oversight

Food Safety: Issues USDA Should Address Before Ending Canadian Meat Inspections

Published by the Government Accountability Office on 1990-07-06.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

.Jdy   I!MO
                       FOOD SAFETY
                       Issues USDA Should
                       Address Before Ending
                       Canadian Meat       -
                       Inspections




GAO,‘HC:EI)-W-   176
                   United States
GAO                General Accounting Office
                   Washington, D.C. 20648

                   Resources, Community,           and
                   Economic Development            Division

                   B-239981.1

                   July 6,199O

                   The Honorable Byron L. Dorgan
                   The Honorable Tim Johnson
                   House of Representatives

                   In response to your April 27, 1989, letter and subsequent discussions
                   with your offices, this report examines the U.S. Department of Agricul-
                   ture’s (USDA) Food Safety and Inspection Service (FSIS) “streamlined”
                   inspection procedures for Canadian meat.’ These procedures were intro-
                   duced in response to the 1988 United States-Canada Free Trade Agree-
                   ment (Free Trade Agreement). In particular, you asked us to review (1)
                   the process used to determine that the Canadian inspection system
                   meets U.S. standards; (2) how the current border inspection procedures
                   differ from past procedures; (3) how changes in border inspection proce-
                   dures between 1988 and 1989 affected the rejection rate, and how rejec-
                   tion rates are used to manage the import inspection program; and (4)
                   whether U.S. plants exporting meat to Canada are receiving satisfactory
                   treatment under the Canadian import inspection system.

                   In February 1990, FSISand Agriculture Canada proposed conducting a l-’
                   year experiment during which the streamlined inspection procedures
                   would be replaced with an “open border” between the United States and
                   Canada. An open border would eliminate import inspections by FSIS
                   inspectors. As agreed, this report also discusses the legal and policy
                   issues involved in this proposal.


                   The assurance that Canadian meat is wholesome is primarily based on
Results in Brief   an FSISdetermination that the Canadian meat inspection system meets
                   U.S. standards, i.e., that it is at least equivalent to the U.S. inspection
                   system. FSISofficials base this determination on their familiarity with
                   the Canadian inspection system and their review of available informa-
                   tion. FSIS officials believe that Canada’s system is equal, if not virtually
                   identical, to the U.S. system. FSIS is confident that Canada, more so than
                   other countries, can ensure wholesome meat. FSIS has also changed its
                   procedures for determining Canadian equivalency in two principal
                   ways. First, FSIS is not using its standard approach for assessing a for-
                   eign inspection system’s ability to control such major hazards as resi-
                   dues and disease. Second, beginning in 1989, Canadian inspectors, rather

                   ‘Because Canada exports only a small amount of poultry to the United States, thii report refers only
                   to meat, unless otherwise noted.



                   Page 1                                     GAO/RCED-90.176    F’SIS and Canadian   Meat Inspectiona
             B233381.1




             than FSISreviewers, are conducting on-site reviews of Canadian plants.
             However, the documentation in FSIS’files was not adequate for us to
             independently review the basis for FSIS’conclusions about the
             equivalency of the Canadian inspection system,

             Under the streamlined border inspection procedures, several changes
             have occurred to ease entry of Canadian meat into the United States.
             Among other things, every shipment of Canadian meat no longer must
             be unloaded, inspected for general condition and proper labeling, and
             stamped “U.S. Inspected and Passed.” Selected Canadian meat ship-
             ments are subject to inspections for wholesomeness.

             Rejection rates of Canadian meat were higher in 1989 than in 1988,
             according to FSISinspection data, but the causes and significance of
             these higher rates are unclear. In 1989,3 percent of 3,030 randomly
             selected lots for Canada as a whole failed product examination; and 8
             percent of an additional 1,866 lots were rejected under an intensified
             inspection program for individual plants failing inspections. In 1988, 1
             percent of 13,466 lots failed product examinations. Because FSISdoes not
             calculate sampling errors for rejection rates, it cannot determine to what
             extent the increased rates may have resulted from random chance, a
             decline in product quality, or some other reason. Moreover, FSIS has no
             criteria for an acceptable rejection rate for Canada.

             Regarding whether U.S. plants exporting meat to Canada are receiving
             satisfactory treatment under the Canadian inspection system, our con-
             tacts with 25 major U.S. plants indicated they were satisfied.

             The open border proposal raises both legal and policy issues. FSIS’ pro-
             gram officials have raised a possible legal issue about whether authority
             exists to permanently establish an open border or whether FSIS needs to
             ask the Congress to amend the Federal Meat Inspection Act (21 USC.
             601 et seq). From a policy perspective, FSIS needs to ensure that food
             safety will not be compromised under an open border system. Also, we
             believe the rejection rates experienced under streamlined inspection and
             the lack of a well documented equivalency review are concerns that FSIS
             should address in its decision on the proposal.


             The Federal Meat Inspection Act requires that meat imports be pro-
Background   duced under inspection systems that are at least equal to that of the
             United States and that the imports are wholesome, unadulterated, prop-
             erly marked, labeled, and packaged. FSIS does not require a foreign


             Page 2                        GAO/RCED-90-176 FSIS and Canadian Meat Inspections
c    *


              5239981.1




              country’s controls and practices to be identical to those in the United
              States, but they must achieve the same results. FSIS is responsible for
              reviewing the inspection systems of eligible exporting countries for
              equivalency and for inspecting imported meat items at the port of
              entry to help ensure product integrity.

              One goal of the Free Trade Agreement is to facilitate commerce between
              the two countries by reducing technical and regulatory trade barriers.
              The Free Trade Agreement provides that both countries minimize
              inspection procedures applicable to each other’s meat and poultry
              imports. Generally, it allows each country to make “spot checks” neces-
              sary to ensure compliance with the importing country’s standards or
              technical regulations.

              In January 1989, FSIS installed new, streamlined inspection procedures
              for Canadian meat to ease its entry into the United States. During the
              last quarter of 1989, Agriculture Canada and the Canadian meat
              industry objected to certain features of the streamlined procedures,
              citing what they viewed as an excessively high inspection frequency,
              questionable rejections of Canadian meat, and increased fees charged by
              private U.S. border inspection facilities. On February 26, 1990, following
              discussions between USDA and Agriculture Canada officials, the U.S. Sec-
              retary of Agriculture and Canada’s Minister of Agriculture issued a joint
              statement announcing, consistent with the spirit of the Free Trade
              Agreement, their intent to conduct a l-year experiment of an open
              border for trade in meat and poultry. An open border will eliminate
              port-of-entry inspections by FSIS inspectors. If successful, the open
              border is expected to become permanent. ms plans to initiate the open
              border experiment following a rulemaking procedure.


              Since the early 198Os, rather than relying on reviews of individual
Determining   plants within a country to determine inspection system equivalency,Z
Equivalency   FSIShas been shifting to a “systems” approach, which uses risk profiles
              to evaluate foreign inspection systems as a whole. The profiles assess an
              inspection system’s control over five areas-residues, disease, economic
              fraud (i.e., deliberate adulteration of product), contamination, and
              processing. FSIS first prepared risk profiles in 1983 for eligible exporting
              countries, including Canada, but by 1987 it found these profiles out-
              dated and no longer useful. Also, FSIS modified and improved upon the

              %IS has a permanent staff of veterinarians, called foreign program officers, responsible for con-
              ducting plant reviews in exporting countries.



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                         R-239981.1




                         risk assessment approach. ms is currently preparing new risk assess-
                         ments for eligible countries using the improved profiles but has decided
                         to exempt Canada from this process.

                         FSISofficials told us that to determine the Canadian inspection system’s
                         equivalency to the U.S. system, they reviewed Canada’s meat inspection
                         laws and regulations; evaluated Canada’s ability to control potential
                         hazards, such as residues and contamination; conducted on-site reviews
                         of exporting plants; and reviewed data from port-of-entry inspections.
                         The officials said that this information, along with more than 20-years’
                         familiarity with the Canadian inspection system, assure them that the
                         Canadian system is virtually identical to the U.S. system. As a result,
                         they have more confidence in the Canadian inspection system’s ability
                         to ensure wholesome meat than they do in other countries’.

                         However, documentation in FSIS’ files was not adequate for us to inde-
                         pendently review how ISIS had determined the Canadian system’s
                         equivalency or the basis for IWS’ confidence in Canada’s system.

                         Because of its high degree of confidence in the Canadian inspection
                         system, FSIS changed the equivalency review process for Canada: It dis-
                         continued using its risk profiles and eliminated reviews of Canadian
                         plants conducted by its foreign reviewers. Instead, FSIS has proposed
                         that, annually, a single team of experts from both countries jointly
                         determine their inspection systems’ equivalence. Agriculture Canada is
                         considering F’SIS’ proposal. In addition, Canadian inspectors have
                         reviewed Canadian exporting plants for ISIS since 1989, and under the
                         terms of the February 1990 agreement, FSIS and Agriculture Canada
                         plan to end their reviews of each other’s exporting plants.

                         USDA  recognizes the importance of equivalency reviews in guarding
                         against contaminated meat imports. In December 1989, in compliance
                         with the Federal Managers’ Financial Integrity Act (31 U.S.C. 3512),
                         USDA reported to the President and the Congress that the lack of com-
                         pleted risk analyses for exporting countries is a material management
                         control weakness that it is correcting.


