[Federal Register Volume 70, Number 86 (Thursday, May 5, 2005)]
[Proposed Rules]
[Pages 23813-23820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-8907]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 101

[Docket No. 2004N-0382]
RIN 0910-ZA23


Food Labeling: Safe Handling Statements: Labeling of Shell Eggs

AGENCY: Food and Drug Administration, HHS.

ACTION: Proposed rule.

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SUMMARY: The Food and Drug Administration (FDA) is proposing to amend 
the agency's food labeling regulations to permit the egg industry to 
place the safe handling statement for shell eggs on the inside lid of 
egg cartons if the statement ``Keep Refrigerated'' appears on the 
principal display panel (PDP) or information panel. This proposed rule, 
if finalized, will provide the industry greater flexibility in the 
placement of safe handling instructions on egg cartons, while 
continuing to provide consumers with this important information. This 
proposed action is in response to numerous requests from the egg 
industry.

DATES: Submit written or electronic comments by July 19, 2005. See 
section VII for the proposed effective date of a final rule based on 
this proposal.

ADDRESSES: You may submit comments, identified by [Docket No. 2004N-
0382], by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Agency Web site: http://www.fda.gov/dockets/ecomments. 
Follow the instructions for submitting comments on the agency Web site.
     E-mail: [email protected]. Include [Docket No. 2004N-
0382] in the subject line of your e-mail message.
     FAX: 301-827-6870.
     Mail/Hand delivery/Courier [For paper, disk, or CD-ROM 
submissions]: Division of Dockets Management, 5630 Fishers Lane, rm. 
1061, Rockville, MD 20852.
    Instructions: All submissions received must include the agency name 
and Docket No. or Regulatory Information Number (RIN) for this 
rulemaking. All comments received will be posted without change to 
http://www.fda.gov/ohrms/dockets/default.htm, including any personal 
information provided. For detailed instructions on submitting comments 
and additional information on the rulemaking process, see the 
``Comments'' heading of the SUPPLEMENTARY INFORMATION section of this 
document.
    Docket: For access to the docket to read background documents or 
comments received, go to http://www.fda.gov/ohrms/dockets/default.htm 
and insert the docket number, found in brackets in the heading of this 
document, into the ``Search'' box and follow the prompts and/or go to 
the Division of Dockets Management, 5630 Fishers Lane, rm. 1061, 
Rockville, MD 20852.

FOR FURTHER INFORMATION CONTACT: Catalina Ferre-Hockensmith, Center for 
Food Safety and Applied Nutrition (HFS-820), Food and Drug 
Administration, 5100 Paint Branch Pkwy., College Park, MD 20740, 301-
436-2371.

SUPPLEMENTARY INFORMATION:

I. Background

A. Safe Handling Labeling of Shell Eggs

    In the Federal Register of December 5, 2000 (65 FR 76092), FDA 
published a final rule entitled ``Food Labeling, Safe Handling 
Statements, Labeling of Shell Eggs; Refrigeration of Shell Eggs Held 
for Retail Distribution'' (hereinafter referred to as the ``shell egg 
labeling regulation''), which established a labeling regulation in 
Sec.  101.17(h) (21 CFR 101.17(h)) that requires the egg industry to 
place a safe handling statement on cartons of shell eggs that have not 
been treated to destroy Salmonella microorganisms. The regulation also 
requires retail establishments to store and display shell eggs under 
refrigeration. FDA issued that rule because of the number of outbreaks 
of foodborne illnesses and deaths caused by Salmonella Enteriditis (SE) 
that are associated with the consumption of shell eggs. Safe handling 
statements help consumers take measures to protect themselves from 
illness or death associated with consumption of shell eggs that have 
not been treated to destroy Salmonella. Refrigeration of shell eggs 
that have not been treated to destroy Salmonella helps prevent the 
growth of SE.

B. Placement and Prominence of FDA's Safe Handling Statement

    Section 403(f) of the Federal Food, Drug, and Cosmetic Act (the 
act) (21 U.S.C. 343(f)) requires that mandatory label information be 
placed on the label with such conspicuousness as to render it likely to 
be read and understood by ordinary individuals under customary 
conditions of use. Accordingly, the shell egg labeling regulation 
requires the safe handling statement to appear either on the PDP or on 
the information panel of egg cartons.
    FDA regulations define the PDP for packaged food as ``the part of a 
label that is most likely to be displayed, presented, shown, or 
examined by a consumer under customary conditions of display for retail 
sale'' (Sec.  101.1). For egg cartons, the top is usually the PDP. The 
information panel for packaged food generally is defined by Sec.  
101.2(a) as that part of the label that is immediately contiguous and 
to the right of the PDP, with the following exceptions. If the

[[Page 23814]]

part of the label immediately contiguous and to the right of the PDP is 
too small to accommodate the necessary information or is otherwise 
unusable label space, the panel immediately contiguous and to the right 
of that part of the label may be used (Sec.  101.2(a)(1)). If the 
package has one or more alternative PDPs, the information panel is 
immediately contiguous and to the right of any PDP (Sec.  101.2(a)(2)). 
If the top of a container is the PDP and the package has no alternate 
PDP, the information panel is any panel adjacent to the PDP (Sec.  
101.2(a)(3)). For egg cartons, the information panel is considered to 
be any side panel of the carton. Thus, the shell egg labeling 
regulation requires the safe handling statement to appear on either the 
top or side of egg cartons.

