[Federal Register Volume 68, Number 90 (Friday, May 9, 2003)]
[Proposed Rules]
[Pages 25188-25240]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-11460]



[[Page 25187]]

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Part IV





Department of Health and Human Services





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Food and Drug Administration



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21 CFR Parts 1 and 11



Establishment and Maintenance of Records Under the Public Health 
Security and Bioterrorism Preparedness and Response Act of 2002; 
Proposed Rule

  Federal Register / Vol. 68, No. 90 / Friday, May 9, 2003 / Proposed 
Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Parts 1 and 11

[Docket No. 02N-0277]
RIN 0910-AC39


Establishment and Maintenance of Records Under the Public Health 
Security and Bioterrorism Preparedness and Response Act of 2002

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Food and Drug Administration (FDA) is proposing 
regulations that would require the establishment and maintenance of 
records by certain domestic persons who manufacture, process, pack, 
transport, distribute, receive, hold, or import food intended for human 
and animal consumption in the United States. In addition, these 
requirements apply to certain foreign facilities that manufacture, 
process, pack, or hold food for human or animal consumption in the 
United States. Such records are to allow for the identification of the 
immediate previous sources and the immediate subsequent recipients of 
food. The proposed regulations implement the Public Health Security and 
Bioterrorism Preparedness and Response Act of 2002 (the Bioterrorism 
Act) and are necessary to properly address credible threats of serious 
adverse health consequences or death to humans and animals. FDA expects 
that the requirements the agency is proposing in these regulations, if 
finalized as proposed, would result in a significant improvement in 
FDA's ability to respond to and help contain threats of serious adverse 
health consequences or death to humans or animals from accidental or 
deliberate contamination of food.

DATES: Submit written or electronic comments by July 8, 2003. Written 
comments on the information collection provisions should be submitted 
by June 9, 2003.

ADDRESSES: Submit written comments to the Dockets Management Branch 
(HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, 
Rockville, Maryland 20852. Submit electronic comments to http://www.fda.gov/dockets/ecomments. The Office of Management and Budget 
(OMB) is still experiencing significant delays in the regular mail, 
including first class and express mail, and messenger deliveries are 
not being accepted. To ensure that comments on the information 
collection are received, OMB recommends that written comments be 
electronically mailed to [email protected] or faxed to the Office of 
Information and Regulatory Affairs, OMB, Attn: Stuart Shapiro, Desk 
Officer for FDA, FAX: 202-395-6974.

FOR FURTHER INFORMATION CONTACT: Nega Beru, Center for Food Safety and 
Applied Nutrition (HFS-305), Food and Drug Administration, 5100 Paint 
Branch Pkwy., College Park, MD 20740, 301-436-1400.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background and Legal Authority
    A. Public Health Security and Bioterrorism Preparedness and 
Response Act of 2002
    B. Preliminary Stakeholder Comments
    C. Highlights of the Proposed Rule
II. Description of the Proposed Regulations
    A. General Provisions
    1. Who is subject to this subpart? (Proposed Sec.  1.326)
    2. Who is excluded from all or part of the regulations in this 
subpart? (Proposed Sec.  1.327)
    3. What definitions apply to this subpart? (Proposed Sec.  1.328)
    4. Do other statutory provisions and regulations apply? (Proposed 
Sec.  1.329)
    5. Can existing records satisfy the requirements of this subpart? 
(Proposed Sec.  1.330)
    B. Establishment and Maintenance of Records to Identify the 
Nontransporter and Transporter Immediate Previous Source of all Food 
(Proposed Sec.  1.337)
    C. Establishment and Maintenance of Records to Identify the 
Nontransporter and Transporter Immediate Subsequent Recipient of all 
Food (Proposed Sec.  1.345)
    D. Requirements to Establish and Maintain Records to Trace the 
Transportation of all Food
    1. Who is required to establish and maintain records for tracing 
the transportation of all food? (Proposed Sec.  1.351)
    2. What information is required in the transportation records? 
(Proposed Sec.  1.352)
    E. General Requirements
    1. What are the record retention requirements? (Proposed Sec.  
1.360)
    2. What are the record availability requirements? (Proposed Sec.  
1.361)
    3. What records are excluded from this subpart? (Proposed Sec.  
1.362)
    4. What are the consequences of failing to establish or maintain 
records or make them available to FDA? (Proposed Sec.  1.363)
    5. What are the compliance dates for this subpart? (Proposed Sec.  
1.368)
III. Analysis of Economic Impact
    A. Benefit-Cost Analysis
    B. Initial Regulatory Flexibility Analysis
    C. Unfunded Mandates
    D. SBREFA Major Rule
IV. Paperwork Reduction Act of 1995
V. Analysis of Environmental Impact
VI. Federalism
VII. Comments
VIII. References

I. Background and Legal Authority

A. Public Health Security and Bioterrorism Preparedness and Response 
Act of 2002

    The events of September 11, 2001, reinforced the need to enhance 
the security of the U.S. food supply. Congress responded by passing the 
Public Health Security and Bioterrorism Preparedness and Response Act 
of 2002 (``the Bioterrorism Act'') (Public Law 107-188), which was 
signed into law on June 12, 2002. The Bioterrorism Act includes a 
provision in Title III (Protecting Safety and Security of Food and Drug 
Supply), Subtitle A--Protection of Food Supply, section 306 (21 U.S.C. 
335a), which amends the Federal Food, Drug, and Cosmetic Act (the act) 
by adding section 414, Maintenance and Inspection of Records (21 U.S.C. 
350(c)). Section 414(b) of the act provides, in part, that the 
Secretary of Health and Human Services (the Secretary), may by 
regulation establish requirements regarding the establishment and 
maintenance, for not longer than 2 years, of records by persons 
(excluding farms and restaurants) who manufacture, process, pack, 
transport, distribute, receive, hold, or import food. The records that 
must be kept by these regulations are those that are needed by the 
Secretary for inspection to allow the Secretary to identify the 
immediate previous sources and immediate subsequent recipients of food, 
including its packaging, in order to address credible threats of 
serious adverse health consequences or death to humans or animals. In 
section 306(d) of the Bioterrorism Act, Congress directed the Secretary 
to issue proposed and final regulations establishing recordkeeping 
requirements under section 414(b) of the act no later than 18 months 
after enactment of the Bioterrorism Act, that is, by December 12, 2003.
    In addition, the Bioterrorism Act adds a new section 414(a) to the 
act that

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provides records inspection authority to FDA. Section 414(a) of the act 
provides that when the Secretary has a reasonable belief that a food is 
adulterated and presents a threat of serious adverse health 
consequences or death to humans or animals, persons who manufacture, 
process, pack, distribute, receive, hold, or import food must provide 
access to records related to the food that are needed to assist the 
Secretary in determining whether the food is adulterated and presents a 
threat of serious adverse health consequences or death to humans or 
animals. Section 306 of the Bioterrorism Act also amends section 704(a) 
of the act (21 U.S.C. 374(a)) to specifically authorize FDA inspections 
of all records and other information described in section 414 of the 
act, when the Secretary has a reasonable belief that an article of food 
is adulterated and presents a threat of serious adverse health 
consequences or death to humans or animals. Also, section 301 of the 
act (21 U.S.C. 331) is amended to make it a prohibited act to refuse to 
permit access to, or copying of, any record as required by section 414 
or 704(a) of the act; or to fail to establish or maintain any record as 
required by section 414(b) of the act or to refuse to permit access to 
or verification or copying of any such required record; or for any 
person to use to his own advantage, or to reveal, other than to the 
Secretary or officers or employees of the Department of Health and 
Human Services, or to the courts when relevant in any judicial 
proceeding under this act, any information acquired under authority of 
section 414 of the act.
    In addition to section 306 of the Bioterrorism Act, which amends 
the act as described above, FDA is relying on sections 701(a) of the 
act (21 U.S.C. 371(a)) in issuing this proposed rule. Section 701(a) of 
the act authorizes the agency to issue regulations for the efficient 
enforcement of the act.

B. Preliminary Stakeholder Comments

    On July 17, 2002, FDA sent an open letter to the members of the 
public interested in food issues outlining the four provisions in Title 
III of the Bioterrorism Act that require FDA to issue regulations in an 
expedited time period, and FDA's plans for implementing them. In the 
letter, FDA invited stakeholders to submit comments to FDA by August 
30, 2002, for FDA's consideration as it developed this proposed rule. 
FDA also held meetings with representatives of industry, consumer 
groups, other Federal agencies, and foreign embassies after sending out 
the July 17, 2002, letter, to solicit stakeholder comments. In response 
to these solicitations, FDA received a number of comments regarding 
section 306 of the Bioterrorism Act.
    FDA has considered all the comments received by August 30, 2002. 
FDA will consider all comments we received so far with the comments we 
receive during the public comment period on this proposed rule in 
developing the final rule. Some of the significant comments FDA 
received on or before August 30, 2002, include:
    [sbull] The regulations should be performance-based. There is no 
need to specify the form or manner in which the information must be 
kept by a person subject to the regulations;
    [sbull] The regulations should provide flexibility for using 
existing recordkeeping systems;
    [sbull] The regulations should give businesses the flexibility they 
need to store records in the manner they find most efficient;
    [sbull] The regulations should divide food products into two 
categories, perishable and nonperishable, and establish separate 
recordkeeping requirements for each;
    [sbull] The regulations should not have a 2-year time period for 
maintenance of records for fresh fruits and vegetables;
    [sbull] The regulations should not require retailers to maintain 
records to identify which consumers bought specific food products;
    [sbull] The regulations should make clear that the transporter of 
the food and its packaging between sources and recipients should not be 
considered the ``immediate previous source'' or the ``immediate 
subsequent recipient'' under the Bioterrorism Act;
    [sbull] The regulations should make the actual physical location of 
the food the key to identifying the source and recipient, which may 
differ from ownership (i.e., corporate headquarters);
    [sbull] The regulations should exclude as farms those engaged in 
shellfish growing and harvesting in the farm exemption;
    [sbull] The regulations should define the exemption for restaurants 
as businesses that prepare food at the same location where such food is 
sold to individual consumers, and where such food may be eaten;
    [sbull] The regulations should provide a phase-in period of at 
least 6 months to allow all businesses to make any needed adjustments 
to their current practices before implementation of new regulations;
    [sbull] Although the regulations must take size of business into 
account, the regulations should not have a general exemption for small 
businesses;
    [sbull] The regulations should allow for phasing-in of the 
requirements based on the size of regulated companies.

C. Highlights of the Proposed Rule

    This proposal is just one of several rulemaking activities 
currently underway as part of the overall implementation of Title III 
of the Bioterrorism Act that enhance FDA's ability effectively and 
efficiently to respond to bioterrorist threats and other food-related 
emergencies in a way that promotes and protects the public health. Our 
intent in developing these proposed regulations is to provide the 
proper balance between ensuring that FDA has information it needs to 
complete a tracing investigation and ensuring adequate and reasonable 
flexibility for industry to comply with these requirements.
    Section 414(b) of the act, as added by section 306(a) of the 
Bioterrorism Act, provides that the Secretary ``may'' by regulation 
establish recordkeeping requirements. Section 306(d) of the 
Bioterrorism Act, however, provides that the Secretary ``shall'' issue 
proposed and final regulations no later than 18 months from the date of 
enactment. FDA believes that Congress has directed the agency to 
exercise the authority in section 414(b). However, the agency 
recognizes that the use of the term ``may'' in one section of the 
statute and ``shall'' in another section creates an ambiguity. We 
request comments on our interpretation that we are required by section 
306(d) of the Bioterrorism Act to exercise the authority in section 
414(b) of the act.
    In establishing and implementing this proposed rule, FDA will 
comply fully with its international trade obligations, including the 
applicable World Trade Organization (WTO) agreements and the North 
American Free Trade Agreement (NAFTA). For example, FDA believes this 
proposed rule is not more trade-restrictive than necessary to meet the 
objectives of the Bioterrorism Act. FDA has endeavored to make the 
establishment and maintenance of records process as simple as possible 
for both domestic and foreign facilities.
    FDA is proposing to describe the specific information a covered 
entity must keep, but not specify the form or type of system in which 
those records must be maintained. Some of the key provisions we are 
proposing include: (1) Requirements to establish and maintain records 
to identify the immediate previous source of all food, (2) requirements 
to establish and maintain records to identify the immediate subsequent 
recipient of all food, (3) requirements to establish and maintain

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records to trace the transportation of all food, (4) record retention 
requirements, (5) record availability requirements, and (6) compliance 
dates. Following is an overview of the proposed regulations, which is 
intended to highlight the content of certain sections and request 
comment on those sections specifically, including comment on whether 
certain requirements should be included in the final regulations.
    Proposed requirements to establish and maintain records to identify 
the nontransporter and transporter immediate previous sources of all 
food (Sec.  1.337) would require specific persons (``you'') to 
establish and maintain records that identify the sources of all food 
you receive. The information that we propose as necessary to identify 
the nontransporter immediate previous sources includes: (1) The name, 
address, and phone number of the nontransporter immediate previous 
source; (2) the type of food received; (3) the date you received the 
food; (4) the lot number or other identifier of the food if available; 
(5) the quantity; and (6) the name, address, and phone number of the 
transporters who transported the food to you.
    Proposed requirements to establish and maintain records to identify 
the nontransporter and transporter immediate subsequent recipients of 
all food (Sec.  1.345) would require that you keep records that 
identify the nontransporter recipients of all food you release. The 
information that we propose as necessary to identify the nontransporter 
immediate subsequent recipients is similar to that required to identify 
the nontransporter immediate previous sources.
    Proposed requirements to establish and maintain records to trace 
the transportation of all food (Sec. Sec.  1.351 and 1.352) would 
require that you keep records that trace the transportation process of 
all food you transport. The information that we propose as necessary to 
trace the transportation process includes: (1) The name, address, and 
phone number of the person who had the food immediately before you (the 
transporter's immediate previous source), and the date you received it 
from that person; (2) the name, address, and phone number of the person 
who had the food immediately after you (the transporter's immediate 
subsequent recipient), and the date you delivered it to that person; 
(3) the type of food transported; (4) the lot number or other 
identifier of the food if available; (5) the quantity; and (6) 
identification of each and every mode of transportation used (e.g., 
company truck, private carrier, rail, air, etc.) from the time you 
first received the food until the time you delivered it.
    Proposed record retention requirements (Sec.  1.360) would require 
records for perishable foods not intended to be processed into 
nonperishable foods to be retained for 1 year after the date the 
records were created. FDA seeks comment on whether a person subject to 
these proposed regulations always or usually knows at the time 
perishable food is released whether or not it is intended to be 
processed into nonperishable food. For all other food, you would be 
required to retain the records for 2 years after the date the records 
were created. You would be required to retain all records at the 
establishment where the covered activities described in the records 
occurred (onsite) or at a reasonably accessible location. The 
maintenance of electronic records would be acceptable. FDA is proposing 
to exempt electronic records established or maintained to satisfy the 
requirements of this subpart from the requirement to comply with part 
11--Electronic Records; Electronic Signatures (21 CFR part 11) and 
proposing to amend part 11 to reflect this exemption.
    Proposed records availability requirements (Sec.  1.361) would 
require that records be made available within 4 hours of an FDA request 
if the request is made between 8 a.m. and 6 p.m., local standard time, 
Monday through Friday, or within 8 hours of a request if made at any 
other time.
    In Sec.  1.368, the agency is proposing that firms be in full 
compliance with these regulations within 6 months of publishing the 
final regulations. However, these proposed requirements would not be 
effective for small businesses (those employing fewer than 500 but more 
than 10 full-time equivalent employees) until 12 months after 
publishing the final regulations. Very small businesses that employ 10 
or fewer full-time equivalent employees would have 18 months to comply.
    The Bioterrorism Act directs the Secretary to take appropriate 
measures to ensure that there are effective procedures to prevent the 
unauthorized disclosure of any trade secret or confidential information 
that is obtained by the Secretary under the new regulations. FDA is 
planning to reemphasize in instructions to FDA personnel the importance 
of current protections and legal requirements against the unauthorized 
disclosure of any trade secret or confidential information that is 
obtained.
    Section 306 of the Bioterrorism Act expressly states that FDA has 
authority to require recordkeeping as to ``food, including its 
packaging.'' FDA interprets this section as authority to require 
persons who manufacture, process, pack, transport, distribute, receive, 
hold, or import food to establish and maintain records to allow for the 
identification of the immediate previous sources and immediate 
subsequent recipients of food packaging as well. FDA interprets 
packaging in section 306 of the Bioterrorism Act to mean the outer 
packaging of food that bears the label. FDA is not interpreting 
packaging to include food contact substances, which are included in the 
definition of ``food.'' Outer packaging would include, for example, the 
outer cardboard cereal box that bears the label of the cereal, but 
would not include the inner lining that holds the cereal. Outer 
packaging would also not include the outer shipping box in which the 
cereal boxes are shipped.
    FDA has tentatively concluded that the risk to human and animal 
health from contamination of outer food packaging is relatively small 
compared to the risk from contamination of the immediate packaging that 
comes in direct contact with food. Therefore, FDA is proposing not to 
require covered persons to keep records regarding outer food packaging. 
However, the agency also recognizes that there may be instances where 
it may be necessary for FDA to be able to investigate agents that could 
lace outer packaging and could thereby contaminate a food for which the 
immediate food contact packaging may not provide an adequate barrier. 
In addition, outer packaging could be intentionally diverted and used 
to package food that has been tampered with. FDA seeks comment on 
whether the level of risk to human and animal health from potential 
contamination of outer packaging is high enough to warrant inclusion of 
outer packaging in the final regulations.
    In addition to the above, we seek comment on all other provisions 
in the proposed regulations, such as the proposed definitions and 
exclusions. We also invite comment on whether the final rule should 
include additional provisions, such as a model form that can be used to 
record all the required information.

II. Description of the Proposed Regulations

A. General Provisions

1. Who is subject to this subpart? (Proposed Sec.  1.326)
    Proposed Sec.  1.326(a) describes the scope of the rule. As 
required by the Bioterrorism Act, proposed Sec.  1.326(a) would require 
domestic persons who

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manufacture, process, pack, transport, distribute, receive, hold or 
import food intended for human or animal consumption in the United 
States to comply with the regulations in this subpart, unless you 
qualify for one of the exclusions proposed in Sec.  1.327. In addition, 
foreign facilities that manufacture/process, pack, or hold food for 
human or animal consumption in the United States are subject to these 
regulations, unless you qualify for one of the exclusions proposed in 
Sec.  1.327.
    However, even if you qualify for one of the exclusions proposed in 
Sec.  1.327, if you conduct more than one type of activity at a 
location, and some of that activity is not exempt, you would be 
required to keep records with respect to the statutorily covered 
activities. For example, in addition to selling food to consumers, a 
retail facility may have an onsite restaurant or counter that prepares 
food it sells to consumers. The restaurant activity is exempt from all 
of the regulations in this subpart; however, the retail activities are 
covered by Sec.  1.336. Similarly, a retail facility may sell both food 
and nonfood products, and may even sell primarily nonfood products. 
Regardless of what proportion of the retail facility sells nonfood 
products, these proposed regulations would require the retail facility 
to keep records of the immediate previous source for all food it 
receives that is not exempted by an exclusion. The regulations do not 
apply to the nonfood products the retail facility receives.
    Proposed Sec.  1.326(b) would require compliance by persons who 
engage either in interstate or in intrastate activities involving food. 
The Bioterrorism Act does not limit the establishment and maintenance 
of records requirement only to persons directly engaged in interstate 
commerce. To the contrary, the Bioterrorism Act provides FDA with the 
authority to require the establishment and maintenance of records by 
all ``persons'' who engage in specified activities involving food. 
Therefore, FDA tentatively concludes that the statute allows FDA to 
require domestic persons to keep records, whether or not they engage in 
interstate commerce. Because a bioterrorist threat involving food or 
other food-related emergency would have the same effect on the public 
health regardless of whether the food had originated from an out of 
state source, FDA is proposing in Sec.  1.326(b) that all persons who 
manufacture, process, pack, transport, distribute, receive, hold, or 
import food be subject to these regulations, whether or not they 
directly engage in interstate activities involving food. Nonetheless, 
because FDA recognizes that this is an important and controversial 
issue, the agency is seeking comment on whether its tentative 
conclusion that it has authority to require recordkeeping by persons 
engaged in only intrastate commerce is correct. FDA also seeks comment 
on how many intrastate persons are not covered by one of the exemptions 
from the recordkeeping requirement (e.g., the farm or retail exemption) 
and we invite recommendations on what screening questions the agency 
could ask to enable a person to easily determine whether the person is 
engaged in interstate or intrastate commerce.
    Proposed Sec.  1.326(a) would also require compliance by foreign 
facilities that manufacture/process, pack, or hold food for human or 
animal consumption in the United States unless the facilities qualify 
for an exclusion under proposed Sec.  1.327(f). FDA is proposing that 
the foreign facilities that are required to register under section 305 
of the Bioterrorism Act also be required to establish and maintain 
records under section 306 of the Bioterrorism Act. (The foreign 
facilities that would be excluded from both the proposed registration 
and recordkeeping requirements are described in the discussion of 
proposed Sec.  1.327(f).) FDA believes if these foreign firms were not 
required to establish and maintain records identifying the immediate 
previous sources and immediate subsequent recipients of food, trace 
back of food products from outside the United States would be severely 
compromised. FDA believes that this approach provides the most 
efficient and effective strategy for obtaining needed information on 
food from foreign countries. FDA plans to take the appropriate steps 
and work closely with foreign governments to obtain access to the 
needed records if a threat of serious adverse health consequences or 
death to humans or animals from adulterated food necessitates 
inspection of records in foreign countries.
    The provisions of this proposed rule apply to records of both human 
food and animal food. FDA believes that some recordkeeping requirements 
are necessary for food intended for food-producing animals, as well as 
for certain food for nonfood-producing animals (e.g., pet dogs and 
cats, horses, and zoo and circus animals). We define food for nonfood-
producing animals as pet food. FDA believes, however, that the 
consequences of a potential terrorist attack or food-related emergency 
are greater for human food than for animal food. FDA also believes that 
the consequences of a potential terrorist attack or food-related 
emergency are greater for food for food-producing animals than for pet 
food. FDA addressed certain animal food risks in our regulation for 
animal proteins prohibited in ruminant feed (21 CFR 589.2000), also 
referred to as the bovine spongiform encephalopathy (BSE) rule.
    Although FDA acknowledges that the risk to humans from an attack on 
the animal food supply is lower than the risk to humans from an attack 
on the human food supply, there is some risk to both humans and animals 
from an attack on the animal food supply. Contaminated animal food can 
be a link to human foodborne illness. (Ref. 32). People could be at 
risk through direct contact with animal food or through unintentional 
cross-contamination of cooking surfaces or utensils. Animals may also 
become infected and serve as a reservoir for exposing other animals and 
humans. For example, in 1996, an organochlorine pesticide was 
intentionally introduced into an ingredient used in animal food, 
including pet food. In 2002, dog chew treats were contaminated with 
Salmonella and became a vehicle to transmit Salmonella into homes. As a 
consequence, many pet owners became ill and one person died.
    We propose that (1) All entities that manufacture, process, pack, 
transport, distribute, receive, hold, or import food for food-producing 
animals must keep records under this proposed rule; and that (2) those 
entities that manufacture, process, pack, transport, distribute, 
receive, hold, or import pet food that must keep records under the BSE 
rule also keep records under this rule. Because of the concern that 
some pet food is diverted for use for food-producing animals, the BSE 
rule recordkeeping requirements apply to pet food. We believe this 
proposal to require recordkeeping under the Bioterrorism Act by pet 
food entities covered by the BSE rule will provide important safeguards 
needed to limit the impact of contamination of pet food while 
minimizing additional costs to industry.
    As discussed below, we are proposing to exempt pet food entities 
that are not subject to the recordkeeping requirements of the BSE rule 
from the recordkeeping requirements of this proposed rule. We propose 
that all entities involved in animal food, including the pet food 
entities exempt from the recordkeeping requirements, remain subject to 
the proposed records access and availability requirements.
    FDA is interested in comments on whether or not the proposal 
provides adequate tools to trace animal food affected by a terrorist 
attack or other food related emergency and whether an

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alternative approach should be used. Specifically, FDA is soliciting 
comments on the following questions: (1) Should we exempt all types of 
animal food entities from all or part of this proposed rule? (2) Should 
we exempt all pet food entities from all or part of this proposed rule? 
(3) Should we treat pet food the same as other types of animal food by 
requiring all pet food entities to meet the recordkeeping requirements 
under this regulation, not just those subject to the BSE rule? (4) 
Should we use criteria other than the scope of the BSE rule to 
determine which pet food entities should be exempt? If so, what should 
those criteria be?
2. Who is excluded from all or part of the regulations in this subpart? 
(Proposed Sec.  1.327)
    Proposed Sec.  1.327(a) codifies the exemption for farms. This 
exemption is consistent with and required by the express language of 
the Bioterrorism Act.
    Proposed Sec.  1.327(b) codifies the exemption for restaurants. 
This exemption is consistent with and required by the express language 
of the Bioterrorism Act.
    Proposed Sec.  1.327(c) would exclude certain fishing vessels from 
all of the regulations in this subpart, except Sec. Sec.  1.361 and 
1.363. These vessels include those that not only harvest and transport 
fish, but also engage in practices such as heading, eviscerating, or 
freezing intended solely to prepare fish for holding on board a harvest 
vessel. The Bioterrorism Act is silent with respect to exempting 
fishing vessels in section 306, the ``Maintenance and Inspection of 
Records for Foods'' provision, although the ``Registration of Food 
Facilities'' provision, section 305, expressly exempts fishing vessels, 
except such vessels engaged in processing as defined in Sec.  123.3(k) 
(21 CFR 123.3(k)).
    FDA has tentatively concluded that the records of fishing vessels 
as defined in Sec.  123.3(k), like those of farms, are not a necessary 
component of an effective traceback investigation. Nevertheless, 
because the records of ``fishing vessels otherwise engaged in 
processing fish, which for purposes of this subsection means handling, 
storing, preparing, heading, eviscerating, shucking, freezing, changing 
into different market forms, manufacturing, preserving, packing, 
labeling, dockside unloading, or holding'' are necessary to an 
effective traceback investigation, these would still be subject to all 
of the regulations in this subpart.
    Proposed Sec.  1.327(d)(1) would exclude retail facilities from the 
regulations in Sec.  1.345 of this subpart. This limited exclusion is 
only from the requirement to establish and maintain records of the 
immediate subsequent recipients of food when the food is sold directly 
to consumers. The Bioterrorism Act expressly states that the Secretary 
may require the establishment and maintenance of records by persons who 
``distribute'' food, and therefore retail facilities could be subject 
to all other regulations in this subpart if FDA required it. FDA has 
tentatively concluded that to require retail facilities to keep records 
of each individual recipient consumer would be too burdensome and not 
necessary in order to address credible threats of serious adverse 
health consequences or death to humans or animals.
    Proposed Sec.  1.327(d)(2) would exclude retail facilities, such as 
roadside stands, located in the same general physical location as 
farms, as defined in proposed Sec.  1.328, that sell unprocessed food 
grown or raised on those farms directly to consumers. This exclusion 
only applies to those retail facilities that employ 10 or fewer full-
time equivalent employees, which is consistent with the way FDA is 
proposing to define very small businesses in proposed Sec.  
1.368(a)(2). This exclusion applies only to unprocessed food, including 
fresh fruits and vegetables and other raw agricultural commodities for 
use as food, such as honeycomb. The exclusion also applies to fish 
raised on farms. Unprocessed food grown or raised on locations other 
than farms, or on farms not located in the same general physical 
location, are not excluded.
    This exclusion does not apply to processed food, even if it is sold 
directly to consumers from a retail facility in the same general 
location as a farm, unless all of the ingredients in that processed 
food were grown or raised on that farm. Processed foods include, for 
example, baked goods, jams, jellies, and maple syrup. Retail facilities 
would be required to establish and maintain records of the immediate 
previous sources under proposed Sec.  1.337 for processed food sold 
directly to consumers if any of the ingredients of that processed food 
were not grown on that farm.
    FDA believes that the burden placed on these retail facilities to 
establish and maintain records for unprocessed food grown or raised on 
a nearby farm and sold directly to consumers would likely outweigh the 
risk to the public health that follows from this proposed exclusion. 
FDA has tentatively concluded that such records are not needed in order 
to address credible threats of serious adverse health consequences or 
death to humans or animals. FDA believes it is necessary to narrow this 
exemption only to those retail facilities that remain close to the 
source farm in order to not compromise FDA's ability to trace 
adulterated food that has been transported over a distance greater than 
the same general physical location. The agency solicits comments on 
this proposed exemption.
    FDA also is proposing in Sec.  1.327(e) to exempt from all of the 
regulations in this subpart persons who manufacture, process, pack, 
transport, distribute, receive, hold, or import food that is regulated 
exclusively by the U.S. Department of Agriculture (USDA) under the 
Federal Meat Inspection Act (21 U.S.C. 601 et seq.), the Poultry 
Products Inspection Act (21 U.S.C. 451 et seq.), or the Egg Products 
Inspection Act (21 U.S.C. 1031 et seq.). This section complies with 
section 306(d)(2) of the Bioterrorism Act, which states that section 
306 should not be construed to authorize FDA to promulgate regulations 
for records governing foods within the exclusive jurisdiction of USDA. 
It also complies with section 315 of the Bioterrorism Act, which states 
that nothing in Title III of the Bioterrorism Act, or an amendment made 
by Title III, shall be construed to alter the jurisdiction between USDA 
and the U.S. Department of Health and Human Services under applicable 
statutes and regulations.
    This exemption is for food within the exclusive jurisdiction of the 
USDA. Persons who manufacture, process, pack, transport, distribute, 
receive, hold, or import food that is jointly regulated by FDA and USDA 
would be required to keep records with regard to the food regulated by 
FDA. An example of food that is jointly regulated by FDA and USDA is 
frozen T.V. dinners containing both meat and fish.
    Proposed Sec.  1.327(f) would exclude foreign facilities that are 
also excluded from the requirement to register under section 305 of the 
Bioterrorism Act. As discussed previously in this document, FDA 
believes that requiring foreign facilities that must register to also 
establish and maintain records would be the most efficient and 
effective way to obtain information on food from foreign countries. 
Therefore, foreign facilities would not be required to establish and 
maintain records ``if food from these facilities undergoes further 
manufacturing/processing (including packaging) by another foreign 
facility outside the United States.'' In other words, foreign 
facilities involved in the initial stages of manufacturing/

