INTRODUCTION

IN THE FIELD of legislation affecting the marketing of agricultural products, there is a large and important group of laws dealing with grading, packaging, and labeling. Only a few scattered instances of such laws were to be found on the statute books 25 years ago, but since then there has been a tremendous growth of this type of legislation.

STATE GRADING AND LABELING LEGISLATION.Every State in the Union now has legislation either prescribing grade standards for at least one farm product or requiring or authorizing their establishment. In 31 States, laws grant the commissioner or board of agriculture or some other State agency the authority to set up grade standards for any farm product. Nine other States grant the same authority with respect to any fruit or vegetable. In 34 States there are laws applying to one or two specific fruits or vegetables. In 40 States there is egg grading and labeling legislation, and in 20, legislation relating to grades for grain. Some notion may be gained of the extent as well as the complexity of this legislation when it is realized that the States have on their statute books, at present, approximately 170 separate pieces of legislation relating to the grading and labeling of farm products.

FEDERAL GRADING AND LABELING LEGISLATION. The Federal Government has also been active in this field. As early as 1902, funds were allotted to the Bureau of Plant Industry "to investigate the varieties of wheat . . . in

order to standardize the naming of varieties as an assistance in commercial grading."

In 1906 the same Bureau was authorized for the first time to carry on special investigations in the grading of grain. This authority has gradually been widened to the point where each annual appropriation act now allots funds to the Bureau of Agricultural Economics for carrying on research in grade standards and promoting the use of uniform grades for farm products generally. In addition, there are 12 acts of Congress that contain provisions relating to grading and labeling.1

Among the earliest and most important of these Federal acts are the Cotton Futures Act of 1914 (revised and reenacted in 1916), the Grain Standards Act of 1916, and the Cotton Standards Act of 1923. All three have compulsory features, and the great bulk of the trading in grain and cotton is carried on in terms of the uniform national grades established by the authority of these acts. Under authority granted in the Commodity Exchange Act of 1936, on April 1, 1939 Federal grade standards will be made compulsory for futures trading in butter. It is expected that one result of this will be the widespread use of Federal grades in all types of transactions in butter.

Trading in other agricultural products is not

1 These 12 acts are: Standard Apple Barrel Act of 1912; Cotton Futures Act of 1914 (as revised and reenacted in 1916); Grain Standards Act of 1916; Warehouse Act of 1916; Cotton Standards Act of 1923; Special Appropriation Act of May 17, 1928, relating to the promotion of Federal wool grades; Tobacco Statistics Act of 1929; Perishable Agricultural Commodities Act of 1930; Export Apple and Pear Act of 1933; Tobacco Inspection Act of 1935; Commodity Exchange Act of 1936; and Peanut Stocks and Standards Act of 1936.

characterized by the same degree of uniformity, as the remaining Federal acts having grading provisions either provide merely for the voluntary use of Federal grades to be established or else affect only a small part of the total volume of the commodity going to market.

NEED FOR GRADING AND LABELING LEGISLATION.—The multiplication of laws dealing with the grading and labeling of farm products has reflected a rapidly growing need. As the market for a product widens and seller and buyer find themselves farther and farther apart, buying on personal inspection becomes less and less satisfactory as a method of doing business and the need for a system of objective grades, that will furnish a common language for buyer and seller, becomes more and more imperative. As pointed out in a previous publication of this Department, "The growth of large terminal wholesale markets, and the sale of farm products by telegraph and especially by futures contract, made some system of uniform grading almost indispensable for the marketing of the most important farm products." 2

Because grain and cotton were the first farm products in this country to be traded in large volume and across long distances, they were the first to be traded in on the basis of grade. In the first stage, grain and cotton exchanges each formulated their own sets of grades, and some grain-producing States established State grades. Although this was much better than having no grades at all, it was not satisfactory. In at least one State, the official grain grades were redetermined every year.

