Petition for Writ of Certiorari — National Pork Producers Council, et al., Petitioners v. Karen Ross, in Her Official Capacity as Secretary of the California Department of Food & Agriculture, et al.

APPENDICES

1a

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

NATIONAL PORK PRODUCERS COUNCIL;

AMERICAN FARM BUREAU FEDERATION,

Plaintiffs-Appellants,

v.

KAREN ROSS, in her official capacity as Secretary

of the California Department of Food & Agriculture;

TOMÁS J. ARAGÓN, in his official capacity as Director of the California Department of Public Health;

ROB BONTA,∗ in his official capacity as Attorney

General of California,

Defendants-Appellees,

and

THE HUMANE SOCIETY OF THE UNITED

STATES; ANIMAL LEGAL DEFENSE FUND; ANIMAL EQUALITY; THE HUMANE LEAGUE; FARM

SANCTUARY; COMPASSION IN WORLD FARMING USA; COMPASSION OVER KILLING,

Intervenor-Defendants-Appellees.

No. 20-55631

D.C. No. 3:19-cv-02324-W-AHG

∗ Rob Bonta is substituted for his predecessor, Xavier

Becerra, as Attorney General of California; and

Tomás J. Aragón is substituted for his predecessor,

Sonia Angell, as Director of the California Department of Public Health. Fed. R. App. 43(c)(2).

2a

Appeal from the United States District Court

for the Southern District of California

Thomas J. Whelan, District Judge, Presiding

Argued and Submitted April 14, 2021

Pasadena, California

Filed July 28, 2021

Before: Milan D. Smith, Jr. and Sandra S. Ikuta, Circuit Judges, and John E. Steele,∗∗ District Judge.

Opinion by Judge Ikuta

OPINION

IKUTA, Circuit Judge:

In 2018, California voters passed Proposition 12,

which bans the sale of whole pork meat (no matter

where produced) from animals confined in a manner

inconsistent with California standards. The National

Pork Producers Council and the American Farm Bureau Federation (collectively referred to as “the Council”) filed an action for declaratory and injunctive relief on the ground that Proposition 12 violates the

dormant Commerce Clause. Under our precedent, a

state law violates the dormant Commerce Clause only

in narrow circumstances. Because the complaint here

does not plausibly allege that such narrow circumstances apply to Proposition 12, we conclude that the

district court did not err in dismissing the Council’s

complaint for failure to state a claim.

∗∗ The Honorable John E. Steele, United States Dis-

trict Judge for the Middle District of Florida, sitting

by designation.

3a

I

Proposition 12 amended sections 25990–25993 of

the California Health and Safety Code to “prevent animal cruelty by phasing out extreme methods of farm

animal confinement, which also threaten the health

and safety of California consumers, and increase the

risk of foodborne illness and associated negative fiscal

impacts on the State of California.” Cal. Prop. 12, § 2

(2018). The relevant portion of Proposition 12 precludes a business owner or operator from knowingly

engaging in a sale within California of various products, including the sale of “[w]hole pork meat” unless

the meat was produced in compliance with specified

sow confinement restrictions. Cal. Prop. 12, § 3(b)

(2018); see Cal. Health & Safety Code §§ 25990(b)(1)–

(2), 25991(e)(1)–(4).

On December 5, 2019, the Council filed a complaint against California officials (referred to collectively as the California defendants) challenging Proposition 12 and seeking, among other things, a declaratory judgment that Proposition 12 is unconstitutional under the dormant Commerce Clause, and a

permanent injunction enjoining the implementation

and enforcement of Proposition 12.1 The complaint alleged that Proposition 12 violates the dormant Commerce Clause in two ways. First, it impermissibly regulates extraterritorial conduct outside of California’s

borders by compelling out-of-state producers to

change their operations to meet California standards.

Second, it imposes excessive burdens on interstate

On January 9, 2020, several nonprofit organizations

were granted intervention as defendants (referred to

collectively as the intervenors).

1

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commerce without advancing any legitimate local interest because it significantly increases operation

costs, but is not justified by any animal-welfare interest and “has no connection to human health or foodborne illness.”

On April 27, 2020, the district court granted the

California defendants’ motion to dismiss and the intervenors’ motion for judgment on the pleadings. The

district court held that Proposition 12 did not impermissibly control extraterritorial conduct and did not

impose a substantial burden on interstate commerce.

Although the district court had granted the Council

leave to amend, the Council instead moved for entry

of judgment, and the district court dismissed the complaint with prejudice. The Council timely appealed.

We have jurisdiction under 28 U.S.C. § 1291, and

review de novo the district court’s order granting a

motion to dismiss for failure to state a claim under

Rule 12(b)(6) of the Federal Rules of Civil Procedure,

Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir.

2009), and the district court’s order granting a motion

for judgment on the pleadings under Rule 12(c) of the

Federal Rules of Civil Procedure, Lyon v. Chase Bank

USA, N.A., 656 F.3d 877, 883 (9th Cir. 2011). At the

motion to dismiss stage, we take as true the facts

plausibly alleged in the complaint. See Ashcroft v. Iqbal, 556 U.S. 662, 678–79 (2009).

II

The Constitution grants Congress the power to

“regulate Commerce . . . among the several States.”

U.S. Const. art. I., § 8, cl. 3. The Commerce Clause

does not, on its face, impose any restrictions on state

law in the absence of congressional action. Nonetheless, “[f]rom early in its history,” the Supreme Court

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has interpreted the Commerce Clause as implicitly

preempting state laws that regulate commerce in a

manner that is disruptive to economic activities in the

nation as a whole. See South Dakota v. Wayfair, Inc.,

138 S. Ct. 2080, 2090 (2018); Gibbons v. Ogden, 22

U.S. (9 Wheat.) 1, 200–01 (1824). In its most recent

consideration of the scope of the dormant Commerce

Clause, the Court stated there are “two primary principles that mark the boundaries of a State’s authority

to regulate interstate commerce.” Wayfair, 138 S. Ct.

at 2090. “First, state regulations may not discriminate

against interstate commerce; and second, States may

not impose undue burdens on interstate commerce.”

Id. at 2091. Although “State laws that discriminate

against interstate commerce face ‘a virtually per se

rule of invalidity,’” id. (quoting Granholm v. Heald,

544 U.S. 460, 476 (2005)), “State laws that ‘regulat[e]

evenhandedly to effectuate a legitimate local public

interest . . . will be upheld unless the burden imposed

on such commerce is clearly excessive in relation to

the putative local benefits,’” id. (quoting Pike v. Bruce

Church, Inc., 397 U.S. 137, 142 (1970)). Wayfair indicated that these two principles are “subject to exceptions and variations.” Id. Among other things, Wayfair cited an earlier decision holding that a state law

may violate the dormant Commerce Clause when it

has extraterritorial effects. Id. (citing Brown-Forman

Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S.

573 (1986)).

The Council does not argue that the complaint has

plausibly pleaded that Proposition 12 discriminates

against out-of-state interests, and so has foregone the

first principle recognized in Wayfair. Instead, it argues the second Wayfair principle, that Proposition 12

places an undue burden on interstate commerce, and

the Brown-Forman variation, that Proposition 12 has

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an impermissible extraterritorial effect. At the motion

to dismiss stage, we must determine whether the

Council has plausibly pleaded a dormant Commerce

Clause claim under its theories.

A

The Council’s primary argument is that the complaint adequately alleges that Proposition 12 has an

impermissible extraterritorial effect.

1

In making this claim, the Council relies primarily

on three historical Supreme Court cases that first delineated when a state law violates the dormant Commerce Clause by impermissibly regulating prices in

other states. See Baldwin v. G.A.F. Seelig, Inc., 294

U.S. 511 (1935); Brown-Forman, 476 U.S. at 579;

Healy v. Beer Inst., Inc., 491 U.S. 324 (1989). In Baldwin, the Court struck down a New York law that required a dealer selling milk in New York to pay an

out-of-state milk producer the minimum price set by

New York law in order to equalize the price of milk

from in-state and out-of-state producers. 294 U.S. at

518–19. As the Court later explained, the New York

law in Baldwin was “aimed solely at interstate commerce attempting to affect and regulate the price to be

paid for milk in a sister state, [which] amounted in

effect to a tariff barrier set up against milk imported

into the enacting state.” Milk Control Bd. of Pa. v. Eisenberg Farm Prods., 306 U.S. 346, 353 (1939). In

Brown-Forman, the Court invalidated a New York

law requiring every liquor distiller or producer selling

to wholesalers within the state to affirm that the

prices charged for every bottle or case of liquor were

no higher than the lowest price at which the same

product would be sold in any other State during the

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month covered by the particular affirmation. 476 U.S.

at 576. The Court concluded that the price-affirmation

law was invalid because it had the “practical effect” of

requiring “producers or consumers in other States to

surrender whatever competitive advantages they may

possess,” by forcing them to sell their product in-state

for a set price. 476 U.S. at 580, 583. Last, Healy struck

down a Connecticut price-affirmation statute that, in

interaction with the laws in the neighboring states,

had the practical effect of controlling prices in those

states, causing an anti-competitive result. 491 U.S. at

337–39.

These cases used broad language. For instance,

Healy states that the extraterritoriality principle

“protects against inconsistent legislation arising from

the projection of one state regulatory regime into the

jurisdiction of another State,” and “precludes the application of a state statute to commerce that takes

place wholly outside of the State’s borders, whether or

not the commerce has effects within the [regulating]

State.” Id. at 336–37 (cleaned up). But such broad

statements are “so sweeping that most commentators

have assumed that these cases cannot mean what

they appear to say.” Katherine Florey, State Courts,

State Territory, State Power: Reflections on the Extraterritoriality Principle in Choice of Law and Legislation, 84 Notre Dame L. Rev. 1057, 1090 (2009); see also

Jack L. Goldsmith & Alan O. Sykes, The Internet and

the Dormant Commerce Clause, 110 Yale L.J. 785, 806

(2001) (suggesting that the Court’s “overbroad extraterritoriality dicta” can be ignored). The extraterritoriality test cannot strictly bar laws that have extraterritorial effect, scholars argue, because “[i]n practice,

states exert regulatory control over each other all the

time.” Gillian E. Metzger, Congress, Article IV, and

Interstate Relations, 120 Harv. L. Rev. 1468, 1521

8a

(2007) (noting, for example, “Delaware’s corporate

law, which has de facto nationwide application”).

And indeed, the Supreme Court has given force to

these scholarly observations, as it has indicated that

the extraterritoriality principle in Baldwin, BrownForman, and Healy should be interpreted narrowly as

applying only to state laws that are “price control or

price affirmation statutes,” Pharm. Rsch. & Mfrs. of

Am. v. Walsh, 538 U.S. 644, 669 (2003). We have

adopted this interpretation and held that the extraterritoriality principle is “not applicable to a statute

that does not dictate the price of a product and does

not tie the price of its in-state products to out-of-state

prices.” Ass’n des Eleveurs de Canards et d’Oies du

Quebec v. Harris (Eleveurs), 729 F.3d 937, 951 (9th

Cir. 2013) (cleaned up). The Tenth Circuit has followed suit. See Energy & Env’t Legal Inst. v. Epel, 793

F.3d 1169, 1172 (10th Cir. 2015) (Gorsuch, J.) (holding

that the “three essential characteristics” that mark

Baldwin, Brown-Forman, and Healy are that the

state law at issue (1) was a price-control statute, (2)

linked prices paid in-state with those paid out-ofstate, or (3) discriminated against interstate commerce).

Under this narrow interpretation, Baldwin,

Brown-Forman, and Healy do not support the Council’s arguments. It is undisputed that Proposition 12

is neither a price-control nor price-affirmation statute, as it neither dictates the price of pork products

nor ties the price of pork products sold in California to

out-of-state prices. See Eleveurs, 729 F.3d at 951. And

the Council has not claimed that Proposition 12 discriminates against interstate commerce.

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2

The Council nevertheless asks us to hold that

Proposition 12’s extraterritorial impact violates the

underlying principles of the dormant Commerce

Clause in light of the unique nature of the pork industry. According to the allegations of the complaint, the

pork industry is highly interconnected. A single hog is

butchered into many different cuts which would normally be sold throughout the country. In order to ensure they are not barred from selling their pork products into California, all the producers and the end-ofchain supplier will require assurances that the cuts

and pork products come from hogs confined in a manner compliant with Proposition 12. This means that

all pork suppliers will either produce hogs in compliance with California specifications or incur the additional cost of segregating their products. As a practical

matter, given the interconnected nature of the nationwide pork industry, all or most hog farmers will be

forced to comply with California requirements. The

cost of compliance with Proposition 12’s requirements

is high, and would mostly fall on non-California transactions, because 87% of the pork produced in the country is consumed outside California. Therefore, the

complaint alleges, Proposition 12 violates the

dormant Commerce Clause given its substantial extraterritorial impact as a practical matter.

The Council’s theory is not barred by Walsh’s

characterization of the Baldwin line of cases as being

limited to price-control and price-affirmation statutes.

We have recognized that the Supreme Court has not

expressly narrowed the extraterritoriality principle to

only price-control and price-affirmation cases, and we

have recognized a “broad[er] understanding of the ex-

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traterritoriality principle” may apply outside this context, Ward v. United Airlines, Inc., 986 F.3d 1234,

1240–41 (9th Cir. 2021). But even though the Council’s complaint plausibly alleges that Proposition 12

has an indirect “practical effect” on how pork is produced and sold outside California, we have rejected

the argument that such upstream effects violate the

dormant Commerce Clause.

Under our precedent, state laws that regulate

only conduct in the state, including the sale of products in the state, do not have impermissible extraterritorial effects. See Rosenblatt v. City of Santa Monica,

940 F.3d 439, 445 (9th Cir. 2019). A state law may require out-of-state producers to meet burdensome requirements in order to sell their products in the state

without violating the dormant Commerce Clause. See

Rocky Mountain Farmers Union v. Corey (Rocky II),

913 F.3d 940, 952 (9th Cir. 2019); Eleveurs, 729 F.3d

at 942. Even if a state’s requirements have significant

upstream effects outside of the state, and even if the

burden of the law falls primarily on citizens of other

states, the requirements do not impose impermissible

extraterritorial effects. See Eleveurs, 729 F.3d at 942,

948–53. A state law is not impermissibly extraterritorial unless it directly regulates conduct that is wholly

out of state. Rosenblatt, 940 F.3d at 442, 445 (holding

that a city ordinance restricting vacation rentals in a

California city did not violate the dormant Commerce

Clause even though 95% of vacation rentals in the city

involved an out-of-state party, because the ordinance

penalized only conduct within the city).

The Council’s allegations regarding the upstream

effects of Proposition 12 are most closely analogous to

those we rejected in Eleveurs. 729 F.3d at 942. In Eleveurs, plaintiffs argued that a law banning the sale in

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California of certain duck products made by force

feeding the duck violated the extraterritoriality principle because it controlled commerce outside of California. According to the plaintiffs, the law targeted

out-of-state entities and compelled out-of-state farmers to comply with California’s standards. Id. at 949.

We held that the plaintiff’s argument failed because

the state law applied to “both California entities and

out-of-state entities,” and the law merely precluded “a

more profitable method of operation—force feeding

birds for the purpose of enlarging its liver—rather

than affecting the interstate flow of goods.” Id.

The requirements under Proposition 12 likewise

apply to both California entities and out-of-state entities, and merely impose a higher cost on production,

rather than affect interstate commerce. Therefore,

even though Proposition 12 has some upstream effects, California is “free to regulate commerce and contracts within [its] boundaries with the goal of influencing the out-of-state choices of market participants.” Rocky Mountain Farmers Union v. Corey

(Rocky I), 730 F.3d 1070, 1103 (9th Cir. 2013); see also

Eleveurs, 729 F.3d at 948–49 (“A statute is not invalid

merely because it affects in some way the flow of commerce between the States.” (cleaned up)).

For the same reason, California’s promulgation of

regulations to implement Proposition 12, which, as a

practical matter, may result in the imposition of complex compliance requirements on out-of-state farmers,

does not have an impermissible extraterritorial effect.

Proposition 12 required the California Department of

Food and Agriculture (CDFA) to publish implementing regulations. Cal. Prop. 12 § 6 (2018); Cal. Health

& Safety Code § 25993(a). Under the proposed regula-

12a

tions,2 an out-of-state producer must hold a valid California certification in order to sell its products in California. CDFA, Proposed Regulations at 30 (May 28,

2021) (proposing to adopt California Code of Regulations Title 3, § 1322.1(b)). And to obtain the certification, a producer must “allow access by the certifying

agent, and/or authorized representatives of the Department, to . . . houses where covered animals and

covered animal products may be kept . . . .” Id. at 40

(proposing to adopt § 1326.1(c)). Once certified, porkproducing operations must also comply with the

recordkeeping requirements. Id. at 40–41 (proposing

to adopt § 1326.2).

