Title: Assessing Relief Provisions of the FDA Food Safety Modernization Act for Small Business To: UCDC

From: Gregory G. Costanza Date: Final Due December 21, 2011 I. Introduction The main components of the legal architecture for food regulation in the United States stem from the passage of the Federal Food, Drug and Cosmetic Act (FD&C Act) in 19381. Important amendments to this legislation have passed since then2, including more stringent regulation of infant formula (1980), more information disclosure through food labeling requirements (1990), and labeling and good manufacturing practices for dietary supplements (1994). Under the FD&C Act, the Food and Drug Administration (FDA or Agency) has had the primary responsibility of ensuring the safety for the majority of the U.S. food supply3,4. This framework increasingly became outdated because of technological changes affecting food production, processing and distribution, as well as the trade consequences of globalization. Today, about eighty percent of seafood, and two-thirds of fruits and vegetables are imported for consumption in the United States5. Furthermore, foodborne illness is still a costly problem in this country, affecting worker productivity, while disproportionately impacting the young and the

Curtis, P. Food Regulation in the United States. In Microbial Food Safety. Edited by Ovarzabal, O. and Backert, S. New York: Springer. 2012. pp. 204. 2 See FDA, Significant Amendments to the FD&C Act. Available at http://www.fda.gov/RegulatoryInformation/Legislation/FederalFoodDrugandCosmeticActFDCAct/SignificantAmen dmentstotheFDCAct/default.htm. Last updated 04/29/2011. 3 See FN 1, Curtis, pp. 204. 4 The United States Department of Agriculture has primary regulatory authority only for specific foods, mostly major meat products. The FDA has primary regulatory authority for almost all other foods, including animal feed. 5 See FDA, Pathway to Global Product Safety and Quality: A Special Report, 2011, pp. 1. Available at http://www.fda.gov/AboutFDA/CentersOffices/OfficeofGlobalRegulatoryOperationsandPolicy/GlobalProductPathw ay/default.htm.

elderly6. According to data from the Centers for Disease Control and Prevention, each year about 48 million people (1 in 6 Americans) get sick from foodborne illnesses, while 3,000 die and 128,000 are hospitalized7,8. Recent foodborne illness outbreaks from spinach9, eggs10 and peanut butter11 helped underscore the need for changes to food regulation. A rare alignment of support for these changes occurred between consumer advocacy organizations and food manufacturers. Consumer advocacy organizations promoted stronger food regulation in order to protect consumer health. Food manufacturers wanted a safer food supply because one bad apple would spoil the bunch. In other words, every time one producer or processer engaged in negligent food safety practices, resulting in large-scale outbreaks, consumer demand for the entire product class would drop precipitously. As a consequence, compliant food companies suffered because of the unhygienic practices of their competitors. As a result of this broad support from traditionally left- and rightleaning groups, Congress passed the FDA Food Safety Modernization Act12 (FSMA), which was signed into law by President Obama in January 2011. The FSMA represents a shift in how the government addresses food safety. The new emphasis is on the prevention of foodborne illness by requiring food producers, processors and
6

Patricia K., L.C. Medeiros, V. Hillers, G. Chen, S. Dimascola, Food Handling Behaviors of Special Importance for Pregnant Women, Infants and Young Children, the Elderly, and Immune-Compromised People, Journal of the American Dietetic Association, Volume 103, Issue 12, December 2003, Pages 1646-1649, DOI 10.1016/j.jada.2003.09.027. 7 Scallan E., R.M. Hoekstra, F.J. Angulo, R.V. Tauxe, M-A. Widdowson, S.L. Roy, et al., "Foodborne Illness Acquired in the United States--Major Pathogens," Emerging Infectious Diseases, 17(1):7-15, 2011. Available at http://www.cdc.gov/EID/content/17/1/7.htm. 8 Scallan E., P.M. Griffin, F.J. Angulo, R.V. Tauxe, R.M. Hoekstra, "Foodborne Illness Acquired in the United States--Unspecified Agents," Emerging Infectious Diseases, 17(1):16-22, 2011. Available at http://www.cdc.gov/EID/content/17/1/16.htm. 9 See FDA, FDA News Release, March 23, 2007. Available at http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/2007/ucm108873.htm. 10 See FDA, FDA News Release, August 19, 2010. Available at http://www.fda.gov/newsevents/newsroom/pressannouncements/ucm223248.htm. 11 See FDA, Peanut Products Recall, Last updated June 18, 2009. Available at http://www.fda.gov/Safety/Recalls/MajorProductRecalls/Peanut/default.htm. 12 Public Law 111-353.

