[Federal Register Volume 61, Number 153 (Wednesday, August 7, 1996)]
[Rules and Regulations]
[Pages 40963-40981]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20075]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration
21 CFR Part 101
[Docket No. 94N-0031]
RIN 0910-AA19
Food Labeling; Nutrition Labeling, Small Business Exemption
AGENCY: Food and Drug Administration, HHS.
ACTION: Final rule.
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SUMMARY: The Food and Drug Administration (FDA) is amending its food
labeling regulations to modify the basis on which low-volume food
products of small businesses are exempted from the requirements for
nutrition labeling. The regulations also establish a notification
procedure for small businesses to claim exemption for qualifying food
products. This final rule is in response to the Nutrition Labeling and
Education Act Amendments of 1993 (the 1993 amendments), and it is
intended to provide an understanding of how the small business food
labeling exemption provisions of the 1993 amendments operate.
DATES: The effective date of this rule is October 7, 1996.
Submit written comments on the information collection requirements
by October 7, 1996. This information collection has been approved by
the Office of Management and Budget (OMB) for 90 days, under OMB
control no. 0910-0324.
ADDRESSES: Submit written comments on the information collection
requirements to the Dockets Management Branch (HFA-305), Food and Drug
Administration, 12420 Parklawn Dr., rm. 1-23, Rockville, MD 20857.
FOR FURTHER INFORMATION CONTACT: Gerad L. McCowin, Center for Food
Safety and Applied Nutrition (HFS-151), Food and Drug Administration,
200 C St. SW., Washington, DC 20204, 202-205-4561.
SUPPLEMENTARY INFORMATION:
I. Background
A. Procedural
On November 8, 1990, the Nutrition Labeling and Education Act of
1990 (Pub. L. 101-535) (the 1990 amendments) was enacted. This new law
amended the Federal Food, Drug, and Cosmetic Act (the act) in a number
of important ways. One of the most notable aspects of the 1990
amendments is that they added section 403(q) to the act (21 U.S.C.
343(q)). This section, as amended by the Nutrition Labeling and
Education Act Amendments of 1993 (Pub. L. 103-80) (the 1993 amendments)
and the Dietary Supplement Health and Education Act of 1994 (Pub. L.
103-417) (the DSHEA), provides that, with certain exceptions, a food,
including both conventional foods and dietary supplements, is
misbranded unless its label or labeling bears certain nutrition
information (nutrition labeling).
Among the exceptions that Congress made to the nutrition labeling
requirement was one for small businesses based upon the value of their
gross sales (section 403(q)(5)(D) of the act). Following the expression
of concerns by small businesses about the narrow coverage of the
exemption and about the problems that relatively small firms would have
in meeting the requirements of the new law, Congress passed the 1993
amendments establishing a new exemption for low-volume food products of
small businesses under section 403(q)(5)(E) of the act. This section
provides that low-volume products of small businesses need not be
nutrition labeled.
What constitutes a low-volume food product is defined in the act by
the number of units of the product sold per year; what constitutes a
small business is defined by the number of full-time equivalent
employees (FTE's) that the firm employs. For a food product to be
exempt under this section, a small business must file a notice with FDA
claiming the exemption and providing information as to: (1) The average
number of FTE's for itself and all of its affiliates and (2) the
approximate number of units of its sales in the United States for each
product for which an exemption is claimed. For products that were on
the market before May 8, 1994, the 1993 amendments provide a gradual
phase-down of what constitutes a low-volume food product of a small
business. The number of units decreases from ``fewer than 600,000'' for
the 12-month period before May 8, 1994; to ``fewer than 400,000'' for
the 12-month period before May 8, 1995; to ``fewer than 200,000'' for
the 12-month period before May 8, 1996; and to ``fewer than 100,000''
thereafter. The number of FTE's starts at ``fewer than 300'' through
May 8, 1995, decreases to ``fewer than 200'' for the year before May 8,
1996, and down to ``fewer than
[[Page 40964]]
100'' thereafter. Products that initially come onto the market after
May 8, 1994, are subject to the ``fewer than 100,000 unit and 100 FTE''
limit.
Thus, the 1993 amendments provide additional time before low-volume
food products of small businesses must conform with the requirements
for nutrition labeling. By doing so, the 1993 amendments permit small
businesses to use up stocks of labels, thereby reducing the costs of
label inventory disposal, and to avoid having to compete for design and
printing resources with larger firms. By providing that no food product
from a firm having fewer than 100 employees and for which there are
sales of fewer than 100,000 units per year will have to be nutrition
labeled (at least until after May 8, 2002), the 1993 amendments save
small firms the expense of nutrient analysis and preparation of new
labels for those products.
Under the provisions of the 1993 amendments, as noted above,
persons that claim an exemption for a low-volume food product must file
an annual notice with FDA claiming the exemption. For products on the
market before May 8, 1994, the first such notice was due May 7, 1994,
and a second notice was due on May 7, 1995 (section 403(q)(5)(E)(iii)
of the act). Although the filing of the notice is necessary for an
exemption, it does not entitle a firm to an exemption. Under section
403(q)(5)(E)(I)(I) and (q)(5)(E)(ii) of the act, a product is not
exempt if its labeling provides nutrition information or bears a
nutrient content or health claim.
One other aspect of the small business exemption is relevant for
background purposes. In providing the new exemption for low-volume food
products of small businesses (section 403(q)(5)(E) of the act),
Congress noted that FDA had misinterpreted its intent as related to the
small business exemption in the 1990 amendments, which is based upon
total gross sales, by applying it to manufacturers, packers, and
distributors in addition to retailers (section 403(q)(5)(D)). However,
recognizing that FDA had issued regulations that small businesses were
relying on, Congress provided that section 403(q)(5)(D) of the act
would apply to all firms through May 7, 1995, but only to firms that
sell directly to the consumer (i.e., retailers) after that date
(Statement of Explanation, H.R. 2900, 139 Congressional Record H6358
(August 6, 1993)).
The 1993 amendments were self-effectuating in establishing the
provisions for exemption from nutrition labeling for low-volume foods
of small businesses. In passing the 1993 amendments, Congress was
concerned that action be taken quickly. In discussing the need for
quick action, Senator Bumpers noted that: ``To come into compliance
with the May 1994, effective date of the Nutrition Labeling and
Education Act requirements, small businesses must in the very near
future begin to incur the cost of initiating product analysis and
labeling redesign.'' (139 Congressional Record S10818 (August 6, 1993.)
Further, in introducing H.R. 2900 (the bill that became the 1993
amendments) for consideration, Senator Kennedy stated that: ``No action
or response by the FDA is required for the exemption to be in place.
Businesses with fewer than 10 employees, which sell fewer than 10,000
units of products, are (not) required to file any notice with the
FDA.'' (139 Congressional Record S10817 (August 6, 1993).) The
provisions of the 1993 amendments became effective upon their enactment
on August 13, 1993.
Although FDA recognized that the 1993 amendments were self-
effectuating, it concluded that rulemaking would be useful in providing
a common understanding of how the exemption provisions operate. Thus,
to facilitate implementation of the 1993 amendments, FDA published in
the Federal Register of March 14, 1994, a proposal entitled ``Food
Labeling; Nutrition Labeling, Small Business Exemption'' (hereinafter
referred to as ``the small business exemption proposal'') (59 FR 11872)
to: (1) Modify Sec. 101.9(j)(1)(21 CFR 101.9(j)(1)) and
Sec. 101.36(f)(1) (21 CFR 101.36(f)(1)), which provide for a small
business exemption based upon gross sales, to reflect the provisions of
the new law, (2) incorporate the provisions for exemption of low-volume
food products of small businesses, and (3) establish procedures for the
filing with FDA of notices from small businesses claiming exemptions
for low-volume food products.
FDA received 30 letters, each containing one or more comments, to
the small business exemption proposal. The responses were received from
trade and retail associations, Federal and State government agencies,
and industry. A number of the comments supported various aspects of the
proposal. Several comments addressed issues outside the scope of this
proposal, which will not be responded to here. A number of comments
suggested modifications in, or were opposed to, various provisions of
the small business exemption proposal. A summary of the arguments and
changes suggested by these latter comments, and the agency's responses,
are provided below.
B. FDA's Experience with the Filing of Notices
Before responding to the comments, it may be informative to discuss
FDA's experience with the notices that have been submitted claiming
exemptions under the 1993 amendments. FDA began receiving notices
almost immediately after enactment of the 1993 amendments with
approximately 150 notices being received by March 14, 1994, when it
published the small business exemption proposal. Approximately, 3,600
more notices were received by May 7, 1994, the date when all such
notices were to have been filed for products already on the market. The
agency has continued to receive notices from firms claiming exemption
for products that had been on the market before May 8, 1994, as well as
notices for new firms and new products.
Although not required by the 1993 amendments to approve or even
review the notices, FDA has maintained a file on each notice and has
attempted to acknowledge receipt of the notice. One of FDA's first
steps following receipt of a notice has been to record the name and
address of the firm in a computer data base. In establishing and
maintaining its file of notices claiming an exemption, FDA has reviewed
each notice to determine whether it contained the basic information on
the number of employees and the number of units of food products sold
by the firm in the United States. Finally, FDA has issued a letter
acknowledging receipt of the notice for each notice that appeared to
contain complete information and appeared to, in fact, be qualified for
the exemption.
One of the intended uses of the computer data base information on
firms that had submitted notices to the agency was to develop for FDA
field offices and State enforcement agencies a list of firms that had
submitted notices claiming an exemption under the provisions of the
1993 amendments. Enforcement action under the 1990 amendments was
delayed until after August 8, 1994, by enactment of Pub. L. 103-261 on
May 26, 1994. This public law extended the time period for compliance
with the provisions of section 403(q) of the act until after August 8,
1994, for certain food products. By August 8, 1994, FDA had received
approximately 6,000 notices claiming exemption under the 1993
amendments. Between that time and the present, FDA has received
approximately 3,000 notices from
[[Page 40965]]
additional firms claiming exemptions under the 1993 amendments.
In August 1994, FDA made its data base of the names and addresses
of each firm that had submitted a notice under the provisions of the
1993 amendments available to its field offices and State enforcement
agencies through a computer bulletin board system called ``FDA PRIME
CONNECTION,'' which is maintained by the agency. FDA also placed
information concerning the names and addresses of foreign firms and
American importers filing notices on a second bulletin board system
called ``FIARS'' (``FDA Import Alert Retrieval System'') that is
available to FDA's import offices. FDA's enforcement offices were
advised to review these listings to determine whether a firm had
submitted a notice under the 1993 amendments if a product appeared to
be out of compliance with the nutrition labeling requirements of the
act.
As stated above, under the 1993 amendments, the notice claiming an
exemption must be resubmitted every 12 months. The anniversary date for
most such notices, i.e., those covering products on the market before
May 8, 1994, is May 7th of each year. By May 7, 1995, FDA had received
just over 1,100 notices claiming a continued exemption for food
products for the time period of May 8, 1995, to May 7, 1996, under the
provisions of section 403(q)(5)(E)(ii)(II) of the act. In the beginning
of June, the agency sent a letter to each firm that had not yet renewed
its exemption reminding it of the need to submit a new exemption notice
to claim exemption for eligible products for the time period of May 8,
1995, to May 7, 1996. The reminder letter asked that the notices be
submitted to the agency by July 10, 1995. By July 31, 1995, FDA had
received a total of approximately 4,000 notices for the time period of
May 8, 1995, to May 7, 1996. A small number of firms responded to the
June reminder letters by stating that they were out of business or had
revised the labels of their products to comply with the requirements
for nutrition labeling.
A small number of the notices submitted to the agency were
deficient, or inconsistent with the provisions of the 1993 amendments,
in one or more aspects. A small number of the notices were deficient in
that they did not supply information on the average number of FTE's or
the number of units of product sold in the United States. Others were
deficient in that they did not name the products sold in the United
States for which the firm was claiming exemption. Some notices were
inconsistent with the provisions of the 1993 amendments in that the
average number of FTE's was 300 or more, or the number of units sold in
the United States was 600,000 or more. To the extent that its resources
permitted, FDA contacted by telephone or by mail those firms that had
submitted notices that were deficient or contained information
inconsistent with the provisions of the 1993 amendments. In some cases,
products appeared to be ineligible for the exemption without further
clarification; e.g., a bakery claimed an exemption for ``cookies'' and
listed total sales of less than one million units. Upon questioning
concerning the information in the notice, the firm advised that it
produces several different types of cookies, none with sales of greater
than 100,000 units. While resolving such questions, FDA has retained
the firm's name and address in the data bases for exempt firms and for
products. There were some instances where FDA advised firms submitting
notices that one or more products listed in their notice were not
exempt from nutrition labeling because either they did not qualify as a
small business or the product was not a low-volume food product. In
such a case the firm or the product were removed from the computer
listing of exempt firms or exempt products.
