Federal Register: Definitions and Standards of Identity or Composition: Elimination of the Pizza with Meat or Sausage Standards

[Federal Register: July 31, 2003 (Volume 68, Number 147)]
[Rules and Regulations]
[Page 44859-44870]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31jy03-2]

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DEPARTMENT OF AGRICULTURE

Food Safety and Inspection Service

9 CFR Part 319

[Docket No. 01-018F]

Definitions and Standards of Identity or Composition: Elimination
of the Pizza with Meat or Sausage Standards

AGENCY: Food Safety and Inspection Service, USDA.

ACTION: Final rule.

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SUMMARY: The Food Safety and Inspection Service (FSIS) is rescinding
the regulatory standards of identity for ``pizza with meat'' and
``pizza with sausage.'' FSIS has determined that the standards no
longer serve their original purpose of protecting the public from
economic deception. Furthermore, FSIS believes that the standards may
be

[[Page 44860]]

inhibiting manufacturers of federally inspected pizzas from producing
and marketing the styles of pizzas that today's consumers demand. Once
this rule becomes effective, products may be identified with a common
or usual name that includes the term ``pizza;'' identifies the meat or
poultry component, e.g., ``pepperoni;'' and declares other components
as a feature that distinguishes them from the other pizza product, e.g.
``pizza--garlic sauce, tomatoes, reduced-fat cheese, and seasoned beef
strips on a crust.''
FSIS is also amending the meat and poultry products inspection
regulations to require, for a limited time, that the labels of products
identified as meat or poultry pizzas in their common or usual names
include the percent of meat or poultry in the product in a
parenthetical statement that is contiguous to the ingredients
statement. This labeling requirement will expire after three years.
FSIS is adopting this requirement because, based on comments received
in response to the proposed rule, the Agency has concluded that some
consumers still rely on the standards to ensure that a product
identified as a meat or poultry ``pizza'' contains a certain amount of
meat or poultry. FSIS will allow pizza manufacturers to exhaust their
remaining packaging inventory before they will be required to comply
with the new labeling requirement. Requiring percent labeling of the
meat or poultry content of non-standardized pizzas for a limited time
is a transitional step to allow these consumers to understand the
nature of the food.

DATES: This rule is effective October 22, 2003. Sections 317.8(b)(40)
and 381.129(f) shall expire October 24, 2006.

FOR FURTHER INFORMATION CONTACT: Robert C. Post, Ph.D., Director,
Labeling and Consumer Protection Staff, Food Safety and Inspection
Service, U.S. Department of Agriculture, Washington, DC 20250-3700;
(202) 205-0279.

SUPPLEMENTARY INFORMATION:

Background

On November 2, 2001, FSIS published a proposed rule in the Federal
Register to amend part 319 of the Federal meat inspection regulations
to rescind the standards of identity for ``pizza with meat'' and
``pizza with sausage'' (66 FR 55601). The proposed rule was in response
to a petition submitted on February 4, 1999, by the National Frozen
Pizza Institute (NFPI). In support of its petition, NFPI submitted data
to demonstrate that the pizza standards are restricting the development
of new products by the frozen pizza industry, including pizzas with
reductions in constituents that are of health concern to some people,
such as fat and cholesterol. NFPI also presented evidence that, due to
product innovation in the food service industry, consumers'
expectations of what is meant by the term ``pizza'' are broader that
what is prescribed by the current standards.
Once this final rule becomes effective, products identified as meat
or sausage pizzas will no longer be required to contain tomato sauce,
cheese, and a bread-based crust, as prescribed by the standards under 9
CFR 319.600. In addition, manufacturers of pizza products will be
permitted to reduce the minimum meat content from 12 percent cooked or
15 percent raw to 2 percent cooked or 3 percent raw, the level of meat
required for a product to be considered a meat food product subject to
USDA jurisdiction.
In the preamble to the proposed rule, FSIS mentioned that although
the regulations do not contain a standard of identity for pizza
products that contain poultry, FSIS has treated these products as
``like products'' to pizza with meat or sausage. The Agency's policy
has been that these products must contain at least 12 percent cooked
poultry meat. Once this final rule becomes effective, the policy that
pizzas that contain poultry must have a minimum poultry content will
also be revoked.
As discussed in the preamble to the proposed rule, rescinding the
meat and sausage pizza standards of identity does not mean that the
names for products identified as ''pizzas'' will be unregulated. Under
9 CFR 317.2(c)(1) and 381.117(a), non-standardized meat and poultry
products must be identified by the common or usual name of the product,
or if the product has no common or usual name, a truthful, descriptive
designation. FSIS has determined that, in the absence of a regulatory
standard of identity, the term ``pizza'' represents the appropriate
common or usual name for the class of products that have been
traditionally formulated with the components stipulated in the
regulatory standard prescribed by 9 CFR 319.600, i.e., tomato sauce,
cheese, and meat topping on a bread-based crust. Products that contain
these ingredients may be identified by a common or usual name that
includes the term ``pizza;'' identifies the meat or poultry component,
e.g., pepperoni; and declares any other components or features that
distinguish it from traditional pizzas, e.g., ``pizza--garlic sauce,
tomatoes, reduced-fat cheese, and seasoned beef strips on a crust.''
In the preamble to the proposed rule, FSIS requested comments on
whether the product names of non-standardized pizzas should be required
to include the percent of meat or poultry. Based on the comments
received in response to this question, FSIS has concluded that some
consumers still rely on the standards to ensure that a meat or poultry
product identified as a ``pizza'' contains a certain amount of meat or
poultry. To prevent these consumers from being misled about the meat or
poultry content of non-standardized pizzas, the Agency is requiring
that the labeling of products that are identified in their common or
usual names as pizzas that contain a meat or poultry component (e.g.
``pizza with meat,'' ``sausage, green pepper, and mushroom pizza,''
``Thai pizza--chicken, peanut sauce, and vegetables on a crust'')
include a parenthetical statement of the percent of meat or poultry in
the product that is contiguous to the ingredients statement. This
labeling requirement will be effective for three years to allow
consumers to become familiar with variations in the meat or poultry
content that will be permitted in pizzas as non-standardized foods.
FSIS will allow manufacturers of meat and poultry pizzas to exhaust
their remaining packaging inventory before they will be required to
comply with the new labeling requirement.

Comments and Responses

The comment period for the proposed rule closed on January 2, 2002.
However, in response to comments requesting that FSIS extend the
comment period, on March 14, 2002, the Agency reopened and extended
that comment period for an additional 30 days. Thus, the comment period
closed on April 15, 2002.
FSIS received 36 comments in response to the proposed rule from
consumers, consumer advocacy organizations, members of the frozen pizza
industry, academia, industry consultants, and trade and professional
associations representing livestock producers, meat processors, food
processors, seasoning manufacturers, soy product producers, and
dietitians. Most of the commenters supported eliminating the standards
of identity for meat and sausage pizzas. In general, the supporters
agreed that the standards are restricting the development of new
products by the frozen pizza industry, and that consumers, expectations
of what is meant by the term ``pizza'' are broader that what is
prescribed by the current standards. Eight commenters opposed the
proposed rule, mainly because they believe that the current