Even assuming these proposed regulations become effective, “[a]ppropriate certificates may be exacted” from out-of-state producers for in-state health

and safety purposes without violating the dormant

Commerce Clause. Baldwin, 294 U.S. at 524. Indeed,

in Rocky I, we held that a California law did not impermissibly regulate extraterritorial conduct even

though it required out-of-state fuel distributors “to

seek regulatory approval in California before undertaking a transaction also in California” and imposed

reporting requirements on out-of-state producers. 730

2 The complaint alleges that Proposition 12 charges

California agencies with promulgating regulations to

implement the proposition. After oral argument was

held in this appeal, CDFA published proposed regulations implementing Proposition 12. The proposed regulations are located at http://www.cdfa.ca.gov/ahfss/pdfs/regulations/AnimalConfinementText1stNotice_05252021.pdf. See also 22-Z Cal. Regulatory Notice Reg. 594 (May 28, 2021).

Although the CDFA has published the proposed regulations, it has not yet promulgated a final version.

13a

F.3d at 1104. Therefore, the proposed regulations’ requirement that out-of-state producers seek a California certification in order to access the California market is not an impermissible extraterritorial effect.

3

The Council relies on a handful of cases in which

we determined that a state law had an impermissibly

extraterritorial effect because it directly regulated

transactions conducted entirely out of state. In Daniels Sharpsmart, Inc. v. Smith, we struck down a California law requiring a company that sent medical

waste out of state for disposal to use only a medical

waste facility that met California requirements. 889

F.3d 608, 612–13, 615–16 (9th Cir. 2018). The transaction at issue in that case (the purchase of medical

waste disposal services from out-of-state treatment facilities in Kentucky and Indiana) occurred wholly outside California. Id.; see also Sam Francis Found. v.

Christies, Inc., 784 F.3d 1320, 1323 (9th Cir. 2015) (en

banc) (striking down a law that required California

residents to pay five percent of their sales price in outof-state art sale transactions to the artists). And in

National Collegiate Athletic Ass’n v. Miller, we held

that a statute had extraterritorial effect because it

was “directed at interstate commerce and only interstate commerce,” given that “it regulates only interstate organizations, i.e., national collegiate athletic

associations which have member institutions in 40 or

more states.” 10 F.3d 633, 638 (9th Cir. 1993); see also

Legato Vapors, LLC v. Cook, 847 F.3d 825, 833 (7th

Cir. 2017) (invalidating a state law which “govern[ed]

the services and commercial relationships between

out-of-state manufacturers and their employees and

contractors”). Citing Daniels Sharpsmart and Miller,

the Council argues that Proposition 12 necessarily

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controls transactions conducted among out-of-state

pork producers, processors, distributors and sellers of

pork products, because it compels them to ensure that

pork products that may eventually be sold in California are traceable to hogs that have been confined in a

manner that meets California requirements.

The Council’s reliance on the Daniel Sharpsmart

line of cases is misplaced, because Proposition 12 does

not regulate transactions conducted wholly outside of

California. Rather, Proposition 12 directly regulates

only the in-state sales of “products that are brought

into or are otherwise within the borders of [California].” Daniels Sharpsmart, 889 F.3d at 615. Nor does

Proposition 12 directly regulate interstate commerce;

rather, by its terms, it is aimed at the in-state sales of

pork, regardless whether it is produced by in-state or

out-of-state farmers. We have not extended the Daniel

Sharpsmart line of cases to a situation where the state

law had an upstream effect only as a practical matter

on out-of-state transactions. As explained above, we

have rejected similar arguments relying on this theory. See Eleveurs, 729 F.3d at 942; see also Epel, 793

F.3d at 1174 (holding that the Supreme Court has rejected the “grand[] proposition” that the Baldwin line

of cases “require [courts] to declare automatically unconstitutional any state regulation with the practical

effect of controlling conduct beyond the boundaries of

the State” (cleaned up)).

4

Finally, the Council argues that Proposition 12 violates the dormant Commerce Clause because it poses

a risk of inconsistent regulations that undermines a

“compelling need for national uniformity in regulation.” See Gen. Motors Corp. v. Tracy, 519 U.S. 278,

299 n.12 (1997). While Wayfair did not overrule this

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principle (so it may be deemed a “variation” of the two

primary principles of the dormant Commerce Clause),

see 138 S. Ct. at 2090–91, we have held that only

“state regulation of activities that are inherently national or require a uniform system of regulation” violates the dormant Commerce Clause, Rosenblatt, 940

F.3d at 452 (quoting Chinatown Neighborhood Ass’n

v. Harris, 794 F.3d 1136, 1146 (9th Cir. 2015)); see also

Ward, 986 F.3d at 1242 (holding that to prevail on the

contention that it will inevitably be subjected to a

patchwork of inconsistent regulations, a party must

show that the challenged state law “regulates in an

area that requires national uniformity”). Absent such

a need for uniform national regulation, a state regulation does not violate the dormant Commerce Clause

even where there is a threat of conflicting regulations.

See Chinatown, 794 F.3d at 1146–47. The “small number” of cases dealing with “activities that are inherently national or require a uniform system of regulation” generally concern taxation or interstate transportation. See Rosenblatt, 940 F.3d at 452 (quoting

Chinatown, 794 F.3d at 1146). Unless the state law at

issue interferes with a system of national concern, it

does not violate the dormant Commerce Clause. Thus

in Eleveurs, we held that “Plaintiffs have not demonstrated that a nationally uniform foie gras production

method is required to produce foie gras.” 729 F.3d at

950. Likewise, neither optometrists nor gas producers

demonstrated a need for national uniformity in their

economic activities. See Nat’l Ass’n of Optometrists &

Opticians v. Harris, 682 F.3d 1144, 1148 (9th Cir.

2012); Rocky I, 730 F.3d at 1104–05.

The complaint here fails to make a plausible allegation that the pork production industry is of such national concern that it is analogous to taxation or interstate travel, where uniform rules are crucial. See Gen.

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Motors Corp., 519 U.S. at 298 n.12. Although the complaint plausibly alleges that Proposition 12 will have

an impact on a national industry, we have already

held that such impacts do not render the state law impermissibly extraterritorial. Accordingly, the complaint fails to state a claim on this basis.3

B

We now turn to the Council’s second argument

that Proposition 12 imposes a burden on interstate

commerce which is “clearly excessive in relation to the

putative local benefits” and thus violates the dormant

Commerce Clause. Pike, 397 U.S. at 142. The Supreme Court has not provided a clear methodology for

comparing in-state benefits and out-of-state burdens,

but at the motion to dismiss stage a complaint must,

at a minimum, “plausibly allege the ordinance places

a ‘significant’ burden on interstate commerce.” Rosenblatt, 940 F.3d at 452.

3 In any event, the Council has not shown that a

threat of “conflicting, legitimate legislation[s]” by

other jurisdictions is “both actual and imminent.”

Rocky I, 730 F.3d at 1104–05 (emphasis added) (quoting S.D. Myers v. City of San Francisco, 253 F.3d 461,

469–70 (9th Cir. 2001)). According to an amicus brief,

“Massachusetts, Maine, Michigan, and Rhode Island

have enacted animal-confinement laws similar” or

“nearly identical” to California’s current confinement

rules. The Council points to Ohio’s regulations, see

Ohio Admin. Code 901:12-8-02(G)(4), (5), but while

they differ in approach from Proposition 12, compliance with both sets of regulations is possible. In short,

while it is plausible that other states will implement

laws regulating pork meat production, the referenced

laws demonstrate that the Council has not stated a

plausible claim that the various regulations will be

conflicting.

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We have held that a statute imposes such a significant burden only in rare cases. “[M]ost statutes that

impose a substantial burden on interstate commerce

do so because they are discriminatory.” Eleveurs, 729

F.3d at 952. As indicated above, the Council does not

allege that Proposition 12 has a discriminatory effect.

“[L]ess typically, statutes impose significant burdens

on interstate commerce as a consequence of inconsistent regulation of activities that are inherently national or require a uniform system of regulation.” Id.

(cleaned up). As we have explained, the complaint

here does not plausibly allege that Proposition 12 falls

into the narrow class of state laws that meets this requirement.

For dormant Commerce Clause purposes, laws

that increase compliance costs, without more, do not

constitute a significant burden on interstate commerce. “The mere fact that a firm engaged in interstate commerce will face increased costs as a result of

complying with state regulations does not, on its own,

suffice to establish a substantial burden on interstate

commerce.” Ward, 986 F.3d at 1241–42. Nor does a

non-discriminatory regulation that “precludes a preferred, more profitable method of operating in a retail

market” place a significant burden on interstate commerce. Nat’l Ass’n of Optometrists, 682 F.3d at 1154–

55. Finally, even a state law that imposes heavy burdens on some out-of-state sellers does not place an impermissible burden on interstate commerce. In Exxon

Corp. v. Governor of Maryland, the Supreme Court

held that even where the burdens imposed by a Maryland law would cause some refiners to stop selling in

Maryland, and would deprive consumers of some special services, the law did not impermissibly burden interstate commerce. 437 U.S. 117, 127 (1978). While

some refiners “may choose to withdraw entirely from

18a

the Maryland market,” it was reasonable to assume

that they would “be promptly replaced by other interstate refiners.” Id. “[I]nterstate commerce is not subjected to an impermissible burden simply because an

otherwise valid regulation causes some business to

shift from one interstate supplier to another.” Id.; see

also Rosenblatt, 940 F.3d at 453 (holding that a city

ordinance did not violate the dormant Commerce

Clause merely because it shifted tourism dollars from

vacation rentals to hotels).

In this case, the crux of the allegations supporting

the Council’s substantial burden claim is that the cost

of compliance with Proposition 12 makes pork production more expensive nationwide. The complaint alleges that, to comply with Proposition 12’s requirements, “producers will have to expend millions in upfront capital costs and adopt a more labor-intensive

method of production.” The cost of compliance would

result in a 9.2 percent increase in production cost,

which would be passed on to consumers, and producers that do not comply with Proposition 12 would lose

business with packers that are supplying the California market.

Taking the plausible allegations in the complaint

as true and making all reasonable inferences in the

Council’s favor, we conclude that these alleged cost increases to market participants and customers do not

qualify as a substantial burden to interstate commerce for purposes of the dormant Commerce Clause.

“[A] loss to [some specific market participants] does

not, without more, suggest that the [state] statute impedes substantially the free flow of commerce from

state to state.” Burlington N. R.R. Co. v. Dep’t of Pub.

Serv. Regul., 763 F.2d 1106, 1114 (9th Cir. 1985)

(cleaned up). Even if producers will need to adopt a

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more costly method of production to comply with Proposition 12, such increased costs do not constitute a

substantial burden on interstate commerce. Eleveurs,

729 F.3d at 952. Nor do higher costs to consumers

qualify as a substantial burden on interstate commerce. See Nat’l Ass’n of Optometrists, 682 F.3d at

1152. “[I]f the statute caused the loss [to some sellers]

and therefore caused harm to the consuming public,

such a result would be related to the wisdom of the

statute, not to a burden on interstate commerce.” Id.

(citing Exxon, 437 U.S. at 127–28)).

Accordingly, the district court did not err in holding that, as a matter of law, the Council failed to state

a claim that Proposition 12 imposes a substantial burden on interstate commerce. Because the complaint

failed to make a plausible allegation to that effect, the

district court was correct in concluding that it “need

not determine whether the benefits of the challenged

law are illusory.” See Rosenblatt, 940 F.3d at 452.

III

While the dormant Commerce Clause is not yet a

dead letter, it is moving in that direction. Indeed,

some justices have criticized dormant Commerce

Clause jurisprudence as being “unmoored from any

constitutional text” and resulting in “policy-laden

judgments that [courts] are ill equipped and arguably

unauthorized to make,” Camps Newfound/Owatonna,

Inc. v. Town of Harrison, 520 U.S. 564, 610, 618 (1997)

(Thomas, J., dissenting). Under our precedent, unless

a state law facially discriminates against out-of-state

activities, directly regulates transactions that are conducted entirely out of state, substantially impedes the

flow of interstate commerce, or interferes with a national regime, a plaintiff’s complaint is unlikely to survive a motion to dismiss. Even though the Council has

20a

plausibly alleged that Proposition 12 will have dramatic upstream effects and require pervasive changes

to the pork production industry nationwide, it has not

stated a violation of the dormant Commerce Clause

under our existing precedent.

AFFIRMED.

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APPENDIX B

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

NATIONAL PORK PRODUCERS COUNCIL &

AMERICAN FARM BUREAU FEDERATION,

Plaintiffs,

v.

KAREN ROSS, in her official capacity as Secretary

of the California Department of Food and Agriculture, SONIA ANGELL, in her official capacity as Director of the California Department of Public Health,

and XAVIER BECERRA, in his official capacity as

Attorney General of California,

Defendants,

THE HUMAN SOCIETY OF THE UNITED

STATES; ANIMAL LEGAL DEFENSE FUND; ANIMAL EQUALITY; THE HUMAN LEAGUE; FARM

SANCTUARY; COMPASSION IN WORLD FARMING USD; and COMPASSION OVER KILLING

Defendant-Intervenors.

Case No.: 19-cv-02324 W (AHG)

Filed 04/27/20

ORDER:

(1) GRANTING DEFENDANTS’ MOTION TO

DISMISS [DOC. 18]; AND

(2) GRANTING DEFENDANT-INTERVENORS’

MOTION FOR JUDGMENT ON THE PLEADINGS [DOC. 19.]

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Pending before this Court are Defendants’ motion

to dismiss and Defendant-Intervenors’ motion for

judgment on the pleadings. The Court decides the

matters without oral argument pursuant to Civil Local Rule 7.1(d)(1). For the reasons that follow, the

Court GRANTS Defendants’ motion to dismiss [Doc.

18] and Defendant-Intervenors’ motion for judgment

on the pleadings [Doc. 19] with leave to amend.

I.

BACKGROUND

National Pork Producers Council & American

Farm Bureau Federation (collectively “Plaintiffs”) file

this case against Defendants Karen Ross, in her official capacity as Secretary of California Department of

Food and Agriculture, Sonia Angell, in her official capacity as Director of the California Department of

Public Health, and Xavier Becerra, in his official capacity as Attorney General of California (collectively

“Defendants”). Plaintiffs file this action for declaratory and injunctive relief and allege California’s Proposition 12 violates the Commerce Clause of the U.S.

Constitution.

A. Procedural Background

This case was initially filed on December 5, 2019.

(Compl. [Doc. 1].) On January 9, 2020 Defendant-Intervenors’ motion to intervene was granted. [Doc. 17.]

On January 10, 2020, Defendants filed a motion to dismiss for failure to state a claim. [Doc. 18.] That same

day Defendant-Intervenors filed a motion for judgment on the pleadings. [Doc. 19.] Plaintiffs filed an opposition to these motions on February 28, 2020. [Doc.

26.]

On January 29, 2020, California Egg Farmers

filed a supplemental Amicus Brief in support of the

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Defendants’ motion to dismiss and Defendant-Intervenors’ motion for judgment on the pleadings. [Doc.

25.] A supplemental Amicus Brief in support of the

Plaintiffs was filed on March 10, 2020, by the States

of Alabama, Arkansas, Indiana, Iowa, Kansas, Louisiana, Missouri, Nebraska, Ohio, Oklahoma, South Carolina, South Dakota, Texas, Utah, and West Virginia.

[Doc. 32.]

B. Factual Background

Plaintiffs allege Proposition 12 violates the Commerce Clause of the U.S. Constitution because it

reaches extraterritorially and imposes substantial

burdens on interstate commerce. (Compl. ¶ 31.) Plaintiffs seek a declaration that Proposition 12 violates

the Commerce Clause and seek an injunction against

the enforcement of Proposition 12’s requirements concerning pork. (Id. ¶¶ 31, 32.)

Proposition 12 is a ballot initiative passed in November 2018 that amended the California Health and

Safety Code. (Id. ¶ 14.) Proposition 12 regulates the

production of veal, pork, and eggs. (Id. ¶ 33.) Importantly for this case, it forbids the sale in California

of pork meat from the hogs born of sows (female pigs)

not housed in conformity with the law’s requirements.

(Id. ¶ 21.) The law “requires that a sow cannot be confined in such a way that it cannot lie down, stand up,

fully extend its limbs, or turn around without touching the side of its stall or another animal.” (Id. ¶ 23.)

This requirement, known as the stand up-turn around

requirement, “requires producers to house their sows

together in a group, referred to as `group housing.’”

(Id. ¶¶ 23, 24.) In contrast, individual stalls each hold

one sow and do not allow sows to turn around. (Id. ¶

24.) Thus, Proposition 12 bans the use of individual

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stalls that do not meet the stand up-turn around space

requirements. (Id. ¶25.)

The U.S. Department of Agriculture’s Census of

Agriculture for 2017 estimates nearly 65,000 farms

nationwide sold hogs for a market value of $26 billion.