II. The Final Rule
A. Provisions Rendered Moot by Passage of Time
Certain provisions contained in the small business exemption
proposal are subject to timeframes, after which they no longer have an
effect. Proposed Sec. 101.9(j)(1)(i) would have provided an exemption
until May 7, 1995, for food offered for sale by a manufacturer, packer,
or distributor based upon the firm's gross sales. Proposed
Sec. 101.9(j)(18)(i)(A) would have provided an exemption for low-volume
food products for the time period of May 8, 1994, to May 7, 1995. The
passage of time has rendered both of these proposed provisions moot.
Accordingly, FDA is not incorporating Sec. 101.9(j)(1)(i) and
(j)(18)(i)(A) as proposed on March 14, 1994 (59 FR 11880), and is
renumbering the remaining paragraphs in Sec. 101.9(j)(1) and (j)(18) in
this final rule. Because Sec. 101.9(j)(1)(ii) is identical to the
existing regulation, it will not be set out in this final rule.
B. Dietary Supplements
On January 4, 1994, before it issued the small business exemption
proposal, FDA issued final rules on nutrition labeling and nutrient
content claims for dietary supplements. At that time, the act provided
an exemption from nutrition labeling for dietary supplements of
vitamins or minerals but not for dietary supplements of herbs or other
nutritional substances. Thus, in the small business exemption proposal,
FDA included provisions for conventional foods and dietary supplements
of herbs and other nutritional substances under proposed
Sec. 101.9(j)(18) and for dietary supplements of vitamins and minerals
under proposed Sec. 101.36(f)(2).
The DSHEA amended section 403(q)(5)(F) of the act to eliminate the
distinction between dietary supplements of vitamins or minerals and
dietary supplements of herbs and other nutritional substances. In
addition, even though the nutrition labeling and nutrient content claim
requirements for dietary supplements were to go into effect on July 1,
1995, in the wake of the DSHEA, FDA published a notice on February 9,
1995 (60 FR 7711), in which it stated that, given the need to modify
its regulations on nutrition labeling and nutrient content claims for
dietary supplements to respond to the DSHEA, it did not intend to
enforce those regulations until after December 31, 1996. The agency
published a document proposing appropriate changes to its regulations
for the nutrition labeling and nutrient content claims for dietary
supplements on December 28, 1995 (60 FR 67194).
FDA notes that the DSHEA does not alter the exemption for low-
volume food products created by the 1993 amendments as they relate to
the submission of notices to claim exemption for dietary supplements.
The agency has received some notices claiming exemption for dietary
supplements under the provisions of the 1993 amendments even though the
agency has yet to enforce the labeling requirements with respect to
this class of products. FDA is unaware of any basis for not moving
forward to establish provisions for the exemption of dietary
supplements under the 1993 amendments. None of the comments on the
small business exemption proposal raised a question about its
application to dietary supplements. To streamline the regulations and
to be consistent with the manner in which other exemptions and special
labeling provisions are listed under Sec. 101.36(g)(21 CFR 101.36(g)),
FDA has modified Sec. 101.36(f) to cross-reference the small business
exemption in Sec. 101.9(j)(1) and the exemption for low-volume food
products of small businesses in Sec. 101.9(j)(18), rather than codify
those exemptions in Sec. 101.36.
[[Page 40966]]
C. Definition of ``Person''
1. Two comments stated that the agency should clarify that the
exemption is available to private label packers and distributors as
well as to manufacturers. The comments urged that FDA state that a
``person'' entitled to apply for the low-volume food product small
business exemption includes a manufacturer, a packer, or a distributor
of such food products. The comments stated that the clarification that
they suggested is consistent with the law and with the preamble to the
proposal and would prevent confusion over the exclusion of
manufacturers, packers, and distributors from the exemption based on
gross sales.
FDA agrees that the 1993 amendments should be interpreted to give
as much relief to small businesses as can fairly be provided. FDA
recognizes that, by tracking the language of the 1993 amendments and
using the term ``person'' in the proposal, the agency may not have made
clear that all types of small businesses are eligible to submit a
notice for the exemption for low-volume foods. The agency has modified
Sec. 101.9(j)(18) to clarify that a small business, whether it is a
manufacturer, a packer, a distributor, including an importer or a
retailer that introduces the food into interstate commerce, is eligible
to claim an exemption for a low-volume food product under the 1993
amendments.
2. One comment stated that the ``person'' claiming the exemption
for a product should not be limited to the manufacturer or the company
whose name is on the label of the food product. The comment argued that
the person that is the exclusive sales agent for a firm's products also
should be able to file the notice. The comment argued that, because the
1993 amendments consistently refer to the person who claims an
exemption for a food product, the exemption need not be linked to the
manufacturer of the product but can be claimed by the firm that makes
sales of the food product in the United States. The comment stated that
the focus of the 1993 amendments is on making accountable the person
who presents the product to the consumer. The comment identified three
provisions of the 1993 amendments that it stated supported its
position:
(1) The law does not mandate that one affiliate (manufacturing)
instead of another (marketing) file the notice,
(2) The very small business exemption from the notice requirement
applies to a person who sells fewer than 10,000 units of a food product
in a year, and
(3) A notice may be filed by importers, who of course are not
manufacturers of the products they handle.
The comment concluded that the exclusive sales agent knows the
total number of units of a food product sold in the United States and
can make an accurate statement of those sales on the notice.
As noted in response to the preceding comment, FDA agrees that the
law does not mandate that the ``person'' filing the claim be the
manufacturer or the company whose name is on the label. The agency
agrees that an exclusive sales agent can file a notice claiming an
exemption for a low-volume food product under the 1993 amendments.
This comment interprets the intent of the 1993 amendments too
narrowly, however, by linking the exemption directly to the seller of
the food product, as opposed to the manufacturer, repacker, or
distributor. The 1993 amendments are silent in defining what type of
small business constitutes the ``person'' that may submit a notice
claiming an exemption for a low-volume food product. The only specific
requirement that relates to that person is that the average number of
FTE's of the person, and of all of its affiliates, be fewer than the
number established as the standard by the statute (i.e., less than 300
between 1994 and 1995, less than 200 between 1995 and 1996, and less
than 100 after that date or less than 100 for any product initially
introduced into interstate commerce on or after May 8, 1994). The
modification to Sec. 101.9(j)(18) that FDA has made in response to
comment 1 in section II.C.1. of this document will adequately address
the concerns of this comment.
3. Several comments addressed the relationship of affiliated firms
to those firms claiming an exemption under the provisions of the 1993
amendments. One comment stated that the guiding notion in defining
``affiliate'' should be whether one entity actually exercises control
over a small food company. It stated that indirect and unexercised
control should not create the status of affiliate. The comments argued
that tenuous relationships linking far flung affiliates, and standard
contractual arrangements that permit small food companies to exist,
should not be considered an affiliation.
The Statement of Explanation presented by Mr. Waxman in presenting
the bill that became the 1993 amendments explains that:
Section 403(q)(5)(E)(vi)(III) defines person, in the case of a
corporation, to include all domestic and foreign affiliates of the
corporation. The FDA should consider the regulations issued by the
Small Business Administration on this issue. 13 CFR. 131.401 (sic)
(1993).
(139 Congressional Record H6358 (August 6, 1993).)
Section 121.401 of Title 13 of the Code of Federal Regulations (13
CFR 121.401) sets out the provisions established by the Small Business
Administration (SBA) concerning affiliation. (FDA presumes that the
reference in the Congressional Record to 13 CFR 131.401 was a
typographical error because that section does not involve the question
of affiliation.) 13 CFR 121.401 provides a general rule on the
determination of affiliation plus more specific instructions on how to
determine whether affiliation exists between two firms. Among other
things, 13 CFR 121.401 states that size determinations shall include
the applicant concern and all its domestic and foreign affiliates.
Moreover, all affiliates, regardless of whether organized for profit,
must be included. Concerns are affiliates of each other when either
directly or indirectly one concern controls or has the power to control
the other; or a third party or parties controls or has the power to
control both; or an identity of interest between or among parties
exists such that affiliation may be found. In determining whether
affiliation exists, consideration shall be given to all appropriate
factors, including common ownership, common management, and contractual
relationships.
FDA agrees with the comment that stated that standard contractual
arrangements, to the extent that they do not create an identity of
interest, should not be considered as evidence of affiliation. However,
the other comments on affiliation are inconsistent with the provisions
of 13 CFR 121.401. The other comments argued that affiliation is not
present if an entity is not actually exercising control over the
affiliate. The SBA regulation provides, however, that concerns are
affiliates of each other when one ``controls or has the power to
control.'' None of the comments attempted to explain how their
suggested interpretations of the term ``affiliation'' were consistent
with 13 CFR 121.401.
Because the suggestion for the interpretation of affiliation
presented in the comments is not consistent with the congressional
intent, as evidenced by the Statement of Explanation, FDA concludes
that modification of the meaning of ``affiliation'' as suggested by the
comments would be improper, and the agency is not making the suggested
change. To reduce the potential for confusion over the use of the term
[[Page 40967]]
``affiliate'' in its regulation, however, FDA is modifying the
definition of the term ``person'' in Sec. 101.9(j)(18)(vi)(C) to
include a reference to 13 CFR 121.401 as defining ``affiliate.''
4. One comment stated that FDA should not expand upon Congress'
definition of ``person'' to include, for companies that are not
corporations, all affiliates of that company.
FDA recognizes that the 1993 amendments specifically refer to
corporations when stating that: ``the term `person' in the case of a
corporation includes all domestic and foreign affiliates of the
corporation.'' Accepting the view that the 1993 amendments are silent
with respect to how entities other than corporations are to be treated,
the fact remains that section 201(e) of the act (21 U.S.C. 321(e))
states that the ``term `person' includes individual, partnership,
corporation, and association.'' Even though the 1993 amendments are
silent as to how persons other than corporations should be treated,
there is nothing that suggests that those persons should be treated
differently than corporations. None of the comments presented any basis
for treating these other persons differently than corporations.
Therefore, FDA concludes that the best approach would be to treat all
persons the same. Thus, in Sec. 101.9(j)(18)(vi)(C), the term
``person,'' as relates to an entity that is not a corporation, includes
all affiliates as defined in 13 CFR 121.401 for purposes of section
403(q)(5)(E) of the act.
D. Definition of ``Unit''
5. Some comments stated that whether a food is a low-volume food
product should be based upon the number of units of a food product for
which the packer or distributor is responsible, regardless of the
number of similar units produced by its manufacturer for other persons.
These comments stated that FDA has inadequately explained in the
proposal how the number of units criterion and the definition of ``food
product'' should be applied to private label food products. They stated
that a private label packer or distributor that is a small business
should be able to apply for, and claim the benefit of, the small
business exemption based on the number of units of food products the
packer or distributor sells annually under its own private label. They
reasoned that this approach would be consistent with the agency's
explanation of the application of the small business exemption based
upon gross sales, where the name of the firm on the label determines
responsibility for the label for the purpose of determining the firm
that must have sales of less than $500,000 for purposes of section
403(q)(5)(D) of the act, which was passed as part of the original 1990
amendments. The comments stated that FDA's interpretation of
eligibility for exemption under the 1993 amendments should be
consistent with its interpretation under the 1990 amendments.
Having evaluated these comments and the notices that it has
received over the past year, FDA concludes that there are some basic
misunderstandings about the products that are eligible for exemption
under the 1993 amendments, particularly with respect to how to count
units in determining whether a product is a low-volume food product.
The comments also evidence a belief that the agency has considerable
leeway in its interpretation of the 1993 amendments. To the contrary,
the 1993 amendments are highly specific and prescriptive in providing
an exemption from the requirements of mandatory nutrition labeling for
low-volume food products of small businesses and leave little room for
interpretation by FDA.
It is not clear that those submitting the comments understand fully
the differences between the exemption for small businesses under the
1990 amendments and the exemption under the 1993 amendments. In
presenting guidance on the 1990 small business exemption in ``Food
Labeling QUESTIONS AND ANSWERS'' (Office of Food Labeling, FDA, August,
1993), FDA stated that, for a food to be eligible for the exemption,
the firm that was responsible for the labeling of the food, i.e., the
firm whose name appeared on the label of the food product, would be the
firm whose total gross sales would be considered; that is, the firm
whose gross sales must be less than $500,000 for the product in
question to be eligible for exemption.
Under section 403(q)(5)(E) of the act, which was added by the 1993
amendments, however, whether a food product is eligible for exemption
is based on two factors, neither of which involves the value of the
firm's gross sales. One factor is the number of employees of the firm
that is submitting the notice claiming the exemption (see the
discussion above under section II.C. of this document on the definition
of ``person'' and the discussion under section II.F. of this document
on ``calculation of average number of FTE's.'' The other is the number
of units of the product that is sold in the United States. The latter
factor is the one that is not well-understood by the comments.
