[Federal Register Volume 63, Number 30 (Friday, February 13, 1998)]
[Proposed Rules]
[Pages 7319-7322]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-3725]
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Proposed Rules
Federal Register
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This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 63, No. 30 / Friday, February 13, 1998 /
Proposed Rules
[[Page 7319]]
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DEPARTMENT OF AGRICULTURE
Food Safety and Inspection Service
9 CFR Parts 308, 318, and 381
[Docket No. 97-007N]
Notice of Policy Change; Elimination of Prior Approval for
Proprietary Substances and Nonfood Compounds
AGENCY: Food Safety and Inspection Service, USDA.
ACTION: Notice of policy change; request for comments.
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SUMMARY: The Food Safety and Inspection Service (FSIS) is revising its
policy regarding Agency approval of nonfood compounds and proprietary
substances prior to use in official meat and poultry establishments.
The compounds and substances currently subject to prior approval
include maintenance and operating chemicals (sanitizers, cleaning
compounds, water treatments, lubricants, and pesticides) and
proprietary food processing chemicals (branding inks, scalding agents,
rendering agents, and denaturants). FSIS recently proposed to eliminate
the sanitation regulations requiring prior approval of some of these
compounds and substances (contained in 9 CFR Parts 308 and 381, Subpart
H). FSIS now is announcing that it is eliminating the prior approval
system for all-nonfood compounds and proprietary substances and
specifically requests comment on alternatives to the current prior
approval system.
DATES: Comments must be received on or before April 14, 1998.
ADDRESSES: Submit one original and two copies of written comments to
FSIS Docket Clerk, Docket #97-007N, U.S. Department of Agriculture,
Food Safety and Inspection Service, Room 102, Cotton Annex, 300 12 St.,
SW, Washington, DC 20250-3700. All comments submitted in response to
this notice will be available for public inspection in the Docket
Clerk's Office between 8:30 a.m. and 4:30 p.m., Monday through Friday.
FOR FURTHER INFORMATION CONTACT: Patricia F. Stolfa, Assistant Deputy
Administrator, Regulations and Inspection Methods, Food Safety and
Inspection Service, U.S. Department of Agriculture (202) 205-0699.
SUPPLEMENTARY INFORMATION:
Background
FSIS is planning to discontinue approving nonfood compounds and
proprietary substances prior to use in official meat and poultry
products establishments. Nonfood compounds are compounds used in
official establishments, but which are not expected to become
components of their products. Nonfood compounds subject to prior
approval by FSIS include cleaning compounds, compounds for laundry use,
paint removers, sanitizers, hand washing compounds, pesticides, boiler
and water treatments, lubricants, solvents, and sewer and drain
cleaners. Proprietary substances are used in the preparation of
products. They are considered proprietary because all of their
ingredients are not identified, either on the containers by common or
chemical name or by some other means. Proprietary substances subject to
prior approval by FSIS include: marking agents, such as branding and
tattoo inks; food processing substances, such as poultry and hog scald
agents and tripe denuding agents; denaturants; substances to control
foaming in soups, stews, rendered fats, and curing pickle; and
substances for cleaning or treating feet or other edible parts.
FSIS receives annually between 16,000 and 20,000 applications for
approval of nonfood compounds and proprietary substances. It is
important to note that many of these applications are requests for
approval of formulation changes in or new use patterns for compounds
and substances already approved for use in meat and poultry
establishments. FSIS approves approximately 9,000 applications per year
and rejects approximately 1,000. FSIS returns around 40 percent of the
applications to applicants each year, for a variety of reasons: the
application paperwork may not be complete; FSIS may request additional
information, changes in chemical formulation, or revisions to the
requested use patterns. FSIS annually publishes a list of the approved
substances and compounds in FSIS Miscellaneous Publication No. 1419,
``List of Proprietary Substances and Nonfood Compounds'' ( hereafter
referred to as the List). This publication currently lists
approximately 115,000 compound and substances produced by about 8,000
manufacturers.