(Id. ¶ 3.) Pigs are raised throughout the country with

a majority of production concentrated in the Midwest

and North Carolina. (Id. ¶ 5.) A small percentage of

farms are structured as “wean to finish,” meaning the

pigs are held at the same farm throughout the production process. (Id. ¶ 145.) However, a majority of the

production of pork comes from a segmented production chain. (Id. ¶ 138.) Sows give birth to piglets on

sow-specific farms where the piglets are raised for

about three weeks before they are weaned at approximately 10 pounds. (Id. ¶ 8.) After weaning, piglets are

generally moved to nursery farms for about six to

eight weeks. (Id. ¶¶ 142, 143.) At six to eight weeks

piglets have grown into “feeder pigs” and are “transferred again to separate finishing facilities.” (Id. ¶

143.) Pigs spend 16 to 17 weeks at the finishing farms

before being sent to markets and packers where the

pigs are slaughtered. (Id. ¶ 144.) Packers slaughter

and butcher the market hogs and sell the pork to

wholesalers or retailers, which then distribute to consumers. (Id. ¶ 124.) Pork product from one hog is cut

into primals, or different cuts of meat, and then

shipped to different end users across the country. (Id.

¶ 96.)

Beginning December 31, 2021, Proposition 12 requires each sow whose offspring is intended to be sold

into California be allotted at least 24 square feet in

the group pen. (Id. ¶ 26.) However, Proposition 12 has

an immediate impact on what producers must do now

given the time needed for building and production

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changes. (Id.) Plaintiffs allege these requirements are

“inconsistent with industry practice and standards,

generations of producer experience, scientific research, and standards set by other states.” (Id. ¶ 28.)

Plaintiffs also allege these requirements impose costly

mandates on producers that interfere with commerce

among the states and impose costs on pork producers

that will ultimately increase costs for American consumers. (Id.)

In California, there are an estimated 8,000 breeding sows and “1,500 out of California’s 8,000 sows are

used in commercial breeding” which produces around

30,000 offspring a year. (Id. ¶¶ 16, 17.) However, “California’s pork consumption makes up about 13 percent

of the national market.” (Id. ¶ 20.) As a result, California’s in-state sow breeding does not supply the demand of pork consumption in the state. (Id.) Thus, the

offspring of approximately “673,000 sows is required

to satisfy California consumers’ demand for pork meat

annually.” (Id.)

Plaintiffs claim that by imposing these requirements on an industry that is national in scope, Proposition 12 unconstitutionally interferes with the functioning of a $26 billion a year interstate industry. (Id.

¶ 303.) In addition, Plaintiffs claim that compliance

with Proposition 12 will require new and less efficient

methods of animal husbandry that will increase operating, staff training and veterinary costs. (Id. ¶ 322.)

As a result, Plaintiffs allege producers may be forced

to comply with Proposition 12 standards even if most

of their product is not bound for California. (Id.

¶¶ 339, 347.)

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II. LEGAL STANDARD

The Court must dismiss a cause of action for failure to state a claim upon which relief can be granted.

Fed. R. Civ. P. 12(b)(6). A motion to dismiss under

Rule 12(b)(6) tests the legal sufficiency of the complaint. See Parks Sch. of Bus., Inc. v. Symington, 51

F.3d 1480, 1484 (9th Cir. 1995). A complaint may be

dismissed as a matter of law either for lack of a cognizable legal theory or for insufficient facts under a

cognizable theory. Balisteri v. Pacifica Police Dep’t.,

901 F.2d 696, 699 (9th Cir. 1990). In ruling on the motion, a court must “accept all material allegations of

fact as true and construe the complaint in a light most

favorable to the non-moving party.” Vasquez v. L.A.

Cnty., 487 F.3d 1246, 1249 (9th Cir. 2007).

A complaint must contain “a short plain statement of the claim showing that the pleader is entitled

to relief.” Fed. R. Civ. P. 8(a)(2). The Supreme Court

has interpreted this rule to mean that “[f]actual allegations must be enough to raise a right to relief above

the speculative level.” Bell Atl. Corp. v. Twombly, 550

U.S. 554, 555 (2007). The allegations in the complaint

must “contain sufficient factual matter, accepted as

true, to ‘state a claim to relief that is plausible on its

face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quoting Twombly, 550 U.S. at 570).

Leave to amend should be freely granted when

justice so requires. See Fed. R. Civ. P. 15(a). However,

where an amendment would be futile, a district court

may dismiss a pleading without leave. Chubb Custom

Ins. Co. v. Space Sys./Loral, Inc., 710 F.3d 946, 956

(9th Cir. 2013).

A motion for judgment on the pleadings may be

brought “[a]fter the pleadings are closed—but early

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enough not to delay trial[.]” Fed. R. Civ. P. 12(c).

“Analysis under Rule 12(c) is substantially identical

to analysis under Rule 12(b)(6) because, under both

rules, a court must determine whether the facts alleged in the complaint, taken as true, entitle plaintiff

to a legal remedy.” Chavez v. United States, 683 F.3d

1102, 1108 (9th Cir. 2012).

III. DISCUSSION

Plaintiffs allege Proposition 12 violates the

dormant Commerce Clause. The Commerce Clause

authorizes Congress to “regulate commerce with foreign Nations, and among the several States....” U.S.

Const., art. I, § 8, cl. 3. “The Commerce Clause has

accordingly been interpreted by this Court not only as

an authorization for congressional action, but also,

even in the absence of a conflicting federal statute, as

a restriction on permissible state regulation.” Hughes

v. Oklahoma, 441 U.S. 322, 326 (1979). “This limitation on state power has come to be known as the

dormant Commerce Clause.” Nat’l Ass’n of Optometrists & Opticians v. Harris, 682 F.3d 1144, 1147 (9th

Cir. 2012).

The Supreme Court has adopted a two tiered approach in determining whether a law violates the

dormant Commerce Clause. Brown-Forman Distillers

Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 578-79

(1986). First, a law that (1) “discriminate[s] against

interstate commerce” or (2) “directly regulate[es] extra-territorial conduct” is “generally struck down

without further inquiry.” Ass’n des Eleveurs de Canards et d’Oies du Quebec v. Harris, 729 F.3d 937,

948-49 (9th Cir. 2013) (quoting Brown, 476 U.S. at

579). Second, a law that (3) “regulate[s] even-handedly to effectuate a legitimate local public interest,

and [where] its effects on interstate commerce are

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only incidental, [] will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefit.” Pike v. Bruce

Church, Inc., 397 U.S. 137, 142 (1970). Thus, “[i]f a

legitimate local purpose is found, the question becomes one of degree.” Id. “[T]he extent of the burden

that will be tolerated will of course depend on the nature of the local interest involved and whether it could

be promoted as well with a lesser impact on interstate

activities.” Id.

//

A. Extraterritorial Effect

Plaintiffs argue Proposition 12 violates the extraterritorial principle because it regulates wholly out-ofstate conduct. (Compl. 47:7-8.) Any “statute that directly controls commerce occurring wholly outside the

boundaries of a State exceeds the inherent limits of

the enacting State’s authority and is invalid regardless of whether the statute’s extraterritorial reach

was intended by the legislature.” Healy v. Beer Institute, Inc., 491 U.S. 324, 336 (1989). However, “[a] statute is not invalid merely because it affects in some

way the flow of commerce between the states.” Eleveurs, 729 F.3d at 948-49. Even when a statute “has

significant extraterritorial effects it passes Commerce

Clause muster when those effects result from the regulation of in-state conduct.” Chinatown Neighborhood

Ass’n v. Harris, 794 F.3d 1136, 1145 (9th Cir. 2015).

“The critical inquiry is whether the practical effect of

the regulation is to control the conduct beyond the

boundaries of the State.” Healy, 491 U.S. at 336 (quoting Brown, 476 U.S. at 579).

29a

A statute that applies both to California entities

and out-of-state entities does not target wholly extraterritorial activity. See Eleveurs, 729 F.3d at 949. In

Eleveurs, the statute at issue “applie[d] both to California entities and out-of-state entities and preclude[d] the sale within California of products produced by force feeding birds.” Id. Because the statute

precluded sales within California of products produced by force feeding birds regardless of where the

force feeding occurred, the statute did not directly target out-of-state entities. See id. The court in Eleveurs

reasoned that the economic impact did not “depend on

where the items were produced, but rather how they

were produced.” Id. at 948. In other words, the statute

was not directed solely at out-of-state producers because it applied to both in-state and out-of-state producers. See id. at 949.

Similarly here, Proposition 12 applies both to California entities and out-of-state entities. (Compl. ¶

292.) Proposition 12 precludes the sale within California of products produced by hogs not raised in conformity with the requirements of Proposition 12, regardless of where the hogs are raised. It therefore does

not regulate wholly out-of-state conduct. “[I]n-state

and out-of-state” hog farmers “are burdened in exactly

the same way-all are effectively prevented from” raising hogs in violation of Proposition 12 if they wish to

sell their products to California. See Hass v. Oregon

State Bar, 883 F.2d 1453, 1462 (9th Cir. 1989); see

also Rocky Mountain Farmers Union v. Corey, 913

F.3d 940, 952 (9th Cir. 2019) (explaining that “subjecting both in and out-of-jurisdiction entities to the same

regulatory scheme to make sure that out-of-state jurisdiction entities are subject to consistent [] standards is a traditional use of the State’s police power”).

30a

Plaintiffs argue Proposition 12 reaches extraterritorially because it will “impose California’s . . . housing requirements on other states and their producers”

and “farms developing some or all of their product primarily for sale outside California will likely be required to meet Proposition 12” regulations. (See

Compl. ¶¶ 31, 301.) However, such arguments of disproportionate impact are ineffective in an extraterritorial effect analysis. Even when a statute “has significant extraterritorial effects it passes Commerce

Clause muster when . . . those effects result from the

regulation of in-state conduct.” Chinatown, 794 F.3d

at 1145. Further, California may seek to influence

which hog products are sold in-state and create incentives for less harmful farming practices. See Rocky

Mountain Farmers Union, 913 F.3d at 952. Although

Proposition 12’s regulations may consequentially

touch out of state farmers, “[t]he Commerce Clause …

does not treat regulations that have upstream effects

on how sellers who sell to California buyers produce

their goods as being necessarily extraterritorial.” Id.

(citing Minnesota v. Clover Leaf Creamery Co., 449

U.S. 456, 472 (1981)).

Generally, a statute violates the extraterritorial

principle when it is “directed at interstate commerce

and only interstate commerce.” See National Collegiate Athletic Ass’n v. Miller, 10 F.3d 633, 638 (9th

Cir. 1993). In NCAA, the statute only regulated the

NCAA-an inherently interstate organization. Id. In

order to avoid liability under the statute, the NCAA

needed to apply Nevada’s procedures throughout the

entire country. Id. at 639. This type of extraterritorial

effect is forbidden by the commerce clause because it

“could control the regulation of the integrity of a product in interstate commerce that occurs wholly outside

Nevada’s borders.” Id.

31a

In contrast, Proposition 12 is not directed at interstate commerce and only interstate commerce. See id.

at 638. Unlike the Nevada statute, Proposition 12

does not call for uniform procedures and practices

throughout the entire country. Only those out-of-state

producers who sell directly to California need to follow

the regulations that Proposition 12 details. In addition, although a majority of production might take

place outside of California, California contains “approximately 8,000 sows” of which “1,500 of those are

in commercial production.” (Compl. ¶ 292.) Proposition 12 applies to these California producers just the

same as out-of-state producers.

Thus, Proposition 12 does not regulate extraterritorially because it does not target solely interstate

commerce and it regulates in-state and out-of-state

conduct equally. Although there are upstream effects

on out-of-state producers, those effects are a result of

regulating in-state conduct. The motions challenging

the sufficiency of Plaintiffs’ allegations supporting the

unconstitutional regulation claim are accordingly

GRANTED and Plaintiffs’ first claim for relief is denied without prejudice. If Plaintiffs elect to file an

amended extraterritorial claim they will need to allege facts that demonstrate Proposition 12 regulates

conduct wholly outside of California.

B. Substantial Burden on Interstate Commerce

In their second claim for relief, Plaintiffs allege

that Proposition 12 places excessive burdens on interstate commerce. (Compl. ¶ 465.) The second tier of the

dormant Commerce Clause analysis focuses on statutes that “regulate[] even-handedly to effectuate a legitimate local public interest.” Pike, 397 U.S. at 142.

These laws “will be upheld unless the burden imposed

32a

on such commerce is clearly excessive in relation to

the putative local benefit.” Id. “[U]nder Pike, a plaintiff must first show that the statute imposes a substantial burden before the court will ‘determine

whether the benefits of the challenged laws are illusory.’” Eleveurs, 729 F.3d at 951-52 (quoting Optometrists, 682 F.3d at 1155).

“[M]ost statutes that impose a substantial burden

on interstate commerce do so because they are discriminatory” or attempt to regulate extraterritorially.

See Eleveurs, 729 F.3d at 952. Plaintiffs do not raise

a discriminatory argument, and as we concluded

above, their extraterritorial argument fails. However,

the Ninth Circuit has found a small number of cases

violate the dormant Commerce Clause because they

“generally result from inconsistent regulation of activities that are inherently national or require a uniform

system of regulation.” Optometrists, 682 F.3d at 1148;

Chinatown, 794 F.3d at 1146; Eleveurs, 729 F.3d at

952.

“Where [a] regulation does not regulate activities

that inherently require a uniform system of regulation and does not otherwise impair the free flow of materials and products across state borders, there is not

a significant burden on interstate commerce.” Optometrists, 682 F.3d at 1154-55. In Optometrists, the

plaintiffs challenged a California law that “prohibited

opticians and optical companies from offering prescription eyewear at the same location in which eye

examinations are provided.” Id. at 1146. The plaintiffs

wanted opticians to be able to offer similar one-stop

shops as optometrists and ophthalmologists could offer. Id. at 1151. They argued the law imposed a significant burden because the restriction of one-stop shops

resulted in a transfer of market share income from

33a

out-of-state to in-state eyewear sellers. Id. at 1150.

However, the court found the plaintiffs failed to raise

an argument regarding a burden on interstate commerce because the plaintiffs did not produce evidence

that the law interfered with the flow of eyewear into

California and the court concluded the activities did

not require a uniform system of regulation. Id. at

1155; see also NCAA, 10 F.3d at 639 (finding a Nevada

statute unconstitutional because its extraterritorial

reach created a uniform system of application of enforcement proceedings.)

Plaintiffs make two arguments in support of their

claim that Proposition 12 imposes a substantial burden on interstate commerce. First, Plaintiffs claim

Proposition 12 substantially interferes with the interstate commerce of pork. (Compl. 56:6-7.) Plaintiffs allege that if a cut of pork is sold in California, the entire

pig must be raised in accordance with Proposition 12

requirements. (Id. ¶ 346.) This means producers will

be required to conform to Proposition 12’s standards

even for cuts of pork bound for other states where

there is no consumer demand for Proposition 12 pork.

(Id. ¶ 347.) However, while Proposition 12 might result in barriers to the production of pork, there are no

barriers to the flow of pork across state lines. See Optometrists, 682 F.3d at 1155. Further, unlike the statute in NCAA, the fact that some Proposition 12 compliant pork might reach states other than California

does not mean Proposition 12 has the effect of requiring a uniform system of regulation. While Proposition

12 will require “many producers” to remodel their

farms, (Compl. ¶ 231), Plaintiffs have not alleged that

Proposition 12 will require a uniform system of regulation.

34a

Plaintiffs’ second argument in support of their

claim that Proposition 12 imposes a substantial burden on interstate commerce is that compliance with

Proposition 12 will result in substantial costs on outof-state producers. (Compl. 51:3.) They allege producers will incur direct costs from required renovations

and indirect costs from new and less efficient methods

of animal husbandry. (Id. ¶¶ 310, 322.) “Supreme

Court precedent establishes that there is not a significant burden on interstate commerce merely because

a non-discriminatory regulation precludes a preferred, more profitable method of operating.” Optometrists, 682 F.3d at 1154; see also Exxon Corp. v. Governor of Maryland, 437 U.S. 117 (1978). This is because the Commerce Clause “protects the interstate

market, not particular interstate firms, from prohibitive or burdensome regulations.” Exxon, 473 U.S. at

127-28. Although Proposition 12’s regulations may

burden pork producers and result in a less efficient

mode of operation, there is no burden on interstate

commerce merely because it is less profitable than a

preferred method of operation.

In support of their argument that Proposition 12

will impose substantial costs on producers, Plaintiffs

claim the pork industry will consolidate into larger

farms and smaller farms will cease operations as a

consequence of increased costs. (Compl. ¶ 341.) However, “interstate commerce is not subjected to an impermissible burden simply because an otherwise valid

regulation causes some business to shift from one []

supplier to another.” Exxon, 437 U.S. at 127. While

pork producers and consumers might be injured economically, “that argument relates to the wisdom of the

statute, not its burden on commerce.” See id. at 128.

