United States-Canada Open Border Proposal for Meat and Poultry Inspection

Published by the Government Accountability Office on 1990-07-12.

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

                   United States General Accounting Office

           I       Testirnony

For Release        United States-Canada    open Border    Proposal   for    Meat and
on Delivery        Poultry Inspection
Expected at
2:00 p.m. EKT
July 12, 1990

                   Statement of
                   John W. Harman, Director
                   Food and Agriculture   Issues
                   Resources, Comnunity, and Economic Developent                 Division

                   Before the Suktittee       on Agricultural      Research and
                     General Legislation
                   Senate Corrrnittee on Agriculture,    Nutrition    and Forestry

                                                                           GAO    Farm   160 f 12/87-l
Mr.     Chairman          and Members              of     the     Subcommittee:

         We are         pleased        to     be here            today        to        discuss          the      results       of        our
review       of    the      Food Safety             and Inspection                       Service's               (FSIS)
streamlined              inspection           procedures               for     Canadian             meat          and our       views
on the      proposed             "open       border"            between        the         United         States           and Canada
for     meat      and poultry              products.              As you know,                    both     the         streamlined

inspection             procedures            and the            open border                proposal             were       made in
response          to     the     1988 United              States-Canada                    Free     Trade           Agreement.

         Our testimony                is     based        on a report                   we issued              on July        6 to
Representatives                  Byron       Dorgan        and Tim Johnson.1                             At their           request,

we examined              five     areas       related            to    FSIS inspection                         procedures           for
Canadian          meat.          Our findings              are        summarized               below.

         First,          we found          that      the        assurance               that      Canadian             meat    is
wholesome          rests         primarily           on an FSIS determination                                   that       Canada's
meat     inspection              system-is           at    least           equivalent              to     the       U.S.
inspection             system.           However,          we could                not     independently                   review         the
basis     for      FSIS'         determination                  because            it    was not          adequately

         Second,          under       the     streamlined                  procedures,              all         Canadian
shipments          are      no longer             unloaded            at     an inspection                     facility        and

IFood Safety:                   Issues USDA Should                     Address Before                     Endins           Canadian
Meat Inspections                   (GAO/RCED-90-176,                    July 6, 1990.
given      a routine           visual          inspection                 for     general         condition.                 However,

selected          shipments            are     still         subject            to      comprehensive               inspections
for     wholesomeness.

         Third,        rejection              rates      of     Canadian                meat were          higher          in    1989
than     in    1988,      but         the     causes         and significance                      of     these       higher              rates
are     unclear.          FSIS cannot                  account            for     the        differences            in the            2
years,        or determine              whether          they            are     important,             in part         because              it
has no criteria                 for         an acceptable                 rejection             rate      for     Canada.

         Fourth,         officials              from     25 plants                that        export       a substantial
amount        of meat         and poultry               to     Canada were                   generally           satisfied                with
the     treatment         they         received          under            the     Canadian             inspection            system.

         And finally,                 we reported              that        the         open border              proposal         raises                i
both     legal       and policy               issues         that         we believe             FSIS should               address                in   1
its     decisionmaking                 on the          proposal.                 For      example,         a possible                 legal            I
issue      has been           raised          about      whether                FS-IS has the             authority             to                     i
permanently            establish              an open border                     for     meat      imports          or whether
the     Congress         would         need to          amend the                Federal         Meat      Inspection                 Act
(21 U.S.C.           601 et           sea).        From a policy                       perspective,              FSIS needs                to
ensure        that     food      safety          will         not        be compromised                 under       an open
border        system      by addressing                  questions                raised         by our          review         and
others        regarding          the         current         program             for      inspecting             meat      imported
from     Canada.          For example,                  the         increase            in    rejection           rates         for
Canadian          meat    imports             experienced                 under         the     streamlined             inspection                     j
procedures             and the             lack           of    a well-documented                       equivalency                review       of
the     Canadian            inspection                    system            are    concerns            that     need to            be


          Before         providing                   more detail                  on our      findings,               let     me briefly
give      you some background                              on FSIS'               import      inspection               program           and
the     Free      Trade         Agreement.                      Although            the     streamlined                procedures              and
the     open border                 apply            to    both            meat and poultry,                   Canada         exports
mostly      meat to             the        United              States.             The Federal                Meat      Inspection             Act

requires          that         meat         imports             be produced                under        inspection             systems
that      are     at     least            equal           to    that         of the        United         States            and that        the
imports         are      wholesome,                   unadulterated,                      properly            marked,         labeled,          and
packaged.              FSIS          is    the        U.S.           Department            of Agriculture                    (USDA) agency
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 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"         necessary                 to     ensure           compliance               with        the     importing            country's
standards                 or technical                regulations.                     These         spot         checks             will     not

exceed             those         made for            domestically                produced              meat        and poultry.

