https://gipsa.usda.gov/psp/regulated/SOC_list.pdf.
    \4\ NASS, USDA. Livestock Slaughter Annual Summary, April 2015.
    \5\ U.S. Census Bureau. 2012 Economic Census. Business and 
Industry Subject Series. Sales/Receipt Size of Establishment/Firm. 
EC1251SSSZ1. Issued October 2015.
    \6\ Ibid.
    \7\ AMS, USDA. Perishable Agricultural Commodities Act database.

                  Table 1--Number of Affected Entities
------------------------------------------------------------------------
                  Type                         Firms        Operations
------------------------------------------------------------------------
Beef and Pork
    Cattle and Calves \1\...............         913,246         913,246
    Hogs and Pigs \2\...................          63,246          63,246
    Stockyards, Dealers & Market                   4,723           4,723
     Agencies \3\.......................
    Livestock Processing & Slaughtering            2,629           2,862
     \4\................................
    Meat & Meat Product Wholesale \5\...           2,162           2,405
General Line Grocery Wholesalers \6\....           2,271           2,832
Retailers \7\...........................           4,504          37,890
Totals
    Producers...........................         976,492         976,492
    Handlers, Processors, & Wholesalers.          11,785          12,822
    Retailers...........................           4,504          37,890
                                         -------------------------------
        Grand Total.....................         992,781       1,027,204
------------------------------------------------------------------------

    It is assumed that all firms and establishments identified in Table 
1 will be affected by the rule, although some may not produce or sell 
products within the scope of this rule. While this assumption likely 
overstates the number of affected firms and establishments, it is 
consistent with previous regulatory assessments of COOL. With the 
exception of retailers, the number of firms and operations has declined 
as compared to the 2009 final rule. Detailed data are not available on 
the number of entities categorized by the marketing channels in which 
they operate and the specific products that they sell. Such data would 
be needed to

[[Page 10757]]

refine the estimates of the entities directly affected by COOL.
    Estimation of benefits: The process of determining estimates of 
what were previously costs, but are now considered to be benefits 
(costs avoided) of this rule have been detailed in both the economic 
analyses for the 2009 and 2013 final rules, as well as proposed and 
interim rulemaking actions associated with those rules. Details of the 
data, sources, and methods underlying the economic analyses are 
provided in the previous Final Regulatory Impact Analyses (FRIA), the 
Intermediate Regulatory Impact Analysis (IRIA), and the previous 
Preliminary Regulatory Impact Analysis (PRIA) under the sections 
relating to costs for the beef and pork industries. This section 
presents the revised benefits estimates and describes changes made for 
this final analysis.
    In the 2009 final rule (74 FR 2658), the economic analysis provided 
estimates of first-year incremental outlays for directly affected 
firms. In addition, the results of a computable general equilibrium 
model were included to show the economic impact of the rule 10 years 
after the initial implementation. The longer term assessment was 
conducted to show that over time the impact of the rule will likely 
change as economic agents adapt to the rule. The longer term assessment 
also allowed for estimation of impacts of COOL across the U.S. economy.
    Table 2 below presents results of the 2009 rule economic analysis 
for beef and pork, adjusted for inflation (2015 dollars).\8\ All 
impacted entities in the supply chain are included in these values, 
from the producer to the processor, wholesaler and retailer. The 
second, third and fourth columns show the adjusted estimates of 
increased costs for the first year of the rule's implementation.
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    \8\ Bureau of Labor Statistics. https://www.bls.gov/data/inflation_calculator.htm.

              Table 2--Estimated Implementation Costs for the 2009 COOL Regulation, in 2015 Dollars
----------------------------------------------------------------------------------------------------------------
                                                                                    (Million $)
                                                                 -----------------------------------------------
                                                                       Beef            Pork            Total
----------------------------------------------------------------------------------------------------------------
Producers.......................................................          $335.5          $115.5          $451.0
Intermediaries..................................................           410.3           111.1           521.4
Retailers.......................................................           631.4           102.3           733.7
                                                                 -----------------------------------------------
    Total.......................................................         1,377.2           328.9         1,706.1
----------------------------------------------------------------------------------------------------------------