The fact that changes to the physical farms and oper-

35a

ations might impose financial burdens on the hog producers is not enough to establish a substantial burden

on interstate commerce.

Thus, Plaintiffs have failed to demonstrate that

there is a substantial burden on interstate commerce.

As such, the Court need not determine whether the

benefits of the challenged law are illusory. The motions challenging the sufficiency of Plaintiffs’ substantial burden on interstate commerce claim for relief are

GRANTED and the second claim for relief is dismissed with leave to amend.

IV. CONCLUSION & ORDER

For the foregoing reasons, the court GRANTS Defendants’ motion to dismiss [Doc. 18] and DefendantIntervenors’ motion for judgment on the pleadings

[Doc. 19] with leave to amend.

Plaintiffs shall have 14 days to file an amended

pleading, if any, to cure the defects detailed above.

IT IS SO ORDERED.

Dated: April 27, 2020

/s/ Thomas J. Whelan

Hon. Thomas J. Whelan

United States District

Judge

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APPENDIX C

United States District Court

SOUTHERN DISTRICT OF CALIFORNIA

National Pork Producers Council;

American Farm Bureau Federation

Plaintiff,

V.

(See Attached)

Defendant.

Civil Action No. 19cv2324-W-AHG

JUDGMENT IN A CIVIL CASE

IT IS HEREBY ORDERED AND ADJUDGED:

The Court hereby enters judgment dismissing Plaintiffs’ Complaint with prejudice.

Date: 6/16/20

CLERK OF COURT

JOHN MORRILL, Clerk of

Court

By: s/ J. Taylor

J. Taylor, Deputy

* * *

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APPENDIX D

PROPOSITION 12

This initiative measure is submitted to the people in

accordance with the provisions of Section 8 of Article

II of the California Constitution.

This initiative measure amends and adds sections to

the Health and Safety Code; therefore, existing provisions proposed to be deleted are printed in strikeout

type and new provisions proposed to be added are

printed in italic type to indicate that they are new.

PROPOSED LAW

The people of the State of California do enact as follows:

SECTION 1. This act shall be known, and may be

cited, as the Prevention of Cruelty to Farm Animals

Act.

SEC. 2. The purpose of this act is to prevent animal

cruelty by phasing out extreme methods of farm animal confinement, which also threaten the health and

safety of California consumers, and increase the risk

of foodborne illness and associated negative fiscal impacts on the State of California.

SEC. 3. Section 25990 of the Health and Safety Code

is amended to read:

25990. PROHIBITIONS. In addition to other applicable provisions of law,:

(a) a person A farm owner or operator within

the state shall not tether or confine knowingly

cause any covered animal; to be confined in a

cruel manner. on a farm, for all or the majority

of any day, in a manner that prevents such animal from:

38a

(a) Lying down, standing up, and fully extending his or her limbs; and

(b) Turning around freely.

(b) A business owner or operator shall not

knowingly engage in the sale within the state

of any of the following:

(1) Whole veal meat that the business

owner or operator knows or should know is

the meat of a covered animal who was confined in a cruel manner.

(2) Whole pork meat that the business

owner or operator knows or should know is

the meat of a covered animal who was confined in a cruel manner, or is the meat of

immediate offspring of a covered animal

who was confined in a cruel manner.

(3) Shell egg that the business owner or

operator knows or should know is the

product of a covered animal who was confined in a cruel manner.

(4) Liquid eggs that the business owner or

operator knows or should know are the

product of a covered animal who was confined in a cruel manner.

SEC. 4. Section 25991 of the Health and Safety Code

is amended to read:

25991. DEFINITIONS. For the purposes of this

chapter, the following terms have the following

meanings:

39a

(a) “Breeding pig” means any female pig of the

porcine species kept for the purpose of commercial breeding who is six months or older or

pregnant.

(b) “Business owner or operator” means any

person who owns or controls the operations of

a business.

(c) “Cage-free housing system” means an indoor or outdoor controlled environment for

egg-laying hens within which hens are free to

roam unrestricted; are provided enrichments

that allow them to exhibit natural behaviors,

including, at a minimum, scratch areas,

perches, nest boxes, and dust bathing areas;

and within which farm employees can provide

care while standing within the hens’ usable

floorspace. Cage-free housing systems include,

to the extent they comply with the requirements

of this subdivision, the following:

(1) Multitiered aviaries, in which hens

have access to multiple elevated platforms

that provide hens with usable floorspace

both on top of and underneath the platforms.

(2) Partially slatted systems, in which

hens have access to elevated flat platforms

under which manure drops through the

flooring to a pit or litter removal belt below.

(3) Single-level all-litter floor systems

bedded with litter, in which hens have limited or no access to elevated flat platforms.

40a

(4) Any future systems that comply with

the requirements of this subdivision.

(a)(d) “Calf raised for veal” means any calf of

the bovine species kept for the purpose of producing the food product described as veal.

(e) “Confined in a cruel manner” means any

one of the following acts:

(1) Confining a covered animal in a manner that prevents the animal from lying

down, standing up, fully extending the animal’s limbs, or turning around freely.

(2) After December 31, 2019, confining a

calf raised for veal with less than 43

square feet of usable floorspace per calf.

(3) After December 31, 2021, confining a

breeding pig with less than 24 square feet

of usable floorspace per pig.

(4) After December 31, 2019, confining an

egg-laying hen with less than 144 square

inches of usable floorspace per hen.

(5) After December 31, 2021, confining an

egg-laying hen with less than the amount

of usable floorspace per hen required by

the 2017 edition of the United Egg Producers’ Animal Husbandry Guidelines for

U.S. Egg-Laying Flocks: Guidelines for

Cage-Free Housing or in an enclosure

other than a cage-free housing system.

(b)(f) “Covered animal” means any pig during

pregnancy, calf raised for veal, breeding pig,

or egg-laying hen who is kept on a farm.

41a

(c)(g) “Egg-laying hen” means any female domesticated chicken, turkey, duck, goose, or

guinea fowl guineafowl kept for the purpose of

egg production.

(d)(h) “Enclosure” means any cage, crate, or

other a structure (ineluding-what is commonly described as a “gestation crate” for pigs;

a “veal crate” for calves; or a “battery cage” for

egg laying hens) used to confine a covered animal or animals.

(e)(i) “Farm” means the land, building, support facilities, and other equipment that are

wholly or partially used for the commercial

production of animals or animal products used

for food or fiber; and does not include live animal markets., establishments at which mandatory inspection is provided under the Federal Meat Inspection Act (21 U.S.C. Sec. 601 et

seq.), or official plants at which mandatory inspection is maintained under the federal Egg

Products Inspection Act (21 U.S.C. Sec. 1031

et seq.).

(j) “Farm owner or operator” means any person

who owns or controls the operations of a farm.

(f)(k) “Fully extending his or her the animal’s

limbs” means fully extending all limbs without touching the side of an enclosure, including, in the case of egg laying hens, fully

spreading both wings without touching the

side of an enclosure or other egg laying hens

or another animal.

(l) “Liquid eggs” means eggs of an egg-laying

hen broken from the shells, intended for human food, with the yolks and whites in their

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natural proportions, or with the yolks and

whites separated, mixed, or mixed and

strained. Liquid eggs do not include combination food products, including pancake mixes,

cake mixes, cookies, pizzas, cookie dough, ice

cream, or similar processed or prepared food

products, that are comprised of more than liquid eggs, sugar, salt, water, seasoning, coloring, flavoring, preservatives, stabilizers, and

similar food additives.

(g)(m) “Person” means any individual, firm,

partnership, joint venture, association, limited liability company, corporation, estate,

trust, receiver, or syndicate.

(h) “Pig during pregnancy” means any pregnant pig of the porcine species kept for the primary purpose of breeding. (n) “Pork meat”

means meat, as defined in Section 900 of Title

3 of the California Code of Regulations as of

August 2017, of a pig of the porcine species, intended for use as human food.

(o) “Sale” means a commercial sale by a business that sells any item covered by this chapter, but does not include any sale undertaken

at an establishment at which mandatory inspection is provided under the Federal Meat

Inspection Act (21 U.S.C. Sec. 601 et seq.), or

any sale undertaken at an official plant at

which mandatory inspection is maintained

under the federal Egg Products Inspection Act

(21 U.S.C. Sec. 1031 et seq.). For purposes of

this section, a sale shall be deemed to occur at

the location where the buyer takes physical

possession of an item covered by Section 25990.

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(p) “Shell egg” means a whole egg of an egglaying hen in its shell form, intended for use as

human food.

(i)(q) “Turning around freely” means turning

in a complete circle without any impediment,

including a tether, and without touching the

side of an enclosure or another animal.

(r) “Uncooked” means requiring cooking prior

to human consumption.

(s) “Usable floorspace” means the total square

footage of floorspace provided to each covered

animal, as calculated by dividing the total

square footage of floorspace provided to the animals in an enclosure by the number of animals in that enclosure. In the case of egg-laying hens, usable floorspace shall include both

groundspace and elevated level flat platforms

upon which hens can roost, but shall not include perches or ramps.

(t) “Veal meat” means meat, as defined in Section 900 of Title 3 of the California Code of

Regulations as of August 2017, of a calf raised

for veal intended for use as human food.

(u) “Whole pork meat” means any uncooked

cut of pork, including bacon, ham, chop, ribs,

riblet, loin, shank, leg, roast, brisket, steak,

sirloin, or cutlet, that is comprised entirely of

pork meat, except for seasoning, curing agents,

coloring, flavoring, preservatives, and similar

meat additives. Whole pork meat does not include combination food products, including

soups, sandwiches, pizzas, hotdogs, or similar

processed or prepared food products, that are

comprised of more than pork meat, seasoning,

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curing agents, coloring, flavoring, preservatives, and similar meat additives.

(v) “Whole veal meat” means any uncooked cut

of veal, including chop, ribs, riblet, loin,

shank, leg, roast, brisket, steak, sirloin, or cutlet, that is comprised entirely of veal meat, except for seasoning, curing agents, coloring, flavoring, preservatives, and similar meat additives. Whole veal meat does not include combination food products, including soups,

sandwiches, pizzas, hotdogs, or similar processed or prepared food products, that are comprised of more than veal meat, seasoning, curing agents, coloring, flavoring, preservatives,

and similar meat additives.

SEC. 5. Section 25992 of the Health and Safety Code

is amended to read:

25992. EXCEPTIONS. This chapter shall not apply:

(a) During scientific or agricultural medical

research.

(b) During examination, testing, individual

treatment, or operation for veterinary purposes.

(c) During transportation.

(d) During rodeo exhibitions, state or county

fair exhibitions, 4-H programs, and similar exhibitions.

(e) During the slaughter of a covered animal

in accordance with the provisions of Chapter

6 (commencing with Section 19501) of Part 3

of Division 9 of the Food and Agricultural

Code, relating to humane methods of slaughter, and other applicable law and regulations.

45a

(f) To a breeding pig during the seven-day

five-day period prior to the breeding pig’s expected date of giving birth, and any day that

the breeding pig is nursing piglets.

(g) During temporary periods for animal

husbandry purposes for no more than six

hours in any 24-hour period, and no more than

24 hours total in any 30-day period.

SEC. 6. Section 25993 of the Health and Safety Code

is amended to read:

25993. ENFORCEMENT. (a) The Department of

Food and Agriculture and the State Department of

Public Health shall jointly promulgate rules and

regulations for the implementation of this act by

September1, 2019.

(b) Any person who violates any of the provisions of this chapter is guilty of a misdemeanor, and upon conviction thereof shall be

punished by a fine not to exceed one thousand

dollars ($1,000) or by imprisonment in the

county jail for a period not to exceed 180 days

or by both such fine and imprisonment. In addition, a violation of subdivision (b) of Section

25990 constitutes unfair competition, as defined in Section 17200 of the Business and Professions Code, and is punishable as prescribed

in Chapter 5 (commencing with Section 17200)

of Part 2 of Division 7 of the Business and Professions Code.

(c) The provisions of this chapter relating to

cruel confinement of covered animals and sale

of products shall supersede any conflicting regulations, including conflicting regulations in

Chapter 6 (commencing with Section 40601) of

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Subdivision 6 of Division 2 of Title 22 of the

California Code of Regulations.

SEC. 7. Section 25993.1 is added to the Health and

Safety Code, to read:

25993.1. It shall be a defense to any action to enforce subdivision (b) of Section 25990 that a business owner or operator relied in good faith upon a

written certification by the supplier that the whole

veal meat, whole pork meat, shell egg, or liquid

eggs at issue was not derived from a covered animal who was confined in a cruel manner, or from

the immediate offspring of a breeding pig who was

confined in a cruel manner.

SEC. 8. This act shall be amended only by a statute

approved by a vote of four-fifths of the members of

both houses of the Legislature. Any amendment of

this act shall be consistent with and further the purposes of this act.

SEC. 9. If any provision of this act, or the application

thereof to any person or circumstances, is held invalid

or unconstitutional, that invalidity or unconstitutionality shall not affect other provisions or applications

of this act that can be given effect without the invalid

or unconstitutional provision or application, and to

this end the provisions of this act are severable.

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APPENDIX E

TITLE 3. FOOD AND AGRICULTURE

PROPOSED REGULATIONS – ANIMAL CONFINEMENT

NOTICE IS HEREBY GIVEN that the Department of Food and Agriculture (Department) is proposing to take the action described in the Informative Digest. A public hearing is not scheduled for this proposal. A public hearing will be held if any interested

person, or his or her duly authorized representative,

submits a written request for a public hearing to the

Department no later than 15 days prior to the close of

the written comment period. Any person interested

may present statements or arguments in writing relevant to the action proposed to the person designated

in this Notice as the contact person beginning May

28, 2021 and ending on July 12, 2021. Following

the public hearing, if one is requested, or following the

written comment period if no public hearing is requested, the Department, upon its own motion or at

the instance of any interested party, may thereafter

adopt the proposals substantially as described below

or may modify such proposals if such modifications

are sufficiently related to the original text. With the

exception of technical or grammatical changes, the

full text of any modified proposal will be available for

15 days prior to its adoption from the person designated in this Notice as contact person and will be

mailed to those persons who submit written or oral

testimony related to this proposal or who have requested notification of any changes to the proposal.

Authority and Reference: Pursuant to the authority vested by section 25993 of the Health and

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Safety Code (HSC), the Department is proposing to

implement, interpret, or make specific the requirements relating to the confinement of egg-laying hens,

veal calves, and breeding pigs, and/or selling specified

whole veal meat, whole pork meat, shell eggs, and liquid eggs in California in accordance with sections

25990, 25991, 25992, 25993.1, and 25994 of the HSC,

as described in the Informative Digest.

INFORMATIVE DIGEST/POLICY STATEMENT

OVERVIEW

In 2018, California voters passed Proposition 12,

Farm Animal Confinement Initiative, self-titled as

the Prevention of Cruelty to Farm Animals Act, and

as defined in the proposed regulatory text, the Farm

Animal Cruelty statute (Act), which amended the requirements of HSC sections 25990 through 25993 and

added section 25993.1; section 25994 remained unchanged. The purpose of the Act is to prevent animal

cruelty by phasing out certain methods of farm animal

confinement for covered animals raised in the State

and the products harvested from those animals, or immediate offspring of those animals in the case of

breeding pigs, if sold within the State for human consumption. The Act mandates farm animal confinement standards and compliance timeframes, establishes definitions affecting the production and sale of

shell eggs, liquid eggs, whole veal meat, and whole

pork meat in the State, and directs the Department

and the Department of Public Health (DPH) to jointly

promulgate regulations to implement the provisions

of the HSC relating to the confinement of specified

farm animals and the sale of specified products derived from them.

In this rulemaking, the Department proposes to

adopt new Chapter 10 (commencing with section

49a

1320) of Division 2 of Title 3 of the California Code of

Regulations (CCR) to implement, interpret, and make

specific the laws established by the Act. Specifically,

this proposal would establish a program of registration, certification, conveyance inspection, and labeling

and marking requirements for the sale of shell eggs,

liquid eggs, whole veal meat, and whole pork meat in

the State which is necessary to fully effectuate the intent of the Act.

Existing law, section 25990(a) of the HSC specifies that a farm owner or operator within the State of

California shall not knowingly cause any covered animal to be confined in a cruel manner.

Existing law, section 25990(b) of the HSC specifies that a business owner or operator shall not knowingly engage in the sale within the State of any of the

following: (1) Whole veal meat that the business

owner or operator knows or should know is the meat

of a covered animal who was confined in a cruel manner; (2) Whole pork meat that the business owner or

operator knows or should know is the meat of a covered animal who was confined in a cruel manner, or is

the meat of immediate offspring of a covered animal

who was confined in a cruel manner; (3) Shell eggs

that the business owner or operator knows or should

know is the product of a covered animal who was confined in a cruel manner; (4) Liquid eggs that the business owner or operator knows or should know are the

product of a covered animal who was confined in a

cruel manner.

