FDA posts new FSMA compliance dates

Is your food business affected by Food Safety Modernization Act (FSMA) rules? FDA launched a new website listing the staggered FSMA compliance dates, some based on the size of a business. FDA also has provided a graphic timeline that shows these staggered compliance dates by month and year.

The rules that include compliance dates, in the order they became final, are:

  • Preventive Controls for Human Food
  • Preventive Controls for Animal Food
  • Produce Safety
  • Foreign Supplier Verification (discussed in an earlier blog post)
  • Sanitary Transportation
  • Intentional Adulteration

There are no compliance dates for the Accredited Third-Party Certification rule since it is a voluntary program. However, FDA launched a website earlier this year where an organization can apply to be recognized as a Third-Party accreditation body.

If FSMA applies to your business, then you may want to take a look and make sure you will be ready before these deadlines. If you have questions about FSMA compliance, contact our attorneys at Morsel Law.

FSMA Small Biz Compliance Guide Published by FDA

The Food and Drug Administration recently released a guide to help small businesses comply with the Produce Safety Rule mandated by the Food Safety Modernization Act (FSMA).

The FDA said its guide could help farmers determine whether they were eligible for a qualified exemption, which would modify the requirements they are subject to under the Produce Safety Rule.

The main compliance dates for small businesses and very small businesses under the Produce Safety Rule are Jan. 28, 2019, and Jan. 27, 2020, respectively, but certain agricultural water requirements have extended compliance dates.

If you have questions about FSMA compliance, contact our attorneys at Morsel Law.

Food Recalls: Does Your Insurance Policy Cover “Reasonable Probability” of Contamination?

Many food businesses, after conducting a risk assessment, will purchase some form of recall insurance (commonly referred to as product contamination insurance). These recall policies typically provide coverage for “actual” contamination, meaning for coverage to kick in the consumption or use of the product must have resulted in bodily injury and/or property damage. To date, recalls were voluntary and initiated by the company. However, earlier this year the final rules were issued under the Food Safety Modernization Act (FSMA), which provide FDA with the authority to mandate recalls for food products if there is a “reasonable probability” that the food product is adulterated or misbranded and the use and/or exposure to the product would cause serious health consequences or death.

The FDA’s mandatory recall authority under FSMA may put food businesses at risk because many insurance policies don’t provide coverage for government recalls without an “actual” contamination. The direct and indirect costs associated with these recalls can be substantial. It is important to know if your damages are covered by your policy and, if so, to what extent.

While many insurers have yet to address FSMA, some insurers have altered their basic form or issue an endorsement for “government recall”.  However, not all “government recall” clauses are created equal, so careful attention should be spent when reviewing or negotiating the policy to ensure proper coverage, especially since every business is different and are faced with different risks.

In order to better understand their insurance requirements, businesses should perform a comprehensive risk analysis. The risk analysis should not only include the business’s products and operations, but also the operations of their suppliers’ and an analysis of the quality of the ingredients included in the business’s final products. Often overlooked in the analysis process is the risks assumed in purchase and sale agreements and vendor contracts. Businesses should review these agreements to identify and determine which risks can and/or should be insured. Many contracts in the food industry are written in favor of the buyer, so in the event of a recall, the seller (policyholder) is responsible for associated costs. The effects of a recall to a seller without proper coverage could be devastating.

When discussing recall coverage with your broker, the following are a list ofitems you may want to address:

  • Direct Product Damage – Many policies cover the contaminated product in the field or warehouse, but some only cover product in the field.
  • Publicity – Publicity coverage is not always included in a basic policy, but when it is the most important feature of this coverage is that it can result from “an actual or alleged contamination, where the Named Insured’s Product(s) and the Named Insured must be specifically named.” If a business supplies an ingredient used by a buyer in a finished product and the buyer’s product is recalled (in most cases only the finished product is identified in the recall), then is this scenario the policy won’t provide coverage.
  • Lost Gross Profit/Extra Expense (LGP) – If the policyholder loses an account due to a recall event, this pays for a year or more of LGP. For many food businesses, a large account could represent a significant portion of their total revenue. Extra Expenses may arise when it is necessary to engage another processor and new processing costs exceed the businesses normal processing costs.
  • Rehabilitation Expenses – This coverage pays for the rehabilitation of the brand in the marketplace. Many businesses overlook the importance of obtaining this coverage because one food safety incident can destroy a brand that a business has spent years building.
  • Crisis Response/Consultant Expenses – Coverage for these expenses can be very important and largely address the costs involving specialized attorneys and public relations/crisis response specialists.