    The 2009 rule is now at the start of its seventh year of 
implementation. The economic analysis for the 2009 rule did not examine 
the costs of implementing COOL to affected entities beyond the initial 
year. However, it was acknowledged that the first year costs were 
likely to be higher than subsequent year costs due to changes in 
technology, development of more efficient practices, and greater 
familiarity with its implementation. While such cost reductions are 
likely, in the absence of detail on subsequent years of implementation 
we to assume that removal of beef and pork from COOL regulations 
results in a cost savings to affected entities of at most $1.377 
billion for the beef sector, $328 million for the pork sector, and a 
total of $1.706 billion for both industries combined.
    In 2013, an additional rule was promulgated that amended the 
requirements regarding labeling of muscle cuts of covered commodities 
to provide consumers with more specific information. The economic 
assessment for this rule determined the costs of implementation to be 
the figures reported in Table 3, adjusted to 2015 dollars. As Table 3 
shows, the economic assessment presented low, high, and mid-point 
values for estimated outlays.

              Table 3--Estimated Implementation Costs for the 2013 COOL Regulation, in 2015 Dollars
----------------------------------------------------------------------------------------------------------------
                                                                                     Mid-point
                                                                   Low estimate      estimate      High estimate
----------------------------------------------------------------------------------------------------------------
Labeling--Retail (million $)....................................            17.3            33.5            48.2
Commingling--Beef (million $)...................................            21.5            53.9            86.2
Commingling--Pork (million $)...................................            15.3            38.4            61.5
                                                                 -----------------------------------------------
    Total (million $)...........................................            54.1           125.8           195.9
----------------------------------------------------------------------------------------------------------------

    Again, these costs were estimated for the initial year of 
implementation, with the recognition that over time increased 
efficiencies would lead to reduced annual costs. However, as with the 
2009 rule, the 2013 regulation did not provide cost estimates beyond 
the first year. For consistency, we again assume the cost savings for 
this third year of the 2013 rule's implementation is equivalent to the 
first year, recognizing that it is likely to be an upper limit value. 
Assuming the mid-point of the range, removing beef and pork products 
from the 2013 COOL regulation would save these industries a total of 
roughly $126 million per year in costs.
    Withdrawing beef and pork products completely from both the 2009 
and the 2013 COOL regulations therefore is expected to save these 
industries a combined $1.832 billion. Specifically, this translates 
into total cost savings for the industry as $799.7 million saved by 
beef producers and intermediaries, $265.0 million saved by pork 
producers, and $767.2 million saved by retailers for both beef and pork 
covered commodities.
    The benefits per firm and per establishment represent industry 
averages for aggregated segments of the supply chain. Large firms and 
establishments may see greater savings relative to small operations due 
to the volume of commodities that they handle

[[Page 10758]]

and the increased complexity of their operations. In addition, 
different types of businesses within each segment are likely to benefit 
differently. Thus, the range of benefits gained by individual 
businesses within each segment is expected to be large, with some firms 
seeing greater gains than others.\9\
---------------------------------------------------------------------------

    \9\ Some affected entities may not experience net savings. For 
example, although this rulemaking will reduce the cost of compliance 
activities conducted by firms in the beef and pork supply chain, the 
savings may, in some cases, be passed on to others in the supply 
chain or consumers.
---------------------------------------------------------------------------

    Average benefits, in the form of cost savings per operation for 
each of the three types of operations is shown in Table 4. These values 
were calculated from Table 1, and total cost savings estimations of 
$451.0 million for producers, $613.7 million for intermediaries such as 
handlers, processors and wholesalers, and $767.2 million for retailers.

   Table 4--Number of Operations and Average Cost Savings per Affected
                                 Entity
------------------------------------------------------------------------
                                                           Average cost
                  Type                      Operations        savings
------------------------------------------------------------------------
Producers...............................         976,492            $462
Intermediaries..........................          12,822          47,863
Retailers...............................          37,890          20,248
------------------------------------------------------------------------