[[Page 44861]]

standards still serve their intended purpose of protecting consumers
from economic deception, particularly with regard to the meat content
of products identified as meat or sausage pizzas. Three commenters, a
trade association representing the frozen foods industry, a trade
association representing meat processors, and a large company that
manufactures a variety of food products, including frozen pizzas, took
no position on whether FSIS should eliminate the existing pizza
standards but submitted comments on certain aspects of the proposed
rule. Summaries of issues raised by commenters and Agency responses
follow.
Comment: As mentioned above, in the preamble to the proposed rule,
FSIS stated that, if it were to rescind the pizza standards, it had
tentatively determined that required labeling features, such as the
product name, ingredients statement, and nutrition facts panel, will
provide adequate information for consumers to make informed choices
when purchasing federally inspected pizza products (66 FR 55601,
55602). In particular, the Agency concluded that the product name would
become a descriptive feature to convey to the consumer the components
of the product. The Agency went on to request comments on whether the
product name of non-standardized pizzas should be required to include
the percent of meat or poultry in the product. Almost all commenters
that supported eliminating the pizza standards opposed this proposed
requirement. Following is a summary of the reasons for their
opposition.
[sbull] The product names of pizzas sold by restaurants and
delivery services would not be required to contain the percent of meat
or poultry in the product, thereby re-establishing different regulatory
treatment for the retail and frozen pizza industries.
[sbull] Percentage labeling of a specific ingredient is not
required for other products regulated by FSIS or the Food and Drug
Administration (FDA).
[sbull] If the product name for non-standardized pizzas must
include the percent of meat or poultry in the product, then it should
also be required to include the percent of other characterizing
ingredients, such as mushrooms or seasonings, as well.
[sbull] Requiring that the percent of meat or poultry in a non-
standardized pizza product be included as part of the product name is
not necessary because existing required labeling features, including
mandatory ingredient and nutrition information, already provide
sufficient information about a product's meat or poultry content.
[sbull] Requiring percent labeling of the meat content implies that
meat is the most valuable ingredient in the product. The amount of meat
topping is not the determining characteristic of the product. Consumers
also look at overall cost and quality of ingredients used.
[sbull] Unlike some other products, the meat content of a pizza is
readily apparent with even a superficial visual exam, which allows
consumers to assess the value of the product for the price.
[sbull] Such information would have little meaning to consumers and
could lead to counter productive competitive labeling contests, which
would not serve consumers' best interests.
[sbull] Percent meat content labeling assumes that all meat
toppings are equivalent in cost, which is not an accurate assumption.
[sbull] Pizzas subject to FDA and FSIS jurisdiction should be
marketed and regulated similarly. FDA has no such specific requirement
or any standards for pizzas subject to FDA's jurisdiction.
[sbull] Few consumers have a working knowledge of the current
standards. Therefore, it is not relevant to require the labeling to
include the percentage of meat or poultry in the pizza.
[sbull] Requiring percent labeling of the meat or poultry content
would require manufacturers to disclose proprietary information,
including trademark recipes. Manufacturers who wish to provide this
information voluntarily could do so if they believed that communicating
the percent of meat in the product provided them an advantage.
[sbull] Percent ingredient labeling, including a requirement for
meat or poultry percent ingredient labeling, is not in keeping with
historical U.S. government policy regarding standards that suggest
percentage ingredient labeling of foods in international trade. For a
number of years, the U.S. delegation to the Codex Committee on Food
Labeling opposed a European Union (EU) proposal to require labeling of
percent fish core in fish sticks. Importantly, unlike frozen pizza,
fish sticks do have one characterizing ingredient.
One commenter, a representative of a consumer advocacy
organization, stated that requiring that the product names of non-
standardized pizzas include the percent of meat or poultry in the
product, although well intentioned, seems clumsy and extreme. A better
solution, suggested the commenter, is to identify the percent of meat
or poultry in a product somewhere outside the ingredients statement,
but not as part of the product name.
Another commenter, a trade association representing meat
processors, noted that if the meat and sausage pizza standards are
rescinded, it is important that FSIS give consideration to alternative
ways to provide truthful information about the meat or sausage
component of products identified as ``pizza.''
Response: The Agency was not persuaded by the comments that opposed
percent labeling of the meat or poultry content of non-standardized
pizzas because many of these comments are misleading or inaccurate.
Requiring percent labeling of the meat or poultry content for packaged
pizzas will not re-establish different regulatory requirements for
retail and frozen pizza industries, as suggested by the comments. Even
with the elimination of the pizza standards, restaurant pizzas and
packaged pizzas will still be subject to different regulatory
requirements. For example, nutrition labeling is required for packaged
pizzas but not for restaurant pizzas.
The statement that percent labeling of a specific ingredient is not
required for any other products regulated by FSIS and FDA also is not
accurate. FDA regulations require that the common or usual name of a
food contain the percentage of any characterizing ingredients when the
proportion of such ingredients in the food has a material bearing on
price or consumer acceptance, or when the labeling or appearance of the
food may create the erroneous impression that the ingredient is present
in an amount greater than is actually the case (21 CFR 102.5(b)). Thus,
contrary to what was suggested in the comments, requiring percent
labeling of the meat or poultry component of a meat or poultry pizza
with a common or usual name is consistent with FDA regulations.
Although it is true that the meat content of pizza is readily
apparent when examining the pizza itself, the meat content is not
readily apparent if there is a solid cover on the package. Furthermore,
FSIS disagrees that percent meat content labeling promotes unproductive
labeling contests. The Agency believes that it could promote consumer
choice and fair competition.
Upon further consideration of the issue, FSIS has determined that
required labeling features, such as the nutrition facts panel and
ingredients statement, do not provide sufficient information about the
meat or poultry content of products identified as ``pizza.'' Although
ingredients must be listed in order of predominance, there could be
such a wide range of ingredients in a pizza that such a listing does
not

[[Page 44862]]