[[Page 25193]]

processing food are not required to establish and maintain records if 
another facility further manufactures/processes or packs the food 
produced at that facility outside the United States.
    This exclusion would not apply to facilities if the ``further 
manufacturing/processing'' at the subsequent facility is of a de 
minimis nature, such as adding labeling to a package or adding plastic 
rings to the outside of beverage bottles to hold them together. In that 
case, both the facility conducting the de minimis activity and the 
facility immediately prior to it would be required to register and, 
therefore, would also be subject to these regulations. FDA seeks 
comment on the requirement for facilities conducting de minimis 
activities to keep records. The following are examples of which foreign 
facilities would be subject to, or excluded from, these regulations 
based on the activities they perform. As stated previously, the foreign 
facilities that are subject to these regulations are the same 
facilities that would be required to register under section 305 of the 
Bioterrorism Act.
    [sbull] A foreign facility would be subject to these regulations if 
it prepares a finished food and places it into packages suitable for 
sale and distribution in the United States.
    [sbull] A foreign facility distributing food to food processors 
outside the United States for further manufacturing/processing before 
the food is exported for consumption in the United States would not be 
subject to these regulations, unless the further manufacturing/
processing entails adding labeling or other de minimis activity. If the 
further manufacturing/processing is of a de minimis nature, both the 
facility conducting the de minimis activity and the facility 
immediately prior to it would be subject to these regulations.
    [sbull] The last foreign facility that manufactures/processes an 
article of food before it is exported to the United States would be 
subject to these regulations, even if the food subsequently is held or 
stored at a different facility outside of the United States.
    [sbull] Facilities located outside the United States that take 
possession, custody, or control of finished foods for holding, packing, 
and/or storage prior to export to the United States are subject to 
these regulations.
    Proposed Sec.  1.327(g) provides that persons who manufacture, 
process, pack, transport, distribute, receive, hold, or import pet food 
who are not subject to the recordkeeping provisions of the animal 
proteins prohibited in ruminant feed regulation (21 CFR 589.2000) would 
be excluded from the recordkeeping requirements of this proposed rule. 
However, these entities, like all entities involved in animal food, 
remain subject to the proposed records access and availability 
requirements in proposed Sec.  1.361 and Sec.  1.363.
3. What definitions apply to this subpart? (Proposed Sec.  1.328)
    Proposed Sec.  1.328 states that the definitions of terms in 
section 201 of the act (21 U.S.C. 321) apply to such terms when used in 
this subpart. Section 201 of the act defines various terms that appear 
throughout the act, including ``food'' (see section 201(f) of the act). 
The definitions of such terms apply when we use those terms in these 
regulations. In addition, proposed Sec.  1.328 defines specific 
additional terms used in the proposed rule.
    Proposed Sec.  1.328 defines ``act'' as the Federal Food, Drug, and 
Cosmetic Act.
    FDA is proposing in Sec.  1.328 to define ``domestic person'' 
consistent with the definition of ``State'' in section 201(a)(1) of the 
act. That is, FDA is proposing to define a domestic person as one that 
is located in any State or Territory of the United States, the District 
of Columbia, or the Commonwealth of Puerto Rico.
    FDA is proposing in Sec.  1.328 to define a ``foreign facility'' as 
a facility other than a domestic person that manufactures, processes, 
packs, or holds food for consumption in the United States.
    Proposed Sec.  1.328 defines ``farm'' as a facility in one general 
physical location devoted to the growing of crops for food, the raising 
of animals for food (including seafood), or both. A farm may consist of 
contiguous parcels of land, ponds located on contiguous parcels of 
land, or, in the case of netted or penned areas located in large bodies 
of water, contiguous nets or pens. The term ``farm'' includes: (a) 
Facilities that pack or hold food, provided that all food used in such 
activities is grown or raised on that farm or is consumed on that farm; 
and (b) facilities that manufacture/process food, provided that all 
food used in such activities is consumed on that farm or another farm 
under the same ownership. ``Farm'' includes such facilities because 
they are activities incidental to farming that most farms engage in 
(e.g., holding and packing of harvested crops). Facilities that engage 
in manufacturing/processing, packing, or holding of food that is not 
described in the definition of ``farm'' are subject to these 
regulations because such activities are not activities that most farms 
engage in and are thus not included in the definition of ``farm.'' Some 
examples of farms include: Apple orchards, hog farms, dairy farms, 
feedlots, and aquaculture facilities.
    Persons that engage in more than one type of activity may meet the 
definition of farm as to some of those activities while not meeting the 
definition of farm as to other activities. Persons that grow crops and 
raise animals and also manufacture/process food that is sold for 
consumption off the premises are not farms for purposes of this subpart 
and are not exempt. For example, a person who grows oranges and 
manufactures/processes them into orange juice for sale to a distributor 
would need to keep records under this subpart of both the immediate 
previous sources and the immediate subsequent recipients of the orange 
juice. However, establishing and maintaining records of the immediate 
previous sources would only be required when persons manufacture/
process food from ingredients obtained from other sources than that 
farm.
    Similarly, persons who manufacture/process food from ingredients 
obtained from other sources only meet the definition of farm if all the 
food used in such activities is consumed on that farm or another farm 
under the same ownership. If a person combines oranges grown on his 
farm with oranges obtained from another source, processes them into 
orange juice on his premises, and consumes all of the orange juice on 
those premises, he would not need to keep records regarding those 
oranges. However, if the person sells that orange juice at a roadside 
stand directly to consumers, that roadside stand would not meet the 
definition of farm but would fall within the partial retail exclusion 
provided in proposed Sec.  1.344. Retailers need only keep records 
identifying the immediate previous source.
    Proposed Sec.  1.328 defines ``food'' as having the meaning given 
in section 201(f) of the act, which is: ``(1) articles used for food or 
drink for man or other animals, (2) chewing gum, and (3) articles used 
for components of any such article.'' FDA also is proposing to include 
some examples of products that are considered food under section 201(f) 
of the act. Examples listed in the proposed rule include: Fruits; 
vegetables; fish; dairy products; eggs; raw agricultural commodities 
for use as food or components of food; animal feed, including pet food; 
food and feed ingredients and additives, including substances that 
migrate into food from food packaging and other articles that contact 
food; dietary supplements and dietary ingredients; infant formula; 
beverages, including alcoholic beverages and bottled water; live food 
animals (such as hogs and elk); bakery goods;

[[Page 25194]]

snack foods; candy; and canned foods. ``Substances that migrate into 
food from food packaging'' include immediate food packaging or 
components of immediate food packaging that are intended for food use. 
Outer food packaging is not considered a substance that migrates into 
food.
    The provisions of this proposed rule apply to records of both 
nontransporters and transporters. Section 414(b) of the act provides 
that FDA may require recordkeeping with regard to records that are 
needed for inspection to allow the agency to identify the immediate 
previous sources and the immediate subsequent recipients of food. The 
proposed rule establishes two sets of immediate previous sources and 
immediate subsequent recipients, one for nontransporters and one for 
transporters. For nontransporters, the proposed rule defines immediate 
previous source as the nontransporter from which the company received 
the food. The immediate subsequent recipient for nontransporters is the 
nontransporter to which the company sent the food. The definition of 
nontransporter immediate previous source and immediate subsequent 
recipient describes them as persons who own food or who hold, process, 
pack, import, receive, or distribute food for purposes other than 
transportation. Nontransporters are also expected to keep records of 
the transporters that they receive food from and send food with. 
Nontransporters will thus be required to keep records on both 
transporters and nontransporters for both previous sources and 
subsequent recipients.
    With respect to transporters (persons who have possession, custody, 
or control of food for the sole purpose of transporting it), the 
proposed rule provides for the company to establish and maintain 
records about its own transportation activities and the person from 
whom it received the food and the person to whom the food is delivered. 
The person from whom the food is received by the transporter is the 
immediate previous source. This could be a nontransporter as described 
previously or another transporter. The person to whom the food is 
delivered by the transporter is the immediate subsequent recipient. 
This person could be another transporter or a nontransporter. These 
records allow FDA to follow the chain of custody of the food through 
each transportation step, which may include a variety of forms of 
transportation (e.g., plane, train, and truck).
    Because it is critically important for FDA to have the ability to 
trace back and trace forward quickly in the event of a terrorist event 
or other food-related emergency, FDA has defined for nontransporters 
the immediate previous source and immediate subsequent recipient as the 
previous nontransporter or next nontransporter. This will allow FDA in 
most cases to efficiently and effectively determine where the food was 
contaminated and to locate where the contaminated food was sent. 
However, the contamination could occur during the transportation 
process as well. The records of transporters will ensure that FDA has 
the potential in all cases to determine the source of contamination and 
trace the food back and forward through the transportation chain. FDA 
recognizes that requiring nontransporters to keep records on both 
previous and subsequent transporters and nontransporters is potentially 
burdensome. FDA is mandating this in order to facilitate the efficient 
investigation of food related emergencies (records on nontransporters) 
and to increase the likelihood of a successful traceback by ensuring 
all those who handle the food are examined (records on transporters).
    We also recognize that there could be other interpretations of the 
statute. The statute could be read to provide that at every step of the 
movement of the food, the immediate previous source is the person who 
had the food before they delivered it to the next person. That next 
person would be the immediate subsequent recipient. Under that reading, 
if company A processes the food and sends it to company B via several 
modes of transportation, the chain of custody would be as follows: (1) 
Company A; (2) Red Truck Co.; (3) train; (4) Blue Truck Co.; and (5) 
company B. In this scenario, the immediate subsequent recipient for 
company A is Red Truck Co. The immediate previous source for Red Truck 
Co. is company A and the immediate subsequent recipient is the train. 
The immediate previous source for the train is Red Truck Co. and the 
immediate subsequent recipient is Blue Truck Co. The immediate previous 
source for Blue Truck Co. is the train and the immediate subsequent 
recipient is company B. If it is discovered at company B that the food 
is contaminated, since company B only has records to identify Blue 
Truck Co. as its immediate previous source, FDA would have to trace 
back from company B to Blue Truck Co. and from there to the train, then 
to Red Truck Co., until FDA finally arrives at company A, the source of 
the contamination. This type of tracing would not allow the agency to 
efficiently and effectively trace back from company B to company A or 
get to company A quickly to trace forward other food sent out by 
company A.
    We are requesting comments on whether the approach with two sets of 
immediate previous sources and immediate subsequent recipients in this 
proposed rule is a reasonable interpretation of the statute. We also 
request comments on whether all transporters, including small 
independent transporters, have the capability to maintain records for 
the 1 and 2 year record retention periods. FDA also requests comment on 
the extent to which the recordkeeping burden on nontransporters 
(previous and subsequent transporters and nontransporters) creates new 
burdens for firms. We are also interested in suggestions for 
alternative recordkeeping arrangements that would allow for the 
complete and efficient investigation of food-related emergencies. In 
addition, we request comments on whether an approach different from the 
proposed rule that would require or create incentives for 
nontransporters to obtain and keep records on all the transporters that 
transport food between the nontransporters, by obtaining the records 
from the transporters, would be a reasonable interpretation of the 
statute.
    Proposed Sec.  1.328 defines ``manufacturing/processing'' as making 
food from one or more ingredients, or synthesizing, preparing, 
treating, modifying or manipulating food, including food crops or 
ingredients. Some examples of manufacturing/processing include, but are 
not limited to, cutting, peeling, trimming, washing, waxing, 
eviscerating, rendering, cooking, baking, freezing, cooling, 
pasteurizing, homogenizing, mixing, formulating, bottling, milling, 
grinding, extracting juice, distilling, labeling, or packaging. FDA is 
defining ``manufacturing'' and ``processing'' together because the 
meanings of the terms overlap. For example, combining two materials 
into a finished product, such as macaroni and cheese, could be 
considered ``manufacturing,'' ``processing,'' or both. Since both 
manufacturers and processors are subject to these regulations, FDA does 
not believe it is necessary to distinguish between manufacturing and 
processing in the proposed rule.
    Proposed Sec.  1.328 defines ``nontransporter'' as a person who 
owns food or who holds, processes, packs, imports, receives, or 
distributes food for purposes other than transportation.

[[Page 25195]]

    Proposed Sec.  1.328 defines the ``nontransporter immediate 
previous source'' as a nontransporter who last had an article of food 
before transferring it to another nontransporter. Nontransporter 
immediate previous source includes, but is not limited to, an 
individual, a partnership, a corporation, a cooperative, an 
association, or a government entity. Government entities include school 
systems, public hospitals, prisons, commissaries, etc.
    Proposed Sec.  1.328 defines ``nontransporter immediate subsequent 
recipient'' as a nontransporter who acquires an article of food from 
another nontransporter. Nontransporter immediate subsequent recipient 
also includes, but is not limited to, an individual, a partnership, a 
corporation, a cooperative, an association, or a government entity.
    Proposed Sec. Sec.  1.337(a)(1) and 1.345(a)(1) would require the 
name of the firm and responsible individual, address, phone number and, 
if available, the fax number and e-mail address of the nontransporter 
immediate previous source and nontransporter immediate subsequent 
recipient, respectively, whether domestic or foreign. We propose these 
requirements to mean the address and information of the specific 
location of where the statutorily covered activity occurred, and not 
that of a corporate headquarters at another location than where the 
activities took place. For example, a food product may be processed at 
a manufacturing plant, shipped to a packing facility, and then 
transported to a retail store all owned by the same corporation. The 
proposed requirements would apply to each individual location that 
received or released the food, even if each facility is owned by the 
same corporation. This would mean that firms would need to establish 
and maintain records accessible at each specific plant, packing 
facility, and retail store. FDA's intention is that these requirements 
identify the physical location of the food at each step of the way as 
it travels through the chain of distribution, from the farm or sea to 
the consumer. FDA requests information on whether this requirement to 
keep records on intra-corporate transfers will impose new burdens upon 
firms or whether firms keep these records currently.
    Proposed Sec.  1.328 defines ``perishable food'' as food that is 
not heat-treated, not frozen, and not otherwise preserved in a manner 
so as to prevent the quality of the food from being adversely affected 
if held longer than 7 days under normal shipping and storage 
conditions.
    The ``perishable food'' definition has been modeled after the 
current Regulatory Procedures Manual definition of ``perishable 
commodity'' for purposes of this proposal. Examples include, but are 
not limited to, fluid milk (but not ultrapasteurized), live fish, 
lobster, crab, other crustaceans, shellfish, fresh fruits and 
vegetables. The agency is seeking comment on whether we have best 
defined ``perishable food'' for purposes of these regulations.
    In addition, FDA is defining ``perishable foods'' for the purposes 
of establishing a shorter record retention time for those foods as 
opposed to nonperishable foods. FDA seeks comments on the proposed 
definition of perishable foods and whether the agency should use that 
definition as the basis for establishing record retention times.
    Proposed Sec.  1.328 defines ``pet food'' as food for nonfood-
producing animals. Nonfood-producing animals include household pets, 
such as dogs and cats, and also include other nonfood-producing animals 
such as horses and circus and zoo animals.
    Section 306 of the Bioterrorism Act does not extend to recipes. 
Proposed Sec.  1.328 defines ``recipe'' as the quantitative formula 
used in the manufacturing of the food product, but not the identity of 
the individual ingredients of the food. If finalized as proposed, FDA 
would have access to the records containing the ingredients used in a 
food product, but would not have access to the quantities of the 
ingredients used to make a product. The act currently requires 
manufacturers to disclose to the public the ingredients they use on the 
labels of their food products. It is critical to a tracing 
investigation that the ingredients and the sources of the ingredients 
are identified.
    Proposed Sec.  1.328 defines ``restaurant'' as a facility that 
prepares and sells food directly to consumers for immediate 
consumption. As with farms, persons who engage in more than one type of 
activity may meet the definition of restaurant as to some of those 
activities while not meeting the definition of restaurant as to other 
activities. Those persons would be required to keep records as to those 
activities covered by this subsection that do not meet the definition 
of restaurant.
    Some examples of restaurants as defined in the proposed regulations 
include: Cafeterias, lunchrooms, cafes, bistros, fast food 
establishments, food stands, saloons, taverns, bars, lounges, catering 
facilities, hospital kitchens, day care kitchens, and nursing home 
kitchens.
    Due to possible ambiguity in the term ``catering facilities,'' FDA 
states in the proposed restaurant definition that facilities that 
provide food to interstate conveyances, such as airplanes, passenger 
trains, and cruise ships, rather than directly to consumers, are not 
restaurants. Facilities that provide food to interstate conveyances are 
not considered restaurants because they do not serve food directly to 
consumers for immediate consumption. For example, a facility that 
provides sandwiches to a passenger train for eventual sale to 
passengers would not be considered a restaurant. However, the snack bar 
on the train that sells the sandwiches to consumers would be considered 
a restaurant. FDA has historically inspected these facilities that 
provide food to interstate conveyances and considers them processors, 
rather than restaurants.
    Because the proposed regulations also apply to persons who 
manufacture, process, pack, transport, distribute, receive, hold, or 
import food for animal consumption in the United States, by analogy, 
the term ``restaurant'' also includes pet shelters, kennels, and 
veterinary facilities in which food is provided to animals.
    Proposed Sec.  1.328 defines ``retail facility'' as a facility that 
sells food products directly to consumers only. The term includes, but 
is not limited to, grocery and convenience stores, vending machine 
locations, and commissaries. The limited exclusion from establishing 
and maintaining records of the immediate subsequent recipient applies 
only to food sold directly to consumers. A facility that sells food to 
wholesalers and/or other retailers, in addition to consumers, would 
have to keep records of the immediate subsequent recipients because 
wholesalers and retailers are not considered consumers for purposes of 
these proposed regulations.
    Proposed Sec.  1.328 defines ``transporter'' as a person who has 
possession, custody, or control of an article of food for the sole 
purpose of transporting the food. A person who owns food or who holds, 
processes, packs, imports, receives, or distributes food for purposes 
other than transportation is not a transporter.
    Proposed Sec.  1.328 defines ``transporter's immediate previous 
source'' as the person from whom a transporter receives food. This 
source can be either another transporter or a nontransporter. The 
transporter's immediate previous source includes, but is not limited 
to, an individual, a partnership, a corporation, a cooperative, an 
association, or a government entity.

[[Page 25196]]

    Proposed Sec.  1.328 defines ``transporter's immediate subsequent 
recipient'' as the person to whom a transporter delivered food. This 
recipient can be either another transporter or a nontransporter. A 
transporter's immediate subsequent recipient includes, but is not 
limited to, an individual, a partnership, a corporation, a cooperative, 
an association, or a government entity.
    Proposed Sec.  1.328 defines ``you'' as a person or facility 
subject to this subpart under Sec.  1.326. FDA is proposing to use 
``you'' throughout the proposed rule for easier readability.
4. Do other statutory provisions and regulations apply? (Proposed Sec.  
1.329)
    Proposed Sec.  1.329 would require that in addition to the 
regulations in this subpart, you must comply with all other applicable 
statutory provisions and regulations related to the establishment and 
maintenance of records for foods. Regulations in this subpart are in 
addition to existing recordkeeping regulations, such as the regulations 
for low acid canned foods, juice, infant formula, color additives, 
bottled water, animal feed, and medicated animal feed. (See 21 CFR 
113.100(d); 21 CFR 120.12; 21 CFR 106.100(g); 21 CFR 80.39; 21 CFR 
129.35; Sec.  589.2000; and 21 CFR 225.102 & 225.110, respectively).
5. Can existing records satisfy the requirements of this subpart? 
(Proposed Sec.  1.330)
    Proposed Sec.  1.330 states that the regulations in this subpart do 
not require duplication of existing records if those records contain 
all of the information required by this subpart. If a person subject to 
the regulations keeps records of all of the information as required by 
this subpart in compliance with other Federal, State, or local 
regulations, or for any other reason, e.g., as a result of its own 
business practices, then those records may be used to meet these 
requirements. Such records may include, but are not limited to, 
purchase orders, bills of lading, invoices and shipping documents. Some 
current FDA regulations require records, including those for low acid 
canned foods, juice, infant formula, color additives, bottled water, 
animal feed, and medicated animal feed. (See 21 CFR 113.100(d); 21 CFR 
120.12; 21 CFR 106.100(g); 21 CFR 80.39; 21 CFR 129.35; 21 CFR 
589.2000; and 21 CFR 225.102 & 225.110, respectively). However, none of 
the existing FDA regulations are sufficient alone to meet the 
requirements we are proposing in these regulations. A person who has 
been complying with these regulations only would have to add records 
addressing the new elements. The burden is on the person subject to 
these regulations to ensure it keeps all applicable records. Our intent 
is to have as little impact as possible on current recordkeeping 
practices if those records can meet the requirements of these proposed 
regulations. We are proposing the specific information a covered person 
must keep, but we will not specify the form or type of system in which 
those records must be maintained.

B. Establishment and Maintenance of Records to Identify the 
Nontransporter and Transporter Immediate Previous Source of All Food

    What information is required in the records established and 
maintained to identify the nontransporter and transporter immediate 
previous source? (Proposed Sec.  1.337)
    The Bioterrorism Act authorizes FDA to require by regulation the 
establishment and maintenance of records ``needed'' by the Secretary 
for inspection to allow the Secretary to ``identify'' the immediate 
previous sources of food. Based on FDA's interpretation of this 
statutory authority and what is ``needed'' to ``identify'' the 
immediate previous source, proposed Sec.  1.337(a) would require that 
you establish and maintain records for all food as follows:
    [sbull] Proposed Sec.  1.337(a)(1) would require the name of the 
firm and responsible individual, address, phone number and, if 
available, the fax number and e-mail address of the nontransporter 
immediate previous source, whether domestic or foreign;
    [sbull] Proposed Sec.  1.337(a)(2) would require an adequate 
description of the type of food received, to include brand name and 
specific variety (e.g., brand x cheddar cheese, not just cheese; or 
romaine lettuce, not just lettuce);
    [sbull] Proposed Sec.  1.337(a)(3) would require the date you 
received the food;
    [sbull] Proposed Sec.  1.337(a)(4) would require the lot or code 
number or other identifier of the food (to the extent this information 
exists);
    [sbull] Proposed Sec.  1.337(a)(5) would require the quantity and 
how the food is packaged (e.g., 6 ct. bunches, 25 lb carton, 12 oz 
bottle); and
    [sbull] Proposed Sec.  1.337(a)(6) would require the name of the 
firm and responsible individual, address, phone number and, if 
available, the fax number and e-mail address of the transporters who 
transported the food to you.
    Proposed Sec.  1.337(a) would require that you include information 
reasonably available to you to identify the specific source of each 
ingredient that was used to make every lot of finished product, so that 
incoming ingredients can be linked to the outgoing finished products. 
If FDA cannot immediately narrow the trace back to a specific source, 
tracing becomes much more difficult, there is an increased risk to 
consumers, and some food sources are unfairly implicated. FDA believes 
this is a necessary and beneficial requirement for consumers, and will 
help conserve FDA's limited resources, by focusing our investigation 
only on those entities who handled the at-risk food. FDA's 
investigation of the unaffected sources is time consuming and may have 
a negative business impact on the incorrectly implicated sources. These 
sources should not be penalized by exposure to unwarranted scrutiny and 
perhaps unwarranted adverse publicity because of inadequate 
recordkeeping by others in the distribution chain. In addition, in a 
recall situation, a business could limit the economic impact by being 
able to limit its recall to only a specific group of products instead 
of having to conduct a broader recall. What is reasonably available may 
vary from case to case.
    FDA recognizes that the food industry often relies on multiple 
sources of ingredients to make food products, and that it is common 
practice to commingle ingredients from different sources prior to 
incorporating them into a finished product. For example, some food 
processors commonly store raw materials like corn syrup and flour in 
tanks and silos. In some instances, these tanks and silos are not 
dedicated by suppliers, but are topped off as supplies run low, 
resulting in routine commingling of raw ingredients from a number of 
suppliers. Moreover, it is FDA's understanding that flour or grain silo 
crowns do not uniformly dissipate, resulting in uneven distribution of 
ingredients. FDA acknowledges that changing this longstanding system to 
require dedicated supplier storage to facilitate source specific 
recordkeeping would involve significant financial costs.
    It is not FDA's intent to require the reconfiguration of each 
manufacturing plant. These proposed regulations, however, would require 
you to capture the information that is reasonably available to you to 
connect finished products with the immediate previous source of each of 
the food products used to make that finished product. FDA understands 
that in some multiple sourcing contexts this information only may allow 
for a reduction in the number of potential sources for a specific food 
product, but may not necessarily

[[Page 25197]]

identify one specific source of the food product.
    For example, a company that bakes cookies may source flour from 
five different companies rather than depend on a single company as its 
supplier. The flour from the five companies may be stored in one common 
silo prior to being used in the manufacture of the cookies. In this 
scenario, the manufacturer could identify, depending on the date the 
flour was received from each company and placed in the silo and when 
the silo was emptied, the various companies that were the sources of 
the flour. Under this situation, the information is not reasonably 
available to determine a single source of the flour used in a 
particular lot of cookies. In this case, the information reasonably 
available to you would be the identity of all of the potential sources 
of the flour for each finished lot of cookies.
    Conversely, if the manufacturer did have dedicated silos for each 
supplier of flour, then the information would be reasonably available 
to the manufacturer to specify the specific source of the flour for 
each finished product.
    Proposed Sec.  1.337(a)(4) would require maintenance of the lot or 
code number or other identifier of the food (to the extent this 
information exists) to allow FDA the capability to limit its 
investigation to the implicated food. For instance, if a company 
repeatedly and consistently orders a particular food from a supplier, 
and the threat is associated with a single shipment or some shipments 
but not others, it is important to have the capability to isolate the 
shipment or shipments in question from others. This would be more cost 
effective and less burdensome to FDA. In addition, if the threat 
affects the transporter, identifying information such as lot numbers or 
other identifiers would facilitate the location and isolation of the 
conveyance that may have become contaminated by the implicated food. 
This cannot readily be done without information that specifically 
identifies the food.
    Proposed Sec.  1.337(a)(5) would require you to record the quantity 
of the food and how it is packaged to assist FDA in identifying the 
implicated food and also allow FDA to determine the scope of the 
threat. With this information contained in the records, FDA would be 
able to determine the quantity of the potentially adulterated food that 
is in the stream of commerce, i.e., whether it is one crate or 1,000 
crates of tomatoes. In addition, as part of a tracing investigation, 
FDA would be able to identify at each location whether all of the 
potentially adulterated food has been accounted for or whether any part 
of a shipment had been diverted. Both the immediate previous source and 
immediate subsequent recipient would be required to keep records of the 
quantity of food received or released to allow FDA to determine that 
the quantity of food sent was the quantity received. This would ensure 
that FDA is best able to protect public health by being able to 
identify and locate adulterated food that presents a threat of serious 
adverse health consequences or death to humans or animals.
    Proposed Sec.  1.337(a)(6) would require you to keep in your 
records information to identify the transporter who transported the 
food to you. This requirement to identify the transporter is in 
addition to proposed Sec.  1.337(a)(1), which requires you to keep in 
your records information that identifies the nontransporter immediate 
previous source.

C. Establishment and Maintenance of Records to Identify the 
Nontransporter and Transporter Immediate Subsequent Recipient of All 
Food

    What information is required in the records established and 
maintained to identify the nontransporter and transporter immediate 
subsequent recipient? (Proposed Sec.  1.345)
    The Bioterrorism Act authorizes FDA to require by regulation the 
establishment and maintenance of records ``needed'' by the Secretary 
for inspection to allow the Secretary to ``identify'' the immediate 
subsequent recipient of food. Based on FDA's interpretation of this 
statutory authority and what is ``needed'' to ``identify'' the 
immediate subsequent recipient, proposed Sec.  1.345(a) would require 
that you establish and maintain records for all food you release that 
identifies information that is substantially similar to that discussed 
in the requirements to identify the nontransporter immediate previous 
source.

D. Requirements to Establish and Maintain Records to Trace the 
Transportation of All Food

1. Who is required to establish and maintain records for tracing the 
transportation of all food? (Proposed Sec.  1.351)
    The Bioterrorism Act expressly states persons who transport food 
are subject to these regulations. Proposed Sec.  1.351 would require 
you, if you are a domestic person, to establish and maintain records 
for tracing those immediately before (transporter's immediate previous 
source) and immediately after you (transporter's immediate subsequent 
recipient) in the transportation process if you transport food.
2. What information is required in the transportation records? 
(Proposed Sec.  1.352)
    Proposed Sec.  1.352(a) would require that you establish and 
maintain the following records for each food you transport:
    [sbull] Proposed Sec.  1.352(a)(1) would require the name of the 
firm and responsible individual, address, phone number and, if 
available, the fax number and e-mail address of the person who had 
possession, custody, or control of the food immediately before you, and 
the date you received it from that person;
    [sbull] Proposed Sec.  1.352(a)(2) would require the name of the 
firm and responsible individual, address, phone number and, if 
available, the fax number and e-mail address of the person who had 
possession, custody, or control of the food immediately after you, and 
the date you delivered it to that person;
    [sbull] Proposed Sec.  1.352(a)(3) would require an adequate 
description of the type of food, including brand name and specific 
variety (e.g., brand x cheddar cheese, not just cheese; or romaine 
lettuce, not just lettuce);
    [sbull] Proposed Sec.  1.352(a)(4) would require the lot or code 
number or other identifier of the food (to the extent this information 
exists);
    [sbull] Proposed Sec.  1.352(a)(5) would require the quantity and 
how the food is packaged (e.g., 6 ct. bunches, 25 lb carton, 12 oz 
bottle); and
    [sbull] Proposed Sec.  1.352(a)(6) would require the identification 
of each and every mode of transportation (e.g., company truck, private 
carrier, rail, air, etc.), and the individual responsible, from the 
time you first received the food until the time you delivered it.
    The proposed requirements are intended to provide the necessary 
information to allow FDA to trace the transportation of all food. In 
proposed Sec.  1.352(a)(1) and (a)(2), the required information would 
consist of whoever had the food before you and after you. This person 
could be either a nontransporter or another transporter. In a multiple 
transporter situation, you may be receiving the food from another 
transporter and/or delivering it to another transporter. The proposed 
requirements in Sec.  1.352(a)(1) and (a)(2) are intended to capture 
this information regardless of whether you receive food from a 
nontransporter or another transporter, or deliver it to a 
nontransporter or another transporter. You would only be responsible 
for maintaining a record of the required information with respect to 
the person

[[Page 25198]]

from whom you received the food from and the person to whom you gave 
it. You would not be required to maintain records of transactions to 
which you were not a party.
    Proposed Sec.  1.352(a)(6) would require transportation companies 
that use several modes of transportation within their company to record 
when the food was put on which kind of vehicle and who was responsible 
for it during that leg of the trip. For example, Yellow Transportation 
Co. may use two different Yellow trucks and a Yellow plane. This 
section would require Yellow Transportation Co. to keep records of each 
and every mode of transportation and the individual responsible, from 
the time the food was first received until the time it was delivered. 
The ``individual responsible'' should be the person within the 
transportation company who is responsible for that vehicle and the food 
being transported. FDA seeks comments on whether ``individual 
responsible'' should be the operator of the conveyance or whether it 
can be someone within the corporation who has overall responsibility 
for the vehicle and the food being transported. FDA understands that it 
is common practice for one transportation company to use several 
different modes of transportation within that company throughout its 
possession and control over the food. The food is potentially subject 
to tampering at each phase of the transportation process. If the 
transportation company responsible for the food does not have complete 
records identifying the mode of transportation and who was responsible 
for the food throughout the entire time that company had possession and 
control over the food, the tracing chain is broken and it becomes more 
difficult and time consuming to determine if that shipment of food has 
been diverted or tampered with. FDA believes this detailed information 
regarding the food transportation would be necessary to expedite the 
tracing investigation in situations when FDA has a reasonable belief 
that food is adulterated and presents a threat of serious adverse 
health consequences or death to humans or animals.

E. General Requirements

1. What are the record retention requirements? (Proposed Sec.  1.360)
    Proposed Sec.  1.360(a) states the records required by these 
regulations are to be created at the time the statutorily covered 
activities take place. Proposed Sec.  1.360(b) would require records 
for perishable foods not intended to be processed into nonperishable 
foods to be retained for 1 year after the date the records were 
created. Although perishable foods have a relatively short shelf life, 
FDA is proposing a 1 year record retention period for these foods. In 
some situations, the health hazard may not be immediately apparent but 
may emerge months after the food has been consumed. In other 
situations, the harm may have been caused by novel contaminants or 
novel vehicles for known contaminants, and it may take months to 
identify the sources of contamination. As an example, in 1995, there 
was an investigation of an outbreak of cyclosporiasis. At the time, FDA 
did not know that Cyclospora could contaminate raspberries. An 
investigation concluded that water was the likely vehicle. In 1996, 
there were numerous additional cyclosporiasis outbreaks in the United 
States and the link was made to raspberries from Guatemala. Fresh 
raspberries had been served at the site of the 1995 outbreak and then, 
a year later, FDA needed to determine their source. The distributor had 
no records to facilitate the traceback.
    The proposed 1-year period would not apply to perishable foods that 
are intended for processing into nonperishable foods, e.g., jams and 
jellies made from fruits. In those instances, the longer record 
retention period of 2 years is needed to ensure the recordkeeping chain 
for finished food products made using perishable foods is available 
during tracing investigations. If you are uncertain whether a 
perishable food is destined or intended for processing into a 
nonperishable food, the 2-year record retention period applies. FDA 
seeks comment on the impact of this provision.
    Proposed Sec.  1.360(c) would require that you retain records for 
all foods (except animal foods as discussed below) not covered by 
proposed Sec.  1.360(b) for 2 years after the date the records were 
created. This proposed requirement is consistent with the authority 
given in the Bioterrorism Act. Based on information provided to FDA by 
the food industry, the minimum time for processed food products to 
clear the food production and distribution/retail system is 3 years. In 
addition, the average distribution time between harvesting and final 
retail sale of frozen fruits and vegetables is approximately 3 to 24 
months. These are average times, and individual products may be in 
commerce for a longer period. FDA believes that allowing anything less 
than a 2-year record retention period for nonperishable food, as well 
as perishable foods intended to be processed into nonperishable food, 
would severely compromise a tracing investigation.
    Proposed Sec.  1.360(d) would require that you retain records 
required by these regulations for animal food, including pet food, for 
1 year after the date the records are created. Food for food-producing 
animals tends to have a faster turnover rate than many kinds of human 
food. In addition, since pet foods are typically the sole source of 
food for pets, such foods tend not to be stored as long as many human 
foods. Therefore we propose that records for all animal food, including 
pet food, be retained for only one year after the date the records are 
created. This is consistent with the BSE rule.
    Proposed Sec.  1.360(e) would require that you retain all records 
required by these regulations at the establishment where the covered 
activities described in the records occurred (onsite) or at a 
reasonably accessible location. We recognize that there may be more 
records than available storage space at the location where the covered 
activities occur. We are therefore proposing that records may be stored 
offsite, provided you can comply with the record availability 
requirements in proposed Sec.  1.361.
    Proposed Sec.  1.360(f) provides that the maintenance of electronic 
records is acceptable. In the Federal Register of March 20, 1997 (62 FR 
13430), FDA issued regulations at part 11 that provide criteria for 
acceptance by FDA of electronic records under certain circumstances. To 
minimize the burden of this proposed rule, FDA proposes to exempt 
electronic records established or maintained to satisfy the 
requirements of this subpart from the requirement to comply with part 
11. FDA believes that a requirement that records kept under this 
subpart comply with part 11 would hinder the ability of persons subject 
to these regulations to utilize existing systems and records to satisfy 
the requirements of these proposed regulations as contemplated in 
proposed Sec.  1.330. If the agency decided to require all electronic 
records to satisfy part 11 before they could satisfy these proposed 
recordkeeping requirements, large numbers of already existing 
electronic records and recordkeeping systems would have to be recreated 
and redesigned. This provision would require that records kept for some 
other statutory or regulatory purpose, but which also may be used to 
meet the requirements of this subpart, must comply with part 11 as 
required.

