Testimony of Fred L. Dailey regarding S 1988, New Markets for State-Inspected Meat Act
- Speaker: Fred L. Dailey, NASDA President
- Subject: S 1988, New Markets for State-Inspected Meat Act
- Venue: US Senate Committee on Agriculture, Nutrition and Forestry
- Date of Speech: April 06, 2000
Statement of Fred L. Dailey
Director, Ohio Department of Agriculture
on behalf of
NATIONAL ASSOCIATION OF STATE DEPARTMENTS OF AGRICULTURE
before the
Committee on Agriculture, Nutrition and Forestry
United States Senate
on
S 1988, New Markets for State-Inspected Meat Act
April 6, 2000
_______________________________________________________________________________________________
Re: S 1988, New Markets for State-Inspected Meat Act
Mr. Chairman and members of the Committee, I am Fred L. Dailey, Director of the Ohio Department of Agriculture. I currently serve as President of the National Association of State Departments of Agriculture, NASDA. I am also responsible for a state meat and poultry inspection program which oversees 215 establishments. I am accompanied this morning by Dr. Lee Jan, Director of the Meat Safety Assurance Division of the Texas Department of Health. Dr. Jan is President of the National Association of State Meat and Food Inspection Directors (NASMFID). We thank you for the opportunity to appear before the Committee this morning.
NASDA represents the 50 state and 4 U.S. territorial departments of agriculture. I am here on behalf of all the states, but in particular, the 25 states which have meat and poultry inspection programs, to support the approach embodied in S. 1988, the New Markets for State-Inspected Meat Act, which would lift the unfair ban on interstate shipment of meat and poultry products that have been inspected and approved under state inspection programs. This is a subject of extreme importance to the states and thousands of small business operators, farmers and ranchers. The reasons to act are clear, simple, and compelling.
To put this issue in its proper context, you need to understand the current operating relationship between state and federal inspection programs. Under the Federal Meat Inspection Act (FMIA) and the Poultry Products Inspection Act (PPIA), the state-federal cooperative inspection program was established which requires that state inspection programs be "at least equal to" the federal inspection program. Both Acts give the USDA clear responsibility for setting a national standard for meat and poultry inspection. USDA is required to monitor state programs and to assume direct responsibility at state plants when a state fails to develop or effectively enforce inspection requirements that are "at least equal to" federal requirements. At the end of my statement, I have provided the committee with an appendix which includes a detailed explanation of the annual process USDA's Food Safety and Inspection Service (FSIS) has developed to review and certify state programs to be "at least equal to" federal inspection (FSIS Directive 5720.2). The key point to remember is that in the entire history of the state-federal cooperative inspection program, USDA has never unilaterally found that a state inspection program should be discontinued because of deficiencies. That is why we have never viewed the question of removing the ban on interstate shipment as a food safety issue, rather an economic one.
Some of you may wonder why twenty five (25) states have their own meat inspection programs. Who are we serving? Why does Ohio operate an inspection program? Why did Minnesota, just last year begin a state inspection program? Why has North Dakota's legislature just authorized that state to start up a program? Why doesn't a plant simply apply for federal inspection, especially if the differences between state and federal inspection aren't that significant anymore?
The mission of state meat and poultry inspection programs is to provide consumers with a wholesome, unadulterated product that is properly labeled and safe. The state programs are desirable to the industry and state government alike because we are geared to regulating small-and medium-sized businesses. State inspection personnel are generally more accessible and more flexible in providing inspection resources that are geared to the needs and timing of small plants that are not running three production shifts, five days a week. The state programs also provide practical information and technical assistance. They are geared to working with and supporting businesses that cannot afford to employ a scientific staff or attorneys to sort through regulations searching for answers. In many cases, fees for overtime inspection (weekends, holidays, or over eight hours in a day) are much more affordable ($18/hour, state verses $47/hour, federal, in Ohio). We provide a direct line of information sharing and decision making that is accessible to small businesses much more easily than the multi-layered chain of command and the frequently adversarial attitude of the large federal system. So, there is definitely a need for existing state inspection programs to continue and that if this legislation passes, you most likely will see more states begin programs.
Now, the question before you this morning is whether it is time to create a level economic playing field and provide the same opportunities for all meat and poultry processors — both large and small — or to continue the government-sanctioned economic advantage for large corporations and foreign competitors at the expense of U.S. small business owners and operators.