effectively convey the proportion of meat or poultry in the product.
FSIS agrees with the comment that, once the standards are rescinded,
the Agency should consider alternative ways to provide truthful
information about the meat or poultry content of products identified as
``pizza.'' It also agrees that the percent of meat or poultry in
products identified as ``pizza'' need not appear as part of the product
name and can be conveyed somewhere else on the product label.
Therefore, FSIS has decided to require, for three years from the
effective date of this final rule, that products that are identified as
``pizza'' and whose common or usual name identify a meat or poultry
component state the percent of meat or poultry in the product in a
parenthetical statement contiguous to the ingredients statement. If
consumers find this information useful, and believe that it should
appear on the product labeling permanently, they may petition the
Agency to rescind the expiration date of this part of the regulation.
Comment: Most of the commenters who opposed eliminating the meat
and sausage pizza standards did so because, as previously mentioned,
without the standards a product identified as a ``meat pizza'' or a
``sausage pizza'' would be permitted to contain as little as 2 percent
cooked or 3 percent raw meat instead of the 12 percent cooked or 15
percent raw meat prescribed by the standards. These commenters noted
that meat is the most expensive ingredient in a meat pizza, and that
without standards, manufacturers would be able to significantly reduce
the meat content of meat pizzas without consumers' knowledge. They also
asserted that descriptors of meat or sausage imply that a product
contains some minimum amount of these ingredients, and that consumers'
expectations are that this amount is greater than two percent. Thus,
the commenters argued, removing the meat and sausage pizza standards
would lead to economic deception of consumers that purchase non-
standardized pizzas.
Response: As discussed above, FSIS believes that these comments
demonstrate that some consumers rely on the pizza standards of identity
to ensure that a product identified as a meat or poultry pizza contains
a certain amount of meat. However, the Agency does not believe that
retaining the regulatory pizza standards of identity is necessary to
address the concerns expressed by these comments. As discussed above,
to address concerns that consumers could be misled about the meat
content of non-standardized pizzas, the Agency is requiring temporary
supplemental labeling of the meat or poultry content for products that
are identified as ``pizzas'' and whose product name includes a meat or
poultry component.
Furthermore, FSIS does not agree that rescinding the meat and
sausage pizza standards will lead to economic deception of consumers
that purchase non-standardized pizzas. FSIS has determined that over
the years consumer expectations, industry creativity, and technological
innovation have created new types of pizza products that fall outside
the realm of the traditional or standardized pizza of several decades
ago. The existing pizza standards inhibit the production and marketing
by Federal establishments of new pizza products. Examples of new pizza
products found at retail and food service establishments include:
``deep dish pizzas'' that provide a smaller surface area for toppings,
``white pizzas'' that do not have a traditional tomato-based sauce, and
ethnic-oriented pizzas that often reduce the meat component to permit a
greater amount of vegetable toppings. The current standards for meat
and sausage pizzas require that the products contain tomato sauce,
cheese, and a bread-based crust, in addition to a minimum percentage of
meat or poultry. Thus, the current standards impede the development and
marketing of these new and innovative products.
Comment: Many commenters that opposed the proposed rule stated that
eliminating the meat and sausage pizza standards of identity is not
necessary for companies to produce pizzas with nutritional profiles
more consistent with nutritional guidance (e.g., lower in fat). They
stated that nutritionally improved products can and should be achieved
by using lower fat ingredients, not less of fat-containing ingredients,
such as meat and cheese. One commenter, an individual consumer, stated
that even if the pizza standards were eliminated, it would not likely
result in more lower-fat frozen meat or sausage pizzas. To support his
argument, the commenter noted that of all the restaurant menus that
NFPI presented in support of its petition, not one contained a meat or
sausage pizza advertised as being a healthier or lower fat product.
Supporters of the proposal felt that the current standards are
obstructing producers' ability to create meat pizzas lower in fat,
saturated fat, and cholesterol in response to changing consumer tastes.
They stated that eliminating the standards will give manufacturers the
flexibility to offer pizzas with less meat, sausage, and fat, and will
permit the production of frozen pizzas with reduced-fat cheese or no
cheese, provided there is disclosure on the product's label. One
commenter noted that it is not always economical to use leaner meats,
which are more expensive on a per pound basis, when a manufacturer has
to comply with a percentage minimum weight.
Response: FSIS does not disagree that once this final rule is
effective, many pizza manufacturers will continue to market the
traditional pizza products that are available to consumers today.
However, these manufacturers will also have greater flexibility to
produce meat and poultry pizzas with reductions in constituents that
are of health concern to some people, such as calories and fat. While
it is true, as noted in some of the comments, that the standards permit
the production of pizzas with improved nutritional profiles through the
use of lower fat ingredients, removing the standards will give pizza
manufacturers additional flexibility to produce and market
nutritionally improved packaged pizzas.
Removal of the pizza standards will not only permit greater use of
lower fat ingredients in meat pizza products, such as vegetables and
soy-based and other reduced-fat cheeses, it will also permit reductions
in the amount of fat-containing ingredients, such as meat and cheese,
which will result in a wider selection of pizza products that meet
nutrient content claims such as ``lower fat,'' ``healthy,'' and
``lean.'' As noted by one commenter, using leaner meats to reduce the
fat content of a pizza product that must comply with a minimum meat
content is not always economical because leaner meats are more
expensive on a per pound basis. Thus, eliminating the standard will
permit pizza manufacturers to provide packaged pizza products with
improved nutritional profiles at a variety of pricing levels.
Comments: Some of the commenters that opposed eliminating the pizza
standards asserted that changes in standards should be based on
consumer research. They pointed out that, while NFPI presented
restaurant menu data to support its petition, it did not provide
research to indicate that consumers liked the new styles of pizzas
presented on the menus. One commenter noted that neither FSIS nor the
petitioner presented strong evidence of consumer confusion or
dissatisfaction with the current standards.
A few commenters presented their own consumer research that they
contended provides evidence that consumers are satisfied with the pizza
standards. Two commenters, trade

[[Page 44863]]

associations representing livestock producers, submitted a consumer
research report from a consumer focus group study on the meaning of
food names and the assumptions underlying them. The report concluded,
among other things, that the identities of certain foods, such as
bologna and beef stew, are so distinct to consumers, and consumers are
so used to the products being labeled as such, that consumers have
difficulty grasping the concept of a simulated change to the names or
composition of the product. The research report also concluded that
changing the composition of a commonly named food product is equivalent
to changing the meaning of the name itself. These findings, the
commenters asserted, are evidence that consumers rely on product
standards to ensure product integrity and prevent economic
adulteration.
Another commenter, a manufacturer and distributor of frozen
prepared food products that supported removal of the portion of the
pizza standards that prescribes the four basic components (meat,
cheese, tomato sauce and bread based crust) but opposed elimination of
the minimum meat content requirement, submitted a consumer survey that
questioned consumers about the meat content of specific meat pizza
products produced by the commenter's company. A majority of the
consumers surveyed felt that the meat content of each product involved
in the survey was ``just about right.'' The commenter stated that these
results indicate that consumers are satisfied with the meat content
requirements imposed by the current standards and that the standards
still ``promote honesty and fair dealing in the interest of the
consumer.''
Another commenter, a multinational manufacturer and marketer of
consumer branded meat and food products, submitted the results of a
survey conducted after publication of the proposed rule in which the
company contacted over 1,000 consumers by telephone. The survey asked
consumers how they felt about the U.S. Government's proposal ``to
change the minimum amount of meat for frozen meat pizza to two percent
of the cooked weight or three percent of the raw weight.'' The
commenter's survey found that consumers' were overwhelmingly against
the proposed change.
Response: The restaurant menu data submitted by NFPI in support of
its petition demonstrate that many products identified as ``pizza''
that are purchased by consumers in restaurants do not meet the Agency's
standards. Thus, even without consumer survey data, it is no longer
reasonable to assume that consumer expectations with regard to what
constitutes a pizza mirror the standards for FSIS-inspected products.
Restaurants would not be offering such a variety of pizza products if
consumers were not interested in purchasing such products.
Although FSIS does not dispute the findings of the consumer studies
submitted by the commenters, the Agency disagrees that these findings
demonstrate a need to retain the meat and sausage pizza standards of
identity. The consumer focus group study that examined the meaning of
common names for meat products submitted by the two trade associations
questioned consumers about their expectations regarding the composition
of a variety of products that have regulatory standards of identity,
including bacon and bologna. However, it did not question consumers
about their expectations regarding the composition of products
identified as ``pizza.''
The data submitted by NFPI in support of its petition indicate
that, unlike consumer perceptions of products that were the subject of
the consumer focus group studies, such as bacon or bologna, consumer
perceptions of what a product identified as a ``pizza'' is have changed
dramatically in recent years to include a wide variety of non-
traditional, non-standard versions of pizzas. Thus, it is unlikely that
changing the composition of a product identified as a ``pizza'' will
result in consumer confusion as to the characteristics of the product.
FSIS does not completely disagree with the commenters' conclusion that
the study results support the notion that consumers rely on product
standards to ensure product integrity and prevent economic
adulteration. However, when a product standard no longer reflects
consumer expectations about the composition of the product, the
standard is not serving its purpose and should be rescinded.
The survey conducted by the frozen foods manufacturer that found
that a majority of the consumers surveyed felt that the meat content of
a variety of meat pizza products was ``just about right,'' and the
survey conducted by the multinational manufacturer of meat products
that asked consumers how they felt about the U.S. Government's proposal
``to change the minimum amount of meat for frozen meat pizza to two
percent of the cooked weight or three percent of the raw weight,'' both
imply that the sole effect of eliminating the pizza standards would be
a reduction in the minimum meat content and that once the standards are
rescinded every pizza manufacturer will reduce the meat content of
frozen pizzas to 2 percent cooked or 3 percent raw meat.
Rescinding the pizza standards involves more that permitting a
reduction in the minimum meat content requirement for meat food
products identified as ``pizza.'' It also involves permitting the use
of sauces other than tomato-based sauces, crusts other than bread-based
crusts, and components other than standardized cheese and cheese food
products in federally inspected pizzas. Thus, in addition to permitting
a reduction in the meat content of a meat or sausage pizza, eliminating
the pizza standards provides the opportunity for the development and
marketing of non-traditional pizza products, such as pizza with no
sauce or cheese component. None of the consumer research studies
submitted by the commenters questioned consumers on how they felt about
this aspect of eliminating the pizza standards.
Furthermore, the fact that consumers state that they are satisfied
with the meat content of certain products does not necessarily mean
that that meat content must be prescribed by regulation. As discussed
above, to allow consumer to become familiar with the variations that
will be permitted in the meat content of non-standardized pizzas, the
Agency is requiring that products identified as ``pizza'' that include
a meat or poultry component as part of the product name bear temporary
supplemental labeling that conveys the percent of meat or poultry in
the products. Furthermore, in the absence of a prescribed meat content
requirement, companies are likely to continue to manufacture pizzas
with an amount of meat that consumers desire because if they do not
they will lose their market share to companies that do.
As demonstrated by the studies discussed above, consumer research
can be greatly affected by the manner in which questions are posed to
consumers. Thus, the results of the consumer surveys submitted in
response to the proposed rule have not persuaded FSIS to retain the
pizza standards of identity.
Comment: One commenter stated that policy interpretations on the
regulations made by FSIS over the years provide frozen pizza
manufacturers with sufficient flexibility to produce and market ``non-
traditional'' meat pizzas, and therefore, there is no need to eliminate
the pizza standards. The commenter cited FSIS's interpretive policies
related to the pizza standards, including the policy that permits
certain products to be identified as ``white

