Federal Register, Volume 74 Issue 242 (Friday, December 18, 2009)

[Federal Register Volume 74, Number 242 (Friday, December 18, 2009)]
[Proposed Rules]
[Pages 67736-67800]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-29323]

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Part III

Department of Agriculture

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Food Safety and Inspection Service

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9 CFR Parts 317 and 381

Nutrition Labeling of Single-Ingredient Products and Ground or Chopped
Meat and Poultry Products; Proposed Rule

Federal Register / Vol. 74, No. 242 / Friday, December 18, 2009 /
Proposed Rules

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DEPARTMENT OF AGRICULTURE

Food Safety and Inspection Service

9 CFR Parts 317 and 381

[FDMS Docket No. FSIS-2005-0018]
RIN: 0583-AC60

Nutrition Labeling of Single-Ingredient Products and Ground or
Chopped Meat and Poultry Products

AGENCY: Food Safety and Inspection Service, USDA.

ACTION: Supplemental Proposed Rule.

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SUMMARY: The Food Safety and Inspection Service (FSIS) is issuing this
supplemental proposed rule that, if finalized, will amend the Federal
meat and poultry products inspection regulations to require nutrition
labeling of the major cuts of single-ingredient, raw meat and poultry
products, unless an exemption applies.

DATES: Submit comments on or before February 16, 2010.

ADDRESSES: FSIS invites interested persons to submit comments on this
proposed rule. Comments may be submitted by either of the following
methods:
Federal eRulemaking Portal: This Web site provides the
ability to type short comments directly into the comment field on this
Web page or attach a file for lengthier comments. Go to http://www.regulations.gov. Follow the online instructions at that site for
submitting comments.
Mail, including floppy disks or CD-ROMs, and hand- or
courier-delivered items: Send to Docket Clerk, U.S. Department of
Agriculture (USDA), FSIS, Room 2-2127, George Washington Carver Center,
5601 Sunnyside Avenue, Mailstop 5474, Beltsville, MD 20705-5474.
Instructions: All items submitted by mail or electronic mail must
include the Agency name and docket number FSIS-2005-0018. Comments
received in response to this docket will be made available for public
inspection and posted without change, including any personal
information, to http://www.regulations.gov.
Docket: For access to background documents or to comments received,
go to the FSIS Docket Room at the address listed above between 8:30
a.m. and 4:30 p.m., Monday through Friday. All comments submitted in
response to this proposal, as well as background information used by
FSIS in developing this document, will be available for public
inspection in the FSIS Docket Room at the address listed above between
8:30 a.m. and 4:30 p.m., Monday through Friday.

FOR FURTHER INFORMATION CONTACT: Sally Jones, Senior Technical Advisor,
Labeling and Program Delivery Division, Office of Policy and Program
Development, Food Safety and Inspection Service, U.S. Department of
Agriculture, Beltsville, MD 20705; (301) 504-0878.

Section I

SUPPLEMENTARY INFORMATION:

Background

Supplemental Proposed Rule: On January 18, 2001, FSIS published a
proposed rule in the Federal Register entitled, ``Nutrition Labeling of
Ground or Chopped Meat and Poultry Products and Single-Ingredient
Products'' (66 FR 4969). Because of the length of time since the
publication of the proposed rule, FSIS is providing the public an
opportunity to comment on this supplemental proposed rule. FSIS also
welcomes comments on relevant issues for which there is new evidence
since the proposed rule was issued.
This supplemental proposed rule responds to all comments received
on the January 18, 2001 proposed rule and explains how the Agency
intends to proceed with a final rule. Although FSIS has come to
tentative conclusions regarding the issues raised by the commenters, in
this supplemental proposed rule, FSIS is requesting additional comments
on policies for which there were significant differences of opinion
among commenters.
Specifically, under the ``Provisions of the Supplemental Proposed
Rule'' heading below, FSIS is requesting comments on whether nutrition
information should be allowed on point-of-purchase materials for ground
or chopped products, as an alternative to requiring nutrition
information on the product labels. FSIS is also requesting comments on
the use of statements of lean percentages on the label or in labeling
of ground or chopped products that do not meet the regulatory criteria
for ``low fat.'' In addition, under the ``Provisions of the
Supplemental Proposed Rule'' heading below, FSIS is requesting comments
on whether it should provide an exemption from nutrition labeling
requirements for small businesses that include a fat percentage
statement and lean percentage statement on the labeling or in labeling
of ground or chopped product. FSIS is requesting copies of any studies,
surveys, or other data on consumers' perception of and use of point-of-
purchase materials versus nutrition labels for ground or chopped
product and on consumers' understanding of the nutrient content of
ground or chopped products. FSIS is also requesting copies of any
studies, surveys, or data on consumers' use and understanding of fat
percentage and lean percentage statements on ground or chopped
products. FSIS will post on its Web site, with this supplemental
proposed rule, all studies and data submitted to the Agency in response
to this request. FSIS requests comment on the potential effects of
disallowing a statement of lean percentage on ground or chopped
products.
FSIS will consider all comments received in response to this
supplemental proposed rule. After evaluating the comments, FSIS intends
to respond to them, make any appropriate and necessary changes to this
rule, and issue the final rule in the Federal Register.

The Proposed Rule

Major cuts: FSIS proposed to require nutrition labeling of the
major cuts of single-ingredient, raw meat and poultry products
identified in Sec. Sec. 317.344 and 381.444 that are not ground or
chopped, except for certain exemptions. FSIS proposed that ``ground
beef regular without added seasonings,'' ``ground beef about 17% fat,''
and ``ground pork'' would no longer be included in the list of major
cuts in Sec. 317.344.
FSIS proposed to make the guidelines in place for the voluntary
nutrition labeling program mandatory for the major cuts of single-
ingredient, raw products that are not ground or chopped. Thus, for
these products, FSIS proposed that nutrition information be provided on
the label or at point-of-purchase, unless an exemption would apply. For
further explanation of the guidelines for voluntary nutrition labeling,
see 66 FR 4971, January 18, 2001. For further explanation of the
proposal to make these guidelines mandatory for the major cuts of
single-ingredient, raw products that are not ground or chopped, see 66
FR 4973-4975, January 18, 2001.
In the preamble to the proposed rule, FSIS explained that, in its
two most recent surveys of the voluntary nutrition labeling of single-
ingredient, raw products, FSIS found that significant participation in
the voluntary nutrition labeling program did not exist (66 FR 4972,
January 18, 2001). FSIS regulations provide that a food retailer is
participating at a significant level (1) if the retailer provides
nutrition labeling information for at least 90 percent of the major
cuts of single-ingredient, raw meat and poultry products it sells; and

[[Page 67737]]

(2) if the nutrition label on these products is consistent in content
and format with the mandatory program, or if nutrition information is
displayed at point-of-purchase in an appropriate manner. The required
nutrition labeling provisions for multi-ingredient and heat processed
products are referred to as ``the mandatory program.'' The regulations
also provide that significant participation by food retailers exists if
at least 60 percent of all companies that are evaluated are
participating in accordance with the guidelines (Sec. 317.343 and
Sec. 381.443). The term ``companies,'' as used in these regulations,
refers to individual stores. FSIS used a representative sample of
stores to assess participation (see 58 FR 640, January 6, 1993). Based
on the survey data from the two most recent surveys, less than 60
percent of stores evaluated were participating in accordance with the
guidelines.
In the preamble to the proposed rule, FSIS explained that, because
the most recent surveys showed that significant participation in the
voluntary nutrition labeling program did not exist, FSIS believed that
the proposed rule was necessary. FSIS stated that, without nutrition
information, consumers are not able to assess the nutrient content of
the major cuts and thus cannot make educated choices about these
products based on nutrition information. FSIS believed that the lack of
nutrition information on the labeling of the major cuts was misleading
(66 FR 4973-4974, January 18, 2001) because it fails to disclose
material facts about the consequences of consumption of these products.
Consumers can compare the fat content in major cuts of poultry based on
whether the product has skin and based on the levels of attached fat in
the product. Similarly, consumers can compare the fat content among
major cuts of meat products based on internal marbling and attached
fat. However, without nutrition labeling for the major cuts, consumers
cannot assess precise levels of fat (e.g., 10 grams vs. 20 grams of fat
per serving) and cannot know the levels of specific nutrients, such as
saturated fat, in these products. Therefore, without nutrition labeling
of these products, consumers cannot make educated choices about
consuming the major cuts.
The FMIA and PPIA provide that product is misbranded if its
labeling is false or misleading in any particular (21 U.S.C. 601(n)(1)
and 453(h)(1)). Without nutrition information for the major cuts of
single-ingredient, raw products, FSIS tentatively concluded that these
products would be misbranded under section 1(n) of the FMIA or section
4(h) of the PPIA because the label would fail to reveal significant
material facts about the consequences of consuming these products(66 FR
4974, January 18, 2001).
As explained in the preamble to the proposed rule, although FSIS
believed that nutrition information on the labels of individual
packages of single-ingredient, raw products is useful, the Agency
proposed that nutrition information for the major cuts could also be
provided on point-of-purchase materials, because consumers have
reasonable expectations as to the nutrient content of these products.
Also, FSIS stated that the nutrient content of a given major cut is
relatively uniform across the market, and these products are not
formulated in the manner of ground or chopped products (66 FR 4974,
January 18, 2001).
Ground or Chopped Products: Ground or chopped products that are
multi-ingredient or heat processed products are subject to the
requirements of the mandatory nutrition labeling program; therefore,
these products are already required to bear nutrition labels, unless
they qualify for an exemption. FSIS proposed to extend mandatory
nutrition labeling requirements to all ground or chopped products,
including single-ingredient, raw ground or chopped products, unless an
exemption applies. Thus, FSIS proposed to require that nutrition labels
be provided for all ground or chopped products (livestock species) and
hamburger, with or without added seasonings, unless an exemption
applies. Similarly, FSIS proposed to require that nutrition labels be
provided for all ground or chopped poultry (kind), with or without
added seasonings, unless an exemption applies. Under the proposed rule,
products that would be required to bear nutrition labels include
single-ingredient, raw hamburger, ground beef, ground beef patties,
ground chicken, ground turkey, ground chicken patties, ground pork, and
ground lamb.
In the proposed rule, FSIS explained that, unlike other single-
ingredient, raw products, producers are able to formulate precisely the
fat content of ground or chopped products. Therefore, in this respect,
these products are similar to products in the existing mandatory
program that are required to bear nutrition labels (66 FR 4975, January
18, 2001). FSIS noted that other single-ingredient, raw products cannot
be formulated in the same manner or to the same degree as ground beef
products (66 FR 4976, January 18, 2001).
FSIS noted that it believed that consumers could not easily see the
fat in ground or chopped beef. In ground or chopped beef products, the
fat is uniformly distributed throughout the product, and is not clearly
distinguishable on the surface of the product (66 FR 4975, January 18,
2001). FSIS also explained that the Agency believed that consumers
cannot estimate the level of fat in ground or chopped beef and cannot
compare the levels of fat in these products to those in other products
(66 FR 4975, January 18, 2001). Similarly, FSIS explained that ground
lamb and ground pork may contain varying amounts of fat and varying
nutrient content, which consumers cannot visually detect (66 FR 4976,
January 18, 2001). Additionally, FSIS noted that producers sometimes
use meat from advanced meat recovery (AMR) systems and low temperature
rendering in ground or chopped beef or pork products, which can affect
their nutrient content (66 FR 4975 and 4976, January 18, 2001).
Finally, FSIS noted that, as with the fat on ground meat products,
consumers cannot readily detect the fat content of ground poultry
products (66 FR 4976, January 18, 2001). For these reasons, FSIS
tentatively concluded that ground or chopped meat and poultry products
that did not bear nutrition information would be misbranded under
section 1(n)(1) of the FMIA and section 4(h)(1) of the PPIA (66 FR
4977, January 18, 2001).
FSIS proposed to require that nutrition information for ground or
chopped products appear on the label of these products (unless an
exemption applies), as is required for multi-ingredient and heat
processed products, rather than on point-of-purchase materials because
ground or chopped products are similar to multi-ingredient and heat
processed products in that certain parameters, such as their fat
content, can be controlled precisely to obtain the desired product. In
addition, because there are numerous formulations of ground or chopped
products, it would be difficult for producers or retailers to develop
point-of-purchase materials that would address all the different
formulations that exist for these products. Furthermore, it would be
difficult for consumers to find the correct information for a specific
ground or chopped product on point-of-purchase materials that include
information concerning numerous formulations of these products (66 FR
4977, January 18, 2001).
Exemptions: FSIS proposed that certain exemptions from nutrition
labeling requirements would apply to the major cuts of single-
ingredient, raw meat and poultry products and ground or chopped meat
and poultry products. FSIS proposed the following

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exemptions from nutrition labeling requirements for ground or chopped
products: ground or chopped products that qualify for the small
business exemption in Sec. Sec. 317.400(a)(1) and 381.500(a)(1);
ground or chopped products in packages that have a total surface area
available to bear labeling of less than 12 square inches, provided that
the product's labeling includes no nutrition claims or nutrition
information and provided that an address or telephone number that a
consumer can use to obtain the required information is included on the
label; ground or chopped products that are intended for further
processing; ground or chopped products that are not for sale to
consumers; ground or chopped products that are in small packages that
are individually wrapped packages of less than \1/2\ ounce net weight;
ground or chopped products that are custom slaughtered or prepared; and
ground or chopped products that are intended for export.
FSIS proposed the following exemptions for major cuts of single-
ingredient, raw products that are not ground or chopped: major cuts
intended for further processing; major cuts not for sale to consumers;
major cuts in small packages that are individually wrapped packages of
less than \1/2\ ounce net weight; major cuts that are custom
slaughtered or prepared; and major cuts that are intended for export.
FSIS proposed to exempt ground or chopped products that qualified
for the small business exemption from nutrition labeling requirements
for the main reason stated in the January 6, 1993, final rule: because
these requirements would create undue economic hardship for small
businesses (58 FR 638). FSIS stated in the proposed rule that it did
not believe that the reasons that necessitated the establishment of the
small business exemption, as explained in the January 6, 1993 final
rule, are applicable to the major cuts of single-ingredient, raw meat
and poultry products produced by small businesses. For these products,
FSIS proposed that nutrition information may be provided on labels or,
alternatively, at their point-of-purchase. In addition, FSIS explained
that it intended to make point-of-purchase materials available over the
Internet free of charge. Therefore, the nutrition labeling requirement
for major cuts of single-ingredient, raw products should not impose an
economic hardship for ``small businesses'', including those that are
retail stores (66 FR 4978, January 18, 2001).
In the preamble to the January 6, 1993, final rule, FSIS explained
that it was proposing an exemption from nutrition labeling requirements
for products intended for further processing and products not for sale
to consumers because consumers do not see the nutrition information on
products used for further processing or products that are not for sale
to consumers. The Agency also explained that it would exempt
individually wrapped packages of less than \1/2\ ounce net weight,
provided no nutrition claim or nutrition information was made on the
label, because these products are an insignificant part of the diet.
With regard to the custom exemption, the Agency explained that an
exemption should apply because these custom services are performed
solely for individuals. Finally, the Agency explained that products
intended for export should be exempt because these products are labeled
according to the requirements of the country where the product is to be
exported (58 FR 639, January 6, 1993). In the January 18, 2001,
proposed rule, the Agency proposed these exemptions because the Agency
had tentatively determined that the bases for these exemptions, as
explained in the January 6, 1993, final rule, are valid as applied to
nutrition labeling for ground or chopped products and for major cuts of
single-ingredient, raw products. Therefore, FSIS proposed that any
ground or chopped product or major cut of single-ingredient, raw
product that qualifies for any of these exemptions will continue to be
exempt (66 FR 4979, January 18, 2001).
Under current regulations, products in packages that have a total
surface area available to bear labeling of less than 12 square inches
are exempt from nutrition labeling, provided the product's labeling
includes no nutrition claims or nutrition information and provided that
an address or telephone number that a consumer can use to obtain the
required information is included on the label. FSIS allowed for
nutrition information to be provided by alternative means for products
of this size in order to incorporate sufficient flexibility in the
regulations (58 FR 47625, January 6, 1993). As explained in the
proposed rule, for ground or chopped products, FSIS believes it is
necessary to provide this flexibility for products in packages that
have a total surface area available to bear labeling of less than 12
square inches, provided that the labels for these products bear no
nutrition claims or nutrition information. However, because nutrition
information for the major cuts of single-ingredient, raw meat and
poultry products may be provided on point-of-purchase materials, FSIS
proposed that the provisions for providing nutrition labeling by
alternate means for products in packages that have a total surface area
available to bear labeling of less than 12 square inches would not
apply to the major cuts of single-ingredient, raw meat and poultry
products (66 FR 4979, January 18, 2001).
In the preamble to the proposed rule, FSIS explained that
restaurant menus that include ground or chopped products generally do
not constitute nutrition labeling or fall within the scope of the
proposed regulations. Similarly, although a restaurant menu would most
likely not include a major cut of single-ingredient, raw product, if it
did, the menu would not fall within the scope of the proposed
regulations. Finally, the preamble explained that, under the proposed
rule, any ground or chopped product or major cut of single-ingredient,
raw product represented or purported to be specifically for infants and
children less than 4 years of age would not be allowed to include
certain nutrient content declarations, because infants and children
less than 4 years of age have different nutrition needs than adults and
children older than 4 years of age (66 FR 4979, January 18, 2001).
In the 1993 final rule on nutrition labeling, FSIS exempted from
mandatory nutrition labeling requirements multi-ingredient products
processed at retail, and ready-to-eat products packaged or portioned at
retail. The reasons that FSIS provided these exemptions in the 1993
final rule were that FSIS believed that it would be impractical to
enforce nutrition labeling requirements on these products prepared or
served at retail and because the Agency concluded, based on a review of
National Food Consumption Survey (NFCS) data, that the average person's
diet consisted of an insignificant proportion of ready-to-eat retail
packaged products or retail processed products (58 FR 639, January 6,
1993).
The proposed rule did not provide an exemption for ready-to-eat
ground or chopped products packaged or portioned at retail, or multi-
ingredient ground or chopped products that are processed at retail
because, as FSIS explained in the 2001 nutrition labeling proposed
rule, there may be a significant amount of multi-ingredient ground beef
retail processed products or ready-to-eat retail packaged products.
Also, FSIS explained that the Agency no longer believes enforcement of
nutrition labeling requirements at retail stores to be impractical
because FSIS is already conducting testing for Escherichia coli

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(E. coli) O157:H7 at retail (66 FR 4979, January 18, 2001).
For further explanation of the reasons for the proposed exemptions,
see 66 FR 4978-4980, January 18, 2001.
Nonmajor Cuts of Single-Ingredient, Raw Meat and Poultry Products
That Are Not Ground or Chopped: FSIS did not propose to require
nutrition information for single-ingredient, raw meat and poultry
products that are not major cuts and that are not ground or chopped.
However, FSIS proposed that if nutrition information is provided for
these products, it must be provided according to the existing
guidelines for the current voluntary nutrition labeling program.
Therefore, under the proposed rule, if nutrition information were
provided for these products, it would be consistent with the nutrition
information required for the major cuts of single-ingredient, raw
products. In the preamble to the proposed rule, FSIS explained that the
Agency could not determine whether it would be beneficial to require
nutrition labeling for nonmajor cuts that are not ground or chopped
until it assessed whether adequate nutrition information is being
provided for these products (66 FR 4974, January 18, 2001).
Enforcement and Compliance: FSIS conducts sampling and nutrient
analysis of products that fall under the mandatory nutrition labeling
program. FSIS proposed that the procedures set forth for FSIS product
sampling and nutrient analysis in Sec. Sec. 317.309(h)(1) through
(h)(8) and 381.409(h)(1) through (h)(8) would be applicable to ground
or chopped meat and to ground or chopped poultry products,
respectively. FSIS explained that under the proposal, FSIS would sample
and conduct nutrient analysis of ground or chopped products to verify
compliance with nutrition labeling requirements, even if nutrition
labeling on these products is based on the most current representative
data base values contained in USDA's National Nutrient Data Bank or the
USDA National Nutrient Database for Standard Reference and there are no
claims on the labeling. Therefore, FSIS would treat these products as
it treats other products required to bear nutrition labels (66 FR 4980,
January 18, 2001).
FSIS explained that it would treat ground or chopped products in
this way because the fat content of these products can vary
significantly. In addition, the preamble to the proposed rule stated
that FSIS employees cannot visually assess whether nutrition
information on the label of ground or chopped products accurately
reflects the labeled products' contents because, in most cases, it is
not possible to visually assess the level of fat in a ground or chopped
product (66 FR 4980, January 18, 2001).
FSIS also proposed that if nutrition labeling of the major cuts of
single-ingredient, raw products (other than ground beef or ground pork)
is based on USDA's National Nutrient Data Bank or the USDA's National
Nutrient Database for Standard Reference, and there are no nutrition
claims on the labeling, FSIS would not sample and conduct a nutrient
analysis of the products. The preamble explained that, for the major
cuts, FSIS personnel can visually identify the particular cut. FSIS
further explained that, if the nutrition information for these products
is based on USDA's National Nutrient Data Bank or the USDA National
Nutrient Database for Standard Reference, and there are no nutrition
claims on the labeling, it is not necessary for FSIS to verify the
accuracy of the data because they are USDA data. USDA has already
evaluated these USDA data and determined that they are valid (66 FR
4980, January 18, 2001).
Permitting Percent Lean Statements on labels or in labeling of
ground or chopped products: FSIS also proposed to permit a statement of
lean percentage on the label or in labeling of ground or chopped meat
and poultry products that do not meet the regulatory criteria for ``low
fat,'' provided that a statement of the fat percentage is also
displayed on the label or in labeling. FSIS proposed that the required
statement of fat percentage be contiguous to, in lettering of the same
color, size, and type as, and on the same color background as, the
statement of lean percentage. FSIS stated that many consumers have
become accustomed to this labeling on ground beef products, and that
FSIS believed this labeling provided a quick, simple, and accurate
means of comparing all ground or chopped meat and poultry products (66
FR 4981, January 18, 2001).

Provisions of the Supplemental Proposed Rule

Major cuts and nonmajor cuts that are not ground or chopped:
Consistent with the proposal, should this rule become final, FSIS will
require nutrition information for the major cuts, either on their label
or at their point-of-purchase. The provisions of the voluntary
nutrition labeling program will be mandatory for the major cuts. As
FSIS proposed, ``ground beef regular without added seasonings,''
``ground beef about 17% fat,'' and ``ground pork'' will no longer be
included in the list of major cuts in Sec. 317.344 because FSIS has
decided to treat ground meat and poultry products differently than
single cuts of meat for the purposes of this regulation. Should this
rule become final, ground meat and poultry products will be required to
bear nutrition labeling on their packages, unless an exemption applies.
Nutrition information at the point-of-purchase for ground or chopped
products will not meet the requirements of these regulations.
FSIS believes that without nutrition information, consumers are not
able to assess the nutrient content of the major cuts and, thus, cannot
make educated decisions about these products based on nutrition
information. FSIS has concluded that the lack of nutrition information
for the major cuts of single-ingredient, raw products, either on their
label or at their point-of-purchase, makes these products misbranded
under 21 U.S.C. 601(n)(1) and 453(h)(1). Although FSIS believes that
nutrition information on the labels of individual packages of the major
cuts of single-ingredient, raw products is useful, this final rule
provides that nutrition information for these products may be provided
at their point-of-purchase.
In the 1991 proposed rule and the 1993 final rule on nutrition
labeling, FSIS stated that if it determined, during any evaluation of
its voluntary guidelines, that significant participation did not exist,
it would initiate proposed rulemaking to determine whether it would be
beneficial to require nutrition labeling on single-ingredient, raw meat
and poultry products (56 FR 60306, November 27, 1991; 58 FR 640,
January 5, 1993). Therefore, FSIS initiated rulemaking to propose
requiring nutrition labeling for the major cuts of single-ingredient,
raw products. Through this rulemaking, FSIS has determined that because
nutrition information has not been universally available for the major
cuts of single-ingredient products, consumers have not been able to
assess the nutrient content of these products and, thus, cannot make
educated choices about them, and about the significant portion of their
diet that these products represent, based on nutrition information.
Without nutrition information, the labeling of major cuts of single-
ingredient, raw meat and poultry products fails to include material
facts about the consequences of consuming these products. FSIS has
concluded that the lack of nutrition information for the major cuts of
single-ingredient, raw products, either on their label or at their
point-of-purchase, makes these products misbranded under 21 U.S.C.
601(n)(1) and 453(h)(1). FSIS has determined that this rule is
necessary to ensure that consumers obtain nutrition information
concerning

[[Page 67740]]

these products. Through the supplemental proposed regulatory impact
analysis (PRIA), FSIS has determined that this rule would result in
benefits to consumers and net benefits to society.
Consistent with the proposed rule, this supplemental proposed rule
will not require nutrition information for nonmajor cuts of single-
ingredient, raw meat and poultry products that are not ground or
chopped.
FSIS has determined that it is not appropriate or necessary to
require nutrition information for nonmajor cuts that are not ground or
chopped at this time. They do not contribute in a major way to the
diet. Thus, at this time, the consequences of consuming these products
cannot be considered to be a material fact. In the future, FSIS will
reassess the production and consumption volume of nonmajor cuts that
are not ground or chopped and will determine the levels of consumption
of these products and whether sufficient nutrition information is being
made available about them. After FSIS assesses the volume of these
products and assesses the adequacy of nutrition information provided
for them, FSIS will determine whether it is necessary to propose
nutrition labeling requirements for these products, and whether
nutrition labeling requirements for these products would be beneficial.
Should this rule become effective, if establishments or retail
facilities voluntarily provide nutrition information for nonmajor cuts
of meat and poultry products that are not ground or chopped, they will
have to provide it according to the nutrition labeling requirements for
the major cuts. Should establishments or retail facilities choose to
provide nutrition information for these products, they will have to
either provide it at the point-of-purchase, in accordance with Sec.
317.345 or Sec. 381.445, or on their label, in accordance with Sec.
317.309 or Sec. 381.409. Thus, the nutrition labeling provisions for
these products will be consistent with those for the voluntary
nutrition labeling program.
As proposed, the supplemental proposed rule would allow nutrition
information for the major cuts and nonmajor cuts of single-ingredient,
raw products that are not ground or chopped to be declared on either an
``as packaged'' basis or an ``as consumed'' basis because most of these
products will not need FSIS compliance scrutiny. If FSIS conducts
nutrient analysis of products under 317.309(h) or 381.409(h), it does
so on the packaged product. If nutrition information for these products
is based on USDA's National Nutrient Database for Standard Reference,
and there are no claims on the labeling, FSIS will not conduct a
nutrient analysis of these raw products and, therefore, will not
evaluate ``as packaged'' nutrition labeling information for these
products.
Also consistent with the proposed rule, under this supplemental
proposed rule, the declaration of the number of servings per container
would not need to be included on the nutrition label for the major or
nonmajor cuts of single-ingredient, raw products that are not ground or
chopped, because these products are typically random weight products.
Existing regulations do not require the number of servings on the
nutrition label of random weight products (see Sec. Sec.
317.309(b)(10)(iii) and 381.409(b)(10)(iii)).
Ground or Chopped Products: Consistent with the proposed rule, this
supplemental proposed rule would extend the mandatory nutrition
labeling requirements to all ground or chopped products, including
single-ingredient, raw ground or chopped products, unless an exemption
applies. Should this rule become effective, FSIS will require that
nutrition labels be provided for all ground or chopped products
(livestock species) and hamburger, with or without added seasonings,
unless an exemption applies. This rule would also require that
nutrition labels be provided for all ground or chopped poultry
products, with or without added seasonings, unless an exemption
applies. After analyzing the comments and for the reasons discussed in
the proposed rule and discussed below in the response to comments
section, FSIS has concluded that ground or chopped meat and poultry
products that do not bear nutrition information on their label are
misbranded under 21 U.S.C. 601(n)(1) and 453(h)(1).
FSIS recognizes that single-ingredient, raw ground or chopped
products have not been required to bear nutrition labels. In the
proposed rule, FSIS explained that, on June 3, 1997, the Center for
Science in the Public Interest (CSPI) submitted a petition to the
Agency stating that FSIS should require complete ``Nutrition Facts'' on
ground beef labels that make nutrient content claims. This petition
brought many of the issues concerning the need for nutrition labeling
of ground or chopped products to FSIS's attention. Consistent with
CSPI's petition, FSIS has determined that nutrition information should
be required on packages of all ground or chopped meat and poultry
products, unless an exemption applies. (For more information on the
petition from CSPI, see 66 FR 4975, January 18, 2001).
Most industry commenters did not support requiring on-package
nutrition information for ground or chopped products. Some of these
commenters supported requiring nutrition labeling for these products at
their point-of-purchase. Individuals, consumer organizations, and
nutrition organizations supported mandatory nutrition labeling on the
packages of ground or chopped products.
FSIS requests comments on how retailers or official establishments
would prepare point-of-purchase materials that would address all
possible combinations of percent fat and percent lean in ground or
chopped products. FSIS also requests comments on how point-of-purchase
materials would convey the nutrient values of ground or chopped
products that contain AMR product or product from low temperature
rendering (e.g., finely textured beef or lean finely textured beef). In
addition, FSIS requests comments on how consumers would identify which
nutrient values on point-of-purchase materials correspond to specific
ground or chopped products available in the store, if a statement of
fat percentage or lean percentage is not required on the product. Such
statements would not be required under this supplemental proposed rule.
Finally, FSIS requests surveys, studies, or other data on consumers'
perception and use of point-of-purchase materials versus nutrition
labels for ground or chopped products and on consumers' understanding
of the nutrient content of such products.
Exemptions: This supplemental proposal would provide all the
exemptions that it proposed for the major cuts of single-ingredient,
raw meat and poultry products and for ground or chopped products for
the reasons set forth in the proposal. Consistent with the proposed
rule, it does not provide an exemption for ready-to-eat ground or
chopped products packaged or portioned at retail or multi-ingredient
ground or chopped products that are processed at retail. As FSIS
explained in the 2001 nutrition labeling proposed rule, there may be a
significant amount of multi-ingredient ground beef retail processed
products or ready-to-eat retail packaged products. Also, as was stated
in the proposed rule, FSIS no longer believes enforcement of nutrition
labeling requirements at retail stores to be impractical because FSIS
is already conducting testing for E. coli O157:H7 at retail.
In response to comments, the supplemental proposal provides an

[[Page 67741]]

exemption from nutrition labeling requirements for products that are
ground or chopped at an individual customer's request and that are
prepared and served or sold at retail, provided that the labels or
labeling of these products bear no nutrition claims or nutrition
information.
Enforcement and Compliance: Consistent with the proposed rule and
the reasons discussed in it, under this supplemental proposed rule,
FSIS would sample and conduct nutrient analysis of ground or chopped
products to verify compliance with nutrition labeling requirements,
even if nutrition labeling on these products is based on the most
current representative database values contained in USDA's National
Nutrient Data Bank or the USDA National Nutrient Database for Standard
Reference and there are no claims on the labeling. Also consistent with
the proposed rule, for the major cuts that are not ground or chopped,
if nutrition labeling of these products is based on USDA's National
Nutrient Data Bank or the USDA's National Nutrient Database for
Standard Reference, and there are no nutrition claims on the labeling,
FSIS would not sample and conduct a nutrient analysis of these
products.
Permitting Percent Lean Statements on labels or in labeling of
ground or chopped products: Consistent with the proposed rule, the
supplemental proposed rule would permit a statement of lean percentage
on the label or in labeling of ground or chopped meat and poultry
products that do not meet the regulatory criteria for ``low fat,'' as
long as a statement of fat percentage is contiguous to, in lettering of
the same color, size, and type as, and on the same color background as,
the statement of lean percentage. Because the percent fat statement
must be contiguous to the percent lean statement and must be in
lettering of the same color, size, and type as, and on the same color
background as, the lean percentage statement, FSIS believes that the
percent lean statements will not mislead consumers.
Under the proposed rule, if small businesses produced ground or
chopped product and included a statement of lean percentage and fat
percentage on the product's label or in labeling, the business would
have been required to include nutrition information on the product
label. Based on the National Cattleman's Beef Association (NCBA)
National Meat Case Study in 2004, 93 percent of ground beef packages
had statements of lean or fat percentages. Sixty-eight percent of
packages with such statements had nutrition facts panels and 25 percent
did not. Because 25 percent of ground beef packages in the NCBA study
had statements of lean or fat percentages but did not have nutrition
facts panels, FSIS found it reasonable to conclude that many small
businesses may include a statement of the lean percentage on the label
of ground products but may not include nutrition facts panels on the
product label. On this basis, FSIS concluded that requiring small
businesses that use the lean percentage statement on the label of
ground products to also include nutrition information on the label of
such products may result in significant expenses for small businesses.
Therefore, in this supplemental proposed rule, small businesses that
use statements of percent fat and percent lean on the label or in
labeling of ground products would be exempt from nutrition labeling
requirements, provided they include no other nutrition claims or
nutrition information on the product labels or labeling.
The majority of industry associations supported the use of a
statement of lean percentage on the label or in labeling of ground
products that do not meet the regulatory criteria for ``low fat.''
Because of the longstanding use of the statements of percent fat and
percent lean on the label or in labeling of ground beef and hamburger
products, FSIS has concluded that such statements on the label or in
labeling of ground products produced by small businesses will not
mislead consumers, even if the small businesses do not include
nutrition information on the products' labels.
However, individuals and consumer and nutrition organizations
generally did not support the use of statements of lean percentages on
the label or in labeling of ground or chopped products that do not meet
the regulatory criteria for ``low fat.'' Therefore, FSIS requests
comments on whether such statements should be prohibited on the label
or in labeling of ground or chopped products that do not meet the
regulatory criteria for ``low fat.'' FSIS requests comments on whether
lean percentage statements are inherently misleading to consumers on
the label or in labeling of ground or chopped product that does not
meet the regulatory criteria for ``low fat'' when contiguous to fat
percentage statements, as the rule would require. FSIS also requests
comments on whether lean percentage statements are redundant on the
label or in labeling of such products when contiguous to fat percentage
statements. If commenters believe the regulations should prohibit lean
percentage statements on the label or in labeling of ground or chopped
products that do not meet the ``low fat'' criteria, FSIS requests
comments on whether a fat percentage statement on the label or in
labeling of such products would be useful. If commenters believe such a
statement would be useful, do they believe it should be required on the
label or in labeling for these products?
FSIS also requests comments on whether the final rule should allow
a lean percentage statement and fat percentage statement on the label
or in labeling of ground or chopped products produced by small
businesses if such product does not include nutrition information on
the product label. If commenters believe that nutrition information
should be required on labels of any ground or chopped product for which
a lean percentage and fat percentage statement is provided on the label
or in labeling, FSIS requests comment on the costs of this requirement
for small businesses.
FSIS requests copies of surveys, studies, or other data on
consumers' use and understanding of lean percentage and fat percentage
statements on ground or chopped products.

Effective Date

Should this rule become final, FSIS intends that the requirements
for ground or chopped products would become effective on January 1,
2012. FSIS issued final regulations to establish this date as the
uniform compliance date for new food labeling regulations that are
issued between January 1, 2009, and December 31, 2010 (73 FR 75564;
December 12, 2008). As is discussed in the response to comments below,
FSIS issued the uniform compliance regulations to minimize costs
associated with on-package labels. Because this supplemental proposed
rule would allow for the presentation of nutrition information for the
major cuts of single-ingredient, raw meat and poultry products at their
point-of-purchase, FSIS intends to make the labeling requirements for
the major cuts effective one year from the date of publication of the
final rule. FSIS requests comments on these two planned effective
dates.

Availability of Nutrition Information

FSIS intends to make available nutrition labeling materials that
can be used at the point-of-purchase of the major cuts at the following
Internet address: http://www.fsis.usda.gov. Also, the Food Marketing
Institute (FMI) has made available materials that can be used at the
point-of-purchase of the major cuts at the following Internet address:
http://www.fmi.org/consumer/nutrifacts/.

[[Page 67742]]

The USDA National Nutrient Database for Standard Reference is
developed and maintained by the Agricultural Research Service (ARS) and
can be found on the Internet at the following address: http://www.ars.usda.gov\nutrientdata. Information is available at this site
for ground beef products containing 5%, 10%, 15%, 20%, 25%, and 30%
fat. In addition, ARS has included a calculator on the Internet, with
the Database. Parties can enter the amount of fat (5% to 30% percent
fat) or lean (70% to 95% lean) in a particular raw ground beef product,
and the calculator will calculate the nutrient values for the product
based on the fat value entered.
The USDA National Nutrient Database for Standard Reference also
includes a set of tables with nutrient values for ground pork with fat
levels from 4 to 28%, in one percent increments. ARS did not develop a
calculator because, at this time, labeling for ground pork at retail
does not include statements of percentage fat or percentage lean. The
USDA Nutrient Database also includes nutrient values for raw and cooked
ground chicken but does not include nutrient values for such product at
varying fat levels. Ground chicken is not typically produced over a
wide range of fat levels. ARS also has nutrient data for three types of
commonly marketed ground turkey products. Nutrient values for these
products are not yet in the database. However, ARS expects that the
nutrient values for these ground turkey products will be available in
the database by August 2010. Most ground poultry products are produced
and labeled at Federal establishments rather than at retail.
FSIS requests comments on whether provision of nutritional tables
will be sufficient for retailers and establishments to provide
nutrition labels for ground pork. FSIS also requests comments on
whether the available data for ground chicken and ground turkey in the
USDA Nutrient Database will be sufficient for retailers and
establishments.
Below are examples of nutrition labels for ground or chopped
products that would meet the requirements of the supplemental proposed
rule. Should this rule become final, FSIS will make additional examples
of acceptable nutrition labels for ground or chopped products available
on the Agency's Web site.
BILLING CODE 3410-DM-P

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[GRAPHIC] [TIFF OMITTED] TP18DE09.421

[[Page 67744]]

[GRAPHIC] [TIFF OMITTED] TP18DE09.422

BILLING CODE 3410-DM-C

Summary of and Response to Comments

FSIS received approximately 5,000 comments on the proposed rule
from individuals, consumer advocacy organizations, academia, trade and
professional associations, health and nutrition organizations, two
county health departments, meat and poultry producers, and food
retailers. The majority of the comments (approximately 3,500) were
generated from a letter writing campaign initiated by a consumer
organization. In addition, there were approximately 450 form letters
that expressed consumers' concerns and did not identify an affiliation
with any organization, approximately 60 form letters from a consumer
co-op organization, and two sets of form letters from relatively small
retail chains (approximately 10 letters in each set).
A summary of issues raised by commenters and the Agency responses
follows.

