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February 2014Newsletter

Agribusiness, Food and Beverage Newsletter

5-Year Congressional Farm Bill Signed Into Law
Laura L. Riske

 

After years of grueling negotiations, the 949-page $956 billion sweeping Agricultural Act of 2014 (Farm Bill) passed the House 251-166 on January 29, the Senate 68-32 on February 4 and was signed into law by President Barack Obama on February 7, 2014. The new law cuts funding for food stamps, consolidates conservation programs, provides funding for energy programs and authorizes agricultural programs to provide farmers, ranchers and consumers certainty over the next five years. The food stamp program is approximately 80 percent of the total funding, while the remaining 20 percent goes toward the conservation programs, energy initiatives and agriculture subsidies. According to the Congressional Budget Office, the final bill saves $16.6 billion in spending over ten years when compared to current spending.

 

Two key Farm Bill legislative players voiced the following reactions to passage of the bill:

 

  • Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) “This is not your father’s Farm Bill. It’s a new direction for American agriculture policy. Major reforms will be implemented and direct payments will finally come to an end. The bill supports the transition Americans are already making to a healthier, more locally based food system. This is also one of the largest investments in land and water conservation we’ve made in many years.”

 

  • House Agriculture Committee Chairman Frank Lucas (R-Okla.) The bill marks “A new era of farm and food policy that values saving money, reforming or repealing government programs, and yet still providing an effective safety net for production of our national food supply and for those Americans who are struggling.”

 

Highlights of a few major provisions of the sprawling Farm Bill include:

 

Eliminates Direct Payments & Establishes New Crop Insurance Programs: Approximately $5 billion in automatic direct payments that had been sent out annually, regardless of need, to farmers and land owners for nearly two decades will cease under the new law. Instead, the new Farm Bill rewrites commodity subsidy programs and establishes new crop insurance programs. Under the new Farm Bill, instead of receiving subsidy payments whether crops were grown or not, now farmers will pay an insurance bill annually and they will only receive support from that insurance in years when they suffer losses. Specifically, the new Farm Bill offers producers a one-time choice to enroll their commodities in either revenue or price-triggered supports via the following programs:

 

*Agriculture Risk Coverage (ARC): This revenue program covers both price and yield losses, and makes payments when revenue falls below a trigger level; or

*Price Loss Coverage (PLC): This price support program pays out when market prices fall below trigger levels. This program allows for the optional purchase of additional crop insurance coverage under the Supplemental Coverage Option (SCO). Farmers who enroll in ARC are not eligible to buy SCO insurance.

Creates Dairy Margin Protection Program: The new Farm Bill provides historic reforms to dairy policy through the repeal of several existing programs and the creation of a new voluntary Margin Protection Program. The USDA must establish the new program no later than September 1, 2014. The new program offers dairy producers a safety net without imposing government-mandated supply controls. The new Margin Protection Program replaces the dairy Market Stabilization Program that was initially proposed by the National Milk Producers Federation. The new subsidized insurance program that was adopted is designed to protect against periods of both low milk prices and high feed costs, and pays farmers when the difference between milk and feed prices grow too small. The new program offers a risk management tool to help farmers deal with the global volatility in commodity prices in today’s market.

 

All U.S. dairy operators are eligible to participate in the new program provided they register, pay an annual $100 fee and establish a production history. Initially, the dairy operation production history is equal to the highest annual milk marketings of the participating dairy operation during any one of the 2011, 2012, or 2013 calendar years. The individual production history will grow by the U.S. average production growth in subsequent years. Dairy farms in operation less than one year may determine production history by using the volume of the actual milk marketings for months the dairy has been in operation extrapolated to a yearly amount; or estimate of the actual milk marketings of the participating dairy operation based on the heard size relative to the national rolling herd average. As it relates to protection/premiums, dairy operations may select margin insurance to protect between a $4.00/cwt to $8.000/cwt milk-feed price margin in 50 cent increments, or they may also elect to cover a percentage of their milk production.

