In April of 2013, Nicholas Kluge wrote an article titled: Government Liability for an Unnecessary Product Recall This article analyzed the recent decision of Los Angeles Salad Co. v. Canadian Food Inspection Agency, 2013 BCCA 34, which is a British Columbia Court of Appeals case. In this…
As reported by The Packer (and announced by the FDA), “the FDA is reopening the comment period for a draft risk assessment for certain food facilities that include farm packing operations for fresh fruits and vegetables.” See FDA Reopens Comment Period on Food Facilities.
The FDA recently issued a revised industry guidance document titled: What You Need to Know About Administrative Detention of Foods Small Entity Compliance. Utilizing a question and answer format, this industry guidance document contains some valuable information. Here are some of the highlights you need to know:
Why is administrative detention needed?
Administrative detention provides a means through which FDA can hold adulterated or misbranded food and prevent it from reaching the marketplace, thus further enhancing FDA’s ability to ensure the safety of food for U.S. consumers.
What food is subject to administrative detention?
The term food refers to (1) articles used for food or drink for man or other animals, (2) chewing gum, and (3) articles used for components of any such article (section 201(f) of the FD&C Act [21 U.S.C. § 321(f)]). The term food also refers to dietary supplements, which are to be treated as food under the FD&C Act (section 201(ff) [21 U.S.C. § 321(ff)]).
How long may FDA administratively detain an article of food?
FDA may detain an article of food for a reasonable period, not to exceed 20 calendar days, after the detention order is issued. However, an article of food may be detained for 10 additional calendar days if a greater period of time is required to institute a seizure or injunction action. The entire detention period may not exceed 30 calendar days (21 CFR 1.379).
What criteria does FDA use to order an administrative detention?
An officer or qualified employee of FDA may order the administrative detention of any article of food that is found during an inspection, examination, or investigation under the FD&C Act if the officer or qualified employee has reason to believe that the article of food is adulterated or misbranded (21 CFR 1.378).
May an administratively detained article of food be delivered to another entity or transferred to another location?
It is a prohibited act under section 301(bb) of the FD&C Act [21 U.S.C. 331(bb)] to transfer an article of food subject to an administrative detention order and/or to alter or remove any mark or label that identifies an article of food as administratively detained.
Can an administrative detention order be modified?
FDA may approve a request for modification of an administrative detention order to allow for the destruction of the article of food or movement of the detained article of food to a secure facility, to maintain or preserve the integrity or quality of the article of food, or for any other purpose that the authorized FDA representative believes is appropriate in the case (21 CFR 1.381(c)).
What’s the difference between an import detention and administrative detention?
FDA’s authority to administratively detain food under section 304(h) of the FD&C Act [21 U.S.C. 334(h)] is separate and distinct from detention that may occur during FDA’s import admissibility review. Under section 801(a) of the FD&C Act [21 U.S.C. 334(h)], when food is imported or offered for import into the United States, FDA conducts an admissibility review to determined whether to admit the product into United States or detain the product.
On the other hand for administrative detentions under section 304(h) of the FD&C Act, FDA will issue an order to the owner of the suspect food notifying him that FDA is administratively detaining the food and that he has an opportunity to appeal the detention with or without a hearing (see 21 CFR Part 1 Subpart K).
When does an administrative detention order terminate?
If FDA terminates an administrative detention order or the detention period expires, an authorized FDA representative will issue an administrative detention termination notice to any person who received the detention order (or that person’s representative), releasing the article of food, as quickly as possible. If FDA fails to issue an administrative detention termination notice and the detention period expires, the administrative detention is deemed to be terminated (21 CFR 1.384).
Who pays the costs associated with the detention order, such as storage, moving, disposal or reconditioning?
As stated in the preamble to the 2004 final rule (69 Federal Register 31659 at 31690), the party or parties responsible for paying the storage costs of food that FDA orders administratively detained is a matter between the private parties involved with the food. FDA is not liable for those costs. An owner, operator, or agent in charge of the place where the food is located can always request modification of a detention order to destroy the food if they do not want to store it.
