AMI\'s Top Ten Goals and Objectives

AMI’s Top Ten Goals and Objectives

Food Safety Goal: Improve the safety of raw meat and poultry products and the safety of RTE, processed meat and poultry products through funding solutions-based research, sponsoring forums for industry to share best practices, and affecting FSIS domestic and international regulatory policies concerning those products. Objective: Continue to solicit, prioritize and fund research proposals aimed at providing solutions to the challenges of controlling and eliminating Listeria monocytogenes in RTE meat and poultry products, as well as E. coli O157:H7 in cattle and beef products and Salmonella in raw poultry, pork, beef and RTE products. Specifically, work to influence regulatory policies regarding E. coli O157:H7 so that such policies, domestically and internationally, are fact-based, practical, and meaningful. Seek new legislative and regulatory strategies to target additional government funding toward industry food safety research priorities. Oversee, finalize and disseminate research results to multiple audiences, including industry, government, and media. Provide educational opportunities to develop, share, and disseminate industry best practices for pathogen control.

AMI Foundation Food Safety Initiative (Separate Binder)

E. coli O157:H7 Regulatory Policy

INFORMATIONAL MEMORANDUM

ISSUE: THE EXPANSION OF E. COLI O157:H7 AS AN ADULTERANT ON BEEF IMPORTANCE: E. coli O157:H7 has been a concern in the meat industry since the 1993 outbreak in the Pacific Northwest and that caused the Food Safety and Inspection Service (FSIS) to declare the pathogen to be an adulterant in raw ground beef in 1994. No sampling program exists that will assure that the pathogen is not in the product. The ramifications of positive test results are significant in terms of regulatory action, plant operations, trade, crisis management, and media reaction. BACKGROUND: On January 19, 1999, FSIS expanded the existing policy regarding raw beef products such that beef products that have been injected or mechanically tenderized are considered adulterated if E. coli O157:H7 is found and the product is not processed into a RTE item. In addition, intact cuts that are to be processed into non-intact cuts (e.g., beef trim) before distribution are treated as non-intact cuts and are considered adulterated if E. coli O157:H7 is found. A 2002 FSIS notice identified that at any level whatsoever, E. coli O157:H7 is a hazard reasonably likely to occur. A Federal Register publication by FSIS in May 2005 made clear that “clean-up to clean-up” is no longer an adequate basis for lot definition if testing of the raw materials is not conducted in a manner that supports a distinction between raw materials used on separate days. FSIS Notices published in 2007 continue to focus sampling and testing on all raw materials for non-intact product, as well as at slaughter establishments that supplied such raw materials to processing establishments where positive test results are found. Because of an increase in the number of positive results and outbreaks in 2007, FSIS undertook a series of actions in an attempt to reduce the likelihood that raw, non-intact products will be adulterated with E. coli O157:H7. FSIS increased the number of verification samples taken throughout the supply chain from slaughter to the production of raw ground beef and other raw nonintact products, such as needle-tenderized and enhanced products. E. coli O157:H7 remains a focus in the Office of International Affairs (OIA) as well. Because of apparent lapses in operational and testing controls for E. coli O157:H7 at a single Canadian supplier, FSIS and OIA required all nonU.S. suppliers that want to export raw beef to the U.S. to re-evaluate and resubmit their E. coli O157:H7 control programs for approval (for equivalency); the key components of these revised programs were the sampling and testing frequencies, and the definition of lot size based on the verification testing program. FSIS remains committed to sampling and testing of imported products. Despite repeated requests from industry for labeling of imported trimmings that are destined for cook operations (and thus outside of the focus on the control of E. coli O157:H7 destined for raw, nonintact products), FSIS has decided not to allow any labeling of imported raw beef that would separate product destined for cooking from that destined for use in raw, non-intact products.

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Informational Memorandum The Expansion of E. coli O157:H7 O157:H7 as an Adulterant On Beef Page 2 of 3 STATUS: On April 9-10, 2008, the agency conducted a public meeting regarding E. coli O157:H7 during which some agency officials presented new and troubling perspectives. In the meeting agency officials expressed concern about the number of outbreaks and recalls in 2007. Although a number of topics were discussed, two significant topics attracted most of the attention. First, FSIS officials stated that the agency is evaluating whether to identify six serotypes of nonO157:H7 shiga toxin producing E. coli as adulterants in raw beef products. According to FSIS six serogroups [O26, O111, O103, O121, O145, O45] are responsible for causing more than 80% of nonO157:H7 shiga toxin producing E. coli related illnesses. Regulatory action at this point is impractical because there is not a validated method for detection in agency labs and there are not commercially available test kits for differentiating these serotypes that could be used timely in a commercial setting by industry. FSIS intends, however, to begin a baseline study to look at the magnitude and prevalence of non-O157:H7 shiga toxin producing E. coli and will do so by using samples taken for E. coli O157:H7 under the current sampling program and analyzing them for non-O157:H7 shiga toxin producing E. coli. FSIS officials stated that the analysis would be “non-regulatory,” but advised that a "prudent establishment" would hold product subject to this testing. Second, FSIS is contemplating broadening the scope of when E. coli O157:H7 is an adulterant such that if the pathogen is present on any raw beef product or ready-to-eat product, the product would be considered to be adulterated. Agency officials indicated they would like to know what the industry is doing with regard to primals when establishment generated data suggests that the establishment may have lost control of the process (e.g. had positives for E. coli O157:H7 in trim or ground product). Although FSIS began collecting some data on prevalence of E. coli O157:H7 on primals in January of 2008, importantly, FSIS officials acknowledged that they have very limited data concerning the prevalence of E. coli O157:H7 on primals. Again, however, they do not intend to conduct a riskassessment on intact beef products. Before the meeting, AMI sent a letter to Secretary of Agriculture Ed Schafer objecting to any change in agency policy along these lines. Other topics of interest discussed at the meeting include the following. •

Agency officials expressed considerable concern about the number of establishments that reported through the survey using bench trimmings, or trim generated from sub-primals or mechanically tenderized primals in grinding operations. Thus, FSIS is considering ways to address the risk of incorporation of these components, with one possibility testing these components as part of the regulatory sampling program for E. coli O157:H7.

•

Sampling methods continue to be a point of discussion with the agency. Sampling of purge, and individual combo sampled at N=60 have been discussed by the agency.

•

Agency officials expressed concern that using head, cheek, or weasand meat in ground beef presents a higher risk of contamination with E. coli O157:H7 because, according to the agency, often these inputs are not subject to interventions aimed at reducing the microbial load.

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Informational Memorandum The Expansion of E. coli O157:H7 O157:H7 as an Adulterant On Beef Page 3 of 3 •

FSIS also expressed concern that beef slaughter establishments "threaten" their customers such that the slaughter establishments will stop supplying product if customers test the product for E. coli O157:H7 after receipt. FSIS officials stated that they may "step in" to address this “problem.”

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The agency expressed concern about the use of informative or disclaimer statements, such as "not for use in grinding or non-intact product," by beef slaughter establishments as a means of passing off to further processors or retailers product that is positive for E. coli O157.

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The agency is considering rulemaking that would require products sampled for pathogens to be held by the establishment pending negative test results.

AMI POSITION: AMI opposed the declaration of E. coli O157:H7 as an adulterant in fresh beef products. Intervention efforts for pathogen control and reduction should be focused upstream, particularly the reduction of E. coli O157:H7 on hides of incoming animals and on carcasses. AMI will work with other industry trade associations to develop technological advancements to eliminate E. coli O157:H7 from the food supply, to develop more scientifically based sampling and testing programs, and to extrapolate these findings into improved regulatory policies. Also, AMI will work with the agency to suggest methods to improve the communication of company test results (COA’s) throughout the sales channel, has proposed the concept of hold and control of FSIS tested products in order to reduce recalls, and continues to gather information, including test methodology on non-E. coli 0157:H7 STEC. The level of E. coli O157:H7 in raw beef generally is so low that current, lowlevel sampling and testing cannot ensure the absence of the organism. Therefore, process control is a key factor in the reduction of this pathogen versus unwarranted expansion of test methods. AMI CONTACT: MARK DOPP SENIOR VICE PRESIDENT REGULATORY AFFAIRS AND GENERAL COUNSEL

JIM HODGES EXECUTIVE VICE PRESIDENT

RANDY HUFFMAN PRESIDENT AMI FOUNDATION

SCOTT GOLTRY VICE PRESIDENT FOOD SAFETY AND INSPECTION AND SERVICES

JULY 2008

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Congressional Appropriations

INFORMATIONAL MEMORANDUM

ISSUE: FY2009 FOOD SAFETY FUNDING REQUESTS

IMPORTANCE: Government involvement in the food safety arena should be focused on sciencebased, risk-assessed, intervention, applied research and education initiatives that can improve the safety of the food supply as measured by public health outcomes. BACKGROUND: Each fiscal year Congress appropriates funds to federal agencies to carry out their functions, including funds that are directed for research programs. The House and Senate Appropriations Subcommittees on Agriculture have jurisdiction over the funding that is approved for research activities conducted by the U.S. Department of Agriculture. Since Fiscal Year 2000, AMI asked Congress to approve research funding to help augment private sector research directed at eradicating two food-borne pathogens: E. coli 0157:H7 and Listeria monocytogenes. In 2005 and with AMI’s urging, Congress added Salmonella as key pathogen to control. The funding is directed through two accounts, one with the Agriculture Research Service (ARS) and another at the Cooperative, State, Research, Extension and Education Service (CSREES). The CSREES funding is largely directed to an AMI supported project at Cornell University. AMI’s Jim Hodges and Randy Huffman serve advisory committees to evaluate and provide recommendations to these agencies on meat and poultry safety funding. Depending on budget and political developments, AMI has been successful in maintaining and increasing the funding levels in a number of years and in improving the designation for the direction of the funds. AMI also attempted unsuccessfully to have funding directly sent to the Foundation for meat and poultry safety research. Unrelated to food safety, but also important, Sen. Specter (R-PA) included a request on AMI’s behalf to increase research on hides and leather at USDA-ARS’ Eastern Regional Research Center in Wyndmoor, PA. The research is focused on providing the hides and leather industry with costeffective and environmentally safe tanning processes which will enhance U.S. producers’ competitiveness in world markets. STATUS: In May 2007, AMI submitted two funding request for the ARS and CSREES account, requesting Congress to maintain and increase each account by $500,000. AMI pursued the larger increases this year because USDA’s National Research Initiative removed food safety research funding for red meat as it relates to key pathogens. Additionally, AMI pursued an additional $250,000 increase for Hide and Leather research to be conducted at USDA’s Eastern Regional Research Lab. 27

Informational Memorandum FY 2008 Food Safety Funding Requests Page 2 of 3 In July 2007, the full House of Representatives approved the Agriculture Appropriation’s bill for FY2008. Included in the bill is an increase of $134,339 for ARS monies and $990,000 for pathogen research at Cornell. The final bill included an increase of $124,620 for ARS and $990,000 for CSREES. The odd number reflects a 0.7 percent across the board reduction for all programs. These levels total pathogen/food safety research monies for ARS for FY2008 will be $2.863 million. TABLES Total USDA/ARS Funding for Food Safety Research 2000 2001 2002 2003 2004 2005 2006 2007 2008 Cumulative Total

$1,000,000 $1,750,000 $1,990,000 $2,340,000 $2,340,000 $2,639,000 $2,739,000 $2,739,000 $2,863,620 $20,400,620

Total USDA/CSREES Funding for Food Safety Research 2001 2002 2003 2004 2005 2006 2007 2008 Cumulative Total

$289,000 $800,000 $900,000 $805,000 $900,000 $1,000,000 $1,000,000 $990,000 $6,684,000

In March 2008, AMI prepared and submitted a request for continuation and a $500,000 increase for the ARS budget and to refine its language to directly address meat and poultry safety challenges. Also, in March, the House and Senate Agriculture appropriations committees began their budget hearing process. As the appropriations process moves forward, AMI will continue to push for continuation and an increase in this account. An emerging risk in food safety research funding is an effort by USDA to direct more monies to fruits and vegetable research and away from meat and poultry. Some of the reprogramming of funds would move funds that are part of long standing programs where the agency made multi-year investments. AMI is working with key congressional offices to see that meat and poultry safety research remains and potentially increases. 28

Informational Memorandum FY 2008 Food Safety Funding Requests Page 3 of 3 AMI POSITION: AMI supports public/private partnership efforts directed towards food safety research and education that improves the overall safety of meat and poultry products. AMI will continue to work aggressively to identify and secure government funding for additional science-based food safety initiatives in the future.