 

Funds Supplemental Agriculture Disaster Assistance Program: The program includes a Livestock Indemnity Program for livestock losses from adverse weather, a Livestock Forage Program for losses resulting from drought or fire, a program of emergency relief to producers of livestock, honey bees, and farm raised fish not covered by the two previous programs and a Tree Assistance Program for natural disasters.

 

Reauthorizes Energy Programs: The Farm Bill provides $881 million over ten years for the continuation of energy programs. The Rural Energy for America Program (REAP) which funds biomass, biograss, wind, solar, hydroelectric was reauthorized at $50 million/year to help rural businesses and farmers conduct energy audits, install renewable energy technology or make energy efficiency improvements to their property. The Biomass Crop Assistance Program (BCAP) was reauthorized and includes $25 million/year in mandatory funding, prioritizes existing projects and will provide funding to farmers who are working to develop new biofuels from non-food sources. The bill also eliminates funding for the construction of ethanol blender pumps.

 

Maintains Country of Origin Labeling Rules: Most farm lobbyists pushed for passage of the final Farm Bill except for those representing the meat and poultry industry who opposed the bill because it did not remove onerous country of origin meat labeling requirements and new regulations on purchasing.

 

USDA Secretary Tom Vilsack will now take the lead in overseeing development of the rules that need to be established in order to implement and administer the new Farm Bill law. Working groups have already been established in the department to work to prioritize what segments of the new law move forward first.

 


 

It’s That Time of the Year Again: Tax Assessment Challenges

Nancy Leary Haggerty

 

No, we don’t mean time for the groundhog to finally stick his head up; it’s time to take a good look at the value the assessor is putting on your property, and consider whether it is correct. Property taxes are necessary, of course, for roads and schools and all of the other services your property receives, but you should take some time to make sure that you are not paying more than your fair share of these taxes.

 

Wisconsin’s State Constitution has a provision requiring that all real estate be taxed “uniformly.”  Regular real estate and personal property is taxed by the local municipality.  Property which is used for manufacturing purposes, is taxed by the State of Wisconsin, in an effort to make sure that manufacturing property throughout the State is taxed in the same manner.  Land which is in agricultural use enjoys a separate “use value assessment” system, which not only allows a lower assessment for land in that use, but also requires a per-acre penalty if that land is removed from the ag use, as defined by those statutes.

 

Of course, each of those taxing categories is controlled by pages of regulations containing definitions and limitations which are too complicated to insert into this article.  Be aware that if you bought a parcel during calendar year 2013, your tax assessment may rise this year to the sale price named on the Transfer Tax Return filed with that deed, and you will receive a notice sometime this Spring of that increased assessment. The notice will tell you the procedure for contesting that new higher assessment, and the time period, usually very short, during which you must file an appeal or lose the opportunity for another year.  However, if your tax assessment should have been reduced, and was not, you might not receive a notice at all, which means you must affirmatively seek out the date for filing the tax challenge, and the forms needed to preserve the right to challenge.  You must affirmatively notify the assessor if you demolished a building, or lost a tenant, suffered a casualty loss, signed new leases for lower rents or had to offer rent concessions to renew a lease, or moved a parcel of land into or out of ag use, if you want to be sure the 2014 tax assessment is properly calculated for the actual use of the land and actual income from it.  We can help you evaluate behind the scenes, if the property is accurately assessed, and, if it is not, file and defend a claim for you.  We often charge a nominal amount for the investigation, and then take the tax challenge on a contingency basis, so you are only billed if we secure a tax savings for you.