distributors to implement food safety plans that have taken into account the hazards that may exist in the course of their operations. These prevention principles are mostly set forth in various provisions of Title I of the FSMA. Title II of the FSMA is partly focused on granting additional authorities to the FDA, including new mandatory recall authority (section 206), stronger administrative detention authority (section 207) and the enhanced tracking and tracing of foods and access to records (section 204). Title III of the FSMA significantly alters the regulatory regime for imported food, by expanding the capacity of the Agency to inspect foreign facilities (section 306), by requiring importers to ensure the compliance of their suppliers with particular provisions of the FD&C Act (section 302), and by establishing a 3rd-party inspection regime (section 307) to perform inspections for import certifications (section 303) and the voluntary qualified importer program (section 302). These far-reaching changes to the regulation of food were met with apprehension by one group in particular: small food businesses. Passage of the bill was partly stalled by this group13, which was able to successfully incorporate certain protective provisions into the final bill through changes known as the Tester Amendment14, after its sponsor Senator Jon Tester of Montana. In addition to those changes made by the Tester Amendment, there are a number of provisions in the FSMA that direct the FDA to ease the burden of the FSMA regulations on small businesses. These provisions are described below based on their order of appearance in the FSMA.

13

Tom Lutey, Food Safety Bill Vote Delayed, Billings Gazette, November 18, 2010. Available at http://billingsgazette.com/news/state-and-regional/montana/article_45d8a1ad-76b5-58aa-9d31-6fe257131ba7.html. 14 See Jon Tester, United States Senator for Montana, Summary of Tester Amendment, Accessed online on November 16, 2011, Available at http://tester.senate.gov/Legislation/foodsafety.cfm. These changes included a clarification of the definition of a retail food establishment, qualified exemptions for small businesses from the preventive controls regulations, a requirement that the FDA conduct a study to define small businesses in the food processing sector, and an exemption for certain small farms from the produce safety rules.

II. FSMA Section 102: Registration of Food Facilities Small Entity Compliance Guide; Clarification of Intent Section 41515 of the FD&C Act requires all domestic and foreign facilities that are engaged in manufacturing, processing, packing, or holding food for consumption in the United States to register with the FDA. Congress added this requirement to the FD&C Act through incorporation into the Public Health Security and Bioterrorism Preparedness and Response Act Of 2002 (the Bioterrorism Act)16. FSMA section 102(b)(1) amends FD&C Act section 415 by creating a mechanism by which the FDA has the authority to suspend the registration of a facility (with some qualifications) if the FDA determines that the food from that facility has a reasonable probability of causing serious adverse health consequences or death to humans or animals17 . Once a facility is suspended, it may not introduce its products into the stream of commerce in any way18. The FDA can have a facilitys registration reinstated either during a hearing or through the submission of a satisfactory corrective action plan19. Section 415(b)(5) of the FD&C Act20 directs the FDA to promulgate regulations to implement these new requirements. FSMA section 102(b)(2) requires the FDA to issue a small entity compliance guide to assist small entities in complying with the registration and other requirements in section 102. The term small entity will have to be defined during the FDAs rulemaking process21. This guide will help small businesses to the extent that it provides some clarity and plain language for small businesses to determine whether they have to register (depending on what type of facility they
15 16

21 U.S.C. 350d. Public Law 107-188. 17 FD&C Act Section 415(b)(1). 18 FD&C Act Section 415(b)(4). 19 FD&C Act Section 415(b)(2) and (3). 20 Id. 21 See FD&C Act section 418(n)(1).

