Unintended Consequences Of Food Safety Regulation Quite Costly
The Food SafetyModern-ization Act (FSMA) signed by President Obama in 2011 is the first reform of FDA food safety policy since the Federal Food, Drug, and Cosmetic Act of 1938. FSMA mandates a science-based and risk-based policy to improve the safety of our food. It gives FDA authority to implement this policy recognizing resource limitations that mandate identification of the greatest risks and focusing resources where the greatest opportunities are to reduce those risks.
Under FSMA, all food-handling facilities are required to register with FDA every two years and cannot sell into interstate commerce without being registered. On-farm handling, holding, and packing operations are treated as a food facility, which is required to develop and implement a Hazard Analysis Critical Control Point plan. Realizing the potential adverse implications for small businesses, Congress added a number of exemptions to ease the burden on these small businesses. These include exemptions to those farms that sold food in the previous three-year period of $500,000 or less, and if more than 50% of their food sales were directly to qualified end-users. Qualified end-users included the consumers of the food regardless of location, or a restaurant or retail food establishment in the same state or not more than 275 miles from the farm. Commercially processed produce also is exempt if processed in a manner to adequately reduce pathogens. Other exemptions included farms with food sales of $25,000 or less and produce that is rarely consumed raw.
Same, But Not Equal
These exemptions result in 149,426 farms that are exempt or not covered by the law, leaving 40,211 that are covered (as reported by FDA in their analysis of economic impacts). Even exempt farms will be required to post notice of their business name and location at the point of sale, resulting in total costs of $3.8 million to those firms. To non-exempt domestic producers, total first year costs for compliance with the rules outlined by FDA were estimated at $699.79 million with recurring costs of $419.28 million to $459.6 million.
FDA estimates the benefits of this policy to be a 56.09% reduction in the estimated illnesses attributable to produce, from 3.12 million illnesses annually prior to the implementation of FSMA to 1.75 million illnesses after implementation. They contend these savings amount to $1.036 billion annually.
Paying The Price
The intention of these regulations is to make food safer for consumers and to mitigate the cost of food safety incidents in our society. Unintended consequences are those impacts occurring as a result of the regulation that do not contribute to the intent of the legislation. Exemptions provided under these regulations will provide more incentives for locally grown produce. The regulations would have minimal impact if they were equally felt by all producers. The regulations will increase the cost of growing and selling covered commodities in the national market. Those commodities will suffer a price impact on their demand, forcing them to compete with rival commodities that may be exempt. Non-exempt growers also will be forced to compete with growers who hold those exemptions because of size (small farms being exempt) or market (those selling into local markets are exempt).
The unintended consequences of this regulation are those producers who have established their presence in the national market will see their competitive advantage whittled away to small and local growers. We can only hope Congress understands these impacts and helps growers adjust to these rules. That will require money to develop safer technologies and to help implement those new technologies. Where does that money come from?