Facing a mountain of new responsibilities and a heightened specter of authority, the Food and Drug Administration has the unenviable task of doing more with less.
With the January signing of the Food Safety Modernization Act, Congress and President Obama gave a clear mandate to improve U.S. food safety across the board, but so far neither the Legislative Branch nor the Executive Branch has given FDA the money it needs.
So the FDA is looking to make up the shortfall with fees. There are a variety of reasons these fees may not work as intended, and indeed may backfire on the economic recovery.
In fact, some provisions may reduce supply chain transparency and food safety, which couldn’t be further from the intent of the law.
Here are seven reasons why FDA’s proposed fees are ill-advised.
Reason No. 1 — Fresh produce food safety programs are designed to minimize hazards but cannot completely eliminate them.
Yet the presumed thinking behind a fee for re-inspection or removal from Detention Without Physical Examination (DWPE) is to charge firms that are wrong-doers or are out of compliance.
Statistically, if a farming operation is tested enough, there will eventually be a positive test result. The larger and more sophisticated the operation, the more likely it is to have high food safety standards. Yet these commercial operations are more likely to pay fees than smaller firms that may not have as extensive preventative controls.
Reason No. 2 — Noncompliant firms that are unable or unwilling to pay re-inspection fees in the magnitude proposed by FDA might continue operation in another name or through a third party.
We saw something similar under a different law, the Perishable Agriculture Commodities Act.
The so-called Montreal Effect saw foreign wholesalers run up large bills, go bankrupt and simply re-open under a different name, avoiding PACA altogether.
In the end, FDA’s proposed fees and the way they are assessed to individual companies may decrease transparency within the industry, harming open communication between FDA and suppliers of FDA regulated commodities and with foreign governments.
Reason No. 3 — Under the above scenario, FDA’s ability to effectively trace back contaminated produce, or even keep it out of the supply chain, becomes compromised because of the lack of cooperation and the subsequent lack of transparency.
This is an unacceptable outcome of a well-intentioned law.
Reason No. 4 — Under the core World Trade Organization principle of “national treatment,” member countries cannot discriminate between imported and domestic products in terms of regulatory burden or fees.
The proposed fees for removal from DWPE are not assessed on domestic produce.
For imported produce, when a positive sample occurs, the product is put on DWPE (the product is removed from market and no longer allowed to be imported until completion of a petition and process, including five clean samples).
Under FSMA, FDA is proposing to charge $224 an hour for work, including physical inspection and lab analysis, for removal from DWPE, which may cost importers tens of thousands of dollars.
For domestic produce, when there is a positive sample, there is a recall. Any company foolish enough to disregard a recall order will be fined, but it is unlikely this will ever transpire.
Essentially, for the same positive sample, the imported product is subject to significant fees while the domestic product is subject to minimal or no fees.
Reason No. 5 — Foreign governments will likely view re-inspection fees as a trade barrier and implement retaliatory fees, duties or other actions that could severely damage U.S. exports.
At a time when the U.S. has just achieved the removal of retaliatory tariffs for items like apples, pears and other exports to Mexico, the domestic export market cannot tolerate another hit that might come in the form of foreign food-inspection fees or other measures.
Reason No. 6 — There is an unjustified difference between the rate for domestic and foreign facility re-inspection fees.
While domestic facilities are charged $224 an hour for re-inspection, foreign facilities are charged $325 an hour, ostensibly for increased travel costs.
This foreign rate was derived from a formula that included many trips to Asia.
Mexico and Canada, our largest food trading partners, are not a major distance and should have rates closer to the domestic rate.
An FDA trip to Hawaii or Puerto Rico may cost much more than a trip to Mexico City, for instance.
The rate needs to be on a sliding scale based on distance and travel time.
Reason No. 7 — Whatever FDA could hope to collect from fees is a drop in the bucket compared to its overall budget.
Previously, FDA said it hoped to recoup about $25 million from such fees. This is out of a budget of $2.5 billion.
Is the potential for widespread retaliatory measures from over 100 trading partners worth collecting fees that amount to 1% of the budget?
The fees are almost certain to create costs to the industry many times greater than any the FDA could ever hope to collect.
These fees also come at the risk of losing transparency and collaboration, two key and priceless elements that FDA and industry have established in the last four years toward securing America’s food supply.
These are but a few of the reasons why fees for food safety are ill-advised, but the most important one is this: To allow the fees to result in less transparency and potentially even one death is inexcusable.
The answer to this problem is for Congress to submit a funding plan for FDA that allows the agency to do its job.
Lance Jungmeyer is president of the Fresh Produce Association of the Americas, Nogales, Ariz.
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