                         Normal FSIS import inspection procedures require that every shipment of
Streamlined Inspection   meat and poultry entering the United States be unloaded at a border
Procedures               inspection facility for a routine visual inspection. FsIs often refers to
                         import inspections as -reinspections to recognize that imported meat has



                         Page 4                        GAO/RCED-90-176 FSJS and Canadian Meat Inspections
i   I




        B-229981.1




        already been inspected and approved by the exporting country’s inspec-
        tors. The FSIS inspector examines a shipment for general condition,
        proper certification, and labeling. Generally, rejections from this type of
        inspection result from transportation and water damage, labeling defi-
        ciencies, and improper certification. In addition, shipments are subject
        to more comprehensive inspections, using computer-assigned sampling
        procedures and individual plant performance history, to verify that the
        product is wholesome and unadulterated. Inspection frequency is
        increased whenever a shipment fails an inspection. Finally, except in
        cases where every shipment must be inspected, the shipping plant has
        no advance notice of whether a particular shipment will be inspected.

        The product examination, a key inspection performed on meat imports
        including Canadian product, accounts for most rejections of Canadian
        meat. In a product examination, the inspector feels, smells, and visually
        examines exposed product samples to discover defects such as blood
        clots, bone fragments, extraneous materials, feces, hair, and lesions.

        Under FSIS’ streamlined inspection procedures, Canadian meat is no
        longer given the routine visual inspection or stamped “U.S. Inspected
        and Passed.” However, Canadian meat is still subject to comprehensive
        inspections for wholesomeness, such as product examinations, although
        the methodology is now based on 3,000 randomly selected inspections
        for Canada as a whole rather than on the performance of individual
        plants. In April 1989, FSIS added an intensified inspection program for
        producing plants failing the comprehensive inspections. Under this pro-
        gram, 15 consecutive shipments from the responsible plant must stop at
        a border inspection facility where an ISIS inspector pulls the samples
        and performs the inspection.

        Nevertheless, the streamlined procedures offer Canadian meat
        exporters a significant advantage over the former procedures. Ship-
        ments that have not been assigned one of the more comprehensive
        inspections can proceed directly to their delivery point.

        To determine whether a planned shipment of Canadian meat will be sub-
        ject to U.S. inspection, a Canadian government inspector calls an FSIS
        field office and provides product information, which is entered into the
        FSIS computer system. If the computer system selects a shipment for one
         of the random inspections, a Canadian inspector draws samples fol-
         lowing ISIS instructions and places them in an accessible location in the
         back of the truck, eliminating the necessity of unloading the entire



        Page 5                         GAO/RCED-!bO-176   IWS and Canadhn   Meat Inspection
                  R-239981.1




                  vehicle. After passing through U.S. Customs, the shipment goes to a pri-
                  vately owned and operated import inspection facility located near the
                  border where the samples are examined by an FSISinspector.

                  During 1989, the new procedures experienced several start-up problems,
                  which FSIShas been working to correct. For example, from January
                  through April 1989, 15 truckloads of Canadian meat designated for
                  inspection failed to stop for inspection. As a result, FSIS directed, begin-
                  ning in April 1989, that plants whose trucks failed to stop for inspection
                  would have to send their next 10 shipments to the border inspection
                  facility regardless of whether the shipment would be inspected. This
                  penalty reduced but did not eliminate the problem. During the last 8
                  months of 1989, another 22 designated trucks did not stop.

                  Although FSIS has attempted to strengthen controls and correct
                  problems, it continues to allow Canadian inspectors to draw samples for
                  FSIS inspection. FSIS has no control procedure to ensure that samples are
                  pulled in accordance with FSIS instructions; rather, it trusts the Canadian
                  inspector to ensure samples are pulled properly. The FSIS inspectors
                  union has expressed concern about this procedure because it reduces the
                  control its members have over the inspection process, However, if
                  inspections are eliminated entirely, as now proposed, the use of Cana-
                  dian inspectors to draw samples for ISIS inspections will be moot.


Rejection Rates   were higher in 1989 than in 1988, In 1989,90, or 3 percent, of 3,030
                  randomly selected lots for Canada as a whole failed product examina-
                  tion; and 151, or 8 percent, of an additional 1,866 lots failed inspection
                  under the intensified inspection program. Twenty-one, or almost 8 per-
                  cent, of 271 randomly selected shipments failed at the Pembina, North
                  Dakota, port of entry, a rate about three times as high as the average
                  rate of six other ports of entry and twice as high as the port of entry
                  with the next highest rate. In 1988, 129, or 1 percent, of 13,466 lots
                  failed product examinations. Data by port of entry could not be devel-
                  oped for 1988.

                  The causes and significance of the increased 1989 rejection rate and the
                  higher rate at Pembina are unclear for several reasons. First, the many
                  changes made to import inspection procedures in 1989 make compari-
                  sons with prior years difficult. Second, FSIS generally has not used coun-
                  trywide rejection rates to manage its import inspection program and has
                  no criteria for an acceptable rejection rate for Canada. FSIS officials said


                  Page 0                         GAO/RCED-90-176   FSIS and Canadian   Meat Inspections
I’   ,




         R-229981.1




         that the 1989 random, countrywide sampling approach, if followed for
         several years, may provide a basis for developing better information on
         rejection rates. Historically, ISIS has structured its inspection program to
         focus primarily on ensuring wholesome product from individual plants
         by intensifying the level of inspection for plants failing inspection. And
         third, ISIS has not calculated sampling errors for these rejection rates,
         and thus it cannot determine to what extent the increased rates may
         have resulted from random chance, a decline in product quality, or some
         other reason.

         FSIS has  not analyzed the reasons why the rejection rate increased from
         1988 to 1989. It has conducted an analysis of 1989 rejection data (see
         app. III), which shows that low-rated Canadian plants had higher rejec-
         tion rates than high-rated plants.” Because of the proposed open border
         and limited staff resources, ISIS officials view additional analyses of
         rejection rates as a low priority.

         Others have found the 1989 Canadian rejection rates significant. Begin-
         ning in February 1990, the FSIS inspector assigned to the Sweetgrass,
         Montana, border inspection facility and the president of the U.S.-Canada
         Border Inspection Association, whose membership includes owners of. 12
         border inspection facilities, publicly criticized “loose” inspection proce-
         dures and expressed concern about “high” rejection rates for Canadian
         meat. (The Sweetgrass inspector accounted for about 30 percent of all
         Canadian rejections from product examination failures in 1989.)
         According to the inspector and the association president, the open
         border should not be implemented, and FSIS should return to the proce-
         dures applied to Canada prior to 1989. They noted that if streamlined
         procedures were continued, the procedures should be revised so that
         Canadians do not have advance notice of an assigned inspection. As sup-
         port for the need for tighter procedures, the inspector provided us with
         documentation showing that in one 4-day period during May 1990 he
         rejected five of eight truckloads of fresh pork from one Canadian plant
         for product examination failures-a total of about 200,000 pounds.

         The inspector’s and association’s concerns have been the subject of sto-
         ries in a Montana newspaper and several industry publications. The
         head of FSIS’ International Programs office told us that she believes that
         the inspector cannot generalize from his experience to the overall
         quality of Canadian product. Although the FSIS official’s response is
         valid, we believe that the inspector’s statements will generate confusion

         %hnada rates its meat-producing plants on a five-point scale in descending order of excellence.



         Page 7                                   GAO/RCED-W-176       ISIS and Canadian    Meat Inspections
                        B-233381.1




                        and concerns among consumers about the wholesomeness of Canadian
                        meat, and FSIS needs to further evaluate Canadian rejection rates.


                        Canada has set the level of its import inspections at the same basic rate
US. Plants Satisfied    the United States uses-about one shipment in nine. Canada believes
With Canadian           this rate is too high and would prefer to further reduce or eliminate
Inspection Procedures   inspections but has decided to follow whatever rate FSIS sets. Agricul-
                        ture Canada officials told us that their import inspection system for US.
                        meat and poultry was not experiencing any problems. Our contacts with
                        25 major U.S. meat and poultry plants exporting to Canada indicated
                        satisfaction with the Canadian inspection procedures, principally
                        because (1) they do not pay to use Canadian inspection facilities and (2)
                        their meat exports to Canada were accepted, with few exceptions.


                        Our review identified several legal and policy issues about FSIS’ proposal
Open Border Raises      to establish an open border for meat and poultry trade between the
Legal and Policy        United States and Canada.
Issues                  From a legal perspective, there is a question of whether the open border
                        proposed under the Free Trade Agreement conflicts with the require-
                        ments of U.S. meat inspection laws and whether a legislative change is
                        necessary. The United States-Canada Free-Trade Agreement Implemen-
                        tation Act of 1988 (P.L, 100-449) specifies (section 102(a)) that “no pro-
                        vision of the Agreement, nor the application of any such provision to
                        any person or circumstance, which is in conflict with any law of the
                        United States shall have effect.” FSIS’ program officials have raised a
                        possible legal issue about whether legal authority exists to permanently
                        establish an open border or whether FSIS needs to ask the Congress to
                        amend the Federal Meat Inspection Act. Before the open border agree-
                        ment, the head of FSIS International Programs office told us that port-of-
                        entry inspection of Canadian meat imports was required under FSIS’ stat-
                        utes. Subsequently, she told us that a legislative change may be neces-
                        sary to permanently eliminate import inspection for Canadian product.