FSIS does not test the products submitted for approval but
evaluates them based on information submitted by manufacturers and
other information in the Agency's files, including chemical
formulations and information on proposed uses and labeling. FSIS also
consults with the Food and Drug Administration (FDA), the Environmental
Protection Agency (EPA), and the Occupational Safety and Health
Administration (OSHA) in regard to those Agencies' determinations
concerning the safety and suitability of the compound for the requested
use. Generally, FSIS consults with FDA regarding the status of the
substance or compound as an FDA-approved direct or indirect food
additive. Also, FSIS sometimes consults with FDA regarding nonfood
compounds that have been reviewed as drugs, such as hand washing
agents. FSIS generally consults with EPA concerning that Agency's
review and registration of pesticides with labeling claims. FSIS may
consult with OSHA if the intended use of the substance or compound
raises worker health and safety concerns.
FSIS's prior approval program obviously is somewhat redundant with
those of the aforementioned agencies. However, the approval of these
compounds prior to their intended use provides some assurance to meat
and poultry processors that use of the compounds and substances will
not result in the adulteration or contamination of food products,
providing they are used properly. Prior approval has also ensured that
certain compounds, such as sanitizers, meet minimum standards of
effectiveness when used as directed. Consequently, as an additional
unintended benefit of the prior approval program, the FSIS List has
served as a marketing tool for chemical manufacturers and distributors;
inclusion in the List immediately renders a nonfood compound or
proprietary substance more marketable to meat and poultry processors.
[[Page 7320]]
However, this prior approval program is inconsistent with the new
food safety strategy and approach set forth in FSIS Docket No. 93-016F,
``Pathogen Reduction; Hazard Analysis and Critical Control Point
(HACCP) Systems'' (61 FR 38806). Under these new regulations, every
official meat and poultry establishment will be required to develop and
implement HACCP, a science-based process control system designed to
improve the safety of meat and poultry products. Establishments will be
responsible for developing and implementing HACCP plans incorporating
the controls necessary and appropriate to produce safe meat and poultry
products. Consequently, establishments, not FSIS, will be responsible
for determining whether the nonfood compounds and proprietary
substances they use are safe and effective.
By terminating the prior approval program for nonfood compounds and
proprietary substances and discontinuing publication of the List, FSIS
will be able to redirect resources to better implement inspection under
the HACCP regulations. FSIS will maintain, however, a small staff with
expertise in nonfood compounds and proprietary substances. That staff
will keep abreast of developments in this sector of chemical
manufacturing, maintain liaison with outside organizations that have an
interest in the area, and issue technical guidance, particularly to
small meat and poultry plants, from time to time, as circumstances
dictate.
FSIS will, of course, continue to require that meat and poultry
products be neither adulterated nor misbranded through the misuse of
proprietary additives and nonfood compounds. Enforcement activities in
this regard will include, but are not limited to: organoleptic
inspection of establishment premises and product; sampling for chemical
residues as necessary; review of establishment records, including
sanitation standard operating procedures, HACCP plans, and the use
directions, pest control certifications, and other materials furnished
to establishments by chemical manufacturers and suppliers; and requests
for formulation information from chemical manufacturers themselves. In
light of this, FSIS anticipates that establishments considering
purchasing and using nonfood compounds and proprietary substances will
demand formulation and other information from chemical manufacturers as
part of their decision-making in the private marketplace. Manufacturers
failing to provide such information could expect to lose their market
share.
FSIS already has proposed to eliminate regulatory requirements for
prior approval of certain nonfood compounds and proprietary substances
in FSIS Docket No. 96-037P, ``Sanitation Requirements for Official Meat
and Poultry Establishments'' (62 FR 45045; August 25, 1997). In that
document, the Agency has proposed to clarify and consolidate the
sanitation requirements for meat and poultry establishments, eliminate
unnecessary differences between those regulations, make the existing
sanitation regulations more compatible with the HACCP and sanitation
Standard Operating Procedures (SOP) requirements, and convert command-
and-control requirements to performance standards. As part of this
comprehensive revision, FSIS proposed to eliminate the sanitation
regulations that require certain equipment, processes, and nonfood
compounds be approved by FSIS prior to use in meat or poultry
establishments (contained in 9 CFR parts 308 and 381, subpart H).
Compounds and substances currently requiring prior approval under the
sanitation regulations include pesticides used in meat establishments
(Sec. 308.3 (h)); disinfectants for implements used in dressing
diseased meat carcasses (Sec. 308.8 (b)); and germicides, insecticides,
rodenticides, detergents, and wetting agents used in poultry
establishments (Sec. 381.60).