AMI CONTACT: MIKE BROWN SENIOR VICE PRESIDENT LEGISLATIVE AFFAIRS

JESSE SEVCIK VICE PRESIDENT LEGISLATIVE AFFAIRS

ASHLEY PETERSON, PH.D. DIRECTOR LEGISLATIVE AFFAIRS JULY 2008

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FSIS’s Listeria monocytogenes Rulemaking

INFORMATIONAL MEMORANDUM

ISSUE: LISTERIA MONOCYTOGENES PETITION FOR REGULATORY LIMIT IMPORTANCE: Listeria monocytogenes (Lm) is a foodborne pathogen of primary concern in ready to eat (RTE) foods, including RTE meat products. RTE products are subject to the regulatory burden of “zero tolerance”, regardless of type of food or the conditions of processing. A more science-based and rational regulatory approach is needed that recognizes that certain foods are unlikely to contain Lm or allow its growth to levels that present a human health risk. A coalition of food industry groups, including AMI, have submitted a citizens petition to the U.S. Food and Drug Administration (FDA) requesting a regulatory limit for Lm for certain food categories that do not support growth of Lm, and that contain the bacterium at low, but unavoidable, levels that present minimal risk to public health. BACKGROUND: Since 1985, the FDA has maintained a policy of "zero tolerance" for Lm in RTE foods, which are foods that may be consumed without further preparation by the consumer. FDA considers RTE foods to be adulterated under section 402(a) of the FFDCA if any Lm is detected in either of two 25-gram samples. Since 1989, FSIS has maintained a similar "zero-tolerance" policy for RTE meat or poultry products. Meat or poultry products in RTE form in which any Lm is detected are deemed adulterated under the Federal Meat Inspection Act and the Poultry Products Inspection Act, 21 U.S.C. §§ 601(m) and 453(g), respectively. The regulatory status of non-RTE products that contain Lm is determined on a case-by-case basis, but such products may be subject to "zero tolerance" as well. The consequence of this regulatory position has resulted in significant industry control actions to address this pathogen in food processing environments. The “zero tolerance” policy has also resulted in numerous product recalls. The food industry has engaged in unprecedented efforts to eradicate Lm from the processing environment, and multiple actions by AMI and AMI member companies have been targeted at Lm control. Despite continuing efforts, elimination of Lm remains a constant challenge because the organism is ubiquitous in the raw materials entering the plant every day and in the refrigerated processing environments. AMI, along with 14 other food trade associations, have formed the Alliance for Listeriosis Prevention (the Alliance). This alliance has worked over the past several years studying the science and the legal and regulatory issues surrounding the “zero tolerance” federal policy. The result of these deliberations has been the development of a science based position that certain foods present a substantially lower risk from Lm and therefore should not be subject to the “zero tolerance” policy. A detailed explanation of this position may be found in the petitions posted at the Alliance website (http://www.listeriosisprevention.com ).

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Informational Memorandum Listeria Monocytogenes Petition for Regulatory Limit Page 2 of 3 On December 17, 2003 the Alliance submitted a citizen’s petition requesting FDA consider establishing a regulatory limit of 100 colony forming units/gram for Lm in ready-to-eat foods that do not support the growth of the organism. The Alliance representatives presented the petition to FDA staff, who posed several questions that they would expect to be answered as part of the submission. The Alliance has begun the process of addressing those questions. The Alliance submitted public comment to FDA in support of the petition for a regulatory limit. In 2005, the Alliance submitted a citizen’s petition to FSIS requesting a regulatory limit for Lm on RTE meat and poultry that do not support the growth of Lm. During the presentation of the petition the FSIS informed AMI and members of the Alliance that the agency would put the petition under review and would work jointly with FDA – CFSAN as the two agencies review the two petitions. In September, 2005, the Alliance received notification from FSIS that the citizen’s petition had been denied, without prejudice to its revision and resubmission at a later date. In the response to the alliance, FSIS stated that they “think the concept of a quantitative pathogen limit for certain products under carefully defined circumstances may have merit”, they went on to cite several regulatory and scientific concerns that they have adopting such a policy. Some of these concerns include, the definition of Lm growth, the appropriate statistical sampling schemes, the quantitative methodologies, potential for cross contamination at retail and the home, and the human infectious dose for Lm. The Alliance submitted a new petition to FSIS in December 2006 addressing the questions raised in the first denial letter with additional scientific support. STATUS: The Alliance members met with representatives from FDA-CFSAN early in 2008 to discuss proposed modifications to the petition that could speed the review and address concerns that had been raised; however, government representatives advised that those revisions would only slow the process down. Subsequently on February 7, 2008 FDA-CFSAN released a draft Compliance Policy Guide (CPG) which recognizes the variable risk of different categories of RTE foods and captures the essence of the request made in the Alliance petition. FDA-CFSAN also released a draft Guidance to Industry on the Control of Listeria in RTE foods, which many in industry believe is overly prescriptive and does not recognize the flexibility needed in a properly designed Listeria control program. A public meeting was held on March 29, 2008 where AMI and other members of the Alliance provided oral comments on the CPG. FDA –CFSAN is also taking written comments on both the CPG and the guidance to industry. AMI is developing those written comments now. Several members of the Alliance have requested that the AMI Foundation coordinate a briefing of the FDA-CFSAN staff concerning the principles conveyed during the AMIF Listeria Intervention and Control workshops with the purpose of providing a clear example of the efforts used by the meat industry to address the issue of Listeria control in the RTE environment. FSIS is on record in disagreement with FDA-CFSAN regarding the CPG and it has become clear that FSIS has no intention of moving forward with the provisions requested in the Alliance petition. AMI POSITION: AMI supports the use of sound science in establishing regulatory policy and believes that policy aimed at controlling the risk of Lm should not target foods in which Lm is unlikely to be present in numbers that will pose a public health risk at time of consumer consumption. AMI continues to support the efforts of the Alliance for Listeriosis Prevention and will work with the Alliance members to develop an appropriate, science based response to FDA and FSIS.

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Informational Memorandum Listeria Monocytogenes Petition for Regulatory Limit Page 3 of 3 AMI CONTACT: RANDALL HUFFMAN PRESIDENT AMI FOUNDATION

JAMES H. HODGES EXECUTIVE VICE PRESIDENT

JULY 2008

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INFORMATIONAL MEMORANDUM

ISSUE: LISTERIA MONOCYTOGENES CONTROL AT RETAIL DELIS IMPORTANCE: Control of microbial hazards in ready-to-eat (RTE) manufacturing facilities continues to be a top priority for RTE operations. Specifically, microbial pathogens such as Listeria monocytogenes (Lm) pose a significant challenge to the industry from the perspective of public health, regulatory compliance, and company profitability. Much has been learned over the past 10 – 15 years regarding the control of Lm in the processing environment and the information concerning intervention and control of Lm has been widely distributed through the AMIF Listeria Intervention and Control Workshops. However, the control of Listeria in retail deli environments has been questioned by regulators and some surveys indicate that the prevalence of Listeria in products produced in this environment may be higher than in the processing plant. There is a need for industry to work cooperatively with retail, share knowledge, data and expertise to develop the current state of knowledge concerning this important issue. BACKGROUND: Control of Lm in finished RTE products is achieved through the application of a validated lethality step (e.g. cooking) combined with an aggressive environmental control and sanitation program that prevents the establishment of Lm growth in a niche within the cooked products area of the plant. This control program must be continually verified with an aggressive environmental sampling and testing program. These concepts are the core of AMIF’s Listeria Intervention and Control Workshop. When products that are destined to be further prepared or spiced in a retail customer deli, the product will have the opportunity to be re-exposed to a post lethality processing environment that could inadvertently be contaminated with Listeria. Recent surveys have provided insight into how frequently RTE meat products sliced in retail deli test positive for Lm. Gombas et al. 2003 reporting on a large survey of deli prepared products that the prevalence of Lm in deli meats was 0.89% overall and when the samples were separated into those sliced at manufacturing, vs. those sliced at delis the prevalence was 0.4% and 2.7% respectively. These data indicate that the deli environment is contributing to a higher rate of positive Lm samples, than those produced sliced and packaged in the processing plant. A similar but larger study (n=8000) study reported by Draughon and others at the 2006 IAFP meeting in Calgary found significant reductions in prevalence rates over those reported by Gombas et al. In this study, the pre-packaged deli products had a prevalence rate of 0.15% while the deli prepared products rate was 1.23%. While these data may indicate an improving trend, it still points out that the retail deli is a potential area for concern with respect to Listeria control. Furthermore, work by Dr. Martin Wiedmann (Cornell University) and co-workers in New York state delis is indicating that the retail deli is a potential site for recontamination of RTE meat products during slicing.

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Informational Memorandum Listeria monocytogenes Control in Retail Delis Page 2 of 2 In early 2005 the AMI Scientific Affairs Advisory Committee (SAC) developed a research protocol to study in greater detail what risk factors are potentially associated with Lm contamination in retail delis to assist in developing appropriate control strategies. The project was developed into a research proposal and was reviewed and approved for funding by the AMIF Research Advisory Committee and the AMIF Board of Directors. Project implementation required cooperation from volunteer retailers so that appropriate environmental samples could be collected. To this end, the third party contractor began contacting certain retailers to invite them to participate in the project. The AMI SAC held a joint meeting on March 16, 2006, with FMI’s Food Protection Committee (FPC) to discuss this project. The outcome of these efforts was the development of a joint task force that would reevaluate the proposal and work to achieve consensus on the objectives of the project and approach to data collection. The joint committee is made up of four AMI SAC members and four FMI FPC members along with science advisors Dr. Martin Wiedmann and Dr. John Sofos, Colorado State University. The joint AMI-FMI task force established an agreed upon protocol which was submitted to the AMIF research funding process in 2006 by Silliker Laboratories. The research advisory committee reviewed the proposal and found that the research is important and the proposal has merit, however due to the remaining questions concerning the level of volunteer participation by retail supermarkets, they chose not to recommend the project for funding in the 2006 – 2007 research cycle. The AMI SAC met jointly with the FMI food protection committee in late April 2006 and continued dialog on this important issue. The meeting led to a mutual decision that the survey research originally proposed by AMIF was not the best use of resources at this time, and the project should be tabled. Both groups agreed that if new research needs were clearly delineated by either group, that there would be mutual benefit in sharing ideas and working on this issues jointly. STATUS: The AMIF Research Advisory Committee recently favorably reviewed a research project aimed and developing best practices and control measures targeted to enhance the control of Listeria on retail deli slicers and in the retail deli environment. AMI will seek to get collaboration with FMI and their member companies on the objectives and design of the study. AMI POSITION: AMI strongly believes that environmental control of Lm in the post cooking environment for RTE products, including the retail deli environment, is critical to the safety of RTE meat and poultry products. AMI will work closely with our retail partners on development of control strategies to address this area and reduce the likelihood that Lm contaminates RTE meat and poultry products prior to reaching the consumer. AMI CONTACT: RANDALL HUFFMAN PRESIDENT AMI FOUNDATION JULY 2008

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Food Safety and Nutrition

INFORMATIONAL MEMORANDUM

ISSUE: ANTIBIOTIC RESISTANCE IMPORTANCE: Concern about the public health consequences regarding the use of antibiotics in food animals is growing. Some studies indicate that foodborne bacterial pathogens are becoming increasingly resistant to antibiotics, which diminishes their effectiveness for human therapeutic treatment. Restrictions on the use of antibiotics in animals could adversely affect animal agriculture. Additionally, theories are being studied that suggest that some strains of multi-drug resistant bacteria may be more virulent to humans and more highly associated with human foodborne illness. BACKGROUND: Antibiotics have been used in food animals for almost half a century to treat and control disease, and to improve productivity. Antibiotics were first approved in 1951 by the Food and Drug Administration (FDA) as feed additives for animals. Antibiotics work by killing bacteria or halting their growth. Some bacteria are naturally resistant to certain antibiotics, but bacteria can also develop resistance by changes in their genetic makeup. Resistance to antibiotics is a consequence of their use. Whether this hazard is a significant public health risk remains in question. The antibiotic resistance issue has precipitated more than four decades of analysis and research beginning in 1956 when the National Academy of Sciences first studied it. The World Health Organization and the National Research Council issued separate reports in 1998 that examined the extent to which the use of antibiotics in farm animals causes antibiotics to be less effective in fighting foodborne infections. The groups concluded that a link exists between the use of antibiotics in food animals and the development of resistant bacteria. There is also concern that resistant bacteria can transfer to humans and lead to human illness that may be difficult to treat. But the magnitude of the risk and the options available to minimize the risk are not well understood. On June 13, 2000, the World Health Organization released its first major report on antimicrobial resistance and warned that disease-causing organisms are mutating at an alarming rate which could render existing antibiotics ineffective over the next one or two decades. The report concluded that drug resistance is spreading mainly due to overuse of antibiotics in developed nations, inappropriate use in poor countries and widespread use in the livestock industry. The report described numerous examples of serious health consequences including an estimated 14,000 people that die in the U.S. each year from drug-resistant microbes that infect them in hospitals.

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Informational Memorandum Antibiotic Resistance Page 2 of 4 To provide better scientific information, the federal government established the National Antimicrobial Resistance Monitoring System (NARMS) in 1996 to provide information and analysis about trends in antibiotic resistance. Data from the program show Salmonella with increased resistance to new classes of antibiotics are rare or non-existent. Trend data from NARMS do not suggest an increase in antibiotic resistance from most foodborne bacteria. The Food and Drug Administration, the Centers for Disease Control and Prevention (CDC) and the Department of Agriculture are expanding the monitoring program to better coordinate it with the emergence of resistant Salmonella and Campylobacter isolates in human medicine. Scientist in Europe and the U.S. continue to raise questions over the treatment of food animals with antibiotics. Several studies have reported a rise in human gastrointestinal illness cased by antibiotic resistant bacteria. The European Union (EU) banned the use of four antibiotics in animal feeds effective July 1, 1999. The ban was instituted, without scientific justification, as a precautionary measure to address fears that the use of antibiotics in animal feed may reduce the effectiveness of related antibiotics in humans. The EU in March 2002, announced further plans to phase-out by January 1, 2006, the remaining four antibiotics currently permitted for use in animal feed. In the U.S., the Center for Science in the Public Interest (CSPI) has filed a petition asking FDA to rescind approved subtherapeutic uses for penicillin, tetracyclines, erythromycin, linomyocin, tylosin and virginiamycin. On October 23, 2003 FDA issued a new guidance document (Final Guidance Document 152) that for the first time outlines a comprehensive evidence-based approach to preventing antimicrobial resistance that may result from the use of antimicrobial drugs in animals. The guidance provides a scientific process for assessing the likelihood that an antimicrobial drug used to treat an animal may cause an antimicrobial resistance problem in humans consuming meat or other products from that animal. The new guidance also encourages drug sponsors to use a risk assessment approach to demonstrate that the use of an antimicrobial drug will not lead to human health problems. More recently, FDA has withdrawn approval of fluoroquinolones for use in chickens and turkeys effective September 12, 2005. The agency said it had sufficient evidence to demonstrate an unacceptable human health impact from Campylobacter infections from the use of fluoroquinolones in chickens. After five years of legal proceedings, this is the first time FDA has successfully banned the use of a drug that has previously been approved for animal use. On the international front, the EU in July 2003 announced the final adoption of a regulation banning the use of antibiotics as growth promoters in animal feed. The EU had already banned antibiotics used in human medicine from being added to animal feed. The new regulation completes the ban on antibiotic growth promoters in feed by prohibiting the use of four substances: monensin sodium; salinomycin sodium; avilamycin; and flavophospholipol. A coalition of consumer and environmental activist groups have organized under the banner of Keep Antibiotics Working (www.keepantibioticsworking.com), and have the stated goal of eliminating the use of medically important antibiotics in livestock and poultry production. This group, who claims to represent over nine million consumers, has been active in seeking legislation to limit the use of antibiotics in agriculture. Further, this group coordinated a petition to FDA by five environmental and medical groups seeking to have FDA withdraw approval for 7 classes of livestock antibiotics. 36