         In January                     1989,        FSIS installed                    new,         streamlined                     inspection

procedures                 for      Canadian            meat to            ease        entry         into         the         United         States.
In     February             1990,          following           discussions                 between                USDA and
Agriculture                 Canada            officials,            the         U.S.      Secretary                of Agriculture                        and

Canada's             Minister              of Agriculture                      announced             their         intent              to    conduct
an experiment,                      of     up to        1 year,            of    an open border                         for         trade     in
meat     and poultry.                         On June        29,       1990,           FSIS published                         the      proposed

rule         for     the         open border               experiment              in     the        Federal             Reqister.                  An
open border                 will         eliminate           port-of-entry                         inspections                 by FSIS


         The assurance                        that      Canadian               meat      is        wholesome             is     primarily
based         on an FSIS determination                                that         the        Canadian             meat             inspection
system             meets         U.S.      standards,              i.e.,         that         it      is     at    least             equivalent
to     the         U.S.     inspection                system.              To determine                    the     Canadian
inspection                 system's             equivalency,                   FSIS officials                     told         us they
reviewed             Canada's              meat       inspection                laws      and regulations;                             evaluated
Canada's             ability             to     control        potential                hazards,                 such         as residues                and
disease;             conducted                on-site        reviews             of     exporting                 plants;              and
reviewed             data          from       port-of-entry                    inspections.                   This            information,
the     officials                  said,        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     independently                    review              how FSIS had determined                                    the     Canadian
system's             equivalency                     or the           basis         for     FSIS'            confidence                in the
Canadian             inspection                    system.             For        example,            although                FSIS maintains

information                 in    its             files      on specific                   aspects            of the           Canadian             meat
inspection              system,               correspondence                       with       Agriculture                     Canada,          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              or
virtually             identical                    to      the    U.S.        system.

           Because           of        its         high      degree           of        confidence                in    the         Canadian
inspection              system,               FSIS changed                    the         equivalency                  review         process         for
Canada         in     two        important                  ways.         First,            FSIS eliminated                          its     own on-

site       reviews           of    Canadian                  plants.                Beginning                in    1989,            Canadian
inspectors              have       reviewed                  Canadian              exporting                 plants           for     FSIS and,
under         the     proposed                open border,                    FSIS and Agriculture                                  Canada plan             to
end their             reviews                of      each other's                  exporting                 plants.

           Second,           FSIS            is      not     using        its        standard                "systems"'              approach         to
assess         the      Canadian                   inspection             system's                 ability             to    control          such

major       hazards             as residues                and disease.                    The systems                       approach          uses

risk     profiles               to    assess          foreign            inspection               systems'                   control          over
five     areas--residues,                         disease,           economic              fraud             (i.e,           deliberate
adulteration               of        product),             contamination,                   and processing.                              FSIS is

currently           preparing                new risk              assessments              for             other       countries              using

updated       profiles                but      has decided                to    exempt            Canada              from       this
process.            Instead,                FSIS has proposed                      that,          annually,                   a single          team
of     experts       from            both      countries             jointly          determine                      their       inspection
systems'          equivalence.                     Agriculture                 Canada            is         considering                FSIS'


          With      respect             to     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."
However,          Canadian              meat         is    still         subject           to     comprehensive
inspections               for        wholesomeness,                  although              the         methodology                  is    now
based       on 3,000             randomly             selected            inspections                       for      Canada         as a whole.
Under       the     old         procedures,                comprehensive                   inspections                       were      tied     to
the     performance                  history          of     individual             plants.                       However,          in April
1989,       FSIS added                an intensified                     inspection               program               for      producing
plants       that         failed            the    comprehensive                   inspections.
            The two key comprehensive                                    inspections                       performed              on Canadian
meat        are     product            examinations                     and chemical                        residue            tests.            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.                For     residue              tests,        the           inspector                  draws         samples          and sends
them to            designated             laboratories                       for         analysis.                      The product
examination                   accounts          for         almost           all         rejections,                     by weight,              of
Canadian            meat;            few residue               tests             fail.

            The streamlined                     procedures                   are         controversial                      because           of
(1)        the     advance            notice          given        Canadian                    plants             for     shipments              that
FSIS has selected                        for         inspection                  and          (2)     the         pulling         of      samples            by
Canadian               inspectors.                   These      procedures                      are        used          so that          only
trucks           carrying             Canadian              meat        selected                for         inspection                 have      to     stop
at        a U.S.        border         inspection               facility,                      and when these                     trucks           do
stop,        they        do not         have          to      be completely                         unloaded.                  Although            FSIS
has attempted                   to     strengthen               controls                  and correct                     problems            with          its
inspection               procedures,                  it      continues                  to     allow             Canadian             inspectors                 to
draw        samples            for     FSIS inspection.                               This          procedure               has caused                some
controversy                because             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.                Further,              the         FSIS inspectors                          union          has expressed                   concern
about        this        procedure              because            it        reduces                the      control             its     members
have        over        the     inspection                  process.                  However,               if         import         inspections

are     eliminated               entirely,              as now proposed,                     the        use of          Canadian
inspectors              to    draw         samples          for     FSIS inspections                      will          no longer            be
an issue.