 


 

EPA Appeals Successful Challenge to a Pre-Enforcement CWA Order; Federal District Court Upholds Agricultural Stormwater Exemption for West Virginia Poultry CAFO

Leah H. Ziemba

 

In October 2013, the U.S. District Court for the Northern District of West Virginia held that rainwater containing some particles of manure, litter, dander and feathers from the farmyard of a poultry operation was exempt from federal Clean Water Act (CWA) regulation as “agricultural stormwater.”  Alt v. U.S. Environmental Protection Agency, Civil Action No. 2:12-CV-42 (N.D. W. Va., Oct. 23, 2013).   In late December 2013, EPA and several environmental groups filed an appeal of the district court’s decision to the U.S. Court of Appeals for the Fourth Circuit.  The Fourth Circuit’s review of Alt v. EPA will be closely watched by environmental and agricultural groups alike.  Because the district court’s decision applied the agricultural stormwater runoff exemption to stormwater discharges from a farmyard, not just a land application area, the Fourth Circuit will play an important role in reviewing the scope of the CWA and EPA’s permitting authority.

 

Alt’s Operation and EPA Enforcement

 

The plaintiff, Lois Alt, operates a poultry concentrated animal feeding operation (CAFO) in West Virginia that consists of eight poultry confinement houses equipped with ventilation fans, a litter storage shed, compost shed and feed storage bins.  All operations are under roof.  According to the administrative record, some particles of manure and litter from the operation had been tracked or spilled in Alt’s farmyard and some dust composed of manure, litter and dander, as well as some feathers, had been blown by the ventilation fans from the confinement houses into Alt’s farmyard where they settled on the ground.  Alt utilized certain management procedures to reduce the amount of manure and litter that could be exposed to precipitation in the farmyard. 

 

In November 2011, EPA issued an enforcement order alleging that Alt had violated the CWA by operating a CAFO without a National Pollutant Discharge Elimination System (NPDES) permit.  EPA alleged that Alt’s poultry operation had “discharged pollutants from man-made ditches via sheet flow to Mudlick Run [a stream on Alt’s property that eventually connects with the south branch of the Potomac River] during rain events generating runoff without having a NPDES permit.”  Id. at 5.  EPA concluded that Alt was in violation of the CWA as a matter of law. 

 

Alt’s Lawsuit, Reliance on Supreme Court’s Sackett Decision and EPA’s Withdrawal of Enforcement Order

 

Alt filed suit in the U.S. District Court for the Northern District of West Virginia challenging EPA’s enforcement order based on the U.S. Supreme Court’s 2012 Sackett v. EPA decision.  In Sackett, the Supreme Court allowed pre-enforcement judicial review of enforcement orders issued by EPA pursuant to the CWA.  Sackett v. EPA, 132 S. Ct. 1367 (2012).  The Sackett decision allowed a plaintiff to challenge in court EPA’s authority to issue a compliance order when the compliance order is issued.  Before Sackett, a plaintiff would have been forced to comply with the enforcement order or not comply with the enforcement order, wait for EPA to enforce the order while taking the risk of being fined for each day out of compliance, and then file a judicial challenge after EPA had taken steps to enforce the order. Here, Alt relied on Sackett’s authority to be proactive by challenging EPA’s authority to require a NPDES permit, before waiting for EPA to enforce its order against the operation. Plaintiff-intervenors, the American Farm Bureau and West Virginia Farm Bureau, joined with Alt in the suit and five environmental groups intervened on EPA’s behalf. 

 

After Alt filed suit, EPA withdrew the enforcement order, claiming that Alt had taken certain steps to remedy environmental harm and sought to dismiss Alt’s suit as moot.  Alt opposed EPA’s motion to dismiss on the basis that EPA had left open the possibility of reissuing the enforcement order against Alt if there was a significant change in the operations and EPA had not changed its position that stormwater contacting manure in the farmyard did not constitute agricultural stormwater exempt from NDPES permitting requirements. The court denied EPA’s motion to dismiss and allowed Alt to challenge EPA’s legal assertions regarding the extent of the agricultural stormwater exemption.  See Alt. v. EPA, No. 2:12-CV-42 (N.D. W. Va. Apr. 22, 2013).  Alt and the plaintiff-intervenors sought a declaratory judgment that any precipitation related discharges containing manure and litter emanating from Alt’s farmyard were exempt agricultural stormwater discharges.