In the resulting confusion it is not surprising that conflicts among the States broke out. For example, the cities of Duluth, Minn., and Superior, Wis., located across the Saint Louis River from one another, were for all practical purposes one single grain market. The board of trade was located in Duluth, and the buying and selling was done on the basis of Minnesota grades. Over half of the warehouse and milling capacity of the two cities, however, was in Superior. Much of the inspection to ascertain grades was

1 National Standards for Farm Products, U. S. Dept. Agr. Circ. No. 8 (Rev. 1935) p. 1.

done on the Wisconsin side by Minnesota inspectors. Minnesota inspectors inspecting in Wisconsin were outside the jurisdiction of the Minnesota law, and Wisconsin had no law to regulate them.

Abuses had grown out of this situation. The growers were being systematically defrauded by short-weighting and undergrading. As a remedy, the Wisconsin Legislature enacted a law in 1905 setting up the Superior Grain and Warehouse Commission to supervise the merchandising and warehousing of grain in Superior. However, not content with remedying the evils that existed, the legislature forbade the use of Minnesota grades in connection with selling and buying, or storing grain in Superior. Wisconsin grades were prescribed instead. A war for the grain trade ensued, between the Duluth Board of Trade and the State of Wisconsin, which was ended when a Federal court declared the Wisconsin statute an unconstitutional interference with interstate commerce.3

The multiplicity and confusion of conflicting private and State grades for cotton and grain were brought to an end by the enactment of the Cotton Futures Act in 1914 (as revised and reenacted in 1916), the Grain Standards Act in 1916, and the Cotton Standards Act in 1923.

The more recent development of grading legislation for eggs and for fruits and vegetables reflects the great broadening of markets for these products that resulted from the commercial development of cold storage and rapid refrigerated transportation. It became possible for great cities to reach out across the breadth of the continent for their supplies of these commodities; and conversely, specialized areas of intensive production developed at long distances from their markets. Just as in earlier years the need for grades for cotton and grain had been keenly felt, so now the need for grades for fruits and vegetables became urgent. At the first stage, private and local grades were formulated. Later, most of them were discarded in favor of State and Federal grades.

BENEFITS OF GRADING.-The advantages of standardization—that is, of having a set of

Globe Elevator Co. v. Andrew et al., 144 Fed. 871 (1906).

commonly accepted grades-have been summarized as follows: First, there are all the advantages of having a common language between seller and buyer and other financially interested parties such as banks that loan money on warehouse receipts. Contracts can be made in clear-cut terms. Many disputes are avoided, and a solid basis exists for the settlement of those which do arise. Telegraphic and futures sales would be practically impossible without a system of commonly accepted grades. The usefulness of market news price quotations is greatly enhanced when it is possible to refer to definite grades. Intelligent comparisons of prices in different markets and from one season to another are made possible. In the second place, there are the advantages that are derived from the physical separation of the product into grades. The buyer is enabled to purchase goods of the quality he desires, unmixed with qualities he does not want. If the product is graded at the farm, the poorer qualities, which will bring lower prices and will not stand as long a haul, can be sold nearer home or used on the farm. Finally, if the commodity is graded all the way back from the consumer to the producer, the producer receives a fuller reward for high quality and his incentive to produce the quality that consumers prefer is heightened.

STANDARDIZATION OF CONTAINERS.-The first Federal legislation defining a standard container was enacted in 1912, when Congress passed the Standard Apple Barrel Act. This act became obsolete in 1916 when the Standard Barrel Act Iwas made law. The Standard Barrel Act of 1916 is still in full effect. It prescribes the dimensions of the standard barrel for fruits, vegetables, and other dry commodities. It also prescribes the dimensions of a standard barrel for cranberries. It provides for one-third, onehalf, and three-fourth barrels, and forbids the use of nonstandard barrels in connection with transactions in fruits, vegetables, or other dry commodities. The Standard Container Act of 1916 establishes standard sizes and dimensions for berry boxes and certain types of baskets used in marketing fruits and vegetables. It forbids

National Standards for Farm Products, pp. 4-7.

the manufacture for shipment, and shipment, in interstate commerce, of nonstandard berry boxes and certain types of fruit and vegetable baskets. The Standard Container Act of 1928 establishes standard sizes for certain other types of baskets used in marketing fruits and vegetables. Among other things, the act requires manufacturers to have specifications for such types of baskets approved; forbids manufacture, sale, and shipment of nonstandard sizes and nonapproved baskets; provides for seizure of nonstandard sizes; and makes inoperative all State weight-per-bushel laws so far as fruits and vegetables packed in baskets standardized under the act are concerned.