Under section 403(q)(5)(E) of the act, whether a food product is a
low-volume food product, and, thus, eligible for the exemption, is not
dependent on the identity of the firm claiming the exemption. This
determination depends only on the total number of units of that
specific food product that are sold in the United States (see, e.g.,
section 403(q)(5)(E)(I)(IV) of the act).
A specific food product is defined by three parameters: (1) Its
being from a single manufacturer or bearing the same brand name; (2)
bearing the same statement of identity; and (3) having a similar method
of preparation (section 403(q)(5)(E)(vi)(II) of the act). This
definition means that, in counting the number of units of a food
product, e.g., a cake mix, for purposes of claiming an exemption, firms
must consider: (1) The total number of units of the cake mix produced
by the manufacturer for sale to consumers in the United States
regardless of the brand name under which it is packaged and (2) the
total number of units of the cake mix labeled under one brand name,
regardless of the number of manufacturers that produced it. If either
number exceeds the low-volume criteria, the product is not eligible for
the exemption.
Presume, for example, that a manufacturer produces one million
packages or units of a cake mix for sale in the United States. The cake
mix is not a low-volume food product and, thus is not eligible for
exemption under the 1993 amendments, even if the manufacturer ships all
of the product in equal quantities to 20 small businesses, and each
puts its own brand name on the cake mix that it sells. Alternatively,
if one million packages of a cake mix are made in equal quantities by
20 different manufacturers, but all bear the same brand name, the cake
mix is not eligible for exemption under the 1993 amendments, even if
each of the manufacturers has less than 100 employees, because, again,
it is not a low-volume food product.
On the other hand, a food product could be eligible for the
exemption even though it is manufactured by a large firm, if the food
product qualifies as a low-volume food product. If a manufacturer with
too many employees to qualify for the exemption were to make a product
under another firm's brand name, the product may qualify as a low-
volume food product if the sales of that private formula food product
are less than the applicable number defining a low-volume food product.
In the case of the cake mix, for example, presume that a small
business with only 15 employees contracts with 1 large copacker or
manufacturer to
[[Page 40968]]
make 50,000 units annually of that small business's special private
formula cake mix which is not available to any other firm. In such a
case, the private formula cake mix would be exempt under the 1993
amendments upon the submission of a notice by the small business
claiming an exemption, regardless of the number of employees of the
copacker and regardless of the amounts of other products that the
copacker produces. The cake mix would be exempt because the firm
claiming the exemption is small (15 employees), and the cake mix is a
low-volume food product (neither the total number of units produced for
sale in the United States, nor the total number of units sold under the
brand name in question, exceed 50,000).
In summary, contrary to the assertions by the comments, under the
1993 amendments (section 403(q)(5)(E) of the act), and in contrast to
the small business exemption established in the 1990 amendments
(section 403(q)(5)(D) of the act), the size of the company listed on
the label of a food product is not necessarily determinative of whether
that product is exempt from the nutrition labeling requirement. While
that firm must be a small business (that is, have less than the
requisite number of employees) to be eligible to claim an exemption,
the number of products sold in the United States must be below the
requisite levels for the product to be eligible for the exemption, and
that number may include products sold by companies other than the
company that is seeking the exemption. A product qualifies for the
exemption under section 403(q)(5)(E) of the act only if the company
submitting the notice is small, and the product is a low-volume food
product.
6. Several comments stated that the suggested method for counting
products from a private label manufacturer that was in the small
business exemption proposal was inappropriate. One comment suggested
that the 600,000-unit exemption be based on the sales/production of the
firm that takes control of (i.e., owns) the label and packaging on
which nutrition information would otherwise be included. According to
the comments, in many cases, that firm will be the private-label
manufacturer; in other cases, that firm will be the distributor and
marketer.
Another comment stated that a private label distributor should be
able to claim an exemption if the number of units sold in the United
States under the distributor's own label meets the statutory
requirement. The comment explained that it would defeat the purpose of
the exemption to require a distributor to aggregate all units of a food
produced by a common manufacturer and sold by other firms. Such an
interpretation, according to the comment, would require a small
distributor that sells a food in a low-volume to provide nutrition
labeling, contrary to Congress's intent to relieve the burden on such
firms. The comment noted that the approach that it was suggesting is
the only feasible way in which the exemption provision can be
administered because a distributor cannot know how many units of the
food produced by the particular manufacturer were sold in the United
States by other distributors under other brand names. Another comment
stated that the proposed requirement that a private label manufacturer
count all production in determining whether it is eligible for the
exemption is inconsistent with the 1993 amendments and may produce a
hardship on ``mom and pop stores'' that cannot produce product on their
own, particularly if each has to supply labels to the manufacturer for
labeling of the product.
FDA agrees that the intent of the 1993 amendments was to provide
relief for small businesses. In considering the intent of the 1993
amendments, it is important to remember that Congress amended a section
of the act (section 403(q)) that was added by the 1990 amendments. The
overall intent of the 1990 amendments is to ensure that nutrition
information is available on almost all foods marketed in the United
States. The 1993 amendments were enacted to provide relief for small
businesses from the economic burden of having to nutrition label low-
volume food products. This fact does not mean, however, that Congress
intended to exempt all products that bear the name of small businesses.
Rather, Congress sought to exempt those products that, because of the
size of the firm that sold them and the number of units of the product
that were sold, would likely be discontinued by the firm because the
costs of relabeling would be too great to make continued marketing of
the product economically feasible. Thus, Congress tailored the
qualifications for an exemption to meet these goals.
Congress apparently felt that, in circumstances where a firm that
sells the product is small, but the firm that manufactures it is large
and manufactures it for other firms as well, in numbers that exceed the
``low-volume'' standard, it is reasonable to expect that the larger
company would assist the smaller company in coming into compliance with
the law by, for example, providing nutrition information for the
product. Regardless of whether it is reasonable to expect that a firm
will not place its suppliers or customers in jeopardy of violating the
law, it is FDA's responsibility to ensure that there is compliance with
the provisions of the 1993 amendments.
Section 403(q)(5)(E)(vi)(II) of the act states that a ``food
product'' means food in any sized package that is manufactured by a
single manufacturer, bears the same statement of identity, and has
similar methods of preparation. Thus, if a manufacturer makes 1,000,000
units of a ``cola'' for six private label soft drink firms, 1,000,000
must be used as the number of units for each firm for the purposes of
deciding whether that firm's ``cola'' is eligible for the small
business exemption for the purposes of section 403(q)(5)(E)(i) or
403(q)(5)(E)(ii) of the act. It is important to note that in both of
the latter provisions, the statute is talking about ``units of such
product [that] were sold in the United States,'' not about the units of
such product that were sold in the United States by the person seeking
the exemption.
7. Several comments addressed FDA's proposal that, in counting
units, a small business must total all units of all of the various
sizes in which a food is packaged and all of the ways it is sold
unpackaged. These comments claimed that this proposed definition of
``unit'' by the agency basically eliminated the exemption for their
firms. Noting that the intent of Congress was to mitigate cost to small
businesses, another comment stated that it would be severely damaged if
food in any sized package that is manufactured by a single
manufacturer, no matter what the brand name, is considered a unit of
that food. One comment complained that FDA's interpretation is blind to
the cost of changing each label size for low-volume packages, and that
it overlooked the congressional intent to mitigate the cost of labeling
conversion for small manufacturers. The comment proposed that the first
year exemption for small businesses under 300 employees be allowed on
all packages under 600,000 units of sales per year provided that
printing films are different. Another comment stated that the proposed
definition does not take into account exactly what is a ``Package/
Label.'' The comment stated that FDA should allow individual, distinct
packages of a food product, as defined by the UPC (Universal Product
Code) number, to be counted separately in determining exemption
eligibility, rather than the proposed combination of all types of
products and sizes of packages.
One comment supported the agency's definition of ``units.'' The
comment
[[Page 40969]]
stated that it would be absurd and contrary to congressional intent to
exempt the many identical products made by a private label manufacturer
on the theory that each individual brand label was produced at levels
below the regulatory maximum.
The agency agrees with the latter comment and finds that the others
present suggestions that are contrary to the 1993 amendments. FDA
understands the concerns that are being raised by the comments. FDA has
no desire to implement the 1993 amendments unfairly, but it is its duty
to enforce the law in accordance with its terms.
In the counting of units, it is the definition of ``food product''
that is controlling. That definition states that a food product
includes food in any sized package which is manufactured by a single
manufacturer or which bears the same brand name. Given that being
manufactured by a single manufacturer is alternative to bearing the
same brand name, it means that products manufactured by the same
manufacturer that do not bear the same brand name would still be
considered a single product as long as they meet the other aspects of
the definition of ``food product.'' Thus, FDA's definition is fully
consistent with the act.
FDA is aware of the various factors that pose economic burdens to
small businesses that are identified by these comments, but it still
has an obligation to implement the act as written. In the face of the
statute, given the use of the words ``in any sized package'' in the
definition of ``food product,'' it is apparent that Congress decided
not to take into account the additional factors to which the above
comments point. Although the agency recognizes that the use of
different printing films or different UPC numbers would provide greater
economic relief for small businesses, as noted above, FDA is bound by
the terms of the act. Neither of these considerations are permitted or
even addressed in the 1993 amendments. As explained above, FDA's
approach is fully consistent with, and responds to, the act.
8. One comment objected to FDA's definition of a unit for soft
drinks as being the individual bottle rather than the case, noting that
there might as well not be a small business exemption for their
industry.
FDA was well aware of the concern raised by this comment and
attempted to address it in the small business exemption proposal. In
that proposal, FDA stated that, if the individual cans or bottles of a
case or carton were labeled in accordance with the provisions for
multiunit packages under Sec. 101.9(j)(15), the case or carton could be
treated as a single unit for the purpose of counting units of food
product (59 FR 11872 at 11874). To be in compliance with
Sec. 101.9(j)(15), the individual can or bottle of a multiunit package
must bear the statement ``This Unit Not Labeled For Retail Sale.'' This
possibility still exists for producers of soft drinks.
However, as noted in the small business exemption proposal, soft
drinks are not normally packaged in this manner, but instead they are
packaged in bottles or cans that are amenable to sales either as
individual packages or as part of a carton or a case. Historically,
consumers have often been able to mix individual flavors of particular
soft drinks when purchasing them by the carton or case. Thus, FDA
tentatively concluded in the proposal that the total number of
individual cans or bottles of a soft drink is controlling for the
purpose of counting the number of units sold in the United States.
In considering this comment on how units of soft drinks should be
counted, the agency has reviewed its tentative conclusions on this
matter. FDA now finds that there is a basis for counting the cases or
cartons of cans or bottles of soft drinks as individual units for the
purposes of the 1993 amendments. FDA agrees that there may be instances
where a case of soft drinks should be considered to represent a unit.
In the proposal, FDA stated its tentative finding that the case is a
convenience used by the manufacturer to deliver 12 or 24 individual
units to the customer. As noted above, this finding was based on the
historical practice of the consumer being able to mix units of soft
drinks when purchasing a case of 24 bottles. However, upon considering
this matter as part of its review of the comment, FDA recognizes that
there may be instances where the unit being sold to the consumer is the
carton or the case of soft drinks. Such situations would be those where
soft drinks are sold in cartons or cases that are sealed or have
plastic over-wraps that deter individual sales or mixing of individual
cans or bottles in the carton or case. FDA agrees that a firm may count
such sealed cartons or cases as individual units for the purpose of a
claim under the 1993 amendments, regardless of whether the individual
units are labeled in accordance with Sec. 101.9(j)(15), if the firm has
evidence of the extent to which its soft drink is sold by the carton or
case instead of by the individual can or bottle. FDA notes that if a
firm intends to rely upon the provisions of the 1993 amendments to
claim an exemption from the requirements of nutrition labeling for one
of its products, then it is incumbent upon that firm, for the purpose
of reporting the number of units, to have knowledge of how the product
is sold to the consumer.
9. Two of the comments stated that FDA should clarify how units
should be counted for a product that is not sold in a package. One
comment representing foreign firms noted the potential differences in
marketing in the United States as compared to another country and the
difficulties a foreign firm faces in learning about U.S. marketing
practices. The comment suggested that FDA include in the final rule
that the counting of units could be based upon a person's reasonable
determination of U.S. marketing practices even if that determination
deviated somewhat from actual marketing practices in the United States.
Another comment requested that FDA clearly set forth in the preamble
accompanying the final regulation how this aspect of the ``unit''
definition (i.e., sales of food not in package) will be applied to
confectionery and similar items sold individually and priced by weight.
FDA recognizes that estimating the number of units of a product
that is sold to consumers in an unpackaged form may be difficult for a
firm seeking to submit a notice claiming exemption under the 1993
amendments, particularly for a foreign firm. This is especially true
for candies which were mentioned in these two comments. Depending upon
the type of candy and its quality, a particular product may be sold at
retail by the piece (either because it is expensive or for a low price,
such as penny candy); by the half-pound or by the pound; or by the
package. In such a case, the candy manufacturer would total the number
of units sold by the piece or by the half-pound (or the pound) with
those sold in packages to determine the total number of units of candy
sold in 12 months. It is incumbent upon the firm that provides an
approximation of the number of units of a product sold in the United
States as part of a claim for exemption from nutrition labeling under
the provisions of the 1993 amendments to have adequate knowledge of the
sales of that product in the United States. This knowledge is necessary
for the firm to be able to report accurately in its notice claiming
exemption the number of units that it sold.