[[Page 25199]]

2. What are the record availability requirements? (Proposed Sec.  
1.361)
    Proposed Sec.  1.361 states that when FDA has a reasonable belief 
that an article of food is adulterated and presents a threat of serious 
adverse health consequences or death to humans or animals, any records 
or other information accessible to FDA under section 414 or 704(a) of 
the act must be readily available for inspection and photocopying or 
other means of reproduction. Although the statutory requirements in 
section 414 and amended section 704(a) of the act regarding records 
access are self-executing and are currently in effect, FDA is issuing 
regulations to further refine some aspects of the food records access 
requirements. Because section 306 of the Bioterrorism Act includes two 
records inspection authorities, one of which, section 704(a), cross 
refers to records described in section 414, we request comment on the 
interconnection between the records access provisions in sections 414 
and 704(a) of the act.
    Proposed Sec.  1.361 would require records to be made available 
within 4 hours of a request if the request is made between 8 a.m. and 6 
p.m. (local standard time), Monday through Friday, or within 8 hours of 
a request if made at any other time, by an officer or employee duly 
designated by the Secretary who presents appropriate credentials and a 
written notice. In the event of a threat of serious adverse health 
consequences or death to humans or animals, FDA believes these time 
limits are necessary to effectively and efficiently perform a tracing 
investigation.
    The most common problem encountered by the FDA in a tracing 
investigation has been a lack of ready access to records. Records are 
often stored offsite or are stored in a database where the records are 
difficult to retrieve. In FDA's experience, rarely do firms make 
records available within 24 hours. The usual timeline is 2 to 3 days. 
This delay severely reduces the speed at which FDA can perform a 
traceback. If every firm were to take 2 days to give FDA the needed 
records, even with a short traceback (e.g., 3 firms), it could take FDA 
up to 2 weeks to trace the product to its source, taking into account 
time for record review and travel to the firms. This time may be 
increased if the records are incomplete and FDA has to wait for missing 
records to be retrieved. This possible delay would be a substantial 
concern if FDA were attempting to remove adulterated food that presents 
a threat of serious adverse health consequences or death to humans or 
animals from commerce.
    Proposed Sec.  1.361 would also require that if you store the 
records required by these regulations offsite, you must be able to 
retrieve and provide the records onsite within the specified time 
period. Electronic records are considered to be onsite if they are 
accessible from an onsite location.
3. What records are excluded from this subpart? (Proposed Sec.  1.362)
    Proposed Sec.  1.362 would exclude from the proposed regulations 
recipes for food as defined in proposed Sec.  1.328, financial data, 
pricing data, personnel data, research data, or sales data (other than 
shipment data regarding sales). These exclusions are consistent with 
the express language in the Bioterrorism Act.
4. What are the consequences of failing to establish or maintain 
records or make them available to FDA? (Proposed Sec.  1.363)
    Consistent with the express language in the Bioterrorism Act, 
proposed Sec.  1.363 states (a) the failure to establish or maintain 
records as required under section 414(b) of the act or to refuse to 
permit access to or verification or copying of any such required record 
is a prohibited act under section 301 of the act (21 U.S.C. 331) and 
(b) the failure to make records or other information available to FDA 
as required by section 414 or 704(a) of the act is a prohibited act 
under section 301 of the act (21 U.S.C. 331).
5. What are the compliance dates for this subpart? (Proposed 1.368)
    Under sections 414 and 704(a) of the act, FDA may have access to 
and copy all records and other information related to an article of 
food if the Secretary has a reasonable belief that the food is 
adulterated and presents a threat of serious adverse health 
consequences or death to humans or animals. The basic requirement that 
access to records and other information be given under these 
circumstances is currently in effect and does not require implementing 
regulations. FDA has chosen to further define access requirements in 
regulations, but can use its inspectional authority prior to the 
effective date of these regulations.
    FDA carefully considered the size of a business when developing 
these proposed regulations. FDA found that most products and 
ingredients pass through at least one small business when moving 
through the distribution process (see Initial Regulatory Flexibility 
Analysis discussion in section III.B. of this document). If FDA were to 
exempt small businesses from these regulations or to permit shorter 
record retention times for them, the effectiveness of the regulations 
would be severely compromised due to the breaks in the recordkeeping 
chain during tracing investigations. Thus, FDA cannot propose totally 
exempting any business based on size from these requirements. However, 
FDA does propose to provide small and very small businesses additional 
time to come into compliance with these regulations.
    Thus, proposed Sec.  1.368(a) would require that firms that do not 
qualify as small businesses be in full compliance with these 
regulations within 6 months after the publishing date of the final 
rule. Proposed Sec.  1.368(a)(1) would require that small businesses 
employing fewer than 500 but more than 10 full-time equivalent 
employees be in full compliance with these regulations within 12 months 
after the publishing date of the final rule. Proposed Sec.  1.368(a)(2) 
would require that very small businesses, defined as those employing 10 
or fewer full-time equivalent employees, be in full compliance with 
these regulations within 18 months after the publishing date of the 
final rule.

III. Analysis of Economic Impact

A. Benefit-Cost Analysis

    FDA has examined the economic implications of this proposed rule as 
required by Executive Order 12866. 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, and other advantages; 
distributive impacts; and equity). Executive Order 12866 classifies a 
rule as significant if it meets any one of a number of specified 
conditions, including: Having an annual effect on the economy of $100 
million, adversely affecting a sector of the economy in a material way, 
adversely affecting competition, or adversely affecting jobs. A 
regulation is also considered a significant regulatory action if it 
raises novel legal or policy issues. FDA has determined that this 
proposed rule is a significant regulatory action as defined by 
Executive Order 12866.
    Need for the regulations: The purpose of these proposed regulations 
is to enable FDA to respond to, and help contain, adulterated food that 
presents a threat of serious adverse health consequences or death to 
humans or

[[Page 25200]]

animals. The benefits of these proposed regulations would be realized 
by accomplishing this purpose.
    Reason for the regulations: FDA is proposing several regulations 
that will work in harmony to improve food safety. Food safety is mostly 
a private good. Establishments have powerful incentives to ensure that 
the ingredients they purchase are not contaminated and that their 
production processes are protected from unintentional and intentional 
contamination. Deliberate (intentional) contamination of food linked to 
a particular product or plant--particularly if the plant is considered 
negligent--would be extraordinarily costly to a firm. Indeed, the 
private incentives to avoid deliberate contamination should be similar 
to the private incentives for food safety. Deliberate food 
contamination events nonetheless differ from ordinary outbreaks of 
food-borne illness in that they are more likely to be low probability 
events with severe public health consequences.
    Although private incentives lead to the private efforts to protect 
against deliberate contamination at the plant level, there are external 
effects associated with privately produced protection. The most 
important external effect of protection against deliberate 
contamination is information. Getting food from the farm or sea to the 
plate involves a complex system of production and distribution. The 
system works using local knowledge and information; each participant 
needs to know only as much about the overall system as is necessary for 
his or her business. Market prices convey most of the information 
necessary for the ordinary production and distribution of food. In the 
event of an actual or suspected contamination of the food supply, 
however, more complete information is needed where it can be centrally 
used. The suspect food must be traced backward and forward through the 
distribution chain, both to protect consumers and to find the source 
and cause of the event.
    No individual firm or organization has sufficient financial 
incentive to establish a central information system relating to food 
safety for the entire economy. The nation's food producers and 
importers as a whole would benefit from such a system because it would 
be easier to uncover and solve problems, but the private costs to 
create the system would probably be prohibitive for any single firm or 
third party organization.
    We estimate that an effective system of information would require 
several hundred thousand participants to gather information and provide 
it to a central system. The private transaction costs to bring all the 
participants together voluntarily and get them to agree to create such 
a system would be extraordinarily high. No single organization could 
capture additional revenue sufficient to cover the cost. Also, because 
the provision of information by some participants makes it available 
for all, there would be a tendency for establishments to try to be free 
riders in the information system. But the more information and 
participation in the system, the more effective it is.
    Another way of looking at the problem of participation is in terms 
of marginal private benefits and marginal social benefits. By gathering 
and providing the information used in a food safety system, an 
individual establishment receives additional private benefits from 
enhancing the safety of its own food. In addition, participating in the 
system increases the effectiveness of the entire information system. In 
other words, the system works better the more establishments 
participate in it. The individual establishment does not capture this 
additional social benefit. The marginal private benefit (enhanced 
safety for individual establishments) is less than the marginal social 
benefit (the marginal private benefit plus the increased effectiveness 
of the entire information system). The difference between private and 
social benefit reduces the incentive for establishments to participate 
in a voluntary private system.
    The events of September 11, 2001, led Congress to conclude that 
public creation and provision of an information system is necessary. 
The Bioterrorism Act and its implementing regulations would establish 
an information system that would allow FDA to have an integrated 
picture of the food distribution system. This particular regulation 
addresses one important aspect of this information system: The need to 
keep product and ingredient distribution records. However, as stated 
above, FDA is proposing several regulations to address these needs so 
the costs and benefits of any one regulation will be closely associated 
with related provisions in other proposed rules. With the regulations 
in place, the agency would have the additional tools necessary to help 
deter and respond to deliberate threats to the nation's food supply as 
well as to other food safety problems.
    Baseline: FDA considers the baseline for this analysis the current 
state of the world, and we assume this baseline has zero costs and 
benefits. We also consider having no new recordkeeping requirements as 
option 1 in our analysis. Section 414(b) of the act, as added by 
section 306(a) of the Bioterrorism Act, provides that the Secretary 
``may'' by regulation establish recordkeeping requirements. Section 
306(d) of the Bioterrorism Act, however, provides that the Secretary 
``shall'' issue proposed and final regulations no later than 18 months 
from the date of enactment. FDA believes that Congress has directed the 
agency to exercise the authority in section 414(b) of the act, so the 
current state of the world as considered in option 1 is not legally 
viable. The agency recognizes, however, that the use of the term 
``may'' in one section of the statute and ``shall'' in another section 
creates an ambiguity. We request comments on our interpretation that we 
are required by section 306(d) of the Bioterrorism Act to exercise the 
authority in section 414(b) of the act. However, the Office of 
Management and Budget (OMB) cost-benefit analysis guidelines recommend 
discussing statutory requirements that affect the selection of 
regulatory approaches. These guidelines also recommend analyzing the 
opportunity costs of legal constraints that prevent the selection of 
the regulatory action that best satisfies the philosophy and principles 
of Executive Order 12866. Option 1 will serve as the baseline against 
which other options will be measured for assessing costs and benefits.
    Options: The following section analyzes regulatory options that 
address the need for the recordkeeping regulation:
    1. No recordkeeping requirements. Take no new regulatory action.
    2. Require all persons that manufacture, process, pack, hold, 
receive, distribute, transport, or import food destined for consumption 
or use in the United States to establish and maintain records 
identifying the immediate previous source and the immediate subsequent 
recipient of the food, and its outer packaging. Also require all 
persons that manufacture, process, pack, hold, receive, distribute, 
transport, or import outer food packaging destined for use in the 
United States to establish and maintain records identifying the 
immediate previous source and the immediate subsequent recipient of 
that outer food packaging. The records requirements apply to both 
foreign and domestic persons. For domestic persons, this includes those 
who engage in the specified food-related activity whether or not those 
activities occur solely intrastate. Persons engaging in more than one 
type of activity, some of which is covered by this proposed

[[Page 25201]]

regulation, would be required to keep records pertaining to the covered 
activity even if they are not required to keep records relating to 
exempt activity. Records must include information reasonably available 
to identify the specific source of each ingredient that was used to 
make every lot of finished product. Required times for record-retention 
would be 1 year for perishables destined for final consumption in their 
perishable state, and 2 years for all other foods or food packaging. 
Upon a written request, records must be made available to FDA in 4 
hours, if the request is made during the normal business hours of 8 
a.m. to 6 p.m., or 8 hours otherwise.
    3. Require all elements of option 2, except exclude persons that 
manufacture, process, pack, hold, receive, distribute, transport, or 
import outer food packaging.
    4. Require all components of option 3 but do not require persons 
that are required to establish and maintain records on food to 
establish and maintain records on the food's outer packaging.
    5. Require all components of option 4, but change the required time 
for responding to an FDA records request to 24 hours.
    6. Require all components of option 4, but exempt intrastate 
businesses.
    7. Require all components of option 4, but exempt persons who 
operate farms, and persons who operate restaurants, who also perform a 
covered activity.
    8. Require all components of option 4, but change the record 
retention requirement to 1 year for all products.
    9. Require all components of option 4, but change the record 
retention requirement to 2 years for all products.
    10. The proposed rule. Require all components of option 4, but only 
cover foreign facilities also covered by the proposed registration 
regulation published at 68 FR 5377 (February 3, 2003).
    11. Require all components of option 4, but only cover foreign 
facilities that are the final holder of the product before export to 
the United States.
    12. Require all components of option 4 but cover only domestic 
persons.
    13. Require all components of option 4, but the required 
information would include the records necessary for facilities to be 
able to link specific raw ingredients to specific outgoing finished 
products for all raw ingredients and all products. This option is to 
analyze the costs and benefits of requiring records that link specific 
raw ingredients to specific finished products, including ingredients 
from different sources that are currently commingled before being 
incorporated into finished products.
    In order to clearly identify the marginal cost of each provision 
specified in the codified, most options represent only one modification 
of a provision in another option. Option 4 is appropriate to use for 
comparison with the other options, since it differs by only one 
provision from almost all other options considered. As the Analysis of 
Economic Impact section will reflect, FDA has examined the economic 
implications of this proposed rule by analyzing several regulatory 
options that address the need for the recordkeeping regulation. FDA is 
proposing option 10. FDA believes that this option would require 
creation and maintenance of the records needed to address credible 
threats of serious adverse health consequences or death to humans or 
animals while providing adequate flexibility and minimizing industry 
burden. FDA requests comments on other viable options not considered by 
this analysis. Note that additional options designed to lower the 
regulatory burden on small businesses are considered in the initial 
regulatory flexibility analysis below.
    Cost assumptions: The total cost of each of these options will 
depend on the number of facilities affected and the extra burden these 
options place on facilities. For all options, FDA would only specify 
the information a covered entity must keep, but not specify the form or 
type of system in which those records must be maintained; we expect 
that for all options, if possible, firms will choose to collect the 
additional information not currently included in their existing 
records. Furthermore, FDA assumes that firms will choose to comply with 
any new requirements by modifying shipping or purchase records such as 
Bills of Lading, Invoices, or Purchase Orders. In its cost 
computations, FDA does not take into account other Federal, State, or 
local regulations that require similar recordkeeping practices for 
small sectors of the food economy (e.g., ``the BSE rule'', Sec.  
589.2000) because of the relatively large amount of uncertainty in our 
knowledge of existing State and local recordkeeping requirements, and 
because the effect on the cost computations from their inclusion is 
likely to be very small. For this reason the analysis does not 
distinguish among entities that may be covered by the recordkeeping 
requirements in ``the BSE rule'' which may result in a small 
overstatement of the costs of the proposed rule. The following 
discussion of facility counts and per facility costs is not tied to any 
specific option, but describes the data and assumptions we use to 
analyze the cost of each option.
    Number of facilities and number of firms affected: FDA assumes that 
for the options that do not consider exemptions, approximately 
1,230,000 facilities owned by approximately 960,000 firms would be 
covered. This number includes domestic facilities that manufacture, 
process, transport, distribute, pack, receive, hold, or import food or 
food packaging, and foreign facilities performing any of these 
activities on food or food packaging destined for consumption or use in 
the United States. Table 1 contains a summary and breakdown of this 
estimate.

              Table 1.--Affected Facility and Firm Details
------------------------------------------------------------------------
                                                       North American
                                Facility                  Industry
        Type          Facility   to Firm    Firm       Classification
                      Estimate   Adjust.  Estimate  System (NAICS) Codes
                                 Factor                 if Applicable
------------------------------------------------------------------------
Domestic
------------------------------------------------------------------------
  Manufacturers      43,376       1.17    36,948    3111-3119, 3121
------------------------------------------------------------------------
  Wholesalers/       95,745       1.24    76,952    4224, 4225, 4228,
   Warehouses                                        49312, 49313
------------------------------------------------------------------------
  Packaging\1\       73,813       1.07    69,266    32221, 32222,
                                                     326111, 326112,
                                                     326130, 326140,
                                                     326150, 326160,
                                                     3272, 331315,
                                                     331316, 332431,
                                                     332439, 42261,
                                                     323110, 323111,
                                                     323112, 323113,
                                                     323114, 323115
------------------------------------------------------------------------

[[Page 25202]]

 
  Transporters/      16,773       1.11    15,171    481112, 481212,
   Packers                                           483111, 483113,
                                                     483211, 4841,
                                                     48422, 48423,
                                                     488320, 488510,
                                                     488991
------------------------------------------------------------------------
  Retail Grocery     207,657      1.35    153,277   44511, 445220,
   and Specialty                                     445230, 44529,
   Food                                              445310, 446191,
------------------------------------------------------------------------
  Convenience        128,985      1.87    68,866    44512, 447110
   Stores
------------------------------------------------------------------------
  Mixed-Type         30,497       1.25    24,397    --
   Facilities that
   Have Farms
------------------------------------------------------------------------
  Importers          5,036-32,    1.25    4,029-26  --
                      768                  ,214
------------------------------------------------------------------------
Total Domestic       601,883-6  ........  448,905-  ....................
                      29,615               471,090
------------------------------------------------------------------------
Foreign
------------------------------------------------------------------------
  Final Holders      77,427       1.25    61,942    ....................
------------------------------------------------------------------------
  Manufacturers      125,450      1.17    106,858   ....................
------------------------------------------------------------------------
  Other Facility     457,836      1.25    366,269   --
   Types
------------------------------------------------------------------------
Total Foreign        660,713    ........  535,068   ....................
------------------------------------------------------------------------
\1\ Includes both outer packaging and food contact substances.

    Data sources for the number of facilities and firms affected: 
Except for the firm-to-facility adjustments explained below, the unit 
of observation for all data used for this analysis is the number of 
establishments performing a particular activity. To estimate the number 
of establishments, FDA uses several sources: The 2000 County Business 
Patterns (Ref. 1) and the 1999 Nonemployer Statistics from the U.S. 
Census Bureau (Ref. 2), the FDA Field Accomplishments and Compliance 
Tracking System (FACTS), the FDA Operational and Administrative System 
for Import Support (OASIS), and the 1997 National Agricultural 
Statistics Service (NASS) Survey (Ref. 3). All datasets used in this 
analysis were the latest available as of the time of writing.
    The Census Bureau creates the 2000 County Business Patterns (CBP) 
by analyzing data from the Business Register, the Census Bureau's file 
of all known single and multiestablishment companies with at least one 
employee. Data for single-location firms are obtained from the Economic 
Censuses, the Annual Survey of Manufacturers, Current Business Surveys, 
and administrative records from the U.S. Internal Revenue Service, 
Social Security Administration, and the Bureau of Labor Statistics.
    Facilities not included in the CBP are counted in the Nonemployer 
Statistics, also from the Census Bureau. Nonemployer businesses are 
companies with no paid employees. The Census Bureau primarily obtains 
data about nonemployer businesses from business income tax returns 
filed with the Internal Revenue Service.
    The FDA FACTS tracking system is an online database designed to 
monitor compliance related information for each facility that is 
regulated by FDA. The database contains an updated list of regulated 
facilities. FACTS and the Census Bureau use different categories for 
facilities, making a direct comparison of FACTS with the CBP and 
Nonemployer Statistics difficult. In our estimates, FACTS facility 
counts are the primary source of data on importers and foreign 
facilities, and interstate manufacturers, wholesalers, and warehouses.
    Manufacturing, warehouses, wholesalers, and packaging facilities: 
The primary source for the total (both intrastate and interstate) 
number of manufacturers, warehouses, wholesalers, and packaging 
facilities is the 2000 CBP and 1999 Nonemployer Statistics for the 
NAICS codes identified in table 1 of this document. The NAICS codes 
identify industry groups and subgroups. Often the data are more 
aggregated in the 1999 Nonemployer Statistics than in the CBP; when the 
nonemployer statistics only exist for an aggregated NAICS code, we 
adjust the total number of facilities identified in the aggregated 
nonemployer category by the ratio of CBP counts in the relevant 
subcategory and aggregated category. For example, the 1999 Nonemployer 
Statistics identified 4,700 facilities under code 4931, but does not 
break the total down further. Our adjustment changes the 4,700 
facilities to 964 [4,700 x (1,461/7,123)] facilities in subcategories 
49312 and 49313. The sum of the number of facilities under the codes 
49312 and 49313 in the CBP is 1,461, and 7,123 is the number of 
facilities under the aggregated code 4931 in the CBP.
    The term ``packaging'' described by the data used in this analysis 
varies from FDA's interpretation of ``packaging'' in section 306 of the 
Bioterrorism Act because it is broader and includes food contact 
substances, which fall within the act's definition of food. In this 
economic analysis, we use the term ``manufacturer and distributor'' of 
outer packaging to refer to all persons who manufacture, process, pack, 
hold, receive, distribute, transport, or import ``packaging'' as that 
term is used in the Bioterrorism Act. FDA was unable to find any data 
that discriminated between outer packaging manufacturers and 
distributors and those that manufacture or distribute materials that 
FDA currently regulates as food contact substances, including plastic 
beverage bottles and inner cereal box liners. The data used for the 
analyses include the number of manufacturers and distributors of the 
following types of packaging: Paperboard containers, paper

[[Page 25203]]

bags and treated paper, plastic bags, bottles, laminated plastics and 
other plastic materials, polystyrene and urethane foam products, glass 
products, and metal and aluminum can, sheet, plate, and products. 
Furthermore, printing services and label producers are included such as 
lithographic, gravure, flexographic, screen, digital, and quick 
printing services.
    Transporters and packers: Although the CBP and Nonemployer 
statistics distinguish passenger and nonpassenger transport, they do 
not separately identify establishments engaged in the transport of 
food. Based on a comment received through our preliminary outreach 
activities, FDA assumes that 20 percent of the specialized freight 
transport industry is engaged in food transport. FDA requests comments 
on this assumption. The largest category in transport and packing is 
trucking.
    Mixed-type facilities that engage in farming: Firms engaged in 
covered activities would be required to keep records on these 
activities as discussed above, even if those firms were mixed-type 
facilities that engage in farming. Covered activities conducted on 
mixed-type facilities that engage in farming potentially comprise a 
large percentage of the activity conducted at these facilities. For 
example, manufacturing or processing for farms includes canning, 
freezing, cooking, pasteurization, homogenization, irradiation, 
milling, grinding, chopping, slicing, cutting, coloring, waxing, 
shelling of nuts, peeling, labeling, and packaging. Facilities with 
farms will be considered mixed-type facilities if they alter the 
general state of the commodity, use any ingredients obtained from 
another source, and then sell or transfer the product for final use 
offsite.
    To estimate the number of mixed-type facilities that engage in 
farming that would be affected by this rule, FDA uses the 1997 USDA 
NASS Census of Agriculture and data obtained from various county level 
Cooperative Extension Service (CES) offices. The Census of Agriculture 
provides the total number of farms producing specific commodities. To 
estimate the number of farms that are part of mixed-type facilities, 
FDA used a sample of counties with information from their respective 
CES offices. CES offices from Clay County, Kansas; Monterey, Sonoma, 
Marin, and San Diego counties in California; Jackson County, Wisconsin; 
Gillespie and San Saba counties in Texas; Carol County, Maryland; and 
Berks County, Pennsylvania provide data on the percentage of farms 
producing specific commodities that could be considered mixed-type 
facilities (Ref. 4). Table 2 presents the estimated number of mixed-
type facilities that engage in farming by type of farm. While some of 
the facilities described in table 2 may qualify as roadside stands for 
some of the products that are sold from these facilities (and would not 
be subject to recordkeeping requirements for those products), we were 
not able to distinguish between facilities that would qualify as 
roadside stands and mixed-type facilities that engage in farming. The 
numbers of mixed-type facilities that engage in farming listed in table 
2 may be overstated to the extent that they qualify as roadside stands. 
The estimated total is 30,497. FDA requests comments on the methods 
used to estimate the numbers of mixed-type facilities that engage in 
farming and for identifying the number roadside stand facilities.

         Table 2.--Mixed-Type Facilities that Engage in Farming
------------------------------------------------------------------------
                                              Percent  No. of Mixed-Type
        Commodity             Total No. of     Mixed-   Facilities that
                                 Farms          Type   Engage in Farming
------------------------------------------------------------------------
Pig Farms (Feed Mixing)               46,353    1.5%                 695
------------------------------------------------------------------------
Cattle (Feed Mixing)                 785,672      1%               7,857
------------------------------------------------------------------------
Poultry (Feed Mixing)                 36,944      1%                 369
------------------------------------------------------------------------
Other Animal Production              110,580      1%               1,106
 (Feed Mixing)
------------------------------------------------------------------------
Dairy                                 86,022    1.1%                 903
------------------------------------------------------------------------
Grain, Rice, and Beans               462,877      1%               4,629
------------------------------------------------------------------------
Apples                                10,872    1.5%                 163
------------------------------------------------------------------------
Oranges                                9,321    1.5%                 140
------------------------------------------------------------------------
Peaches                               14,459    1.5%                 217
------------------------------------------------------------------------
Cherries                               8,423    1.5%                 126
------------------------------------------------------------------------
Pears                                  8,062    1.5%                 121
------------------------------------------------------------------------
Other Fruit                           29,413    1.5%                 441
------------------------------------------------------------------------
Nuts                                  14,500      2%                 290
------------------------------------------------------------------------
Berries                                6,807    1.5%                 102
------------------------------------------------------------------------
Grapes                                11,043   10.5%               1,160
------------------------------------------------------------------------
Olives                                 1,363    3.5%                  48
------------------------------------------------------------------------
Vegetables and Melons                 31,030    0.5%                 155
------------------------------------------------------------------------
Organic vegetables                     6,206     50%               3,103
------------------------------------------------------------------------

[[Page 25204]]

 
Honey                                  7,688     50%               3,844
------------------------------------------------------------------------
Syrup                                  4,850    100%               4,850
------------------------------------------------------------------------
Herbs                                  1,776     10%                 178
------------------------------------------------------------------------
  Total                                                           30,497
------------------------------------------------------------------------

    Importers: FDA bases the number of importers on a database 
collected from shipment records that list all companies that were 
listed as importers or consignees for a covered product in 2001. These 
data were collected through FDA's OASIS system, which is an automated 
system for processing and making admissibility determinations for 
shipments of FDA-regulated products seeking to enter U.S. domestic 
commerce. Many of these facilities are of a type that would already be 
counted in the FDA FACTS or CBP (or nonemployer statistics) data. In 
order to avoid double counting, FDA assumes the following: (1) Any 
facility that identifies itself through its name as being a facility 
type covered by the CBP will already be counted in the CBP; (2) any 
facility that is a consignee only will already be counted in the CBP 
since its main business is not simply importing; (3) any facility self-
identified as an importer only is not in the CBP; and (4) all other 
facilities will be considered in an uncertain range of facilities 
affected. Since it is uncertain whether these facilities would already 
be counted in the CBP, we will use a uniform distribution to assign a 
probability of double counting in all of our cost estimates. For 
example, if the uniform distribution generates a probability of 0.5, 
then we will assume that half of these unclassified facilities are 
already in the CBP. A uniform distribution implies that any probability 
from zero to 100 is equally likely. FDA requests comments on these 
assumptions.
    Foreign establishments: FDA estimated the number of foreign 
manufacturing establishments that will be affected by the regulation 
from a count of foreign manufacturers identified in the OASIS system. 
We were unable to find reliable data on the number of foreign 
nonmanufacturing establishments and made the following assumptions to 
estimate their numbers: For the final holders of the article before the 
food or food packaging is imported into the United States, we assumed 
the same number of facilities as on the domestic side of the 
importation process, for a total of approximately 77,000 foreign final 
holders. For other firm types, we assumed that the ratio of foreign to 
domestic facilities of other types is approximately equal to the ratio 
of foreign to domestic manufacturers. We also assumed that the facility 
to firm ratio is the same for both foreign and domestic establishments. 
We request comments on the assumptions used to arrive at these 
estimates, as well as on reliable sources of data that would improve 
these estimates.
    Firm adjustment: Even though recordkeeping requirements apply to 
each facility within a firm, some of the overall burden will be 
estimated at a firm level in order to better capture the true burden of 
the regulation. In order to estimate the number of firms affected, we 
used the 1999 Statistics of U.S. Businesses, also from the U.S. Census 
Bureau (Ref. 5). This dataset is based on the CBP and Nonemployer 
Statistics, but calculates both the number of establishments and the 
number of firms for each NAICS code. The Census Bureau has not updated 
this dataset for the latest 2000 CBP, so we use the 1999 ratio of 
establishments to firms to adjust the 2000 CBP and 1999 nonemployer 
establishment count numbers to firm numbers.
    Costs per facility or per firm: Some costs of the regulatory 
options apply to firms, while other costs apply to individual 
facilities. FDA assumes that the costs to facilities are the same for 
transfers within firms as for transfers between firms. We request 
comments on this assumption. Costs fall into several broad categories:
    Additional record information: Any possible new regulation may 
require more information on the input, output, or source ingredients 
than is kept in existing food facility records. A limited amount of new 
information could be accommodated by a simple redesign of existing 
records, whereas requiring more new information may require a 
completely new design and collection. The extreme version of this 
requirement is explored under option 13: requiring all raw ingredients 
to be connected through records to all final products would cause a 
substantial change in recordkeeping and other business practices for 
many commingled commodities.
    Information Collection and Maintenance: The burden of maintaining 
extra information is a direct function of the amount of information 
required by this proposed regulation that is not normally collected by 
industry. This burden estimate will be substantially correlated with 
the redesign burden described previously.
    Storage time: A longer storage time may place more of a burden on 
industry, but will also increase the probability of having records 
available should an outbreak occur. The major determinant of the impact 
on costs of storage time requirements is whether the proposed storage 
times will be longer than normal industry practices. FDA believes that 
the storage times proposed in option 2 are within normal industry 
practices. Requiring longer retention times than those proposed in 
option 2 for records on perishable foods might impose an additional 
burden. This issue is discussed in more detail below and in options 2, 
8, and 9.
    Records access time: As in storage time, the major determinant of 
the impact of any required response time for records access is what 
firms would reasonably be able to achieve in an emergency situation 
with current business practices.

Data sources and cost estimates common to options:

    Labor costs: For all labor costs, FDA used a wage rate for an 
administrative worker of $25.10 from the Bureau of Labor Statistics 
occupational wage rates for the year 2000 (Ref. 6), doubled to include 
overhead costs. We assume that all labor for all options is by 
administrative workers. FDA lacks wage data specific to each of the 
foreign countries that export to the United States, so we used the wage 
rate for an administrative worker in the United States for the foreign 
wage rate. We

[[Page 25205]]

assume that the nature of the worker and the worker's wage would be 
about the same in foreign countries as in the United States. In open 
markets where trade takes place, real wage rates tend to be equal for 
similar work and productivity across countries.
    Learning costs: Foreign and domestic facilities will incur 
administrative costs in order to learn how to comply with any new 
regulation. Because most of the facilities covered by the proposed 
registration rule would be covered by this proposed rule, the 
administrative costs will be shared between the registration and 
recordkeeping rules. Those establishments covered by both regulations 
will probably search for information on both regulations at the same 
time and find information in the same places. Therefore, the learning 
cost estimates presented here probably overestimate the costs actually 
incurred by firms covered by both rules since there is the potential 
for double counting. The potential for double counting occurs in 
estimates of costs for firms covered by both rules. These include 
domestic manufacturers, wholesalers, warehouses, mixed-type facilities 
that engage in farming, foreign final holders, foreign manufacturers, 
and importers in any of these categories.
    Facilities will become aware of these requirements through normal 
business activities: Reading trade press, reading industry news, FDA 
outreach, or conversation with other business operators. Because 
facility operators or owners must be aware of the requirement to change 
their activity, we assume that becoming aware of the regulations will 
occur as part of normal business practice and so have no economic costs 
for the facility. There may be costs incurred, however, by FDA or trade 
organizations to undertake the outreach.
    Once the owner or operator of the facility becomes aware of the 
regulations, he or she will need to research the requirements of the 
regulation, which will require searching for a copy of the requirements 
and reading and understanding them. Owners or operators may search for 
a copy of these requirements on the Internet or at a library. FDA 
received comments indicating that many businesses might not have access 
to the Internet. Searching costs will be higher for facilities that do 
not have access to the Internet and have to write to FDA or find other 
sources of information. In the United States, 59.1 percent of the 
population accessed the Internet at least once in the 3 months prior to 
being surveyed (Ref. 7). A Small Business Administration (SBA) report 
cites two studies that report 40 and 47 percent of small businesses had 
Internet access in 1998 (Ref. 8). An updated report from Dunn and 
Bradstreet in 2002 reports that 71 percent of small businesses have 
Internet access (Ref. 9). Therefore, FDA assumes that 71 percent of 
domestic facilities will search for the requirements for both 
regulations electronically. FDA estimates it will take domestic 
facilities with Internet access 1 hour to search for the requirements, 
and domestic facilities without Internet access 2 hours to search for 
the requirements. FDA requests comments on these assumptions.
    FDA expects foreign establishments to go through the same 
searching, reading, and comprehending steps as domestic establishments. 
Costs for searching, reading, and comprehending the regulation 
requirements will be higher for some foreign establishments than for 
domestic establishments due to distance and language differences. Costs 
for searching, reading, and comprehending for some foreign 
establishments may be so high that, rather than become informed about 
the requirements before shipping, they learn about the requirements 
after shipments to the United States have been made. Costs for 
searching, reading, and comprehending for foreign facilities will vary 
depending on: (1) Whether the worker researching the regulatory 
requirements or the person who manufactures, processes, packs, 
transports, distributes, receives, holds, or imports food or food 
packaging can read and write in English; and (2) the level of Internet 
access available in exporting countries.
    The percent of foreign facilities with Internet access will be 
lower than in the United States. Although 71 percent of the small 
businesses in the United States have Internet access, only 3 percent of 
the population of China, the country that has the largest number of 
manufacturers that export to the United States, has access to the 
Internet (Ref. 7). To get an idea of how many facilities that export to 
the United States have access to the Internet, FDA looked at Internet 
access for the 26 countries that represent 80 percent of the 
manufacturers that export to the United States (OASIS) and the percent 
of the population that has access to the Internet worldwide for the 
remaining 20 percent. A weighted average of these 26 countries by the 
number of manufacturers suggests that 26 percent of the population that 
exports to the United States has Internet access. Because businesses 
are more likely to have Internet access than individuals, FDA adjusts 
the percent of the populations of other countries with Internet access 
upward by the percent difference in Internet access between individuals 
and small businesses in the United States. Seventy one percent of small 
businesses in the United States have Internet access versus 59 percent 
of the population, or the percent of businesses with Internet access 
represents a 20 percent increase over the population. Applying this 
adjustment to Internet access in foreign countries increases the 
percent of businesses with Internet access from 26 percent to 31 
percent. FDA therefore assumes that 31 percent of foreign manufacturers 
would be able to research the new requirements electronically. 
Regardless of whether the cost of obtaining Internet access is borne by 
the facility, or by a third party, for ease of computation FDA 
estimates the cost per facility. FDA expects that, due to the overall 
lower level of Internet access in foreign countries, it will be more 
difficult for foreign facilities without Internet access at their place 
of business than it will be for domestic facilities to access the 
Internet elsewhere. FDA assumes it would take foreign facility 
operators that do not have access to the Internet 5 additional hours to 
search for the recordkeeping requirements. FDA requests comments on 
these assumptions.
    In addition to search costs, there are costs for reading and 
comprehending the regulation requirements. Reading costs depend on the 
length of the document that describes the requirements and the reading 
speed of the user. Costs for comprehending the regulation requirements 
are linked to the reading speed of the user. For purposes of simplicity 
FDA assumes that, on average, the user comprehends the requirements 
described in the regulation after one reading. FDA requests comments on 
this assumption.
    The online speed-reading training course, TurboRead Speed Reading 
(Ref. 10), estimates that the average reading speeds for the vast 
majority of the worlds' readers is between 200 and 250 words per 
minute. Dividing the approximate length of the current proposal 
(approximately 44,450 words) by an average speed of 225 words per 
minute yields an estimate of the time required to read the regulation 
of about 3 hours and 18 minutes. Because the length of the document may 
change and the approximate nature of the calculation, FDA rounds up to 
the nearest half-hour to 3 1/2 hours for the time required for reading 
and comprehending the requirements of this rule for all English reading 
users. FDA requests comments on this assumption.