C. Requests for Flexibility in Placement and Prominence of the Safe 
Handling Statement

    FDA has received over 20 letters regarding the shell egg labeling 
regulation from egg producers, egg carton manufacturers, grocery 
retailers, an egg producer cooperative, and a consumer group. These 20 
letters have been placed in Docket No. 2004N-0382 and may be seen at 
the Division of Dockets Management (see ADDRESSES). The egg industry 
generally supported the requirement of a safe handling statement on egg 
cartons but expressed concern that placing the statement on the top or 
sides of the carton would result in a financial hardship for their 
companies. The egg industry asked FDA to allow safe handling statements 
to be placed on the inside lid of egg cartons for the following 
reasons: (1) The lack of equipment to print on the side panels of egg 
cartons (i.e., the information panel), (2) the high cost to purchase 
equipment to print on the sides of egg cartons, and (3) the high cost 
to change the graphic design of the PDP for each brand that 
manufacturers produce for each customer.
    The egg industry also argued that most consumers open cartons to 
check eggs before purchase, so the placement of the safe handling 
statement on the inside lid would be sufficiently prominent and 
conspicuous. To support this argument, a cooperative of egg producers 
included results of a consumer opinion survey conducted by the U.S. 
Department of Agriculture's (USDA) Cooperative State Research, 
Education, and Extension Service, in cooperation with the University of 
Georgia (UGA) (hereinafter referred to as the ``USDA/UGA survey'') 
(Ref. 1). Nearly 92 percent of the consumers surveyed reported that 
they open up egg cartons before purchase to check for cracked eggs. The 
egg producers argued that consumers are quality conscious and would be 
likely to see and read at the time of purchase a safe handling message 
on the inside lid of the egg carton. One egg carton manufacturer 
pointed out that all of its customers (egg producers) print the 
nutrition labeling information on the inside lid of egg cartons. Thus, 
the manufacturer asserted, many consumers consider the inside lid of 
the carton to be the information panel.
    The consumer group, who also supported the shell egg labeling 
regulation, asked that FDA re-evaluate the type size and readability of 
the safe handling statement because the safe handling statement may be 
illegible, particularly for elderly consumers. The consumer group did 
not provide data or other appropriate information to support this 
assertion.
    In the summer of 2001, FDA responded (by letter) to these requests 
by stating that the agency had decided to issue a proposed rule to 
amend the regulation in Sec.  101.17(h) to include the option of 
placing the safe handling statement on the inside lid of egg cartons. 
The agency stated that, until such rulemaking is complete, it would 
consider requests from individual companies for permission to place the 
safe handling statement on the inside lid of egg cartons. FDA further 
indicated that actions for enforcement of Sec.  101.17(h)(2) would not 
be a high priority for the agency, where companies have ensured that 
the statement on the inside lid is prominent (e.g., there is language, 
i.e., a referral statement, on the PDP that instructs consumers to look 
at the inside lid of egg cartons for the safe handling statement). FDA 
also stated that, in considering whether the statement in the inside 
lid is prominent, it might consider whether any referral statement is 
in close proximity to the ``Keep Refrigerated'' statement required by 
USDA under 9 CFR 590.50.

II. Proposal

    FDA is proposing to allow the egg industry to place the required 
safe handling statement on the inside lid of egg cartons if the 
statement ``Keep Refrigerated'' appears on the PDP or information 
panel.
    FDA tentatively believes that the inside lid would serve as an 
acceptable panel for the safe handling instructions without diminishing 
the effectiveness of the message. Consumers must open egg cartons 
before removing the eggs and thus would be exposed to the instructions 
before cooking. Also, as noted by the USDA/UGA survey, many consumers 
open the lids of egg cartons to check for cracked eggs at the point of 
purchase. These consumers would be exposed to the instructions at this 
time as well.
    The agency further notes that companies using inside-lid labeling 
may print the safe handling instructions in a larger font because there 
is generally more space available inside the lid for such labeling. A 
larger font may increase the number of consumers who read the 
instructions. As mentioned previously in section I.C of this document, 
a consumer group contended that the currently required safe handling 
statement may be illegible for some consumers. We solicit comment on 
this issue. We also solicit comment on whether it is necessary to 
require a referral statement on the outside lid when the safe handling 
instructions are placed on the inside lid.
    Furthermore, the agency is aware of the industry's data showing 
that the cost of printing the safe handling instructions on the PDP or 
information panel may be prohibitively expensive for some firms. FDA 
believes that providing flexibility may result in a cost savings for 
the egg industry and, thus, for consumers.
    The change to permit placement of the safe handling instructions 
that FDA is proposing in Sec.  101.17(h)(2) necessitates safeguards to 
ensure that the egg safe handling instruction ``Keep Refrigerated'' is 
seen as soon as possible and by those who might not open egg cartons. 
As discussed in the shell egg labeling regulation, refrigeration is a 
practicable and useful measure to limit the number of viable SE in 
shell eggs (65 FR 76092 at 76100-76102). Because personnel involved in 
the production, distribution, and storage of shell eggs may not open 
the lid of egg cartons, some consumers may not open the eggs cartons 
until they cook the eggs, and because the instruction to ``Keep 
Refrigerated'' is relevant before a consumer opens the carton, the 
agency believes that refrigeration instruction must appear on the 
outside of egg cartons that have an inside-lid safe handling statement. 
Accordingly, FDA is proposing to amend Sec.  101.17(h)(2) to require 
that, when the safe handling statement appears on the inside lid of the 
egg carton, the words, ``Keep Refrigerated''appear on the PDP or 
information panel.

