Eligibility Requirements for USDA Graded Shell Eggs

Proposed Rules

Federal Register

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Proposed Rules

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 56

[Docket No. PY-98-006]

RIN 0581-AB56

Eligibility Requirements for USDA Graded Shell Eggs

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Agricultural Marketing Service (AMS) proposes to amend the

regulations governing the voluntary shell egg grading program. Media

reports in April 1998 raised concerns about the practice of repackaging

eggs. The proposed revisions would provide that in order to be

officially identified with a USDA consumer grademark, shell eggs must

not have been previously shipped for retail sale. The proposal would

also amend the definition of the term ``eggs of current production''

(currently eggs no older than 30 days) thereby making eggs that were

laid more than 15 days before the date of packing ineligible for

official grading. However, interested parties are invited to submit

comments proposing other periods of time that are viewed as being more

appropriate. AMS is particularly interested in receiving comments

regarding the period of between 15 to 30 days. In addition, a

definition of the term ``shipped for retail sale'' would be added to

the regulations. These revisions would strengthen the integrity of the

USDA grade shield by making ineligible for grading certain types of

eggs.

DATES: Comments must be received on or before September 27, 1999.

AMS is particularly interested in receiving comments

regarding the period of between 15 to 30 days. In addition, a

definition of the term ``shipped for retail sale'' would be added to

the regulations. These revisions would strengthen the integrity of the

USDA grade shield by making ineligible for grading certain types of

eggs.

DATES: Comments must be received on or before September 27, 1999.

ADDRESSES: Send written comments to Douglas C. Bailey, Chief,

Standardization Branch, Poultry Programs, Agricultural Marketing

Service, U.S. Department of Agriculture, STOP 0259, 1400 Independence

Avenue, SW, Washington, D.C. 20250-0259. Comments may be faxed to 202/

690-0941.

State that your comments refer to Docket No. PY-98-006 and note the

date and page number of this issue of the Federal Register.

Comments received may be inspected at the above location between

8:00 a.m. and 4:30 p.m., Eastern Time, Monday through Friday, except

holidays.

FOR FURTHER INFORMATION CONTACT: Rex A. Barnes, Chief, Grading Branch,

202/720-3271.

SUPPLEMENTARY INFORMATION:

Background

AMS administers a voluntary grading program for shell eggs under

the Agricultural Marketing Act of 1946, as amended (7 U.S.C. 1621 et

seq.). Any interested person, commercial firm, or government agency

that applies for service must comply with the terms and conditions of

the regulations and must pay for the services rendered. AMS graders

monitor processing operations and verify the grade and size of eggs

packaged into packages bearing the USDA grade shield. Plants in which

these grading services are performed are called official plants.

Currently in the United States, about one-third of the eggs marketed in

shell form for human consumption are processed under the voluntary

grading program.

Shell egg producers either pack their eggs at the site where the

eggs are produced (an ``in-line'' operation), or ship their eggs to a

processing facility or egg processor located elsewhere (an ``off-line''

operation)

ed official plants.

Currently in the United States, about one-third of the eggs marketed in

shell form for human consumption are processed under the voluntary

grading program.

Shell egg producers either pack their eggs at the site where the

eggs are produced (an ``in-line'' operation), or ship their eggs to a

processing facility or egg processor located elsewhere (an ``off-line''

operation). Egg processors also sell and ship eggs among themselves to

accommodate local imbalances in supply. Once eggs are washed, sized,

and packaged for retail sale, they are shipped to retailers for

distribution to the ultimate consumer.

Occasionally a retail store may have an excess inventory of eggs.

They may have overstocked for a seasonal promotion (e.g., Easter or

Christmas) or the expiration date printed on the cartons may be

approaching. Retailers either dispose of these eggs, give the eggs to

local charitable feeding operations before the expiration date, or

return the eggs to the processor. The processor may, in turn, repackage

the eggs or process them into liquid, frozen, or dried egg products. If

repackaged, the eggs are removed from their original package, such as a

carton or open tray (known as a ``flat''), and placed into a new

package which bears a pack date that is the same or different than on

the original package. Eggs are usually, but not always, intermixed with

other unprocessed eggs, rewashed, and regraded before repacking. The

option of repackaging eggs has always been available to egg processors;

there are no Federal regulations addressing the practice and Agency

personnel have observed very little of it in official plants.