Compliance with Executive Order 12866
This action has been reviewed for compliance with Executive Order
12866. As this action is determined to be significant for purposes of
Executive Order 12866, the Office of Management and Budget has reviewed
it. FSIS has estimated that the adoption of this action is likely to
generate net social benefits.
Executive Order 12866 requires identification and, if possible,
quantification and monetization of incremental benefits and costs of
this action. FSIS has identified two types of incremental benefits in
the form of avoidance of costs that are currently being incurred by
chemical manufacturers/distributors and by FSIS. These benefits are
discussed below.
First, the action would eliminate the requirement that the chemical
manufacturers file applications and obtain approval for nonfood
compounds and proprietary substances prior to use. As stated above,
FSIS receives between 16,000 and 20,000 applications per year. The
economic burden of requesting FSIS approval of nonfood compounds and
proprietary substances includes the administrative, mailing, and labor
costs associated with preparing the required Agency forms. FSIS
estimates that it takes about 25 minutes to prepare each submission.
Assuming an hourly earnings rate of $20-$25 for each person preparing
requests for prior approval, the annual economic burden is between
$150,000 and $187,000. The elimination of this burden associated with
the adoption of the proposed action would, therefore, translate into an
incremental benefit of $150,000 and $187,000.
Second, FSIS incurs considerable costs in processing and approval
or disapproval of the products. FSIS could re-allocate these resources
to better implement the new HACCP requirements. One measure of this
allocative efficiency is the amount of savings in administrative costs
if FSIS were to eliminate the approval/disapproval program without
redirecting resources to administration of the performance-based
standards. The value of this allocative efficiency could not, however,
be quantified because of uncertainty and unavailability of the required
data. The required budgetary data overlap with the data for other
regulatory functions of FSIS.
To sum up, the value of incremental benefits of the proposed action
could be monetized only partially and amounts to $150,000 to $187,000
per year.
Social Costs
The incremental benefits of the proposed action need be compared
with the incremental social costs to obtain the net social benefit (if
the benefits exceed the costs) or the net social cost (if the costs
exceed the benefits). FSIS has identified two types of social costs.
The first type of social cost is the additional marketing expense that
would be incurred by the industry. Currently, the industry is not
required to incur much of this expense, because, as noted earlier,
inclusion of the industry's products in FSIS's List serves as a
marketing tool. After FSIS discontinues publication of the List, the
chemical industry might have to develop additional methods to advertise
and publicize its products for marketing. These marketing expenditures
would represent incremental costs to society. Ideally, these costs
should be quantified and juxtaposed against the value of incremental
benefits referred to above. Unfortunately, FSIS could not quantify
these costs because currently the industry does not incur these costs
so that the required data are not available.
[[Page 7321]]
The second type of cost item is the expenditure on research
required to develop and test nonfood compounds and proprietary
substances that are demonstrably safe and effective. FSIS anticipates,
however, that the elimination of the FSIS prior approval would not
significantly change these costs. Chemical manufacturers will continue
to be required to demonstrate the safety and efficacy of their products
to FDA, EPA, and/or OSHA, as required. Because FDA, EPA, and OSHA will
review the safety and efficacy of these compounds and substances in
food processing environments, FSIS assumes that chemical manufacturers
will continue to conduct the same sort of research to determine whether
or not their products are safe and effective.
Furthermore, FSIS expects that meat and poultry establishments will
request, as a condition of purchase, that chemical manufacturers
somehow certify the safety and efficacy of their products.
Establishments will keep on file any information provided by chemical
manufacturers (written approvals from other agencies, letters of
guaranty, etc.) as part of sanitation SOP, HACCP, or other records.
FSIS inspectors may ask to review such information if they have
questions about the composition or use of nonfood compounds and
proprietary substances. FSIS anticipates, therefore, that manufacturers
will continue to conduct research on nonfood compounds and proprietary
substances in order to demonstrate their safety and efficacy to meat
and poultry establishments, as well as to Federal Agencies.
It is acknowledged that the chemical manufacturing and distributing
industry's costs of marketing would increase, but such an increase
would bring about greater economic efficiency as it would internalize
their costs by elimination of the external subsidy that was provided by
FSIS. The industry's cost of research and development to demonstrate
safety and efficacy of nonfood compounds and proprietary substances
would not decrease because the industry would be required to continue
this practice to comply with similar requirements by EPA, FDA or OSHA.
