# Establishment and Maintenance of Records Under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002

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URL: https://www.frixlaw.com/law-library/documents/fr%3A03-11460

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** May 9, 2003
- **Citation:** 68 FR 25188

## Text

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration
21 CFR Parts 1 and 11
[Docket No. 02N-0277]
RIN 0910-AC39
Establishment and Maintenance of Records Under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002

AGENCY:

Food and Drug Administration, HHS.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Food and Drug Administration (FDA) is proposing regulations that would require the establishment and maintenance of records by certain domestic persons who manufacture, process, pack, transport, distribute, receive, hold, or import food intended for human and animal consumption in the United States. In addition, these requirements apply to certain foreign facilities that manufacture, process, pack, or hold food for human or animal consumption in the United States. Such records are to allow for the identification of the immediate previous sources and the immediate subsequent recipients of food. The proposed regulations implement the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (the Bioterrorism Act) and are necessary to properly address credible threats of serious adverse health consequences or death to humans and animals. FDA expects that the requirements the agency is proposing in these regulations, if finalized as proposed, would result in a significant improvement in FDA's ability to respond to and help contain threats of serious adverse health consequences or death to humans or animals from accidental or deliberate contamination of food.

DATES:

Submit written or electronic comments by July 8, 2003. Written comments on the information collection provisions should be submitted by June 9, 2003.

ADDRESSES:

Submit written comments to the Dockets Management Branch (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, Maryland 20852. Submit electronic comments to http://www.fda.gov/dockets/ecomments. The Office of Management and Budget (OMB) is still experiencing significant delays in the regular mail, including first class and express mail, and messenger deliveries are not being accepted. To ensure that comments on the information collection are received, OMB recommends that written comments be electronically mailed to sshapiro@omb.eop.gov or faxed to the Office of Information and Regulatory Affairs, OMB, Attn: Stuart Shapiro, Desk Officer for FDA, FAX: 202-395-6974.

FOR FURTHER INFORMATION CONTACT:

Nega Beru, Center for Food Safety and Applied Nutrition (HFS-305), Food and Drug Administration, 5100 Paint Branch Pkwy., College Park, MD 20740, 301-436-1400.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background and Legal Authority

A. Public Health Security and Bioterrorism Preparedness and Response Act of 2002

B. Preliminary Stakeholder Comments

C. Highlights of the Proposed Rule

II. Description of the Proposed Regulations

A. General Provisions

1. Who is subject to this subpart? (Proposed § 1.326)

2. Who is excluded from all or part of the regulations in this subpart? (Proposed § 1.327)

3. What definitions apply to this subpart? (Proposed § 1.328)

4. Do other statutory provisions and regulations apply? (Proposed § 1.329)

5. Can existing records satisfy the requirements of this subpart? (Proposed § 1.330)

B. Establishment and Maintenance of Records to Identify the Nontransporter and Transporter Immediate Previous Source of all Food (Proposed § 1.337)

C. Establishment and Maintenance of Records to Identify the Nontransporter and Transporter Immediate Subsequent Recipient of all Food (Proposed § 1.345)

D. Requirements to Establish and Maintain Records to Trace the Transportation of all Food

1. Who is required to establish and maintain records for tracing the transportation of all food? (Proposed § 1.351)

2. What information is required in the transportation records? (Proposed § 1.352)

E. General Requirements

1. What are the record retention requirements? (Proposed § 1.360)

2. What are the record availability requirements? (Proposed § 1.361)

3. What records are excluded from this subpart? (Proposed § 1.362)

4. What are the consequences of failing to establish or maintain records or make them available to FDA? (Proposed § 1.363)

5. What are the compliance dates for this subpart? (Proposed § 1.368)

III. Analysis of Economic Impact

A. Benefit-Cost Analysis

B. Initial Regulatory Flexibility Analysis

C. Unfunded Mandates

D. SBREFA Major Rule

IV. Paperwork Reduction Act of 1995

V. Analysis of Environmental Impact

VI. Federalism

VII. Comments

VIII. References

I. Background and Legal Authority

A. Public Health Security and Bioterrorism Preparedness and Response Act of 2002

The events of September 11, 2001, reinforced the need to enhance the security of the U.S. food supply. Congress responded by passing the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (“the Bioterrorism Act”) (Public Law 107-188), which was signed into law on June 12, 2002. The Bioterrorism Act includes a provision in Title III (Protecting Safety and Security of Food and Drug Supply), Subtitle A—Protection of Food Supply, section 306 (21 U.S.C. 335a), which amends the Federal Food, Drug, and Cosmetic Act (the act) by adding section 414, Maintenance and Inspection of Records (21 U.S.C. 350(c)). Section 414(b) of the act provides, in part, that the Secretary of Health and Human Services (the Secretary), may by regulation establish requirements regarding the establishment and maintenance, for not longer than 2 years, of records by persons (excluding farms and restaurants) who manufacture, process, pack, transport, distribute, receive, hold, or import food. The records that must be kept by these regulations are those that are needed by the Secretary for inspection to allow the Secretary to identify the immediate previous sources and immediate subsequent recipients of food, including its packaging, in order to address credible threats of serious adverse health consequences or death to humans or animals. In section 306(d) of the Bioterrorism Act, Congress directed the Secretary to issue proposed and final regulations establishing recordkeeping requirements under section 414(b) of the act no later than 18 months after enactment of the Bioterrorism Act, that is, by December 12, 2003.

In addition, the Bioterrorism Act adds a new section 414(a) to the act that

provides records inspection authority to FDA. Section 414(a) of the act provides that when the Secretary has a reasonable belief that a food is adulterated and presents a threat of serious adverse health consequences or death to humans or animals, persons who manufacture, process, pack, distribute, receive, hold, or import food must provide access to records related to the food that are needed to assist the Secretary in determining whether the food is adulterated and presents a threat of serious adverse health consequences or death to humans or animals. Section 306 of the Bioterrorism Act also amends section 704(a) of the act (21 U.S.C. 374(a)) to specifically authorize FDA inspections of all records and other information described in section 414 of the act, when the Secretary has a reasonable belief that an article of food is adulterated and presents a threat of serious adverse health consequences or death to humans or animals. Also, section 301 of the act (21 U.S.C. 331) is amended to make it a prohibited act to refuse to permit access to, or copying of, any record as required by section 414 or 704(a) of the act; or to fail to establish or maintain any record as required by section 414(b) of the act or to refuse to permit access to or verification or copying of any such required record; or for any person to use to his own advantage, or to reveal, other than to the Secretary or officers or employees of the Department of Health and Human Services, or to the courts when relevant in any judicial proceeding under this act, any information acquired under authority of section 414 of the act.

In addition to section 306 of the Bioterrorism Act, which amends the act as described above, FDA is relying on sections 701(a) of the act (21 U.S.C. 371(a)) in issuing this proposed rule. Section 701(a) of the act authorizes the agency to issue regulations for the efficient enforcement of the act.

B. Preliminary Stakeholder Comments

On July 17, 2002, FDA sent an open letter to the members of the public interested in food issues outlining the four provisions in Title III of the Bioterrorism Act that require FDA to issue regulations in an expedited time period, and FDA's plans for implementing them. In the letter, FDA invited stakeholders to submit comments to FDA by August 30, 2002, for FDA's consideration as it developed this proposed rule. FDA also held meetings with representatives of industry, consumer groups, other Federal agencies, and foreign embassies after sending out the July 17, 2002, letter, to solicit stakeholder comments. In response to these solicitations, FDA received a number of comments regarding section 306 of the Bioterrorism Act.

FDA has considered all the comments received by August 30, 2002. FDA will consider all comments we received so far with the comments we receive during the public comment period on this proposed rule in developing the final rule. Some of the significant comments FDA received on or before August 30, 2002, include:

• The regulations should be performance-based. There is no need to specify the form or manner in which the information must be kept by a person subject to the regulations;

• The regulations should provide flexibility for using existing recordkeeping systems;

• The regulations should give businesses the flexibility they need to store records in the manner they find most efficient;

• The regulations should divide food products into two categories, perishable and nonperishable, and establish separate recordkeeping requirements for each;

• The regulations should not have a 2-year time period for maintenance of records for fresh fruits and vegetables;

• The regulations should not require retailers to maintain records to identify which consumers bought specific food products;

• The regulations should make clear that the transporter of the food and its packaging between sources and recipients should not be considered the “immediate previous source” or the “immediate subsequent recipient” under the Bioterrorism Act;

• The regulations should make the actual physical location of the food the key to identifying the source and recipient, which may differ from ownership (i.e., corporate headquarters);

• The regulations should exclude as farms those engaged in shellfish growing and harvesting in the farm exemption;

• The regulations should define the exemption for restaurants as businesses that prepare food at the same location where such food is sold to individual consumers, and where such food may be eaten;

• The regulations should provide a phase-in period of at least 6 months to allow all businesses to make any needed adjustments to their current practices before implementation of new regulations;

• Although the regulations must take size of business into account, the regulations should not have a general exemption for small businesses;

• The regulations should allow for phasing-in of the requirements based on the size of regulated companies.

C. Highlights of the Proposed Rule

This proposal is just one of several rulemaking activities currently underway as part of the overall implementation of Title III of the Bioterrorism Act that enhance FDA's ability effectively and efficiently to respond to bioterrorist threats and other food-related emergencies in a way that promotes and protects the public health. Our intent in developing these proposed regulations is to provide the proper balance between ensuring that FDA has information it needs to complete a tracing investigation and ensuring adequate and reasonable flexibility for industry to comply with these requirements.

Section 414(b) of the act, as added by section 306(a) of the Bioterrorism Act, provides that the Secretary “may” by regulation establish recordkeeping requirements. Section 306(d) of the Bioterrorism Act, however, provides that the Secretary “shall” issue proposed and final regulations no later than 18 months from the date of enactment. FDA believes that Congress has directed the agency to exercise the authority in section 414(b). However, the agency recognizes that the use of the term “may” in one section of the statute and “shall” in another section creates an ambiguity. We request comments on our interpretation that we are required by section 306(d) of the Bioterrorism Act to exercise the authority in section 414(b) of the act.

In establishing and implementing this proposed rule, FDA will comply fully with its international trade obligations, including the applicable World Trade Organization (WTO) agreements and the North American Free Trade Agreement (NAFTA). For example, FDA believes this proposed rule is not more trade-restrictive than necessary to meet the objectives of the Bioterrorism Act. FDA has endeavored to make the establishment and maintenance of records process as simple as possible for both domestic and foreign facilities.

FDA is proposing to describe the specific information a covered entity must keep, but not specify the form or type of system in which those records must be maintained. Some of the key provisions we are proposing include: (1) Requirements to establish and maintain records to identify the immediate previous source of all food, (2) requirements to establish and maintain records to identify the immediate subsequent recipient of all food, (3) requirements to establish and maintain

records to trace the transportation of all food, (4) record retention requirements, (5) record availability requirements, and (6) compliance dates. Following is an overview of the proposed regulations, which is intended to highlight the content of certain sections and request comment on those sections specifically, including comment on whether certain requirements should be included in the final regulations.

