WASHINGTON (FNS) -- With a full plate of regulatory measures under consideration at the executive and legislative levels this year, retailers and wholesalers are concerned about how the industry would handle new compliance challenges.
In many cases, the costs of additional regulations would be burdensome to many corporate bottom lines, industry executives and association representatives complain. Despite some recent signs of an uptick in the economy, many operators are still hit hard by the effects of the long-running recession and the slow recovery, and they're feeling more of a pinch from existing regulations.
"They've never felt the pressure of regulations like this before," said Tom Wenning, senior vice president and general counsel of the National Grocers Association, Reston, Va. "The cumulative effect is adding up. The economy today is far different than it was in the '70s and '80s, both in terms of employment and growth."
In this climate, it isn't surprising that supermarkets, wholesalers and other sectors of the supply chain are keeping close tabs on various regulatory moves. Among the issues they're tracking for 1994 are: · Safe handling labels for meat. · Health care reform. · Child labor policies. · More rigorous tax audits. · Striker replacement legislation. · Seafood inspection legislation.
The tough economy makes it harder for operators to meet current and future regulatory challenges, executives stressed. "It's a very frightening environment for business people," said Bruce Gates, vice president of the National-American Wholesale Grocers' Association, Falls Church, Va. "Trying to comply with the plethora of regulatory initiatives is a nightmare."
Wenning noted that "with each new law that is passed, there are costly new pieces of paperwork. Retailers have to be more like lawyers because they have to pay attention to all the regulations."
Experts say that although the recent political rhetoric had pointed to a reduction in regulations, the reality was very different.
"If you go back to the Reagan years, the battle cry was 'minimize regulations,' " noted John McClung, vice president of government affairs at the United Fresh Fruit and Vegetable Association, Alexandria, Va. "The truth is, there wasn't much deregulation. Not much got done. I don't think the regulatory grip has been lessened much at all since then. It's the same old music, no matter what band is playing," McClung said.
Still, the industry is hopeful that its efforts will help foster closer cooperation with government. A case in point is the recent battle over meat labeling regulations. The U.S. Department of Agriculture was forced to reissue its regulations last year after NGA, NAWGA and the Texas Food Industry Association blocked its first plan in federal court. "I think [USDA's] experience on these labels has helped them appreciate the value of consulting industry," said Harry Sullivan, senior vice president and general counsel at the Food Marketing Institute, Washington. Following are some issues that the industry will be watching this year:
MEAT LABELS
The meat labeling saga has sparked another round of controversy as USDA prepares to issue final regulations on safe-handling and cooking labels for meat.
Many retail and wholesale executives are insisting USDA should limit label requirements to ground meat and poultry rather than enacting a broader plan affecting nonground products as well. Executives are also claiming the timetable is too fast. The label rules are expected to be implemented 30 days after a final regulation is published, which is expected by the end of this month. But some officials are asking that the deadline be postponed until July 6, which is the compliance date for meat products to be labeled under the Nutrition Labeling and Education Act.
NAWGA's Gates said USDA should have avoided the controversy by being more attuned to the industry, which, he stressed, has a history of enacting food safety campaigns for consumers.
CHILD LABOR LAWS
Some executives are claiming the Labor Department is going too far in the way it polices the supermarket industry on child labor laws. The scrutiny began during the Bush administration and carried over into the Clinton presidency, they claim.
A&P, Food Lion and Winn-Dixie are among the retailers hit with heavy fines for allowing 14- and 15-year-olds to work outside of hours prescribed by the federal government. Officials with companies cited by the agency say the violations and fines are disproportionate compared to the actual occurrences.
"For some retailers, the answer now is to not hire teen-agers" under 18, which cuts into the available labor pool, Wenning said. He noted that some independent grocers have seen their operating profits wiped out after being hit by child labor fines.
Retailers claim they are also being hit with trumped-up child labor violations for teen-agers operating paper balers. They contend the employees are doing nothing more than tossing paper boxes and wrappers into balers that aren't in operation and are locked for safety. Retailers are asking the agency to rework the tightly worded regulations that make this a violation.
Sullivan said the problem reflects "an enforcement attitude and interpretation that is bordering on being absolutely egregious and totally contrary to the vice president's reinventing government."
PACA
Some industry executives are concerned about potential fee increases under the Perishables Agricultural Commodity Act. This law, which dates back to 1930, was designed to ensure that buyers and sellers of fresh and frozen fruits and vegetables follow terms of their contracts. The act also provides dispute resolution services outside of the court system. Some industry lobbyists contend that PACA, as it's known, has long outlived its usefulness. PACA now requires retailers and wholesalers to pay annual licensing fees of $400 per outlet, for a maximum of $4,000. PACA is administered by USDA.
"Supermarket operators tell you they get nothing out of it," Sullivan said. "The growers and government say you get a lot out of it and that without it you wouldn't get product. That is absolutely ridiculous." Gates said PACA officials have made rumblings that they'll ask Congress to increase the fee. "We'll try and stop them if they try and ram it through," he said.
HEALTH CARE REFORM
The potential costs of the Clinton administration's planned health care reform have made many businesses nervous, particularly in the supermarket industry, which is dependent on part-time workers.
The plan includes provisions that would bring part-time workers under the health care umbrella. The Clinton package, which involves networks of regional and corporate alliances, sets 30 hours a week as the designation for full-time work and provides for prorated health care funding for employees with fewer working hours. A person who works 15 hours a week would have to pay 40% of health insurance costs. In addition, the plan sets another coverage floor: An employee must work at least 40 hours a month, or 10 hours a week, in order to be eligible for any company-funded health care insurance. Employers would not need to provide any health care coverage for workers less than 18 years of age or full-time students age 23 or younger.
