JANUARY 24, 2006

SEC. MIKE JOHANNS: Well, thank you very much, Dr. Raymond. And to all of you, thank you very much for being here. We do appreciate it immensely.

Last Friday we awoke to the news that a shipment of beef had arrived in Japan and that a part of that shipment had failed to meet the terms of our agreement for the resumption of trade in beef with a key-trading partner. As a result, just several weeks after resuming beef trade with Japan we are at risk at being back to where we were when I took this job about a year ago.

We know the value of this market. It's significant. Its value before 2003 was $1.4 billion. That's a lot of revenue to jeopardize over a careless mistake. No one is more disappointed than I at this turn of events, and it would be an understatement to say that I'm treating this incident very, very seriously.

While it is true, and I believe we all acknowledge, that the backbone or the vertebral column which was exported to Japan is not a specified risk material under U.S. regulation -- and I might add international beef trade guidelines because it was from beef under 20 months old -- the fact does remain that our agreement with Japan is to export beef with no vertebral column.

And very clearly this shipment in part at least failed to meet the terms of the agreement.

We are mindful that the product in question, which was veal, was only recently added to the U.S. export agreement with Japan, and therefore U.S. exporters and inspection program personnel for veal had little time to familiarize themselves with the export verification program and its requirements for Japan. But we are also mindful that an agreement was made, and it was very clearly laid out to the exporters interested in becoming certified.

I can also share with you that although our investigation into this matter continues we do know that this plant shipped the first and the only shipment of veal to Japan. And it was in response to a custom order from Japan.

We believe the ineligible product was transmitted to Japan due to human error, a failure on the part of the exporter and on the part of USDA personnel to identify the product as being ineligible. The details of our export agreements are clearly and meticulously explained, and it is incumbent upon you and our inspection and verification personnel to ensure that we meet the requirements of our export agreements, all of our export agreements.

As a result of the delisting of the plant involved with this shipment, no plant is currently eligible to ship veal into Japan.

But the question remains whether our actions will be enough to satisfy our friends in Japan so that we can resume beef trade with this very important trading partner. We are making the case that our swift actions address the problem because we have a comprehensive system in place to ensure the quality of our products in compliance with our export verification agreement.

But we must ensure that mistakes are not repeated. While this is not a food safety issue, this is an unacceptable failure on our part to meet the requirements of an agreement that we negotiated with Japan. Ensuring compliance with all trade agreements will require diligence and absolute attention to detail on your part and on the part of our personnel.

Billions of dollars of trade literally hang in the balance on these issues. As I said when I started, we are taking this matter very seriously recognizing the importance of our beef export markets, and we are acting swiftly, and we are acting firmly.

On Friday I announced several action steps to further strengthen our system and to ensure compliance. To summarize, the steps I have identified are these:

We will be submitting a report to the government of Japan on our investigation, our actions, and the consequences of failure to comply with our requirements.

Secondly, the plant in question has been delisted for export of beef products into Japan.

Third, we are requiring a second FSIS signature on our export verification certificates.

Fourth, we will initiate unannounced reviews of the plants that are a part of the export program.

Fifth, FSIS held a conference call with district managers on Friday, January 20 to reaffirm requirements of all countries with which we have an export verification program.

Sixth, we initiated another call between our district offices and Offices of International Affairs yesterday also to reaffirm the export requirements.

Seventh, we are requiring inspectors in all plants that are certified to export to review procedures to ensure compliance.

Eighth, on Friday I indicated that no additional plants would be listed under the Export Verification Programs until we are absolutely confident we have reviewed and reinforced our procedures, which is part of what we are doing here today.

Ninth, we will dispatch a team to Japan to work with the Japanese government to review all shipments that are there to ensure compliance. Of course we also have a team in Japan now led by Under Secretary J.B. Penn to discuss the situation with Japanese officials, and those discussions have occurred over the last day.

Tenth, FSIS and our USDA Inspector General are conducting thorough investigations of the incident.

And eleventh, upon completion of further training of USDA personnel on BEV requirements, we will require a signed validation that they have successfully completed the training.

And finally, I announced Friday that this meeting would take place, a meeting of all plants that participate in the BEV program, to ensure that the requirements are understood.

I implore you to ensure every appropriate employee in your plants understands thoroughly the terms of our trade agreements, not just with Japan but also with all of our trading partners. The bottom line is that our jobs, yours and mine, are critical to maintaining trust and confidence in the integrity of the export programs by upholding the agreements.

Now more than ever it is critical we do all of our jobs and we do them meticulously. A lot of products pass through our plants. We have a very, very successful industry. And we must work together to ensure that we abide by our agreements. So much of that product continues to be destined for the export market, and we want to build that market.

Okay. I would be happy to entertain some questions from the industry. This is not a time for a speech. This is a time to ask me questions. What I will do then with the media, just to give you a heads up, as soon as I'm done here we'll do a media gaggle right outside the doors there so I can visit with you. But for now if I could just confine the questions to those in the industry-- yes, sir?