    Net Effects on the Economy: As discussed in the 2009 final rule, 
the impacts described fall to those directly involved in the 
production, distribution, and marketing of covered commodities. 
However, they do not represent the net impacts to the United States 
economy.
    In the 2009 rulemaking, the impact of the regulation on overall 
economy was examined using a Computable General Equilibrium (CGE) model 
developed by the USDA's Economic Research Service. Given that this is a 
deregulatory action that reduces costs and in the interest of 
expediency, the CGE model was not re-estimated with COOL compliance 
costs for beef and pork covered commodities removed as economic 
``shocks'' to the model. However, reasonable assumptions can be applied 
to the earlier results to arrive at approximate estimates of the impact 
of this rulemaking action on the broader U.S. economy.
    The 2009 economic impact analysis demonstrated that production and 
marketing cost increases associated with COOL regulations for covered 
commodities ultimately led to reduced output within the covered 
industries, in other industries, or both. As a result, the net impact 
on the general economy of regulations that increased supply-side costs 
for covered commodities was negative.
    In the 2009 rule (74 FR 2658), it was determined that the overall 
impact on the U.S. economy from that rule (which also included lamb, 
chicken, fruits, vegetables, and other commodities) was $234.1 million 
in 2015 dollars. The assumptions used in developing this value were 
that consumers' preferences for the commodities would not change, and 
that the adjustments were made over a 10-year time period. This value 
represents the decline in consumer purchasing power as a result of the 
initial implementation costs filtering through the economy after 10 
years of adjustment.
    Because removal of beef and pork from COOL regulations should have 
the opposite effect, it is likely that the long-term impact on the 
overall economy from withdrawing beef and pork from COOL requirements 
would be a reduction in this loss of purchasing power. In the 2009 
FRIA, 59 percent of the total initial implementation costs were 
attributable to beef and pork. If we assume the same proportion applies 
to the CGE model, the reduction in purchasing power to U.S. consumers 
attributable to cost increases for beef and pork would be approximately 
$138 million after 10 years of adjustment. Conversely, then, removal of 
COOL requirements for beef and pork through this rulemaking may result 
in an improvement of approximately $138 million in U.S. consumers' 
purchasing power after 10 years of adjustment.
    Costs: As discussed in previous assessments of COOL regulation, the 
expected benefits from implementation of the rule (i.e., the current 
regulations) were likely to be negligible and were difficult to 
quantify. With this rule removing beef and pork products from COOL, 
those consumers who had previously benefited from the information will 
now experience a reduction in economic welfare due to the loss of this 
information. This reduction in welfare is the cost of exempting beef 
and pork from COOL requirements.
    COOL provides consumers with information about a credence 
attribute. Another credence attribute that consumers sometimes confuse 
with COOL is food safety. However, as noted in previous rulemaking 
actions, COOL is simply a labeling rule, not a food safety rule. As a 
result, there are no costs to consumers from removing COOL requirements 
for beef and pork products from a food safety perspective.
    Alternatives considered: Section 759 of Division A of the 
Consolidated Appropriations Act, 2016 mandates the withdrawal of beef 
and pork muscle cuts, ground beef, and ground pork. This rule would 
implement the Act accordingly. The only effective means of achieving 
the results mandated by the Consolidated Appropriations Act, 2016, is 
through rule promulgation.

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 
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 significant economic impact on a 
substantial number of small entities, but this impact will be in the 
form of removing regulatory burdens. The Agency has prepared the 
following final regulatory flexibility analysis of the rule's likely 
economic impact on small businesses pursuant to section 604 of the 
Regulatory Flexibility Act.
    The rule is the direct result of statutory obligations to implement 
Section 759 of Division A of the Consolidated Appropriations Act, 2016. 
The intent of this law is to remove muscle cut beef and pork, and 
ground beef and pork from a regulation that provides consumers with 
information on the country of origin of covered commodities at certain 
retail establishments. Specifically, the law withdraws these 
commodities from Federal country of origin labeling