[[Page 23815]]

III. Analysis of Economic Impacts

A. Preliminary Regulatory Impact Analysis

    FDA has examined the economic implications of this proposed rule 
under Executive Order 12866 and the Regulatory Flexibility Act (5 
U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Public 
Law 104-4). 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 under Executive Order 12866 if it raises novel legal 
or policy issues. The Office of Management and Budget has determined 
that this proposed rule is a significant regulatory action as defined 
by Executive Order 12866.
1. Need for the Proposed Regulation
    The need for this proposed regulation is to provide the shell egg 
industry, which includes egg producers, carton manufacturers, egg 
distributors, and retailers, additional flexibility in complying with 
FDA requirements for the placement of safe handling instructions on egg 
cartons, without reducing the prominence or conspicuousness of the 
information and without undermining the effectiveness of the shell egg 
labeling regulation. Allowing the inside lid to be used for the safe 
handling instructions may create cost savings for firms that were 
concerned that complying with the shell egg labeling regulation would 
be a financial hardship. This proposed regulation would allow the safe 
handling instructions to be placed on the inside lid of egg cartons if 
the words ``Keep Refrigerated'' are placed on the PDP or information 
panel.
2. Options
    FDA has evaluated three regulatory options to allow the safe 
handling statement to be printed on the inside lid of egg cartons. The 
options considered are the following: (1) No new regulatory action, (2) 
allow the safe handling statement to be placed on the inside lid with a 
referral statement on the outside of the carton if the words ``Keep 
Refrigerated'' are placed on the PDP or information panel, and (3) the 
proposed option, allow the safe handling statement to be placed on the 
inside lid with no referral statement required if the words ``Keep 
Refrigerated'' are placed on the PDP or information panel. The policy 
options are presented in an order that allows each to be built on the 
preceding option and facilitates comparison among the options.
    The first option analyzes the existing requirement for printing the 
safe handling statement on egg cartons. The second option proposes 
flexibility in the placement of the safe handling statement on egg 
cartons to include the inside lid, provided that a referral statement 
and the words ``Keep Refrigerated'' are placed on the PDP or 
information panel. The proposed option is a modification of the second 
option and allows additional flexibility by removing the referral 
statement requirement when the safe handling statement is located on 
the inside lid if the words ``Keep Refrigerated'' are placed on the PDP 
or information panel. FDA estimates the cost of each option by 
measuring the additional costs where they first occur--at the carton 
manufacturers, which is consistent with the method used in the 
Preliminary Regulatory Impact Analysis of the proposed shell egg 
refrigeration and labeling rule (64 FR 36516 at 36529, July 6, 1999).
    FDA analyzed the impacts of this rule relative to a baseline that 
includes FDA no longer exercising enforcement discretion with regard to 
the placement requirements of the shell egg labeling regulation, which 
we believe is a reasonable scenario in the absence of this rulemaking. 
Because the placement requirements in the shell egg labeling regulation 
are not currently fully enforced, we assume, for the purposes of 
setting a baseline only, that if FDA did not finalize this proposed 
rule, we would eventually start fully enforcing the shell egg labeling 
regulation no earlier than 12 months and no later than 36 months 
following the date of publication of this proposed rule.

Option One: Require Safe Handling Labeling on the PDP or Information 
Panel

    Option one is to maintain the labeling requirements imposed by the 
shell egg labeling regulation. With no new regulatory action, the total 
number of people who currently read the safe handling statement would 
remain unchanged. The benefits from the current shell egg labeling 
regulation would not change, so the benefits associated with this 
option would be zero. With no new regulatory action, the costs of the 
existing regulation, measured as the costs to egg carton manufacturers 
of printing the safe handling statement on the PDP or information 
panel, also would remain unchanged.
    Though the agency finds no new costs associated with option one, 
the letters from industry provide additional information on the costs 
associated with compliance with the shell egg labeling regulation. The 
letters explained that placing the safe handling statement on the PDP 
may require a logo redesign, while placing it on the information panel 
may require the manufacturer to purchase special equipment. One 
manufacturer reported the costs for the purchase of new equipment 
required for printing on the information panel to be approximately 
$230,000 (Ref. 2). The same manufacturer estimated the costs for mold 
changes required for logo redesign to be approximately $780,000 and the 
total costs for redesigning a logo for one complete brand to be 
approximately $1,740 (Ref. 2). This latter cost estimate does not 
account for the potential opportunity cost of lost advertising revenue 
to the egg carton producer due to the reduction in space available for 
promotion when the safe handling statement is required on the PDP or 
information panel.