On April 7, 1998, a report was televised about an egg processor's

practice of repackaging eggs. This report questioned the food safety

and quality implications of this practice. This rule addresses the

quality issues

gs has always been available to egg processors;

there are no Federal regulations addressing the practice and Agency

personnel have observed very little of it in official plants.

On April 7, 1998, a report was televised about an egg processor's

practice of repackaging eggs. This report questioned the food safety

and quality implications of this practice. This rule addresses the

quality issues.

On April 17, 1998, USDA issued a written notice to the industry

announcing suspension of the repackaging of eggs packed under the

voluntary grading program while the Department reviewed its policies on

egg repackaging. The suspension, effective April 27, ensured that eggs

shipped for retail sale and returned were specifically ineligible for

USDA-grade identification.

This proposed rule is the result of the Department's review of the

repackaging issue. It would prohibit the USDA grade identification of

eggs previously shipped for retail sale or eggs laid more than 15 days

before date of packing. AMS is also requesting comments on alternate

periods, particularly those between 15 and 30 days, that are viewed as

being a more appropriate limit.

Eggs are at their peak of quality when they are laid and, over

time, quality will decline. The rate of decline varies according to a

variety of factors, with the most important being elapsed time since

lay, storage temperature, and storage humidity. To maintain the

integrity of the quality standards and the grade shield, only ``eggs of

current production'' may be officially graded. AMS has defined those

eggs to be shell eggs which have moved through usual marketing channels

since the time they were laid and have not been held in refrigerated

storage in excess of 30 days. In practice, AMS requires eggs being

officially identified to be no older than 30 days on the day of

packaging.

The first definition for ``eggs of current production'' was added

to the regulations March 1, 1955, and included a 60-day requirement,

which was

oved through usual marketing channels

since the time they were laid and have not been held in refrigerated

storage in excess of 30 days. In practice, AMS requires eggs being

officially identified to be no older than 30 days on the day of

packaging.

The first definition for ``eggs of current production'' was added

to the regulations March 1, 1955, and included a 60-day requirement,

which was

reduced to 30 days August 1, 1963. This definition allowed buyers and

sellers to differentiate between relatively fresh eggs and cold storage

or storage eggs. Commercial cold storage of eggs began in the U.S.

around 1890, when egg production was seasonal. Until the 1950s, it was

common for eggs to be held in refrigerated storage for up to 6 months.

Cold storage could hold the spring and summer production surplus (about

50 percent of the annual production) for release during periods of

relative scarcity in autumn and winter, thus avoiding drastic supply

and price fluctuation. Modern breeding and flock management practices

have virtually eliminated seasonal differences in egg production, so

cold storage is no longer necessary or even practical. In addition,

technological advances in the handling and marketing of shell eggs have

reduced the time it takes for eggs to move through normal marketing

channels and provide optimum conditions for maintaining egg quality.

Four dates are associated with the marketing of shell eggs. These,

in order of occurrence, are the date of lay, the date of packaging, the

expiration date, also known as the ``Sell By'' date, and the ``Use By''

date. The ``Use By'' date suggests the date after which product quality

would likely be significantly diminished. Federal law does not require

any of these dates to be present on shell egg packaging materials such

as egg cartons. However, under the USDA grading program, the date of

packaging is required, and if the expiration date is present, it can be

no more than 30 days after the packaging date

The ``Use By'' date suggests the date after which product quality

would likely be significantly diminished. Federal law does not require

any of these dates to be present on shell egg packaging materials such

as egg cartons. However, under the USDA grading program, the date of

packaging is required, and if the expiration date is present, it can be

no more than 30 days after the packaging date.

AMS believes that current shell egg marketing practices readily

allow all processors to package shell eggs within 15 days of lay.

However, as currently permitted by regulation, processors may on

occasion repackage product returned from retail marketing channels or

product stored in the processor's cooler that is approaching the

current 30-day limit. In this way, processors can extend the number of

days available to market the product by establishing a new, later

expiration date. An April 1998 media story reported this practice and

raised consumer awareness and concern about its food safety and quality

implications.

This proposed rule responds to consumer concerns about product

quality by proposing to make retail-returned eggs ineligible for

official identification and proposing a shorter time limit for

packaging shell eggs under the USDA grading program. This rule would

not add or change any program requirements regarding the expiration

date or the ``Use By'' date. By prohibiting retail-returned eggs and

eggs older than 15 days from being officially graded and packaged, AMS

believes that consumers who purchase officially graded product will

receive product that is free of unwanted variation in egg quality that

may be caused by the occasional blending of older, lower quality eggs

with more recently laid, higher quality eggs.

