Commenters Concerned About Agent Liability, High Costs of FSMA Reinspection Fees

(See ITT’s Online Archives 12073133 for summary of FDA’s FY 2013 fees. See also ITT’s Online Archives 12101902 for summary of increased U.S. Agent liability due to FSMA.)

U.S. Agents May be Hard to Find Given FSMA Liability; May Ask for Exorbitant Fees

Use of the U.S. Agent under the Bioterrorism Act of 2002 for assessment of reinspection fees greatly expands the potential financial liability of the U.S. Agent, said the Food Produce Association of the Americas (FPAA), which represents companies involved in the importation and distribution of fresh produce from Mexico. Fees for foreign reinspection could be as high as $40,000 based on FDA’s own analysis and an average of 120 hours to conduct a foreign inspection, it said.

As a result, U.S. companies will be reluctant to be the U.S. Agent for foreign facilities, leaving foreign facilities with limited options, FPAA said. Foreign facilities could even continue to export to the U.S. under different names or through third parties to avoid liability, it said. And companies may charge fees to foreign facilities because of the added liability, FPAA said. In theory, the liabilities could be such that no one might be willing to act as a U.S. Agent and foreign facilities would not be able to obtain FDA registrations, making their products completely inadmissible, said VLM Foods, an exporter of U.S. and Canadian Pork. Given the risk exposure, U.S. Agents will be able to extract substantial rents from foreign food producers looking to enter the U.S. market, it said.

Some may view these additional expenses as a form of taxation on non-U.S. foodstuffs, and it would not be surprising if parties in foreign markets tried to adopt similar regulations for foods entering from the U.S., VLM said. “In short, the establishment of U.S. Agent ‘gatekeepers’ may well increase costs to U.S. consumers and U.S. food exporters alike.”

FDA needs to confirm with U.S. Agents that they are listed as agents for foreign entities, and that they are willing to pay reinspection and other fees on behalf of the shipper, the Texas International Produce Association said. FDA should also clarify that any U.S. Agent can formally inform it prior to any food safety incident that they accept or deny responsibility for any and all foreign shippers that might list him or her as their U.S. Agent, it said. The National Fisheries Institute said the FDA should inform the U.S. Agent of the outcome of any initial inspection of the foreign facility and the scheduling of a subsequent reinspection. “The U.S. Agent should not find out that there is a potential to be invoiced for reinspection fees by reading a Warning Letter posted on FDA’s website,” it said.

Fees Exceed Comparable Fees by Other Agencies, Private Auditors

Commenters were also concerned about the high rates for the fees, particularly as they compare to other inspection operations. Despite FSMA’s mandate that the fees be used solely to pay for the costs of activities, FDA is including indirect costs in its fee calculations, such as human resources, administrative support, and legal counsel, the Grocery Manufacturers Association said. This is inappropriate because food facility reinspections are conducted by existing FDA employees, so FDA did not have to hire new employees and create a new infrastructure, it said.

When compared to other agencies, the FDA hourly costs "appear significantly and disproportionately large,” GMA said. The Food Safety and Inspection Service only charges $54.24 per hour for reimbursed inspection services, compared to $221 per hour for domestic FDA services, it said. “For the many GMA members that operate dual jurisdiction processing establishments, which manufacture both FDA and FSIS-inspected products, this disparity of costs for similar though not identical services is unjustifiable,” GMA said. The fees are also much higher than what private food safety auditors in California typically charge, said the California Strawberry Commission.

Fees Accord Different Treatment to Domestic Recalls, Foreign Import Alerts

Finally, the as-yet-unimplemented FSMA importer reinspection fees may be viewed as trade barriers as currently designed, said FPAA. Specifically, if a positive sample occurs in an imported product, importers would have to pay the fees to remove it from FDA detention without physical examination. But when domestic producers experience positive samples, there is a recall. The fees will not be assessed in such circumstances, FPAA said.

The resulting situation where imported products are subject to significant fees while domestic products are subject to minimal fees violates the core World Trade Organization principle of national treatment, FPAA said. “Member countries of the WTO cannot discriminate between imported and domestic products in terms of regulatory burden and/or fees,” it said.

“In our current budget conscious political environment, it may seem politically expedient to impose these reinspection fees, but the likely repercussions may far outweigh any benefits,” FPAA concluded. The amount of reinspection fees will at best represent a very small part of FDA’s budget, but the costs to industry and the consequential risks to public health could be substantial,” it said. “Potential damage to U.S. agricultural exports alone may exceed fee revenues many times over.”

Comments on the FY 2013 FSMA fees are available here.