Informational Memorandum Antibiotic Resistance Page 3 of 4 During late 2003 and early 2004 a large multi-state outbreak caused by multi-drug resistant Salmonella Typhimurium DT 104 was reported by CDC and state health departments in five Northeastern states. The investigation never yielded definitive data that would link a specific product to the outbreak, however, epidemiological evidence showed a strong association between the patients in the outbreak and the consumption of raw or undercooked ground beef that was associated with one slaughter facility. There were 57 cases linked to the outbreak, yet samples taken from the ground beef in question from a patient’s freezer was negative for Salmonella. In December 2003, FSIS issued a general public safety message urging consumers to thoroughly cook raw ground beef products prior to consumption. This outbreak, among other issues, led to the development of symposium on March 7 – 8, 2005 at Tufts University School of Veterinary Medicine entitled “Ground Beef Contaminated with Multidrug-resistant Salmonella Including S. Typhimurium DT 104: An Emerging Public Health Concern”. The symposium was led by state public health agencies and the CDC. The meeting was an opportunity for various segments of the animal products industry, public health community and government agencies to share views on this subject. CDC and representatives from the consumer advocate groups called on USDA – FSIS to establish stricter regulations on this organism in ground beef, including consideration of Salmonella Typhimurium DT 104 as an adulterant in ground beef. At this time FSIS is not contemplating such action. On June 26, 2006 the Institute of Food Technologist issued an Expert Report entitled “Antimicrobial Resistance: Implications for the Food System”. This report provides a balanced, scientific review of the role that antibiotics play in animal agriculture, and points out the risks and benefits of their use. This comprehensive report can be accessed at the following link: http://members.ift.org/IFT/Research/IFTExpertReports/antimicrobial_report.htm STATUS: In early 2006 the Codex Alimentarius Commission (CAC) announced they plan to establish an ad hoc Intergovernmental Task Force to deal with antimicrobial resistance issues. According to the Codex Circular letter on this issue, the purpose of this effort is “…to develop science-based guidance, to reduce the risks to human health associated with the presence in food and feed and the transmission through food of antimicrobial resistant microorganisms and antimicrobial resistance genes.” AMI staff has been invited by the U.S. Delegation chair Dr. David White of FDACVM to participate in the U.S. Delegation as Codex begins the deliberations on this issue. Korea will be hosting the first meeting of this subcommiteee in October 2007. AMI staff will closely monitor the deliberations of the new codex committee. AMI POSITION: AMI supports the prudent use of antibiotics in food animal production that is consistent with public health protection. AMI will closely monitor the developments related to the declaration of Salmonella Typhimurium DT 104 or other serotypes as adulterants in meat products. AMI strongly believes that the microbial interventions currently in place in slaughter and processing operations are appropriate to control for the risk posed by multidrug resistant microbial pathogens. AMI CONTACT: JAMES H. HODGES EXECUTIVE VICE PRESIDENT

RANDALL HUFFMAN PRESIDENT AMI FOUNDATION

JULY 2008 37

INFORMATIONAL MEMORANDUM

ISSUE: IRRADIATION IMPORTANCE: Irradiation is a safe process, proven to destroy bacteria, fungi, parasites and insects that may be present in foods. FDA has approved irradiation for use in fruits, vegetables, spices, grains, raw poultry, raw pork and raw beef. Ready-to-eat (RTE) products may also benefit from irradiation processing. However, FDA has not yet promulgated rules to permit its use in RTE meat and poultry products. BACKGROUND: On December 2, 1997, the Food and Drug Administration (FDA) issued a final rule authorizing irradiation of meat to control foodborne pathogens and extend product shelf life. On August 17, 1998, FDA amended the December 1997 rule to allow more flexible labeling of irradiated products. On March 4, 1999, FSIS published a proposed rule and on December 23, 1999, a final rule implementing the FDA regulations and permitting irradiation of raw meat. The final rule requires use of the radura symbol and irradiated products must bear a label declaration identifying the products as irradiated. The effective date of the final rule was February 22, 2000. The FDA and FSIS final rules, however, do not permit irradiation of meat and poultry containing ingredients other than dry spices (e.g. marinated pork chops, wieners, ready-to-eat products, or bacon). On August 23, 1999, AMI and a coalition of food industry trade associations, health organizations, and academic and consumer groups filed a petition asking the Food and Drug Administration to extend the use of food irradiation to ready-to-eat meat and poultry products and fruit and vegetable products. The petition documents the safety and wholesomeness of the proposed use of food irradiation on ready-to-eat meats, poultry, fruits and vegetables, and assesses the impact on relevant essential nutrients in those foods, concluding that the nutrient reduction would be “negligible.” The petition also requests expedited review by FDA’s Center for Food Safety and Applied Nutrition. FDA accepted the petition in October 1999. FDA has determined that there are additional data needs on certain RTE products. FDA has requested additional data to address certain compounds that may be formed during the irradiation of certain non-meat fully cooked products. The petition is at FDA’s Office of Food Additive Safety, and it appears that with regard to RTE Meat and Poultry products, all necessary and appropriate data and literature reviews have been completed. A timeline for completion of this review has not been provided.

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Informational Memorandum Irradiation Page 2 of 2 In late 2003 the AMI Foundation, in conjunction with the National Cattlemen’s Beef Board, agreed to fund an exploratory research project to determine the viability of using very low dose irradiation applied to the carcass surface. FSIS provided guidance on the type of information that the agency will need to address this application of irradiation and early regulatory and legal opinion indicate that this application would be treated as a processing aid, thus labeling of the subsequent products would not be required or appropriate. The AMIF-CBB funded project regarding pathogen reduction and organoleptic properties of surface irradiated product demonstrated clearly that the treatment is exceptionally effective at reducing E. coli O157:H7 on surrogate carcass surface pieces, and creates no measurable impact on organoleptic properties, shelf life, or on the nutritional profile. The project has been completed and the results were submitted to the FSIS New Technology Staff (NTS) for review. Unfortunately, the NTS, while agreeing that the data had satisfactorily addressed all issues raised in the original FSIS review, determined that the minimal surface treatment would require labeling of the secondary products produced from the carcass. Subsequent to this decision, FSIS policy staff rescinded the previous letter and decision by NTS, and requested that a citizen’s petition be submitted to FSIS. On July 8, 2005 AMI submitted the citizen’s petition and it is currently under review at FSIS. On April 3, 2007 FDA published a proposed rule to revise the labeling regulations for which FDA has approved irradiation. FDA is proposing that only those irradiated foods in which the irradiation has caused a material change in the food or a material change in the consequences that may result from the use of the food, bear the “radura” logo and the term “irradiated”. According to FDA, “material change” refers to a change in the organoleptic, nutritional, or functional properties of the irradiated food that the consumer could not readily identify at point of purchase, absent labeling. The proposed rule also provides for a company to petition FDA to use an alternative term to irradiation, other than pasteurization, and further the proposed rule would allow a company to use the term pasteurized in lieu of irradiated provided the firm can demonstrate that the process meets the requirements set forth by FDA for the use of the term pasteurized. FDA will be accepting comments on the proposed rule until July 5, 2007. STATUS: The FDA petition for approval of irradiation for RTE foods remains under review at the FDA office of additive safety. Significant data has been collected by USDA ARS to address issues raised by FDA during their review of the RTE petition. AMI will continue to monitor developments related to the RTE approval. Likewise, AMI will actively monitor the FSIS review of the citizen’s petition for use of carcass surface irradiation, and will provide additional information and data if required. AMI POSITION: AMI supports making available all technologies, including irradiation, to improve the safety of meat and poultry products. AMI will continue to seek flexible implementation rules and urge FDA to expedite the approval process for irradiation of ready-to-eat meat and poultry products. AMI CONTACT: RANDALL HUFFMAN PRESIDENT AMI FOUNDATION

MARK D. DOPP SENIOR VICE PRESIDENT REGULATORY AFFAIRS AND GENERAL COUNSEL

JULY 2008 39

INFORMATIONAL MEMORANDUM

ISSUE: FOOD SAFETY/ PERFORMANCE STANDARD LEGISLATION IMPORTANCE: Legislative remedies for food safety are only beneficial to the degree that it can improve public health. Unfortunately, most efforts have been focused on increasing authorities and bureaucracy with no and little indication of a favorable impact to reducing food borne illness associated with meat and poultry producers. BACKGROUND: In December 1999, when a Texas ground beef plant sued USDA over the validity of the Salmonella performance standard, the issue of performance standards and USDA’s authority to set and enforce them took on new significance. Judge Joe Fish ruled in May 2000 that USDA did not have the legal authority to shut down a Texas plant for unsanitary conditions based solely on compliance with the Salmonella performance standard. Since 2000 Sen. Harkin (D-IA) has introduced a bill would give USDA authority to prescribe performance standards by regulation for the reduction of microbiological pathogens in meat and poultry regardless of the science or interventions available. Harkin’s performance standards bill came to the Senate Floor on July 20, 2000 as an amendment to the FY2001 Agriculture Appropriations bill. It was narrowly rejected, 48 yeas to 49 nays. On December 11, 2001, a U.S. Court of Appeals reaffirmed a U.S. District Court Judge’s earlier decision, that USDA could not use Salmonella performance standard test results to determine the sanitary condition of a ground beef plant. Thus, the test results alone could not lead to withdrawal of inspection. In April 2003, experts from both National Academy of Sciences and the USDA’s National Advisory Committee on Microbiological Criteria for Food released reports that recognized that further study is essential to obtaining an understanding of the incidence levels, regional differences and seasonal patterns of key food-borne pathogens associated with food animal production and processing. NAS recommends that additional studies be conducted to assess the real-world impact of a proposed performance standard before attempting implementation across the meat and poultry industry. Additionally, the NAS report clearly calls for Congress to develop a comprehensive national surveillance system to identify specific foods responsible for specific food-borne illnesses. Right now, despite the existence of the Centers for Disease Control’s FoodNet and PulseNet programs, more detailed food attribution information is largely unknown. The NAS recommend that this surveillance information be examined prior to the development of performance standards or other control measures.

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Informational Memorandum Food Safety/Performance Standard Legislation Page 2 of 3 During consideration of the FY’05 Agriculture Appropriation bill, Rep. DeLauro (D-CT) inserted a provision in the non-binding report language that required greater disclosure of products that are part or associated with a food recall. After some negotiations, the final language that was included in the Omnibus Appropriations Act reads as follows: “The conferees commend FSIS for beginning to include photographs of recalled products and website addresses of manufacturers in recall press release notices. The conferees urge FSIS to continue to do this to the greatest extent possible and also to ask manufacturers if they will voluntarily provide information on retail outlets of recalled products for inclusion on the FSIS press release, so that consumers may readily locate them.” Repeatedly since 2004, Sen. Durbin and Rep. DeLauro introduced companion measures for the creation of a single food agency. They provide a statutory prescribed risk weighting, placing meat and poultry processing facilities at the highest degree of scrutiny. Among other provisions, these bills also include mandatory recall and civil penalty components. STATUS: In December 2007, Sen. Durbin (D-IL) introduced an amendment to the Senate version of the Farm Bill to discontinue the budget authority of nearly all the statutes that regulate food within two years. The purpose of this amendment was to cause action and to consider a substantial realignment of food safety functions within the federal government. However, there are many objections to this approach on both sides of the aisle. At writing, no action has occurred on this measure. In December 2007, Sen. Durbin (D-IL) included an amendment to the Farm Bill or other must pass legislation that would 1) create an adulterated food registry for adulterated meat and poultry product that enters commerce or is discovered at a retail or food service location; 2) requires USDA inspected establishments to maintain a written recall plan on record; and, 3) requires establishments that process beef to reassess their E.coli O157:H7 plan upon enactment; and 4) requires USDA and the US Department of Transportation to update their MOU on the safe transportation of food. AMI worked with the Senator’s officer to limits its adverse impacts on the meat and poultry industry and to provide protection for confidential information. All of these provisions were rejected in the final 2008 Farm Bill. AMI continues to work closely with House and Senate offices to stay apprised of any effort and to coordinate and implement the appropriate counter strategy to limit ideas that would adversely impact the meat and poultry industry and not advance meat and poultry safety. AMI is also mindful that in light of non-meat/poultry related safety concerns, a debate on a single food agency concept could arise in 2009. Protective Atmosphere Packaging On March 8, 2006, the House defeated a procedural motion (254-170) that would have paved the way for a measure outlawing the use of carbon-monoxide and possibly adversely impacted the FDA process for what is Generally Recognized As Safe (GRAS). The underlying measure was pushed by Rep. Stupak (D-MI) on the National Food Uniform Labeling Act, a bill that provides for federal preemption of state law for FDA regulated products. At issue is a company that produces rosemary extract, a color stabilizer and flavor, who is concerned about market share and would like Congress to outlaw carbon monoxide and possibly the GRAS process. AMI was successful in identifying several leaders on this issue and reaching out to many offices in a short period of time. 41

Informational Memorandum Food Safety/Performance Standard Legislation Page 3 of 3 The proponents of CO/MAP labeling introduced the ‘Carbon Monoxide Treated Meat, Poultry, and Seafood Safe Handling, Labeling and Consumer Protection Act.’ This legislation sets the standard for a required label on all meat, poultry and seafood packages that contain carbon monoxide. The label would read, ‘SAFETY NOTICE: Carbon monoxide has been used to preserve the color of this product. Do not rely on color or the ‘use or freeze by’ date alone to judge the freshness or safety of the product. Discard any product with an unpleasant odor, slime, or a bulging package.’ AMI POSITION: AMI recognizes USDA’s statutory authority concerning the mark of inspection and opposes legislative increases to this authority. AMI supports food safety policy that is riskbased, measurable, and achievable and applied throughout the food chain. AMI supports performance standards and the appropriate enforcement thereof that meet the “AMI food safety vision” criteria. However, USDA’s Salmonella performance standards do not satisfy these criteria.

