WASHINGTON -- Grower/shippers have been caught off guard by retailers demanding they indemnify supermarket companies from any liability associated with country-of-origin labels, and cover the cost of paying for third-party audits, according to produce industry sources.
The situation places suppliers, who generally support COOL, in an awkward position with their retailer customers, who have been vocal critics of the rules. Furthermore, sources said the demands are premature since final regulations are not out yet. The U.S. Department of Agriculture plans to release proposed guidelines this fall, with the final rule to be published in spring 2004. The regulations are scheduled to take effect Sept. 30, 2004.
Sources said vendors have been directed to sign agreements that would indemnify retailers from any fines or legal obligations related to the labeling. Retailers also are demanding suppliers pay for third-party audits that would certify product origin and provide labels in shipping carts.
An official with the Florida Fruit and Vegetable Association said he's heard reports of suppliers being directed by retailer customers to sign the compliance agreements, leading him to believe the situation is not isolated to a few cases.
"It's pretty universal," said Mike Stuart, president of FFVA, Orlando. "There's significant pressure being placed on them."
A wait-and-see approach could be what's needed, since sources close to the regulations have led the industry to believe the final rules will differ greatly from voluntary guidelines issued in fall 2002, a source said.
"It's way too premature to set up these agreements with buyers when within a matter of weeks the actual regulatory framework will be revealed," said Ray Gilmer, director of public affairs with FFVA. "Part of the problem is this process has taken too long. All we have are voluntary guidelines issued last fall that nobody likes."
In the absence of final rules, retailers and suppliers are in the dark, and that's caused frustration all around, said Kathy Means, vice president of the Produce Marketing Association, Newark, Del.
"I don't know how widespread it is," she said, referring to the demands for signed compliance agreements. "If a retailer is doing that with one supplier, then they're probably doing it with all their suppliers. That should blanket the industry. They're all trying to comply with the same law."
The National Potato Council accused retailers of providing misleading information to its members. In some cases, the NPC said suppliers have been led to believe the mandatory law will go into effect Sept. 30 of this year. In certain markets, retailers have told their suppliers they expect an action plan with a letter of intent by Sept. 30 of this year.
While it supports COOL, the NPC noted compliance should not come at the expense of unnecessary obligations to suppliers. Directing suppliers to sign compliance agreements now is "putting the cart before the horse," said John Keeling, executive vice president and chief executive officer of NPC, Washington.
"When the regulations are published, we may love them or have problems with them," he said. "We'll consult with retailers then. We want to conduct ourselves like partners, not like antagonists. Nobody wants to be in a fight with their customers."