[[Page 25206]]

    Users who have limited ability to read English may take longer to 
read and comprehend the requirements. Comments suggest that many 
foreign manufacturers are limited in their ability to read and write 
English. Estimates of the number of people outside of countries where 
English is the primary language who are able to speak English fluently 
vary widely, ranging from 300 million to 750 million (Ref. 11). To 
estimate the number of English speakers outside of the United States, 
FDA adds the number of English speakers in countries where English is 
the primary language, excluding the United States (151 million), the 
number of English speakers in countries where English is a secondary 
language (300 million), and the midpoint (525 million) of the range of 
the estimate of the number of speakers of English as a foreign 
language. FDA then divides this total number of English speakers by 5.9 
billion--the world population minus the U.S. population (Ref. 11) to 
tentatively conclude that 16 percent of foreign manufacturers read and 
write English well enough to research the recordkeeping requirement 
directly. FDA requests comments on this calculation. Facilities without 
the capacity to read and write English would have to hire a translator 
to aid them in comprehending the regulatory requirements. 
Alternatively, trade groups, distributors, or the government may 
provide translation services. Regardless of whether the translation is 
paid for directly by the registrant or a third party, for ease of 
computation we assume there is a cost for translation for 84 percent of 
foreign facilities. FDA assumes it would take foreign facility 
operators who do not understand English 5 additional hours to read and 
comprehend the recordkeeping requirements. FDA requests comments on 
these assumptions.
    Table 3 summarizes these cost estimates, which do not differ across 
any of the options that do not grant exemptions. These include costs 
for searching, reading, and comprehending the requirements of the rule 
for English and non-English speaking users, and for users with and 
without Internet access.

                                            Table 3.--Learning Costs
----------------------------------------------------------------------------------------------------------------
                                                                                                      Average
                                                                Firm Count      Cost (at labor    Learning Costs
                                                                                rate of $25.10)      per Firm
----------------------------------------------------------------------------------------------------------------
Domestic
----------------------------------------------------------------------------------------------------------------
  Manufacturers                                                       43,376          $5,215,000            $120
----------------------------------------------------------------------------------------------------------------
  Wholesalers/Warehouses                                              95,745         $11,511,000            $120
----------------------------------------------------------------------------------------------------------------
  Packaging\1\                                                        73,813          $8,875,000            $120
----------------------------------------------------------------------------------------------------------------
  Transporter/Packer                                                  16,773          $2,017,000            $120
----------------------------------------------------------------------------------------------------------------
  Retail Grocery and Specialty Food                                  207,657         $24,966,000            $120
----------------------------------------------------------------------------------------------------------------
  Convenience Stores                                                 128,985         $15,508,000            $120
----------------------------------------------------------------------------------------------------------------
  Mixed-Type Facilities that Engage in Farming                        30,497          $3,667,000            $120
----------------------------------------------------------------------------------------------------------------
  Importer                                                             5,036            $605,000            $120
----------------------------------------------------------------------------------------------------------------
Total Domestic                                                       601,883         $72,364,000            $120
----------------------------------------------------------------------------------------------------------------
Foreign
----------------------------------------------------------------------------------------------------------------
  Final Holders                                                       77,427         $23,613,000            $305
----------------------------------------------------------------------------------------------------------------
  Manufacturers                                                      125,450         $38,258,000            $305
----------------------------------------------------------------------------------------------------------------
  Other Facility Types                                               457,836        $139,624,000            $305
----------------------------------------------------------------------------------------------------------------
Total Foreign                                                        660,713        $201,495,000            $305
----------------------------------------------------------------------------------------------------------------
\1\ Includes both outer packaging material and food contact substances.

    New and closing facilities: In future years new businesses will 
open and existing businesses will close. Since the total number of 
firms in the food industry remains stable from year to year, we assume 
that the rate at which new firms enter the industry is the same as the 
rate at which existing firms leave the industry. The Small Business 
Administration estimates that in 2000 approximately 10 percent of all 
businesses were new businesses and 10 percent of all businesses closed 
(Ref. 31). FDA estimates that new businesses will also have to incur 
learning costs.
    New information collection costs: These costs include the burden of 
redesigning records to accommodate new information specified in 
possible options, and the burden of collecting and maintaining that new 
information within the recordkeeping system.
    Records redesign: In order to estimate the cost of adding 
additional information to a firm's records, we used the Label Cost 
Model developed for FDA by RTI International (Ref. 13). We modified 
this model to estimate the graphic design and printing cost for adding 
information onto existing records such as Bills of Lading, Invoices, 
and Purchase Orders. We also used the model to estimate the cost of 
designing an entirely new input-to-output ingredient record for part of 
option 13.
    Based on a sample of bills of lading collected through FDA's early 
outreach efforts and through the Web sites of companies and trade 
associations, FDA assumes that firms already collect most

[[Page 25207]]

of the information necessary to comply with options 2-12. Bills of 
lading, purchase orders, or invoices typically have the full address of 
all parties, the transaction date, and descriptions of the relevant 
food articles. Based on the samples, FDA assumes that firms will have 
to add a limited amount of new information to their standard documents. 
This new information principally depends on how the precise definition 
of ``description of the food article'' developed in these regulations 
differs from that commonly used by industry under its current 
recordkeeping practices. In some of the sample bills of lading the 
description of the food article being transported did not have the 
precision required under these proposed regulations. In addition, some 
bills of lading did not have a design that would allow for the 
identification of other entities in custody, or control of the 
transported food articles, or an official spot to record the mode of 
transportation.
    The FDA Labeling Cost Model was designed to estimate the costs of 
designing and printing new food labels, but many of the design issues 
should be similar when designing and printing a new food product 
record. For example, both a label and a document designer must make 
similar decisions regarding wording and spacing, and both activities 
should include administrative activity, graphic design, and printing. 
The model also includes cost categories, such as analytical testing and 
focus groups that we do not use, since they are not relevant for 
document redesign. FDA does acknowledge that these estimates are only 
approximations; we believe the values this model generates are 
reasonable, and request comments on all assumptions. For the purposes 
of the analysis of options 2-12, FDA assumes a limited information, 
one-color redesign of a paper document. For the purposes of option 13, 
FDA assumes an additional full design of a new paper document.
    The model also includes an estimate of central tendency, and a low 
and a high estimate for each cost category included in the document 
redesign cost. For each component of cost in this model, FDA's 
contractor, RTI International, received a range of estimates from food 
companies. The lowest of these estimates is considered the limit of the 
low range, and the highest of the estimates is considered the limit of 
the high range. The low and high range of total cost is calculated by 
adding together all of the low and high range estimates of each 
component cost, so the low and high range estimates of this model are 
unlikely. The estimated cost of a limited information redesign in year 
1 is $1,309, with an uncertainty range of between $897 and $2,299. The 
estimated cost of a full information redesign in year 1 is $6,193, with 
an uncertainty range of between $4,653 and $11,198. The label cost 
model estimates an approximately 10 percent efficiency savings in 
redesign costs incurred by very small firms in year 2.
    The cost of redesigning product records will not be borne by all 
firms. For each step in the chain of custody, copies of the same bills 
of lading or invoices probably will be used for records of the 
immediate previous source, records of the immediate subsequent 
recipient, and transportation records. Consider the following example 
of a long chain of custody for a food product: (1) Farmer, (2) 
transporter, (3) bulk collection (e.g. grain silo), (4) transporter, 
(5) processor, (6) transporter, (7) warehouse, (8) transporter, and (9) 
retailer. The number of entities in this series is clearly limited by 
the total number of transporters in the country, so FDA assumes that 
all transporting firms have to redesign their records. This supply 
chain should generate four sets of bills of lading and four sets of 
invoices for all products. Similarly, a six-step supply chain should 
generate three separate sets of records. Since farmers are exempt under 
this proposed regulation, the number of records possibly containing new 
information is roughly equal to the number of facilities in the supply 
chain, but FDA assumes a substantial number of nontransporters will 
depend on storing only the redesigned bill of lading to comply with the 
regulation. Assuming an equal probability of a firm using the bill of 
lading or redesigning its own documents, FDA assumes that half of the 
nontransporting firms will incur redesign costs.
    We modify this estimate for convenience stores. Individual 
convenience stores have a small sales volume and--according to a 
comment received during FDA's early outreach efforts--only 11.4 percent 
of their average total sales are for food products. In addition, the 
majority of convenience stores are locally owned franchises of large 
corporations, and these stores may have access to the parent 
corporation to assist in redesign. FDA therefore assumes that 90 
percent of convenience stores will rely on other parties for records 
redesign. The total costs for other firm types may also be an 
overestimate; FDA expects that trade groups may assist in the needed 
redesign of existing records, further lowering the burden, but we do 
not estimate the cost savings for this activity.
    In addition, we make a further adjustment for foreign facilities: 
According to comments received, firms exporting from the European Union 
(EU) are already subject to similar recordkeeping requirements under EU 
regulation 178/2002. Article 18: Traceability of the EU regulation 
states: * * *
    (1) The traceability of food, feed, food-producing animals, and any 
other substance intended to be, or expected to be, incorporated into a 
food or feed shall be established at all stages of production, 
processing and distribution.
    (2) Food and feed business operators shall be able to identify any 
person from whom they have been supplied with a food, a feed, a food-
producing animal, or any substance intended to be, or expected to be, 
incorporated into a food or feed. To this end, such operators shall 
have in place systems and procedures, which allow for this information 
to be made available to the competent authorities on demand.
    (3) Food and feed business operators shall have in place systems 
and procedures to identify the other businesses to which their products 
have been supplied. This information shall be made available to the 
competent authorities on demand * * *.
(Ref. 14).
    Because of these regulations, FDA assumes that the firms from EU 
member states (31.9 percent of all foreign firms that export to the 
United States) will already be subject to recordkeeping requirements 
similar to the requirements of this proposed rule. Therefore these 
foreign firms would not have to redesign their records and would not 
incur a redesign burden.
    Additional records maintenance: FDA expects that personnel at most 
facilities will incur a burden in order to collect and maintain a 
limited amount of additional information. However, as in the redesign 
section previously discussed in this document, FDA assumes that one set 
of records can serve as source, transportation, and recipient records, 
so the estimated burden of collecting and maintaining the additional 
information will be shared among more than one facility.
    FDA does not have a direct estimate of this recordkeeping burden; 
we rely on a previous analysis of Juice Hazard Analysis and Critical 
Control Point (HACCP) recordkeeping (Ref. 15) because that analysis 
also dealt with the costs of additional recordkeeping. In that analysis 
an estimate of 3 minutes per hour is made of the burden that would be 
incurred by some food

[[Page 25208]]

processing facilities for the additional monitoring of critical control 
points and keeping HACCP system records that would be required. In this 
proposed rule the additional monitoring activities required would be 
negligible since records will likely only need to be modified. 
Furthermore, compared to the Juice HACCP requirements, there would be 
less additional information that would need to be maintained in this 
proposed rule. If the weekly burden for additional monitoring and 
recordkeeping required for Juice HACCP compliance is 120 minutes 
(assuming 3 minutes per hour of additional monitoring and recordkeeping 
for 8 hours a day and 5 days a week) a burden estimate of about 6 
minutes per day or 30 minutes per week seems reasonable for this 
proposed rule. We request comments on this assumption. FDA treats 
foreign facilities already subject to a similar recordkeeping 
regulation as already in compliance, and assumes that the burden of 
additional records maintenance will be shared among an average of two 
covered entities, including transporters, for an average of 15 minutes 
per week per facility or 13 hours per year per facility.
    Grocery stores, convenience stores, and packaging producers and 
distributors may have different additional records maintenance burdens. 
Since, under the proposed rule, grocery stores only have to maintain 
immediate previous source records, their additional burden may be lower 
but they also receive many shipment records they would need to 
maintain. In a comment FDA received during our early outreach efforts, 
a large retail grocery chain estimated that they received approximately 
300 purchase orders per store per year, or approximately 6 purchase 
orders per week per store. A purchase order could contain many invoices 
and may be more of a burden to maintain, so FDA considers the estimated 
additional burden of 15 minutes per week reasonable for grocery stores. 
We request comments on the assumptions used to derive this estimate.
    Convenience stores have a lower records maintenance burden than 
grocery stores. According to comments received during our early 
outreach efforts, approximately 50-70 percent of grocery store stock 
keeping units (SKUs) are food products, while only 11.4 percent of the 
sales of convenience stores are from food products. SKUs and sales are 
not equivalent measures of size, but this comparison is a reasonable 
basis to lower the estimated additional burden for convenience stores 
relative to grocery stores. Dividing the grocery store burden by the 
ratio of the percent of food sales for convenience stores and grocery 
stores (assumed to be 60 percent, or an average between 50 percent and 
70 percent of SKU totals) yields an additional records maintenance 
burden of approximately 2.5 hours per year for convenience stores. We 
request comments on the assumptions used to derive this estimate.
    Finally, the data sources do not distinguish between facilities 
that produce packaging for food and packaging for other products. 
Although we assume that all packaging facilities potentially could be 
producing or handling food packaging, not all of their output would be 
dedicated in this way. We assume that, for the average packaging 
facility, 50 percent of the output is for food packaging and that an 
information collection burden of 50 percent would be required of 
packaging facilities. We request comments on this assumption.
    Storage costs: Although FDA does not believe the marginal burden of 
storing records to the specified times in any of the options is zero, 
evidence on record storage times suggests that the burden would be 
minimal. Since FDA was unable to gather any evidence suggesting the 
size of this extra burden, however small, and since the specified 
storage time requirement in these options is well within industry 
norms, we estimate the cost for extra storage time to be zero.
    Many comments received in response to FDA's early outreach 
supported requirements of either 1 year for perishable products or 2 
years for nonperishable products, stating that the maximum allowable 2-
year requirement was both reasonable and necessary. In addition, a 
survey of dietary supplement manufacturing practices conducted by FDA's 
contractor, RTI International, asked a representative sample of dietary 
supplement manufacturers how long they kept records of shipped 
ingredients (Ref. 16). The facilities had a choice of two response 
types: Keeping records a certain amount of time past the date of 
expiration, and keeping records a certain amount of time past the 
manufacturing date. The survey did not distinguish between perishable 
and nonperishable ingredients. Because of nonresponse weighting, 
stratification, and deductive disclosure problems, FDA's contractor, 
RTI International, did not report confidence intervals for these 
estimates, but the mean number of years that firms kept data records 
was 2.31 years for facilities that reported retention from the date of 
the expiration of the ingredient, and 4.57 years for facilities that 
reported retention from the date of product manufacture. The lowest 
mean response from any facility category was 1.94 years from the 
expiration date of the ingredient, which is still probably more than 2 
years from the delivery date.
    Access costs: For purposes of evaluating the marginal cost of the 
record access time provision, FDA considered two possible requirements: 
The combination of 4 hours during normal business hours and 8 hours at 
other times, or 1-day regardless of when the request was made. 
Accessing records in a shorter time period than what industry is 
currently capable of will impose a burden on firms and facilities, and 
the shorter the required response time the larger the burden. The cost 
of records access response fall into two categories: Costs that would 
be incurred only in the event that FDA requests records under this 
authority, and costs that would be incurred to plan for records access 
and to change business practices to allow for a rapid response. The 
latter costs would be incurred regardless of whether or not FDA ever 
requested records under this authority.
    For the first cost, FDA expects that in the event of a records 
request under this authority, any access requirements less than the 
current average access time of 2-3 days would impose a burden on 
businesses involved in providing those records. All other things equal, 
a 4-hour or 8-hour requirement would probably impose a greater burden 
than the 1-day requirement. However, we cannot quantify the probability 
of this burden for the same reason as the lack of quantification in the 
benefits section: It is impossible to predict when FDA will have to 
invoke this authority in response to an adulterated food that presents 
a threat of serious adverse health consequences or death to humans or 
animals.
    For the second cost, FDA assumes that a 1-day records access time 
requirement is approximately the shortest possible response time that 
would not compel some firms to change their business practices. The 
costs for a 1-day records access requirement are considered in option 
5. We assume that the 4-hour or 8-hour response time required in all 
options except option 5 is more likely to compel business practice 
changes and preemptive emergency planning than is the 1-day response 
requirement. A 1-day response time is possible with the types of 
recordkeeping systems currently in use, including automated 
recordkeeping technology, and offsite storage and paper retrieval. 
While the average access

[[Page 25209]]

time for FDA traceback investigations is 2-3 days, we believe the same 
information could be provided in one day with the types of 
recordkeeping systems currently in use. Therefore, the difference 
between the cost of a 2-3 day response time and a 1-day response time 
is assumed to be negligible. However, the shorter access time 
requirements of 4 hours or 8 hours would likely impose a new burden on 
a number of firms.
    FDA assumes that regardless of whether or not the firms maintain 
records electronically, every firm would probably have to devise a 
predetermined compliance strategy to deal with the situation where FDA 
requested records under this authority. Furthermore, a comprehensive 
response plan may allow firms to maintain their current business 
practices, such as maintaining paper records or maintaining records 
offsite, and still comply with a request, so it may be the lowest cost 
solution. Therefore, as a first estimate of the potential impact of 
this proposed rule, FDA assumes a burden for each firm of devising a 
response plan that could accommodate a 4-hour or 8-hour access time for 
an FDA record request. Since European firms are required to supply 
their tracing records on demand to the appropriate authorities, FDA 
assumes that they already have in place a plan that would accommodate a 
4-hour or 8-hours records required response time. (Ref. 14).
    In the analysis of previous regulations, we estimated a related 
planning cost for food firms. In the juice HACCP rule, (Ref. 15), we 
estimated a 60-hour labor burden per firm of developing a HACCP plan. 
Developing a HACCP plan is very complicated and includes the 
establishment of: (1) Critical control points and critical limits for 
every hazard identified, (2) protocols on how to manage deviations from 
these limits, and (3) procedures for verifying and validating all 
aspects of the plan. By contrast, developing a records access plan 
requires: (1) Evaluating current recordkeeping practices including 
records maintenances and records storage practices, which we assume 
would take on average about 3 hours; and (2) identifying and planning 
for any changes in recordkeeping practices that would be required, 
which we assume would also take on average about 3 hours. FDA considers 
the planning needed to deal with a possible records request under this 
authority much less complicated than what would be needed in a HACCP 
plan. If developing a HACCP plan takes 60 hours, then 6 hours of 
administrative labor per firm (lowered to 3 hours per convenience store 
firm) is a reasonable estimate of the burden imposed from this planning 
requirement, which is far more simple than a HACCP plan. We request 
comments on this assumption. FDA estimates that new businesses will 
also have to incur records access costs.
    FDA requests comments regarding how many firms may need to adopt a 
new records retention strategy under both the 4-hour or 8-hour, and 1-
day records access time requirements, and the additional time and 
capital needed to comply with these requirements. We plan to conduct 
further research on all of these burden estimates before publishing the 
final rule, and expect that the estimates could change.
Option 2: Comprehensive foreign and domestic coverage with 4-hour and 
8-hour records access times and 1 and 2 year records retention times.
    FDA assumes that facilities currently collect and keep records with 
most of the information required by this option in their normal 
business activities. FDA assumes that learning and redesign costs will 
be incurred per firm, and that the additional records maintenance costs 
will be incurred per facility. For all options the learning costs are 
explained in the general cost section above.
    Redesign Costs, option 2. Table 4 of this document presents the 
average redesign cost calculations. For the purposes of presentation, 
Table 4 only includes calculations for the mean number of exclusive 
importers affected. FDA assumes that large and small firms incur all 
redesign costs in the first year following the final rule, while very 
small firms will incur all redesign costs in the second year following 
the final rule. The label cost model estimated planning efficiencies of 
10 percent for redesign processes further than 1 year in the future, 
and this savings is included in the categorical totals in table 4.

                                                           Table 4.--Redesign Costs, Option 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                         Average Middle
                                                               Firm Count      Middle Estimate      Low Estimate      High Estimate      Cost per Firm
--------------------------------------------------------------------------------------------------------------------------------------------------------
Domestic
--------------------------------------------------------------------------------------------------------------------------------------------------------
  Manufacturers                                                       18,474        $22,488,000        $15,402,000        $39,497,000             $1,217
--------------------------------------------------------------------------------------------------------------------------------------------------------
  Wholesalers/Warehouses                                              38,476        $46,601,000        $31,916,000        $81,845,000             $1,211
--------------------------------------------------------------------------------------------------------------------------------------------------------
  Packaging\1\                                                        34,633        $42,092,000        $28,827,000        $73,926,000             $1,215
--------------------------------------------------------------------------------------------------------------------------------------------------------
  Transporters/Packers                                                15,171        $18,243,000        $12,494,000        $32,040,000             $1,203
--------------------------------------------------------------------------------------------------------------------------------------------------------
  Retail Grocery and Specialty Food                                   76,639        $92,308,000        $63,220,000       $162,122,000             $1,204
--------------------------------------------------------------------------------------------------------------------------------------------------------
  Convenience Stores                                                   6,887         $8,415,000         $5,763,000        $14,779,000             $1,222
--------------------------------------------------------------------------------------------------------------------------------------------------------
  Mixed-Type Facilities that Engage in Farming                        12,199        $14,786,000        $10,127,000        $25,969,000             $1,212
--------------------------------------------------------------------------------------------------------------------------------------------------------
  Importers                                                            7,561         $9,165,000         $6,277,000        $16,096,000             $1,212
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Domestic                                                       210,038       $254,098,000       $174,026,000       $446,274,000             $1,210
--------------------------------------------------------------------------------------------------------------------------------------------------------
Foreign
--------------------------------------------------------------------------------------------------------------------------------------------------------
  Final Holders                                                       21,091        $25,565,000        $17,509,000        $44,900,000             $1,212
--------------------------------------------------------------------------------------------------------------------------------------------------------
  Manufacturers                                                       36,385        $44,103,000        $30,205,000        $77,459,000             $1,212
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 25210]]

 
  Other Facility Types                                               124,714       $151,170,000       $103,532,000       $265,500,000             $1,212
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Foreign                                                        182,191       $220,838,000       $151,246,000       $387,859,000             $1,212
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Includes both outer packaging and food contact substances.

    Additional records maintenance: Table 5 of this document presents 
the calculations for additional records maintenance costs. Based on the 
previous discussion, the annual burden per facility that is assumed in 
the computation of the cost of additional records maintenance is: 13 
hours for most facilities, 2.5 hours for convenience stores, and 6.5 
hours for packaging facilities. A $25.10 hourly wage is also assumed in 
the computation. For example, the additional records maintenance costs 
for manufacturers reported in the top row of Table 5 is calculated by 
multiplying the number of facilities (43,376) by the number of hours 
required (13) and the hourly wage ($25.10).
    In Table 5, variation in the number of importers reflects the range 
of uncertainty in the data on the number of these facilities. 
Additional records maintenance costs are assumed to be incurred by 
facility. The estimated average cost per firm for additional records 
maintenance is also reported in table 5 and is computed using the 
facilities-to-firm adjustment factor reported in table 1. FDA assumes 
that facilities will begin to incur the additional records maintenance 
burden in the second year following the enactment of the final rule. 
There is considerable nonquantified uncertainty surrounding these 
estimates; FDA requests comments.

                            Table 5.--Additional Records Maintenance Costs, Option 2
----------------------------------------------------------------------------------------------------------------
                                                                                                   Average Cost
                                                              Facility Count         Cost            per Firm
----------------------------------------------------------------------------------------------------------------
Manufacturers                                                         43,376         $14,154,000            $383
----------------------------------------------------------------------------------------------------------------
Wholesalers/Warehouses                                                95,745         $31,242,000            $406
----------------------------------------------------------------------------------------------------------------
Packaging\1\                                                          73,813         $12,043,000            $174
----------------------------------------------------------------------------------------------------------------
Transporters/Packers                                                  16,773          $5,473,000            $361
----------------------------------------------------------------------------------------------------------------
Retail Grocery and Specialty Food                                    207,657         $67,759,000            $442
----------------------------------------------------------------------------------------------------------------
Convenience Stores                                                   128,985          $8,094,000            $118
----------------------------------------------------------------------------------------------------------------
Mixed-Type Facilities that Engage in Farming                          30,497          $9,951,000            $408
----------------------------------------------------------------------------------------------------------------
Importers                                                              5,036          $1,643,000            $408
----------------------------------------------------------------------------------------------------------------
Total Domestic                                                       601,883        $150,359,000            $335
----------------------------------------------------------------------------------------------------------------
Foreign
----------------------------------------------------------------------------------------------------------------
  Final Holders                                                       52,728         $17,205,000            $278
----------------------------------------------------------------------------------------------------------------
  Manufacturers                                                       85,431         $27,876,000            $261
----------------------------------------------------------------------------------------------------------------
  Other Facility Types                                               311,786        $101,736,000            $278
----------------------------------------------------------------------------------------------------------------
Total Foreign                                                        449,945        $146,817,000            $274
----------------------------------------------------------------------------------------------------------------
\1\ Includes both outer packaging and food contact substances.

    Access costs: For the purposes of this analysis, as mentioned 
above, FDA assumes that the 4-hour or 8-hour records access times in 
option 2 imply extra planning and may imply a change in record 
retention practices for many firms. FDA has little information on the 
possible impact of this requirement, and requests comments. As 
previously discussed, the computation of the access costs reported in 
Table 6 of this document assumes a 6-hour burden per firm for 
developing an access plan and a $25.10 hourly wage. FDA assumes that 
all access planning costs will be incurred in the first year following 
the final rule for large and small firms, and in the second year 
following the final rule for very small firms. Table 6 presents the 
calculations.

[[Page 25211]]



                                         Table 6.--Access Costs Option 2
----------------------------------------------------------------------------------------------------------------
                                                                                                   Average Cost
                                                                Firm Count           Cost            per Firm
----------------------------------------------------------------------------------------------------------------
Domestic
----------------------------------------------------------------------------------------------------------------
  Manufacturers                                                       36,948          $5,564,000            $151
----------------------------------------------------------------------------------------------------------------
  Wholesalers/Warehouses                                              76,952         $11,589,000            $151
----------------------------------------------------------------------------------------------------------------
  Packaging\1\                                                        69,266         $10,431,000            $151
----------------------------------------------------------------------------------------------------------------
  Transporters/Packers                                                15,171          $2,285,000            $151
----------------------------------------------------------------------------------------------------------------
  Retail Grocery and Specialty Food                                  153,277         $23,084,000            $151
----------------------------------------------------------------------------------------------------------------
  Convenience Stores                                                  68,866          $5,186,000             $75
----------------------------------------------------------------------------------------------------------------
  Mixed-Type Facilities that Engage in Farming                        24,397          $3,674,000            $151
----------------------------------------------------------------------------------------------------------------
  Importers                                                            4,029            $607,000            $151
----------------------------------------------------------------------------------------------------------------
Total Domestic                                                       448,905         $62,420,000            $139
----------------------------------------------------------------------------------------------------------------
Foreign
----------------------------------------------------------------------------------------------------------------
  Final Holders                                                       42,182          $6,353,000            $151
----------------------------------------------------------------------------------------------------------------
  Manufacturers                                                       72,770         $10,959,000            $151
----------------------------------------------------------------------------------------------------------------
  Other Facility Types                                               249,429         $37,564,000            $151
----------------------------------------------------------------------------------------------------------------
Total Foreign                                                        364,381         $54,876,000            $151
----------------------------------------------------------------------------------------------------------------
\1\ Includes both outer packaging and food contact substances.

    Total quantified costs for option 2. Table 7 of this document 
presents the total quantifiable startup and recurring costs for option 
2, and a range of uncertainty based on the uncertain number of 
exclusive importers and the range of uncertainty in design costs. We 
calculated the range of uncertainty using the 5th and 95th percentiles 
of the range of costs, with a uniform distribution of importers and a 
separate triangular distribution of redesign costs for each facility 
category and size. Both distributions represent the most amount of 
information implied by the known characteristics of the uncertain 
ranges. This procedure allows each component of cost uncertainty to 
vary independently, but this range cannot be interpreted in 
probabilistic terms.
    Table 7 of this document presents the range of undiscounted annual 
costs of future compliance for option 2. Costs incurred in year 1 are 
learning costs for all existing firms, redesign costs for large and 
small firms, and access planning costs for large and small firms. Costs 
incurred in year 2 are redesign and access planning costs for very 
small firms. Recurring costs are the additional records maintenance 
costs incurred by all firms and learning costs and records access costs 
for new firms. The mean, low, and high cost estimates presented here 
characterize the known and quantifiable uncertainties as they are 
defined previously. The cost estimate that is greater than 5 percent of 
all other estimates generated by the model is reported as the low cost 
estimate. The cost estimate that is greater than 95 percent of all 
other estimates generated in the model is reported as the high cost 
estimate. Table 8 presents the discounted annual costs incurred in 
future years and the present value of total costs incurred for option 
2. The computations are made using the mean costs, and assume no 
increase in real labor cost and a 7 percent real discount rate. 
Although the recurring costs reported for year 3 and later years are 
the same in nominal terms ($341,669,000 reported in Table 7), they are 
reported in discounted terms for each year in Table 8 to account for 
the fact that a dollar in 5 years, for example, is worth less than a 
dollar today. Each cell that contains only the symbol ``:'' is meant to 
convey the continuation of the series depicted in the cells that 
precede it from above. FDA acknowledges considerable nonquantifiable 
uncertainty in the estimates presented in Table 7 and requests 
comments.

                                     Table 7.--Total Annual Costs, Option 2
----------------------------------------------------------------------------------------------------------------
                                                                                               Average Mean Cost
                                             Mean               Low                High             per Firm
----------------------------------------------------------------------------------------------------------------
Year 1                                     $412,474,000       $389,256,000       $432,307,000               $415
----------------------------------------------------------------------------------------------------------------
Year 2                                     $737,595,000       $665,189,000       $816,183,000               $741
----------------------------------------------------------------------------------------------------------------
Year 3 and later years                     $341,669,000       $327,575,000       $355,445,000               $343
----------------------------------------------------------------------------------------------------------------


[[Page 25212]]


               Table 8.--Discounted Annual Costs, Option 2
Year 1                                    $412,474,000
------------------------------------------------------------------------
Year 2                                    $689,341,000
------------------------------------------------------------------------
Year 3                                    $298,427,000
------------------------------------------------------------------------
Year 4                                    $278,904,000
------------------------------------------------------------------------
Year 5                                    $260,658,000
------------------------------------------------------------------------
Year 6                                    $243,605,000
------------------------------------------------------------------------
:\1\                                      :
------------------------------------------------------------------------
:                                         :
------------------------------------------------------------------------
Year 15                                   $132,505,000
------------------------------------------------------------------------
:                                         :
------------------------------------------------------------------------
:                                         :
------------------------------------------------------------------------
Year 30                                   $48,026,000
------------------------------------------------------------------------
:                                         :
------------------------------------------------------------------------
:                                         :
------------------------------------------------------------------------
Present Value                             $5,663,484,000
------------------------------------------------------------------------
\1\ Each cell that contains only the symbol ``:'' is meant to convey the
  continuation of the series depicted in the cells that precede it from
  above.