AMS has tentatively concluded that reducing the time between date

of lay and date of packaging will enhance the quality of USDA consumer

graded eggs

that consumers who purchase officially graded product will

receive product that is free of unwanted variation in egg quality that

may be caused by the occasional blending of older, lower quality eggs

with more recently laid, higher quality eggs.

AMS has tentatively concluded that reducing the time between date

of lay and date of packaging will enhance the quality of USDA consumer

graded eggs. Differences in the internal quality of eggs are expressed

in Haugh units, a standardized quality scale determined primarily by

the height of the albumen, or ``white'', of a broken-out egg under

laboratory conditions. In one case study, AMS found that, under proper

storage conditions, the Haugh unit average for eggs approximately 15

days old was 72, whereas the Haugh unit average for eggs approximately

30 days old was 68. These findings are consistent with the loss of

quality normally associated with eggs of increasing age.

AMS has also tentatively concluded that industry practice readily

allows eggs to be packaged within a period shorter than the current 30

days from date of lay. Discussions with industry members and Agency

personnel familiar with current industry practice suggest that a 15-day

limit would allow sufficient time for both in-line and off-line

processors to trade, ship, process, and package eggs. In order to

provide consumers with high quality shell eggs, AMS identifies best

operational practices for processors that pack officially identified

eggs. Accordingly, AMS is proposing to require that all eggs graded by

USDA be no older than 15 days on the day of packaging by amending the

definition of current production to mean shell eggs that are no more

than 15 days old.

However, while formulating this proposal, AMS understood from some

in the industry that a 15-day period may be an undue burden in certain

situations

ially identified

eggs. Accordingly, AMS is proposing to require that all eggs graded by

USDA be no older than 15 days on the day of packaging by amending the

definition of current production to mean shell eggs that are no more

than 15 days old.

However, while formulating this proposal, AMS understood from some

in the industry that a 15-day period may be an undue burden in certain

situations. For example, smaller size eggs are sometimes stored to

accumulate sufficient volumes for processing, and heavy demand for

processing during holiday periods may extend the time between the date

of lay and date of packaging. Therefore, although AMS still believes

that a 15-day limit between the date of lay and date of packaging would

generally allow sufficient time for processors to trade, ship, process,

and package eggs, we are inviting interested persons to submit comments

proposing other periods of time that are viewed as being more

appropriate. AMS is especially interested in receiving comments

regarding other limits between 15 to 30 days, for example a 21-day

limit.

On May 19, 1998, the Food Safety and Inspection Service (FSIS) and

the Food and Drug Administration (FDA) jointly published an advance

notice of proposed rulemaking that set forth a farm-to-table strategy

that may decrease the food safety risks associated with Salmonella

enteritidis in shell eggs (63 FR 27502). The comment period closed

August 17, 1998. The actions proposed by the two agencies included

reviews of potential food safety risks associated with the practices of

rewashing and repackaging shell eggs and of expiration dating practices

that might mislead consumers. Future regulatory actions taken by FSIS

and FDA would apply to all packaged shell eggs, including those

packaged under USDA's voluntary grading program, which addresses

quality.

Proposed changes

he two agencies included

reviews of potential food safety risks associated with the practices of

rewashing and repackaging shell eggs and of expiration dating practices

that might mislead consumers. Future regulatory actions taken by FSIS

and FDA would apply to all packaged shell eggs, including those

packaged under USDA's voluntary grading program, which addresses

quality.

Proposed changes

This proposed rule would further restrict the eligibility

requirements for shell eggs packed under the voluntary AMS quality

grading program.

The proposal would change the definition for Eggs of current

production (Sec. 56.1) by specifying that the term denotes eggs that

are no more than 15 days old. This definition would require eggs being

officially identified to be no older than 15 days on the day of

packaging instead of the present 30-day limit. Additionally, reference

to the term ``Refrigerator or storage eggs'' that is used to define

eggs held in excess of 30 days is removed because it is obsolete. It is

a term that once referred to eggs which had been put into cold storage

during periods of high production to be released during periods of

relative scarcity. This is no longer industry practice and therefore

the term is no longer needed.

The proposal adds a definition for the term Shipped for retail sale

(Sec. 56.1). This term would mean shell eggs that are forwarded from

the processing facility for distribution to the ultimate consumer. This

includes eggs forwarded for sale to wholesalers, brokers, retailer

warehouses, retailer stores, or other distribution points in the

marketing chain.