AMI CONTACT: MIKE BROWN SENIOR VICE PRESIDENT LEGISLATIVE AFFAIRS

MARK DOPP SENIOR VICE PRESIDENT REGULATORY AFFAIRS, AND GENERAL COUNSEL

JESSE SEVCIK VICE PRESIDENT LEGISLATIVE AFFAIRS

ASHLEY PETERSON, PH.D. DIRECTOR LEGISLATIVE AFFAIRS

JULY 2008

42

INFORMATIONAL MEMORANDUM

ISSUE: MICROBIOLOGICAL PERFORMANCE STANDARDS IMPORTANCE: Since the 1996 publication of the Pathogen Reduction and Hazard Analysis and Critical Control Point System Final Rule (the rule), there has been a focus on the use of microbiological performance standards. The continued use, or revision of existing performance standards, and establishing new performance standards without following principles established by experts such as those in the International Commission on Microbiological Specifications for Foods (ICMSF) and the National Advisory Committee on Microbiological Criteria for Foods (NACMCF) will create unjustified regulation of the meat and poultry industries. BACKGROUND: Under the regulations in 9 CFR 417, critical limits must be designed to satisfy relevant Food Safety and Inspection Service (FSIS) regulations, including performance standards. FSIS stated that developing HACCP systems around verifiable, objective performance standards is the most effective way for establishments to consistently produce safe, unadulterated meat and poultry products. Performance standards define the expected level of control at one or more steps in a process. The stringency of a performance standard should be proportional to the risk and stated public health goals. The principles for linking public health goals to performance standards via a risk analysis process have been articulated by ICMSF, NACMCF, NAS and Codex Alimentarius. STATUS: FSIS has not made any recent changes to existing performance standards or implemented new performance standards, suggesting that they are listening to the experts. Currently, microbiological surveys are being conducted by FSIS to assist their development of appropriate performance standards. FSIS data on compliance of individual establishments to some Salmonella performance standards are being published categorically in an attempt to drive down the prevalence. The FSIS Salmonella Initiative Program described in 2008 has been written to assist FSIS in obtaining additional data on the incidence of microbial pathogens in a variety of raw products, as well as to improve compliance to performance standards. AMI POSITION: AMI endorses the use of microbiological performance standards to establish process control verification. The development, and ultimately the impact of performance standards, will be optimized when all stakeholders participate in the process. AMI continues to engage the legislators and regulators directly, and through participation in scientific meetings, to influence the development of regulatory policies regarding microbiological performance standards. AMI CONTACT: RANDALL HUFFMAN PRESIDENT AMI FOUNDATION JULY 2008

43

INFORMATIONAL MEMORANDUM

ISSUE: FOOD DEFENSE IMPORTANCE: President Bush created a Department of Homeland Security (DHS) on June 6, 2002 to consolidate the functions of numerous federal resources, including USDA’s border inspection and protection services, to ensure the safety and defense of food, livestock and agricultural production. DHS facilitated the organization of the Food and Agriculture Sector, including the meat and poultry processing industries, and established the umbrella for a range of readiness initiatives in the National Preparedness Guidelines published in September, 2007. As a result of several presidential directives, the Food Safety and Inspection Service (FSIS) increased its focus on the preparedness of the meat, poultry and egg industries, set the expectation that all FSIS-inspected establishments should have a functional food defense plan, and initiated non-regulatory monitoring of establishments’ food defense plans. BACKGROUND: As a result of 9/11/01, USDA established the office of Food Defense and Emergency Response (OFDER) to work in partnership with DHS, FDA and other stakeholders. AMI worked closely with OFDER to publish numerous guides on food defense, including Food Defense Guidelines (2002), Self Assessment Tool (2005), and Developing a Food Defense Plan for Meat and Poultry Slaughter and Processing Plants (2007), a workbook-type tool designed for small and very small plants to generate food defense plans. FSIS Directives (5420 series) describe all FSIS activities related to food defense. FSIS has published FSIS Safety and Security Guidelines for the Transportation and Distribution of Meat, Poultry, and Egg Products, designed to improve food Security safety and defense in the handling of FSISregulated products and has published Pre-Harvest Guidelines and Checklist 2006 to assist agricultural producers enhance food defense at the farm level. FDA implemented two new rules in October 2003, one requiring prior notification of imported food shipments, and a second requiring registration of food facilities, as exist for facilities under the regulatory activity of USDA. FDA also has issued Preventative Measures Guidance for Food Producers, Processors, Transporters, Importers and Filers.

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Informational Memorandum Food Defense Page 2 of 3 The organizational structure for the Food and Agriculture Sector, requested by DHS, was finalized June 2004. AMI is a participating member of the processors/manufacturers sub-council; and a consultant to the animal production sub-council. AMI participated in joint FSIS-AMI working sessions in 2005 to review FSIS food defense risk evaluations, and since January, 2006, participated in a series of mock food defense exercises bringing together federal, state and local agencies, industry and others to determine means to optimize the cooperative response to a food related terrorist attack. AMI organized an industry-government Countermeasures Workshop held September, 2006 that delivered countermeasures to reduce risks associated with production of meat, poultry and egg products; the output of this workshop served as the basis for an AMI presentation at an International Association of Food Protection Symposium in 2007. AMI presented the industry views on the melamine crisis as it related to food defense at the May 2007 Homeland Security Science and Technology Stakeholders Conference in Washington, DC. DHS, USDA, FDA and the FBI jointly facilitate the Strategic Partnership Program Agroterrorism (SPPA) initiative, a partnership with industry and the States to initiate and validate vulnerability assessments in the food and agriculture sector. AMI has coordinated SPPA exercises for RTE poultry products, raw ground beef, cooked linked sausages, water and hot dogs for FSIS. Currently, AMI is working with OFDER on a FSIS Resource Allocation Strategy in the event that inspection resources are impacted by a pandemic. STATUS: AMI continues to work closely with OFDER on food defense initiatives that impact the meat and poultry industries. IT IS CRITICAL THAT ALL MEAT AND POULTRY ESTABLISHMENTS DEVELOP FUNCTIONAL FOOD DEFENSE PLANS TO REDUCE THE LIKELIHOOD THAT FSIS WILL DETERMINE THAT REGULATORY INITIATIVES ARE NECESSARY. A SURVEY WILL BE COMPLETED BY FSIS AUGUST, 08 THAT WILL MEASURE THE EFFECTIVENESS OF VOLUNTARY FOOD DEFENSE PROGRAM IMPLENTATION. WHAT & WHEN TO REPORT TO HOMELAND SECURITY The DHS National Infrastructure Coordination Center (NICC) serves as the federal government’s focal point for incident and threat assessments, warnings, investigations and response to any deliberate or terrorist attacks. All reporting is done on a voluntary basis, as goes directly to NICC to protect the information (see http://www.fmi.org/isac/ for more information). All threat warnings stemming from the information, if any, are generalized in nature and do not identify individual companies. Reports to NICC may be filed by telephone at 202-282-9201 or 202-282-8101, or by E mail to [email protected] or [email protected]. Alternatively, local law enforcement or regional FBI Joint Terrorism Task Force officials (phone numbers at http://www.fbi.gov/contact/fo/fo.htm) can be contacted. You also are urged to contact either of us, or anyone else on the AMI Crisis Management Team.

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Informational Memorandum Food Defense Page 3 of 3 AMI POSITION: AMI supports initiatives that enhance the preparedness of the meat and poultry industry relative to food defense. In this regard, AMI supports the voluntary adoption of guidance material prepared by OFDER so there is no need to implement regulatory initiatives through directives or notices. AMI will work with its members to ensure that these government entities enhance food defense while not diminishing other critical programs to the meat and poultry industry. AMI CONTACT:

SCOTT GOLTRY VICE PRESIDENT FOOD SAFETY AND INSPECTION SERVICES JULY 2008

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MIKE BROWN VICE PRESIDENT LEGISLATIVE & PUBLIC AFFAIRS

INFORMATIONAL MEMORANDUM

ISSUE: AUDIT HARMONIZATION IMPORTANCE: Duplicate food safety and facility audits completed by third party audit on behave of customers create a time-consuming and costly activity for meat and poultry processors. BACKGROUND: The proliferation of audits done to service customers has occurred because of the lack of a standard set of expectations and unique customer requirements. Customers also have broadened audits to cover not only food safety, but regulatory compliance, quality management systems, food defense, animal welfare and social accountability. In 2007, a multi-commodity Global Audit Harmonization Initiative was undertaken in an attempt to recognize a standard set of expectations for food safety, regulatory compliance and quality management systems. AMI joined in this initiative. STATUS: An AMI Audit Harmonization Task Force was created from the Inspection Committee members. The task force has developed a set of expectations for food safety, regulatory compliance and quality management systems. The task force is reviewing the expectations and meeting with stakeholders in an attempt to broaden the acceptance of this common set of expectations. The challenge is to gain acceptance by the many food service customers. Recent letters to members from retail customers have supported the use of Global Food Safety Initiative (GFSI) audit schemes in order to reduce duplication. AMI POSITION: Harmonizing audit expectations should lead to a reduction of duplicative audits and a reduction of costs associated with audits. AMI will coordinate with the GAHI to use the meat and poultry processing expectations as a model for acceptance. AMI CONTACTS: SCOTT GOLTRY VICE PRESIDENT FOOD SAFETY AND INSPECTION SERVICES JULY 2008

47

INFORMATIONAL MEMORANDUM

ISSUE: SALMONELLA INITITIVE PROGRAM (SIP) IMPORTANCE: The SIP program, also referred to, as Salmonella Verification Sampling Program (Federal Register docket number FSIS-2006-0034) will affect those classes of livestock and ground products that are regulated by Performance Standards. The agency has developed categories of results, I, II or III1. If the results of the industry product survey class, for example market hogs, meet agency expectations of 90% of the samples in category I and no results in category III, then no results will be posted on the agency website. If not individual plants in category, II or III will be posted. BACKGROUND: The Salmonella verification-sampling program began with the agency’s Pathogen Reduction: Hazard Analysis and Critical Control Point Systems. This system was driven by basic three strikes and you are out mentality and was challenged in the Supreme Beef case. Although the court ruled on the side of Supreme Beef, there was no formal change to the PR/HACCP program. In 2006 the agency stated that since 2002, the rise of Salmonella in broilers, although still below the national baseline prevalence figures has caused the agency concern. STATUS: Recent broiler data shows an improved trend in the Salmonella rate but the agency continues to move ahead with the remaining product classes. The next product class to move to the posting of results phase is market hogs. AMI has suggested to the agency that a public meeting be held to discuss SIP for market hogs prior to moving forward with posting of results. Market hog Inspection Committee members have been survey and AMI membership would meet the 90% in Category I and no Category III plants. Nevertheless, FSIS data shows (see table) that the market hog class does not meet the FSIS objective.

Market Hogs by Category Category I

72%

Category II

25%

Category III

3%

1

Category I, less than 50% of the standard, Category II, greater than 50% of the standard but not greater than the standard, Category III greater than the standard. 48

Informational Memorandum Salmonella Initiative Program (SIP) Page 2 of 2

Market Hogs by Size Category (Number of Plants)

Large

I 27

II 2

III 1

Small

36

20

3

Very Small

107

36

2

AMI POSITION: Even though the AMI plants have a leadership position in the FSIS data, there is no reason to believe that FSIS could continue to ratchet down the level of Salmonella. AMI contends that regulatory policy should be driven by sound science and not an ad hoc reduction in performance levels that could place an economic hardship on businesses. The agency should understand the possible impact on food safety as measured by CDC Healthy People goals before proposing change to the Salmonella Verification Sampling Programs. AMI CONTACT: SCOTT GOLTRY VICE PRESIDENT FOOD SAFETY AND INSPECTION SERVICES

JIM HODGES EXECUTIVE VICE PRESIDENT

JULY 2008

49

INFORMATIONAL MEMORANDUM

ISSUE: BETA-AGONIST FEED ADDITIVES IMPORTANCE: Beta-adrenergic agonist is used in livestock production to increase production efficiencies. These compounds can also have adverse effects on quality and consumer acceptability. The use of these feed additives is a much debated topic in the industry. BACKGROUND: Beta-adrenergic agonist is a class of animal drugs that modifies an animal’s metabolism to increase the amount of muscle as compared to the amount of fat. They enable livestock to more efficiently convert feed to protein and are designed to improve production efficiencies, such as average daily gain and feed efficiency. The compounds are use in both beef and pork production. FDA in August 2006 approved the use of another beta-agonist (Zilpaterol Hydrochloride) manufactured by Intervet for use in steers and heifers during the last 20 to 40 days of the feeding period prior to harvest. Zilmax, the commercial name of the product, has been shown to increase carcass weight, dressing percentage and yield grade. However, potentially lower quality grade and tenderness is a concern if the product is not fed according to recommendations. Intervet acknowledges that Zilmax is not ideal for all cattle and that it works best when feeding cattle on grid and/or for the carcass market, not when selling on live weight... Initial consumer sensory studies has indicated consumers find no difference in overall and tenderness acceptability of beef from Zilmax-fed cattle and non-Zilmax fed cattle; however, Intervet is conducting additional consumer beef sensory research. Final results will be available in 2008. The studies include more than 2,000 consumers in four major cities. Most recently, FDA approved the use of cattle feeds containing five different combinations of Zilmax (Zilpaterol Hydrochloride), MGA (Melengestrol Acetate), Rumensin (Monensin, USP) and Tylan (Tylosin Phosphate). These five new combination clearances enable Zilmax to be more easily incorporated into steer- and heifer-feeding programs. STATUS: The use of beta-agonist feed additives was briefly discussed at the AMI Beef Group meeting on May 15, 2008. A representative from Intervet is scheduled to present results of its consumer beef sensory results at the next meeting on October 15, 2008. AMI POSITION: To be determined. AMI CONTACT: JAMES HODGES EXECUTIVE VICE PRESIDENT JULY 2008 50