Option 3: Require all elements of option 2 (comprehensive coverage, 4 
or 8 hour records access, 1 and 2 year records retention for 
perishables and all other products) except persons who manufacture, 
process, pack, hold, receive, distribute, transport, or import outer 
food packaging are excluded.
    FDA identifies the option excluding outer packaging facilities 
separately because the fundamental risk to the public from contaminated 
packaging is probably different from the risk associated with 
contaminated food, including inner materials that are food contact 
substances.
    FDA was unable to find any data that discriminated between outer 
packaging manufacturers and distributors and those that manufacture or 
distribute materials that FDA currently regulates as food contact 
substances, including plastic beverage bottles and inner cereal box 
liners. The possibility exists that some of these data describe 
manufacturers and distributors of outer packaging materials only, and 
the remainder describe manufacturers and distributors of both outer 
packaging materials and food contact substances. To distinguish between 
manufacturers and distributors of outer packaging materials and food 
contact substances, we assume that the data is distributed uniformly 
over the interval between 0 and 1, and each packaging facility has an 
equal probability (0.5) of being either one or both types of 
facilities. Based on this distributional assumption, the expected 
number of manufacturers and distributors of outer packaging materials 
exclusive of food contact substances is 36,906.5 (or 73,813 divided by 
2). We request comments on this distributional assumption.
    The range and discounted costs for option 3 are estimated to be the 
same as for option 4, as explained in the following paragraphs, and are 
reported in tables 9 and 10. The discount computations are made using 
mean costs. Although the recurring costs reported for year 3 and later 
years are the same in nominal terms (i.e., $334,682,000 reported in 
table 9), they are reported in discounted terms for each year in table 
10. As previously discussed, costs incurred in year 1 are learning 
costs for all firms and redesign and access planning costs for large 
and small firms. Costs incurred in year 2 are redesign and access 
planning costs for very small firms. Recurring costs are the additional 
records maintenance costs incurred by all firms, and learning costs and 
records access costs for new firms. The mean, low, and high cost 
estimates presented here characterize the known and quantifiable 
uncertainties as they are defined previously. The cost estimate that is 
greater than 5 percent of all other estimates generated by the model is 
reported as the low cost estimate. That cost estimate that is greater 
than 95 percent of all other estimates generated in the model is 
reported as the high cost estimate.
Option 4: Require all components of option 3 (no outer packagers, 4 or 
8 hour records access, 1 and 2 year records retention for perishables 
and all other products) but do not require persons that are required to 
establish and maintain records on food to establish and maintain 
records on the food's outer packaging.
    FDA is unable to distinguish between the costs incurred when these 
persons are required to keep records on the food's outer packaging and 
when they are not required to keep such records. Persons required to 
establish and maintain records on foods will also keep records on the 
food contact substances they use because these substances meet the 
definition of food. Moreover, we believe that a large portion of outer 
packaging materials used by persons required to establish records is 
shipped to that person along with food contact substances. 
Consequently, persons keeping records on food contact substances are 
also likely to keep records on the food's outer packaging under current 
recordkeeping practices. As a result, the cost savings from exempting 
recordkeeping on outer packaging are assumed to be negligible and the 
costs of this option are assumed to be the same as option 3. We request 
comments on this assumption.
    Tables 9 and 10 present the range and discounted cost estimates for 
options 3 and 4.

                                  Table 9: Total Annual Costs, Options 3 and 4
----------------------------------------------------------------------------------------------------------------
                                                                                               Average Mean Cost
                                             Mean               Low                High             per Firm
----------------------------------------------------------------------------------------------------------------
Year 1                                     $400,491,000       $318,274,000       $404,529,000               $417
----------------------------------------------------------------------------------------------------------------
Year 2                                     $711,860,000       $566,254,000       $738,803,000               $741
----------------------------------------------------------------------------------------------------------------
Year 3 and later years                     $334,682,000       $279,074,000       $334,079,000               $348
----------------------------------------------------------------------------------------------------------------


[[Page 25213]]


          Table 10.--Discounted Annual Costs of Options 3 and 4
Year 1                                   $400,491,000
------------------------------------------------------------------------
Year 2                                   $665,290,000
------------------------------------------------------------------------
Year 3                                   $292,324,000
------------------------------------------------------------------------
Year 4                                   $273,200,000
------------------------------------------------------------------------
Year 5                                   $255,327,000
------------------------------------------------------------------------
Year 6                                   $238,624,000
------------------------------------------------------------------------
:\1\                                     :
------------------------------------------------------------------------
:                                        :
------------------------------------------------------------------------
Year 15                                  $129,795,000
------------------------------------------------------------------------
:                                        :
------------------------------------------------------------------------
:                                        :
------------------------------------------------------------------------
Year 30                                  $47,044,000
------------------------------------------------------------------------
:                                        :
------------------------------------------------------------------------
:                                        :
------------------------------------------------------------------------
Present Value as of Year 1               $5,534,165,000
------------------------------------------------------------------------
\1\ Each cell that contains only the symbol ``:'' is meant to convey the
  continuation of the series depicted in the cells that precede it from
  above.

Option 5: Require all components of option 4, but change the required 
records access time to 24 hours.
    All costs for this option will be identical to those for option 4 
except for the access costs for records detailed in that section. As 
mentioned previously, FDA believes that 24 hours is the least amount of 
time allowable that would not cause any firms to need to plan for a 
rapid response or change their business practices. While the average 
access time for FDA traceback investigations is 2-3 days, we believe 
the same information could be provided in 1 day with the types of 
recordkeeping systems currently in use, including automated 
recordkeeping technology, and offsite storage and paper retrieval. 
Therefore, the difference between the cost of a 2-3 day response time 
and a 1-day response time is assumed to be negligible. However, the 
shorter response time requirements of 4 hours or 8 hours would likely 
impose a new burden on a number of firms. Therefore, we assume that the 
difference between 4 or 8 hours and 24 hours is the difference between 
having to preplan a response and being able to react with normal 
personnel in an emergency capacity. In order to estimate this cost 
difference, FDA assumes that no firm would incur extra planning costs 
detailed in option 2, and requests comments on this assumption. The 
marginal cost savings of extending the records access time requirement 
is approximately $715,355,000.
    Table 11 of this document presents the range of undiscounted costs 
of future compliance and Table 12 of this document presents the 
discounted annual costs incurred in all future years and the present 
value of total costs incurred for option 5. In addition, Table 12 
reports the marginal savings of option 5 with respect to option 4 as 
well as the discounted annual costs and the present value of total 
costs. The marginal savings of option 5 with respect to option 4 
reflect the cost savings realized from relaxing the records access 
requirements from 4 and 8 hours in option 4 to 24 hours in option 5. As 
discussed earlier in this document, discounted computations are made 
using mean costs and assume no increase in real labor cost and a 7 
percent real discount rate. Costs incurred in year 1 are learning costs 
for all firms and redesign and access planning costs for large and 
small firms. Costs incurred in year 2 are redesign and access planning 
costs for very small firms. Recurring costs are the additional records 
maintenance costs incurred by all firms, and learning costs and records 
access costs for new firms. The mean, low, and high cost estimates 
presented here characterize the known and quantifiable uncertainties as 
they are defined previously. The cost estimate that is greater than 5 
percent of all other estimates generated by the model is reported as 
the low cost estimate. That cost estimate that is greater than 95 
percent of all other estimates generated in the model is reported as 
the high cost estimate.

                                     Table 11.--Total Annual Costs, Option 5
----------------------------------------------------------------------------------------------------------------
                                                                                               Average Mean Cost
                                             Mean               Low                High             per Firm
----------------------------------------------------------------------------------------------------------------
Year 1                                     $338,594,000       $288,569,000       $387,887,000               $387
----------------------------------------------------------------------------------------------------------------
Year 2                                     $567,921,000       $481,993,000       $659,106,000               $649
----------------------------------------------------------------------------------------------------------------
Year 3 and later years                     $295,813,000       $258,715,000       $326,509,000               $338
----------------------------------------------------------------------------------------------------------------


               Table 12.--Discounted Annual Costs, Present Value, and Marginal Savings of Option 5
----------------------------------------------------------------------------------------------------------------
                                                                   Marginal Savings of Option 5 With Respect to
                        Discounted Annual Costs of Option 5                          Option 4
----------------------------------------------------------------------------------------------------------------
Year 1                                             $338,594,000                                     $61,897,000
----------------------------------------------------------------------------------------------------------------
Year 2                                             $530,767,000                                    $134,523,000
----------------------------------------------------------------------------------------------------------------
Year 3                                             $258,375,000                                     $33,949,000
----------------------------------------------------------------------------------------------------------------
Year 4                                             $241,472,000                                     $31,728,000
----------------------------------------------------------------------------------------------------------------
Year 5                                             $225,675,000                                     $29,652,000
----------------------------------------------------------------------------------------------------------------
Year 6                                             $210,911,000                                     $27,713,000
----------------------------------------------------------------------------------------------------------------
:\1\                                                          :                                               :
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------

[[Page 25214]]

 
Year 15                                            $114,722,000                                     $15,073,000
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
Year 30                                             $41,580,000                                      $5,464,000
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
Present Value                                    $4,818,810,000                                    $715,355,000
----------------------------------------------------------------------------------------------------------------
\1\ Each cell that contains only the symbol ``:'' is meant to convey the continuation of the series depicted in
  the cells that precede it from above.

Option 6: Require all components of option 4 (no outer packagers, no 
recordkeeping on outer packaging, 4 or 8 hour records access, 1 and 2 
year records retention for perishables and all other products) except 
intrastate facilities are excluded.
    In the datasets used for this analysis, it is difficult to 
distinguish between interstate and intrastate facilities. In order to 
be considered only engaged in intrastate commerce, a food or food 
packaging facility must obtain all its ingredients and sell its entire 
product within a single state. Since all food and food ingredients are 
regulated in a similar manner, even one ingredient in a food not 
obtained from within a particular state would make the food facility 
involved in interstate commerce. None of these datasets distinguishes 
facilities based on interstate or intrastate commerce. It is reasonable 
to assume, however, that intrastate facilities will be very small and 
are unlikely to be retailers or transporters.
    The FACTS database of currently regulated facilities contains 
71,781 facilities possibly engaged in manufacturing, warehousing, and 
wholesale marketing of foods. Since the FACTS database gives a count of 
facilities that FDA inspects, this would estimate the total number of 
manufacturing, warehousing, and wholesale marketing facilities that are 
engaged in interstate commerce. The count of covered facilities of 
these types obtained from the CBP and non-employer statistics and 
presented in table 1, is 139,121 and includes both intrastate and 
interstate facilities. We estimate the number of intrastate facilities 
engaged in manufacturing, warehousing, and wholesale marketing by 
subtracting the number of facilities in FACTS from the number of 
corresponding facilities reported in table 1. The FACTS database does 
not track food packaging producers and distributors, so we assume that 
the ratio of intrastate to total packaging facilities is the same as 
that of the facility types (48.3 percent) that are tracked by FACTS. 
This estimate may underestimate the intrastate facilities by the number 
of mixed-type facilities that engage in farming and other facility 
types engaged in only intrastate commerce. For the firm estimates, we 
assume one firm per facility for the facilities not counted in the 
FACTS data; intrastate firms are likely to be very small, and the 
average number of facilities to firms for small firms in the Census 
datasets is almost exactly 1.
    Table 13 of this document presents the effects of excluding these 
intrastate firms on the number of facilities affected, and Tables 14 
and 15 of this document present the range of undiscounted costs and the 
discounted annual costs, present value of total costs, and marginal 
savings of option 6 with respect to option 4.

                          Table 13.--Number of Facilities and Firms Affected, Option 6
----------------------------------------------------------------------------------------------------------------
                  Type                             Facility Estimate                     Firm Estimate
----------------------------------------------------------------------------------------------------------------
Manufacturers                                                         34,437                              28,009
----------------------------------------------------------------------------------------------------------------
Wholesalers/Warehouses                                                37,434                              30,189
----------------------------------------------------------------------------------------------------------------
Packaging\1\                                                          17,840                              16,741
----------------------------------------------------------------------------------------------------------------
Transporters/Packers                                                  16,773                              15,171
----------------------------------------------------------------------------------------------------------------
Retail Grocery and Specialty Food                                    207,657                             153,277
----------------------------------------------------------------------------------------------------------------
Convenience Stores                                                   128,985                              68,866
----------------------------------------------------------------------------------------------------------------
Mixed-Type Facilities that Engage in                                  30,497                              24,397
 Farming
----------------------------------------------------------------------------------------------------------------
Importers                                                             18,902                              15,122
----------------------------------------------------------------------------------------------------------------
Total Domestic                                                       492,525                             351,772
----------------------------------------------------------------------------------------------------------------
Foreign
----------------------------------------------------------------------------------------------------------------

[[Page 25215]]

 
  Final Holders                                                       77,427                              61,942
----------------------------------------------------------------------------------------------------------------
  Manufacturers                                                      125,450                             107,222
----------------------------------------------------------------------------------------------------------------
  Other Facility Types                                               423,348                             338,678
----------------------------------------------------------------------------------------------------------------
Total Foreign                                                        626,225                             507,842
----------------------------------------------------------------------------------------------------------------
\1\ Includes both outer packaging and food contact substances.


                                     Table 14.--Total Annual Costs, Option 6
----------------------------------------------------------------------------------------------------------------
                                                                                               Average Mean Cost
                                             Mean               Low                High             per Firm
----------------------------------------------------------------------------------------------------------------
Year 1                                     $376,263,000       $358,454,000       $397,619,000               $424
----------------------------------------------------------------------------------------------------------------
Year 2                                     $648,418,000       $583,071,000       $720,849,000               $731
----------------------------------------------------------------------------------------------------------------
Year 3 and later years                     $307,485,000       $286,089,000       $317,845,000               $347
----------------------------------------------------------------------------------------------------------------


               Table 15.--Discounted Annual Costs, Present Value, and Marginal Savings of Option 6
----------------------------------------------------------------------------------------------------------------
                                                                   Marginal Savings of Option 6 With Respect to
                        Discounted Annual Costs of Option 6                          Option 4
----------------------------------------------------------------------------------------------------------------
Year 1                                             $376,263,000                                     $24,228,000
----------------------------------------------------------------------------------------------------------------
Year 2                                             $605,998,000                                     $59,292,000
----------------------------------------------------------------------------------------------------------------
Year 3                                             $268,569,000                                     $23,755,000
----------------------------------------------------------------------------------------------------------------
Year 4                                             $250,999,000                                     $22,201,000
----------------------------------------------------------------------------------------------------------------
Year 5                                             $234,579,000                                     $20,748,000
----------------------------------------------------------------------------------------------------------------
Year 6                                             $219,233,000                                     $19,391,000
----------------------------------------------------------------------------------------------------------------
:\1\                                                          :                                               :
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
Year 15                                            $119,248,000                                     $10,547,000
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
Year 30                                             $43,221,000                                      $3,823,000
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
Present Value as                                 $5,087,535,000                                    $446,630,000
 of Year 1
----------------------------------------------------------------------------------------------------------------
\1\ Each cell that contains only the symbol ``:'' is meant to convey the continuation of the series depicted in
  the cells that precede it from above.

Option 7: Require all components of option 4 (no outer packagers, no 
recordkeeping on outer packaging, 4 or 8 hour records access, 1 and 2 
year records retention for perishables and all other products) except 
persons who operate mixed-type facilities that engage in farming are 
excluded.
    This option would exempt from recordkeeping requirements all 
persons who operate mixed-type facilities that engage in farming. The 
total number of mixed-type facilities that would be exempt under this 
option is estimated to be 30,497, and the estimated numbers of such 
facilities by commodity type are reported in table 2. Tables 16 and 17 
of this document summarize the estimated range and impact of this 
exemption on total costs and marginal savings into the future.

[[Page 25216]]



                                     Table 16.--Total Annual Costs, Option 7
----------------------------------------------------------------------------------------------------------------
                                                                                                Average Cost per
                                             Mean               Low                High               Firm
----------------------------------------------------------------------------------------------------------------
Year 1                                     $379,977,000       $354,015,000       $406,264,000               $406
----------------------------------------------------------------------------------------------------------------
Year 2                                     $689,275,000       $619,484,000       $771,484,000               $736
----------------------------------------------------------------------------------------------------------------
Year 3 and later years                     $322,701,000       $309,635,000       $337,022,000               $345
----------------------------------------------------------------------------------------------------------------


               Table 17.--Discounted Annual Costs, Present Value, and Marginal Savings of Option 7
----------------------------------------------------------------------------------------------------------------
                                                                   Marginal Savings of Option 7 With Respect to
                        Discounted Annual Costs of Option 7                          Option 4
----------------------------------------------------------------------------------------------------------------
Year 1                                             $379,977,000                                     $20,514,000
----------------------------------------------------------------------------------------------------------------
Year 2                                             $644,182,000                                     $21,108,000
----------------------------------------------------------------------------------------------------------------
Year 3                                             $281,860,000                                     $10,464,000
----------------------------------------------------------------------------------------------------------------
Year 4                                             $263,420,000                                      $9,780,000
----------------------------------------------------------------------------------------------------------------
Year 5                                             $246,187,000                                      $9,140,000
----------------------------------------------------------------------------------------------------------------
Year 6                                             $230,081,000                                      $8,543,000
----------------------------------------------------------------------------------------------------------------
:\1\                                                          :                                               :
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
Year 15                                            $125,149,000                                      $4,646,000
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
Year 30                                             $45,360,000                                      $1,684,000
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
Present Value                                    $5,332,584,000                                    $201,581,000
----------------------------------------------------------------------------------------------------------------
\1\ Each cell that contains only the symbol ``:'' is meant to convey the continuation of the series depicted in
  the cells that precede it from above.

    We believe that there is an even smaller number of mixed-type 
facilities that have restaurants. We have assumed that the costs and 
marginal savings for these facilities would be negligible. We invite 
comment and information relating to this assumption.
Options 8 and 9: Require all components of option 4 (no outer 
packagers, no recordkeeping on outer packaging, 4 or 8 hour records 
access, 1 and 2 year records retention for perishables and all other 
products) but change required records-retention times for perishables 
and all other foods to 1 year (option 8), and 2 years (option 9).
    FDA believes that the 1-year record retention requirement for 
perishable foods not intended for processing into nonperishable foods 
and the 2-year record retention requirement for all other food products 
is well within industry norms (see the discussion of evidence 
supporting provided in a previous section of this document). We do not 
have enough information to quantify any marginal change in the cost of 
record storage under a universal 1-year required storage time (option 
8) or a universal 2-year required storage time (option 9). All other 
things equal, FDA assumes that option 8 would be less costly than 
option 4, which in turn would be less costly than option 9. Because 
evidence suggests that most firms keep records for 2 years or more, FDA 
also believes that the marginal difference in storage costs between all 
of these options is smaller than the marginal difference in cost 
between other options we consider in this analysis. Therefore, while 
there may be a benefit from simplifying requirements by requiring the 
same storage time for both perishable and nonperishable foods, because 
the increased benefit is negligible, we assume that the marginal cost 
is zero for both options 8 and 9. We explicitly specify these options 
principally to request comments, including specific examples where 
required record retention times may have a large impact on cost.
Option 10: Require all components of option 4 (no outer packagers, no 
recordkeeping on outer packaging, 4 or 8 hour records access, 1 and 2 
year records retention for perishables and all other products) but 
cover only those foreign facilities also covered by FDA's proposed 
registration regulation published at 68 FR 5378, February 3, 2003.
    The proposed registration regulation (68 FR 5378, February 3, 2003) 
would require certain foreign facilities that manufacture, process, 
pack, and hold food for consumption in the United States to register. 
Therefore, a useful alternative to explore may be to cover the same 
facilities in both regulations. This exclusion implies that these

[[Page 25217]]

regulations would not cover most of the category ``Other Facility 
Types'' in the last row of Table 1 of this document. Only facilities 
that do de minimis processing or packaging of food, such as affixing a 
label, are included in this option from the category of ``Other 
Facility Types''. Because the minimal degree of processing that de 
minimis processing facilities perform, they are not included in the 
OASIS count of foreign manufacturers.
    We assume that domestic packers and repackers are the domestic 
counterpart to foreign de minimis food processing facilities. This 
seems reasonable since the amount of processing performed by packers 
and repackers is minimal. To estimate the number of foreign packers and 
repackers, FDA takes the number of packers and repackers in the FACTS 
database, 6,204, and adjusts it by the ratio of foreign manufacturers 
in OASIS to the number of domestic manufacturers in FACTS. This 
adjustment of 3.64 (125,450 foreign facilities divided by 34,437 
domestic facilities), estimates the total number of foreign packers and 
repackers (or foreign de minimis processing facilities) as 22,600. The 
facilities-to-firms adjustment factor of 1.25, used to compute the 
number of firms in the ``Other Facility Types'' category, indicated 
that 18,080 firms were included in the foreign de minimis category. 
Table 18 reports the numbers of facilities and firms that were used in 
the cost estimates. FDA requests comments on these estimates.

                          Table 18.--Number of Facilities and Firms Affected. Option 10
----------------------------------------------------------------------------------------------------------------
                                                        Facility to Firm Adjust.
         Type                 Facility Estimate                  Factor                     Firm Estimate
----------------------------------------------------------------------------------------------------------------
Domestic
----------------------------------------------------------------------------------------------------------------
  Manufacturers                               43,376                          1.17                        36,948
----------------------------------------------------------------------------------------------------------------
  Wholesalers/                                95,745                          1.24                        76,952
   Warehouses
----------------------------------------------------------------------------------------------------------------
  Packaging\1\                                36,907                          1.07                        34,633
----------------------------------------------------------------------------------------------------------------
  Transporters/Packers                        16,773                          1.11                        15,171
----------------------------------------------------------------------------------------------------------------
  Retail Grocery and                         207,657                          1.35                       153,277
   Specialty Food
----------------------------------------------------------------------------------------------------------------
  Convenience Stores                         128,985                          1.87                        68,866
----------------------------------------------------------------------------------------------------------------
  Mixed-Type                                  30,497                          1.25                        24,397
   Facilities that
   Engage in Farming
----------------------------------------------------------------------------------------------------------------
  Importers                                   18,902                          1.25                        15,122
----------------------------------------------------------------------------------------------------------------
Total Domestic                               578,842  ............................                       425,366
----------------------------------------------------------------------------------------------------------------
Foreign
----------------------------------------------------------------------------------------------------------------
  Final Holders                               77,427                          1.25                        61,942
----------------------------------------------------------------------------------------------------------------
  De minimus                                  22,600                          1.25                        18,080
   Processors/
   Packagers
----------------------------------------------------------------------------------------------------------------
  Manufacturers                              125,450                          1.17                       106,858
----------------------------------------------------------------------------------------------------------------
  Other Facility Types                             0                             0                             0
----------------------------------------------------------------------------------------------------------------
Total Foreign                                225,477  ............................                       186,879
----------------------------------------------------------------------------------------------------------------
\1\ Includes both outer packaging and food contact substances.

    Since ``Other Facility Types'' is such a large and uncertain 
category, the exclusion of most of the category has a significant 
impact on all cost estimates.
    The estimated ranges of the costs for learning, records access 
planning, additional records maintenance, and records redesign, as well 
as the total for this option are reported in table 19. The costs 
reported in the table are identified by the applicable Code of Federal 
Regulations (CFR) section and are expressed in present value terms to 
account for the fact that some costs are one-time costs while others 
are recurring costs. The cost estimate that is greater than 95 percent 
of all other estimates generated by the model is reported as the high 
value. The cost estimate that is greater than 5 percent of all other 
estimates generated by the model is reported as the low value.

                          Table 19.--Cost Description in Present Value Terms: Option 10
----------------------------------------------------------------------------------------------------------------
                     21 CFR Section                             Mean               Low                High
----------------------------------------------------------------------------------------------------------------
1.337, 1.345, and 1.352, (Learning)                           $138,357,000       $134,017,000       $142,346,000
----------------------------------------------------------------------------------------------------------------
1.337, 1.345, and 1.352, (Redesign)                           $381,292,000       $326,799,000       $430,439,000
----------------------------------------------------------------------------------------------------------------
1.361 (Access Planning)                                        $78,834,000        $73,176,000        $84,179,000
----------------------------------------------------------------------------------------------------------------

[[Page 25218]]

 
1.337, 1.345, and 1.352 (Additional Records                 $2,952,309,000     $2,817,570,000     $3,070,891,000
 Maintenance)
----------------------------------------------------------------------------------------------------------------
1.337, 1.345, and 1.352, (Learning for New Firms)              $13,836,000        $13,310,000        $14,328,000
----------------------------------------------------------------------------------------------------------------
1.361 (Access Preparation for New Firms)                        $7,883,000         $7,318,000         $8,418,000
----------------------------------------------------------------------------------------------------------------
Total\1\                                                    $3,660,808,000     $3,478,944,000     $3,833,452,000
----------------------------------------------------------------------------------------------------------------
\1\ The totals reported at the bottom of each column differ slightly from the results that would be obtained by
  adding together all of the cells in the column. This is because the computation of the totals reported here is
  made assuming a joint distribution of the cost components, as described elsewhere in the analysis, rather then
  by adding together the individually computed component costs.

    The annual range and discounted costs for option 10 as well as the 
marginal savings of option 10 with respect to option 4 are detailed in 
tables 20 and 21 of this document. The mean, low, and high cost 
estimates presented here characterize the known and quantifiable 
uncertainties as they are defined previously. The cost estimate that is 
greater than 5 percent of all other estimates generated by the model is 
reported as the low cost estimate. That cost estimate that is greater 
than 95 percent of all other estimates generated in the model is 
reported as the high cost estimate.

                                    Table 20.--Total Annual Costs, Option 10
----------------------------------------------------------------------------------------------------------------
                                                                                               Average Mean Cost
                                             Mean               Low                High             per Firm
----------------------------------------------------------------------------------------------------------------
Year 1                                     $234,425,000       $215,030,000       $252,196,000               $383
----------------------------------------------------------------------------------------------------------------
Year 2                                     $507,230,000       $459,345,000       $550,801,000               $828
----------------------------------------------------------------------------------------------------------------
Year 3 and later years                     $221,130,000       $212,313,000       $229,680,000               $361
----------------------------------------------------------------------------------------------------------------


               Table 21.--Discounted Annual Costs, Present Value, and Marginal Savings: Option 10
----------------------------------------------------------------------------------------------------------------
                                                                   Marginal Savings of Option 10 With Respect to
                        Discounted Annual Costs: Option 10                           Option 4
----------------------------------------------------------------------------------------------------------------
Year 1                                             $234,425,000                                    $166,066,000
----------------------------------------------------------------------------------------------------------------
Year 2                                             $474,047,000                                    $191,243,000
----------------------------------------------------------------------------------------------------------------
Year 3                                             $193,144,000                                     $99,180,000
----------------------------------------------------------------------------------------------------------------
Year 4                                             $180,508,000                                     $92,692,000
----------------------------------------------------------------------------------------------------------------
Year 5                                             $168,699,000                                     $86,628,000
----------------------------------------------------------------------------------------------------------------
Year 6                                             $157,663,000                                     $80,961,000
----------------------------------------------------------------------------------------------------------------
:\1\                                                          :                                               :
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
Year 15                                             $85,758,000                                     $44,037,000
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
Year 30                                             $31,083,000                                     $15,961,000
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
Present Value as                                 $3,660,808,000                                  $1,873,357,000
 of Year 1
----------------------------------------------------------------------------------------------------------------
\1\ Each cell that contains only the symbol ``:'' is meant to convey the continuation of the series depicted in
  the cells that precede it from above.


[[Page 25219]]

Option 11: Require all components of option 4 (no outer packagers, no 
recordkeeping on outer packaging, 4 or 8 hour records access, 1 and 2 
year records retention for perishables and all other products) except 
foreign coverage includes only facilities that are the final holders of 
the product before export to the United States.
    We estimate that there would be approximately 62,000 foreign 
facilities covered under this option. We assumed that the number of 
foreign final holding facilities is equivalent to the number of 
domestic importers. Since foreign manufacturing facilities and foreign 
de minimus processors/packagers would be excluded from recordkeeping 
requirements, the coverage under this option is more limited than the 
coverage under option 10. The rationale for specifying this option is 
that final holders may be the most accessible foreign facilities in the 
event of an FDA traceback investigation. In addition, foreign final 
holders may be particularly at risk at this level in the food chain if 
the food is clearly identified as destined for consumption in the 
United States.
    Tables 22 and 23 of this document present the cost estimates for 
option 11. As previously discussed, discount computations are made 
using mean costs and assume no increase in real labor cost and a 7 
percent real discount rate. Although the recurring costs reported for 
year 3 and later years are the same in nominal terms (i.e., 
$182,429,000 reported in Table 22 of this document), they are reported 
in discounted terms for each year in Table 23 of this document to 
account for the fact that a dollar in 5 years, for example, is worth 
less than a dollar today. Each cell that contains only the symbol ``:'' 
is meant to convey the continuation of the series depicted in the cells 
that precede it from above. Costs incurred in year 1 are learning costs 
for all firms and redesign and access planning costs for large and 
small firms. Costs incurred in year 2 are redesign and access planning 
costs for very small firms. Recurring costs are the additional records 
maintenance costs incurred by all firms, and learning costs and records 
access costs for new firms. The mean, low, and high cost estimates 
presented here characterize the known and quantifiable uncertainties as 
they are defined previously. The cost estimate that is greater than 5 
percent of all other estimates generated by the model is reported as 
the low cost estimate. That cost estimate that is greater than 95 
percent of all other estimates generated in the model is reported as 
the high cost estimate.

                                    Table 22.--Total Annual Costs, Option 11
----------------------------------------------------------------------------------------------------------------
                                                                                               Average Mean Cost
                                             Mean               Low                High             per Firm
----------------------------------------------------------------------------------------------------------------
Year 1                                     $172,973,000       $156,033,000       $190,831,000               $355
----------------------------------------------------------------------------------------------------------------
Year 2                                     $413,484,000       $369,335,000       $458,871,000               $849
----------------------------------------------------------------------------------------------------------------
Year 3 and later years                     $182,429,000       $174,474,000       $190,610,000               $374
----------------------------------------------------------------------------------------------------------------


               Table 23.--Discounted Annual Costs, Present Value, and Marginal Savings: Option 11
----------------------------------------------------------------------------------------------------------------
                                                                   Marginal Savings of Option 11 With Respect to
                        Discounted Annual Costs: Option 11                           Option 4
----------------------------------------------------------------------------------------------------------------
Year 1                                             $172,973,000                                    $227,518,000
----------------------------------------------------------------------------------------------------------------
Year 2                                             $386,434,000                                    $278,856,000
----------------------------------------------------------------------------------------------------------------
Year 3                                             $159,341,000                                    $132,983,000
----------------------------------------------------------------------------------------------------------------
Year 4                                             $148,916,000                                    $124,284,000
----------------------------------------------------------------------------------------------------------------
Year 5                                             $139,174,000                                    $116,153,000
----------------------------------------------------------------------------------------------------------------
Year 6                                             $130,069,000                                    $108,555,000
----------------------------------------------------------------------------------------------------------------
:\1\                                                          :                                               :
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
Year 15                                             $70,749,000                                     $59,046,000
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
Year 30                                             $25,643,000                                     $21,401,000
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
Present Value as                                 $2,995,041,000                                  $2,539,124,000
 of Year 1
----------------------------------------------------------------------------------------------------------------
\1\ Each cell that contains only the symbol ``:'' is meant to convey the continuation of the series depicted in
  the cells that precede it from above.


[[Page 25220]]

Option 12: Require all components of option 4 (no outer packagers, no 
recordkeeping on outer packaging, 4 or 8 hour records access, 1 and 2 
year records retention for perishables and all other products) except 
all foreign food facilities are excluded.
    This option excludes all foreign firms from recordkeeping 
requirements and has even less coverage than under option 11. Tables 24 
and 25 of this document present the cost estimates. As previously 
discussed, discount computations are made using mean costs and assume 
no increase in real labor cost and a 7 percent real discount rate. 
Although the recurring costs reported for year 3 and later years are 
the same in nominal terms (i.e., $162,228,000 reported in Table 24), 
they are reported in discounted terms for each year in Table 25 of this 
document. Costs incurred in year 1 are learning costs for all firms and 
redesign and access planning costs for large and small firms. Costs 
incurred in year 2 are redesign and access planning costs for very 
small firms. Recurring costs are the additional records maintenance 
costs incurred by all firms, and learning costs and records access 
costs for new firms. The mean, low, and high cost estimates presented 
here characterize the known and quantifiable uncertainties as they are 
defined previously. The cost estimate that is greater than 5 percent of 
all other estimates generated by the model is reported as the low cost 
estimate. That cost estimate that is greater than 95 percent of all 
other estimates generated in the model is reported as the high cost 
estimate.