Proposed requirements to establish and maintain records to identify the nontransporter and transporter immediate previous sources of all food (§ 1.337) would require specific persons (“you”) to establish and maintain records that identify the sources of all food you receive. The information that we propose as necessary to identify the nontransporter immediate previous sources includes: (1) The name, address, and phone number of the nontransporter immediate previous source; (2) the type of food received; (3) the date you received the food; (4) the lot number or other identifier of the food if available; (5) the quantity; and (6) the name, address, and phone number of the transporters who transported the food to you.

Proposed requirements to establish and maintain records to identify the nontransporter and transporter immediate subsequent recipients of all food (§ 1.345) would require that you keep records that identify the nontransporter recipients of all food you release. The information that we propose as necessary to identify the nontransporter immediate subsequent recipients is similar to that required to identify the nontransporter immediate previous sources.

Proposed requirements to establish and maintain records to trace the transportation of all food (§§ 1.351 and 1.352) would require that you keep records that trace the transportation process of all food you transport. The information that we propose as necessary to trace the transportation process includes: (1) The name, address, and phone number of the person who had the food immediately before you (the transporter's immediate previous source), and the date you received it from that person; (2) the name, address, and phone number of the person who had the food immediately after you (the transporter's immediate subsequent recipient), and the date you delivered it to that person; (3) the type of food transported; (4) the lot number or other identifier of the food if available; (5) the quantity; and (6) identification of each and every mode of transportation used (e.g., company truck, private carrier, rail, air, etc.) from the time you first received the food until the time you delivered it.

Proposed record retention requirements (§ 1.360) would require records for perishable foods not intended to be processed into nonperishable foods to be retained for 1 year after the date the records were created. FDA seeks comment on whether a person subject to these proposed regulations always or usually knows at the time perishable food is released whether or not it is intended to be processed into nonperishable food. For all other food, you would be required to retain the records for 2 years after the date the records were created. You would be required to retain all records at the establishment where the covered activities described in the records occurred (onsite) or at a reasonably accessible location. The maintenance of electronic records would be acceptable. FDA is proposing to exempt electronic records established or maintained to satisfy the requirements of this subpart from the requirement to comply with part 11—Electronic Records; Electronic Signatures (21 CFR part 11) and proposing to amend part 11 to reflect this exemption.

Proposed records availability requirements (§ 1.361) would require that records be made available within 4 hours of an FDA request if the request is made between 8 a.m. and 6 p.m., local standard time, Monday through Friday, or within 8 hours of a request if made at any other time.

In § 1.368, the agency is proposing that firms be in full compliance with these regulations within 6 months of publishing the final regulations. However, these proposed requirements would not be effective for small businesses (those employing fewer than 500 but more than 10 full-time equivalent employees) until 12 months after publishing the final regulations. Very small businesses that employ 10 or fewer full-time equivalent employees would have 18 months to comply.

The Bioterrorism Act directs the Secretary to take appropriate measures to ensure that there are effective procedures to prevent the unauthorized disclosure of any trade secret or confidential information that is obtained by the Secretary under the new regulations. FDA is planning to reemphasize in instructions to FDA personnel the importance of current protections and legal requirements against the unauthorized disclosure of any trade secret or confidential information that is obtained.

Section 306 of the Bioterrorism Act expressly states that FDA has authority to require recordkeeping as to “food, including its packaging.” FDA interprets this section as authority to require persons who manufacture, process, pack, transport, distribute, receive, hold, or import food to establish and maintain records to allow for the identification of the immediate previous sources and immediate subsequent recipients of food packaging as well. FDA interprets packaging in section 306 of the Bioterrorism Act to mean the outer packaging of food that bears the label. FDA is not interpreting packaging to include food contact substances, which are included in the definition of “food.” Outer packaging would include, for example, the outer cardboard cereal box that bears the label of the cereal, but would not include the inner lining that holds the cereal. Outer packaging would also not include the outer shipping box in which the cereal boxes are shipped.

FDA has tentatively concluded that the risk to human and animal health from contamination of outer food packaging is relatively small compared to the risk from contamination of the immediate packaging that comes in direct contact with food. Therefore, FDA is proposing not to require covered persons to keep records regarding outer food packaging. However, the agency also recognizes that there may be instances where it may be necessary for FDA to be able to investigate agents that could lace outer packaging and could thereby contaminate a food for which the immediate food contact packaging may not provide an adequate barrier. In addition, outer packaging could be intentionally diverted and used to package food that has been tampered with. FDA seeks comment on whether the level of risk to human and animal health from potential contamination of outer packaging is high enough to warrant inclusion of outer packaging in the final regulations.

In addition to the above, we seek comment on all other provisions in the proposed regulations, such as the proposed definitions and exclusions. We also invite comment on whether the final rule should include additional provisions, such as a model form that can be used to record all the required information.

II. Description of the Proposed Regulations

A. General Provisions

1. Who is subject to this subpart? (Proposed § 1.326)

Proposed § 1.326(a) describes the scope of the rule. As required by the Bioterrorism Act, proposed § 1.326(a) would require domestic persons who

manufacture, process, pack, transport, distribute, receive, hold or import food intended for human or animal consumption in the United States to comply with the regulations in this subpart, unless you qualify for one of the exclusions proposed in § 1.327. In addition, foreign facilities that manufacture/process, pack, or hold food for human or animal consumption in the United States are subject to these regulations, unless you qualify for one of the exclusions proposed in § 1.327.

However, even if you qualify for one of the exclusions proposed in § 1.327, if you conduct more than one type of activity at a location, and some of that activity is not exempt, you would be required to keep records with respect to the statutorily covered activities. For example, in addition to selling food to consumers, a retail facility may have an onsite restaurant or counter that prepares food it sells to consumers. The restaurant activity is exempt from all of the regulations in this subpart; however, the retail activities are covered by § 1.336. Similarly, a retail facility may sell both food and nonfood products, and may even sell primarily nonfood products. Regardless of what proportion of the retail facility sells nonfood products, these proposed regulations would require the retail facility to keep records of the immediate previous source for all food it receives that is not exempted by an exclusion. The regulations do not apply to the nonfood products the retail facility receives.

Proposed § 1.326(b) would require compliance by persons who engage either in interstate or in intrastate activities involving food. The Bioterrorism Act does not limit the establishment and maintenance of records requirement only to persons directly engaged in interstate commerce. To the contrary, the Bioterrorism Act provides FDA with the authority to require the establishment and maintenance of records by all “persons” who engage in specified activities involving food. Therefore, FDA tentatively concludes that the statute allows FDA to require domestic persons to keep records, whether or not they engage in interstate commerce. Because a bioterrorist threat involving food or other food-related emergency would have the same effect on the public health regardless of whether the food had originated from an out of state source, FDA is proposing in § 1.326(b) that all persons who manufacture, process, pack, transport, distribute, receive, hold, or import food be subject to these regulations, whether or not they directly engage in interstate activities involving food. Nonetheless, because FDA recognizes that this is an important and controversial issue, the agency is seeking comment on whether its tentative conclusion that it has authority to require recordkeeping by persons engaged in only intrastate commerce is correct. FDA also seeks comment on how many intrastate persons are not covered by one of the exemptions from the recordkeeping requirement (e.g., the farm or retail exemption) and we invite recommendations on what screening questions the agency could ask to enable a person to easily determine whether the person is engaged in interstate or intrastate commerce.

Proposed § 1.326(a) would also require compliance by foreign facilities that manufacture/process, pack, or hold food for human or animal consumption in the United States unless the facilities qualify for an exclusion under proposed § 1.327(f). FDA is proposing that the foreign facilities that are required to register under section 305 of the Bioterrorism Act also be required to establish and maintain records under section 306 of the Bioterrorism Act. (The foreign facilities that would be excluded from both the proposed registration and recordkeeping requirements are described in the discussion of proposed § 1.327(f).) FDA believes if these foreign firms were not required to establish and maintain records identifying the immediate previous sources and immediate subsequent recipients of food, trace back of food products from outside the United States would be severely compromised. FDA believes that this approach provides the most efficient and effective strategy for obtaining needed information on food from foreign countries. FDA plans to take the appropriate steps and work closely with foreign governments to obtain access to the needed records if a threat of serious adverse health consequences or death to humans or animals from adulterated food necessitates inspection of records in foreign countries.

The provisions of this proposed rule apply to records of both human food and animal food. FDA believes that some recordkeeping requirements are necessary for food intended for food-producing animals, as well as for certain food for nonfood-producing animals (e.g., pet dogs and cats, horses, and zoo and circus animals). We define food for nonfood-producing animals as pet food. FDA believes, however, that the consequences of a potential terrorist attack or food-related emergency are greater for human food than for animal food. FDA also believes that the consequences of a potential terrorist attack or food-related emergency are greater for food for food-producing animals than for pet food. FDA addressed certain animal food risks in our regulation for animal proteins prohibited in ruminant feed (21 CFR 589.2000), also referred to as the bovine spongiform encephalopathy (BSE) rule.

Although FDA acknowledges that the risk to humans from an attack on the animal food supply is lower than the risk to humans from an attack on the human food supply, there is some risk to both humans and animals from an attack on the animal food supply. Contaminated animal food can be a link to human foodborne illness. (Ref. 32). People could be at risk through direct contact with animal food or through unintentional cross-contamination of cooking surfaces or utensils. Animals may also become infected and serve as a reservoir for exposing other animals and humans. For example, in 1996, an organochlorine pesticide was intentionally introduced into an ingredient used in animal food, including pet food. In 2002, dog chew treats were contaminated with Salmonella and became a vehicle to transmit Salmonella into homes. As a consequence, many pet owners became ill and one person died.

We propose that (1) All entities that manufacture, process, pack, transport, distribute, receive, hold, or import food for food-producing animals must keep records under this proposed rule; and that (2) those entities that manufacture, process, pack, transport, distribute, receive, hold, or import pet food that must keep records under the BSE rule also keep records under this rule. Because of the concern that some pet food is diverted for use for food-producing animals, the BSE rule recordkeeping requirements apply to pet food. We believe this proposal to require recordkeeping under the Bioterrorism Act by pet food entities covered by the BSE rule will provide important safeguards needed to limit the impact of contamination of pet food while minimizing additional costs to industry.

As discussed below, we are proposing to exempt pet food entities that are not subject to the recordkeeping requirements of the BSE rule from the recordkeeping requirements of this proposed rule. We propose that all entities involved in animal food, including the pet food entities exempt from the recordkeeping requirements, remain subject to the proposed records access and availability requirements.

FDA is interested in comments on whether or not the proposal provides adequate tools to trace animal food affected by a terrorist attack or other food related emergency and whether an

alternative approach should be used. Specifically, FDA is soliciting comments on the following questions: (1) Should we exempt all types of animal food entities from all or part of this proposed rule? (2) Should we exempt all pet food entities from all or part of this proposed rule? (3) Should we treat pet food the same as other types of animal food by requiring all pet food entities to meet the recordkeeping requirements under this regulation, not just those subject to the BSE rule? (4) Should we use criteria other than the scope of the BSE rule to determine which pet food entities should be exempt? If so, what should those criteria be?