Existing law, section 25991(a) of the HSC defines

“breeding pig” as meaning any female pig of the porcine species kept for the purpose of commercial breeding who is six (6) months or older or pregnant.

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Existing law, section 25991(b) of the HSC defines

a “business owner or operator” to mean any person

who owns or controls the operations of a business.

***

Existing law, section 25991(e) of the HSC defines

acts that mean an animal was “confined in a cruel

manner” including, but not limited to, confining a calf

raised for veal with less than 43 square feet of usable

floorspace per calf after December 31, 2019; confining

a breeding pig with less than 24 square feet of usable

floorspace per pig after December 31, 2021; confining

an egg-laying hen with less than 144 square inches of

usable floorspace per hen after December 31, 2019;

and confining an egg-laying hen with less than the

amount of usable floorspace per hen required by the

2017 edition of the United Egg Producers’ Animal

Husbandry Guidelines for U.S. Egg-Laying Flocks:

Guidelines for Cage-Free Housing or in an enclosure

other than a cage-free system after December 31,

2021.

Existing law, section 25991(f) of the HSC defines

a “covered animal” as meaning any calf raised for veal,

breeding pig, or egg-laying hen who is kept on a farm.

***

Existing law, section 25991(h) of the HSC defines

“enclosure” as meaning a structure used to confine a

covered animal or animals.

Existing law, section 25991(i) of the HSC defines

“farm” as meaning the land, building, support facilities, and other equipment that are wholly or partially

used for the commercial production of animals or animal products used for food or fiber; and does not include live animal markets, establishments at which

51a

mandatory inspection is provided under the Federal

Meat Inspection Act (21 U.S.C. Sec. 601 et seq.), or official plants at which mandatory inspection is maintained under the federal Egg Products Inspection Act

(21 U.S.C. Sec. 1031 et seq.).

Existing law, section 25991(j) of the HSC defines

“farm owner or operator” as meaning any person who

owns or controls the operations of a farm.

Existing law, section 25991(k) of the HSC defines

“fully extending the animal’s limbs” as meaning fully

extending all limbs without touching the side of an enclosure, or another animal.

***

Existing law, section 25991(m) of the HSC defines

a “person” as meaning any individual, firm, partnership, joint venture, association, limited liability company, corporation, estate, trust, receiver, or syndicate.

Existing law, section 25991(n) of the HSC defines

“pork meat” as meaning meat, as defined in 3 CCR 900

as of August 2017, of a pig of the porcine species, intended for use as human food.

Existing law, section 25991(o) of the HSC defines

“sale” as meaning a commercial sale by a business

that sells any item covered by this chapter, but does

not include any sale undertaken at an establishment

at which mandatory inspection is provided under the

Federal Meat Inspection Act (21 U.S.C. Sec. 601 et

seq.), or any sale undertaken at an official plant at

which mandatory inspection is maintained under the

federal Egg Products Inspection Act (21 U.S.C. Sec.

1031 et seq.). For purposes of this section, a sale shall

be deemed to occur at the location where the buyer

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takes physical possession of an item covered by HSC

section 25990.

***

Existing law, section 25991(q) of the HSC defines

“turning around freely” as meaning turning in a complete circle without any impediment, including a

tether, and without touching the side of an enclosure

or another animal.

Existing law, section 25991(r) of the HSC defines

“uncooked” as meaning requiring cooking prior to human consumption.

Existing law, section 25991(s) of the HSC defines

“usable floorspace” as meaning the total square footage of floorspace provided to each covered animal, as

calculated by dividing the total square footage of floorspace provided to the animals in an enclosure by the

number of animals in that enclosure. In the case of

egg-laying hens, usable floorspace shall include both

ground space and elevated level flat platforms upon

which hens can roost but shall not include perches or

ramps.

***

Existing law, section 25991(u) of the HSC defines

“whole pork meat” as meaning any uncooked cut of

pork, including bacon, ham, chop, ribs, riblet, loin,

shank, leg, roast, brisket, steak, sirloin, or cutlet, that

is comprised entirely of pork meat, except for seasoning, curing agents, coloring, flavoring, preservatives,

and similar meat additives. Whole pork meat does not

include combination food products, including soups,

sandwiches, pizzas, hotdogs, or similar processed or

prepared food products, that are comprised of more

53a

than pork meat, seasoning, curing agents, coloring,

flavoring, preservatives, and similar meat additives.

***

Existing law, section 25992 of the HSC specifies

the exceptions to the provisions of Chapter 13.8 of Division 20 of the HSC, including during medical research; during examination, testing, individual treatment, or operation for veterinary purposes; during

transportation; during rodeo exhibitions, state or

county fair exhibitions, 4-H programs, and similar exhibitions; during slaughter; for a breeding pig during

the five (5) day period prior to her farrowing date and

while she is nursing piglets; and during temporary periods of no more than six (6) hours in an 24-hour period and no more than 24 hours total in any 30-day

period.

Existing law, section 25993(a) of the HSC specifies that the Department and DPH shall jointly promulgate rules and regulations for the implementation

of these provisions by September 1, 2019.

Existing law, sections 25993(b) and (c) specify

that a violation of any of the provisions of Chapter

13.8 of Division 20 of the HSC is a misdemeanor and

punishable by a fine not to exceed $1,000 or by imprisonment in the county jail for a period not to exceed

180 days or by both, and that provisions of the chapter

supersede any conflicting regulations, including those

in Chapter 6 (commencing with section 40601) of Subdivision 6 of Division 2 of Title 22 of the CCR.

Existing law, section 25993.1 of the HSC specifies

that it shall be a defense to any action to enforce section 25990(b) that a business owner or operator relied

in good faith upon a written certification by a supplier

that the whole veal meat, whole pork meat, shell eggs,

54a

or liquid eggs at issue was not derived from a covered

animal confined in a cruel manner, or from the immediate offspring of a breeding pig who was confined in

a cruel manner.

Existing law, section 25994 of the HSC specifies

that the provisions of the chapter are in addition to,

and not in lieu of, any other laws protecting animal

welfare, including the California Penal Code, and

shall not be construed to limit any state law or regulations protecting the welfare of animals, nor prevent

a local governing body from adopting and enforcing its

own animal welfare laws and regulations.

***

Regulations do not exist for the confinement of

veal calves and breeding pigs, or the covered products

of whole veal meat and whole pork meat as mandated

by the Act.

Therefore, the Department is proposing to adopt

new Chapter 10 (commencing with section 1320), of

Division 2, of Title 3 of the CCR to specify the requirements for persons housing egg- laying hens, veal

calves, and breeding pigs, and/or selling specified

whole veal meat, whole pork meat, shell eggs, and liquid eggs in the State in accordance with sections

25990, 25991, and 25993 of the HSC.

Anticipated Benefits of the Proposal: This proposal would establish a regulatory framework for purposes of implementation of the provisions of the Act as

mandated by section 25993 of the HSC. Effective implementation of the provisions specified in HSC sections 25990 through 25994 by adopting these regulations would benefit the objectives of the citizens of

California that voted to approve the Proposition 12 initiative and the standards for animal confinement and

55a

prohibition of animal cruelty that it described. Egg,

pork, and veal producers and distributors would benefit from this proposal because the Department is establishing compliance requirements for producing and

selling covered products in the State in accordance

with current law as specified in HSC sections 25990

through 25994 to ensure the orderly sale of covered

products from covered animals not confined in a cruel

manner regardless of their state or country of origin

within California. This proposal does not directly impact human health and welfare of California residents, worker safety, or the State’s environment, however the Department can infer that benefits accrue to

Californians knowing that breeding pigs, veal calves,

and egg-laying hens are raised with a minimum space

requirement, which may be more space than covered

animals previously were allotted. There are no quantitative studies that document or measure the effect

of confinement covered animals according the standards outlined in the Act for people in California. The

proposed regulations are necessary to implement animal confinement requirements and sale of the covered

products pursuant to HSC sections 25990, 25991 and

25993.

Comparable Federal Regulations/Mandated by

Federal Law or Regulations: This proposal is not mandated by federal law or regulations and does not duplicate or conflict with any federal regulations because there are no federal regulations governing farm

animal confinement requirements if the products

from specified animals are marketed to California

consumers.

Consistency and Compatibility with Existing

State Regulations: The Department has evaluated

this proposal and believes that it is not inconsistent or

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incompatible with existing State regulations. The intent is to conform the Department’s regulations relating to marketing shell eggs, liquid eggs, whole veal

meat, and whole pork meat in California to HSC sections 25990 and 25991. Existing regulations in 3 CCR

section 1350 (Shell Egg Food Safety) specify the minimum cage size requirements for egg producers and

egg handlers, as defined as defined by FAC section

27510, for marketing unpasteurized shell eggs in California. The Egg Safety and Quality Management

(ESQM) program ensures shell eggs have been

properly handled, labeled, transported, and refrigerated by inspecting eggs at production, packing, distribution, and retail facilities; and are wholesome and

safe to eat. The intent of the ESQM program’s section

1350 regulations is based on food safety to prevent the

occurrence of Salmonella enterica serotype Enteritidis

(SE) contamination of shell eggs at production and to

prevent SE contaminated shell eggs from being marketed to California consumers. Regulations do not exist for the confinement of veal calves and breeding

pigs, or the covered products of whole veal meat and

whole pork meat as mandated by the Act.

Forms Incorporated by Reference: None.

Technical, Theoretical, and Empirical Study, Report,

or Similar Documents (Materials Relied Upon):

•

California Proposition 12, Farm Animal Confinement Initiative (2018)

•

United Egg Producers, Animal Husbandry

Guidelines for U.S. Egg-Laying Flocks, Guidelines for Cage-Free Housing, 2017 Edition

•

Federal Meat Inspection Act (21 U.S.C. 601 et

seq.)

57a

•

Egg Products Inspection Act (21 U.S.C. 1031 et

seq.)

•

Title 3, California Code of Regulations section

900

•

Title 3, California Code of Regulations section

1350

•

Food and Agricultural Code section 27510

•

CDFA Workshop to Discuss CA Proposition 12:

Farm Animal Confinement Initiative (2018),

February 22, 2019, Sacramento, CA

•

Sumner, D.A., Goldstein, R., Hart, J.D., Lee,

H., Matthews, W.A., & Medellin-Asuara, J.

(2020). Standardized regulatory impact assessment of proposed regulations to implement

proposition 12. University of California, Davis,

UC Agricultural Issues, and California Department of Food and Agriculture

•

California Department of Public Health, Memo

dated November 13, 2020

•

CDFA State Organic Program (FAC sections

46000-46029 and 3 CCR sections 1391- 1391.7)

•

USDA National Organic Program (7 CFR Part

205)

•

Internal Revenue Code (26 U.S.C. 501(c)(3))

•

Health and Safety Code section 113758

•

USDA, Food Safety Inspection Service, Meat,

Poultry and Egg Product Inspection Directory,

Legend for Establishment Numbers

58a

•

Title 21, Code of Federal Regulations, Part 172

sections 172.510 and 172.515(b); Part 182 sections 182.10, 182.20, 182.40, and 182.50; and

Part 184

•

Health and Safety Code section 113789

•

Health and Safety Code section 109947

•

Title 21, Code of Federal Regulations, Part 160

•

Title 21, Code of Federal Regulations, Part 101

section 101.3

•

Title 21, United States Code, Part 343 section

403; Title 9, Code of Federal Regulations section 590.5; Health and Safety Code section

109992; and Food and Agricultural Code section 27519.6

•

Health and Safety Code section 110460

•

Title 9, Code of Federal Regulations, Part 424

section 424.21(c)

•

USDA, Institutional Meat Purchase Specifications: Fresh Veal Series 300 (November 2014)

•

2014 Uniform Retail Meat Identity Standards

•

Title 9, Code of Federal Regulations Part 317

section 317.2(1) and Part 381 section

381.125(b)

•

USDA, Institutional Meat Purchase Specifications: Fresh Pork Series 400 (November 2014)

•

Title 21, Code of Federal Regulations, Part 530

section 530.3(i)

•

Title 3, Code of Federal Regulations, Part 2 section 2.31

59a

•

Economic and Fiscal Impact Statement, STD

399 with Attachment

LOCAL MANDATE

There will be no local mandate.

COST OR SAVINGS TO STATE AGENCIES

(FISCAL IMPACTS)

The Act mandates farm animal confinement

standards and compliance timeframes, establishes

definitions affecting the production and sale of shell

eggs, liquid eggs, whole veal meat, and whole pork

meat in the State, and directs the Department and the

DPH to jointly promulgate regulations to implement

the provisions of the HSC relating to the confinement

of specified farm animals and the sale of specified

products derived from them. Details of the estimated

fiscal impacts discussed below can be found in the Department’s Standardized Regulatory Impact Assessment (SRIA) and appendix.

Department. The total annual agency budget for

Fiscal Year (2020-21) equals approximately $3.53 million. The Department estimates the total annual fiscal

costs for Fiscal Years (2021-22) and (2022-23) to each

equal approximately $4.94 million.

Pursuant to the Act, the Department’s proposed

regulations describe a program to implement prohibitions on the sale of shell eggs, liquid eggs, whole veal

meat, and whole pork meat derived from cruelly confined animals so Californians can have confidence

that the products they purchase come only from

sources that meet specified animal housing standards,

as described. Specifically, this proposal would establish a program of registration, certification, convey-

60a

ance inspection, and labeling and marking requirements for the sale of shell eggs, liquid eggs, whole veal

meat, and whole pork meat in the State which is necessary to fully effectuate the intent of the Act.

Schools. Schools in California serve free or reduced-price meals to needy children with funding

from the State Meal Program that includes state and

federal dollars. In the 2018-2019 school year a total of

288 million breakfasts and 536 million lunches were

provided to school children. Eggs and pork are components in these meals and the costs of these covered

products will increase after January 1, 2022 when the

full standards go into effect. In total, it is expected

State costs for school meals to increase by $1.84 million in the first full school year after egg- laying hen

and breeding pig confinement standards move to cagefree and twenty-four square feet, respectively.

Colleges and universities. The economic impact on

the operating costs of California state colleges and

universities is accounted for in meal plan fees to participating students living on campus. The costs to the

State of California from the increase in meal plan fees

is the State expenditure to fund meal plans for students on state-subsidized scholarships which include

coverage of room and board fees. The State costs for

student meal plan subsidy is $1.32 million for the first

full academic year after January 1, 2022 when animal

confinement minimum standards go into full effect

due to an increase in food costs.

State prisons. California’s state prison population

is projected to remain at about 117 thousand people

for the next several years when animal confinement

minimum standards go into full effect after January

1, 2022. (California Department of Corrections and

Rehabilitation 2020). An increase in the price of shell

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eggs, liquid eggs, and whole pork meat would increase

the total costs of meals for the state prisons by about

$4.68 million per year.

COST TO ANY LOCAL AGENCY OR SCHOOL

DISTRICT WHICH MUST BE REIMBURSED IN

ACCORDANCE WITH GOVERNMENT CODE

SECTIONS 17500 THROUGH 17630

Cost to local governments will not be reimbursed

by the State.

OTHER NON-DISCRETIONARY COST OR SAVINGS IMPOSED ON LOCAL AGENCIES

The Department’s regulations do not require additional expenditures by local governments; however,

local agencies may incur costs. Fiscal impact on local

governments will begin when the second deadline of

animal confinement minimum standards go into effect

January 1, 2022 for whole pork meat, shell eggs, and

liquid eggs due to the increase in the cost of these

foods sold in California. Whole veal meat is not included in this impact to local agencies because it is not

purchased by the impacted local governments. This

cost to local governments will not be reimbursed by

the State.

County jails. California county jail population totaled around 73,000 inmates in 2018 and 2019. (California Board of State and Community Corrections August 25, 2020 report). Beginning in 2022, an annual

total cost for county jails of about $2.92 million due to

increase in costs of shell egg, liquid egg, and whole

pork meat due to full implementation of animal confinement standards as outlined in statutes.

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COST OR SAVINGS IN FEDERAL FUNDING

TO STATE

None.

DETERMINATION OF ANTICIPATED

BUSINESS IMPACT

The Department has made an initial determination that this regulatory proposal will impact egg,

veal, and pork producers; food processing facilities (referred to as “food manufacturing” in SRIA); distribution; food retailers (supermarkets/grocery/convenience stores); and restaurants (and drinking establishments) that purchase or sell shell eggs, liquid

eggs, whole veal meat, or whole pork meat in California, as specified. Details of the estimated business impacts as discussed below can be found in the Department’s SRIA and appendix.

Businesses (and individuals) affected by this proposal:

California egg producers: approximately 6,546 farms

California veal producers: approximately 0 farms

California pork producers: approximately 1,236 farms

California restaurant/drinking establishments: approximately 76,200

California supermarkets/grocery/convenience stores:

approximately 20,000

California food processing facilities: approximately

450

Total number of businesses affected: approximately

104,432

Compete with businesses in other states. In-state

farms will find it more costly to compete with farms

outside of the State when selling shell eggs, liquid

eggs, whole veal meat, and whole pork meat to an out-

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of-state buyer compared to farms located in states

that do not have the same animal confinement standards as described in the Act. Food processing facilities

based in the State will have to use more expensive ingredients, shell eggs, liquid eggs, whole veal meat,

and whole pork meat, that are compliant with the Act

compared to food processing facilities located outside

the State.