FDA has modified the instructions contained in Appendix II to
provide more details on the counting of units of a food that is sold
unpackaged. The agency has retained in Sec. 101.9(j)(18) language from
the 1993 amendments as
[[Page 40970]]
the appropriate description of how to count units of a food that is
sold unpackaged. FDA is concerned that to be more specific in the
regulations may reduce the degree of flexibility available under the
definition of ``unit.'' This definition (section 403(q)(5)(E)(vi)(I) of
the act) provides that ``the term `unit' means the packaging or, if
there is no packaging, the form in which a food product is offered for
sale to consumers.'' Many foods are sold to the consumer in an
unpackaged form, such as by the piece, by the slice, or by a measured
amount. Thus, to comply with definition of ``unit,'' a small business
would include in its count of units in a notice claiming an exemption
under the 1993 amendments both packaged and unpackaged product. The
agency provided an example of counting units of unpackaged food
products for flour in the proposal (59 FR 11872 at 11874). As stated in
the proposal (59 FR 11872 at 11874), the small business should make its
determination of the specific ``unit'' to use as a basis for reporting
sales of unpackaged food products according to the normal sales
practice for that food product in the United States.
E. Definition of ``Food Product''
10. Although some comments commended FDA for its definition of
``similar method of preparation,'' discussed in the preamble of the
small business exemption proposal (59 FR 11872 at 11875), some comments
asked for further clarification of the definition, in particular as it
related to nutritive value. One comment stated that the definition of
``food product'' must be limited to the factors referred to in the 1993
amendments. The comment added that the 1993 amendments link the
definition of ``food product'' to the food's statement of identity and
neither explicitly nor implicitly permit the use of nutritive value as
a factor in distinguishing one food product from another. Other
comments, however, encouraged the use of the concept of ``nutritive
value.''
One comment stated that FDA should incorporate into the regulation
the preamble language that explains the intended meaning of ``similar
preparation methods,'' including an explanation of criteria that will
allow businesses to determine when the lack of similarity of their
products' nutritional profiles is such that they must consider products
to be different than each other. One comment stated that products that
have the same common or usual name, have identical nutrition profiles,
but that are subjected to different scheduled processes because of the
size of their container, should be counted as the same product. The
comment added that products that are basically the same but have
differing names for differing shapes/forms, such as taco shells and
chalupa shells, which are both forms of tortilla shells, should be
counted as the same product.
Another comment stated that FDA should clarify that variations of a
product with formulation differences, such as different flavors, are
considered different ``food products'' for purposes of the small
business exemption. The comment stated that the preamble to the
proposal stated that the term ``similar preparation methods'' included
``all aspects in the manufacture of the food product, from the initial
steps of determining the ingredients to be used, i.e., formulation * *
*'' (59 FR 11872 at 11875). The comment stated that this statement
should be set forth in the final regulatory text itself, along with
language to the effect that even minor formulation differences, such as
differences in flavor ingredients in some cases, result in two
different food products, regardless of whether the formulation
differences result in differences in nutrient profiles between the two
different food products. The comment noted that for many firms and many
products there will be no way of determining whether two similar
products have the same nutrient profile without nutrient analyses of
each product. The comment added that requiring small businesses to
undertake such analyses solely for the purpose of ascertaining whether
they qualify for the small business exemption would undermine much of
the benefit of the exemption and be contrary to the congressional
intent.
After considering the various comments seeking clarification of the
term ``similar method of manufacture,'' FDA has decided to adopt the
definition for ``food product'' that it proposed. Also, after reviewing
the comments, FDA is emphasizing that consideration of nutritive value
is not a necessary consideration in the definition of ``similar
preparation methods.'' The comments appear to have misinterpreted FDA's
intent as it relates to the use of ``nutritive value'' of foods.
Although the legislative history for the 1993 amendments discusses
what is meant by ``statement of identity,'' it provides no insight into
what factors led Congress to establish ``similar preparation methods''
as the third factor in the definition of ``food product.'' The agency
intended that the concept of ``nutritive value'' could be used by firms
as an informal guideline in determining whether the manufacturing
processes for food products meet the parameter of ``similar preparation
method.'' FDA had presumed that firms would be faced with situations
where there were minor differences in the method of preparation that
would lead them to question whether the food products should be counted
as being the same. FDA was stating that a firm could use nutritive
value as a determinant in resolving this question. The agency did not
mean to imply that if two foods prepared by dissimilar processes were
found to have the same nutritive value they should be considered to be
the same food product. Further, FDA did not intend that firms should
analyze foods to determine nutritional value to determine whether they
should be considered to be different foods because to expect firms to
do so would be contrary to the intent of the 1993 amendments.
The agency has included an additional discussion in Appendix II
concerning the term ``similar preparation methods'' to assist firms
that submit notices to FDA under the 1993 amendments. However, the
agency is not providing further explanation of the meaning of the term
``similar preparation methods'' in the regulations. FDA is concerned
that any attempt to elaborate on a definition of ``similar preparation
methods'' would only result in a regulation that is more restrictive
than the statutory definition.
FDA agrees with the comment that urged that minor differences in
scheduled processes or differences in shapes for the same product
should not be considered as resulting in different products. FDA does
agree, however, that differences in formula, even differences that
involve different flavors, would be sufficient to consider foods having
such differences to be different food products.
11. One comment requested that FDA clarify in any final rule that
similar foods whose preparation methods result in different nutritional
profiles represent only one example of different ``food products'' for
exemption eligibility purposes. The comment stated that the agency
should make clear that other significant differences in preparation
that do not affect nutrient content, such as kosher preparation, can
also serve to differentiate ``food products'' for exemption eligibility
purposes. The comment also noted that certain such differences, like
kosher preparation, but for being symbolically rather than expressly
declared in labeling, also would differentiate products in terms of a
distinguishing statement of identity (e.g., ``kosher green beans'' as
compared to ``green beans''), thereby contravening the second
[[Page 40971]]
element of the ``food product'' definition.
As discussed in response to the previous comment, this comment
misinterprets the way in which FDA had meant for the concept of
nutritive value to be used. FDA had never intended that the concept of
nutritional value should be used as a basis for concluding that food
products with differing methods of preparation but the same levels of
nutrients should be considered the same food product for the purpose of
counting units. However, the comment raises the issue of whether both
perceived and real differences in the method of preparation should be
considered in distinguishing between food products.
A determination of whether real and perceived differences
distinguish particular foods can only be made on a case-by-case basis.
It is not possible to provide guidelines that would cover every case.
FDA believes that real differences, such as differences in formulation
or differences in preparation, would be used to distinguish a
``Kosher'' product as a different food product. However, there may be
steps in the production of a ``Kosher'' product that would not
distinguish it from a nonkosher product; e.g., the comment mentioned
rabbi inspection as a step that distinguishes kosher food products from
other food products. FDA does not agree that rabbi inspection would be
sufficient to result in differing food products for the purposes of the
1993 amendments. As noted above, such distinctions will have to be made
on a case by-case-basis.
12. One comment suggested that identically formulated products in
different size packages or types of packages should be considered
different ``food products'' for purposes of the small business
exemption.
This suggested approach is contrary to the wording in the 1993
amendments themselves. The definition of food product states: `` `food
product' means food in any sized package'' (section
403(q)(5)(E)(vi)(II) of the act). This wording makes clear that, for
the purpose of counting units of a food product, all of the various
sizes and forms in which a food product is sold are to be combined.
Thus, FDA cannot modify the definition for ``food product'' in the
manner suggested in the comment because to do so would be contrary to
the 1993 amendments themselves. (See comment 7 in section II.D. of this
document.)
F. Calculation of the Average Number of FTE's
13. Three comments raised questions concerning the proposed
provision that the average number of FTE's should be based upon the
total number of individuals employed by the firm and by all of its
affiliates, both domestic and foreign. Two comments stated that, for
the purpose of calculating the average number of FTE's, the employees
that are considered should be limited to those of the firm claiming the
exemption and not of separately incorporated affiliates. One of the
comments contended that including employees of unrelated businesses
would severely undermine the purpose and scope of the amendment. The
comment stated that a fundamental assumption of the amendment is that
each product is an independent ``profit center,'' and, accordingly,
nutrition information is only mandated when it is economically feasible
given the economies pertaining to the production and sale of an
individual food item. Although family owned retail confectioners often
are involved in other business enterprises, the comment continued, the
size or nature of those outside business interests is irrelevant to
whether the retail confectioner can cover the cost of nutrition
labeling of a particular item.
One comment stated that, in the explanation of the term ``FTE,''
FDA added a discussion that links this definition with the definition
of ``person.'' The comment stated that the effect is to require that
the employees of a domestic company be combined with those of an
affiliate company regardless of whether their operations are related to
sales of food products in the United States. The comment stated that
there is nothing in the 1993 amendments that points to or requires this
conclusion. The comment argued that the relevant issue is how many
employees were employed in the United States, not overseas and not in
unrelated positions.
FDA disagrees with the conclusion that is reached in these
comments. Each of the above comments raises the same basic argument,
that the calculation of the average number of FTE's should be based
only on the employees of the company submitting a notice claiming an
exemption under the 1993 amendments and then only on those employees
involved in the production of the food product for sale in the United
States. Although the comments state that nothing in the 1993 amendments
supports the approach proposed by FDA, they do not provide specific
citations to language in the 1993 amendments or the legislative history
of the 1993 amendments that support their conclusions. One comment said
that a fundamental assumption of the 1993 amendments is that each
product is a ``profit center'' but did not offer a citation to where
this assumption is either explicit or implicit in the 1993 amendments.
FDA concludes that the approach suggested by the comments is contrary
to the clear meaning of the 1993 amendments.
In introducing H.R. 2900 (the bill that became the 1993
amendments), Congressman Waxman stated:
certain small businesses will have extreme difficulty complying with
the NLEA by May 8, 1994. * * * Under the amendments, qualifying
businesses will be given 1 to 3 additional years to comply with the
NLEA. After May 8, 1997, any business with fewer than 100 employees
can qualify for an exemption for any products for which it sells
fewer than 100,000 cans or other units per year.
(139 Congressional Record H6358 (August 6, 1993).)
The 1993 amendments state as criteria under which a product would
be exempt from the requirements for mandatory nutrition labeling that
``the person who claims for such product an exemption from such
paragraphs employed fewer than an average of 100 full-time equivalent
employees'' (section 403(q)(5)(E)(i)(II), or 300 or 200 in the cases of
subparagraphs I and II or III of section 403(q)(5)(E)(ii) of the act,
respectively). In describing the notice to be filed to claim an
exemption under the 1993 amendments, section 403(q)(5)(E)(iii) of the
act states that the notice shall ``state the average number of full-
time equivalent employees such person employed during the 12 months
preceding the date such person claims such exemption.'' In providing
for the exemption of low-volume food products from nutrition labeling,
the 1993 amendments state that ``the term `person' includes all
domestic and foreign affiliates of the corporation'' (section
403(q)(5)(E)(vi)(III) of the act). As noted above, the ``Statement of
Explanation'' for H.R. 2900 also explains: ``Section
403(q)(5)(E)(vi)(III) defines person, in the case of a corporation, to
include all domestic and foreign affiliates of the corporation. The FDA
should consider the regulations issued by the Small Business
Administration on this issue.'' FDA is unaware of any further
discussion on the calculation of the average number of FTE's in the
1993 amendments or related legislative history. Contrary to what was
suggested by one comment, there is no indication that FTE's should only
be determined based on those employees that are related to the
[[Page 40972]]
production of the food that is the subject of the notice. In fact, the
clear implication is to the contrary. Both the 1993 amendments and
their legislative history state that the term ``person'' includes both
domestic and foreign affiliates.
FDA finds that the above references in the 1993 amendments and
their legislative history are unambiguous as to the calculation of the
average number of FTE's for a firm or other person submitting notice
claiming an exemption under the 1993 amendments. Thus, the notice
claiming an exemption must state the average number of FTE's of the
firm or person submitting the notice, including the employees of all
domestic and all foreign affiliates as defined in 13 CFR 121.410.
Further, because neither the 1993 amendments nor their legislative
history make a distinction with respect to the business of the
affiliates, the average number of FTE's must be reported based on all
the employees of all affiliates regardless of the nature of the
business of the affiliate. Given the language of the 1993 amendments
and their legislative history, FDA finds that no other interpretation
of how the average number of FTE's is to be determined is reasonable.
