ROD SMITH, Feedstuffs Staff Editor

NASHVILLE, TENN. -- Call it the country-of-origin reality week.

A happy high that a mandated country-of-origin label that will be required on beef products beginning late next year became a hard realization for beef cattle producers here two weeks ago when they found out that the label will be an expense, liability and pro-poultry rule that was never envisioned by those who clamored for a mandatory origin label that they argued would improve the competitiveness of U.S. beef over beef imported from other countries.

The realization set in as producers received facts -- some producers for the first time -- about the country-of-origin labeling (COOL) rule that was written into the 2002 farm bill and will become mandatory for all beef and pork products Oct. 1, 2004 (Feedstuffs, Dec. 2, 2002).

From presentations to meetings at the Cattle Industry Annual Convention & Trade Show here Jan. 29-Feb. 1, producers learned that under COOL:

* U.S. cow/calf producers who background or finish their calves in Canada and sell them to U.S. packers will not be producing U.S. beef and may be penalized in the marketplace if plants provide premiums for cattle born, raised and slaughtered in the U.S., the only such cattle from which beef can be labeled as a "product of the U.S.;"

* U.S. cattle feeders who feed U.S. grain and use U.S. management and technology to finish cattle procured from Canadian and Mexican suppliers will not be producing U.S. beef and may be penalized in the marketplace;

* U.S. cow/calf producers and feeders will be expected to maintain records, "audit trails" as specified under COOL, that prove where every head they graze, background, finish and market was born and raised -- records that will allow interested persons to trace any individual meat product back to the feedlot, farm or ranch where the animal from which the meat product came was produced;

* Record-keeping will add to costs of production for cow/calf producers, feeders, packers and retailers, which will be passed back in the form of lower prices for livestock and forward in the form of higher prices for beef and which will decrease the competitiveness of beef next to poultry, which is not a covered commodity under COOL, and

* Retailers and packers will be subject to enormous penalties -- as much as $10,000 per violation per day -- if federal investigators discover that a beef product is mislabeled at retail -- penalties that one speaker suggested would lead to "indemnification papers" that plants will ask producers to sign should producers provide incorrect documentation of the origin of their cattle.

The facts provided a sobering story for producers, and the board of directors of the National Cattlemen's Beef Assn. (NCBA), which convenes for its annual business meeting during the Cattle Industry Convention, passed by an unanimous vote that included an endorsement by cow/calf states, a resolution that the association continue its position that it only supports voluntary COOL, develop an information program to educate producers across the country on the effect of mandatory COOL and seek congressional hearings on the impact of the rule.

The convention also houses the annual business meetings of the Cattlemen's Beef Promotion & Research Board, American National CattleWomen's Assn. and Cattle-Fax, as well as business meetings that allied companies have for clients and customers.

Rule could cost U.S. status for part of U.S. production

The facts began to unravel the expectations of COOL at NCBA committee meetings Jan. 29 and 30 and in hallway talk throughout the convention.

At the cattle marketing committee meeting, Barry Carpenter, director of the livestock and seed division of the Agricultural Marketing Service (AMS), explained that the COOL rule requires that all beef, pork, fish, fruit, produce, vegetables and peanuts be labeled at retail as to their country, or countries, of origin and that there is no category for "unknown."

He said, in the case of meat, this means that the label must identify where the animal from which an individual meat product was produced was born, raised and slaughtered, and only a product from an animal that was born, raised and slaughtered in one country can state that it's a product of that country, e.g. of Australia or Canada or the U.S. Otherwise, he said, it must specify all three of the origin requirements.

In the case of blended products, such as ground beef, which may mix trimmings from more than one cow, the label must state the origin of each cow, he said.

Many northern and northwestern producers acknowledged that this was the first time they were given information that moving their calves into Canada for any period of time would cost them U.S. status, and some feeders said they hadn't realized that finishing cattle from Canada and Mexico would mean that they would be producing non-U.S. beef.

Carpenter explained that AMS, which was charged in the farm bill with developing the COOL program, will investigate labels to make sure that products are not being mislabeled -- an investigation that he said would make retailers responsible for providing an audit trail back to the animals. He noted, though, that AMS cannot mandate an animal identification process, which means that the industry must develop an acceptable verification process or processes, but he said "self-verification," i.e., a pledge, even if a written and signed statement, about where an animal was born, raised and slaughtered, would not be acceptable.

He said COOL currently is voluntary but becomes mandatory at the end of September next year. He acknowledged that no retailer is presently running a voluntary program under the rule and asked for input from the industry for AMS for its development of the final, or mandatory, rule, which the agency begins doing in April.

COOL does not apply to meat products sold through foodservice.

Rule could make foreign beef more saleable

The unraveling worsened as Mark Dopp from the American Meat Institute (AMI), which represents the meat packing sector, and Deborah White from the Food Marketing Institute (FMI), which represents the supermarket sector, addressed the committee.

White, FMI's regulatory counsel, noted that the difference between COOL and other government regulations is that government normally provides the compliance process to make sure that the consumer is protected, but in the case of COOL, AMS has made retailers responsible for providing the compliance process -- verification that the COOL label is "present and accurate" -- at a penalty of $10,000 per violation per day.

She said this will make retailers insist that their packer suppliers provide verification.