If you have questions about coverage under your insurance policy, please contact our attorneys at Morsel Law.

Entrepreneurs Beware: Violating Food Safety Laws Can Land You in Jail

I frequently receive calls from food startups who want to know the best way to protect their business from their competition. Specifically they’re concerned about theft of their recipes, intellectual property and key employees. After listening to their concerns, I then pose a question to them: what steps have you taken to protect your business from a food safety incident? More often than not there is silence on the other end of the phone. What I attempt to explain to them is that, regardless of all their other legal concerns, without a comprehensive food safety program in place their business will be worthless. Some listen, others don’t. But many of these entrepreneurs don’t realize is that, while they may think they’re in the food business, they’re actually in the food safety business.

The food industry is unlike any other. When a software company’s product is defective or a financial services company provides poor advice the worst thing that may happen is customers lose money. But unlike these industries, when a food business introduces an adulterated product into commerce consumers may become seriously ill, possibly resulting in death. Now I get many startups are “bootstrapping” their business and capital is tight, so careful decisions must be made where to spend and where to cut corners. While you may want everyone of your witty and artfully crafted slogans trademarked, if by doing so you’re foregoing having your product labels reviewed for FDA compliance or engaging a food safety professional to assist in designing and implementing good manufacturing principals, then you’re setting yourself up for failure.

If you don’t believe me, let’s take a look at a few recent examples. A licensed maple syrup producer decided to expand his business by using the apples picked from his farm to make and sell cider. This all seemed harmless until the cider was linked to an E.coli outbreak that sickened four people, including two children. The court found that the owner failed to follow good manufacturing processes and he was convicted of selling adulterated food, sentencing him to 14 to 48 months in prison.

In another incident, a woman plead no-contest to charges that she sold adulterated and misbranded food at several Michigan farmers markets. She sold various pickled products directly to consumers, which under Michigan law requires certain processes to take place during the production cycle to prevent the risk of botulism. Additionally, under federal law all food processors who make low acid and acidified foods must register their establishment. Here, the woman produced the products out of her home kitchen, not a registered facility, and she apparently didn’t even know there are laws regarding the manufacturing of food products which are intended to protect consumer health. These mistakes cost her not only $3,100 in fines and 11 months of probation, but her business.

For food startup businesses, making sure your products and food safety procedures are in compliance up front will save you countless headaches, and potentially money, down the road.  If there is on piece of parting advice I can give food entrepreneurs out there it’s this: you will make many mistakes running your business, but most likely the business will continue to survive and you’ll learn from these mistakes; however, it only takes one food safety incident to destroy a business. If you don’t believe me, take a look at Blue Bell ice cream and Chipotle. Whether their businesses will survive these outbreaks or not remains unclear.

Salad Grown Locally: Investment Opportunity or False Hope

All food is local…that is unless you live in Chicago and want a salad in the middle of January. In this case the lettuce in your salad (and the majority of the other ingredients) is most likely grown in Mexico or California and shipped to your local grocery store. However, a few entrepreneurs are trying to change the produce supply chain by growing green, leafy vegetables on a commercial scale in some unlikely places.

As reported in articles last week by Wall Street Journal and Eater.com, rooftop greenhouse facilities have sprouted up in cities across the United States, including New York City and Chicago. These businesses seek to provide consumers with fresh produce that is available in stores within a few hours of harvest, reducing the amount of waste due to spoilage. They also aim to price their products comparably to existing brands since their transportation costs are significantly less as shipping is usually only a short trip across town. Reducing transportation use would also result in a positive environmental impact, which is another one of their goals.

Some urban farms have caught the attention of investors who have contributed millions of dollars in hope of success. But apparently, not all urban farms are created equal.  Some, including BrightFarms Inc. and FarmedHere LLC, have cancelled plans to open farms or shut down operations after only a few months in business. However others, like Gotham Greens Farms LLC (which has raised $30 million from investors) and AeroFarms LLC (which has raised $70 million in corporate and project financing), appear to be on track for success.

While it is not clear whether these business models will prove to be long-term successes, potential investors should be familiar with the potential roadblocks that can make or break urban farming businesses. First (and foremost) is cost. Rooftop greenhouses are extremely expensive, upwards of 20% more than a traditional greenhouse. Also, permitting times will increase because “farming” is normally not a permitted use in urban centers and would require a zoning variance. In addition to local laws, growers may be subject to the recently published Produce Safety rule promulgated under the Food Safety Modernization Act, which establishes science-based minimum standards for the safe growing, harvesting, packing and holding of fruits and vegetables. It is important businesses prepare for the implementation of, and the steps required for their business to comply with, the Produce Safety rule.

