Regulatory gumbo

Importers and customs brokers racing against the clock to comply with FDA’s new Food Supplier Verification Program    A new U.S. regulation requiring food importers to identify their foreign suppliers and verify that they are using safe food processes and procedures will enter into force May 30, but whether the industry will be in compliance immediately with these measures by then remains highly uncertain.
   “We’re not sure how it’s going to be implemented in time,” John LeBold, customs broker-manager for A Customs Brokerage (ACB) in Miami, told the Adam Smith Project. “We’re in a standby mode.”
   LeBold said ACB has been routinely relaying email messages to its importer customers about the May implementation of the Food and Drug Administration’s Food Supplier Verification Program (FSVP), which was announced in the Federal Register in November 2015.
   Despite the 18-month implementation, many importers have either found the regulation confusing about who is responsible for supplying the correct information, or have chosen to disregard it altogether assuming it’s not their problem.
   However, the FDA is clear in this regulation that the customs broker is not the FSVP importer of record, since these intermediaries are not the consignee or owner of the food nor have a financial interest in the food shipments.
   “The FDA wants the details for the real party in interest for the FSVP,” said Cindy Thomas of Kent & O’Connor, who serves as assistant Washington representative to the National Customs Brokers and Forwarders Association of America. “That’s the U.S. person at the time of entry, the U.S. person who owns the product, purchased it, or agreed in writing to purchase it,”
   The customs broker using Customs and Border Protection’s Automated Commercial Environment to process food import entries, starting May 30, will need to fill in a data field that identifies the FSVP importer, including the entity’s contact information and Dun & Bradstreet number. Since the FSVP importer and the CBP importer of record are not necessarily the same party, this information is not always readily available.
   “You have some consignees who have purchased the food import, or agreed to purchase it, but don’t want to be the FSVP importer, although they certainly are by definition,” Thomas said.
   To satisfy the FSVP importer regulation, a company identified as the FSVP importer must establish an internal program to verify their food suppliers, or hire a qualified third party to perform this task. Verifications include on-site checks, food sampling and testing, reviews of suppliers’ food safety records, and programs to prevent food contamination.
   “Brokers are concerned about having accurate information for the FSVP importer at the time of entry, and this is not always clear-cut or is difficult to obtain,” Thomas said. “The regulation is very complex, and I understand why the supply chain overall is struggling to get ready for it.”

The regulation is very complex, and I understand why the supply chain overall is struggling to get ready for it.

   “We don’t have the regulatory responsibility with this regulation, but we do have the responsibility to provide the correct information to FDA through ACE,” said Roger Clarke, president of Los Angeles-based customs broker Williams Clarke Co., and co-chairman of the NCBFAA Regulatory Affairs Committee.
   And without the identity of the FSVP importer provided in ACE, the entry will not be accepted and the shipment will be stopped at the border.
   Fortunately for many customs brokers, the majority of their large U.S. food importers qualify as FSVPs. It becomes trickier, however, when these imports are initiated by wholesalers who work with multiple smaller food product suppliers.
   Some food products are exempt from FSVP importer compliance, such as juices, seafood, alcoholic beverages, certain meats, poultry and eggs which are regulated by the U.S. Department of Agriculture. Foods for personal consumption, or foods that are imported for processing in preparation for re-exportation are also exempt. However, these products must still meet other federal food safety regulations.
   In addition, Canada and New Zealand have comparable food safety programs to the United States, and thus the U.S. verification activities for food imports from these countries are greatly reduced. Still, the FSVP importer sourcing products from Canada or New Zealand must still be identified in the ACE import entry.
   “Just because you’re a Canadian company is not a get-out-of-jail-free card in terms of complying with this regulation,” said Mike Lahar, corporate compliance manager with northern border customs broker A.N. Deringer and co-chairman of the NCBFAA Regulatory Affairs Committee.
   Lahar warned that the FSVP importer rule will be a significant mind-shift for Canadian food companies shipping into the United States. These companies often present themselves to the U.S. government as the non-U.S. resident importer of record, taking regulatory responsibility for entry and duty payment of their products exported to the United States. With FSVP, they will now have to require their U.S. customers take responsibility for certifying that they meet the food safety obligations under the Food Safety Modernization Act, and then transmit those details to the U.S. customs broker for processing the import entries. These U.S. food importers must also maintain those records in case FDA should perform an audit.
   “I worry that an unscrupulous exporter could declare a U.S. company as the FSVP importer without their permission,” Lahar said. “The U.S. importer could be unwittingly on the hook if the FDA decides to investigate.”
  The NCBFAA sent a letter to the FDA April 10 requesting the agency either push back the implementation date or take a “soft approach” to initial enforcement of the FSVP importer regulation.
   “It’s been taking people by surprise with all that’s been happening with ACE and ITDS (International Trade Data System),” Lahar said. “This thing has fallen through the cracks.”

Stopping cargo without correct FSVP importer of record information immediately on May 30 will be a particularly big problem for customs brokers operating along the Canadian and Mexican borders since trucks often arrive at the border crossings for clearance in hours, not days, after purchase orders are made.

   A soft enforcement approach will afford U.S. food importers that want to abide by the regulation (and their customs brokers) more time to ensure they’re supplying FDA with the correct information and not immediately having their cargoes stopped at the docks, incurring costly demurrage or risking spoilage, without it, Clarke explained.
   Stopping cargo without correct FSVP importer of record information immediately on May 30 will be a particularly big problem for customs brokers operating along the Canadian and Mexican borders since trucks often arrive at the border crossings for clearance in hours, not days, after purchase orders are made. These shipments could quickly pile up at the border until the correct information is supplied for the ACE entry, Lahar said.
   The FSVP importer regulation is part of the 2011 Food Safety Modernization Act (FSMA), which is considered the most significant reform of U.S. food safety laws in more than 70 years.
   “It aims to ensure the U.S. food supply is safe by shifting the focus from responding to contamination to preventing it,” FDA said.
   FSMA has been rolled out in stages in recent years, and covers both human and animal foods from the point of production, its transportation and storage, and delivery to the U.S. consumer. One of the biggest catalysts for Congress to create FMSA was the massive pet food recall in 2007. It was discovered that Chinese suppliers had introduced melamine and cyanuric acid into dog and cat food to artificially inflate the protein levels, resulting in injury and a spate of pet deaths. An outraged American public demanded heightened sanitation controls over imported foods.
   Charles Breen, a former FDA official and now independent advisor to EAS Consulting, said the new food safety regulations strive to modernize the FDA’s oversight.
   “The FDA’s import mechanisms were originally designed for imports of raw materials, not for partially processed or fully processed foods from other countries,” he said. “Nearly all those activities used to be done here. Now that’s no longer the case.”
   Breen acknowledged that the new FDA food safety regulations aren’t easy for importers to implement, but believes they will pay off in the long run.
   “Ultimately, the new regulations will provide consumers a higher level of protection and a more efficient way for the FDA to deliver that necessary level of protection,” he said. “There’s a lot of moving parts yet, but we’ll get there. FDA is committed to taking the time to make this work right.”