Option Two: Allow the Safe Handling Statement to Be Placed on the 
Inside Lid With a Required Referral Statement on the Outside of the 
Carton if the Words ``Keep Refrigerated'' are Placed on the PDP or 
Information Panel

    Option two would allow the safe handling statement to be printed on 
the inside lid of the egg carton, provided that a referral statement 
and the words ``Keep Refrigerated'' are placed on the PDP or 
information panel.
    a. Costs of option two: potential reduction in the numbers of 
consumers reached--FDA estimates that there would be no costs to the 
proposed flexibility. The agency believes that at least as many, if not 
more, consumers would read safe handling instructions on the inside lid 
of egg cartons than would read the statement on the PDP or information 
panel, based on the following factors:
    1. The referral statement required on the outside panel;
    2. The consumer practice of looking inside the egg carton either at 
the time of purchase or at a time before consumption; and

[[Page 23816]]

    3. The potential for more space on the inside lid of egg cartons 
because of the relatively large surface area there.
    A study has shown that labels that are larger and have less text 
density are more attractive (Ref. 3). Another study has shown that 
larger font sizes enhance label readability (Ref. 4). Because the 
inside lid may allow more space for printing the safe handling 
statement in larger font sizes, such placement may result in a larger 
number of consumers reading the safe handling statement than under the 
existing regulation and could be considered an additional benefit from 
the proposed flexibility. FDA seeks comment on the impact, if any, on 
consumer behavior of the font size of instructional labeling 
statements.
    b. Benefits of option two: cost savings realized by egg carton 
manufacturers--The benefits from the proposed flexibility would be the 
cost savings for firms that place the safe handling statement inside 
the lid, rather than placing it on the PDP or information panel, 
accompanied by the referral statement and words ``Keep Refrigerated'' 
on the outside of the carton. No cost savings would be attributed to 
firms that continue to place the safe handling statement on the PDP or 
information panel, as required by the existing regulation. FDA assumes 
that a firm would choose the inside lid with referral statement option 
if the cost of printing the safe handling statement on the inside lid 
plus the cost of printing the referral statement were less than the 
cost of printing the safe handling statement on either the PDP or 
information panel.
    The cost savings for a firm from the additional flexibility equal 
the difference between the sum of the costs of printing the safe 
handling statement on the inside lid and printing the referral 
statement, and the costs of printing the safe handling statement on 
either the PDP or information panel. When the cost savings for each 
firm in the industry are added together, then the total cost savings 
from the added flexibility for the entire industry is expressed as:
Total Cost Savings = S1 x (IP - IN - REF) + S2 x (PDP - IN - REF),
where,
    S1 represents the proportion of the industry that avoids 
printing the safe handling statement on the information panel by 
using the inside lid with referral statement option,
    S2 represents the proportion of the industry that avoids 
printing the safe handling statement on the PDP by using the inside 
lid with referral statement option,
    IP, PDP, and IN represent the cost to the industry of printing 
the safe handling statement on the information panel, PDP, and 
inside lid, respectively, and REF reflects the costs of printing the 
referral statement.
    The agency estimated the cost savings associated with option two by 
computing the costs of full logo redesign and of a safe handling 
statement using the FDA Labeling Cost Model, Final Report (Ref. 5). 
Based on evidence elicited from experts, the labeling cost model 
assumes a flexography method for printing the safe handling statement 
on egg cartons. While other printing methods exist, such as offset 
lithography or rotogravure, expert elicitation suggests that the 
flexography method is representative for egg packaging and labeling. 
Furthermore, the principal determinant of the costs of printing the 
safe handling statement is the number of colors used, rather than the 
amount of space that the label occupies. For full logo redesign, we 
assume that six colors will be used; for a safe handling statement, we 
assume only one color will be used. Since the labeling cost model does 
not have explicit options for determining the costs of either a 
referral statement or an inside lid safe handling statement, we assume 
that each of these statements uses one color. Therefore, the costs of 
printing a referral statement are assumed to be equal to the costs of 
printing an inside lid safe handling statement.
    Under these cost assumptions, the labeling cost model predicts that 
no firm would choose the inside lid with referral statement option over 
the information panel option in the absence of a need for logo 
redesign, because the inside lid with referral statement option will 
cost twice as much as placing all of the information on the information 
panel. This is because the cost of printing a safe handling statement 
on the inside lid is equivalent to the cost of printing it on an 
information panel. A firm choosing the inside lid alternative would 
incur the additional cost of printing a referral statement on the 
information panel, which is also assumed to be equivalent to the costs 
of a safe handling statement on the information panel. Therefore, the 
model predicts that all potential cost savings from added flexibility 
come from firms that would otherwise have had to redesign their logo on 
the PDP.
    In practice, there could also be cost savings for firms that, in 
the absence of the proposed flexibility, might have chosen to print the 
safe handling statement on an information panel (e.g., if specialized, 
new machinery were required for printing it on an information panel but 
not on the inside lid). However, because of the way that the labeling 
costs are computed by the labeling cost model as described previously, 
we do not take this possibility into account. Consequently, the value 
generated by the labeling cost model underestimates the true cost 
savings that would be realized from this option because there would 
also be costs savings for firms that would otherwise place the safe 
handling statement on an information panel. Because we do not know how 
large these costs savings might be, we request comments on this 
possibility. Finally, the cost savings estimated using the labeling 
cost model do not account for any producer surplus generated by making 
available valuable marketing space on the PDP that would otherwise have 
been used to display the safe handling statement. To the extent 
producer surplus is generated, the costs savings estimated from the 
labeling cost model will understate the true gains from the proposed 
flexibility.
    The agency ran the labeling cost model for option two, using both a 
12-month and a 36-month compliance period. The labeling costs are 
reported in table 1 of this document as a range that includes three 
numbers. The top and bottom numbers reported in each cell are the low 
and high cost estimates for the relevant label and compliance period. 
The middle number is the estimate of the most likely cost to industry 
for the relevant label and compliance period.
    The most likely cost estimate for a full logo redesign with a 12-
month compliance period is $31.4 million, with low and high estimates 
of $23.6 and $56.8 million. These represent the estimates of the total 
costs to the industry if all firms have to redesign the logos on their 
egg cartons in order to print the safe handling statement. The figures 
likely overestimate the costs of the safe handling statement, because 
most firms will not need to redesign their logos. For a 12-month 
compliance period, the low and high costs of adding a safe handling 
statement are estimated to be $4.5 and $11.6 million, with the most 
likely cost estimate to be $6.6 million.
    For a full logo redesign and a 36-month compliance period, the low 
and high costs are estimated to be $6.1 and $14.8 million, with the 
most likely cost estimate to be $8.2 million. For a 36-month compliance 
period, the low and high costs of adding a safe handling statement are 
estimated to be $1.2 and $3.1 million, with the most likely cost 
estimate to be $1.7 million. The higher costs reported for the 12-month 
compliance period compared with the 36-month compliance period reflects 
the loss of inventories of cartons not in

