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RE: Current Good Manufacturing Practice and Hazard Analysis and Risk-Based Preventive Controls for Human Food: Preamble Section X.B.5. “Food Sector Study and the Definitions of ‘Small Business’ and ‘Very small business,’” Proposed § 117.3 “Definitions.” [Docket No. FDA-2011-N-0920, 78 Fed. Reg. 3646, 3700-02 & 3800 (2013)]
The Center for Science in the Public Interest (CSPI) thanks you for the
opportunity to comment on the proposed rule to implement § 418 of the Food, Drug, and Cosmetic Act of 1938 (FDCA) as amended by section 103 of the FDA Food Safety Modernization Act (FSMA). CSPI is a nonprofit health advocacy and education organization focused on food safety, nutrition, and alcohol issues. CSPI is supported principally by the 900,000 subscribers to its Nutrition Action HealthLetter and by foundation grants. We accept no government or industry funding.
SUMMARY
This comment covers the definition of very small business under the proposed rule. The definition will have a significant impact on public health and consumer safety because very small businesses can be exempted from the preventive food safety plans that other facilities must implement. For that reason, CSPI supports the defining a very small business as one that has less than $250,000 in total annual sales of food, adjusted for inflation.
• Statutory authority to define very small business must be strictly and
narrowly construed because of the definition’s impact on public health and safety. The definition that is most consistent with normal rules of statutory interpretation is a business with less than $250,000 in total annual sales.
• The Tester Amendment controls how very small business may be defined. If the term is defined as a business with less than $500,000 or $1 million in total annual sales of food it would—
o conflict with the structure of the Tester Amendment;
o render provisions in the Tester Amendment superfluous; and o be inconsistent with the intent of the Tester Amendment.
• Defining very small business to mean a business with less than $250,000 in total annual sales most closely follows the structure, gives effect to every provision, and is most consistent with the purpose of the Tester Amendment.
COMMENT
FSMA is designed to enable the Food and Drug Administration (FDA) to better protect public health by focusing on preventing food safety problems rather than reacting to them after they occur.1 This is in keeping with FDA’s primary mission of protecting public health as described in § 1003 of the FDCA. The proposed rule on Current Good Manufacturing Practice and Hazard Analysis and Risk-Based Preventive Controls for Human Food [Docket No. FDA-2011-N-0920]
is intended to implement some of the public health programs and consumer
protections embodied in FSMA and reflected in FDA’s underlying mission statement. Due to the broad scope of the proposed rule, CSPI is providing this comment on the definition of very small business separately from comments we will submit on other provisions. Additionally, we believe how FDA defines very small business will have a significant impact on public health and consumer safety, a factor further justifying an individualized comment. We conclude that within the options offered FDA may only define the term as meaning “a business that has less than $250,000 in total annual sales of food, adjusted for inflation.” In support of this conclusion we offer the following comments with regard to –
• The limited nature of FDA’s discretion to define an exemption to public
health and safety rules.
• Why options 2 and 3 are unacceptable given the statutory structure and
intent of § 418(l) of the FDCA (the Tester Amendment).
• Reasons for adopting a “less than $250,000 in total annual sales”
threshold to define very small business.
1 Current Good Manufacturing Practice and Hazard Analysis and Risk-Based Preventive Controls for
Human Food, proposed rule, 78 Fed. Reg. 3646, 3650 (Jan. 16, 2013).
A. Agency has limited discretion in how it defines the term very small business.
As an initial matter, we believe the only viable definition among those made available by the rule is that a very small business will have less than $250,000 in total annual sales of food. This is because well-established canons of statutory
interpretation apply to FDA’s exercise of its authority to exempt some food facilities from the full requirements of the preventive controls rule.
FDA does not have unfettered discretion in how it defines the term very small business. Agencies are required to strictly and narrowly interpret statutory
exemptions particularly when they affect public health and safety.2 In this case, the definition will govern when a food facility may be exempt from the preventive controls rule under section 103(c)(1)(D) of FSMA or is required to comply with modified requirements in lieu of those covered by subsections (a) through (i) and (n) of § 418 of the FDCA. As a practical matter there is little to distinguish between the exemption and modified requirements in this instance.3 A very small business will be exempt from complying with FSMA’s preventive food safety provisions in either case. As a consequence, consumers could be at greater or lesser risk depending on how FDA defines the term. FDA estimates the difference in the
definitions will expose consumers to between 4,800 and 19,200 additional illnesses each year from food the rule would have regulated if there were no exemptions.4 Since the definition exempts food facilities from the requirement to implement a preventive food safety program, FDA is required to apply the exemption to as narrow a subset of facilities as possible consistent with FSMA’s instructions. FDA does this if it adopts the less than $250,000 in annual sales threshold for defining very small business.
B. Options 2 and 3 for defining very small business lead to conflicts between statute’s provisions.
1. § 418(l) of the FDCA, the Tester Amendment, controls how FDA may define very small business.