Please take the time to read the entire guidance document. It contains information about your rights and other deadlines that become very important if your product is administratively detained.
On October 23, 2012, I had the privilege of addressing an audience of about 50 executive level food company representatives in a large roundtable event that Freeborn & Peters LLP, Mesirow Financial, Worldwide Facilities, Inc. and Red24 jointly hosted. This event focused on food recalls and discussed both the legal issues surrounding recalls and the types of insurance coverage available to help protect company’s balance sheet from the economic impact of a recall.
Among the legal issues discussed, I addressed the purposes of a recall, recall best practices, recall classifications, recall reporting misconceptions and recall planning. On the insurance side, Mesirow Financial and Worldwide Facilities addressed the gaps in traditional insurance coverage for food recall events and the types of recall coverage available to fill those gaps. Lastly, Red24 discussed issues related to the crises management side of food recalls. This was a very informative and well attended event.
The October 2012 edition of the Blue Book’s BluePrints – The Produce Professionals’ Quarterly Journal contains a recent article I authored addresses key issues involved in the preparation of indemnification agreements.
Titled Zen and the Art of Indemnification the article looks at the elements of control, fault and liability in order to illustrate how to prepare a buyer/seller balanced indemnification agreement. As you may know, this is in contrast to what we are currently seeing in the industry, which is unilateral buyer biased indemnification agreements that unfairly saddle the seller will ALL risk of loss and harm. The buyer/seller balanced indemnification agreement discussed in my article suggests a different and perhaps better reasoned approach.
Here is a link to the article: Zen and the Art of Indemnification
I hope you find it useful.
As many of you know, the introduction of the Food Safety Modernization Act (“FSMA”) and the subsequent delay in rolling out certain of its key provisions has the produce industry concerned. As a direct result of this concern, coupled with the rise of recent foodborne illness outbreaks and the fact that number of food and beverage recalls has tripled since 2000, many produce companies are insisting that their suppliers execute indemnification agreements, hold harmless agreements or continuing guarantees.
Although logical on the surface, the problem I am seeing in the industry is that buyers are over using boiler plate language that someone “cut & paste” from something they either found on-line or pulled from a different agreement. To add insult to injury, many produce buyers now require their suppliers to either sign one of these “cut & paste” agreements or risk losing the business.
In connection with the preparation of real indemnification agreements that accurately reflect the realities of the produce industry; I have reviewed hundreds of seller prepared indemnification agreements that savvy suppliers refuse to sign. Throughout this process, I compiled a list of the most commonly referenced statutes that produce buyers have asked their produce suppliers to indemnify them against and which have NO bearing on the produce industry.
Allow me to share:
Federal Food, Drug & Cosmetic Act Sections 404, 405, 505, & 512
Section 404 of the Federal Food, Drug, and Cosmetic Act provides for emergency permit control by the Secretary where the Secretary finds that a class of food distributed in interstate commerce is contaminated with micro-organisms during the manufacture, processing, or packing, that it is injurious to health, and that the injurious nature cannot be adequately determined after the articles have entered interstate commerce. The section further provides that the Secretary is authorized to suspend any permit issued under section 404 if a violation of the permit issued is found. Nothing in Section 404 requires a seller of produce to comply with any regulations absent the initial finding of contamination by the Secretary and promulgation of regulations and issuance of permits. Therefore, there is no need to, ex ante, guaranty compliance with section 404.
Section 405 allows the Secretary to make regulations exempting certain labeling requirements, but does not put any affirmative obligation on suppliers to label products.
Section 505 provides that no person shall introduce or deliver into interstate commerce any new drug unless such application is approved. This section has no applicability to the sale of produce.
Section 512 provides that a new animal drug is unsafe unless there is an approval of an application on file with the FDA. Again, this section has no applicability to the sale of produce.
Fair Packaging and Labeling Act
The Fair Packaging and Labeling Act exempts certain persons from the scope of its requirements. Specifically, it exempts persons engaged in business as wholesale or retail distributors of consumer commodities unless they are specifically engaged in the packaging or labeling of such commodities or prescribe means by which commodities are labeled. 15 USC § 1452(b). Most produce companies operate as either a wholesale or retail distributor of food products and are not engaged in packaging or labeling of the commodities, nor does it specify the manner in which the commodities are labeled. Therefore, this Act will not apply to most produce companies.