[[Page 23817]]

compliance with the regulation that would be incurred in the shorter 
compliance period.

                    Table 1.--Costs for a Safe Handling Statement and for Full Logo Redesign
----------------------------------------------------------------------------------------------------------------
  Compliance  Period            Full Logo Redesign (2002 $)                Safe Handling Statement (2002 $)
----------------------------------------------------------------------------------------------------------------
12 months              Low: $23.6 million                            Low: $4.5 million
                       Most likely: $31.4 million                    Most likely: $6.6 million
                       High: $56.8 million                           High: $11.6 million
----------------------------------------------------------------------------------------------------------------
36 months              Low: $6.1 million                             Low: $1.2 million
                       Most likely: $8.2 million                     Most likely: $1.7 million
                       High: $14.8 million                           High: $3.1 million
----------------------------------------------------------------------------------------------------------------

    Monte Carlo simulations of the total cost savings from the added 
flexibility were performed using the above expression, with 
distributional assumptions, for both the 12-month and 36-month 
compliance period estimates reported in table 1 of this document. 
Lognormal distributions, rather than fixed values, were assumed to 
reflect uncertainty about the true values of the industry shares, S1 
and S2, that would avoid printing the safe handling statement on either 
the PDP or information panel. Triangular distributions were used to 
reflect uncertainty about the true cost of each label change. This 
distribution was appropriate since it incorporates all of the knowledge 
that we have about the true cost of each label change. The three 
numbers in each cell reported in table 1 of this document were used as 
parameters for the triangular distributions.
    The lognormal distribution is appropriate for representing the 
uncertainty in the true values of S1 and S2 because it is not symmetric 
in general; almost all of its values lie between 0 and 1 when certain 
values of the mean and variance are assumed, and it can accommodate a 
wide range of prior beliefs about the true values of S1 and S2. One 
prior belief is that the true value of S1 is close to 0. We chose a 
lognormal distribution of mean 0.1 and variance 0.1 to represent the 
uncertainty surrounding this belief. We chose a lognormal distribution 
of mean 0.4 and variance 0.1 to represent the uncertainty surrounding 
our belief of the true value of S2. The findings from the Monte Carlo 
simulation are reported in table 2 of this document.