                                    Table 24.--Total Annual Costs, Option 12
----------------------------------------------------------------------------------------------------------------
                                                                                               Average Mean Cost
                                             Mean               Low                High             per Firm
----------------------------------------------------------------------------------------------------------------
Year 1                                     $139,947,000       $125,857,000       $152,775,000               $329
----------------------------------------------------------------------------------------------------------------
Year 2                                     $376,310,000       $334,230,000       $421,832,000               $885
----------------------------------------------------------------------------------------------------------------
Year 3 and later years                     $162,228,000       $155,337,000       $169,446,000               $381
----------------------------------------------------------------------------------------------------------------


               Table 25.--Discounted Annual Costs, Present Value, and Marginal Savings: Option 12
----------------------------------------------------------------------------------------------------------------
                                                                   Marginal Savings of Option 12 With Respect to
                        Discounted Annual Costs: Option 12                           Option 4
----------------------------------------------------------------------------------------------------------------
Year 1                                             $139,947,000                                    $260,544,000
----------------------------------------------------------------------------------------------------------------
Year 2                                             $351,692,000                                    $313,598,000
----------------------------------------------------------------------------------------------------------------
Year 3                                             $141,696,000                                    $150,628,000
----------------------------------------------------------------------------------------------------------------
Year 4                                             $132,426,000                                    $140,774,000
----------------------------------------------------------------------------------------------------------------
Year 5                                             $123,763,000                                    $131,564,000
----------------------------------------------------------------------------------------------------------------
Year 6                                             $115,666,000                                    $122,958,000
----------------------------------------------------------------------------------------------------------------
:\1\                                                          :                                               :
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
Year 15                                             $62,915,000                                     $66,880,000
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
Year 30                                             $22,803,000                                     $24,241,000
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
:                                                             :                                               :
----------------------------------------------------------------------------------------------------------------
Present Value as                                 $2,657,566,000                                  $2,876,599,000
 of Year 1
----------------------------------------------------------------------------------------------------------------
\1\ Each cell that contains only the symbol ``:'' is meant to convey the continuation of the series depicted in
  the cells that precede it from above.

Option 13: Facilities must be able to tie specific input ingredients to 
specific products.
    Most comments FDA received during its early outreach efforts for 
this proposed rule stated that tying specific raw input ingredients to 
specific finished products would significantly increase the burden on 
industry, which would translate into large social costs. Some comments 
suggested that some facilities have systems in place that can link each 
lot of raw ingredient to each lot of finished product, but such systems 
are rare for bulk agricultural commodities. For example, it is common 
practice in handling agricultural commodities to commingle raw 
ingredients from several suppliers in a large silo or storage tank. 
While this business practice would not be required to change under 
options 2-12, option 13 would add the significant new burden of 
requiring firms that traditionally commingle raw ingredients from 
several suppliers to redesign a production or storage strategy that 
would allow them

[[Page 25221]]

to identify more precisely the source of all the food products.
    Most agricultural crops are traded as bulk commodities; bulk 
trading operates on the premise that crops produced by different 
farmers are sufficiently similar to be traded at a common price and 
with a common grading specification. For various reasons, some firms 
have put in place identity preservation systems, which they use to 
track individual lots of products throughout production and 
distribution. These identity preservations systems exist for organic 
products, kosher products, and some specialty versions of bulk 
products. FDA estimated the potential impact of this option by 
reviewing studies of current identity preservation systems. We assume 
that the identity preservation systems put in place for specialty 
versions of traditionally commingled products closely resembles what 
would be required to comply with the input-to-output requirement of 
this option. The study we rely on for our estimates (Ref. 17) is for 
corn and soybeans, the largest crops by value in the United States, but 
the issues should be similar for other types of bulk products.
    The cost of identity preservation consists of: (1) The cost of 
segregating crops to prevent commingling, and (2) the cost of tracking 
ingredients. First, commodity suppliers should incur an increase in 
cost due to their inability to mix commodities in bulk. The Bender et 
al (Ref. 16) study estimates costs based on responses to a small survey 
of specialty elevators, grain firms, seed companies, and brokers. On 
average, 35 percent of the volume handled by these firms is specialty 
product, so they have ample experience in identifying cost differences, 
including storage, handling and segregation, risk management, 
transportation, analysis and testing, and marketing costs. Of the 84 
survey responses, 55 estimated the cost of segregating and handling 
specialty crops. FDA used the overall average across facility types to 
estimate an average cost premium to be applied to each preprocessed 
commodity: $0.17 per bushel for corn and $0.48 per bushel for soybeans. 
The original estimate included a premium paid to farmers, but we 
subtracted this amount out of the total. Since option 13 would only 
require the identification of a particular immediate previous source, 
in this case a farm, we assume no new farming activity would have to 
take place. At an average price of $1.81 per bushel for corn and $4.60 
per bushel for soybeans in 1999 (Ref. 18), the premium estimated for 
corn is 9.4 percent and for soybeans is 10.4 percent. Due to the small 
sample, standard errors were not reported in this study, but 
considerable nonquantified uncertainty exists around these estimates. 
These estimates may be an overestimate of premiums if economies of 
scale are possible in identity preservations systems. These estimates 
may be an underestimate if the reason these specialty product systems 
exist is that it is easier to preserve identities for corn and soybeans 
than for other products.
    Table 26 of this document presents the calculations of the cost 
based on these segregation premiums. We apply the premium to the 1999 
farm value of commodities, not to the retail values as retail prices 
include many other aspects of branding and bringing the product to 
market. These are also the latest data available, and since 
agricultural prices have been fairly stable, we do not adjust these 
dollar amounts to 2002. The estimated corn premium from the studies is 
used for all other bulk grain products, and the estimated soybean 
premium is also used for nuts, sugarcane and beets, sunflowers, and 
flaxseeds. Milk is assumed to have a lower cost increase; most milk 
production is local and already includes a tracking system to allow for 
the use of expiration dates for the final product. Vegetables destined 
for final consumption in an unaltered state, vegetables used for 
production, and eggs are also assumed to have a lower cost of tracking 
since current commingling practices for these products are limited. The 
table includes nuts, but we were unable to find a satisfactory price 
estimate. FDA requests comments on these assumptions.

                       Table 26.--Commingling Costs Based on Specialty Premiums, Option 13
----------------------------------------------------------------------------------------------------------------
       Food Type               Count               Unit           $ Farm gate      Premium %       Premium $
----------------------------------------------------------------------------------------------------------------
Corn (for grain)             9,430,612,000  bushels              $17,103,991,000         9.4%     $1,603,204,000
----------------------------------------------------------------------------------------------------------------
Soybeans                     2,653,758,000  bushels              $12,205,352,000        10.4%     $1,273,804,000
----------------------------------------------------------------------------------------------------------------
Milk                       162,716,000,000  pounds               $23,400,050,000         5.0%     $1,170,003,000
----------------------------------------------------------------------------------------------------------------
Wheat                        2,299,010,000  bushels               $5,593,989,000         9.4%       $524,340,000
----------------------------------------------------------------------------------------------------------------
Fruits                          31,152,000  tons                  $9,345,600,000         5.0%       $467,280,000
----------------------------------------------------------------------------------------------------------------
Fresh Vegetables                22,484,150  tons                  $7,610,780,000         5.0%       $380,539,000
----------------------------------------------------------------------------------------------------------------
Eggs                        82,715,000,000  eggs                  $4,321,859,000         5.0%       $216,093,000
----------------------------------------------------------------------------------------------------------------
Sugar beets                     33,420,000  tons                  $1,242,898,000        10.4%       $129,714,000
----------------------------------------------------------------------------------------------------------------
Rice                        20,602,700,000  pounds                $1,231,207,000         9.4%       $115,404,000
----------------------------------------------------------------------------------------------------------------
Peanuts                      3,829,490,000  pounds                  $971,608,000        10.4%       $101,401,000
----------------------------------------------------------------------------------------------------------------
Sugarcane                       35,299,000  tons                    $941,791,000        10.4%        $98,290,000
----------------------------------------------------------------------------------------------------------------
Sorghum                        595,166,000  bushels                 $937,406,000         9.4%        $87,866,000
----------------------------------------------------------------------------------------------------------------
Prod. Vegetables                15,476,230  tons                  $1,660,051,000         5.0%        $83,003,000
----------------------------------------------------------------------------------------------------------------
Barley                         280,292,000  bushels                 $597,038,000         9.4%        $55,962,000
----------------------------------------------------------------------------------------------------------------
Sunflower                    4,341,862,000  pounds                  $339,993,000        10.4%        $35,483,000
----------------------------------------------------------------------------------------------------------------

[[Page 25222]]

 
Oats                           146,193,000  bushels                 $175,172,000         9.4%        $16,419,000
----------------------------------------------------------------------------------------------------------------
Honey                          205,250,000  pounds                  $126,075,000         5.0%         $6,304,000
----------------------------------------------------------------------------------------------------------------
Flaxseed                         7,864,000  bushels                  $30,098,000        10.4%         $3,141,000
----------------------------------------------------------------------------------------------------------------
Rye                             11,038,000  bushels                  $25,084,000         9.4%         $2,351,000
----------------------------------------------------------------------------------------------------------------
Nuts                         1,295,700,000  pounds                            $0         5.0%                 $0
----------------------------------------------------------------------------------------------------------------
Total                    .................  .................    $87,860,042,000  ...........     $6,370,601,000
----------------------------------------------------------------------------------------------------------------

    As the second component of cost, FDA assumes that manufacturers 
using bulk production processes would have to adopt a new tracking 
system for their input ingredients. Having identity-preserved input 
ingredients delivered from their suppliers would help in this task, but 
the disruption to production practices could be substantial. FDA does 
not have an estimate of the percentage of producers that may be 
affected by this option, or the amount of change in production 
practices that would have to take place, but we assume that a useful 
lower bound of the increase in production cost would be the increase in 
information design and collection costs that manufacturers would face 
in this system.
    For redesign costs, FDA used the Labeling Cost Model, assuming a 
full new document design as opposed to simple addition of information. 
FDA also assumed a doubling of information collection burden for 
manufacturers when compared to other options; they would have to track 
three sets of records (input sources, output sources, and input to 
output tracking) instead of two, but could not share the information 
collection burden with others in the production chain for these 
manufacturing records. As in the other options, we assumed the design 
costs would be incurred at the firm level and the additional records 
maintenance costs would be incurred at the facility level. FDA 
considers these design and records maintenance costs a probable 
underestimate of the total cost of disruption in manufacturing possible 
under this option, since it does not consider production process 
changes or additional tracking costs required in the post-production 
distribution chain. Table 26 of this document summarizes the redesign 
and additional records maintenance burden calculations unique to option 
13.

                    Table 27.--Additional Redesign and Records Maintenance Costs, Option 13.
----------------------------------------------------------------------------------------------------------------
                                              Count            Medium              Low                High
----------------------------------------------------------------------------------------------------------------
Redesign
----------------------------------------------------------------------------------------------------------------
  Domestic Manufacturing Firms                   36,948       $228,816,000       $171,917,000       $413,738,000
----------------------------------------------------------------------------------------------------------------
  Foreign Manufacturing Firms                    72,770       $450,666,000       $338,600,000       $814,880,000
----------------------------------------------------------------------------------------------------------------
Total                                           109,718       $679,482,000       $510,517,000     $1,228,618,000
----------------------------------------------------------------------------------------------------------------
Additional Records Maintenance
----------------------------------------------------------------------------------------------------------------
  Domestic Manufacturing Facilities              43,376        $14,154,000  .................  .................
----------------------------------------------------------------------------------------------------------------
  Foreign Manufacturing Facilities               85,431        $27,876,000  .................  .................
----------------------------------------------------------------------------------------------------------------
Total                                           128,807        $42,030,000  .................  .................
----------------------------------------------------------------------------------------------------------------

    Tables 28 and 29 of this document present the estimated range and 
impact of option 13 on total costs into the future. As the tables 
indicate, option 13 is much costlier than any of the other regulatory 
options. The numbers in parentheses in the right hand column of Table 
29 reflect a negative marginal cost savings of option 13 with respect 
to option 4. As previously discussed, discount computations are made 
using mean costs and assume no increase in real labor cost and a 7 
percent real discount rate. Although the recurring costs reported for 
year 3 and later years are the same in nominal terms (i.e., 
$6,743,086,000 reported in Table 28), they are reported in discounted 
terms for each year in Table 29 to account for the fact that a dollar 
in 5 years, for example, is worth less than a dollar today. Each cell 
that contains only the symbol ``:'' is meant to convey the continuation 
of the series depicted in the cells that precede it from above. Costs 
incurred in year 1 are learning costs for all firms and redesign and 
access planning costs for large and small firms. Costs incurred in year 
2 are redesign and access planning costs for very small firms. 
Recurring costs are the additional records maintenance costs incurred 
by all firms, and learning costs and records access costs for new 
firms. The mean, low, and high cost estimates presented here 
characterize the known and quantifiable uncertainties as they are 
defined previously. The cost estimate that is greater than 5 percent of 
all other estimates generated by the model is reported as the low cost 
estimate. That cost estimate that is greater than 95 percent of all 
other estimates generated in the model is reported as the high cost 
estimate.

[[Page 25223]]



                                    Table 28.--Annual Total Costs, Option 13
----------------------------------------------------------------------------------------------------------------
                                                                                               Average Mean Cost
                                             Mean               Low                High             per Firm
----------------------------------------------------------------------------------------------------------------
Year 1                                     $442,970,000       $405,800,000       $484,402,000               $445
----------------------------------------------------------------------------------------------------------------
Year 2                                   $2,692,790,000     $2,504,068,000     $2,921,375,000             $2,706
----------------------------------------------------------------------------------------------------------------
Year 3 and later years                   $6,743,086,000     $6,702,239,000     $6,726,422,000             $6,748
----------------------------------------------------------------------------------------------------------------


 Table 29.--Discounted Annual Costs, Present Value, and Marginal Savings: Option 13 (numbers in parentheses are
                                                    negative)
----------------------------------------------------------------------------------------------------------------
                                                                   Marginal Savings of Option 13 With Respect to
                          Discounted Annual Costs: Option 13                          Option 4
----------------------------------------------------------------------------------------------------------------
Year 1                                               $442,970,000                                 ($183,745,000)
----------------------------------------------------------------------------------------------------------------
Year 2                                             $2,516,626,000                               ($1,901,433,000)
----------------------------------------------------------------------------------------------------------------
Year 3                                             $5,889,672,000                               ($5,630,368,000)
----------------------------------------------------------------------------------------------------------------
Year 4                                             $5,504,367,000                               ($5,262,026,000)
----------------------------------------------------------------------------------------------------------------
Year 5                                             $5,144,268,000                               ($4,917,781,000)
----------------------------------------------------------------------------------------------------------------
Year 6                                             $4,807,727,000                               ($4,596,057,000)
----------------------------------------------------------------------------------------------------------------
:\1\                                                            :                                              :
----------------------------------------------------------------------------------------------------------------
:                                                               :                                              :
----------------------------------------------------------------------------------------------------------------
Year 15                                            $2,615,085,000                               ($2,499,951,000)
----------------------------------------------------------------------------------------------------------------
:                                                               :                                              :
----------------------------------------------------------------------------------------------------------------
:                                                               :                                              :
----------------------------------------------------------------------------------------------------------------
Year 30                                              $947,827,000                                 ($906,097,000)
----------------------------------------------------------------------------------------------------------------
:                                                               :                                              :
----------------------------------------------------------------------------------------------------------------
:                                                               :                                              :
----------------------------------------------------------------------------------------------------------------
Present Value as                                  $92,987,447,000                              ($88,149,370,000)
 of Year 1
----------------------------------------------------------------------------------------------------------------
\1\ Each cell that contains only the symbol ``:'' is meant to convey the continuation of the series depicted in
  the cells that precede it from above.

    Marginal analysis: As a way of comparing the options, Table 30 of 
this document presents the present values of total costs and the 
marginal savings of each option compared with option 4. Option 4 was 
chosen for comparison since it differs by only one provision from 
almost all the other options considered in the analysis. The marginal 
savings for all options, except options 2 and 13, are either zero or 
positive reflecting either a lower total cost or equivalent total cost 
compared with option 4.
    Since option 3 and options 5-12 involve a single modification of 
the requirements in option 4, the marginal savings expressed for each 
of those options reflects the cost savings from removing that 
requirement. Furthermore, while option 2 differs from option 4 by two 
provisions, rather than one provision (option 4 does not require 
persons that manufacture, process, pack, hold, receive, distribute, 
transport, or import outer food packaging to keep records and does not 
require persons that are required to keep records on foods to keep 
records on the food's outer packaging), the costs computed for both 
options are equivalent. As a result, there is no loss in meaning by 
comparing the costs of all options to option 4 in Table 30. 
Consequently, for option 10, the marginal savings in present value 
terms from relaxing the comprehensive foreign coverage requirement in 
option 4 to the reduced level of coverage specified by the registration 
rule is $1,873,357,000 as reported in the following table.

 Table 30.--Present Value and Marginal Savings With Respect to Option 4
------------------------------------------------------------------------
                                                          Description of
  Option      Present Value of    Marginal Savings With       Option
                 Total Cost        Respect to Option 4     Requirements
------------------------------------------------------------------------
2                $5,663,484,000      ($129,319,000)\1\   Comprehensive
                                                          coverage, 4 or
                                                          8 hour records-
                                                          access
                                                          requirement, 1
                                                          and 2-year
                                                          records-
                                                          retention
                                                          requirement
------------------------------------------------------------------------

[[Page 25224]]

 
3                $5,534,165,000                     $0   Exclude outer
                                                          packagers
------------------------------------------------------------------------
4                $5,534,165,000                     $0   Exclude outer
                                                          packagers and
                                                          recordkeeping
                                                          on outer
                                                          packaging
------------------------------------------------------------------------
5                $4,818,810,000           $715,355,000   Same as option
                                                          4 except
                                                          records-access
                                                          requirement is
                                                          relaxed to 24
                                                          hours
------------------------------------------------------------------------
6                $5,087,535,000           $446,630,000   Same as option
                                                          4 except
                                                          intrastate
                                                          facilities are
                                                          excluded
------------------------------------------------------------------------
7                $5,332,584,000           $201,581,000   Same as option
                                                          4 except mixed-
                                                          type
                                                          facilities
                                                          that engage in
                                                          farming are
                                                          excluded
------------------------------------------------------------------------
8                $5,534,165,000                     $0   Same as option
                                                          4 except
                                                          universal
                                                          records
                                                          retention of 1
                                                          year
------------------------------------------------------------------------
9                $5,534,165,000                     $0   Same as option
                                                          4 except
                                                          universal
                                                          records
                                                          retention of 2
                                                          years
------------------------------------------------------------------------
10               $3,660,808,000         $1,873,357,000   Proposed. Same
                                                          as option 4
                                                          but limit
                                                          foreign
                                                          coverage to be
                                                          the same as
                                                          registration.
------------------------------------------------------------------------
11               $2,995,041,000         $2,539,124,000   Same as option
                                                          4 but limit
                                                          foreign
                                                          coverage to
                                                          the final
                                                          holders prior
                                                          to export.
------------------------------------------------------------------------
12               $2,657,566,000         $2,876,599,000   Same as option
                                                          4 except all
                                                          foreign
                                                          facilities are
                                                          excluded.
------------------------------------------------------------------------
13              $93,137,167,000   ($87,603,002,000)\1\   Comprehensive
                                                          coverage.
                                                          Precise input
                                                          to output
                                                          recordkeeping
                                                          requirement.
------------------------------------------------------------------------
\1\ Numbers in parentheses are negative.

    Sensitivity of cost estimates to assumptions: For all the options, 
FDA attempted to quantify the uncertainty associated with redesign 
costs and the number firms and facilities exclusively dedicated to 
imports, but we had no basis for assigning distributions to other 
uncertain components. By far the largest source of uncertainty is the 
premium on products that would be subject to new identity preservation 
under option 13. FDA also tested the sensitivity of other sources of 
uncertainty under option 10, in order for the reader to compare various 
sources of uncertainty and submit comments regarding our assumptions. 
Although the dollar sensitivities to the assumptions specified in Table 
31 of this document should be similar across the options, many of the 
percentage sensitivities would--because of different base costs--differ 
under other options. FDA believes that the ranking of the costs of 
these options is not affected by any uncertainty in our estimates.
    There is significant uncertainty in the estimate of the number of 
mixed-type facilities that engage in farming. Based on research 
described earlier, our estimate of the number of mixed-type facilities 
that engage in farming that would be covered by this proposed rule is 
30,497. To determine the sensitivity of the cost estimates to changes 
in the numbers of mixed-type facilities that engage in farming, a 
sensitivity analysis was performed in which the number of these types 
of facilities was increased by 10 percent.
    Table 31 of this document presents the results of the sensitivity 
analyses that we conducted. For option 13, Table 31 reports the effect 
of an increase in crop premium for identity preservation of 1 percent 
for all crops. For option 10, Table 31 reports the effect of a 10 
percent increase in the estimate of the number of mixed-type facilities 
that engage in farming, and 10 percent cost increases for each 
component cost on the mean first-year total cost estimates. For 
redesign costs, we assumed a 10 percent increase in the medium cost 
estimate.
    Finally, to be consistent with the analysis conducted for the 
Registration proposed rule, a sensitivity analysis was conducted that 
accounted for the possibility that a number of foreign firms would 
cease to export to the United States because of the burden imposed by 
these regulations. This is particularly relevant when considering the 
burden imposed on foreign firms by the Registration proposed rule. In 
the analysis of the registration proposed rule, it was estimated that 
approximately 16 percent of small manufacturers and processors (defined 
in that analysis as those exporting 10 or fewer line items to the 
United States) would cease exporting to the United States because of 
the increase in costs due to that proposed rule. Consistent with the 
analysis of the Registration proposed rule, we analyzed the cost 
sensitivity of a 16 percent reduction in the number of foreign firms. 
FDA requests comments on other desired sensitivity analyses.

[[Page 25225]]



                     Table 31.--Sensitivity Analysis
------------------------------------------------------------------------
                                          Effect on Present
            Test                Option     Value Mean Cost     Percent
                                                 ($)            Effect
------------------------------------------------------------------------
10% increase in records               10       $276,513,000        7.02%
 maintenance
------------------------------------------------------------------------
10% increase mixed-type               10        $17,061,000        0.46%
 facilities that engage in
 farming
------------------------------------------------------------------------
10% decrease in percent               10        $33,529,000        0.91%
 European
------------------------------------------------------------------------
10% increase in redesign              10        $38,006,000        1.03%
------------------------------------------------------------------------
10% increase in learning              10        $32,185,000        0.87%
------------------------------------------------------------------------
10% increase in access                10        $18,873,000        0.51%
------------------------------------------------------------------------
16% decrease in number of             10  ($138,484,000)\1\   (3.93%)\1\
 foreign firms
------------------------------------------------------------------------
1% increase in identity               13       $490,117,000        0.52%
 preservation premium
------------------------------------------------------------------------
\1\ Numbers in parentheses are negative.

    Benefits: These options would improve FDA's ability to address 
adulterated food and food packaging that presents a threat of serious 
adverse health consequences or death to humans and animals. FDA is 
unable to quantify the benefits of these regulations, though we 
consider them substantial. While the probability of a deliberate 
contamination of the food supply may be low, the potential cost of a 
deliberate contamination of the food supply may be high. Below we 
present some examples to demonstrate what such a contamination may look 
like. Without having any hypothesis on the likelihood of a deliberate 
contamination, it is impossible to quantitatively measure the benefits 
of the reduced impact due to each of these regulatory options.
    Further hindering any quantification of benefits is the interactive 
effect of other regulations that are being developed to implement Title 
III of the Bioterrorism Act of 2002. The registration (section 305 of 
the Bioterrorism Act) and recordkeeping regulations would work 
cooperatively to identify and track possible sources of an outbreak. 
The prior notice for imported shipments (section 307 of the 
Bioterrorism Act) would allow the agency time to identify possible 
sources of risk from adulterated food and its packaging that presents a 
threat of serious adverse health consequences or death to humans and 
animals, which could then be investigated with the aid of the new 
registration and recordkeeping regulations.
    To understand possible costs of an intentional attack on the food 
supply, we examine five outbreaks resulting from accidental and 
deliberate contamination, and from both domestic and imported foods. It 
is possible that an intentional attack on the food supply that sought 
to disrupt the food supply and sicken many U.S. citizens would be much 
larger. Also, intentional attacks may be fundamentally more difficult 
to trace than natural outbreaks due to deliberate obfuscation of the 
source and possible multiple contamination events of different food 
types and food facilities. We then examine mechanisms through which 
each regulatory option discussed in this analysis may act and analyze 
how each of the options affects the mechanisms.

                                 Table 32.--Summary of Five Foodborne Outbreaks
----------------------------------------------------------------------------------------------------------------
                                                            Confirmed or     Estimated Number    Total Illness
     Pathogen      Location and Year       Vehicle         Reported Cases        of Cases       Cost  (dollars)
----------------------------------------------------------------------------------------------------------------
Salmonella         Minnesota 1994     Ice cream          150 cases; 30      29,100 in MN;      3,187,744,000 to
 enteritidis                                              hospitalized       224,00             5,629,792,000
                                                                             nationwide
----------------------------------------------------------------------------------------------------------------
Shigella sonnei    Michigan 1988      Tofu salad         3,175 cases        Not available      45,183,000 to
                                                                                                79,797,000
----------------------------------------------------------------------------------------------------------------
Outbreaks resulting from deliberate contamination
----------------------------------------------------------------------------------------------------------------
Salmonella         Dalles, Oregon     Salad bars         751 cases; 45      Not available      10,687,000 to
 Typhimurium        1984                                  hospitalized                          18,875,000
----------------------------------------------------------------------------------------------------------------
Shigella           Texas 1996         Muffins and        12 cases; 4        All cases          83,000
 dysentreriae                          doughnuts          hospitalized       identified
 type 2
----------------------------------------------------------------------------------------------------------------
Outbreaks resulting from imported foods
----------------------------------------------------------------------------------------------------------------
Cyclospora         United States and  Raspberries        1465 cases         Not available      3,941,000
 cayaetanensis      Canada 1996        (probably          identified, less
                                       imported from      than 20
                                       Guatemala)         hospitalized
----------------------------------------------------------------------------------------------------------------


[[Page 25226]]

Salmonella enteritidis in ice cream

    In 1994, approximately 224,000 people were sickened by ice cream 
contaminated with Salmonella enteritidis. The source of the 
contamination appeared to be pasteurized premix that had been 
contaminated during transport in tanker trailers that carried 
nonpasteurized eggs. There were 150 confirmed cases of salmonellosis 
associated with the outbreak in Minnesota. However, ice cream processed 
during the contamination period was distributed to 48 states. To 
calculate the total number of illnesses associated with the outbreak, 
researchers calculated an attack rate of 6.6 percent. This attack rate 
was extrapolated to the population that consumed the ice cream, giving 
a total number sickened of 224,000 (Ref. 19).
    Salmonellosis most commonly causes gastrointestinal symptoms. 
Almost 91 percent of cases are mild and cause 1 to 3 days of illness 
with symptoms including diarrhea, abdominal cramps, and fever. Moderate 
cases, defined as cases that require a trip to a physician, account for 
8 percent of the cases. These cases typically have a duration of 2 to 
12 days. Severe cases require hospitalization and last 11 to 21 days. 
In addition to causing gastroenteritis, salmonellosis also can cause 
reactive arthritis in a small percentage of cases. Reactive arthritis 
may be short or long term and is characterized by joint pain. Just over 
1 percent of cases develop short-term reactive arthritis and 2 percent 
of cases develop chronic, reactive arthritis.
    FDA estimated the costs associated with salmonellosis, including 
medical treatment costs and pain and suffering. Table 32 of this 
document provides a summary of these estimates. Pain and suffering is 
measured by lost quality adjusted life days (QALDs). QALDs measure the 
loss of utility associated with an illness. A QALD is measured between 
zero and one, with one being a day in perfect health. FDA uses the 
value placed by consumers on the risks to life found in current 
economic literature (See Refs. 20, 21, 22, and 23). In addition, FDA 
presents two estimates of values of pain and suffering associated with 
arithritis, one based on physician estimates (Ref. 24) and another 
based on a regression analysis approach (Ref. 25). This gives a range 
of costs for the average case of salmonellosis between $14,231 and 
$25,133.
    To estimate the economic cost due to illness associated with this 
outbreak, FDA used the range for the average cost per case. For 224,000 
people, this is a total cost of between $3,187,744,000 and 
$5,629,792,000 from this accidental food disaster.

                                                 Table 33.--The Cost of a Typical Case of Salmonellosis
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                               Medical
                                                                                       Total QALDs         Health Loss          Costs        Weighted
                             Severity                                Case Breakdown      Lost per      (dollars) per Case     (dollars)     Dollar Loss
                                                                       (percent)         Illness          (Discounted)        per Case       per Case
                                                                                                                            (Discounted)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Illness.................................................................................................................................................
  Mild............................................................         90.7              1.05                   660             0             599
  Moderate........................................................          8.1              3.68                 2,310           283             209
  Severe..........................................................          1.2              9.99                 6,266         9,250             188
--------------------------------------------------------------------------------------------------------------------------------------------------------
Arthritis...............................................................................................................................................
Regression approach...............................................  ...............  ...............  ....................  ............  ..............
  Short-term......................................................          1.26             5.41                 3,391           100              44
  Long-term.......................................................          2.40         2,613.12               452,554         7,322          11,048
Direct survey approach............................................  ...............  ...............  ....................  ............  ..............
  Short-term......................................................          1.26            10.81                 6,778           100              87
  Long-term.......................................................          2.40         5,223.15               904,573         7,322          21,906
--------------------------------------------------------------------------------------------------------------------------------------------------------
Death.............................................................          0.04     ...............          5,000,000     ............        2,143
========================================================================================================================================================
Total expected loss per case............................................................................................................................
  Regression approach...................................................................................................................       14,231
  Direct survey approach................................................................................................................       25,133
--------------------------------------------------------------------------------------------------------------------------------------------------------

Shigella sonnei in tofu salad

    In 1988, a tofu salad at an outdoor music festival was contaminated 
with Shigella sonnei and sickened an estimated 3,175 people. Over 2,000 
volunteer food handlers served communal meals at the festival (Ref. 
26). Shigellosis causes similar symptoms and is of similar duration to 
salmonellosis. It also is associated with short term and chronic 
reactive arthritis; thus FDA assumed the average case of shigellosis 
has the same cost as salmonellosis. This gives a total cost of 
$45,183,000 to $79,797,000.

Salmonella typhimirium in salad bars

    During September and October of 1984, two outbreaks of Salmonella 
typhimirium occurred in association with salad bars in restaurants in 
The Dalles, Oregon. At least 751 people were affected. Members of the 
local Rajneeshpuram commune intentionally caused the outbreak by 
spraying Salmonella typhimirium on the salad bars in local restaurants. 
Their apparent motivation was to influence a local election by 
decreasing voter turnout. Intentional contamination was not suspected 
immediately and no charges were brought until a year after the attacks 
(Ref. 27).
    The 751 people affected primarily were identified through passive 
surveillance; thus the true number of people actually sickened is 
undoubtedly much higher. The Dalles is located on Interstate 84 in 
Oregon and is a frequent stop for travelers who were unlikely to be 
identified by passive or active surveillance for salmonellosis. 
However, since we do not have any estimates of the true size of the 
outbreak, we estimated the costs associated with known cases, 
recognizing this is an underestimate of the true cost of the outbreak. 
We use the cost estimates for salmonellosis as ranging from $14,231 to 
$25,133. This gives an estimated cost

[[Page 25227]]

of known cases for the outbreak of $10,687,000 to $18,875,000.

Shigella dysenteriae type 2 among laboratory workers

    Twelve people working in a laboratory who consumed muffins left in 
the laboratory break room contracted shigellosis. Affected workers had 
diarrhea, nausea, and abdominal discomfort. Investigators concluded 
that the outbreak likely was the result of deliberate contamination. 
All twelve affected workers were treated by, or consulted with, a 
physician. Nine affected workers went to the emergency room, four of 
whom were hospitalized (Ref. 28).
    To estimate the cost of this outbreak, FDA assumed that the eight 
cases requiring consultation with a doctor, but not requiring 
hospitalization, had the same cost as a moderate case of salmonellosis. 
The four cases requiring hospitalization were estimated to have the 
same cost as a severe case of gastroenteritis resulting from 
salmonellosis. This gives a cost of $83,000 for illnesses associated 
with the event.

          Table 34.--Summary of Costs for Cases of Shigellosis
------------------------------------------------------------------------
                               Number of   Cost per case    Total cost
           Severity              cases       (dollars)       (dollars)
------------------------------------------------------------------------
Mild                                0               0               0
------------------------------------------------------------------------
Moderate                            8           2,593          21,000
------------------------------------------------------------------------
Severe                              4          15,516          62,000
------------------------------------------------------------------------
Grand total                                                    83,000
------------------------------------------------------------------------

Cyclospora cayatanensis in imported raspberries

    In 1996, 1,465 cases of cyclosporiasis were linked to consumption 
of raspberries imported from Guatemala. Nine hundred and seventy eight 
of these cases were laboratory confirmed. No deaths were confirmed and 
less than 20 hospitalizations were reported (Ref. 29). Case control 
studies indicated that raspberries imported from Guatemala were the 
source of the illnesses. Fifty-five clusters of cases were reported in 
20 states, two Canadian provinces, and the District of Columbia (Ref. 
30).
    Cyclosporiasis typically causes watery diarrhea, loss of appetite, 
weight loss, and fatigue. Less common symptoms include fever, chills, 
nausea, and headache. The median duration of illness associated with 
the outbreak was more than 14 days and the median duration of diarrheal 
illness was 10 days (Ref. 30). We estimated the cost of a mild case of 
cyclosporiasis as two and a half times higher than the cost of a mild 
case of gastroenteritis from salmonellosis due to the longer duration. 
The reports of cyclosporiasis outbreaks did not include information on 
the number of physician visits. We assumed that the percentage of total 
cases that result in physician visits would be larger than the 
corresponding percentage for salmonellosis illnesses, due to the longer 
duration of illnesses. We assumed, therefore, that 40 percent of those 
infected with cyclosporiasis visited a physician. Less than 20 
hospitalizations were reported from the cyclosporiasis outbreak (Ref. 
29). No deaths were confirmed.