INFORMATIONAL MEMORANDUM

ISSUE: BISPHENOL A (BPA) IMPORTANCE: Concerns have been raised that the use of BPA in the epoxy coating of metal cans and other food containers could cause health effects. To date, however, there is no conclusive evidence that the use of BPA causes any adverse health issues for children or adults. Neither federal regulatory agencies nor the federal government should impose a ban on the use of BPA until sound science is available for such a decision. BACKGROUND: Bisphenol A (BPA) is a chemical produced in large quantities for use primarily in the production of polycarbonate plastics and epoxy resins. It exists at room temperature as a white solid and has a mild “phenolic” or hospital odor. Polycarbonate plastics have many applications including use in certain food and drink packaging such as water and infant bottles, compact discs, impact-resistant safety equipment, and medical devices. These plastics are typically clear and hard and marked with a recycle symbol “7” or may contain the letters “PC” near the recycle symbol. Polycarbonate plastic can also be blended with other materials to create molded parts for use in mobile phone housings, household items, and automobiles. Epoxy resins are used as lacquers to coat metal products such as food cans, bottle tops, and water supply pipes. Some polymers used in dental sealants or composites contain bisphenol A-derived materials (NTP Brief, 2008). There is an increase in concern due to human exposures and concern for reproductive and developmental effects that have been reported in laboratory animal studies. One issue that has drawn concern is the presence of BPA in infant products such as baby bottles and liners, teething rings, pacifiers, and children’s flatware, that could pose a risk of cancer and neurological disorders to infants and young children. The second issue is the use of BPA in the manufacturing of products that have an epoxy coating. This would include the metal can industry that has used epoxy can coatings for decades. The concern in both of these issues is that the level of BPA used is not safe and could cause health effects. The safety of BPA-derived protective coatings in food and beverage containers have undergone independent reviews of the science by multiple regulatory agencies, including the U.S. Food and Drug Administration, the United Kingdom Food Standards Agency, the Research Center for Chemical Risk Management of the National Institute for Advanced Industrial Science and Technology of Japan, and most recently the European Food Safety Authority. Every regulatory review conducted to date has affirmed that BPA-based can liners are approved for use in food contact applications and safe for use. The FDA has been reviewing emerging literature on BPA on a continuous basis for years and its Center for Food Safety and Applied Nutrition initiated a formal reexamination of the safety of BPA in early 2007.

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Informational Memorandum BPA Page 2 of 2 STATUS: In April 2008, the National Toxicology Program (NTP) of the National Institutes of Health published a Draft Brief indicating that some studies in animals suggest that BPA may raise concerns for developmental effects in humans. FDA has been reviewing the emerging literature on BPA on a continuous basis. FDA has recently completed a review of the available biological fate data and two recently completed rodent multigenerational reproductive studies; these studies did not indicate a safety concern for BPA at current exposure levels. FDA is also conducting a review of the data on neural and behavioral effects of BPA exposure. Congress is also addressing the issue. On June 10, 2008 a hearing entitled “Safety of Phthalates and Bisphenol-A in Everyday Consumer Products” was held in the House Energy and Commerce Subcommittee on Commerce, Trade, and Consumer Protection Hearing. Witnesses included EPA, FDA, American Chemistry Council and several consumer protection advocate groups. The discussions mainly revolved around the use of BPA in infant products and the potential impact on neurological development. However, upon the conclusions of the hearing, it was agreed to that there was a lack of evidence indicating that BPA caused any health risk and that more practical research needed to be done on the issue before Congress would take any steps to ban its use. AMI POSITION: AMI continues to support sound scientific research and until conclusive evidence is reached on the health impact of BPA, AMI opposes any regulation or banning of the product. AMI CONTACT: JIM HODGES EXECUTIVE VICE PRESIDENT

ASHLEY PETERSON, PH.D. DIRECTOR LEGISLATIVE AFFIARS

JULY 2008

52

INFORMATIONAL MEMORANDUM

ISSUE: SINGLE FOOD INSPECTION AGENCY IMPORTANCE: Publicity surrounding recent food borne illness cases has elevated the interest of congressional leaders to review, evaluate, and propose revisions to the U.S. food safety regulatory structure and authorities. Some congressional leaders have provided targeted criticisms while others have called for broad restructuring of agencies and the allocation of greater authority to regulators. Of greatest interest are those measures intended to create a single food safety inspection agency and expand authority. Consolidating food inspection activities would have far reaching effects on the industry. BACKGROUND: Recent food borne illnesses associated with fruits and vegetables have prompted discussion about consolidating food inspection activities into a single food safety agency and providing greater authority to this entity. Most of the impetus has come from consumer groups who charge that FDA, FSIS, APHIS, and other agencies with food safety responsibilities lack coordination, public-health focus, resources, and authority. The debate surrounding the proposal to create a single food safety agency has been on the congressional agenda before. As far back as 1993, then-Vice President Al Gore presented a “Report of the National Performance Review” to President Clinton. That report advocated, among other things, moving meat, poultry, and seafood inspection to the FDA, as well as imposing user fees on industry to pay for inspection. Through the 1990’s the concept of a single food agency remained under consideration. In 2003, the National Academy of Sciences (NAS) released a study, which had three significant findings. First, NAS concluded that the need for regulatory control must be balanced with the need for regulatory flexibility and the expectation that an agency’s actions reflect the most current and effective scientific methods available to protect the public health. Second, there is a need to better coordinate existing and emerging food safety information systems. Finally, the approach to developing, implementing, and enforcing food safety criteria, including performance standards, varies among regulatory agencies.

Informational Memorandum Single Food Inspection Agency Page 2 of 3 Several legislative measures have been introduced over the years that would consolidate food safety regulatory functions and could result in less than continuous inspection for non-slaughter meat processing operations. For example, Senator Richard Durbin (D-IL) and Congresswoman Rosa DeLauro (D-CT) previously introduced bills that would establish five categories of food manufacturing facilities and include farms, ranches, and food production facilities as regulated facilities. Those bills also would have established pathogen performance standards, provided for mandatory recall authority, and included a provision for civil money penalties that range from $10,000 and/or one year imprisonment per infraction to $100,000 and/or up to three years of imprisonment for more severe infractions. In December 2006, Senator Durbin indicated that he intended to introduce and advance a modified measure to consolidate food safety agencies and to enhance statutory authorities. Much of that bill’s scrutiny focused on the farm and production level for fruits and vegetables and on farm-raised and wild-caught seafood safety. Again in February 2007 Sen. Durbin and Rep. DeLauro introduced the Safe Food Act of 2007, which would have created a single food agency and included civil liability language, mandatory recall authority, and an arbitrary microbiological pathogen performance standard modeled from the late 1990s. STATUS: In 2007, in response to the melamine/animal feed incident, certain key Senate and House legislators sought to increase FDA’s role in import inspection and model it after USDA’s foreign system/plant approval process. Late in 2007, Sen. Durbin introduced an amendment to the Senate version of the 2007 Farm Bill to discontinue the budget authority within two years of nearly all the statutes that regulate food. The purpose of this amendment was to prompt consideration of a substantial realignment of food safety functions within the federal government. The provision did not remain in the 2008 Farm Bill as enacted, however. Numerous food borne illness outbreaks associated with imported and domestically produced food products have renewed debate about the effectiveness of FDA and FSIS. Both agencies’ ability to quickly identify and remove contaminated product from the marketplace is increasingly being questioned. A serious debate on changes that need to be made in the federal food safety system is likely to occur in the next Congress. Some food trade organizations, e.g. the Grocery Manufacturers Association, have proposed legislation that would reform the Federal Food, Drug, and Cosmetic Act. To date, no attempt has been made to change the Federal Meat Inspection Act of the Poultry Products Inspection Act, but it is likely that regulation of the meat and poultry supply will be drawn into the debate. Foremost on some legislators’ agendas is consolidation of food safety regulatory activities into a single food agency. Some members of Congress believe consolidating the food safety functions of various agencies into a single food agency will lead to better coordination, more efficient use of resources, and have more resources available. Others argue that consolidating various food safety agencies into a single food agency will add bureaucracy and diminish the effectiveness of agencies to assure the safety of foods. Most parties agree that simply housing the various food safety programs in a single food agency will accomplish very little unless the authorizing statues are completely re-written and consolidated. Revising the existing statues also likely will invite attempts to add regulatory authority such as mandatory recall, civil penalties, and other provisions.

Informational Memorandum Single Food Inspection Agency Page 3 of 3 AMI POSITION: AMI supports the continued administration of the meat and poultry inspection programs within the U.S. Department of Agriculture. AMI CONTACT: JESSE SEVCIK VICE PRESIDENT LEGISLATIVE AFFAIRS

JIM HODGES EXECUTIVE VICE PRESIDENT FOOD SAFETY

MIKE BROWN SENIOR VICE PRESIDENT LEGISLATIVE AFFAIRS

MARK DOPP SENIOR VICE PRESIDENT AND GENERAL COUNSEL

ASHLEY PETERSON, PH.D. DIRECTOR LEGISLATIVE AFFAIRS JULY 2008

Restoration of International Trade Goal: To ensure governmental policies are designed to prevent disruption of international trade in the event a foreign or domestic animal disease is introduced into the U.S. and to restore lost markets. Government policies should be based on sound science, supported by risk analysis, harmonized with international trading rules under the Codex, OIE or other international standard bodies and should expand both domestic and export trade opportunities. Objective: Work with government agencies to restore market access for U.S. beef in foreign markets. Seek full normalization of cattle and beef trade with Canada. Assure regulations to establish minimal risk regions are consistent with accepted scientific principles and based on appropriate risk assessments. Work with USDA and USTR to ensure that countries adhere to the World Organization for Animal Health (OIE) in adopting regulations on animal health and the Codex Alimentarius of the Food and Agriculture Organization of the United Nations in adopting food standards. Ensure coordinated industry response to the news media and the public. Convince foreign markets that BSE poses virtually no public health risk and should not be used as an artificial trade barrier.

BSE

INFORMATIONAL MEMORANDUM

ISSUE: IMPACT OF BSE ON U.S. BEEF TRADE IMPORTANCE: In 2003, the United States exported beef and beef products to 150 countries valued at $3.8 billion. Of these countries, 117 are currently open to at least some selected U.S. beef and beef products. In 2007, US exports of fresh, chilled, frozen beef reached $2.6 billion, 71 percent of the pre-BSE period. Canada and Mexico accounted for 69% of beef trade in 2007, down from 81 percent beef in 2005. Japan and Korea, accounted for 55 percent of beef trade in 2003 yet was only at 14 percent in 2007. BACKGROUND: Most countries had banned imports of U.S beef due to the one incident of BSE in the State of Washington. However, 117 countries are now open or partially open to U.S. beef, the largest markets being Mexico and Canada. Japan agreed to open its market to US beef from animals under 21 months of age on July 27, 2006. The Korean-US Free Trade Agreement calls for normalized trade of US beef before the FTA moves to Congress for approval. During the 73rd OIE General Session (the General Assembly of OIE Member Countries), several significant changes were adopted for many Terrestrial Animal Health Code Chapters (Terrestrial Code), but the most important concern the new versions of the chapters on Bovine Spongiform Encephalopathy (BSE), Avian Influenza (AI) and Animal Welfare. AMI is urging every foreign government to adopt the new OIE guidelines on BSE. USDA in mid October 2006 submitted to the OIE the justification to have the OIE declare the U.S. a controlled or negligible risk country for BSE. The OIE informed countries on May 22 that the risk status for the United States and Canada is controlled risk. Korea stopped the issuing of import licenses on June 4, 2007 due to two unauthorized shipments of bone-in products. USDA provided information that the fault lay with an inspector and not with US beef plants. Korea accepted this statement and began reissuing import licenses on June 8. Since the OIE announcement, the Philippines, Indonesia and Thailand had publicly stated they will follow OIE guidelines. USDA worked with those countries on the import protocols and those markets opened to all US beef by the end of 2007. On June 13, 2007, after Japan’s recent audits of U.S. meat plants, eliminated its 100-percent reinspection of U.S. beef and beef products, and implemented a sampling-based protocol. Japan has indicated they are ready to move toward opening the market for beef products from animals under 30 months with some vague indications of moving toward adopting the OIE guidelines in the future. Since Japan could not be specific on the timing of normalized trade, USTR rejected Japan’s moving to under 30 month beef. Japan still had not indicated any changes to the definition of specified risk materials.