[[Page 44864]]

pizza,'' the policy that defines ``tomato sauce'' as any sauce that
contains two percent tomatoes, the policy that liberally interprets
``bread-based crust'' to include most every kind of flour-based
component, and the policy that allows for percentage meat labeling on
pizza products that do not otherwise comply with the minimum meat
content prescribed by the standards.
Response: In addition to allowing pizza manufacturers to produce
the ``non-traditional'' products that are currently described in FSIS
policy documents, rescinding the standards of identity for meat and
sausage pizza will provide pizza manufacturers with the flexibility to
create new and novel styles of pizza products without having to
approach FSIS for new policy interpretations or regulatory changes.
Comment: Several commenters requested that FSIS clarify whether it
will permit generic label approval for meat and poultry pizza products
once the pizza standards are rescinded.
Response: Modifications made to incorporate the percent meat or
poultry content declaration prescribed by this final rule into the
labels of existing meat or poultry pizza products will be generically
approved pursuant to 9 CFR 317.5(b)(1) and 9 CFR 381.133(b)(1). These
provisions of the FSIS regulations allow generic approval of the
labeling for products that have product standards as specified in the
meat and poultry inspection regulations or in the FSIS Standards and
Labeling Policy Book (the Policy Book). In addition to those products
produced in accordance with the regulatory pizza standards in 9 CFR
319.600, many of the meat and poultry pizza products on the market
today qualify for generic label approval because they are produced
under informal standards described in the Policy Book.
Although meat and poultry pizza products will not be subject to
prescribed product standards once this final rule becomes effective,
for labeling approval purposes, FSIS will consider existing meat or
poultry pizza products whose labels were generically approved prior to
the effective date of this final rule as products that qualify for
generic label approval under 9 CFR 317.5(b)(1) and 9 CFR 381.133(b)(1).
New meat and poultry pizza products that are developed and marketed
after the effective date of this final rule will not qualify for
generic label approval under 9 CFR 317.5(b)(1) and 9 CFR 381.133(b)(1)
because these products are not subject to a product standard. Thus,
unless they qualify for generic label approval under a provision other
than 9 CFR 317.5(b)(1) or 9 CFR 381.133(b)(1), the labels of such
products must be submitted for formal approval from FSIS.
Once the labels of non-standardized pizza products have been
approved as sketch labeling, certain modifications made to the final
labeling may be generically approved pursuant to 9 CFR 317.5(b)(9) and
381.133(b)(9). For example, under 9 CFR 317.5(b)(9)(vii) and 9 CFR
381.133(b)(9)(vii), changes made to the percent meat or poultry
declaration statement may qualify for generic approval if the
modification reflects a change in the quantity of the meat or poultry
ingredient shown in the formula without a change in the order of
predominance shown on the label. Also, once the three-year effective
date for the meat or poultry content labeling requirement has expired,
the meat or poultry content declaration will become a non-mandatory
feature. Deletions of non-mandatory features qualify for generic
labeling approval under 9 CFR 317.5(b)(9)(xxiii) and 9 CFR
381.133(b)(9)(xxiii).
Comment: Several commenters requested that, in conjunction with
this rulemaking, FSIS modify the policies contained in the Food
Standards and Labeling Policy book and in the FSIS Policy Memoranda
that are associated with the regulatory pizza standards of identity.
Most of the requested modifications were to eliminate the references to
9 CFR 319.600 in these policies.
Response: Most of the FSIS policies for products identified as
``pizza'' require that these products comply with the minimum meat
content requirement prescribed by 9 CFR 319.600. Once this final rule
becomes effective, products with standards specified in the Policy Book
will no longer be subject to this requirement. However, like all
products identified as ``pizza'' with a meat or poultry component as
part of the product name, the labels of pizza products that had been
subject to standards specified in the Policy Book will be required to
bear a statement contiguous to the ingredients statement that conveys
the percent of meat of poultry in the product.
Comment: Several commenters requested that, in the preamble to the
final rule, FSIS provide clarification as to what it considers to be
appropriate descriptive names for non-standardized pizza products.
These commenters agreed with the Agency's statements in the preamble to
the proposed rule that products with the four ``traditional'' pizza
ingredients should be identified by the term ``pizza'' with a
designation of the meat component (e.g. ``pizza with sausage''). These
commenters also agreed that the labeling of products that vary in terms
of the four traditional components should bear a descriptive qualifier
following ``pizza'' that specifies the principal components (e.g.,
``pizza with sausage and pesto sauce''). However, the commenters
believed that the descriptive qualifier for products with ``non-
traditional'' components should not list the ingredients in order of
predominance but in the order that best characterizes the non-
traditional product. These commenters also suggested that a description
of the crust not be required to be included in the descriptive
qualifier unless the crust is different from the traditional dough-
based crust.
Response: An appropriate descriptive name for a non-standardized
pizza product that contains components that differ from those
stipulated in the regulatory standard prescribed by 9 CFR 319.600
(i.e., tomato sauce, cheese, and meat topping on a bread-based crust)
would be a listing of the components used at levels that characterize
the product. Historically, the Agency has considered food and
ingredient components used at levels above two percent of product
formulation to be ``characterizing.'' While all characterizing
components must be listed in the descriptive product name, they need
not be listed in order of predominance. As suggested by the commenter,
they may be listed in an order that best characterizes the non-
traditional product. The descriptive name should list all
characterizing components of the non-standardized pizza product,
including crust even if the crust is a traditional dough-based crust.
This is consistent with descriptive labeling requirements for other
non-standardized products such as stuffed sandwiches or meat fillings
wrapped in dough.
Comment: One commenter felt that the examples of acceptable
descriptive names for products that do not comply with the traditional
standards but that purport to be pizzas provided by FSIS in the
preamble to the proposed rule are unwieldy, cumbersome, and in direct
contradiction to the goals of the proposed rule. The commenter stated
that listing names of ingredients in the name of the pizza, as
suggested by the Agency, duplicates the information listed in the
ingredients statement.
Response: The examples of descriptive names for non-standardized
pizzas provided by FSIS in the preamble to the proposed rule list all
characterizing components of the non-standardized pizza product. This
is consistent with descriptive labeling