           Rejection             rates           of    Canadian          meat were             higher            in     1989 under               the
new streamlined                     inspection              procedures              than       in       1988,          according            to
FSIS data.               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          the        intensified
inspection              program            for        individual            plants         failing            inspections.                   In
1988 I 1 percent                  of       13,466          lots     failed          product             examinations.

           The causes             and significance                       of   the       increased                1989 rejection
rate       are    unclear            for         several          reasons.            First,            the     many changes                 made
to     import         inspection                 procedures            in     1989 make comparisons                             with        prior
years       difficult.                  Second,            FSIS generally                  has not            used       countrywide
rejection             rates       to manage its                    import         inspection               program          and has no
criteria          for        what       constitutes                an acceptable                   rejection             rate       for
Canadian          meat.           Historically,                    FSIS 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,              FSIS has not                     calculated
sampling          errors          for       these          rejection          rates,           and thus                cannot
determine            to     what         extent         the         incr.eased           rates          may have         resulted            from

random        chance,            a decline              in     product           quality,               or some other               reason.


          Officials              from       25 plants                that      were        substantial              exporters           of
meat      or poultry              products              to     Canada          in    1989 told             us that          they      have
received        satisfactory                      treatment             under        the         Canadian          import                           4
inspection            system.               The officials                    were        satisfied           for      three         reasons.
First,        since         shipments              to    Canada were inspected                             at      the    destination               /I
                                                                                                             Second,           American             j
rather        than         at    the      border,             delays         were        minimal.                                                   I
exporters            did        not      pay for         use of             inspection             facilities             in    Canada.
And finally,                these         plants         experienced                 minimal             rejections            of    their
shipments            by Agriculture                     Canada          in     1988 and 1989.


          Our review                  identified              several          legal        and policy              issues          about
FSIS'      proposal              to      establish             an open border                     for     meat      and poultry
trade      between              the      United         States          and Canada.

          From a legal                   perspective,                  there        is     a question              of whether           the
open border                proposed            under          the      Free      Trade       Agreement              conflicts           with
the      requirements                  of U.S.          meat         inspection             laws         and whether            a
legislative                change         is      necessary.                 FSIS'        program          officials            have                1
raised        a possible                 legal       issue           about       whether           FSIS has the                authority            i

to     permanently               establish              an open border                        or whether                  the        Congress
needs       to    amend the                   Federal             Meat     Inspection               Act.             According              to

USDA's         Deputy           Assistant              General             Counsel,               the         legality           of      the         open

border         experiment                may be an issue                       that          is    raised              during         the       public
comment period                    for         FSIS'     proposed               open border                     rule.            The June              29

proposed          rule          indicates              that         FSIS believes                       that        adequate             legal
authority              exists           for     such         an experiment.

         If,          following               the     rulemaking,                 FSIS decides                      to    test        the       open
border         concept,              the       key policy                 issue       will         be whether                   FSIS still                  has
adequate              import         controls           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.          However,              as previously                    mentioned,                  FSIS is              not      using          its
standard              systems           approach             to     evaluate            the        equivalency                   of      the
Canadian              inspection               system             and documentation                           in    FSIS'        files          was not
adequate              for     us to           independently                 review            how FSIS had determined                                       the
Canadian              system's             equivalency.

         Finally,               there          is     the         issue     of how FSIS should                                determine               the
success          of         an open border                   experiment.                 USDA's March                         1990 plan               for
an open border                    includes             an evaluation                    plan            for        determining              the

extent          to which           the       economic             objectives              of     the           Free    Trade        Agreement

are    met during               the        experiment.                   The evaluation                        plan,     however,           does
not    discuss            how it           will          assess         the     effectiveness                     of   an open border
in    ensuring            the      safety             and wholesomeness                    of        imported            meat       and
poultry.               We believe                 that     if     FSIS decides                  to     proceed           with       the     open
vorder          test      after           the      rulemaking,                 both      the     economic               and food           safety
impacts          of      an open border                    should             be evaluated.

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

           --     review          and document                   the     equivalency                 of        the     Canadian
                  inspection               system;

           --     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.

           Mr.         Chairman,           this          ends my prepared                      statement.                  I would         be
glad       to     respond           to      any questions.