Nutrition Labeling for the Major Cuts of Single-Ingredient, Raw Meat
and Poultry Products

Comment: The majority of letters from individuals, consumer groups,
and health organizations stated that FSIS should require on-package
nutrition labeling for all single-ingredient, raw meat and poultry
products (major and nonmajor cuts). They stated that point-of-purchase
materials fail to convey effectively the nutrition information for
specific fresh meat or poultry products because the materials are
difficult to find and difficult to read. Some of these commenters also
stated that nutrition labels are particularly important for meat and
poultry products because they are a major source of fat, saturated
fatty acids, and calories.
A health organization stated that because the same cut of meat can
be labeled by different names, consumers would be better served by
nutrition information on the labels of the products. Several commenters
stated that an advantage of including nutrition information on the
label is that consumers could review the nutrient content once the
product is taken home, and others, besides the primary food purchaser,
would have better access to the nutrition information. A nutrition
association stated that if FSIS permits point-of-purchase information
for fresh meat and poultry packages, the Agency should require on-
package messages directing consumers to point-of-purchase labeling at
another location in the store.
One consumer association noted that a recent telephone survey
showed an overwhelming percentage (78%) of the respondents said that it
was ``more useful'' to provide nutrition information about raw meat and
poultry products on package labels than on posters or brochures.
Comments from a coalition of health and consumer organizations
suggested that the nutrient content for ground products often has less
variance than the nutrient content of specific cuts. Thus, the
coalition believes that it is more important to provide nutrition
information on the labeling of major cuts than on ground products. The
coalition also stated that the reasons provided by the Agency for
mandating nutrition labeling on the packaging of ground products would
be the reasons for mandating nutrition labeling on

[[Page 67745]]

packaging of the major cuts of meat or poultry (see 66 FR 4977). This
coalition also stated that there are more major cuts than there are
ground products, and it would be difficult for producers or retailers
to develop point-of-purchase materials to address the different
formulations and trim levels of the major cuts; and it would be
difficult for consumers to locate the appropriate information for a
particular cut on the point-of-purchase materials.
One health group stated that although on-package labeling may be a
more effective approach for conveying nutrition information than point-
of-purchase materials, the organization has historically supported the
use of point-of-purchase materials as an acceptable means of nutrition
labeling. This commenter also stated that for single-ingredient, raw
products, other than ground or chopped products, the use of
standardized averages is likely to be the most effective way to provide
nutrition information, either on the package or at point-of-purchase.
An individual also stated that for many major cuts, having the
nutrition label next to the product would be sufficient.
A consumer organization did not believe that consumers have
reasonable expectations as to the nutrient content, including the fat,
of raw meat and poultry products. The organization referenced a
consumer telephone survey in which most respondents were unable to
identify which cut of meat had the highest fat content among four
choices. One medical organization stated that although it may be true
that the nutrient content of the major cuts is relatively uniform,
consumers generally have no idea of the nutrient content of these
foods.
The majority of industry and industry associations supported the
continued use of point-of-purchase nutrition information materials for
the major cuts, rather than nutrition labels on the packages of these
products. Two of these groups presented results of focus group research
demonstrating that consumers currently understand and use point-of-
purchase materials in numbers comparable to the number of consumers who
read and use the nutrition information on the labeling of products
subject to the requirements of the mandatory nutrition labeling
program. Additionally, according to the commenters, the focus group
research demonstrates that consumers are generally satisfied with the
current nutrition information provided for fresh meats.
One industry association stated that the use of individual
nutrition labels may result in consumers' viewing a smaller portion of
the product and paying a higher amount for the product, because of the
cost associated with maintaining a vast number of labels to be placed
on the package. Additionally, according to this commenter, if the
consumer intends to trim the fat from meat or remove the skin from
poultry products, the nutrition information on the label would not
adequately represent the product's nutrition information after fat had
been trimmed from it or skin from it had been removed.
One industry commenter stated that it is extremely difficult to
provide accurate nutrition information for each major muscle cut
because nutrient content varies depending on the breed and quality of
each animal. Another industry commenter stated that although
``average'' numbers from the USDA database are appropriate for point-
of-purchase materials, because of the potential variations in specific
individual cuts, trims and grades, the average numbers are not
appropriate for on-package labeling, where consumers justifiably expect
a label to accurately define the exact nutrient content of what is in
that package.
Two industry commenters stated that according to the Agency's own
survey, 62.7% of men and 57.9% of women rarely or never use the
nutrition information provided on raw meat, poultry or fish (see 66 FR
4982, January 18, 2001). They speculated that this low usage may in
part be explained by the fact that consumers already have reasonable
expectations regarding the nutrient values of these products as a
result of industry's voluntary efforts to provide this information.
Similarly, one retail association stated that consumers have reasonable
expectations as to the nutrient content of major cuts, and that the
nutrient content of a given major cut is relatively uniform across the
market. An industry commenter stated that, unlike ground meat,
consumers can see and remove the fat from whole muscle meat.
Another industry organization stated that single-ingredient, raw
meat and poultry products have a unique quality: the structure of the
cut, including the amount of fat, is visible both on the exterior and
within the muscle cut. As a result, consumers can visibly discern which
products are leanest. However, the commenter also believed that
consumers would benefit from additional nutrition information because
consumers cannot discern the quantitative nutrient content of single-
ingredient, meat and poultry products without the nutrition information
provided on point-of-purchase materials.
Response: As FSIS proposed, should this rule become final, it will
require that nutrition information be provided for the major cuts of
single-ingredient, raw meat and poultry products, either on the label
or at the point-of-purchase. Although FSIS continues to agree with the
commenters who stated that nutrition labels on the major cuts of
single-ingredient, raw products are useful, FSIS believes that
consumers have reasonable expectations as to the nutrient content of
these products and can make comparative judgments about the fat content
of the various cuts. While consumers' expectations for these products
may not be perfect, they are significantly more aware of the
nutritional content of single cuts of meat than the nutritional content
of ground meat. Thus, the rule allows an alternative way of providing
nutrition information for major cuts of single-ingredient, raw
products. As is discussed above, even though FSIS believes that
consumers have reasonable expectations concerning the nutrient content
of the major cuts, without nutrition information for these products,
consumers cannot assess specific nutrient levels in them and cannot
make educated choices about consuming them. These educated choices are
significant to a consumer's effort to construct a healthy diet.
FSIS does not believe that the telephone survey results used by a
consumer organization in support of their belief that most consumers do
not have reasonable expectations of the nutrient content of raw meat
and poultry demonstrate that consumers do not have reasonable
expectations concerning the major cuts. FSIS does not believe it is
reasonable to expect consumers in a telephone survey to be able to
identify which individual cuts of meat or poultry have the highest fat
levels. However, if shown pictures of the various cuts (that are not
ground or chopped), FSIS believes that most consumers could identify
the cut with the most fat, by its internal marbling and external fat
cover. The medical organization commenter that stated that consumers
generally have no idea of the nutrient content of the major cuts
provided no data to substantiate this statement.
Although individuals, and consumer organization commenters, stated
that point-of-purchase materials are difficult to read, they provided
no explanation for their assertion that these materials are difficult
to read. Their other concern about the difficulty of finding point-of-
purchase materials will be taken care of

[[Page 67746]]

by this rule. Should it become final, the rule will require that point-
of-purchase materials be made available in close proximity to the food
(Sec. 317.345(a)(3) and Sec. 381.445(a)(3)).
Regarding the health organization's comment that the same cut of
meat can be labeled by different names, and thus consumers would be
better informed by nutrition information on a product's label, FSIS is
not aware that consumers are confused about the names of the major cuts
of single-ingredient, raw products listed on point-of-purchase
materials. FMI was involved in developing these materials, and that
organization has the most current names used to designate the major
cuts. However, if necessary, retail facilities and establishments can
include multiple names for a major cut on point-of-purchase materials.
In addition, if FSIS is informed of specific cuts that are identified
by different names, FSIS will revise the point-of-purchase materials
that it is making available on the Internet.
After the comment period for the proposed rule ended, FSIS received
correspondence from industry stating that the list of major cuts in the
regulations should be changed to reflect more accurately the most
popular cuts in the market. This correspondence recommended removing
certain cuts and adding others. Because FSIS did not propose to amend
the codified list of major cuts in the regulations and did not provide
an opportunity for the public to comment on proposed changes to the
list, FSIS is not amending the list of major cuts in the regulations at
this time. However, FSIS will review this issue, and if the Agency
determines that a change in the list of major cuts is warranted to
accurately represent the market, FSIS will pursue future rulemaking.
Regarding the comments that noted that an advantage of including
nutrition information on the label is that consumers can review the
nutrient content of the product once the product is taken home, and
others besides the primary food purchaser would have better access to
this information, surveys, including the Diet and Health Knowledge
Survey (DHKS), show that a majority of individuals report using labels
while buying foods. Although the DHKS shows that adults who are not
main household shoppers use labels, the survey shows that the main
shoppers use labels at a higher rate than those who are not main
household shoppers. Also, FSIS assumes that if individuals in a
household have certain nutrition practices and needs, the person who
purchases food for the household would take other household members'
needs and preferences into account. In addition, FSIS assumes that
purchased food would typically be consumed by members of the household
and not thrown away.
In response to the comment that the nutrient content of the major
cuts may be more variable than that of ground products, FSIS recognizes
that there is significant variability in the nutrient content of the
major cuts depending on the grade of the product and the levels of
exterior fat on the products. However, the point-of-purchase materials
that FSIS and FMI have developed to convey nutrition information for
the major cuts take into account this variability and reflect average
nutrition information for these products. The information on the point-
of-purchase materials is meaningful and accurate for the major cuts.
Consumers can view the point-of-purchase materials to make educated
choices based on nutrition information among the different major cuts.
In addition, to further distinguish among different packages of the
same major cut, consumers can make comparisons based on levels of
visible fat on the product.
This coalition's other concern that it would be difficult for
producers or retailers to develop point-of-purchase materials to
address the different formulations and trim levels of the major cuts
need not be a concern. FSIS and FMI have made available nutrition
information that can be displayed at the point-of-purchase of the major
cuts of single-ingredient, raw meat and poultry products. These point-
of-purchase materials will meet the nutrition labeling requirements of
this rule, should it become final. Furthermore, requiring that all
major cuts of single-ingredient, raw meat and poultry products bear
nutrition labels would be a significant cost to the industry based on
FSIS's supplemental proposed cost analysis.
Comment: Two industry commenters stated that it was appropriate for
FSIS to provide point-of-purchase materials via the Internet. They
believed that this would lessen the burden on retailers unable to
develop appropriate customized nutrition information. One of these
commenters also stated that the Agency should develop point-of-purchase
materials so that the nutrition information supplied would be accurate
and consistent.
With regard to the type of point-of-purchase materials used to
display nutrition information, several commenters stated that easy to
understand charts that convey the information would be more helpful and
informative to consumers than a collection of individual labels on
display. One industry organization commenter, however, stated that each
option of the display of nutrition information on charts or on
individual display panels had advantages. This industry organization
believed that the presentation of information in charts which have
vertical and horizontal columns, that cover multiple products, would
allow consumers to make comparisons and would consume less space than
individual labels. This organization also stated that charts are
readily available to retailers. However, this organization felt that
consumers might be more familiar with single nutrition panels than with
nutrition charts covering multiple products. Nevertheless, this
organization believed that the provision of nutrition panels for every
major cut at their point-of-purchase would be costly and would consume
a significant amount of space in retail settings. Thus, the
organization concluded that retailers should have the freedom to
present nutrition information in any way that suits customer needs, so
long as it is not misleading. Accordingly, the commenter suggested that
USDA conduct research to determine the best method of presenting such
information.
Several industry commenters stated that the Agency should describe
the information required but should not prescribe a specific format or
presentation of the information so that retailers that want to develop
customized point-of-purchase materials can develop customized
materials. These commenters believed it was important to provide as
much flexibility in the development of nutrition materials as possible.
One of these commenters also stated that the Agency should only
prescribe the specific required presentation of the nutrition
information after significant consumer testing.
Response: The Agency will provide nutrition information for the
major cuts of single-ingredient, raw products that retailers can use at
point-of-purchase at the following Internet address: http://www.fsis.usda.gov. Point-of-purchase materials are also available from
FMI at the following Internet address: http://www.fmi.org. At this
time, FSIS intends to provide information on charts with columns that
cover multiple products, rather than providing a compilation of
individual nutrition facts panels. The Agency does not intend to
conduct consumer surveys or additional research to determine whether
individual nutrition labels or charts covering multiple products would
best address

[[Page 67747]]

consumer needs because most comments received on this issue supported
the use of charts covering multiple products.
The Agency agrees with commenters that it is important to provide
as much flexibility as possible in the presentation of nutrition
information on point-of-purchase materials for the major cuts of
single-ingredient, raw products. Therefore, should this rule become
final, FSIS will allow point-of-purchase nutrition information for the
major cuts to be presented through a variety of means, including signs,
brochures, notebooks, or leaflets in close proximity to the food. The
nutrition labeling information may also be supplemented by a video,
live demonstration, or other media. Furthermore, if there is no
nutrition claim made on the point-of-purchase materials, they will not
be subject to any of the format requirements applicable to on-package
nutrition labels. However, if a nutrition claim is made on the point-
of-purchase materials, all of the format and content requirements
applicable to on-package nutrition labels in Sec. Sec. 317.309 and
381.409 will apply.
Consistent with existing voluntary and mandatory nutrition labeling
program regulations, should this rule become final, the Agency will
provide more flexibility for the presentation of nutrition information
for the major cuts at the point-of-purchase than for the presentation
of nutrition information on labels. FSIS believes this is appropriate
and necessary because there is no small business exemption from
nutrition labeling requirements for the major cuts. Also, FSIS does not
want to impose any burden on retailers that are following the voluntary
guidelines for voluntary nutrition labeling.
Comment: One animal protection organization supported allowing
nutrition information for the major cuts of single-ingredient, raw
products to be provided on an ``as packaged'' basis, as opposed to an
``as consumed'' basis, because there are numerous cooking methods, and
the cooking method used could affect the nutrient content of the
product. In addition, one industry association supported allowing
nutrition information to be provided on an ``as consumed'' basis for
the major cuts of single-ingredient, raw products.
Response: As proposed, for the major cuts and nonmajor cuts of
single-ingredient, raw products, should this rule become final, it will
allow nutrition information on the label or on point-of-purchase
materials to be declared on either an ``as packaged'' basis or ``as
consumed'' basis because, as noted in the proposed rule, most of the
major cuts of single-ingredient, raw meat and poultry products will not
need FSIS compliance scrutiny (66 FR 4974, January 18, 2001). If
nutrition information for these products is based on USDA's National
Nutrient Database for Standard Reference, and there are no claims on
the labeling, FSIS will not conduct a nutrient analysis of these raw
products and, therefore, will not evaluate ``as packaged'' nutrition
labeling information for these products. Consistent with the provisions
in the voluntary nutrition labeling program, when nutrition information
is presented on an ``as consumed'' basis, retailers or manufacturers
will be required to specify a method of cooking that will not add
nutrients from other ingredients such as flour, breading, and salt
(Sec. Sec. 317.345(d) and 381.445(d)). FSIS welcomes further comment
on this issue.
Comment: An industry association and animal protection organization
agreed that it was unrealistic to state the ``servings per container''
on the nutrition labels of the major cuts of single-ingredient, raw
products because the majority of these products are random weight
items.
Response: FSIS agrees that the number of serving per container is
not necessary information on the nutrition labels of the major cuts or
nonmajor cuts of single-ingredient, raw products, because these
products are typically random weight products. For multi-ingredient and
heat-processed products that must bear nutrition labels, the number of
servings is not required on random weight products (Sec. Sec.
317.309(b)(10)(iii) and 381.409(b)(10)(iii)).
Comment: Several industry groups believed that the voluntary
nutrition labeling program should remain in place, and that FSIS should
not require nutrition labeling of the major cuts of single-ingredient,
raw products. One retail association stated that FSIS could improve
voluntary compliance with nutrition labeling guidelines without
requiring nutrition labeling for the major cuts by making the same free
information available that it plans to make available under the new
regulations. Similarly, a form letter that multiple retailers submitted
stated that FSIS could increase compliance with the voluntary
guidelines at less cost to consumers than the regulations would
generate by providing free and updated information to retailers.
Several individuals stated that the USDA should not establish new
labeling requirements for meat products because they believed that
current labeling on these products is sufficient.
As noted above, two commenters stated that according to the
Agency's own data, 62.7% of men and 57.9% of women rarely or never use
nutrition information on raw meat, poultry or fish. Given such low
usage, the commenters stated that FSIS should not require nutrition
labeling for the major cuts of single-ingredient, raw products but
should be more flexible in encouraging greater participation in the
voluntary program.
Two industry commenters questioned the accuracy of the USDA surveys
that did not find significant participation in the voluntary nutrition
labeling program. They stated that the USDA surveys in 1996 and in 1999
checked only for the presence of the ``new'' formatted nutrition
information; one of these commenters stated that FSIS did not announce
in the Federal Register that only ``new'' materials would be
considered.
These commenters also noted that FSIS determined whether
significant participation in the voluntary nutrition labeling program
existed based on the number of stores found to be in compliance.
However, these commenters stated that equal consideration should have
been given to the volume of product for which nutrition information was
provided and the numbers of shoppers given access to the information.
These commenters noted that volume-weighted participation would have
represented 60 percent participation in the voluntary nutrition
labeling program.
One of the commenters that questioned the accuracy of the surveys
also stated that the surveys were not conducted every two years; it is
not clear that every chain company was included; neither the 1996 nor
the 1999 survey reported on nutrition information that was applied in
label form directly to the package; and the surveys may have included
stores that the organization believes should be exempt from the
nutrition labeling guidelines. The other commenter that questioned the
accuracy of the surveys stated that, given a variance factor of 4% (a
conservative margin of error based on 2,000 stores, according to the
survey reports), store participation could have been 70.5% in 1995,
61.5% in 1996, and 58.5% in 1999. In other words, FSIS could have found
significant participation existed in two of the surveys.
Response: FSIS continues to believe that nutrition information for
the major cuts of single-ingredient, raw products is important and
necessary. In addition, FSIS believes that requiring nutrition labeling
of the major cuts of single-

[[Page 67748]]

ingredient, raw meat and poultry products will result in benefits. FSIS
did encourage participation in the voluntary nutrition labeling program
through meetings with industry. Further, nutrition labeling materials
for the major cuts have been available on FMI's Web site for several
years (http://www.fmi.org). Despite this and FSIS's encouragement of
the use of such materials, the 1999 voluntary nutrition labeling survey
found a lower rate of participation than the 1996 survey found. Thus,
the fact that nutrition information was available was insufficient to
ensure consumers received the necessary nutrition information. By
making the guidelines currently in place for the voluntary nutrition
labeling program mandatory, FSIS will ensure that consumers are
provided with necessary nutrition information concerning the major
cuts.
To determine how much of a behavioral response and change in
dietary intake might result from providing more nutrition information
on meat and poultry products in the proposed rule's benefits analysis,
FSIS assumed that when labels and other sources of nutrition
information were provided for raw meat and poultry products, the usage
rates would rise to match nutrition label usage rates for food products
as a whole (66 FR 4990, January 18, 2001). As FSIS noted, although some
information was being provided for some single-ingredient, raw meat and
poultry products, nutrition information for these products was not
required. FSIS noted it could be reasonably assumed that when nutrition
information becomes mandatory, more consumers will use the nutrition
information for the major cuts of single-ingredient, raw products.
FSIS does not believe that the surveys conducted to determine
whether there was significant participation in the voluntary nutrition
labeling program were inaccurate because they were not conducted
precisely every two years or because of the manner in which FSIS
determined whether there was significant participation. FSIS's
regulations provide that the Agency would evaluate significant
participation every 2 years (Sec. Sec. 317.343(e) and 381.443(e)).
However, the timing of these surveys did not make them invalid.
Although FSIS did not conduct the surveys precisely 2 years apart, the
Agency conducted the surveys approximately every two years.
Further, the survey conducted in June 1995 included as participants
in the voluntary nutrition labeling program those retailers who
displayed at point-of-purchase either materials that were developed
before or after issuance of the 1993 final rule on nutrition labeling.
The older nutrition information materials, which were developed in
1992, did not comply entirely with the voluntary nutrition labeling
program provisions in the 1993 final rule. For example, the older
materials did not include the required percent daily values for certain
nutrients. Therefore, the results of the 1995 survey may have actually
overestimated participation in the voluntary nutrition labeling
program.
Additionally, the 1996 and 1999 surveys correctly only counted a
store as providing voluntary nutrition information for meat and poultry
products if it displayed point-of-purchase materials that were
developed after the final rule was published. FSIS program officials
had decided that by 1996 retailers had had enough time to obtain the
updated nutrition labeling materials for display in their stores. FSIS
did not announce in the Federal Register that only ``new'' materials
would be considered to meet the voluntary nutrition labeling program
guidelines. However, FSIS met with industry organizations and informed
them that, in the 1996 survey, the Agency would only consider ``new''
materials to meet the voluntary nutrition labeling program guidelines.
It could reasonably be expected that stores that were participating in
the program would replace the materials over the course of three years.
Moreover, consistent with its stated intention to sample all chain
companies (58 FR 640, January 6, 1993), the contractor that conducted
the surveys on behalf of FSIS used various sources to sample all
chains, including Retail Diagnostics, Inc.'s listing of supermarkets,
Progressive Grocer Marketing Guidebook, Progressive Grocer MarketScope,
Chain Store Guide Directory of Supermarkets & Convenience Store Chains,
and the latest U.S. Economic Census. Moreover, although the surveys do
not report the number of stores found to be providing nutrition
information on package labels, the surveys did take this into account.
Retailers were considered to be participating in the voluntary program
when they provided nutrition information on nutrition labels or on
point-of-purchase materials, in accordance with program guidelines, for
at least 90 percent of the major cuts sold at the facility.
FSIS correctly did not make a determination of whether there was
significant participation in the voluntary nutrition labeling program
based on the volume of product for which nutrition information was
provided and the number of shoppers given access to the information.
FSIS regulations clearly provide that a determination of whether
significant participation in the voluntary nutrition labeling program
existed was to be based on the percentage of companies evaluated that
were participating in accordance with the guidelines. Significant
participation would exist if at least 60 percent of all companies that
were evaluated were participating in accordance with the guidelines. As
is explained above, the term ``companies,'' as used in the regulations,
refers to individual stores. The preamble to the 1993 nutrition
labeling rule stated, ``FSIS will use a representative sample of stores
to obtain the information necessary to assess participation'' (58 FR
640, January 6, 1993). FSIS developed these regulations through notice
and comment rulemaking, and FSIS conducted the surveys consistent with
the regulations and the 1993 preamble statement. No comments received
in response to the November 27, 1991, proposed rule on nutrition
labeling stated that significant participation should be based on the
volume of product covered and the number of shoppers given access to
this information.
In addition, as FSIS explained in the preamble to its final
nutrition labeling regulations in 1993, it is important to provide
nutrition information to consumers and, to the extent possible, to
harmonize with FDA's voluntary program for raw fruit, raw vegetables,
and raw fish (58 FR 640, January 6, 1993). Consistent with FSIS's
regulations, FDA's regulations provide that substantial compliance
exists with the guidelines for the voluntary nutrition labeling for raw
fruits, vegetables, and fish when at least 60 percent of all stores
that are evaluated are in compliance (21 CFR 101.43(c)).
The 1995 survey found that 66.5% of stores were participating in
the voluntary nutrition labeling program; the 1996 survey found that
57.5% of stores were participating; and the 1999 survey found that
54.5% of stores were participating. Based on the regulations, stores
were found to be participating in the voluntary nutrition labeling
program if they provided nutrition information for 90% of the major
cuts in their stores.
FSIS recognizes that, given a variance factor of plus or minus 4%,
store participation could have been 70.5% in 1995, 61.5% in 1996, and
58.5% in 1999. However, even assuming a plus 4% margin of error, the
1999 survey showed that significant participation did not exist.
Furthermore, given a

[[Page 67749]]

variance factor of 4%, store participation also could have been 62.5%
in 1995, 53.7% in 1996, and 50.8% in 1999. Significantly, the 1999
participation rate was lower than the 1996 participation rate. As a
result, FSIS concluded that it had an obligation under its regulations
to institute this rulemaking. The Agency did not survey again after
1999.
Consistent with the regulations, the surveys assessed whether
stores provided nutrition information for 90% of major cuts stocked in
their stores (Sec. 317.343(b) and Sec. 381.443.(b)). In addition, the
surveys assessed whether stores provided nutrition information for a
lower percentage of such products. The 1996 survey found that 59.4% of
stores provided nutrition information, according to voluntary
guidelines, for 70% to 90% or more of their major cuts. Thus, based on
the 1996 survey, even if FSIS includes stores that provided nutrition
information according to the voluntary guidelines for only 70% of their
major cuts, this percentage of stores is not quite 60% and, thus, still
does not meet the ``significant participation'' criteria in the
regulations.
In the 1999 survey, 58.3% of stores provided nutrition information,
according to the voluntary guidelines, for 50% to 90% or more of their
major cuts. Again, this percentage of stores is still not quite 60% and
does not meet the ``significant participation'' criteria in the
regulations. Based on the 1999 survey, even if FSIS includes stores
that provided nutrition information according to the voluntary
guidelines for only 50% of their major cuts, FSIS still would not find
60% participation. (See Table 7 of the surveys on the FSIS Web site:
http://www.fsis.usda.gov/Frame/FrameRedirect.asp?main=http://www.fsis.usda.gov/OPPDE/rdad/FRPubs/Docs_98-005P.htm).
Comment: One retail industry association stated that, unamended by
a legislative vehicle comparable to the Nutrition Labeling and
Education Act, the meat and poultry Acts do not give USDA the statutory
authority to mandate nutrition labeling regulations for single-
ingredient, raw meat and poultry products.
Response: FSIS believes that without nutrition information, the
labeling of major cuts of single-ingredient, raw meat and poultry
products fails to include material facts about the consequences of
consuming these products. This information is necessary for consumers
to have if they are to make educated choices that are necessary in
structuring a healthy diet. FSIS has concluded that the lack of this
information on the labeling of the major cuts causes the labeling of
these products to be misleading. The FMIA and PPIA provide that a
product is misbranded if its labeling is false or misleading in any
particular (21 U.S.C. 601(n)(1) and 453(h)(1)). Without the nutrition
information for the major cuts of single-ingredient, raw products that
would be provided if significant participation in the voluntary
nutrition labeling program existed, the Agency has concluded that these
products would be misbranded under the FMIA and the PPIA (21 U.S.C.
601(n)(1) and 453 (h)(1)).

Mandatory Nutrition Labeling for Ground or Chopped Products

Comment: Many individuals, consumer organizations, and nutrition
organizations supported mandatory nutrition labeling on the package for
ground or chopped products. Several industry associations also
supported these requirements and stated that these requirements were
feasible and reasonable. One of these associations also stated that
because ground meat products are formulated to have greater consistency
and uniformity in their composition than other cuts, retailers can
create a standard, on-package label that provides accurate, reliable
nutrition information.
Consumer groups noted that several supermarket chains already
include full nutrition facts labels on their ground beef products.
These commenters believed that required nutrition labels for ground or
chopped meat and poultry products would create the most informative and
clear information for consumers.
Consumer and industry commenters stated that consumers cannot
visually detect the fat content of ground beef products, and without
on-package labeling, consumers cannot easily determine what nutrition
information provided on point-of-purchase materials would apply to
individual packages of ground products. However, one of the industry
commenters that supported on-package nutrition labeling had concerns
regarding the economic impact of this labeling.
Most industry trade associations and grocer associations did not
support on-package nutrition labeling information for ground or chopped
products. One industry association stated that the FMIA and PPIA do not
support on-pack nutrition labels for ground or chopped products.
Another industry association stated that consumer education regarding
the nutritional qualities of meat and poultry products, in conjunction
with mandatory point-of-purchase labeling, would provide consumers with
sufficient information for ground or chopped meat and poultry products.
Similarly, a third industry association supported mandatory nutrition
labeling for ground or chopped products, provided it could be provided
at their point-of-purchase.
Industry commenters stated that there is not room on the label of
ground products for a nutrition facts panel. Two commenters stated that
nutrition labels for ground or chopped products should be exempt from
the current type size requirements or the labels will be too large;
alternatively, these commenters suggested that FSIS should allow use of
the linear label format.
Two industry commenters stated that results from surveys conducted
in March 2001 indicated that the majority of their members routinely
test for fat in ground beef. However, they believe that few retailers
can determine nutrient or fat content of ground product blended at the
store. Similarly, several other industry commenters stated that few
retailers have, or could afford, equipment to determine the nutritional
content, including fat, for the products they grind. Therefore,
according to these commenters, mandating nutrition information on
labeling may constrain small operations, limit the variety of ground
products, and dissuade the practice of grinding at the request of the
customer. An individual also stated that the proposed requirements for
ground or chopped products would not be feasible for small grocers.
One retail industry association stated that, although retailers can
readily measure the fat content of ground product, establishing the
exact nutrient profiles on a daily basis would not be feasible.
According to this commenter, if products were analyzed, they would no
longer be salable by the time analytical results became available.
Another retail industry association stated that some retail stores have
access to fat content by using a fat analyzer when doing in-store
grinding of meat or poultry products; however, testing for additional
nutrient content would require the use of a laboratory and would prove
costly. Another industry commenter stated that large, centrally
processed ground products can be formulated to precise fat contents,
but many ground products produced in retail settings cannot.
Two industry associations supported the required nutrition labels
on ground or chopped products that are ``case-ready'' but not for
products prepared and packaged at retail. Like other industry
commenters summarized above, these commenters stated that retailers do
not have the equipment

[[Page 67750]]

necessary to determine the finished product's nutrient content.
Two associations stated that most consumers purchase ground
products based on percent lean, the cut, or the cost of product, rather
than based on the other nutrient content information. Another
association stated that according to survey data, 45% of consumers
choose ground beef based on price, 23% based on cut, and 9% based on
fat content.
Response: Should this rule become final, FSIS will require on-
package nutrition information for these products rather than allowing
nutrition information to be provided at their point-of-purchase for the
reasons stated in the proposed rule. Because there are numerous
formulations of ground or chopped products, it would be difficult for
producers or retailers to develop point-of-purchase materials that
would address all the different formulations that exist for these
products. Furthermore, it would be difficult for consumers to find the
correct information for a specific ground or chopped product on point-
of-purchase materials that include information concerning numerous
formulations of these products (66 FR 4977, January 18, 2001). If a
statement of the fat percentage and lean percentage is not included on
a package of ground product, consumers would not know which nutrient
data concerning ground product on point-of-purchase materials would
apply to that particular ground product. Establishments and retailers
are not currently required to provide such a statement and will not be
required to provide such a statement when this rule becomes effective.
The FMIA and PPIA do support on-package nutrition labels for ground
or chopped products. The FMIA and PPIA provide that a product is
misbranded if its labeling is false or misleading in any particular.
FSIS has concluded that ground or chopped meat and poultry products
that do not bear nutrition information would be misbranded under 21
U.S.C. 601(n)(1) and 453(h)(1). Information concerning the nutritional
qualities of ground or chopped meat and poultry products is
particularly important because these products, especially ground beef,
are widely consumed. Pertinent nutritional information is integral to
consumer purchase decisions because use of this information may result
in the prevention of health problems and the reduction of health risks
for some consumers. Additional information about the nutrient values of
ground or chopped meat and poultry products would enable consumers to
make informed decisions about including these products in their diets
and will, therefore, help consumers to construct healthy diets.
Thus, consistent with the recommendations from individuals,
consumer organizations, and some industry comments, should it become
final, this rule will require nutrition labels on all ground or chopped
meat and poultry products, with or without added seasonings, unless an
exemption applies. The rule will also require nutrition labels on
packages of single-ingredient, raw ground or chopped products, rather
than at their point-of- purchase. These products are similar to multi-
ingredient products in the mandatory nutrition labeling program (which
requires nutrition information to be on the label of individual
packages). Just as producers can control the incoming ingredients and
levels of such ingredients in multi-ingredient products, producers can
precisely control the fat content of ground or chopped products to
obtain the desired product. In addition, just as consumers cannot often
see all the ingredients in multi-ingredient products, consumers cannot
easily see the fat in ground or chopped products. The fat is uniformly
distributed throughout the product and is not clearly distinguishable
on the surface of the product. Therefore, consumers cannot estimate the
fat levels in these products and cannot compare the fat levels in these
products to those in other products. Thus, it is difficult for
consumers to have a reasonable expectation of the nutritional quality
of these products.
Many grocers and manufacturers currently provide nutrition facts
panels on ground beef products; therefore, FSIS questions why certain
commenters stated that there is not sufficient room on the label of
these products for nutrition information. In addition, FSIS continues
to believe that, unlike other single-ingredient, raw products,
producers are able to formulate precisely the fat content of ground or
chopped products. If, as some commenters suggested, grocers cannot
determine the fat percentage in ground or chopped beef produced at
retail, FSIS questions how they can be certain they produce product
that meets the standard of identity for ground or chopped beef, which
requires that the product not exceed 30 percent fat (see Sec. 319.15).
Information on ground beef products containing 5%, 10%, 15%, 20%,
and 25% fat is available through ARS at the following Internet address:
http://www.ars.usda.gov\nutrientdata. In addition, ARS has included a
calculator on the Internet, with the Database, that allows parties to
enter the amount of fat (5% to 30% fat) or lean (70% to 95% lean) in a
raw ground beef product. The calculator will calculate the nutrient
values for the product based on the fat or lean value entered. If
retailers are able to determine the fat content, as two industry
commenters suggested they could, they can use the ARS nutrient database
to obtain the information necessary to help them determine other
nutrient values in the product.
Additionally, the nutrition labeling requirements for ground or
chopped products should not be particularly difficult for small
operations, since ground or chopped product produced by retail
establishments and Federal establishments that meet specific small
business criteria will be exempt from nutrition labeling requirements
(Sec. Sec. 317.400(a)(1) and 381.500(a)(1)).
Moreover, a new exemption from the nutrition labeling requirements,
that is provided in this supplemental proposed rule, should alleviate
any concerns that nutrition labeling requirements will discourage
retailers from grinding product based on customers' requests. Should it
become final, the rule will provide an exemption from nutrition
labeling requirements for ground or chopped products that are ground or
chopped at an individual customer's request and that are prepared and
served or sold at retail, provided that the labels or labeling of these
products bear no nutrition claims or nutrition information.
If an individual customer selects an intact product for purchase
and requests that the product be ground at the retail facility, FSIS
has determined that nutrition information on the package of the ground
product would not be necessary. In this instance, the customer has made
the decision to purchase the product before it was ground. The customer
is not selecting the product from among various, formulated, ground or
chopped product, and thus the reasons for requiring a nutrition label
on such a product would not be applicable here.
Comment: One animal protection organization stated that the
nutrition information should be presented on an ``as packaged'' basis
for ground or chopped meat and poultry products, and that ``as
consumed'' information should be in addition to, not instead of, ``as
packaged'' information. No commenters suggested that ``as consumed''
information alone was adequate.
Response: FSIS agrees with the commenter. Should it become final,
the rule will require, as proposed, that nutrition information on the
labels of

[[Page 67751]]

ground or chopped products be presented on an ``as packaged'' or
``raw'' basis. Although not required, a second column can be added to
show nutrition information on the product on an ``as consumed'' or
``cooked'' basis. The regulations provide that if a product is commonly
combined with other ingredients or cooked before eating, and directions
for such combinations or preparations are provided, another column with
nutrition information may be used (9 CFR Sec. Sec. 317.309(b)(15) and
(e) and 381.409(b)(15) and (e). Therefore, the nutrition information
required on packages of ground or chopped products will be consistent
with the information required on multi-ingredient and heat processed
products. FSIS requests further comment on this issue.
Comment: FSIS did not receive any comments on how much meat derived
from advanced meat/bone separation and recovery (AMR) systems or how
much low temperature rendered product is currently being used in ground
or chopped products. However, an industry organization stated that the
use of product from AMR systems in ground beef products would not cause
a dramatic change in the nutrient content of the product such that it
would be misleading to consumers. The commenter noted that, based on
the data FSIS presented (see 66 FR 4976, January 18, 2001), the level
of cholesterol in product containing meat from AMR systems is slightly
elevated, and the level of iron in the product is above 20 percent of
the value of iron product not containing meat from AMR systems.
However, according to the commenter, the studies were not performed in
a compliance context, and FSIS did not provide information concerning
the historical levels of iron or other information that would shed
light on whether the difference accords with good manufacturing
practices.
Response: FSIS presented information concerning ground beef with
AMR product for illustrative purposes only. The data show an increase
in the level of calcium over what would occur if good manufacturing
practices were used. Similarly, iron levels in ground beef that
includes AMR product may be higher than those in ground beef that does
not include AMR product.
In meetings with FSIS, representatives of the meat industry have
stated that the percentage of ground beef with AMR product and the
level of AMR product in ground beef is higher than FSIS previously
thought. FSIS continues to believe that one of the reasons nutrition
information on the labels of ground or chopped meat products is
important is because producers may use product from AMR systems in some
of these products, and the use of AMR product can affect the nutrient
values of these products. Finally, even though FSIS issued an interim
final rule on AMR that provides specific restrictions on the levels of
calcium and iron in AMR product (69 FR 1874, January 12, 2004),
nutrition labeling of ground products that may contain AMR product is
necessary to understand the nutritional profile of the food.
Comment: FSIS received few comments regarding consumer expectations
of the fat content of ground products. One industry commenter stated
that consumers do not have reasonable expectations of the nutrient
content of ground products given the wide variation of fat and lean
content.
Response: FSIS agrees that consumers do not have reasonable
expectations of the nutrient content of ground or chopped products.
Unlike whole muscle product, most consumers cannot visually discern
which ground or chopped products have less fat, and which products have
more fat, because the fat is ground in with the lean portion. In
addition, producers may use meat from AMR systems and low temperature
rendering in ground or chopped beef and pork products, which may affect
the variability of these products.

No Requirements for Nonmajor Cuts

Comment: Several industry groups supported the proposal not to
require nutrition labeling on nonmajor cuts that are not ground or
chopped (e.g., pork jowls, pigs feet, pork leg, pork shoulder picnic,
and beef round rump) and did not believe such labeling was needed in
the future. Two industry commenters stated that when grades and trim
levels are considered, there are over 3300 cuts of red meat products,
and it would be impossible to provide information on this number of
products.
One industry group also indicated that the major cuts identified by
the nutrition labeling regulations are still relevant today as
representing the greatest share of fresh meat consumption, thus
suggesting that it is more important that nutrition information be
provided for these products than for the nonmajor cuts of single-
ingredient, raw products.
As discussed above, the majority of comments from individuals,
consumer groups, and health organizations stated that FSIS should
require on-package nutrition labeling for all single ingredient, raw
meat and poultry products (major and nonmajor cuts). An animal
protection organization recommended that FSIS take no more than 24
months to investigate whether required nutrition labeling for single-
ingredient, nonmajor cuts that are not ground or chopped is warranted.
Response: At this time, FSIS does not intend to require that
nutrition information be provided for nonmajor cuts of single-
ingredient, raw products that are not ground or chopped. FSIS has
determined that it is not appropriate or necessary to require nutrition
information for nonmajor cuts that are not ground or chopped at this
time. They do not contribute in a major way to the diet. FSIS stated in
the proposed rule that it intended to examine the current state of
nutrition labeling for single-ingredient, raw products that are not
ground or chopped and that are not major cuts (66 FR 4974, January 18,
2001). FSIS still intends to conduct this assessment but has not yet
been able to do so because of competing priorities. Should this rule
become effective, FSIS will examine and assess the adequacy of the
nutrition information provided for the major cuts and will also
determine whether sufficient nutrition information is being made
available for the nonmajor cuts.

Permitting Percent Lean Statements on Labels or in Labeling of Ground
or Chopped Products

Comment: Individuals and consumer and nutrition organizations
generally did not support the use of statements of lean percentages on
the label or in labeling of ground or chopped products that do not meet
the regulatory criteria for ``low fat.'' A coalition of consumer and
health and nutrition organizations stated that permitting such claims
on packages of ground meat and poultry is inherently deceptive and will
confuse consumers about the healthfulness of fresh ground meat and
poultry products compared to other fresh meat, processed meat, and
other foods. This coalition and an individual stated that a statement
of fat percentage without a statement of lean percentage would be an
effective means of allowing consumer comparison of ground products.
Similarly, a medical school stated that, instead of a statement of
``lean'' on ground or chopped products, labeling of ground or chopped
products should list the actual amount of fat in terms of ``x% fat or
less.''
One medical organization suggested that instead of a statement of
lean percentage as a quick reference, FSIS should allow a ``percent
calories from fat'' statement on labeling of ground or chopped
products. According to this commenter, this statement would allow
comparisons among ground products and would also allow a comparison of

[[Page 67752]]

the amount of fat in the product to the daily amount of fat recommended
in USDA dietary guidelines and the daily amount of fat recommended by
other health associations.
One animal protection organization suggested that the use of
percent lean statements is highly misleading since ``percent lean''
refers to percent by weight not percent of calories.
As a better means to compare ground products than a statement of
the percentage fat and percentage lean in the product, one consumer
organization noted that many packages of ground meat or poultry would
meet the regulatory criteria for ``reduced fat,'' ``light,'' and
``lower fat'' nutrient content claims. This organization stated that
such claims are now familiar to consumers, and that the use of such
claims would ensure uniformity across product categories and reduce
consumer confusion.
In contrast, an industry association did not support ``reduced
fat'' labeling on ground products because, according to the commenter,
it would penalize retailers who offer only the leanest products and do
not offer those with higher fat content. In addition, the commenter
believed that ``reduced fat'' labeling would be confusing to consumers
who understand and have come to rely on the percentage fat and lean
statements that are currently in use.
Two poultry industry associations did not support the provision for
statements of lean percentages on ground or chopped products that do
not meet the regulatory criteria for ``low fat.'' These associations
stated that allowing the use of a statement of lean percentage on
ground product that does not meet the regulatory criteria for ``low
fat'' would be misleading, and that there is no basis for exempting
ground product from the regulatory criteria for ``low fat'' that
normally applies to product labeled ``lean'' (see Sec. Sec.
317.362(e)(1) and (2) and 381.462(e)(1) and (2)).
The majority of industry associations supported the use of a
statement of lean percentage on the label or in labeling of ground
products that do not meet the regulatory criteria for ``low fat.'' They
believed that the statement of lean percentage on ground beef products
is not misleading and is a useful tool for consumers. Several
commenters discussed telephone surveys whose findings indicated that
the statement of lean percentage does not mislead consumers. The
commenters stated that these surveys indicated that many consumers use
the statements of lean and fat percentages as a basis for selecting
ground beef products, and that most consumers understand that the
statement of fat percentage indicates the percentage of fat in the
product, not the grams of fat, percent Daily Value, or percent of
calories from fat. Several industry associations stated that the
percent lean and percent fat statements, in combination with the
nutrition facts panel, will benefit consumers and allow consumers to
quickly differentiate among ground products and determine how a serving
of ground product fits into their overall diet.
One industry group recommended that FSIS consider allowing
retailers to make a statement such as ``not more than 25% fat'' for a
75% lean/25% fat ground beef product, and one industry commenter
recommended a tolerance for percentage content statements comparable to
the tolerance allowed for nutrient value variations.
Response: The supplemental proposed regulations would permit a
statement of lean percentage on the label or in labeling of ground or
chopped meat and poultry products that do not meet the regulatory
criteria for ``low fat.'' The regulations would require that a
statement of fat percentage be contiguous to, in lettering of the same
color, size, and type as, and on the same color background as, the
statement of lean percentage.
Although individuals, consumer commenters and nutrition
organizations generally did not support this provision, most industry
commenters did. Industry commenters presented information from consumer
surveys that showed that consumers understood the meaning of statements
of lean and fat percentages on ground beef. Based on the survey
information provided, interested consumers use this information as a
quick way to compare ground beef products and as a means for ensuring
the desired product is purchased. Additionally, based on the survey
information discussed in the comments, consumers appear to understand
that the percent lean statements simply indicate the percentage of lean
versus fat in the products and do not interpret the information as a
percent daily value (%DV) or percent of calories from fat in the
product.
Producers, according to industry, have been using lean percentage
statements on the labeling of ground beef and hamburger products for
over 20 years (59 FR 26917, May 24, 1994). Because the percent fat
statement must be contiguous to the percent lean statement and must be
in lettering of the same color, size, and type as, and on the same
color background as, the lean percentage statement, FSIS believes that
the percent lean statements will not mislead consumers.
As the coalition and individual commenter suggested, producers may
include a percent fat statement on the label or in labeling of ground
products without including a percent lean statement, because a percent
fat statement is factual information. A percent fat statement on ground
or chopped products would be an acceptable alternative to a statement
of lean and fat percentage. However, because of the longstanding use of
the statements of percent fat and percent lean on the label or in
labeling of ground beef and hamburger products, FSIS believes such
statements on the label or in labeling of ground products will not
mislead consumers.
As the consumer organization noted, ground or chopped products may
meet the regulatory criteria for ``reduced fat'' or for ``light.'' The
provisions for the statement of percent fat and percent lean in ground
or chopped products will not preclude producers from using ``reduced
fat,'' ``light,'' and other nutrient content claims.
In response to the suggestion that FSIS allow a ``percent calories
from fat,'' FSIS already allows such a statement because it is factual
information.
The current regulations do not preclude the use of the phrases ``x%
fat or less'' or ``not more than x% fat'' on the labeling of ground or
chopped product. The problem with the suggested alternative of listing
the actual amount of fat in terms of ``x% fat or less'' or allowing
statements such as ``not more than 25% fat,'' is that these statements
are implied claims as defined by Sec. 317.369 for red meat and Sec.
381.469 for poultry products. In order to use the implied claim, ground
products would need to meet one of the definitions for a nutrient
content claim for fat content in Sec. 317.362(b)(2) or (4) or Sec.
381.462(b)(2) or (4). According to these regulations, to use such
phrases, the product would have to be ``low fat,'' and most ground beef
and hamburger do not qualify as ``low fat.'' Alternatively, the product
would have to qualify as having ``reduced fat'' and would need to meet
a 25% reduction in fat compared to a similar product.
Finally, in response to the industry suggestion that FSIS provide a
tolerance for percentage content statements comparable to the tolerance
allowed for nutrient value variations, the same tolerances allowed for
nutrient value variations (317.309(h)(5) and (6) and 381.409(h)(5) and
(6)) would apply to the statements of the percentages of lean and fat
in the product, because these statements are based on information in
the nutrition facts panel.