14. One comment stated that the average number of FTE's should be
based on actual hours worked in a year, 1,824 (i.e., the time that a
person that is actually on the job) instead of the proposed 2,080. The
comment provided the following explanation of the derivation of 1,824
hours as the amount of actual hours worked in a year:
An hourly person paid only for amount of time on the job is on
the job only 1,824 hours (2,080-80 annual, -80 sick, -96 for 12
holidays = 1,824 hours). Using 2,080 hours instead of 1,824 would
allow a firm to omit the declaration of a ``ninth'' employee for
every eight full-time employees.
Another comment stated that FDA should retain its proposed method for
determining the number of employees and should maintain the 2,080 hour
denominator for the calculation.
There are any number of approaches that FDA could have used to
define ``full-time'' for use in calculating the average number of
FTE's. For any particular situation, however, each possible denominator
might over- or undercount the actual number of persons. For example, a
firm may hire large numbers of part-time employees for which it does
not provide vacation or sick leave hours. Other firms may have more
generous or less generous annual leave provisions. Still other
companies may recognize fewer or more holidays. For this reason, FDA
tentatively decided to simply take the standard full-time work week
established by the Department of Labor, 40 hours, and multiply by the
number of weeks in a year, 52, to obtain the number to be used in the
denominator for calculating the average number of full-time employees.
Although FDA recognizes the concern of the comment that suggested using
1,824 hours as the denominator, the use of 1,824 could result in a
hardship to those small businesses that provide less amount of time for
leave or holidays per employee than suggested by the comment in that it
would lead to an overcounting of employees. The agency concludes that
use of 2,080 as the denominator provides an equitable approach for a
formula to be used in determining the average number of full-time
equivalents and is retaining this value in its regulations.
15. One comment stated that FDA should consider as employees only
those persons for whom the small business pays income and social
security taxes. The comment stated that the calculation of average
number of FTE's should not include all ``individuals that render
service'' to a company, which would include lawyers, mail carriers, and
accountants that are not under the direct employ of the small business.
The comment stated that FDA should narrow the definition of employee,
and that, in case of doubt, the approach of the Internal Revenue
Service could provide guidance. Another comment stated that FDA should
reconsider who it counts as employees to exclude contract distribution
personnel. The comment explained that many small businesses use route
salesmen to service retail establishments. These route salesmen were
described by the comment as independent small businessmen who receive
compensation from the manufacturers usually as a percentage of the
sales. The comment stated that firms should not be precluded from
qualifying for the exemption because they chose this form of
distribution for their products.
The small business exemption proposal stated that the average
number of FTE's ``shall be determined by dividing the total number of
hours of salary paid directly to individuals, or companies that employ
those individuals, that render service to the person.'' In proposing
the definition in this way, FDA was attempting to ensure that persons
calculating the average number of FTE's considered all employees (e.g.,
all owners, officers, the secretarial staff, and part-time employees)
of the firm and not just those that are directly involved full-time in
the production and sales of food products. The agency had seen this as
a potential problem because some of the early notices submitted to the
agency had reported ``0,'' ``Zero,'' or ``None'' as the average number
of FTE's.
After reviewing the comments and the language of the proposed
definition for an FTE, FDA finds that the explanation for the
calculation of the average number of FTE's was overly broad and subject
to confusion. For example, FDA agrees that it is not normally necessary
to include in the determination of FTE's individuals that perform
services for the small business as part of the responsibilities of
their employment, such as the mailman, fireman, policeman, or even
grocery store clerk. FDA finds that such individuals need not be
included in the count of the average number of FTE's unless they work
for an affiliate of the firm.
The agency has modified the definition of the term an FTE in
Sec. 101.9(j)(18)(vi)(D) to narrow it to refer simply to ``employees''
instead of all individuals that render service to the firm. To ensure
that there is no misunderstanding of which employees to count, FDA is
also modifying the discussion of the calculation and reporting of the
average number in Appendix II to refer to the ``employees of the person
and of all of its affiliates.''
G. Small Business Food Labeling Exemption Notice
16. Two comments suggested changes in the model form that the
agency included as Appendix I to the proposal. One comment suggested
that the agency include a place on the form for the telephone and FAX
numbers of the firm. The comment stated that the form or instructions
should also contain the address to which the form is to be mailed. The
other comment stated that the small business food labeling exemption
notice should be modified, printed, and made available to the public.
The comment suggested use of a form prepared by the National
Association for the Specialty Food Trade, Inc. (NASFT) because it
claimed that the NASFT form is less confusing than the one that the
agency provided. The comment stated that the model form should make a
clear statement referencing the provisions of 18 U.S.C. 1001 that
prohibit the submission of false information to the Federal Government.
The comment also stated that FDA should make the modified form publicly
available.
FDA has modified the form in line with the comments and has
included the modified form in Appendix I to this
[[Page 40973]]
final rule. The agency contacted the NASFT to gain its agreement that
the agency could incorporate parts of NASFT's form into the form
supplied by FDA. FDA has modified the form to include spaces for a
telephone number and a FAX number. In reviewing notices, FDA has found
that use of the telephone is frequently an expeditious way of resolving
questions that arise. The agency has also made the address to which the
form should be sent more prominent in the instructions.
FDA has also modified the form to include specific spaces for the
date that the form was prepared and for the name of a contact person.
The agency has found that information on the date of preparation is
important to help keep multiple notice submissions separate. The name
of a specific contact person for a firm has helped the agency to
resolve rapidly questions that have arisen during its review of a
notice.
Because it has received numerous inquiries as to whether a form
exists for the submission of the notice, FDA is providing a model form
in Appendix I of this document, along with instructions for completing
it in Appendix II of this document. This model form may be used by
firms to claim exemptions. FDA advises, however, that it is not
necessary to use this form.
The agency also advises that the small business exemption for a
food product will be in effect once a notice has been filed with FDA,
even though it may be necessary for the Office of Food Labeling to work
with the firm that is filing the notice to address deficiencies in it.
Although no action by the agency is required, FDA will attempt to
review all notices to ensure that they are complete and to notify
companies of the receipt of the notice, and whether additional
information needs to be submitted.
FDA is initiating the steps necessary to obtain approval from the
Office of Management and Budget (OMB) for printing and distribution of
the ``model form'' as an official Government form. OMB approval is
required under provisions of the Paperwork Reduction Act of 1995.
17. One comment stated that the section of the notice requesting
information on the manufacturer of a product, if it is other than the
person claiming the exemption, is irrelevant and should not be
required. The comment stated that adding irrelevant information
increases the paperwork burden, forces companies to give the Government
unnecessary information, and enlarges the scope of the 1993 amendments.
The comment suggested that FDA may be asking for the name of the
manufacturer because it hopes to exclude from the small business
exemption small companies that have product made by a copacker.
The 1993 amendments require that the firm filing a notice provide
information on the total number of units that it sold in the United
States in the preceding year. As a number of comments stated, and as
FDA agrees, a firm can only be held responsible for knowing, and
reporting, the number of units that it sold, not the total number of
units of a product sold in the United States by all firms that might
sell the product. However, as noted above in response to comment 5 in
section II.D. of this document, whether a food product is eligible for
exemption under the 1993 amendments depends not on the total number of
units sold in the United States by the firm claiming the exemption, but
it depends on the total number of units sold in the United States by
all firms that sold the food product. In the case of a manufacturer or
exclusive sales agent, the total number of units sold in the United
States may well be the number reported by the firm claiming the
exemption. In the case of an own-label distributor, the total number of
units sold in the United States may include sales by firms other than
the firm claiming the exemption.
FDA has included space in the model form for the listing of the
manufacturer, if it is not the person submitting the notice, to enable
the agency, if necessary, to identify instances in which the total
number of units of a food product sold in the United States might
exceed the applicable number for eligibility for exemption under the
1993 amendments. FDA seeks this information not to unfairly harass
small businesses, but to ensure that there is a level playing field so
that firms are not at a competitive disadvantage. Equally importantly,
FDA is seeking the information to ensure that consumers have access to
nutritional information on products when they have a right to it.
In its discussion with firms that were preparing notices to claim
exemption under the 1993 amendments, FDA has become aware that firms
may not always know the identity of the manufacturer of the product,
particularly if it is an imported product. If this is the case, FDA is
asking the person that submits a notice under the 1993 amendments to
identify the firm from which they received the product if he or she is
unaware of the identity of the manufacturer of the product.
18. Some comments stated that FDA should allow additional time for
firms to submit the notice claiming the exemption. One comment
suggested 6 months in view of the short time span between the
publication of the proposal and the May 7, 1994, filing date for
notices. One comment raised a concern about the requirement that
notices be filed by May 7th of each year and the attendant lack of
flexibility. Another comment stated that no firm should have to refile
for exemption before May 8, 1995.
These comments seem to be based on a belief that FDA has more
flexibility in the establishment of the date for filing of the notice
claiming an exemption than is actually provided by the 1993 amendments.
Most of the concerns raised by these comments have become moot with the
passage of time. The concern about the inflexibility of the May 7 date
for the submission of notices apparently arose from the agency's
statement in the preamble that ``[A]ll notices must be filed by May 7,
1994, for the 12-month period beginning May 8, 1994, the date that the
new mandatory labeling regulations become effective'' (59 FR 11872 at
11876). FDA advises that the May 7, 1994, date derives directly from
section 403(q)(5)(E)(iii) of the act, which requires that the notice
claiming exemption under the 1993 amendments be submitted ``prior to
the beginning of the period during which the exemption under subclause
(i) or (ii) is to be in effect.'' Thus, May 7 was established as the
date for submitting the claim for exemption for the 12-month periods
beginning May 8th of 1994, 1995, or 1996. The agency has no authority
to change this requirement.
FDA notes that a person is not restricted to the May 7 date for the
submission of a notice claiming an exemption under the provisions of
section 403(q)(5)(E)(i) of the act. Such a notice may be submitted on
any date as long as it is submitted before the beginning of the period
during which the exemption is to be in effect.
19. Two comments stated that it should be permissible to submit a
claim for an exemption within a reasonable time after the marketing of
a new food product has begun.
As noted above, a food is misbranded if it does not bear nutrition
labeling and is not exempt under one of the exemptions provided by the
1990 and the 1993 amendments. Because the exemption for a firm's low-
volume food products provided by the 1993 amendments is not in effect
until the firm has submitted a notice to FDA claiming the exemption
(with the exception of firms other than importers that have less than
10 employees and do not sell more than 10,000 units of the
[[Page 40974]]
particular food product), a low-volume food product from a small
business would be misbranded if marketed without nutrition labeling
before the notice claiming exemption has been submitted.
The 1993 amendments do not give FDA the authority to provide for a
reasonable time after a product has been marketed for the submission of
a notice claiming an exemption under the 1993 amendments. If a firm
begins marketing a product without nutrition labeling before submitting
such a notice, the product is subject to regulatory action. As noted
above, FDA supplies its field personnel and State enforcement agencies
with a listing of all firms that have filed notice for exemption under
the 1993 amendments. Firms that wait to submit a notice until after
they have begun marketing a product run the risk of regulatory action
because their name does not appear on that list.
FDA recognizes that many small businesses may not have adequate
resources to be aware of all of the requirements for nutrition labeling
on their products or for claiming an exemption. Thus, during the past
year, FDA has exercised discretion and restraint with respect to firms
that have marketed products before having filed the necessary notice
claiming exemption. While the agency intends to continue to exercise
such restraint, the agency urges firms that expect to market a food
product that will not bear nutrition labeling because it is exempt
under section 403(q)(5)(E) of the act to notify the agency of this fact
before marketing the product.
20. In the small business exemption proposal, FDA described
generally the approach that it intended to take to review and verify
the various notices that it received from small businesses claiming the
exemption for low-volume food products (59 FR 11872 at 11876). The
agency asked for comments on this general approach, stating that it
might provide in the final rule specific requirements for the
verification of notices, including a provision for inspection.
Several comments asked that FDA clarify how it would verify the
appropriateness of notices claiming an exemption under the 1993
amendments. Most of these comments stated that a firm should be able to
supply the necessary verification by mail. Several comments expressed
their belief that no additional recordkeeping requirements should be
imposed.
In its review of the approximately 13,000 notices that it has
received since enactment of the 1993 amendments, FDA has attempted to
follow the general approach to reviewing and verifying notices that it
outlined in the proposal. The agency has considered notices to be
acceptable, regardless of their format or approach, as long as they
supplied the basic information, that is, the name and address of the
firm claiming the exemption, an estimate of the number of employees, a
listing of the products for which exemption was claimed, including
brand names, and the approximate number of units of each of those
products sold by the firm in the United States. Although the 1993
amendments do not require review and approval of the claim by FDA for
the exemption to be in effect, FDA is briefly reviewing each notice.
This review is directed at four areas: (1) Did the notice provide an
estimate of the number of employees; (2) did the notice provide the
identity of the specific food products for which an exemption was
claimed; (3) did the notice provide the approximate number of units of
each food product that the firm sold in the United States in the 12
months preceding the period for the exemption; and, (4) based on the
information in the notice, did the product appear to be a low-volume
food product (e.g., were total annual sales in the United States
between May 8, 1993, and May 7, 1994, less than 600,000 units)?