         Table 35.--Summary of Costs for Cases of Cyclosporiasis
------------------------------------------------------------------------
                         Number of   Cost per case
        Severity           cases       (dollars)    Total cost (dollars)
------------------------------------------------------------------------
Mild                        879           1,650             1,450,000
------------------------------------------------------------------------
Moderate                    586           3,748             2,196,000
------------------------------------------------------------------------
Severe                       19          15,516               295,000
------------------------------------------------------------------------
Grand total                                                $3,941,000
------------------------------------------------------------------------

    Mechanisms: The new recordkeeping provisions we describe in the 
options section would not only help FDA determine the cause of a 
particular outbreak by tracing the source, they would also reduce 
further adverse health effects by enabling FDA to trace forward to 
locate adulterated food and its packaging that presents a threat of 
serious adverse health consequences or death to humans and animals. We 
expect that, working in concert with other regulations, having complete 
records identifying all links in the chain of custody for a particular 
product will allow FDA to more efficiently deploy its compliance and 
regulatory resources in an event of an outbreak. Having complete 
records increases the probabilities of FDA being able to trace back to 
the source of an outbreak and of FDA being able to trace forward to 
locate adulterated food and its packaging. FDA conducts approximately 
20 emergency traceback investigations per year. Although no 
investigation has been completely halted by a lack of adequate records 
in the past several years, inadequate records have hindered 
investigations. For example, FDA attempted to conduct approximately 38 
tracebacks in a Cyclospora outbreak in 1997. Of those, we were able to 
complete 33, and the majority of failures were due to the lack of 
available records. More commonly, incomplete records severely impede 
the ability of FDA to conduct effective investigations.
    Faster required record access times may allow FDA to more rapidly 
identify the source of an outbreak and limit its effects. Over the past 
several years of FDA traceback investigations, the normal response time 
between a request for data and the receipt of the records from the firm 
is 2-3 days. The response times in these options would greatly speed up 
the traceback process, which would be critical in limiting a deliberate 
or accidental major outbreak.

[[Page 25228]]

    Comparison of benefits under each option: Because we cannot 
quantify these benefits, we cannot differentiate the benefits of each 
option in dollar terms. Instead, we explore how effectively each of the 
two mechanisms, trace back and response, would operate under each of 
the options. The extent of coverage by each option is one criterion 
that we use to evaluate the effectiveness of each mechanism since the 
extent of coverage may influence the effectiveness of both trace-back 
and response times. Tables 36 and 37 of this document present the 
numbers of firms covered under each option, and the reduction in the 
numbers of firms covered under each option when compared to those 
covered under option 4. As in the costs section, option 4 was chosen 
for comparison purposes for the sake of consistency. Foreign and 
domestic coverage are presented separately in Tables 36 and 37 of this 
document since there may be reason to weigh the benefits from the 
inclusion of each category differently. Table 38 of this document 
provides a summary of the expected effects.

                                                      Table 36.--Number of Firms Covered by Option
--------------------------------------------------------------------------------------------------------------------------------------------------------
                   Option                                  Domestic                             Foreign                              Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
2                                                                        459,998                             535,432                             995,431
--------------------------------------------------------------------------------------------------------------------------------------------------------
3                                                                        425,365                             449,676                             875,041
--------------------------------------------------------------------------------------------------------------------------------------------------------
4                                                                        425,365                             449,676                             875,041
--------------------------------------------------------------------------------------------------------------------------------------------------------
5                                                                        425,365                             449,676                             875,041
--------------------------------------------------------------------------------------------------------------------------------------------------------
6                                                                        351,772                             449,676                             801,448
--------------------------------------------------------------------------------------------------------------------------------------------------------
7                                                                        400,968                             449,676                             850,644
--------------------------------------------------------------------------------------------------------------------------------------------------------
8                                                                        425,365                             449,676                             875,041
--------------------------------------------------------------------------------------------------------------------------------------------------------
9                                                                        425,365                             449,676                             875,041
--------------------------------------------------------------------------------------------------------------------------------------------------------
10                                                                       425,365                             186,879                             612,245
--------------------------------------------------------------------------------------------------------------------------------------------------------
11                                                                       425,365                              61,942                             487,307
--------------------------------------------------------------------------------------------------------------------------------------------------------
12                                                                       425,365                                   0                             425,365
--------------------------------------------------------------------------------------------------------------------------------------------------------
13                                                                       459,998                             535,432                             995,431
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                 Table 37.--Marginal Reduction in the Numbers of Firms Covered With Respect to Option 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
                   Option                                  Domestic                             Foreign                              Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
2                                                                    (34,633)\1\                         (85,756)\1\                        (120,389)\1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
3                                                                              0                                   0                                   0
--------------------------------------------------------------------------------------------------------------------------------------------------------
4                                                                              0                                   0                                   0
--------------------------------------------------------------------------------------------------------------------------------------------------------
5                                                                              0                                   0                                   0
--------------------------------------------------------------------------------------------------------------------------------------------------------
6                                                                         73,594                                   0                              73,594
--------------------------------------------------------------------------------------------------------------------------------------------------------
7                                                                         24,397                                   0                              24,397
--------------------------------------------------------------------------------------------------------------------------------------------------------
8                                                                              0                                   0                                   0
--------------------------------------------------------------------------------------------------------------------------------------------------------
9                                                                              0                                   0                                   0
--------------------------------------------------------------------------------------------------------------------------------------------------------
10                                                                             0                             262,797                             262,797
--------------------------------------------------------------------------------------------------------------------------------------------------------
11                                                                             0                             387,735                             387,735
--------------------------------------------------------------------------------------------------------------------------------------------------------
12                                                                             0                             449,676                             449,676
--------------------------------------------------------------------------------------------------------------------------------------------------------
13                                                                   (34,633)\1\                         (85,756)\1\                        (120,389)\1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Numbers in parentheses are negative.


[[Page 25229]]

Evaluating the benefits by option using two mechanisms: (1) Complete 
records (which increase the probability of a thorough trace-back 
investigation), and (2) faster records access times (which may allow 
for more rapid identification of the source of an outbreak and limit 
its effects).
    Option 1, no action: No impact.
    Option 2, comprehensive coverage, 4 or 8 hour records access, 1 and 
2 year records retention for perishables and all other products: This 
option contains no exemptions, so it has the largest coverage of any of 
the options we consider and ranks high with regard to improving the 
ability to perform a thorough trace-back investigation. However, option 
13 requires even greater additional record information collection, 
which would aid in trace-back investigations. So, based on mechanism 1, 
this option has the second highest benefits. With regard to the speed 
criterion--this option also has the quickest response time specified in 
any of the options. It is ranked second in overall benefits behind 
option 13.
    Option 3, same as option 2 except outer-packaging manufacturers and 
distributors are excluded: The exclusion of outer food packagers from 
recordkeeping requirements reduces the coverage and the potential to 
perform a thorough trace-back investigation compared with option 2. It 
is also unclear what the relative risk of outer food packaging is 
compared with the risk of the food itself (including food contact 
substances), but FDA assumes that the potential harm through packaging 
adulteration, although serious, is lower than the potential harm 
through adulteration of food. This would tend to mitigate the 
consequences on potential trace-back capability from excluding these 
facilities. This option also scores relatively well if rated by the 
speed criterion since the records-access time is the same as in option 
2. The exclusion of outer packaging manufacturers and distributors will 
not reduce benefits by much compared with option 2--especially because 
the risk of contamination through outer packaging is likely to be 
small.
    Option 4, same as option 3 except recordkeeping on outer-packaging 
is excluded: The reduction in benefits from not requiring recordkeeping 
on outer food packaging is assumed to be negligible compared with 
option 3. Therefore, the benefits from this option are about the same 
as option 3 using both the complete records criterion and the speed 
criterion.
    Option 5, same as option 4 except records access requirement is 
relaxed to 24 hours: This option does not differ much from option 4 by 
this ranking criterion, since it has the same domestic and foreign 
coverage and record scope requirements. However, this option scores 
relatively low by the speed criterion, since all other options would 
require a much faster response time for records access.
    Option 6, same as option 4 except intrastate facilities are 
excluded: This option has lower benefits than many other options since 
it exempts the largest number of domestic facilities of any option. The 
relative ranking of options that offer exemptions will be affected by 
the total number of facilities exempted and the breadth of the supply 
chain these facilities cross. This intrastate exclusion would affect 
many different facility types throughout the supply chain, including 
approximately 91,383 domestic manufacturers, wholesalers, and 
warehouses. In addition, many facilities involved only in intrastate 
commerce handle food products that eventually will be introduced into 
interstate commerce farther along the supply chain. While intrastate 
facilities are likely to be small, if they are participants in the 
chain of custody of the food that causes a major outbreak, their 
exclusion could disrupt FDA's ability to identify the source of an 
outbreak and limit its effects. The overall ranking of this option is 
behind option 10.
    Option 7, same as option 4 except mixed-type facilities that engage 
in farming are excluded: There are fewer exempted facilities in this 
option, owned by approximately 24,397 domestic firms, than in option 6. 
Furthermore, these exempt firms are mixed-type facilities that engage 
in farming and would be closer to the beginning of the chain of custody 
for food products. FDA considers this option to have lower benefits 
than option 5, since fewer facilities would be required to keep records 
that may be needed for a traceback investigation, but higher benefits 
than options 6 and 10-12, since fewer facilities would be exempt and 
especially since these facilities are closer to the beginning of the 
supply chain.
    Option 8, same as option 4 except there is a universal records-
retention requirement of 1 year for perishables and all other products: 
All other things being equal, the shorter the retention time for 
records, the more likely that those records would be missing when 
needed for a trace-back investigation. Most nonperishable products and 
perishable products that are processed into finished food products may 
be in the supply chain for longer than a year, but it is very likely 
that the effects of a contamination of nonperishable goods would be 
seen within a year of being introduced in the market. FDA considers 
this option to have higher benefits than options 6 and 7, and higher 
benefits than the other exemptions offered in options 10-12. Option 8 
is ranked lower than option 9 because of the nonzero probability that a 
nonperishable food is adulterated and that adulteration is not 
discovered until more than a year after the event.
    Option 9, same as option 4 except there is a universal records-
retention requirement of 2 years for perishables and all other 
products: Once again, all other things being equal, the longer the 
record retention the better, so this option probably has more benefits 
than option 2. While option 9 has the benefit of simplicity in that 
there is only one retention requirement for all records, in practical 
terms the danger from a perishable good will be known soon after that 
good is consumed. Consequently, keeping records longer than one year 
for perishable goods that are consumed in an unaltered state would most 
likely exceed the time period of many tracing investigations. 
Therefore, based on the ability to conduct a thorough investigation, 
FDA ranks the benefits of this option as roughly equal to option 4, 
especially since the longer records-retention requirement should not 
affect the speed of an investigation.
    Option 10, same as option 4 except that foreign coverage is the 
same as for the registration proposed rule: The proposed option would 
generate more benefits than other options that exempt foreign 
facilities. Since the foreign coverage is progressively lower for 
options 10, 11, and 12, the benefits also decrease for those options 
accordingly. However, the benefit from improved recordkeeping practices 
by a given set of facilities also depends on the amount of food 
produced by those facilities. Because imported food accounts for a 
small percentage of total domestic food consumption, the average amount 
of domestically consumed food from foreign facilities is smaller than 
that from domestic facilities. Under this option, the reduction in the 
number of foreign facilities that are covered is proportionally greater 
than the reduction in the amount of food covered. As a result, the 
incremental reduction in potential costs caused by the exemption of 
foreign facilities should be larger than the incremental reduction in 
benefits. The exemption of foreign facilities under this option

[[Page 25230]]

would likely hamper trace-back capability by less than an exemption of 
the same number of domestic facilities.
    Moreover, option 10 has the added benefit of simplicity in that the 
foreign coverage would be the same as that covered under the 
registration rule. This parallel coverage to the registration rule 
would make monitoring both recordkeeping and registration practices 
less costly.
    Option 11, same as option 4 except that foreign coverage includes 
only the final holders before export: In addition to the exemptions in 
option 10, this option exempts an additional single category in the 
middle of the foreign supply chain and with a large number of 
facilities. Consequently, the benefits under this option are lower than 
under option 10 by both the speed criterion and the thorough 
investigation criterion. However, as we explained in the discussion of 
option 10, the proportionally smaller importance of imported foods in 
the domestic food supply implies that the exemption should have 
relatively little effect on benefits.
    Option 12, same as option 4 except that all foreign facilities are 
excluded: This option exempts all foreign suppliers from record-keeping 
requirements. When compared to options 10 and 11, the number of foreign 
firms covered under this option is the lowest. As such, the benefits of 
this option, when compared to the other two, are the lowest as well 
using both the speed criterion and the ability to conduct a thorough 
investigation.
    Option 13, comprehensive coverage that requires facilities to be 
able to tie specific input ingredients to specific products: This 
option generates the highest benefits. A complete list of the specific 
source of all ingredients would be available for all processed and raw 
foods, greatly aiding traceback and trace forward investigations. In 
addtion, of all the options, this would allow investigators to most 
quickly identify candidate traceback facilities, since it would allow 
FDA to effectively narrow our search to specific entities.
    Table 38 of this document presents the overall ranking of each 
option based on the previous summary. Option 13, requiring input 
ingredients to be connected to output ingredients through records, has 
the highest absolute benefits, followed by option 2. The lowest ranked 
option in terms of absolute benefits is the baseline, option 1, and the 
lowest benefits of the possible interventions would be the proposed 
rule with a complete foreign facility exemption, due to the large 
number of foreign facilities where adulteration might occur. FDA 
requests comments on this ranking.

 Table 38.--Ranking of Effectiveness of Each Mechanism Under Each Option
------------------------------------------------------------------------
                                                               Overall
             Option:                Benefit 1    Benefit 2     Ranking
------------------------------------------------------------------------
1) No action                                13           13           13
------------------------------------------------------------------------
2) 4 or 8 hour records access                2            2            2
------------------------------------------------------------------------
3) Outer packaging exemption                 3            3            3
------------------------------------------------------------------------
4) Exclude recordkeeping on outer            3            3            3
 packaging
------------------------------------------------------------------------
5) 24-hour records access                    7            9            8
------------------------------------------------------------------------
6) Intrastate exemption                     10           10           10
------------------------------------------------------------------------
7) Mixed-type facilities that                5            5            5
 engage in farming
------------------------------------------------------------------------
8) 1-year record retention                   7            7            7
------------------------------------------------------------------------
9) 2-year record retention                   6            6            6
------------------------------------------------------------------------
10) Proposed. Same foreign                   8            8            8
 coverage as Registration
------------------------------------------------------------------------
11) Cover only final foreign                11           11           11
 holders
------------------------------------------------------------------------
12) Exempt all foreign suppliers            12           12           12
------------------------------------------------------------------------
13) Input to output requirement              1            1            1
------------------------------------------------------------------------

B. Initial Regulatory Flexibility Analysis

    FDA has examined the economic implications of this proposed rule as 
required by the Regulatory Flexibility Act (5 U.S.C. 601-612). If a 
rule has a significant economic impact on a substantial number of small 
entities, the Regulatory Flexibility Act requires agencies to analyze 
regulatory options that would lessen the economic effect of the rule on 
small entities. FDA finds that this proposed rule would have a 
significant economic impact on a substantial number of small entities.
    Impact per firm: We define small as employing fewer than 500 full-
time-equivalent workers. The SBA uses several criteria for identifying 
a small firm based on its NAICS code, but having less than 500 
employees is the most common SBA small definition in the food industry 
(Ref. 31). We also consider two definitions of very small: Less than 20 
employees and less than 10 employees. The great majority of firms are 
considered small when classified by any of these definitions. Table 39 
presents the percent of firms in each of these categories. Not included 
in this table are farm numbers. We calculated farm percentages using 
the Agricultural census through the NASS, but the Agricultural census 
only classifies farm size by sales and acreage, not by the number of 
employees (Ref. 19). Fifty percent of farms have less than $10,000 in 
annual sales. Neither SBA definitions nor employee data exist for 
exclusive food importers; we assume that the percentage of small firms 
in this category is similar to the percentage in other food categories. 
We do not include foreign firms in this analysis because the Regulatory 
Flexibility Act does not

[[Page 25231]]

apply to foreign entities. It is clear from Table 39 of this document 
that any provision in this regulation that takes the size of the 
facility into account would cover a significant percent of food 
businesses.

                               Table 39.--Percentage of Small and Very Small Firms
----------------------------------------------------------------------------------------------------------------
                 Type                      < 500 Employees           < 20 Employees           < 10 Employees
----------------------------------------------------------------------------------------------------------------
Manufacturers                                            98.0%                    85.3%                    77.0%
----------------------------------------------------------------------------------------------------------------
Wholesalers/Warehouses                                   99.3%                    89.4%                    82.2%
----------------------------------------------------------------------------------------------------------------
Packaging\1\                                             98.6%                    87.0%                    78.7%
----------------------------------------------------------------------------------------------------------------
Transporter/Packers                                      99.5%                    94.8%                    89.5%
----------------------------------------------------------------------------------------------------------------
Grocery and other Retail                                 99.7%                    93.9%                    87.8%
----------------------------------------------------------------------------------------------------------------
Convenience Stores                                       99.6%                    88.9%                    73.1%
----------------------------------------------------------------------------------------------------------------
Mixed-Type Facilities that Have Farms                       --                       --                       --
----------------------------------------------------------------------------------------------------------------
Importers                                                   --                       --                       --
----------------------------------------------------------------------------------------------------------------
\1\ Includes both outer packaging and food contact substances.

    In Tables 40 and 41 of this document, FDA presents the average and 
maximum possible burden placed on each small and very small firm 
following the adoption of the final rule. We explain these costs in 
detail in the preliminary regulatory impact analysis. Costs fall into 
four categories: learning about the regulation, redesigning records to 
accommodate new information, collecting and maintaining new 
information, and planning for a rapid response in the event of a 
records request from FDA under this authority. The average mean startup 
costs reported in the table are approximately $888, and the average 
mean recurring costs reported in the table are approximately $222. 
Based on our assumptions, average maximum startup costs are 
approximately $2569 and the average maximum recurring costs reported in 
the table are $521. We also acknowledge considerable nonquantifiable 
uncertainty in these estimates, so the true burden of the regulation on 
small businesses could be higher or lower.
    The estimated burden on convenience stores is lower since: (1) We 
assume that most convenience stores will depend on either a corporate 
parent or other facility in the supply chain for document redesign, and 
(2) only a small percentage of convenience stores sales (11.4 percent 
according to a comment received through FDA's early outreach) is for 
food products, so the volume of food products for which they would have 
to collect information and prepare access is relatively small. 
Transporters and Packing firm costs are larger since we assume that 
transporting firms would not be able to share records redesign costs 
with firms up or down the supply chain. We also assumed that packaging 
producers and distributors would have to maintain relatively less 
additional information since not all of their products will be used to 
pack food. In subsequent years, all firms will only incur the 
additional records maintenance burden.

                             Table 40.--Average Startup and Recurring Costs Per Firm
----------------------------------------------------------------------------------------------------------------
                                                   Transporter/     Convenience
                      Cost                            Packer           Store       Packaging\1\        Other
----------------------------------------------------------------------------------------------------------------
Startup
----------------------------------------------------------------------------------------------------------------
  Learning                                                  $120            $120            $120            $120
----------------------------------------------------------------------------------------------------------------
  Redesign                                                $1,211            $121            $606            $606
----------------------------------------------------------------------------------------------------------------
  Access Preparation                                        $151             $75            $151            $151
----------------------------------------------------------------------------------------------------------------
Total Startup                                             $1,482            $317            $876            $876
----------------------------------------------------------------------------------------------------------------
Recurring
----------------------------------------------------------------------------------------------------------------
  Additional Records Maintenance                            $326             $63            $163            $326
----------------------------------------------------------------------------------------------------------------
\1\ Includes both outer packaging and food contact substances.

    The maximum first year costs per firm are calculated using the 
following assumptions: First, a firm may not have Internet access, so 
it may have a 5 1/2 hour learning burden. Next, a firm may incur the 
largest value in the distribution of redesign costs, and may not be 
able to share the redesign burden with other facilities. Finally, the 
firm may not receive records with any additional information previously 
collected that is required in this proposed rule. Thus they may incur 
the entire burden of additional records maintenance. We assume access 
preparation costs do not vary.

[[Page 25232]]



                             Table 41.--Maximum Startup and Recurring Costs Per Firm
----------------------------------------------------------------------------------------------------------------
                                                   Transporter/     Convenience
                      Cost                            Packer           Store       Packaging\1\        Other
----------------------------------------------------------------------------------------------------------------
Startup
----------------------------------------------------------------------------------------------------------------
  Learning                                                  $138            $138            $138            $138
----------------------------------------------------------------------------------------------------------------
  Redesign                                                $2,299          $2,299          $2,299          $2,299
----------------------------------------------------------------------------------------------------------------
  Access Preparation                                        $151             $75            $151            $151
----------------------------------------------------------------------------------------------------------------
Total Startup                                             $2,588          $2,512          $2,588          $2,588
----------------------------------------------------------------------------------------------------------------
Recurring
----------------------------------------------------------------------------------------------------------------
  Additional Records Maintenance                            $653            $126            $653            $653
----------------------------------------------------------------------------------------------------------------
\1\ Includes both outer packaging and food contact substances.

    In order to get a rough estimate of the impact of higher 
recordkeeping costs on small businesses, we ran the small business 
simulation model that was developed by FDA's contractor, RTI 
International (Ref. 31), for the candy and ready-to-eat food sectors. 
In the simulation, we used the high annual costs of the second year 
per-firm recordkeeping costs (about $850) to see the impact on revenues 
and cash flow. The results from the simulation indicate that when firm 
size (by number of employees) is assumed to be normally distributed, 
the recordkeeping costs in the second year would result in pre-tax 
costs being greater than cash flow for 0.1 percent of firms with fewer 
than 20 employees in the candy industry. For the ready-to-eat sector, 
the results indicate that the high second year per-firm recordkeeping 
costs would not result in pre-tax costs being greater than cash flow 
for any firms.
    Additional flexibility considered: Agencies can consider three 
basic small business regulatory options: First, if the implementing 
statute allows, an agency could exempt small businesses from all 
regulatory requirements. In addition, an agency could modify the 
regulatory requirements for small businesses, including offering an 
exemption from part of the regulation. Finally, an agency could specify 
a longer effective compliance date for small businesses. In this 
proposed rule, FDA considers each of these possibilities. We designed 
several provisions to lower the impact on small firms, some of which 
apply to small firms exclusively, and some of which apply to all firms.
    First, FDA proposes a staggered effective compliance date for this 
regulation. The compliance dates are the following: 6 months for large 
firms, 12 months for small firms, defined as having less than 500 but 
more than 10 full-time equivalent employees, and 18 months for very 
small firms, defined as having 10 or fewer full-time equivalent 
employees. Only one of the cost estimates we explained in detail in the 
preliminary regulatory impact analysis directly depends on the 
compliance date; records redesign cost. We estimated using the FDA 
Label Cost Model that very small firms would save an average of 10 
percent in their redesign costs by having longer than a year to comply. 
The medium 1-year redesign cost estimate is $1,309 per redesign. We 
assume this cost is shared between two firms, since a single set of 
records can serve as source, recipient, and transport records. The 
average redesign cost per firm is $655 for firm types other than 
transporters and convenience stores. The median 18-month redesign cost 
estimate is $1,190 per redesign, for an average cost of $595 per firm. 
The estimated medium redesign burden would drop by $60 per firm, or 8 
percent of the estimated average first startup burden of the 
regulation. Also, present value considerations will result in reduced 
future cost estimates. Thus, the later compliance dates specified in 
the proposed rule will reduce the total cost for all small firms. FDA 
requests comments regarding these assumptions.
    In addition, FDA is proposing to describe the specific information 
a covered entity must keep, but not specify the form or type of system 
in which those records must be maintained, which will allow firms to 
comply with the regulation in a manner that is cost effective. Mandated 
structural changes to records or required retention technology probably 
would not be the most cost effective solution for every firm, so not 
specifying the form or type of system in which the records must be 
maintained almost certainly would impose a smaller burden on industry, 
including small businesses. Comments to FDA's preliminary outreach 
generally agreed with this position. FDA believes that describing the 
specific information a covered entity must keep, but not specifying the 
form or type of system in which those records must be maintained is the 
most flexible means of proposing this regulation for all businesses. 
However, FDA also believes that each provision in this proposed rule is 
necessary to tracing investigations, so we do not propose any 
additional flexibility for small or very small businesses.
    Finally, FDA is proposing several exemptions based on facility 
type. Since the majority of facilities of each type are small 
businesses, these exemptions will reduce the small business burden of 
this regulation. In the proposed rule, FDA exempts retail facilities 
from having to maintain records of final consumers who purchase retail 
food products. Requiring firms to collect and maintain consumer 
information would increase the burden on retail facilities by at least 
the amount of the current redesign burden and current additional 
records maintenance burden summarized in Table 40 of this document. 
Without this exemption, retail firms (including small retail firms) 
would have to design and maintain an entirely new recordkeeping system.
    Most other small business exemptions are infeasible for this 
regulation because we believe records held by these businesses are an 
important link in the chain of custody for the food products. As shown 
in Table 39 of this document, a large percentage of the food industry 
would be exempt under any blanket small business exemption. Even 
nonemployee businesses (who have no paid employees, the smallest 
exemption possible) still constitute a substantial proportion of the 
food industry. Any type of exemption in the middle of the

[[Page 25233]]

supply chain very likely would make records unavailable and therefore 
would break the chain of custody of many products during tracing 
investigations.
    The Bioterrorism Act exempts farms and restaurants. Because most 
farms and restaurants are small businesses, this exemption provides 
regulatory relief to small entities. In addition, in this proposed rule 
the term ``farm'' includes facilities that pack or hold food, provided 
that all food used in such activities is grown or raised on that farm 
or is consumed on that farm; ``farm'' also includes facilities that 
manufacture or process food, provided that all food used in such 
activities is consumed on that farm or another farm under the same 
ownership. Most of these facilities are small entities. The statutory 
exemptions provide considerable relief to small entities without 
compromising the purpose of the recordkeeping regulation. FDA will 
continue to conduct research regarding possible further exemptions, and 
requests comments regarding possible exemptions that would provide 
additional relief for small businesses while still accomplishing the 
goals of the Bioterrorism Act.

C. Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (Public Law 
104-4) requires cost-benefit and other analyses before any rule making 
if the rule would include a ``Federal mandate that may result in the 
expenditure by State, local, and tribal governments, in the aggregate, 
or by the private sector, of $100,000,000 or more (adjusted annually 
for inflation) in any 1 year.'' The current inflation-adjusted 
statutory threshold is $112,300,000. FDA has determined that this 
proposed rule does constitute a significant rule under the Unfunded 
Mandates Reform Act.
    Most of the requirements of the Unfunded Mandates are fulfilled in 
the Executive Order 12866 analysis, above. The requirements under the 
Unfunded Mandates Act of 1995 include assessing the rule's effects on 
future costs; productivity; particular regions, communities, or 
industrial sectors; economic growth; full employment; job creation; and 
exports.
    Future costs: The future costs from the recordkeeping rule include 
the recurring costs, which reach their long-term value in the third 
year after the proposed rule would become final. These costs would be 
incurred by domestic facilities that manufacture, process, pack, 
transport, distribute, receive, hold, or import food, and the foreign 
facilities that are subject to this proposed rule (foreign 
manufacturers, processors, packers, and holders of food that would be 
required to register).
    Recurring costs from collecting new information would be incurred 
in each future year. The estimates of these costs were modeled using 
the previous analysis of the juice HAACP regulation as a frame of 
reference. An hourly burden of 30 minutes a week was used for the 
additional monitoring and recordkeeping that would be required from 
this proposed rule. This hourly burden estimate was modified for 
foreign facilities and convenience stores to allow for structural 
differences assumed in their operations. For a fuller illustration of 
the future costs of the proposed rule, see Table 20 of this document.

                                             Table 42.--Future Costs
----------------------------------------------------------------------------------------------------------------
                                                                Mean               Low                High
----------------------------------------------------------------------------------------------------------------
Year 3 and later years                                        $221,130,000       $212,313,000       $229,680,000
----------------------------------------------------------------------------------------------------------------

    Particular regions, communities, or industrial sectors: The costs 
of the recordkeeping requirement will be shared among domestic 
manufacturers, processors, packers, transporters, receivers, holders, 
and importers of food, and the foreign facilities that would be subject 
to this proposed rule (foreign holders, packers, manufacturers, and 
processors that would be required to register) as well as domestic 
consumers. The higher costs incurred by domestic and foreign suppliers 
as a result of these regulations will mostly be passed on to consumers 
in the form of higher food prices. Since consumer demand for food is 
highly inelastic almost all of the higher costs incurred by food 
suppliers will be passed on to consumers. Consequently, higher food 
prices will reduce real incomes for all consumers. However, we believe 
that the benefits from these regulations will justify the reduction in 
real incomes. These benefits are measured as an improved ability by the 
FDA to respond to and contain threats of serious adverse health 
consequences from accidental or deliberate contamination of food.
    National productivity, economic growth, job creation, and full 
employment: Although this proposed regulation is costly, we do not 
expect it to substantially affect national productivity, growth, jobs, 
or full employment. The total costs will be small relative to the 
economy, and will be offset by benefits. The improved ability to 
respond to, and contain, serious adverse health consequences means less 
illness and fewer sick days taken by employees, and lower adjustment 
costs by firms that would otherwise need to hire replacement employees.
    Exports: This proposed rule would require additional records to be 
kept throughout the production and distribution chain for food. The 
additional recordkeeping costs would increase the total costs of 
production and distribution for all of the regulated products, 
including products sold within the United States and across national 
borders. These increased costs will be largely passed on to consumers 
in the form of higher prices, which will tend to reduce the quantity 
demanded of the regulated products. The increased prices of U.S. 
exports could reduce the quantity of U.S. exports demanded, 
particularly in comparison with exports from countries that do not 
implement similar recordkeeping regulations. We expect this effect to 
be insignificant, because under the proposed rule (option 10, described 
above), the increases in the price of U.S. exports (and resulting 
decreases in quantity demanded) would be quite small.

D. SBREFA Major Rule

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(Public Law 104-121) defines a major rule for the purpose of 
congressional review as having caused or being likely to cause one or 
more of the following: An annual effect on the economy of $100 million; 
a major increase in costs or prices; significant adverse effects on 
competition, employment, productivity, or innovation; or significant 
adverse effects on the ability of United States-based enterprises to 
compete with foreign-based enterprises in domestic or export markets. 
In accordance with the Small Business Regulatory Enforcement Fairness 
Act, OMB has determined that

[[Page 25234]]

this proposed rule, when final, will be a major rule for the purpose of 
congressional review.

IV. Paperwork Reduction Act of 1995

    This proposed rule contains information collection provisions that 
are subject to review by OMB under the Paperwork Reduction Act of 1995 
(44 U.S.C. 3501-3520). A description of these provisions is given below 
with an estimate of the annual recordkeeping burden. Included in the 
estimate is the time for reviewing instructions, searching existing 
data sources, gathering and maintaining the data needed, and completing 
and reviewing each collection of information.
    FDA invites comments on: (1) Whether the proposed collection of 
information is necessary for the proper performance of FDA's functions, 
including whether the information would have practical utility; (2) the 
accuracy of FDA'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, when appropriate, and other forms of 
information technology.
    Title: Recordkeeping and Records Access Requirements for Food 
Facilities
    Description: The Bioterrorism Act contains a provision authorizing 
the Secretary to develop regulations requiring food facilities that 
manufacture, process, pack, hold, receive, distribute, transport, or 
import food to establish and maintain records identifying the immediate 
previous sources and immediate subsequent recipients of food, animal 
food, or food ingredients. Records for nontransporters must include the 
name and full contact information of sources, recipients, and 
transporters, an adequate description of the food including the 
quantity and the way that it is packaged, and the receipt and shipping 
dates. Records for transporters must include similar information about 
the food or food packaging, sources, and recipients, identification of 
all modes of transportation, and responsible individuals, while the 
food or food packaging is in the custody of the transporter.
    Description of Respondents: Facilities that manufacture, process, 
pack, hold, receive, distribute, transport, or import food are required 
to establish and maintain records, including facilities in both 
interstate and intrastate commerce. Foreign manufacturers, processors, 
packers, and holders of food that would be required to register are 
required to maintain records if they ship food to the United States.
    Burden: FDA estimates that the paperwork burden of this rule will 
be incurred by the number and types of firms and facilities listed in 
Table 43 of this document. FDA assumes that, approximately 841,000 
facilities owned by approximately 646,000 firms would be covered. This 
number includes domestic facilities that manufacture, process, 
transport, distribute, pack, receive, hold, or import food, and the 
foreign facilities that manufacture, process, package, or hold food 
destined for consumption or use in the United States that would be 
required to register. Some of the recordkeeping burden will be incurred 
at the firm level and some of the burden will be incurred at the 
facility level.