[[Page 67753]]

Exemptions for Nutrition Labeling

Comment: Two industry organizations stated that there should be a
small business exemption from the nutrition labeling requirements for
the major cuts. They argued that the Agency's stated rationale for not
providing a small business exemption for these products (i.e., that
FSIS intends to make point-of-purchase materials available over the
Internet free of charge) shows a lack of understanding of the
challenges faced by small businesses and the economic hardships that
the regulation imposes. These commenters stated that many small
businesses do not have Internet access. Additionally, according to
these commenters, small stores may not have space available to post the
point-of-purchase materials.
Response: If retailers cannot obtain the point-of-purchase
materials over the Internet, should this rule become final, FSIS
personnel will have copies of the information to provide to retailers.
Furthermore, the regulations will provide flexibility in regard to the
manner in which the required presentation and posting of nutrition
information for the major cuts must be done, so that all retailers
should be able to post the information or have it available to
consumers without using much space. For example, posters with nutrition
information could be on walls near the products, or brochures or
leaflets could be placed in a box near the products.
Comment: One animal protection organization did not support the
small business exemption from nutrition labeling requirements for
ground or chopped products. This commenter stated that the exemption
could create a significant information gap in small towns and rural
areas where large chain retail and grocery stores do not have a
presence. Similarly, an individual stated that there should be no
exemptions from the nutrition labeling requirements.
One industry group stated that ground or chopped products with or
without seasonings, processed or packaged at retail must continue to be
exempt from nutrition labeling requirements. This commenter stated that
the quantity of ground products actually prepared at retail represents
a small portion of the average diet.
Two industry commenters stated that FSIS should allow an exemption
for ground or chopped products that are custom processed. They stated
that when a retailer is only providing a service, not a food product,
the retailer should not be expected to bear the cost of providing
nutrition information, especially in rural areas where families raise
their own animals and have a local meat market or supermarket provide
the cutting and grinding service.
Response: FSIS believes that a small business exemption from
nutrition labeling requirements is necessary for ground products, with
or without seasoning. As explained in the proposed rule, small
businesses should be exempt from mandatory nutrition labeling
requirements for ground or chopped products because these requirements
would create undue economic hardship for small businesses and would
create disincentives for these small businesses to develop more
nutritious food products (66 FR 4978, January 18, 2001). Therefore,
should this rule become final, it will provide a small business
exemption for ground or chopped products produced by retail facilities
or official establishments that qualify for the exemption.
Should this rule become final, to qualify for the exemption, a
retail store will either need to be a single retail store that employs
500 or fewer people or a multi-retail store operation that employs 500
or fewer people and will need to produce no more than 100,000 pounds of
each ground product per year. For an official establishment to qualify
for the exemption, it will need to be either a single-plant facility
that employs 500 or fewer people, or a multi-plant company/firm that
employs 500 or fewer people and will need to produce no more than
100,000 pounds per year of each ground product. As explained in the
preamble to the proposed rule, ground or chopped products formulated to
have different levels of fat would be considered different food
products for the purposes of the small business exemption (66 FR 4978,
January 18, 2001).
Should this rule become final, ready-to-eat ground or chopped
products packaged or portioned at retail stores and similar retail-type
establishments, and multi-ingredient ground or chopped products
processed at retail stores and similar retail-type establishments, will
be required to bear nutrition labels, unless the retail store or
similar retail-type establishment qualifies for the small business
exemption. Because a significant amount of ground beef is processed at
retail, the Agency believes that there may be a significant amount of
multi-ingredient ground beef retail processed products or ready-to-eat
retail packaged products.
The Economics Research Service determined that ground beef
accounted for 42 percent of all beef (boneless, trimmed-weight
equivalent) consumed in 1996 (Putnam, Judy and Gerrior, Shirly,
``Americans Consuming More Grains and Vegetables, Less Saturated Fat,
Food Review, Sept.-Dec., 1997, Vol. 20, Issue 3, pp. 2-12), and, as
explained in the preamble to the proposed rule, most ground beef,
traditionally, has been ground and packaged at retail (66 FR 4978,
January 18, 2001). Therefore, ground beef products actually prepared at
retail may represent a significant portion of beef consumed in the
average diet.
When butchers custom grind product for customers, this product is
considered a custom prepared product, and as such, this product will
continue to qualify for an exemption from nutrition labeling
requirements, should this rule become final.
Comment: One retail association and one consultant believed that
the small business exemption for ground or chopped products should be
phased in, in a manner similar to the way the small business exemption
was phased in for nutrition labeling requirements in the 1993 FSIS
final rule on nutrition labeling.
Response: FSIS disagrees with these commenters. Should this rule
become final, the nutrition labeling requirements for ground or chopped
meat and poultry products will apply to a much smaller number of
products than the number of products subject to the 1993 final
regulations on nutrition labeling. At this time, many businesses are
familiar with nutrition labeling requirements; that was not the case in
1993. Therefore, as explained in the supplemental PRIA cost analysis,
FSIS believes that it will not be costly for companies to add nutrition
labels to packages of ground or chopped products.
Furthermore, many of the suppliers of coarse ground products that
are then ground and packaged at retail have supplied, or can supply,
the nutrition facts panels for the retailers. Most retailers offer a
limited selection of ground beef products. Thus, dozens of different
nutrition labels for each retailer will not be necessary. In addition,
information for ground beef and other products is available through the
National Nutrient Database for Standard Reference. In addition, should
this rule become effective, the requirements for on-package nutrition
labeling for ground or chopped products will not be effective until
January 1, 2012.
Comment: Two industry commenters supported the continued exemption
for multi-ingredient sausage products produced at retail. They stated
that retail constraints in determining nutrient content support the
continuation of the exemption. One

[[Page 67754]]

commenter asserted that the final regulation should specify that the
provisions for ground or chopped products apply to product labeled as
``hamburger, (species or kind) burger or ground or chopped (species or
kind)'' in order to differentiate such products from sausage products
(ground meat with seasonings). This commenter stated that some parties
might believe that the provisions for ground product apply to sausage
products manufactured at retail.
Response: Nutrition information for sausage products are not
covered by this regulation. Nutrition labeling requirements for these
products were previously addressed in the 1993 nutrition labeling rule.
Sausage, meat loaf, or beef patty mix are typically multi-ingredient
products that are required to bear nutrition labeling, unless they
qualify for an exemption, and multi-ingredient sausage products
processed at retail will continue to be exempt from nutrition labeling
requirements under Sec. 317.400(a)(7)(ii) and Sec. 381.500(b)(7)(ii).
Because there is a standard of composition for ground or chopped beef
(Sec. 319.15) and distinct standards of identity for sausage products,
industry generally understands which products are referred to and
labeled ``ground or chopped products'' and which products are referred
to and labeled ``sausage products.''
In the 1993 final rule on nutrition labeling, FSIS exempted from
mandatory nutrition labeling requirements multi-ingredient products
processed at retail and ready-to-eat products packaged or portioned at
retail. Therefore, multi-ingredient sausages processed at retail and
ready-to-eat sausages packaged or portioned at retail are exempt from
nutrition labeling requirements. The reasons that FSIS provided these
exemptions in the 1993 final rule were that FSIS believed that it would
be impractical to enforce nutrition labeling requirements on these
products prepared or served at retail and because the Agency concluded,
based on a review of National Food Consumption Survey (NFCS) data, that
the average person's diet consisted of an insignificant proportion of
ready-to-eat retail packaged products or retail processed products (58
FR 639, January 6, 1993).
Should this rule become final, FSIS will not exempt ready-to-eat
ground or chopped products packaged or portioned at retail or multi-
ingredient ground or chopped products that are processed at retail
because, as FSIS explained in the 2001 nutrition labeling proposed
rule, there may be a significant amount of multi-ingredient ground beef
retail processed products or ready-to-eat retail packaged products.
Also, FSIS no longer believes enforcement of nutrition labeling
requirements at retail stores to be impractical because FSIS is already
conducting testing for Escherichia coli O157:H7 at retail (66 FR 4979,
January 18, 2001).

Enforcement & Compliance

Comment: One retail association stated that FSIS should include in
the regulations provisions comparable to those in the Nutrition and
Labeling Education Act (NLEA) such that retailers would not be subject
to substantial civil and criminal penalties for violations of the
nutrition labeling requirements. This commenter was concerned that, if
the USDA requires nutrition labeling for the major cuts, retailers
could be penalized for minor violations of these regulations. For
example, the commenter suggested that if a poster providing nutrition
labeling information falls down, the retailer could suffer substantial
penalties.
This commenter also asserted that, with regard to FSIS product
sampling and nutrient analysis, FSIS should continue to treat single-
ingredient, raw ground products in the same manner it treats other
single-ingredient, raw products. Therefore, the commenter stated, FSIS
should not sample raw, ground products for which USDA data are used as
the basis for the nutrition information on the label. Further, the
commenter stated that if FSIS conducts sampling of ground products at
retail for nutrient analysis, the ground products should only be
analyzed for fat content. According to this commenter, once FSIS
verifies the fat content of ground products, products labeled with
corresponding USDA data values should not be subject to further
compliance and enforcement.
An animal protection organization stated that ground products
should be subject to nutrient analysis. This commenter stated that the
USDA National Nutrient Database for Standard Reference includes only a
limited number of ground products, and there are many others available
on the market. According to this commenter, FSIS employees cannot, and
should not be expected to, visually assess the product and compare it
against its label.
Response: Products under FSIS jurisdiction are not subject to the
NLEA. Nonetheless, FSIS does not consider it likely that substantial
criminal penalties could be imposed for significant violations of the
nutrition labeling requirements. FSIS stated in the preamble to the
final January 6, 1993, nutrition labeling rule that it is not the
Agency's intent to proceed in a punitive manner when problems surface
during compliance monitoring (58 FR 657, January 6, 1993). Should this
rule become final, FSIS will likely seek criminal penalties for
violations of the nutrition labeling requirements in the same types of
circumstances as it would for other labeling violations of the FMIA and
PPIA. Consistent with its approach to enforcing existing nutrition
labeling requirements, under this rule, if FSIS finds nutrition
information on product labels that, based on FSIS or USDA data, is
inaccurate, FSIS would contact the company and request that it either
correct the information on the label or provide adequate justification
to support the information. If the company failed to do so, FSIS would
likely issue a letter of warning.
FSIS is authorized to issue letters of warning in lieu of seeking
criminal penalties when the Secretary of Agriculture determines the
public interest will be adequately served by a letter of warning. If
the company continued to use the inaccurate label, FSIS could institute
an administrative process to rescind the label approval under 9 CFR
Sec. 500.8 and could seize any product in commerce because it is
misbranded. However, FSIS considers it highly unlikely that companies
will continue to use inaccurate labels after FSIS has contacted them
because introducing misbranded product in commerce is a prohibited act
under 21 U.S.C. 610 and 458. FSIS is not authorized to impose civil
penalties under the FMIA or PPIA.
With regard to FSIS product sampling and nutrient analysis of
ground products, as FSIS stated in the preamble to the proposal, the
fat content of different ground or chopped products can vary
significantly, depending upon the level of fat in the product being
ground and depending on whether product from AMR systems is used (66 FR
4980, January 18, 2001). Therefore, the procedures set forth for FSIS
product sampling and nutrient analysis in Sec. Sec. 317.309(h)(1)-(8)
and 381.409(h)(1)-(8) would be applicable to ground or chopped meat and
to ground or chopped poultry products, respectively. Should this rule
become final, FSIS will not analyze ground or chopped products for fat
only, because if the ground product includes AMR product or product
from low temperature rendering (e.g., finely textured beef or lean
finely textured beef), the use of these materials could affect the
nutrient values in the product.

[[Page 67755]]

With regard to FSIS product sampling and nutrient analysis, FSIS
will not treat single-ingredient, raw ground or chopped products in the
same manner that it treats other single-ingredient, raw products
primarily because, as explained in the proposed rule, FSIS program
employees cannot visually assess whether nutrition information on the
label of ground or chopped products accurately reflects the labeled
products' content. In most cases, it is not possible to visually assess
the level of fat in a ground product. For example, FSIS program
employees cannot visually determine whether product that is labeled 17
percent fat ground beef is actually 17 percent fat ground beef as
opposed to 27 percent fat (or another percentage of fat) ground beef
(66 FR 4980, January 18, 2001). Therefore, should this rule become
final, FSIS will sample and conduct nutrient analysis of ground or
chopped products to verify compliance with nutrition labeling
requirements, even if nutrition labeling on these products is based on
the most current representative data base values contained in USDA's
National Nutrient Data Bank or the USDA National Nutrient Database for
Standard Reference and there are no claims on the labeling. Therefore,
FSIS will treat ground or chopped products as it treats all other
products for which the regulations require nutrition information on
their package. In the event that FSIS samples and conducts nutrient
analysis of ground or chopped beef, if producers know the fat content
of their product and have used USDA database values on the nutrition
labels, FSIS would find the product's label in compliance with
nutrition labeling requirements, provided the product's source
materials did not include AMR product or product from low temperature
rendering.

Costs and Benefits

Comment: Many commenters stated that the proposed rule would result
in increased label costs. For example, one individual stated that it
would cost a little more for production but did not think that it would
affect the profit of major meat companies. Another individual stated
that the rule would increase the final price of the product and require
a change in packaging.
A small retailer who carries 26 different packages of ground meat
in their stores and packages 6,000 packages per week stated that it
would cost the company more than $22,600 a year in added costs due to
labor and the additional labels that would be needed. Another small
retailer estimated that the cost would approach $10,000 annually for
adding a new poster and taking into account the necessary packaging,
labor, and machinery modifications for ground or chopped products.
A beef producer believed that FSIS's cost estimates for requiring
nutrition labeling for ground or chopped products are too low. This
commenter stated that for those producers that must supply their own
labels, the cost would be prohibitive. According to this commenter, if
retail stores were to provide the information, the costs would be as
calculated in the proposed rule. This commenter also believed that FSIS
could still achieve its goal of having a large percent of compliance by
making information on the label optional for certain groups that would
be financially burdened. This commenter noted that FSIS estimated that
the average weight of packages of ground or chopped products is 2
pounds and stated that the average weight of a package of pasture fed
ground beef is between one and 1.5 pounds.
An animal protection organization contacted a major commercial
laboratory that conducts nutrient analysis. This commenter stated that
the laboratory charges $130 for a single sample analysis for total fat
and saturated fat and $85 for cholesterol. The laboratory gives volume
discounts for multiple samples.
According to an industry association commenter, the majority of
retailers do not have equipment, such as a Fat-O-Meter or CEM analyzer,
to determine the exact nutritional content, including the percentage of
fat for their products. It is unlikely, according to this commenter,
that retailers will be able to afford this type of equipment because it
costs nearly $40,000.
A retail industry organization stated that according to Hobart, the
company that manufacturers a large proportion of the scales used by
retailers, 50 to 60 percent of supermarkets would need to upgrade their
current printers, which represents $45 to $75 million in costs. Also,
40 to 50 percent of supermarkets would be required to replace their
entire scale systems at the store level, which Hobart estimates would
cost $54 to $90 million. In addition, according to this commenter,
substantially more sophisticated and more expensive analytical
equipment or laboratory testing will be needed to measure the nutrient
profiles in ground products, which are likely to vary significantly in
the context of USDA's compliance and enforcement standards.
Another retail industry association stated that a distributing
company supplying 200 supermarkets estimated that the labeling
requirement for ground or chopped products would affect over 20 million
packages annually. Using the FSIS estimate of .005 cents per label, the
labels alone would cost $100,000 per year. In addition, this commenter
stated that although retail stores may be able to assess fat content by
using a fat analyzer when doing in-store grinding, testing for nutrient
content would require the use of a laboratory and prove costly. The
commenter stated that these costs would cause many retailers that
provide on-site custom service to increase prices or sell case-ready
meat only, to the detriment of consumer choice.
Two individuals were concerned that the proposed rule would
increase the price of meat; one stated that if people wanted nutrition
information for meat and poultry products, stores would already provide
the information on the packages.
In terms of the overall costs and benefits of compliance, an animal
protection organization stated that, if the analyses and costs
estimated by FSIS are accurate, it is evident that consumers need more
information than they are currently getting. The commenter further
stated that the costs to industry are negligible when compared to the
benefits to the consumer.
An industry association stated that FSIS will also incur costs.
According to this commenter, if the Agency requires on-package labeling
for ground product, to verify compliance, it will be diverting a
significant portion of its resources to the chemical analysis of
numerous ground products produced at retail levels across the United
States. The commenter also stated that, while FSIS has increased its
level of sampling at the retail level for the purpose of
microbiological sampling of E. coli O157:H7, it should also be able to
collect additional samples for chemical analysis simultaneously.
However, the commenter stated that FSIS would also be incurring new
costs associated with sending samples to the laboratories as well as
the actual cost of the analyses.
Response: FSIS recognized that the proposal, like many regulations
promulgated by various government entities, would result in increased
costs to various affected parties, so it is not surprising to FSIS that
commenters would indicate that they would incur increased compliance
costs. The commenter who stated that the rule would cost it $22,464
annually also stated that it produces 6,000 packages of ground beef per
week or 312,000 packages per year. This equates to a per label cost of
7.2 cents. Another

[[Page 67756]]

commenter who said it would cost them $10,000 annually also said that
they sell 100,000 packages annually. This equates to a per label cost
of ten cents. Both estimates are significantly higher than any estimate
prepared by FSIS. The Agency does not doubt that these retailers may
incur higher labeling costs should this rule become final, but FSIS is
unsure how their estimates were prepared. For example, FSIS is unsure
as to whether these estimates include certain costs that should or
should not be attributed to the proposal. At this time, the Agency is
not in the position to accept these estimates as being comparable (in
methodology or assumptions) to the costs presented by FSIS. As
explained in the supplemental PRIA, FSIS estimates that retailers would
incur the costs of upgrading store scales and printers to include
nutrition information, redesigning larger store labels, providing
nutrition analysis for each product, and using larger labels.
The Agency has reviewed the concerns of the beef producer but, with
the limited supporting information provided, finds that the commenter's
concerns are unconvincing. At no time does the commenter indicate what
its costs might be, so it is difficult to determine how burdensome the
requirements are for this producer.
The beef producer stated that the average weight of a package of
pasture fed ground beef is between one and 1.5 pounds. However, in the
supplemental PRIA cost analysis, FSIS estimates that the average weight
of a retail package is 2.7 pounds (ranging from 1.7 pounds at the 5th
percentile, to 4.35 at the 95th percentile). This estimate is from the
National Cattlemen's Beef Association (NCBA), and FSIS believes this
estimate better reflects the average weight of a retail package of
ground product than the figure the commenter provided for pasture fed
ground beef. NCBA's source is the Meat Purchase Diary, which is a
survey. Although FSIS believes that NCBA data provide a sound estimate
of the average weight of a retail package of ground product, there is
some uncertainty in this estimate, because NCBA does not release any
detailed data from its survey.
With regard to the comments on the cost of samples and nutrient
analysis, the supplemental PRIA cost analysis includes costs of
nutrition analysis ranging from $599 to $787 per modified label. These
are costs required to create a nutrition facts panel. As explained in
the cost analysis below, FSIS does not believe that the cost of a fat
analyzer should be attributed to this rule. Stores may receive product
for which a fat analysis has been performed and labeled accordingly.
Also, as explained above, retailers currently must have a means of
knowing that their product meets the standard of identity for ground
beef.
With regard to the comment on the costs of upgrading scale
printers, FSIS's supplemental PRIA cost analysis estimates the cost of
updating scale printers at $2,400 per store or $56.35 million total.
FSIS also estimated annual scale maintenance costs at $144 every year
after the first year the scale has been purchased. Therefore, the
supplemental PRIA analysis is consistent with the comment on updating
scale printers.
In response to the comment that costs would cause many retailers
that provide on-site custom service to increase prices, products that
are ground or chopped at an individual customer's request and that are
prepared or sold at retail are exempt from nutrition labeling
requirements, provided the labels or labeling of those products bear no
nutrition claim or nutrition information.
In response to the comments from individuals concerned that the
rule would increase the price of meat, as explained in the supplemental
PRIA cost analysis, the cost of this rule is not likely to be excessive
relative to the volume of input of ground or chopped meat and poultry
products sold at retail. The estimated cost of the rule on a per pound
basis is $.0053. This increase in cost should not affect consumer
purchases.
In response to the statement that nutrition information would be
available if people wanted it, market forces have not been great enough
to ensure significant participation in the voluntary nutrition labeling
program. This fact could be evidence that consumers are not willing to
pay for this information. Nonetheless, as is explained above, FSIS
believes that consumers have reasonable expectations concerning the
nutrient content of the major cuts of meat and poultry products, but
they need precise information about the nutrient content of the major
cuts in order to make a fully informed comparative judgment about the
various cuts. In addition, the extent that such information conveys a
negative credence attribute would limit its availability, if retailers
were not required to disclose it. Without nutrition information for the
major cuts of single-ingredient products and ground or chopped
products, consumers do not have necessary and sufficient information to
make informed purchasing decisions.
As far as the overall costs and benefits of compliance, the Agency
believes that it has done a reasonable job in estimating the costs and
benefits of the proposal.
In terms of cost to FSIS, in the Paperwork Reduction Act analysis,
FSIS estimated that the costs of label and records review will total
$300,000 annually. Other costs the Agency incurs as a result of this
rule will be negligible. The rule will not increase inspection
activities substantially. Similarly, it will not increase substantially
the laboratory costs associated with FSIS sampling and testing for
nutrient analysis. FSIS will conduct inspection and testing activities
under this rule concurrent with existing inspection and testing
activities.
Comment: A consumer organization asserted that FSIS overestimated
the cost of the proposed rule by assuming that 20 percent of
establishments would have to install new machinery for stamping,
printing, or affixing nutrition labels for ground and chopped meat. The
commenter believed that the 20 percent estimate is too high. FSIS's own
1999 survey showed that 97 percent of large chains, 91 percent of large
independent retailers, and 84 percent of medium and small independents
already complied with the label requirements of the final rule for
Mandatory Safe Handling Statements on Labeling of Raw Meat and Poultry
products. In addition, the commenter noted that small firms are exempt
from the proposed rule.
Response: After the proposed rule was published, FSIS contracted
with RTI International to assist the Agency in data collection and
revising the cost analysis for the supplemental PRIA. Among the several
changes based upon RTI's review, FSIS revised the label cost estimates.
The supplemental PRIA assumes that retail facilities and official
establishments have not yet incurred any costs for nutrition labeling
of ground or chopped products or major cuts. However, the supplemental
PRIA also estimates the current levels of nutrition labeling and
adjusts cost and benefit estimates to reflect current levels of
nutrition labeling.
Comment: According to a retail industry association, provisions
requiring labels on individual packages of ground meat and poultry
products will impose most costs and burdens upon independent retailers
that offer custom service rather than pre-packaged case-ready meat. The
commenter further alleged that the proposal would disproportionately
affect independent operators and their customers, coercing retailers
into increasing prices to cover increased costs or eliminating custom
service because of the need to provide labeling for nutritional content
of products ground in retail stores.

[[Page 67757]]

One individual stated that the proposed requirements would
adversely affect small businesses. Also, a small producer stated that
providing nutrition information on the labels of ground products would
be difficult and costly for the small farmer or producer selling beef
wholesale to stores.
Response: When Federal Agencies like FSIS issue rules, they are to
make sure that the rules are fair to those being regulated. The
Regulatory Flexibility Act requires Federal Agencies to consider the
affect of regulations on small entities in developing regulations (see
the Regulatory Flexibility Act Analysis below).
To minimize the burden on small businesses, should it become final,
the rule will provide a small business exemption. In addition, the rule
will provide an exemption from nutrition labeling requirements for
ground or chopped products that are ground or chopped at an individual
customer's request and that are prepared and served or sold at retail,
provided that the labels or labeling of these products bear no
nutrition claims or nutrition information. FSIS also intends to provide
nutrition labeling materials for the major cuts of single-ingredient,
raw products and for ground or chopped products on a free basis through
its Web site. Retailers can display these materials at the point-of-
purchase for the major cuts. Also, retailers and official
establishments can obtain nutrition information for ground or chopped
products at the following Web site: http://www.ars.usda.gov.
Comment: A consumer organization argued that FSIS underestimated
the benefits of the rule by ignoring both the impact of meat and
poultry consumption on non-fatal cases of heart disease and cancer and
the impact on obesity and its consequences.
According to the commenter, FSIS limited its estimates of the
benefits to the reduction in annual deaths from breast cancer, prostate
cancer, colorectal cancer, and coronary heart disease. The commenter
stated that this approach ignores the benefits to consumers in reducing
the number of non-fatal cases of these four diseases. For example,
according to the commenter, when FDA evaluated the benefits of its
proposed rule on trans fatty acids in foods, the Agency estimated that
only one-third of heart attack cases due to coronary heart disease are
fatal. For non-fatal cases, FDA estimated the discounted value of the
reduction in functional disability and pain and suffering of the
patient and the reduction in medical costs at $282,000 per case (or
33.5 percent of the FDA's estimated value of $840,000 per fatal case).
According to the commenter, as there are two non-fatal cases of
coronary heart disease for every fatal case, FSIS should increase its
benefits from the proposed rule by 67 percent. At a seven percent
discount rate, this would increase the benefits over 20 years from a
reduction in coronary heart disease from FSIS's current estimate of
$752 million to $1.256 billion.
The commenter also stated that similar adjustments could be made to
account for the reductions in the non-fatal cases of three types of
cancer that FSIS considered. About 42 percent of colorectal cancer
cases are fatal, about 16 percent of prostate cancer cases are fatal,
and about 21 percent of breast cancer cases are fatal. The commenter
believed that one could assume that the ratio of the benefits of
reducing these non-fatal cases to the benefits of reducing the fatal
ones is the same for these three types of cancer as FDA used for
coronary heart disease, i.e., 33.5 percent. Using a seven percent
discount rate, the commenter estimated that including the reduction in
non-fatal cases would increase the benefits over 20 years from a
reduction in these three types of cancer from FSIS's current estimate
of $167 million to $316 million.
In sum, including the impact of the proposed rule on non-fatal
cases of the four diseases FSIS considered increases the total benefits
(using a seven percent discount rate over 20 years) from $918 million
to $1.572 billion.
When the commenter looked at the impact of the rule as it related
to total fat, saturated fat, and cholesterol, the commenter thought
that the proposal might help lead to a reduction in weight, which, in
turn, could lead to a reduction in both mortality and morbidity from
various diseases. According to the commenter, recent studies placed the
cost of obesity in the United States at $39 billion in direct medical
costs and $48 billion in indirect loss of output because of both
morbidity and mortality. Reducing these $87 billion in annual costs by
even 0.15 percent through the provisions of this rule would mean
additional annual benefits of $13.05 million, which (at a 7 percent
discount rate) means additional benefits over 20 years of about $138
million.
In summary, the benefits of the proposed rule over 20 years
(discounted at 7 percent)--taking account of morbidity and obesity--
could well be $1.71 billion rather than the $918 million estimated in
the proposed rule based on FSIS's examining only mortality.
Conversely, a meat industry organization cautioned FSIS against
making the mortality assumptions included in the proposed rule's
benefits analysis. This commenter stated that FSIS's assumptions were
based on only one part of meat's nutrient content. The commenter stated
that, while diets high in saturated fat and cholesterol have been
associated with risk of chronic disease, meat has never been shown to
cause such diseases.
A farmer/rancher believed that the new nutrition labeling
requirements could potentially encourage consumers to eat more meat,
which would increase her profits.
Response: In response to the comment concerning non-fatal cases of
heart disease and cancer, FSIS has reviewed all of the information
provided by this commenter and believes that the information provided
on coronary heart disease is potentially useful to the FSIS analysis.
The information on the relationship between fatal cases and non-fatal
cases of coronary heart disease is reliable in that FDA looked at the
relevant literature and medical statistics to determine the annual
number of heart attack cases of coronary heart disease that occur and
the percent of those (occurring each year) that are fatal. This allows
for a total, in a given year, of the number of heart attack cases that
are not fatal, based just on new heart attack cases. FSIS agrees that a
reduction in non-fatal cases of chronic heart disease would result in a
significant benefit to society. The methods for estimating both the
number of non-fatal cases avoided annually, and the value of non-fatal
cases avoided annually are unsettled and further research is needed to
improve the reliability of this information.
The information on colorectal, prostate, and breast cancer is not
as reliable as that on non-fatal cases of coronary heart disease.
Specifically, the information reported by the American Cancer Society
represents the annual number of new cases, but the annual number of
deaths includes deaths from both old cases and new cases of disease. In
other words, the annual number of deaths also represents deaths from
cases that were reported as new cases in previous years. Therefore, if
FSIS were to adopt the information suggested by this commenter, then
the denominator used to calculate the percent of fatal cases to all
cases would be too small and the percent of fatal cases would be too
high. Consequently, the benefits estimates associated with the
reduction of non-fatal cases would be greater than the actual value of
benefits. It should be noted however, that to ignore the

[[Page 67758]]

benefits associated with the reduction of non-fatal cases is also
incorrect because, in fact, some benefits exist even though methods are
not available to provide reliable estimates. At this time, it is not
possible to provide a quantitative estimate of the benefits associated
with reducing the non-fatal cases of colorectal, prostate, breast
cancer, and coronary heart diseases.
Although the consumer organization recommended that FSIS revise the
benefits estimate to include specific benefits associated with weight
loss, FSIS did not account for these benefits in the final analysis.
FSIS does not have the data necessary to estimate these benefits, and
the commenter did not provide the data.
With regard to the industry comment that cautioned against making
the benefits assumptions included in the preliminary benefits analysis,
the supplemental PRIA benefits analysis is consistent with the
preliminary benefits analysis. Therefore, the supplemental PRIA
benefits analysis estimates the value of potential changes from intake
of fat, saturated fat, and cholesterol that could occur as consumers
respond to newly available nutrition information. The supplemental PRIA
analysis uses changes in serum cholesterol to estimate health outcomes,
which are reductions in the number of cases and mortality from three
cancers and coronary heart disease. FSIS used survey data and a model
developed by Zarkin, et al. to conduct the benefit analysis. The
industry commenter did not provide data that would allow FSIS to
conduct an alternative benefit analysis.
With regard to the comment that new nutrition labeling requirements
could encourage consumers to eat more meat, FSIS does not have data
that indicate that consumers will consume more meat as a consequence of
new nutrition labeling requirements. Therefore, the supplemental PRIA
benefits analysis does not include increased profits to producers.
Comment: One individual stated that there are benefits to
individuals in keeping track of their nutritional intake. This
commenter believed that he would find it valuable to know the levels of
the different nutrients in meat and poultry products.
Response: FSIS concurs that there are benefits to keeping track of
an individual's nutritional intake. The level of benefits associated
with nutrition labeling depends on the extent to which consumers change
their food consumption in favor of products that are more nutritious.
To accomplish this, a consumer needs to keep track of his or her
nutritional intake.
Comment: One individual stated that nutrition labeling on raw meat
and poultry products could potentially lead to some decreases in the
sale of red meat. The commenter also stated that poultry and fish will
become more popular. The commenter did not anticipate a big overall
change in sales.
An animal protection organization also stated that the net effect
of the rule may be a decrease in the overall consumption of meat.
Response: Should this rule become final, the impact of the rule
will depend upon the extent to which consumers change their food
consumption in favor of products that they believe are more consistent
with a healthy diet. Therefore, it is possible, as the commenters
stated, that nutrition labeling on raw meat and poultry products could
lead to some decreases in the sale or consumption of red meat as well
as some increases in the sale of poultry and fish. FSIS has no
information that would allow the Agency to measure such impact.
Therefore, the supplemental PRIA does not reflect any anticipated
changes in the volume of meat and poultry products consumed annually.
Comment: A consumer organization stated that there are significant
differences between African Americans and Caucasions in the incidence
of the four diseases that the FSIS examined in determining the benefits
of the proposed rule. According to this commenter, African Americans
are 50 percent more likely than Caucasians to die of heart disease, 43
percent more likely to die of colorectal cancer, 153 percent more
likely to die of prostate cancer, and 38 percent more likely to die of
breast cancer. African Americans are also 140 percent more likely than
Caucasians to die of diabetes, a disease linked to obesity.
Response: The benefits analysis that was prepared for this
rulemaking does not estimate benefits attributable to specific groups
(e.g., Caucasians or different minority groups). However, the benefits
analysis does measure the impact to all affected parties. Therefore, no
group of individuals has been excluded. Assuming that the information
provided by this commenter is correct, then the rule may have a greater
positive impact on minorities than on Caucasians.

Other Comments

Comments: Two industry organizations suggested that other
nutrients, e.g., zinc, and B-vitamins, should be required nutrients in
nutrition labeling of meat and poultry products. One producer suggested
that USDA provide information on omega 3 fatty acids and Conjugated
Linoleic Acid (CLA) in the nutrient data base. One commenter suggested
the addition of a warning label on meat products stating, ``Meat
consumption has been linked in research to a higher risk for heart
disease, cancer, hypertension, diabetes, and other serious diseases.''
Response: These comments are beyond the scope of the regulation.
Comment: One industry commenter suggested that what was needed most
was more consumer education on understanding and interpreting nutrition
facts panels.
Response: FSIS's requirements for nutrition facts panels are
consistent with FDA's requirements for nutrition facts panels. FSIS has
no information indicating that consumers are confused regarding the
information displayed on nutrition facts panels. However, if FSIS
receives information indicating that consumers need more education
concerning the information on nutrition facts panels, the Agency will
consider developing consumer education materials to aid consumers in
understanding the nutrition facts panels.
Comment: One commenter suggested that a uniform compliance date
should be provided for meat and poultry labeling requirements.
Response: FSIS has published a final rule that establishes January
1, 2012, as the uniform compliance date for new food labeling
regulations that are issued between January 1, 2009, and December 31,
2010 (73 FR 75564). FSIS issued these regulations to enhance the
industry's ability to make orderly adjustments to new labeling
requirements without unduly exposing consumers to outdated labels and
to minimize the economic impact of labeling changes. Should this rule
become final, the January 1, 2012, effective date will apply to the
nutrition labeling requirements for ground or chopped products because
nutrition labels will be required on ground or chopped products, unless
an exemption applies. Should it become final, this rule will allow
nutrition information for the major cuts of single-ingredient, raw meat
and poultry products at their point-of-purchase, not on the product.
Therefore, FSIS intends to make the labeling requirements for the major
cuts effective one year from the date of publication of the final rule.
Comment: One commenter stated that it had heard that the data in
the USDA National Nutrient Database for Standard Reference are not
current, and that USDA is undertaking nutrient analyses of additional
fat/lean combinations (e.g.,

[[Page 67759]]

93/7; 90/10; 85/15) of ground beef. This commenter recommended that
USDA forestall promulgation or implementation of these nutrition
labeling regulations until all of the necessary information is
available. Should FSIS finalize the rule, the commenter recommended
that FSIS adopt an 18-month implementation period for the regulations.
Response: As noted above, the USDA National Nutrient Database for
Standard Reference includes nutrient values for ground beef product
containing 5%, 10%, 15%, 20%, and 25% fat. In addition, ARS has
included a calculator on the Internet that will calculate the nutrient
values of a particular ground beef product based on the fat or lean
value entered.
Should it become final, the effective date for the nutrition
labeling requirements for ground or chopped products will be January 1,
2012. Therefore, the affected industry will likely have more than 18
months prior to FSIS's implementation of the rule for ground or chopped
products.

