Risk, rewards seen in new food importation scheme created by FSMA draft rules

By Hank Schultz

- Last updated on GMT

Related tags: Food safety, Food, Import

Risk, rewards seen in new food importation scheme created by FSMA draft rules
New rules from FDA to implement the Food Safety Modernization Act will place significant new burdens on industry, observers say.  But the new food importation regime that will result could provide new business opportunities, too.

The two new draft rules, Foreign Supplier Verification Program (FSVP) and the rule on the accreditation of third party auditors, will profoundly change how food is imported into the US. The rules were released by FDA on Friday, July 27 and now that experts have had a chance to digest their contents, they agree that the FSVP in particular will place heavy burdens on food importers.

“I think the average importer is going to have a very difficult time complying with this program.  It’s going to put tremendous burdens on importers that didn’t exist before,”​ said Jim Prochnow, an attorney with firm Greenberg Traurig.

A bridge too far?

Ben England, an attorney and principal with the food consultancy FDA Imports.com LLC​, goes a step further.  The draft rule calls for competencies and imposes costs that many firms do not have and will not be able to bear, he said.

“It essentially is going to put small importers and mid sized importers out of business,”​ England said.

The goal of the rules is to implement the overarching FSMA mission to prevent contamination in imported food at its source rather than try to interdict tainted shipments at the border.  FDA says it currently has the capability to physically inspect only 2% of incoming food shipments and can do laboratory analysis on only a fraction of those.

Under FSVP, food importers would be required to document the food safety programs of their overseas suppliers, either through their own inspections or through an audit by a third party.  Importers would need to have extensive documentation of their overseas suppliers quality control operations.  FDA’s role in this program would be to audit the plans importers have in place to get all this done.

And the program is intended to be risk based. Less attention need be paid to food coming from countries where local government agencies do a good job of policing food production. At least at this stage of the draft rules game, it appears it’s up the food importer to make these judgments about the performance of foreign government agencies and to back up those judgments.

Sellers market for QA/QC personnel

It will create a sellers market when it comes to food safety experts, England said.

“The importers are not in the food safety compliance business.  Most importers are not themselves going to be experts in food safety. They have got to get these people from somewhere,”​ England said.

“What happens where there are (for example) only 20,000 of these people and there is a demand for 200,000?  The price will go through the roof and the small companies will not be able to afford them,”​ he said.

FDA has dramatically underestimated how much FSVP will cost, England said.  The initial estimate puts the annualized cost to industry at about $470 million.

“Their numbers are obviously low.  They are not thinking about what happens in the marketplace,”​ England said. “The comments are going to bear that out. They are going to say you guys are out to lunch. You have no idea what this is going to cost.”

Prochnow takes a slightly less dire view of the way FSVP will be implemented.  It will change the way importers do business surely, but it could also create new business opportunities, too.

“The FSVP is going to have the impact of causing more contract manufacturing in the United States,” ​he said. “(And) it will create a cottage industry of companies that will help importers comply with the law.”

Third party auditors

Congress was sensitive to the new burdens the law creates, and tacked on the third party auditor program as a way to deal with them. The program is supposed to work like this:  Set up parameters to verify the competency and trustworthiness of auditors in foreign countries, whether they be local government agencies or private companies. Then accept the findings of those audits as part of the FSVP process. The problem, as England sees it, is that FDA has not agreed to do this in any other case and he doubts the agency is enthusiastic to start doing it now.

“FDA cannot stand the idea of third party certification,”​ England said. “In my mind this (draft rule) is FDA doing what it had to do under the statute. The third party piece will be slow in coming. I think it’s going to require litigation.”

Prochnow however, thinks FDA sees the opportunity the auditor program presents to enforce better compliance.

“I think that the FDA will embrace this opportunity. From what I have seen in the last three years the FDA’s enforcement of all of its rules has increased five fold.  It will take time for FDA to implement this and I think a longer time that for the FSVP,”​ Prochnow said.

Implementation will be years off

But Prochnow and England were in agreement on something else: Full implementation of these rules is still some years off.  The draft rules were published with a built-in 120-day comment period.  England expects industry to ask for more time.

“This is a game changing regulation.  It will have a big effect on the economy. The cost of food will go up under this regulation,”​ England said. “It will need more Q&As from FDA and more public meetings so that people can understand it and will able to write intelligent comments.”

The rules are intended to become effective 18 months after being adopted in final form. Even under the most rapid scenario, that yields an earliest possible effective date somewhere in late 2015, Prochnow said.

“There is a lot of opportunity for softening or amending the final language,” Prochnow said. “There is a lot of room for having a lot to do with the final outcome.”

Related topics: Regulation

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