SEC. JOHANNS: There's one right there and one there. Yes. Rosemary?

ROSEMARY MUCKLOW: Mr. Secretary, on Sunday I sat, Sunday afternoon, the better the day, the better the deed my mother always used to say. I wrote to you a letter, and I wanted you to know that the beef producers that we represent and that are in this great industry in this country are deeply regretful of this major setback to the relationship of trust that you have worked so hard to develop with the Japanese government. It's also a setback and a great embarrassment to the many companies in the industry that have worked diligently to support our government in its efforts to reopen this critical market to U.S. beef.

We'd like to apologize to you as an organization for this serious failure on the part of our entire industry, which has an obligation to meet the requirements of the Export Verification Program. The shipment of the product with vertebral bone in it to Japan by one small company that failed to meet the requirements is a major breakdown and is inexcusable. We take the failure very seriously. We want to do everything possible to support compliance and with the requirements of the agreement that you negotiated for the resumption of trade with Japan.

We earnestly ask that you convey our apologies to the Japanese government officials as you seek to reopen this market again.

Further, we'd like to work closely and cooperate with you and the USDA agencies that provide that enormously valuable international confidence in our nations export requirements to restore and increase the confidence. We do appreciate your efforts.

SEC. JOHANNS: Thank you very much.

ROSEMARY: Thank you.

SEC. JOHANNS: Thank you. Other questions or comments? Anyone else? Okay. We've got a good program for you today. We do thank you for being here. I'm going to go out and visit with the media, and I look forward to working with you. Thank you.

[Applause.]

PRESS GAGGLE:

SEC. JOHANNS: If I could offer -- there's so many people I don't want anybody crushed here -- if I could offer just a comment or two to get us started, and then as I said I'd be happy to answer any questions. We invited the industry here today because they are a very vital link in terms of this whole program and compliance with the program. I think you can see from the comments we heard from representatives of the industry that they just genuinely regret that this happened. Unfortunately it happened so early on in our process of bringing beef back to the Japanese marketplace.

But the way I look at it, this is an opportunity for us to very aggressively address the issue, get the investigation done, see exactly what the situation is here, work with Japan in terms of the requirements to make sure that it doesn't happen again, and start again to reestablish trust.

The trust issue is enormously important to me because with any product in any country you're always working with consumer trust. And so if I might offer a thought about that, I sincerely regret this happened because I've read some of the articles and what tends to happen in situations like this is people get impressions about what the circumstances are. And sometimes the impressions just are not accurate.

I can say without hesitation that the vertebral column did violate the agreement we had with Japan; it should not have been shipped over there. It was not a situation however where there was a risk to human health. Under international standards, under our standards here, the vertebral column is not considered a specified risk material even.

But again it still gets back to this issue of, we reached an agreement, it was a specific agreement, and we want to do everything we can to make sure that that agreement is honored. Whether that agreement complied -- or comply is the wrong word, but whether that agreement was within our regulations isn't the issue. That was the agreement that Japan wanted from us. And so we need to make sure that in our processing, our inspection efforts, that the BEV terms are adhered to.

And so that's what we definitely need to focus on.

With that --

REPORTER: -- Japanese Embassy report from the United States, (unclear) pivotal to the (unclear) decision whether (unclear) resume trade?

SEC. JOHANNS: We haven't set a date in terms of that report, but I can tell you this. No grass is growing under our feet. The investigation is actually being conducted by two areas of the USDA -- the FSIS and then the Office of Inspector General. What Japan is looking for in terms of the report is, what happened? And I believe that we will be able to offer that very quickly.

Now I will avoid saying it will be done by February 15 or February 10 just simply because there's a piece of this we don't control. We have to make sure that the report is very thorough. We want to make sure that speed versus thorough that we choose thorough. And so my direction to the people that are involved in that investigation is to make sure you touch all the appropriate bases.

VOICE: Thank you everybody.

REPORTER: -- not be (unclear) after the discovery of BSE?

SEC. JOHANNS: Let me offer a thought or two about Canada. What we always expect of our trading partners is that they operate within the international standards, which are based upon science and that decisions are made based upon science.

It is very clear that under the current rule with Canada -- which as you know beef product from animals under 30 months and live animals under 30 months so long as they're slaughtered before they are 30 months -- that there just isn't a risk here.

And I shouldn't play games with that.

We should be a leader in this area in terms of our expectation that our trading partners will operate based upon international standards and based upon science. And so the last 72 hours or so were very, very interesting. They started with this vertebral column in Japan, which again is not even a specified risk material but it's very clearly not supposed to be a part of what we send to Japan under the agreement.

But under international standards and our standards it's not a risk material.

