Food Logistics

As if the food industry wasn’t already suffering enough this year with soaring fuel and commodities prices, it may be faced with even more costs in the form of fees levied by the Food and Drug Administration (FDA).

In April, the U.S. House of Representatives Committee on Energy and Commerce, led by Rep. John Dingell [D, MI], released a Discussion Draft (http://energycommerce.house.gov/FDAGlobalAct-08/Dingel_60AXML.pdf) of the FDA’s Globalization Act of 2008. The draft is intended to begin a discussion about how to provide adequate funding and authority for the FDA to ensure the safety of the nation’s food supply in a global marketplace. The committee plans to hold hearings on the draft over the next few weeks and mark up the legislation soon thereafter.

The draft, if adopted, would place new burdens on the food industry as well as the FDA, and come with a heavy price tag. The proposal calls for food manufacturers to pay an annual registration fee of $2,000 per facility (not per company) operating in the U.S. and a $10,000 annual tax on each food importer to finance FDA operations. The committee said the fee would generate approximately $600 million, more than double the FDA’s current food safety budget.

Industry trade associations blasted the draft, citing that the cost of FDA inspections should be paid from general tax revenue, not from taxes imposed on food facilities or importers. By some estimates, the user fees—and the fees associated with non-compliance–will cost the industry over $1 billion. This unnecessary expense will be ultimately passed on to consumers.

“The user fees proposed in the draft are unfair food taxes imposed on food manufacturers that will only work to arbitrarily increase the cost of food for consumers at the worst time possible–when thousands of Americans are already struggling to hold on to their homes and pay their already skyrocketing grocery bills,” says Bob Brackett, Grocery Manufacturer of America’s senior vice president and chief science and regulatory affairs officer.

In addition to the user fees, the draft is also calling for new regulatory requirements, including provisions that provide broad authority to review the adequacy of food safety plants, to mandate controls at each facility and to require labeling for food treated with carbon monoxide. It would also give the FDA mandatory recall authority. Yet, in the past three years, the FDA has lost 600 inspectors.

While there is no arguing that the U.S. food safety system needs improvement, the drastic measures that are proposed in the draft will have negative, long-term impact that could put small food processors out of business. How will this affect your business?