Therefore, the only increase in the cost would be the additional
expenditures on marketing the products. Moreover, this cost increase
would be voluntary on the chemical manufacturers and distributors and
would not be required by the proposed action.
Conceptually, it is possible that the value of subsidy provided by
FSIS by publishing the List is greater than the marketing cost to be
incurred by the chemical manufacturers and distributors. This is
because publication of the List increases the value of information
provided to the public at large. Such a provision tends to encourage
entry of newer firms into the meat and poultry industries to compete
with the existing firms. The non-publication of the List would,
therefore, reduce the value of this information and hence reduce the
social benefit. In practice, we could not quantify or monetize the
value of this information to the society at large because of non-
availability of data.
Net Social Benefits
FSIS believes that the incremental costs of marketing would be less
than the incremental benefits identified and monetized above. These
benefits include the benefits to the industry in the form of savings
from the expenses of avoiding the economic burden of mailing and filing
the Agency forms. Furthermore, the internalization of marketing costs
by the firms in the industry would bring about a more competitive
industry where product prices would more accurately reflect the
marginal costs of production. The current system of publishing the List
is tantamount to subsidization of the industry by FSIS. This subsidy
brings about inefficiencies in the industry. Adoption of the proposed
action would remove this subsidy and bring about a more competitive and
efficient industry. A competitive industry is more likely to bring
about greater product innovations in the chemical industry to ensure
safer meat and poultry products. Also, the transparency in the chemical
industry where prices reflect marginal costs would enable the chemical
industry to make more informed choices.
To sum up, FSIS believes the incremental benefits are likely to
exceed the incremental costs so that there are net social benefits
associated with the proposed action. Also, the distribution burden of
the incremental costs and benefits is not likely to be inequitable
because, while the marketing costs for chemical manufacturers and
distributors would increase, these businesses would also realize the
benefits of reduced costs of filing forms required for approval of
their products by FSIS.
Compliance with Regulatory Flexibility Act
FSIS certifies that the proposed action will not bring about a
significant economic impact on a substantial number of small entities
in the chemical manufacturing and distribution industry. The costs of
developing and testing their products would not increase because, as
noted earlier, these firms already incur similar development and
testing costs to comply with health and safety requirements of FDA,
EPA, and OSHA. Furthermore, production and distribution of proprietary
substances and nonfood compounds is such a small segment of total
production of these firms that it is not listed separately as a 4-digit
industry in the Standard Industrial Classification (SIC) Manual
published by the Office of Management and Budget (1987). For example,
some of the proprietary substances and nonfood compounds are grouped in
SIC 2842 with over a dozen other products.
FSIS also assures that there will not be any adverse economic
impact on small meat and poultry plants as a result of discontinuation
of publication of the List. This assurance is based on two reasons. As
noted earlier, the manufacturers and distributors of proprietary
substances and nonfood compounds will be required to continue their
research and testing of their products to comply with FDA, EPA, and
OSHA requirements. Small meat and poultry plants would also rely on
documentation submitted by the chemical manufacturers and distributors
to these agencies for meeting of their products. Also, in the long run,
competition should ensure that chemical manufacturers and distributors
maintain or improve the safety and efficacy features of their products
so as to preserve or increase their market shares.
There will be no adverse economic impact on small communities,
cities, and municipalities because these entities are not engaged
either in production or distribution of proprietary substances and
nonfood compounds, or in the meat and poultry products.
Alternatives to the Proposed Action
No Action
FSIS considered continuing the current prior approval program
requirements, i.e., taking no action, but has decided against it
because the prior approval requirements are inconsistent with HACCP,
economically inefficient, and somewhat inequitable. The HACCP
requirements clearly define industry's responsibility for the safety of
meat and poultry products, but provide the industry with greater
flexibility to innovate and to customize their processes to the nature
and volume of their production. The current prior approval requirements
are inconsistent with HACCP and economically inefficient because they
are based on a ``command and control'' regulatory
[[Page 7322]]
system that often fails to provide incentives to entrepreneurs to
innovate new products, processes, and technologies which can result in
safer meat and poultry products. Also, as noted earlier, the
incremental costs of continuing the current system are likely to exceed
the incremental benefits. The existing program is inequitable because
it imposes the same amount of administrative burden on small and large
chemical manufacturers and distributors; the relative burden is greater
on small plants because, unlike large size plants, they cannot spread
the costs over a larger quantity of output.