[[Page 44865]]

requirements for other non-standardized meat and poultry products.
Comment: One commenter suggested that rather than rescind the pizza
standards, FSIS should decline jurisdiction over pizzas made with
processed meat products. The commenter felt that inspection of these
products is a waste of resources that could be better directed to
overseeing the slaughter of animals and preparation of raw meat
products. The commenter stated that legally FSIS could declare that
food products that contain less than 50 percent cooked meat are not
considered ``meat food products'' and therefore, are not subject to
FSIS jurisdiction.
Response: Under section 1(j) of the FMIA, the Secretary of
Agriculture, and FSIS by delegation, may exempt from the definition of
``meat food products'' those products that contain meat only in
relatively small proportions or that have not been considered by
consumers as products of the meat food industry (21 U.S.C. 601(j)).
FSIS does not believe that products that consist of up to 49 percent
cooked meat contain meat in relatively small proportions as
contemplated by the FMIA. Furthermore, FSIS is not aware of any
evidence to indicate that consumers do not consider meat pizzas as
products of the meat food industry. Therefore, FSIS disagrees that it
should decline jurisdiction over meat pizzas and other products that
contain less than 50 percent cooked meat.
Comment: One commenter suggested that in addition to eliminating
the pizza standards, FSIS should examine the wisdom of its remaining
regulatory standards. Another commenter stated that standards reform
should not be delayed. This commenter felt that continued adherence to
the standards by FSIS impedes product innovation to the detriment of
consumers and food industry alike. Another commenter stated that rather
than eliminating regulatory standards of identity for meat and poultry
products, FSIS should implement them in a more harmonious way. The
commenter stated that the regulatory standards governing the amount of
poultry in processed food products that contain poultry are
substantially different from those governing the meat content of
similar processed products that contain meat.
Response: FSIS and FDA are jointly developing a proposed rule whose
goal is to establish ``general principles'' that outside parties can
apply in requesting changes to food standards. The proposed rule,
``Food Standards; General Principles and Standards Modernization'' (the
``General Principles'' proposal) will address all Federal food
standards of identity, whether under FSIS jurisdiction or that of the
FDA. Following the conclusion of this rulemaking, parties interested in
pursuing changes to the regulatory standards of identity may petition
the Agency to initiate rulemaking to make the requested changes.
Comment: One commenter noted that in the preamble to the proposed
rule, FSIS stated that consumers'' understand the term ``pizza'' to
mean ``an open-faced crust with one or more of a variety of
ingredients'' (66 FR 55601). The commenter noted that it produces pizza
stuffed sandwiches that are required to comply with the pizza standards
and requested that FSIS recognize that the term ``pizza'' is not
limited to products with open-faced crusts.
Response: Products such as ``pizza rolls'' or ``pizza pockets'' are
non-standardized products that must be identified by descriptive names.
Those products that were required to comply with the minimum meat
content prescribed by the standards will no longer be required to do so
once the standards are eliminated. However, any product identified as
``pizza'' product that lists a meat or poultry component as part of the
product name, including a product identified as a ``meat pizza roll,''
must comply with the meat or poultry content labeling requirement
prescribed by this final rule.
Comment: One commenter stated that in the proposed rule's analysis
under the Regulatory Flexibility Act, FSIS failed to discuss the impact
that elimination of the pizza standards will have on small businesses
that make meat toppings for pizzas.
Response: The four companies that supply most of the meat toppings,
such as pepperoni, sausage, and chopped meat, to both major and
contract pizza manufacturers are large businesses. There are some small
regional companies that supply meat toppings to regional manufacturers.
However, this final rule is not likely to have a significant economic
impact on these small businesses. Once the standards are rescinded,
FSIS has no information to indicate that in the absence of the minimum
meat content requirement prescribed by the standards companies will
significantly reduce the amount of meat or poultry in products
identified as ``pizza''. As discussed above, companies are likely to
continue to manufacture pizzas with an amount of meat that consumers
desire because if they do not they will lose their market share to
companies that do. Therefore, FSIS does not believe that this final
rule will have an adverse impact on the small businesses that supply
meat toppings for packaged pizza products.

The Final Rule

As proposed, FSIS is rescinding the regulatory standards of
identity for pizza by removing 9 CFR 319.600 from the federal meat
inspection regulations. In addition, the Agency is amending 9 CFR 317.8
and 9 CFR 381.129 by adding new paragraphs (b)(40) and (f),
respectively, to require that the labeling of meat or poultry products
identified as ``pizza'' that contain a meat or poultry component as
part of the product name convey the percent of the meat or poultry in
the product in a parenthetical statement contiguous to the ingredients
statement. The percentage of meat or poultry in the product must be
calculated on the weight of the cooked, dried, or cured meat or poultry
in the product (as opposed to the weight of the raw meat or poultry) in
relation to all components of the product. This labeling requirement
will expire three years after the effective date of this rule. Pizza
manufacturers are permitted to exhaust their remaining packaging
inventory before they will be required to comply with the new labeling
requirement.

Executive Order 12866 and Unfunded Mandates Reform Act

I. Executive Order 12866: Cost-benefit Analysis

This action has been reviewed for compliance with Executive Order
(EO) 12866. EO 12866 directs agencies to assess all costs and benefits
of available regulatory alternatives and, when a regulation is
necessary, to select the regulatory approach that maximizes net
benefits (including potential economic, environmental, public health
and safety, and other advantages, distributive impacts, and equity). We
have determined that this final rule maximizes net benefits to
consumers by removing the standard of identity for ``pizza with meat''
and ``pizza with sausage.''
EO 12866 classifies a rule as significant if it meets any one of a
number of specified conditions, including: having an annual effect on
the economy of $100 million, adversely affecting a sector of the
economy in a material way, adversely affecting competition, or
adversely affecting jobs. A regulation is also considered a significant
regulatory action if it raises novel legal or policy issues. This final
rule has been designated as non-significant as defined by EO 12866 and
therefore has not been reviewed by the Office of Management and Budget.

[[Page 44866]]

II. Unfunded Mandates Reform Act

The Unfunded Mandates Reform Act of 1995 (Public Law 104-4),
requiring cost-benefit and other analyses, in section 1531 (a) defines
a significant rule as ``a Federal mandate that may result in the
expenditure by State, local, and tribal governments in the aggregate,
or by the private sector, of $100,000,000 (adjusted annually for
inflation) in any 1 year.'' This final rule is not a significant rule
under the Unfunded Mandates Reform Act.

III. Industry Profile

The meat and poultry pizza industry affected by this final rule
consists of manufacturers who produce refrigerated pizzas, frozen
pizzas, pizza kits, and mixes. Because frozen pizzas are the dominant
products of this industry, making up 99 percent of the affected market,
FSIS is focusing on this segment of the industry in this analysis.
It is estimated that there are about 155 manufacturers of frozen
pizzas \1\ (manufacturers of both brand and private label frozen
pizzas) and these consist of 6 major manufacturers, 20 private-label
manufacturers, and approximately one hundred twenty nine regional
contract manufacturers.\2\ The major manufacturers produce brand-named
frozen pizzas on a national basis and the contract manufacturers
produce brand-named frozen pizzas on a regional basis. Some restaurants
make pizzas, freeze them, and then sell them to the local grocery
stores on a contractual basis. Finally, there are several companies,
like chain supermarkets, warehouse clubs, restaurants, and franchises,
that contract out the production of frozen meat pizzas to approximately
20 private label manufacturers and regional contract manufacturers.
---------------------------------------------------------------------------

\1\ Final rule affects all meat and poultry pizzas produced in
federally inspected establishments.
\2\ The exact number of regional contract manufacturers is
unknown.
---------------------------------------------------------------------------

Four major suppliers to pizza manufacturers supply meat toppings,
such as pepperoni, sausage, and chopped meat, to both major and
contract pizza manufacturers. There are also some small regional
companies that supply meat toppings to regional manufacturers. FSIS has
determined that the suppliers of meat pizza toppings will most likely
not be adversely affected by the final rule because even though pizza
manufacturers may reduce the amount of meat toppings on pizzas, these
suppliers can still supply other markets with their meat toppings, e.g.
deli, frozen dinners, etc. In addition, these suppliers offer several
product lines of pizza toppings other than meat, and they may
experience an increase in demand for these other toppings. The agency
believes, however, that as a direct result of the final rule, the
overall demand for frozen pizzas will increase, and therefore the total
demand for pizzas with meat toppings will also increase.

