I would guess that government bureaucracy is not actually forcing the destruction of the butter. Presumably Costco would be well within their rights to pull the butter off the shelves, relabel it, and sell it.
Costco is making the call to trash the butter instead of fixing it.
I, personally, am sick and tired of people complaining about various government functions without seriously contemplating said functions. Is there a way to ask for an exemption to a food labeling rule to avoid waste? I have no idea. But I can play pretend-management-consultant as well as the next person, and we’re talking about on the order of $200k of merchandise, and relabeling it would involve coordinating sending it back to the factory, applying the fixes (I can basically guarantee that, while the factory can efficiently package butter, it probably lacks the tooling to unpackage the butter), and getting it back to stores in time for the Feb-Mar 2025 best-by date. This is absolutely not worth it. And it’s not even worth the paperwork to as the FDA for some kind of exemption.
What I would do if I worked at Costco is to see if I could legally sell it all in bulk to a very small number of very large buyers, and then offer it to some such buyers at a massive discount. “Hey, want 10k boxes of mislabeled butter? You need to sign some documents promising that you will either use or destroy all of it and not give it to anyone else in its present packaging, but you can have it for $5/box.” Even that might be a tough sell, since buyers on that scale probably don’t want their butter in 8oz sticks…
If this were an order of magnitude larger, maybe it would be worth Costco’s energy to see if they could slap stickers on the outer packaging to solve the problem.