Finally, the proposal revises the requirements of shell eggs to be

identified with consumer grademarks (Sec. 56.40). Eggs ``shipped for

retail sale'' that are returned to an egg processor would be ineligible

for USDA consumer grade identification, even if they are eggs of

current production.

Executive Order 12866 and Effect on Small Entities

other distribution points in the

marketing chain.

Finally, the proposal revises the requirements of shell eggs to be

identified with consumer grademarks (Sec. 56.40). Eggs ``shipped for

retail sale'' that are returned to an egg processor would be ineligible

for USDA consumer grade identification, even if they are eggs of

current production.

Executive Order 12866 and Effect on Small Entities

This proposed rule has been determined to be significant for

purposes of Executive Order 12866 and, therefore, has been reviewed by

the Office of Management and Budget (OMB). In addition, pursuant to

requirements set forth in the Regulatory Flexibility Act (RFA) (5

U.S.C. 601 et seq.), the AMS has considered the economic impact of this

proposed rule on small entities and has determined that its provisions

would not have a significant economic impact on a substantial number of

small entities.

The purpose of the RFA is to fit regulatory actions to the scale of

businesses subject to such actions in order that small businesses will

not be unduly or disproportionately burdened. The Small Business

Administration defines small entities that produce and process chicken

eggs as those whose annual receipts are less than $9,000,000 (13 CFR

121.201). Approximately 550,000 egg laying hens are needed to produce

enough eggs to gross $9,000,000.

Currently, the Agricultural Marketing Act of 1946, as amended (7

U.S.C. 1621 et seq.) authorizes a voluntary grading program for shell

eggs. Shell egg processors that apply for service must pay for the

services rendered. These user fees are proportional to the volume of

shell eggs graded, so that costs are shared by all users. Shell egg

processors are entitled to pack their eggs in packages bearing the USDA

grade shield when AMS graders are present to certify that the eggs meet

the grade requirements as labeled. Plants in which these grading

services are performed are called official plants

services rendered. These user fees are proportional to the volume of

shell eggs graded, so that costs are shared by all users. Shell egg

processors are entitled to pack their eggs in packages bearing the USDA

grade shield when AMS graders are present to certify that the eggs meet

the grade requirements as labeled. Plants in which these grading

services are performed are called official plants. Shell egg processors

who do not use USDA's grading service may not use the USDA grade

shield. There are about 700 shell egg processors registered with the

Department that have 3,000 or more laying hens. Of these, 130 are

official plants that use USDA's grading service and would be subject to

this proposed rule. Of these 130 official plants, 14 meet the small

business definition.

Repackaging is the practice of removing eggs from their original

package and repacking them into a new package, with a pack date that is

the same or different than on the original package. Eggs are at their

peak of quality when they are laid and, over time, quality will

decline. The repackaging of retail-returned eggs extends the time

before those eggs reach the ultimate consumer. Since August 1, 1963,

AMS has required eggs being officially identified to be no older than

30 days on the day of packaging.

In April 1998, the Agency surveyed its graders in the 130 official

plants to determine the repackaging practices of those plants. Results

of the survey indicated that 4 of the 130 plants had infrequently

repackaged retail-returned eggs into shielded cartons during the

previous year, usually during the holidays. No official plants that

meet the definition for small businesses repackaged retail-returned

eggs into shielded cartons.

On April 27, 1998, AMS suspended by written notice to the industry

the repackaging of eggs into packages bearing the USDA grade shield

when retailers had returned those eggs to the processor

d eggs into shielded cartons during the

previous year, usually during the holidays. No official plants that

meet the definition for small businesses repackaged retail-returned

eggs into shielded cartons.

On April 27, 1998, AMS suspended by written notice to the industry

the repackaging of eggs into packages bearing the USDA grade shield

when retailers had returned those eggs to the processor. The proposed

revisions would provide that in order to be officially identified with

a USDA consumer grademark, shell eggs must not have been previously

shipped for retail sale.

This proposal would also amend the definition of the term ``eggs of

current production,'' thereby making eggs that were laid more than 15

days before the date of packing ineligible for grading. AMS is also

requesting comments on alternate periods, particularly those between 15

and 30 days, that are viewed as being a more appropriate limit. In

addition, a definition of the term ``shipped for retail sale'' would be

added to the regulations.