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Informational Memorandum Impact of BSE on U.S. Beef Trade Page 2 of 7 Korea conducted on-site visits in early July 2007 to check on the sanitary conditions of livestock. These visits were to feedlots, feed mills and laboratories with the purpose of looking at the BSE risk control system of the United States and the measures in place to prevent the cross-contamination of feeds, control measures for removing and handling of SRM, etc., and the system for the issuance of health certificates for products being exported to Korea. In early August 2007, Korea stopped inspecting product from the US due to additional mispacked shipments. On August 27 South Korea resumed quarantine inspections on U.S. beef shipments after the U.S. agreed to tighten controls on product destined for Korea. While quarantine inspections on American beef resumed, the ban was maintained on four meat processing centers that shipped ribs. Then in October 2007 the Ministry of Agriculture (MAF) detected a part of vertebral column in a box of boneless chuck eye. The product was shipped on September 7 and detected October 4. MAF then suspended quarantine inspections for all U.S. beef and asked that USDA to suspend loading of exports to Korea. USDA agreed and no new certificates have been issued since October 2007. In a January 2008 visit by USDA and USTR to China, no progress was made on a beef protocol. China said they were ready to allow beef from animals less than 30 months of age but they were not ready to adopt OIE to normalize beef trade now or in the future. They have also linked the DeLauro amendment that prevents USDA from finalizing the Chinese cooked chicken rule to resolving any beef or pork trade problems. The U.S. and S. Korea agreed to allow the resumption of beef trade on April 18, 2008. However, the protocol was delayed due to massive protests in Korea in May and June. As a result, both Korean importers and U.S. exporters voluntarily agreed to only trade beef and beef products from animals under 30 months of age, until such time as Korean consumers are comfortable with the idea of products from older animals. Under the protocol and voluntary LT30 program, the market will not close due to a mispacked item or another case of BSE in the U.S. Beef trade with Korea pre BSE was over $700 million and the U.S. should be able to recapture this trade in a relatively short time. STATUS: On June 26, S. Korea published the April 16 protocol. USDA has set up a QSA program for companies to comply with Korean consumer demand. Negotiations with other countries to normalize beef trade will intensify once exports of beef to Korea begin to flow on a regular basis without incident. AMI POSITION: AMI will continue to work with USDA to provide advice for the swift opening of international borders, while ensuring that domestic procedures for handling BSE issues are based on sound science. AMI is also working with Congressional staffs and with the White House to keep them focused on applying pressure to foreign governments to open their markets to U.S. beef. AMI CONTACT: MARK DOPP SENIOR VICE PRESIDENT REGULATORY AFFAIRS AND GENERAL COUNSEL

JOHN REDDINGTON VICE PRESIDENT INTERNATIONAL TRADE

JULY 2008

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Informational Memorandum Impact of BSE on U.S. Beef Trade Page 3 of 7

Country

Age Restriction

SRM Definition

Products Allowed

Processed Products/Veal/Bison

Offals

Liver

Special Requirements

Chile

Animals < 30 months of age Animals that do not exceed 30 months of age Animals < 30 months of age

Same as U.S.

Fresh/frozen boneless beef Fresh/frozen boneless beef

None allowed

None allowed

No

*part of LT 30 program

None specified/unclear

Liver, kidney, hearts

Yes

U.S. origin cattle or imported from BSE-free country

Remove all SRM from products regardless of age; entire small intestine

Fresh/frozen boneless

No bison; none specified for processed products or veal

None allowed

No

Japan

20 months of age or younger

Fresh/frozen boneless and bone-in beef

Unclear on bison and veal; no processed products

allowed

Yes

Lebanon

Animals less than 30 months of age

Remove from all products regardless of age Same as U.S.

Excludes trimmings, diaphragm, cheek meat, head meat, mechanically separated beef. Dedicated split saw for >30 month carcasses, colorcoded hand tools, cooler separation, processed after full clean, box separation, traceability back to previous location Age verified cattle through traceability or physiological evaluation (A40)

Fresh/frozen boneless and bone-in beef

None specified/unclear

No offals allowed

No

Egypt

Hong Kong

Same as U.S.

55

Cattle of U.S. origin or legally imported

Informational Memorandum Impact of BSE on U.S. Beef Trade Page 4 of 7

Country

Age Restriction

SRM Definition

Products Allowed

Processed Products/Veal/Bison

Offals

Liver

Special Requirements

Mexico

Cattle younger than 30 months of age

Boneless beef- same as U.S. except entire small intestine Bone-in beef-skull, brain, eyes, tonsil, spinal cord, entire small intestine from products regardless of age

Fresh/frozen boneless and bone-in beef

All product allowed except ground beef and Mechanically separated beef

Allowed except small intestine

Liver allowed from cattle of all ages

Veal from animals 36 weeks or younger; beef and beef products from NZ, Canada, Australia allowed

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Informational Memorandum Impact of BSE on U.S. Beef Trade Page 5 of 7

Country

Age Restriction

SRM Definition

Products Allowed

Processed Products/Veal/Bison

Offals

Liver

Special Requirements

St. Lucia

Animals less than 30 months of age Animals under 30 months of age

Same as U.S.

Fresh/frozen boneless beef

None allowed

No

* Part of LT 30 program

Removed from all products regardless of age Removed from all products regardless of age

Fresh/frozen boneless beef

Bison/veal- none specified/unclear Processed products allowed Bison/veal- none specified/unclear Processed Products not allowed

None allowed

No

Must be slaughtered in the U.S.

Fresh/frozen boneless beef

Bison/veal- none specified/unclear Processed Products not allowed

None allowed

No

One-time affidavit for Mexican cattle signifying grass-fed; born, raised, and slaughtered in U.S. or from countries approved by Gov’t of Singapore; utensils used to sever or remove SRM material (excluding the splitting saw) must be used exclusively on cattle 5 x 150 pound containers); (e) sodium nitrate as a curing agent for spices (if present at or above the STQ of 400 pounds); and (f) propane for backup boiler fuel for plants with interruptible natural gas contracts (if present at or above the STQ of 10,000 pounds). DHS notes that having to complete a Top-Screen assessment does not mean that a facility is going to be regulated by DHS as a high-risk chemical facility. Rather, the majority of FDA- and USDA-regulated food facilities likely do not present a risk high enough to warrant further regulation by DHS. AMI POSITION: The AMI Environmental and Worker Safety Committees and Legislative staff will continue to provide information to the industry on compliance steps and Congressional actions to modify and make permanent these regulations. AMI CONTACT: JOHN THORNE CONSULTANT ENVIRONMENTAL AFFAIRS

MARK DOPP SENIOR VICE PRESIDENT REGULATORY AFFAIRS AND GENERAL COUNSEL

DAN McCAUSLAND DIRECTOR WORKER SAFETY AND HUMAN RESOURCES

JULY 2008

281

INFORMATIONAL MEMORANDUM

ISSUE: EPA PROPOSES TO EXEMPT LIVESTOCK AND POULTRY FACILITIES FROM CERCLA/EPCRA AIR EMISSIONS REPORTING IMPORTANCE: Many AMI members produce livestock and poultry and have been vulnerable to federal, state or citizen lawsuits and penalties for failure to report ongoing emissions of ammonia or hydrogen sulfide from their barns or manure storage facilities under the emergency reporting provisions of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) or the Emergency Planning and Community Right-to-Know Act (EPCRA). Following considerable effort by the poultry and livestock industries and AMI, the U.S. Environmental Protection Agency (EPA) on December 28, 2007 proposed to exempt animal feeding operations from these reporting requirements for air emissions. The comment period ended March 27, 2008. BACKGROUND: EPA and activist groups began targeting livestock operations with lawsuits for alleged violations of CERCLA and EPCRA air emissions reporting requirements several years ago. As a result, representatives from the poultry industry filed a petition with EPA for a rulemaking to exempt poultry production and simultaneously lobbied Congress for a legislative amendment along with other livestock and agricultural industry representatives. STATUS: With this rule, EPA is proposing that air emissions reporting is unnecessary to State Emergency Response Commissions, Local Emergency Planning Committees, and the U.S. Coast Guard when there is a release to the air from animal waste at farms of any hazardous substance at or above the reportable quantity for those hazardous substances. EPA based this proposal on the conclusion that there is no reasonable expectation that Federal, state or local emergency responders would respond to such report(s), and having to file such unnecessary reports is a burden on producers. The proposed administrative reporting exemption is limited to releases of hazardous substances to the air where the source of those hazardous substances is animal waste at farms. Notifications must still be made when and if hazardous substances are released to the air from any source other than animal waste (e.g., ammonia tanks) at farms, as well as releases of any hazardous substances at farms to any other environmental media (i.e., soil, ground water, surface water) when the release of those hazardous substances is at or above its reportable quantity for 24 hours. AMI filed public comments supporting the proposed exemption.

AMI POSITION: AMI will continue to monitor this rulemaking and keep members apprised of the provisions of the rule when finalized.

282

Informational Memorandum CERCLA/EPCRA Exemption Page 2 of 2 AMI CONTACT: JOHN THORNE CONSULTANT ENVIRONMENTAL AFFAIRS

MARK DOPP SENIOR VICE PRESIDENT, REGULATORY AFFAIRS AND GENERAL COUNSEL

JULY 2008

283

International Trade Issues

INFORMATIONAL MEMORANDUM

ISSUE: RACTOPAMINE IN PORK IMPORTANCE: In December, 2007, China imposed very serious restrictions on U.S. pork due to a zero tolerance policy for a feed additive commonly used in the United States and 24 other countries. Taiwan has also taken adverse actions against US pork with ractopamine residues levels. U.S. pork exports to China in 2006 totaled 51,000 MT, valued at $55.2 million. Until China began to restrict U.S. imports due to ractopamine, China was one of the fastest growing markets in the world for U.S. pork exports. Nevertheless, pork trade continues to rise and in 2007, pork exports directly into China totaled $103 million and are up 566 percent for the first quarter of 2008. In 2006 the United States exported 25,188 metric tons of pork to Taiwan valued at $38 million. In 2007, the United States accounted for 48 percent of Taiwan’s pork imports, exporting 13,918 tons, the lowest amount since 2001. BACKGROUND: China began delisting U.S. pork plants due to ractopamine residues in 2006. However, the number of plant delistings has increased rapidly in the last few months, a clear political counter-response by China to increased scrutiny of imported Chinese products by the U.S. government. The U.S. pork industry received word the week of August 13 that China’s Administration for Quality Supervision and Inspection Quarantine (AQSIQ) had that week delisted or placed under 45 day review a number of additional U.S. pork plants due to ractopamine findings. With these most recent actions, China has now delisted 11 U.S. pork plants from eligibility to export to China, and has placed another 11 under 45 day review. It is almost certain that the 11 plants under 45 day review will be delisted when the 45 day period is over. China’s most recent action leaves a relatively small number of U.S. pork plants still eligible to export to China. Those plants still approved to export to China will view future exports to that country as being extremely risky, given current Chinese policy on ractopamine. China’s current policy with respect to ractopamine is thus coming very close to acting as a complete ban on imports of U.S. pork. China has undertaken a scientific risk assessment for ractopamine, with the hope that it will be completed by early spring 2008 and that it would be the basis to establishing a MRL. In spite of this issue with ractopamine, US exports of pork and pork offals to China exceeded $150 million in 2007 and are up over 800 percent for the first month of 2008.

284

Informational Memorandum Ractopamine in Pork Page 2 of 3 Taiwan is once again on the verge of an effective ban on U.S. pork because of the U.S. use of the ractopamine. This represents a reversal for the Taiwanese government, which in late August 2007 indicated that it was going to establish a maximum residue limit (MRL) for ractopamine. Taiwanese government officials have conceded that their decision to postpone the establishment of the MRL is for political reasons, stemming from very strong political pressure from Taiwanese farm groups. Officials from the government of Taiwan in October 2007 informed the U.S. Trade Representative’s office that they were moving to 100% testing of U.S. pork for ractopamine. The 100% testing requirement for ractopamine was based on four positive findings of ractopamine in U.S. pork. Taiwan announced on October 30 that they had detected a 5th violation in a pork muscle meat (HS 0203) shipment from the U.S. Per their legislation, Taiwan indicated that they would need to close the market to these products. Taiwan officials traveled to Washington DC on November 1 and 2 and met with both government and industry in an effort to avert a market closure. On November 5, industry provided an “Improvement Plan” to Taiwan and in return, the market remained open. Some of the elements of the improvement plan include Taiwan taking action for exceeding zero tolerance against a plant rather than the country; the US shipping only ractopamine free product during the next few months while Taiwan established a MRL in accordance to CODEX. The U.S. and Taiwan will be working over the next three months to develop an agreed upon testing protocol for ractopamine; this will include a standardized and agreed upon level of detection and testing methodology. After three months, if an exporter has violative shipments that put them in the 100% testing category, they will be required to pre-test the product prior to shipment from the U.S. and the results of the test will have to be presented to Taiwan customs officials prior to clearance in Taiwan. Taiwan went to 20 percent testing in February 2007 as a result of no new violations. However, in March 2008, Taiwan decided to roll back the limit of detection (LOD) in imported pork as a result of heightened political pressure from hog producers. The LOD was moved from 1 part per billion (ppb) back to 0.3 ppb for muscle products and 0.5 ppb for offal items. We are hoping that a newly elected president to be inaugurated in May 2008 may defuse this issue enough to establish a MRL. However, illegal use and detection of Clenbuterol and Ractopamine in Taiwanese livestock products have increased consumer awareness of this issue, which may complicate efforts to change current domestic regulations. The 17th session of Codex Committee on Residues of Veterinary Drug in Food (CCRVDF) met Breckenridge Colorado the week of September 3, 2007; where over 200 delegates from 50 countries participated in deliberations. One of the agenda items was a discussion of the draft MRL’s for ractopamine and several countries spoke in favor of advancing the Ractopamine MRLs based upon the scientific reviews and the need for Codex to set MRL reference points for food safety purposes, especially for developing countries. While the European Union along with Norway and Switzerland expressed concern based upon the legal situation in their countries, the CCRVDF advanced ractopamine draft MRLs to Step 8 based upon the scientific reviews. We thought that this would pave the way for the draft MRLs to be considered by the Codex Commission for adoption at their next meeting, likely in mid-2008. However, we have learned that the EU would likely vote against adopting a MRL at this time with support from a number of Asian countries and it is the general consensus to withdraw consideration of establishing a MRL this year. USDA Under Secretary Keenum and Deputy Under Secretary Terpstra visited Beijing, China in late January and February 2008 and made no progress in convincing China to change its policy. In fact China’s Vice Minister of AQSIQ suggested that no movement on this issue can take place until the USDA final rule to allow Chinese cooked chicken into the U.S. is resolved. 285