In its review, FDA has used a flexible approach to resolve
questions concerning the information contained in the notices. In the
first year, for approximately 90 percent of the notices, FDA found the
information in the notice itself to be adequate to justify the claimed
exemption. In the remainder, where questions arose concerning the
notices, FDA used two approaches for resolving questions. If the notice
raised a fairly straight-forward question, such as the number of
employees because the number was not included in the notice, the agency
called the firm by telephone if a telephone number was available and
asked that the firm supply the missing information, either over the
telephone or by mail. For more complex questions, such as whether the
notice included products that did not qualify as low-volume food
products, e.g., it listed products bearing brand names for large
national corporations, the agency contacted the firm either by
telephone or by letter and requested that the firm modify its notice to
include only those products that qualified as low-volume food products
based on total sales in the United States.
As noted above, the agency found it necessary during the first year
under the provisions of the 1993 amendments to ask for verification or
additional information for only a small percentage of the notices
submitted. Based on its experience to date, FDA finds that there is no
need to provide specific requirements in the final rule for the
verification of notices. As was stated in the small business exemption
proposal, companies should be prepared to provide information to FDA to
support their notices of exemption should FDA question the validity of
any information contained in those notices (59 FR 11872 at 11876).
21. A number of comments disagreed with the preamble discussion
that the 1993 amendments provide FDA access to firms' records for
verification of exemption notices and emphasized that FDA should not
use the 1993 amendments as a basis for gaining unintended access to
records.
Section 403(q)(5)(E)(iii)(IV) of the act provides that the notice
shall contain such information as the Secretary of Health and Human
Services (the Secretary) may require to verify the information that is
required to be in the notice if the Secretary has questioned the
validity of such information. In the preamble to the small business
exemption proposal, FDA stated that it might provide in the final rule
that companies claiming the exemption will be required to permit
inspection of supporting documentation. Because it has not had
sufficient experience to have developed a clear view of what such an
approach would involve, FDA is not including a requirement concerning
inspection of records in the regulations set forth below.
Although FDA continues to hold that the use of an inspection is an
appropriate means for obtaining verification information, it agrees
that section 403(q)(5)(E)(iii)(IV) of the act does not give it free
access to all records of a firm. There must be some question about the
validity of information in a notice claiming an exemption under section
403(q)(5)(E) of the act for the agency to obtain such access. Secondly,
the information sought must have a nexus to: (1) The number of
employees of the firm, (2) the number of units of product sold in the
United States, and (3) proof that the product is a low-volume food
product. Any other review of records is not authorized by the 1993
amendments.
The agency will normally first try to verify the validity of the
information, or otherwise resolve the question that arises, by
telephone or mail. However, contrary to the assertion of some comments,
there is nothing in the 1993 amendments that prohibits FDA from
obtaining through inspection the information necessary to verify the
validity of information in a notice. It is
[[Page 40975]]
FDA's intent only to use an inspection to obtain verifying information
if it is the way that is most likely to produce the information
necessary to verify the validity of the notice. FDA has yet to resort
to inspection of records as an approach to verifying the information in
a notice.
22. Several comments stated that the proposed verification process
appeared to be burdensome. Some comments stated that any question
concerning eligibility could be promptly and efficiently addressed by
requesting written verifying information. The comments noted that the
1993 amendments contemplate that firms will be entitled to the
exemption simply by claiming it, absent an FDA request for supporting
documentation. The comments stated that, if there is a need for
supporting documentation to resolve doubt about the propriety of the
claimed exemption, FDA may simply demand that the information be
provided, or else the exemption will be revoked.
These comments are mistaken in their concern that the proposed
verification process is overly burdensome. However, as noted above,
until it has more experience in what is necessary to verify the
validity of a notice, FDA is not revising the regulations to specify
how it will verify the accuracy of notices, or what information is
necessary for such verification. As noted above, the agency found it
necessary during the first year to ask for verification or additional
information for only a small percentage of the notices submitted. FDA
agrees with the various comments that supplemental information to
verify the validity of a notice should be limited to that information
that is already maintained by the firm and should not require the
development of new records.
23. A number of comments addressed the requirement for a
certification statement as part of the notice. One comment stated that
the requirement was burdensome because it would impose business costs
and legal liability not contemplated by Congress and not provided for
by the amendments. Another comment stated that the certification
requirement should be deleted, noting a number of factors that mitigate
against the need for the certification statement, including the fact
that FDA can request verification, that anybody providing false
information commits a punishable criminal offense, and that FDA can
declare the product misbranded. One comment stated that a firm should
not be put in the position of having to certify that second-hand
information, such as the amount of production of a copacker, that it
cannot verify, is true and accurate. One comment stated that the
certification requirement should be eliminated, particularly the part
about notifying FDA when it becomes ineligible, because it exceeds
statutory authority provided by the amendments, is contrary to
congressional intent, and imposes burdens on small businesses. One
comment stated that FDA should clarify that a company would only be at
risk of criminal prosecution if it had intentionally and knowingly
provided false information.
FDA included the certification statement as a requirement of the
notice claiming an exemption under the 1993 amendments as a
confirmation to the agency of the expected; that is, that the
information being submitted to the agency complied with the
requirements of 18 U.S.C. 1001 and contained only valid information.
FDA disagrees with the comments that this requirement creates
additional liabilities for the firms or is burdensome. Most comments
were aware of 18 U.S.C. 1001 and the prohibition that it contains on
the submission of false information to a Government agency. This
prohibition exists regardless of whether a notice contains a signed
certification from the firm.
Moreover, the certification statement serves as the initial
verification of the validity of the information in a notice. As
evidenced by the tone of some of the comments, firms will take greater
care to ensure the validity of the information in a notice if a
responsible individual has to certify to the accuracy of the
information. FDA notes that some of the forms that it has received that
were devised by firms and associations contain more expansive
certification statements than that proposed by FDA. Some of these
certifications, for example, contained a statement that there was no
nutrition information or claims on the label for any of the products
included in the notice.
FDA notes that the greatest concern seems to be over the
requirement that a firm notify FDA when a product is no longer eligible
for the exemption. FDA included this commitment as part of the
certification requirement to ensure that the firm is aware of the
provision in the 1993 amendments that the firm has 18 months after its
product no longer qualifies for the exemption to bring the label into
compliance. The requirement that a firm notify FDA if it becomes
ineligible for the exemption is thus fully consistent with the act and
the agency's authority to adopt regulations for its efficient
enforcement. (See section 701(a) of the act.)
The agency emphasizes that it is asking firms to certify the
accuracy of the information that they are submitting as it relates to
the operations of their firm only. This information should be readily
available to the firm in records maintained during the normal course of
its business. Contrary to what was stated by one comment, FDA is not
asking a firm to certify to information unknown to it such as the
volume of sales of a copacker that produces product for the firm.
24. One comment stated that FDA should take pains to explain its
plans for protecting confidential business information included in
notices.
FDA advises that any trade secret or confidential commercial
information submitted in notices is protected by the safeguards against
inappropriate release that are provided by the agency's regulations in
part 20 (21 CFR part 20) for the release of information under the
Freedom of Information Act.
H. Miscellaneous Issues
25. One comment stated that FDA should not single out imports for
enforcement of noncompliance.
FDA advises that it has been acting to ensure that there is
compliance with the new labeling regulations in as evenhanded a manner
as possible with respect to both foreign and domestic firms. The agency
initiated its enforcement efforts for domestic products on August 8,
1994, the date after which the nutrition labeling and nutrient content
claim requirements of the act became applicable (see Pub. L. 103-261,
enacted May 26, 1994). FDA initiated its import enforcement efforts on
September 19, 1994. The approach that the agency's district offices
take when they encounter a noncompliant label is similar for both
domestic product and imported products. Copies of the agency's domestic
and import enforcement assignments explaining the approaches being
taken have been placed on public display under this docket number.
26. One comment stated that FDA's proposal places too much emphasis
on enforcement, and that FDA should maintain a flexible enforcement
policy; e.g., a small company whose notice is deficient (or which is
found to exceed a ceiling) should be given a complete written
explanation of the deficiency and a reasonable time to submit a
compliance plan.
FDA has been maintaining a flexible, lenient enforcement policy,
particularly as regards companies whose notice is found to be
deficient. The first step that the agency takes upon receipt of a
notice is to place the name and address of the firm in its computer
data base of firms that have filed a notice and to make that
[[Page 40976]]
information available to its field offices by entering the information
into the PRIME Connection and FIARS computer bulletin boards. As noted
above, the agency next issues a letter acknowledging the receipt of the
notice, unless it has a question concerning the information in the
notice. If there is a deficiency in the information in the notice, or
the agency has some other question concerning it, the agency either
calls or writes the firm to ask for clarification of the information.
During this time, the name and address of the firm remain on the
listing of firms that have submitted a notice claiming exemption under
the 1993 amendments.
27. One comment stated that the agency should adopt specific
procedures to maintain a list of exempt firms and provide effective
means of disseminating the list to districts. This action should be
taken, the comment said, to minimize the possibility of needless
detention of products for which an exemption has been filed. A foreign
firm also commented that FDA should adopt a policy that would permit
the manufacturer or its importer to include a statement on the
particular import documents that it has filed for a particular
exemption, and that such a statement should bar the district from
detaining the imported product.
Before launching its enforcement efforts for domestic and imported
products, FDA developed a computerized data base listing the firms that
have submitted a notice claiming an exemption under the 1993 amendments
by name and address. As stated above, FDA made this data base available
to its district offices and to State enforcement agencies through an
FDA computer bulletin board system called ``PRIME Connection.'' A
similar data base listing the names and addresses of foreign firms and
recognized importers that filed a notice to claim an exemption for
their products was made available to FDA's import offices under FDA's
FIARS system. FDA has periodically updated these lists since they were
established. Additionally, FDA advises that it has recommended that,
and has permitted, statements that a particular product qualifies for
an exemption under the 1993 amendments be included in the shipping
records for an imported product. The presence of such additional
information with the shipping records is considered by FDA in
determining whether to release a particular import. Because each import
must be considered on a case-by-case basis, however, the presence of
such a statement will not serve as a de facto bar to detention.
28. Several comments suggested steps that the agency should take to
permit the continued use by small businesses of nutrition labeling in
compliance with FDA's former provisions for the voluntary nutrition
labeling of food. Most of these comments supported the use of
Sec. 101.9(g)(9) for small businesses to request, and FDA to grant,
alternative approaches that would enable them to use up labeling that
used the former type of nutrient labeling. Some comments suggested that
FDA should extend the exemption of the 1993 amendments in the proposed
regulation for low-volume food products to cover such products.
Other comments stated that FDA should consider establishing a
special rule permitting labels with pre-1990 amendments nutrition
information to be used by processors that otherwise would qualify for
the small business exemption. One comment noted that if it is barred
from using labels bearing pre-1990 amendments nutrition information, it
will be required to bear an economic loss for these label stocks, which
would be extreme for a company of its size. Other comments noted that
denying an extension to firms that had voluntarily cooperated in the
past would be unjust. Some comments suggested that limits be created on
the use of such pre-1990 amendments labeling; e.g., a certification
that the labeling was purchased before January 6, 1993, and that
compliance with the new requirements will be achieved by the end of the
extension period or the next printing whichever comes first; that there
are no claims; that there is no competitive advantage from improper
listing of serving sizes, calories from fat, saturated fat,
cholesterol, and sodium; and that the product was not introduced into
the marketplace since the new nutrition labeling regulations were
issued (since January 6, 1993).
Since issuance of the small business exemption proposal, FDA has
received a number of requests for permission under Sec. 101.9(g)(9) to
exhaust inventories of labels containing nutrition information that was
in compliance with FDA's regulations that were in effect before the
effective date of the 1990 amendments. FDA has required that these
requests contain information showing that the firm and the product
would be eligible for exemption under the provisions of the 1993
amendments but for the fact that the product's label bears the former
nutrition labeling. FDA has also asked that the requests include a copy
of the label for each product for which permission was being sought to
exhaust the old label, along with an estimate of the remaining
inventory of the label stocks and the estimated time required to
exhaust the inventory.
Within its limited resources, FDA has reviewed and granted
permission to firms to exhaust labels that contain only the former
voluntary nutrition information. In granting permission to exhaust
inventories of labeling by a specific date, FDA has advised the firms
that the label for the product is to be corrected by either removing
the old nutrition information or bringing the label into compliance
with new Sec. 101.9. FDA has advised firms requesting permission to
continue the use of labels containing nutrient content or health claims
that such permission would not be granted.