Investing in agriculture, just as with any other type of investment, requires competent and thorough due diligence. While the investment may look good on paper, investors should remember the saying made famous by President Ronald Reagan: “trust, but verify.”

Food Importers Required to Verify Foreign Suppliers

As I’m sure those of you in the food import business are aware, FDA finalized its rule on Foreign Supplier Verification Programs (“FSVP”) for Importers of Food for Humans and Animals. The rule requires that importers implement a FSVP to verify that their foreign suppliers are producing food in a manner that provides the same level of public health protection as the preventive controls or produce safety regulations, and to ensure that the supplier’s food is not adulterated and not misbranded with respect to allergen labeling.

If you import food into the U.S. you must comply with the requirements under the rule or face regulatory action. The following is an overview of rule and what your business can do to comply its requirements.

What Importers Are Affected:  The rule applies to all importers of food into the U.S. An “importer” is the U.S. owner or consignee of food that is being offered for import or, if there is no such owner or consignee, the U.S. representative or agent of the foreign owner or consignee at the time of entry.

What Food Is Covered: The FSVP Rule applies to all food that is imported or offered for import into the United States. Certain foods are not covered by FSVP, including (1) juice and fish that complies with FDA’s Hazard Analysis and Critical Control Point (“HACCP”) regulations; (2) food for research or evaluation; (3) food for personal consumption; (4) alcoholic beverages; (5) food that is imported for processes and future export; (6) low-acid canned foods; and (7) certain meat, poultry, and egg products that are regulated by the U.S. Department of Agriculture at the time of import. The rule also sets forth modified requirements for importers of dietary supplements and dietary supplement components, very small importers, and importers of food from certain small foreign suppliers.

Importer Requirements Under Rule: Each importer must develop an FSVP that ensures “foreign suppliers” are producing food in a way that provides the same level of protection as what is required under the Preventive Controls Rules and the Produce Safety Rule (if applicable) and ensure that the supplier’s food is not adulterated and is not misbranded with respect to allergen labeling. A “foreign supplier” is an entity that manufactures, processes or grows food, or raises animals that are exported to the U.S. without further manufacturing or processing.

What Must Be Included:  An FSVP must be developed by a “qualified individual” who must perform the various activities and be able to read and understand the language of any records that must be reviewed. In developing an FSVP, an importer is required to conduct and document the following activities:

  • Hazard Analysis: An importer must complete a written hazard analysis that identifies potential hazards for each food and each supplier, including biological, chemical (including radiological) and physical hazards.
  • Risk Evaluation: An importer must evaluate the risk posed by a food, based on the hazard analysis, and the foreign supplier’s performance. Factors that importer’s must consider in the evaluation can include the foreign supplier’s procedures, processes and practices related to food safety, and any information that FDA may have regarding the foreign supplier’s compliance. The importer can also rely on another entity to perform the risk evaluation under certain circumstances.
  • Verification Activities: Based upon the evaluation of risk conducted, the importer must establish and follow written procedures to ensure that it only imports from approved foreign suppliers. Appropriate supplier verification activities may include annual on-site audits of the supplier’s facility, sampling and testing, or a review of the supplier’s relevant food safety records. The importer can also rely on another entity to determine and perform appropriate supplier verification activities under certain circumstances.
  • Supply Chains: The final rule also adds flexibility and recognizes the reality of modern distribution chains by not requiring an importer to conduct supplier verification (or evaluate the risk posed by a food and the foreign supplier’s performance) when the hazard requiring a control in a food will be controlled by a subsequent entity in the distribution chain in the United States. For example, if an importer’s customer will control the hazard, the importer can rely on its customer to provide written assurance that the food will be processed for food safety and must disclose that the food has not been processed to control the identified hazard. If the hazard will be controlled by a subsequent entity in the distribution chain, the rule requires disclosure that the food has not been processed to control the identified hazard as well as a series of written assurances starting with assurances from the customer to the importer and continuing the obligation to provide written assurance of processing for food safety throughout the distribution chain. The rule provides flexibility for an importer to establish, document and implement an alternative system that ensures adequate control, at a later distribution step, of the hazards in a food product distributed by a manufacturing/processing facility.
  • Conduct Corrective Actions: If something goes wrong and an importer determines that its foreign supplier has not used safe processes and procedures, the importer must take immediate corrective action. The appropriate action will depend on the circumstances, but can include discontinuing use of the foreign supplier until the cause of noncompliance, adulteration or misbranding has been adequately addressed.