Federal Hazardous Substances Act
Under 15 USC § 1261(f)(2), the term “hazardous substance” does not apply to foods, drugs, and cosmetics subject to the Food, Drug, and Cosmetic Act. Fruits and vegetables are products subject to the Food, Drug, and Cosmetic Act (though the sections discussed above are inapplicable) and, therefore, the Federal Hazardous Substances Act is inapplicable.
For the buyer: Improper use of “cut & paste” agreements and other boiler plate language can do more harm to your supply line than good because you may jeopardize a relationship with a valuable supplier if you demand they indemnify you against things outside of their control. Simply put, you may force the end of a valuable and mutually beneficial relationship because you are asking your supplier to indemnify you against something over which they have no control. This presents to great of a risk for the seller and smart sellers will not assume such a risk.
For the seller: You must read the fine print and know what it is that your customers are asking you to indemnify them against. It could be financially disastrous for you to indemnify your customer against something over which you have no control. Similarly, you must be careful and guard against the unintended consequences of signing agreements that reference statutes that you do not understand. In a dispute, a court will likely rule against the seller because the obvious intent of any type of hold harmless agreement between a buyer and seller is the seller’s desire to indemnify the buyer in order to induce the buyer to purchase product from the seller. Against this backdrop the tie goes to the buyer.
Please see a link to the article below:
This article discusses the Food and Drug Administration (FDA)’s second annual report on the roll out of the Food Safety Modernization Act (FSMA) and illustrated how the report did not mention the FDA’s failure to promulgate five important regulations during 2012.
Along this same line, we discussed the Center for Food Safety and the Center for Environmental Health’s August 29, 2012 civil action against certain governmental agencies and officers to enforce the FSMA and to compel the promulgation of certain key regulations.
Please see a link to the article below:
This article discusses the July 31, 2012, Food and Drug Administration (FDA) announcement of the per hour FDA inspector charges it will levy against food companies in the upcoming fiscal year under the Food Safety Modernization Act (FSMA). Those rates are $221 per hour if no foreign travel is required and $289 per hour if foreign travel is required. The new rates will take effect October 1, 2012, and will be effective through September 30, 2013. FDA intends to reassess the rates for the fiscal year starting October 1, 2013.
The FDA recently issued a DRAFT guidance for the food industry discussing the agency’s current thinking regarding the necessity of food categories in food facility registrations.
DISCLAIMER: The forthcoming discussion relates to draft guidance that is still open for comment, modification and retraction. As such, it is not intended for immediate implementation in its current form and it does not create a legally enforceable responsibility.
Step One: Relevant Rule (FD&C Act & Bioterrorism Act)
Section 305 of the Bioterrorism Act, generally required domestic and foreign facilities that manufacture, process, pack, or hold food for human or animal consumption in the United States to register with FDA by December 12, 2003 (See 68 FR 58894). This section also required facilities to submit registrations to FDA containing information regarding applicable food product categories as identified in 21 CFR 170.3.
Step Two: Necessity to be Determined by the FDA Through Guidance
Section 415(a)(2) of the FD&C Act, as added by section 305 of the Bioterrorism Act, provided in relevant part that, when determined necessary by FDA “through guidance,” a registrant must submit a registration to FDA containing information necessary to notify FDA of the general food category (as identified in 21 CFR 170.3) of food manufactured, processed, packed, or held at such facility.
Step Three: FDA Issued the Requisite Guidance and Finding of Necessity
On July 17, 2003, FDA issued a guidance stating that the agency had determined that the inclusion of food product categories in food facility registrations was necessary for a quick, accurate, and focused response to an actual or potential bioterrorist incident or other food-related emergency (see 68 FR 42415).
Step Four: Net Result…
Section 305 of the Bioterrorism Act, in relevant part, requires a food facility registrant to submit a registration to FDA containing information necessary to notify FDA of the general food category (as identified in 21 CFR 170.3) of food manufactured, processed, packed, or held at such facility.