Informational Memorandum Ractopamine in Pork Page 3 of 3 CODEX was in Step 7 of an 8 step process in establishing a MRL for ractopamine, which would have been concluded by mid 2008. However, this has been put on hold for this year, as the EU indicated it had some concerns with the CODEX recommendations. There are increased concerns being expressed in Japan as well. STATUS: No progress has been made in finalizing a Chinese risk assessment or within Taiwan in establishing a MRL. AMI has been working with a coalition of beef, pork and poultry associations to educate Congress on the unintended consequences of the DeLauro amendment that prevents USDA from finalizing the China cooked chicken rule. AMI POSITION: AMI is urging the U.S. government to move Taiwan and China in adopting a MRL for ractopamine as soon as possible. Additionally, we are working with Congressional staff to lift any opposition to allowing USDA to spend funds that would allow completion of the rule to allow poultry products to be imported into the United States from the PRC AMI CONTACT: MARK DOPP SENIOR VICE PRESIDENT REGULATORY AFFAIRS AND GENERAL COUNSEL

JOHN REDDINGTON VICE PRESIDENT INTERNATIONAL TRADE

JULY 2008

286

INFORMATIONAL MEMORANDUM

ISSUE: U.S. FREE TRADE AGREEMENTS IMPORTANCE: A free trade agreement is a pact between two or more countries to eliminate tariff and nontariff barriers affecting trade among them, while each participating country applies its own independent schedule of tariffs to imports from countries that are not members. The United States has completed or is in the process of negotiating free trade agreements with 16 countries and regions. The United States is pursuing trade liberalization with many developed and developing countries. With access to growing markets, American producers will have greater opportunities to grow and develop their businesses. BACKGROUND: Regional and bilateral trade agreements form an integral part of the U.S. approach to international trade policy. Through NAFTA, Canada, Mexico, and the United States have eliminated numerous barriers to the economic integration of these three countries. As a result of NAFTA, the United States has much closer economic ties with Canada and Mexico. Full implementation of NAFTA commenced on January 1, 2008, which means duty free access for beef, pork and poultry. With the hope of building on NAFTA’s success, the United States has entered negotiations with 33 other nations in the Western Hemisphere to form a Free Trade Area of the Americas (FTAA). Leaders from across the Americas met in Mar del Plata, Argentina from November 4-5, 2005. This agreement is in serious jeopardy, given the recent political changes in South America. The next Summit of the Americas will be hosted by Trinidad and Tobago. The date has yet to be set, but the gathering is expected to be held in late 2008 or 2009. On August 2, 2005 President Bush signed implementing legislation approving the Central America Free Trade Agreement (CAFTA) after close votes in the House and the Senate. On April 1, 2006, Honduras and Nicaragua officially joined the agreement. El Salvador and Guatemala earlier had agreed to all aspects of the agreement. Costa Rica and the Dominican Republic still have not implemented the agreement. This was to have taken affect on January 1, 2006 with all six countries, but it has run into a series of obstacles as different countries have had trouble passing necessary legislation. On March 30, 2007, the President notified Congress of his intent to enter into a free trade agreement with Panama.

287

Informational Memorandum U.S. Free Trade Agreements Page 2 of 3 The U.S. has completed negotiations with Panama, Peru and Colombia and is continuing its negotiations with Ecuador in trying to finish up the Andean Free Trade Agreement. Both Colombia and Peru completed negotiations in March 2006 and Panama was completed in December 2006. The Peru FTA was signed into law on December 12, 2007. The Colombia FTA still has some Congressional opposition centered on their wish to have Colombia curb violence against union organizers. The Panama FTA, which was thought to be an easy approval, is now in jeopardy because of a recent election of a man wanted for murder of a US serviceman to the head of the National Assembly. It is possible to have all these two FTAs passed this year, depending on how the situations play out. The United States has forged bilateral free trade agreements with Israel, Jordan, Australia, Singapore and Chile, and it is committed to securing similar bilateral or regional agreements with Central America, and South Africa, and others. The first FTA with a Persian Gulf country was the U.S. - Bahrain FTA completed in 2003 and signed into law on January 11, 2006. The Bush Administration is negotiating FTAs with UAE and Oman. The Oman FTA was passed by the Senate on June 29, 2006 and by the House on July 20, 2006. The FTA with Morocco advances Bush’s goal of a U.S. Middle East Free Trade Area (MEFTA) by 2013 to enhance the other FTAs signed with Israel and Jordan. In Asia, the U.S. is negotiating FTAs with Thailand, Malaysia and S. Korea. The Bush administration finalized free trade talks with South Korea (KORUS) on April 1, 2007. The beef industry is in support of requiring normalized beef trade with Korea as a condition for supporting the FTA. The Korean FTA is the biggest free-trade accord since the North American Free Trade Agreement in 1994. Bilateral trade last year was $78 billion and the FTA could boost it by more than $20 billion annually in coming years. However, the accord will not be supported by Congress until the Korean market is unconditionally open to U.S. beef. Korean President Roh had promised that the Korean Government will recognize the US’ controlled risk BSE status and will work toward restoration of beef trade in accordance with OIE guidelines. He offered a verbal commitment to President Bush that Korea will do this as quickly as possible. However, recent Presidential and Congressional elections have postponed this until April/May. The FTA with Thailand is proceeding slowly and will not be completed until sometime in late 2008. The Free Trade Agreement with Malaysia is on hold, as the Malaysian negotiators said they need more time to seek political consensus in its own Cabinet. In Africa, the U.S. is having some problems with the South African Custom Union (SACU) with Botswana, Lesotho, Namibia, South Africa and Swaziland. It may be difficult in completing before the Trade Promotion Act expires in June 2007. STATUS: South Korea and the U.S. signed the KORUS in July, after reaching the agreement in April following 10 months of often acrimonious negotiations. The agreement would eliminate tariffs and other trade barriers on a wide range of industrial goods and services, including automobiles, agricultural products and services. The agreement still needs legislative approval from both nations.

288

Informational Memorandum U.S. Free Trade Agreements Page 3 of 3 In a public announcement on September 7, Prime Minister Han Duck-soo called for the National Assembly to pass the U.S. free trade deal "as soon as possible to take advantage of national interests." "The South Korea-U.S. FTA will be a touchstone for strengthening our economic fundamentals and advancing our administrative competitiveness," Han said in the statement. South Korea held presidential elections on Dec. 19 and new President Lee Myung-bak won by a landslide. He is an ardent supporter of the U.S. trade pact and wants to strengthen ties with the U.S. The FTA will need more than half of the 299 National Assembly member votes. Recent antiAmerican sentiment against US beef has delayed the process of finalizing the beef protocol. The Korus agreement will not be taken up by the US Congress until after the Colombia and Panama agreements are passed, which could mean sometime in mid 2008 or later. AMI POSITION: AMI supports Free Trade Agreements, both bilateral and multilateral, and supports the premise of open and free trade between countries. However, in the case of S. Korea, AMI has informed the administration and Congress that normalization of beef trade with S. Korea needs to happen before we can support the FTA. (See Impact of BSE on U.S. Beef Trade Info Memo.) AMI CONTACT: MARK DOPP SENIOR VICE PRESIDENT REGULATORY AFFAIRS AND GENERAL COUNSEL

JOHN REDDINGTON VICE PRESIDENT INTERNATIONAL TRADE

JULY 2008

289

INFORMATIONAL MEMORANDUM

ISSUE: WTO NEGOTIATIONS IMPORTANCE: The United States has proposed ambitious reforms for agricultural trade in the World Trade Organization (WTO) negotiations. Taken as a package, the U.S. proposal on export competition, market access, and domestic support would result in reductions in trade barriers for agricultural products, greater equity in world agriculture, and expanding growth opportunities. BACKGROUND: Agricultural negotiations under the Uruguay Round format began in January 2000. After six years of negotiation, chances of reaching a deal before the summer deadline are fading. Success or failure rests on the political will of the big trading powers. In June 2000, the U.S. submitted its comprehensive proposal. During the Doha Ministerial in November 2001, the 132 nations outlined the objectives and timetable for the negotiations. The agreed objectives were: substantial improvements in market access; reductions of, with a view toward phasing out, all forms of export subsidies; substantial reductions in trade-distorting domestic support; with the negotiations to conclude January 1, 2005. The establishment of formulas and rules (modalities) was to be completed by March 31, 2003. However, all countries had roundly rejected the paper that was meant to provide a compromise position between all the negotiating countries, called the Harbenson Text. In the weeks leading up to the Cancun Ministerial, six counter proposals were submitted for review. On September 10-14, 2003, the 5th Ministerial took place in Cancun, Mexico. The WTO trade talks collapsed after trade groups representing developed and developing nations failed to reach common ground on key issues. No progress was made because of a voting bloc known as the G-22, which is an evolving trade group representing developing nations. G-22 includes Brazil, India, South Africa, Egypt, Colombia, Thailand, El Salvador, Costa Rica, Morocco, Guatemala, China, Argentina, Philippines, Pakistan, Turkey, Bolivia, Cuba, Ecuador, Mexico, Peru, and Venezuela. Countries have been getting together in a number of meetings since September 2003 and reached a framework agreement by July 30, 2004, which allows countries to return to the negotiating table to work out the details. The framework contains important commitments to eliminate or reduce overall levels of subsidies. The eventual elimination of export subsidies, reduction in the overall aggregate measure of support (AMS) levels and stronger disciplines on less distorting blue box subsidies should benefit U.S. exports. As part of the exercise, negotiators have a better understanding of where their subsidy program fits (e.g. in which colored box). The framework also accommodates sensitive products to some extent and will require substantial reductions in all import barriers.

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Informational Memorandum WTO Negotiations Page 2 of 3 Over the next three months countries met in Geneva and elsewhere to negotiate the specifics of the Doha Round. The General Council had called on all its Members to redouble their efforts and agreed to continue the negotiations leading to the Sixth Session of the Ministerial Conference in Hong Kong on December13-18, 2005. The new WTO Director General Pascal Lamy held meetings throughout 2005 to identify outstanding problems and to devise a strategy for solving them in time for the December Ministerial. There were problems in all three pillars. In domestic support, negotiating hurdles included coming up with a tiered formula for reducing the final bound total aggregate measurement for support, overall cuts in trade-distorting support, blue box criteria and review and clarification of the green box. In market access, a tiered formula for tariff reductions and sensitive products remains and in export competition, disciplines on export state trading enterprises and food aid need to be devised. World Trade Organization (WTO) Director-General Pascal Lamy informed WTO members on November 10th that there was insufficient convergence of views to be able to agree on negotiating modalities at the December 13-19 Hong Kong Ministerial. All 148 member countries agreed, and began discussing “recalibrating” the Hong Kong ministerial – meaning they were deciding just what the Ministerial should now do. For agriculture, the primary achievement was agreement to end all export subsidies by 2013. Modalities were to have been agreed upon by July 2005 …then September …and then at the December Ministerial… then April 2006, then July. The sticking point remains the unwillingness of the European Union (EU) to cut its huge agricultural tariffs as sharply as its trading partners want. The EU maintains a highly protected agricultural market by maintaining tariff barriers that frequently exceed 100 percent – effectively doubling the world price of food in the EU as a means of keeping inefficient farmers employed. France, in particular, is afraid that sharp cuts in farm tariffs will lead to the collapse of Europe’s farm policy and rising agricultural unemployment. Other countries, however, are unwilling to reduce their agricultural or industrial trade barriers if they cannot get access to the EU agricultural market. This has been the central point of trench warfare for 30 years, and remains so now. The WTO meetings in Geneva and Russia collapsed in July to the point that countries thought there would be no progress made the rest of 2006. Negotiations were indefinitely suspended. A two step approach to getting the meetings back on track was devised near the end of 2006. This was “quiet diplomacy” and informal meetings in Geneva. Leaders from 21 Asian and Pacific countries, as well as the U.S. met in Vietnam November 18 and promised to make new commitments to free up farm trade to kick-start the talks. Not much came from this meeting. In early 2007, there were “fire-side chats” between WTO Agriculture Trade Negotiator Chair Crawford Falconer and individual countries lead negotiators. To date, members have held to their positions. 30-36 countries had been meeting in September – November to review the Crawford text with the hope of reaching enough consensuses to convene a Ministerial meeting in December. This did not occur and redraft of the Crawford text was completed the end of 2007 to be reviewed by all countries with the hope of convening in early 2008. President Bush said that the U.S. is willing to reduce its agricultural subsidies in a “substantial way” in exchange for market access for US goods and services but that it will not carry the entire load in making sure the agreement moves forward. A second agricultural text was issued in May and reviewed by the agricultural committee with many issues still in contention. A third text is being considered depending on the progress made in the next round of talks.

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Informational Memorandum WTO Negotiations Page 3 of 3 Trade ministers met on June 5, 2008 in Paris in an informal setting on the sidelines of this year’s annual Organization for Economic Cooperation and Development spring ministerial and failed to agree on a “roadmap” for finalizing modalities in the Doha Development Agenda agriculture and market-opening for industrials negotiations due to simmering differences over the level of balance between industrialized countries and members of the developing-country coalition. The European Union, the United States, Japan, Canada, Switzerland New Zealand, Chile, Mexico, Argentina, Brazil, Hong Kong, India and South Africa attended the brief session hosted by Australia. The meeting was specifically convened to decide Doha process-related issues, such as setting the timeframe for “horizontal” meetings among senior trade officials – and later ministers – to start the negotiating trade-off process between agriculture and industrials. Beyond a commitment to intensify consultations, there was no agreement on the core issues – including the comparable level of ambition in agriculture and nonagricultural market access. This could put in jeopardy any hope of a ministerial in July. STATUS: A number of countries, led by Brazil and India have indicated that it would be difficult to negotiate the conclusion of the six-year old Doha Development Agenda trade negotiations unless the Bush Administration secures extension of the expired Trade Promotion Authority (TPA). TPA expired in June. President Bush and USTR Schwab have indicated that they believe the Doha Round can be completed by the end of 2008, but not at any price. A Ministerial is planned for July 21 to settle the outstanding controversies in hopes of moving toward resolution for the seven-year old Doha Development Agenda. AMI POSITION: AMI will continue to support the U.S. goals and objectives in the WTO. AMI is working with USDA and USTR to suggest appropriate policies specifically affecting the meat industry.