                                                         Table 2.--Total Cost Savings, Option 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Savings from Avoiding a Label on the  Savings from Avoiding a Label on the           Total Cost Savings
                                                         PDP                            Information Panel          -------------------------------------
                                       ----------------------------------------------------------------------------
                                             12-month           36-month           12-month           36-month           12-month           6-month
                                            compliance         compliance         compliance         compliance         compliance         compliance
--------------------------------------------------------------------------------------------------------------------------------------------------------
Mean estimate                              $11,032,000         $2,888,000                  0                  0        $11,032,000         $2,888,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low estimate (5th percentile)               $5,125,000         $1,352,000                  0         $5,125,000         $1,352,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
High estimate (95th percentile)            $18,658,000         $4,732,000           $365,000           $112,000        $19,022,000         $4,844,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The mean, low, and high estimates of the cost savings are reported 
in table 2 of this document. Low estimates are where there is a 5 
percent probability of being higher than the true value. High estimates 
are where there is a 95 percent probability of being higher than the 
true value. The distribution of the cost savings is truncated at zero, 
since no firms would print the safe handling statement on the 
information panel if the savings were negative. The total cost savings 
from option two are estimated to range from $5.1 to $19 million, with a 
mean of $11 million assuming a 12-month compliance period, and from 
$1.4 to $4.8 million, with a mean of $2.9 million, assuming a 36-month 
compliance period.
    After inventories of the labeled egg cartons have been depleted, it 
can reasonably be expected that firms would again decide on which panel 
to print the safe handling statement for a new batch of egg cartons. 
There could be additional savings from the proposed flexibility if 
firms at that later date would choose to print the safe handling 
statement on the inside lid rather than either the PDP or information 
panel. However, in this analysis we assume that all cost savings from 
the proposed flexibility result from the initial decision on the 
placement of the safe handling statement. This assumption is justified 
because it is likely that adjustment costs from changing the earlier 
decision on the placement of the safe handling statement are greater 
than any savings that could result from a labeling change at that later 
date. Once a firm has decided on which panel to print the safe handling 
statement and has incurred the labor and capital costs of that 
decision, the costs of changing that decision at a later date are 
assumed to be greater than any potential benefit from doing so. 
Finally, as explained previously in this document, the placement of the 
safe handling statement on the inside lid could result in a larger 
number of consumers reading it than under the existing regulation.

[[Page 23818]]

 Although this possibility is not quantified in the analysis, it may be 
considered as an additional benefit from the proposed flexibility. We 
request comments on this possibility.

The proposed option: Allow the Safe Handling Statement to Be Placed on 
the Inside Lid Without a Referral Statement if the Words ``Keep 
Refrigerated'' are Placed on the PDP or Information Panel

    The proposed option allows firms to print the safe handling 
statement on the inside lid but does not require a referral if the 
words ``Keep Refrigerated'' are placed on the PDP or information panel.

c. Costs of the proposed option: potential reduction in the numbers of 
consumers reached--FDA estimates that the costs of the proposed option 
are likely to be zero. We assume that the costs of this option arise 
from changes in the number of consumers who read the safe handling 
statement. The number of consumers who would read the safe handling 
statement on the inside lid under the proposed option is assumed to be 
about the same as the number who read it under the existing regulation. 
The reasons for this assumption are:
    1. The consumer practice of looking inside the egg carton either at 
the time of purchase or at a time before consumption and
    2. The potential for more space on the inside lid of egg cartons 
because of the relatively large surface area there.
Because all consumers look inside the egg carton at some time before 
consumption, FDA assumes that the costs of the proposed option are the 
same as those from option two. In addition, as explained in option two, 
because of the potential for larger font sizes and less text density on 
the inside lid, the safe handling statement located there may actually 
be read by more consumers than the same statement placed on the outside 
of the carton, as is currently required by the shell egg labeling 
regulation. We request comments on this possibility.
d. Benefits of the proposed option: no required referral statement if 
the words ``Keep Refrigerated'' appear on the PDP or information 
panel--FDA performed Monte Carlo simulations of the total cost savings 
for the proposed option by modifying the distributional assumptions in 
option two, to incorporate additional potential cost savings of not 
requiring a referral statement. The results are reported in table 3 of 
this document, which contains the mean, low, and high estimates of the 
cost savings.

                                                      Table 3.--Total Cost Savings, Proposed Option
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Savings from Avoiding a Label on the  Savings from Avoiding a Label on the           Total Cost Savings
                                                         PDP                            Information Panel          -------------------------------------
                                       ----------------------------------------------------------------------------
                                             12-month           36-month           12-month           36-month           12-month           6-month
                                            compliance         compliance         compliance         compliance         compliance         compliance
--------------------------------------------------------------------------------------------------------------------------------------------------------
Mean estimate                              $14,843,000         $3,886,000                  0                  0        $14,843,000         $3,886,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low estimate (5th percentile)               $8,039,000         $2,175,000                  0                  0         $8,039,000         $2,175,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
High estimate (95th percentile)            $23,192,000         $6,192,000         $1,453,000           $389,000        $24,645,000         $6,582,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The distribution of the cost savings is truncated at zero, since no 
firms would print the safe handling statement on the information panel 
if the savings were negative. Consequently, the cost savings for the 
mean and lower estimates of cost savings for firms that would otherwise 
print the safe handling statement on the information panel are reported 
to be zero. Only the high estimate of cost savings (95 percent), for 
firms that would otherwise print the safe handling statement on the 
information panel, is reported to be positive.
    The range of cost savings from the proposed option is estimated to 
be between $8 and $24.6 million, with a mean of $14.8 million assuming 
a 12-month compliance period, and between $2.2 and $6.6 million, with a 
mean of $3.9 million, assuming a 36-month compliance period. As in the 
analysis for option two, we assume that there are no additional cost 
savings from proposed flexibility after the initial cost savings, 
because the adjustment costs from changing the earlier decision on the 
placement of the safe handling statement are probably greater than any 
savings from a labeling change.