[[Page 10759]]

requirements for products sold by retailers subject to COOL.
    The objective of the current COOL regulation is to regulate the 
activities of covered retailers and their suppliers to enable retailers 
to fulfill their statutory and regulatory obligations. COOL requires 
retailers to provide country of origin information for all of the 
covered commodities that they sell. It also requires all firms that 
supply covered commodities to these retailers to provide the retailers 
with the information needed to correctly label the covered commodities. 
In addition, all other firms in the supply chain for the covered 
commodities are potentially affected by the rule because country of 
origin information needs to be maintained and transferred along the 
entire supply chain. In general, the supply chains for the covered 
commodities consist of farms, processors, wholesalers, importers, and 
retailers. This rule withdraws muscle cut beef and pork, and ground 
beef and pork from the list of covered commodities, and subsequently 
withdraws all entities along the supply chain for these commodities 
from the requirements of COOL regulation.
    Section 604 of the RFA requires the Agency to provide an estimate 
of the number of small entities to which the rule will apply. A listing 
of the number of entities in the supply chains for each of the covered 
commodities can be found in Table 1. However, in the case of this rule, 
these entities will benefit from reduced costs, rather than incur 
additional costs. Retailers covered by this rule must meet the 
definition of a retailer as defined by Perishable Agricultural 
Commodities Act of 1930 (PACA). In utilizing this definition, the 
number of retailers affected by this rule is considerably smaller than 
the total number of retailers nationwide.
    Because of the removal from country of origin requirements, COOL 
information will no longer be required to be passed along the supply 
chain and made available to consumers at the retail level. As a result, 
each participant in the supply chain as identified in Table 1 will 
benefit from reductions in recordkeeping costs, as well as changes or 
modifications to their business practices. It is estimated that 
approximately 1,027,000 establishments owned by approximately 993,000 
firms will be either directly or indirectly affected by this rule.
    This rule potentially will have an impact on all participants in 
the supply chain, although the nature and extent of the impact will 
depend on the participant's function within the marketing chain. On a 
total basis, the economic assessment estimated benefits in the form of 
cost savings of up to $451.0 million for producers, $613.7 million for 
intermediaries such as handlers, processors and wholesalers, and $767.2 
million for retailers for a total of $1.832 billion.
    On a per operation basis, the rule likely will have the largest 
benefit on intermediaries (handlers, processors, wholesalers, and 
importers) and retailers, while the impact on individual producers is 
likely to be relatively small. These impacts were shown in Table 6 of 
the economic impact analysis.
    There are two measures used by the Small Business Administration 
(SBA) to identify businesses as small: Sales receipts or number of 
employees. In terms of sales, SBA classifies as small those grocery 
stores with less than $25 million in annual sales and specialty food 
stores with less than $6.5 million in annual sales (13 CFR 121.201). 
Warehouse clubs and superstores with less than $25 million in annual 
sales are also defined as small. SBA defines as small those 
agricultural producers with less than $750,000 in annual sales. Of the 
other businesses potentially affected by the rule, SBA classifies as 
small those manufacturing firms with less than 500 employees and 
wholesalers with less than 100 employees.
    Retailers: 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. The number of 
retailers subject to the COOL rule is considerably smaller than the 
number of food retailers nationwide. There are 4,504 retail firms as 
defined by PACA that would be subject to the rule. An estimated 88 
percent (3,964 out of 4,504) of the retailers subject to the rule were 
reported to be small.
    Retailer benefits under this rule are estimated at $767.2 million. 
Benefits are estimated at $170,337 per retail firm and $47,863 per 
retail establishment. Retailers will save on recordkeeping costs, costs 
associated with supplying country of origin information to consumers, 
and handling costs.
    Wholesalers: Any establishment that supplies retailers with one or 
more of the covered commodities will no longer be required to provide 
country of origin information to retailers. Of wholesalers potentially 
affected by the rule, SBA defines those having less than 100 employees 
as small. Importers of covered commodities will also be affected by the 
rule and are categorized as wholesalers in the data.
    General-line wholesalers were assumed to handle at least one and 
possibly all of the covered commodities. As a result, the number of 
general-line wholesale businesses was included among entities affected 
by the rule. In 2012 there were 2,271 firms in total, and 2,108 firms 
had less than 100 employees. Therefore, approximately 93 percent of the 
general-line grocery wholesaler can be classified as small businesses.
    In addition to general-line wholesalers, there are specialty 
wholesalers which deal in certain types of products. According to the 
2012 Economic Census, there was a total of 2,162 meat and meat products 
wholesalers firms. Of these, 2,043 firms had less than 100 employees, 
meaning approximately 95 percent of meat wholesalers were considered 
small firms.
    The 2012 Economic Census reports that 2,629 livestock processing 
and slaughtering firms were in operation. Almost 90 percent or 2,354 of 
these firms qualified as small businesses under the SBA definition.
    The USDA's Packers and Stockyards Program provides regularly 
updated data on the number of livestock buyers, dealers and auction 
markets. While this information does not include sales and/or 
employment data, it is expected that the large majority of these 
entities are small businesses.
    It is estimated that intermediaries (importers and domestic 
wholesalers, handlers, and processors) would benefit from cost savings 
under the rule by approximately $613.7 million, or $52,075 per 
intermediary firm and $47,863 per establishment. Wholesalers will save 
recordkeeping costs, costs associated with supplying country of origin 
and method of production information to retailers, costs associated 
with segmenting products by country of origin and method of production, 
and additional handling costs.
    Producers: Producers of cattle and hogs will be affected because 
covered meat commodities are produced from livestock. SBA defines a 
small agricultural producer as having annual receipts less than 
$750,000. According to the 2012 Census of Agriculture, there were 
913,246 farms that raised beef cows, and roughly 45,000 were estimated 
to have annual receipts greater than $750,000. Thus, about 95 percent 
of these beef cattle farms were classified as small businesses 
according to the SBA definition. Similarly, an estimated 80 percent of 
hog farms were considered small.
    At the production level, agricultural producers maintained records 
to