 

Federal District Court Grants Summary Judgment to Alt; Upholds Agricultural Stormwater Exemption

 

The district court framed the central issue in the case as “whether the litter found on Alt’s farmyard that could be picked up by rainwater, washed two hundred yards across a grassy cow pasture, and discharged into a creek [Mudlick Run] was exempt from liability under the agricultural stormwater exemption to the definition of a point source under the CWA.”  Id. at 7.  The court reviewed the CWA’s legislative history, and its exemption of “agricultural stormwater runoff” from the definition of a point source.  See 40 CFR § 122.2.

 

The term “agricultural stormwater” has not been defined in the CWA.  In EPA’s 2003 CAFO rule, the definition of exempt “agricultural stormwater” was expanded to include land application discharges, if the land application met site-specific nutrient management practices.  The 2003 CAFO rule was challenged in Waterkeeper Alliance Inc. v. EPA, 399 F.3d 486 (2d Cir. 2005) and the Second Circuit upheld EPA’s exclusion of agricultural stormwater discharges resulting from land application, from designation as a point source under the CWA.  Id. at 507-09. 

 

EPA’s position has been that the agricultural stormwater exemption “applies only to precipitation-related discharges from land application areas … where application of manure, litter, or process wastewater is in accordance with appropriate nutrient management practices and not to discharges from the CAFO production area.”  Id. at 15.

 

Because EPA’s regulations only defined “agricultural stormwater” discharges in the context of land applications – not within the context of CAFO farmyard runoff – the district court did not give deference to EPA’s land application regulations and relied on statutory interpretation to determine whether the discharges at issue here met the definition of “agricultural stormwater” discharges.  According to the court, “[c]ommon sense and plain English lead to the inescapable conclusion that Ms. Alt’s poultry operation is ‘agricultural’ in nature and that the precipitation-caused runoff from her farmyard is ‘stormwater.’”  Id. at 18.  As a result, the court concluded that there was more to the agricultural stormwater exemption than set forth in the 2003 land application area regulations and the stormwater discharges from Alt’s farmyard qualified as exempt “agricultural stormwater discharges.”

 

Besides EPA’s argument that the land application area regulations are the exclusive source of the agricultural stormwater exemption and that the agency should receive deference, EPA also asserted that stormwater from a CAFO’s production area does not qualify for the exemption and that Alt’s discharge was industrial in nature, not agricultural.  Id. at 21.  The district court dismissed both arguments.  The court held that Alt’s “farmyard” was not a “production area” because the area at issue (between the poultry houses) was not the “animal confinement area, the manure storage area, the raw materials storage area, or a waste containment area.”  Id. at 22-23 (40 C.F.R. § 122.23(b)(8) (“production area”)). Although the definition of “production area” goes on to include but not be limited to “open lots, … cowyards, barnyards…” the court noted that all of the described areas are areas where animals may be kept or raised.  Id. at 23.  Because Alt’s farmyard is not an area where animals are confined, the court held it was not a production area.  Id.  The court found its interpretation to be consistent with EPA’s “longstanding interpretation that the agricultural stormwater exemption is inapplicable to runoff from within a confinement area, manure storage area, and similar features deemed to be the CAFO ‘production area.’”  Id. Moreover, Alt indicates that it is for this reason that she and “thousands of farmers like her not only keep their animals under roof, but also maintain covered structures for manure storage, composting, and similar activities.”  Id. at 23-24. 

 

Because stormwater discharges from Alt’s farmyard meet the definition of “agricultural stormwater exemptions” they are exempt from the CWA definition of a point source and are exempt from any NPDES permitting requirements, including industrial stormwater permitting requirements.  Id. at 25.

 

Significance of the District Court’s Decision

 

The district court addressed, for the first time since the U.S. Supreme Court’s Sackett decision, whether EPA can avoid pre-enforcement judicial challenges by simply withdrawing the enforcement order upon which the judicial challenge is based.  The Alt court held that EPA’s withdrawal of the enforcement order did not prevent Alt from pursuing her judicial challenge.  As for the agricultural stormwater exemption, the Alt court strengthened the exemption by clearly applying it to discharges from a farmyard and not limiting the exemption to land application areas in accordance with appropriate nutrient management practices.  