                        On June 29,1990, MS’ proposed rule for a l-year open border experi-
                        ment was published in the Federal Register. According to USDA’SDeputy
                        Assistant General Counsel, the legality of the open border experiment
                        may be an issue that is raised during the public comment period.




                        Page 8                         GAO/RCED-90-176   FSIS and Canadian   Meat Inspections
              R-239981.1




              If, following the rulemaking, FSIS decides to test the open border concept,
              the key policy issue will be whether ISIS still has adequate import con-
              trols to ensure the wholesomeness of Canadian meat. FSIS reviewers no
              longer review Canadian plants, and an open border will eliminate border
              reinspections. These are two controls that enabled FSIS to obtain some
              direct assurance that the Canadian inspection system was functioning in
              conformance with USDA laws and regulations. Without them, FSIS’
              equivalency review becomes FSIS’basic management control for ensuring
              the wholesomeness of Canadian meat.

              Finally, there is the issue of how ISIS should determine the success of an
              open border experiment. In March 1990, USDA issued a “Joint U.S.-
              Canada Plan for Implementing the Open Border Experiment in Meat and
              Poultry Trade,” which includes an evaluation plan for determining the
              extent to which objectives of the Free Trade Agreement are met during
              the experiment. These objectives are about eliminating trade barriers,
              facilitating fair competition, and liberalizing conditions for investment.
              The evaluation plan, however, does not discuss how it will assess the
              effectiveness of an open border in ensuring the wholesomeness of
              imported meat and poultry.


              Our review identified two areas that raise concerns about whether ISIS’
Conclusions   loosening of import controls over Canadian meat will ensure wholesome
              meat. First, ISIS’ determination that the Canadian inspection system is
              virtually identical to the U.S. system and that FSIS can have more confi-
              dence in Canada’s ability to ensure wholesome meat than it can for
              other countries has not been documented to allow an independent, objec-
              tive review of how FSIS arrived at its determination. Second, the unex-
              plained 1989 rejection rates for Canadian product are cause for concern.
              Without an adequate explanation, the rates could be interpreted as indi-
              cating a decline during 1989 in the effectiveness of the Canadian inspec-
              tion system. The rates can also be expected to raise concerns in
              consumers’ minds about the wholesomeness of Canadian meat that was
              not inspected, especially in light of the criticisms from the Sweetgrass
              inspector and inspection facility owners.

              FSIS’ proposal for a U.S.-Canadian team to annually review the
              equivalency of the two inspection systems appears to recognize the need
              to establish a documented record. FSIS’ proposal calls for the preparation
              of a report that would “serve as a record of the state of equivalence of




              Page 9                         GAO/RCED-90-176   FSIS and Canadian   Meat Inspections
                      B-239981.1




                      the two systems.” We believe FSIS needs to clearly demonstrate and doc-
                      ument that American consumers can rely on the Canadian inspection
                      system to guard against contaminated meat under an open border.

                      Also, if FSIS decides to proceed with the open border test after the
                      rulemaking, we believe it is important that both the economic and food
                      safety impacts of an open border be evaluated.


                      As part of the process for deciding whether to go forward with an open
Recommendations       border test, we recommend that the Secretary of Agriculture direct the
                      Administrator, FSIS, to

                  .   review and document the equivalency of the Canadian inspection
                      system using the risk assessment systems approach or the proposed
                      team approach;
                      investigate, as part of the equivalency review, the reasons for the high
                      rejection rates in 1989; and
                      if the open border test is approved, incorporate into the evaluation plan
                      an assessment of the impact of an open border on food safety.


                      More detailed information on each question is presented in appendixes I,
                      II, and III. Our objectives, scope, and methodology are in appendix IV.

                      FSISofficials reviewed portions of a draft of this report for technical
                      accuracy, and changes have been made where appropriate. However,
                      requested, we did not obtain official agency comments on this report. As
                      arranged with your offices, we plan to distribute copies of this report to
                      the Secretary of Agriculture and other interested parties.

                      This work was done under the direction of John W. Harman, Director,
                      Food and Agriculture Issues, who can be reached on (202) 275-5138.
                      Other major contributors to this report are listed in appendix V.




                      J. Dexter Peach      -
                      Assistant Comptroller General




                      Page 10                       GAO/RCED-90-176   FSIS and Canadian   Meat I~pectiom
I   ’   .




            Page 11   GAO/RCED96-176   FSIS and Canadian   Meat Inspections
Letter                                                                                                         1

Appendix I                                                                                                 14
FSIS’ Current              FSIS’ Inspection Program to Ensure Wholesomeness of                             14
                               Imported Meat
Equivalency Review         USDA Cites Inadequate Systems Approach as a Material                            16
for Canada Is                  Management Control Weakness
Outdated and Poorly        Systems Approach and Plant Evaluations Will Not Be                              18
                               Done for Canada
Documented                 FSIS’ Current Equivalency Review for Canada Is                                  20
                               Outdated and Poorly Documented

Appendix II                                                                                                21
U.S. And Canadian          FSIS Inspection Procedures for Canadian Meat                                    21
Streamlined   Inspection   First year Start-Up Problems                                                    23
                           No FSIS Control Over Samples Drawn by Canadian                                  24
Procedures for                  Inspectors
Imported Meat              US. Customs Does Not View Contraband as a Problem                               25
                           U.S. Plants Satisfied With Canadian Inspection                                  26
                                Procedures for U.S. Meat and Poultry

Appendix III                                                                                               27
Reasonsfor Higher          Rejection Data Stored in Computer System Are Generally
                               Reliable
                                                                                                           27
Rejection Rates in         Rejection Rates for Canadian Product Show Increase in                           27
1989 Are Unclear               1989
                           FSIS Uses Rejection Data to Monitor Performance of                              29
                               Individual Plants
                           Reasons for Higher Rejection Rates Are Unclear                                  30

Appendix IV                                                                                                33
Objectives, Scope,and
Methodology
Appendix V                                                                                                 36
Major Contributors to
This Report


                           Page 12                     GAO/RCED-90-176   FWS and Canadian   Meat Inspectiona
Tables   Table 111.1:Comparison of Canadian Meat and Poultry                                  28
             Inspection Data for 1988 and 1989
         Table 111.2:Analysis of Canadian Lots Failing Product                                28
             Examinations in 1989




         Abbreviations

         Am        Automated Import Information System
         FMFIA     Federal Managers’ Financial Integrity Act
         FSIS      Food Safety and Inspection Service
         GAO       General Accounting Office
         OIG       Office of the Inspector General
         USDA      U.S. Department of Agriculture


         Page 13                       GAO/RCEDfM%l76   FSIS and Canadian   Meat Inspection
Appendix I

IBIS Current Equivalency Review for Canada
Is Outdakd and Poorly Documented

                             This appendix discusses the Food Safety and Inspection Service’s (FSIS)
                             meat inspection program for exporting countries, including its efforts to
                             develop an effective approach for evaluating the equivalency of foreign
                             inspection systems. The appendix also examines FSIS’ reasons for
                             exempting Canada from the standard requirements for exporting coun-
                             tries and assesses the information that is available on the Canadian
                             inspection system.


                             The Federal Meat Inspection Act requires that meat imports be pro-
FSIS’ Inspection             duced under inspection systems that are at least equal to that of the
Program to Ensure            United States. The act also provides that, to be imported into the United
Wholesomenessof              States, meat items must be wholesome, unadulterated, and properly
                             marked, labeled, and packaged. The U.S. Department of Agriculture’s
Imported Meat                (USDA)ms carries out these requirements through an import control pro-
                             gram centering on (1) the review of foreign inspection systems, supple-
                             mented by on-site reviews of inspection activities in foreign plants,’ and
                             (2) port-of-entry inspection.

                             The review of a foreign country’s inspection system is to be completed
                             using the risk analysis systems approach. This approach examines the
                             exporting countries’ entire system of maintaining security over a
                             product as it moves from point of production to the loading dock for
                             export. FSIS considers the eligible foreign countries’ inspection system
                             the primary control for ensuring that imported meat and poultry prod-
                             ucts meet U.S. standards.” Port-of-entry inspections are intended as a
                             check on the effectiveness of foreign inspection systems in ensuring that
                             wholesome, accurately labeled products are imported that meet U.S.
                             standards.


FSIS Efforts to Dev,elop a   Since the mid-1960s, FSIS has sought to develop an import inspection
                             program that ensures protection “equal to” that provided by its
Systems Approach             domestic inspection program. In 1963, FSIS began an on-site review pro-
                             cess of the operations in individual plants certified to export to the
                             United States. In 1966, FSIS formalized this procedure and established a

                             ‘FSIS has a staff of foreign program officers, who are licensed veterinarians with experience in
                             domestic inspection; they evaluate foreign inspection systems and conduct periodic reviews of estab-
                             lishments certified to export to the United States to determine if U.S. requirements are being met.

                             “Examples of U.S. inspection standards required of other countries include (1) the assignment of
                             competent, qualified inspectors and (2) national inspection officials with sufficient authority and
                             responsibility to enforce meat inspection laws and regulations and to certify or refuse to certify
                             product intended for export.