What’s New Under FSMA?
Step One: The New Relevant Rule
FSMA, enacted on January 4, 2011, amended section 415 of the FD&C Act. Section 415(a)(2) of the FD&C Act, as amended by section 102 of FSMA, now provides in relevant part that, when determined necessary by FDA “through guidance,” a registrant must submit a registration to FDA containing information necessary to notify FDA of the general food category (as identified in 21 CFR 170.3 or any other food categories, as determined appropriate by FDA, including by guidance) of any food manufactured, processed, packed, or held at such facility.
Step Two: Necessity to be Determined by FDA Through Guidance
FDA believes that it is necessary for a food facility to submit to FDA a registration containing the general food category as identified in 21 CFR 170.3 and any other food categories as identified below, if applicable, for a quick, accurate, and focused response to a food-safety related issue or an actual or potential bioterrorist incident, other food-related emergency, or food safety incident.
FDA believes that information about a facility’s food categories is a key element to allow for rapid communications between FDA and facilities directly impacted by actual or potential bioterrorist attacks, other food-related emergencies, or food safety incidents. Information about the categories of food a facility handles currently assists FDA in conducting investigations and surveillance operations in response to food-related emergencies. These categories also enable FDA to quickly alert facilities potentially affected by such an incident if FDA receives information indicating the type of food affected.
Section 102 of FSMA, also provides in relevant part that FDA may, through guidance, determine that additional food categories, other than those listed in 21 CFR 170.3, are appropriate for the purposes of food facility registration under section 415 of the FD&C Act.
Step Three: FDA Issued a DRAFT Version of the Requisite Guidance and Finding of Necessity
This draft guidance document also addressed the FDA’s finding of necessity needed to include additional food categories into the food facility registration process. To this end, the “FDA believes that the following additional food categories are appropriate for food facility registration and will include such categories as mandatory fields in the food facility registration form when FDA finalizes this guidance”:
Additional Food Categories for Foods for Human Consumption:
- Acidified Food (see 21 CFR 114.3(b));
- Cheese and Cheese Product Categories: Soft, Ripened Cheese; Semi-Soft Cheese; Hard Cheese; Other Cheeses and Cheese Products;
- Dietary Supplement Categories: Proteins, Amino Acids, Fats and Lipid Substances; Animal By-Products and Extracts; Herbals and Botanicals;
- Fisher/Seafood Product Categories: Fin Fish, Whole or Filet; Shellfish; Ready to Eat (RTE) Fishery Products; Processed and Other Fishery Products;
- Fruit and Fruit Products: Fresh Cut Produce; Raw Agricultural Commodities; Other Fruit and Fruit Products;
- Fruit or Vegetable Juice, Pulp or Concentrate Products;
- Low Acid Canned Food (LACF) Products (see 21 CFR 113.3(n));
- Nuts and Edible Seed Product Categories: Nut and Nut Products; Edible Seed and Edible Seed Products;
- Shell Egg and Egg Product Categories: Chicken Egg and Egg Products; Other Egg and Egg Products;
- Vegetable and Vegetable Product Categories: Fresh Cut Products; Raw Agricultural Commodities; Other Vegetable and Vegetable Products; and
- Baby (Infant and Junior) Food Products Including Infant Formula.
Additional Food Categories for Foods for Animal Consumption:
- Grain or Grain Products (i.e., barley, grain sorghums, maize, oat, rice, rye, wheat, other grains or grain products);
- Oilseed or Oilseed Products (i.e., cottonseed, soybeans, other oilseeds or oilseed products);
- Alfalfa Products or Lespedeza Products;
- Amino Acids or Related Products;
- Animal-Derived Products;
- Brewer Products;
- Chemical Preservatives;
- Citrus Products;
- Distillery Products;
- Fats or Oils;
- Fermentation Products;
- Marine Products;
- Milk Products;
- Minerals or Mineral Products;
- Miscellaneous or Special Purpose Products;
- Molasses or Molasses Products;
- Non-protein Nitrogen Products;
- Peanut Products;
- Recycled Animal Waste Products;
- Vitamins or Vitamin Products;
- Yeast Products;
- Mixed Feed (e.g., poultry, livestock, equine);
- Pet Food;
- Pet Treats or Pet Chews;
- Pet Supplements (e.g., vitamins, minerals); and
- If none of the above food categories apply, print the applicable food category or categories (that does not or do not appear above).