As I was preparing my testimony for this hearing, I re-read the testimony I gave to a House Agriculture subcommittee on this same subject back in 1996, almost four years ago. I found myself thinking back to those days in 1996 and wondering how many small meat processors are no longer in business today because Congress failed to act back then. In Ohio, I know we have lost 41 small plants during that time. I wondered how many small cattle ranchers and hog farmers have been forced to quit because they couldn't find a market for their livestock which would pay them a fair price. I wondered how their situation might be different if we had a more vigorous and competitive small meat processing sector to offer them more choices and better opportunities for price discovery. The sad reality is that the loss of many of these small, mostly rural businesses and the jobs and economic activity they created could have been prevented if Congress would have allowed them the same access to the marketplace that is given to large packing conglomerates and foreign competitors.
Mr. Chairman, quite a lot has NOT changed since that 1996 hearing, yet quite a lot HAS changed. And that presents us with a new opportunity, which is why I am here today, and why NASDA hopes this committee, and ultimately the Congress, will act.
Let me first tell you what has NOT changed over the years and why this issue is so important to state departments of agriculture and the constituents we serve.
Most importantly, small meat processors that are under state inspection are still denied many opportunities to sell their products because they do not have full access to the United States marketplace. Many of these small, state-inspected companies make and market speciality products like sausages, bratwurst, jerky, and ethnic meat products which are not cost effective product lines for large operations, but for which there is clearly a demand. Today, many consumers do not have access to the full selection of these delicious, innovative products created by small companies. Repealing the ban would provide consumers with more choices in the supermarkets and convenience stores.
It has always struck us as both unfair and illogical to say that consumers in one state may enjoy a meat product while consumers in another state cannot eat that same product. I chose the words "meat product" carefully, because meat and poultry are the ONLY food products subject to this illogical ban. Milk, cheese, ice cream, even buffalo jerky are all inspected under state programs and can move freely across state lines and be enjoyed by ALL consumers. Why not meat and poultry products? In fact, the buffalo jerky illustrates the absurdity of the current ban. The same small company which is state inspected and makes two similar jerky products, one made from beef and one made from buffalo, cannot sell the beef jerky outside of the state, but CAN sell the buffalo jerky anywhere.
Maintaining the interstate shipment ban prevents small businesses from capitalizing on other sales opportunities such as niche marketing through mail-order gift catalogs or internet sales or even serving very small communities or rural areas which straddle state boundaries. In some cases, the new opportunity could be as small as getting broader distribution of a product within a state. Some state inspected plants have delivery routes that require them to provide state inspected product to Ohio clients and also to cross state lines when they need to fill orders with federally inspected "pass through" product. We are aware of a situation where federal compliance officers issued a letter of warning to a state plant for having Ohio inspected product on their truck when it crossed the Michigan state line. The plant was told the "even if the product was not for sale in Michigan, it could not be transported across a state line." This scenario points up a real economic burden in time and delivery costs for any plant caught in this dilemma. So, even the opportunity to just "get on the distribution truck" can make a big difference to some small companies. Other opportunities could be sales to federally-inspected plants for further processing into finished products, or even exports to other countries.
In my own state of Ohio, a study conducted in 1997 by the Ohio State University College of Agriculture found that lifting the ban would create 588 new jobs and would boost our state's economy by over $56 million. I have submitted a copy of that study to the committee for the Record.
Let me also briefly share with you the results that Minnesota has experienced since beginning its program in January, 1999. Minnesota Agriculture Commissioner Gene Hugoson reports that 30 new meat processing plants have started up. The majority of these are 5 to 10 employee operations. These are not existing small plants which switched from federal to state inspection. They are new businesses that are creating new jobs, stabilizing rural communities, and are providing new and innovative products. Let me give you two quick examples: one company is processing meat cuts and providing a fresh meat supply to approximately 130 small groceries which could not afford to hire their own meat cutters and therefore could not offer a fresh meat selection to their customers. Now these stores are more financially stable and able to offer their shoppers more choices. Another company has begun making a very innovative new alligator/pork bratwurst, which has really taken off with local consumers. I'd really like to try those brats, but right now I'd have to take a trip all the way to Minnesota to get them. I think these guys should be able to sell their product wherever they want. And the irony is that if those brats were purely alligator meat, they COULD sell them anywhere, but because they are combined with cuts of pork, they can't. It just doesn't make sense.
The second thing that hasn't changed since 1996, is the unfairness of this ban. We are only asking you to provide the same opportunity for small business owners and operators that exists for large corporations and foreign competitors. Large packing conglomerates now account for more than 82 percent of all meat processing in the United States. Lifting the unfair market restrictions imposed on state-inspected meat and poultry processors could slow the concentration in meat packing by enabling small- and mid-size processors to expand their operations and hire more employees. Also, we cannot overlook the fact that under our international trade agreements foreign meat and poultry processors today have greater market access than our own state-inspected processors. This is not only unfair, it is simply wrong. These trade agreements allow foreign-inspected meat to be shipped to and sold anywhere in the United States so long as that foreign inspection program is "equivalent" to U.S. federal standards – in practice, the same standard which state-inspection programs must meet. How can anyone justify continuing to deny small businesses in the United States the same opportunity that is given to companies in Mexico, Guatemala, Australia, and other foreign countries?
Now, let me tell you what HAS changed since 1996, and why we are optimistic that this is the year to finally end this inequity.
First, three USDA advisory committees, the Advisory Committee on Agricultural Concentration (in June, 1996), the National Commission on Small Farms (in January, 1998) and the National Advisory Committee on Meat and Poultry Inspection (in May, 1998) recommended to the Secretary that the ban on interstate shipment should be removed because it would create more opportunities for a prosperous and competitive small meat processing sector that could help sustain rural communities.
Second, state meat and poultry inspection programs and federal inspection are even more similar today than before due to two major factors:
One -- HACCP is now fully implemented down to the "very small plant" level (10 employees or fewer). This means that every meat processing plant in this country – whether state or federally inspected – now must be operating under a HACCP system; and,
Two -- FSIS has gone through a series of regulatory reforms that have removed many outdated requirements and regulations in the federal inspection program. The vast majority of these requirements had no bearing on the safety or quality of the food produced, but they were exploited as "differences" between the two inspection systems and used as a diversionary tactic by those who argued that "equal to" inspection was not the "same as," thereby implying that state inspection programs were somehow inferior.
And finally, the third major change since 1996, is that the Administration, after years of sitting on the sidelines criticizing our approach and saying the timing was not right, has finally put a plan on the table which, while not perfect, will work. Notwithstanding the effects of the regulatory changes I just mentioned a minute ago which have narrowed the differences between state and federal inspection, I will have to credit the Administration for coming up with an approach to solving the interstate shipment issue that actually moves us even closer to a uniform national inspection program which has federal and state components both using and enforcing the same set of rules and regulations. So, now we don't have to have the debate on the "equal to" verses "same as" smokescreen that we've had in previous years. Now both systems will be the "same," or "seamless" as FSIS likes to say. And now, the timing is right.
The bottom line is.... today, there simply are no meaningful distinctions between federal and state inspection requirements which justify perpetuating this unfair ban. And, the few distinctions which do remain would be virtually eliminated if the approach embodied in S. 1988 is passed. Mr. Chairman, it's time to stop talking and start acting.
In closing, I want to thank the Administration for putting a good concept on the table. And, I also want to thank Senators Daschle and Hatch for agreeing to sponsor it in the Senate. But, I must raise one note of concern. While the specific bill you have in front of you has been characterized by some as a "consensus" bill, clearly some others feel they were not a part of the process. Indeed, NASDA's members themselves did not feel we were adequately included in the consensus process.
That being said, we feel that true consensus is very close and with a little work by the committee with all of the interested stakeholders, all of the issues can be worked through and we can reach a reasonable accommodation that maintains all of the essential elements of the USDA concept.
I would challenge my colleagues in the food, consumer and agricultural communities who are here this morning to commit to working out these remaining issues and getting a bill passed. I do not believe keeping the "status quo" is in the best interest of anyone in this room.
The status quo is clearly not in the interest of small meat processors or farmers and ranchers who would remain at a competitive disadvantage and who want and need better prices and more opportunities to market their products.