                             Page 14                                   GAO/RCED-90-176      FSIS and Canadian     Meat Inspections
Appendix I
F6lS’ Current JY?quivalency Review for Canada
Is Outdated and Poorly Documented




permanent staff of veterinarians, called foreign program officers,
responsible for conducting plant reviews. Over the next decade, ISIS
believed that this review procedure served the needs of the public ade-
quately for the amount of resources that were invested. However,
during those years the volume and the product variety of foreign
exports changed significantly, and FSISrealized that the acceptability of
individual plants greatly depended on the controls built into each
country’s inspection system.

In November 1979, a USDA task force report recommended comprehen-
sive changes to reorient the resources of the imported meat and poultry
inspection program to ensure that the inspection process focuses on
examining the most critical areas of a meat inspection system. The task
force criticized the agency’s reliance on individual plant reviews as a
means of assessing the adequacy of foreign inspection systems and pro-
posed that a systematic method be developed to evaluate each country’s
regulatory control system. According to the task force, by concentrating
on individual establishments rather than entire inspection systems, the
program was focusing resources on proving the compliance of particular
products from particular plants on a periodic basis rather than on
ensuring the effectiveness of foreign country inspection programs over
the long run.

To improve the equivalency review process and shift its focus from
plant reviews, the task force report identified various risk areas that
needed to be analyzed as part of a systematic review of a country’s meat
inspection system. A risk area analysis is the process of (1) assessing a
hazard in terms of its severity, probability, and the extent of its impact
and (2) measuring each country’s ability to control the hazard. A risk
area analysis is not intended as a one-time look at a country but as an
ongoing and dynamic process that reflects changes occurring in the
country.

In response to the 1979 task force recommendations, ISIS began devel-
oping the methodology and necessary tools to conduct risk area anal-
yses. For example, a profile instrument was developed for each risk area
that could affect meat acceptability. In 1983, risk area profile assess-
ments were conducted for all meat exporting countries’ inspection sys-
tems for the risk areas identified in the 1979 task force report. These
assessments evaluated how a foreign inspection system deals with cer-
tain risk areas: residues, diseases, additives, gross contamination, micro-
scopic contamination, economic fraud, and compliance.



Page 15                                GAO/RCED-90-176   FSIS and Canadian   Meat Inspections
                          Appendix I
                          FBIS’ Current Equivalency Review for Canada
                          Is Outdated and Poorly Documented




                          Program officials, however, found this initial effort did not adequately
                          assess the risks associated with a country’s meat inspection program
                          and began to develop a revised risk profile format. By 1987, the risk
                          area profiles identified in the 1983 systems approach review were modi-
                          fied to reflect a more accurate systems approach review of a foreign
                          country’s inspection system. It included residues, disease, contamina-
                          tion, processing, and economic fraud/compliance. FSISbelieves it now
                          has created an appropriate way to implement a systems approach, and
                          it is preparing new risk area profiles for eligible countries, except
                          Canada, The reasons for exempting Canada are discussed in subsequent
                          sections of this appendix.


Reinspection at Port of   The second aspect of import inspection is inspection of product at the
Entry                     port of entry. FsIs refers to port-of-entry inspections as reinspections
                          because all the imported product has already been ex&ed           and
                          approved by the exporting countries’ own inspection systems. FSIS
                          inspectors are required to examine each lot of a product for general
                          dition, proper certification, and labeling. In addition to this limited
                          visual inspection, individual shipments are subject to further, more
                          thorough inspections, based on computer-assisted sampling procedures,
                          to verify that the product is wholesome and unadulterateda

                          The import reinspection program acts as a spot-check of the country’s
                          inspection system and gathers data to evaluate the continuing perform-
                          ance of the foreign inspection system. However, FSIS considers the eli-
                          gible foreign countries’ inspection system, not port-of-entry
                          reinspection, the primary control for ensuring that imported meat prod-
                          ucts meet US. standards.


                          In 1983,1987, and 1989, GAO and USDA Office of the Inspector General
USDA Cites                (OIG) reports recommended that USDAplace greater emphasis on com-
Inadequate Systems        pleting the development and implementation of systems approach
Approach as a             reviews, instead of individual plant reviews, for the countries eligible to
                          export meat to the United States. USDAhas cited the lack of an effective
Material Management       systems review approach as a material management control weakness
Control Weakness          and is taking action to update systems reviews for all countries, except
             yi           Canada, by September 1991.



                          “Port-of-entry inspection procedures are discussed in detail in app. II.



                          Page 16                                    GAO/RCED-96-176       WIS and Canadhn   Meat Inspections
              Appendix I
              FSIS’ Current Equivalency Review for Canada
              Is Outdated and Poorly Documented




GAO Reports   In two reports, we found that FSIS was not completing its systems
              approach review expeditiously. In 1983,4 we concluded that FSIS was
              making slow progress in ensuring that foreign countries’ regulations
              were equal to U.S. regulations, especially for the systematic approach
              the 1979 task force recommended. In 1987,5 we concluded that the risk
              profiles, which form the basis for the systems approach, should be
              updated to better ensure the safety of imported meat. Specifically, the
              report found FSIS’ acquisition of data to support its foreign country eval-
              uations was piecemeal, and important information, such as the risk
              profiles, was not current.


OIG Reports   In its 1987 report on FSIS’ imported meat process,” USDA’S OIG said that
              FSIS needs to more effectively utilize the systems approach to evaluate a
              country’s eligibility to export meat and/or poultry products to the
              United States. The OIG concluded that FSIS did not have reasonable assur-
              ance that systemic problems in foreign inspection systems were detected
              and corrected, Therefore, an increased risk exists that products not
              meeting U.S. standards are exported to the United States. The OIG also
              recommended that FSIS revise and evaluate the most current information
              concerning eligible countries’ meat inspection programs to determine
              whether the foreign systems have remained equal to that of the United
              States. In a 1989 follow-up,7 the OIG emphasized the importance of imple-
              menting the systems approach recommendations made in 1987 and the
              need to centrally maintain documentation supporting the residue certifi-
              cation of foreign countries.




              41mproved Management of Import Meat Inspection Program Needed (GAO/RCED-83-81, June 1983).
                                        ck: Chemical Residue Detection and the Issue of Labeling (GAO/


              “Food Safety and Inspection Service: Audit of the Imported Meat Process (USDA/OIG, Audit Report
              No. 38002-2-Hy, Jan. 1987).
              7FsIS Follow-Up Audit of the Imported Meat Process (USDA/OIG, Audit Report No. 38002-4-Hy, Mar.
              1989).



              Page 17                                 GAO/RCED-90-176    FSLS and Canadian    Meat Inspections
                              Appendix I
                              ItSIS’ Current Equivcllency Reviews for Canada
                              Is Outdated and Poorly Documented




Inadequate Systems            The Federal Managers’ Financial Integrity Act (FMFIA) (31 USC. 3512)
Reviews Cited as Material     requires agencies to assess and report annually to the President and the
                              Congress on the adequacy of the internal management controls in their
Management Control            programs.
Weakness
                              In its fiscal year 1988 and 1989 FMFIA reports, USDA described how FSIS’
                              evaluation systems are not designed to detect and correct systemic
                              problems in the inspection programs of countries exporting to the
                              United States. The USDA reports cited the following FSISmaterial weak-
                              nesses and planned action with a scheduled completion date of Sep-
                              tember 1991:

                            . Material Weakness: Evaluation systems are not designed to detect and
                              correct systemic problems in the inspection programs of countries
                              exporting to the United States. Planned action: Fully implement conver-
                              sion of the foreign inspection review program to a systems approach
                              instead of the plant-by-plant approach.
                            . Material Weakness: New written guidance is needed for evaluating the
                              inspection programs of foreign countries. Planned action: Develop and
                              issue written guidance to foreign program officers as the systems review
                              approach is implemented.


Status of Systems             IBIS plans to complete support materials and risk area profiles for all
Approach Reviews              countries, except Canada, at the rate of one per year through 1991. To
                              date, two risk area profiles, contamination and residues, have been com-
                              pleted and another risk profile, processing, is scheduled to be completed
                              this year.


                              Since January 1989, FSIShas made two major changes to the equivalency
Systems Approach              review process for the Canadian system. First, the systems approach
and Plant Evaluations         risk area analyses will not be done for Canada. Instead, FSIS has pro-
Will Not E3eDone for          posed an annual equivalency review to be conducted by a single team of
                              experts from both countries, with a single report prepared. FSIS believes
Canada                        this approach to equivalency is more appropriate for Canada, given its
                              close relationship with the United States.

                              Second, FSIS’ foreign program officers are no longer conducting on-site
                              evaluations of Canadian plants, nor are Agriculture Canada inspectors
                              conducting similar evaluations of U.S. plants. Before 1989, FSIS had a
                              foreign program officer assigned to examine all aspects of the Canadian
                              inspection system, including its plants, on a regular basis. Similarly,


                              Page 18                                 GAO/RCED-90-176   FSIS and Canadian   Meat Inspections
Appendix I
FY3IS’ Current Equivfdency Review for Canada
Is Outdated and Poorly Documented




Canadian reviewers routinely traveled to the United States and looked
at establishments exporting to Canada. However, in 1989 FSISbegan a
new procedure: It now accepts on-site evaluations conducted by Agricul-
ture Canada’s internal review group and Agriculture Canada accepts
FSIS’evaluations of domestic plants conducted for Agriculture Canada.s
(Each country’s inspection service has an internal audit group that eval- G
uates the work of the inspection service. Inspectors from these internal
audit groups now conduct the on-site plant evaluations.)