2. Who is excluded from all or part of the regulations in this subpart? (Proposed § 1.327)

Proposed § 1.327(a) codifies the exemption for farms. This exemption is consistent with and required by the express language of the Bioterrorism Act.

Proposed § 1.327(b) codifies the exemption for restaurants. This exemption is consistent with and required by the express language of the Bioterrorism Act.

Proposed § 1.327(c) would exclude certain fishing vessels from all of the regulations in this subpart, except §§ 1.361 and 1.363. These vessels include those that not only harvest and transport fish, but also engage in practices such as heading, eviscerating, or freezing intended solely to prepare fish for holding on board a harvest vessel. The Bioterrorism Act is silent with respect to exempting fishing vessels in section 306, the “Maintenance and Inspection of Records for Foods” provision, although the “Registration of Food Facilities” provision, section 305, expressly exempts fishing vessels, except such vessels engaged in processing as defined in § 123.3(k) (21 CFR 123.3(k)).

FDA has tentatively concluded that the records of fishing vessels as defined in § 123.3(k), like those of farms, are not a necessary component of an effective traceback investigation. Nevertheless, because the records of “fishing vessels otherwise engaged in processing fish, which for purposes of this subsection means handling, storing, preparing, heading, eviscerating, shucking, freezing, changing into different market forms, manufacturing, preserving, packing, labeling, dockside unloading, or holding” are necessary to an effective traceback investigation, these would still be subject to all of the regulations in this subpart.

Proposed § 1.327(d)(1) would exclude retail facilities from the regulations in § 1.345 of this subpart. This limited exclusion is only from the requirement to establish and maintain records of the immediate subsequent recipients of food when the food is sold directly to consumers. The Bioterrorism Act expressly states that the Secretary may require the establishment and maintenance of records by persons who “distribute” food, and therefore retail facilities could be subject to all other regulations in this subpart if FDA required it. FDA has tentatively concluded that to require retail facilities to keep records of each individual recipient consumer would be too burdensome and not necessary in order to address credible threats of serious adverse health consequences or death to humans or animals.

Proposed § 1.327(d)(2) would exclude retail facilities, such as roadside stands, located in the same general physical location as farms, as defined in proposed § 1.328, that sell unprocessed food grown or raised on those farms directly to consumers. This exclusion only applies to those retail facilities that employ 10 or fewer full-time equivalent employees, which is consistent with the way FDA is proposing to define very small businesses in proposed § 1.368(a)(2). This exclusion applies only to unprocessed food, including fresh fruits and vegetables and other raw agricultural commodities for use as food, such as honeycomb. The exclusion also applies to fish raised on farms. Unprocessed food grown or raised on locations other than farms, or on farms not located in the same general physical location, are not excluded.

This exclusion does not apply to processed food, even if it is sold directly to consumers from a retail facility in the same general location as a farm, unless all of the ingredients in that processed food were grown or raised on that farm. Processed foods include, for example, baked goods, jams, jellies, and maple syrup. Retail facilities would be required to establish and maintain records of the immediate previous sources under proposed § 1.337 for processed food sold directly to consumers if any of the ingredients of that processed food were not grown on that farm.

FDA believes that the burden placed on these retail facilities to establish and maintain records for unprocessed food grown or raised on a nearby farm and sold directly to consumers would likely outweigh the risk to the public health that follows from this proposed exclusion. FDA has tentatively concluded that such records are not needed in order to address credible threats of serious adverse health consequences or death to humans or animals. FDA believes it is necessary to narrow this exemption only to those retail facilities that remain close to the source farm in order to not compromise FDA's ability to trace adulterated food that has been transported over a distance greater than the same general physical location. The agency solicits comments on this proposed exemption.

FDA also is proposing in § 1.327(e) to exempt from all of the regulations in this subpart persons who manufacture, process, pack, transport, distribute, receive, hold, or import food that is regulated exclusively by the U.S. Department of Agriculture (USDA) under the Federal Meat Inspection Act (21 U.S.C. 601
et seq.
), the Poultry Products Inspection Act (21 U.S.C. 451
et seq.
), or the Egg Products Inspection Act (21 U.S.C. 1031
et seq.
). This section complies with section 306(d)(2) of the Bioterrorism Act, which states that section 306 should not be construed to authorize FDA to promulgate regulations for records governing foods within the exclusive jurisdiction of USDA. It also complies with section 315 of the Bioterrorism Act, which states that nothing in Title III of the Bioterrorism Act, or an amendment made by Title III, shall be construed to alter the jurisdiction between USDA and the U.S. Department of Health and Human Services under applicable statutes and regulations.

This exemption is for food within the exclusive jurisdiction of the USDA. Persons who manufacture, process, pack, transport, distribute, receive, hold, or import food that is jointly regulated by FDA and USDA would be required to keep records with regard to the food regulated by FDA. An example of food that is jointly regulated by FDA and USDA is frozen T.V. dinners containing both meat and fish.

Proposed § 1.327(f) would exclude foreign facilities that are also excluded from the requirement to register under section 305 of the Bioterrorism Act. As discussed previously in this document, FDA believes that requiring foreign facilities that must register to also establish and maintain records would be the most efficient and effective way to obtain information on food from foreign countries. Therefore, foreign facilities would not be required to establish and maintain records “if food from these facilities undergoes further manufacturing/processing (including packaging) by another foreign facility outside the United States.” In other words, foreign facilities involved in the initial stages of manufacturing/

processing food are not required to establish and maintain records if another facility further manufactures/processes or packs the food produced at that facility outside the United States.

This exclusion would not apply to facilities if the “further manufacturing/processing” at the subsequent facility is of a de minimis nature, such as adding labeling to a package or adding plastic rings to the outside of beverage bottles to hold them together. In that case, both the facility conducting the de minimis activity and the facility immediately prior to it would be required to register and, therefore, would also be subject to these regulations. FDA seeks comment on the requirement for facilities conducting de minimis activities to keep records. The following are examples of which foreign facilities would be subject to, or excluded from, these regulations based on the activities they perform. As stated previously, the foreign facilities that are subject to these regulations are the same facilities that would be required to register under section 305 of the Bioterrorism Act.

• A foreign facility would be subject to these regulations if it prepares a finished food and places it into packages suitable for sale and distribution in the United States.

• A foreign facility distributing food to food processors outside the United States for further manufacturing/processing before the food is exported for consumption in the United States would not be subject to these regulations, unless the further manufacturing/processing entails adding labeling or other de minimis activity. If the further manufacturing/processing is of a de minimis nature, both the facility conducting the de minimis activity and the facility immediately prior to it would be subject to these regulations.

• The last foreign facility that manufactures/processes an article of food before it is exported to the United States would be subject to these regulations, even if the food subsequently is held or stored at a different facility outside of the United States.

• Facilities located outside the United States that take possession, custody, or control of finished foods for holding, packing, and/or storage prior to export to the United States are subject to these regulations.

Proposed § 1.327(g) provides that persons who manufacture, process, pack, transport, distribute, receive, hold, or import pet food who are not subject to the recordkeeping provisions of the animal proteins prohibited in ruminant feed regulation (21 CFR 589.2000) would be excluded from the recordkeeping requirements of this proposed rule. However, these entities, like all entities involved in animal food, remain subject to the proposed records access and availability requirements in proposed § 1.361 and § 1.363.

3. What definitions apply to this subpart? (Proposed § 1.328)

Proposed § 1.328 states that the definitions of terms in section 201 of the act (21 U.S.C. 321) apply to such terms when used in this subpart. Section 201 of the act defines various terms that appear throughout the act, including “food” (see section 201(f) of the act). The definitions of such terms apply when we use those terms in these regulations. In addition, proposed § 1.328 defines specific additional terms used in the proposed rule.

Proposed § 1.328 defines “act” as the Federal Food, Drug, and Cosmetic Act.

FDA is proposing in § 1.328 to define “domestic person” consistent with the definition of “State” in section 201(a)(1) of the act. That is, FDA is proposing to define a domestic person as one that is located in any State or Territory of the United States, the District of Columbia, or the Commonwealth of Puerto Rico.

FDA is proposing in § 1.328 to define a “foreign facility” as a facility other than a domestic person that manufactures, processes, packs, or holds food for consumption in the United States.

Proposed § 1.328 defines “farm” as a facility in one general physical location devoted to the growing of crops for food, the raising of animals for food (including seafood), or both. A farm may consist of contiguous parcels of land, ponds located on contiguous parcels of land, or, in the case of netted or penned areas located in large bodies of water, contiguous nets or pens. The term “farm” includes: (a) Facilities that pack or hold food, provided that all food used in such activities is grown or raised on that farm or is consumed on that farm; and (b) facilities that manufacture/process food, provided that all food used in such activities is consumed on that farm or another farm under the same ownership. “Farm” includes such facilities because they are activities incidental to farming that most farms engage in (e.g., holding and packing of harvested crops). Facilities that engage in manufacturing/processing, packing, or holding of food that is not described in the definition of “farm” are subject to these regulations because such activities are not activities that most farms engage in and are thus not included in the definition of “farm.” Some examples of farms include: Apple orchards, hog farms, dairy farms, feedlots, and aquaculture facilities.

Persons that engage in more than one type of activity may meet the definition of farm as to some of those activities while not meeting the definition of farm as to other activities. Persons that grow crops and raise animals and also manufacture/process food that is sold for consumption off the premises are not farms for purposes of this subpart and are not exempt. For example, a person who grows oranges and manufactures/processes them into orange juice for sale to a distributor would need to keep records under this subpart of both the immediate previous sources and the immediate subsequent recipients of the orange juice. However, establishing and maintaining records of the immediate previous sources would only be required when persons manufacture/process food from ingredients obtained from other sources than that farm.

Similarly, persons who manufacture/process food from ingredients obtained from other sources only meet the definition of farm if all the food used in such activities is consumed on that farm or another farm under the same ownership. If a person combines oranges grown on his farm with oranges obtained from another source, processes them into orange juice on his premises, and consumes all of the orange juice on those premises, he would not need to keep records regarding those oranges. However, if the person sells that orange juice at a roadside stand directly to consumers, that roadside stand would not meet the definition of farm but would fall within the partial retail exclusion provided in proposed § 1.344. Retailers need only keep records identifying the immediate previous source.

Proposed § 1.328 defines “food” as having the meaning given in section 201(f) of the act, which is: “(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.” FDA also is proposing to include some examples of products that are considered food under section 201(f) of the act. Examples listed in the proposed rule include: Fruits; vegetables; fish; dairy products; eggs; raw agricultural commodities for use as food or components of food; animal feed, including pet food; food and feed ingredients and additives, including substances that migrate into food from food packaging and other articles that contact food; dietary supplements and dietary ingredients; infant formula; beverages, including alcoholic beverages and bottled water; live food animals (such as hogs and elk); bakery goods;

snack foods; candy; and canned foods. “Substances that migrate into food from food packaging” include immediate food packaging or components of immediate food packaging that are intended for food use. Outer food packaging is not considered a substance that migrates into food.