We followed that almost simultaneously with two announcements. One is that in Japan they identified their 22nd case of BSE. They have a much smaller herd than we do in the United States, and by comparison we've identified two and only one that was native-born. One of the animals, the Washington state animal, actually came from Canada.

And then Canada announced that it had identified an additional case of BSE.

I am reassured by the response of the international community. At least today the international community has followed our lead, and we hope we can be leaders in doing all we can to deliver the message that our trading relationships need to be based upon science, they need to be based upon international standards.

And so I look at the situation very, very carefully with Canada. I brought our USDA team together. I sought their advice. We discussed the current rule.

Now I will also offer this. We are going to ask Canada to share with us the analysis of their investigation relative to this animal. They have assured me that they will do that, and I'm confident that that will occur.

REPORTER: Is that protocol? Do you always ask them to share the information?

SEC. JOHANNS: Yes. It would be protocol. It, you know keep in mind that on a worldwide basis every day billions of dollars worth of trade occurs between countries. I would like to tell you that every dollar of those transactions happen with absolute perfection, but you and I both know that that's not always the case whether you're trading in automobiles or beef or pork or poultry.

Most of these issues are handled on a very, very informal basis, a basis by which countries work through issues, solve them, trade continues, because it's so important for the international economy for trade to occur.

So that would not be an unusual situation. We would ask that if it occurred in another country --

REPORTER: Do any of our trading partners ask for the same information that we're giving to Japan? Or are they reconsidering --

SEC. JOHANNS: Well, we're reaching out to our trading partners. We're reaching out to them. We didn't even wait for them to ask. We made them aware of the situation. We're going to do everything we can to provide information to them. As you can see from my comments today, the steps that we put in place, those are the steps that apply to international trading partners, we'll apply across the board. It assures and reassures our trading partners that we're very sincere when we say we believe we have very, very safe products in the United States, including beef.

REPORTER: -- update (unclear) why this happened?

SEC. JOHANNS: Well, as I said in my comment, I believe it was a simple human error. Now here's the thing I want to say. We still have an investigation that we're working through. This product was labeled. If somebody wanted to hide something you would think that they would have fixed the label, changed the label to hide what was in that box. But if you look at the box, anyone with experience would see that this is a beef product with a vertebral column attached.

And the whole idea behind requiring the second signature is to get another pass at that if you will. But I think this was new enough. Veal in itself was very new to the export verification process. It was only added in the last weeks. Japan made it very clear to us they wanted the same requirements for veal as the rest of beef. As I said in my comments, this was the only veal plant certified and in fact I can say today that there is no other plant in the United States that could even ship veal into Japan because this was the only one.

So it appears to me that as this shipment was being readied for shipment into Japan that all of it was just new enough where it just didn't connect with people it needed to connect to.

And what I need to do now is show Japan that our second signature and the other steps we're taking will deal with that issue. But like I said if you look at the paperwork involved here, it's clearly listed as a "hotel-rack, seven-ribs" I think is how it's described, or something like that. Don't quote me exactly. But that would indicate to somebody who works in this area that the vertebral column was still intact.

Now again I will point out to you that that's the way it would be shipped in the United States. That is perfectly legal. This was a very young animal. Veal almost always is under a year for sure, and typically even younger than that. So there was no age problem. It just simply was a problem of the paperwork was processed and it appears to list what's in, but it just -- human error.

REPORTER: Mr. Secretary, is South Korea still on schedule to lift its ban on U.S. beef, or has that been delayed?

SEC. JOHANNS: Well, I can tell you that our discussions -- I won't single out South Korea, but our discussions with our trading partners have gone well. And they've asked questions. But we've reached out to them. We've been very proactive. The first, one of the first directions I gave when I learned of these circumstances was, reach out to our trading partners, explain to them what happened, indicate to them that the steps I'm putting in place that what will be applied will be applied across the board.

One more question.

REPORTER: How long has that inspector been on the job?

SEC. JOHANNS: I don't know.

REPORTER: Was the inspector aware of the vertebral column was not allowed?

SEC. JOHANNS: Well, it's probably a question better put to the inspector. But you know there was a thorough training. There's a -- training is --

Let me put it this way. There's a thorough process in place. And so paperwork and all of that. But you know, the last thing I would say is this. Our whole effort here is to investigate it, be thorough about that, understand what happened here, and then provide a very direct remedy for Japan.

We value the Japanese market. It's historically been a very good market. On any given day there truly are billions of dollars with the trade in the world, and probably tens of millions of dollars of trade with Japan. And our goal is to deal with this issue, deal with it aggressively and effectively and return beef to the Japanese marketplace.

REPORTER: -- package do you believe the request of that specific (unclear) package --

SEC. JOHANNS: That I think is still going through the investigation process, but my understanding is that the request originated with the customer in Japan, so it was a request for product. But if your question is, did he request the vertebral column, don't interpret my answer as saying that. He wanted some veal, and that's what my understanding is. Okay? Thank you.