The process provided by Sec. 101.9(g)(9) appears to be adequate to
address the issue of granting permission to small businesses to exhaust
their stocks of old labeling. Also, FDA notes that it is using most of
the ``limits'' suggested by the one comment in evaluating requests for
additional time to exhaust inventories of labels under
Sec. 101.9(g)(9). However, the suggested limits on granting permission
to exhaust labels printed after January 6, 1993, or for products
introduced after January 6, 1993, have largely been rendered moot by
the passage of time. Thus, FDA concludes that a special rule permitting
labels with pre-1990 amendments nutrition information is unnecessary.
Also, FDA advises that it does not have authority to extend the
exemption provided by the 1993 amendments to cover products bearing
pre-1990 amendment nutrition information. Such products are
specifically excluded from the exemption by section 403(q)(5)(E(i)(2)
and (ii) of the 1993 amendments.
III. Economic Impact
FDA has examined the impacts of this final rule as required by
Executive Order 12866 and the Regulatory Flexibility Act (Pub. L. 96-
354). Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, when regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects; distributive impacts; and equity). The Regulatory Flexibility
Act requires agencies to analyze options for regulatory relief for
small businesses.
The agency reported in the small business exemption proposal its
finding that the net effect of this rule is the benefit that it creates
by reducing labeling costs for exempted companies. This benefit is the
result of statutory provisions and not FDA discretion.
[[Page 40977]]
There are two types of costs of this regulation: (1) Costs of lost
nutrition benefits because nutrition information is not available and
(2) costs to comply with the notification requirement.
FDA has estimated that the volume of food product eligible for
exemption constitutes less than one percent of the United States diet,
and that any lost nutrition benefits are likely to be small. Also, the
agency estimated that in the first year approximately 4,500 firms
claiming exemption would file notices at a cost of approximately
$1,656,000. The agency estimated that in the following 2 years the
number of firms filing notices would reduce to approximately 4,000 at a
cost of approximately $1,472,640 and approximately 3,200 at a cost of
approximately $1,177,640, respectively. However, in the first year that
the 1993 amendments have been in effect, the agency has received
approximately 9,000 notices claiming an exemption for one or more low-
volume food products. Assuming that the number of firms filing an
exemption will decrease for the next 2 years at the same rate as
previously estimated, then the costs to comply with the notification
requirements are estimated to be approximately $3,312,000 the first
year, approximately $2,947,000 the second year, and approximately
$2,358,000 in subsequent years as the number of firms filing notices
decreases. Federal costs for implementing the notification system are
estimated (as in the proposal) to be approximately $207,000. The total
costs of notification will be less than $4 million for the first year
and decrease substantially in subsequent years.
On the other hand, FDA estimates that the cost savings to small
businesses that were exempted from labeling to be between $275 and $360
million. These costs are estimated based on the Regulatory Impact
Analysis (RIA) (58 FR 2927, January 6, 1993) done for rules
implementing the 1990 amendments. In the RIA, FDA estimated relabeling
costs of approximately $3,000 per stock keeping unit (SKU). This rule
is expected to save costs for between 90,000 and 120,000 SKU's. Because
of this positive effect on the economy, this rule is economically
significant under Executive Order 12866, but because the rule will not
have any adverse effect on small business, the agency believes that,
under the Regulatory Flexibility Act, the rule will not have a
significant impact on a substantial number of small entities.
However,the preceding discussion of the costs and cost savings to small
business would constitute a final regulatory flexibility analysis under
the Regulatory Flexibility Act.
None of the comments to the small business exemption proposal
presented any information, nor is the agency aware of any information,
that would serve as a basis for significantly increasing the estimated
costs of this regulation or significantly decreasing the estimated cost
savings.
IV. Congressional Review
This final rule has been classified as a major rule subject to
congressional review. The effective date is October 7, 1996. If,
however, at the conclusion of the congressional review process the
effective date has been changed, FDA will publish a document in the
Federal Register to establish the actual effective date or to issue a
notice of termination of the final rule action.
V. Environmental Impact
The agency has previously considered the environmental effects of
the action being taken in this final rule. As announced in the small
business exemption proposal published in the Federal Register of March
14, 1994 (59 FR 11872), the agency has determined under 21 CFR
25.24(a)(8) and (a)(11) that these actions are of a type that do not
individually or cumulatively have a significant effect on the human
environment. No comments questioned this determination. Therefore,
neither an environmental assessment nor an environmental impact
statement is required.
VI. Paperwork Reduction Act
This final rule contains information collections that are subject
to review by OMB under the Paperwork Reduction Act of 1995 (Pub. L.
104-13). This information collection has been approved by OMB for 90
days, under 5 CFR 1320.13 and OMB control No. 0910-0324. Persons are
not required to respond to a collection of information unless it
displays a currently valid OMB control number.
Because OMB approval of this information collection is valid for
only 90 days, FDA is also taking the appropriate steps to obtain a
regular approval. Section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 (44 U.S.C. 3506(c)(2)(A)) requires Federal agencies to provide
a 60-day notice in the Federal Register concerning each collection of
information. ``Collection of information'' is defined in 44 U.S.C.
3502(3) and 5 CFR 1320.3(c). In accordance with 5 CFR part 1320, the
title, description, and respondent description of the information
requirement are shown below with an estimate of the annual collection
and information burden. Included in the estimate is the time for
reviewing instructions, gathering necessary information, and completion
and submission of the notice.
Title: Food Labeling; Nutrition Labeling, Small Business Exemption.
Description: The final rule provides the procedures for the
submission of a notice of a claim by a company for an exemption from
FDA's regulations for mandatory nutrition labeling. FDA action on the
notice will include review of notices for completeness and
acknowledgment that the notice had been received and was or was not
adequate. Additionally, FDA will provide to its field personnel and
State enforcement agencies a listing of firms that have submitted a
notice to FDA along with a listing of the products claimed to be
exempt.
The 1993 amendments revise the basis for a small business exemption
provided by section 403(q)(5)(E) of the act. This new provision
provides an exemption for a food product based on the number of
employees and the total number of units sold in the United States on an
annual basis. Under the 1993 amendments, to qualify for an exemption, a
person must file the notice mentioned in the preceding paragraph with
FDA before the time period for the claimed exemption. Sections
101.9(j)(18)(iv) and 101.36(f)(2) reflect the information identified in
section 403(q)(5)(E) of the act, as necessary, as part of the notice
for a claimed small business exemption.
Descriptions of Respondents: Persons and small businesses,
particularly small businesses.
Estimated Annual Reporting and Recordkeeping Burden
----------------------------------------------------------------------------------------------------------------
Total
Average annual
Annual Annual burden Annual operating
Section number of frequency hours per burden and
respondents response hours maintenance
costs
----------------------------------------------------------------------------------------------------------------
101.9 and 101.36..................................... 10,000 1 8 80,000 $3,312,000
----------------------------------------------------------------------------------------------------------------
[[Page 40978]]
Since enactment of the 1993 amendments, FDA has received notices
from approximately 9,000 firms. Although FDA is uncertain how many
other firms may take advantage of the exemption provided by the 1993
amendments to file notice, it expects a maximum of 10,000 respondents
to file for the exemption. The agency expects that the number of
respondents and corresponding annual burden hours will decrease over
succeeding years as the basis for the exemption changes. By May 1997,
FDA estimates that approximately 5,000 companies may be filing notices
to claim the exemption with a corresponding annual burden hours of
approximately 40,000 hours. There are no capital costs created by this
final rule. As noted above in section III. Economic Impact, FDA
estimates that the total operating and maintenance costs to respondents
to submit notices to the agency during the first year to be
approximately $3,312,000. The agency does not believe that this
regulation requires any capital expenditures to comply with the
requirements for submitting a notice.
In the small business exemption proposal, FDA requested comments
regarding the estimated burden, including suggestions for reducing the
burden. Nine responses were received that contained one or more
comments concerning the information collection provisions that would be
established by the small business exemption proposal. A number of these
comments suggested modifications in, or were opposed to, various
provisions of the information collection portion of the small business
exemption proposal. A summary of the arguments and changes suggested by
these latter comments, and the agency's responses, are provided above.
None of the comments addressed FDA's estimates of the cost and hour
burden associated with the information collection.
As required by section 3507(d) of the Paperwork Reduction Act of
1995, FDA has submitted copies of the final rule to OMB for its review
of the recordkeeping requirements. In addition, the agency solicits
public comment on: (1) Whether the proposed collection of information
is necessary for the proper performance of the functions of the agency,
including whether the information will have practical utility; (2) the
accuracy of the agency's estimate of the burden of the proposed
collection of information, including the validity of the methodology
and assumptions used; (3) ways to enhance the quality, utility, and
clarity of the information to be collected; and (4) ways to minimize
the burden of the collection of information on respondents, including
through the use of automated collection, techniques, or other forms of
information technology (e.g., permitting electronic submission of
responses).
Individuals and organizations may submit comments on the
information collection requirements of this final rule by October 7,
1996. These comments should be submitted to the Dockets Management
Branch (address above).
Under the Paperwork Reduction Act of 1995, persons are not required
to respond to a collection of information unless it displays a
currently valid OMB control number. This final rule contains
information collection requirements that have been submitted to OMB for
approval. FDA will publish a notice in the Federal Register of OMB's
decision to approve, modify, or disapprove the information collection
requirements established in this final rule prior to the effective date
of such requirements.
FDA advises that the statutory requirements of the 1993 amendments
for the filing of a notice with FDA take precedence over the provisions
of the Paperwork Reduction Act of 1995. Thus, if small businesses
desire to avail themselves of the exemption from nutrition labeling
that is provided by the 1993 amendments, they must file notice with FDA
as required by section 403(q)(5)(e)(i)(III) or (q)(5)(e)(ii) of the
act. Products that are not the subject of such notice will be
misbranded unless they bear nutrition labeling as required by section
403(q) of the act regardless of whether OMB has approved the
information requirements included in this final rule.
List of Subjects in 21 CFR Part 101
Food labeling, Nutrition, Reporting and recordkeeping requirements.
Therefore, under the Federal Food, Drug, and Cosmetic Act and under
authority delegated to the Commissioner of Food and Drugs, 21 CFR part
101 is amended as follows:
PART 101--FOOD LABELING
1. The authority citation for 21 CFR part 101 continues to read as
follows:
Authority: Secs. 4, 5, 6 of the Fair Packaging and Labeling Act
(15 U.S.C. 1453, 1454, 1455); secs. 201, 301, 402, 403, 409, 701 of
the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321, 331, 342,
343, 348, 371).
2. Section 101.9 is amended by revising paragraph (j)(1)(i) and by
adding new paragraph (j)(18) to read as follows:
Sec. 101.9 Nutrition labeling of food.
* * * * *
(j) * * *
(1)(i) Food offered for sale by a person who makes direct sales to
consumers (e.g., a retailer) who has annual gross sales made or
business done in sales to consumers that is not more than $500,000 or
has annual gross sales made or business done in sales of food to
consumers of not more than $50,000, Provided, That the food bears no
nutrition claims or other nutrition information in any context on the
label or in labeling or advertising. Claims or other nutrition
information subject the food to the provisions of this section.
* * * * *
(18) Food products that are low-volume (that is, they meet the
requirements for units sold in paragraphs (j)(18)(i) or (j)(18)(ii) of
this section); that, except as provided in paragraph (j)(18)(iv) of
this section, are the subject of a claim for an exemption that provides
the information required under paragraph (j)(18)(iv) of this section,
that is filed before the beginning of the time period for which the
exemption is claimed, and that is filed by a person, whether it is the
manufacturer, packer, or distributor, that qualifies to claim the
exemption under the requirements for average full-time equivalent
employees in paragraphs (j)(18)(i) or (j)(18)(ii) of this section; and
whose labels, labeling, and advertising do not provide nutrition
information or make a nutrient content or health claim.
(i) For food products first introduced into interstate commerce
before May 8, 1994, the product shall be exempt for the period:
(A) Between May 8, 1995, and May 7, 1996, if, for the period
between May 8, 1994, and May 7, 1995, the person claiming the exemption
employed fewer than an average of 300 full-time equivalent employees
and fewer than 400,000 units of that product were sold in the United
States; and
(B) Between May 8, 1996, and May 7, 1997, if for the period between
May 8, 1995, and May 7, 1996, the person claiming the exemption
employed fewer than an average of 200 full-time equivalent employees
and fewer than 200,000 units of that product were sold in the United
States.
(ii) For all other food products, the product shall be eligible for
an exemption for any 12-month period if, for the preceding 12 months,
the person claiming the exemption employed fewer than an average of 100
full-time equivalent employees and fewer than 100,000 units of that
product were sold in the United States, or in the case of a food
product that was not sold in the 12-month period preceding the period
[[Page 40979]]
for which exemption is claimed, fewer than 100,000 units of such
product are reasonably anticipated to be sold in the United States
during the period for which exemption is claimed.