are), how to register, and how to contest a suspension. To date the FDA has not promulgated any rules to implement these new registration requirements, nor has the Agency issued the small entity compliance guide to clarify the registration requirements. Congress added section 102(c) of the FSMA as part of the Tester Amendment to the Senates version of the FSMA, S. 51022. Section 102(c) directs the FDA to amend the definition of the term retail food establishment in 21 CFR 1.227(b)(11). Retail food establishments were exempted from the registration requirement under the Bioterrorism Act. The amended definition would clarify the primary function of a retail food establishment to include the direct sale of food to consumers through such means as roadside stands, farmers markets, community supported agriculture (CSA) operations, and other direct sales platform[s] as determined by the Secretary [of HHS]23. Therefore, in addition to farms, restaurants, and some other establishments that are exempt from the registration requirements, these other entities that engage in direct sales are to be exempted as well. Since small businesses are the predominant entities that sell their products at farmers markets, at roadside stands or through CSA operations, this clarification for the exemption requirement will reduce their regulatory burden. III. FSMA Section 103: Hazard Analysis and Risk-Based Preventive Controls Exemption for qualified facilities; Exemption for low-risk on-farm activities; Small Entity Compliance Policy Guide; Delayed Compliance Section 103 of the FSMA amends the FD&C Act by adding a new section 418, which creates a new requirement for the owner, operator or agent in charge of a facility to routinely evaluate hazards, identify and implement preventive controls to minimize these hazards, to
22

Govtrack, S. 510: FDA Food Safety Modernization Act, Accessed on December 20, 2011, Available at http://www.govtrack.us/congress/bill.xpd?bill=s111-510. 23 FSMA section 102(c)(1).

monitor the performance of those controls and to maintain records of the monitoring24. These functions are further clarified and explained in FD&C Act sections 418(b) (i) and are modeled on the Hazard Analysis and Critical Control Points (HACCP) standards25 that have already been established for seafood, juice and thermally processed low-acid foods. HACCP is a management process for mitigating hazards in all stages of the food system26. FD&C Act section 418(l) exempts a qualified facility from the preventive control requirements. The intended beneficiaries of this qualified facility exemption are small businesses. There are two definitions of a qualified facility, as described in FD&C Act section 418(l)(1)(B) and (C). The first definition of a qualified facility under 418(l)(1)(B) is for a very small business. FD&C Act section 418(n)(1)(B) requires the FDA to define a very small business (and for other purposes, a small business) for this exemption after conducting a study of the food processing sector, as described in FD&C Act section 418(l)(5). This study must characterize the size and distribution of farms, food processors, and foodborne illness risk by these entities across different agricultural sectors. The FSMA directed the FDA to publish this study along with the proposed rule for section 103. Presumably, a very small business will also be defined in this proposed rule. The second definition of a qualified facility under FD&C Act section 418(l)(1)(C) is for facilities that meet two tests regarding the type and size of their annual sales27, and includes subsidiaries and affiliates. The first test is satisfied when a facilitys average annual monetary
24 25

FD&C Act section 418(a). David Acheson, FDAs Views on Preventive Control Requirements Beginning to Emerge Time to go Beyond HACCP? Leavitt Partners Blog, December 8, 2011. http://leavittpartnersblog.com/20113304/david-acheson/fda %E2%80%99s-views-on-preventive-control-requirements-beginning-to-emerge-time-to-go-beyond-haccp. 26 See FDA, Hazard Analysis & Critical Control Points (HACCP), Last updated April 27, 2011. Available at http://www.fda.gov/food/foodsafety/hazardanalysiscriticalcontrolpointshaccp/default.htm. 27 Based on the preceding three-year calendar year average of their sales.