Comparing the Benefits of Option Two With Those of the Proposed Option

    A comparison of the estimates of the total costs savings reported 
for option two with those reported for the proposed option indicates 
the potential for substantial cost savings from the proposed option. 
The larger cost savings from the proposed option compared with option 
two reflects the lower cost from not requiring a referral statement on 
an outside panel in the proposed option, as well as the cost savings 
from a larger share of the industry choosing the inside lid statement 
under the proposed option (i.e., S2 would be larger under the proposed 
option than under option two). The results from the comparison are 
reported in table 4 of this document. The cost savings from the 
proposed option compared with option two range from $0 to $11.5 
million, with a mean of $3.8 million assuming a 12-month compliance 
period, and from $0 to $3.3 million, with a mean of $1 million assuming 
a 36-month compliance period.

[[Page 23819]]



                                            Table 4.--Savings From The Proposed Option Compared With Option 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Savings from Avoiding a Label on the  Savings from Avoiding a Label on the           Total Cost Savings
                                                         PDP                            Information Panel          -------------------------------------
                                       ----------------------------------------------------------------------------
                                             12-month           36-month           12-month           36-month           12-month           6-month
                                            compliance         compliance         compliance         compliance         compliance         compliance
--------------------------------------------------------------------------------------------------------------------------------------------------------
Mean estimate                               $3,811,000           $998,000                  0                  0         $3,811,000           $998,002
Low estimate (5th percentile)                        0                  0                  0                  0                  0                  0
High estimate (95th percentile)            $10,308,100         $2,977,000         $1,180,000           $306,000        $11,488,000         $3,282,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The values reported here are computed by assuming a joint distribution of the difference in cost savings between option 2 and the proposed option.
  Consequently, a value reported here may be different from that which would be obtained by simply subtracting a value reported in table 2 of this
  document from the appropriate value reported in table 3 of this document.

Summary of Costs and Benefits

    FDA estimates the costs and benefits for three regulatory options 
for flexibility in the placement of the safe handling statement on egg 
cartons. The regulatory options considered were: (1) No new regulatory 
action, (2) allowing flexibility in the placement of the safe handling 
statement to include the inside lid, accompanied by a referral 
statement on an outside panel if the words ``Keep Refrigerated'' are 
placed on the PDP or information panel, and the proposed option, 
allowing flexibility in the placement of the safe handling statement to 
include the inside lid but without requiring the referral statement if 
the words ``Keep Refrigerated'' are placed on the PDP or information 
panel. The analysis concludes that the costs of the proposed 
flexibility, measured as the public health effects of a decrease in the 
number of consumers that would read the safe handling statement, are 
zero for both option two and the proposed option. Because all consumers 
open egg cartons before consumption, we assume the same number of 
consumers will notice the safe handling statement on the inside lid as 
would notice statement on the outside of the carton, because of the 
greater potential for larger font sizes and lower text density on the 
inside lid. If this is true, there would be no additional benefit from 
the required referral statement on an outside panel under option two. 
However, we requested comments on these assumptions.
    The benefits from the options considered are measured as the cost 
savings from allowing firms the flexibility of printing the safe 
handling statement on the inside lid. Option two requires an 
accompanying referral statement on an outside panel and the words 
``Keep Refrigerated'' to be placed on the PDP or information panel, 
while the proposed option does not require a referral statement but 
does require the words ``Keep Refrigerated'' to be placed on the PDP or 
information panel. The estimated cost savings from option two range 
from $4.7 to $20 million, with a mean of $11 million. The estimated 
cost savings from the proposed option range from $8 to $25 million, 
with a mean of $15 million. The estimated cost savings from the 
proposed option range from $8 and $24.6 million, with a mean of $14.8 
million assuming a 12-month compliance period, and between $2.2 and 
$6.6 million, with a mean of $3.8 million assuming a 36-month 
compliance period. The estimated savings from the proposed option 
compared with option two range between $0 and $11.5 million, with a 
mean of $3.8 million assuming a 12-month compliance period, and between 
$0 and $3.3 million, with a mean of $1 million assuming a 36-month 
compliance period.

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. The proposed rule provides additional options for 
placing the safe handling statement on egg cartons. No small business 
would be forced to use this option, so the proposed rule imposes no 
costs on small businesses. For those small businesses choosing the 
option, the proposed rule reduces labeling costs. FDA certifies that 
this proposed rule, if it becomes final, would not have a significant 
economic impact on a substantial number of small entities.

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 rulemaking 
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 $115 million. FDA has determined that this 
proposed rule does not constitute a significant rule under the Unfunded 
Mandates Reform Act.