 

As previously noted, EPA and its related intervenors (Center for Food Safety, Potomac Riverkeeper, Waterkeeper Alliance, Inc., West Virginia Rivers Coalition and Food & Water Watch) have appealed the district court’s decision to the Fourth Circuit.  Look for the scope of the agricultural stormwater exemption to continue to play out this year as both sides have significant interest in how the Fourth Circuit will review the district court’s decision. 

 


 

Rainy Day Food Regulatory Projects

Seth A. Mailhot

 

Looking at some downtime between emergencies? It’s always a good idea to plan ahead for the next emergency! Some rainy day projects your regulatory team can do include scheduling an audit of your regulatory operations, and reviewing your recall program.

 

When conducting an audit, try to use a fresh set of eyes. Things that appear to be clean or in good working order to you because you see it day in and day out may appear unsanitary or in disrepair to someone not familiar with the facility. Also, it is always a good idea to review the procedures for handling an FDA inspection. These procedures should include the corporate policy for refusing to read, copy or sign any affidavit. All facilities subject to FDA inspection should have such a procedure, given that FDA is mandated under the Food Safety Modernization Act to conduct a greater number of inspections over the next few years. Everyone needs to be familiar with the plan for handling an FDA inspection, because it can happen, unannounced, at any time.

 

Food recalls are an ever present threat, and it’s important to review recall strategies periodically. For example, make sure the recall team identified in the plan is correct, that the list of contacts in the event of a recall is current, and that shipping and receiving records provide sufficient traceability. It might also be a good opportunity to review lot or batch identification to ensure that it is sufficiently descriptive to allow for targeted product recalls.

 

It may involve some work, but these preventative steps can help save costs and prevent agency actions ahead of time before the worst happens.


Pollution Exclusion Clauses: Wisconsin Courts Find “Septage” to be an Excluded Pollutant But Not “Manure”

Cameron F. Field

Leah H. Ziemba

 

Two Wisconsin Court of Appeals panels recently considered whether “manure” and “septage” fall under pollution exclusion clauses of insurance policies. One decision held that manure is not a pollutant, and insured a farmer after a manure application contaminated a neighbor’s well, while the other decision held that septage—a mixture of human urine, feces, house-hold chemicals, and water—is a pollutant, barring any insurance coverage. The panels’ analyses of the two cases illustrate how Wisconsin courts interpret pollution exclusion clauses for two different materials—manure and septage.

 

The two cases hinged on whether the contaminant at issue—manure or septage—was a “pollutant” under the respective insurance policies. The insurance policies were nearly identical, both expressly excluding coverage for losses from the release of “pollutants.” Pollutants were defined to be a solid, liquid, or gaseous irritant or contaminant, including “waste.” Materials that are recycled, reclaimed, or reconsidered may be considered “waste” under both policies.

Contamination of Property

 

In the first case, Wilson Mutual Ins. Co. v. Falk, Case No. 2013AP691 (WI Ct. App., Dist. 2, Dec. 11, 2013), dairy farmers fertilized their field with manure from their dairy cows according to a nutrient management plan prepared by an agronomist and approved by the county conservation division. A few months later, the Wisconsin Department of Natural Resources alleged that the farm’s manure had polluted an aquifer and neighboring wells. Thereafter, the neighboring landowners sought compensation for damages arising out of the well contamination. The circuit court concluded that the pollution exclusion in the farm’s policy applied so as to exclude coverage, finding that a “reasonable person in the position of the [dairy farmers] would understand cow manure to be waste.” The circuit court found that Wilson Mutual had no duty to defend or indemnify the dairy farmers and the dairy farmers appealed.