The Standard Barrel Act and the Standard Container Act of 1928 are based on the weightsand-measures power of Congress and, therefore, apply to intrastate as well as interstate transactions. The Standard Container Act of 1916 applies only to interstate transactions.

A great deal of legislation has also been enacted by the States defining standard containers or authorizing some State official or State board to do so. All of the States except four have at least one law of this type on their books. For the most part the State laws deal with boxes and crates, which are not covered by any of the Federal Standard Container acts. But there are rather numerous State laws that deal with the same types of containers as the Federal acts although a Federal act takes precedence over the State laws if it is based on the weights-andmeasures power of Congress. Some room for nonuniformity is left, under the Standard Container Act of 1916, since that act applies only to interstate transactions. Nonuniformity of State container laws is discussed later (see pp. 75-77).

PURE FOOD AND drug laws.—Closely related to packaging, grading, and labeling laws are the pure food and drug laws, since they also govern the package and its contents on the way to market. A large degree of national uniformity was achieved in this type of legislation when the Federal Food and Drugs Act was passed in 1906 3 and most of the States, in the same or immedi

This act has been amended 6 times-in 1912, 1913, 1919, 1927, 1930, and 1935. For its present form, see 21 U. 8. C. 917 and 21 U. S. C. Sup. III, 283.

ately following years, enacted laws roughly parallel to the Federal act. All 48 States, excepting only New Mexico, now have food-anddrug legislation.

Three provisions in the Federal Food and Drugs Act deserve special attention here." (1) Any food is declared to be adulterated and therefore illegal in interstate commerce

"First. If any substance has been mixed and packed with it so as to reduce or lower or injuriously affect its quality or strength.

"Second. If any substance has been substituted wholly or in part for the article.

"Third. If any valuable constituent of the article has been wholly or in part abstracted. "Fourth. If it be mixed, colored, powdered, coated, or stained in a manner whereby damage or inferiority is concealed.

"Fifth. If it contain any added poisonous or other added deleterious ingredient which may render such article injurious to health. . . .

"Sixth. If it consist in whole or in part of a filthy, decomposed, or putrid animal or vegetable substance, or any portion of an animal unfit for food. . . ."

(2) If a canned food, other than canned meat 7 and canned milk, falls below the standard of quality, condition, and fill of container promulgated for it by the Secretary of Agriculture, the can must be plainly labeled to show that the food contained in it is below the Federal standard. (3) Labeling provisions in the act not only prohibit false labeling, but also define a food as misbranded, and therefore illegal in interstate commerce, if it be in package form and "the quantity of the contents be not plainly and conspicuously marked on the outside of the package in terms of weight, measure, or numerical count."

Most of the State food and drug laws are closely patterned after the Federal act, although they frequently deviate from it in the phraseology of some of the provisions. Many States also have special legislation establishing minimum standards of condition and quality for specific

• Sec. 7, sec. 8, par. 10, and sec. 8, par. 14.

Canned meat is regulated under the Meat Inspection Act of 1907 (34 Stat. 1260).

products such as sausage, vinegar, and ice

cream.

The Federal Food and Drug Administration has been active in enforcing maximum limits on the quantity of spray residue permitted on fruits and vegetables and in bringing actions against frost-damaged or artificially colored immature citrus fruit, and against wormy fruits, especially berries. Since January 1937, regulatory work has been carried on in cooperation with the Bureau of Agricultural Economics, to eliminate misgraded and otherwise misbranded fresh fruits and vegetables from commercial channels. The Administration has also given particular attention to adulteration and misbranding not easily recognized by consumers, for example, where they occur in canned foods.

In June 1938 the Congress passed a new act, the Federal Food, Drug, and Cosmetic Act, to take the place of the existing law. Insofar as the new act affects foods, however, it does not become effective until June 1939. With respect to foods, it is a strengthened and expanded version of the old law, following the same main lines.