Section II. Executive Order 12866--Supplemental Proposed Rule
Regulatory Impact Analysis (PRIA)

This action has been reviewed for compliance with Executive Order
12866. As this action is determined ``economically significant'' for
purposes of Executive Order 12866, the Office of Management and Budget
(OMB) has reviewed it.
This supplemental PRIA differs from the PRIA that was published for
the proposed rule. The Food Safety and Inspection Service (FSIS), after
reviewing public comments, has concluded that further analysis of the
costs and benefits of the rule was required. RTI, International
performed an in-depth analysis responding to those comments (RTI,
International, 2003) that formed the basis for the revisions to the
cost analysis. FSIS incorporated the RTI findings with minor changes
into this final analysis. FSIS, among other revisions, has also added a
discussion comparing the costs of regulatory alternatives, revised the
analysis of benefits, and added a new section examining the cost
effectiveness of the rule.
This economic analysis uses the most current data available to the
Agency. It relies on the U.S. economic census data from 2002, released
in a report dated November 2005. Even though the data collection for
the ``U.S. Bureau of the Census--2007 Economic Census'' has been
completed, because the detailed reporting on the retail firms and
establishments that would likely be affected by the final rule is not
scheduled to be available to the Agency until about October 2010, FSIS
was unable to use that data. Thus, Tables 3, 4, and 5 (below), which
rely on the 2002 census data, have the most current information on
these retail firms and establishments available. Further, the Agency
used data from the FSIS Performance Based Inspection System (PBIS),
April 2006, to estimate the number of Federally- and State-inspected
meat and poultry slaughter and processing establishments that would
likely be affected by the final rule. These are the most representative
data available to the Agency on the time period around the 2002
economic census data. In addition, the Agency used 2005 costs because
they are the most representative data available to the Agency, for the
time period reflected in the 2002 economic census data.
The Agency requested that the Interagency Economic Peer Review
Group coordinate a peer review of the final regulatory impact analysis.
The peer reviews conducted by two economists from Federal agencies and
the FSIS responses to their comments are available in the FSIS docket
room and on the FSIS Web page with the supplemental proposed rule.
FSIS is proposing to amend the Federal meat and poultry products
inspection regulations to require nutrition labeling of the major cuts
of single-ingredient, raw meat and poultry products, unless an
exemption applies. Should this rule become effective, the guidelines
for voluntary nutrition labeling will become mandatory for these
products.
FSIS is also proposing to amend its regulations to require on-
package nutrition labels for ground or chopped meat and poultry
products. The Agency has determined that single-ingredient, raw ground
or chopped meat and poultry products are different from other single-
ingredient, raw meat and poultry products in several important
respects, and that these products are similar to products in the
current mandatory program that are required to bear nutrition labels.
Thus, under this rule, the nutrition labeling requirements for all
ground or chopped meat and poultry products will be consistent with the
nutrition labeling requirements for multi-ingredient and heat processed
products.
The supplementary proposed rule provides for a number of
exemptions, including a small business exemption. Should the rule
become final, small businesses will be exempt from the requirement for
nutrition labeling of single-ingredient, raw ground or chopped
products. Small businesses are those with 500 or fewer employees, are
owned by companies with 500 or fewer employees, and produce 100,000
pounds or less annually of each ground product affected by the rule.\1\
---------------------------------------------------------------------------

\1\ It is possible that some very small establishments could
potentially be affected by the requirements if they are owned by
companies with more than 500 employees and they produce more than
100,000 pounds of any ground product.
---------------------------------------------------------------------------

A. Need for the Rule

FSIS believes that less than the optimal amount of nutrition
information is being provided because consumers cannot independently
determine the nutritional qualities of the meat and poultry products
affected by the rule, thus leading to insufficient incentives for
processors and retailers to reveal the nutrient content of these
products. To the extent that consumers purchase these products to
achieve a nutritional objective, information about the nutritional
characteristics of these products has value. Some consumers may
purchase or otherwise obtain such information at a cost. However, such
information may be costly to obtain for most consumers, and such
information may change in value with the development of new products
with different nutritional characteristics.
The association between consumption of fat, saturated fat, and
cholesterol with three types of cancer and coronary heart disease is
discussed in the proposed rule (66 FR 4969, January 18, 2001) and the
Supplemental PRIA Benefits Analysis of this section. In 2003, there
were about 39,800 deaths in the United States from breast cancer,
29,800 deaths from prostate cancer, and 57,100 deaths from colorectal
cancer. There were about 515,200 deaths from coronary heart disease in
2000. Consequently, a decline in the percentage of calories from fat,
saturated fat, and cholesterol can lead to a potentially significant
number of deaths averted.
A substantial amount of theoretical and applied research has been
conducted on the economics of consumer information since first
discussed by Stigler, and subsequently by Lancaster and Rosen. Economic
theory now treats information on the characteristics of a good along
with information on the price of the product as major determinants of
consumer choice.
A basis for required labeling exists when the market does not
supply enough information to allow consumers to make consumption
choices that reflect their individual preferences. Under conditions of
asymmetric information, social costs and benefits

[[Page 67760]]

may suggest a different labeling outcome than the one resulting from a
private firm's labeling decision (Golan, et al.). Asymmetric
information may particularly be a problem in markets for foods with
negative credence attributes \2\ as is discussed below regarding
products subject to the rule.
---------------------------------------------------------------------------

\2\ Credence attributes are characteristics of the quality of a
product that the consumer cannot determine even after consumption
(nutritional value, medical expertise). Credence characteristics
will always require the consumer to acquire information, such as
nutritional information, from the seller or third parties, whose
credibility will vary.
---------------------------------------------------------------------------

In their examination of food consumption patterns before and after
the general availability of information about nutritional
characteristics, diet-disease connections, and health claims, a number
of authors have confirmed the role of nutrition information in
enhancing the ability of consumers to make healthier food choices (Kim
et al., Neuhouser et al., Tiesl, et al. (1997, 2001), Moorman, and
Ippolito and Mathios (1990b, 1991, 1995, 1998). The results of these
studies are discussed in the Benefits Analysis.
Ground or chopped meat and poultry products are formulated by
processors and the nutritional characteristics of these products may
vary.\3\ In addition, without nutrition information for the major cuts,
consumers cannot assess precise levels of fat and cannot know the
levels of specific nutrients in these products.\4\ Major cuts are
generally considered by consumers to be largely undifferentiated
products in terms of nutrient content. If one supplier of major cuts
provides the nutrient information, and such information is the same
regardless of supplier, there is no incentive for other suppliers to
incur the cost of providing the information. The extent that such
information conveys a negative credence attribute would further limit
its availability.
---------------------------------------------------------------------------

\3\ Single-ingredient, raw ground or chopped meat and poultry
products is one of the two major product categories addressed in the
rule. As the definition of this product does not change in the
analysis, it will be referred to as ``ground or chopped products''.
\4\ Major and nonmajor cuts of single-ingredient, raw meat and
poultry products is one of the two major product categories
addressed in the rule. The category of products will be referred to
as ``major and nonmajor cuts''. In the case where only major cuts of
single-ingredient, raw meat and products are considered, they will
be referred to as ``major cuts''. Nonmajor cuts of single-
ingredient, raw meat and poultry products will be referred to as
``nonmajor cuts''.
---------------------------------------------------------------------------

As is explained above, FSIS believes that consumers have reasonable
expectations as to the nutrient content of the major cuts. Competitive
pressures among processors could over time increase the supply and
accuracy of such information (Ippolito and Mathios, 1991). However, the
comparison between foods necessary to construct a healthy diet is made
difficult if precise information about nutrient content is not
provided, significantly different formats are used to provide nutrition
information, or the information is difficult to interpret. Thus, the
point-of-purchase (POP) nutrition information requirement and
enforcement of accuracy will facilitate consumer efforts to construct a
healthy diet and facilitate consumer understanding of the information
provided.
There is not uniform agreement that nutrition labeling is always an
effective policy measure, even if government intervention were
warranted on the basis of informational needs and social welfare.
Variyam, Blaylock, and Smallwood, 1995 and 1997, found that labels are
not an effective means for educating consumers and changing consumption
behavior. However, these papers emphasize format and context of the
information as important factors affecting the influence of the
information on the audience. For example, consumers are more likely to
read and understand labels that are clear and concise (Hadden; Magat
and Viscusi; Noah). Some of the studies cited above (Tiesl and Levy,
1997, and Ippolito and Mathios, 1995) have found that the effectiveness
of nutrition labels are augmented within the context of broader
nutrition education programs about diet-health linkages.
Golan, et al., summarize research showing when nutrition labeling
is the most appropriate policy tool. Conditions when labeling may be
appropriate include:
Consumer preferences differ. Labeling may be preferable if
consumer preferences differ widely with respect to product
characteristics, in this case total fat, cholesterol, saturated fat,
calcium, and iron for example. As is the case for high sodium foods,
consumers show significantly different attitudes to fat content.
Information is clear and concise. To be effective, the
information on the label is clear, concise, and informative. FSIS
believes that this criterion will be achieved for both nutrition labels
and POP information.
FSIS concludes that these conditions exist for the products subject
to the rule or would be accomplished by the rule. FSIS also concludes
that nutrition labels and POP information are superior to other tools
such as food bans, taxes on fat content, and consumer education
programs.
Ippolito and Mathios (1990a) argued that competition among food
suppliers and consumer skepticism about suppliers' claims for their
foods often leads to well-informed consumers. If, for example,
consumers were concerned about dietary intake of sodium, a supplier
with a product low in sodium would advertise that attribute. If
consumers were also concerned about fat, a supplier with a low-sodium
and low-fat product would advertise both attributes. Consumers would
know that the low-sodium product that does not make a low-fat claim is
likely a higher-fat product. And any product that is silent on both
attributes is higher in sodium and fat.
But Ippolito and Mathios also argued there could be conditions
under which unfolding of information fails to occur and consumers are
not informed about important product attributes. Unfolding might not
occur when similar products share a negative attribute, like having a
high fat content when consumers are concerned about the fat content of
foods. If all competing foods share a high fat content, all suppliers
have products embodying a negative attribute, and no supplier would
have an incentive to advertise fat content. In that case, mandatory
nutrition labels might provide consumers with information they want and
did not have.
From a statutory perspective, the lack of nutrition information on
the labeling of the major cuts and on ground or chopped products is
misleading because material facts or attributes about these products
are not disclosed to the public. The FMIA and PPIA provide that product
is misbranded if its labeling is false or misleading in any particular
way (21 U.S.C. Sec. Sec. 601(n)(1) and 453(h)(1)). Therefore, without
nutrition information for the major cuts and for ground or chopped
products, FSIS has concluded that these products would be misbranded
under section 1(n) of the FMIA or section 4(h) of the PPIA (66 FR 4974,
January 18, 2001).
FSIS believes that the nutrition labeling requirements, when
implemented, will provide consumers with valuable information, leading
to improved dietary decisions. By increasing consumer awareness of the
levels of total fat, saturated fat, and cholesterol in meat and poultry
products affected by the rule, nutrition labeling may serve as a
further incentive to food retailers and official establishments to
provide products with reduced levels of these nutrients. FSIS has
concluded that further action is necessary in order to provide
consumers with adequate nutrition information.

[[Page 67761]]

B. Baseline

The rule would affect Federal establishments and may affect State
establishments \5\ that produce ground or chopped meat and poultry
products. The rule would also affect retail food establishments such as
supermarkets, grocery stores, meat markets, warehouse clubs, and
superstores. To be conservative, FSIS has included State establishments
in this analysis. The Agency used its Performance Based Inspection
System (PBIS) database of April 2006 to determine the number of active
Federally-inspected establishments producing ground or chopped products
affected by the rule (Table 1).
---------------------------------------------------------------------------

\5\ Unless stated otherwise, when discussing meat and poultry
processing establishments, Federally-inspected establishments will
be referred to as ``establishments''. State-inspected establishments
will be referred to as ``State inspected establishments''.

Table 1--Size Distribution of Federal Establishments Producing Ground or
Chopped Products
------------------------------------------------------------------------
Size Number
------------------------------------------------------------------------
Very Small (9 or fewer employees or less than $2.5 1,433
million in sales annually)..........................
Small (10 to 499 employees).......................... 858
Large (500 or more employees)........................ 109
------------------
Total............................................ 2,400
------------------------------------------------------------------------
Source: FSIS Performance Based Inspection System (PBIS), April 2006.

For purposes of this analysis, very small establishments, defined
as those with 9 or fewer employees or less than $2.5 million in annual
sales are exempt from the requirement for nutrition labeling of single-
ingredient, raw ground or chopped products because they have 500 or
fewer employees, are owned by companies with 500 or fewer employees,
and FSIS assumes they produce 100,000 pounds or less annually of each
ground product.\6\ Some small establishments may also be exempt from
the regulation for the same reasons that some very small establishments
are exempt.\7\
---------------------------------------------------------------------------

\6\ It is possible that some very small establishments could
potentially be affected by the requirements if they are owned by
companies with more than 500 employees and they produce more than
100,000 pounds of any ground product. However, FSIS has concluded
that this is a reasonable criterion for defining very small
establishments that would be exempt from certain provisions of the
rule. FSIS has not received public comment objecting to the use of
this criterion and does not believe that establishments would alter
their operations to meet this criterion.
\7\ The PBIS does not include data on the size of the owning
company or on processed food volumes. Therefore, it is not possible
to determine whether some of these establishments qualify for the
small business exemption.
---------------------------------------------------------------------------

Nutrition labels are designed for company-wide use. FSIS estimated
the number of affected companies by dividing the number of small and
large Federal establishments in Table 1 by three. Based on research,
multi-establishment firms own an average of three establishments (Muth,
2003, RTI, 2003). That is, 858 small establishments + 109 large
establishments /3 = 322 small and large firms. Some of these Federal
establishments may be independent and may not be part of a multi-
establishment firm. Similarly, some very small establishments may be
part of a multi-establishment firm. Therefore, this is an area of
uncertainty in the analysis. However, FSIS believes its assumptions are
reasonable for purposes of estimating costs.
In addition, the Agency used the PBIS to estimate the number of
active State establishments producing single-ingredient, raw ground or
chopped meat and poultry products that would be affected by the rule
(Table 2). The information in PBIS on State establishments may not be
complete. Thus, the Agency may be underestimating the number of State
establishments, or the total number of these establishments that would
be affected by the rule.

Table 2--Size Distribution of State Establishments Producing Ground or
Chopped Products
------------------------------------------------------------------------
Number of
Size establishments
------------------------------------------------------------------------
Very Small (9 or fewer employees or less than $2.5 632
million in sales annually)..........................
Small (10 to 499 employees).......................... 41
Large (500 or more employees)........................ 0
------------------
Total............................................ 673
------------------------------------------------------------------------
Source: FSIS Performance Based Inspection System (PBIS), April 2006.

Most, if not all, of these State establishments may be independent
and may not be part of a multi-establishment firm. Very small State
establishments are exempt from the requirement for nutrition labeling
of ground or chopped products because they have 500 or fewer employees,
and the agency has assumed that they are owned by companies with fewer
than 500 employees and produce 100,000 pounds or less annually of each
ground product. Some small State establishments may also be exempt from
the regulation for the same reasons that some very small Federal
establishments are exempt. Nutrition labels are designed for company-
wide use. Thus, for purposes of the analysis the number of small State
establishments and firms are the same.
The total estimated number of meat and poultry processing firms is
363 firms (322 firms with establishments + 41 firms with State
establishments) that would be producing ground or chopped meat and
poultry products that would be affected by the rule.
Based on the U.S. Economic Census for 2002, there are 47,688 retail
firms and 74,910 retail establishments that would be affected by the
POP requirements for the major cuts of meat and poultry (Table 3).
Despite FSIS encouragement of retailers' use of (POP) materials for the
major cuts, the October 1999 voluntary nutrition labeling survey

[[Page 67762]]

(USDA, 1999) found a lower rate (54.7 percent of retail stores) of
participation than the December 1996 survey (USDA, 1996) found (57.7
percent of retail stores). The effect of existing compliance reduces
the cost impacts of the rule are shown in Appendices C and D and are
discussed below.\8\
---------------------------------------------------------------------------

\8\ The appendices supporting the economic analysis are
available from the FSIS docket room and at http://www.fsis.usda.gov/regulations_&_policies/2009_Proposed_Rules_Index/index.asp.

Table 3--Number of Retail Firms and Establishments Affected by POP
Nutrition Information Requirements for Major Cuts of Meat and Poultry
------------------------------------------------------------------------
NAICS
NAICS code description Firms Establishments
------------------------------------------------------------------------
445110............ Supermarket and 42,318 66,150
other grocery
(except
convenience
stores).
445210............ Meat markets.... 5,354 5,848
452910............ Warehouse clubs 16 2,912
and superstores.
-----------------------------------------------------
Total......... ................ 47,688 74,910
------------------------------------------------------------------------
Note: NAICS is North American Industry Classification. A ``firm'' refers
to the parent company and an ``establishment'' refers to the retail
facility.
Source: U.S. Department of Commerce, U.S. Bureau of the Census--2002
Economic Census, November 2005. ``Establishment and Firm Size: Retail
Trade.'' EC02-44SS-SZ. Washington, DC: U.S. Department of Commerce.

Table 4 shows the number of large retail firms and establishments
affected by nutrition labeling requirements for ground or chopped
products. About 23,479 retail establishments are owned by about 266
companies that have 500 or more employees. Table 5 shows the estimated
number of small retail firms and establishments that would be affected
by nutrition labeling requirements for ground or chopped products, if
there were no waiver related to the use of a ``percentage-lean/
percentage-fat'' statement. About 51,431 retail establishments are
owned by the 47,422 firms that have less than 500 employees. This
policy is discussed below.

Table 4--Estimated Number of Large Retail Firms and Establishments
Affected by Nutrition Labeling Requirements for Ground or Chopped Meat
and Poultry Products
------------------------------------------------------------------------
NAICS
NAICS code description Firms Establishments
------------------------------------------------------------------------
445110............ Supermarket and 253 20,434
other grocery
store (except
convenience
stores).
445210............ Meat markets.... 2 142
452910............ Warehouse clubs 11 2,903
and superstores.
-----------------------------------------------------
Total......... ................ 266 23,479
------------------------------------------------------------------------
Note: NAIC is North American Industry Classification. A ``firm'' refers
to the parent company and an ``establishment'' refers to the retail
facility.
Source: U.S. Department of Commerce, U.S. Bureau of the Census--2002
Economic Census, November 2005. ``Establishment and Firm Size: Retail
Trade.'' EC02-44SS-SZ. Washington, DC: U.S. Department of Commerce.

Table 5--Estimated Number of Small Retail Firms and Establishments
Affected by Nutrition Labeling Requirements for Ground or Chopped Meat
and Poultry Products, When the ``Percent-Lean/Percent-Fat'' Label Is No
Longer Waived for These Products
------------------------------------------------------------------------
NAICS
NAICS code description Firms Establishments
------------------------------------------------------------------------
445110............ Supermarket and 42,065 45,716
other grocery
store (except
convenience
stores).
445210............ Meat markets.... 5,352 5,706
452910............ Warehouse clubs 5 9
and superstores.
-----------------------------------------------------
Total......... ................ 47,422 51,431
------------------------------------------------------------------------
Note: NAIC is North American Industry Classification. A ``firm'' refers
to the parent company and an ``establishment'' refers to the retail
facility.
Source: U.S. Department of Commerce, U.S. Bureau of the Census--2002
Economic Census, November 2005. ``Establishment and Firm Size: Retail
Trade.'' EC02-44SS-SZ. Washington, DC: U.S. Department of Commerce.

Should it become final, the rule would affect an estimated 21.6
billion pounds of meat and poultry products. Of this amount, 16.7
billion pounds are major cuts of single-ingredient, raw products and
4.9 billion pounds are ground or chopped meat and poultry products. The
amount of ground or chopped product subject to the provisions by the
rule is reduced from an estimated 6.2 billion pounds as a result of
exemptions to small businesses. There are approximately 2.9 billion
pounds of nonmajor cuts. These products are not affected by the final
rule; however they are affected by the requirements of Alternatives 2
and 5 discussed in the following section. The source and derivation of
these estimates are provided in Appendix A, Tables 1-4 and discussed in
the Cost Effectiveness Analysis.
These estimates, however, do not take into account the level of
voluntary compliance with the nutrition labeling requirements for
ground or chopped products that currently exists. Consequently, the
estimated amounts of ground or chopped products and major cuts that
would be impacted by the final rule are overstated. However, in the
analysis that follows we take into account the 68 percent compliance
rate

[[Page 67763]]

(NCBA, 2004) of voluntary nutrition labeling of ground or chopped
products and 54.8 percent level of voluntary compliance (USDA, 1999) of
stores that provide nutrition labeling for major cuts.
FSIS used data from USDA's Continuing Survey of Food Intake by
Individuals (CSFII), and the associated Diet and Health Knowledge
Survey (DHKS) to establish a baseline for fat, saturated fat, and
cholesterol intake. The CSFII collects data on food intakes by
individuals. USDA conducted three separate one-year surveys for 1994-96
(USDA, 1994-1996). These surveys recorded two nonconsecutive days of
food consumption and collected information on what and how much
individuals ate, and where the food was obtained. This information was
used to develop estimates of nutrient intake for each individual
respondent. The DHKS gathered data on consumers' knowledge of issues
related to diet and health, and contained several questions relating to
the use of nutrition information labels and nutrition information for
food products. Linking information from the two surveys allowed FSIS to
correlate use of nutrition information from the DHKS with nutrient
intake data from the CSFII. The Agency focused here on two key
questions pertaining to nutrition information use on all food products
and on meat and poultry in particular: Q: When you buy foods, do you
use the nutrition panel that tells the amount of calories, protein,
fat, and such [e.g., sodium, total carbohydrate] in the serving of a
food: Often (always), sometimes, rarely, or never? (Question 16-c,
DKHS) Q: When you buy raw meat, poultry, or fish, do you look for
nutrition information: Often (always), sometimes, rarely, or never?
(Question 17-I, DHKS). Using data from the CSFII and the DHKS, FSIS
estimated rates of nutrition information usage, based on these two
questions. The results are presented in Benefits Analysis (Table 15)
where they are used to establish a baseline for intake of fat,
saturated fat, and cholesterol. Additional information is then used to
estimate the impacts of label usage on dietary intakes of these
nutrients, and the resulting human health effects.

C. Regulatory Alternatives

FSIS considered several regulatory alternatives:
Alternative 1: Continuing with the existing voluntary
program;
Alternative 2: Making the voluntary program mandatory;
Alternative 3 (the supplemental proposed rule): Requiring
nutrition information on labels of all ground or chopped products and
making the voluntary program mandatory for the major cuts;
Alternative 4: Requiring nutrition information on labels
of the major cuts and on all ground or chopped products; and
Alternative 5: Requiring nutrition information on labels
of major and nonmajor cuts and all ground or chopped products.
The provisions for the regulatory alternatives are summarized in
the following table.

Table 6--Nutrition Labeling Requirements under Regulatory Alternatives
----------------------------------------------------------------------------------------------------------------
Type of product
-----------------------------------------------------------------------------------------------------------------
Major cuts of single Nonmajor cuts of single-
Regulatory alternative Ground or chopped ingredient, raw ingredient, raw
products products products
----------------------------------------------------------------------------------------------------------------
Alternative 1; (Status quo/current On-package nutrition Voluntary program: Voluntary program:
requirements). labeling is not nutrition information nutrition information
required for ground or can be on package or for these products is
chopped products that at point of purchase. not required. However,
are raw, single- if nutrition
ingredient. information is
voluntarily provided
for these products, it
must be consistent
with the nutrition
information required
for the major cuts of
single-ingredient, raw
products.
Alternative 2........................ Mandatory nutrition Mandatory nutrition Mandatory nutrition
labeling requirements. labeling requirements. labeling requirements.
Nutrition information Nutrition information Nutrition information
must be provided on is provided on package is provided on package
package or at the or at the point of or at the point of
point of purchase. The purchase. The analysis purchase. The analysis
analysis assumes that assumes that a assumes that a
a reference manual is reference manual is reference manual is
provided at the point provided at the point provided at the point
of purchase which of purchase which of purchase which
contains the required contains the required contains the required
nutrition information. nutrition information. nutrition information.
Alternative 3 (Supplemental Proposed On-package nutrition Mandatory nutrition Nutrition information
Rule provisions). labeling is mandatory labeling requirements. for these products is
for all ground or Nutrition information not required. However,
chopped products, must be provided on if nutrition
including those that package or at the information is
are single ingredient, point of purchase. The voluntarily provided
raw products. analysis assumes that for these products, it
placards conveying the must be consistent
required nutrition with the nutrition
information will be information required
located at the point for the major cuts of
of purchase. single-ingredient, raw
products.
Alternative 4........................ Same as Alternative 3.. On-package nutrition Nutrition information
labeling is mandatory for these products is
for these products. not required.
Nutrition information
can be provided on the
label or by POP.
Alternative 5........................ Same as Alternative 3.. Same as Alternative 4.. On-package nutrition
labeling is mandatory
for these products.
----------------------------------------------------------------------------------------------------------------

[[Page 67764]]

Uncertainty analyses are conducted to estimate cost distributions
for each of the alternatives and the supplemental proposed rule. The
stochastic cost model uses @RISK (Version 4.5, Palisades Corp.) to
examine the effects of uncertainty. The model, statistical properties,
assumptions, documentation, and results are presented in the tables of
Appendix B and Appendix D, Tables 2 and 3.\9\
---------------------------------------------------------------------------

\9\ The stochastic model structure or framework, equation
specification, statistical properties, assumptions, documentation,
and results are presented in the tables of Appendix B and in
Appendix D, Tables 2 and 3. In most cases, the minimum (low),
maximum (high), and most-likely or mid-points values are to be found
in the tables of Appendix B. In general, the values used represent
information collected by RTI for the FDA Labeling Model, or other
studies such as the NCBA surveys. Other values were assumed to be
around a point-value that was collected by RTI, NCBA, or other
referenced studies. Assumptions are made and tested for their effect
on average cost of the alternatives considered. The results are in
tables of Appendix B, and in Appendix D, Table 1 that has the
summary of additional costs by alternative. In addition, Appendix D,
Tables 2 and 3, have the detailed stochastic model framework of the
economic analysis, and results of the preferred Alternative 3.
---------------------------------------------------------------------------

Alternative 1: Continuing With the Voluntary Program
FSIS considered continuing with the existing voluntary program and
attempting to increase participation by providing additional assistance
to the non-participants. FSIS considered providing nutrition
information or POP materials directly to retail stores to encourage
their participation in the voluntary nutrition labeling program and
providing POP material files on the FSIS Web site that retailers could
print and place in their stores.
Under this alternative, retail establishments would continue to
provide, on a voluntary basis, nutrition labeling for all single-
ingredient, raw meat and poultry products, including major cuts
identified in Sec. Sec. 317.344 and 381.444 (including ground beef,
ground pork) and cuts that are not identified as major cuts (including
ground or chopped products not covered in Sec. Sec. 317.344 and
381.444). This information could be provided at the point of purchase
or on the label of the product.
FSIS's efforts to provide nutrition information or POP materials to
retail stores to encourage their participation in the voluntary
nutrition labeling program and to provide POP material files on the
FSIS Web site could lead to additional participation in the voluntary
nutrition labeling program. However, FSIS did not choose this
alternative because, even though its cost is relatively low, the
benefits of the alternative are also relatively low. This option would
not ensure that nutrition information is provided for the major cuts of
single-ingredient, raw meat and poultry products. In addition, FSIS did
not choose this alternative because the Agency has determined that
ground or chopped products that do not bear nutrition information would
be misbranded under section 1(n)(1) of the FMIA and section 4(h)(1) of
the PPIA. Therefore, POP materials would not be adequate to provide
nutrition information for these products.
Alternative 2: Make the Voluntary Program Mandatory
FSIS considered making the voluntary program mandatory by requiring
nutrition information, either on labels or at the point of purchase,
for all single-ingredient, raw meat and poultry products, including the
major cuts and the nonmajor cuts of single-ingredient, raw meat and
poultry products. Under this alternative, FSIS would assume that most
retailers would display POP information for these products rather than
nutrition labels, because this is a low-cost means of providing
nutrition information for multiple products.
FSIS believes the vehicle chosen by retail establishments for
displaying nutrition information at the point of purchase for all major
and nonmajor cuts of single-ingredient, raw meat and poultry products
would be a reference manual, because placards covering all the major
and nonmajor cuts would take up product display space and result in
visual clutter. In addition, a manual may be easier for consumers to
use than numerous placards covering all major and nonmajor cuts, and
all the numerous formulations of ground or chopped meat and poultry
products. A manual about the size of the Uniform Retail Meat and
Identity Standards publication could include nutrition information for
all the major and nonmajor cuts, including nutrition information for
numerous formulations of ground or chopped products. The Uniform Retail
Meat and Identity Standards publication is approximately 100 pages,
with a page size of 8\1/2\x11, in a three-ring binder. The publication
provides meat identification standards for all cuts. However, the
publication does not provide nutrition information or information on
poultry cuts. Such information would have to be assembled from other
sources for inclusion in the manual.
This publication, including shipping and handling costs, is
available for purchase through the National Cattleman's Beef
Association for a minimum cost of $97.50; most-likely cost of $100.00;
or a maximum cost of $102.50. In the cost analysis of the alternative
chosen, FSIS estimated there are about 74,910 retail establishments
(Table 3). FSIS assumed that the manual would be replaced annually.
FSIS estimated the labor cost of displaying POP information for the
major cuts at $21.11 per hour.\10\ The time to obtain and make
available POP information for the major cuts per store, an average of
0.5 hour, is the same as that used to estimate the cost of Alternative
3, the supplemental proposed rule. Based on these estimates, the annual
costs of this alternative is estimated to be $8,281,675.\11\ This
estimate is comprised of $790,675 for labor costs (74,910
establishments x $21.11/hour x .5 hours) and $7,491,000 for the cost of
the reference manual (74,910 x $100.00/establishment). The average
present value of this cost is estimated at $87.74 million\12\ when
discounted at 7 percent over 20 years.\13\
---------------------------------------------------------------------------

\10\ Department of Labor, 2002. This wage represents an
appropriate wage for a combination of managerial and regular staff
that would be making available POP materials for major cuts and
includes wages of $15.62 and fringe benefits of $5.49 per hour.
\11\ This average annual cost has a range of variability of
$8.03 million at the 5th percentile and 8.53 at the 95th percentile
(see Appendix B, Table 10 and Appendix D, Table 1).
\12\ This average annual cost has a range of variability of
$85.10 million at the 5th percentile and $90.83 million at the 95th
percentile (see Appendix B, Table 10 and Appendix D, Table 1).
\13\ All present value calculations in the analysis of both
costs and benefits use a 20-year time horizon.
---------------------------------------------------------------------------

This alternative would be less expensive than the alternative
chosen by the Agency. As explained in the preamble to the proposed
rule, FSIS is unable to distinguish between the benefits that would
accrue from requiring nutrition labels on products versus nutrition
information on POP materials (66 FR 4984-4985, January 18, 2001).
Research is not available to differentiate the benefits of nutrition
information on labels versus nutrition information on displays. This is
a significant area of uncertainty in analyzing benefits of the
regulatory alternatives.
The benefits of this alternative may be comparable to the benefits
of the alternative chosen if POP nutrition information and on-package
labels have roughly the same amount of success \14\

[[Page 67765]]

in leading to dietary change.\15\ However, because there are numerous
formulations of ground or chopped products, it would be difficult for
producers or retailers to develop POP materials that would address all
the different formulations that exist for these products. Furthermore,
it would be difficult for consumers to find the correct information for
a specific ground or chopped product on POP materials that include
information concerning numerous formulations of these products (66 FR
4977, January 18, 2001). To use POP materials only, without nutrition
labels, consumers would have to find the nutrition information for a
specific fat and lean formulation among multiple formulations. If a
statement of the fat percentage is not included on a package of ground
products, consumers would not know which nutrient data concerning
ground product on POP materials would apply to that particular ground
product. Therefore, because this option may not result in benefits
associated with the consumption of ground or chopped products, this
option would likely result in lower benefits compared to the option
chosen. In addition, FSIS did not choose this alternative because it
does not allow for any distinction between major and nonmajor cuts.
FSIS has determined that it is not appropriate or necessary to require
nutrition information for nonmajor cuts that are not ground or chopped
at this time.
---------------------------------------------------------------------------

\14\ The term ``success'' or ``successful'' is used to aid the
discussion in the cost effectiveness analysis where the
effectiveness of the regulatory alternatives is discussed under
scenarios where the impact (``success'') of POP nutrition
information is varied relative to that of on-package nutrition
labels in leading to dietary change. The use of the same term to
refer to two different types of comparisons is intended to clarify
the discussion.
\15\ As the success of point-of-purchase information declines
relative to on-package nutrition labels, there is a proportional
decline in dietary changes and consequently a proportional decline
in lives saved associated with that measure, given the differences
in that amount of product affected.
---------------------------------------------------------------------------

Alternative 3 (Supplemental Proposed Rule): Require Nutrition
Information on Labels of All Ground or Chopped Products and Make the
Voluntary Program Mandatory for the Major Cuts (Other Than Ground Beef,
Ground Pork)
Should this rule become final, it will require nutrition
information on the labels of all ground or chopped products and
requires nutrition information, either on their labels or at their POP,
for the major cuts of single-ingredient, raw products, unless such
products qualify for an exemption. Under this alternative, retail
establishments and processors of meat and poultry products could
continue to voluntarily provide nutrition information for nonmajor cuts
of single-ingredient, raw meat and poultry products that are not ground
or chopped. This approach allows for a distinction between ground or
chopped products and other cuts. It also allows for a distinction
between major and nonmajor cuts.
Consistent with the regulations, the most recent voluntary
nutrition labeling survey (USDA, 1999) only assessed whether retail
stores provided nutrition labeling for the major cuts of single-
ingredient, raw meat and poultry products. Until some assessment is
made of whether adequate information is being provided for the nonmajor
cuts of single-ingredient, raw products that are not ground or chopped,
FSIS cannot determine whether it would be beneficial to require
nutrition information for these products.
The derivations of the costs of Alternative 3 are shown in the
section, Supplemental PRIA Cost Analysis. The average total present
value of the costs of this alternative is $348.06 million, assuming
retailers select the lower cost compliance option (Table 14). The
average annualized cost associated with this alternative is $32.85
million. As is shown in the section, Supplemental PRIA Benefits
Analysis, the present value of the benefits of this alternative is $2.2
billion if POP nutrition information for the major cuts is as
successful as on-package labels in leading to dietary changes. The
annualized benefit associated with this alternative is $205.5 million.
These estimates are not adjusted to account for current compliance,
thus over estimate costs and benefits from saved lives.
Alternative 4: Require Nutrition Information on Labels of the Major
Cuts and on All Ground or Chopped Products
FSIS considered requiring nutrition information only on labels of
the major cuts and on all other ground or chopped products not covered
in Sec. Sec. 317.344 and 381.444.\16\ As in Alternative 3,
establishments could voluntarily provide nutrition information, either
at the POP or on the label, for the nonmajor cuts that are not ground
or chopped. This approach allows for a distinction between major cuts
and nonmajor cuts that are not ground or chopped.
---------------------------------------------------------------------------

\16\ Ground or chopped products or not covered in Sec. Sec.
317.344 and 381.444 will be referred to as ``ground or chopped
products'' in the remainder of the final regulatory impact analysis.
---------------------------------------------------------------------------

FSIS estimates that packages of single-ingredient, raw major cuts,
including ground beef and ground pork, represent at a minimum 80
percent, most-likely 85 percent, and at a maximum 90 percent of all
packages of single-ingredient, raw meat and poultry products sold
through retail stores. Therefore, FSIS estimates the minimum, most-
likely, and maximum costs of this alternative would be the same as
these percentages of the costs of Alternative 5, which requires
nutrition information on the package labels of all major and nonmajor
cuts sold through retail stores. FSIS has based these percentages on a
previous determination by FSIS that the major cuts are representative
of the market (56 FR 60307, November 27, 1991) and are the most popular
cuts (56 FR 60320). Comments on the 1991 nutrition labeling proposal
generally supported the list of major cuts (58 FR 640, January 6,
1993). Similarly, one comment to the January 18, 2001, proposed rule on
nutrition labeling stated that the major cuts represent the greatest
share of fresh meat consumption. The cost analysis of Alternative 5
follows this discussion.
FSIS estimates the average present value of the costs of this
alternative to be $812.99 million ($956.5 million, the average present
value cost of Alternative 5, x .85). The average annualized cost
associated with this alternative is estimated at $90.28 million.
The benefits of this alternative would be similar to those of the
selected alternative if POP nutrition information and on-package labels
are equally successful at leading to dietary change. The pounds of
product requiring nutrition labeling are the same for both Alternatives
3 and 4. However, this alternative would be significantly more costly
than the alternative chosen, because this alternative would require on-
package nutrition labels on a large volume of product that are not
required to bear labels under Alternative 3.
These estimates are not adjusted to account for current compliance,
thus over estimate costs and benefits from saved lives.
Alternative 5: Require Nutrition Labels on All Single-Ingredient, Raw
Meat and Poultry Products and on All Ground or Chopped Products
FSIS considered requiring nutrition information on labels of major
cuts and nonmajor cuts of single-ingredient, raw meat and poultry
products, and on labels of ground or chopped products, unless an
exemption applied.
The supplemental PRIA cost analysis for the alternative chosen
calculated the costs of requiring nutrition labels on all ground or
chopped products. FSIS calculated the costs of requiring labels on all
other major and nonmajor cuts of single-ingredient, raw products that
are not ground or chopped. The same method for estimating the labeling
cost for all ground and chopped products under the alternative chosen
was used to estimate the labeling costs for major

[[Page 67766]]

and nonmajor cuts of single-ingredient, raw products under Alternative
5.
Table 7 shows the number of Federal establishments producing major
or nonmajor cuts that are not ground products. Many of these
establishments have a mix of operations that fabricate a variety of
cuts derived from multiple species in the same establishment. This is
especially prevalent in small and very small sized establishments.
Thus, the totals of the columns or the rows in this table do not
represent the total number of establishments under Federal inspection
due to double counting.

Table 7--Federal Establishments That Fabricate Major or Nonmajor Cuts That are Not-Ground Products
----------------------------------------------------------------------------------------------------------------
Size
Product ---------------------------------------------------------------
Large Small Very small Unknown
----------------------------------------------------------------------------------------------------------------
Meat:
Beef........................................ 52 886 1303 28
Pork........................................ 56 750 1155 23
Lamb........................................ 0 319 575 11
Other meat.................................. 3 186 338 4
Poultry:
Chicken..................................... 158 611 698 15
Turkey...................................... 38 210 264 5
Other poultry............................... 0 0 2 0
----------------------------------------------------------------------------------------------------------------
Note: Data is from the Performance Based Inspection System (PBIS) April 2006.

Consistent with the supplemental PRIA cost analysis for the
selected alternative, FSIS estimates that very small establishments
would be exempt from nutrition labeling requirements because they have
500 or fewer employees, are owned by companies with 500 or fewer
employees, and FSIS assumes they produce 100,000 pounds or less
annually of each product. Also, FSIS assumes that all ``small''
establishments are owned by large, multi-establishment firms and would
not qualify for this exemption. Nutrition labels are designed for
company-wide use. FSIS estimated the number of affected companies by
dividing the number of small and large establishments in the table
above by three, the number of establishments owned on average by multi-
establishment firms (Muth, 2003; RTI, 2003). FSIS assumed
establishments of unknown size are either large or small, to ensure
that the Agency did not underestimate the number of affected
establishments.
In addition, there are about 41 State establishments that are small
that would likely be affected by this rule. Little information is
available to the Agency about the number of firms that represent the 41
State establishments. However, it is likely that the 41 State
establishments are owned by 41 firms. There are no State establishments
that are large. The analysis assumes that State establishments that are
small would be affected. Furthermore, the Agency does not have data for
these 41 State establishments on the fabrication of major or nonmajor
cuts of single-ingredient, raw products. Therefore, the Agency may be
underestimating the number of affected firms that own small or large
processing establishments that fabricate major and nonmajor cuts.
Thus, the final estimates of the number of affected firms that own
small or large processing establishments that fabricate major and
nonmajor cuts that are not ground are: 322 beef firms; 276 pork firms;
110 lamb firms; 64 ``other'' meat firms, including goat processors; 261
chicken firms; and 84 turkey firms.\17\
---------------------------------------------------------------------------

\17\ The number of firms affected is derived by summing the
number of large establishments, small establishments, and
establishments of unknown size for each type of species in Table 7
and dividing by 3, the average number of establishments owned by a
firm.
---------------------------------------------------------------------------

To estimate the average number of cut products fabricated per firm,
FSIS estimated that all firms would fabricate all the major cuts
(except the ground major cuts, because FSIS has already accounted for
those) and an additional 3 nonmajor cuts. FSIS estimated that beef
firms would typically fabricate 12 major products; pork firms, 9; lamb
firms, 6; chicken firms, 5; and turkey firms, 5 major products.
Therefore, the total number of major and nonmajor products fabricated
by beef firms is 15 products; pork firms, 12; lamb firms, 9; chicken
firms, 8; and turkey firms, 8. FSIS then assumed processors of
``other'' meat products would fabricate 12 products (similar to the
number of beef or pork products). In the table above, the PBIS figures
for beef processors include veal processors. For purposes of this
analysis, FSIS considered the number of major beef cuts rather than
veal cuts, because beef is more widely produced and consumed than veal.
FSIS estimated the average, one-time cost to modify on-package
labels for prepackaged meat and poultry product by multiplying the
average per label modification cost ($2,274 as shown in the
Supplemental PRIA Cost Analysis) by the number of affected firms and by
the number of products per firm. Based on this formula and the numbers
of firms and products shown above, the estimated average label
modification costs are: beef and veal firms, $10.85 million ($33,700/
firm); pork firms, $7.44 million ($27,000/firm); lamb firms, $2.22
million ($20,000/firm); other meat firms, 1.73 million ($27,000/firm);
chicken firms, $4.69 million ($18,000/firm); and turkey firms, $1.51
million ($18,000/firm). The total, one-time average costs of designing
labels would be $28.45 million.
In addition to the one-time average costs of designing labels,
companies will also incur costs for providing larger labels with
nutrition information. To calculate this cost, FSIS estimated that
there are 11.25 billion packages (15 billion \18\ retail packages of
all raw meat and poultry x 75 percent \19\ that are single-ingredient,
raw packages) of major and nonmajor cuts sold through retail
establishments.
---------------------------------------------------------------------------

\18\ The safe handling rule estimated that there were 15 billion
retail packages of raw meat and poultry products (58 FR 58925).
\19\ Based on information from the July 2004 National Conference
on Weights and Measures held in Pittsburgh, PA, FSIS estimates that
25 percent of retail packages of meat and poultry are products with
added solutions. Therefore, FSIS estimates that 25 percent of retail
packages of fresh meat and poultry products are multi-ingredient
products for which nutrition labeling information is already
required, unless an exemption applies. Thus, 75 percent (100 percent
minus 25 percent) of retail packages of raw meat and poultry
products are single-ingredient products for which nutrition labeling
information is now required, unless an exemption applies.
---------------------------------------------------------------------------

Furthermore, in the supplemental PRIA cost analysis for the
alternative

[[Page 67767]]

chosen, FSIS estimated that there are 2.267 billion packages of ground
or chopped products (see Appendix B Table 8). Therefore, FSIS estimates
that there are 8.983 billion packages (11.25 billion packages of all
meat and poultry minus 2.267 billion packages of ground or chopped
products) of major and nonmajor cuts that are not ground or chopped
sold through retail establishments.
FSIS estimates that 25 percent of 8.893 billion packages of single-
ingredient, raw major and nonmajor cuts that are not ground or chopped
are packaged by processing establishments, or 2.246 billion packages
(8.893 billion packages x 25 percent). Based on information collected
by RTI, a blank label is assumed to have a minimum cost of $0.002;
most-likely cost of $0.005; and a maximum cost of $0.008. Multiplying
2.246 billion packages by the annual added average cost of $0.005 per
label results in an average cost of approximately $11.23 million (2,246
billion packages x $0.005 per label) annually. Total first-year costs
(one-time and annual recurring) to processing establishments would be
$39.68 million ($28.45 million for one-time cost + $11.23 million
annual recurring cost).
Only retail establishments that have 500 or more employees will be
affected by nutrition labeling requirements for major and nonmajor cuts
because it is not likely that others would produce 100,000 pounds per
single-ingredient, raw product. Table 4 shows that 23,479 retail
facilities are owned by companies that have 500 or more employees. The
stores are owned by 266 firms.
Retail establishments subject to the requirements of the rule could
comply by either incorporating nutrition information on the label
printed by store scale printer systems (option 1) or by applying an
additional preprinted label with nutrition information (option 2).\20\
The supplemental PRIA cost analysis for the Alternative chosen shows
that option 1 is the less expensive option. Therefore, FSIS assumes
stores would choose this option under Alternative 5 as well. FSIS also
assumes that, on average, the estimated total cost to upgrade printer
scales to provide store-printed labels is $56.35 million (23,479 retail
establishments x $2,400 per establishment). The analysis assumes that
scales with the added features for making store-printed labels are
replaced every five years. The annual maintenance costs for the
upgraded scale printer is estimated to be 6 percent of $2,400 or $144
every year after a scale printer has been purchased equal to $3.38
million (23,479 retail establishments x $144 per establishment). FSIS
is including these costs here, in addition to the costs for nutrition
labeling of ground or chopped products, because FSIS assumes that
retail stores would need to have additional scale printers to apply
labels to major and nonmajor cuts that are not ground or chopped.
---------------------------------------------------------------------------

\20\ Options 1 and 2 are described in the Final Rule Cost
Analysis.
---------------------------------------------------------------------------

The supplemental PRIA cost analysis shows that for retail stores
the average one-time cost estimates for redesigning labels is $0.414
million (Appendix B, Table 3). FSIS is including this cost here and in
the ground or chopped products labeling costs to ensure that FSIS does
not underestimate the costs of this alternative.
The supplemental PRIA cost analysis estimates that each processor
company produces an average of 6.6 unique ground or chopped products
(see Appendix B, Table 2), that each retail firm and meat market firm
offers an average of 4.6 unique ground or chopped products (4.6/6.6 or
69 percent of the number of ground or chopped products produced by
processors), and that each warehouse club firm offers an average of
1.33 unique ground or chopped products (1.3/6.6 or 20 percent of the
number of ground or chopped products sold by processors, (Appendix B,
Table 9).
Excluding ground or chopped products, FSIS estimates that retail
and meat market firms package 69 percent of the total number or major
and nonmajor cuts produced by establishments. Consequently, these firms
would package on average 10.35 beef products, 8.28 pork products, 6.21
lamb products, 5.52 chicken products, 5.52 turkey products; and 8.28
other meat products. Excluding ground or chopped products, FSIS
estimates that warehouse club firms package 20 percent of the total
number of major and nonmajor cuts by processors. Consequently, these
firms would package an average of 3 beef products, 2.4 pork products
1.8 lamb products, 1.6 chicken products, 1.6 turkey products, and 2.4
other meat products. Therefore, FSIS estimates that each retail and
meat market firm packages an average of 44.16 unique major and nonmajor
cuts. FSIS also estimates that each warehouse club firm packages an
average of 12.8 unique major and nonmajor cuts.
Therefore, an average of 11,402 unique major and nonmajor cuts will
require nutrition labels applied in retail facilities ((44.16 products
x 255 supermarket, grocery store and meat market firms) + (12.8
products x 11 warehouse club and superstore firms)).
Consistent with the cost analysis of the chosen alternative, the
average one-time cost to retailers affected by the rule for the
nutrition analyses of major and nonmajor cuts\21\ is $7.87 million
(11,402 unique products x $690 average cost of a nutrition analysis,
Appendix B, Table 3).
---------------------------------------------------------------------------

\21\ A nutrition analysis is required to create a Nutrition
Facts panel. Nutrition information is available from FSIS and other
sources for many ground or chopped products, and major and nonmajor
cuts of meat and poultry products.
---------------------------------------------------------------------------

The use of larger labels is another cost that retail stores may
incur. If retail stores package 75 percent of total single-ingredient,
major and nonmajor cuts that are not ground or chopped, then an average
of 6.737 billion packages (8.983 billion packages x 75 percent) are
packaged by retail stores annually. If the added average cost of each
label is $0.005 (as assumed in the cost analysis for the alternative
chosen), then retailers affected by the rule will incur an added
average annual cost of about $33.68 million.
A summary of the frequency of various labeling costs for single-
ingredient, raw products for Alternative 5 are shown in Table 8. A
summary of the costs for Alternative 5 are shown in Table 9 and in
Appendix D.
Alternative 5 is the most expensive alternative that FSIS
considered. This alternative would require labels on a larger volume of
product than would Alternative 4. As with Alternative 4, this
alternative would require labels on a large volume of product not
currently required to bear labels.

