• Food Safety Working Group Meeting on FSMA Fees
  • November 11, 2011 | Author: Melvin S. Drozen
  • Law Firm: Keller and Heckman LLP - Washington Office
  • On Friday, October 28, 2011, representatives from the U.S. Food and Drug Administration's (FDA) Food Safety Modernization Act (FSMA) Fees Team (the Team) met with the Grocery Manufacturers Association and other industry representatives to discuss the team's progress and recent guidance document on the implementation of the fee provisions of Section 107 of FSMA. The major areas of discussion were: (1) the method for determining the fee schedule, (2) the billing procedure for the fees, (3) both the method of appointment and liability of the US Appointed Agent, (4) clarifying the assessment of import reinspections fees particularly in the context of country-wide import alerts, and (5) small business considerations.

    Method for Determining the Fee Schedule

    Section 107 of FSMA requires FDA to publish the fees in a Federal Register notice not later than 60 days before the start of each fiscal year (FY). On August 1, 2011, FDA announced the 2012 fee schedule for facility reinspections and failure to comply with recall orders. The FY 2012 fees rates are as follows: $224 an hour if no foreign travel is required and $335 an hour if foreign travel is required. The fees are effective for occurrences on or after October 1, 2011 and through September 30, 2012. FDA reiterated that although it began tracking and assessing fees for reinspections and failure to comply with recall orders on October 1, 2011, it does not expect to send any fee invoices prior to January 1, 2012. In its September 2011 guidance document, FDA advised that is would delay the import reinspection fees as it evaluated the comments it had received.

    Under FSMA, the fees are to recover 100 percent of FDA's costs from the activity (here either failure to comply with recall orders or reinspection-related activities). And so hourly fees will be assessed for all of the actual time FDA inspectors spend preparing for the reinspection, traveling to the facility, conducting the reinspection, and preparing the final report with FDA's determination or the time spent handling a failure to comply with a recall order. FDA also clarified that it will not give a fee estimation prior to a facility reinspection.

    FDA provided their 5-step process for determining the fee schedule:

    1. Calculate direct cost per full-time equivalent (FTE)

    2. Multiple by 1.43 to include indirect support costs

    3. Determine hourly rate (assuming 1,600 hours per employee per year)

    4. Inflate the hourly rate by inflation adjustment

    5. Estimate foreign travel costs

    Industry took issue with FDA's method for determining the fee schedule calling it over inclusive and inaccurate. Attendees commented that FDA's calculation includes too many costs (especially indirect costs) and lacked transparency, predictability, and measures to ensure consistent application. Some industry members opined that the fee should reflect the specific cost of the activity instead of the average cost; the time should be billed on a varying schedule more like the private sector where, for example, travel time is billed at a different rate than for substantive work; the overhead costs are already funded and therefore should be excluded from the calculation of costs; and that medical devices generate higher revenues per pound as compared food, so the fee determinations for FSMA should not be based on the medical device fee system.

    The Billing Procedure for the Fees

    FDA will mail firms an itemized bill for the fees owed on a monthly basis. Bills for fees assessed for failure to comply with mandatory recalls will be mailed during the month following the end of the recall process. Alls bills will be addressed to "the most responsible person at the firm." For domestic firms the responsible party will be the person who submitted the food facility registration required under § 415, and for foreign firms it will be the U.S. Agent. Payment is due within 30 days following the invoice date. Two methods of payment are acceptable, a check or a wire transfer through Fedwire. Firms should be sure to include the invoice number with their payments to ensure the proper application of their payment to their bill.

    FSMA fees are subject to the Debt Collection Improvement Act of 1996. Although a bill will be considered to be in arrears 30 days after the invoice date, FDA will send 30, 60, and 90 day collection notices. But after 90 days, the debt will be turned over to FDA's Program Support Center for further collection actions.

    Foreign Firms and Liability of the U.S. Appointed Agent

    As noted above, in the case of foreign firms, the bill for assessed fees may be sent to the registered U.S. Agent. Industry expressed its concerns with FDA using the same agent appointed for FDA registration under The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (the Bioterrorism Act). The stated concerns focused on the Agents' new liability that was not considered at the time of appointment; that some Agents are unaware of their appointments; and that this new role is completely different from the Agent's role under the Bioterrorism Act, suggesting this should be a separate appointment. The Team encouraged the submission of comments regarding these topics.

    Clarifying Import Reinspections Fees and Country-wide Import Alerts

    The Team reiterated that "at least" the following 4 situations would trigger import reinspection fees:

    1. Reconditioning of imported food;

    2. Importers seeking admission of an article that has been detained under an import alert;

    3. Entities requesting removal from an import alert for detention without physical examination; and

    4. Destruction (or exportation) of food that has been refused admission.

    As to nos. 2 and 3 above, and of some surprise to industry, the Team clarified that in the context of country-wide import alerts (import alerts that apply to a product from a specific country) an importer seeking admission of an article or removal from the import alert would not be charged the reinspection fee as long as it did not play a role in the issuance of the alert (i.e. the importer's product was not one that lead to the import alert).

    Small Business Considerations

    The Team raised its concerns relating to small businesses, which included the definition of "small business", how FDA should achieve the total cost recovery instructed by FSMA if small businesses are given a reduced fee, and other factors FDA should take into consideration for determining the amount of the fee reduction.

    Industry expressed concerns about the burden on small businesses and the risk that these fees are high enough to put a small business out of business. Some suggested FDA use the commonly cited definition of "small business" of 500 or fewer employees, while others forwarded alternative definitions including one that would take into account the prevalence of very small businesses (even just 1 or 2 employees) in the food industry. While industry agreed that small businesses should be given a reduced fee for their first offense, no one supported a reduced fee for repeat offenders.

    Currently there are Federal Register notices on two topics regarding FSMA fees—the fees' burden on small businesses (Docket ID: FDA-2011-N-0529) and the 2012 FY fee rates (Docket ID: FDA-2011-N-0528). FDA encourages all interested parties to submit comments regarding either topic at http://www.regulations.gov through November 30, 2011.