Creation/elimination of existing businesses/expansion of businesses: The proposed regulations will

impact whole veal meat, whole pork meat, shell eggs,

and liquid eggs produced and marketed in California.

The current businesses from farm to end-user will be

affected. Some farms may choose to exit during implementation rather than make the necessary adjustments, others may find the implementation of the regulations attractive for entry into the market. Private

third-party certifying businesses providing certification services to farms and “handlers” according the

NOP standards within the State will be able to expand

services to additional farms and distributors for compliance with the Act and this proposal. This flux is expected to be small relative to the numbers already in

the production, distribution, processing, and retailing

businesses. It is expected entries and exits in the

range of less than 100 businesses.

Creation/elimination of jobs: Impacts on jobs in

California is minimal compared to the impact on consumer expenditures for the covered food items. Overall, there is a projected a loss of 31 jobs statewide in

the calendar year 2022, when final deadlines for the

Act go into effect, and then a loss of 332 jobs in 2023,

after adjustments for the a reduction in cage-free shell

egg production are fully incorporated. A large portion

of the jobs effect from the proposed regulations are in

64a

California’s shell egg production and associated industries due to requirement to a cage-free production

system.

Anticipated compliance requirements as a result

of this proposal: Producers and distributors who sell

their shell eggs, liquid eggs, whole pork meat, and

whole veal meat in California would need to comply

with the certification, registration, and labeling requirements as proposed. Private third-party certifiers

would need to be accredited by the Department to certify operations in as compliance with the Act and

these regulations.

Certification. The proposed regulations require producers and distributors to be certified as compliant with the Act. This may be

done by a private third-party that is accredited by the Department, a government entity

outside of the State, or directly by the Department. Certification compliance consists of

credible regulatory documentation (audit

trail) of a production or distribution operation’s good standing with certification requirements in these regulations and conformance

with the specific minimum confinement

standards in accordance with HSC section

25991.

Registration. The proposed regulations require annual distributor registration application and renewal used by the Department to

identify and ensure compliance of businesses

selling shell eggs, liquid eggs, whole pork

meat, and whole veal meat within or into California.

65a

Labeling. The proposed regulations require

product container labeling for shell egg cartons, which is already a requirement under

the Department’s ESQM program (3 CCR section 1354), although this proposal would require some modifications to the existing required labeling on printed cartons. Consumer

facing packaging labeling of other products

such as liquid eggs, whole pork meat, and

whole veal meat is not a requirement of the

proposed regulations, however, could be implemented voluntarily by associated industries. Required labeling of shipping manifests

and bills of lading is proposed for all covered

product sales transactions within or into the

State, however these types of documents are

easily generated and modified.

Paperwork/Reporting: There are new paperwork

and reporting requirements under this proposal. The

requirements include annual distributor registration

application and renewal forms, certifying agent accreditation application and renewal (every five years)

forms that may be retained and otherwise required by

statute or regulation, and submitted to the Department as part of routine business transactions in order

for the sale of covered products in California. Accredited third-party certifying agents are also required to

submit an annual report to the Department of the operations that have been granted, renewed, or denied

certification. Each producer and distributor operation

must be certified as compliant to raise covered animals producing covered products sold in California,

and/or businesses selling covered products within and

into the State. This certification requires necessary

66a

records to be maintained for review or audit by a certifying agent or the Department, as specified.

Recordkeeping: There are new recordkeeping requirements under this proposal that may impact egg,

pork, and veal distributors and producers. The proposed regulations require that records must be sufficient for an audit trail and documented in a traceable

manner that covered product originated from certified

compliant operations with the Act and these regulations. For example, records of their business operations, such as, production and shipment records, invoices, receipts, and related paperwork. The records

are not required to be sent to the Department, however certified producers and certified distributors

must keep the records on-site or available electronically for two years. Accredited third-party certifiers

are to submit annual reports to the Department as a

part of their recordkeeping requirements as specified

in this proposal. The Department conducts routine

and risk-based audits and inspections of farms, distributors, end-users, and certifying agents to ensure

compliance with statutes and regulations.

Benefits to human health, worker safety, or the

State’s environment. This proposal does not directly

impact human health and welfare of California residents, worker safety, or the State’s environment, however the Department can infer that benefits accrue to

Californians knowing that breeding pigs, veal calves,

and egg-laying hens are raised with a minimum space

requirement, which may be more space than covered

animals previously were allotted. This proposal is

needed to implement the Proposition 12 initiative

which was passed by California voters in 2018. A benefit is for proper and orderly implementation of a law

directly decided by voters for them to purchase with

67a

confidence covered products from covered animals not

raised in a cruel manner. There are no quantitative

studies that document or measure the effect of purchasing shell eggs, liquid eggs, whole veal meat, and

whole pork meat from farms animals not confined in

a cruel manner for people in California.

The Department has made an initial determination that the proposed regulatory action will have significant, statewide adverse economic impact directly

affecting California businesses including the ability of

California businesses to compete with businesses in

other states. The Department has considered proposed alternatives that would lessen any adverse economic impacts on business and invites you to submit

proposals. Submissions may include the following considerations:

• The establishment of differing compliance or reporting requirements or timetables that take into

account the resources available to businesses.

• Consolidation or simplification of compliance and

reporting requirements for businesses.

• The use of performance standards rather than prescriptive standards.

• Exemption or partial exemption from the regulatory requirements for businesses.

COST IMPACTS ON REPRESENTATIVE PRIVATE PERSONS OR BUSINESSES

The Department is aware of cost impacts that a

representative private person or businesses would

necessarily incur in reasonable compliance with the

proposed action. This determination is based on the

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SRIA included in this filing. The impacts are as a result of the implementation of existing law, HSC sections 25990 and 25991.

Private persons: There are no initial costs for an

individual and ongoing costs for an individual are estimated at $50 per year for increase in food costs after

January 1, 2022. California per individual annual covered egg consumption (including in processed products made in California) is a little over 20 dozen. Per

dozen cost increase about $2 per dozen, increasing ongoing costs to $40 per individual and it is estimated

that increase in whole pork meat and whole veal meat

prices will increase food costs $10 per individual giving a total of $50 per year individual ongoing costs.

Businesses: Producers and distributors selling

shell eggs, liquid eggs, whole pork meat, and whole

veal meat would need to comply with the provisions

for animal confinement or ensure covered product sold

in the State originate from animals that comply with

the provisions for animal confinement as specified in

HSC section 25990 and 25991.

Whole pork meat. A typical breeding pig farm

has about 1,000 breeding pigs and produces

20,000 hogs per year. Estimated initial cost

for a typical breeding pig operation is $66,000

per farm to convert barns and pens into housing compliant with minimum standards outlined in the Act. Estimated ongoing cost is

greater than the initial cost of conversion at

$100,000 per year for a typical breeding pig

farm due to smaller inventory of breeding

pigs, lower piglet output per animal and increased breeding pig mortality.

***

69a

Paperwork/Reporting and Recordkeeping: The

recordkeeping/reporting requirement for a typical

California business is estimated at $5,000/year and a

conservative estimate of 7,900 businesses will need to

comply with proposed recording requirements for a total of $39.5 million/year. The possible 7,900 businesses include egg producers, pork producers, and distributors of covered egg, pork, and veal products. Each

of these operations must be certified as compliant to

raise covered animals in California and/or sell covered

products in California. This certification requires necessary records to be maintained for review or audit by

an accredited third-party certifier or the Department.

This number of California businesses, 7,900, is potentially an overestimate based on the current number of

commercial egg and pork producers in California being much smaller than the United States Department

of Agriculture (USDA) 2017 Agricultural census reference of 6,500 covered farming operations in the State.

The Act does not have a minimum herd or flock size

requirement for compliance (ESQM program), or a

minimum number of dollars sold to register (State Organic Program), so any farm raising egg-laying hens

or breeding pigs will need to comply with recordkeeping requirements. In addition, California distributors

are responsible for documenting traceability of selling

shell eggs, liquid eggs, whole veal meat, and whole

pork meat sourced from certified farms, which may

originate at locations outside of the State or country.

HOUSING COSTS

None.

70a

SMALL BUSINESS IMPACT

The Department’s proposal may affect small California businesses, as defined in Government Code section 11342.610, such as small retail food establishments (supermarkets, grocery stores, convenience

stores, restaurants, and other food retailers) that have

veal on their menus due to the increase in veal wholesale prices, however, as a whole, costs are negligible

because total sales change little. For small California

pork and egg producers, they face initial and annual

compliance costs that are less than a typical operation

because they are likely to have space that is compliant

or almost compliant. There are about 210 small pork

farms selling more than 25 hogs annually and 823

small egg farms may need to make investments for

animal confinement compliance in California. Estimated initial costs is $5,000 and ongoing annual cost

$500 for small pork and egg producers.

BUSINESS REPORTING REQUIREMENT

It is necessary for the health, safety, or welfare of

the people of the State that the regulation apply to

businesses. There are new paperwork and reporting

requirements under this proposal. The requirements

include annual distributor registration application

and renewal forms, certifying agent accreditation application and renewal (every five years) forms that

may be retained and otherwise required by statute or

regulation, and submitted to the Department as part

of routine business transactions in order for the sale

of covered products in California. Accredited thirdparty certifying agents are also required to submit an

annual report to the Department of the operations

that have been granted, renewed, or denied certification.

71a

RESULTS OF STANDARDIZED REGULATORY

IMPACT ASSESSMENT

The Department completed a SRIA, which is included in this filing. A summary of the results of the

assessment is as follows:

a. The creation or elimination of jobs within the

State.

Impacts on jobs in California is minimal

compared to the impact on consumer expenditures for the covered food items. Overall, the Department projects a loss of 31

jobs statewide in the calendar year 2022,

when final deadlines for the Act go into effect and proposed regulations are fully implemented, and then a loss of 332 jobs in

2023, after adjustments for the reduction in

cage-free shell egg production are fully incorporated. A large portion of the jobs lost

are in the shell egg production and associated industries because the mandates of

the Act require these industries to move

into a cage-free production system.

b. The creation of new businesses or the elimination of existing businesses within the State.

Creation and elimination of businesses is

natural given any significant change to the

business conditions. The regulations considered here will change the nature of veal,

pork, and eggs produced and marketed in

California. The current businesses from

farm through end-user will be affected.

Some farms may choose to exit during im-

72a

plementation rather than make adjustments others may find the implementation

of the regulations attractive for entry. The

Department expects this flux to be small

relative to the numbers already in the production, distribution, and retailing businesses. The Department expects entries

and exits in the range of less than 100 businesses.

California has a large shell egg industry.

Egg producers in California face higher

costs by $72 million, and egg output will decline by 51 million dozen relative to the

baseline in 2022. Shell egg farm revenue

rises by $7 million in 2022.

c. The competitive advantages or disadvantages

for businesses currently doing business within

the State.

The cage-free mandate for egg-laying hens

and 24-square-foot mandate for breeding

pigs (the portion of the proposed regulations that goes into effect starting January

1, 2022) may cause some egg and pork producers to exit because they find it uneconomical to adapt their facilities to comply

with the new mandates required by the Act.

The Department expects that some preexisting producers whose facilities already

meet the Act’s standards will enjoy corresponding competitive advantages. Preexisting cage-free egg producers, whose potential market grows when statutes take effect, will have an advantage over those who

have not engaged in cage-free production in

73a

that they will not face costs of converting

facilities. Similar competitive farm issues

apply to breeding pig operations, but there

are very few such businesses in California.

d. The increase or decrease of investment in the

State.

As discussed in Section 6.2 and 6.3 of the

SRIA, some new businesses and investment may enter the market as a result of

the proposed regulations, the overall effect

of the regulations (as summarized in Section 1.4, reported in Section 4, and detailed

in Appendices 1–4 of the SRIA) is to decrease the total amount of shell eggs, liquid

eggs, whole pork meat, and whole veal meat

consumed in California. Although some

one-time investments in construction, machinery, and labor will be made by businesses as they adapt their facilities, in the

long run the Department expects that the

regulations promulgated to implement the

Act will decrease average annual investment in California egg and pork producers

and distributors, relative to the Baseline.

Although investment in other businesses in

California may correspondingly decrease as

investors move resources elsewhere, the

Department expects the net effect to be a

modest decrease in overall investment in

the State.

California consumers will be affected by

higher food prices and respond with lower

quantity consumed. In the 2022 calendar

year, when the Act’s standards go into full

74a

effect, proposed regulations will increase

consumer expenditures in California of

$1,195 million. The largest impacts are on

consumers of shell eggs and whole pork

meat due to increased cost of these covered

products at wholesale and retail.

e. The incentives for innovation in products, materials, or process.

Farms may have some incentives to innovate in their business processes as they

adapt their facilities to be compliant with

the Act’s confinement standards. However,

businesses involved in the design and manufacturing of products and materials for adaptation, such as animal cages, are not typically located in California.

f. The benefits of the regulations, including, but

not limited to, benefits to the health, safety, and

welfare of California residents, worker safety,

and the State’s environment and quality of life,

among any other benefits identified by the

agency.

The SRIA did not quantify any benefits directly impacting human health and welfare

of California residents, worker safety, or

the State’s environment. Other economic

studies have shown that some government

regulations of meat and egg production and

processing increase consumer willingness

to pay more in food markets. About 20% of

California’s shell egg consumption prior to

2022 already met California cage-free egg

standards. This means cage-free shell egg

75a

consumers were already willing to pay

more than twice as much, on average, for

cage-free shell eggs than for conventional

shell eggs. Other consumers who are not

willing to pay double for cage-free eggs may

be willing to pay a smaller increased

amount for cage-free shell eggs. Both of

these types of consumers would therefore

receive some corresponding benefits (even

if they are hard-to-quantify benefits such as

moral satisfaction, peace of mind, social approval, etc.) from knowing all eggs raised

and sold in California are cage-free after

January 1, 2022. In addition, non-consumers of the covered products may benefit

from assurance that shell eggs, liquid eggs,

whole veal meat, and whole pork meat sold

in California meet the specified housing

standards even if they do not plan to consume these foods. The Department notes

that a large majority of voters in 2018 approved, 63%, the Proposition 12 initiative to

eliminate egg-laying hens, veal calves, and

breeding pigs from being cruelly confined in

the State or if products from those animals

are sold in the State.

Animal confinement space allowances prescribed in the Act (cage-free for egg-laying

hens, 43 square feet for veal calves and 24

square feet for breeding pigs) are not based

in specific peer-reviewed published scientific literature or accepted as standards

within the scientific community to reduce

human food-borne illness, promote worker

safety, the environment, or other human or

76a

safety concerns. Health and Safety Code

confinement standards are described as a

minimum standard for space allowance to

prevent cruel confinement of covered animals and the law was not primarily written

with the concern or benefit of human foodborne illness, worker safety, environment,

etc. The standard of cage-free in HSC references the United Egg Producers 2017

guidelines and is the cage-free standard set

by the egg industry to provide uniform

guidance of cage-free egg operations. Minimum space requirements for veal calves

and breeding pigs outlined in HSC are not

drawn from specific industry standards or

published scientific research prescribing 43

square feet for veal calves and 24 square

feet for breeding pigs. The Department has

no regulatory discretion over the Act’s animal confinement mandates, so any such effects would stem not from the way regulations were written or implemented, but

from the mandates directly imposed by the

Act.

SUMMARY OF DEPARTMENT OF FINANCE

COMMENTS AND DEPARTMENT’S

RESPONSE

The Department of Finance (Finance) provided

comments to the Department’s SRIA. A summary of

the five comment categories and the Department’s responses are below. Reference citations noted in the below responses can be found in the Department’s SRIA.

77a

Finance comment #1: The SRIA must estimate the

costs to producers to comply with the new housing, certification, labeling, and reporting requirements and

for individuals to maintain their consumption or to

substitute. Furthermore, disparate impacts must be

discussed. For instance, some small farmers might not

be able to switch to cage-free eggs right away and

might reduce or stop production altogether. Larger

farms, who typically can adapt more quickly, will increase their market share to compensate for lower production from smaller farms.

a. Cost to producers for certification, labeling, and

reporting requirements

Certification costs. Proposed regulations require

farms to be certified as compliant with the Act. This

may be done by a private third-party that is accredited

by the Department or directly by the Department.