FSISsupports these changes because it believes that the Canadian meat
inspection system is more like the U.S. system than is that of any other
country. This equivalency is based on the close similarity between the
goals, objectives, and other features of the two countries’ inspection sys-
tems. Although FSIS recognizes that other countries have inspection sys-
tems “at least equal to” the U.S. system, FSIS believes the Canadian
system is virtually identical to the U.S. system. (FSIS’ standard of accept-
ability is equivalence with the U.S. inspection system; this means that
controls and practices do not have to be identical to those in the United
States if they achieve the same results.) As a result, FSIShas more confi-
dence in the Canadian inspection system’s ability to ensure wholesome
meat than it does in other countries’. According to the head of FSIS’ Inter-
national Programs, the enactment of the Free Trade Agreement between
the United States and Canada served as a mechanism to reduce the regu-
latory and bureaucratic burdens that each country imposes on each
other and helped hasten the changes that had already been considered.

FSISofficials base their high degree of confidence in the Canadian inspec-
tion system on about 20 years of a close working relationship with
Canadian inspection officials and a detailed familiarity with the Cana-
dian inspection system. On the basis of this experience, and the exper-
tise and judgment of FSIS’professional staff, IBIS believes that the
Canadian inspection system is virtually identical to the U.S. system.
However, we did not find documentation in FSIS’ files supporting this
belief.




aUnder the recent Feb. 26,1990, U.S.-Canada agreement, both countries plan to eliminate altogether
on-site reviews of each other’s plants if the proposed l-year test of the open border proves successful.
Successwill be determined by a joint U.S.-Canadian team that will evaluate how well the test meets
five objectives of the Free Trade Agreement: (1) elimination of trade barriers, (2) facilitation of fair
competition, (3) liberalization of investment, (4) establishment of effective administrative procedures,
and (6) establishment of further cooperation to expand and enhance the benefits of the agreement.



Page 19                                   GAO/RCED-99-176      FSIS and Canadian     Meat Inspections
                      Appendix 1
                      FSIS’ Current Jkpivalency Review for Canada
                      Is Outdated and Poorly Documented




                      Our evaluation, like our prior findings on all exporting countries, found
FSIS’ Current         that the available information on Canada’s equivalency is outdated and
Equivalency Review    fragmented, This information is not assembled in a document that sys-
for Canada Is         tematically assesses the Canadian inspection system. Although FSIS offi-
                      cials said that they have a management process that periodically
Outdated and Poorly   consolidates, analyzes, and summarizes information to determine the
Documented            equivalency of the Canadian inspection system, our review of agency
                      files found that this process was not documented.

                      The original equivalency review conducted for Canada in about 1970
                      evaluated the laws, policies, and administration of Canada’s inspection
                      system. However, ISIS did not prepare summary reports or management
                      documents of this evaluation. An initial systems approach using the risk
                      area profiles was completed in 1983 but has not been updated to reflect
                      the revised and improved systems approach’s risk areas. Although FWS
                      maintains more current information in its files on specific aspects of the
                      Canadian meat inspection system, daily correspondence with Agricul-
                      ture Canada concerning specific problem areas, and other miscellaneous
                      information, we found no systematic assessment of this information that
                      demonstrates how it supports FSIS’ position that the Canadian inspection
                      system is equivalent to the U.S. system. Also, documentation was not
                      available in FSISfiles to allow an independent, objective review of how
                      FSIS’arrived at its determination that the Canadian inspection system is
                      virtually identical to the U.S. system and that FSIS can have more confi-
                      dence in Canada’s ability to ensure wholesome meat than it can in other
                      countries’.




                      Page 20                              GAO/RCED-90-176   FSIS and Canadian   Meat Inspections
Appendix II

U.S. And Cmadim Streamlined Inspection
Procedures for Imported Meat

                  This appendix discusses the streamlined inspection procedures FSISinsti-
                  tuted in 1989 in response to the Free Trade Agreement.


                        1989 streamlined inspection procedures for Canadian meat differ in
FSIS Inspection   IBIS’
                  several respects from previous procedures. FWS,however, did not change
Procedures for    its residue testing program, which checks for drugs and other chemical
Canadian Meat     residues that may occur in meat products.

                  Under normal FSISimport inspection procedures, which Canada followed
                  prior to the Free Trade Agreement and all other eligible foreign coun-
                  tries still follow, meat and poultry entering the United States must be
                  unloaded at inspection facilities for a routine visual inspection.1 The FSIS
                  inspector examines a shipment for general condition, proper certifica-
                  tion, and labeling. Product defects found in this inspection are generally
                  related to transportation and water damage, inadequate labeling, and
                  improper certification.

                  In addition, certain computer-selected shipments are subject to further,
                  more comprehensive inspections to verify that the product is wholesome
                  and unadulterated. The computer selects these shipments taking pre-
                  vious plant performance and the nature of the product into account.
                  Inspection frequency is increased whenever a shipment fails an inspec-
                  tion Also, except in cases where every shipment must be inspected, the.
                  shipping plant has no advance notice of the computer’s inspection
                  assignments.

                  The two key inspections performed on Canadian meat are product
                  examinations and chemical residue tests. The product examination is an
                  “organoleptic” type of inspection in which an inspector feels, smells,
                  and visually examines exposed product samples to discover defects such
                  as blood clots, bone fragments, extraneous materials, feces, hair, and
                  pathologic lesions. For residue tests, the inspector draws samples and
                  sends them to designated laboratories for analysis. Almost all rejections
                  (by weight) of Canadian product result from product examination fail-
                  ures; few residue tests fail.

                  If meat passes these inspections, it (or the shipping containers) is
                  stamped “U.S. Inspected and Passed,” the product is reloaded, and the


                  ’ FSIS often refers to import inspections as reinspections to recognize that imported meat has already
                  been inspected and approved by the expot&g country’s inspection system.



                  Page 21                                   GAO/RCED-B&176       FWS and Canadian     Meat Inspections
                  Appendix II
                  U.S. And Canadian Streamlined   Inspection
                  Procedures for Imported Meat




                  truck proceeds to its destination. Meat and poultry failing import inspec-
                  tion are refused entry; marked “U.S. Refused Entry;” and destroyed,
                  converted to nonhuman food use, or returned to the originating country.

                  In 1988, Canadian exporting plants or their importers could elect to
                  have inspection performed by FSIS either at inspection facilities near the
                  port of entry or at the shipment’s delivery point. Canadian plants would
                  make their choice on the basis of such factors as cost and convenience.


Changes in 1989   In January 1989, under general provisions of the Free Trade Agreement
                  to minimize inspections and remove barriers to trade, FSIS changed its
                  inspection procedures for Canadian meat to ease entry into the United
                  States. These changes, which FSIS called streamlined procedures, elimi-
                  nated some inspections and reduced others. But the streamlined proce-
                  dures involve more than just reducing the level of inspection. In certain
                  areas FSIShas fundamentally changed its approach for inspecting Cana-
                  dian product.

                  Canadian meat is no longer given the routine, visual inspection or
                  stamped “U.S. Inspected and Passed.” However, Canadian product is
                  still subject to the more thorough types of inspection, such as product
                  examinations, although the basic sampling methodology is now based on
                  3,000 randomly selected lots for Canada as a whole rather than on the
                  past performance of individual plants. In 1989, all 3,000 lots selected
                  were given at least a product examination. However, FSISmade no
                  changes in its residue-testing approach for Canada because it believed it
                  had a clear legislative mandate for a strong residue-testing program for
                  imported meat and poultry. In fact, the sampling rate for residue tests of
                  Canadian product, as set forth in ISIS’ annual residue test plan,
                  increased from 3,900 sample units in 1988 to 4,700 units in 1989
                  because of a relatively high number of Canadian violations in 1988.
                  (More than one residue sample may be taken from a randomly selected
                  lot.)

                  Also, beginning in January 1989, Canadian shippers no longer had the
                  option of choosing the delivery point as the place where the FSIS inspec-
                  tion would be performed. If an inspection was required, it had to be per-
                  formed at an inspection facility near the port of entry. This policy
                  change did not result from the Free Trade Agreement but from a 1986
                  agency decision to improve control prior to inspection by requiring that
                  imported product be inspected as soon as it enters the United States.



                  Page 22                                GAO/RCED-90-176   FSIS and Canadian   Meat Inspections
                          A.ppe* n
                          U.S. And Caruulian StreamUned     Inspection
                          Procedures for Imported Meat




                           To determine whether a planned shipment of Canadian meat will be sub-
                          ject to a product examination, a residue test, or other types of inspection
                          under the streamlined inspection procedures, the Canadian inspector
                           calls an FSIS field office and provides product information, which is
                          entered into the ISIS computer system. If the computer system selects
                          the shipment for detailed inspection, the samples at participating Cana-
                           dian plants are (1) drawn by Canadian inspectors according to FSIS
                          instructions and (2) placed in an accessible location in the back of the
                          truck.’ After passing through U.S. Customs, the shipment must go to a
                          privately owned and operated import inspection facility located near the
                          border where the samples are examined by an FSISinspector. Samples
                          may be drawn up to 3 working days prior to FSISinspection. If a ship-
                          ment is not selected for any of the detailed inspections, the shipment can
                          proceed directly to its destination, stopping at the border generally for
                          only a paperwork check by U.S. Customs.