[[Page 67768]]

Table 8--Frequency of Labeling Costs for Single-Ingredient, Raw Meat and Poultry Products, Excluding Cost for
Ground and Chopped Products
----------------------------------------------------------------------------------------------------------------
Frequency of cost *
---------------------------------------------------------------
One-time Recurring
Item ---------------------------------------------------------------
1st year &
1st year only Annual once/5 years Other **
----------------------------------------------------------------------------------------------------------------
$ Million
----------------------------------------------------------------------------------------------------------------
Processing:
Modify Labels............................... 28.45 .............. .............. ..............
Use larger labels........................... .............. 11.23 .............. ..............
Retail:
Upgrade printer scales...................... .............. .............. 56.35 ..............
Printer Maintenance......................... .............. .............. .............. 3.38
Redesign larger labels...................... 0.414 .............. .............. ..............
Use larger labels........................... .............. 33.68 .............. ..............
Nutrition analysis.......................... 7.87 .............. .............. ..............
----------------------------------------------------------------------------------------------------------------
* All costs are average costs as derived in Appendix B.
** Costs for printer maintenance occur annually, except for years in which a printer is purchased.

Table 9--Average Present Value and Annualized Costs * for Alternative 5
----------------------------------------------------------------------------------------------------------------
Present value Present value
3% 7% Annualized 3% Annualized 7%
----------------------------------------------------------------------------------------------------------------
$ Million
----------------------------------------------------------------------------------------------------------------
Ground and chopped product:
Processing.................................. 47.70 35.28 3.21 3.33
Retail...................................... 381.71 281.70 25.66 26.59
---------------------------------------------------------------
Total ground and chopped................ 429.41 316.98 28.86 29.92
===============================================================
Raw, single-ingredient cuts:
Processing.................................. 217.33 159.87 14.61 15.09
Retail...................................... 652.00 479.62 48.82 45.27
---------------------------------------------------------------
Total raw, single-ingredient cuts....... 869.33 639.49 58.44 60.36
===============================================================
Total, All Products................. 1,298.82 956.54 87.20 90.28
----------------------------------------------------------------------------------------------------------------
* These estimates are not adjusted to account for current compliance, thus over estimate costs.

The benefits of this alternative are comparable to the alternative
chosen after taking into account the amount of nonmajor cuts covered by
this alternative and on the condition that POP nutrition information is
equally as successful as on-package labels in leading to dietary
change.
Summary Comparison of Regulatory Alternatives
The Analysis of Alternatives section provides an in-depth
comparison of the regulatory alternatives, including a cost-
effectiveness analysis. This comparison takes into account the relative
success of POP nutrition information compared to on-package nutrition
information labels, and the cost of each measure (form in which
nutrition information is provided) for the products affected. The
discussion of cost-effectiveness centers on Tables 26-29.

D. Costs and Benefit of the Supplemental Proposed Rule

1. Supplemental PRIA Cost Analysis
FSIS analysis of this rule includes many of the same assumptions
that were used in the proposed rule. In most cases, FSIS believes that
the initial assumptions are still valid. No new data has been presented
refining or disputing these original assumptions. However, in other
cases FSIS and RTI were able, based upon more current information, to
change and improve the original assumptions.
PRIA vs. supplemental PRIA: The PRIA estimated the costs of
nutrition labels based on the cost analysis conducted for the
``Mandatory Safe Handling Statements on Labeling of Raw Meat and
Poultry Products'' proposed rule published November 4, 1993 (58 FR
58922). In the PRIA, FSIS adjusted the costs of the safe handling rule
to reflect the costs related to the volume of ground or chopped
products produced. For fixed costs associated with nutrition labeling
of ground or chopped products, FSIS assumed that 80 percent of the
estimated fixed costs were already incurred by retailers and
processors, and only 20 percent of the estimated fixed costs would be
required for compliance with the proposed rule. Therefore, FSIS
estimated the fixed costs for the nutrition labeling of ground or
chopped products would total 20 percent of the estimated fixed safe
handling labeling costs: $10 million to $20 million for processors and
$28.8 million to $43.2 million for retailers (66 FR 4986, January 18,
2001).
The estimates of operating costs to retail establishments in the
PRIA are based on the number of packages of ground or chopped products
that would be sold through small and large retail stores and the
labeling costs per package based on the safe handling labeling costs.
FSIS multiplied the estimated

[[Page 67769]]

number of ground or chopped products sold through large retail stores
by the safe handling label cost for large retail stores to derive an
estimate of $6 million in annual operating costs for these stores.
Similarly, FSIS multiplied the estimated number of packages of ground
or chopped products sold through small retail stores by the safe
handling label costs for small retail stores to derive an annual
estimate of $4 million in costs for these establishments (66 FR 4988,
January 18, 2001). FSIS explained that these operating costs would
increase by $2 million to $12 million in current prices. FSIS also
estimated the labor costs of small firms applying a separate nutrition
label would be $.6 million, based on safe handling label costs (66 FR
4988, January 18, 2001). FSIS assumed processors would incur no
additional operating costs associated with nutrition labeling ground or
chopped products.
FSIS also estimated one-time paperwork burden costs for nutrition
labels on ground or chopped products of $8.8 million. These paperwork
burden costs were the estimated costs of label development,
recordkeeping, and the costs of submitting label approval applications
to FSIS (66 FR 4988, January 18, 2001).
Finally, FSIS estimated that the average time for each retail
establishment to obtain POP materials that include nutrition
information for the major cuts of single-ingredient, raw meat and
poultry products would be 30 minutes. Based on labor costs of $20 per
hour, FSIS estimated that total retail costs for obtaining these
materials would be $0.7 million. (66 FR 4985-4986, January 18, 2001).
The PRIA did not estimate any other costs associated with retailers
obtaining or maintaining POP materials.
The revisions in the supplemental PRIA are based on additional
information available to FSIS, improved analytical methods, and a more
accurate characterization of the impacts of the rule. FSIS revised the
supplemental PRIA in response to concerns expressed during the
Interagency review of the PRIA about data quality and in response to
final guidelines issued by the Office of Management and Budget (OMB,
2002) to Federal Agencies after publication of the proposed rule.
The supplemental PRIA assumes that no establishment or retail
facility has incurred any costs associated with the requirements of
this regulation prior to its effective date, even though many firms
have already been providing the information that is being required.\22\
Rather than prorate cost estimates in the safe handling rule based on
the volume of ground or chopped products, the supplemental PRIA
includes estimates for itemized costs that pertain specifically to
nutrition labels. For processing firms, these costs in the supplemental
PRIA include administrative costs, graphic design costs, prepress
activities costs, plate engraving costs, nutrition analysis costs, and
the costs of larger labels.
---------------------------------------------------------------------------

\22\ The impacts of a 68 percent compliance rate for nutrition
labeling of ground or chopped products (NCBA, 2004) and a 54.8
percent compliance rate for major cuts (USDA, 1999) will be
discussed at the conclusion of this section.
---------------------------------------------------------------------------

The supplemental PRIA explains that if retail firms choose to use
store scale-printers to print nutrition labels for ground or chopped
products, costs to these retailers would include upgrading store
scales-printers to include nutrition information, redesigning larger
store labels, providing a nutrition analysis for each product, and
using larger labels. This method of labeling is referred to as ``Option
1'' in the analysis. If retail firms choose to apply an additional
preprinted label with nutrition information to ground or chopped
products, the cost to these retail stores would include designing a
one-color nutrition label, conducting a nutrition analysis for each
product, and purchasing and applying a separate label on packages of
ground or chopped product at the retail level. This method of labeling
is referred to as ``Option 2'' in the analysis.
The supplemental PRIA assumes that labels will be redesigned for
company-wide use. The supplemental PRIA also assumes that small and
large plants are owned by large, multi-firm establishments. In
addition, the supplemental PRIA assumes that retail stores or chains
with fewer than 500 employees produce 100,000 pounds or less annually
of each ground or chopped product and are exempt from the nutrition
labeling requirements for ground or chopped products. In the
supplemental PRIA, the average material and labor cost for POP placards
have been revised.
The benefits analysis is revised from the PRIA to reflect a
constant value for each premature death prevented by the requirements
of the rule to update cost to 2002 dollars. The value of preventing a
premature death varied on the basis of age in the benefits analysis of
the PRIA. Because of these changes, the benefits in the supplemental
PRIA are higher than those of the PRIA.

Table 10--Average Costs in the Supplemental PRIA
----------------------------------------------------------------------------------------------------------------
Total 1st year Present value Present value
Bases of estimates costs 7% 3%
----------------------------------------------------------------------------------------------------------------
$ Million
----------------------------------------------------------------------------------------------------------------
Retail costs, including POP materials: Option 1................. 75.58 312.77 424.53
Retail costs, including POP materials: Option 2................. 50.83 564.36 790.70
Costs to processors only........................................ 7.81 35.28 47.70
-----------------------------------------------
Total costs (Option 1)...................................... 83.38 384.06 472.23
----------------------------------------------------------------------------------------------------------------

[[Page 67770]]

Table 11--Benefits of the PRIA and Supplemental PRIA
----------------------------------------------------------------------------------------------------------------
Annualized benefits Present value
Rule status ---------------------------------------------------------------
7% 3% 7% 3%
----------------------------------------------------------------------------------------------------------------
$ Million
----------------------------------------------------------------------------------------------------------------
Supplemental PRIA............................... 205.5 248.3 2,176.7 3,694.4
PRIA............................................ 86.6 145.3 917.8 2,161.0
----------------------------------------------------------------------------------------------------------------

The supplemental proposed rule would require nutrition labels on
all ground or chopped products, with or without added seasonings,
unless an exemption applies, and would make the voluntary nutrition
labeling program mandatory for major cuts, unless an exemption applies.
The cost analysis of the requirements for ground or chopped
products is based on the FDA Labeling Cost Model developed by RTI, the
Enhanced Facilities Data Base (EFD), Performance Based Inspection
System (PBIS), the FSIS Performance Based Inspection System database,
AC Nielsen Purchase Data of 2003, and Information Resources Inc. (IRI).
The PBIS provides estimates of the number of very small, small, and
large processing establishments that grind meat and poultry products.
IRI scanner data and AC Nielsen Purchase Data provide estimates of the
number of ground or chopped products produced by processing
establishments.

Supplemental Proposed Rule Cost Estimates for Major Cuts

For the major cuts, FSIS assumes that retailers will comply by
using POP placards. The number of retail establishments affected by the
nutrition labeling requirements for the major cuts is based on 2002
data from the Bureau of the Census (Table 3).\23\ The Census data are
consistent with the establishment numbers used in the analysis of
nutrition labeling of ground or chopped products used in the PRIA. The
number of retail establishments used in the supplemental PRIA is 74,910
(owned by 47,688 firms) compared to 69,500 (comprised of supermarkets,
other stores, and wholesale clubs) used in the PRIA (66 FR 4982,
January 18, 2001). The use of the 2002 Bureau of Census data instead of
FMI data (from the PRIA) results in a higher estimated cost of the POP
requirements in the supplemental proposed rule. The supplemental PRIA's
estimate is also higher than the PRIA's estimate because in the PRIA,
FSIS assumed retail facilities would incur labor costs only and would
not purchase frames and placards.
---------------------------------------------------------------------------

\23\ November 2005, more of the 2002 Census data was released.
---------------------------------------------------------------------------

The cost of three nutrition information placards for displaying POP
information for the major cuts is estimated to be $65.17 per store
($28.00 for placards and $37.17 for metal frames), based on information
from the Food Marketing Institute (FMI) and http://www.hubert.com.
Placards will be replaced every two years because of normal wear and
tear. The supplemental PRIA estimates that an average of 0.5 hour at
labor cost of $21.11 per hour, per store is the amount of time
necessary to obtain and make available the POP materials, insert the
placards or posters into frames, and post the information in the store.
The average labor cost is then $10.16 ($21.11 x 0.5). The total average
cost per store is then $75.73.
The average total cost of purchasing and installing posters or
placards will be $5.67 million the first year and every other year
after that ((74,910 establishments x $21.11 per hour x .5 hours) +
(74,910 establishments x $65.17 per establishment)). The present value
of this cost is $31.07 million when discounted at 7 percent over 20
years.

Supplemental Proposed Rule Cost Estimates for Ground or Chopped Product

Should this rule become final, both meat and poultry processing
firms and retail establishments will incur compliance costs associated
with nutrition labeling of ground or chopped products for such items as
label redesign, nutrition analysis, larger labels, and upgrading store
scale-printers. The following discussion presents the costs associated
with nutrition labeling ground or chopped products for meat and poultry
processing firms and for retail firms.

Meat and Poultry Processing Firms

The cost of nutrition labeling of ground or chopped products
packaged by processing establishments is comprised of costs for
redesigning preprinted product labels that will include a nutrition
label (one-time cost), for conducting nutrition analysis on products to
obtain information for the nutrition label (one-time cost), and for
using larger labels that would be needed for the former product labels
(recurring cost).
Based on an examination of labels applied to ground or chopped
products that are labeled at processing establishments, the most common
printing method for these labels is flexography.\24\ Nutrition facts
are typically printed in one color. The per-label modification
estimated midpoint cost, in 2005 dollars, for a one-color change using
the flexography printing method is $2,247. The estimated minimum cost
is $1,528, and the maximum cost is $3,170. Cost depends upon the
complexity of the label design (Table 12). These estimates reflect
administrative, graphic design, prepress activities, plate engraving
costs, and nutrition analysis. The paperwork costs are included in the
administrative costs. FSIS assumes that the paperwork costs are about
14 percent of the midpoint estimate administrative costs. Thus, the
midpoint estimate of the paperwork burden costs would be $44.66 ($319 x
14 percent) per label modification. The estimated total per label
design modification cost ranges from a low of $929 to a high of $2,383
with a midpoint of $1,557.
---------------------------------------------------------------------------

\24\ Flexography printing is frequently used for printing on
plastic foil, acetate film, and other material used in packaging.
Flexography uses flexible printing plates made of rubber or plastic.
The inked plates with a slightly raised image are rotated on a
cylinder which transfers the image to the substrate. Flexography
uses fast-drying inks, is a high-speed print process, can print on
many types of absorbent and non-absorbent materials, and can print
continuous papers such as gift wrap and wallpaper.

[[Page 67771]]

Table 12--Costs per Label Modification for a One-Color Change Using Flexography Printing Method
----------------------------------------------------------------------------------------------------------------
Type of Cost Low Mid-Point High
----------------------------------------------------------------------------------------------------------------
Dollars
-----------------------------------------------
Administrative\1\............................................... 137 319 502
Graphic design.................................................. 342 513 684
Prepress activities............................................. 279 401 627
Plate engraving................................................. 171 323 570
-----------------------------------------------
Total label redesign........................................ 929 1,557 2,383
===============================================
Nutrition analysis \2\.......................................... 599 690 787
-----------------------------------------------
Total....................................................... 1,528 2,247 3,170
----------------------------------------------------------------------------------------------------------------
\1\ Includes regulatory affair costs that are similar to paperwork burden costs.
\2\ RTI assumed that the cost for nutrition analysis would be the cost associated with analysis required to
create a Nutrition Facts panel. Source: RTI, 2003, P.7.

Although nutrition information for some ground products will be
available from the USDA National Nutrient Database for Standard
Reference (USDA, Agricultural Research Service, 2005) or other low-cost
sources, in many cases, the regulations would require that companies
conduct a separate nutrition analysis for ground or chopped products
for which the USDA National Nutrient Database for Standard Reference or
other sources have not provided nutrition information. Because of the
large variety of ground product formulations, many products will not
likely be the same or similar enough to the products for which the USDA
National Nutrient Database for Standard Reference or other sources
provide nutrition information. Because FSIS could not identify the
number of ground or chopped products that would require a separate
nutrition analysis versus the number of products for which the USDA
National Nutrient Database for Standard Reference or other sources
supply complete nutrition information, FSIS estimated a one-time
nutrition analysis cost for all ground or chopped products. The per-
label cost of this analysis is in the range of $599 and $787, with an
average of $690. On average, the Agency assumed that total label design
will be $1,557, and a nutrition analysis will be $690.
Nutrition labels are designed for company-wide use. The number of
affected companies is estimated by dividing the number of small and
large establishments in Table 1 by three, the number of establishments
owned on average by multi-establishment firms (Muth, 2003; See RTI
analysis). Thus, the final estimate of the number of affected firms
that own small or large Federal processing establishments that grind
meat is 322 ((858 small processing establishments + 109 large
processing establishments)/3). For the purposes of this analysis, very
small establishments are considered to be exempt from the requirements
for nutrition labeling of ground or chopped products because FSIS
assumes they have fewer than 500 employees, are owned by companies with
fewer than 500 employees, and FSIS assumes they produce 100,000 pounds
or less annually of each ground product. The PBIS database does not
include data on size of the owning company or processed product
volumes. Thus, the total number of establishments affected by the rule
for this analysis may be overestimated. In addition, this analysis
includes 41 State establishments/firms that are small-sized. These
firms were identified in PBIS database as having grinding operations
that would produce ground or chopped products.
AC Nielsen Food Purchase data from 2003 and Information Resources
Inc. (IRI) were used to identify ground meat and poultry products with
or without added seasonings. The purchase data include data for frozen
and fresh, ground or chopped products affected by the final nutrition
labeling rule. The information shows that an average of 3.3 frozen
ground meat or poultry products are produced by companies that grind
meat and poultry. The data were then scaled to account for the total
number of ground or chopped products by assuming that a typical company
produces an equal number of fresh and frozen ground meat or poultry
products. Therefore, multiplying 3.3 x 2 results in an average of 6.6
products per firm and 2,396 unique meat and poultry products (6.6 x 363
firms) that are subject to the labeling requirements of the rule.
The one-time, average cost for meat and poultry establishments to
modify product labels on prepackaged ground meat and poultry products
to include nutrition information at processing establishments is
estimated at $5.38 million ($2,247 mid-point per label modification
costs x 363 affected companies x 6.6 affected products per company).
The average present value of this one time cost discounted over 20
years at 7 percent is $5.03 million.
In addition to the one-time costs of designing labels, companies
will also incur costs for providing larger labels. The cost of larger
labels was obtained by estimating the volume of ground meat and poultry
products packaged by processors and multiplying the results by the
incremental cost of larger labels. The cost of applying larger labels
is assumed to be the same as the cost of applying smaller labels.
The NCBA's Meat Purchase Diary (RTI, 2003) indicates that an
average American household purchases 49.3 pounds of raw ground beef
annually from retail stores. Based on 112.0 million households in the
United States (U.S. Department of Commerce, 2003), 5.5216 billion
pounds (49.3 pounds per household x 112 million households) of ground
beef are purchased from retail stores annually. The American Meat
Institute estimates that 0.123 pounds of other ground meat and poultry
products are consumed for every pound of ground beef. Consequently, an
estimated 6.201 billion pounds of ground or chopped meat and poultry
(5.5216 billion pounds x 1.123 scale factor) are purchased by consumers
annually (66 FR 4987, January 18, 2001).
According to the NCBA, the average weight of a retail package is
2.735 pounds, with a distribution of 1.17 pounds at the 5th percentile
and 4.35 pounds at the 95th percentile (McGowan, 2003). Dividing 6.201
billion pounds by 2.735 pounds per package yields an average of 2.267
billion packages of ground or chopped products sold at retail stores
annually.
To determine the total number of packages sold at ``exempt''

[[Page 67772]]

establishments, the Agency, using U.S. Census 2002 data, FSIS found
that 79.3 percent of total dollar sales by supermarkets, meat markets,
and warehouse stores were sold by establishments owned by large retail
firms and establishments (500 or more employees). These large retail
firms and establishments (266) represent 0.006 of the total number of
retail firms and establishments (47,688) affected by the rule as shown
in Tables 4 and 5 above. Assuming that the percentage of total dollar
sales is similar to sales for ground meat and poultry products, about
1.798 billion packages (2.267 billion packages x .793) of ground or
chopped products are sold each year by nonexempt processing
establishment and retail establishments.
Finally, a study conducted by NCBA, found that less than 25 percent
of ground products are packaged by processing establishment (Dopp,
2001). Thus the Agency estimates that at most 566.75 million packages
of ground or chopped products are packaged by processing establishments
each year (2.267 billion packages x .25).
The Agency assumes that a larger label will cost an additional
$0.005 per label, on average. This estimate was based on information
from the FDA Labeling Cost Model (Muth, et al. 2003), where $0.005 was
the difference in cost between the low and high cost estimates for
pressure-sensitive labels. This estimate was evaluated by Hobart, a
label manufacturer, who believed that it was reasonable (Schuller,
2003). Multiplying 566.75 million packages by the annual added cost of
$0.005 per label results in an added cost of approximately $2.83
million, annually. The present value of these annual costs discounted
at 7 percent is $30.02 million.

Retail Firms

The cost of nutrition labeling would also affect retail stores. But
because of the small business exemption, fewer retail stores are
affected by the requirements for ground and chopped products than the
74,910 establishments shown in Table 3. Using U.S. 2002 Census data
shown earlier in Table 4, a total of 23,479 stores will be affected.
Table 4 shows the number of retail stores that are owned by companies
with more than 500 employees. FSIS assumes that stores or chains with
500 or fewer employees produce 100,000 pounds or less annually of each
ground or chopped product and are, therefore, exempt from the nutrition
labeling requirements for ground or chopped products.
Should the rule become final, retail establishments subject to the
requirements of the rule may comply by either incorporating nutrition
information on the label printed by store scale printer systems (Option
1) or by applying an additional preprinted label with nutrition
information (Option 2). The cost of store-printed labels includes
upgrading store scale-printers to include nutrition information,
redesigning larger store labels, providing a nutrition analysis for
each product, and using larger labels. Based on information from NCBA
and FMI (Amstein, 2003) many scale-printers in retail establishments do
not have the capability to print nutrition information on store-
generated labels without an upgrade of memory capacity and software and
either new printers or new printer heads. Based on a pilot study
conducted by King Marketing Services, Inc., for the NCBA, the average
cost to upgrade a scale-printer system in their study was $1,600
(Amstein, 2003). FSIS assumes that, on average, retail stores have 1.5
scales in their meat departments. Thus the total cost for upgrading
printer-scale systems is assumed to be about $2,400 per store ($1,600
per printer x 1.5 printers). The total average cost to upgrade printer
scales to provide store-printed labels for ground or chopped products
is estimated at $56.35 million (23,749 retail establishments x $2,400
per establishment). The analysis assumes that scales with the added
features for making store-printed labels are replaced every five years.
The annual maintenance costs for an upgraded scale-printer is estimated
to be 6 percent of $2,400 or $144 ($2,400 x .06) every year after a
scale-printer has been purchased.^{25 26}
---------------------------------------------------------------------------

\25\ Based upon a communication between Warranty Department,
Hobart Corporation, Troy, Ohio, and Gary Becker, USDA, FSIS,
September 4, 2003, and a second communication between Sales
Department, Hobart Corporation, Beltsville, Maryland, and Gary
Becker, USDA, FSIS, September 4, 2003. The suggested retail price
for a Quantum scale-printer is between $5,500 and $6,000. A one-year
maintenance agreement would cost about $355. Therefore, it has been
estimated that operating and maintenance costs would be about six
percent of the purchase price annually ($355/$5,750 = 6%).
\26\ It is possible that as new scale-printer systems are
developed that the cost of including the added feature to new scale-
printer systems may be less than $1,600 per scale. But to assume, as
RTI reported, that there is no additional cost for these added
features in the future results in an underestimate of the compliance
costs.
---------------------------------------------------------------------------

The cost of redesigning larger store logo labels to be used with
the scale-printer systems was based upon cost data from the FDA
Labeling Cost Model and Census data on the number of large companies
that own retail establishments. As for preprinted labels, flexography
is the most common printing method for the store logo labels used with
scale printer systems. The cost to make a one-color label redesign
change depending on the complexity of the label redesign ranges from a
minimum of $929, an average of $1,557, and a maximum of $2,383, as
shown in Table 12.\27\ Because each company will need to redesign only
one label, the average cost was multiplied by the 266 firms affected by
the rule. The average one-time cost estimates for redesigning labels is
$0.414 million ($1,557 per label design x 266 firms). The average one-
time cost estimate for the paperwork costs (average regulatory affairs
costs of $319 x 14 percent = $44.50) of redesigning labels is $11,837
($44.50 x 266 firms). As with products packaged by processors, label
redesign can not simply be incorporated into the normal label redesign
process because it is a fundamental change in the label format. Once
the label is redesigned, the costs of subsequent label redesigns will
not be affected substantially.
---------------------------------------------------------------------------

\27\ Package redesign varies depending upon what must be changed
on the current label. Therefore, three estimates have been provided.
---------------------------------------------------------------------------

To estimate the cost of conducting nutrition analysis for ground or
chopped products packaged by retailers, the number of unique products
was estimated. It was assumed that each firm (or parent company) would
conduct a nutrition analysis once for each unique product, which might
be sold in some or all of their retail facilities. The number of firms
shown in Table 4 was multiplied by an average number of store-brand
products packaged at each store. To estimate the average number of
ground or chopped products packaged at retail, the number of ground or
chopped products with store-applied packaging at six different grocery
stores and three wholesale clubs was counted.\28\ This analysis showed
that grocery stores sell an average of 4.57 ground or chopped products
and warehouse stores sell an average of 1.33 ground or chopped products
packaged at the store. Multiplying 4.57 by the total number of grocery
store firms and meat market firms and multiplying 1.33 by the total
number of warehouse club firms in Table 4 results in 1,180 ((4.57
products x 255 grocery store and meat market firms) + (1.33 x 11
warehouse club firms))\29\ unique products that will

[[Page 67773]]

require nutrition labels applied in retail stores. FSIS recognizes that
a survey of six grocery stores and three wholesale clubs in one U.S.
city is not a nationally representative survey. Because of limited time
and Agency resources, information from this survey provided the best
available data for FSIS's estimates. Although this is a significant
area of uncertainty in the cost analysis, FSIS believes these data
allow for reasonable estimates of the costs to retailers.
---------------------------------------------------------------------------

\28\ Each store visited by RTI was owned by a different company
and included medium and large sized stores. No meat markets were
visited because RTI believed that no meat markets owned by companies
large enough to be affected by the labeling requirements are located
in the Raleigh-Durham area.
\29\ Numbers are rounded.
---------------------------------------------------------------------------

Using the cost of a nutrition analysis shown in Table 12 above, and
the number of unique products that will require nutrition labels
applied in retail stores the average cost estimate is $2.65 million
($2,247 x 1,180 unique products).
The use of larger labels is another cost that retail stores may
incur should the rule become final. The cost of larger labels is the
product of the number of packages of ground or chopped products sold in
retail establishments and the cost of using a larger label. Earlier in
the analysis, it was estimated that about 25 percent of approximately
2.267 billion packages or about 566.79 million packages of ground or
chopped products are packaged by processing establishments each year.
If the remaining 75 percent of total package volume of ground or
chopped products is packaged at retail stores, then 1.700 billion
packages (2.267 billion x .75) are packaged by retail stores annually.
If the added average cost of each label is $0.005, then retail stores
will incur an added cost of about $8.5 million (1.7 billion packages x
$0.005).\30\
---------------------------------------------------------------------------

\30\ The Agency assumed an average cost of $0.005 per label for
a larger label because it represents the change in cost between low,
midpoint, and high cost estimates for pressure-sensitive labels in
the FDA Labeling Cost Model (Appendix B). The differences in the
low, midpoint, and high cost estimates derive primarily from the
differences in the size of labels. Second, a representative from
Hobart, which manufactures labels, says that $0.005 was a reasonable
estimate for the added cost of a larger label for including
nutrition facts.
---------------------------------------------------------------------------

FSIS estimates that based on the analysis described above, the
resulting average present value of one-time costs of upgrading scale-
printer systems, added annual operating and maintenance costs for the
scale-printer systems, one-time costs for redesigning larger store
labels, one-time costs for conducting nutrition analysis, and present
value costs for using a larger label will be about $209.43 million
discounted at 7 percent.
The cost of the second method of complying with the labeling
requirements for ground or chopped products at retail stores (Option 2)
includes designing a one-color nutrition label, conducting a nutrition
analysis for each product, and purchasing and applying a separate label
on packages of ground or chopped products applied at the retail level.
Using the same methodology that was described earlier, it is estimated
that 1,180 unique products will be required to have nutrition labels
applied in retail stores. Multiplying the number of unique products by
the average per-label redesign and nutrition analysis costs (the cost
of flexography is $2,470), results in a one-time cost estimate of $2.65
million (1,180 unique products x $2,247 per label design).
To estimate the cost of purchasing and applying labels to packages
of ground or chopped products packaged at retail, the per-unit cost
estimates from the FDA Labeling Cost Model were multiplied by the
volume of packages described earlier.\31\ FSIS estimates the annual
cost using the average cost of $0.0293 per label applied. The estimated
annual cost is $49.77 million ($0.0293 per label and application cost x
1.452 billion retail packages). All of these costs will be incurred by
large and small businesses. The present value of these costs is $452.83
million when discounted at 7 percent.
---------------------------------------------------------------------------

\31\ The Agency estimated the low, mid-point, and high per-unit
cost for purchasing and applying one-color pressure-sensitive labels
in 2005 dollars to be $0.016, $0.0293, and $0.042, respectively.
---------------------------------------------------------------------------

Percentage Lean/Percentage Fat Labeling

In the PRIA, FSIS assumed that the cost per label to provide
information regarding percent lean/percent fat would be comparable to
those costs for nutrition labeling, $0.0025 to $0.05 per label, if that
information was included as part of the price label and $0.01 per label
if producers developed separate percent fat/percent lean labels. Based
on the National Cattleman's Beef Association National Meat Case Study
in 2004, approximately 25 percent of ground beef package labels
surveyed had statements of the lean percentage of the packaged products
but did not have nutrition facts panels. Therefore, FSIS assumed that
many small businesses may currently include a statement of the lean
percentage on the label of ground products but may not include
nutrition facts panels on the product label. Based on this assumption,
FSIS concluded that requiring small businesses that use the lean
percentage and fat percentage statement on the label of ground products
to also include nutrition information on the label of such products may
result in significant expenses for small businesses. An additional
47,422 small businesses with an additional 51,431 retail establishments
(stores) (see Table 5) may be affected. Based on the FSIS cost model
(see Appendix B), this may increase the present value (7 percent) of
average expenses for small businesses by about $394.16 million or by
about $37.21 million when annualized (7 percent). Therefore, in this
supplemental proposed rule, small businesses that use statements of
percent fat and percent lean on the label or in labeling of ground
products will be exempt from nutrition labeling requirements, provided
they include no other nutrition claims or nutrition information on the
product labels or labeling. FSIS is taking this action, pursuant to 5
U.S.C. 604(a)(5), to minimize the significant impact of the regulation
on small and very small establishments and small retailers. By taking
this action, many of these small businesses will not be affected by
this rule at all.

Summary of Cost Estimates

FSIS estimates that the average present value of the compliance
costs associated with the provisions of the supplemental proposed rule
for retail and processing establishments is $348.06 million discounted
at 7 percent,\32\ or $472.23 million discounted at 3 percent \33\ (see
tables 13 and 14). The average annualized costs are $32.85 million and
$31.74 million, based on a 7 percent and 3 percent discount rate,
respectively. These estimates are based on the assumption that retail
stores will choose the less costly of the two options which would be to
upgrade their scale-printer systems, redesign larger store labels,
conduct a nutrition analysis, and use larger labels. If these retail
establishments choose the more costly option, the average present value
cost to retail processing establishments could be as high as $599.64
million, discounted at 7 percent and $838.40 million, discounted at 3
percent.
---------------------------------------------------------------------------

\32\ The FSIS analysis which takes into account the uncertainty
associated with various cost factors shows that the values at the
5th and 95th percentiles for this average present value using a 7
percent discount rate and 20 year time horizon are $282.88 and
$474.79 million, respectively. See Appendix D, Table 1.
\33\ The FSIS analysis which takes into account the uncertainty
associated with various cost factors shows that the values at the
5th and 95th percentiles for this average present value using a 3
percent discount rate and 20 year time horizon are $380.76 and
$650.23 million, respectively. See Appendix D, Table 1.
---------------------------------------------------------------------------

The average present value cost of the supplemental proposed rule
for retail establishments under option 1 would be

[[Page 67774]]

$312.77 million using a 7 percent discount rate and $424.53 million
using a 3 percent rate. However, under Option 2, the average present
value cost to retail establishments could be $564.36 million discounted
at 7 percent and $790.70 million discounted at 3 percent.
Processing establishments will incur the smallest portion of the
cost increases. FSIS expects average present value costs to processing
establishments costs to be $35.28 million discounted at 7 percent and
$47.70 million discounted at 3 percent.

Table 13--Cost Summary of the Supplemental Proposed Rule (Nominal)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year
Measure ----------------------------------------------------------------------------------------------
1 2 3 4 5 6-10 11-20 Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
$ Million
----------------------------------------------------------------------------------------------
Retail: Purchase & Install POP Placards.................. 5.67 0.0 5.67 0.0 5.67 11.35 28.36 56.73
Processing: Modify Labels on Prepackaged Ground or 5.39 0.0 0.0 0.0 0.0 0.0 0.0 5.39
Chopped Products........................................
Processing: Larger Labels on Ground or Chopped Products.. 2.42 2.42 2.42 2.42 2.42 12.10 24.21 48.41
Retail : (Option 1....................................... 69.91 12.33 12.33 12.33 12.33 118.01 236.03 473.29
Retail: (Option 2)....................................... 45.13 42.51 42.51 42.51 42.51 212.55 425.10 852.86
Total Retail: (Option 1 and POP Placards)................ 75.58 12.33 18.01 12.33 18.01 129.36 264.39 530.01
Total Retail: (Option 2 and POP Placards)................ 50.83 42.51 48.18 42.51 48.18 223.90 453.47 909.58
Total All Processing Plants.............................. 7.81 2.42 2.42 2.42 2.42 12.10 24.21 53.80
Total Retail: (Option 1 and POP Placards) and Processing. 83.39 14.75 20.43 14.75 20.43 141.46 288.60 583.81
Total Retail: (Option 2 and POP Placards) and Processing. 58.64 44.93 50.60 44.93 50.60 236.00 477.67 963.38
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 14--Cost Summary of the Supplemental Proposed Rule (Discounted)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year
Measure ---------------------------------------------------------------------------------------------
1 2 3 4 5 6-10 11-20 Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
7% Discount Rate $ Million
---------------------------------------------------------------------------------------------
Retail: Purchase & Install POP Placards................... 5.30 0.0 4.63 0.0 4.04 6.62 10.47 31.07
Processing: Modify Labels on Prepackaged Ground or Chopped 5.04 0.0 0.0 0.0 0.0 0.0 0.0 5.04
Products.................................................
Processing: Larger Labels on Ground or Chopped Products... 2.26 2.11 1.98 1.85 1.73 8.64 7.08 30.24
Retail: (Option 1)........................................ 65.37 10.77 10.06 9.41 8.79 73.58 89.91 281.70
Retail: (Option 2)........................................ 42.23 37.11 34.69 32.44 30.31 124.36 151.80 533.29
Total Retail: (Option 1 and POP Placards)................. 70.67 10.77 14.69 9.41 12.84 80.20 100.38 312.77
Total Retail: (Option 2 and POP Placards)................. 47.53 37.11 39.32 32.44 34.35 130.88 162.28 564.36
Total All Processing Plants............................... 7.71 2.11 1.98 1.85 1.73 7.08 8.64 35.28
Total Retail: (Option 1 and POP Placards) and Processing.. 79.60 12.88 16.67 11.26 14.56 87.27 109.03 348.06
Total Retail: (Option 2 and POP Placards) and Processing.. 62.34 39.22 41.29 34.28 36.08 137.95 170.92 599.64
---------------------------------------------------------------------------------------------
3% Discount Rate $ Million
---------------------------------------------------------------------------------------------
Retail: Purchase & Install POP Placards................... 5.51 0.0 5.19 0.0 4.90 8.96 18.27 42.82
Processing: Modify Labels on Prepackaged Ground or Chopped 5.23 0.0 0.0 0.0 0.0 0.0 0.0 5.23
Products.................................................
Processing: Larger Labels on Ground or Chopped Products... 2.35 2.28 2.21 2.15 2.09 9.56 13.36 42.46
Retail: (Option 1)........................................ 67.88 11.63 11.28 10.95 10.64 95.87 154.06 381.72
Retail: (Option 2)........................................ 43.85 40.09 38.90 37.75 36.69 167.87 269.77 747.88
Total Retail: (Option 1 and POP Placards)................. 73.39 11.63 16.48 10.95 15.54 104.82 172.32 424.53
Total Retail: (Option 2 and POP Placards)................. 49.36 40.09 44.09 37.75 41.59 176.83 288.04 790.70

[[Page 67775]]

Total All Processing Plants............................... 8.00 2.28 2.21 2.15 2.09 9.56 15.36 47.70
Total Retail: (Option 1 and POP Placards) and Processing.. 82.66 13.91 18.69 13.10 17.63 114.38 187.68 472.23
Total Retail: (Option 2 and POP Placards) and Processing.. 64.74 42.37 46.30 39.90 43.67 186.39 303.40 838.40
--------------------------------------------------------------------------------------------------------------------------------------------------------

The average cost increases that FSIS has identified are higher than
those estimated by RTI in their revised final report to FSIS. RTI had
estimated the present value cost to be $159.0 million discounted at 7
percent under Option 1. RTI had also estimated the present value cost
to be $396.7 million discounted at 7 percent under Option 2. The FSIS
estimates are higher than the RTI estimates because FSIS believes that
scale-printers will have to be replaced periodically since they have a
limited useful life. This equipment will also have to be maintained on
a periodic basis. In addition, the costs are higher because the costs
were updated to reflect 2005 costs instead of 2003 costs. Also, the
U.S. Census 2002 data was used that indicated that there are more
stores selling food products.