                                  Table 43.--Affected Facility and Firm Details
----------------------------------------------------------------------------------------------------------------
                  Type                             Facility Estimate                     Firm Estimate
----------------------------------------------------------------------------------------------------------------
Manufacturers                                                         43,376                              36,948
----------------------------------------------------------------------------------------------------------------
Wholesalers/Warehouses                                                95,745                              76,952
----------------------------------------------------------------------------------------------------------------
Packaging\1\                                                          36,907                              34,633
----------------------------------------------------------------------------------------------------------------
Transporters/Packers                                                  16,773                              15,171
----------------------------------------------------------------------------------------------------------------
Retail Grocery and Specialty Food                                    207,657                             153,277
----------------------------------------------------------------------------------------------------------------
Convenience Stores                                                   128,985                              68,866
----------------------------------------------------------------------------------------------------------------
Mixed-Type Facilities That Have Farms                                 30,497                              24,397
----------------------------------------------------------------------------------------------------------------
Importers                                                             18,902                              15,122
----------------------------------------------------------------------------------------------------------------
Total Domestic                                                       578,842                             425,366
----------------------------------------------------------------------------------------------------------------
Final Holders                                                         77,427                              61,942
----------------------------------------------------------------------------------------------------------------
De minimus Processors/Packagers                                       22,600                              18,080
----------------------------------------------------------------------------------------------------------------
Manufacturers                                                        125,450                             106,858
----------------------------------------------------------------------------------------------------------------
Other Facility Types                      ..................................  ..................................
----------------------------------------------------------------------------------------------------------------
Total Foreign                                                        225,477                             186,879
----------------------------------------------------------------------------------------------------------------
\1\ Including outer packaging and food contact substances.

    The recordkeeping burden for Sec. Sec.  1.337, 1.345, and 1.352 
includes learning about the regulation requirements, the redesign of 
records, and records maintenance including information collection for 
these records. The burden for Sec.  1.361 is associated with planning 
for and executing an FDA request for records. Because it is difficult 
to estimate with any degree of precision the burden incurred from 
executing a records access request, we only compute the burden for 
firms to prepare for a potential records access request from FDA.

[[Page 25235]]

    The burden for learning the regulatory requirements of this 
proposed recordkeeping rule may be shared by firms that also need to 
learn the regulatory requirements of the proposed rule entitled 
``Registration of Food Facilities'' (68 FR 5378, February 3, 2003). The 
learning burden presented in Table 44 of this document includes the 
total number of hours needed to learn and understand the records 
required for compliance. This is a one-time burden that covered firms 
will incur in the first year following enactment of the final rule.
    The records redesign burden presented in Table 44 of this document 
reflects the burden that some firms will incur by adding a limited 
amount of new information to their records. Some firms will not already 
be keeping the required information in a readily accessible form. The 
records redesign burden includes labor and capital costs associated 
with modifying existing forms so that they are better suited to meet 
the recordkeeping requirements. This is assumed to be a one-time burden 
incurred by each covered firm in the first and second years following 
implementation of the final rule.
    The records access preparation burden presented in Table 44 of this 
document reflects the burden of preparing a plan for modifying current 
business practices in order to be able to respond to an FDA records 
request in the 4-hour or 8-hour required timeframe. The estimate of the 
records access planning burden is a one-time burden that would be 
incurred in the first and second years following enactment of the final 
rule. We assume that this burden will be incurred by each facility.
    FDA expects that personnel at most facilities will incur a records 
maintenance burden due to collecting, recording, and checking for 
accuracy the limited amount of additional information required by the 
proposed rule. The burden from this activity is reported in table 45 of 
this document and is assumed to be incurred by all facilities in each 
subsequent year following enactment of the final rule. Finally, new 
firms are assumed to incur burdens from learning and records access 
preparation in each subsequent year following enactment of the final 
rule. These burdens for new firms are reported in table 44 of this 
document.

                                          Table 44.--Estimated Annual Recordkeeping Burden--One-Time Burden\1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Annual
                    21 CFR Section                           No. of        Frequency per   Total Annual      Hours per     Capital Costs    Total Hours
                                                         Recordkeepers        Record          Records         Record
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.337, 1.345, and 1.352, (Learning)                              804,319               1         804,319           6.853  ..............       5,512,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.337, 1.345, and 1.352, (Redesign)                              278,858               1         278,858          29.607    $130,582,000       8,256,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.361 (Access Preparation)                                       552,630               1         552,630           5.626  ..............       3,109,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
  Total                                                                                                                                       16,877,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ There are no operating and maintenance costs associated with this collection of information.


                      Table 45.--Estimated Annual Recordkeeping Burden--Subsequent Years\1\
----------------------------------------------------------------------------------------------------------------
                                                      Annual
        21 CFR Section               No. of        Frequency per   Total Annual      Hours per      Total Hours
                                 Recordkeepers        Record          Records         Record
----------------------------------------------------------------------------------------------------------------
1.337, 1.345, and 1.352                  772,410               1         772,410          10.625       8,207,000
 (Additional Records
 Maintenance)
----------------------------------------------------------------------------------------------------------------
1.337, 1.345, and 1.352,                  80,432               1          80,432           6.853         551,000
 (Learning for New Firms)
----------------------------------------------------------------------------------------------------------------
1.361 (Access Preparation for             55,263               1          55,263           5.626         311,000
 New Firms)
----------------------------------------------------------------------------------------------------------------
  Total                                                                                                9,069,000
----------------------------------------------------------------------------------------------------------------
\1\ There are no capital costs or operating and maintenance costs associated with this collection of
  information.

    In compliance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507(d)), the agency has submitted the information collection 
provisions of this proposed rule to OMB for review. Interested persons 
are requested to send comments regarding information collection to OMB 
(see ADDRESSES).

V. Analysis of Environmental Impact

    The agency has carefully considered the potential environmental 
effects of this action. FDA has concluded under 21 CFR 25.30(h) that 
this action is of a type that does not individually or cumulatively 
have a significant effect on the human environment. Therefore, neither 
an environmental assessment nor an environmental impact statement is 
required.

VI. Federalism

    FDA has analyzed this proposed rule in accordance with the 
principles set forth in Executive Order 13132. FDA has determined that 
the proposed rule does not contain policies that have substantial 
direct effects on the States, on the relationship between the National 
Government and the States, or on the distribution of power and 
responsibilities among the various levels of government. Accordingly, 
the agency tentatively concludes that the proposed rule does not 
contain policies that have federalism implications as defined in the 
Executive order and, consequently, a federalism summary impact 
statement is not required.

VII. Comments

    Interested persons may submit to the Dockets Management Branch (see 
ADDRESSES) written or electronic comments regarding this document. 
Submit a single copy of electronic comments or two paper copies of any 
mailed comments, except that individuals may submit one paper copy. 
Comments are to be identified with the docket number found in brackets 
in the

[[Page 25236]]

heading of this document. FDA cannot be responsible for addressing 
comments submitted to the wrong docket or that do not contain a docket 
number. Received comments may be seen in the Dockets Management Branch 
between 9 a.m. and 4 p.m., Monday through Friday.
    FDA notes that the comment period for this document is shorter than 
the 75-day period that the agency customarily provides for proposed 
rules that are technical or sanitary or phytosanitary (SPS) measures. 
FDA believes that a 60-day comment period is appropriate in this 
instance. Executive Order 12889, ``Implementation of the North American 
Free Trade Agreement'' (58 FR 69681, December 30, 1993), states that 
any agency subject to the Administrative Procedure Act must provide a 
75-day comment period for any proposed Federal technical regulation or 
any Federal SPS measure of general application. Executive Order 12889 
provides an exception to the 75-day comment period where the United 
States considers a technical or SPS measure of general application 
necessary to address an urgent problem related to the protection of 
human, plant, or animal health. FDA has concluded that this proposed 
rule is subject to the exception in Executive Order 12889.
    The Bioterrorism Act states that it is intended ``[t]o improve the 
ability of the United States to prevent, prepare for, and respond to 
bioterrorism and other public health emergencies.'' In order to meet 
these objectives, section 306 of the act requires FDA to propose and 
issue final regulations requiring the establishment and maintenance of 
records within 18 months of the Bioterrorism Act's enactment, which is 
by December 12, 2003. This expedited timeframe reflects the urgency of 
the U.S. Government's need to prepare to respond to bioterrorism and 
other food-related emergencies. Accordingly, FDA has concluded that the 
urgency of this matter is sufficient justification for shortening the 
public comment period for this proposal to 60 days, consistent with 
Executive Order 12889.
    FDA will not consider any comments submitted after the 60-day 
comment period closes and does not intend to grant any requests for 
extension of the comment period due to the Bioterrorism Act's December 
12, 2003, deadline.

VIII. References

    The following references have been placed on display in the Dockets 
Management Branch (see ADDRESSES) and may be seen by interested persons 
between 9 a.m. and 4 p.m., Monday through Friday. FDA has verified the 
Web site addresses in this document, but is not responsible for 
subsequent changes to the Web sites after this document publishes in 
the Federal Register.
    1. U.S. Census Bureau. 2000 County Business Patterns. Available 
at http://www.census.gov/epcd/cbp/view/cbpview.html.
    2. U.S. Census Bureau. 1999 Nonemployer Statistics. Available at 
http://www.census.gov/epcd/nonemployer/index.html.
    3. U.S. Department of Agriculture, National Agriculture 
Statistics Service. 1997 Census of Agriculture-United States Data. 
Available at http://www.nass.usda.gov/census/.
    4. Brown, J. Bradley, Memorandum to File, December 13, 2002.
    5. U.S. Census Bureau. 1999 Statistics of U.S. Businesses. 
Available at http://www.census.gov/epcd/www/recent.htm.
    6. U.S. Department of Labor, Bureau of Labor Statistics. 
National Compensation Survey: Occupation Wages in the United States, 
2000. Summary 01-04. Available at http://www.bls.gov/ncs/ocs/sp/ncbl0354.pdf.
    7. NUA. How Many Online? Available at http://www.nua.com/surveys/how_many_online/index.html. Accessed on September 4, 2002.
    8. U.S. Small Business Administration, Office of Advocacy. E-
commerce, Small Business Venture Online. July, 1999. Available at 
http://www.sba.gov/advo/stats/e_comm.pdf. Accessed on September 31, 
2002.
    9. Dunn and Bradstreet. D&B 21st Annual Small Business Survey 
Summary Report. Available at http://sbs.dnb.com/?referrer=sbsnavcenter. Accessed on September 31, 2002.
    10. Turbo Speed Reading. Internet site, http://www.turboread.com. Accessed on April 21, 2003.
    11. The English Speaking Union. Frequently Asked Questions. 
Available at http://www.esu.org/faqs.html. Accessed September 4, 
2002.
    12. U.S. Census Bureau Web site. (http://www.census.gov/main/www/popclock.html).
    13. RTI, International 2000. FDA Labeling Cost Model: Final 
Report. Revised April 2002.
    14. The European Parliament And The Council Of The European 
Union 2002. Regulation (EC) No 178/2002, laying down the general 
principles and requirements of food law, establishing the European 
Food Safety Authority, and laying down procedures in matters of food 
safety. Official Journal of the European Communities V 31, January 
2, 2002.
    15. U.S. Food and Drug Administration, ``Hazard Analysis and 
Critical Control Point (HAACP); Procedures for the Safe and Sanitary 
Processing and Importing of Juice,'' 66 FR 6138, January 19, 2001.
    16. RTI, International 2000. Survey of Manufacturing Practices 
in the Dietary Supplement Industry: Final Report. May 17, 2000.
    17. Bender, K., L. Hill, B. Wenzel, and R. Hornbaker, 
``Alternative Market Channels for Specialty Corn and Soybeans,'' 
1999. Department of Agricultural, Consumer and Environmental 
Sciences, University of Illinois at Urbana-Champaign AE-4726.
    18. U.S. Department of Agriculture, National Agriculture 
Statistics Service: Agricultural Statistics. Available at http://www.usda.gov/nass/pubs/agstats.htm.
    19. Hennessy, T. W., C. W. Hedberg, L. Slutsker, K. E. White, J. 
M. Besser-Wiek, M. E. Moen, J. Feldman, W. W. Coleman, L. M. 
Edmonson, K. L. MacDonald, M. T. Osterholm, and the Investigation 
Team, ``A National Outbreak of Salmonella Enteritidis Infections 
From Ice Cream,'' The New England Journal of Medicine, 1281-1286, 
May 16, 1996.
    20. Kaplan, R. M., J. P. Anderson, and T. G. Ganiats, ``The 
Quality of Well-Being Scale: Rationale for a Single Quality of Life 
Index,'' edited by S. R. Walker and R. M. Rosser. Quality of Life 
Assessment: Key Issues in the 1990s. The Netherlands: Kluwer 
Academic Publishers, 1993.
    21. Moore, M., W. K. Viscusi, ``The Quantity Adjusted Value of 
Life,'' Economic Inquiry 26, 369-388.20, 1988.
    22. Viscusi, W. K., ``The Value of Risks to Life and Health,'' 
Journal of Economic Literature, 31:1912-1946, December, 1993.
    23. Cutler, D., E. Richardson, ``Your Money and Your Life: The 
Value of Health and What Affects It.'' Working Paper 6895. National 
Bureau of Economic Research, 1999.
    24. Zorn, D., K. Klontz, ``Appendix: The Value of Consumer Loss 
Relating to Foodborne Reactive Arthritis,'' 63 FR 24292, May 1, 
1998.
    25. Scharff, R., and A. Jessup, ``Valuing Chronic Disease for 
Heterogeneous Populations: The Case of Arthritis,'' Mimeo, 2002.
    26. Lee, L. A., S. M. Ostroff, H. B. McGee, D. R. Johns, F. P. 
Downes, D. N. Cameron, N. H. Bean and P. M. Griffin, ``An Outbreak 
of Shigellosis at an Outdoor Music Festival, American Journal of 
Epidemiology, 133:6:608-615, 1991.
    27. Trook, T. J., R. V. Tauxe, R. P. Wise, J. R. Livengood, R. 
Sokolow, S. Mauvais, K. A. Birkness, M. R. Skeels, J. M. Horan, and 
L. R. Foster, ``A Large Community Outbreak of Salmonellosis Caused 
by Intentional Contamination of Restaurant Salad Bars,'' The Journal 
of the American Medical Association, 278:5:389-397, August 6, 1997.
    28. Kolavic, S. A., A. Kimura, S. L. Simons, L. Slusker, S. 
Barth, and C. E. Haley, ``An Outbreak of Shigella Dysenteriae Type 2 
Among Laboratory Workers Due to Intentional Food Contamination, The 
Journal of the American Medical Association, 278:5:396-403, August 
6, 1997.
    29. Colley, D. G., ``Widespread Foodborne Cyclosporiasis 
Outbreaks Present Major Challenges'' (letter), Emerging Infectious 
Diseases, 2:4:354-356, October-December 1996.
    30. Herwaldt, B. L., M. L. Ackers, and Cyclospora Working Group, 
``An Outbreak in 1996 of Cyclosporiasis Associated with Imported 
Raspberries,'' New England Journal of Medicine, 1548-1556, May 29, 
1997.
    31. SBA Office of Advocacy. Small Business by the Numbers. May, 
2002. Available at http://www.sba.gov/advo/stats/sbfaq.html.

[[Page 25237]]

    32. Cramp, John A., P. M. Griffin, and F. J. Angulo, ``Bacterial 
Contamination of Animal Feeds and its Relationship to Human 
Foodborne Illness,'' Clinical Infectious Diseases, 35:859-865, 2002.

List of Subjects

21 CFR Part 1

    Cosmetics, Drugs, Exports, Food labeling, Imports, Labeling, 
Reporting and recordkeeping requirements.

21 CFR Part 11

    Administrative practice and procedure, Computer technology, 
Reporting and recordkeeping requirements.
    Therefore, under the Federal Food, Drug, and Cosmetic Act and under 
authority delegated to the Commissioner of Food and Drugs, it is 
proposed that 21 CFR parts 1 and 11 be amended as follows:

PART 1--GENERAL ENFORCEMENT REGULATIONS

    1. The authority citation for 21 CFR part 1 continues to read as 
follows:

    Authority: 15 U.S.C. 1453, 1454, 1455; 21 U.S.C. 304, 321, 331, 
334, 343, 350c, 350d, 352, 355, 360b, 362, 371, 374, 381, 382, 393; 
42 U.S.C. 216, 241, 243, 262, 264.
    2. Subpart J is added to part 1 to read as follows:
Subpart J--Establishment, Maintenance, and Availability of Records
General Provisions
Sec.
1.326 Who is subject to this subpart?
1.327 Who is excluded from all or part of the regulations in this 
subpart?
1.328 What definitions apply to this subpart?
1.329 Do other statutory provisions and regulations apply?
1.330 Can existing records satisfy the requirements of this subpart?
Requirements to Establish and Maintain Records to Identify the 
Nontransporter and Transporter Immediate Previous Source of All Food
1.337 What information is required in the records you must establish 
and maintain to identify the nontransporter and transporter 
immediate previous source?
Requirements to Establish and Maintain Records to Identify the 
Nontransporter and Transporter Immediate Subsequent Recipient of All 
Food
1.345 What information is required in the records you must establish 
and maintain to identify the nontransporter and transporter 
immediate subsequent recipient?
Requirements to Establish and Maintain Records to Trace the 
Transportation of All Food
1.351 Who is required to establish and maintain records for tracing 
the transportation of all food?
1.352 What information is required in the transportation records?
General Requirements
1.360 What are the record retention requirements?
1.361 What are the record availability requirements?
1.362 What records are excluded from this subpart?
1.363 What are the consequences of failing to establish or maintain 
records or make them available to FDA?
Effective Dates
1.368 What are the compliance dates for this subpart?

Subpart J--Establishment, Maintenance, and Availability of Records

General Provisions


Sec.  1.326  Who is subject to this subpart?

    (a) Domestic persons who manufacture, process, pack, transport, 
distribute, receive, hold, or import food intended for consumption in 
the United States are subject to the regulations in this subpart, 
unless you qualify for one of the exclusions in Sec.  1.327. In 
addition, foreign facilities that manufacture/process, pack, or hold 
food for human or animal consumption in the United States are subject 
to these regulations, unless you qualify for one of the exclusions in 
Sec.  1.327. If you conduct more than one type of activity at a 
location, you are required to keep records with respect to those 
activities covered by this subpart, but are not required by this 
subpart to keep records with respect to activities that fall within one 
of the exclusions in Sec.  1.327.
    (b) Persons subject to the regulations in this subpart must keep 
records whether or not the food enters interstate commerce.


Sec.  1.327  Who is excluded from all or part of the regulations in 
this subpart?

    (a) Farms are excluded from all of the regulations in this subpart;
    (b) Restaurants are excluded from all of the regulations in this 
subpart;
    (c) Fishing vessels including those that not only harvest and 
transport fish but also engage in practices such as heading, 
eviscerating, or freezing intended solely to prepare fish for holding 
on board a harvest vessel are excluded from all of the regulations in 
this subpart, except Sec.  1.361 and Sec.  1.363. However, those 
fishing vessels otherwise engaged in processing fish, which for 
purposes of this subsection means handling, storing, preparing, 
heading, eviscerating, shucking, freezing, changing into different 
market forms, manufacturing, preserving, packing, labeling, dockside 
unloading, or holding, are subject to all of the regulations in this 
subpart;
    (d)(1) All retail facilities are excluded from Sec.  1.345 of this 
subpart;
    (2) Retail facilities that employ 10 or fewer full-time equivalent 
employees that:
    (i) Are located in the same general physical location as a farm; 
and
    (ii) Sell unprocessed food grown or raised on that farm or on 
another farm located in the same general physical location are excluded 
from all of the regulations in this subpart, except Sec.  1.361 and 
Sec.  1.363, with respect to that unprocessed food.
    (e) Persons who manufacture, process, pack, transport, distribute, 
receive, hold, or import food that is within the exclusive jurisdiction 
of the U.S. Department of Agriculture under the Federal Meat Inspection 
Act (21 U.S.C. 601 et seq.), the Poultry Products Inspection Act (21 
U.S.C. 451 et seq.), or the Egg Products Inspection Act (21 U.S.C. 1031 
et seq.) are excluded from all of the regulations in this subpart with 
respect to that food.
    (f) Foreign facilities are excluded from all the regulations in 
this subpart, if food from such facilities undergoes further 
manufacturing/processing (including packaging) by another foreign 
facility outside the United States. This exclusion does not apply to a 
foreign facility if the further manufacturing/processing (including 
packaging) conducted by the subsequent facility consists of adding 
labeling or any similar activity of a de minimis nature.
    (g) Persons who manufacture, process, pack, transport, distribute, 
receive, hold, or import pet food who are not subject to the 
recordkeeping provisions of the animal proteins prohibited in ruminant 
feed regulation (Sec.  589.2000 of this chapter) are, with respect to 
pet food records, excluded from all the regulations in this subpart 
except for Sec.  1.361 and Sec.  1.363.


Sec.  1.328  What definitions apply to this subpart?

    The definitions of terms in section 201 of the Federal Food, Drug, 
and Cosmetic Act apply to such terms when used in this subpart.
    In addition, for the purposes of this subpart:
    Act means the Federal Food, Drug, and Cosmetic Act.
    Domestic person means any person located in any State or Territory 
of the

[[Page 25238]]

United States, the District of Columbia, or the Commonwealth of Puerto 
Rico.
    Farm means a facility in one general physical location devoted to 
the growing of crops for food, the raising of animals for food 
(including seafood), or both. The term ``farm'' includes:
    (1) Facilities that pack or hold food, provided that all food used 
in such activities is grown or raised on that farm or is consumed on 
that farm; and
    (2) Facilities that manufacture/process food, provided that all 
food used in such activities is consumed on that farm or another farm 
under the same ownership.
    Food has the meaning given in section 201(f) of the act (21 U.S.C. 
321(f)). Examples of food include, but are not limited to: Fruits; 
vegetables; fish; dairy products; eggs; raw agricultural commodities 
for use as food or components of food; animal feed, including pet food; 
food and feed ingredients and additives, including substances that 
migrate into food from food packaging and other articles that contact 
food; dietary supplements and dietary ingredients; infant formula; 
beverages, including alcoholic beverages and bottled water; live food 
animals; bakery goods; snack foods; candy; and canned foods.
    Foreign facility means a facility other than a domestic person that 
manufactures/processes, packs, or holds food for consumption in the 
United States.
    Manufacturing/processing means making food from one or more 
ingredients, or synthesizing, preparing, treating, modifying or 
manipulating food, including food crops or ingredients. Examples 
include, but are not limited to: Cutting, peeling, trimming, washing, 
waxing, eviscerating, rendering, cooking, baking, freezing, cooling, 
pasteurizing, homogenizing, mixing, formulating, bottling, milling, 
grinding, extracting juice, distilling, labeling, or packaging.
    Nontransporter means a person who owns food or who holds, 
processes, packs, imports, receives, or distributes food for purposes 
other than transportation.
    Nontransporter immediate previous source means a person that last 
had an article of food before transferring it to another 
nontransporter.
    Nontransporter immediate subsequent recipient means a 
nontransporter that acquires an article of food from another 
nontransporter.
    Perishable food means food that is not heat-treated, not frozen, 
and not otherwise preserved in a manner so as to prevent the quality of 
the food from being adversely affected if held longer than 7 days under 
normal shipping and storage conditions.
    Pet food means food for nonfood-producing animals.
    Recipe means the quantitative formula used in the manufacturing of 
the food product, but not the identity of the individual ingredients of 
the food.
    Restaurant means a facility that prepares and sells food directly 
to consumers for immediate consumption. Restaurants include, but are 
not limited to, cafeterias, lunchrooms, cafes, bistros, fast food 
establishments, food stands, saloons, taverns, bars, lounges, catering 
facilities, hospital kitchens, day care kitchens, and nursing home 
kitchens. Facilities that provide food to interstate conveyances, 
rather than directly to consumers, are not restaurants.
    Retail facility means a facility that sells food products directly 
to consumers only. The term includes, but is not limited to, grocery 
and convenience stores, vending machine locations, and commissaries.
    Transporter means a person who has possession, custody, or control 
of an article of food for the sole purpose of transporting the food. A 
person who owns food or who holds, processes, packs, imports, receives, 
or distributes food for purposes other than transportation is not a 
transporter.
    Transporter's immediate previous source means a person from whom a 
transporter received an article of food. This source can be either 
another transporter or a nontransporter.
    Transporter's immediate subsequent recipient means a person to whom 
a transporter delivered an article of food. This recipient can be 
either another transporter or a nontransporter.
    You means a person or facility subject to this subpart under Sec.  
1.326.


Sec.  1.329  Do other statutory provisions and regulations apply?

    (a) In addition to the regulations in this subpart, you must comply 
with all other applicable statutory provisions and regulations related 
to the establishment and maintenance of records for foods except as 
described in paragraph (b) of this section. For example, the 
regulations in this subpart are in addition to existing recordkeeping 
regulations for low acid canned foods, juice, seafood, infant formula, 
color additives, bottled water, animal feed, and medicated animal feed.
    (b) Records established or maintained to satisfy the requirements 
of this subpart that meet the definition of electronic records in Sec.  
11.3(b)(6) of this chapter are exempt from the requirements of part 11 
of this chapter. Records that satisfy the requirements of this subpart 
but that are also required under other applicable statutory provisions 
or regulations remain subject to part 11 of this chapter.


Sec.  1.330  Can existing records satisfy the requirements of this 
subpart?

    The regulations in this subpart do not require duplication of 
existing records if those records contain all of the information 
required by this subpart. If a covered person keeps records of all of 
the information as required by this subpart in order to comply with 
other Federal, State, or local regulations, or for any other reason, 
then those records may be used to meet these requirements.

Requirements to Establish and Maintain Records to Identify the 
Nontransporter and Transporter Immediate Previous Source of All 
Food


Sec.  1.337  What information is required in the records you must 
establish and maintain to identify the nontransporter and transporter 
immediate previous source?

    (a) If you are a nontransporter, you must establish and maintain 
the following records for all food you receive. Your records must 
include information reasonably available to you to identify the 
specific source of each ingredient that was used to make every lot of 
finished product.
    (1) The name of the firm and responsible individual, address, phone 
number and, if available, the fax number and e-mail address of the 
nontransporter immediate previous source, whether domestic or foreign;
    (2) An adequate description of the type of food received, to 
include brand name and specific variety (e.g., brand x cheddar cheese, 
not just cheese; or romaine lettuce, not just lettuce);
    (3) The date you received the food;
    (4) The lot or code number or other identifier of the food (to the 
extent this information exists);
    (5) The quantity and how the food is packaged (e.g., 6 ct. bunches, 
25 lb carton, 12 oz bottle); and
    (6) The name of the firm and responsible individual, address, phone 
number and, if available, the fax number and e-mail address of the 
transporters who transported the food to you.

Requirements to Establish and Maintain Records to Identify the 
Nontransporter and Transporter Immediate Subsequent Recipient of 
All Food


Sec.  1.345  What information is required in the records you must 
establish and maintain to identify the nontransporter and transporter 
immediate subsequent recipient?

    (a) If you are a nontransporter, you must establish and maintain 
the

[[Page 25239]]

following records for all food you release:
    (1) The name of the firm and responsible individual, address, phone 
number and, if available, the fax number and e-mail address of the 
nontransporter immediate subsequent recipient, whether domestic or 
foreign;
    (2) An adequate description of the type of food released, to 
include brand name and specific variety (e.g., brand x cheddar cheese, 
not just cheese; or romaine lettuce, not just lettuce);
    (3) The date the food was released;
    (4) The lot or code number or other identifier of the food (to the 
extent this information exists);
    (5) The quantity and how the food is packaged (e.g., 6 ct. bunches, 
25 lb carton, 12 oz bottle); and
    (6) The name of the firm and responsible individual, address, phone 
number and, if available, the fax number and e-mail address of the 
transporters who transported the food from you.
    (b) [Reserved]

Requirements to Establish and Maintain Records to Trace the 
Transportation of All Food


Sec.  1.351  Who is required to establish and maintain records for 
tracing the transportation of all food?

    If you are a domestic person and you are a transporter of food, you 
are required to establish and maintain records containing information 
not only about your transportation activities but also about the person 
from whom you received the food (the transporter's immediate previous 
source) and the person to whom you delivered it (the transporter's 
immediate subsequent recipient), as specified in Sec.  1.352.


Sec.  1.352  What information is required in the transportation 
records?

    (a) You must establish and maintain the following records for each 
food you transport:
    (1) The name of the firm and responsible individual, address, phone 
number and, if available, the fax number and e-mail address of the 
person who had the food immediately before you, and the date you 
received it from that person;
    (2) The name of the firm and responsible individual, address, phone 
number and, if available, the fax number and e-mail address of the 
person who had the food immediately after you, and the date you 
delivered it to that person;
    (3) An adequate description of the type of food, including brand 
name and specific variety (e.g., brand x cheddar cheese, not just 
cheese; or romaine lettuce, not just lettuce);
    (4) The lot or code number or other identifier of the food (to the 
extent this information exists);
    (5) The quantity and how the food is packaged (e.g., 6 ct. bunches, 
25 lb carton, 12 oz bottle);
    (6) Identification of each and every mode of transportation (e.g., 
company truck, private carrier, rail, air, etc.), and the individual 
responsible, from the time you first received the food until the time 
you delivered it.
    (b) [Reserved]

General Requirements


Sec.  1.360  What are the record retention requirements?

    (a) You must create the required records at the time the activity 
occurs.
    (b) You must retain for 1 year after the date the records were 
created all required records for perishable foods not intended for 
processing into nonperishable foods.
    (c) You must retain for 2 years after the date the records were 
created all required records for all other foods, except animal foods.
    (d) You must retain for 1 year after the date the records were 
created all required records for animal food, including pet food.
    (e) You must retain all records required by these regulations at 
the establishment where the covered activities described in the records 
occurred (onsite) or at a reasonably accessible location.
    (f) The maintenance of electronic records is acceptable.


Sec.  1.361  What are the record availability requirements?

    When FDA has a reasonable belief that an article of food is 
adulterated and presents a threat of serious adverse health 
consequences or death to humans or animals, any records and other 
information accessible to FDA under section 414 or 704(a) of the act 
must be readily available for inspection and photocopying or other 
means of reproduction. Such records and other information must be made 
available within 4 hours of a request if the request is made between 8 
a.m. and 6 p.m., Monday through Friday, or within 8 hours of a request 
if made at any other time, by an officer or employee duly designated by 
the Secretary who presents appropriate credentials and a written 
notice. If records and other information are stored offsite, the 
records must be retrieved and provided onsite within the specified time 
period. Electronic records are considered to be onsite if they are 
accessible from an onsite location.


Sec.  1.362  What records are excluded from this subpart?

    The establishment and maintenance of records as required by this 
subpart does not extend to recipes for food, financial data, pricing 
data, personnel data, research data, or sales data (other than shipment 
data regarding sales).


Sec.  1.363  What are the consequences of failing to establish or 
maintain records or make them available to FDA?

    (a) The failure to establish or maintain records as required by 
section 414(b) of the act or the refusal to permit access to or 
verification or copying of any such required record is a prohibited act 
under section 301 of the act (21 U.S.C. 331).
    (b) The failure to make records or other information available to 
FDA as required by section 414 or 704(a) of the act is a prohibited act 
under section 301 of the act.

Effective Dates


Sec.  1.368  What are the compliance dates for this subpart?

    (a) The regulations in this subpart shall be effective 6 months 
after the date of publication of the final rule in the Federal 
Register. However, this subpart is not binding on small and very small 
businesses until the dates listed in paragraphs (a)(1) and (a)(2) of 
this section.
    (1) The regulations in this subpart are binding 12 months after the 
date of publication of the final rule in the Federal Register, for 
small businesses employing fewer than 500 but more than 10 full-time 
equivalent employees.
    (2) The regulations are binding 18 months after the date of 
publication of the final rule in the Federal Register, for very small 
businesses that employ 10 or fewer full-time equivalent employees.
    (b) [Reserved]

PART 11--ELECTRONIC RECORDS; ELECTRONIC SIGNATURES

    3. The authority citation for 21 CFR part 11 continues to read as 
follows:

    Authority: 21 U.S.C. 321-393; 42 U.S.C. 262.
    4. Section 11.1 is amended to add paragraph (f) to read as follows:


Sec.  11.1  Scope.

* * * * *
    (f) This part does not apply to records required to be established 
or maintained by Sec. Sec.  1.326 through 1.368 of this chapter. 
Records that satisfy the requirements of Part 1, Subpart J of this 
chapter but that are also required under other applicable statutory 
provisions or regulations remain subject to this part.


[[Page 25240]]


    Dated: May 1, 2003.
Mark B. McClellan,
Commissioner of Food and Drugs.
    Dated: May 2, 2003.
Tommy G. Thompson,
Secretary of Health and Human Services.
[FR Doc. 03-11460 Filed 5-5-03; 5:08 pm]
BILLING CODE 4160-01-S