User Fees
FSIS considered the alternative of setting up a system of user fees
charged to chemical manufacturers and distributors to cover the costs
of approval or disapproval of the products. FSIS did not propose this
alternative for several reasons. One is that the incremental costs of
setting up such a system would probably exceed the incremental
benefits. The incremental costs of this alternative would include the
costs of setting up an administrative system of user charges for over
100,000 proprietary substances and nonfood compounds. The user fees
should recover the total costs of administration of the program. These
costs cannot be identified, let alone quantified, making it virtually
impossible to set up a structure of user fees.
Alternatively, the user fees could be based on the value of
benefits to the firms in the industry or to society at large. This
approach would require quantification of the benefits. As noted above,
only a small part of the benefits to chemical manufacturers and
distributors could be quantified, so that this amount would fail to
cover comprehensive costs of the program.
Finally, FSIS did not propose this alternative because the Agency
does not have legislative authority to levy user charges to recover the
costs of such a program. Although the Agricultural Marketing Service
(AMS) has authority to levy user fees, it is not responsible for
ensuring the safety of meat, poultry, and egg products. The
Agricultural Reorganization Act of 1994 (Public Law 103-354)
consolidated food safety responsibility with respect to these products
under FSIS. Therefore, AMS is unlikely to be suitable to administer a
user fee-funded program with a food safety objective.
Prior Approval by Third Parties
FSIS considered the feasibility of allowing industry recognized,
non-government organizations or laboratories to test and certify
nonfood compounds and proprietary substances for safety and efficacy.
Chemical manufacturers could voluntarily submit samples of their
products to third-party organizations, or qualified independent
laboratories (e.g., Underwriters Laboratories) for testing and
consequent approval or disapproval. The theoretical rationale for this
option is that competing firms in compliance with the standards or
exceeding them would have ample incentive to publicize the fact that
their product(s) are approved by third party organizations and/or
independent laboratories.
However, FSIS sees several disadvantages to this alternative.
First, there is the potential for conflict of interest. For example, a
laboratory testing and approving nonfood compounds and proprietary
substances for a particular chemical manufacturer could be testing
other products for that same manufacturer; hence there could be a
perception that, to maintain its business, it would readily approve the
proprietary substances and nonfood compounds.
Second, the complexity of the task of approving 16,000 to 20,000
products per year would probably require numerous laboratories
specializing in different substances; the economies of scale associated
with a standardized testing and rating system would not be realized.
Finally, the incremental costs of the approval/disapproval process
to the laboratory or organization would likely exceed the incremental
benefits of revenues from the fees earned by the laboratory
organization, unless the fees were set so high that they covered the
total costs plus a reasonable profit. If the fees were set too high,
they could drive many small and marginal manufacturers and distributors
of proprietary substances and nonfood compounds out of the market. Such
an outcome would render this industry less competitive.
Nevertheless, FSIS specifically requests comments on whether an
industry-recognized, non-government organization or laboratory could
provide prior approval or a similar service to chemical manufacturers
and distributors of nonfood compounds and proprietary substances. It is
possible that a centralized, technically expert, third party could play
an effective role in facilitating the marketing and appropriate use of
nonfood compounds and proprietary substances. Economic theory suggests
that, where the primary users and beneficiaries of a Federal service
are a relatively circumscribed group, that group should bear the cost
of the service. Therefore, FSIS requests comments on whether prior
approval should be provided by a non-government agency, what type of
prior approval system that would be appropriate and feasible within a
user fee system, and whether interest in obtaining such a service is
sufficient to support its costs.
Conclusion
In conclusion, FSIS is eliminating its prior approval program for
nonfood compounds and proprietary substances. This prior approval
program is somewhat redundant with the reviews performed by other
Federal agencies and inconsistent with FSIS's HACCP regulations. FSIS
is requesting comment on possible alternatives to its prior approval
program for nonfood compounds and proprietary substances, including the
feasibility of industry-recognized, non-government organizations or
laboratories providing prior approval or similar services to chemical
manufacturers .
Done in Washington, DC, February 4, 1998.
Thomas J. Billy,
Administrator, Food Safety Inspection Service.
[FR Doc. 98-3725 Filed 2-12-98; 8:45 am]
BILLING CODE 3410-DM-P