Producers would incur costs for certification services

from accredited third-party certifiers by payment of

fees charged by these private entities. For existing private businesses that conduct certification services

similar to those proposed in these regulations (e.g.,

American Certified Humane, Certified Humane, Validus, Global Humane Animal Partnership, etc.), the

fee structures are most commonly based on a sliding

scale depending on the size of the production operation. Small producers may pay $100-$200 per year for

certification while large producers may pay $2,0004,000 each year for certification (subsection b. below

for more information on smaller- and larger-sized operations). If a production operation is already inspected by a third- party company for welfare standards who is accredited by the Department, then the

producer may not have to incur additional costs for

78a

certification. For example, American Certified Humane, Certified Humane, and Global Animal Partnership all have standards that meet the minimum confinement requirements for egg-laying hens. Similar

costs might be expected for producers receiving certification services directly from the Department, depending upon the extent of public funds available to

support this activity.

Labeling costs. Product container labeling is only

required for shell egg cartons under this proposal.

Currently, all cartons of unpasteurized eggs still in

the shell that are sold in California have required labeling of “CA SEFS COMPLIANT” as part of the Department’s Shell Egg Food Safety program. The addition of “CA CAGE FREE” labeling as part of the proposed regulations starting in July of 2022 is not expected to result in significant additional costs to shell

egg producers that already must print cartons with

California specific statements. Additionally, the use of

“Cage Free” statements on cartons to identify this

type of production system for consumers purchasing

eggs is already common in the marketplace, and the

proposed addition of “CA” to existing statements to

designate conformance with the Act and this proposal’s specific standards is not expected to be a significant added cost.

Labeling of other covered products (e.g., liquid

eggs, whole pork meat, and whole veal meat) on consumer facing packaging is not a requirement of the

proposed regulations, but could be done voluntarily by

the industry at the discretion of the producer, packer,

or co-packer to communicate compliance with the Act

and these regulations for marketing purposes.

Proper labeling of shipping manifests and bills of

lading is required by the proposed regulations and

79a

again is estimated to be a nominal cost to the producer

or distributor because these types of documents are

already being generated and printed for covered products distributed and sold in California. For example,

beginning in January of 2022 shipments of whole pork

meat under this proposal will need to have “CA 24+”

printed on the shipping documents and be available

for review during the certification process, upon entry

at a California Border Protection Station, or during an

inspection or investigation.

Reporting costs. The additional cost of reporting

requirements as outlined in the proposed regulations

is estimated to be $5,000 annually for a typical California business (producer, distributor or accredited

third-party certifier). This record keeping cost will

vary depending on the extent of time required to

maintain documents required to demonstrate compliance and traceability with the Act and these regulations. Additionally, annual reporting to the Department is required of accredited third-party certifiers

and annual renewal distributor registration under

this proposal will contribute to overall recordkeeping

costs for a typical California business.

b. Consideration of disparate impacts

***

California Pork Operations: small and large farm

potential differential impacts. According to the 2017

United States (US) Census of Agriculture, there were

1,389 swine farms that had a total of 96,456 hogs and

pigs in California. The census data does not distinguish between breeding pig, weaned pig, finishing, or

fully integrated operations. Of the total swine operations in California, 1,236 of the farms sold hogs and

pigs at a total of 207,768 animals in 2017. Most of the

80a

farms that sold hogs and pigs (USDA reported term

for number of head slaughtered), 1,009 farms, sold

fewer than 25 hogs and pigs each annually. To qualify

as a “farm” operation under the USDA definition, the

business only needs to have products that might have

sold for more than $1,000 in a year. Of these 1,009

very small operations, a total of 5,950 animals were

sold, giving an average of about 6 hogs and pigs from

each farm. A breeding pig will produce about 25 piglets per year, therefore few of these small operations

would have any breeding pigs that would be affected

by the Act’s confinement square footage minimums.

There were six farms in 2017 that sold more than

5,000 hogs and pigs each for a total of 161,409 animals, giving an average of about 26,900 hogs and pigs

sold by each of these larger swine operations.

Of the six large farms that sold more than 5,000

pigs each, three were farrow-to-finish, meaning they

housed breeding sows and would need to comply with

minimum confinement standards requirements in

2022. Calculations assume that these farms sold

about 25,000 hogs and pigs each, that would imply

about 1,000 breeding pigs at each of these three larger

swine farms. Nationwide, breeding pigs represent

about 4% of hogs and pig inventory, which of the

96,456 hogs and pigs in California indicates there are

less than 4,000 breeding pigs in California. According

to the 2017 Agricultural Census, the total inventory of

hogs and pigs in the United States (US) was 72 million

animals. Since breeding pigs represent 4% of the total

hog and pig population, California has about 0.133%

of the national breeding pig herd.

California pork producers produce specialty pork,

such as organic, pasture-raised, and show animals for

4-H and FFA projects. Farrowing operations with a

81a

small number of breeding pigs will likely find it easier

to meet California-specific housing regulations than

would commercial- sized operations. Generally, very

small livestock farms have higher measured, imputed,

or implied accounting costs per animal sold, but continue to operate the farm because either their actual

individual costs are lower than those imputed or implied in the studies or for non- pecuniary reasons

(Whitt, McDonald and Todd).

The economic impact of proposed regulations on

swine producers in California is likely concentrated on

the larger operations that are more likely to have already made the capital investment in housing that

based on pens and square footage allowance from traditional commercial breeding pig operations. Very

small pork producers are more likely to already be

compliant with confinement standards outlined in the

Act or would have nominal cost adjustments to become compliant.

Data and economic analysis indicate no significant change in the size distribution of pork producers

in California from the proposed regulations.

***

Finance comment #2: Small businesses that rely

on regulated products such as small restaurants, who

tend to have a thin profit margin, might increase

prices or close if cost increases cannot be absorbed.

a. Effects on restaurants that are small businesses

The National Restaurant Association estimates

that there were about 76,200 eating and drinking establishments in California in 2018, with $97 billion in

retail sales, and employing 1.83 million food service

82a

workers. Of course, these statistics are pre-pandemic

and the long-term effects of COVID on restaurant

businesses in California is not known. The Small

Business Association (SBA) has specific definitions to

include these food services as a small business; fullservice restaurants, mobile food services, “drinking

places,” caterers, and Snack and Nonalcoholic Beverage Bars if they have less than $8 million in annual

revenues. Limited- service restaurants are small businesses if they have less than $12 million in annual

revenues. Cafeterias and buffets are small businesses

if they have less than $30 million in annual revenues.

And food service contractors are small businesses if

they have less than $41.5 million in annual revenues.

Under these definitions established by the SBA, most

restaurants in California are considered small businesses.

By National Restaurant Association estimates,

average annual revenues of an “eating and drinking

establishment” in California in 2018 were $1.27 million, less than one-sixth of the maximum revenue for

an (SBA-defined) “small business.” A restaurant in

California with average revenue for its industry is

thus considered a small business as defined by the

SBA. Thus, most impacts on restaurants identified in

the SRIA are primarily impacts on small businesses.

Within the restaurant category, sit-down family

restaurants or “fine dining” restaurants tend to be

smaller businesses than fast-casual or fast-food restaurants. Veal is unusual among most restaurant categories in that it is primarily consumed at high-end

restaurants. Popular restaurant veal dishes include

veal chop, veal parmigiana, and veal marsala and will

cost more for restaurant patrons to enjoy after full im-

83a

plementation of the Act and proposed regulations because it is assumed the increase in veal meat wholesale prices will be passed along to the customer. Californians may not be willing to bear an increase in veal

meal prices on the menu; alternatively, many restaurants may simply stop including veal on their menu or

serve fewer portions of veal. Thus, the Act and this

proposal will have a significant impact on those small

businesses in California that have historically had

veal dishes on their menus.

Restaurants or other food service places that purchase covered pork and egg products that are cagefree, crate-free, or otherwise already meet or almost

meet the confinement standards in the Act would face

lower costs of adjusting to the new standards. The impact for those restaurants serving pork is less severe

because the price impact is small on menu prices,

given the high share of whole pork meat in food service food prices. The other category of restaurants

likely to be significantly affected are those with menu

items that have significant covered egg product content. Certain large quick-serve chains, like McDonald’s, declared plans to shift to cage-free eggs independent of the Proposition 12 initiative, but few had

completed that adjustment before the Act was passed

into law. There is no data to indicate that their costs

of shifting or maintaining confinement standards to

meet the requirements outlined in the Act would be

different per unit of sales than other independent food

service places. There is no data to suggest that the

Act’s standards have a particular impact by size of establishment.

b. Grocery stores and retail that are small businesses

84a

A substantial portion of grocery stores and convenience stores in California sell covered pork and egg

products and are also classified as “small businesses”

under the SBA definition.

IBISWorld (2019) reports that there are about

8,000 supermarkets and grocery stores in California

employing about 300,000 people. The California Grocers Association (2020) reports having about 6,000

member-businesses. The National Association of Convenience Stores (2020) reports that there are about

12,000 convenience stores in California.

Meat markets, fish and seafood markets, fruit and

vegetable markets, baked goods stores, confectionery

and nut stores, and other specialty food stores are

classified by the SBA as small businesses if they have

less than $8 million in annual revenues. Convenience

stores are small businesses if they have less than $32

million in annual revenues. Supermarkets and other

grocery stores are small businesses if they have less

than $35 million in annual revenues. Thus, a substantial portion of grocery stores and convenience stores

are small businesses, although large chains have a

greater presence in the grocery and convenience store

category than in the restaurant category. Consumers

shopping at small or large grocery stores, or convenience stores, are likely to respond to higher shell egg,

liquid egg, whole veal meat, and whole pork meat

prices by buying less of the covered pork, veal and egg

products, and are also likely to substitute some or all

of their covered product spending for spending on

other food products, including non-covered pork such

as ready-to-eat or ground pork products. The covered

egg, veal and pork products represent a small share of

total consumer food spending at grocery stores and

85a

even less at convenience stores. Therefore, no disproportionate impact of the Act’s standards on small grocery or other retail companies is expected.

Finance comment #3: Effects on individual SNAP

and food subsidy program benefits

a. SNAP: Low income Californians pay a higher

share of their total income on food

Covered pork, and especially covered egg products

will become more expensive to consumers starting in

January 2022 because of the animal confinement

standards mandated in statutes. Eggs are purchased

by low-income consumers as a higher share of their

food budgets compared to middle- and high-income

consumers.

Many low-income consumers in California are enrolled in USDA food and nutrition service programs

such as school meals, the Special Supplemental Nutrition Program for Women, Infants, and Children

(WIC), and Supplemental Nutrition Assistance Program (SNAP), which in California is administered as

the Cal Fresh program. These programs enroll millions of Californians, many of whom participate in

several programs. For example, there were almost 4

million SNAP recipients (about 10% of the population

in California in 2019). Supplemental Nutrition Assistance Program benefits averaged about $1,700 annually per household member in 2019. However, not all

low-income consumers are enrolled in programs and

many face higher food costs with little assistance. It is

not yet clear the extent, if any, to which federal program benefits will be adjusted to fully cover the added

food costs of consumers beginning in 2022. For example, the typical consumer (across all ages and other

characteristics) consumes about 21 dozen eggs and 40

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pounds of pork meat annually, and estimated increase

in food costs are approximately $2 per dozen shell eggs

and $0.20 per pound of whole pork meat. This means

covered egg and pork costs go up by $42 and $8 per

year respectively for a total of $50 per person per year

starting in 2022. This increase in food costs does not

include veal because it is assumed lower-income

households are not purchasing veal. These calculations are based on economic results which repeatedly

find that the quantity purchased by low-income

households of broad food items like shell eggs or whole

pork meat do not fall proportionately to when the

price increase (demand is price inelastic). Meaning,

when price rises, the expenditure on that item also

rises. The increased cost of $50 per person will need to

be included in federal benefits for California recipients otherwise their real food purchasing power will

fall.

Therefore, the Act will disproportionately reduce

food purchasing power of low-income consumers.

However, since some of the food budget of low-income

consumers is covered by federal programs, they may

not be differentially affected, as a group, relative to

consumers with higher incomes that are not eligible

for food assistance. Food consumers most affected will

be those low-income consumers that are not enrolled

in assistance programs.

Consumers least affected are those who already

consume cage-free shell and liquid eggs and whole

pork meat from hogs for whom the mother pig experienced additional space during gestation. These tend

to be higher income consumers.

b. Other food subsidy benefit programs

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In addition, as noted above, there are federal meal

subsidy programs serving other populations such as

daycare for younger children and eldercare facilities.

A brief summary of the Federal Child and Adult Care

Food Program is provided by the USDA Economic Research Service (USDA, ERS 2019). The program is designed to improve nutrition with meals and snacks for

infants, children, and adults. Providers are reimbursed for meals and snacks. In 2018-19 Federal reimbursement for the California program was $485

million and state reimbursement was about $2.1 million. Almost all the outlays were for childcare centers

and in-home daycares. (CDE, 2020). In addition, the

state cost of the Federal Child and Adult Care Food

Program is $2.1 million. The best estimate of added

cost of these programs is about 0.5% times $2.1million, equaling an added cost due to the Act’s confinement standards of about $11,000 per year.

Finance comment #4: Fiscal cost calculations must

be disclosed and include all costs to state and local

governments. Costs should be broken down by category

including but not limited to certification, registration,

enforcement, and other administrative costs.

The Department’s proposed program for implementation of Proposition 12 initiative is titled the Animal Care Program and total fiscal cost for 22/23 fiscal

year for this program is $4,936,485. This is the first

full fiscal year after the Act’s timelines are all in effect

for covered animals and costs have been broken down

into administration, compliance audits, investigations, and registration/certification/accreditation.

Within each of these categories the expenses are further divided into personal services and operating expenses and equipment. More specifically, total administration costs are $1,047,157 ($557,661 for personal

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services and $489,496 for operating expenses and

equipment), total compliance audits costs are

$3,024,377 ($1,858,393 from personal services and

$1,165,984 from operating expenses and equipment),

total investigations costs are $456,058 ($349,186 from

personal services and $106,872 from operating expenses and equipment), and total registration/certification/accreditation costs are $408,893 ($350,021

from personal services and $58,872 from operating expenses and equipment).

No fiscal costs to local governments.

Finance comment #5: The SRIA must evaluate impacts on other government agencies that are consumers

of the covered products, such as schools and prisons.

a. Fiscal impact on California schools

Schools in California served 288 million breakfasts and 536 million lunches in the 2018-2019 academic year. Of those meals, 233 million breakfasts

and 405 million lunches were served free of charge to

needy children. The total funds expended for school

meal programs were $2.27 billion with the State contributing $161 million or about 7% of this budget in

2018-2019. Of these state funds, $103 million were expended for lunches, and $58 million were expended for

breakfast meals. In addition, summer meal programs

in the 2018-2019 school year served 14.8 million

meals, including 3.2 million breakfast meals and 9.5

million lunch meals. Total funds expended for the

summer meal programs were $46.1 million with State

funds contributing $1.7 million or about 3.7% of the

total budget. Of these state funds for the summer

meal program, $1.2 million were expended for lunches

and $495 thousand for breakfast meals (CDEa).

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To estimate the increase in covered egg and pork

costs beginning in 2022, the same average annual increase in food costs is used as in the SNAP explanation above of $50 per person or $50/ (3X365) = $0.0457

per meal increase in food costs. This estimate was

then rounded down to $0.04 per meal because these

meals are mostly lunch and breakfast, the average

consumption of children from 6 to 18 is less than the

average person, and schools have access to bulk buying and economies in covered egg and pork purchases.

Applying this $0.04/meal to the free school-year meals

of 638 million meals gives an increased cost of about

$25.5 million. The California budget pays about 7% of

the total or about $1.80 million ($25.5 million X 0.07).

For summer meals the added total cost is $0.6 million,

and the California cost is $0.042 million ($0.6 million

X 0.07). In total, California state government costs for

these school meals are about $1.84 ($1.80 million plus

$0.042 million) million in the 2022-23 school year.

Besides federal cash contribution to school meals

programs USDA has provided direct food purchasing

of egg products to some school districts at a discounted

rate. Two frozen liquid egg products and an egg patty

product have been available (USDA Foods) for schools

to purchase. California egg producer housing standards have been distinct from those in the rest of the

US for retail sales since 2015, but the California egg

production is mainly for shell eggs which are not often

used in school meal programs. Under the proposed

regulations, liquid eggs and egg products included in

the Egg Products Inspection Act are also included as

covered product needing to come from cage-free hens

and therefore California schools may not be able to

purchase low-cost covered egg products from USDA

Foods.

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It is not known whether USDA will provide USDA

egg products to California schools that meet California cage-free standards. If not provided, this source of

benefit may be lost to school meal programs in California. If USDA is unwilling to use egg products that

meet California standards this will reduce the benefit

of school meal programs in California, unless menu

planners avoid the use of covered egg products. Alternatively, USDA may use cage-free eggs to produce

compliant USDA egg products for use in California

schools.

b. Fiscal impact on California colleges and universities

The impact of the Act and this proposal on food

costs for California state colleges and universities is

small and accounted for in meal plan fees to students.