Impacts of Exemptions and Existing Compliance on Costs

FSIS did not reduce the compliance costs of the supplemental
proposed rule to take into account the level of voluntary compliance
with the nutrition labeling requirements for ground or chopped products
that currently exists. Consequently, the estimated compliance costs for
providing nutrition labeling of ground or chopped products are
overstated. However, Appendix C, Tables 1, 2, 3, 4, and 5 show the
estimated costs which take into account a 68 percent compliance rate
(NCBA, 2004) of voluntary nutrition labeling of ground or chopped
products that is currently assumed to exist.
FSIS estimated the costs to all retailers of obtaining and
displaying POP information for major cuts. FSIS did not take into
account the existing level of compliance with the voluntary guidelines
for nutrition labeling of major cuts. Consequently, the estimated
compliance costs for providing POP nutrition information are also
overstated. The impacts of a 54.8 percent level of voluntary compliance
(USDA, 1999) of stores that provide nutrition labeling for major cuts
are, however, shown in Appendix C, Tables 1, 2, 3, 4, and 5.
Appendix D, Table 1 provides a summary of the present value costs
of the rule after taking into account the levels of voluntary
compliance that are currently assumed to exist. The average present
value costs of the rule decline to $115.45 million and $156.72 million
when using a 7 percent and 3 percent discount rate, respectively.\34\
---------------------------------------------------------------------------

\34\ The FSIS analysis which takes into account the uncertainty
associated with various cost factors shows that the values at the
5th and 95th percentiles for this average present value using a 7
percent discount rate and 20 year time horizon are $94.72 and
$155.97 million, respectively. The values at the 5th and 95th
percentiles of the present value cost distribution using a 3 percent
discount rate are $127.63 and $213.60 million, respectively. See
Appendix D, Table 1.
---------------------------------------------------------------------------

Impact on Estimated Costs

The estimates of the total undiscounted compliance costs of the
final requirements for ground or chopped product and POP requirements
for major cuts are $583.81 million under Option 1. The average present
value cost is $348.06 million at 7 percent, with all but $31.07 million
attributed to the labeling costs for ground or chopped product. The
average annualized cost of the supplemental proposed rule for ground or
chopped product, using the same 7 percent discount rate, is $32.85
million. This cost is not significant relative to the volume of output
of ground or chopped products sold at retail. For example, as noted
earlier, the annual volume of these products sold at retail stores is
estimated at 6.2 billion pounds. Therefore the annualized cost of the
supplemental proposed rule per pound of ground or chopped product is
$0.0053 ($32.85 million/6.2 billion pounds). Viewed another way, it was
estimated earlier that the average weight of a retail package was 2.735
pounds. Therefore the annualized average cost of the supplemental
proposed rule on a per package basis is $0.014 ($0.0053 per pound x
2.735 pounds per package). This increase compares to a price for ground
beef that can easily exceed $2.00 per pound or over $5.00 for an
average-size package.
Should the rule become final, FSIS believes that the compliance
costs of the rule largely will be passed on to consumers in the form of
higher product prices because the demand for meat and poultry products
is inelastic. Huang (1993) analyzed a group of meats and other animal
proteins consisting of products including beef and veal, pork, other
meats, chicken, turkey, fresh and frozen fish, canned and cured fish,
eggs, and cheese. He concluded that the price elasticity of demand for
this group of products was (-0.3611), i.e., a one percent increase in
price for one of these products would reduce demand by only 0.3611
percent.
Review of about a dozen recent studies annotated by William Hahn
(1996) of the Economic Research Service reveals that estimates of price
elasticity of demand for most beef products (ground beef, steak, chuck
roast, etc.) is less than one. Consequently, consumers are unlikely to
reduce their demand for beef, ground meat products, etc., significantly
when beef prices increase a few pennies per pound. Some consumers may
demand labeled products, even at a higher cost per pound, given the
value of the information from a diet/health perspective.
2. Supplemental Proposed Rule Benefit Analysis

Research Findings

FSIS conducted an extensive search of research on the impacts of
nutrition labeling and consulted with the Economics Research Service,
USDA on the estimation of benefits. FSIS has found that there are a
limited number of nationally representative studies on the effect of
nutrition label and POP nutrition information use on dietary intakes.
In these studies, the authors frequently examine consumer behavior
before and after a significant change in the availability of nutrition
labeling information (e.g., Nutrition Labeling and Education Act (NLEA)
implementation and relaxation on the prohibition of health claims). The
general conclusion of the available research is that there is a
positive relationship between the availability of nutrition information
and improvements in diet quality.

[[Page 67776]]

Research by Kim, et al. used USDA's Continuing Survey of Food
Intake by Individuals, 1994-96 (CSFII) and the associated Diet Health
Knowledge Survey (DHKS) to evaluate the impact of nutrition labels
required by the NLEA on consumer label use and intake of selected
nutrients. They used an econometric model to evaluate the effects of
nutrition label usage by comparing the nutrient intake of label users
with the expected intake of the label user in the absence of labels.
For those who use nutrition facts information, the intake of calories
from total fat, saturated fat, cholesterol, and sodium decreases by 6.9
percent, 2.1 percent, 67.6 mg, and 29.58 mg respectively.
However, measuring the effectiveness of nutrition labels on dietary
intake is complicated by the relationship between label reading and
other factors that also affect diet. For example, consumers with high
levels of knowledge and concern about nutrition are likely to eat a
healthier diet than consumers who are less concerned about nutrition;
they are also more likely to read labels and use labels to guide their
diet. A recent study Variyam (2008) uses the same dataset as Kim et al.
(2000) and finds that the labels increase only fiber and iron intakes
of label users compared with label nonusers. The author notes that in
comparison, a model that does not account for self-selection implies
significant label effects for all but two of the 13 nutrients that are
listed on the NFP. Below we provide some information from other studies
that show an association between nutrition label and improved diet.
However, we note that these studies did not account for the potential
self-selection problem and may overstate the effectiveness of nutrition
labeling in improving diet. In addition, none of these studies directly
assessed the consumer responses to labeling on raw meat products.
Neuhouser, et al. 1999, analyzed data from a survey of 1,450 adult
residents in Washington State. The survey assessed nutrition label use,
fat-related diet habits, fruit and vegetable consumption, diet-related
psychological factors, health behavior and demographic characteristics.
They concluded that nutrition label use was significantly associated
with lower fat intake and, after controlling for all demographic,
psychosocial, and behavioral variables, nutrition label use explained 6
percent of the variance in fat intake, with a probability of 99.9
percent.
Teisl and Levy in 1997 conducted a 3-year study on the direct
effects of nutrition shelf label information on consumer purchasing
behavior. Shelf labels containing nutrition information were found to
have small but significant effects on consumer dietary patterns. The
study also found that providing nutrition information may allow
consumers to more easily switch consumption away from ``unhealthy''
products in food categories where differences in other quality
characteristics, such as taste, are relatively small toward consumption
of products in food categories where the difference in taste between
the more and less fatty products may be relatively large. The type and
format for the nutrition information used in the study, brand specific
nutrition information provided on the shelf in conjunction with the
products' unit and item price information, may help to explain the
results. This research shows that the main effect of the nutrition
shelf labeling program occurred relatively quickly. The authors
attribute this response, in part, to ancillary activities efforts, such
as measures to enhance consumer health education, occurring as part of
the initial nutrition labeling program being evaluated.
Related research conducted by Teisl, Bockstael, and Levy in 2001
found that the provision of nutrition information led consumers to
change purchase behavior, but may not necessarily lead to their buying
more ``healthy'' foods. They conclude that consumer responses to
nutrition labeling may take two forms: a ``health'' effect and a
``substitution'' effect. The first arises when consumers reduce net
intake of ``unhealthy'' nutrients and increase purchases of ``healthy''
foods. The second effect occurs when consumers increase their level of
satisfaction by substitution across food categories using nutrition
information to maintain an overall level of health risk while
increasing satisfaction from other food attributes, such as flavor.
They also note that economic analyses that identify the benefits of
health risk reduction as the costs of foregone illness may understate
the overall benefits of nutrition labeling. They assert that consumer
welfare is improved (and, therefore, there is a willingness to pay for
nutrition information) even if health risks are not reduced because
consumers make food choices more in line with non-health preferences
about food attributes.
Research by Moorman in 1996 examined whether the NLEA increased
consumers' understanding of nutrition information at the point of sale,
whether understanding of nutrition information has been promoted
regardless of individual consumer preferences, and whether
understanding of nutrition information at the point of sale has
increased for healthful and non-healthful products. Moorman found
statistically significant increases in consumers' nutrition information
acquisition after the NLEA took effect. Motivated consumers acquired
more information after the law went into effect than before and even
the less motivated more accurately recalled fat content after the law
went into effect. The research also found that consumers retained more
information about higher fat products (defined as those having more
than 5.5 grams of fat per serving) than they did about lower fat
products. The author made the assessment that standardized and adequate
nutrition information, as required by the NLEA, raised awareness of the
nutritional quality of food products, thereby increasing the focus on
higher fat products. Consequently, the NLEA may have spurred product
competition, even among high fat products (Aldrich).
Ippolito and Mathios (1995) studied the effect of an FDA relaxation
on a prohibition against health claims. Following the decision to allow
health claims on labels in 1985, nutrition advertising, a form of
nutrition education when such advertising contains factual information,
increased significantly. While they found that fat consumption per
capita fell prior to the FDA decision to allow health claims on labels,
it fell at a faster rate after the prohibition was eased. Their
research also found that prior to when health claims were allowed, fat
consumption declined among categories of food whose fat or cholesterol
content was widely communicated: Meat, eggs, and fats and oils.
However, increases in fat content from other foods largely offset these
consumption declines. After relaxing the prohibition, people consumed
less fat across more categories, with less of an increase in
consumption in other categories. The results suggest that more specific
information about nutritional content of foods assists consumers in
making healthier food choices within food categories.
In related research, Mathios and Ippolito (1998) analyzed the
effect of nutrition information in advertising and labels on
consumption of food cereals with fiber content. They divided their
study into two periods: The period 1974-1984, when the FDA permitted
printing of fiber content on cereal boxes but did not permit printing
of any health claims; and the period 1985-1987, when health claims were
permitted. They concluded that, in concert with an increase in fiber
intake of cereals in their diets, the average

[[Page 67777]]

intakes of fat, saturated fat, and dietary cholesterol for both men and
women declined during both the periods, albeit the decline was greater
during the second period relative to the first. They concluded that the
increase in fiber and the decrease in fat and cholesterol consumption
were associated with the consumption of labeled cereals.
Although the self-selection issue noted above complicates the
precise measurement of the incremental impact of labeling, the results
of the studies identified above suggest there may be a positive link
between nutrition label use and dietary change beyond that resulting
from healthier eating habits of those who regularly rely on nutrition
labels.

Consumer Response to Nutrition Labeling

FSIS consulted with ERS to develop the empirical analysis of the
benefits of nutrition labeling for the proposed rule (Crutchfield, et
al., 2001b). The estimated benefits take the form of reductions in the
incidence of coronary heart disease and three types of cancer that may
accrue as consumers improve their diet quality through increased use of
nutrition information generated by the regulation.
As will be shown, survey data on nutrient intake and label use were
used to correlate intake of fat, saturated fat, and cholesterol with
usage of existing nutrition information. The Agency estimated the value
of the potential changes from intake of fat, saturated fat, and
cholesterol that could occur as consumers respond to the newly
available nutrition information. A model developed by Zarkin et al.
(1991, 1993) links changes in the serum cholesterol rate to changes in
the percentage of total calories from polyunsaturated fat, saturated
fat, and dietary cholesterol. Changes in serum cholesterol are then
used to estimate the health outcomes, which are reductions in the
number of cases and mortality from three cancers (breast, colorectal,
and prostate) and coronary heart disease. Finally, the economic value
to the public health changes were estimated by assuming an implied
value of life associated with reductions in premature mortality.
Assumptions were made concerning consumer behavior to determine how
much of a behavioral response and change in dietary intake may result
from providing more nutrition information on meat and poultry products.
For example, when nutrition labels and other sources of nutrition
information are provided for raw meat and poultry products, FSIS made
the assumption that nutrition information usage rates will rise to
match nutrition label usage rates for food products as a whole (Table
15).

Table 15--Consumer Usage of Nutrition Information
----------------------------------------------------------------------------------------------------------------
Often Sometimes Rarely/never Do not buy
-------------------------------------------------------------------------------
Men Women Men Women Men Women Men Women
----------------------------------------------------------------------------------------------------------------
Use nutrition facts panel....... 26.7 41.7 25.6 32.6 47.7 25.6 n/a n/a
Look for nutrition information 16.9 22.1 18.2 18.0 62.7 57.9 2.2 2.0
on raw meat....................
----------------------------------------------------------------------------------------------------------------
Note: Percent of respondents, based on 3 year weighted averages, 1994-1996. Crutchfield, et al., 2001b.

Table 15b--Consumer Usage of Nutrition Information After Mandatory Labeling for Raw Meat, Poultry, and Fish
----------------------------------------------------------------------------------------------------------------
Often Sometimes Rarely/never Do not buy
-------------------------------------------------------------------------------
Men Women Men Women Men Women Men Women \
----------------------------------------------------------------------------------------------------------------
Use nutrition facts panel after 26.1 40.9 25.0 31.9 46.7 25.1 2.2 2.0
mandatory labeling.............
----------------------------------------------------------------------------------------------------------------

Using the proportions of men (2.2 percent) and women (2.0 percent)
who report not buying raw meat, poultry or fish, the new assumed label
use distribution after mandatory labeling is shown in Table 15b. The
percentage of men who would use the label often to buy raw meat,
poultry, or fish would be 26.1, which is obtained as 0.267*97.8, where
.267 is the proportion of men who use label often in Table 15 and 97.8
is the percentage of men who buy raw meat, poultry, or fish.
Currently, some nutrition information is provided for some single-
ingredient, raw meat and poultry products, but the information is not
currently required. Mandatory nutrition labeling rules for the major
cuts and ground or chopped products would mean that the nutrition
information provided for these products would be comparable to that
provided for other food products. The analysis could reasonably assume
that nutrition information usage rates for raw meat and poultry
products would then become the same as the nutrition label usage rates
for all foods taken together. For example, before mandatory nutrition
information labeling, the data show that about 17 percent of men look
for nutrition information on meat ``Often'' (Row 2 of Table 15). In
this analysis, then, it is assumed that after mandatory nutrition
information labeling, 26.7 percent of men would use the nutrition fact
panel or POP materials for meat products, which is the nutrition label
usage rate for all foods (Row 1 of Table 15). Similarly, the Agency
assumed that the percentage of women using nutrition information on
meat products ``Sometimes'' would rise from 18 percent to 32.6 percent.
To assess the impacts on diet quality, the Agency assumed in the
preliminary regulatory impact analysis that as nutrition information
usage rates rise for consumers eating meat and poultry, dietary
patterns will change in a manner consistent with current data. However,
Crutchfield et al. (2001b) note that this is an ``admittedly strong''
assumption. As shown above, there is strong statistical evidence that
people who use nutrition information to guide their food consumption
decisions have healthier diets. While other factors may be at work, the
Agency made the assumption that the provision of additional nutrition
information and making that information available to more consumers
will lead to behavioral shifts and improved diet quality. Thus, the
assumption is made that the effect of providing new nutrition
information for meat and poultry products would make some (not all)
consumers who currently do not look for nutrition information on

[[Page 67778]]

meat and poultry products more aware of the dietary implications of
their food choices. As these consumers see the new nutrition labels on
packages of meat and poultry products or new POP information, they may
begin to use the nutrition label or POP information or to use it more
frequently. Some of these consumers would then choose to consume the
same mix of products as people who are currently aware of the
nutritional quality of meat and poultry products because they look for
such nutrition information as currently is available. For example, men
who currently do not look for nutrition information on meat in the
absence of mandatory nutrition information labeling who would begin
using this information ``Sometimes'' after nutrition labeling is in
place would see a decrease in fat intake from 96 grams to 92.5 grams
(Row 1 of Table 16). Women who previously had been using labels
``Sometimes'' who now use them ``Often'' would see a decrease in
saturated fat intake from 20.60 grams to 17.39 grams (Row 5 of Table
16). Similar changes in fat and saturated intakes as a percentage of
total calories can be assessed from Table 17.
The Crutchfield et al. (2001b) study simply assumed consistency of
behavior toward label use and changes in diet quality. Whether the
assumption leads to overstating or understating health benefits is not
known.
Consumers will not use labels to make very significant dietary
changes. If diet quality associations found with all other labeled
foods do not hold up for nutrition labels on meat, then health benefits
in the supplemental PRIA are overestimated. Of course, health benefits
are only one way in which benefits might be realized. Consumers might
choose to use nutritional information to enhance enjoyment of food, and
not to raise their health status. Further, they may be better off than
if they had raised their health status, since rational consumers will
use information to their best advantage. If we observe rational, well-
informed consumers selecting a more enjoyable diet, for these consumers
a more enjoyable diet was worth more than better health. Thus, when we
restrict benefits estimates to allow only for information to be used to
advance health status, we are simultaneously restricting estimated
benefits to a lower level of value to consumers. The FSIS analysis
imposes that restriction and the resulting benefits estimate must
therefore be interpreted as an underestimate of overall benefits.

Table 16--Dietary Intake of Fat, Saturated Fat, and Cholesterol by Usage of Nutrition Information on Raw Meat,
Poultry, or Fish
----------------------------------------------------------------------------------------------------------------
Often Sometimes Rarely/ never Do not buy Average
----------------------------------------------------------------------------------------------------------------
Men:
Total fat................... 81.64 92.49 96.09 74.48 92.51
Saturated fat............... 27.20 31.09 32.44 24.02 31.12
Cholesterol................. 311.81 321.49 355.14 236.83 339.07
Women:
Total fat................... 53.90 61.70 62.18 57.23 60.16
Saturated fat............... 17.39 20.60 21.41 17.27 19.71
Cholesterol................. 194.32 219.27 216.55 135.89 210.53
----------------------------------------------------------------------------------------------------------------
Note: Fat intake in grams, cholesterol in milligrams. Crutchfield, et al., 2001b.

Table 17--Percentages of Calories From Fat, Saturated Fat, by Usage of Nutrition Information on Raw Meat,
Poultry, or Fish
----------------------------------------------------------------------------------------------------------------
Often Sometimes Rarely/ never Do not buy Average
----------------------------------------------------------------------------------------------------------------
Men:
Total fat................... 31.67 34.03 33.88 26.69 33.44
Saturated fat............... 10.53 11.36 11.37 9.52 11.19
Cholesterol................. 311.81 321.49 355.14 236.83 339.07
Women:
Total fat................... 31.62 32.94 32.87 26.79 32.49
Saturated fat............... 10.15 10.82 10.82 9.19 10.64
Cholesterol................. 194.32 219.27 216.55 135.89 210.53
----------------------------------------------------------------------------------------------------------------
Note: Fat and saturated fat values are percentages of total calories; cholesterol in milligrams. Crutchfield, et
al., 2001b.

Under these assumptions, then, the Economic Research Service of the
U.S. Department of Agriculture analyzed how requirements for mandatory
nutrition information labeling of raw meat and poultry products could
possibly affect diet quality (Crutchfield, et al., 2001b). Table 18
shows the estimated intake of fat, saturated fat, and cholesterol, by
gender, after adjusting for the assumed change in patterns of label
use. To reach the values shown in Table 18, each cell in Table 16 (the
dietary intake of fat, saturated fat, and cholesterol) was multiplied
by the associated percentage of label use (nutrition facts panel use)
from Table 15. This increased the number of people in the ``often'' and
``sometimes'' cells, and decreased the number of people in the
``rarely/never'' cells, so that the distribution of label usage on meat
and poultry products would reflect the distribution of label usage on
all products.

[[Page 67779]]

Table 18--Change in Intake Due to Increased Label Usage
----------------------------------------------------------------------------------------------------------------
Intake prior to Intake after
mandatory adjusting for
labeling for meat increased label Decreased intake
& poultry usage
----------------------------------------------------------------------------------------------------------------
Men:
Total fat........................................... 92.51 91.31 1.3%
Saturated fat....................................... 31.12 30.69 1.37%
Cholesterol......................................... 339.1 335.0 4.12
Women:
Total fat........................................... 60.16 58.57 2.65%
Saturated fat....................................... 19.71 19.45 1.32%
Cholesterol......................................... 210.5 208.2 2.37
----------------------------------------------------------------------------------------------------------------
Note: Fat intake in grams, cholesterol in milligrams. Fat and saturated fat intake changes are in percentage
terms, cholesterol intake changes are absolute changes in milligrams. (Crutchfield, et al., 2001b.)

Applying these new label use percentages of men and women to their
intakes in Tables 18 and 19, the new estimated changes in intakes,
after accounting for non-buyers, are reported in Tables 18b and 19b.

Table 18b--Change in Intake Due to Increased Label Usage, Assuming That the Percentage of Non-Buyers Remains
Unchanged
----------------------------------------------------------------------------------------------------------------
Intake prior to Intake after
mandatory adjusting for
labeling for meat increased label Decreased intake
& poultry usage
----------------------------------------------------------------------------------------------------------------
Men:
Total fat........................................... 92.51 90.94 1.7%
Saturated fat....................................... 31.12 30.55 1.83%
Cholesterol......................................... 339.1 335.0 4.1
Women:
Total fat........................................... 60.16 58.54 2.69%
Saturated fat....................................... 19.71 19.40 1.57%
Cholesterol......................................... 210.5 210.52 -0.02
----------------------------------------------------------------------------------------------------------------

Note that the second column in Table 18b is computed as the
weighted average of intakes from Table 16, using the percentages in
Table 15 as weights. For example, for the total fat intake of men,
81.64 *.261 + 92.49 *.25 + 96.09 *.467 + 74.48 *.022 = 90.94.
Aggregating across categories, a new weighted average intake is
obtained, which could be seen after the imposition of mandatory
labeling requirements. Table 19 shows the percentage of calories from
fat and cholesterol intake that were derived in a similar manner using
intakes from Table 17.\35\
---------------------------------------------------------------------------

\35\ The calculations in Tables 18 and 19 ignore the fact that
2.2% of men and 2% of women report not buying meat, poultry or fish
(Table 15). If these proportions are assumed to remain unchanged
after mandatory labeling, then the decrease in intakes estimated in
Tables 18 and 19 would be slightly different.

Table 19--Change in Percentage of Calories From Fat and Cholesterol Intake Due to Increased Label Usage
----------------------------------------------------------------------------------------------------------------
Intake prior to Intake after
mandatory adjusting for Decrease in
labeling for meat increased label intake
& poultry usage
----------------------------------------------------------------------------------------------------------------
Men:
Total fat........................................... 33.44 33.33 0.11
Saturated fat....................................... 11.19 11.14 0.04
Cholesterol......................................... 339.1 335.0 4.12
Women:
Total fat........................................... 32.49 32.37 0.11
Saturated fat....................................... 10.64 10.54 0.10
Cholesterol......................................... 210.5 208.2 2.37
----------------------------------------------------------------------------------------------------------------

Note in Table 19 that fat intake is in grams, and cholesterol is in
milligrams. Further, fat and saturated fat intake changes are in
percentage terms, and cholesterol intake changes are absolute changes
in milligrams. (Crutchfield, et al., 2001b).

[[Page 67780]]

Table 19b--Change in Percentage of Calories From Fat and Cholesterol Intake Due to Increased Label Usage,
Assuming That the Percentage of Non-Buyers Remains Unchanged
----------------------------------------------------------------------------------------------------------------
Intake prior to Intake after
mandatory adjusting for Decrease in
labeling for meat increased label intake
& poultry usage
----------------------------------------------------------------------------------------------------------------
Men:
Total fat.......................................... 33.44 33.19 0.25
Saturated fat...................................... 11.19 11.11 0.08
Cholesterol........................................ 339.1 335.0 4.1
Women:
Total fat.......................................... 32.49 32.23 0.26
Saturated fat...................................... 10.64 10.50 0.14
Cholesterol........................................ 210.5 210.52 -0.02
----------------------------------------------------------------------------------------------------------------
Note: Fat and saturated fat intake changes are in percentage terms, cholesterol intake changes are absolute
changes in milligrams.

Applying these new label use percentages of men and women to their
intakes in Tables 18 and 19, the new estimated change in intakes, after
accounting for non-buyers, are reported in Tables 18b and 19b.
Comparing Table 18b with Table 18 and Table 19b with Table 19, it
can be seen that when the proportions of non-buyers are assumed to
remain unchanged, the estimated decrease in intakes of fat and
saturated fat are higher, decrease in cholesterol is nearly the same
for men, whereas for women cholesterol intake increases slightly. This
is because the fat and saturated fat intakes of buyers are higher than
non-buyers, whereas the cholesterol intakes of women buyers are in
general lower than women non-buyers. Based on these magnitudes, if the
new numbers are used in the calculations, the benefits of labeling are
likely to be even higher.

Evaluation of Health Effects

Based on epidemiological research, the estimated reductions in
calories from fat and cholesterol intake (Table 19) were used to
estimate the decrease in the incidence of major diseases associated
with consumption of fat and cholesterol. The diseases considered in
this analysis include three types of cancer and coronary heart disease.
Epidemiological studies of the relationships between dietary fat and
cholesterol intake and incidence of cancer and coronary heart disease
indicate that saturated and polyunsaturated fat and cholesterol are
converted into serum cholesterol. Serum cholesterol has an impact on
the incidence rates of these diseases. Zarkin, et al. (1993) developed
a model which estimated the relationships between dietary intake of fat
and cholesterol to convert fat contents into the change in fat and
serum cholesterol:

(1) SC (Mg/) = 2.16S-1.65P + 0.097C

Where SC is serum cholesterol, S is the change in percentage of
total calories represented by saturated fat, P is the change in
percentage of total calories represented by polyunsaturated fat, and
C is the change in dietary cholesterol measured in mg/1,000
calories.

Mancino and Kuchler (2009) show that the threat of severe adverse
health consequences can induce significant improvements in diet quality
(improvements from the perspective of the public health community, not
from consumers' perspectives). Cigarette smoking and dietary intake of
cholesterol, total fat, and saturated fat are lower for those whose
physicians told them they have high cholesterol, compared to those with
undiagnosed high cholesterol. But, some also choose to compromise diet
quality. Mancino and Kuchler found that dietary intake of cholesterol
is unaffected by the decision to take cholesterol-lowering medication.
However, for those taking cholesterol-lowering medication, diets are
higher in total fats and in saturated fats than are diets of those with
unmedicated high cholesterol. The waist circumference of those on
medication is also larger, although some of the increase may be
associated with reduced cigarette consumption. The increased dietary
intake of fat and saturated fat, along with increased waist size are
telling evidence of offsetting behavior, as medication lowers the
health price of unhealthy choices.
Reductions in serum cholesterol are then converted to reduction in
risk of coronary heart disease and the three types of cancers. The
estimated values of percentage changes in saturated fat and cholesterol
intake from the last column of Table 18 were substituted into the model
developed by Zarkin, et al. Since separate data for polyunsaturated (P)
fat were not available, it was assumed that P would be one-third of
total fats, as was also assumed by Zarkin, et al. The estimates of
serum cholesterol for male and female consumers and reductions in
mortality are shown in Table 20.

Table 20--Reduction in Serum Cholesterol and Change in Mortality
----------------------------------------------------------------------------------------------------------------
Change in Change in Change in Change in
calories from calories from cholesterol serum Reduction in
total fat saturated fat intake cholesterol mortality
----------------------------------------------------------------------------------------------------------------
% change
%
----------------------------------------------------------------------------------------------------------------
Men............................. 0.11 0.04 4.12 0.399 0.0240
Women........................... 0.11 0.10 2.37 0.231 0.0139
----------------------------------------------------------------------------------------------------------------

The calculated values of SC presented above were used to estimate
incidence of breast, prostate, colon/rectal cancer, and coronary heart
disease. Zarkin, et al. (1993) concluded that an increase in serum
cholesterol by 20 mg/1,000 calories was associated with a 1.2-percent
increase in the incidence of each of these diseases. This rate was used
to convert reductions in total fat, saturated fat, and cholesterol in
Table 18 into SC. It is estimated that the

[[Page 67781]]

reduction in mortality associated with changing dietary pattern
resulting from mandatory nutrition information labeling are 0.024
percent for men, and about 0.014 percent for women. However,
Crutchfield et al. (2001b) note that: ``the link between fat intake,
serum cholesterol, and cancer risk is less clear than for coronary
heart disease.''
The PRIA did not estimate changes in total meat or poultry
consumption that may result from the rule, because of the assumption
that consumers would choose different types of meat and poultry to
reduce fat, saturated fat, and cholesterol. For example, consumers may
consume more poultry and less red meat, or they may consume more white
poultry meat and less dark poultry meat in response to the newly
available nutrition information. Also, in response to the nutrition
information, consumers may prefer to purchase meat that has been
trimmed more closely to remove fat.
The assumption that total consumption of meat or poultry would not
change in response to the newly available nutrition information is
consistent with the approach taken by other studies that examine
consumers' response to health claims. One such study is noted in the
PRIA (66 FR 4989, January 18, 2001). There is no research available
that establishes a relationship among nutrition labeling information,
health effects, and total meat or poultry consumption.
Table 21 presents data on the annual number of deaths associated
with the three types of cancer and coronary heart disease for men and
women in the United States in 1998. Data for the number of deaths came
from the National Center for Health Statistics (coronary heart disease)
and the American Cancer Society (cancer). Data on colorectal cancer
were not available by gender; FSIS assumed the estimated 56,000 cases
were distributed equally between men and women.

Table 21--Reduction in Mortality, Number of Deaths, and Estimated Lives Saved
----------------------------------------------------------------------------------------------------------------
Reduction in Number of deaths Number of lives saved
mortality (%) -------------------------------------------------
-------------------- 3 4 5 6 7
1 2 -------------------------------------------------
--------------------
Men Women Men Women Men Women Total
----------------------------------------------------------------------------------------------------------------
Breast Cancer............................. ........ 0.0139 ........ 41,200 0 6 6
Prostate Cancer........................... 0.0240 ........ 31,900 ........ 8 0 8
Colorectal Cancer......................... 0.0240 0.0139 28,000 28,000 7 4 11
Coronary Heart Disease.................... 0.0240 0.0139 231,332 228,769 55 32 87
----------------------------------------------------------------------------------------------------------------

The fact that FSIS's analysis did not estimate changes in total
meat or poultry consumption may be a limitation of the results, but it
is not a major concern, because FSIS's analysis assumes that when
consumers read the new nutrition information, they will use the
information and choose to consume the same mix of products as consumers
that are aware of the nutritional quality of meat and poultry. The
calculations in the PRIA are based on a distribution of nutrition label
usage on meat and poultry that reflects the distribution of nutrition
label usage for food products as a whole. FSIS did not receive comments
on the fact that the PRIA did not estimate changes in total meat or
poultry consumption. The supplemental PRIA incorporates the PRIA's
estimates of potential changes from intake of fat, saturated fat, and
cholesterol that could occur as consumers respond to the newly
available nutrition information. Finally, the Agency attached an
economic value to the public health changes by estimating the implied
value of life associated with reductions in premature mortality.
Using recent estimates, deaths from breast cancer are estimated at
39,800, prostate cancer at 29,800 and colorectal cancer at 57,100 in
2003. Deaths from coronary heart disease are estimated at 515,204 for
2000. As a result, the estimated lives saved due to dietary changes
from nutrition labeling are revised from those shown in Table 21. The
revised estimates are as follows: annual deaths from breast cancer are
reduced by an estimated 5.5, deaths from prostate cancer by 7.2, deaths
from colorectal cancer by 10.8, and deaths from coronary heart disease
by 97.8.\36\ The total annual lives saved due to dietary changes from
nutrition labeling for all diseases is 121.7.
---------------------------------------------------------------------------

\36\ These estimates are based upon the rates that were
calculated for the PRIA.
---------------------------------------------------------------------------

Effect of Nutrition Labeling on Consumer Attitudes About Beef

As reported by the National Cattlemen's Beef Association (2009) the
U.S. meat industry trade organizations, namely the National Cattlemen's
Beef Association (NCBA), the Food Marketing Institute (FMI) and the
National Pork Board (NPB), conducted research to examine the benefits
and challenges of implementing on-pack nutrition labeling for meat
products. This research included qualitative and quanitative studies
(via focus groups) to explore consumer needs, behavior and preference
for nutrition labeling on fresh meat products.

Focus Group Key Learnings

Findings from the focus groups indicated that consumers desire more
nutrition information, find both on-pack and POP materials useful but
prefer on-pack, and still want to see the product they are purchasing.
Additional learnings indicate:

--Consumers want to see nutrition information for fresh meat and
they want more information on specific nutritional content.
Information on fat content, calories per serving,
cholesterol and proteins are of greatest importance.
Micronutrients (vitamins and minerals) are also of
interest.
--Consumers are generally unaware of the micronutrients found in
fresh meat products and they want to see all of the nutrient
information a food provides (but aren't interested in what a food
doesn't have such as 0 percent for Vitamin C).
--Consumers currently use on-pack labels most often to learn about
the nutritional content of meat products because there is higher
awareness for labels than for posters or take-home brochures.

Beef Checkoff-Funded Research

Given the beef industry's philosophy that nutrition information
should be widely available to help people make informed purchase
decisions, yet understanding the challenges many retailers face in
providing the information in a simple and easy-to-understand format,
NCBA embarked on a number of additional nutrition labeling research
projects. The goal of

[[Page 67782]]

this subsequent research was to further understand appropriate methods
and vehicles for retailers to share the information with consumers.

Effect of Exemptions on Benefits Estimates

Under this rule should it become final, all very small
establishments would be exempt from the requirement for nutrition
labeling of ground or chopped products because they have 500 or fewer
employees, are owned by companies with 500 or fewer employees, and
likely produce 100,000 pounds or less annually of each ground product.
Finally, retail firms that have 500 or fewer employees would be exempt
from nutrition labeling requirements for ground or chopped products,
provided they produce 100,000 or less annually of each ground product.
This exemption for small businesses will reduce the benefits associated
with the rule in proportion to the share of ground or chopped products
affected by the rule that are sold at these establishments.
FSIS estimates that the number of packages of ground or chopped
product sold or produced through exempt facilities is approximately 469
million packages (2.267 billion packages times 20.7 percent, the
estimated share of packages sold at ``exempt'' establishments as shown
using U.S. Census 2002 data in the Cost Analysis). At an average of
2.735 pounds per package, the average amount of ground or chopped
product sold at these establishments is about 1.283 billion pounds (469
million packages x 2.735 pounds per package). FSIS estimates that of
the total of 6.201 billion pounds of ground or chopped meat and poultry
products consumed annually, 4.918 billion pounds will be affected by
the labeling requirements of the rule.
As discussed above, the rule would provide numerous exemptions from
nutrition labeling requirements, in addition to the small business
exemptions, for ground or chopped products sold through retail
facilities. FSIS reduced costs and benefits to account for the small
business exemption regarding the labeling of ground or chopped
products. However, FSIS did not reduce the costs or benefits estimates
to account for the other exemptions for ground or chopped product
because the volume of ground or chopped product that would qualify for
these other exemptions is very low.
Should it become final, the supplemental proposed rule would not
provide a small business exemption from the nutrition labeling
requirements for the major cuts. The rule provides numerous other
exemptions from nutrition labeling requirements for the major cuts.
However, FSIS did not reduce the costs or benefits estimates to account
for the exemptions for major cuts because the volume of major cuts that
would qualify for these exemptions is very low.
FSIS estimates that the total amount of major and nonmajor cuts of
single-ingredient, raw meat and poultry products is 19.6 billion
pounds.\37\ Of this amount, FSIS estimates that 16.745 billion pounds,
or 85 percent are major cuts, would be subject to the label
requirements of the rule as indicated above. The estimate of the total
amount of single-ingredient, raw meat and poultry products that are not
ground or chopped is based on recent research conducted by the Economic
Research Service on beef and pork consumption and on information
provided by the National Chicken Council and National Turkey Federation
at their Web sites. The derivation of this estimate is shown in
Appendix A, Tables 1-4.
---------------------------------------------------------------------------

\37\ This amount includes nonmajor cuts of single-ingredient,
raw meat and poultry that are not ground or chopped. The data
available do not distinguish between major and nonmajor cuts.
---------------------------------------------------------------------------

Based on these estimates, 16.745 billion pounds of major cuts are
affected by the supplemental proposed rule. From above, 4.918 billion
pounds of ground or chopped product are affected by the rule, for a
total of or 21.663 billion pounds of meat and poultry products. This
compares to a total of 63 billion pounds of red meat and poultry
products consumed in the United States in 2003.\38\ The exemption for
small businesses affects 1.283 billion pounds of ground or chopped
product, or 5.92 percent of the total amount of meat and poultry
products affected by the rule. Consequently, the total annual lives
saved due to dietary changes from nutrition labeling for all diseases
is reduced accordingly. For example, the maximum number of lives saved
annually declines from 121.7 to 114.5 (121.7 x (1.0-0.0592)).
---------------------------------------------------------------------------

\38\ Source: Per capita consumption estimates are found at U.S.
Department of Agriculture, World Agricultural Supply and Demand
Estimates and Supporting Materials. Published in Livestock, Dairy,
and Poultry Outlook, http//www.ers.usda.gov/publications/ldp/. Total
consumption is based on a total U.S. population of 288.4 million.
---------------------------------------------------------------------------

Estimating the Benefits of Preventing Premature Death

The benefits of this supplemental proposed rule would be the lives
saved due to the estimated reductions in mortality rates associated
with coronary heart disease and selected cancers. The Agency believes
that there are potential benefits associated with the reductions in
non-fatal cases of coronary heart disease. However, identifying and
quantifying the risk reduction of premature death in an economic
context is difficult. Similarly, it is also complex applying risk
reductions of non-fatal cases of diseases within an economic
context.\39\ Given questions concerning data quality and unsettled
methodological issues in estimating the benefits of a reduction in non-
fatal cases of coronary heart disease, FSIS is restricting its analysis
of benefits to reductions in premature death.
---------------------------------------------------------------------------

\39\ For an in-depth analysis of this issue, see Fred Kuchler
and Elise Golan, 1999.
---------------------------------------------------------------------------

If food were marketed by risk levels (e.g., probabilities of
inducing cancer or heart disease), and consumers treated advertised
risk levels as they do other objectively measurable product
characteristics (e.g., weight or volume), there would be little
difficulty in valuing diet-related food safety risk factors. Product
prices could be statistically associated with risk levels, yielding the
risk-dollar trade-off consumers make. That is, one could measure, based
on consumer purchases, the dollar value consumers attach to particular
types of risk reduction. However, there is no ``market'' for reducing
diet-related fatal risks and these values can not be measured.
There is no price that can be tabulated from commercial
transactions that reflects the value of reducing diet-related fatal
risks. Actions that individuals might take to reduce these risks do not
leave a behavioral trail for analysts to follow. This informational
void makes it difficult to evaluate programs that might reduce diet-
related risks. In particular, there is no obvious dollar value to
assign to the major benefit of such programs, namely lives saved and
reductions in cases of non-fatal diseases.
Ultimately, FSIS wanted to monetize the benefits of diet-related
fatal health risk reduction. The Agency's goal was to find a method of
transferring market-based risk-dollar trade-off estimates to diet-
related fatal cancer risks.
The most studied risk choices are those for on-the-job risks of
accidental injury and death. Analysts have estimated the compensation
required to induce workers to accept such risks. Many studies of labor
market behavior have been carried out because the wide range of risk
levels workers accept and the wide range of wages paid are amenable to
statistical analysis. Available evidence suggests that workers'
subjective assessments of risks they face are plausible (Viscusi,
1992).