The risks evaluated as part of an FSVP must be promptly reevaluated upon the discovery of new information. Additionally, an FSVP must be reassessed for each food and each foreign supplier at least once every three years. Based on the results of any such FSVP reassessment, an importer must promptly adjust its supplier verification activities if necessary.

What is the Deadline to Comply:  Importers must comply with the rule by the latest of the following dates:

  • 18 months after publication of the final rule;
  • For the importation of food from a supplier that is subject to the preventive controls or produce safety rules, six months after the foreign supplier is required to meet the relevant regulations;
  • For an importer that is itself a manufacturer or processor subject to the supply-chain program provisions in the preventive controls regulations, the date by which it has to comply with those provisions.

It is important for companies to determine whether they are subject to FSVP requirements, and, if so, to begin taking steps to ensure compliance. If you are unsure of whether your company is subject to, or if you need assistance complying with, the FSVP rule please contact our attorneys at Morsel Law.

Craft Brewers Should Prepare for FDA Inspections

“Whoa, hold on,” you say, “I’m a craft brewer. What does the FDA have to do with me?” Well, that’s a good question. As a brewer you are already familiar with your state liquor agency and the Tobacco, Tax and Trade Bureau (TTB), but what you probably don’t realize is that the Food and Drug Administration (FDA) also regulates your operations. With the increased focus on food safety, and additional regulations under the Food Safety Modernization Act (FSMA), it is only a matter of time until FDA comes knocking on your door.

“Okay, you’ve got my attention,” you respond. “So what part of my business does the FDA regulate?” Glad you asked. The FDA has jurisdiction over many aspects of your business, including both the inputs to and outputs of your operation. Below are just some examples:

Registration:

Just like food manufacturers, breweries are required to register as a food facility with the FDA and renew their registration every two years. This registration requirement applies regardless of whether you brew domestically or overseas (i.e., import beer into U.S.A.).

Labeling Requirements: 

Beer that contains both malted barley and hops are subject to TTB labeling regulations; however, beer that doesn’t contain both malted barley and hops (i.e., rice or wheat beer) are subject to FDA labeling regulations. These regulations require additional disclosures, including: ingredients (such as spices, flavorings, colorings, chemical preservatives); allergens, such as wheat; and nutritional facts (think of that dreaded word “calories”), of course unless it meets certain exemptions.

Good Manufacturing Practices (GMPs):

Federal regulations have established GMPs for the manufacturing, packing or holding of human food, which includes several of the steps in the beer-making process. Storing and holding grains and other food products for processing and beer for shipment is also subject to regulation. In order to comply with these regulations your operations need to be sanitary, you must perform an analysis of your operations to address any potential hazards, and implement GMPs to minimize such hazards.

Reporting and Record-keeping:

Food safety continues to be a primary concern of FDA and new regulations under FSMA. To ensure your brewery remains compliant you must keep records of the immediate sources of food and the immediate recipients of products you sell. In the event of food safety incident, such as the release of an adulterated product from a production, bottling or manufacturing facility, FDA may require the release be reported. These record will assist brewers and FDA in identifying the sources and recipients of the adulterated products.

Bulk Sales:

Bulk sales of foods and processing byproducts, such as spent grain for animal feed, are subject to FDA regulation. Brewers already implementing human food safety requirements would not need to implement additional preventive controls or GMPs for animal food, except to prevent physical and chemical contamination. This requirement applies even if you’re donating the byproducts for use in animal food.

Food Service and Sales:

In addition to selling beer, do you serve food or sell packaged food products, such as olive oils, cheese, meats or other snacks, in your tasting room or brewpub? Food products served or sold on premise may be subject to federal, as well as state or local, regulations. While exemptions that may apply, you should make sure you stay in compliance with the law.

Inspections:

Under the rules promulgated under FSMA, the FDA is obligated to inspect every brewery in this country over the next several years. This means the FDA can observe your manufacturing processes, inspect your facilities and every aspect of your operation. They also can review your records and take photograph your operations. You should be prepared for any kind of surprise inspection. Also, if the facility fails to meet compliance standards on the first visit to your brewery, FDA will reinspect at a later date and you will be charged at a rate of $221/hour.

