From the book, Foods Pets Die For: Shocking Facts About Pet Food by Ann N. Martin
http://www.homevet.com/petcare/foodbook.html
The rendering of companion animals is legal in the United States. Christine Richmond, spokesperson for the FDA, Division of Animal Feeds, states, "In recognizing the need for disposal of a large number of unwanted pets in this country, CVM (Center for Veterinary Medicine) has not acted to specifically prohibit the rendering of pets. However, that is not to say that the practice of using this material in pet food is condoned by CVM." Even though the FDA/CVM does not condone the use of euthanized pets in pet food, it has not taken any steps to eliminate or restrict this practice.
As discussed in Chapter Two, companion animals from clinics, pounds, and shelters can and are being rendered and used as sources of protein in pet food. Dead-stock removal operations play a major role in the pet food industry. Dead animals, road kill that cannot be buried at roadside, and in some cases, zoo animals, are picked up by these dead stock operations. When an animal dies in the field or is killed due to illness or disability, the dead stock operators pick them up and truck them to the receiving plant. There the dead animal is salvaged for meat or, depending on the state of decomposition, delivered to a rendering plant. At the receiving plants, the animals of value are skinned and viscera removed. Hides of cattle and calves are sold for tanning. The usable meat is removed from the carcass, and covered in charcoal to prevent it from being used for human consumption. Then the meat is frozen, and sold as animal food, which includes pet food.