AMI CONTACTS: MARK DOPP SENIOR VICE PRESIDENT REGULATORY AFFAIRS AND GENERAL COUNSEL

JOHN REDDINGTON VICE PRESIDENT INTERNATIONAL TRADE

JULY 2008

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ISSUE: U.S.-EU BEEF HORMONE DISPUTE IMPORTANCE: In 1997, a panel established at the request of the United States under the dispute settlement procedures of the World Trade Organization (WTO) found that the European Union (EU) Hormone Directive violates WTO rules. The WTO’s Appellate Body in early 1998 reversed and modified some of the panel's findings, but agreed with the panel’s core conclusion -- the EU directive is not based on a risk assessment and is, therefore, illegal under WTO rules. Subsequently, the WTO ruled that the EU ban deprives the U.S. of beef exports valued at $116.8 million annually. The EU still bans US beef treated with hormones. BACKGROUND: The EU enacted legislation to prohibit the sale or import of meat from animals treated with growth hormones in 1985. U.S. exports of meats from animals treated with hormones ended on January 1, 1989. On May 8, 1996, the U.S. formally requested that the WTO establish a panel to resolve the dispute under new rules negotiated in the Uruguay Round. The panel issued its report on August 18, 1997, upholding the U.S. complaint. Through two years of appeals a WTO arbitrator concluded that the EU ban on U.S. beef and beef products resulted in lost annual U.S. exports to the EU in the amount of $116.8 million. The EU has been paying compensation to the US Treasury since 1999. In late 2000, the EU proposed compensating the U.S. for its lost trade by creating a new quota for beef from cattle not treated with growth-promoting hormones. AMI members oppose the compensation proposal at that time. In October 2003, the EU issued a press release claiming compliance with the WTO ruling. The EU had adopted a new Directive (Directive 2003/74/EC) that summer which claimed that the use of estrodial – 17Β is harmful to human health, and banned its use. The U.S. Government (USG) and the EU government held discussions regarding this new risk assessment, but the USG found no science to support the EU’s assertions, and rejected the EU’s claim of compliance with the WTO ruling. On November 8, 2004 the EU announced that it filed a World Trade Organization (WTO) case against the U.S. and Canada claiming that we should remove retaliation because the EU is in compliance with the WTO’s ruling on the beef hormone case. This began a 60-day consultation period between the two governments. The E.U. is pushing to replace retaliation with compensation under the non-hormone treated program, giving a higher quota for hormone free beef. Currently the quota is 11,500 MT. Other issues related to plant approvals and hygiene standards must be agreed upon concurrently with increased quota. A dispute settlement panel has been established to determine if the EU had carried out a risk assessment. 293

Informational Memorandum U.S. – E.U. Hormone Dispute Page 2 of 2 AMI and other interested organizations met with USTR in July 2005 to urge the Bush Administration to oppose the EU claim that they have met the WTO risk assessment criteria. AMI asserted that the EU had presented no new science in this case, and so retaliation should be continued until they fully comply with the WTO ruling. We feel that giving a higher quota will not necessarily give greater access to the EU without providing for increased plant approvals. In November 2005, USTR met with various EU officials to discuss the hormone ban. There appeared to be interest on the part of some officials to try to resolve the dispute outside of the WTO in exchange for an increase in quota for non-hormone beef... USTR mentioned that simplifying EU slaughter plant approval requirements, securing EU approval of pathogen reduction technologies and streamlining the hormone free program requirements needed to be addressed before we could talk about dropping retaliation in exchange for increased hormone free quota. Recently, the EU agreed to try to harmonize plant inspection procedures. The new EU meat hygiene law has made changes to its inspection procedures, some of which were once impediments to US plants getting approval to export beef and pork to the EU. FSIS and the EU have worked together to update the changes on the FSIS export library. USTR has had some discussions on outstanding issues with the EU related to antimicrobial treatments, residue testing and trichina-free status. At this time, negotiations have stalled as a result of the antimicrobial treatment issue. The poultry industry had submitted a request over six months ago to use two antimicrobials. There is still on-going debate on approving the antimicrobials within the EU DG-SANCO. Once this is resolved, it will need to be approved by all 27 EU countries. USDA recently submitted a request to the EU to approve three antimicrobials for beef. STATUS: On July 31, 2007 a WTO panel confidential report was sent to USTR with the latest ruling. It is our understanding that the report indicated there is no new science to change the original WTO position. Conversely, the European Food Safety Authority (EFSA) did their own independent study and found that there are no grounds to amend the risk assessment currently in place in Europe on hormone residues in beef. The EU is now debating the approval of imported poultry using antimicrobial treatments, though it appears that 21 of 28 EU countries will vote against the use of AMTs in poultry. Review of the AMTs for beef will not proceed until the poultry issue is resolved. AMI POSITION: Our singular objective continues to be a re-opening of the European market to U.S. beef. Currently there are only four US plants approved to export beef to the EU. We will continue to keep you informed as new information develops. AMI is continuing to work with USMEF and NCBA to explore the hormone ban implications for future trade with the European Union. The AMI position on dropping retaliation in exchange for an increase in non-hormone beef quota is that we will not agree to this until the EU makes significant changes to plant approval procedures and the approval of the use of anti-microbial treatments. NCBA and USMEF have also adopted this position. AMI CONTACT: MARK DOPP SENIOR VICE PRESIDENT REGULATORY AFFAIRS AND GENERAL COUNSEL

JOHN J. REDDINGTON VICE PRESIDENT INTERNATIONAL TRADE

JULY 2008 294

INFORMATIONAL MEMORANDUM

ISSUE: MEXICAN ANTIDUMPING SUNSET REVIEW OF U.S. BEEF IMPORTANCE: The antidumping duties on U.S. beef have been in place for some U.S. companies since 2000. The sunset review was an opportunity to eliminate those duties for all U.S. companies. Mexico has re-approved those duties for another five years. BACKGROUND: On April 28, 2000, Mexico's Secretaría de Economía (SE) imposed antidumping duties on certain beef imports from the United States. The WTO Antidumping Agreement provides that antidumping duty orders must be reviewed every five years (so-called "sunset reviews") to determine whether revocation of the order is likely to lead to the continuation or recurrence of dumping or injury. On March 26, 2005, SE published a notice of initiation of the "sunset review" of the antidumping duty order on certain beef products from the United States. Under Mexican law, interested parties could submit information and arguments regarding both injury and dumping. Therefore, the sunset review provided an opportunity to have the entire order revoked (based on a showing that there is no injury or threat of injury). In addition, individual producers could request that SE calculate new antidumping margins for their exports. The sunset review was expected to be finalized by March 2006, but on September 13, SE sent notices to interested parties announcing a second round for submitting additional evidence and arguments regarding the Sunset Review. The deadline for submissions was October 21. AMI and USMEF retained White and Case to represent the U.S industry response to the Mexican government. A response was submitted to Economia in early July, 2005. The defense argued that termination of the antidumping duties is not likely to lead to the continuation or recurrence of injury to Mexican producers. On March 13, 2006, the Secretaría de Economía (“SE”) held its audiencia publica (“public hearing”) in the “sunset review” of the antidumping duties on US beef imports. On April 24, 2006, Secretaria de Economia (“SE”) published its final determination in the sunset review of the antidumping duties on bone-in and boneless cuts of beef produced and exported from the United States. SE concluded that removal of the duties would likely result in the continuation or recurrence of injurious dumping. As a result of the decision, the existing duties will remain in effect for five years (until April 28, 2010); unless the sunset review decision is successfully appealed or challenged at the WTO. Under the WTO Antidumping Agreement, antidumping duties must be removed within five years unless the importing country (Mexico) determines that removal of the duties will likely result in the continuation or recurrence of (1) dumping, and (2) material injury or threat of material injury.

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Informational Memorandum Mexican Anti-Dumping Sunset Review of U.S. Beef Page 2 of 3 AMI, USMEF, NCBA and a number of our members have met with USTR and USDA to discuss a possible WTO case against Mexico. WTO members are not permitted to assume that just because injurious dumping occurred in the past it will likely do so in the future. WTO precedent clearly establishes that SE must conduct a “rigorous prospective analysis” based on record evidence if it wants to extend the duties for an additional five years. SE failed to meet this obligation. AMI and USMEF met with its Mexican counterparts in October 2006 and we are told that as long as U.S. exports continue to increase, Mexican producer groups will continue to pressure Economia to investigate anti-dumping. In January 2007, Secretary Johanns met with his Mexican counterpart and brought up the antidumping issues. Both the Mexican Secretary of Agriculture and Mexican President said they were committed to full implementation of NAFTA, which means duty free access in January 2008. They are not in favor of using antidumping measures to protect domestic producers and feel that this case will disappear in the following months. This issue did not get resolved in 2007. STATUS: In January, 2008, USDA Deputy Undersecretary Keenum met with his counterparts in Mexico City to discuss this and other market access issues. The Mexican government reiterated that it did not favor using antidumping measures to protect inefficient industries. It was agreed by the two countries to set up a livestock working group to review and make recommendations of resolve this and other market access issues. Mexico has dragged its feet on allowing any new plants to be approved. USDA has raised this issue a number of times and it will be discussed within the Livestock Working Group over the next few meetings between Mexico and the U.S. Similarly, Mexico has not allowed beef and beef products from animals over 30 months of age as well as other beef products (Beef meat products containing advanced meat recovery, mechanically separated meat and ground meat.) from the U.S. while they do allow for them from Canada. AMI POSITION: We are committed to find ways to reduce our legal exposure and will be working with NCBA and USMEF to meet with our counterparts from Mexico and the U.S. government to remove these barriers to trade. AMI CONTACT: MARK DOPP SENIOR VICE PRESIDENT REGULATORY AFFAIRS AND GENERAL COUNSEL

JOHN REDDINGTON VICE PRESIDENT INTERNATIONAL TRADE

JULY 2008

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ISSUE: AUSTRALIAN SAFEGUARD INVESTIGATION ON PORK IMPORTS IMPORTANCE: As a result of the US-Australian Free Trade Agreement, US pork exports to Australia have risen from $1.2 million in 2002 to nearly $63 million in 2007. However, US market share is only 23 percent compared to 33.8 percent for Denmark and 42.6 percent for Canada. BACKGROUND: Australia’s Productivity Commission (“PC”) initiated on Oct. 24 a global safeguard investigation of imports of frozen boneless pork. The investigation covers frozen pork classified under tariff code 0203.29.00 of Australia’s Harmonized Tariff Schedule. AMI, USMEF, National Pork Producers Council, and American Pork Export Trading Company have formed a coalition to defend the interests of the U.S. pork industry in this investigation. The PC is Australia’s “competent authority” for conducting safeguard investigations. Its inquiries involve calling for submissions from all interested parties, making all non confidential sections of such submissions publicly available and conducting hearings before completing its report to the Australian government. The government has discretion as to what remedy, if any, to provide, such as duties, quotas, or tariff-rate quotas. The remedies can remain in place for up to four years (and extended for an additional four years). The PC does not have any executive power and cannot impose any remedy (e.g., safeguard duties or quotas). The PC makes a recommendation to the government, which then decides what action, if any, should be taken. In the preliminary determination issued on December 14, 2007, the PC found that Australian producers were seriously injured, but that there was not sufficient evidence to conclude that imports caused the injury. In reaching its determination, the PC largely ignored an econometric model submitted by the APL purporting to show that import prices caused domestic prices to fall. Because the PC did not find a causal link between imports and injury to Australian producers, it did not recommend that measures be imposed on imports. The PC indicated that it intended to prepare its own econometric model(s) for purposes of analyzing causation in the final determination. The PC held a hearing on March 17th on the economic model(s) that it intends to use to analyze whether imports have caused Australian prices to decrease, causing injury to Australian producers. White and Case participated via video conference. Others in attendance included representatives of the APL and two "independent" economists retained by the PC to critique the models. The APL representatives were critical of the PC's findings, but did not identify specific problems with the models. Other parties, in particular the independent economists, offered suggestions on how the models might be improved, but it seems unlikely that the suggestions could be implemented in the short time available for the PC to complete the final determination. In sum, based on what we have seen and heard to date, it does not appear that the PC's models would support a reversal of its preliminary findings on causation. 297

Informational Memorandum Australian Safeguard Investigation on Pork Imports Page 2 of 2 This is only the second global safeguard investigation in Australia. The previous investigation, which also covered pork products, did not result in imposition of any quotas or duties. Instead, the government agreed to provide direct assistance to Australian pig farmers and pork producers. White and Case is the law firm that we have retained to defend our rights. They have worked with Minter Ellison, which is one of the leading law firms in the Asia-Pacific region, with offices spread throughout the region. We submitted a 77 page brief that indicates there is insufficient evidence of serious injury to the Australian pork industry. In January, we submitted comments on the econometric model to be used to prepare a final determination. STATUS: The Australian Productivity Commission (PC) on April 4 upheld its conclusion made earlier in the year that imports did not cause and are not threatening to cause serious injury to the domestic pork industry. In its analysis of causation, the PC determined that the profit squeeze experienced by the Australian pork industry was attributable to a sharp rise in feed costs since mid2007 rather than to an increase in imports. The PC accordingly found that safeguard action against frozen pork was not warranted and also recommended that the Government not provide other new forms of assistance to the domestic industry. The Australian Government new budget does not appear to include funding for any new assistance to the domestic industry. This action affectively closes the case against the U.S. and other pork exporters. AMI POSITION: AMI is pleased that we had a positive outcome in this case. AMI CONTACTS: MARK DOPP SENIOR VICE PRESIDENT REGULATORY AFFAIRS AND GENERAL COUNSEL

JOHN REDDINGTON VICE PRESIDENT INTERNATIONAL TRADE

JULY 2008

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