MINIMUM STANDARDS.-In three far western States California, Arizona, and Coloradolegislation has been enacted which sets up minimum standards for specified fruits and vegetables: 30 fruits and vegetables are covered by the California act, 18 by the Arizona law, as 12 by the Colorado law. This legislation forbids the sale or shipment of the specified fruits and vegetables produced within the State unless they meet the specifications of the minimum standards. In California, out-of-State produce is forbidden to be sold within the State unless it meets the minimum standards.

PROBLEMS AND DIFFICULTIES

In the preceding section Federal and State grading, labeling, and packaging legislation, pure food and drug laws, and minimum-stand

52 Stat. 1040. Ch. IV of this act (secs. 401-6) deals specifically with food. For a concise statement of the differences between this act and the old one, see Digest of the New Federal Food, Drug, and Cosmetic Act, multilithed publication of the Food and Drug Administration, dated June 27, 1938.

ards laws have been briefly surveyed. It is intended now to give particular attention to the ways in which such legislation may hinder the flow of agricultural products.

There is general agreement among students of marketing that grading, labeling, and packaging laws perform an important service in some cases a well-nigh indispensable one-in the marketing process. Nor will anyone deny the benefits of the pure food and drug legislation nor of the minimum standards acts. It remains a worth-while task, nonetheless, to look into the way this mass of legislation operates, to see whether in some instances it may affect injuriously the flow of agricultural products, and, if so, under what circumstances. The ultimate aim of such an investigation must be to discover imperfections and to discuss possible ways in which they may be remedied, in order that the framework of law within which marketing is carried on may be made as nearly ideal as possible.

NONUNIFORMITY

In studying grading laws and similar legislation from this point of view, it soon becomes apparent that nonuniformity of grades and standards and regulations as among States is a potential source of a multitude of annoyances and hindrances to trade in agricultural products. Suppose, for instance, that each State should set up its own grade specifications, at the same time making it compulsory to grade and label all produce sold within the State in accordance with those specifications. Great confusion would result. Produce packed in accordance with the regulations of one State would have to be regraded and relabeled before it could be sold. in another State. Diversions from one large market to another would entail the costs of regrading and repacking.

Although this picture is fortunately an imaginary one, conditions somewhat resembling it do exist in some parts of the country in the marketing of fruits and vegetables. A responsible official in close touch with the marketing of fruits and vegetables says:

"The lack of uniformity in standardization requirements of various States constitutes in

itself a hindrance to interstate trading. No shipper can be expected to be familiar with the quality and marking requirements of all the States to which he may ship."

It is instructive here to digress for a moment in order to trace the development of grade standards for fruits and vegetables. Until about 1910 there were no State nor Federal grades for fruits and vegetables. About that time refrigerated cars for shipment of fruits and vegetables began to come into use and specialized areas began to spring up in the Southern and Western States. Whereas the fruit and vegetable industry had been localized in large degree, each consuming market drawing from a surrounding area within the radius of a few miles, it now rapidly became Nation-wide in character, with producing areas finding their markets half or all the way across the continent. With buyer and seller so far away from each other, the need for grades was evident. Each enterprising producing section took the initiative and established a set of grades for its own produce. Although this did provide some basis for trading it was not adequate to meet the needs of a Nation-wide market. Great confusion still existed. The jumble of grade standards that existed before 1916 has been graphically described, as follows:

"The truth is that up to the date of the organization of the Food Administration there was not a single fruit or vegetable for which definite grades were recognized throughout the country.

"The writing of grade specifications was little more than a part of the advertising of the organization or district which issued them. The standards set in the literature of many organizations were impracticably high and were 'interpreted' at harvest time to include anything which in the judgment of the shipper was 'a good commercial delivery.'

"Local pride and jealousies did much to retard real progress in true standardization. There was a prevalent idea that it was a fine thing for a community or organization to have a distinctive

• WELLS A. SHERMAN, MERCHANDIZING FRUITS AND VEGETABLES, Chicago and New York, A. W. Shaw Company, 1928, pp. 178-179.