Size of Labeling Change Costs Uncertain, Says GAO

February 18, 2000

Mandatory country-of-origin labeling costs for meat would require changes in the industry’s current practices, says the General Accounting Office, but the costs of complying are "uncertain." Legislation to mandate labeling is pending in Congress.

Congress directed USDA to study the potential effects of mandatory labeling to the retail level for imported fresh cuts of beef and lamb. USDA was required to issue its study by April 21, 1999, but released its report on Jan. 12, 2000. In addition to fresh cuts of beef and lamb, GAO was asked to consider processed products, such as ground or blended beef and lamb and frozen, prepared and preserved beef and lamb products.

The meat industry "has estimated an annual cost of $182 million for meat packers and processors to maintain information solely on the country of origin for beef," said GAO. "While we have no basis to assess the validity of this estimate, we note that it did not include the costs to packers and processors of also identifying and maintaining country of origin information for meat from cattle that were imported and raised in the United States, if that were to be required."

Although such meat is considered domestic under current law, it would be considered imported under pending legislation.

The grocery industry has estimated that the nation’s 156,300 large and small retail grocers would incur annual costs of about $375 million for record keeping, inventory management and labeling of meats they cut, blend and grind in their stores, GAO said. "U.S. packers, processors and grocers would, to the extent possible, pass their compliance costs back to their suppliers – U.S. cattle and sheep ranchers and foreign exporters – in the form of lower prices or forward to consumers in the form of higher retail prices," the report said.

Enforcement costs would be incurred to oversee adequately all sectors of the meat industry affected by the legislative requirements, GAO continued. USDA had estimated, on the basis of a 1998 proposal to label imported beef and lamb at the retail level, that the Food Safety and Inspection Service would incur a cost of $60 million per year, more than 10% of its budget, to enforce country-of-origin labeling for those meats.

Consumers would benefit from labeling, especially those "who want to know where their food comes from," said GAO. Sales may be increased in some sector of the meat industry. "However, those benefits would not come without costs. All industry sectors expect to incur compliance costs that may be passed on to consumers, and some level of federal enforcement resources would be needed. In addition, a meat labeling law could have adverse trade implications," the report said.