 

The Wilson panel examined the pollution exclusion from the standpoint of “a reasonable person in the position of the insured” while also taking into account the fact that a “substance may or may not be a pollutant under the terms of a policy exclusion depending on the context or environment in which the substance is involved.” Id. at ¶ 13 (citing Hirschhorn v. Auto-Owners Ins. Co., 2012 WI 20, ¶ 27; Langone v. American Family Mutual Insurance Co., 2007 WI App 121, ¶ 28). Applying these principles to the Wilson case, the panel found that the pollution exclusion clause in the Wilson Mutual policy did not apply to manure used as fertilizer on a farm. Id. at ¶ 14. Specifically:

 

A reasonable farmer would not consider manure to be a ‘pollutant,’ an ‘irritant,’ a ‘contaminant,’ or ‘waste.’ Cf. Hirschhorn, 338 Wis. 2d 761, ¶¶33-34, 37. Manure is an everyday, expected substance on a farm that is not rendered a pollutant under the policy merely because it may become harmful in abnormally high concentrations or under unusual circumstances. See Langone, 300 Wis. 2d 742, ¶26.

 

Id. The Wilson panel noted that “[m]anure in the hands of a dairy farmer is not a ‘waste’ product; it is a natural fertilizer….Manure, by act of nature, has always been universally present on dairy farms and, if utilized in normal farming operations, is not dangerous.” Id. at ¶ 15. Moreover, the court noted that Wilson Mutual could not express surprise that manure was not a “pollutant” because the policy covered property with the express purpose of pumping, storing and spreading manure (manure tankers, manure pump and manure spreaders). Id. at ¶ 16. The Wilson panel thus reversed the district court’s decision and held that the pollution exclusion clause did not bar coverage.

 

In the second case, Preisler v. Kuettel’s Septic Service, LLC, Case No. 2012AP2521 (WI Ct. App., Dist. 3, Jan. 14, 2014), the Kuettel family operated a septic pumping service and lived across the street from the Preisler family. The two families entered into an agreement to spread septage from the Kuettel’s septic business on Preisler’s farm fields as a fertilizer and the Kuettels received authorization from the Wisconsin Department of Natural Resources to apply a specific amount of septage on the Preislers’ fields. Several years and several septage applications later, the Preislers discovered their well water had elevated nitrate levels that resulted in Preislers’ cattle dying at an uncharacteristic rate.

 

Preislers filed suit against the Kuettels, alleging that the Kuettels were negligent in spreading and storing septage and caused a private nuisance and trespass through elevated nitrate levels. The Preislers added the Kuettels’ insurers to the case and the insurers filed motions for summary and declaratory judgment, arguing their policies did not provide coverage for the Preislers’ claims. The circuit court agreed, holding that “septage” – consisting largely of human feces and urine – was unambiguously “waste” and therefore a pollutant. Id. at ¶10. Because Preislers’ losses resulted from the “discharge, release, escape, seepage, migration or dispersal” of the septage, the Kuettels’ insurance companies were under no duty to defend or indemnify the insured.

 

Both the Kuettels and the Preislers appealed the circuit court’s decision. Under the relevant policies, a “pollutant” was defined as any solid, liquid, gaseous or thermal irritant or contaminant. Id. at ¶18. Courts have interpreted a “contaminant” as something that makes something else “impure or unclean by contact or mixture.” Id. The Preisler panel affirmed the circuit court’s decision and concluded septage was “plainly a contaminant and irritant.” The septage in this case was waste materials from septic tanks, grease traps, floor pits and catch basins – all materials that are “widely considered undesirable precisely because they cause impurity and uncleanliness.” Id. at ¶19.

 

The Kuettels argued that the Preislers consented and intended to have the septage sprayed on their land, in contrast to the legal precedent where the waste was unwanted. See id. at ¶24. The panel dismissed this argument, noting that the policies’ definitions of “pollutant” did not include an element of intent. Id. (noting also that Preislers clearly did not consent to having septage applied in such quantities that would cause well contamination).