value of food sold directly to qualified end-users (as defined in FD&C Act section 418(l)(4) (B)) exceeded the average annual monetary value of food sold to all other purchasers during such period. In other words, the facility should be deriving more of its revenue from sales to consumers than from wholesalers. The second test is satisfied if the average annual monetary value of all the food sold to all sources was less than $500,000. If both of these tests are met, then the facility satisfies the definition of a qualified facility and will receive an exemption from the preventive control requirements. However, despite a qualified facility receiving an exemption from the requirements of section 418, such a facility would still be obligated under the new FSMA rules to submit to the FDA a choice of two types of documentation. The first type of documentation, as described in FD&C section 418(l)(2)(B)(i)(I), would demonstrate to the FDA that the facility has identified potential hazards, is implementing preventive controls to address these hazards, and is monitoring the preventive controls to ensure that they are effective. This, of course, is largely the same as what the facility would have to follow if they didnt receive an exemption, with the exception that there is no recordkeeping requirement. Alternatively, the facility could submit documentation, as specified by the FDA, which demonstrates compliance with State, local, county or other applicable non-Federal food safety law28 This requirement for qualified facilities is broader than the first one, however it remains to be seen in the proposed rule which non-Federal food safety laws will qualify. Furthermore, all qualified facilities will have to provide documentation demonstrating that they meet either definition for a qualified facility29.

28 29

FD&C Act section 418(l)(2)(B)(i)(II). See FD&C Act section 418(l)(2)(B)(ii).

Aside from the exemption for qualified facilities, there is one other exemption for facilities that are engaged in on-farm packing, holding, manufacturing or processing of food that is not grown on such farm (or another farm under the same ownership). Under FSMA section 103(c), Congress directed the Agency to promulgate regulations for characterizing these activities for the purposes of the registration requirement of FD&C Act section 415 (where farms are exempt, but facilities are not). As part of these regulations, the FDA is directed to conduct a science-based risk analysis of these on-farm packing, holding, manufacturing or processing activities to determine which are low-risk and involve foods that are low-risk, in order to exempt the facilities engaging in these low-risk activities from the preventive controls rules (FD&C Act section 418) and the inspection frequency mandate (FD&C Act section 421) (however, facilities that receive these exemptions will still be subject to the registration requirement). FSMA section 103(c)(1)(D)(ii) states that these exemptions shall apply only to small businesses and very small businesses, as defined in the regulation promulgated under section 418(n) of the [FD&C Act] . This exemption is more extensive than that described above for qualified facilities because it doesnt require alternative preventive controls rules to be followed, although it is more limited in the types and number of entities to which it applies. For all small entities that are subject in one way or another to the preventive controls rules, section 103(d) of the FSMA directs the Agency to issue a small entity compliance guide not later than 180 days after the issuance of the FD&C act section 418 regulations. This guide should describe in plain language the requirements of section 418 and the rest of section 103 of the FSMA, in order to assist small entities in complying with these new rules. Furthermore, FSMA section 103(i)(2)(A) specifies that the amendments made by section 103 (which includes the FD&C Act section 418 rules and regulations) shall apply to

small businesses six months after the effective date of such regulations. Note that this is the same time period as the required issuance of the small entity compliance guide. In theory, then, the guide could be published at the same time that the rules go into effect. These amendments will apply to very small businesses 18 months after the effective date of the regulations30. IV. FSMA Section 105: Standards for Produce Safety Exempt or Modified Standards for Low-Risk Foods; Flexibility Requirement; Delayed Compliance; Small Entity Compliance Guide; Guidance; Direct Farm Marketing Exemption Section 105 of the FSMA amends the FD&C Act by adding a new section 41931, which directs the FDA to issue regulations establishing science-based standards for the safe production and harvesting of fruits and vegetables when such standards minimize the risk of serious adverse health consequences or death. Under FD&C Act section 419(a)(1)(B), small and very small businesses that produce and harvest those types of fruits and vegetables that are determined by the FDA to present a low risk of harm may be exempt from these regulations, or may be subject to modified requirements. Note that the definitions of small and very small business are to be defined in the rulemaking for section 105. Therefore, it is possible that the definitions under the produce safety standards would be different from the definitions used in other parts of the FSMA32. Apart from the exemption or modified standards for low-risk fruits and vegetables available to small businesses, FD&C Act section 419(a)(3)(A) specifically directs the Agency to provide sufficient flexibility to be applicable to small businesses and entities that sell directly to consumers, and be appropriate to the scale and diversity of the production and harvesting of
30 31

FSMA section 103(i)(2)(B). 21 U.S.C. 350h. 32 See FD&C Act section 419(a)(3)(F).