[[Page 10760]]

establish country of origin information. This information was conveyed 
as the animals and products derived from them moved through the supply 
chains. Producer costs included the cost of establishing and 
maintaining a recordkeeping system for the country of origin 
information, animal or product identification, and labor and training. 
The savings benefits for producers are expected to be $451.0 million, 
or an estimated $462 per firm.\10\
---------------------------------------------------------------------------

    \10\ As noted in more detail above, these savings may be shifted 
to others in the supply chain or consumers.
---------------------------------------------------------------------------

    Additional alternatives considered: Section 604 of the RFA requires 
the Agency to describe the steps taken to minimize the significant 
economic impact on small entities including a discussion of 
alternatives considered. As the effect of this rule is reduced burdens 
rather than increased costs on firms, and because there were no 
alternatives for implementing the legislation, no alternatives to 
lessen the burden of this rule on small businesses were considered.

Paperwork Reduction Act

    Pursuant to the Paperwork Reduction Act (PRA) (44 U.S.C 3501-3520) 
the information collection provisions contained in this rule were 
previously approved by OMB and assigned OMB Control Number 0581-0250. 
AMS is publishing a notice and request for comment seeking OMB approval 
to revise this information collection in this edition of the Federal 
Register.

Executive Order 13175

    This final rule has been reviewed in accordance with the 
requirements of Executive Order 13175, ``Consultation and Coordination 
with Indian Tribal Governments.'' Executive Order 13175 requires 
Federal agencies to consult and coordinate with tribes on a government-
to-government basis on policies that have tribal implications, 
including regulations, legislative comments or proposed legislation, 
and other policy statements or actions that have substantial direct 
effects on one or more Indian tribes, on the relationship between the 
Federal Government and Indian tribes or on the distribution of power 
and responsibilities between the Federal Government and Indian tribes.
    The Agricultural Marketing Service (AMS) has assessed the impact of 
this rule on Indian tribes and determined that this rule does not, to 
our knowledge, have tribal implications that require tribal 
consultation under E.O. 13175. If a Tribe requests consultation, AMS 
will work with the Office of Tribal Relations to ensure meaningful 
consultation is provided where changes, additions and modifications 
identified herein are not expressly mandated by Congress.

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 this regulation. 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 minorities, women, or persons with disabilities 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 final 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 2002 Farm Bill, as amended by the 2008 Farm Bill and 
the Consolidated Appropriations Act, 2016.
    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 under 5 U.S.C. 
553(b)(3) for implementing this final rule on March 2, 2016 without 
prior notice and opportunity for comment. 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. The Consolidated Appropriations Act, 2016 amended the Act to 
remove the requirements for labeling beef and pork to bring the United 
States into compliance with its international trade obligations. 
Providing notice and seeking comment are impractical, unnecessary, and 
contrary to public interest because AMS has no discretion in 
implementing the statutory provisions that remove beef and pork from 
the COOL regulations. Additionally, on December 7, 2015, the World 
Trade Organization (``WTO'') Arbitrators set the maximum permissible 
levels of suspension of concessions at Canadian $1.05 billion (US $781 
million) annually for Canada and US $228 million annually for Mexico. 
The WTO granted Canada and Mexico authorization to suspend concessions 
on December 21, 2015. For these same reasons, pursuant to 5 U.S.C. 553, 
it is found and determined that good cause exists to exempt this rule 
from the requirement to delay the effective date. Accordingly, this 
rule will be effective on March 2, 2016.