D. Small Business Regulatory Enforcement Fairness Act

    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 U.S.-based enterprises to compete 
with foreign-based enterprises in domestic or export markets. In 
accordance with the Small Business Regulatory Enforcement Fairness Act, 
the Office of Management and Budget (OMB) has determined that this 
proposed rule, when final, will not be a major rule for the purpose of 
congressional review.

IV. Analysis of Environmental Impact

    The agency has determined under 21 CFR 25.30(k) 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.

[[Page 23820]]

V. Paperwork Reduction Act of 1995

    FDA tentatively concludes that this proposed rule contains no 
collection of information. Therefore, clearance by OMB under the 
Paperwork Reduction Act of 1995 is not 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 rule would have a preemptive effect on State law. Section 4(a) of 
the Executive order requires agencies to ``construe * * * a Federal 
Statute to preempt State law only where the statute contains an express 
preemption provision, or there is some other clear evidence that the 
Congress intended preemption of State law, or where the exercise of 
State authority conflicts with the exercise of Federal authority under 
the Federal statute.''
    To ensure the safety of eggs for all consumers in this country, not 
only must there be minimum national standards, but enforcement of these 
standards must be uniform across the country. However, because State 
and local public health officials are the primary enforcement officials 
in retail establishments, FDA has recognized that it must rely on these 
officials to provide the bulk of the enforcement of these regulations. 
FDA thus believes that it is critical for these regulations to 
establish uniform minimum standards. If less stringent State or local 
refrigeration and labeling requirements are not preempted, enforcement 
of those less stringent requirements--which are not sufficient to 
protect the public health--will interfere with the cooperative 
enforcement of the Federal egg refrigeration and labeling requirements. 
FDA believes that the cooperative enforcement approach utilized in 
FDA's egg labeling regulation is critical to effective implementation 
of this important food safety requirement.
    Thus, although Congress did not expressly preempt State law in this 
area, FDA finds preemption is needed because State and local laws that 
are less stringent than the Federal requirements will significantly 
interfere with the important public health goals of these regulations.
    FDA believes that preemption of State and local labeling 
requirements that are the same as or more stringent than the 
requirements of this proposed regulation would not be necessary, as 
enforcement of such State and local requirements would not interfere 
with the food safety goals of this regulation. Further, it is likely 
that any states that enacted similar labeling requirements to those in 
FDA's rule would change those requirements to be consistent with any 
changes made by FDA as a result of this rulemaking. Accordingly, the 
preemptive effect of this rule would be limited to State or local 
requirements that are not as stringent as the requirements of this 
regulation. Requirements that are the same as or more stringent than 
FDA's requirement would remain in effect.
    Further, section 4(e) of the Executive order provides that ``when 
an agency proposes to act through adjudication or rulemaking to preempt 
State law, the agency shall provide all affected State and local 
officials notice and an opportunity for appropriate participation in 
the proceedings.'' We are providing an opportunity for State and local 
officials to comment on FDA's proposed change to FDA's shell egg 
labeling regulation in this rulemaking. For the reasons set forth 
previously in this document, the agency believes that it has complied 
with all of the applicable requirements under the Executive order. In 
conclusion, FDA has determined that the preemptive effects of this 
proposed rule would be consistent with Executive Order 13132.

VII. Proposed Effective Date

    FDA is proposing that any final rule that may be issued based upon 
this proposal become effective 30 days after its publication in the 
Federal Register.

VIII. Comments

    Interested persons may submit to the Division of Dockets Management 
(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 heading of this document. Received comments may be seen in the 
Division of Dockets Management between 9 a.m. and 4 p.m., Monday 
through Friday.

IX. References

    The following references have been placed on display in the 
Division of Dockets Management (see ADDRESSES) and may be seen by 
interested persons between 9 a.m. and 4 p.m., Monday through Friday.
    1. United Egg Producers letter, Carlton Lofgren, Chairman, Al 
Pope, President, Ken Klippen, Vice President for Government 
Relations, and Randy Green, Senior Government Relations 
Representative, to Dr. Christine Lewis, FDA, March 2, 2001.
    2. Foam Packaging, Inc. letter, Ray B. English, President, to 
Felicia Satchell, FDA, January 25, 2001.
    3. Tuominen, R., ``Why Do Some Yellow Page Advertisements 
Capture Attention Better Than Others?,'' Acta Odontologica 
Scandinavia, 59: 79-82, 2001.
    4. Dietrich, D.A., ``Enhancing Label Readability for Over-the-
Counter Pharmaceuticals by Elderly Consumers,'' Journal of Safety 
Research, 27: 132, 1996.
    5. RTI International, ``FDA Labeling Cost Model, Final 
Report,''prepared by Mary Muth, Erica Gledhill, and Shawn Karns, 
RTI. Prepared for Amber Jessup, FDA/Center for Food Safety and 
Applied Nutrition, April 2002.

List of Subjects in 21 CFR Part 101

    Food labeling, Nutrition, Reporting and recordkeeping requirements.
    Therefore, under the Federal Food, