Federal Rules on Country Labels Roil Grocers, Distributors
By Chris Cziborr
Doing business is set to grow more costly for supermarkets, food distributors and importers next year.
New federal rules finalized by Congress last month require country-of-origin labeling on fruits, vegetables and meat. The rules, part of the 2002 Farm Bill, are set to take effect next September.
“It’s going to add costs to the whole food chain,” said Justo Frias, president of Santa Ana-based Gigante USA Inc., a Hispanic supermarket operator that’s part of Mexico’s Grupo Gigante SA de CV. “Whoever is responsible for the expense of putting that information there and doing the tracking to make sure the information is correct is going to pass on those costs to the customer. The customer’s going to end up paying for all this.”
The Agriculture Department estimates the rules will cost the food industry $3.9 billion to comply during the first year alone.
Companies that fail to comply could be fined up to $10,000 per violation and could be subject to audits to ensure compliance.
John Motley, a spokesman for the Washington, D.C.-based Food Marketing Institute, a trade group that includes Albert-son’s Inc. and others, said the industry might have to cough up an extra $600 million a year in the next decade.
“I have no idea on the expenses, but I know that keeping track of the country of origin takes administration and people,” Gigante’s Frias said. “That’s going to cost money.”
The rules are backed by the National Farmers Union and American Farm Bureau Federation, which have said the rules would be a promotional tool.
The Agriculture Department has yet to provide estimated benefits from the rules.
The rules will hold grocers responsible for ensuring compliance, Frias said. But, logistically, distributors such as Commerce-based distributor United Western Grocers will have to pitch in, he said.
“We at retail won’t be able to determine where the product is coming from,” Frias said.
Frieda’s Inc., a Los Alamitos distributor and marketer of specialty produce, lobbied against the rules, according to Tristan Millar, director of marketing and business development.
“It’s a done deal,” Millar said. “Based on our calculations, it will cost us hundreds of thousands of dollars a year to comply.”
The new rules require every piece of produce and livestock product,including farmed seafood but excluding poultry and dairy,to have a label stating the country the product is from.
Many distributors and grocers already have country-of-origin labels on most imported products. But the rules will require even domestic products to have a “USA” label, which is something a lot of grocers and distributors don’t now have.
Frieda’s already labels its products, Millar said, but not always individually as will be required. The rules require documentation to prove labeling accuracy, she said.
“There are rules on how products are to be stored and segmented. Things that come in from Chile and California can’t commingle,” Millar said. “That costs space and manpower to do,there are a lot of intricacies in that ruling.”
Even ingredients in processed products, such as fruit salad and hamburger, also will require country labels,in descending order of prominence.
The rules offer no exemptions for small businesses. Making matters even more brain-splitting, the Agricul-tural Department has advised companies that state-of-origin designations,like Idaho potatoes,won’t be enough to satisfy the rules, citing global trade obligations. Instead, Idaho potatoes will have to bear a “USA” label.
Officials at Santa Ana-based Calavo Growers Inc., a cooperative of California avocado farmers, said they support the new rules,underscoring a divide on the issue between producers on the one hand and distributors and retailers on the other.
“It’s good for the avocado business,we’re pretty proud of California avocados,” Calavo Chief Executive Lecil Cole said. “The consumers have been asking for this for a long time.”
Calavo imports about 15% of its avocados annually from Mexico. During the winter months, another 15% comes from Chile and New Zealand.
Calavo already labels its imports and has started labeling all its domestic avocados.
“We’re going to be way up front with this,” Cole said. “We already have USA labels printed. The rules aren’t going to help a lot or hinder us a lot,we see it more as education for the consumer. For the avocado business, it’s not a big deal for us to comply with that. In many cases we’re already doing labeling.”
Cole said the company would have to make some changes in terms of reporting and inventory. But it wouldn’t incur big added costs to comply with the rules, he said.
Another problem: Some people aren’t even aware of the rules, which decidedly are arcane at some 200 pages.
“I didn’t know about the rules,” said John Vallejo Jr., Anaheim store director for Fullerton-based La Rioja Ranch Markets, a Hispanic market operator. “Our customers wouldn’t really care about whether we had labels like that.”