 

Finally, both the Kuettels and the Preislers argued that the circuit court interpreted the policies contrary to the Kuettels’ reasonable expectations. Id. at ¶26. However, the court will not look to the expectations of the insured in the face of a clear and unambiguous exclusion, as the court found here. Id. at ¶26-27, 36. Because the Kuettels’ reasonable expectation was a focus of the appeal, the panel addressed the argument despite the fact that the language of the policy was unambiguous. The panel reviewed the applicable case law and concluded that a “reasonable insured would not view spreading or injecting septage on farmland as an ordinary, wholly unremarkable event.” Id. at ¶32. Therefore, although the expectations of a reasonable insured were irrelevant to the panel’s analysis, this argument would have also failed. Id. at ¶36, 38. The Preisler panel affirmed the circuit court’s denial of coverage.

 

Different Materials, Different Legal Analysis

The two panels took different approaches to determining whether the material at issue qualified as a pollutant under the insurance policies. Under Preisler, the court’s analysis ended after it found that septage was clearly a pollutant under the definition of the insurance policy. In Falk, the court found the pollution exclusion policy to be ambiguous as applied to manure, so it went one step further in its analysis and looked to the reasonable expectations of the insured. The insureds in Falk were dairy farmers, and from the perspective of the reasonable dairy farmer, the court held that manure is not considered a pollutant, irritant, or contaminant; it is “liquid gold” because it is used to fertilize the fields that grow the food that nourishes the cows.

 

These two cases show how two similarly worded insurance policies can lead to different liability scenarios based on the facts of each case. If you regularly deal with either manure or septage applications, be sure you know whether you are insured for any accidental property damage caused by your activities. Talk to your insurance provider, or consult an attorney, and go through the details of your policy and farming operation to identify the risks related to your operation and policy language.

 


 

Food Safety Modernization Act: Latest Update

Seth A. Mailhot

 

The Food Safety Modernization Act (FSMA), which was signed into law by President Obama on January 4, 2011, makes significant changes to the Federal Food, Drug and Cosmetic Act with respect to FDA’s authority over food. Intended to strengthen the authority of the U.S. Food and Drug Administration (FDA) to ensure the safety of the U.S. food supply, FSMA will change regulatory requirements of all aspects of the food and agriculture industry, including methods for growing of crops, importation of food, animal feed, transportation, and warehousing.

 

FDA is currently under a court order to issue the remaining rules mandated under FSMA. According to the order, all final rules are to be issued by June 30, 2015. Comment periods for most rules may not be extended past March 31, 2014, with the one exception being the comment period for the sanitary transport rule.  Given the vast number of regulations currently being drafted, the following bullet list provides a brief update on the status of all outstanding rules:

 

  • Preventive Controls for Human Food (Hazard Analysis and Risk-based Preventative Controls, or HARPC)
      • The rule has two major features. The first feature is new provisions requiring hazard analysis and risk-based preventive controls (HARPC) in the production of food. The second feature is a revision of the existing Current Good Manufacturing Practice (CGMP) requirements found in 21 CFR part 110.
      • The proposed rule will require food processors to impose a system similar to Hazard Analysis and Critical Control Points (HACCP) requirements for juice and seafood processors.  CGMP requirements will be strengthened with regards to prevention of food allergen contamination and cross-contact by including controls over food-packaging materials, foods and food-contact surfaces.
      • The comment period for the proposed rule closed on November 22, 2013. The final rule is still pending.

 

  • Produce Safety Rule
      • The proposed rule would establish science-based minimum standards for the safe production and harvesting of raw agricultural commodities to minimize the risk of serious adverse health consequences or death.
      • The proposed rule, if implemented, will require farmers to apply hygienic practices to the growing of crops, including monitoring the quality of water used to produce crops, restrictions on the use of manure, and training requirements for employees.
      • The main comment period for the proposed rule closed on November 22, 2013.  FDA is still accepting comments on the Environmental Impact Statement (EIS) until March 15, 2014.  The EIS comments are to help FDA determine relevant issues that will influence the scope of the environmental analysis, including potential alternatives, and the extent those environmental issues will be analyzed.