The provisions of this proposed rule apply to records of both nontransporters and transporters. Section 414(b) of the act provides that FDA may require recordkeeping with regard to records that are needed for inspection to allow the agency to identify the immediate previous sources and the immediate subsequent recipients of food. The proposed rule establishes two sets of immediate previous sources and immediate subsequent recipients, one for nontransporters and one for transporters. For nontransporters, the proposed rule defines immediate previous source as the nontransporter from which the company received the food. The immediate subsequent recipient for nontransporters is the nontransporter to which the company sent the food. The definition of nontransporter immediate previous source and immediate subsequent recipient describes them as persons who own food or who hold, process, pack, import, receive, or distribute food for purposes other than transportation. Nontransporters are also expected to keep records of the transporters that they receive food from and send food with. Nontransporters will thus be required to keep records on both transporters and nontransporters for both previous sources and subsequent recipients.

With respect to transporters (persons who have possession, custody, or control of food for the sole purpose of transporting it), the proposed rule provides for the company to establish and maintain records about its own transportation activities and the person from whom it received the food and the person to whom the food is delivered. The person from whom the food is received by the transporter is the immediate previous source. This could be a nontransporter as described previously or another transporter. The person to whom the food is delivered by the transporter is the immediate subsequent recipient. This person could be another transporter or a nontransporter. These records allow FDA to follow the chain of custody of the food through each transportation step, which may include a variety of forms of transportation (e.g., plane, train, and truck).

Because it is critically important for FDA to have the ability to trace back and trace forward quickly in the event of a terrorist event or other food-related emergency, FDA has defined for nontransporters the immediate previous source and immediate subsequent recipient as the previous nontransporter or next nontransporter. This will allow FDA in most cases to efficiently and effectively determine where the food was contaminated and to locate where the contaminated food was sent. However, the contamination could occur during the transportation process as well. The records of transporters will ensure that FDA has the potential in all cases to determine the source of contamination and trace the food back and forward through the transportation chain. FDA recognizes that requiring nontransporters to keep records on both previous and subsequent transporters and nontransporters is potentially burdensome. FDA is mandating this in order to facilitate the efficient investigation of food related emergencies (records on nontransporters) and to increase the likelihood of a successful traceback by ensuring all those who handle the food are examined (records on transporters).

We also recognize that there could be other interpretations of the statute. The statute could be read to provide that at every step of the movement of the food, the immediate previous source is the person who had the food before they delivered it to the next person. That next person would be the immediate subsequent recipient. Under that reading, if company A processes the food and sends it to company B via several modes of transportation, the chain of custody would be as follows: (1) Company A; (2) Red Truck Co.; (3) train; (4) Blue Truck Co.; and (5) company B. In this scenario, the immediate subsequent recipient for company A is Red Truck Co. The immediate previous source for Red Truck Co. is company A and the immediate subsequent recipient is the train. The immediate previous source for the train is Red Truck Co. and the immediate subsequent recipient is Blue Truck Co. The immediate previous source for Blue Truck Co. is the train and the immediate subsequent recipient is company B. If it is discovered at company B that the food is contaminated, since company B only has records to identify Blue Truck Co. as its immediate previous source, FDA would have to trace back from company B to Blue Truck Co. and from there to the train, then to Red Truck Co., until FDA finally arrives at company A, the source of the contamination. This type of tracing would not allow the agency to efficiently and effectively trace back from company B to company A or get to company A quickly to trace forward other food sent out by company A.

We are requesting comments on whether the approach with two sets of immediate previous sources and immediate subsequent recipients in this proposed rule is a reasonable interpretation of the statute. We also request comments on whether all transporters, including small independent transporters, have the capability to maintain records for the 1 and 2 year record retention periods. FDA also requests comment on the extent to which the recordkeeping burden on nontransporters (previous and subsequent transporters and nontransporters) creates new burdens for firms. We are also interested in suggestions for alternative recordkeeping arrangements that would allow for the complete and efficient investigation of food-related emergencies. In addition, we request comments on whether an approach different from the proposed rule that would require or create incentives for nontransporters to obtain and keep records on all the transporters that transport food between the nontransporters, by obtaining the records from the transporters, would be a reasonable interpretation of the statute.

Proposed § 1.328 defines “manufacturing/processing” as making food from one or more ingredients, or synthesizing, preparing, treating, modifying or manipulating food, including food crops or ingredients. Some examples of manufacturing/processing include, but are not limited to, cutting, peeling, trimming, washing, waxing, eviscerating, rendering, cooking, baking, freezing, cooling, pasteurizing, homogenizing, mixing, formulating, bottling, milling, grinding, extracting juice, distilling, labeling, or packaging. FDA is defining “manufacturing” and “processing” together because the meanings of the terms overlap. For example, combining two materials into a finished product, such as macaroni and cheese, could be considered “manufacturing,” “processing,” or both. Since both manufacturers and processors are subject to these regulations, FDA does not believe it is necessary to distinguish between manufacturing and processing in the proposed rule.

Proposed § 1.328 defines “nontransporter” as a person who owns food or who holds, processes, packs, imports, receives, or distributes food for purposes other than transportation.

Proposed § 1.328 defines the “nontransporter immediate previous source” as a nontransporter who last had an article of food before transferring it to another nontransporter. Nontransporter immediate previous source includes, but is not limited to, an individual, a partnership, a corporation, a cooperative, an association, or a government entity. Government entities include school systems, public hospitals, prisons, commissaries, etc.

Proposed § 1.328 defines “nontransporter immediate subsequent recipient” as a nontransporter who acquires an article of food from another nontransporter. Nontransporter immediate subsequent recipient also includes, but is not limited to, an individual, a partnership, a corporation, a cooperative, an association, or a government entity.

Proposed §§ 1.337(a)(1) and 1.345(a)(1) would require the name of the firm and responsible individual, address, phone number and, if available, the fax number and e-mail address of the nontransporter immediate previous source and nontransporter immediate subsequent recipient, respectively, whether domestic or foreign. We propose these requirements to mean the address and information of the specific location of where the statutorily covered activity occurred, and not that of a corporate headquarters at another location than where the activities took place. For example, a food product may be processed at a manufacturing plant, shipped to a packing facility, and then transported to a retail store all owned by the same corporation. The proposed requirements would apply to each individual location that received or released the food, even if each facility is owned by the same corporation. This would mean that firms would need to establish and maintain records accessible at each specific plant, packing facility, and retail store. FDA's intention is that these requirements identify the physical location of the food at each step of the way as it travels through the chain of distribution, from the farm or sea to the consumer. FDA requests information on whether this requirement to keep records on intra-corporate transfers will impose new burdens upon firms or whether firms keep these records currently.

Proposed § 1.328 defines “perishable food” as food that is not heat-treated, not frozen, and not otherwise preserved in a manner so as to prevent the quality of the food from being adversely affected if held longer than 7 days under normal shipping and storage conditions.

The “perishable food” definition has been modeled after the current Regulatory Procedures Manual definition of “perishable commodity” for purposes of this proposal. Examples include, but are not limited to, fluid milk (but not ultrapasteurized), live fish, lobster, crab, other crustaceans, shellfish, fresh fruits and vegetables. The agency is seeking comment on whether we have best defined “perishable food” for purposes of these regulations.

In addition, FDA is defining “perishable foods” for the purposes of establishing a shorter record retention time for those foods as opposed to nonperishable foods. FDA seeks comments on the proposed definition of perishable foods and whether the agency should use that definition as the basis for establishing record retention times.

Proposed § 1.328 defines “pet food” as food for nonfood-producing animals. Nonfood-producing animals include household pets, such as dogs and cats, and also include other nonfood-producing animals such as horses and circus and zoo animals.

Section 306 of the Bioterrorism Act does not extend to recipes. Proposed § 1.328 defines “recipe” as the quantitative formula used in the manufacturing of the food product, but not the identity of the individual ingredients of the food. If finalized as proposed, FDA would have access to the records containing the ingredients used in a food product, but would not have access to the quantities of the ingredients used to make a product. The act currently requires manufacturers to disclose to the public the ingredients they use on the labels of their food products. It is critical to a tracing investigation that the ingredients and the sources of the ingredients are identified.

Proposed § 1.328 defines “restaurant” as a facility that prepares and sells food directly to consumers for immediate consumption. As with farms, persons who engage in more than one type of activity may meet the definition of restaurant as to some of those activities while not meeting the definition of restaurant as to other activities. Those persons would be required to keep records as to those activities covered by this subsection that do not meet the definition of restaurant.

Some examples of restaurants as defined in the proposed regulations include: Cafeterias, lunchrooms, cafes, bistros, fast food establishments, food stands, saloons, taverns, bars, lounges, catering facilities, hospital kitchens, day care kitchens, and nursing home kitchens.

Due to possible ambiguity in the term “catering facilities,” FDA states in the proposed restaurant definition that facilities that provide food to interstate conveyances, such as airplanes, passenger trains, and cruise ships, rather than directly to consumers, are not restaurants. Facilities that provide food to interstate conveyances are not considered restaurants because they do not serve food directly to consumers for immediate consumption. For example, a facility that provides sandwiches to a passenger train for eventual sale to passengers would not be considered a restaurant. However, the snack bar on the train that sells the sandwiches to consumers would be considered a restaurant. FDA has historically inspected these facilities that provide food to interstate conveyances and considers them processors, rather than restaurants.

Because the proposed regulations also apply to persons who manufacture, process, pack, transport, distribute, receive, hold, or import food for animal consumption in the United States, by analogy, the term “restaurant” also includes pet shelters, kennels, and veterinary facilities in which food is provided to animals.

Proposed § 1.328 defines “retail facility” as a facility that sells food products directly to consumers only. The term includes, but is not limited to, grocery and convenience stores, vending machine locations, and commissaries. The limited exclusion from establishing and maintaining records of the immediate subsequent recipient applies only to food sold directly to consumers. A facility that sells food to wholesalers and/or other retailers, in addition to consumers, would have to keep records of the immediate subsequent recipients because wholesalers and retailers are not considered consumers for purposes of these proposed regulations.

Proposed § 1.328 defines “transporter” as a person who has possession, custody, or control of an article of food for the sole purpose of transporting the food. A person who owns food or who holds, processes, packs, imports, receives, or distributes food for purposes other than transportation is not a transporter.

Proposed § 1.328 defines “transporter's immediate previous source” as the person from whom a transporter receives food. This source can be either another transporter or a nontransporter. The transporter's immediate previous source includes, but is not limited to, an individual, a partnership, a corporation, a cooperative, an association, or a government entity.

Proposed § 1.328 defines “transporter's immediate subsequent recipient” as the person to whom a transporter delivered food. This recipient can be either another transporter or a nontransporter. A transporter's immediate subsequent recipient includes, but is not limited to, an individual, a partnership, a corporation, a cooperative, an association, or a government entity.

Proposed § 1.328 defines “you” as a person or facility subject to this subpart under § 1.326. FDA is proposing to use “you” throughout the proposed rule for easier readability.

4. Do other statutory provisions and regulations apply? (Proposed § 1.329)

Proposed § 1.329 would require that in addition to the regulations in this subpart, you must comply with all other applicable statutory provisions and regulations related to the establishment and maintenance of records for foods. Regulations in this subpart are in addition to existing recordkeeping regulations, such as the regulations for low acid canned foods, juice, infant formula, color additives, bottled water, animal feed, and medicated animal feed. (See 21 CFR 113.100(d); 21 CFR 120.12; 21 CFR 106.100(g); 21 CFR 80.39; 21 CFR 129.35; § 589.2000; and 21 CFR 225.102 & 225.110, respectively).