IV. Benefits

The final rule removes the standard of identity for meat and
sausage pizza and requires that for a 3-year period, the labeling of
products identified as pizza that lists a meat or poultry component as
part of the product name will bear a statement that conveys the percent
of meat or poultry in the product. The percentage statement must appear
contiguous to the ingredients statement.
The following sections contain qualitative descriptions of consumer
and manufacturer benefits that will ensue from eliminating the meat and
sausage pizza standards of identity.
A. Consumer Benefits
The final rule will allow consumers to choose from a greater
variety of meat and poultry pizzas, some of which may have improved
nutritional profiles. Consumers will have a greater opportunity to
improve their diets, should they desire to do so, because manufacturers
will now be able to market meat and poultry pizzas that contain less
meat or poultry and may contain non-meat toppings such as soy-based
toppings,\3\ and other innovative toppings that contain a lesser amount
of meat than the amount of meat (12% cooked or 15% raw) that they are
currently required to contain.
---------------------------------------------------------------------------

\3\ One large manufacturer has begun producing Smart Pizza for
the school lunch program. Smart Pizza is the first of its kind to
utilize soy protein. By utilizing soy in the pizzas, sodium is
reduced by up to 22 percent and total fat is lowered by as much as
35 percent.
---------------------------------------------------------------------------

Consumers may also benefit because they may be able to purchase
less costly meat and poultry pizzas. In addition, some consumers may be
willing to pay more for some pizzas if they perceive that these meat
and poultry pizzas are healthier than other pizzas. In either case,
consumers will benefit because both the low and high end of the market
can be expanded.
Under the final rule, consumers will also be protected from any
misrepresentations of the amount of meat or poultry contained in
pizzas. Percentage labeling of meat and poultry in pizzas, which is
required for the next three years, will benefit those consumers who
have come to expect a certain amount of meat or poultry on pizzas
(i.e., consumers who rely on standards) by allowing them to become
familiar with and accustomed to a variation in meat or poultry amount
on pizzas. Percentage labeling will also help reduce any confusion
consumers may experience when they are comparing the amounts of meat or
poultry in pizzas. During the 3-year period, consumers will be able to
reduce their search costs when comparing pizzas because when selecting
meat or poultry pizzas, they will be able to readily ascertain the
amount of meat or poultry in different products. Consumers will be able
to make choices consistent with their desire to have more or less meat
or poultry on pizzas, and the percentage labeling will help them make
accurate selections.
Finally, consumers, who live in areas where there are very few
restaurants, or in areas where the restaurants do not sell pizzas, or
in areas where pizza delivery is limited, will benefit because they
will have access to a greater variety of non-traditional pizzas in
their local supermarkets.
B. Manufacturer Benefits
Manufacturers of pizzas containing meat or poultry will benefit
from the final rule because the elimination of the traditional FSIS
pizza standards of identity will make them more competitive with non-
meat and non-poultry containing pizza producers and retail outlets.
Currently, manufacturers of FDA-regulated pizzas and pizzas sold by
restaurants and carry out/delivery services, whether frozen or fresh,
are able to experiment with innovative recipes and ingredient profiles,
in offering consumers new products. These innovative pizzas that are
sold in retail stores need not contain cheese or tomato sauce, as FSIS
requires.
Manufacturers of non-traditional pizzas will potentially experience
an increase in sales and therefore revenues, when they achieve
economies of scale while producing a large variety of these pizzas.
Since the manufacturers will not be restricted to manufacturing a
prescribed recipe pizza, they can become more innovative and create new
markets by offering new products and mass producing them. Also, these
manufacturers can use less costly ingredients and eliminate or reduce
certain ingredients, thereby offering more economically priced meat and
poultry pizzas. For some manufacturers, this may increase their market
share and revenues.

[[Page 44867]]

V. Costs

A. Pre-printed Package Labels
This final rule does not mandate changes in the way meat or poultry
products are produced. However, it does impose a new labeling
requirement, for a limited time, on firms that manufacture and market
products identified as pizzas that list meat or poultry components as
part of the product name. When this rule becomes effective, all
companies that produce products identified as pizzas that list a meat
or poultry component as part of the product name will be required to
modify their product labels by adding a statement contiguous to the
ingredients statement that states the percent of meat or poultry in the
product. Companies must consequently redesign their product labels by
adding the required information to their existing label designs, or by
applying a separate sticker with the required information to their
existing labels. FSIS will permit companies to use their remaining
packaging inventory before they will be required to comply with the new
labeling requirement so that they will not have to discard any unused
packaging.
Manufacturing of pre-printed packaging is generally contracted out
to third-party firms. Costs to redesign product labels or add
information to existing label designs are one-time costs and include
costs associated with internal administrative activities, assessing the
meat or poultry amounts, altering the graphic design, conducting
prepress activities, and changing engraving plates or cylinders.\4\
---------------------------------------------------------------------------

\4\ In this analysis, there will be no costs associated with
assessing the meat or poultry contents of pizzas because companies
will be producing meat and poultry pizzas based on a formula. The
final rule requires companies to calculate the weight of the meat or
poultry toppings in relation to all components of the pizzas, which
FSIS believes will result in no new incremental costs. There will
not be any prepress activities and changing the engraving plates
costs because these costs will be incurred during their normal
business cycle.
---------------------------------------------------------------------------

1. One-Time Costs
FDA's Labeling Cost Model was originally developed by researchers
at RTI International for various consumer food products and was adapted
for egg products, which are primarily shipped to foodservice and
further food manufacturers. RTI adapted the model to determine the cost
of the new regulation of placing the statements ``keep refrigerated''
or ``keep frozen'' on all egg products that require special handling to
maintain their wholesome condition. Additionally such statements had to
be printed on the principal display panel of the product. In
determining the cost of the proposed egg products rule, the model was
used to determine the cost of placing refrigeration labels, the cost of
the labels, and the cost of the labeling equipment needed and the
average size of the containers requiring the labels. FSIS believes that
this is a reasonable and valid model to use to estimate the cost of the
final rule for changing the labels on frozen meat and poultry pizzas.
Using the FDA Labeling Cost Model, the following table provides the
costs associated with changing labeling information for frozen and
refrigerated pizzas packaging using the offset lithography printing
method \5\ for each universal product code (UPC) that needs to be
changed. A UPC is a unique code assigned to every consumer package good
and is read by a scanner when purchased.\6\
---------------------------------------------------------------------------

\5\ The FDA Labeling Cost Model assumes that either the offset
lithography or flexography printing method will be used. In this
analysis the offset lithography printing method is assumed to be
used because of its relative advantages in quality, simplicity, and
cost. The complexity of the label change determines the level of
effort for artwork, stripping or image assembly, and engraving. It
also determines the number of plates or cylinders that must be
modified or replaced. Typically, when companies use offset
lithography printing, many companies engrave new lettering onto an
existing printing plate to save time and resources. Other companies,
however, order new printing plates regardless of how minor the line
copy change may be.
\6\ UPC is a 10 digit code where the first five digits are
assigned to the vendor and the last 5 digits are specific to the
item.