[[Page 67783]]

FSIS is using a range for the value of life of $5.0 million to $6.5
million with a mean of $5.5 million. The preliminary regulatory impact
analysis of the rule used a single value of $5.0 million. The value of
a statistical life is not the value an individual would pay to save his
own life, but the aggregate value paid by many individuals to reduce a
small risk of death each faces. To make this transfer, FSIS assumed
that individuals make consistent risk choices, reducing health risks as
much as their budgets allow. The Agency assumed individuals focus on
the likelihood of health outcomes and the gravity of these
outcomes.\40\
---------------------------------------------------------------------------

\40\ FSIS revised the method employed in the preliminary
regulatory impact analysis of the rule to estimate human health
benefits based on guidance to all Federal agencies concerning the
estimation of human health benefits. The revised method uses a
single value for each premature death prevented, regardless of age.
The revised method results in significantly higher human health
benefits resulting from the nutrition labeling requirements of the
rule.
---------------------------------------------------------------------------

Viscusi (1992) has summarized the empirical work estimating the
value of risk of premature death. Several studies had estimated the
risk-dollar trade-off in the labor market by dividing the wage premium
for high-risk jobs by the risk of a fatal job injury. Drawing on the
compiled results of these studies, he stated: ``Although the estimates
of the risk-dollar trade-off vary considerably depending on the
population exposed to the risk, the nature of the risk, and similar
factors, most of the reasonable estimates of the value of life are
clustered in the $3 to $7 million range'' (Ibid., p. 73). Thus,
compensating wages indicate that, on average, industrial workers value
a statistical life at $5 million (December 1990 dollars), the midpoint
of the range. The Economic Research Service, USDA has used a value of
$5 million per life estimate (adjusted upwards for inflation to 2000
dollars) to measure the benefits of preventing premature death from
foodborne diseases caused by microbial pathogens such as E. coli
O157:H7, Salmonella spp., and Listeria monocytogenes (Crutchfield, et
al., 2001a). This estimate has been used by other government agencies
to evaluate the benefits of regulations designed to reduce the risk of
premature death. For example, the Food and Drug Administration (66 FR
6137, January 19, 2001) and the Consumer Product Safety Commission
(Miller, 1997) currently use Viscusi's mid-point value of $5 million
for each life saved (Kuchler and Golan, 1999, p.25). Finally, the Food
and Drug Administration (68 FR 41434, July 11, 2003, and 69 FR 56824,
September 22, 2004) use both $5.0 million and $6.5 million as the value
of a statistical life. FSIS believes that the value for a statistical
life used in the analysis is consistent with current practices, OMB
guidance, and research.
It should be noted that the calculations used to estimate present
value explicitly account for the time factor associated with delayed
health impacts of dietary change. Decreases in intake of saturated fat,
fat, and cholesterol will reduce the incidence of heart disease and
cancer, but not immediately--the reductions in illness and death will
begin to occur years into the future. To address the uncertainty
associated with the reduced incidence of heart disease and cancer, FSIS
identified three plausible scenarios that are intended to encompass the
actual impact. The scenarios are shown in Table 22. The first scenario
assumes that there would not be any reduction in mortality in the first
time period covering the first two years after the effective date of
the rule. During the second time period covering the third through the
seventh years following the effective date, 25 percent of the potential
reduction in human health risk is achieved--28.6 lives saved annually
as a result of dietary changes. In period 4, covering the last eight
years of the period of analysis, the full reduction in human health
risk is achieved--114.5 lives saved annually as a result of dietary
changes. In scenarios 2 and 3, the benefits of the rule are assumed to
occur progressively later in the period of analysis.

Table 22--Human Health Impact for Alternative Scenarios--Annual Percentage Reductions in Mortality and Lives
Saved
----------------------------------------------------------------------------------------------------------------
Period 1 Period 2 Period 3 Period 4
Percent of Total Reduction ---------------------------------------------------
0 25 50 100
----------------------------------------------------------------------------------------------------------------
Scenario 1
----------------------------------------------------------------------------------------------------------------
Years in period following effective date.................... 1-2 3-7 8-12 13-20
Lives saved annually........................................ 0 28.6 57.3 114.5
----------------------------------------------------------------------------------------------------------------
Scenario 2
----------------------------------------------------------------------------------------------------------------
Years in period following effective date.................... 1-5 6-10 11-15 16-20
Lives saved annually........................................ 0 28.6 57.3 114.5
----------------------------------------------------------------------------------------------------------------
Scenario 3
----------------------------------------------------------------------------------------------------------------
Years in period following effective date.................... 1-8 9-13 14-18 19-20
Lives saved annually........................................ 0 28.6 57.3 114.5
----------------------------------------------------------------------------------------------------------------

To arrive at an estimate of the benefits associated with reductions
in mortality due to changes in fat and cholesterol intake, FSIS
multiplied the dollar values assigned to each premature death ($5.0,
$5.5, and $6.5 million) prevented by the number of lives saved annually
in the three scenarios due to changes in diet quality. The present
values of the benefits associated with the reductions in mortality
associated with the scenarios identified in Table 22 are shown in Table
23. The net present value of the human health benefits of reduced
mortality for all diseases over 20 years is estimated to be a maximum
of $5.9 billion under Scenario 1 using a discount rate of 3 percent and
$6.5 million for each premature death avoided. The lowest present value
of human health benefits occurs under Scenario 3 using a discount rate
of 7 percent and $5.0 million for each premature death avoided and is

[[Page 67784]]

estimated to be $1.1 billion. These benefits would be distributed among
the diseases evaluated in the same share that they represent of total
lives saved due to dietary changes from nutrition labeling as shown
above.
Based on the information shown in Table 22, FSIS constructed a
composite scenario for all diseases by first computing the average
number of lives saved annually from the three scenarios. The derivation
of lives saved for the composite scenario is shown in Appendix A, Table
5. The annual average for lives saved over the 20 year period under the
composite scenario was 50.1. This compares with annual averages of
67.3, 50.1, and 32.9 lives saved under scenarios 1, 2, and 3,
respectively (Appendix A, Table 5). To estimate an average human health
benefit over the three scenarios, the annual average number of lives
saved under the composite scenario is multiplied by each of the three
values for a statistical life year. The average is then computed for
each year to derive the annual values of lives saved under the
composite scenario as is shown in Appendix A, Table 6. Each value was
weighted equally. The results of the analysis of the composite scenario
show a net present value for lives saved of $3.694 billion using a 3
percent discount rate, and $2.177 billion using a 7 percent discount
rate. The corresponding annualized human health benefits from the
reduction in all diseases are $248.3 and $205.5 million, respectively.
The benefits estimates presented here assume POP nutrition information
to be equally successful as nutrition labels in leading to dietary
change and consequent reductions in the three cancers studied and
coronary heart disease. However, this assumption is not realistic. The
analysis of alternatives section below provides a range of benefits
estimates using different assumptions about the relative effectiveness
of the POP nutrition. These annualized values will be used in the cost-
effectiveness analysis.

Table 23--Present Value of Human Health Impacts for Alternative Scenarios Over 20 Years, 3 Percent and 7 Percent
Discount Rates
----------------------------------------------------------------------------------------------------------------
Present value Present value Average annual Average annual
Scenario/ value of a statistical life 3% 7% benefit 3% benefit 7%
----------------------------------------------------------------------------------------------------------------
$ Million
----------------------------------------------------------------------------------------------------------------
Scenario 1
----------------------------------------------------------------------------------------------------------------
5.0............................................. 4,502.4 2,776.4 302.6 260.7
5.5............................................. 4,952.7 3,037.5 332.9 286.7
6.5............................................. 5,853.2 3,589.8 393.4 338.8
----------------------------------------------------------------------------------------------------------------
Scenario 2
----------------------------------------------------------------------------------------------------------------
5.0............................................. 3,223.8 1,865.8 216.7 176.1
5.5............................................. 3,546.1 2,052.4 238.4 193.7
6.5............................................. 4,190.9 2,425.6 281.7 229.0
----------------------------------------------------------------------------------------------------------------
Scenario 3
----------------------------------------------------------------------------------------------------------------
5.0............................................. 2,053.6 1,134.8 138.0 107.1
5.5............................................. 2,258.9 1,248.3 151.8 117.8
6.5............................................. 2,669.7 1,475.3 179.4 139.3
----------------------------------------------------------------------------------------------------------------
Composite....................................... 3,694.4 2,176.7 248.3 205.5
----------------------------------------------------------------------------------------------------------------

Effects of Current Compliance Levels

As has been discussed in the Cost Analysis, the level of
participation in the voluntary nutrition labeling program is 54.8
percent of stores for major cuts (USDA, 1999). In addition, an
estimated 68 percent of ground or chopped products bear nutrition
labels (NCBA, 2004). The analysis of benefits presented above assumes
no prior compliance. Were these levels of compliance incorporated into
the amount of meat and poultry product affected by the supplemental
proposed rule, the amount of product affected would decline from 21.6
billion pounds to 9.1 billion pounds \41\ (21.6 billion pounds minus
16.7 billion pounds of major cuts x (1.0-0.548) and 4.9 billion pounds
ground or chopped product x (1.0-0.68). Since the benefits analysis
treats the consumption of types of meat and poultry products the same
in terms of their impacts on human health, the benefits would be
reduced accordingly. Instead of achieving a maximum number of lives
saved of 114.5 annually, which is the starting value for the benefits
analysis, the rule would save at most 42.1 lives annually. Under the
composite scenario, modified accordingly, the annual number of lives
saved would be 18.4. The present values of the benefits are $1.358 and
$.800 billion using 3 and 7 percent discount rates, respectively. The
corresponding annual benefits are $91.3 million and $75.5 million. The
estimated benefits under this scenario can be compared with those in
Table 23 above.
---------------------------------------------------------------------------

\41\ The estimates amounts of major cuts and ground or chopped
products are shown in Table 24.
---------------------------------------------------------------------------

3. Minimum Effectiveness of Measures Required by the Supplemental
Proposed Rule for Benefits To Exceed Costs
In the cost analysis of the proposed and supplemental proposed
rules, FSIS assumes that retailers will display POP nutrition
information for the major cuts rather than apply nutrition labels to
these products because this is a lower-cost means of providing
nutrition information for multiple products. The benefits analysis does
not provide separate estimates of the benefits of nutrition labels and
POP information as it was not possible to distinguish between the
behavioral response and change in dietary intake associated with these
two means of conveying nutrition information to the consumer.
The Agency assumes that when labels and other sources of nutrition
information are provided for raw meat

[[Page 67785]]

and poultry products that nutrition information usage rates will rise
to match label usage rates for food products as a whole, and that
dietary patterns will change in a manner consistent with current data.
Labeling, as used in the surveys matching its usage and dietary
changes, has generally been interpreted to mean on-package labels
rather than POP labeling. Consequently, the discussion of the benefits
of the rule has implicitly focused on on-package labels.
In the analysis below, we first estimate the reduction in risk
associated with POP nutrition information sufficient to equate its
benefits and costs. Then we estimate remaining benefits of the rule
that must be attributed to on-package nutrition labels for benefits to
exceed costs.
The estimated cost of providing POP nutrition information is $5.67
million starting the year of the effective date and every other year
thereafter. The net present values using a discount rate of 3 and 7
percent for the 20-year period of analysis are discounted costs of
$42.82 and $31.07 million, respectively. The annualized values for
these net present values are $2.88 and $2.93 million, respectively
(Table 25). The net present values for the 20-year costs of on-package
nutrition labels for ground and chopped products are $429.41 million
and $316.99 million, using 3 and 7 percent discount rates,
respectively. The annualized cost associated with net present values
using 3 and 7 percent discount rates are $28.86 and $29.92 million,
respectively.\42\ Under the composite scenario discussed in the
benefits analysis, there is an average of 50.1 lives saved annually as
a result of the nutrition labeling requirements of the rule.
---------------------------------------------------------------------------

\42\ Annualized benefits are defined as the average annual
amounts, when discounted, will provide a present value benefits
equal to that shown for the selected scenario. It is a means for
providing a single annual amount for a scenario showing significant
differences on a year-to-year basis.
---------------------------------------------------------------------------

The average reduction in risk for the benefits of POP nutrition
information for major cuts of single ingredient, raw products to equal
their cost is 0.53 lives saved annually ((2.88+2.93)/2)/5.5) assuming a
value of life of $5.5 million (Table 25). The reduction in risk for the
benefits of on-package nutrition labels for ground or chopped products
to equal their cost is about ten times greater (5.34 lives saved
annually).
The estimated total reduction in risk in order for the benefits of
these combined measures to exceed costs is 5.87 lives saved annually or
about one-ninth (5.87/50.1) of the estimated 50.1 lives saved annually
under the composite scenario, using a value of life saved of $5.5
million.

Table 25--Break-Even Analysis of the Supplemental Proposed Rule Measures
----------------------------------------------------------------------------------------------------------------
Annualized average Number of lives saved annually
costs ($million) for benefits to equal costs
------------------------------------------------------
Measure Discount rate Value of life ($million)
------------------------------------------------------
3% 7% 5.0 5.5 6.5
----------------------------------------------------------------------------------------------------------------
POP nutrition information for major cuts of single 2.88 2.93 .58 .53 .45
ingredient, raw products................................
On-package nutrition labels for ground or chopped 28.86 29.92 5.88 5.34 4.52
products \1\............................................
------------------------------------------------------
Total................................................ 31.74 32.85 6.46 5.87 5.97
----------------------------------------------------------------------------------------------------------------
\1\ The costs of on-package labels include all costs that are not directly attributable to providing POP
nutrition information as identified in Table 13.

E. Analysis of Alternatives

The previous discussion of regulatory alternatives provided a
description of the regulatory alternative considered and information on
the likely costs of the alternatives. The analysis that follows
provides a quantification of the potential effectiveness of the
alternatives as well as a comparison of cost-effectiveness and
potential net benefits.
The regulatory alternatives considered by the Agency employ one or
both of the following measures: POP nutrition information and on-
package nutrition labels. The combination of measures and the products
subject to these measures differ among the regulatory alternatives
considered. In the supplemental proposed rule (Alternative 3), on-
package nutrition labels are required for ground or chopped meat and
poultry products (unless an exemption applies), and on-package
nutrition labels or POP nutrition information are required for the
major cuts of single ingredient, raw meat and poultry products (unless
an exemption applies). It is assumed for the purpose of estimating
compliance costs that, given the option, retail establishments will
provide POP information in the form of placards to convey nutrition
information for major cuts of single ingredient, raw meat and poultry
products. Alternative 2 stipulates POP nutrition information for ground
or chopped product and for major and nonmajor cuts of single
ingredient, raw products. It is assumed for purposes of estimating the
cost of this alternative that retail establishments will use a
reference manual to convey nutrition information for the products
covered. Retailers may employ other methods, however. Alternative 4
requires on-package nutrition labels for ground or chopped products and
major cuts. Alternative 5 stipulates on-package nutrition labels for
ground or chopped product, and both major and nonmajor cuts of single
ingredient raw products.
Relative Effectiveness in Providing the Necessary Material Facts
The Agency considered several factors in selecting Alternative 3.
The factors reflect the significant differences in the two principal
categories of meat and poultry products-- ground or chopped products
and major and nonmajor cuts, consumer preferences, and the
effectiveness with which information about these two categories of
products is presented in retail establishments.
Differences in product characteristics, consumer preferences, and
demand for nutrition information affect the value of nutrition
information for the two general categories of products. The
justification for the government action in requiring nutrition
information differs for the two categories of products, as has been
argued in the need for the rule. Different approaches to labeling may
be warranted and what might be an effective approach for

[[Page 67786]]

providing nutrition information for one category may be unsuitable for
the other. FSIS finds that this is the case, based on the full range of
evidence available.
Ground or chopped product are formulated to achieve a specific fat
content and thus are similar to multi-ingredient and heat processed
products, which receive on-package nutrition labels. The nutritional
characteristics of these products can vary significantly. For example,
the percentage of total fat in ground beef may range from 3 to 30
percent. Consequently, consumers have a significant number of choices
concerning type of product and nutritional characteristics. Nutrition
information enables consumers to match product choices with nutritional
preferences.
While the processor formulating the ground or chopped product has
knowledge of the nutritional characteristics of each product
formulation, such information is not readily available to the consumer.
Significant differences in total fat content of ground and chopped
products may be difficult for the consumer to distinguish.
Consequently, there is little incentive for processors to provide
information on ground or chopped products with higher fat content. Yet,
consumers' information needs are significant, given the differences in
consumer preferences for high fat and low fat products. Under these
conditions, readily accessible nutrition information would be highly
valued by consumers. FSIS has concluded that clear and concise
information should be available to consumers of ground or chopped
product in the form of an on-package label. It would be confusing to
consumers if nutrition information were provided by POP placards for
all potential formulations of these products. Faced with a large array
of signage, the potential value of nutrition information could be
exceeded by the transactions cost for many consumers seeking such
information.
Because there are numerous formulations of ground or chopped
product, it would be difficult for producers or retailers to develop
POP materials that would address all the different formulations that
exist for these products. Furthermore, it would be difficult for
consumers to find the correct information for a specific ground or
chopped product on POP materials that include information concerning
numerous formulations of these products (66 FR 4977, January 18, 2001).
If a statement of the fat percentage and lean percentage were not
included on a package of ground product, consumers would not know which
nutrient data concerning ground product on POP materials would apply to
that particular ground product. Thus, FSIS on-package nutrition labels
would likely enable consumers to make product comparisons far more
efficiently because consumers would have more relevant information
directly attached to the products to inform their choices.
Major cuts are generally considered by consumers to be largely
undifferentiated products in terms of nutrient content (Van
Ravenswaay). The nutritional characteristics of one beef chuck blade
roast are perceived to be much the same as another. The differences in
nutritional characteristics for a particular major cut (e.g., chicken
breasts) vary much less than the nutritional characteristics for a type
of ground or chopped product (USDA, 2005). This is an important factor
to consider as consumer preferences are more likely to differ on the
basis of the type of major cut (e.g., chicken breasts versus pork loin
chops).
Based on the similarity of nutritional attributes of any specific
major cut and the type of information desired by consumers, FSIS has
concluded that it would be acceptable for retail establishments to
provide nutrition information via POP placards for major cuts. They are
an efficient means of providing such information given the relatively
small number of products sold at retail establishments, their
relatively large share of total meat and poultry consumption, and
consumer information needs.
In developing the regulatory alternatives, the Agency concluded
that, given the option, retail establishments would most likely not
choose to provide nutrition information for nonmajor cuts via POP
placards. There are potentially a large number of such products (350
products for meat alone according to the National Live Stock Meat
Board). Using POP placards to convey nutritional information on these
products could result in excessive signage at retail establishments.
Excessive signage would not only be a concern for the retail
establishment, but also would not convey information in a manner that
would promote its usage by consumers. Retail establishments would be
more likely to opt for providing nutrition information for nonmajor
cuts in a reference manual. The following table summarizes factors
considered by the Agency in its selection of Alternative 3 as the most
effective in providing the material information to consumers.

Table 24--Comparisons of Methods for Conveying Nutrition Information and
Meat and Poultry Product Categories
------------------------------------------------------------------------
Product category
-----------------------------------------
Method Single-ingredient,
Ground or chopped raw
------------------------------------------------------------------------
POP Nutrition Information..... Nutrient
Information content of a given
asymmetry is major cut is
greater than the relatively uniform
information across the market,
asymmetry in POP and these products
nutrition are not formulated
information for in the manner of
major cuts and ground or chopped
nonmajor cuts products.
that are not Consumer
ground or preferences differ
chopped. on the basis of
Consumer types of products in
preferences the category.
differ on the Placards.
basis of fat Efficient
content. means of presenting
nutrition
Nutrition information for
information on major cuts--
formulated relatively small
products (ground number of products
or chopped comprising large
products) is share of meat and
less accessible poultry consumption.
on POP materials Ineffective
than it would be means of information
on product delivery for
labels. nonmajor cuts that
Given are not ground or
the number of chopped: potentially
product large number of
formulations, it products resulting
would be in excessive
confusing to signage.
consumers to use Nonmajor
POP nutrition cuts account for
information. small share of
consumption.
Reference Manual.

[[Page 67787]]

Reference
manual is low-cost
means of information
delivery. However,
high search costs
may greatly reduce
effectiveness.
Number of
nonmajor products is
large and amounts
comprise about 15%
of meat and poultry
consumption.
Uniform
reference manuals
not likely given
regional differences
in names of similar
nonmajor products.
On-Package Labels............. Nutrient
Information content of a given
asymmetry is major cut is
greatest for relatively uniform
product category. across the market,
Consumer and these products
preferences are not formulated
differ on the in the manner of
basis of fat ground or chopped
content. products.
Consumer
Information is preferences differ
clear and on the basis of
concise.. types of products in
Highly- the category.
valued Major cuts.
information for Consumers
consumers have reasonable
because consumer expectations as to
preferences the nutrient content
differ most for of these products.
these types of Nonmajor cuts.
products on the Consumers
basis of have limited access
nutritional to nutrition
content. information for
Consumer nonmajor cuts.
search costs are
minimized.
------------------------------------------------------------------------

A major source of uncertainty in this analysis is the success of
POP nutrition information relative to on-package nutrition labels.
Research studies on effectiveness of POP information virtually ended
with passage of the NLEA. So, most POP research is now quite dated.
Thus, the research available does not allow FSIS to make a precise
comparison of the relative success of on-package nutrition labels
versus POP nutrition information. However, POP nutrition information
may be a convenient and effective means for consumers to confirm or
gain new information on the nutritional content of the major or
nonmajor cuts of single ingredient, raw products. Given these
uncertainties, in the analysis that follows, FSIS assumes that POP
nutrition information is 50 percent, 10 percent and 5 percent as
successful as on-package nutrition labels in causing dietary change to
illustrate the impacts of those assumptions on the relative cost-
effectiveness as well as net benefits of the alternatives.
Analysis of Cost Effectiveness
A cost-effectiveness analysis (CEA) provides a means to identify
alternatives that achieve the most effective use of resources available
without requiring the monetization of all benefits or costs by
comparing regulatory alternatives with respect to their ability to
achieve a specified outcome (e.g., units of human or environmental
health). Regulatory alternatives employing the same measures are
ordered on the basis of the increased frequency, scope, lethality, or
some other criterion. Ideally, a CEA results in comparison of the
incremental cost per unit of outcome for each regulatory alternative
when the alternatives are ordered on the basis of an increasing level
of the specified criterion.
FSIS agrees that cost effectiveness ratios for regulatory options
should be calculated incrementally, that is, in terms of the additional
cost incurred by the next most stringent option to produce an
additional life saved. However, the data available for the analysis and
the nature of the regulatory alternatives poses some challenges to
conducting a meaningful incremental CEA. First, the regulatory
alternatives stipulate the use of one or two measures that may be
employed for providing nutrition information for two or three
categories of products--ground or chopped product and single-ingredient
raw products (major and nonmajor cuts)--of meat and poultry. The two
measures are POP nutrition information materials and on-package
nutrition labels. Second, the effectiveness of POP nutrition
information relative to on-package nutrition labels is uncertain. The
greater amount of time required by the consumer to find the relevant
nutrition information on POP materials relative to finding such
information on the packaging of the products suggests that POP
nutrition information may be less successful for some types of products
in leading to healthier dietary choices. Given the assumptions we make
in order to model the regulatory provisions given the uncertain
effectiveness, the result is an incremental cost-effectiveness analysis
which shows that multiple alternatives are weakly dominated under all
scenarios. Consequently, the analysis that follows provides a
comparison of average cost-effectiveness and net-benefits of the
regulatory alternatives for each alternative, for different levels of
assumed relative effectiveness of POP information.
Average Cost-Effectiveness of Regulatory Alternatives
Cost-effectiveness analysis results based on averages can be
misleading in that the regulatory alternative exhibiting the lowest
cost-effectiveness ratio may not be the best option. Low ratios are not
always an accurate indicator of high net social benefits, the desired
economic objective. The following provides information on the average
cost effectiveness of the regulatory alternatives and their net
benefits.
In order to analyze both the average cost effectiveness of the
regulatory alternatives and incremental cost effectiveness of the
measures employed by the regulatory alternatives, the share of the
reduction in risk associated with the POP nutrition information for
ground and chopped products and both major and nonmajor cuts are
estimated. Estimates of the number of products subject to on-package
nutrition labeling are also provided. The costs corresponding to the
risk reduction measures are also estimated. Table 26 provides the
information that was used to allocate the annualized costs and
reductions in risk.
The reductions in risk associated with the regulatory alternatives
reflect the differences in the pounds of product affected. Alternatives
2 and 5 affect ground and chopped products and the

[[Page 67788]]

major and nonmajor cuts, a total of 24.5 billion pounds (Table 26).
Alternative 3 (the supplemental proposed rule) requires on-package
nutrition labels for ground or chopped products and either on-package
nutrition labels or POP nutrition information for the major cuts, a
total of 21.6 billion pounds. Alternative 4 affects the same amount of
product as Alternative 3. The differences in pounds of products
affected among the regulatory alternatives are reflected in the annual
number of lives saved. The potential number of lives saved annually for
Alternatives 2 and 5 are increased proportionately by 13 percent (24.5/
21.6 = 1.1343) to reflect the difference in pounds of product affected.
Therefore, the maximum number of lives saved annually for Alternatives
3 and 4 is 50.1. The corresponding value for Alternative 2 and 5 is
56.8 lives saved annually (50.1 x 1.1343).
The total cost of Alternative 2, which is exclusively the cost of
the POP nutrition information manual, is allocated among ground and
chopped product, and major and nonmajor cuts on the basis of the share
of products in these categories (CFR Sec. Sec. 317.344 and 381.444,
National Livestock Meat Board, 1995). The costs associated with
labeling measures for the product categories (on-package nutrition
labels for ground and chopped and major cuts, and on-package labels for
these products plus nonmajor cuts for Alternatives 4 and 5,
respectively) are allocated on the basis of the relative shares of
these products at retail establishments.

Table 26--Meat and Poultry Product Information
----------------------------------------------------------------------------------------------------------------
Percent
Meat and poultry product volumes affected by regulatory Billion shares for Percent shares for
alternatives pounds Alternatives Alternatives 3 & 4
2 & 5
----------------------------------------------------------------------------------------------------------------
Major and nonmajor cuts................................... 19.6 80.0 77.3
Major cuts................................................ 16.7 68.2 77.3
Nonmajor cuts............................................. 2.9 11.8 .........................
Ground or chopped......................................... 4.9 20.0 22.7
All meat and poultry...................................... 24.5 100.0 100.0

----------------------------------------------------------------------------------------------------------------
Percent
Number of share for
Products in POP nutrition information manual products Alternative
2
----------------------------------------------------------------------------------------------------------------
Ground or chopped.......................................... 13 3.0 .........................
Major cuts................................................. 45 11.0 .........................
Nonmajor cuts \1\.......................................... 350 86.0 .........................
----------------------------------------------------
Total.................................................. 403 100.0 .........................

----------------------------------------------------------------------------------------------------------------
Percent Percent share
Products at retail establishments with on-package nutrition Number of share -------------------------
labels products Alternative
5 Alt. 3 Alt. 4
----------------------------------------------------------------------------------------------------------------
Ground or chopped........................................... 12.50 22.0 100.0 28.3
Major cuts.................................................. 31.74 56.0 ........... 71.7
Nonmajor cuts............................................... 12.42 22.0 ........... ...........
---------------------------------------------------
Total................................................... 56.66 100.0 100.0 100.0
----------------------------------------------------------------------------------------------------------------
\1\ A comprehensive listing of nonmajor cuts was provided in the Uniform Retail Meat Identity Standards
published by the National Livestock and Meat Board. Nonmajor cuts of poultry, of which there are few, are not
included. Amenable kinds of poultry are not accounted for. Most ducks, geese, squab are sold as carcasses and
there is only a very small market for ostrich cuts/parts; and rhea and emu are used for byproducts mostly.

The present value and corresponding annualized costs for the
regulatory alternatives and their measures are shown in Table 27. There
are no costs associated with Alternative 1 as it represents the status
quo. As is reflected in their costs, the alternatives become
increasingly costly due to the increasing share and number of products
that receive on-package nutrition labels, which are significantly more
costly than POP nutrition information. The present value cost of the
alternatives range from a low of $87.74 million for Alternative 2 to
$956.48 million for Alternative 5. The present value of the compliance
costs of the alternative selected by the Agency is $348.06 million. The
table also shows the compliance costs, both present value and
annualized, on the basis of the major product categories.

Table 27--Average Costs of Regulatory Alternatives
----------------------------------------------------------------------------------------------------------------
Present value Annualized values
Alternative ---------------------------------------------
3% 7% 3% 7%
----------------------------------------------------------------------------------------------------------------
$ million
----------------------------------------------------------------------------------------------------------------
Alternative 2. POP manuals for all products:
Total............................................................. 123.19 87.74 8.28 8.28
Ground & chopped.............................................. 3.93 2.80 .26 .26
Major cuts.................................................... 13.59 9.68 .91 .91
Nonmajor cuts................................................. 105.68 75.27 7.1 7.1
Alternative 3. On-package labels for ground and chopped, POP
placards for major cuts:

[[Page 67789]]

Total............................................................. 472.23 348.06 31.74 32.85
Ground & chopped.............................................. 429.41 316.98 28.86 29.92
Major cuts.................................................... 42.82 31.07 2.88 2.93
Alternative 4. On-package labels for ground and chopped products
and major cuts:
Total............................................................. 1,103.90 812.99 74.20 76.75
Ground & chopped.............................................. 429.41 316.98 28.86 29.92
Major cuts.................................................... 674.49 496.00 45.34 46.82
Alternative 5. On-package labels for all products:
Total............................................................. 1,298.74 956.54 87.30 90.28
Ground & chopped.............................................. 429.41 316.99 28.86 29.92
Major cuts.................................................... 674.49 496.00 45.34 46.82
Nonmajor cuts................................................. 194.84 143.49 13.10 13.54
----------------------------------------------------------------------------------------------------------------
Note: These compliance costs do not take into account the level of voluntary compliance with the labeling
required under each alternative. Consequently, the estimated compliance costs are overstated.

The lives saved associated with the nutrition labeling measures for
ground or chopped products, and major and nonmajor cuts are based on
the amount of product affected by the measures for each of the
regulatory alternatives. For example, 16.7 billion pounds of major cuts
are affected by POP nutrition information placards under Alternative 3
(Table 26). On-package nutrition labels are required for the 4.9
billion pounds of ground and chopped meat and poultry products affected
by Alternative 3. The average annual 30.74 (19.37 + 11.37) lives saved
as a result of this alternative, assuming POP nutrition information is
50 percent as successful as on-package nutrition labels in causing
dietary change, is obtained as follows. The average annual lives saved
as a result POP nutrition information for major cuts is 19.4 lives as
shown in Table 28 (16.7/21.6 = 0.77; (0.77 x 50.1) x .5 \43\ = 19.4).
On-package nutrition labels for ground or chopped products account for
the remaining 11.4 lives saved annually (4.9/21.6 = .227; .227 x 50.1 =
11.4).
---------------------------------------------------------------------------

\43\ This value reflects the relative success of POP nutrition
information relative to on-package labels. This value will change
according to the scenario being discussed.
---------------------------------------------------------------------------

Table 28 shows the cost-effectiveness of the regulatory
alternatives when POP nutrition information is assumed to be half as
successful as on-package nutrition labels in bringing about healthier
diets and reducing coronary heart disease and cancer. This success rate
is considered to be an upper bound. The cost per life saved for
Alternative 3 is $1.069 million, when using the composite annual
average and annualized costs based on a 7 percent discount rate. The
cost per life saved for on-package nutrition labels for ground or
chopped products under this alternative is $2.63 million ($29.92
million from Table 27/11.37 lives saved annually, column 1 of Table 28)
and $151,000 for POP nutrition information placards under this
alternative ($2.93 million from Table 27/19.37 lives saved annually).
As would be expected under this scenario, Alternative 4 and 5 are
less cost effective than the supplemental proposed rule measures
because they rely entirely on the relatively more costly measures of
on-package nutrition labels. Alternative 2 has a lower cost-
effectiveness ratio in this scenario because of the assumed high rate
of success for POP nutrition information and because it relies entirely
on a low-cost POP reference manual.\44\ Using an average VSL of $5.5
million, all alternatives show large average annual benefits relative
to annual costs with Alternative 5 yielding the highest net benefits.
---------------------------------------------------------------------------

\44\ The analysis assumes that the manual containing the
nutrition information as specified for Alternative 2 and the POP
nutrition information placards specified in Alternative 3 have the
same impact on consumer dietary patterns. The use of a nutrition
information reference manual is assumed to be the manner by which
retail establishments would convey nutrition information under
Alternative 2.

Table 28--Average Cost-effectiveness and Net Benefits of Potential Lives Saved--POP Nutrition Information 50
Percent as Successful as On-Package Nutrition Label Information
----------------------------------------------------------------------------------------------------------------
Potential Cost/life Value of lives
Alternatives lives saved saved 7% saved Net benefit 7%
----------------------------------------------------------------------------------------------------------------
.............. $ million
----------------------------------------------------------------------------------------------------------------
Alternative 2. POP manuals for all products:
Total........................................... 28.4 .291 156.3 150.0
Ground/chopped.............................. 5.7 .046 31.3 31.0
Major cuts.................................. 19.4 .047 106.5 105.6
Nonmajor cuts............................... 3.4 2.112 18.5 11.4
Alternative 3. On-package labels for ground and
chopped, POP placards for major cuts:
Total........................................... 30.7 1.069 169.0 136.2
Ground/chopped.............................. 11.4 2.633 62.5 32.6
Major cuts.................................. 19.4 .151 106.5 103.6

[[Page 67790]]

Alternative 4. On-package labels for ground and
chopped products and major cuts:
Total........................................... 50.1 1.532 275.6 198.8
Ground/chopped.............................. 11.4 2.633 62.5 32.6
Major cuts.................................. 38.7 1.209 213.4 166.2
Alternative 5. On-package labels for all
products:
Total........................................... 56.8 1.589 312.6 222.3
Ground/chopped.............................. 11.4 2.633 62.5 32.6
Major cuts.................................. 27.8 1.628 153.1 106.3
Nonmajor cuts............................... 10.9 1.202 59.9 46.4
----------------------------------------------------------------------------------------------------------------
Note: These estimates do not take into account the level of voluntary compliance with the labeling required
under each alternative. Consequently, the estimated compliance costs as well as potential lives saved are
overstated.

Tables 29 and 30 show the impact on the cost effectiveness of
Alternatives 2 and 3, and their respective measures, when POP nutrition
information is 10 and 5 percent as successful, respectively, as on-
package nutrition labels in leading to dietary changes. The cost
effectiveness of Alternatives 4 and 5 are not affected as they do not
employ POP nutrition information. Consequently, their effectiveness
ratios and net benefits are unchanged from Table 28.
The results show that as the success of POP nutrition information
declines relative to on-package nutrition labels, the cost-
effectiveness measures for Alternative 2 decline more rapidly than
those for Alternative 3, given the second alternative's entire reliance
on POP nutrition information. When POP nutrition information is 10
percent as successful as on-package nutrition information labels (Table
29), the average cost-effectiveness for Alternatives 2 through 5 are
approximately the same (between $1.5 to $2.2 million per life saved).
While the average cost-effectiveness ratios of the regulatory
alternatives are approximately the same, the annual net benefits of the
alternatives differ significantly. This measure ranges from $23 million
for Alternative 2 to 10 times that amount for Alternative 5 (Table 26).
It should be noted that the cost per life saved associated with POP
nutrition information for nonmajor cuts of single ingredient, raw meat
and poultry products under Alternative 2 exceeds the value of a life
saved and, consequently, the annual benefits associated with the
measure are less than the annual costs.

Table 29--Average Cost-effectiveness and Net Benefits of Potential Lives Saved --POP Nutrition Information 10
Percent as Successful as On-Package Nutrition Label Information
----------------------------------------------------------------------------------------------------------------
Potential Cost/life Value of lives
Alternatives lives saved saved 7% saved Net benefit 7%
----------------------------------------------------------------------------------------------------------------
.............. $ Million
----------------------------------------------------------------------------------------------------------------
Alternative 2. POP manuals for all products:
Total........................................... 5.7 1.457 31.3 23.0
Ground/chopped.............................. 1.1 .232 6.3 6.0
Major cuts.................................. 3.9 .236 21.3 20.4
Nonmajor cuts............................... 0.7 10.562 3.7 -3.4
Alternative 3. On-package labels for ground and
chopped, POP placards for major cuts:
Total........................................... 15.2 2.156 83.8 51.0
Ground/chopped.............................. 11.4 2.633 62.5 32.6
Major cuts...................................... 3.9 .757 21.3 18.4
----------------------------------------------------------------------------------------------------------------
Note: These estimates do not take into account the level of voluntary compliance with the labeling required
under each alternative. Consequently, the estimated compliance costs as well as potential lives saved are
overstated.

When POP nutrition information is 5 percent as successful as on-
package nutrition information labels (Table 30), the average cost-
effectiveness ratio for Alternative 2 is higher than those for the
other alternatives and 15 percent higher than that for Alternative 3.
The annual net benefit of POP nutrition information for ground or
chopped product under Alternative 2 is declining to marginal levels.
The annual net benefit for Alternative 3 is nearly $40.3 million, about
5 times that for Alternative 2.
Due to the differences in search costs for consumers using a POP
reference manual versus a POP placard, Alternative 2 is expected to be
less successful than Alternative 3 in changing dietary patterns. If POP
manuals were 5 percent as successful as on-package labels and placards
were 10 percent as effective as on-package labels, a plausible
scenario, the cost per life saved for Alternative 3 would be about 75
percent (2.156/2.915) of that for Alternative 2. The number of lives
saved annually under Alternative 3 would be about 5 times (15.2/2.8)
that found under Alternative 2. The uncertainty associated with the
success of a POP reference manual (Alternative 2) is an important
factor supporting the effectiveness of Alternative 3 and the Agency's
decision to select this alternative relative to Alternative 2.

[[Page 67791]]

Table 30--Average Cost-effectiveness and Net Benefits of Potential Lives Saved--POP Nutrition Information 5
Percent as Successful as On-Package Nutrition Label Information
----------------------------------------------------------------------------------------------------------------
Potential Cost/life Value of lives
Alternatives lives saved saved saved Net benefit
----------------------------------------------------------------------------------------------------------------
.............. $ million
----------------------------------------------------------------------------------------------------------------
Alternative 2. POP manuals for all products:
Total........................................... 2.8 2.915 15.63 7.4
Ground/chopped.............................. 0.6 .464 3.13 2.9
Major cuts.................................. 1.9 .472 10.70 9.7
Nonmajor cuts............................... 0.3 21.125 1.85 -5.3
Alternative 3. On-package labels for ground and
chopped, POP placards for major cuts:
Total........................................... 13.3 2.470 73.16 40.3
Ground/chopped.............................. 11.4 2.633 62.51 32.59
Major cuts.................................. 1.9 1.514 10.65 7.72
----------------------------------------------------------------------------------------------------------------
Note: These estimates do not take into account the level of voluntary compliance with the labeling required
under each alternative. Consequently, the estimated compliance costs as well as potential lives saved are
overstated.

Summary of Analysis of Alternatives
The analysis shows that the POP information does not need to be
highly successful for its benefits to exceed its costs, even at low
levels of success relative to on-package nutrition labels.
FSIS finds that the measures required in the supplemental proposed
rule are generally more effective than the other alternatives when all
the qualitative and quantitative evidence is considered. As has been
discussed above in this section, FSIS finds that on-package nutrition
labels for ground or chopped product are more effective than POP
nutrition information in informing consumers about the nutritional
characteristics of these products, given the nature of the product, its
presentation in the retail environment, and consumer behavior. FSIS
also finds that POP nutrition placards are an effective means for
informing consumers about the nutritional characteristics of major cuts
of single ingredient, raw products for these same reasons.

F. Summary of Costs and Benefits of the Final Nutrition Labeling Rule

FSIS estimates that for the supplemental proposed rule, the
discounted average present value of benefits over a 20-year period
using a 7 percent discount rate will be $2.2 billion and using a 3
percent discount rate will be $3.7 billion, using a composite of three
scenarios for the effectiveness of nutrition labels and three values
for reducing a premature death. The corresponding average annual
benefits are $205.5 million and $248.3 million (See summary Table 30b).
The discounted average present value costs, over a 20-year period,
are estimated to be $348.06 million using a 7 percent discount rate and
$472.23 million using a 3 percent discount rate. The corresponding
annualized average costs are $32.8 and $31.7 million (See summary table
30b and Appendix D, Tables 1 and 2).
After taking into account the current assumed levels of compliance
with the supplemental proposed rule measures, the average present value
costs of the rule decline to $115.45 million and $156.72 million when
using a 7 percent and 3 percent discount rate, respectively. The
corresponding annualized average costs are $10.9 and $10.5 million. The
average present values of the benefits are $0.800 billion and $1.358
billion using 7 and 3 percent discount rates, respectively. The
corresponding average annual benefits are $75.5 million and $91.3
million. Table 30c provides a summary of these annualized costs and
benefits. These estimates suggest that under plausible assumptions, the
impact of this rule in any given year may be less than $100 million.
However, given the uncertainties in the analysis, this action is deemed
``economically significant''.
Not included in the quantitative analysis were other likely
benefits to providing nutrition labeling: increased profits received by
food retailers and manufacturers, and consumers buy products with the
attributes they want. FSIS believes that the labeling provisions help
consumers make better food choices and provide incentives to producers
to continue producing nutritionally-improved products that contribute
substantially to the health benefits associated with nutrition
labeling. If diet quality associations found with all other labeled
foods do not hold up for nutrition labels on meat, then health benefits
in the FSIS report are overestimated. Of course, health benefits are
only one way in which benefits might be realized. Consumers might
choose to use nutritional information to enhance enjoyment of food, and
not to raise their health status. Further, they may be better off than
if they had raised their health status since rational consumers will
use information to their best advantage. If we observe rational, well-
informed consumers selecting a more enjoyable diet, for these consumers
a more enjoyable diet was worth more than better health. Thus, when we
restrict benefits estimates to allow only for information to be used to
advance health status, we are simultaneously restricting estimated
benefits to a lower level of value to consumers. The FSIS analysis
imposes that restriction and the resulting benefits estimate must
therefore be interpreted as an underestimate of overall benefits. The
estimated costs of the rule's nutrition labeling requirements appear to
be justified by the estimated benefits.