5. Can existing records satisfy the requirements of this subpart? (Proposed § 1.330)

Proposed § 1.330 states that the regulations in this subpart do not require duplication of existing records if those records contain all of the information required by this subpart. If a person subject to the regulations keeps records of all of the information as required by this subpart in compliance with other Federal, State, or local regulations, or for any other reason, e.g., as a result of its own business practices, then those records may be used to meet these requirements. Such records may include, but are not limited to, purchase orders, bills of lading, invoices and shipping documents. Some current FDA regulations require records, including those for low acid canned foods, juice, infant formula, color additives, bottled water, animal feed, and medicated animal feed. (See 21 CFR 113.100(d); 21 CFR 120.12; 21 CFR 106.100(g); 21 CFR 80.39; 21 CFR 129.35; 21 CFR 589.2000; and 21 CFR 225.102 & 225.110, respectively). However, none of the existing FDA regulations are sufficient alone to meet the requirements we are proposing in these regulations. A person who has been complying with these regulations only would have to add records addressing the new elements. The burden is on the person subject to these regulations to ensure it keeps all applicable records. Our intent is to have as little impact as possible on current recordkeeping practices if those records can meet the requirements of these proposed regulations. We are proposing the specific information a covered person must keep, but we will not specify the form or type of system in which those records must be maintained.

B. Establishment and Maintenance of Records to Identify the Nontransporter and Transporter Immediate Previous Source of All Food

What information is required in the records established and maintained to identify the nontransporter and transporter immediate previous source? (Proposed § 1.337)

The Bioterrorism Act authorizes FDA to require by regulation the establishment and maintenance of records “needed” by the Secretary for inspection to allow the Secretary to “identify” the immediate previous sources of food. Based on FDA's interpretation of this statutory authority and what is “needed” to “identify” the immediate previous source, proposed § 1.337(a) would require that you establish and maintain records for all food as follows:

• Proposed § 1.337(a)(1) would require the name of the firm and responsible individual, address, phone number and, if available, the fax number and e-mail address of the nontransporter immediate previous source, whether domestic or foreign;

• Proposed § 1.337(a)(2) would require an adequate description of the type of food received, to include brand name and specific variety (e.g., brand x cheddar cheese, not just cheese; or romaine lettuce, not just lettuce);

• Proposed § 1.337(a)(3) would require the date you received the food;

• Proposed § 1.337(a)(4) would require the lot or code number or other identifier of the food (to the extent this information exists);

• Proposed § 1.337(a)(5) would require the quantity and how the food is packaged (e.g., 6 ct. bunches, 25 lb carton, 12 oz bottle); and

• Proposed § 1.337(a)(6) would require the name of the firm and responsible individual, address, phone number and, if available, the fax number and e-mail address of the transporters who transported the food to you.

Proposed § 1.337(a) would require that you include information reasonably available to you to identify the specific source of each ingredient that was used to make every lot of finished product, so that incoming ingredients can be linked to the outgoing finished products. If FDA cannot immediately narrow the trace back to a specific source, tracing becomes much more difficult, there is an increased risk to consumers, and some food sources are unfairly implicated. FDA believes this is a necessary and beneficial requirement for consumers, and will help conserve FDA's limited resources, by focusing our investigation only on those entities who handled the at-risk food. FDA's investigation of the unaffected sources is time consuming and may have a negative business impact on the incorrectly implicated sources. These sources should not be penalized by exposure to unwarranted scrutiny and perhaps unwarranted adverse publicity because of inadequate recordkeeping by others in the distribution chain. In addition, in a recall situation, a business could limit the economic impact by being able to limit its recall to only a specific group of products instead of having to conduct a broader recall. What is reasonably available may vary from case to case.

FDA recognizes that the food industry often relies on multiple sources of ingredients to make food products, and that it is common practice to commingle ingredients from different sources prior to incorporating them into a finished product. For example, some food processors commonly store raw materials like corn syrup and flour in tanks and silos. In some instances, these tanks and silos are not dedicated by suppliers, but are topped off as supplies run low, resulting in routine commingling of raw ingredients from a number of suppliers. Moreover, it is FDA's understanding that flour or grain silo crowns do not uniformly dissipate, resulting in uneven distribution of ingredients. FDA acknowledges that changing this longstanding system to require dedicated supplier storage to facilitate source specific recordkeeping would involve significant financial costs.

It is not FDA's intent to require the reconfiguration of each manufacturing plant. These proposed regulations, however, would require you to capture the information that is reasonably available to you to connect finished products with the immediate previous source of each of the food products used to make that finished product. FDA understands that in some multiple sourcing contexts this information only may allow for a reduction in the number of potential sources for a specific food product, but may not necessarily

identify one specific source of the food product.

For example, a company that bakes cookies may source flour from five different companies rather than depend on a single company as its supplier. The flour from the five companies may be stored in one common silo prior to being used in the manufacture of the cookies. In this scenario, the manufacturer could identify, depending on the date the flour was received from each company and placed in the silo and when the silo was emptied, the various companies that were the sources of the flour. Under this situation, the information is not reasonably available to determine a single source of the flour used in a particular lot of cookies. In this case, the information reasonably available to you would be the identity of all of the potential sources of the flour for each finished lot of cookies.

Conversely, if the manufacturer did have dedicated silos for each supplier of flour, then the information would be reasonably available to the manufacturer to specify the specific source of the flour for each finished product.

Proposed § 1.337(a)(4) would require maintenance of the lot or code number or other identifier of the food (to the extent this information exists) to allow FDA the capability to limit its investigation to the implicated food. For instance, if a company repeatedly and consistently orders a particular food from a supplier, and the threat is associated with a single shipment or some shipments but not others, it is important to have the capability to isolate the shipment or shipments in question from others. This would be more cost effective and less burdensome to FDA. In addition, if the threat affects the transporter, identifying information such as lot numbers or other identifiers would facilitate the location and isolation of the conveyance that may have become contaminated by the implicated food. This cannot readily be done without information that specifically identifies the food.

Proposed § 1.337(a)(5) would require you to record the quantity of the food and how it is packaged to assist FDA in identifying the implicated food and also allow FDA to determine the scope of the threat. With this information contained in the records, FDA would be able to determine the quantity of the potentially adulterated food that is in the stream of commerce, i.e., whether it is one crate or 1,000 crates of tomatoes. In addition, as part of a tracing investigation, FDA would be able to identify at each location whether all of the potentially adulterated food has been accounted for or whether any part of a shipment had been diverted. Both the immediate previous source and immediate subsequent recipient would be required to keep records of the quantity of food received or released to allow FDA to determine that the quantity of food sent was the quantity received. This would ensure that FDA is best able to protect public health by being able to identify and locate adulterated food that presents a threat of serious adverse health consequences or death to humans or animals.

Proposed § 1.337(a)(6) would require you to keep in your records information to identify the transporter who transported the food to you. This requirement to identify the transporter is in addition to proposed § 1.337(a)(1), which requires you to keep in your records information that identifies the nontransporter immediate previous source.

C. Establishment and Maintenance of Records to Identify the Nontransporter and Transporter Immediate Subsequent Recipient of All Food

What information is required in the records established and maintained to identify the nontransporter and transporter immediate subsequent recipient? (Proposed § 1.345)

The Bioterrorism Act authorizes FDA to require by regulation the establishment and maintenance of records “needed” by the Secretary for inspection to allow the Secretary to “identify” the immediate subsequent recipient of food. Based on FDA's interpretation of this statutory authority and what is “needed” to “identify” the immediate subsequent recipient, proposed § 1.345(a) would require that you establish and maintain records for all food you release that identifies information that is substantially similar to that discussed in the requirements to identify the nontransporter immediate previous source.

D. Requirements to Establish and Maintain Records to Trace the Transportation of All Food

1. Who is required to establish and maintain records for tracing the transportation of all food? (Proposed § 1.351)

The Bioterrorism Act expressly states persons who transport food are subject to these regulations. Proposed § 1.351 would require you, if you are a domestic person, to establish and maintain records for tracing those immediately before (transporter's immediate previous source) and immediately after you (transporter's immediate subsequent recipient) in the transportation process if you transport food.

2. What information is required in the transportation records? (Proposed § 1.352)

Proposed § 1.352(a) would require that you establish and maintain the following records for each food you transport:

• Proposed § 1.352(a)(1) would require the name of the firm and responsible individual, address, phone number and, if available, the fax number and e-mail address of the person who had possession, custody, or control of the food immediately before you, and the date you received it from that person;

• Proposed § 1.352(a)(2) would require the name of the firm and responsible individual, address, phone number and, if available, the fax number and e-mail address of the person who had possession, custody, or control of the food immediately after you, and the date you delivered it to that person;

• Proposed § 1.352(a)(3) would require an adequate description of the type of food, including brand name and specific variety (e.g., brand x cheddar cheese, not just cheese; or romaine lettuce, not just lettuce);

• Proposed § 1.352(a)(4) would require the lot or code number or other identifier of the food (to the extent this information exists);

• Proposed § 1.352(a)(5) would require the quantity and how the food is packaged (e.g., 6 ct. bunches, 25 lb carton, 12 oz bottle); and

• Proposed § 1.352(a)(6) would require the identification of each and every mode of transportation (e.g., company truck, private carrier, rail, air, etc.), and the individual responsible, from the time you first received the food until the time you delivered it.

The proposed requirements are intended to provide the necessary information to allow FDA to trace the transportation of all food. In proposed § 1.352(a)(1) and (a)(2), the required information would consist of whoever had the food before you and after you. This person could be either a nontransporter or another transporter. In a multiple transporter situation, you may be receiving the food from another transporter and/or delivering it to another transporter. The proposed requirements in § 1.352(a)(1) and (a)(2) are intended to capture this information regardless of whether you receive food from a nontransporter or another transporter, or deliver it to a nontransporter or another transporter. You would only be responsible for maintaining a record of the required information with respect to the person

from whom you received the food from and the person to whom you gave it. You would not be required to maintain records of transactions to which you were not a party.

Proposed § 1.352(a)(6) would require transportation companies that use several modes of transportation within their company to record when the food was put on which kind of vehicle and who was responsible for it during that leg of the trip. For example, Yellow Transportation Co. may use two different Yellow trucks and a Yellow plane. This section would require Yellow Transportation Co. to keep records of each and every mode of transportation and the individual responsible, from the time the food was first received until the time it was delivered. The “individual responsible” should be the person within the transportation company who is responsible for that vehicle and the food being transported. FDA seeks comments on whether “individual responsible” should be the operator of the conveyance or whether it can be someone within the corporation who has overall responsibility for the vehicle and the food being transported. FDA understands that it is common practice for one transportation company to use several different modes of transportation within that company throughout its possession and control over the food. The food is potentially subject to tampering at each phase of the transportation process. If the transportation company responsible for the food does not have complete records identifying the mode of transportation and who was responsible for the food throughout the entire time that company had possession and control over the food, the tracing chain is broken and it becomes more difficult and time consuming to determine if that shipment of food has been diverted or tampered with. FDA believes this detailed information regarding the food transportation would be necessary to expedite the tracing investigation in situations when FDA has a reasonable belief that food is adulterated and presents a threat of serious adverse health consequences or death to humans or animals.