As you can see, the FDA has quite a bit of regulatory oversight over your brewery. But it’s not too late to take action to ensure your brewery is compliance, as many of the food safety rules under FSMA have yet to take effect. If your brewery is unsure whether it is in compliance with, or need assistance in adapting your brewery to meet, FDA regulations please contact our attorneys at Morsel Law.

Streamlining Your Food Imports Into the U.S.

If you import food into the United States then you are familiar with the headaches and hassles that go along with this burdensome regulatory process. But that may change with the release of the draft guidance that outlines FDA’s plan to implement the Voluntary Qualified Importer Program (VQIP) mandated under the Food Safety Modernization Act. The VQIP is a voluntary, fee-based program for the expedited review and importation of foods from importers who achieve and maintain a high level of control over the safety and security of their supply chains.

The new draft guidance lays out the various benefits in addition to expedited entry that an importer can expect to receive from participating in VQIP, including limiting examination and/or sampling of VQIP food entries to “for cause” situations. Additionally, participants in the VQIP will have access to the VQIP Importers Help Desk, which will be dedicated to responding to questions and concerns of VQIP importers.

The draft guidance lays out the eligibility for participating in the program, which includes: (a) 3-year history of importing food into the U.S.; (b) do not import food subject to an import alert or Class 1 recall; (c) have a current facility certification for each foreign supplier of food intended to be imported under VQIP; and (d) be in compliance with Foreign Supplier Verification Program requirements and applicable seafood and juice HACCP regulations.

Participation in the VQIP is for the U.S. fiscal year, which begins on October 1st each year. Applications to participate in VQIP will need to be submitted electronically through the FDA’s industry portal between January 1st and May 31st before the fiscal year in which the importer seeks to join the program. FDA has indicated that due to resource constraints, it will limit the number of participants in the first year to 200 at the most. Participation must be renewed annually, and participants will be subject to FDA inspection.

If your company is considering participating in the VQIP program, carefully review the draft guidance as the FDA will only accept comments on until August 4, 2015.

Food Safety Incidents Can Destroy Businesses

Spring is finally here and summer is just around the corner. As a kid this was my favorite time of the year, besides school ending for summer vacation, it was the season of BBQ’s and ice cream. Who doesn’t like ice cream? The average American consumes 48 pints of the delicious treat each year and they consume more ice cream during the summer months than the rest of the year combined.

It is also the favorite time of the year for ice cream makers as they watch their products fly off the shelves. However, not all ice cream makers will be experiencing happiness this summer as some recently were forced to pull their inventories from store shelves. Blue Bell Creameries LP, the maker of Blue Bell Ice Cream, and Jeni’s Splendid Ice Creams LLC both recently found traces of Listeria bacteria in their products. In addition to pulling products, both companies have temporarily shut down their plants until they can identify and remedy the problem. These recalls follow fellow Washington based ice cream maker, Snoqualmie Gourmet Ice Cream Inc., who last year removed all its ice creams, gelatos, custards and sorbets from retailers’ shelves after health officials linked two listeria cases at a hospital to tubs of its ice cream.

Listeria is not a laughing matter, in fact it is one of the deadliest food borne pathogens. Listeria is a virulent pathogen that thrives in cool, wet environments, and has previously prompted food companies to shut plants since it is difficult to eradicate even through plant cleanings.

For food producers, a food safety incident can be catastrophic. Not only is it a financial strain on the company, but it can destroy their reputation as consumers lose confidence in their business. A perfect example is the 1993 E. coli outbreak that damaged Jack in the Box’s reputation for many years from which they may never fully recover. Plaintiff’s lawyers also pick up on food safety incidents like sharks sniffing out blood in the ocean, leading to countless of lawsuits filed on behalf of consumers allegedly injured by the contaminated products.

These incidents demonstrate why food producers must take preventative measures to put place and enforce food safety procedures in their facilities. It is not enough to just have safety procedures in place for the manufacturing process, companies must also address transportation and storage of their products. This is no longer an option as the proposed rules under the Food Safety Modernization Act (FSMA) focus on the storage and transportation of products, including loading and unloading operations, transportation, packaging and bacterial testing.

There are many producers, both domestically and abroad, that are not yet prepared for FSMA’s requirements to take effect or for the audits that will be required. Training and preparation for audits and inspections will be the key to success of any program. FSMA is a game changer as this training must be targeted at all levels, from the corporate offices to floor managers. If your food company hasn’t already begun the process of implementing the processes and procedures under FSMA it should consider doing so now. The final rules are scheduled to be issued later this year.