The preamble to the rule requests comment on three options for defining very small business for purposes of the Tester Amendment and other provisions in
2 USV Pharmaceutical Corporation v. Richardson, 461 F.2d 223, 227-28 (4th Cir., 1972)(citing “the
principle that statutory exemptions, particularly as applied to statutes concerned with public health and safety, are to be strictly and narrowly construed”).
3 This view is further supported by the statutory text. While the subsection is headed “Modified
Requirements for Qualified Facilities” in paragraph (1), its subheading in paragraph (2) for how these facilities are treated by the provision clearly reads “Exemption.”
4 Analysis of Economic Impact, § D.1.b. (Table 4 – Estimated Dollar Burden Attributable to
FDA-Regulated Food Under the Scope of This Proposed Rule-Making).
§ 418. The proposed rule requires food facilities to implement preventive controls that significantly minimize or eliminate the occurrence of foodborne hazards.5 The Tester Amendment carves out two classes of qualified facilities based on their annual sales and marketing methods that may operate under modified rules. A qualified facility may be (1) a very small business or (2) a business with limited annual sales provided a majority of its sales are made directly to qualified end-users.6 This structure controls how FDA must define very small business, and
because average sales of less than $500,000 is used in the statute to define a facility with limited annual sales, the only reasonable definition of very small business is option 1, “less than $250,000 in total annual sales.”7
The alternatives lead to a number of problems in implementing § 418(l). Options 2 and 3 would define very small business to mean a business with less than $500,000 or $1 million in total annual sales respectively. These amounts would equal or exceed the amount allowed for qualified facilities with limited annual sales. As a result, those options overwhelm the Tester Amendment’s structure and defeat its purpose. We offer the following reasons for this view.
2. Options 2 and 3 are inconsistent with statutory structure of § 418(l) of the FDCA
The major objection to the higher sales limits in options 2 and 3 is that they are inconsistent with the statutory structure of the Tester Amendment. A principle of statutory interpretation holds that an agency cannot construe an exemption in a way that nullifies other conditions of its application.8 Options 2 and 3 run afoul of this principle because of how the Tester Amendment treats the two classes of qualified facilities. The first classification automatically applies based on FDA’s definition of very small business. The other applies only if the facility owner agrees to operate under the restrictions set out in § 418(l)(1)(C) of the FDCA. The outcome
5 Food, Drug, and Cosmetic Act of 1938 § 418, 21 U.S.C. § 350g (2013)
6 A qualified end-user is defined as (1) the consumer of the food; or (2) restaurants or retail food
establishments that are located in the same state as the qualified facility or within a radius of 275 miles of it provided they sell the food directly to consumers. Other conditions that apply are that the size of the facility has to take into account the income and practices of any subsidiary or affiliated business. § 418(l)(1)(B) & (C) and (4)(B).
7 CSPI agrees with FDA’s decision to define very small business in terms of total sales rather than
other factors such as volume of production or number of employees.
8USV Pharmaceutical Corporation, 461 F.2d 227, Agencies must avoid interpretations that are
inconsistent with the structure of the statute, or that render any of its provisions superfluous. See, the list of textual integrity canons in William N. Eskridge, Philip P. Frickey & Elizabeth Garrett, Cases and Materials on Legislation: Statutes and the Creation of Public Policy app. A, 20 (3rd Ed. 2001), Market Company v. Hoffman, 101 U.S. 112, 115-16 (1879)(a cardinal rule of statutory construction holds that a statute must be construed so that no clause, sentence or word is rendered superfluous, void or insignificant)(more recently cited in Duncan v. Walker, 533 U.S. 167, 174 (2001)).
of applying either option 2 or 3 is the improper nullification of § 418(l)(1)(C) of the FDCA by taking away any incentive for a facility owner to qualify under that
provision. This happens because they subsume the class of qualified facilities with limited annual sales into the class of very small businesses. That impacts the choice between the classifications of qualified facilities in two ways. In terms of sales, the options match or exceed the limit of less than $500,000 that applies to a facility with limited annual sales. In terms of burdens, a facility with limited annual sales must keep additional records showing a majority of its food is sold to qualified end-users.9 In contrast, a very small business under options 2 and 3 can earn as much or more from unrestricted sales while partially avoiding recordkeeping burdens. Given those advantages, it is unlikely any facility owner would opt for classification as a qualified facility with limited annual sales, rendering § 418(l)(1)(C) of the FDCA superfluous. Since Options 2 and 3 violate well-established principles of statutory interpretation, the only reasonable definition is that a small business is one with less than $250,000 in total annual sales.
