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Abstract
Governments are increasingly taking responsibility to provide
for the safety of consumers in the products they eat and use. in
regulating production practices to insure this safety., there are
almost always effects on producers in terms of added costs. There
may also be added benefits to producers because the higher
standards result in higher dollar sales either because more of the
product is suitable for sale or a higher price is obtained for
improved quality.
This paper analyzes Federal legislative proposals on fish
inspection in the United States and how these might affect frozen
shrimp processing plants. Costs are detailed for meeting minimum
quality and sanitation standards likely to be enacted by the
legislation. These are put in a time frame of 25 years, since
some costs occur annually while investment costs occur only at those times when an equipment item must be replaced..
The added sales value and the added costs are used to compute•
the net cash flaw for each year of the analysis. This flow is
discounted so that it is expressed in current market value. The
rate of return on investment is then computed which shows the
earnings which would occur from these expenditures. This analysis
showed that if a firm, which was assumed for the analysis, could
expect to save 2 percent of the total amount processed from
spoilage that the rate of return would be 30 percent. This would
probably be high enough to attract most firms to install sanitary
practices without mandatory inspection legislation. Many shrimp
processors may have in fact already done so. Therefore, frozen
shrimp processors pr. obably will not be greatly affected
economically by mandatory inspection. Nevertheless, the initial
investment to install sanitary equipment and practices is quite
large and consideration should be given by the Government to .
establish a loan fund to bring plants not now meeting acceptable
standards up to minimum sanitation requirements.