The status quo is not in the best interest of consumers if we know we can improve the system. Consumers should have a more uniform system of meat inspection, which this bill would do. As a parent as well as someone in charge of operating a state inspection program, I want to ensure that my family, and all consumers, have the safest food products we know how to produce.
Nor is the status quo in the best interest of the large meat processors who have also asked for a uniform system of meat inspection with one set of rules.
So, we all have a reason to remain engaged in the process and see this bill through to completion. NASDA's members and the constituents we serve hope that Congress will act this year to remove this unfair competitive barrier to small businesses.
Mr. Chairman, that concludes my statement. Thank you for inviting me here this morning.
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Appendix I: Description of Annual "Equal to" Determination Process
In 1967, the Meat Inspection Act of 1906 was amended by the Wholesome Meat Act and renamed the Federal Meat Inspection Act. In addition to other changes, the state-federal cooperative inspection program was established which required state inspection programs to be "at least equal to" the federal inspection program, and that products receiving state inspection are "solely for distribution within such state." The 1968 Wholesome Poultry Products Act which amended the Poultry Products Inspection Act extended the same provisions to poultry inspection.
The acts, while stressing the need for cooperation between federal and state authorities, give USDA clear responsibility for setting a national standard for meat and poultry inspection. USDA is required to monitor state programs and to assume direct responsibility at state plants when a state fails to develop or effectively enforce inspection requirements "at least equal to" those under the acts.
USDA's Food Safety and Inspection Service (FSIS) certifies that each state inspection program is "at least equal to" federal inspection requirements. This is accomplished by FSIS review of State Performance Plans (SPPs), results of comprehensive reviews, feedback from Inspection Operations field supervisors, and documentation submitted with Annual Reports.
The annual SPP review for "equal to" status includes a review of state laws, state regulations, funding and financial accountability, resource management (staffing, training, program operations), facilities and equipment, labels and standards, in-plant reviews/enforcement, specialty programs, and laboratories.
FSIS has been conducting the "equal to" review since passage of the acts in 1967 and 1968. Since that time, the Agency has never unilaterally found that a state inspection program should be discontinued due to inadequacies in its inspection program. In other words, since 1967 and 1968, FSIS has found all state programs to be "at least equal to" the federal requirements.
The state programs have been under federal oversight since the acts were amended in 1967 and 1968 and while some states did not choose to develop programs, and others gave up their programs over time due to budget constraints, no state program has ever been "designated" to the federal government because the state program did not meet the "equal to" provisions in the federal acts.
In 1987, FSIS developed the current method of state oversight based on the states writing a State Performance Plan (SPP) detailing all aspects of the state inspection system in one document. Today, each state has a SPP written by the individual state and approved by FSIS. The SPP documents in detail all parts of the state program and is the standard to which the state is held when FSIS audits the state program.
The SPP is required by FSIS Directive 5720.2, a document which was established to: "Be a single source of information on the policies and procedures for the management and administration of the State-Federal and Federal-State Cooperative Inspection Programs, including cross-utilization requirements, training, and qualifications."
FSIS Directive 5720.2, Revision 2, dated July 24, 1992, requires that each state program document and provide for nine basic items:
Laws — State Law must be at least equal to the FMIA and PPIA by granting authority for the development, administration and enforcement of the state meat and/or poultry inspection program.
Regulations — The state inspection program must promulgate regulations "at least equal to" the federal regulations.
Funding and Financial Accountability — The state must appropriate funds commensurate with those provided by the USDA as specified by the Cooperative Agreement. The state must follow fiscal guidelines as contained in FSIS Directive 3300.1 and budgetary requirements as contained in the annual FSIS call letter.
Resource Management — The state shall maintain records and information and shall outline procedures for determining the level and type of resources required in the following areas.
Staffing — Having enough employees to carry out the responsibilities assigned to all organizational levels, units, and functions.
Training — Providing directly or contracting for employees, the technical, professional, administrative, supervisory, and managerial training, required to maintain a competent and productive workforce.
Program Operations — Maintaining records and reports that explain the full range of the activities and administration of the state inspection program.
Facilities and Equipment — The state shall have a system for reviewing and approving blueprints for new construction and remodeled facilities and equipment that is "at least equal to" federal standards.
Labels and Standards — The state must have a system for approving labels to assure accurate labeling of all products "at least equal to" USDA standards and developing accurate labeling for new or specialty items not covered by USDA standards.
In-plant Reviews/Enforcement —
The state must have a system of in-plant reviews to assure that slaughtering and processing inspection activities are conducted in accordance with USDA requirements. The Review and Evaluation Glossary and Format in FSIS Directive 8110.2 should be used as a guide.
The state must have a system comparable to USDA requirements for monitoring plants which are exempt from inspection requirements.
The state must have an enforcement system for detecting violations, and investigating and enforcing state meat and poultry laws. Enforcement includes all activities to correct deficiencies inside and outside plants.
Specialty Programs — The state must have an adequate residue monitoring and control program. Also the state must have programs (protein-fat-free, species determination, etc.) which may be addressed through participation in the current USDA program or by developing and conducting its own specialty programs that are at least equal to the USDA requirements.
Laboratories — The state must utilize laboratories with analytical capabilities comparable to those of FSIS laboratories. The laboratories must be able to perform tests to determine product wholesomeness and compliance with regulatory standards, and employ experts in the disciplines of chemistry, microbiology and pathology. Such laboratories may be:
State Laboratories;
Private Laboratories (including laboratories accredited by FSIS); or
USDA Laboratories. State and private laboratories must be FSIS-accredited or participate in the check sample program conducted by FSIS or in chemistry check sample programs which may be approved by FSIS.
FSIS Directive 5720.2 goes on to describe the specific information details of each requirement that will aid in determining that the SPP provides for an inspection system that meets the "equal to" provisions found in the federal acts.
In addition, FSIS Directive 5720.2 provides for an oversight strategy which is utilized by FSIS in determining that any state program meets the "equal to" provisions found in the federal acts. This strategy is composed of three parts.
Strategy 1 is a review of the SPP, related, reports, and information derived from various sources.
Strategy 2 combines the results of a special review of the state's inspection program with the results of strategy 1.
Strategy 3 combines the results of a comprehensive review of a state's overall inspection program with the results of Strategy
1. The Comprehensive Review is an in-depth look at the state's adherence to their own SPP. Each of the nine provisions required by FSIS Directive 5720.2 and explained in the SPP is examined by a team of FSIS reviewers and auditors. The process can take days and weeks to accomplish as teams of FSIS people who specialize in the nine provisions make in-office and in-plant reviews of each aspect of the SPP. In a nutshell, we open our doors and all our records to FSIS.
The culmination of a comprehensive review is a number of in-plant reviews conducted by the FSIS Assistant Area Supervisor, the State Director, and State Operations staff. The number of plants selected depends on the number of plants in the state inspection program and can be increased if previous performance on a comprehensive review indicates that this is appropriate.
The entire comprehensive review is managed by the Deputy Regional Director as the FSIS Team Leader who has responsibility for the state programs in a given USDA Region.
FSIS Directive 5720.2 establishes a criteria for determining the "equal to" status of the state program based on four categories where the best rating is simply "acceptable" (category l), followed by "acceptable with minor variations" (category 2), "acceptable with major variations" (category 3), and "unacceptable" (category 4). The frequency of the comprehensive reviews are determined by the category rating from the previous comprehensive review. A category 1 rating provides for a comprehensive review at least every five years; a category 2 rating, every four years; category 3, every three years; and category 4, the frequency is based on the nature of the unacceptable rating. To our knowledge, no state program has been rated a category 4.
All in all, it is a detailed, complex, and on-going self-examination and federal oversight. We provide for our own in-house review system, and that is followed up by detailed FSIS oversight and review.
At the completion of each review process, FSIS determines whether the state is in compliance with the SPP and so notifies the state authorities. At the completion of the comprehensive review, the Team Leader and the Director of Federal-State Relations meets with the state authorities and reviews in detail the deficiencies found. The state authorities are required to respond in writing to the deficiencies. If the state's response is acceptable to USDA, "equal to" status is maintained. If the state's response is not acceptable, it's returned for modification. And so it goes in this never ending process.
The state programs also submit to the scrutiny of the USDA Office of the Inspector General as directed by USDA, the General Accounting Office as directed by Congress, and various fact finding teams and auditors as determined by our own state governments and department administrators. Needless to say, we are also held responsible by the plants we inspect, the citizens of our communities, and the media.