(iii) If a person claims an exemption under paragraphs (j)(18)(i)
or (j)(18)(ii) of this section for a food product and then, during the
period of such exemption, the number of full-time equivalent employees
of such person exceeds the appropriate number, or the number of food
products sold in the United States exceeds the appropriate number, or,
if at the end of the period of such exemption, the food product no
longer qualifies for an exemption under the provisions of paragraphs
(j)(18)(i) or (j)(18)(ii) of this section, such person shall have 18
months from the date that the product was no longer qualified as a low-
volume product of a small business to comply with this section.
(iv) A notice shall be filed with the Office of Food Labeling (HFS-
150), Center for Food Safety and Applied Nutrition, Food and Drug
Administration, 200 C St. SW., Washington, DC 20204 and contain the
following information, except that if the person is not an importer and
has fewer than 10 full-time equivalent employees, that person does not
have to file a notice for any food product with annual sales of fewer
than 10,000 total units:
(A) Name and address of person requesting exemption. This should
include a telephone number or FAX number that can be used to contact
the person along with the name of a specific contact;
(B) Names of the food products (including the various brand names)
for which exemption is claimed;
(C) Name and address of the manufacturer, distributor, or importer
of the food product for which an exemption is claimed, if different
than the person that is claiming the exemption;
(D) The number of full-time equivalent employees. Provide the
average number of full-time equivalent individuals employed by the
person and its affiliates for the 12 months preceding the period for
which a small business exemption is claimed for a product. The average
number of full-time equivalent employees is to be determined by
dividing the total number of hours of salary or wages paid to employees
of the person and its affiliates by the number of hours of work in a
year, 2,080 hours (i.e., 40 hours x 52 weeks);
(E) Approximate total number of units of the food product sold by
the person in the United States in the 12-month period preceding that
for which a small business exemption is claimed. Provide the
approximate total number of units sold, or expected to be sold, in a
12-month period for each product for which an exemption is claimed. For
products that have been in production for 1 year or more prior to the
period for which exemption is claimed, the 12-month period is the
period immediately preceding the period for which an exemption is
claimed. For other products, the 12-month period is the period for
which an exemption is claimed; and
(F) The notice shall be signed by a responsible individual for the
person who can certify the accuracy of the information presented in the
notice. The individual shall certify that the information contained in
the notice is a complete and accurate statement of the average number
of full-time equivalent employees of this person and its affiliates and
of the number of units of the product for which an exemption is claimed
sold by the person. The individual shall also state that should the
average number of full-time equivalent employees or the number of units
of food products sold in the United States by the person exceed the
applicable numbers for the time period for which exemption is claimed,
the person will notify FDA of that fact and the date on which the
number of employees or the number of products sold exceeded the
standard.
(v) FDA may by regulation lower the employee or units of food
products requirements of paragraph (j)(18)(ii) of this section for any
food product first introduced into interstate commerce after May 8,
2002, if the agency determines that the cost of compliance with such
lower requirement will not place an undue burden on persons subject to
it.
(vi) For the purposes of this paragraph, the following definitions
apply:
(A) Unit means the packaging or, if there is no packaging, the form
in which a food product is offered for sale to consumers.
(B) Food product means food in any sized package which is
manufactured by a single manufacturer or which bears the same brand
name, which bears the same statement of identity, and which has similar
preparation methods.
(C) Person means all domestic and foreign affiliates, as defined in
13 CFR 121.401, of the corporation, in the case of a corporation, and
all affiliates, as defined in 13 CFR 121.401, of a firm or other
entity, when referring to a firm or other entity that is not a
corporation.
(D) Full-time equivalent employee means all individuals employed by
the person claiming the exemption. This number shall be determined by
dividing the total number of hours of salary or wages paid directly to
employees of the person and of all of its affiliates by the number of
hours of work in a year, 2,080 hours (i.e., 40 hours x 52 weeks).
3. Section 101.36 is amended by revising paragraph (f) to read as
follows:
Sec. 101.36 Nutrition labeling of dietary supplements of vitamins and
minerals.
* * * * *
(f) Dietary supplements are subject to the exemptions specified as
follows in:
(1) Section 101.9(j)(1) for dietary supplements that are offered
for sale by a person who makes direct sales to consumers (i.e., a
retailer) who has annual gross sales or business done in sales to
consumers that is not more than $500,000 or has annual gross sales made
or business done in sales of food to consumers of not more than
$50,000, and whose labels, labeling, and advertising do not provide
nutrition information or make a nutrient content or health claim; or
(2) Section 101.9(j)(18) for dietary supplements that are low-
volume products (that is, they meet the requirements for units sold in
Sec. 101.9(j)(18)(i) or (j)(18)(ii)); that, except as provided in
Sec. 101.9(j)(18)(iv), are the subject of a claim for an exemption that
provides the information required under Sec. 101.9(j)(18)(iv); that is
filed before the beginning of the time period for which the exemption
is claimed; and that is filed by a person that qualifies to claim the
exemption under the requirements for average full-time equivalent
employees in Sec. 101.9(j)(18)(i) or (j)(18)(ii); and whose labels,
labeling, or advertising do not provide nutrition information or make a
nutrient content or health claim.
* * * * *
Dated: April 4, 1996.
David A. Kessler,
Commissioner of Food and Drugs.
Donna E. Shalala,
Secretary of Health and Human Services.
Note: The following Appendixes will not appear in the annual
Code of Federal Regulations.
Appendix I--Model Small Business Food
Labeling Exemption Notice
(Please type or clearly print)
1. Name of firm
----------------------------------------------------------------------
2. Address of firm:
Street address---------------------------------------------------------
----------------------------------------------------------------------
City State-------------------------------------------------------------
Zip or postal code-----------------------------------------------------
Country----------------------------------------------------------------
[[Page 40980]]
Telephone--------------------------------------------------------------
FAX--------------------------------------------------------------------
3. Type of firm (Check all that apply)
Manufacturer-----------------------------------------------------------
Packer/Repacker--------------------------------------------------------
Distributor------------------------------------------------------------
Importer---------------------------------------------------------------
Retailer---------------------------------------------------------------
4. Twelve-month time period for which you are claiming exemption
FROM: ____ / ____ / ____
MM DD YY
TO: ____ / ____ / ____
MM DD YY
5. Average number of full-time equivalent employees for 12-month
period______
6. Report of units sold (use continuation sheets if necessary)
Product
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
No. of units
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Manufacturer
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
7. Name and address of manufacturer(s) or distributor(s) of
product(s) in Item 6 if different from firm claiming exemption. (Use
continuation sheets if necessary.)
B Name of manufacturer or distributor
----------------------------------------------------------------------
Address----------------------------------------------------------------
----------------------------------------------------------------------
C Name of manufacturer or distributor
Address----------------------------------------------------------------
----------------------------------------------------------------------
8. Contact person
----------------------------------------------------------------------
9. The undersigned certifies that the above information is a true
and accurate representation of the operations of ________ (Name of
firm). The undersigned will notify the Office of Food Labeling of
the date on which the average number of full-time equivalent
employees or the number of units of food products sold in the United
States exceeds the applicable number for exemption which is being
claimed herein.
Signature--------------------------------------------------------------
Name (Type or clearly print)-------------------------------------------
----------------------------------------------------------------------
Title------------------------------------------------------------------
Date-------------------------------------------------------------------
Appendix II--Model Small Business Food
Labeling Exemption Notice
Instructions for completion
(Please type or clearly print)
1. Name of firm: Enter the recognized legal name of your firm.
2. Firm address: Enter the mailing address for the principal
location of your firm. Also, provide the telephone and FAX numbers.
3. Type of firm: Place a check mark or ``x'' in each block that
is applicable to your firm. For example, if your firm manufactures
all products that it sells place a check mark after
``Manufacturer.'' If your firm also distributes a product that is
manufactured by another firm, also place a check mark after
``Distributor.''
4. Twelve-month time period for which you are claiming
exemption: Enter the specific time period for which you are
requesting exemption for your products. For products initially
introduced into interstate commerce before May 8, 1994, this time
period will be from May 8 of the current year to May 7 of next year:
e.g., ``FROM 05/08/95 TO 05/07/96.'' For new products, the time
period should start with the date on which sales in the United
States are expected to begin: e.g., ``FROM 11/01//95 TO 10/31/96.''
5. Average number of full-time equivalent employees for 12-month
period: Enter the average number of full-time equivalent employees
of your firm and of all of its affiliates for the year preceding the
year for which an exemption is claimed under Item 4. The average
number should include all employees of your firm and of its
affiliates (e.g., owners; officers; and all other personnel such as
secretarial, production, and distribution employees). Firms are
affiliates of each other when, either directly or indirectly: (1)
One firm has the power to control the other, (2) a third party
controls or has the power to control both, or (3) an identity of
interest exists such that affiliation may be found.
The average number of full-time equivalent employees is to be
determined by using the following formula: Total number of employee/
hours paid divided by 2,080 hours = average number of full-time
equivalent employees. For example, 254,998 paid employee/hours
2,080 = 122. If the total number of actual employees for
your firm and its affiliates is less than 100, you may enter the
total number of actual employees instead of calculating the average
number of full-time employees; e.g., if your firm has 24 employees
that work full-time and 12 employees that work part-time, you may
report 36 total actual employees instead of calculating the average
number of full-time equivalent employees.
6. Report of units sold (Continuation sheets using the same
format for Item 6 may be used if necessary):
Product: Under the column for product, enter the name, including
the brand name, for each food product for which your firm is
claiming an exemption. A food product is a food in any sized package
which is manufactured by a single manufacturer or which bears the
same brand name; which bears the same statement of identity; and
which has a similar preparation method. In considering whether food
products have similar preparation methods, consider all steps that
go into the preparation of the food products, from the initial
formulation steps to any finishing steps; for example, products
having differing ingredients would be considered different food
products and counted separately in determining the number of units.
No. of Units: Provide the approximate sales of your firm, in
terms of units, for the product for the year immediately preceding
the time period for the exemption entered under Item 4. For example,
if the time period for which you are claiming exemption for a food
product is May 8, 1996, to May 7, 1997, provide an approximation of
your sales of that product from May 8, 1995, to May 7, 1996. If the
product was not sold for the entire 12 months preceding the time
period for the exemption entered under Item 4, provide an
approximation of the sales expected to be made during the time
period in Item 4. For example, if the time period being claimed in
Item 4 is November 1, 1995, to October 31, 1996, for a product that
is going to be sold beginning November 5, 1995, provide an
approximation of sales for the period from November 1, 1995, to
October 31, 1996.
The approximate total number of units is the summation of the
number of units of the various package sizes of the food product in
the form in which it is sold to consumers; for example, the total of
all 2-pound bags of flour plus all 5-pound bags of flour plus all
10-pound bags of flour should be provided as the number of units
sold by your firm in the United States. There may also be occasions
where a food is sold in bulk or by individual pieces rather than in
packaging; e.g., flour may be sold in bulk displays at grocery
stores. In such a case, the number of units should be determined on
the basis of the typical sales practice for the specific food
product; e.g., if 2,000 pounds of flour are sold from bulk displays
at grocery stores, and the typical practice for sales to consumers
is to price the flour on a per pound basis, then the bulk sales
would represent 2,000 units. If the firm sells the same product in
package form, then the bulk sales, 2,000 units in the above example,
should be added to the sum of the number of packages of the flour
sold to determine the total number of units of flour sold by the
firm in the United States.
Manufacturer: Under the column designated ``Manufacturer'' enter
the letter that corresponds with the name of the manufacturer of the
product. The letter ``A'' is used to designate the firm submitting
the notice if it is the manufacturer of the product. If the firm
submitting the notice is not the manufacturer of the product, use
the letter from Item 7 (B or C), or from the continuation sheets for
Item 7, that corresponds to the name and address of the manufacturer
of the product.
7. Name and address of manufacturer(s) or distributor(s) of
product(s) in Item 6 if different from firm claiming exemption:
Continuation sheets may be used if necessary. Provide the name and
addresses of the manufacturers of the food products for which
exemption is being claimed if they are different from the firm
claiming the exemption. If the name of the manufacturer is unknown,
provide the name of the firm from which the product is purchased.
Insert the letter corresponding to the name of the manufacturer
(``A'' corresponds to the firm submitting the notice) or distributor
in the appropriate block for the name of the product under Item 6.
[[Page 40981]]
8. Contact person: Enter the name of a person that can act as a
contact for your firm if any questions arise concerning the
information included in the notice.
9. Certification: The form is to be signed by a responsible
individual for the firm that can certify to the authenticity of the
information presented on the form. The individual signing the form
will commit to notify the Office of Food Labeling when the numbers
of full-time equivalent employees or total numbers of units of
products sold in the United States exceed the applicable number for
an exemption.
The completed form should be mailed to: Office of Food Labeling
(HFS-150), Food and Drug Administration, 200 C St., SW, Washington,
DC 20204. Questions concerning a claim may be directed to the Office
of Food Labeling at the above address or to 202-205-4561.
[FR Doc. 96-20075 Filed 8-6-96; 8:45 am]
BILLING CODE 4160-01-P