3. Options 2 and 3 are inconsistent with statutory intent of § 418(l) of the FDCA.
Options 2 and 3 are also inconsistent with the statutory intent of § 418(l) of the FDCA. Based on comments by Tester Amendment supporters and by Senator Jon Tester, the amendment’s author, the provision contemplates different safety thresholds at different product distribution levels. During development of the legislation, Tester Amendment supporters argued that FSMA imposes an
unreasonable regulatory burden on small businesses that exceeds the public health benefit from universal compliance with its most rigorous provisions.10 Senator Tester, meanwhile, viewed the close producer-customer relationship as a control for safety when a business is smaller than $500,000 in sales and primarily sells directly to consumers or locally to food retailers and restaurants.11 If these rationales cover the same facilities, as would happen if the definitions overlap, then the first
contradicts the second. Either the risk is present but too small to regulate efficiently or a system of direct and local sales controls the risk making it unnecessary to regulate. The only reasonable interpretation of the Tester Amendment, therefore,
9 While FDA will not require qualified facilities to submit financial records, proposed § 117.201(e) of
the rule requires them to maintain and, if requested, make available to FDA all records that support the facility’s self-certification of its status.
10 Letter from 87 organizations representing local food interests to the U.S. Senate (Apr. 7,
2010)(Support Fresh, Safe Local Food in the Food Safety Bill).
11 156 Cong. Rec. S8010 (daily ed. Nov. 18, 2010)(statement of Sen. Tester)(the geographical area is
limited to the state where the qualified facility is located or to any retailer/restaurant within 275 miles of the qualified facility).
anticipates that a very small facility is overly burdened regardless of how it markets product, but that a transition occurs at some point to account for the weakening of the producer-customer relationship as a business grows. Food processors in that transition can be relied upon to operate safely only if they deal directly with their customers. Under this logic, a reasonable place for FDA to set that transition is less than $250,000 in total annual sales.
C. Option 1 fits most closely with structure and intent of § 418(l) of the FDCA.
The objections to options 2 and 3 would not apply to the definition under option 1 of very small business as meaning a facility with less than $250,000 in annual sales. That makes option 1 the more reasonable approach to implementing the Tester Amendment. It most closely follows the statutory structure of § 418(l) and the intent of its author by clearly distinguishing between the two types of qualified facilities. Furthermore, applying option 1 would provide a rule that properly aligns incentives with the Tester Amendment’s statutory scheme and the assumptions underlying it.
Option 1 treats both classes of qualified facilities more equitably than options 2 and 3. A very small business threshold of less than $250,000 can be understood as applying to either type of qualified facility. Following the logic of the Tester
Amendment a qualified facility selling below the threshold does not produce enough product for federal regulation to be efficient.12 FDA estimates this threshold covers less than half a percent of food falling within the scope of the preventive controls rule. A processor that engages in sales above this threshold, meanwhile, does not of necessity lose its status as a qualified facility. The facility may retain its status if it agrees to marketing restrictions and additional recordkeeping requirements designed to ensure a majority of the food sold goes directly to consumers. These conditions track Senator Tester’s logic that the close relationship of the producer to the consumer that exists in a direct sales situation is sufficient to ensure a safe product.13 The result is a fair rule that provides opportunities for very small
businesses to grow without abruptly losing their status as qualified facilities.
12 An exemption based on regulatory efficiency is not unheard of. FDA has set this kind of regulatory
threshold in other circumstances. For example, FDA cited efficiency in exempting farms with fewer than 3,000 laying hens from its shell egg rule for control of Salmonella Enteritidis. The number of farms with fewer than 3,000 hens is large at 65,000, but the impact of the exemption is small at less than 1 percent of supply. Prevention of Salmonella Enteritidis in Shell Eggs During Production, Storage, and Transportation, 74 Fed. Reg. 33030, 33036 (July 9, 2009).
13 While the logic is debatable, it clearly animates the Tester Amendment and so is cited here merely
for the proposition that option 1 is more closely aligned with the amendment than the other options.
The purpose of FSMA is to improve FDA’s ability to prevent, detect, and respond to food safety problems by establishing a system that is science and risk-based, accountable to consumers, transparent and focused on prevention.14 In order to gain passage of FSMA, the Senate amended the original bill by adding a narrow exemption to address concerns over regulatory burdens on very small businesses. The Tester Amendment carved out two classes of qualified facilities for exemption from the full impact of the preventive controls in section 103 of FSMA. Inherent to arguments for the Tester Amendment is an assumption that the
exempted facilities will have a very small impact on public health. That underlying assumption is rapidly weakened as more facilities are exempted under each option for defining the term very small business. FDA should not allow what was intended as a narrow exemption to swallow up the public health and food safety purpose of the larger law. Yet, that is precisely what happens if FDA adopts a broad definition of very small business as proposed in options 2 and 3. For the reasons stated above, FDA must define very small businesses as being food facilities smaller than $250,000 in annual sales.
Sincerely,
David W. Plunkett Senior Staff Attorney,
Center for Science in the Public Interest
14 156 Cong. Rec. S2693 (2010) (statement of Sen. Durbin on introduction of S. 510).