such commodities. Because this flexibility requirement is vague, it remains to be seen how accommodating the FDA will be when issuing the produce safety rules. This could be especially problematic if there will already be exemptions or modifications of the rules for low risk commodities. Note that this requirement is repeated in FD&C Act section 419(c)(1)(B), which describes the criteria for small business by which the final regulation must comply. Although, instead of saying that the rules must be applicable to small businesses (as described above under FD&C Act section 419(a)(3)(A) for the proposed rule), FD&C Act section 419(c)(1)(B) states that the final rules promulgated must be practicable for all sizes and types of businesses, which is arguably a more stringent requirement. There is a stronger argument to be made that rules that are applicable for small businesses must simply include those entities, whereas rules that are practicable for small businesses must allow those businesses to follow them in a manner that is not overly burdensome. There is also a delayed compliance requirement in FD&C Act section 419(b)(3). The final regulations will not be applicable for small business until one year after their effective date. The final regulations will not be applicable for very small business until two years after their effective date. Unlike the preventive controls rule, however, FSMA section 105(b) directs the Agency to issue a small entity compliance guide before the rules go into effect. In this case, the small entity compliance guide is to be published not later than 180 days after the issuance of the produce safety standards. In addition to the small entity compliance guide, FD&C section 419(e)(1) directs the Agency to provide updated guidance on good agricultural practices (GAPs) and on the safe production and harvesting of specific types of fresh produce In the creation of these guidance documents, the Agency must consult with the Secretary of Agriculture,

representatives of State departments of agriculture, farmer representatives, and small businesses To this end, the Agency must conduct at least three public meetings in diverse geographic locations to solicit input from and conduct outreach for these groups. Furthermore, this guidance document must provide sufficient flexibility to be practicable for all sizes and types of facilities, including small businesses such as a small food processing facility co-located on a farm33 This means that the GAPs guidance document for the production and harvesting of produce must be particularly useful to and provide targeted information for smaller entities (farms and food processing facilities on farms) that cannot afford full-time employees or wellpaid consultants people who are often used by larger entities for determining good agricultural practices. FD&C Act section 419(f), called the Exemption for Direct Farm Marketing, creates an exemption of the section 419 requirements for farms that meet two tests. These tests are almost identical to the second definition test of a qualified facility under the Preventive Controls rule above (where the value of sales to qualified end-users must exceed the value of sales to other buyers and must be less than $500,000). The main difference, however, is the absence of language in this exemption defining a farm to include subsidiaries or affiliates. If this rule is sufficiently costly, then this absence could lead to entity restructuring in order to qualify for this exemption. Furthermore, the definition of a qualified end-user is slightly different in this rule, in that it omits the requirement (which is not omitted in section 418(l)(4)(B)(ii)(II)) that a restaurant or retail food establishment must purchase the food from the farm for sale directly to consumers at that restaurant or establishment34. This second loophole could be exploited through

33 34

See FD&C Act section 419(e)(3)(A). See FD&C Act section 419(f)(4)(A).

transactional restructuring and it remains to be seen how the agency may deal with these potential attempts by farms and qualified end-users to avoid the produce safety regulations. Nevertheless, farms that qualify for this exemption are required to prominently and conspicuously include the name and business address of the farm where the produce is grown, if a food packaging label is required35. If a label is not required, then this information must be displayed prominently and conspicuously at the point of purchase, or on a label, poster, sign, placard or documents delivered contemporaneously with the food in the normal course of business, or if online, in an electronic notice36. Finally, this exemption may be withdrawn in the event of an active foodborne illness investigation that is directly linked to an exempted farm, or if the conduct or conditions associated with the exempted farm are material to the safety of the food produced or harvested by such farm37. V. FSMA Section 107: Authority to Collect Fees Reduced Fee Consideration for Small Business FSMA section 107 creates the first fee regime for foods that are within the FDAs jurisdiction38. Section 107 creates this regime by adding a section 743 to the FD&C Act, which gives the FDA the authority to assess and collect fees for four categories of activities. This includes fees to cover the total cost to the Agency for domestic and foreign facility reinspections, defined as a follow-up inspection after there has been an official action indicated from a primary inspection. Fees are also authorized for parties who refuse a mandatory recall order39, for
35 36