Table 1.--One-Time Costs To Change Labels for Frozen and Refrigerated
Pizzas, Kits, and Mixes Using Off-set Lithography Printing Method
------------------------------------------------------------------------
Per UPC Costs
Cost Type -------------------------
Low Medium High
------------------------------------------------------------------------
Administrative................................ $132 $308 $484
Graphic Design................................ 330 495 660
---------
Total..................................... 462 803 1,144
------------------------------------------------------------------------
Source: FDA Labeling Cost Model (Muth, Gledhill, and Karns, 2001).
\1\ Estimated for 2001.

It is estimated that the cost per UPC will range from a low of $462
to a high of $1,144, with the more likely cost being $803 \7\ as
depicted in the above table.
---------------------------------------------------------------------------

\7\ For each component of cost in this model, RTI obtained a
range of estimates for each printing method. The lowest of these
estimates is considered the limit of the low range, and the highest
of the estimates is considered the limit of the high range. The low
and high range of total cost is calculated by adding together all of
the low and high range estimates of each component cost, so the low
and high range estimates of this model are unlikely.
---------------------------------------------------------------------------

In 2001, there were 1,603 UPC's associated with refrigerated and
frozen pizzas including a small percentage of pizza kits and mixes, of
which 1,042 were from brand name labels and 561 were from private
labels. When all these costs are considered, the estimated one-time
cost to modify pre-printed pizza packaging labels for 1,603 UPC, as
shown in the table below is $741 thousand ($462 x 1,603 UPCs) to $1.8
million ($1,144 x 1,603 UPC),\8\ with the more likely cost being $1.3
million ($803 x 1,603 UPCs).
---------------------------------------------------------------------------

\8\ Source: Muth, M.K., E.C. Gledhill, and S.A. Karns. 2001.
``FDA Labeling Cost Model.'' Prepared for the U.S. Department of
Health and Human Services. Research Triangle Park, NC: RTI.

Table 2.--One-Time Costs, Frozen and Refrigerated Pizzas, Kits, and Mixes for Estimated 1,603 UPC Changes \1\
----------------------------------------------------------------------------------------------------------------
For Estimated 1,603 UPC Changes
Cost Type -----------------------------------------------
Low Medium High
----------------------------------------------------------------------------------------------------------------
Administrative.................................................. $211,636 $493,636 $775,997
Graphic Design.................................................. 529,089 793,634 1,058,178
-----------------
Total....................................................... 740,725 1,287,270 1,834,175
----------------------------------------------------------------------------------------------------------------
Source: FDA Labeling Cost Model (Muth, Gledhill, and Karns, 2001).
\1\ Estimated for 2001

[[Page 44868]]

2. Annual Costs
a. Administrative.
The total cost of administrative activities is the dollar value of
the incremental effort expended in order to comply with the final rule.
Administrative costs consist of activities such as interpreting the
rule in relation to the firm's products, determining the scope and
coverage related to product labels, establishing a corporate position,
formulating a method for compliance, and managing the compliance
method.

Table 3.--Total Annual Costs of Frozen, Refrigerated Pizzas, Kits, and Mixes \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Graphic design Total disc
Year Cost level Admin cost cost Total cost Disc factor 7% cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................................................... Low $211,636 $529,089 $740,725 0.93 $688,874
Medium 493,816 793,634 1,287,450 .............. 1,197,329
High 775,997 1,058,178 1,834,175 .............. 1,705,783
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Costs are over a three year period, even though the industry does not incur costs during the second and third year.

FSIS estimates that the administrative costs over the three-year
period of compliance for the industry will range between $212 thousand
and $776 thousand, ($197 thousand and $722 thousand, discounted at the
7% rate) \9\ as depicted in Table 3, with the mid-point being at $494
thousand and the per company cost being $3,186 at the mid-point
($493,816/155 firms). These administrative costs of changing labels for
pre-printed packages will only be incurred in the first year of the
rule.
---------------------------------------------------------------------------

\9\ The discount factor of 7 percent is used to calculate the
present worth of a future value at the end of a 3 year period.
---------------------------------------------------------------------------

b. Graphic Design

The graphic design costs are being counted as a direct cost of the
final rule, range from $529 thousand to $1.1 million, with the mid-
point being at $794 thousand, as depicted in Table 3, and the per
company cost is $5,120 at the mid-point ($793, 634/155 firms). The cost
depends upon the type of printing processes used, the complexity of the
label change, and the length of the compliance period. The graphic
design costs will be incurred in the first year only, and no additional
costs are expected because companies will need to print labels
regardless of whether this rule is promulgated.

c. Stickers

Companies will also have the option of supplying the required
information by applying a separate sticker to existing product labels.
It should be noted that the meat and poultry pizza manufacturers of
brand-name and private-label pizzas who regularly use stickers to
convey product information already incur these costs. Thus, these costs
are not expected to be a direct effect of the final rule for all meat
and poultry pizza manufacturers. Table 4 depicts the costs of changing
and applying stickers to pizza packages for 2,068 UPC,\10\ ranging from
a low of $6.9 million to a high of $18 million, with the mid-point
being at $12.6 million.
---------------------------------------------------------------------------

\10\ The number of UPCs increased from 1,603 for pre-printed
packages to 2,068 for stickers because the FDA Labeling Cost Model
assumes that the companies which use stickers will have six months
to comply. In those six months, the companies will print the
stickers until they are set up to print their packages. Therefore
the number of UPCs will increase.

Table 4.--Total Industry Costs Associated With Using Individual Stickers To Modify Product Labeling\1\
----------------------------------------------------------------------------------------------------------------
Cost type Low Medium High
----------------------------------------------------------------------------------------------------------------
Administrative.................................................. $273,009 $637,021 $1,001,033
Graphic Design.................................................. $682,523 $1,023,784 $1,365,045
Stickers........................................................ $5,926,137 $10,981,288 $15,654,141
=================
Total....................................................... $6,881,669 $12,642,093 $18,020,219
----------------------------------------------------------------------------------------------------------------
Source: FDA Labeling Cost Model (Muth, Gledhill, and Karns, 2001).
\1\ Estimated for 2001.

The use of pre-printed stickers to modify the product labels also
has recurring labor costs, assuming that the stickers are manually
applied. Estimated sticker application costs range from $0.014 to
$0.034 per package\11\, which is included in the cost for stickers
given in Table 4, ranging from $6 million to $16 million, with the mid-
point being $11 million. Stickers' application costs comprised 87
percent of the total costs for stickers.
---------------------------------------------------------------------------

\11\ Muth, Gledhill, and Karns, 2001.
---------------------------------------------------------------------------

In most cases, FSIS believes that it will not be practical for meat
and poultry pizza manufacturers to use these stickers to incorporate
the required information on the product label because they are small
and difficult to apply. Moreover, FSIS believes that the cost of using
stickers for longer than six month is unrealistic because the costs
associated with stickers are expected to be higher than the alternative
of printing packages. For example, the FDA Labeling Cost Model shows
that the total cost of applying stickers to frozen and refrigerated
pizzas as depicted in the Table 5 below is over 8 times higher than the
costs of changing the labels on packages. The total costs depicted for
printing stickers in the table include both labor and the one-time
redesign cost.

