The Impact of FSMA Import Rules on Domestic Suppliers

By Ching-Fu Lin

The Food and Drug Administration’s (FDA) proposed rule on Accreditation of Third Party Auditors to implement the Food Safety Modernization Act (FSMA) has given rise to many questions on both domestic and international levels.  The proposed rule is intended to establish a program for recognition of accreditation bodies and accreditation of third-party auditors to provide the FDA with a more efficient tool to regulate imported food products.  In this regard, §307 of the FSMA and its implementing rule are generally seen as necessary to assist the FDA in regulating food imported from foreign jurisdictions, as the FDA is currently administratively and financially unable to ensure import safety on its own.

Again, the proposed rule on Accreditation of Third-Party Auditors is designed to cope with import food safety, and works in an inter-related manner to another proposed rule for Foreign Supplier Verification Programs (FSVP) for Importers of Food for Humans and Animals.  However, many have expressed concerns about the possible trend toward  such “import” rules – which embrace private regulatory participation – becoming de facto “domestic” rules.  Although the legal effects of private certification against FDA standards of domestic products are yet to be clarified, the FDA indicated that such an introduction of rules to the domestic sphere may be desirable in the proposed rule on Accreditation of Third-Party Auditors:

It is our intent that the program we establish for foreign food safety audits be solidly grounded in the key principles set out in the statute and in the international standards and best practices that are currently used by leaders at the forefront of efforts to ensure auditor competency and objectivity. We realize that the same principles and standards that are features of a rigorous and credible program for audits of foreign firms would likewise hold great merit for audits of domestic food facilities.

The tripartite private regulatory system (see Lawrence Busch) consisting of private standards, audits, and certifications has been widely practiced in and beyond the area of food (e.g. Eco-friendly detergents and fair trade coffee).  Such systems will continue to expand despite national borders or the FSMA (although the FSMA import rule may result in additional market incentives) as a rapidly growing number of food retailers and service providers have required their upstream suppliers, foreign or domestic, to get certified to various requirements, private or public.  Against such a backdrop, the concern should not be whether private regulatory participation is going to be the de facto domestic norm but how to effectively orchestrate it to reach an optimal output.  And the first question is whether the institutional design in the proposed rule on Accreditation of Third-Party Auditors (albeit aimed at import safety) can serve the domestic context well.

I have previously expressed concerns about the prolonged multilayer delegation chain endorsed by the proposed rule and the resulting dilution of accountability and effectiveness.  As explained in a previous post, “[u]nder the new program, the FDA would recognize accreditation bodies, which would in turn accredit third-party auditors.  These third-party auditors would then conduct onsite food safety audits in foreign jurisdictions and issue certifications for foreign food producers.”  An accreditation body can range from being a foreign government/agency to a private third-party while a third-party auditor can be a foreign government, foreign cooperative, or a private third party.  In the international context, language and cultural barriers are prevalent and the FDA usually lacks comprehensive information about a given market, infrastructure, corporate competence, and regulatory environment.  It may therefore be necessary to delegate accreditation bodies that have sufficient institutional capacity, scientific expertise, and relevant working knowledge (mostly local or regional) the authority to accredit third-party auditors.  In the domestic context, however, such regulatory intermediaries may appear redundant, especially when the multilayer delegation structure increate the regulatory distance and dilute the rigorousness of oversight and accountability.

Furthermore, there have been significant concerns regarding the existing capacity of food facilities, third-party auditors, and testing labs.  While an FDA program on technical assistance and capacity building may be infeasible in the international context given the implied financial and administrative burden, it is certainly possible in the domestic context (preferably in collaboration with state agencies).  An overarching federal program on technical assistance and capacity building, of course, should be designed in a way consistent with the World Trade Organization’s nondiscrimination rules (treating foreign and domestic suppliers/products equally).  Should the FDA seriously consider embracing the tripartite private regulatory system in the domestic setting and conferring a certain legal effect in terms of enforcement discretion (since there is no congressional mandate) to private certification against FDA standards of domestic products, concerns as such should be addressed.

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