FDA Deadline Nears; Unregistered Companies May Face Heavy Losses

The mandatory registration deadline set by the United States Food & Drug Administration (FDA) aimed at protecting the nation's food supply from bioterrorism is just around the corner and, according to legal experts, many companies still haven't taken the necessary steps to comply and others may simply abandon the U.S. market altogether.

Companies, both domestic and foreign, that fail to meet the December 12, 2003 deadline or err in meeting compliance regulations after that date risk having food shipments detained, rejected or destroyed, according to trade attorneys. The FDA program mandates the registration of all domestic and foreign food facilities that manufacture, pack or hold food for human or animal consumption. Particularly vulnerable are companies linked to foreign food suppliers, experts said, largely because of widespread confusion over the specific FDA compliance rules, which include a requirement for all foreign companies to secure U.S. agents to represent them.

Attorneys involved in international trade warned that some foreign food suppliers and their import network of brokers and distributors potentially face heavy losses if food shipments, particularly perishable items, are held up at port or placed in FDA holding pens.

The FDA, apparently in reaction to an outcry from international governments and concerned food suppliers in the U.S. and abroad, acted on October 10 to ease some of the rules, exempting some foreign food packagers from registration requirements and relieving brokers from ultimate responsibility if their foreign client companies fail to comply with certain "advance notice" provisions of the Public Health Security & Bioterrorism Preparedness & Response Act of 2002. To the food manufacturer, the advance notice regulation is perhaps most intimidating. This regulation requires that the FDA be informed, no more than five days and in some instances, no less than eight hours in advance, when specific shipments of human and animal foods are to arrive in the U.S. Once submitted, advance notice forms will go through a series of automated checkpoints. Forms red flagged by the FDA's Oasis computer program will be forwarded to the FDA for manual review. These shipments are subject to approval, inspection or refusal by the FDA.

In order to submit an advance notice form, each food facility will need to obtain an FDA registration number. Registration entails the completion of a form either online, by hand or on CD-ROM. The FDA says that registration information will be kept confidential. In the event of a bioterrorist threat, the FDA then will have a complete contact list of all companies involve in the food supply chain.

Incorrect or questionable paperwork or late or misdirected shipments will be kept in Customs warehouses until the old prior notice is cancelled and resubmitted correctly. Since many food products are date and temperature sensitive, much of the burden of red tape may still fall on the importers, who may find themselves spending significant time and money just locating their confiscated shipments.

But, even vocal critics of the FDA program say that the new interim regulations represent a huge improvement over what the regulations stated only six months ago.

Formerly, the regulations could hold the individual who transmitted the advance notice form - brokers, for example - legally responsible for its accuracy. Now that legal responsibility falls instead upon the submitter, experts said. Former regulations also made no distinction between modes of transport and the number of hours of prior notice. In other words, the FDA originally required the same advance notice period for products shipped by sea and products moving by truck. Under the new interim regulations, advance notice by sea is set at eight hours and by land by road at two hours.

Foreign exporters also must designate a U.S. agent to act as an emergency contact. Lauren Perez, attorney with the trade and customs law firm Sandler, Travis & Rosenberg, Miami, strongly recommended that the agent not be someone in the facility's existing supply chain, to avoid possible conflict of interest. Perez said that as a result of the new, complicated registration process, "up to 16% of foreign exporters who import 10 line-items or less will stop doing business with the U.S." She strongly recommended that foreign importers seek professional assistance in the U.S. for compliance.

Several U.S. law firms have begun offering FDA food facility registration programs for both foreign and domestic companies. Perez said her firm, Sandler, Travis & Rosenberg, for example, offers such a program at a fee of $500 for up to five facilities.

As part of the service, the firm will act as an agent for foreign companies, assist companies in the registration process, compliance with the advance notice form and communicating with Customs and the FDA if problems arise, Perez said. Other law firms, such as Becker & Poliakoff, P.A., Fort Lauderdale, offer similar agent services.

Perez pointed out, however, that anyone in the U.S. can act as an agent for a foreign firm. The FDA does not require that companies contract with law firms to meet the new regulations, Perez said.

Proponents say that while the new FDA regulations will require time, adjustment and patience, the number one issue is to protect the U.S. food supply from bioterrorism. The FDA has initiated a 75-day comment period for businesses to outline the anticipated impact of the new regulations. Perez encouraged food facilities submitting comments to the FDA to not only point out potential problems, but also potential solutions.
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