FD&C Act section 419(f)(2)(A)(i). FD&C Act section 419(f)(2)(A)(ii). 37 See FD&C Act section 418(f)(3)(A). 38 There is also a fee regime created as part of FSMA section 307, to cover the cost of creating a third-party accreditation system. 39 Note that a mandatory recall order is a new authority under FSMA section 206. Who is going to refuse this order if it would trigger a fee?

importers participating in the voluntary qualified importer program (VQIP) to cover administrative costs (see FSMA section 302), and for importers that are subject to reinspection40. FD&C Act section 743(b)(2) requires the Agency to collect sufficient fees to cover 100% of the costs to the Agency for the activities described above. On August 1, 2011, the FDA published a Notice for Comment titled, Food Safety Modernization Act: Domestic and Foreign Facility Reinspections, Recall, and Importer Reinspection User Fee Rates for Fiscal Year 201241. This Notice establishes the fee schedule for the above activities for the FDA fiscal year starting on October 1, 2011. It also discusses the methodology the Agency uses for estimating the fee amounts. These fee amounts represent the direct and indirect costs of full-time-equivalent (FTE) or paid staff whose primary responsibility is for those categories of activities for which the fees are being collected. The Agency calculates that a fully supported FTE (i.e. including indirect costs) is $207 per hour, which does not include foreign travel expenses. After adjusting for inflation, this hourly rate is $224 if no foreign travel is required and $325 if foreign travel is required42. In FD&C section 743(b)(2)(B)(iii), Congress directed the Agency to propose guidelines within the Federal Register in consideration of the burden of fee amounts on small business. The term in consideration is particularly ambiguous, and in the context of the rest of the section, it seems likely that the most reasonable interpretation of the term is one in which the Agency has the discretion, but not the obligation, to reduce the fees for small business. The Agency is not directed to automatically reduce the fee amounts, although this is an option. Instead, the Agency must consider the burden, which is discretionary. If the Agency decides to adjust or reduce the fee amounts, then it must do so through notice and comment rulemaking.
40 41

See FD&C Act section 743(a)(1)(A)-(D). 76 Fed. Reg. 45820-45825. 42 See Table 3 FSMA Fee Schedule for FY 2012 in the Notice for Comment.

Instead of publishing these guidelines and possibly a separate publication where the fee schedule would be reduced by taking into account the guidelines, the Agency decided to first gather additional information so the guidelines could be published along with modifications to the fee schedule. To this end, on August 1, 2011 the Agency also published a Notice for Comment titled, Burden of Food and Drug Administration Food Safety Modernization Act Fee Amounts on Small Business43. In this Notice for Comment, the Agency seeks comment on three overarching questions. The first question is whether a fee reduction or other consideration is appropriate for small business. Under this question, the Agency is attempting to assess the potential burden of the fees on small business, and if there is a burden, how this might be different for certain small businesses. The second question is how to define a small business in the proposed guidelines. The third question is how a reduced fee amount should take form as a waiver, a percentage or fixed dollar reduction, or something else. Based on these questions, it appears likely that the Agency is considering a waiver and/or reduction of the fees for small businesses. However, no decision has been made to date, nor have the guidelines been published. Undoubtedly, the small food business community is closely watching this issue. The impact of these fees on small businesses and importers is one of the most important issues within the FSMA because these fees have the potential to put many people out of business. VI. Section 204: Enhancing Tracking and Tracing of Food and Recordkeeping Pilot Study Requirement; Feasibility Assessment; Relaxed High-Risk Recordkeeping Requirements; Waiver of Recordkeeping Requirements; Small Entity Compliance Guide; Delayed Compliance