The University of California system and the California State University system together enroll about 700

thousand undergraduates (The Regents of the University of California 2020, The California State University 2020, USDE/NCES 2020). About 110 thousand

UC and CSU students live on campus and most of

those are enrolled in campus meal plans. The number

of students living on campus is calculated using the

average percentage of undergraduates living on campus for each UC and major CSU campus from Carnegie Dartlett (2020). On most campuses, basic meal

plans are included in room and board fees and vary

from about $100 to over $200 per week. Cost of meal

plans for each campus was obtained from the corresponding campus website. On average, meal plans

cost about $175 per student, per week, for an equivalent of three meals per day, seven days a week. A typical school year not including summer school consists

of about 32 weeks. Using 32 weeks as the length of an

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average school year, the total cost of meals per student

amounts to $5,600 per year. For the total student population living in campus housing on the UC and CSU

campuses, student meal plans amount to $616 million

per year ($5,600 X 110,000).

Estimates of increased covered egg and pork costs

(veal is not served on college campuses) for meals

served beginning in 2022 take into account the ninemonth academic year and a slight increase in total

eggs consumed based on the demographic and ability

to purchase in bulk. The total increase is $40 per person annually for purchasing covered eggs and pork.

This total uses college student consumption of 23

dozen eggs per year (shell and liquid), but average 3/4

of the year (9 months) on the meal plan so egg cost

increase is (0.75) X 46 = $34.50 due to the price of

cage-free eggs and rounded up to $35 per year. Increase in costs due to increase in the price of whole

pork meat is $5 ($8 X 0.75=$6, rounded down to $5)

because of slightly lower prices due to bulk purchases.

The increase in food costs totals $40 per person or a

total of $4.4 million per year for students living on

campus taking part in a meal program ($40 X

110,000). The cost to the State of California due to this

increase in cost of covered eggs and pork depends on

the expenditure to cover meal plans for students on

state-subsidized scholarships that include coverage of

room and board fees.

About 30% of California public college and university students receive financial benefits that will be affected by meal plan costs and 70% of added meal plan

costs are paid by the students or their families. Therefore, the estimated cost of the Act and this proposal on

State costs for meal plan student subsidy is about 30%

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times $4.4 million or $1.32 million during the first academic year after full implementation in 2022 ($4.4

million X 0.30).

c. California and local jurisdictions operate prisons and jails that provide meals

California’s state prison population is projected to

remain at about 117 thousand people for the next several years (California Department of Corrections and

Rehabilitation 2020). About 117 thousand inmates is

a five-year rolling average projection for 2021 and

2022 based on prison population for 2015–2019. This

gives a total of 42.7 million prison-days per year, or

just over 128 million meals (assuming three meals per

person per day).

California county jail population is totaled at

about 73 thousand in 2018 and 2019 (Board of State

and Community Corrections Jail Profile Survey August 25, 2020 report). Using the same calculation for

county jail inmates as state inmates yields about 80

million meals served each year.

An increase in the price of covered eggs and pork

as a result of the mandated statute and proposed regulations will increase the annual costs of meals per

prisoner by about $40 per year starting in 2022, which

is mostly the higher costs of cage-free shell eggs and

liquid eggs, but with a small amount for cost of whole

pork meat and no added cost for whole veal meat. This

was calculated by estimating that the increase in meal

costs provided to prisoners will be lower than for the

average Californian by about 20%, so additional costs

of covered eggs and pork would be $40 per year ($50 X

0.8). At the current and projected incarceration population numbers, this would increase the total costs of

meals for the state prisons by about $4.68 million per

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year ($40 X 117,000). For county jails, this will be an

added cost of about $2.92 million per year ($40 X

73,000) for meals served to its 73,000 inmates.

CONSIDERATION OF ALTERNATIVES

The Department must determine that no reasonable alternative it considered or that has otherwise

been identified and brought to its attention would be

more effective in carrying out the purpose for which

the action is proposed, would be as effective and less

burdensome to affected private persons than the proposed action, or would be more cost-effective to affected private persons and equally effective in implementing the statutory policy or other provision of law.

Any interested person may present statements or

arguments orally or in writing relevant to the above

determinations at the hearing (if a hearing is requested) or during the written public comment period.

The two alternatives considered do not vary the

basic requirements of the Act itself, for example, the

alternatives did not consider whether eggs must be

cage-free, or by when. The two alternatives considered

the economic impacts of the Department’s discretionary choices, namely through definitions and procedures, used to implement the Act. The two alternative

regulations considered and ultimately rejected include (1) lower-cost regulations and (2) higher- cost

regulations:

Alternative 1: Under the lower-cost alternative,

annual farm cost and consumer expenditure increases

by $982 million; = $19.5 billion in present value at a

5% discount rate.

The lower-cost regulations apply a narrower interpretation of which food products are covered and

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which businesses are subject to annual registration

and certification requirements. Intent of the Act is not

fully applied across sales of covered products and

therefore California residents would not be able to

confidently purchase and consume covered products

knowing they were sourced from covered animals

raised according to the confinement standards of the

Act, regardless of origin of product. The lower-cost alternative would be confusing for the California consumer because there would be a mix of compliant and

non-compliant covered product for sale in California.

The lower-cost regulations are defined in detail in

SRIA 4.2.1, however some key variations in the lowercost regulations, versus the proposed regulations, are

as follows:

• “Shell eggs” include only raw or pasteurized eggs

with the shell still intact, therefore, excluding all

forms of hard-cooked eggs such as peeled, sliced, or

chopped.

• “Liquid eggs” include only eggs broken from the

shell with the yolks and whites in their natural proportions, or with the yolks and whites separated,

mixed or mixed and strained as defined by the Code

of Federal Regulations, therefore excluding other

forms of liquid eggs such as frozen, dried, cooked,

and prepared egg products (e.g. egg patties or egg

“pucks” consisting of mostly eggs except for added

seasoning and flavoring).

• The Act’s confinement requirements are limited to

sales of shell eggs, liquid eggs, whole veal meat, or

whole pork meat at the retail level to a consumer.

• Restaurants, prepared food vendors, and food processing facilities are not required to source shell

eggs, liquid eggs, whole veal meat, or whole pork

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meat compliant with the Act for their business of

further processing those ingredients.

The Department rejected this option because the

narrow definitions of shell eggs and liquid eggs did not

coincide with the intent of the Act that was overwhelmingly passed by voters to ensure eggs purchased and consumed by Californians were not from

egg-laying hens confined in a cruel manner. Whether

the shell egg consumed is purchased raw or hardboiled, peeled, and included in a snack pack, the Department determined that hardboiled eggs need from

be from egg-laying hens confined according to the

Act’s standards to meet the expectations of Californians. Californians that voted to ensure liquid eggs purchased in California were from egg-laying hens not

confined in a cruel manner are most likely not aware

of all food manufacturing processes or the extensive

list of egg products defined in the Egg Products Inspection Act. Due to the versatile use of liquid eggs in

food processing, and food service, the Department

adopted the definitions of liquid egg to include all

products in the federal Egg Products Inspection Act.

The Department feels confident this was the expectation of voters when they voted for the Proposition 12

initiative in 2018. Whether the liquid eggs are frozen,

dried, or cooked into a patty, if the covered egg product

is sold in California, then it must have originated from

egg-laying hens not confined in a cruel manner.

The Department also rejected this lower-cost alternative option because there would be a mix of compliant and noncompliant covered products sold in California and it would be difficult for the consumer to

know if they were purchasing shell eggs, liquid eggs,

whole veal meat, and whole pork meat from animals

not confined in a cruel manner. Also, the lower-cost

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alternative would be more difficult to regulate because wholesale and retail costs of covered products

coming from covered animals not confined in a cruel

manner are significantly higher than the prices of covered products from animals housed in a cruel manner.

With a narrower scope of products included in the

lower-cost alternative option and compliant and noncompliant covered products in the California marketplace, there would more opportunities for cheating,

greater challenges for enforcement, and unfair cost

burden put on California small businesses, mostly restaurants who purchase shell eggs, liquid eggs, whole

veal meat, and whole pork meat from a retailer.

Alternative 2: Under the higher-cost alternative,

annual farm and consumer expenditure increases by

$1.263 billion; = $25.26 billion in present value at a

5% discount rate.

Higher-cost regulations impose more stringent restrictions on some covered products moving through

California and expand the definition of covered products; they imply larger negative economic consequences, including reduced California port activity.

Benefits may be larger under the higher-cost alternative if more covered animals are not raised in a cruel

manner. The higher-cost regulations are defined in

detail in SRIA section 4.2.2. Specifically, the highercost regulations include all the requirements of the

proposed regulations plus the following additional requirements:

• Raw ground veal, raw ground pork, and their

products (meaning foods composed of raw

ground veal or pork plus seasonings, coloring,

curing agents, etc.) are considered cuts of “whole

veal meat” and cuts of “whole pork meat,” and

thus subject to the Act’s requirements.

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• The Act’s requirements apply to covered food

products moving through California for sale and

end-use in another state or country.

• Consumer-facing labeling is required for all covered products or prepared foods containing a

covered product. Labels would allow the buyer

to scan a QR code at retail or when consuming a

prepared food made with covered product and

see record of the Act’s animal confinement certification and traceability of product back to farm

of origin.

The Department rejected this option because in

the Act definitions of whole veal meat and whole pork

meat exclude processed or prepared foods such as hot

dogs. Raw ground and comminuted products made

from veal or pork are specifically identified in these

regulations as not needing to be included under the

definitions of covered products. This decision was

made based on informal feedback from pork stakeholders and due to the definitions in statute. Analysis

for the SRIA include calculations with and without

ground pork because there has been mixed informal

feedback from stakeholders regarding the exclusion of

ground and comminuted products.

The higher-cost alternative option to apply the

Act’s confinement standards of covered products only

moving through California and destined for export,

use on cruise ships, or sale in other states was rejected

because the Department did not think including these

products under the Act’s animal confinement standards was the intention of the law. California has busy

ports for export and import and if all shell eggs, liquid

eggs, whole veal meat, and whole pork meat moving

through these ports had to be compliant with the Act

and these regulations, then import/export business in

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California would be devastated and moved to other

states. The Department specifically excluded covered

products moving through the State for a destination

outside of the State or country in these regulations for

stakeholders to understand the processes and expectations for these types of products.

The final suggestion in the higher-cost alternative

option was rejected by the Department because the requirement for a consumer facing labeling with a

unique QR code was determined to be overly burdensome for stakeholders including restaurants which

are often independently owned and classified as small

businesses. Instead of putting the burden of proof to

defend and communicate that a food is or contains covered product from covered animals not confined in a

cruel manner to the Department on these small businesses, the Department decided to move this compliance one level up in the supply chain to a distributor.

In addition, many of the final consumer facing packaging of liquid eggs, whole veal meat, and whole pork

meat are under inspection of USDA, FSIS and any labeling of those products would need to be approved by

FSIS.

This proposal is necessary for compliance with

section 25990, 25991, 25992, and 25993 of the HSC.

***

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APPENDIX F

DEPARTMENT OF FOOD AND AGRICULTURE

ANIMAL HEALTH AND FOOD SAFETY SERVICES PROPOSED REGULATIONS

ANIMAL CONFINEMENT

The Department of Food and Agriculture, Animal

Health and Food Safety Services Division, proposes to

adopt Chapter 10 of Division 2 of Title 3 of the California Code of Regulations, as specified below.

1) Adopt Chapter 10 of Division 2 of Title 3 of the

California Code of Regulations, to read as follows:

Chapter 10. Animal Confinement.

[Article 1, Egg-laying Hens, and Article 2, Veal

Calves, omitted]

4) Adopt Article 3 and sections 1322 through

1322.10 of Chapter 10 of Division 2 of Title 3 of the

California Code of Regulations, to read as follows:

Article 3. Breeding Pigs.

Section 1322. Definitions.

Unless the context otherwise requires, the following definitions apply to this Article and words in the

singular form shall be deemed to impart the plural

and vice versa, as the case may demand:

(a) “Act” means the Farm Animal Cruelty statute,

as amended (Chapter 13.8 (commencing with section

25990) of Division 20 of the Health and Safety Code.).

(b) “Audit trail” means records that are in sufficient detail to document the identification, source,

supplier, transfer of ownership, transportation, storage, segregation, handling, packaging, distribution,

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and sale of whole pork meat that was derived from a

breeding pig confined in compliance with sections

25991 and 25992 of the Health and Safety Code and

this Article, and from pork producers that hold a valid

certification as a certified operation issued pursuant

to Article 5 of this Chapter.

(c) “Breeding pig” means, pursuant to section

25991(a) of the Health and Safety Code, any female

pig of the porcine species kept for the purpose of commercial breeding who is six (6) months of age or older,

or pregnant.

(d) “Certified operation” means as defined in section 1326(e) of this Chapter.

(e) “Certifying agent” means as defined in section

1326(f) of this Chapter.

(f) “Commercial sale” for purposes of section

25991(o) of the Health and Safety Code and this Article means to sell, offer for sale, expose for sale, possess

for sale, exchange, barter, trade, transfer possession,

or otherwise distribute in California commerce including, but not limited to, transactions by a retailer with

a consumer and electronic transactions made using

the internet. It shall not include any of the following

transactions or transfers of possession:

(1) Whole pork meat produced outside of the state

that enters and exits California, without additional

processing or repackaging, exclusively for purposes of

transshipment or export for human consumption outside of the state;

(2) Any sale of whole pork meat undertaken on the

premises of an establishment at which mandatory inspection is provided under the Federal Meat Inspection Act (21 U.S.C. Sec. 601 et seq.) and that holds an

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official establishment number (prefix “M”) granted by

the Food Safety Inspection Service of the United

States Department of Agriculture; or

(3) Donations to religious, charitable, scientific,

educational, or other nonprofit organizations that

have a tax exemption under section 501(c)(3) of the Internal Revenue Code (26 U.S.C.).

(4) The exception to definition of commercial sale

applies only to a specific transaction listed above, not

to the covered product itself, and therefore does not

apply to all subsequent sales of whole pork meat.

(g) “Consumer” means any person who purchases

whole uncooked pork meat, as defined in section

25991(u) of the Health and Safety Code and this Article, for the sole purpose of their own family use or consumption, or that purchases or consumes cooked pork

meat at a restaurant, food facility, or other business

that serves cooked or ready-to-eat pork meat to customers or patrons.

(h) “Container” means any box, case, basket, tote,

can, carton, sack, pouch, bag, package, wrapper, receptacle, or any other device which is used to facilitate

the handling, distribution, transportation, or commercial sale of whole pork meat.

(i) “Cottage food operation” means an establishment as defined in section 113758 of the Health and

Safety Code.

(j) “Curing agents” for purposes of section

25991(u) of the Health and Safety Code and this Article means any substance listed and described in section 424.21(c) of Title 9 of the Code of Federal Regulations.

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(k) “Cut” for purposes of section 25991(u) of the

Health and Safety Code and this Article means any

uncooked primal, wholesale, sub-primal or retail cut

including, but not limited to, those identified and described in the United States Department of Agriculture’s Institutional Meat Purchase Specifications:

Fresh Pork Series 400 (November 2014 Edition) and

the 2014 Uniform Retail Meat Identity Standards developed by the Industry-Wide Cooperative Meat Identification Standards Committee, but shall exclude any

ground or otherwise comminuted meat products.

(l) “Department” means the California Department of Food and Agriculture.

(m) “Document of title” means a document which

in the regular course of business or financing is

treated as adequately evidencing that the person in

possession of it is entitled to receive, hold, and dispose

of the document and the whole pork meat it covers.

Examples of such document include bill of lading, dock

warrant, dock receipt, warehouse receipt, or an order

for the delivery of whole pork meat.

(n) “Enclosure” means a structure used to confine

a covered animal or animals. For purposes of this subsection and this Article, a structure means any cage,

crate, pen, or other construction used to confine a

breeding pig.

(o) “End-user” means any of the following:

(1) A consumer;

(2) A retailer that is not a pork producer and only

conducts commercial sales directly to a consumer,

without any further distribution, of whole pork meat

that was purchased or received from a pork distributor;

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(3) A food processing facility or cottage food operation that receives whole pork meat solely for use as

an ingredient to manufacture a combination food

product that does not meet the definition of whole

pork meat as defined in this Article; or

(4) A restaurant, food facility or other business

that only cooks and serves pork meat, and/or serves

only ready-to-eat pork meat, to customers, patrons or

guests for purposes of consumption.

ing:

(p) “Enforcement officer” means any of the follow-

(1) Persons employed by and under the supervision and control of the Department; or (2) Persons employed by and under the supervision and control of the

Department of Public Health.

(q) “Flavoring” for purposes of section 25991(u) of

the Health and Safety Code and this Article means

any substance, whether artificial or natural, the function of which is to impart flavor rather than nutrition,

and includes the substances listed and described in

sections 172.510, 172.515(b), 182.10, 182.20, 182.40,

and 182.50, and part 184 of Title 21 of the Code of

Federal Regulations.

(r) “Food facility” means a facility as defined in

section 113789 of the Health and Safety Code.

(s) “Food processing facility” means a facility as

defined

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