[[Page 67792]]

Table 30b--Summary of Annualized Average Net Present Values of Costs and Benefits, Before Accounting for Levels of Current Compliance, $million/year
--------------------------------------------------------------------------------------------------------------------------------------------------------
Units
Primary --------------------------------------------------------------
Category estimate Low estimate High estimate Discount
Year dollars (percent) Period covered
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits:
Annualized........................... 205.5 185.6 230.8 2002 7 20 years.
Monetized* $million/year............. 248.3 228.4 273.6 2002 3 20 years.
Qualitative: Consumers might also choose to use nutritional information to enhance enjoyment of food, and not just to
raise their health status.
--------------------------------------------------------------------------------------------------------------
Costs:
Annualized........................... 32.8 26.7 44.8 2002 7 20 years.
Monetized* $million/year............. 31.7 25.6 43.7 2002 3 20 years.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: * Monetized benefits of potential lives saved.
Note: These estimates do not take into account the level of voluntary compliance with the nutrition labeling requirements for ground or chopped products
that currently exists. Consequently, the estimated amounts of ground or chopped products and major cuts impacted by this supplemental proposed rule
are overstated. Consequently, the estimated compliance costs as well as the monetized benefits of potential lives saved are overstated.

Table 30c--Summary of Annualized Average Net Present Values of Costs and Benefits, After Accounting for Assumed Levels of Current Compliance, $million/
year
--------------------------------------------------------------------------------------------------------------------------------------------------------
Units
Primary -----------------------------------------------
Category estimate Low estimate High estimate Discount
Year dollars (percent) Period covered
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits:
Annualized.......................................... 75.5 68.1 84.8 2002 7 20 years.
Monetized* $million/year............................ 91.3 83.9 100.6 2002 3 20 years.
Qualitative: Consumers might also choose to use nutritional information to enhance enjoyment of food, and
not just to raise their health status.
-----------------------------------------------------------------------------------------------
Costs:
Annualized.......................................... 10.9 8.9 14.7 2002 7 20 years.
Monetized* $million/year............................ 10.5 8.6 14.4 2002 3 20 years.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: * Monetized benefits of potential lives saved.
Note: These estimates take into account the level of voluntary compliance with the nutrition labeling requirements for ground or chopped products that
currently exists--the 68 percent compliance rate (NCBA, 2004) of voluntary nutrition labeling of ground or chopped products and 54.8 percent level of
voluntary compliance (USDA, 1999) of stores that provide nutrition labeling for major cuts.

Regulatory Flexibility Act (RFA)--Assessment
Based on the cost analysis above, FSIS has made a tentative
determination that this rule would not have a significant economic
impact on a substantial number of small entities, as defined by the
Regulatory Flexibility Act (5 U.S.C. 601). The supplemental proposed
rule would affect meat and poultry processing establishments producing
ground or chopped products (Table 1 and 2) and retail firms and
establishments (Tables 3 and 4). There are approximately 3,073
potentially affected Federal and State processing establishments and
47,688 potentially affected retail firms with 74,910 retail
establishments. A ``firm'' refers to the parent company and an
``establishment'' refers to the retail facility. Processing
establishments that grind or chop meat and poultry will be potentially
affected. There are 1,433 very small, 858 small, and 109 large Federal
establishments that produce ground or chopped products, based on PBIS
(April, 2006). The final regulatory analysis assumes that no small
processor is independent. That is, all (regardless of their size) are
part of a larger organization. Table 13 shows the undiscounted costs of
about $53.80 million for all the affected processing establishments.
FSIS does not believe that any very small operations will be
affected by the regulation because very small meat and poultry
operations employ nine or fewer employees. These establishments would
find it difficult to produce over 100,000 pounds per ground product
annually because these employees also process other products. Annual
revenues associated with 100,000 pounds of annual ground beef total
approximately $230,000 for 85 percent lean ground beef, based on a
retail value of $2.30 per pound (Agricultural Marketing Service, Market
Reports, September 2009). Some small establishments are also likely to
be exempt from the regulation because they have 500 or fewer employees,
or are owned by companies with 500 or fewer employees, and FSIS assumes
they produce less than 100,000 pounds annually of each ground product.
FSIS researched this issue to better address the number of
establishments that would be affected but does not have better data on
corporations that own these individual establishments. However, as
discussed earlier in the final regulatory analysis, RTI made the
assumption that Federally-inspected processing establishments generally
are a part of a larger organization that own, on average, three
establishments each. In addition, based on PBIS (April 2006), there are
41 state-inspected processing establishments (Table 2) that are owned
by 41 firms. Therefore, there are about 899 (858 + 41) small processing
establishments that are affected by the supplemental proposed rule.
As part of the Regulatory Flexibility Assessment, FSIS also
examined the impact of the supplemental proposed rule, by altering
certain assumptions, to

[[Page 67793]]

determine whether the supplemental proposed rule could have a
significant impact on a substantial number of small entities.
Therefore, even though FSIS believes that small processors would find
it difficult to produce over 100,000 pounds per ground product annually
because these employees also process other products, FSIS estimated the
cost to small grinders if they were not exempt from nutrition labeling
requirements. For purposes of this alternative analysis, it is assumed
that all 899 small processing firms will be affected by this
regulation.\45\ Also, based on the analysis for the supplemental
proposed rule, there are 6.6 frozen or fresh ground meat or chopped
meat and poultry products produced per company. For this alternative
analysis, it is assumed that there are 5,933 (899 x 6.6) unique ground
or chopped products. FSIS estimates that the one-time average costs of
modifying product labels on prepackaged ground or chopped products to
include nutrition information at processing establishments will be
$13.33 million ($2,247 per label modification costs x 896 affected
companies x 6.6 affected products per company) using average cost
estimates. The annualized cost over 20 years at 7 percent is $1.26
million. On a per company basis the annualized cost over 20 years is
about $1,402 ($1.26 million/896).
---------------------------------------------------------------------------

\45\ Although RTI, in their analysis stated that all of these
businesses are large, for this analysis, FSIS is altering the
assumption in order to determine the impact (measure the
sensitivity) of a set of alternative assumptions.
---------------------------------------------------------------------------

In addition to the one-time costs of designing labels, processing
establishments will also incur added costs of larger labels. Again, it
is assumed that there are 899 small processing establishments that
grind or chop meat and poultry, and that all these establishments are
small businesses. Based on a study conducted by NCBA, 25 percent of
ground or chopped meat and poultry packages are packaged at processing
establishments. As explained above, approximately 437.5 million
packages of ground and chopped meat and poultry products are packed by
processing establishments each year. There are no data available to
estimate the number of packages of ground or chopped meat or poultry
products packaged by these small establishments, but (for purposes of
this analysis) if 25 percent of all of the packages originate at small
establishments, then these 899 companies package 109.4 million packages
annually (437.5 million x .25). Multiplying 109.4 million packages by
0.5 cents per label (RTI, 2003) results in an annual cost of $547,000
(109.4 million packages x $0.005) or about $509 per company. In total,
FSIS estimates that (under the alternative set of assumptions that all
small entities will be affected by this supplemental proposed rule and
that they package 25 percent of the total) the cost to these 899 small
companies (assuming that they package 25 percent of the total) will be
about $1,616 ($1,107 + $509) per company on an annualized basis using a
7 percent discount rate.
If, on the other hand, 50 percent of all packages from processing
establishments originate at the small establishments, then these 899
companies package about 219 million packages annually. Multiplying 219
million packages by $0.005 per label results in an annual cost of
$1,095,000 or $1,218 per company. In total, FSIS estimates that the
cost to 899 small companies (under the alternative set of assumptions
that all small entities will be affected by this supplemental proposed
rule and that they package 50 percent of the total) will be about
$2,126 per company ($1,402 + $1,218) on an annualized basis discounted
at 7 percent.
Small retail stores will incur the cost of providing POP nutrition
information for the major cuts. There are 47,422 small retail firms
that own 51,431 small retail stores that would be required to provide
POP information for the major cuts of single-ingredient, raw products.
FSIS estimates that the cost to a retail store for placards will be
$10.56 for labor plus $65.17 for materials or approximately $75.73 per
store. The annualized cost, assuming that the placards have to be
replaced every two years, is about $41.88 using a 7 percent discount
rate. All retail stores, including small and very small businesses will
incur these costs. FSIS believes that these costs are not significant--
even for very small businesses.
Retail stores will also incur costs related to required nutrition
labels for ground or chopped products. For this analysis, it is assumed
that they will all comply by following Option 1 (the less costly
printing method for labels) because it is the least costly. Based upon
the information contained in the regulatory analysis, a total of 74,910
establishments owned by 47,688 firms could potentially be affected.
However, 23,479 establishments owned by 266 firms are considered to be
large according to the 2002 Economic Census. If they grind or chop over
100,000 pounds of a particular product annually, then as many as 51,431
small establishments owned by 47,422 firms could potentially be
affected.\46\
---------------------------------------------------------------------------

\46\ RTI believes that all of these businesses will be exempt
from nutrition labeling requirements. For purposes of conducting a
sensitivity analysis, this analysis assumes that they are small for
purposes of the Regulatory Flexibility Act and that they will not
qualify for the small business exemption.
---------------------------------------------------------------------------

For these establishments, it is assumed that there would be only
one scale-printer system instead of the 1.5 scale-printer systems that
was assumed in the regulatory analysis. Therefore, the average cost of
upgrading scale-printer systems is estimated at $1,600, and this cost
would be incurred by these businesses once every five years. FSIS
estimates that the annualized cost, since scale-printer systems need to
be replaced every 5 years, is about $390 using a 7 percent discount
rate. Operating and maintenance costs are estimated at 6 percent (See
supplemental PRIA for detailed explanation) or $96 annually. Therefore,
the sum of the annualized maintenance costs at 7 percent is estimated
at $486 annually per establishment ($390 + $96).
The average cost of redesigning larger store labels and conducting
nutrition analysis is estimated at $2,247. However, many firms have
more than one establishment so the cost per establishment will be much
lower. Assuming that each establishment had to redesign its store
labels for 4.6 products and conduct nutrition analysis for each unique
product, then the added annualized cost over 20 years is estimated at
$766 using a 7 percent discount rate.
The use of larger labels is another cost that these retail stores
will incur. As explained above, an estimated 1.75 billion packages of
ground or chopped meat or poultry products are sold at large retail
facilities. Therefore, 460 million packages of ground or chopped
products are sold at small retail establishments. Given that 51,431
small retail establishments could be affected, then each small
establishment (460 million packages/51,431 establishments) sells 8,039
packages annually. If the added average cost of each label is $0.005,
then each retail store will incur an added cost of about $40 annually
($8,039 packages per establishment x .005).
FSIS estimates that using a 7 percent discount rate the sum of the
annual/annualized cost to each retail establishment will be $42 for
nutrition information placards, $486 for upgrading and maintaining
scale-printer systems, $969 for redesigning larger store logo labels,
and $40 for using larger labels. The total annual/

[[Page 67794]]

annualized cost using a 7 percent discount rate will be $1,537. FSIS
also estimates that using a 3 percent discount rate the total annual/
annualized cost using a 3 percent discount rate will be $1,216. In
summary, FSIS concludes from using an alternate set of assumptions,
that this supplemental proposed rule would not have a significant
impact on a substantial number of small entities.
FSIS is cognizant of the possibility that while exempted
establishments would not have to incur labeling costs, they also might
not realize the benefits of increased sales of the nutritionally
labeled products. This is because if demand for the labeled product
increases relative to demand for non-labeled products, the exempt
establishments would lose their market shares to the nonexempt
establishments producing nutritionally labeled products. Therefore, to
keep their market shares, these exempt establishments are likely to
voluntarily include nutrition information on the product label. Such a
strategy would minimize any adverse impact on these smaller
establishments. It would, however, also increase their labeling costs.
Economic theory dictates that these establishments would compare the
costs of nutrition labels with the benefits of retaining their market
shares and would decide to label their products if the benefits of
increasing the market shares exceed the label costs.
Nutrition labeling would be required, either on the product label
or on POP materials, for the major cuts. Therefore, if manufacturers do
not provide nutrition information on the label, retailers would be
required to provide this information at the POP or on product labels.
However, as noted above, this requirement should not impose major costs
or other burdens. The annual/annualized cost to each retail
establishment will be $42 for nutrition information placards.
The economic impact on retail stores is likely to be minimal
because recently there has been consolidation of these stores as a
consequence of mergers and acquisitions, resulting in an increased
market share of large retailers relative to small ones. For example,
several years ago Royal Ahold, the Dutch Conglomerate, bought out Giant
Food. Also, Ahold announced the pending purchase of Supermarket
General-II Holdings Corporation, parent of the Pathmark chain.
Similarly, SUPERVALUE acquired Richfood, Food Lion bought out Hannaford
Brothers and Scarborough, and Albertson's purchased American Stores.
(Sean Mehegan, ``Consolidation Changes the Face of the North American
Supermarket Sector,'' Meat & Poultry (September 1999): 22-25). More
recently, Wal-Mart through its operation Wal-Mart Puerto Rico agreed to
acquire Supermercados Amigo, the leading supermarket chain in Puerto
Rico. These mergers and acquisitions are likely to increase market
shares of the large retailers at the cost of smaller ones.
Based on the 2002 Economic Census of the U.S. Department of
Commerce, meat and poultry processing establishments that are small
entities had annual revenues from total value of shipments that ranged
from $0.454 million to $96.038 million. For each processing (grinding)
establishment, average costs as a percent of revenues range from a
lower bound of 0.001 percent ($1,402/$96.038 million to an upper bound
of 0.3 percent ($1,402/$0.454 million). Further, small entity retail
stores (supermarkets and other grocery (except convenience) stores and
meat market stores) had annual revenues from sales that ranged from
$0.343 million to $8.873 million. Also, the companies or firms of the
small retail stores had annual revenues from sales that ranged from
$0.343 million to $48.342 million. Costs as a percent of revenues range
from the lower bound of 0.02 percent ($1,537/$8.873 million) to the
upper bound of 0.4 percent ($1,537/$0.343 million). Many of these
retail firms that are small entities own multiple retail stores that
are small entity supermarkets and other grocery (except convenience)
stores.
The following table shows the upfront, first year costs for all
businesses affected by the rule, compared to the first year, upfront
costs for small businesses. The table also shows the percent of total
first year costs of the rule that will be incurred by small businesses.
Based on the cost estimates for the rule, assuming retailers choose
Option 1 for labeling ground or chopped products, small businesses will
incur 10.1 percent of total estimated first year costs.

Table 32--Distribution of First Year Costs--3 Percent Discount Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Option 1 Option 2 Option 1 Option 2
Option 1 Option 2 Processing retail + retail + Option 1 Option 2 Processing retail + retail +
retail retail plant processing processing retail retail plant processing processing
plant plant plant plant
--------------------------------------------------------------------------------------------------------------------------------------------------------
$ Million
$ Million--Present value
--------------------------------------------------------------------------------------------------------------------------------------------------------
All entities........................ 61.88 39.88 6.00 67.88 45.88 60.09 38.72 5.83 65.91 44.55
Only small entities................. 2.84 2.84 3.98 6.82 6.82 2.76 2.76 3.86 6.62 6.62
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small entitles share of total costs. 4.59 7.12 66.33 10.05 14.86 4.59 7.12 66.33 10.05 14.86
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 33--Distribution of First Year Costs--7 Percent Discount Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Option 1 Option 2 Option 1 Option 2
Option 1 Option 2 Processing retail + retail + Option 1 Option 2 Processing retail + retail +
retail retail plant processing processing retail retail plant processing processing
plant plant plant plant
--------------------------------------------------------------------------------------------------------------------------------------------------------
$ Million
$ Million--Present value
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Entities........................ 61.88 39.88 6.00 67.88 45.88 57.86 37.29 5.61 63.47 42.90

[[Page 67795]]

Only small entities................. 2.84 2.84 3.98 6.82 6.82 2.66 2.66 3.72 6.38 6.38
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small entitles share of total costs. 4.59 7.12 66.33 10.05 14.86 4.59 7.12 66.33 10.05 14.86
--------------------------------------------------------------------------------------------------------------------------------------------------------

Executive Order 12988
This supplemental proposed rule has been reviewed under Executive
Order 12988, Civil Justice Reform. States and local jurisdictions are
preempted by the Federal Meat Inspection Act (FMIA) and the Poultry
Products Inspection Act (PPIA) from imposing any marking, labeling,
packaging, or ingredient requirements on Federally inspected meat and
poultry products that are in addition to, or different than, those
imposed under the FMIA or the PPIA. However, States and local
jurisdictions may exercise concurrent jurisdiction over meat and
poultry products that are outside official establishments for the
purpose of preventing the distribution of meat and poultry products
that are misbranded or adulterated under the FMIA or PPIA, or, in the
case of imported articles, which are not at such an establishment,
after their entry into the United States.
The supplemental proposed rule would not be intended to have
retroactive effect.
Administrative proceedings would not be required before parties may
file suit in court challenging this rule. However, the administrative
procedures specified in Sec. Sec. 306.5 and 381.35 must be exhausted
before there is any judicial challenge of the application of the rule,
if the challenge involves any decision of an FSIS employee relating to
inspection services provided under FMIA and PPIA.
Paperwork Requirements
Title: Nutrition labeling of ground or chopped meat and poultry
products and single-ingredient products.
Type of Collection: New.
Abstract: FSIS has reviewed the paperwork and record keeping
requirements in this supplemental proposed rule in accordance with the
Paperwork Reduction Act. Should this rule become final, FSIS will
require several information collection and recordkeeping activities.
FSIS will requiring nutrition labeling on the major cuts of single-
ingredient, raw meat and poultry products, either on their label or at
their POP, unless an exemption applies. If the manufacturer provides
nutrition information on the label of individual packages of the major
cuts of single-ingredient, raw meat or poultry products, the retailer
would not be required to provide the information at the POP. However,
if the manufacturer does not provide the nutrition information on the
label of these products, the retailer would be required to provide the
information at their POP. In the estimate of burden below, FSIS is
calculating that all retailers would display POP information for the
major cuts of single-ingredient, raw meat and poultry products, because
this is a low-cost means of providing nutrition information for
multiple products, and because this rule will not require that
manufacturers include nutrition labels on the major cuts of single-
ingredient, raw meat and poultry products. FSIS is also requiring
nutrition labels on all ground or chopped meat and poultry products,
with or without added seasonings, unless an exemption applies.
Estimate of burden: FSIS estimates that obtaining POP materials and
making them available for consumers would take an average of 30
minutes. FSIS believes that the nutrition information on most POP
materials will be based on the most current representative database
values contained in USDA's National Nutrient Data Bank or the USDA
National Nutrient Database for Standard Reference. FSIS also believes
it is unlikely that there will be any nutrition claims made on the POP
materials on the basis of the representative data base values.
Therefore, these products will not be subject to FSIS compliance
review, and there will be no recordkeeping requirements based on this
information.
FSIS estimates that developing nutrition labels for ground or
chopped products would take an average of 6 hours. Labels developed at
official establishments would be submitted to FSIS. FSIS estimates that
each official establishment that produces ground or chopped product
would submit 6.6 labels to FSIS for approval. FSIS estimates that it
would take an average of 1.5 hours to prepare and submit the form for
prior approval. All ground or chopped product would be subject to FSIS
compliance review; therefore, producers of ground or chopped product
would be required to maintain records to support the validity of
nutrient declarations contained on product labels. FSIS estimates the
average time for recordkeeping would be 30 minutes.
Respondents: Meat and poultry establishments and retail stores.
Estimated number of respondents: 75,539.
Estimated number of responses per respondent: 18.04.
Estimated total annual burden on respondents: 66,062 hours
Copies of this information collection assessment can be obtained
from John O'Connell, Paperwork Reduction Act Coordinator, Food Safety
and Inspection Service, USDA, 112 Annex, 300 12th St., Washington, DC
20250. Comments are invited on: (a) Whether the proposed collection of
information is necessary for the proper performance of FSIS's
functions, including whether the information will have practical
utility; (b) the accuracy of FSIS's estimate of the burden of the
proposed collection of information, including the validity of the
methodology and assumptions used; (c) ways to enhance the quality,
utility, and clarity of the information to be collected; and (d) ways
to minimize the burden of the collection of information on those who
are to respond, including through the use of appropriate automated,
electronic, mechanical, or other technological collection techniques,
or other forms of information technology. Comments may be sent to both
John O'Connell, Paperwork Reduction Act Coordinator, at the address
provided above, and the Desk Officer for Agriculture, Office of
Information and Regulatory Affairs,

[[Page 67796]]

Office of Management and Budget, Washington, DC 20253.
To be most effective, comments should be sent to OMB within 60 days
of the publication date of this supplemental proposed rule.
E-Government Act Compliance
FSIS is committed to complying with the E-Government Act, to
promote the use of the Internet and other information technologies to
provide increased opportunities for citizen access to Government
information and services, and for other purposes.
Additional Public Notification
Public awareness of all segments of rulemaking and policy
development is important. Consequently, in an effort to ensure that
minorities, women, and persons with disabilities are aware of this
supplemental proposed rule, FSIS will announce it on-line through the
FSIS Web page located at http://www.fsis.usda.gov/regulations_&_policies/2009_Proposed_Rules_Index/index.asp. FSIS also will make
copies of this Federal Register publication available through the FSIS
Constituent Update, which is used to provide information regarding FSIS
policies, procedures, regulations, Federal Register notices, FSIS
public meetings, and other types of information that could affect or
would be of interest to constituents and stakeholders. The Update is
communicated via Listserv, a free electronic mail subscription service
for industry, trade groups, consumer interest groups, health
professionals and other individuals who have asked to be included. The
Update is available on the FSIS Web page. Through the Listserv and the
Web page, FSIS is able to provide information to a much broader and
more diverse audience.
In addition, FSIS offers an e-mail subscription service which
provides automatic and customized access to selected food safety news
and information. This service is available at http://www.fsis.usda.gov/news_and_events/email_subscription/. Options range from recalls to
export information to regulations, directives and notices. Customers
can add or delete subscriptions themselves, and have the option to
password protect their accounts.
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Amstein, D., NCBA Consultant, King Marketing Services, Raleigh,
North Carolina. April 30, 2003. Personal communication with Mary
Muth, RTI International, Research Triangle Park, NC.
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Crutchfield, Stephen, Tanya Roberts, Jean Buzby, and Paul Frenzen,
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Crutchfield, Stephen, Fred Kuchler, and Jayachandian N. Variyam.
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Ippolito, Pauline M., and Alan Mathios. 1991. ``Information,
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Section III

List of Subjects

9 CFR Part 317

Food labeling, Food packaging, Meat Inspection, Nutrition,
Reporting and recordkeeping requirements.

9 CFR Part 381

Food labeling, Food packaging, Nutrition, Poultry and poultry
products, Reporting and recordkeeping requirements.

For the reasons stated in the preamble, FSIS is proposing to amend
9 CFR Chapter III, as follows:

PART 317--LABELING, MARKING DEVICES AND CONTAINERS

1. The authority citation for part 317 continues to read as
follows:

Authority: 21 U.S.C 601-695; 7 CFR 2.18, 2.53.

2. Section 317.300 is revised to read as follows:

Sec. 317.300 Nutrition labeling of meat and meat food products.

(a) Unless the product is exempted under Sec. 317.400, nutrition
labeling must be provided for all meat and meat food products intended
for human consumption and offered for sale, except single-ingredient,
raw products that are not ground or chopped products described in Sec.
317.301 and are not major cuts of single-ingredient, raw meat products
identified in Sec. 317.344. Nutrition labeling must be provided for
the major cuts of single-ingredient, raw meat products identified in
Sec. 317.344, either in accordance with the provisions of Sec.
317.309 for nutrition labels, or in accordance with the provisions of
Sec. 317.345 for POP materials, except as exempted under Sec.
317.400. For all other products for which nutrition labeling is
required, including ground or chopped meat products described in Sec.
317.301, nutrition labeling must be provided in accordance with the
provisions of Sec. 317.309, except as exempted under Sec. 317.400.
(b) Nutrition labeling may be provided for single-ingredient, raw
meat products that are not ground or chopped meat products described in
Sec. 317.301 and that are not major cuts of single-ingredient, raw
meat products identified in Sec. 317.344, either in accordance with
the provisions of Sec. 317.309 for nutrition labels, or in accordance
with the provisions of Sec. 317.345 for point-of-purchase materials.
3. A new Sec. 317.301 is added to read as follows:

Sec. 317.301 Required nutrition labeling of ground or chopped meat
products.

(a) Nutrition labels must be provided for all ground or chopped
products (livestock species) and hamburger with or without added
seasonings (including, but not limited to, ground beef, ground beef
patties, ground sirloin, ground pork, and ground lamb) that are
intended for human consumption and offered for sale, in accordance with
the provisions of Sec. 317.309, except as exempted under Sec.
317.400.(b). [Reserved]
4. Section 317.309 is amended as follows:
a. In paragraph (b)(3), the first sentence is amended by adding
``that are not ground or chopped meat products described in Sec.
317.301'' after the phrase ``single-ingredient, raw products'', and by
removing ``as set forth in Sec. 317.345(a)(1)''; the second sentence
is amended by adding, ``that are not ground or chopped meat products
described in Sec. 317.301'' after the phrase ``single-ingredient, raw
products'', and the following new sentence is added after the first
sentence: ``For single-ingredient, raw products that are not ground or
chopped meat products described in Sec. 317.301, if data are based on
the product `as consumed,' the data must be presented in accordance
with Sec. 317.345(d).''
b. Paragraph (b)(10) is amended by adding the following new
sentence at the end of the paragraph: ``The declaration of the number
of servings per container need not be included in nutrition labeling of
single-ingredient, raw meat products that are not ground or chopped
meat products described in Sec. 317.301, including those that have
been previously frozen.''
c. Paragraph (b)(11) is amended by adding the phrase ``single-
ingredient, raw products that are not ground or chopped meat products
described in Sec. 317.301 and'' after ``exception of''.
d. Paragraph (d)(3)(ii) is amended by removing the period and
adding ``or on single-ingredient, raw meat products that are not ground
or chopped meat products described in Sec. 317.301.'' at the end of
the paragraph.
e. Paragraph (e)(3) is amended by adding ``, but may be on the
basis of as consumed for single-ingredient, raw meat products that are
not ground or chopped meat products described in Sec. 317.301,'' after
``as packaged''.

[[Page 67798]]

f. Paragraph (h)(9) is amended by removing the phrase ``(including
ground beef)'', by adding, ``that are not ground or chopped meat
products described in Sec. 317.301'' after ``products'', by removing
the phrase, ``its published form, the Agriculture Handbook No. 8 series
available from the Government Printing Office'', and by adding, in its
place, ``its released form, the USDA National Nutrient Database for
Standard Reference'', and by removing the period and adding the
following at the end of the paragraph: as provided in Sec. 317.345(e)
and (f).''

Sec. 317.343 [Amended]

5. Section 317.343 is removed.
6. Section 317.344 is amended by removing the phrases ``ground beef
regular without added seasonings, ground beef about 17% fat,'' and
``ground pork.''
7. Section 317.345 is amended as follows:
a. The section heading and paragraphs (a) and (c) are revised.
b. Paragraph (d) is amended by removing ``should'' and adding, in
its place, ``for products covered in paragraphs (a)(1) and (a)(2)
must''.
c. Paragraph (e) is amended by removing ``its published form, the
Agriculture Handbook No. 8 series'' and by adding, in its place, ``its
released form, the USDA National Nutrient Database for Standard
Reference'', and by removing ``(including ground beef)''.
d. Paragraph (f) is amended by adding ``provided'' after
``nutrition information is''.
e. Paragraph (g) is amended by removing the phrase ``(including
ground beef)''.
The revisions read as follows:

Sec. 317.345 Nutrition labeling of single-ingredient, raw meat
products that are not ground or chopped products described in Sec.
317.301.

(a)(1) Nutrition information on the major cuts of single-
ingredient, raw meat products identified in Sec. 317.344, including
those that have been previously frozen, is required, either on their
label or at their point-of-purchase, unless exempted under Sec.
317.400. If nutrition information is presented on the label, it must be
provided in accordance with Sec. 317.309. If nutrition information is
presented at the point-of-purchase, it must be provided in accordance
with the provisions of this section.
(2) Nutrition information on single-ingredient, raw meat products
that are not ground or chopped meat products described in Sec. 317.301
and are not major cuts of single-ingredient, raw meat products
identified in Sec. 317.344, including those that have been previously
frozen, may be provided at their point-of-purchase in accordance with
the provisions of this section or on their label, in accordance with
the provisions of Sec. 317.309.
(3) A retailer may provide nutrition information at the point-of-
purchase by various methods, such as by posting a sign or by making the
information readily available in brochures, notebooks, or leaflet form
in close proximity to the food. The nutrition labeling information may
also be supplemented by a video, live demonstration, or other media. If
a nutrition claim is made on point-of-purchase materials, all of the
format and content requirements of Sec. 317.309 apply. However, if
only nutrition information--and not a nutrition claim--is supplied on
point-of-purchase materials, the requirements of Sec. 317.309 apply,
provided, however:
(i) The listing of percent of Daily Value for the nutrients (except
vitamins and minerals specified in Sec. 317.309 (c)(8)) and footnote
required by Sec. 317.309(d)(9) may be omitted; and
(ii) The point-of-purchase materials are not subject to any of the
format requirements.
* * * * *
(c) For the point-of-purchase materials, the declaration of
nutrition information may be presented in a simplified format as
specified in Sec. 317.309(f).
* * * * *
8. Section 317.362 is amended by adding a new paragraph (f) to read
as follows:

Sec. 317.362 Nutrient content claims for fat, fatty acids, and
cholesterol content.

* * * * *
(f) A statement of the lean percentage may be used on the label or
in labeling of ground or chopped meat products described in Sec.
317.301 when the product does not meet the criteria for ``low fat,''
defined in Sec. 317.362(b)(2), provided that a statement of the fat
percentage is contiguous to and in lettering of the same color, size,
type, and on the same color background, as the statement of the lean
percentage.
9. Section 317.400 is amended by:
a. Revise paragraph (a)(1) introductory text.
b. Paragraph (a)(1)(ii) is amended by adding ``, including a single
retail store,'' after the phrase ``single-plant facility,'' and by
adding, ``, including a multi-retail store operation,'' after
``company/firm''.
c. Paragraph (a)(7)(i) is amended by removing the semi-colon and
``and'' and by adding the following at the end of the paragraph: ``,
provided, however, that this exemption does not apply to ready-to-eat
ground or chopped meat products described in Sec. 317.301 that are
packaged or portioned at a retail establishment, unless the
establishment qualifies for an exemption under (a)(1);''.
d. Paragraph (a)(7)(ii) is amended by removing the period and by
adding the following at the end of the paragraph: ``, provided,
however, that this exemption does not apply to multi-ingredient ground
or chopped meat products described in Sec. 317.301 that are processed
at a retail establishment, unless the establishment qualifies for an
exemption under (a)(1); and''
e. Add a new paragraph (a)(7)(iii).
f. Paragraph (d)(1) is amended by removing the period at the end of
the first sentence, and by adding the following to the end of the first
sentence: ``, except that this exemption does not apply to the major
cuts of single-ingredient, raw meat products identified in Sec.
317.344.''
The revision and addition read as follows:

Sec. 317.400 Exemption from nutrition labeling.

(a) * * *
(1) Food products produced by small businesses, other than the
major cuts of single-ingredient, raw meat products identified in Sec.
317.344 produced by small businesses, provided that the labels for
these products bear no nutrition claims or nutrition information, and
ground or chopped products described in Sec. 317.301 produced by small
businesses that bear a statement of the lean percentage and fat
percentage on the label or in labeling in accordance with Sec.
317.362(f), provided that labels or labeling for these products bear no
other nutrition claims or nutrition information,
* * * * *
(7) * * *
(iii) Products that are ground or chopped at an individual
customer's request.
* * * * *

PART 381--POULTRY PRODUCTS INSPECTION REGULATIONS

10. The authority citation for part 381 continues to read as
follows:

Authority: 7 U.S.C. 138f, 450; 21 U.S.C. 451-470; 7 CFR 2.18,
2.53.

11. Section 381.400 is revised to read as follows:

[[Page 67799]]

Sec. 381.400 Nutrition labeling of poultry products.

(a) Unless the product is exempted under Sec. 381.500, nutrition
labeling must be provided for all poultry products intended for human
consumption and offered for sale, except single-ingredient, raw
products that are not ground or chopped products described in Sec.
381.401 and are not major cuts of single-ingredient, raw poultry
products identified in Sec. 381.444. Nutrition labeling must be
provided for the major cuts of single-ingredient, raw poultry products
identified in Sec. 381.444, either in accordance with the provisions
of Sec. 381.409 for nutrition labels, or in accordance with the
provisions of Sec. 381.445 for point-of-purchase materials, except as
exempted under Sec. 381.500. For all other products that require
nutrition labeling, including ground or chopped poultry products
described in Sec. 381.401, nutrition labeling must be provided in
accordance with the provisions of Sec. 381.409, except as exempted
under Sec. 381.500.
(b) Nutrition labeling may be provided for single-ingredient, raw
poultry products that are not ground or chopped poultry products
described in Sec. 381.401 and that are not major cuts of single-
ingredient, raw poultry products identified in Sec. 381.444, either in
accordance with the provisions of Sec. 381.409 for nutrition labels,
or in accordance with the provisions of Sec. 381.445 for point-of-
purchase materials.
12. A new Sec. 381.401 is added to read as follows:

Sec. 381.401 Required nutrition labeling of ground or chopped poultry
products.

Nutrition labels must be provided for all ground or chopped poultry
(kind) with or without added seasonings (including, but not limited to,
ground chicken, ground turkey, and (kind) burgers) that are intended
for human consumption and offered for sale, in accordance with the
provisions of Sec. 381.409, except as exempted under Sec. 381.500.
13. Section 381.409 is amended as follows:
a. Revise paragraph (b)(3).
b. Paragraph (b)(10) is amended by adding the following new
sentence at the end of the paragraph: ``The declaration of the number
of servings per container need not be included in nutrition labeling of
single-ingredient, raw poultry products that are not ground or chopped
poultry products described in Sec. 381.401, including those that have
been previously frozen.''
c. Paragraph (b)(11) is amended by adding the phrase ``single-
ingredient, raw products that are not ground or chopped poultry
products described in Sec. 381.401 and'' after ``exception of''.
d. Paragraph (d)(3)(ii) is amended by removing the period and
adding ``or on single-ingredient, raw poultry products that are not
ground or chopped poultry products described in Sec. 381.401.'' at the
end of the paragraph.
e. Paragraph (e)(3) is amended by adding ``, but may be on the
basis of ``as consumed'' for single-ingredient, raw poultry products
that are not ground or chopped poultry products described in Sec.
381.401,'' after ``as packaged''.
f. Paragraph (h)(9) is amended by adding, ``that are not ground or
chopped poultry products described in Sec. 381.401'' after
``products'', by removing the phrase, ``its published form, the
Agriculture Handbook No. 8 series'', and by adding, in its place, ``its
released form, the USDA National Nutrient Database for Standard
Reference'', and by removing the period and adding the following at the
end of the paragraph: ``, as provided in Sec. 381.445(e) and (f).''
The revision reads as follows:

Sec. 381.409 Nutrition label content.

* * * * *
(b) * * *
(3) The declaration of nutrient and food component content shall be
on the basis of the product ``as packaged'' for all products, except
that single-ingredient, raw products that are not ground or chopped
poultry products as described in Sec. 381.401 may be declared on the
basis of the product ``as consumed.'' For single-ingredient, raw
products that are not ground or chopped poultry products described in
Sec. 381.401, if data are based on the product ``as consumed,'' the
data must be presented in accordance with Sec. 381.445(d). In addition
to the required declaration on the basis of ``as packaged'' for
products other than single ingredient, raw products that are not ground
or chopped poultry products as described in Sec. 381.401, the
declaration may also be made on the basis of ``as consumed,'' provided
that preparation and cooking instructions are clearly stated.
* * * * *

Sec. 381.443 [Removed]

14. Section 381.443 is removed.
15. Section 381.445 is amended as follows:
a. The section heading and paragraph (a) and (c) are revised.
b. Paragraph (d) is amended by removing ``should'' and adding, in
its place, ``for products covered in paragraphs (a)(1) and (a)(2)
must''.
c. Paragraph (e) is amended by removing ``its published form, the
Agriculture Handbook No. 8 series'' and by adding, in its place, ``its
released form, the USDA National Nutrient Database for Standard
Reference.''
d. Paragraph (f) is amended by adding ``provided'' after
``nutrition information is''.
The revisions read as follows:

Sec. 381.445 Nutrition labeling of single-ingredient, raw poultry
products that are not ground or chopped products described in Sec.
381.401.

(a)(1) Nutrition information on the major cuts of single-
ingredient, raw poultry products identified in Sec. 381.444, including
those that have been previously frozen, is required, either on their
label or at their point-of-purchase, unless exempted under Sec.
381.500. If nutrition information is presented on the label, it must be
provided in accordance with the provisions of Sec. 381.409. If
nutrition information is presented at the point-of-purchase, it must be
provided in accordance with the provisions of this section.
(2) Nutrition information on single-ingredient, raw poultry
products that are not ground or chopped poultry products described in
Sec. 381.401 and are not major cuts of single-ingredient, raw poultry
products identified in Sec. 381.444, including those that have been
previously frozen, may be provided at their point-of-purchase in
accordance with the provisions of this section or on their label, in
accordance with the provisions of Sec. 381.409.
(3) A retailer may provide nutrition information at the point-of-
purchase by various methods, such as by posting a sign or by making the
information readily available in brochures, notebooks, or leaflet form
in close proximity to the food. The nutrition labeling information may
also be supplemented by a video, live demonstration, or other media. If
a nutrition claim is made on point-of-purchase materials, all of the
format and content requirements of Sec. 381.409 apply. However, if
only nutrition information--and not a nutrition claim--is supplied on
point-of-purchase materials, the requirements of Sec. 381.409 apply,
provided, however:
(i) The listing of percent of Daily Value for the nutrients (except
vitamins and minerals specified in Sec. 381.409(c)(8)) and footnote
required by Sec. 381.409(d)(9) may be omitted; and
(ii) The point-of-purchase materials are not subject to any of the
format requirements.
* * * * *

[[Page 67800]]

(c) For the point-of-purchase materials, the declaration of
nutrition information may be presented in a simplified format as
specified in Sec. 381.409(f).
* * * * *
16. Section 381.462 is amended by adding a new paragraph (f) to
read as follows:

Sec. 381.462 Nutrient content claims for fat, fatty acids, and
cholesterol content.

* * * * *
(f) A statement of the lean percentage may be used on the label or
in labeling of ground or chopped poultry products described in Sec.
381.401 when the product does not meet the criteria for ``low fat,''
defined in Sec. 381.462(b)(2), provided that a statement of the fat
percentage is contiguous to and in lettering of the same color, size,
type, and on the same color background, as the statement of the lean
percentage.
17. Section 381.500 is amended by:
a. Revising paragraph (a)(1) introductory text.
b. Paragraph (a)(1)(ii) is amended by adding, ``, including a
single retail store,'' after the phrase ``single-plant facility,'' and
by adding ``, including a multi-retail store operation'' after
``company/firm''.
c. Paragraph (a)(7)(i) is amended by removing the semi-colon and
``and'' and adding the following at the end of the paragraph: ``,
provided, however, that this exemption does not apply to ready-to-eat
ground or chopped poultry products described in Sec. 381.401 that are
packaged or portioned at a retail establishment, unless the
establishment qualifies for an exemption under (a)(1);''.
d. Paragraph (a)(7)(ii) is amended by removing the period and
adding the following at the end of the paragraph: ``, provided,
however, that this exemption does not apply to multi-ingredient ground
or chopped poultry products described in Sec. 381.401 that are
processed at a retail establishment, unless the establishment qualifies
for an exemption under (a)(1); and''
e. Add a new paragraph (a)(7)(iii).
f. Paragraph (d)(1) is amended by removing the period at the end of
the sentence, and by adding the following to the end of the sentence:
``except that this exemption does not apply to the major cuts of
single-ingredient, raw poultry products identified in Sec. 381.444.''
The revision and addition reads as follows:

Sec. 381.500 Exemption from nutrition labeling.

(a) * * *
(1) Food products produced by small businesses other than the major
cuts of single-ingredient, raw poultry products identified in Sec.
381.444 produced by small businesses, provided that the labels for
these products bear no nutrition claims or nutrition information, and
ground or chopped products described in Sec. 381.401 produced by small
businesses that bear a statement of the lean percentage and fat
percentage on the label or in labeling in accordance with Sec.
381.462(f), provided that labels or labeling for these products bear no
other nutrition claims or nutrition information,
* * * * *
(7) * * *
(iii) Products that are ground or chopped at an individual
customer's request.
* * * * *

Done in Washington, DC, on December 3, 2009.
Alfred V. Almanza,
Administrator.
[FR Doc. E9-29323 Filed 12-17-09; 8:45 am]
BILLING CODE 3410-DM-P