43

76 Fed. Reg. 45818-45820. The author drafted this Notice.

FSMA section 204(c) directs the Agency to establish a product tracing system that will allow the FDA to collect information that improves the capacity of the Secretary [of HHS] to effectively and rapidly track and trace food that is in the United States or offered for import into the United States44. This system must take into account the findings from pilot projects described in FSMA section 204(a) and information gathering requirements described in FSMA section 204(b). The FDA must conduct at least two pilot projects to explore and evaluate methods that enable the Agency to rapidly identify recipients of food [in order] to prevent or mitigate a foodborne illness outbreak45 One pilot project must be with the processed food sector; the other must be with processors or distributors of fruits and vegetables that are raw agricultural commodities46. The purpose of these pilot projects is to develop and demonstrate methods and technologies for the rapid tracing and tracking of foods to be used to inform the proposed regulations47. FSMA section 204(a)(2)(A) directs the Agency to develop and demonstrate methods that are practicable for facilities of varying sizes, including small businesses. This mandate is significant because it requires the FDA to consider track and trace methods that are appropriate for small businesses, which arguably means that the methods cannot impose a disproportionate impact on small businesses through labor intensive methods or methods that require high equipment or material expenditures. This mandate is likely to restrict the types of track and trace technologies that the agency can impose on small food processors. This point is further underscored by FSMA section 204(b), which requires the FDA to conduct a cost/benefit analysis of any contemplated track and trace technologies, including those
44 45

21 U.S.C. 2223. See FSMA secion 204(a)(1). 46 See FSMA section 204(a)(2). 47 See FSMA sections 204(a)(1)(A)-(C).

used in the pilot projects, and to assess the feasibility of such technologies for different sectors of the food industry, including small businesses To summarize, the methods of track and trace, and the technologies for doing track and trace, must be respectively practicable and feasible for small businesses. These are the key terms within the statute, and the proposed rule will have to conform to these rather loose terms. In addition to the establishment of a track and trace system for foods, FSMA section 204(d) directs the FDA to establish additional recordkeeping requirements for certain high risk foods, which are yet to be determined. Facilities that manufacture, process, pack or hold such foods will be required to meet these additional recordkeeping requirements, although there are a number of conditions that the Agency must comply with when crafting these requirements48. Several of these conditions are helpful for small businesses. FSMA Section 204(d)(1)(D) requires the Agency to conduct a cost/benefit analysis to ensure that the benefits of these recordkeeping requirements to the public outweigh the cost of compliance with the requirements. If the costs for compliance are higher for small businesses, then the FDA could use this factor to relax the requirements to the extent necessary to relieve these costs and thereby improve the cost/benefit ratio. FSMA Section 204(d)(1)(E) requires the Agency to design the recordkeeping requirements in a manner that is scale-appropriate and practicable for facilities of varying sizes and capabilities with respect to costs and recordkeeping burdens, and not require the creation of duplicate records. This is an important provision for small businesses because it explicitly directs the Agency to abandon a one-size-fits-all approach that could be particularly burdensome to small businesses, and instead design the requirements in a scale and capability appropriate way.

48

See FSMA section 204(d)(1)(A)-(M).

Furthermore, FSMA section 204(d)(1)(I) requires the Agency to include a waiver process if it is determined that the requirements would result in an economic hardship for an individual facility or a type of facility. It is unclear at this point what factors the Agency will consider when deciding what constitutes an economic hardship of sufficient magnitude to qualify a facility for a waiver. Nonetheless, this waiver provision will most likely be beneficial to small businesses because compliance with the recordkeeping requirements is likely to pose a disproportionate economic hardship on them. To help small businesses comply with the additional recordkeeping requirements for high-risk foods under section 204(d), FSMA section 204(h) requires the Agency to issue a small entity compliance guide not later than 180 days after the promulgation of a final rule. This small entity compliance guide should be in plain language in order to assist small entities including farms in complying with the requirements. Compliance guides, like this one, can be useful for reducing the time and effort required to understand and comply with the law, and therefore lower the costs of compliance. However, this usefulness is dependent on the clarity and efficiency of the writing. The last provision within the FSMA section 204 that provides some relief for small businesses is section 204(i). Section 204(i)(1) provides a one-year grace period for compliance with the recordkeeping requirements of section 204(d) for small businesses (as defined in section 103). Section 204(i)(2) provides a two-year grace period for very small businesses (as defined in section 103). Along with the small entity compliance guide, and the other provisions discussed above, section 204 has the potential to greatly relax and assist small entities with the requirements of track and trace and recordkeeping for high risk foods. Nonetheless, to date the details remain murky since not even a proposed rule has been promulgated for any provisions