Step Four: Net Result… (coming some in final form)
Once FDA issues the final version of the aforementioned guidance document, the foregoing rules about registrations and additional food category disclosures will become a mandatory requirement for food facilities and a legally enforceable obligation under FSMA.
My phone rings the other day and I look at the number… I did not recognize it. Of course, I answer the phone with a friendly, “Good morning, this is Jason.” Just that quickly I am connected to a conference room filled with concerned produce company executives with little time for pleasantries. I quickly discover that the company is involved in a foodborne illness outbreak and has several concurrent fires to put out. Against this back drop, the questions start flying:
- Do I have to give the government copies of my customer list?
- Do I have to allow the government to take pictures of my product, operation, etc.?
- Do I have any rights when it comes to a government inspection?
- What do I need to say or not say to my customers?
- Is there something we should be doing that we are not?
- Does my insurance policy cover this?
- Do I have enough insurance?
- Does it matter that the contaminated product was not ours?
- Do we have any exposure here?
- What should we be doing right now to mitigate our exposure to any type of litigation?
- What should we be doing to protect our brand identify and the company name?
Grappling with any one of these questions while you are watching a foodborne illness outbreak unfold in real-time is both difficult and time sensitive. In an ideal world, you would have a crisis management plan ready to be pulled off the shelf and executed upon. Moreover, the company’s employees would be similarly prepared as they would have received re-occurring training on the company’s crisis management policies and procedures.
The reality for most produce companies is much different… Under a sales driven business model, it is far to common for produce companies to rely on the food safety promises of third parties (many of which are not readily capable of verification) and for product testing to be too heavily focused on good arrival standards, which are governed by the relevant sales contracts. Against this back drop, even successful produce companies find themselves in uncharted waters when they are thrust into the middle of a foodborne illness outbreak and forced to handle all the related media exposure, demands from government investigators and other unanticipated events.
So What Should You Do? (Top 10)
- Seek the advice of an experienced food law attorney of your chosing!
- Through either your attorney or your company, have strategic partners identified and available for you to call upon for assistance. This will help ensure that the crisis management activities of your company does not preclude the company from continuing its “normal” business operations.
- Don’t write anything or say anything that you do not want to see in the media.
- Know your rights and proactively manage any and all government inspections or requests for information.
- Prepare and implement a public relations plan designed to address at least two main target audiences: (i) your customers and (ii) the public.
- Initiate the audits necessary to both identify the source of the problem (contaminated product) and to trace all of the contaminated product that flowed through your company or which may still be in your company.
- Be aware of cross contamination issues…
- Know how to properly document all of the processes mentioned above.
- Know how to properly destroy contaminated food.
- Conduct a review of all relevant insurance policies, supply contracts and other documents that may contain contractual obligations the company must comply with during the crisis. (i.e. are you obligated to notify your insurance carrier of the problem within a certain period of time?)
As you can see from the foregoing list, there are many things a produce company needs to know and do in order to protect itself (as best it can) from the fall out associated with a foodborne illness outbreak. Many of these things can and should be prepared in anticipation of a foodborne illness incident that we all hope never occurs, but there are also many things that can be done and should be done as the event unfolds.
Again, if you find yourself in the middle of a foodborne illness outbreak or related recall you would be well advised to seek the advice of an experienced food law attorney of your choosing. As we know from witnessing the Jensen Farms outbreak, few companies are adequately prepared to deal with these types of situations and that could lead to the demise of your company. Of course, time is always of the essence in these types of cases.
Wrongful death cases related to foodborne illnesses cost the food industry billions of dollars each year and very few, if any, companies responsible for the problem live to tell the story. Why? Frankly this is the way juries like it when it comes to food safety and public health. Accordingly, these types of cases are often won or lost before a civil action is ever filed.