No adverse industry-wide impact has been observed since AMS

suspended the repackaging of eggs returned by retailers, primarily

because of the infrequent use of egg repackaging by official plants.

Additionally, AMS believes that the proposed 15-day limit from date of

lay to date of packaging for eggs officially identified with a USDA

consumer grademark minimizes unwanted variations in egg quality while

allowing sufficient time for the normal wholesale trading and shipping

of shell eggs to be completed. AMS expects this limit to have little or

no economic impact on shell egg producers or processors, including

those that may be small businesses. Shell egg processors can market

eggs that are not of current production by packaging them without USDA

grade identification

ons in egg quality while

allowing sufficient time for the normal wholesale trading and shipping

of shell eggs to be completed. AMS expects this limit to have little or

no economic impact on shell egg producers or processors, including

those that may be small businesses. Shell egg processors can market

eggs that are not of current production by packaging them without USDA

grade identification. Since the difference in economic return to

processors between USDA graded versus non-USDA graded eggs is about one

cent per dozen, the economic impact is minimal for official plants and

non-official plants that may later elect to use the grading service.

Optionally, processors may divert eggs to the production of liquid,

frozen, and dried egg products. By doing so, they can recoup

approximately 50 percent of the products' original value.

AMS considered leaving the 30-day requirement unchanged. However,

AMS believes industry advances now allow wholesale trading and shipping

to be completed in time to allow shell eggs to be packaged by

processors within 15 days of lay. By proposing to change the

requirement to a shorter period, AMS and the industry can better ensure

the quality of officially identified consumer grade eggs.

While formulating this proposal, AMS understood from some in the

industry that a 15-day period may impose an undue burden in certain

situations. For example, smaller size eggs are sometimes stored to

accumulate sufficient volumes for processing, and heavy demand for

processing during holiday periods may extend the time between the date

of lay and date of packaging. Therefore, although AMS believes that a

15-day limit between the date of lay and date of packaging would

generally allow sufficient time for processors to trade, ship, process,

and package eggs, AMS is seeking comments about the impact of the

proposed 15-day limit, particularly on small businesses. AMS is also

interested in receiving comments regarding other limits between 15 to

30 days, for example a 21-day limit.

believes that a

15-day limit between the date of lay and date of packaging would

generally allow sufficient time for processors to trade, ship, process,

and package eggs, AMS is seeking comments about the impact of the

proposed 15-day limit, particularly on small businesses. AMS is also

interested in receiving comments regarding other limits between 15 to

30 days, for example a 21-day limit.

Executive Orders 12988 and 12898

This proposed rule has been reviewed under Executive Order 12988,

Civil Justice Reform. It is not intended to have retroactive effect.

This rule will not preempt any State or local laws, regulations, or

policies, unless they present an irreconcilable conflict with this

rule. There are no administrative procedures that must be exhausted

prior to any judicial challenge to the provisions of this rule.

Pursuant to Executive Order 12898, ``Federal Actions to Address

Environmental Justice in Minority Populations and Low Income

Populations,'' AMS has considered the potential civil rights

implications of this proposed rule on minorities, women, or persons

with disabilities to ensure that no person or group shall be

discriminated against on the basis of race, color, sex, national

origin, religion, age, disability, or marital or familial status. This

included those persons who are employees, program beneficiaries, or

applicants for employment or program benefits in the voluntary shell

egg grading program. Adoption of the proposed rule would not require

official plants to relocate or alter their operations in ways that

could adversely affect such persons or groups. Nor

would it exclude any persons or groups from participation in the

voluntary shell egg grading program, deny any persons or groups the

benefits of the grading program, or subject any persons or groups to

discrimination.

Paperwork Reduction Act

Eggs of current production means shell eggs that are no more than

15 days old.

* * * * *

Shipped for retail sale means shell eggs that are forwarded from

the processing facility for distribution to the ultimate consumer.

* * * * *

In Sec. 56.40 paragraph (c) is revised to read as follows:

Sec. 56.40 Grading requirements of shell eggs identified with consumer

grademarks.

(a) * * *

* * * * *

(c) In order to be officially identified with a USDA consumer

grademark, shell eggs shall:

(1) Be eggs of current production;

(2) Not possess any undesirable odors or flavors; and

(3) Not have previously been shipped for retail sale.

Dated: July 22, 1999.

Kenneth C. Clayton,

Acting Administrator, Agricultural Marketing Service.

[FR Doc. 99-19093 Filed 7-26-99; 8:45 am]

BILLING CODE 3410-02-P