You Say Potato, I Say It's Processed

This isn't just any old deep-fat-fried potato. This french fry, because of a recent federal ruling defining it as a fresh vegetable, is an object lesson on the power of special interest lobbying and the cause of a court case and some regulatory indigestion.

In June, the media had a fine time poking fun at what seemed like an inconsequential ruling by the Department of Agriculture that lumped the battered and coated potato with other vegetables that had undergone some transformation, such as cutting, dicing, peeling, waxing or husking. A federal judge in Sherman, Tex., ruled that the USDA went by the book when it categorized french fries as a fresh vegetable for purposes of its Perishable Agricultural Commodities Act (PACA).

The story seemed to fit in the annals of bizarre bureaucratic decisions made in Washington, right up there with the 1981 Agriculture Department classification of ketchup as a vegetable in the school lunch program -- a designation that ultimately was revoked.

The rule change and court decision outraged health advocates who consider french fries a processed food, no matter how the USDA slices it. Said Michael F. Jacobsen, executive director of the Center for Science in the Public Interest, a nonprofit health advocacy group: "It makes a travesty of the intent of the law."

The rule had immediate consequences for the regulated entities that had to live with it. For example, Fleming Companies Inc., a bankrupt food distributor in Texas, sued the USDA over its "batter and coating" decision. In the Fleming case, creditors have filed claims under the "perishable agricultural commodities" law worth $3.2 million -- about $1 million of that for potato products. Under the law, sellers of fresh vegetables get paid before other creditors.

A deeper look into the fryer -- particularly the court papers filed in the case -- shows how a little lobbying can go a long way in persuading regulators to change a long-standing rule in short order.

The 1930 Perishable Agricultural Commodities Act, it turns out, has nothing to do with nutrition or food safety. It's all about business. It was passed in the Depression years to provide a financial settlement process for growers, buyers and sellers of perishable agricultural commodities who might otherwise get stiffed for payment if buyers go out of business or if perishables arrive perished. The ultimate beneficiary is supposed to be the farmer who doesn't get paid if the middlemen aren't paid higher up the food chain.

In 2003, the USDA supervised about $37 million in payments under the terms of the law, and that's not counting informal phone conversations in which the dispute was settled on the spot or claims that go to bankruptcy court.

Being considered a fresh fruit or vegetable can be worth big money. The key to being covered by PACA is to be considered a perishable agricultural commodity, which, the law says, constitutes "fresh fruits and vegetables of every kind and character." The USDA interprets the law to include commodities that are in "fresh form" and are not manufactured into "articles of food of a different kind or character."

The USDA ruled that it is acceptable to steam, oil blanch, chop, fumigate, add ascorbic acid or perform many other processes without changing the character of the product. "This is completely consistent with the law and previous regulations in the area," said Eric Forman, associate deputy administrator for fruit and vegetable programs. "Perishable has gradually evolved to include processes that weren't available at one time."