Although FMI hasn't yet taken a position on the Clinton plan, Sullivan said its member retailers and wholesalers are very concerned about the mandate to pay health care costs for qualifying part-time employees.
"The plan, if it were enacted as proposed, would have a big impact on labor costs and will cause employers to tend to employ '40-hour' people wherever possible, since this would cost less" than hiring two people each working 20 hours, Sullivan said.
Accordingly, the Clinton health plan "means there will be less job sharing and it translates into job losses, since [companies] probably will eliminate jobs, consolidate them and curtail hours in order to contain costs," Sullivan added.
TAXES
The Internal Revenue Service will be targeting supermarkets, among other industry sectors, for more effective tax audits. The IRS is expected to issue new guidelines for the grocery sector that will probably advise its agents to be more diligent in checking that the declared value of inventory is accurate, said Robert A. LaBaube, director for IRS problem resolution with the accounting firm Coopers & Lybrand. The IRS is concerned that grocers "could declare inventories below their real value, increasing the cost of goods sold, which decreases the income subject to tax," LeBaube said. The guidelines probably also will press agents to check declared depreciation of equipment and payment of unemployment insurance taxes, said LeBaube, a former IRS assistant commissioner.
STRIKER REPLACEMENT
Striker replacement legislation could become a big issue in 1994 in the second session of the 103rd Congress. It will still face opposition from the National Retail Federation and NAWGA. A striker replacement bill was passed by the House last June but did not come before the Senate.
Steve Pfister, a National Retail Federation lobbyist, said, "This is an issue that could have profound impact on labor-management relations. We will work diligently to ensure that this measure is not passed by the U.S. Senate." Under the House-passed plan, employers would be prohibited from hiring permanent replacements for striking workers. NAWGA officials have described it as a consumer issue because, if employers were prohibited from hiring replacements for their striking workers, they would either have to shut down or accede to union demands. Subsequently, grocers would be forced to raise prices, NAWGA said. SEAFOOD SAFETY
Under Commissioner Dr. David Kessler, the Food and Drug Administration has become more focused on preventing biological contamination of food. The agency is developing a Hazardous Analysis Critical Control Point system for monitoring seafood at all levels of the production chain and into the supermarket. The retail industry, through FMI, has been working on developing this HACCP. FDA is also working on an HACCP for food processors, which some executives are concerned about.
"How the federal government goes about imposing these complex regulations is important," said Jeff Nedelman, vice president of communications at the Grocery Manufacturers of America, Washington. "Our view is that they should regulate where there are demonstrable problems. A broad HACCP is not the answer. The fact is, some of these [contamination] problems occur in small, less sophisticated [processors]. The larger companies are making HACCP work." Meanwhile, Sen. Ernest Hollings, D-S.C., chairman of the Senate Commerce Committee, is putting an emphasis on seafood inspection legislation. He has drafted a plan that would create an overall inspection program to require truth in labeling, inspection of foreign seafood sources, and a consumer educational plan. Hollings would give FDA and the National Oceanographic Atmospheric Association authority for the on-board inspection program. His bill has not yet been introduced in the 103rd Congress, and staffers predicted it would be introduced within the next few months so deliberation could begin.
PESTICIDES
The Clinton administration's pesticide policy plan has sparked controversy among food industry groups. The plan is being called inflexible and not responsive to the industry's economic needs. The president's package would do away with the so-called Delaney Clause, a provision of the Food, Drug and Cosmetic Act that had not been enforced until a federal court recently ordered compliance. Delaney prohibits the use of all cancer-causing pesticides on vegetables and fruits slated to be used in processed food. A less stringent standard governs raw vegetables and fruits. The Clinton proposal creates a single standard for both raw and processed foods. It would allow chemical residues if they pose "a reasonable certainty of no harm." While the Clinton plan was intended to simplify pesticide policy, it has been called "a more inflexible standard" by industry groups including the National Food Processors Association, Washington. Some observers say this single standard is too general, and they cite examples. "This does not take into account that tomato paste loses its high pesticide residue concentration when cooked," said John Aguiree, director of federal government affairs at the food processors group.
The admnistration's plan would also use the tougher chemical tolerance levels of children -- not adults -- as the base line. "This is a trainwreck ready to happen," said Aguiree, adding that the administration's plan would result in a number of pesticides going off the market. The administration's plan would also: · Outline review periods for checking pesticide levels and pesticide registrations.
· Allow the Environmental Protection Agency to temporarily take off the market pesticides thought to pose a health hazard while they are being reviewed. Sen. Edward M. Kennedy, D-Mass., and Rep. Henry A. Waxman, D-Calif., already have introduced bills that could serve as vehicles for the administration's proposals. An alternative bill, which has been offered by the House, wins kudos from farm-state lawmakers because it would require the Environmental Protection Agency, when determining whether a pesticide should be registered, to also take into account its benefits in ensuring a sufficient food supply.
FOOD INSPECTION AUTHORITY
Vice President Al Gore, in his government overhaul plan revealed last September, has proposed that all food inspection authority be given to the Food and Drug Administration. Agriculture Secretary Mike Espy opposes the idea, contending food safety can be achieved within USDA's current structure. Gore's proposal has yet to be introduced in Congress in legislative form, however, and a spokesman in the vice president's office said no date had been set for introduction.