Dopp, AMI senior vice president for regulatory affairs and general counsel, said should a packer fail to provide such verification or provides, intentionally or not, incorrect verification, it faces a penalty of $11,200 per violation per day.

For packers, he said, COOL has no mens rea, a legal standard under which even if a plant is misled by a producer supplier, it still is and will be held liable, whereas AMS may excuse a retailer who is misled by his packer supplier. He said a plant also can be charged with criminal violations, as well as civil penalties, and ordered to cease and desist operations.

Accordingly, Dopp advised producers that "it's not too soon to be preparing" for the mandatory phase of COOL because "you have animals being born now and walking around now that will have to be documented" Oct. 1, 2004.

The law states that a packer "shall provide" documentation to retailers, he said, so "we don't have an option on this," he said, "and if we don't have an option, livestock producers who supply us won't have an option." He said documentation and indemnification papers will be necessary.

Most U.S. producers don't have such individual animal identification, and most producers are opposed to mandatory animal identification, and on this, White added the coupe de grace: "Cows (beef) from other countries that have traceback will be far more saleable at retail stores than undocumented U.S. cattle."

Many producers admitted that this was the first time that they were given information that they would be required to have some sort of documentation scheme and would be held liable for not having one or for providing documentation, intentionally or not, that's incorrect.

Rule could trace bad meat back to the farm

The unraveling worsened even more as Lance Kotschwar and Pete Thompson, who head the Senate and House agriculture committee staffs, spoke to the committee and took questions.

Again and again they were asked what can be done to change COOL, if not take the law off the books completely, and again and again they replied that the industry would have to seek congressional relief and have a majority of the members of the House and Senate vote to provide that relief.

However, they also cautioned that the industry needs "to bring a consensus," and if the industry appear divided, i.e., internally within NCBA or between NCBA and other factions, it's not likely that congressional members will look favorably on the issue.

"When you have a family squabble in public," it's difficult to get government to respond, said Kotschwar, a former director of the beef cattle industry's public lands council.

"You need to remember that most of the people who voted for (COOL) represent" urban constituents, not cow/calf producers, Thompson said. "They don't represent you" and, therefore, will be hard to sway. He suggested that the industry needs to first run an education program so that a majority of producers agree on one course of action.

In response to a question about the extent to which consumers support COOL, Thompson told the meeting that he has had a reaction from just one activist group, a group more concerned about food safety than the public's right to know. He said when he asked the group's lobbyist why, the person said: "Because now we can trace E. coli back to the farm."

Rule could reduce competitiveness of U.S. beef

The unraveling continued at a meeting called by an allied company for its feedlot customers where packer representatives were convened to discuss meat quality but were nevertheless quizzed about COOL.

Charlie Mostek, senior vice president for marketing and sales at the IBP fresh meats division of Tyson Foods Inc., said COOL will be as much a burden for producers as for packers and retailers. If packers are going to be required to provide documentation, producers are going to be required to provide documentation, he said, because there is no way to have one without the other.

Marcine Moldenhauer, manager of value-added procurement at the Excel division of Cargill Inc., agreed, saying that documentation "is the law. Traceback will be required, and in a few years, (this will evolve into) traceback for animal welfare and E. coli."

"This is a very serious matter," Mostek said, "and it's going to roll downhill to you as fast as possible."

He also explained how every individual animal and carcass going through a plant will have to be identified and followed from pens to boxes, saying that the cost for the industry "is going to be outstanding."

Mostek also noted COOL doesn't apply to poultry, and he said while chicken doesn't face import competition, the argument used for keeping it out of COOL, chicken integrators won't have the expense that beef and pork processors will have. The gap in competitive costs/prices between livestock meat and chicken "will widen," he said.

Some producers said that was the first time that they were given information explaining that COOL carried competitive disadvantages when they were expecting the opposite.

Moldenhauer, when asked if any Excel retail customer has ever asked for a country-of-origin label, said she could remember two that had, "both times for Australian beef."

Fixing rule needs groundswell from grassroots

The unraveling was heard across the convention as evidenced in the introduction of the COOL resolution, which was brought to the board of directors by cow/calf state Montana.

The resolution states "there is increasing recognition" that there are "many adverse aspects of COOL," including the costs and impact of auditing, verification and compliance and that NCBA, while it supports COOL that's industry-driven and voluntary, does not support a mandatory program. The resolution calls for NCBA:

* To ask for congressional hearings into the impact of COOL;

* To develop educational and informational messages and ask for USDA field hearings to inform producers about the impact of COOL, and

* To work with state associations and related groups to communicate the impact of COOL.

Montana representative John Swanz said the industry needs to seek some sort of relief from COOL as currently proposed but that the effort must not appear to be NCBA acting against what many producers, who have not been educated into the adverse impact of the rule, believe will be beneficial to them." This needs to come up as a groundswell from the grassroots through education of the grassroots," he said.

NCBA international marketing committee chair Jim Peterson seconded that concept. "We don't want this to be perceived as killing an idea that people who have not had access to the facts, to good information, think is a good idea," he said.

One board member noted that it was R-Calf USA, a beef cattle industry organization created to promote COOL and a ban on packer livestock ownership, that went to extremes to get COOL legislation and suggested that NCBA should take no position. "We should just throw this bomb ... back to R-Calf and let them sort this through," he said.

There was little other discussion of the resolution, which carried on an unanimous voice vote.