 

  • Foreign Supplier Verification Programs (FSVPs)
      • The proposed regulations, issued on July 29, 2013, would require importers to implement FSVPs that provide adequate assurances that foreign suppliers produce food in compliance with processes and procedures, including risk-based preventive controls.
      • The proposed rule, if implemented, will impose significant requirements on foreign food producers and importers.
      • The original comment period was extended, and comments were due on January 27, 2014.

 

  • Accreditation of Third-Party Auditors/Certification Bodies
      • The proposed rule, issued on July 29, 2013, would establish a program for accreditation of third-party auditors to conduct food safety audits and issue certifications of foreign facilities and the foods they produce for both humans and animals.
      • As with the proposed FSVPs rule, the comment period was extended to January 27, 2014.

 

  • Preventive Controls for Animal Food
      • The proposed rule, issued on October 29, 2013, would create new current good manufacturing practice (CGMP) regulations for manufacturing, processing, packing, and holding animal food, and implements FSMA’s preventive control provisions.
      • Similar to the proposed rule for Preventive Controls for Human Food, this proposed rule imposes a HACCP-like system and CGMP requirements on animal food processors.
      • The comment period was just recently extended to March 31, 2014.

 

  • Intentional Contamination
      • The proposed rule, issued on December 24, 2013, would require registered domestic and foreign food facilities to address hazards that may be intentionally introduced by acts of terrorism.
      • Under the proposed rule, all registered food facilities would be required to identify and implement focused mitigation strategies to minimize or prevent significant terrorism vulnerabilities identified at actionable process steps in a food operation.
      • Comments are due on March 31, 2014.

 

  • Sanitary Transport of Food and Feed
      • The proposed rule, which was just released on January 31, 2014, would establish regulations governing the transport of food and feed originally required under the Sanitary Food Transportation Act of 2005.
      • The proposed rule would establish requirements for shippers, receivers, and carriers transporting food by motor or rail to ensure the safety of food being transported.
      • Among other requirements, under the proposed rule, shippers, receivers and carriers would be responsible to ensure vehicles and equipment do not cause transported food to become contaminated, and for maintaining records on cleaning, prior cargos and temperature control.  These proposed regulations, if implemented, are anticipated to have a significant effect on the transportation and warehousing of food.
      • Comments are due by May 31, 2014.  In particular, FDA has requested comments regarding whether the proposed rule should apply to anyone other than shippers, receivers and carriers, and whether the proposed rule should apply to intrastate activities.

 

Given the tremendous impact these rules will have on industry, companies should carefully review the proposed rules and submit substantive comments where comment periods are still open.  Michael Best & Friedrich LLP is actively monitoring the implementation of FSMA, and is available to both provide advice on the impact the proposed rules may have on operations, and help draft comments to ensure that client concerns are considered in the final rule.

 


 

Significant Changes Coming to FDA’s Food Inspections Operations

Seth A. Mailhot

 

On February 3, 2014, U.S. Food and Drug Administration (FDA) Commissioner Margaret A. Hamburg issued a memorandum detailing dramatic changes to FDA’s inspection and compliance activities. Among the changes identified in the memorandum, FDA will shift from the current region-based inspection and compliance system to a product-based system. Under this approach, investigators and compliance officers will specialize according to commodity. FDA will also ‘de-layer’ its management and review levels associated with inspections and enforcement to shorten review time and enhance accountability.

 

Deputy Commissioner for Global Regulatory Operations & Policy Howard Sklamberg noted in a recent National Association of State Department of Agriculture meeting that the changes will result in “a unified food and feed program,” allowing the Agency to “have seamless conversations within FDA.”  Further, FDA’s “workforce will be specialized, much more than it is today,” where “[t]here will be folks in [FDA] whose only job will be food safety.”  “I think they’re the most fundamental changes at FDA in memory — in decades.”

 

A detailed analysis of Commissioner Hamburg’s memorandum is provided in our client alert, available here. Michael Best & Friedrich LLP can provide clients with a detailed analysis of what these changes will mean for regulated industry.

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