                          During its first year, the streamlined inspection procedures experienced
First Year Start-Up       several start-up problems. These problems appear to have been caused
Problems                  by (1) FSIS’ decision to implement the procedures shortly after the effec-
                          tive date of the Free Trade Agreement and (2) limited testing and anal-
                          ysis of the new procedures.

                          Although the Congress approved the agreement in September 1988, the
                          Canadian government did not give its approval until November 1988.
                          The agreement was a controversial issue in Canada, and its approval by
                          Parliament was uncertain, The agreement became effective on January
                          1, 1989. FSISconducted no documented analysis or assessment of the
                          impact of its proposed procedures nor did it evaluate alternatives.
                          Although a pilot test of some elements of the proposed procedures was
                          conducted during October 1988, no written report or analysis was pre-
                          pared on test results.

                          Start-up problems with streamlined inspection included the following:

                      l   From January through April 1989,15 truckloads of Canadian meat des-
                          ignated for inspection “bypassed” FSIS border inspection facilities and

                          “Import inspection procedures call for two different types of sampling. One type selects individual
                          shipments or lots for inspection. If a shipment is selected for inspection, the other sampling type
                          determines how portions of the overall shipment are selected for examination. For example, if a
                          40,000-pound shipment is selected for inspection, procedures may call for the inspector to draw 30
                          12-pound samples at random from the overall shipment. On the basis of the inspector’s findings on
                          these 30 samples, the entire 40,000~pound shipment is accepted or rejected.



                          Page 23                                   GAO/RCED-90-176     FSIS and Canadian    Meat Inspections
                           Appendix II
                           U.S. And Canadian Streamlined   Inspection
                           Proceduree for Imported Meat




                         failed to stop for inspection. FSE attributed the bypasses to the Canadian
                         plants’ unfamiliarity with the new procedures. To deal with this situa-
                         tion, FSIS directed in April 1989 that plants found bypassing inspection
                         would have to send their next 10 shipments to the U.S. border inspection
                         facility. In spite of this penalty, however, bypassing continued, with FSIS
                         reporting 22 bypasses from May through December 1989.
                       . In April 1989, partly in response to an increased rejection rate of Cana-
                         dian product, FSISestablished an intensified inspection program for indi-
                         vidual plants failing inspections. Under this program, if a plant fails a
                         product examination, the next 16 shipments from that plant must stop
                         at a border inspection facility where the samples are pulled by FSIS
                         inspectors who perform the product examinations. For the &month
                         period in 1989 during which the intensified inspection program was in
                         effect, FSIS’ performed 1,866 intensified inspections.
                       l The import inspection computer system, quickly reprogrammed to
                         implement the new procedures for Canada, exhibited certain data
                         problems. First, the computer system could not distinguish between
                         inspections assigned on the basis of the 3,000-countrywide sampling
                         plan and those assigned under the intensified inspection program. Con-
                         sequently, FSIScould not determine the overall Canadian rejection rate.
                         In early 1990, FSIS staff had reviewed 1989 inspection files to identify
                         rejections resulting from the countrywide samples. Second, the system
                         was double-counting some inspection failures and understating the
                         weight of others. FSISappears to have corrected these problems in 1990.


                                has no control mechanism to ensure that its sampling procedures are
No FSIS Control Over       FSIS
                           properly performed at Canadian plants, other than its trust in the integ-
SamplesDrawn by            rity of Canadian inspectors. In our view, the primary issue raised by
Canadian Inspectors        these revised sampling procedures is not whether Canadian inspectors
                           can be relied on to follow them, but whether the procedures themselves
                           and the lack of FSIS oversight instill consumer confidence. In this respect,
                           our work raised several concerns.

                           First, the Canadian inspector who is selecting the samples is part of the
                           Canadian inspection system that FSIS import inspections are evaluating,
                           To have the person being evaluated pull his or her own sample creates
                           the appearance that the sampling process lacks independence and objec-
                           tivity. Second, Canadian inspectors and officials told us that if a Cana-
                           dian inspector pulls a sample that is clearly contaminated, the inspector
                           would substitute another sample because he or she could not allow con-
                           taminated product to leave the plant. Substituting for a sample that
                           would be rejected lowers the overall rejection rate and clearly destroys


                           Page 24                                  GAO/RCED-Wl76   FSIS and Canadian   Meat Inspections
                        Appendix II
                        U.S. And Canadian Streamlhed   Inspection
                        Procedures for Imported Meat




                        the integrity of the sampling process. And third, in a visit to 1 of the 10
                        largest Canadian exporting plants, we found that pulling samples prop
                        erly in accordance with FSISinstructions can be a time-consuming and
                        difficult process within the busy operational environment of a typical
                        large Canadian processing plant. (The manager of this plant decided to
                        have the FSISinspector draw the samples even though this may cause
                        some delay at the U.S. border inspection facility.) While there is no evi-
                        dence that Canadian inspectors are not following FSIS instructions when
                        drawing samples, the apparent difficulty of pulling samples at Canadian
                        processing plants and the possibility that new samples could be substi-
                        tuted for contaminated samples are conditions that are not conducive to
                        an inspection program in which consumers can have confidence. How-
                        ever, if inspections are eliminated entirely, as now proposed, the use of
                        Canadian inspectors to draw samples for FSIS inspection will no longer be
                        an issue.

                        In contrast to FSIS procedures, Agriculture Canada representatives meet
                        US. trucks at the border, where they determine whether a shipment will
                        be inspected. Consequently, a U.S. plant does not know until its truck
                        reaches the Canadian border whether a shipment will be inspected. If an
                        inspection is assigned, the samples are selected by the Canadian
                        inspector when the shipment arrives at its destination.


                        We were also asked whether the current streamlined procedures protect
U.S. Customs Does Not   against the shipment of contraband.
View Contraband as a
Problem                 U.S. Customs has primary responsibility for preventing contraband
                        from entering this country. Customs officials told us that although FSIS
                        streamlined procedures provided the opportunity for smuggling contra-
                        band into the United States, they did not believe this was a problem.
                        According to Customs officials at the two ports of entry we visited, Cus-
                        toms inspections for contraband are usually generated by tips and
                        informal sources of information, rather than random testing of trucks
                        entering the United States. With respect to drugs, they noted that
                        Canada considers the United States a source for drugs and other contra-
                        band, not the reverse. In addition, Customs is now installing a random
                        inspection process for the Canadian border. This system will identify
                        high-risk shipments that will be subject to an intensive examination.




                        Page 25                                 GAO/RCEJHO-176   ISIS and Canadian   Meat Inspections
                        Appendix II
                        U.S. And Canadian Streamlined   Inspection
                        Proceduree for Imported Meat




                        Agriculture Canada has reciprocated for the U.S. streamlined proce-
U.S. Plants Satisfied   dures and reduced the level of its import inspection to the same rate as
With Canadian           rsrs-about one shipment in nine. Agriculture Canada would prefer to
Inspection Procedures   reduce the level of inspection to a much lower rate but has decided to
                        follow whatever rate FWS sets. However, Canada’s import inspection
for U.S. Meat and       system differs from the US. system in ways that create several advan-
Poultry                 tages for U.S. plants. For example, Canada conducts import inspections
                        not at ports of entry but at the destination point where the truck will be
                        unloaded, whether or not the shipment is inspected. Also, the U.S. plant
                        does not have to pay a fee for use of Canadian inspection facilities. Agri-
                        culture Canada officials told us that their import inspection system for
                        U.S. product is not experiencing any significant problems.

                        American plants exporting meat and poultry to Canada told us that they
                        have received satisfactory treatment under the Canadian import inspec-
                        tion system. We contacted officials from 26 plants that were substantial
                        exporters of meat or poultry products to Canada in 1989. Overall, these
                        officials were satisfied with the Canadian inspection procedures and
                        had not experienced any serious problems. Their responses indicated
                        several reasons for their overall satisfaction. Since shipments to Canada
                        were inspected at the destination rather than at the border, enroute
                        delays were minimal. Also, American exporters did not pay for inspec-
                        tion services performed in Canada. (The fees charged by US. inspection
                        facilities are an irritant to some Canadian plants.)

                        And finally, these plants experienced minimal rejections of their ship-
                        ments by Agriculture Canada in 1988 and 1989. Although the plants
                        contacted typically shipped 1 or 2 trucks to Canada each week, 18
                        plants reported they had had no rejections in 1989. The other plants
                        reported only a few rejections. The pattern was similar in 1988.

                        Some plant officials did report problems with the paperwork required.
                        They did not always know what Canada’s requirements were or
                        believed that the Canadian inspectors were unnecessarily meticulous
                        about the preparation of the paperwork. Plant officials also reported
                        that Agriculture Canada officials were very helpful in working out
                        problems.




                        Page 26                                 GAO/RCEDQO-176   PSIS and Canadian   Meat Inspectiona
Appendix III

Reasonsfor Higher Rejection Rates in 1989
Are Unclear

                                    This appendix discusses FSIS’ information on Canadian rejection rates
                                    and examines the possible explanations for differences between the
                                    1988 and 1989 rates. It also explains how FSIS uses rejection rates in
                                    managing its import inspection program.