within section 204, and therefore the potential exists that the rules implementing the requirements of this section will be overly burdensome to small businesses. VII. Section 209: Improving the Training of State, Local, Territorial, and Tribal Food Safety Officials Extension Advising; Competitive Grant Program; Best Practices and Model Programs As the name implies, FSMA section 209 directs the Agency to establish various capacity building programs and standards for State, local, territorial and tribal food safety officials in order to enhance their ability to enforce relevant provisions of the Food Safety Modernization Act. FSMA section 209 codifies these provisions by amending the FD&C Act by adding a section 1011, which bears the same title as that of FSMA section 209. Section 209 also amends the Agricultural Research, Extension, and Education Reform Act of 199849 by adding a section 40550, which is titled, National Food Safety Training, Education, Extension, Outreach, and Technical Assistance Program. FD&C Act section 1011(c) directs the FDA to ensure coordination with the National Institute of Food and Agriculture of the USDA in advising producers and small processors transitioning into new practices required as a result of the enactment of [FSMA] and assisting regulated industry with compliance with such Act. It is unclear who qualifies as a small processor under 1011(c), or which provisions of FSMA will be considered a new practice, although FSMA sections 103 (preventive controls), 105 (produce safety), 204 (track and trace) are all significant and largely new practices. It is also unclear what form of advice will be afforded by this provision, i.e. whether the advise will be specific to entities or in a more general

49 50

Public Law 105-185. 7 U.S.C. 7625.

form like a small entity compliance guide for particular entities and sectors. Nonetheless, this advice is going to come from USDA-sponsored agricultural extension programs, so it is reasonable to expect that the current mode of operation of these extension services will not change form, instead they will receive additional funding for FSMA-related outreach. FD&C Act section 1011(d) establishes a competitive grant program, to be administered by the USDA National Institute for Food and Agriculture (through a memorandum of understanding with the Secretary of HHS), to provide food safety capacity building services to owners and operators of farms, small food processors, and small fruit and vegetable merchant wholesalers. Like the extension services described above, many of the details of this program are vague, but this section states that this competitive grant program must be carried out in accordance with section 405 of the Agricultural Research, Extension and Education Reform Act of 1998. Section 405 of the Agricultural Research, Extension, and Education Reform Act of 1998 was created to implement the competitive grant program of FD&C Act section 1011(d). As specified in section 405(b), the purpose of this grant program is to facilitate the integration of food safety standards and guidance with the variety of agricultural production systems, encompassing conventional, sustainable, organic, and conservation and environmental practices. This integration can be viewed as an attempt to harmonize, for farmers and smaller processors and wholesalers, the multitude of agricultural and food safety mandates and programs that these entities may face. However, the details are again sparse. Section 405(c) specifies that the priority for awarding grants should be given to projects that target small and medium-sized farms, beginning farmers, socially disadvantaged farmers, small processors, or small fresh fruit and vegetable merchant wholesalers. Appropriations for

this program are authorized for fiscal years 2011-2015. Information gained from the projects funded through this program may result in the issuance of a set of recommended best practices and models for food safety training programs for the entities targeted by this program. See section 405(i). VIII. Conclusion A review of the relief provisions of the Food Safety Modernization Act for small businesses reveals a regulatory regime that is clear in its basic contours but lacking in the detail necessary for someone to be able to weigh and predict their likely effects on small businesses. In fact, the details will only emerge slowly, as rules are proposed, commented on, deliberated by the FDA and other relevant governmental authorities and stakeholders, and then released in an interim or final form. Some sections of the FSMA will be enacted sooner than others, reflecting their importance and the priorities set by the Agency. This process will take many years, with the possibility of future Congressional bills further altering the legal landscape. What is clear is that the food regulatory regime is greatly expanding in the United States, while globally convergence and harmonization represent trends in food law. While this change may appear slow to some stakeholders, it can appear rapid, daunting and may in fact pose an existential threat to the sustainability of many small food business owners. This paper has attempted to provide an early look at the current contours in how this regulatory structure is setup to address the concerns of this important stakeholder in the food web.