E. General Requirements

1. What are the record retention requirements? (Proposed § 1.360)

Proposed § 1.360(a) states the records required by these regulations are to be created at the time the statutorily covered activities take place. Proposed § 1.360(b) would require records for perishable foods not intended to be processed into nonperishable foods to be retained for 1 year after the date the records were created. Although perishable foods have a relatively short shelf life, FDA is proposing a 1 year record retention period for these foods. In some situations, the health hazard may not be immediately apparent but may emerge months after the food has been consumed. In other situations, the harm may have been caused by novel contaminants or novel vehicles for known contaminants, and it may take months to identify the sources of contamination. As an example, in 1995, there was an investigation of an outbreak of cyclosporiasis. At the time, FDA did not know that Cyclospora could contaminate raspberries. An investigation concluded that water was the likely vehicle. In 1996, there were numerous additional cyclosporiasis outbreaks in the United States and the link was made to raspberries from Guatemala. Fresh raspberries had been served at the site of the 1995 outbreak and then, a year later, FDA needed to determine their source. The distributor had no records to facilitate the traceback.

The proposed 1-year period would not apply to perishable foods that are intended for processing into nonperishable foods, e.g., jams and jellies made from fruits. In those instances, the longer record retention period of 2 years is needed to ensure the recordkeeping chain for finished food products made using perishable foods is available during tracing investigations. If you are uncertain whether a perishable food is destined or intended for processing into a nonperishable food, the 2-year record retention period applies. FDA seeks comment on the impact of this provision.

Proposed § 1.360(c) would require that you retain records for all foods (except animal foods as discussed below) not covered by proposed § 1.360(b) for 2 years after the date the records were created. This proposed requirement is consistent with the authority given in the Bioterrorism Act. Based on information provided to FDA by the food industry, the minimum time for processed food products to clear the food production and distribution/retail system is 3 years. In addition, the average distribution time between harvesting and final retail sale of frozen fruits and vegetables is approximately 3 to 24 months. These are average times, and individual products may be in commerce for a longer period. FDA believes that allowing anything less than a 2-year record retention period for nonperishable food, as well as perishable foods intended to be processed into nonperishable food, would severely compromise a tracing investigation.

Proposed § 1.360(d) would require that you retain records required by these regulations for animal food, including pet food, for 1 year after the date the records are created. Food for food-producing animals tends to have a faster turnover rate than many kinds of human food. In addition, since pet foods are typically the sole source of food for pets, such foods tend not to be stored as long as many human foods. Therefore we propose that records for all animal food, including pet food, be retained for only one year after the date the records are created. This is consistent with the BSE rule.

Proposed § 1.360(e) would require that you retain all records required by these regulations at the establishment where the covered activities described in the records occurred (onsite) or at a reasonably accessible location. We recognize that there may be more records than available storage space at the location where the covered activities occur. We are therefore proposing that records may be stored offsite, provided you can comply with the record availability requirements in proposed § 1.361.

Proposed § 1.360(f) provides that the maintenance of electronic records is acceptable. In the
Federal Register
of March 20, 1997 (62 FR 13430), FDA issued regulations at part 11 that provide criteria for acceptance by FDA of electronic records under certain circumstances. To minimize the burden of this proposed rule, FDA proposes to exempt electronic records established or maintained to satisfy the requirements of this subpart from the requirement to comply with part 11. FDA believes that a requirement that records kept under this subpart comply with part 11 would hinder the ability of persons subject to these regulations to utilize existing systems and records to satisfy the requirements of these proposed regulations as contemplated in proposed § 1.330. If the agency decided to require all electronic records to satisfy part 11 before they could satisfy these proposed recordkeeping requirements, large numbers of already existing electronic records and recordkeeping systems would have to be recreated and redesigned. This provision would require that records kept for some other statutory or regulatory purpose, but which also may be used to meet the requirements of this subpart, must comply with part 11 as required.

2. What are the record availability requirements? (Proposed § 1.361)

Proposed § 1.361 states that when FDA has a reasonable belief that an article of food is adulterated and presents a threat of serious adverse health consequences or death to humans or animals, any records or other information accessible to FDA under section 414 or 704(a) of the act must be readily available for inspection and photocopying or other means of reproduction. Although the statutory requirements in section 414 and amended section 704(a) of the act regarding records access are self-executing and are currently in effect, FDA is issuing regulations to further refine some aspects of the food records access requirements. Because section 306 of the Bioterrorism Act includes two records inspection authorities, one of which, section 704(a), cross refers to records described in section 414, we request comment on the interconnection between the records access provisions in sections 414 and 704(a) of the act.

Proposed § 1.361 would require records to be made available within 4 hours of a request if the request is made between 8 a.m. and 6 p.m. (local standard time), Monday through Friday, or within 8 hours of a request if made at any other time, by an officer or employee duly designated by the Secretary who presents appropriate credentials and a written notice. In the event of a threat of serious adverse health consequences or death to humans or animals, FDA believes these time limits are necessary to effectively and efficiently perform a tracing investigation.

The most common problem encountered by the FDA in a tracing investigation has been a lack of ready access to records. Records are often stored offsite or are stored in a database where the records are difficult to retrieve. In FDA's experience, rarely do firms make records available within 24 hours. The usual timeline is 2 to 3 days. This delay severely reduces the speed at which FDA can perform a traceback. If every firm were to take 2 days to give FDA the needed records, even with a short traceback (e.g., 3 firms), it could take FDA up to 2 weeks to trace the product to its source, taking into account time for record review and travel to the firms. This time may be increased if the records are incomplete and FDA has to wait for missing records to be retrieved. This possible delay would be a substantial concern if FDA were attempting to remove adulterated food that presents a threat of serious adverse health consequences or death to humans or animals from commerce.

Proposed § 1.361 would also require that if you store the records required by these regulations offsite, you must be able to retrieve and provide the records onsite within the specified time period. Electronic records are considered to be onsite if they are accessible from an onsite location.

3. What records are excluded from this subpart? (Proposed § 1.362)

Proposed § 1.362 would exclude from the proposed regulations recipes for food as defined in proposed § 1.328, financial data, pricing data, personnel data, research data, or sales data (other than shipment data regarding sales). These exclusions are consistent with the express language in the Bioterrorism Act.

4. What are the consequences of failing to establish or maintain records or make them available to FDA? (Proposed § 1.363)

Consistent with the express language in the Bioterrorism Act, proposed § 1.363 states (a) the failure to establish or maintain records as required under section 414(b) of the act or to refuse to permit access to or verification or copying of any such required record is a prohibited act under section 301 of the act (21 U.S.C. 331) and (b) the failure to make records or other information available to FDA as required by section 414 or 704(a) of the act is a prohibited act under section 301 of the act (21 U.S.C. 331).

5. What are the compliance dates for this subpart? (Proposed 1.368)

Under sections 414 and 704(a) of the act, FDA may have access to and copy all records and other information related to an article of food if the Secretary has a reasonable belief that the food is adulterated and presents a threat of serious adverse health consequences or death to humans or animals. The basic requirement that access to records and other information be given under these circumstances is currently in effect and does not require implementing regulations. FDA has chosen to further define access requirements in regulations, but can use its inspectional authority prior to the effective date of these regulations.

FDA carefully considered the size of a business when developing these proposed regulations. FDA found that most products and ingredients pass through at least one small business when moving through the distribution process (see Initial Regulatory Flexibility Analysis discussion in section III.B. of this document). If FDA were to exempt small businesses from these regulations or to permit shorter record retention times for them, the effectiveness of the regulations would be severely compromised due to the breaks in the recordkeeping chain during tracing investigations. Thus, FDA cannot propose totally exempting any business based on size from these requirements. However, FDA does propose to provide small and very small businesses additional time to come into compliance with these regulations.

Thus, proposed § 1.368(a) would require that firms that do not qualify as small businesses be in full compliance with these regulations within 6 months after the publishing date of the final rule. Proposed § 1.368(a)(1) would require that small businesses employing fewer than 500 but more than 10 full-time equivalent employees be in full compliance with these regulations within 12 months after the publishing date of the final rule. Proposed § 1.368(a)(2) would require that very small businesses, defined as those employing 10 or fewer full-time equivalent employees, be in full compliance with these regulations within 18 months after the publishing date of the final rule.

III. Analysis of Economic Impact

A. Benefit-Cost Analysis

FDA has examined the economic implications of this proposed rule as required by Executive Order 12866. Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). Executive Order 12866 classifies a rule as significant if it meets any one of a number of specified conditions, including: Having an annual effect on the economy of $100 million, adversely affecting a sector of the economy in a material way, adversely affecting competition, or adversely affecting jobs. A regulation is also considered a significant regulatory action if it raises novel legal or policy issues. FDA has determined that this proposed rule is a significant regulatory action as defined by Executive Order 12866.

Need for the regulations
: The purpose of these proposed regulations is to enable FDA to respond to, and help contain, adulterated food that presents a threat of serious adverse health consequences or death to humans or

animals. The benefits of these proposed regulations would be realized by accomplishing this purpose.

Reason for the regulations
: FDA is proposing several regulations that will work in harmony to improve food safety. Food safety is mostly a private good. Establishments have powerful incentives to ensure that the ingredients they purchase are not contaminated and that their production processes are protected from unintentional and intentional contamination. Deliberate (intentional) contamination of food linked to a particular product or plant—particularly if the plant is considered negligent—would be extraordinarily costly to a firm. Indeed, the private incentives to avoid deliberate contamination should be similar to the private incentives for food safety. Deliberate food contamination events nonetheless differ from ordinary outbreaks of food-borne illness in that they are more likely to be low probability events with severe public health consequences.

Although private incentives lead to the private efforts to protect against deliberate contamination at the plant level, there are external effects associated with privately produced protection. The most important external effect of protection against deliberate contamination is information. Getting food from the farm or sea to the plate involves a complex system of production and distribution. The system works using local knowledge and information; each participant needs to know only as much about the overall system as is necessary for his or her business. Market prices convey most of the information necessary for the ordinary production and distribution of food. In the event of an actual or suspected contamination of the food supply, however, more complete information is needed where it can be centrally used. The suspect food must be traced backward and forward through the distribution chain, both to protect consumers and to find the source and cause of the event.

No individual firm or organization has sufficient financial incentive to establish a central information system relating to food safety for the entire economy. The nation's food producers and importers as a whole would benefit from such a system because it would be easier to uncover and solve problems, but the private costs to create the system would probably be prohibitive for any single firm or third party organization.

We estimate that an effective system of information would require several hundred thousand participants to gather information and provide it to a central system. The private transaction costs to bring all the participants together voluntarily and get them to agree to create such a system would be extraordinarily high. No single organization could capture additional revenue sufficient to cover the cost. Also, because the provision of information by some participants makes it available for all, there would be a tendency for establishments to try to be free riders in the information system. But the more information and participation in the system, the more effective it is.

Another way of looking at the problem of participation is in terms of marginal private benefits and marginal social benefits. By gathering and providing the information used in a food safety system, an individual establishment receives additional private benefits from enhancing the safety of its own food. In addition, participating in the system increases the effectiveness of the entire information system. In other words, the system works better the more establishments participate in it. The individual establishment does not capture this additional social benefit. The marginal private benefit (enhanced safety for individual establishments) is less than the marginal social benefit (the marginal private benefit plus the increased effectiveness of the entire information system). The difference between private and social benefit reduces the incentive for establishments to participate in a voluntary private system.

The events of September 11, 2001, led Congress to conclude that public creation and provision of an information system is necessary. The Bioterrorism Act and its implementing regulations would establish an information system that would allow FDA to have an integrated picture of the food distribution system. This particular regulation addresses one important aspect of this information system: The need to keep product and ingredient distribution records. However, as stated above, FDA is proposing several regulations to address these needs so the costs and benefits of any one regulation will be closely associated with related provisions in other proposed rules. With the regulations in place, the agency would have the additional tools necessary to help deter and respond to deliberate threats to the nation's food supply as well as to other food safety problems.

Baseline
: FDA considers the baseline for this analysis the current state of the world, and we assume this baseline has zero costs and benefits. We also consider having no new recordkeeping requirements as option 1 in our analysis. Section 414(b) of the act, as added by section 306(a) of the Bioterrorism Act, provides that the Secretary “may” by regulation establish recordkeeping requirements. Section 306(d) of the Bioterrorism Act, however, provides that the Secretary “shall” issue proposed and final regulations no later than 18 months from the date of enactment. FDA believes that Congress has directed the agency to exercise the authority in section 414(b) of the act, so the current state of the world as considered in option 1 is not legally viable. The agency recognizes, however, that the use of the term “may” in one section of the statute and “shall” in another section creates an ambiguity. We request comments on our interpretation that we are required by section 306(d) of the Bioterrorism Act to exercise the authority in section 414(b) of the act. However, the Office of Management and Budget (OMB) cost-benefit analysis guidelines recommend discussing statutory requirements that affect the selection of regulatory approaches. These guidelines also recommend analyzing the opportunity costs of legal constraints that prevent the selection of the regulatory action that best satisfies the philosophy and principles of Executive Order 12866. Option 1 will serve as the baseline against which other options will be measured for assessing costs and benefits.

Options
: The following section analyzes regulatory options that address the need for the recordkeeping regulation:

1. No recordkeeping requirements. Take no new regulatory action.

2. Require all persons that manufacture, process, pack, hold, receive, distribute, transport, or import food destined for consumption or use in the United States to establish and maintain records identifying the immediate previous source and the immediate subsequent recipient of the food, and its outer packaging. Also require all persons that manufacture, process, pack, hold, receive, distribute, transport, or import outer food packaging destined for use in the United States to establish and maintain records identifying the immediate previous source and the immediate subsequent recipient of that outer food packaging. The records requirements apply to both foreign and domestic persons. For domestic persons, this includes those who engage in the specified food-related activity whether or not those activities occur solely intrastate. Persons engaging in more than one type of activity, some of which is covered by this proposed

regulation, would be required to keep records pertaining to the covered activity even if they are not required to keep records relating to exempt activity. Records must include information reasonably available to identify the specific source of each ingredient that was used to make every lot of finished product. Required times for record-retention would be 1 year for perishables destined for final consumption in their perishable state, and 2 years for all other foods or food packaging. Upon a written request, records must be made available to FDA in 4 hours, if the request is made during the normal business hours of 8 a.m. to 6 p.m., or 8 hours otherwise.

3. Require all elements of option 2, except exclude persons that manufacture, process, pack, hold, receive, distribute, transport, or import outer food packaging.

4. Require all components of option 3 but do not require persons that are required to establish and maintain records on food to establish and maintain records on the food's outer packaging.

5. Require all components of option 4, but change the required time for responding to an FDA records request to 24 hours.

6. Require all components of option 4, but exempt intrastate businesses.

7. Require all components of option 4, but exempt persons who operate farms, and persons who operate restaurants, who also perform a covered activity.

8. Require all components of option 4, but change the record retention requirement to 1 year for all products.

9. Require all components of option 4, but change the record retention requirement to 2 years for all products.

10. The proposed rule. Require all components of option 4, but only cover foreign facilities also covered by the proposed registration regulation published at 68 FR 5377 (February 3, 2003).

11. Require all components of option 4, but only cover foreign facilities that are the final holder of the product before export to the United States.

12. Require all components of option 4 but cover only domestic persons.

13. Require all components of option 4, but the required information would include the records necessary for facilities to be able to link specific raw ingredients to specific outgoing finished products for all raw ingredients and all products. This option is to analyze the costs and benefits of requiring records that link specific raw ingredients to specific finished products, including ingredients from different sources that are currently commingled before being incorporated into finished products.

In order to clearly identify the marginal cost of each provision specified in the codified, most options represent only one modification of a provision in another option. Option 4 is appropriate to use for comparison with the other options, since it differs by only one provision from almost all other options considered. As the Analysis of Economic Impact section will reflect, FDA has examined the economic implications of this proposed rule by analyzing several regulatory options that address the need for the recordkeeping regulation. FDA is proposing option 10. FDA believes that this option would require creation and maintenance of the records needed to address credible threats of serious adverse health consequences or death to humans or animals while providing adequate flexibility and minimizing industry burden. FDA requests comments on other viable options not considered by this analysis. Note that additional options designed to lower the regulatory burden on small businesses are considered in the initial regulatory flexibility analysis below.

Cost assumptions
: The total cost of each of these options will depend on the number of facilities affected and the extra burden these options place on facilities. For all options, FDA would only specify the information a covered entity must keep, but not specify the form or type of system in which those records must be maintained; we expect that for all options, if possible, firms will choose to collect the additional information not currently included in their existing records. Furthermore, FDA assumes that firms will choose to comply with any new requirements by modifying shipping or purchase records such as Bills of Lading, Invoices, or Purchase Orders. In its cost computations, FDA does not take into account other Federal, State, or local regulations that require similar recordkeeping practices for small sectors of the food economy (e.g., “the BSE rule”, § 589.2000) because of the relatively large amount of uncertainty in our knowledge of existing State and local recordkeeping requirements, and because the effect on the cost computations from their inclusion is likely to be very small. For this reason the analysis does not distinguish among entities that may be covered by the recordkeeping requirements in “the BSE rule” which may result in a small overstatement of the costs of the proposed rule. The following discussion of facility counts and per facility costs is not tied to any specific option, but describes the data and assumptions we use to analyze the cost of each option.

Number of facilities and number of firms affected
: FDA assumes that for the options that do not consider exemptions, approximately 1,230,000 facilities owned by approximately 960,000 firms would be covered. This number includes domestic facilities that manufacture, process, transport, distribute, pack, receive, hold, or import food or food packaging, and foreign facilities performing any of these activities on food or food packaging destined for consumption or use in the United States. Table 1 contains a summary and breakdown of this estimate.

Table 1.—Affected Facility and Firm Details

Type
Facility Estimate
Facility to Firm Adjust. Factor
Firm Estimate
North American Industry Classification System (NAICS) Codes if Applicable

Domestic

Manufacturers
43,376
1.17
36,948
3111-3119, 3121

Wholesalers/Warehouses
95,745
1.24
76,952
4224, 4225, 4228, 49312, 49313

Packaging
1

73,813
1.07
69,266
32221, 32222, 326111, 326112, 326130, 326140, 326150, 326160, 3272, 331315, 331316, 332431, 332439, 42261, 323110, 323111, 323112, 323113, 323114, 323115

Transporters/Packers
16,773
1.11
15,171
481112, 481212, 483111, 483113, 483211, 4841, 48422, 48423, 488320, 488510, 488991

Retail Grocery and Specialty Food
207,657
1.35
153,277
44511, 445220, 445230, 44529, 445310, 446191,

Convenience Stores
128,985
1.87
68,866
44512, 447110

Mixed-Type Facilities that Have Farms
30,497
1.25
24,397
—

Importers
5,036-32,768
1.25
4,029-26,214
—

Total Domestic
601,883-629,615

448,905-471,090

Foreign

Final Holders
77,427
1.25
61,942

Manufacturers
125,450
1.17
106,858

Other Facility Types
457,836
1.25
366,269
—

Total Foreign
660,713

535,068

1
Includes both outer packaging and food contact substances.

Data sources for the number of facilities and firms affected
: Except for the firm-to-facility adjustments explained below, the unit of observation for all data used for this analysis is the number of establishments performing a particular activity. To estimate the number of establishments, FDA uses several sources: The 2000 County Business Patterns (Ref. 1) and the 1999 Nonemployer Statistics from the U.S. Census Bureau (Ref. 2), the FDA Field Accomplishments and Compliance Tracking System (FACTS), the FDA Operational and Administrative System for Import Support (OASIS), and the 1997 National Agricultural Statistics Service (NASS) Survey (Ref. 3). All datasets used in this analysis were the latest available as of the time of writing.

The Census Bureau creates the 2000 County Business Patterns (CBP) by analyzing data from the Business Register, the Census Bureau's file of all known single and multiestablishment companies with at least one employee. Data for single-location firms are obtained from the Economic Censuses, the Annual Survey of Manufacturers, Current Business Surveys, and administrative records from the U.S. Internal Revenue Service, Social Security Administration, and the Bureau of Labor Statistics.

Facilities not included in the CBP are counted in the Nonemployer Statistics, also from the Census Bureau. Nonemployer businesses are companies with no paid employees. The Census Bureau primarily obtains data about nonemployer businesses from business income tax returns filed with the Internal Revenue Service.

The FDA FACTS tracking system is an online database designed to monitor compliance related information for each facility that is regulated by FDA. The database contains an updated list of regulated facilities. FACTS and the Census Bureau use different categories for facilities, making a direct comparison of FACTS with the CBP and Nonemployer Statistics difficult. In our estimates, FACTS facility counts are the primary source of data on importers and foreign facilities, and interstate manufacturers, wholesalers, and warehouses.

Manufacturing, warehouses, wholesalers, and packaging facilities
: The primary source for the total (both intrastate and interstate) number of manufacturers, warehouses, wholesalers, and packaging facilities is the 2000 CBP and 1999 Nonemployer Statistics for the NAICS codes identified in table 1 of this document. The NAICS codes identify industry groups and subgroups. Often the data are more aggregated in the 1999 Nonemployer Statistics than in the CBP; when the nonemployer statistics only exist for an aggregated NAICS code, we adjust the total number of facilities identified in the aggregated nonemployer category by the ratio of CBP counts in the relevant subcategory and aggregated category. For example, the 1999 Nonemployer Statistics identified 4,700 facilities under code 4931, but does not break the total down further. Our adjustment changes the 4,700 facilities to 964 [4,700 x (1,461/7,123)] facilities in subcategories 49312 and 49313. The sum of the number of facilities under the codes 49312 and 49313 in the CBP is 1,461, and 7,123 is the number of facilities under the aggregated code 4931 in the CBP.

The term “packaging” described by the data used in this analysis varies from FDA's interpretation of “packaging” in section 306 of the Bioterrorism Act because it is broader and includes food contact substances, which fall within the act's definition of food. In this economic analysis, we use the term “manufacturer and distributor” of outer packaging to refer to all persons who manufacture, process, pack, hold, receive, distribute, transport, or import “packaging” as that term is used in the Bioterrorism Act. FDA was unable to find any data that discriminated between outer packaging manufacturers and distributors and those that manufacture or distribute materials that FDA currently regulates as food contact substances, including plastic beverage bottles and inner cereal box liners. The data used for the analyses include the number of manufacturers and distributors of the following types of packaging: Paperboard containers, paper

bags and treated paper, plastic bags, bottles, laminated plastics and other plastic materials, polystyrene and urethane foam products, glass products, and metal and aluminum can, sheet, plate, and products. Furthermore, printing services and label producers are included such as lithographic, gravure, flexographic, screen, digital, and quick printing services.

Transporters and packers
: Although the CBP and Nonemployer statistics distinguish passenger and nonpassenger transport, they do not separately identify establishments engaged in the transport of food. Based on a comment received through our preliminary outreach activities, FDA assumes that 20 percent of the specialized freight transport industry is engaged in food transport. FDA requests comments on this assumption. The largest category in transport and packing is trucking.

Mixed-type facilities that engage in farming
: Firms engaged in covered activities would be required to keep records on these activities as discussed above, even if those firms were mixed-type facilities that engage in farming. Covered activities conducted on mixed-type facilities that engage in farming potentially comprise a large percentage of the activity conducted at these facilities. For example, manufacturing or processing for farms includes canning, freezing, cooking, pasteurization, homogenization, irradiation, milling, grinding, chopping, slicing, cutting, coloring, waxing, shelling of nuts, peeling, labeling, and packaging. Facilities with farms will be considered mixed-type facilities if they alter the general state of the commodity, use any ingredients obtained from another source, and then sell or transfer the product for final use offsite.

To estimate the number of mixed-type facilities that engage in farming that would be affected by this rule, FDA uses the 1997 USDA NASS Census of Agriculture and data obtained from various county level Cooperative Extension Service (CES) offices. The Census of Agriculture provides the total number of farms producing specific commodities. To estimate the number of farms that are part of mixed-type facilities, FDA used a sample of counties with information from their respective CES offices. CES offices from Clay County, Kansas; Monterey, Sonoma, Marin, and San Diego counties in California; Jackson County, Wisconsin; Gillespie and San Saba counties in Texas; Carol County, Maryland; and Berks County, Pennsylvania provide data on the percentage of farms producing specific commodities that could be considered mixed-type facilities (Ref. 4). Table 2 presents the estimated number of mixed-type facilities that engage in farming by type of farm. While some of the facilities described in table 2 may qualify as roadside stands for some of the products that are sold from these facilities (and would not be subject to recordkeeping requirements for those products), we were not able to distinguish between facilities that would qualify as roadside stands and mixed-type facilities that engage in farming. The numbers of mixed-type facilities that engage in farming listed in table 2 may be overstated to the extent that they qualify as roadside stands. The estimated total is 30,497. FDA requests comments on the methods used to estimate the numbers of mixed-type facilities that engage in farming and for identifying the number roadside stand facilities.

Table 2.—Mixed-Type Facilities that Engage in Farming

Commodity
Total No. of Farms
Percent Mixed-Type
No. of Mixed-Type Facilities that Engage in Farming

Pig Farms (Feed Mixing)
46,353
1.5%
695

Cattle (Feed Mixing)
785,672
1%
7,857

Poultry (Feed Mixing)
36,944
1%
369

Other Animal Production (Feed Mixing)
110,580
1%
1,106

Dairy
86,022
1.1%
903

Grain, Rice, and Beans
462,877
1%
4,629

Apples
10,872
1.5%
163

Oranges
9,321
1.5%
140

Peaches
14,459
1.5%
217

Cherries
8,423
1.5%
126

Pears
8,062
1.5%
121

Other Fruit
29,413
1.5%
441

Nuts
14,500
2%
290

Berries
6,807
1.5%
102

Grapes
11,043
10.5%
1,160

Olives
1,363
3.5%
48

Vegetables and Melons
31,030
0.5%
155

Organic vegetables
6,206
50%
3,103

Honey
7,688
50%
3,844

Syrup
4,850
100%
4,850

Herbs
1,776
10%
178

Total
30,497

Importers
: FDA bases the number of importers on a database collected from shipment records that list all companies that were listed as importers or consignees for a covered product in 2001. These data were collected through FDA's OASIS system, which is an automated system for processing and making admissibility determinations for shipments of FDA-regulated products seeking to enter U.S. domestic commerce. Many of these facilities are of a type that would already be counted in the FDA FACTS or CBP (or nonemployer statistics) data. In order to avoid double counting, FDA assumes the following: (1) Any facility that identifies itself through its name as being a facility type covered by the CBP will already be counted in the CBP; (2) any facility that is a consignee only will already be counted in the CBP since its main business is not simply importing; (3) any facility self-identified as an importer only is not in the CBP; and (4) all other facilities will be considered in an uncertain range of facilities affected. Since it is uncertain whether these facilities would already be counted in the CBP, we will use a uniform distribution to assign a probability of double counting in all of our cost estimates. For example, if the uniform distribution generates a probability of 0.5, then we will assume that half of these unclassified facilities are already in the CBP. A uniform distribution implies that any probability from zero to 100 is equally likely. FDA requests comments on these assumptions.

Foreign establishments
: FDA estimated the number of foreign manufacturing establishments that will be affected by the regulation from a count of foreign manufacturers identified in the OASIS system. We were unable to find reliable data on the number of foreign nonmanufacturing establishments and made the following assumptions to estimate their numbers: For the final holders of the article before the food or food packaging is imported into the United States, we assumed the same number of facilities as on the domestic side of the importation process, for a total of approximately 77,000 foreign final holders. For other firm types, we assumed that the ratio of foreign to domestic facilities of other types is approximately equal to the ratio of foreign to domestic manufacturers. We also assumed that the facility to firm ratio is the same for both foreign and domestic establishments. We request comments on the assumptions used to arrive at these estimates, as well as on reliable sources of data that would improve these estimates.

Firm adjustment
: Even though recordkeeping requirements apply to each facility within a firm, some of the overall burden will be estimated at a firm level in order to better capture the true burden of the regulation. In order to estimate the number of firms affected, we used the 1999 Statistics of U.S. Businesses, also from the U.S. Census Bureau (Ref. 5). This dataset is based on the CBP and Nonemployer Statistics, but calculates both the number of establishments and the number of firms for each NAICS code. The Census Bureau has not updated this dataset for the latest 2000 CBP, so we use the 1999 ratio of establishments to firms to adjust the 2000 CBP and 1999 nonemployer establishment count numbers to firm numbers.

Costs per facility or per firm
: Some costs of the regulatory options apply to firms, while other costs apply to individual facilities. FDA assumes that the costs to facilities are the same for transfers within firms as for transfers between firms. We request comments on this assumption. Costs fall into several broad categories:

Additional record information
: Any possible new regulation may require more information on the input, output, or source ingredients than is kept in existing food facility records. A limited amount of new information could be accommodated by a simple redesign of existing records, whereas requiring more new information may require a completely new design and collection. The extreme version of this requirement is explored under option 13: requiring all raw ingredients to be connected through records to all final products would cause a substantial change in recordkeeping and other business practices for many commingled commodities.

Information Collection and Maintenance
: The burden of maintaining extra information is a direct function of the amount of information required by this proposed regulation that is not normally collected by industry. This burden estimate will be substantially correlated with the redesign burden described previously.

Storage time
: A longer storage time may place more of a burden on industry, but will also increase the probability of having records available should an outbreak occur. The major determinant of the impact on costs of storage time requirements is whether the proposed storage times will be longer than normal industry practices. FDA believes that the storage times proposed in option 2 are within normal industry practices. Requiring longer retention times than those proposed in option 2 for records on perishable foods might impose an additional burden. This issue is discussed in more detail below and in options 2, 8, and 9.

Records access time
: As in storage time, the major determinant of the impact of any required response time for records access is what firms would reasonably be able to achieve in an emergency situation with current business practices.

Data sources and cost estimates common to options:

Labor costs
: For all labor costs, FDA used a wage rate for an administrative worker of $25.10 from the Bureau of Labor Statistics occupational wage rates for the year 2000 (Ref. 6), doubled to include overhead costs. We assume that all labor for all options is by administrative workers. FDA lacks wage data specific to each of the foreign countries that export to the United States, so we used the wage rate for an administrative worker in the United States for the foreign wage rate. We

assume that the nature of the worker and the worker's wage would be about the same in foreign countries as in the United States. In open markets where trade takes place, real wage rates tend to be equal for similar work and productivity across countries.

Learning costs
: Foreign and domestic facilities will incur administrative costs in order to learn how to comply with any new regulation. Because most of the facilities covered by the proposed registration rule would be covered by this proposed rule, the administrative costs will be shared between the registration and recordkeeping rules. Those establishments covered by both regulations will probably search for information on both regulations at the same time and find information in the same places. Therefore, the learning cost estimates presented here probably overestimate the costs actually incurred by firms covered by both rules since there is the potential for double counting. The potential for double counting occurs in estimates of costs for firms covered by both rules. These include domestic manufacturers, wholesalers, warehouses, mixed-type facilities that engage in farming, foreign final holders, foreign manufacturers, and importers in any of these categories.

Facilities will become aware of these requirements through normal business activities: Reading trade press, reading industry news, FDA outreach, or conversation with other business operators. Because facility operators or owners must be aware of the requirement to change their activity, we assume that becoming aware of the regulations will occur as part of normal business practice and so have no economic costs for the facility. There may be costs incurred, however, by FDA or trade organizations to undertake the outreach.

Once the owner or operator of the facility becomes aware of the regulations, he or she will need to research the requirements of the regulation, which will require searching for a copy of the requirements and reading and understanding them. Owners or operators may search for a copy of these requirements on the Internet or at a library. FDA received comments indicating that many businesses might not have access to the Internet. Searching costs will be higher for facilities that do not have access to the Internet and have to write to FDA or find other sources of information. In the United States, 59.1 percent of the population accessed the Internet at least once in the 3 months prior to being surveyed (Ref. 7). A Small Business Administration (SBA) report cites two studies that report 40 and 47 percent of small businesses had Internet access in 1998 (Ref. 8). An updated report from Dunn and Bradstreet in 2002 reports that 71 percent of small businesses have Internet access (Ref. 9). Therefore, FDA assumes that 71 percent of domestic facilities will search for the requirements for both regulations electronically. FDA estimates it will take domestic facilities with Internet access 1 hour to search for the requirements, and domestic facilities without Internet access 2 hours to search for the requirements. FDA requests comments on these assumptions.

FDA expects foreign establishments to go through the same searching, reading, and comprehending steps as domestic establishments. Costs for searching, reading, and comprehending the re

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A03-11460. Public record. Not legal advice.