                                    Rejection data on imported product are maintained in FSIS’ Automated
Rejection Data Stored               Import Information System (AIIS), a computerized system that central-
in Computer System                  izes inspection and shipping information from all U.S. ports, Information
Are Generally Reliable              stored in the system includes the amount of products offered from each
                                    foreign country and establishment, inspection results, and the amount
                                    refused entry.

                                    Our analysis of rejection data focused on product examinations per-
                                    formed and failed in each year. Except for residue testing, product
                                    examination is the basic type of inspection performed on Canadian
                                    product and the primary reason for rejecting Canadian product. We did
                                    not look at residue tests because relatively few Canadian shipments fail
                                    these tests; ms reported 26 residue violations in 1988 out of 6,916 Cana-
                                    dian samples analyzed and only 7 violations in 1989 out of 3,173 sam-
                                    ples analyzed.

                                    Because our analysis of computer-processed rejection data was impor-
                                    tant for achieving our objectives, we tested the reliability of these data
                                    for 1989 by comparing the computer-processed data with paper source
                                    documents, including field office Refused Entry Logs, health certificates,
                                    and inspection results forms. Generally, inspection and rejection data
                                    were reliable, except for data on the weight of rejected shipments. We
                                    found rejected weight data to be inaccurate because of inadequate
                                    software changes made to the computer system to reflect changes made
                                    to Canadian inspection procedures during 1989. FSIS made additional
                                    software changes to correct this problem in January 1990.


                                    According to FSIS inspection data, rejection rates for Canadian meat
Rejection Rates for                 increased in 1989. As shown in table 111.1,the rejection rate was about 1
Canadian Product                    percent in 1988 and about 5 percent in 1989. In addition, as shown in
Show     Increase       in   1989   table 111.2,the 1989 rejection rate of 5 percent resulted from a 3-percent
                                    rejection rate for product examinations performed under the random-
                    ”               based inspection approach and an 8-percent rate under the intensified
                                    inspection approach for plants failing inspections. These rejection rates
                                    should be reviewed with certain data limitations in mind. First, FSIS offi-
                                    cials emphasized that rejection rates reported under the countrywide


                                    Page 27                        GAO/RCED-90-170   FSIS and Canadian   Meat Inspections
                                        Appendix III
                                        Reaeone for Higher    Rejection   Ratm in 1989
                                        Are Unclear




                                        inspection program are not comparable to rejection rates reported under
                                        the intensified inspection program. Second, sampling errors and confi-
                                        dence intervals have not been calculated for these rejection rates. Conse-
                                        quently, FWS cannot determine to what extent the increased 1989 rates
                                        were actually the result of random chance due to statistical variability.
                                        (Sampling error for rejection rates is discussed later in this appendix.)
                                        And third, since the size of inspected lots can vary from a few thousand
                                        to over 40,000 pounds, a more meaningful comparison of rejection rates
                                        would also include data on the weight of rejected lots, adjusted to reflect
                                        the different lot sizes. However, reliable and consistent data on the
                                        weight of rejected lots were not available to make comparisons between
                                        1988 and 1989.

Table 111.1:Comparison of Canadian
Meat and Poultry Inspection Data for    Data categories                                                                        1988          1989
1989andl989                             Weiaht of oroduct offered for entry into U.S. (in millions of pounds)                   680            693
                                        Total lots offered for entry into USa                                                61,254         26,629
                                        Lots inspected for a product examination                                             13,466          4,696
                                        Ratio of lots assigned a product examination to total lots                             1:4.5          115.4
                                        Total lots failina a product examination                                                 129           241
                                        Percent of lots inspected failing a product examination                                    1             5
                                        aA lot is made up of products produced by one plant that are similarly packaged and processed. A
                                        truckload can include single or multiple lots. In 1989 FSIS broadened its definition of a “lot” by grouping
                                        similar products together into single, “generic” lots, thereby eliminating inspections on many small lots
                                        of similar products.
                                        Source: Data obtained from FSIS’ Automated Import Information System.


Table 111.2:Analybis of Canadian Lots
Failing Product Examlnatlons In 1989                                                                        Number          Number        Percent
                                        Data cateaories                                                   inspected        reiected      rejected
                                        Lots assigned a product examination on the basis of
                                          countrywide random selection                                          3,030             90               3
                                        Lots from specific plants inspected because of prior
                                          oroduct examination failures                                           1,666           151               6
                                        Source: Data obtained from FSIS’ Automated Import Information System.


                                        Twenty-one, or almost 8 percent of 271 randomly selected shipments
                                        failed at the Pembina, North Dakota, port of entry, a rate about three
                                        times as high as the average rate of six other ports of entry and twice as
                                        high as the port of entry with the next highest rate, according to our
                                        analysis of AIIS data of the seven border ports of entry.’ Agriculture
                                        Canada officials have expressed concern about the high failure rate at

                                        ‘The private import inspection facilities are generally located within a few miles of the ports of entry
                                        along the U.S.-Canadian border.



                                        Page 28                                     GAO/RCED-90-176       F’SIS and Canadian    Meat Inspections
                      Appendix Ill
                      ~acm113 for Higher Rejection   Bates in 1989
                      Are Unclear




                      Pembina and reported to FSISthat reinspection of refused shipments
                      revealed no deficiencies.

                      ~5%cannot explain why rejection rates increased in 1989 or whether the
                      rates were within acceptable ranges. ISIS has not analyzed the reasons
                      why the rejection rate increased from 1988 to 1989. According to a FSIS’
                      analysis of the 3,030 random inspections performed in 1989, rejections
                      varied by the quality of the producing plant and by product category. In
                      an April 1990 paper, Reinspection of Canadian Product Presented for
                      Import Into the United States During 1989, ms reported that ratings of
                      Canadian plants were related to the rejection of lots: Higher rated plants
                      had lower rejection rates. Agriculture Canada rates its plants on a five-
                      point scale in descending order of excellence -AAA, AA, A, B, C. FSIS’
                      analysis found that the A-and B-rated plants had rejection rates (3.9 and
                      3.7 percent) about twice those of the AAA- and AA-rated plants (1.7
                      and 2.2 percent). C plants had relatively few product examinations per-
                      formed on their product; none of which failed. The MS paper also found
                      that product categories, such as boneless manufacturing meat and
                      headmeat, had significantly higher rejection rates than other product
                      categories, such as wholesale meat cuts. For example, 3 of 18 lots of
                      headmeat were rejected-a 16.7-percent rejection rate.

                      However, the FSISpaper did not comment on the meaning of any of the
                      reported rates for the import inspection program. For example, the
                      paper did not comment on whether the higher rates for the lower rated
                      plants and for some product categories were acceptable or not.


                          officials have not focused attention on the higher rejection rates in
F’SISUses Rejection   FSIS
                      1989 because their management approach is directed towards ensuring
Data to Monitor       acceptable performance from individual foreign plants, not towards
Performance of        evaluating changes in a country’s overall rejection rate.
Individual Plants     Generally, FSIS does not use a country’s overall rejection rates on inspec-
                      tion failures to manage its import inspection program. It does not have
                      criteria or a standard rate for what is an acceptable level of rejection for
                      Canada, nor does it have threshold or target rates that trigger action
                      when rejections rise to a given level. ISIS does not have standard or
                      target rejection rates for imported product because it does not maintain




                      Page 29                                 GAO/RCED-99-170   FSIS and Canadian   Meat Inspections
                      Appendix Ill
                      Reasons for Higher Rejection     Rate13 in 1939
                      Are Unclear




                      data on rejection rates for domestic meat and poultry.2 Rather, FSIS uses
                      rejection data primarily to monitor and react to the performance of indi-
                      vidual plants. Where it finds a problem, FSISresponds by intensifying
                      the level of inspection for subsequent shipments from that plant. ISIS
                      officials believe that this approach will force the plant to either improve
                      or stop exporting to the United States.

                      Since import inspections have been generally directed at monitoring
                      individual plant performance, FSIS maintains that overall rejection rates
                      have little meaning for a country as a whole. FSIS officials pointed out
                      that the 3,000-countrywide sampling plan applied to Canada in 1989
                      offers FSIS its first opportunity to collect statistically sound data on a
                      country’s overall rejection rate. However, the officials also noted that
                      they would need several years’ data using this new sampling approach
                      before they could make any meaningful analyses of changes in rejection
                      rates from year to year. If the countrywide sampling approach proves
                      useful, FSISsaid it would consider applying it to other countries. How-
                      ever, with the recent U.S.-Canada agreement to conduct an experiment
                      eliminating all import inspections, the issue of FSIS’ sampling approach
                      for Canadian product may be moot.


                      It is not clear why the rejection rate increased in 1989 and Pembina had
Reasonsfor Higher     a high rejection rate. It was difficult to analyze 1989 rejection rates for
Rejection Rates Are   several reasons. First, overall rejection rates for 1989 and prior years
Unclear               cannot be directly compared because many changes were made to Cana-
                      dian import inspection procedures in 1989. For example, in 1989, the
                      3,030 inspections performed were randomly assigned by the AIIS for
                      Canada as a whole without regard to individual plant performance. In
                      contrast, the 13,466 inspections in 1988 were assigned on the basis of
                      individual plant performance, with plants failing inspections receiving
                      more frequent inspections.