[[Page 44869]]

Table 5.--Frozen and Refrigerated Pizzas: Comparison of Total Costs of Printing Stickers and Packages\1\
[In thousands]
----------------------------------------------------------------------------------------------------------------
Packages Stickers
-----------------------------------------------------------------------------
Product category Cost level Cost level
-----------------------------------------------------------------------------
Low Medium High Low Medium High
----------------------------------------------------------------------------------------------------------------
Frozen & refrigerated pizzas...... 740 1,287 1,834 6,880 12,642 17,940
----------------------------------------------------------------------------------------------------------------
Source: RTI Labeling Cost Model (Muth, Gledhill, and Karns, 2001).
\1\ Estimated for 2001.

d. Labeling Approval

FSIS will generically approve the necessary modifications made to
labels of existing pizza products needed to make these products
compliant with the new labeling requirement. Thus, for existing pizza
products, there will be no additional costs associated with the
submission of labels for approval from FSIS. Also, once the three-year
effective date for the labeling requirement has expired, manufacturers
will be able to remove the meat or poultry content statement because
the statement will be a non-mandatory feature. Therefore, there will be
no incremental cost attributed to the final rule.
3. Other Costs
Other costs associated with the rule are voluntary. Companies that
chose to develop and market new styles of pizza will incur the normal
costs of production, labeling, and marketing as before. Labels for new
pizza products may require formal approval from FSIS if they do not
qualify for generic approval. Thus, manufacturers of new pizza products
may incur costs to obtain formal label approval from FSIS. Companies
that chose to identify products with a descriptive name rather than as
a ``pizza'', e.g., ``sausage, cheese, and sauce on a crust,'' will not
be subject to the meat or poultry content labeling requirement.
Additionally, when the three-year effective date for the final rule
has elapsed, companies that chose to remove the percent meat or poultry
statement from their product labels will incur similar administrative
and graphic design costs to modify their labels should they choose to
remove this statement. However, companies will remove the percent meat
or poultry statement from their product labels, if they believe that
the benefits exceed the costs of removing the statement. FSIS does not
believe that this is a cost of the final rule.
4. Total Costs
The total cost associated with the requirement that the percent of
meat or poultry be conveyed on the labeling of meat or poultry pizzas
is estimated at the mid-range point of $1,287,270 industry-wide or
$8,305 (administrative cost--$3,185 and graphic design costs--$5,120)
per firm for the three-year period. The actual costs will be lower than
the estimated total costs because the analysis included the cost of
changing the labels for all pizzas including cheese and vegetable and
cheese pizzas that are not affected by the final rule. The final rule
will be cost-beneficial because FSIS believes that the non-quantifiable
benefits of providing consumers a greater variety of meat pizzas that
have varied and potentially improved nutritional profiles and
protecting consumers from any potential misrepresentation of the amount
of meat and poultry content of pizzas justifies the cost to companies
of providing the percent label of meat and poultry content on pizzas.

VI. Effect on Small Entities

FSIS has examined the economic implications of the final rule as
required by the Regulatory Flexibility Act (5 U.S.C. 601-612). If a
rule has a significant economic impact on a substantial number of small
entities, the Regulatory Flexibility Act requires that the regulatory
options that would lessen the economic effect of the rule on small
entities be analyzed. FSIS has determined that the final rule will not
have a significant impact on a substantial number of small entities.
FSIS has estimated the annualized cost impact on 149 small entities
potentially affected by the final rule. The annualized costs to small
meat and poultry pizza manufacturers are estimated to be approximately
$8,640 over three years, or $2,880 annualized. The annualized cost of
this final rule does not exceed $6,711 which equates to 1 percent of
the average small entity annual revenue, and therefore the impact of
the final rule is considered not significant.
In addition, the cost of modifying the label is offset by the fact
that manufacturers will be permitted to exhaust their current inventory
of pre-printed packages and therefore will not experience any
additional cost of retiring unused packages.

Executive Order 12988

This final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. This final rule: (1) Preempts State and local
laws and regulations that are inconsistent with this rule; (2) has no
retroactive effect; and (3) does not require administrative proceedings
before parties may file suit in court challenging this rule. However,
the administrative procedures specified in 9 CFR 306.5, 381.35, and
590.320 through 590.370 must be exhausted before any judicial challenge
of the application of the provisions of this rule, if the challenge
involves any decision of an FSIS employee relating to inspection
services provided under the FMIA or PPIA.

Paperwork Requirements

FSIS has reviewed the paperwork and recordkeeping requirements in
this final rule in accordance with the Paperwork Reduction Act and has
determined that the paperwork requirements have already been accounted
for in the Marking, Labeling, and Packaging Material information
collection approved by the Office of Management and Budget (OMB). The
OMB approval number for the Marking, Labeling, and Packaging Material
information collection is 0583-0092.

Additional Public Notification

Public awareness of all segments of rulemaking and policy
development is important. Consequently, in an effort to better ensure
that minorities, women, and persons with disabilities are aware of this
final rule, FSIS will announce it and make copies of this Federal
Register publication available through the FSIS Constituent Update.
FSIS provides a weekly Constituent Update, which is communicated via
Listserv, a free e-mail subscription service. In addition, the update
is available on-line through the FSIS web page located at http://www.fsis.usda.gov.
The update is

[[Page 44870]]

used to provide information regarding FSIS policies, procedures,
regulations, Federal Register notices, public meetings, recalls, and
any other types of information that could affect or would be of
interest to our constituents/stakeholders. The constituent Listserv
consists of industry, trade, and farm groups, consumer interest groups,
allied health professionals, scientific professionals, and other
individuals that have requested to be included. Through the Listserv
and web page, FSIS is able to provide information to a much broader,
more diverse audience than would otherwise be possible.
For more information contact the Congressional and Public Affairs
Office, at (202) 720-9113. To be added to the free e-mail subscription
service (Listserv) go to the ``Constituent Update'' page on the FSIS
Web site at http://www.fsis.usda.gov/oa/update/update.htm. Click on the
``Subscribe to the Constituent Update Listserv'' link, then fill out
and submit the form.

List of Subjects

9 CFR Part 317

Food labeling, Meat inspection.

9 CFR Part 319

Food grades and standards, Food labeling, Meat inspection.

9 CFR Part 381

Food labeling, Poultry and poultry products.

0
For the reasons stated in the preamble, FSIS amends 9 CFR Chapter III
as follows:

PART 317--LABELING, MARKING DEVICES, AND CONTAINERS

0
1. The authority citation for part 317 continues to read as follows:

Authority: 21 U.S.C. 601-695; 7 CFR 2.18, 2.53.

0
2. Section 317.8 is amended by adding a new paragraph (b)(40) to read
as follows:

Sec. 317.8 False or misleading labeling or practices generally;
specific prohibitions and requirements for labels and containers.

(b) * * *
(40) Products identified as ``pizza'' that list a meat component as
part of the product name must bear a parenthetical statement contiguous
to the ingredients statement that conveys the percent of the cooked,
cured, or dried meat component in the product. This paragraph shall
expire on October 30, 2006.
* * * * *

PART 319--DEFINITIONS AND STANDARDS OF IDENTITY OR COMPOSITION

0
3. The authority citation for part 319 continues to read as follows:

Authority: 7 U.S.C. 450, 1901-1906; 21 U.S.C. 601-695; 7 CFR
2.18, 2.53.

Sec. 319.600 Removed and Reserved]

0
4. Section 319.600 is removed and reserved.

PART 381--POULTRY PRODUCTS INSPECTION REGULATIONS

0
5. The authority citation for part 381 continues to read as follows:

Authority: 7 U.S.C. 138f, 450; 21 U.S.C. 451-470; 7 CFR 2.18,
2.53.

0
6. Section 381.129 is amended by adding a new paragraph (f) to read as
follows:

Sec. 381.129 False or misleading labeling or containers.

* * * * *
(f) Products identified as ``pizza'' that list a poultry component
as part of the product name must bear a parenthetical statement
contiguous to the ingredients statement that conveys the percent of the
cooked, cured, or dried poultry component in the product. This
paragraph shall expire on October 30, 2006.

Done at Washington, DC: July 28, 2003.
Linda Swacina,
Acting Administrator.
[FR Doc. 03-19505 Filed 7-30-03; 8:45 am