List of Subjects in 7 CFR Part 65

    Agricultural commodities, Food labeling, Meat and meat products, 
Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, 7 CFR part 65 is amended 
as follows:

[[Page 10761]]

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

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

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


0
2. Revise the heading for part 65 to read as set forth above.


Sec. Sec.  65.110, 65.155, 65.175, and 65.215  [Removed]

0
3. Remove Sec. Sec.  65.110, 65.155, 65.175, and 65.215.
0
4. Amend Sec.  65.135 by revising paragraphs (a)(1) and (2) to read as 
follows:


Sec.  65.135  Covered commodity.

    (a) * * *
    (1) Muscle cuts of lamb, chicken, and goat;
    (2) Ground lamb, ground chicken, and ground goat;
* * * * *

0
5. Revise Sec.  65.220 to read as follows:


Sec.  65.220  Processed food item.

    Processed food item means a retail item derived from a covered 
commodity that has undergone specific processing resulting in a change 
in the character of the covered commodity, or that has been combined 
with at least one other covered commodity or other substantive food 
component (e.g., chocolate, breading, tomato sauce), except that the 
addition of a component (such as water, salt, or sugar) that enhances 
or represents a further step in the preparation of the product for 
consumption, would not in itself result in a processed food item. 
Specific processing that results in a change in the character of the 
covered commodity includes cooking (e.g., frying, broiling, grilling, 
boiling, steaming, baking, roasting), curing (e.g., salt curing, sugar 
curing, drying), smoking (hot or cold), and restructuring (e.g., 
emulsifying and extruding). Examples of items excluded include roasted 
peanuts, breaded chicken tenders, and fruit medley.

0
6. Amend Sec.  65.300 by revising paragraph (h) to read as follows:


Sec.  65.300  Country of origin notification.

* * * * *
    (h) Labeling ground lamb, ground goat, and ground chicken. The 
declaration for ground lamb, ground goat, and ground chicken covered 
commodities shall list all countries of origin contained therein or 
that may be reasonably contained therein. In determining what is 
considered reasonable, when a raw material from a specific origin is 
not in a processor's inventory for more than 60 days, that country 
shall no longer be included as a possible country of origin.
* * * * *

0
7. Amend Sec.  65.500 by revising paragraph (b)(1) to read as follows:


Sec.  65.500  Recordkeeping requirements.

* * * * *
    (b) Responsibilities of suppliers. (1) Any person engaged in the 
business of supplying a covered commodity to a retailer, whether 
directly or indirectly, must make available information to the buyer 
about the country(ies) of origin of the covered commodity. This 
information may be provided either on the product itself, on the master 
shipping container, or in a document that accompanies the product 
through retail sale. In addition, the supplier of a covered commodity 
that is responsible for initiating a country(ies) of origin claim, 
which in the case of lamb, chicken, and goat, is the slaughter 
facility, must possess records that are necessary to substantiate that 
claim for a period of 1 year from the date of the transaction. For that 
purpose, packers that slaughter animals that are tagged with an 840 
Animal Identification Number device without the presence of any 
additional accompanying marking (i.e., ``CAN'' or ``M'') may use that 
information as a basis for a U.S. origin claim. Packers that slaughter 
animals that are part of another country's recognized official system 
(e.g. Canadian official system, Mexico official system) may also rely 
on the presence of an official ear tag or other approved device on 
which to base their origin claims. Producer affidavits shall also be 
considered acceptable records that suppliers may utilize to initiate 
origin claims, provided it is made by someone having first-hand 
knowledge of the origin of the covered commodity and identifies the 
covered commodity unique to the transaction.
* * * * *

    Dated: February 26, 2016.
Elanor Starmer,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2016-04609 Filed 3-1-16; 8:45 am]
 BILLING CODE 3410-02-P