                      Second, even with the different procedures, rejection rates for 1989
                      could be compared with prior years if FSIS calculated sampling errors for




                      %ntil FSIS installed its nationwide, computerized Performance-Based Inspection System in 1989, it
                      did not have the capability to collect national data on inspection results. FSIS officials said that they
                      are now beginning to study ways to use the data from this system to improve both the domestic and
                      import inspection programs.



                      Page 30                                     GAO/RCED-90-176      ISIS and Canadian     Meat Inspections
Appendix III
Renaons for Higher Rejection     Rates iv 1989
Are Unclear




rejection rates.3 Sampling errors could help FSIS determine whether
increased rejection rates are due to a random chance or whether product
quality has actually declined. For example, if the sampling error was
plus or minus 1 percent, an increase in the rejection rate from 2 percent
to 3 percent could be explained by random chance. However, FSIS has not
calculated confidence intervals to reflect the degree of sampling error in
rejection rates. FSISexplained that the performance-based sampling
approach used in past years was directed at ensuring quality product
from individual plants, not at determining a country’s overall rejection
rate. FSISbelieves that going back to past years to calculate confidence
intervals now would be complicated and not worth the effort required.
However, FSIS’ statistician said that calculating the sampling error for
the 3,000 countrywide, random inspections taken in 1989 was much
more practical. He estimated that the sampling error for the 3,000
inspections would be less than plus or minus 1 percent.

Third, as noted previously, FSIS has no criteria or standards for what it
considers an acceptable rejection rate. Although the rejection rate of
U.S. product inspected domestically could be a reasonable standard for
assessing the product of other countries, WIS does not collect such data.
Without any standard for what is an acceptable quality level for
imported product, FSISdoes not know whether the Canadian country-
wide and Pembina rejection rates reported during 1989 are within
acceptable ranges.

For these reasons, neither we nor FSIScould explain the increased rejec-
tion rate in 1989 and the high rate at Pembina with certainty. However,
our analysis and discussions with FSISofficials suggest several possible
explanations. For example, FSISinspectors are not uniformly performing
product examinations. In other words, some inspectors may reject more
product because they are more conscientious, thorough, or experienced
than other inspectors. Data for 1989 show that the rejection rate of FSIS
import inspectors performing at least 25 random product examinations
varied from 0 percent to 9 percent, with 9 percent the rejection rate for
the inspector who performed. most of the product examinations at Pem-
bina. FSIScontends, however, on the basis of a special study, that its
import inspectors are performing inspections uniformly. FsIs suggests
instead that some Canadian plants are shipping more product through
Pembina in 1989 that cannot pass a product examination.

“An inspection or quality control system is generally based on statistical sampling because testing all
lots of a product would be inefficient and costly. According to standard statistical sampling theory,
an import inspection system should be able to estimate the rejection rate along with the sampling
error associated with that rejection rate.



Page 31                                    GAO/RCED-W-176       FSIS and Canadian    Meat Inspections
Reaeona for Hlgher Rejection   Rater, in 1333
Are Unclear




Related explanations include differences in product quality among
plants and differences in product quality in the same plant over time.
An additional explanation offered by ISIS, as mentioned earlier, is that
comparisons between 1988 and 1989 are difficult, if not impossible,
given the many changes to inspection procedures made in 1989.




Page 32                                  GAO/RCESD-86-176   FSIS and Canadh   Meat lnspectio~
   I   ’   *

Appendix IV

Objectives, Scope,and Methodology


                   Our objective was to provide answers to a series of questions pertaining
                   to four areas of U.S. and Canadian import meat inspection: equivalency
                   determination, inspection procedures, rejection rates, and treatment of
                   American plants exporting to Canada. Specifically, we addressed the fol-
                   lowing questions:

               . Equivalency determination. What process has FSISfollowed to determine
                 that Canada’s inspection system is equal to the U.S. inspection system?
               . Inspection procedures. How do the current streamlined inspection proce-
                 dures for Canada differ from procedures in I.988? What controls does
                 FSIS have to ensure that the current sampling procedures are properly
                 performed by Canadian inspectors? Do the current procedures protect
                 against the shipment of contraband or contaminated meat?
               l Rejection rates. How does the rejection rate under the system imple-
                 mented on January 6, 1989, compare with the rejection rate under the
                 previous system? Do the rejection rates reported in 1989 vary signifi-
                 cantly by port of entry? If there are significant differences in rejection
                 rates, is there any apparent explanation? How does FSIS compute rejec-
                 tion rates for imported product? How does FSIS use rejection rates to
                 manage its import inspection program?
               . Treatment of American plants. Has Canada instituted a similar stream-
                 lined inspection system for American meat being exported to Canada? If
                 so, is this system experiencing any problems? Are American plants
                 exporting to Canada basically satisfied that they are receiving satisfac-
                 tory treatment under the Canadian import inspection system?

                   In addition, we were asked to comment on, on the basis of our field
                   work, what we believe are the major issues that FSISshould address in
                   its rulemaking proceeding to eliminate import inspection of Canadian
                   meat.

                   To learn about ESB process for determining the equivalency of the
                   Canadian inspection system, we reviewed FSIS’ files for Canada; prior
                   reports by GAO and USDA’S Office of Inspector General, which included
                   evaluations of the equivalency review process; and discussed the
                   equivalency process with officials from FSIS’International Programs
                   office.

                   To evaluate FSIS’1989 streamlined inspection procedures for Canadian
                   meat and compare them with 1988 procedures, we reviewed regulations,
                   instructions, and procedures governing FSISmeat inspection activities




                   Page 33                       GAO/RCED-36-176   FSIS and Canadian   Meat Inspections
Appendix IV
Objectives, Scope, and Methodology




for 1988 and 1989. To better understand how the 1989 import inspec-
tion procedures for Canadian meat differed from 1988 and from proce-
dures followed for all other countries, we made field visits to two FSIS
field offices in Detroit, Michigan, and Tacoma, Washington, and U.S.
Customs ports of entry and four border inspection facilities at Detroit
and Blame, Washington. We also observed several inspections performed
by FSISimport inspectors on meat from Canada and two other countries.

With respect to rejection rates, we obtained data from the Automated
Import Information System, a computerized system that centralizes
inspection and rejection data from U.S. ports. Because our analysis of
computer-processed rejection data was important to accomplishing our
review objectives, we tested the reliability of these data for 1989 by
comparing the computer-processed data with paper source documents,
including field office Refused Entry Logs, health certificates, and inspec-
tion results forms. Our tests found that generally inspection and rejec-
tion data were reliable, except for data on the weight of rejected
shipments. We found rejected weight data to be inaccurate because of
inadequate software changes made to the computer system to reflect
changes made to Canadian inspection’procedures during 1989. FSIShas
begun making additional software changes to correct this problem. The
implementation of the changes began in January 1990.

To determine whether Canada has instituted similar streamlined inspec-
tion procedures for American meat, we reviewed Agriculture Canada’s
import inspection procedures and discussed them with Agriculture
Canada and FSIS meat inspection officials. We also contacted 26 major
U.S. meat and poultry exporters to Canada to obtain comments on their
experience with Canadian inspection procedures in 1989.

We also discussed various aspects of FSIS’import inspection program
with ISIS import inspectors, Canadian inspectors, border inspection
facility owners, U.S. Customs headquarters and field office officials and
inspectors, the American Meat Institute, the Canadian Meat Council,
USDA'S Office of Inspector General and Office of the General Counsel,
and USDA'S Assistant Secretary for Marketing and Inspection Services.

We conducted our work from July 1989 to March 1990, primarily at FSIS
headquarters in Washington, DC. Our review was performed in accor-
dance with generally accepted government auditing standards. Our
examination of the adequacy of internal controls and compliance with
applicable laws and regulations was performed to the extent necessary
to answer the questions asked by the congressional requesters. Our


Page 34                              GAO/RCED-30-176   PS1s and Camdian   Meat In8pectione
Appendix IV
Objectives, Scope, and Methodology




examination of internal controls included a review of USDA'S 1988 and
1989 reports to the Congress on USDA'S evaluation of its management
controls and financial management systems, as required by the Federal
Managers’ Financial Integrity Act.

We discussed the factual information in this report with FSIS officials
during the course of our work and have incorporated their views where
appropriate. However, as your offices requested, we did not obtain offi-
cial agency comments on this report.




Page 36                              GAO/WED-SO-176   FSIS and Canadian   Meat Inspections
Major Contributors to This Report


                        Edward M. Zadjura, Assistant Director
Resources,              Lou Schuster, Assignment Manager
Community, and          Max L. Aguilar, Staff Evaluator
                        Mitchell B. Karpman, Statistician
Economic                Carol Herrnstadt Shulman, Reports Analyst
Development Division,
Washington, DC.
                        Dale A. Wolden, Regional Management Representative
Chicago Regional        Paul I. Wilson, Evaluator-in-Charge
Office




(097757)                Page 36                     GAO/RCEWO-176   FSIS and Canadhn   Meat Inspections
Orclws IIIIIS~. br prepaid by cash or by chwk         or ttwwy   ortlt~r matIe
out  t,o t tw SuI)t~ritit~titlrnt, of’ Docutnerits.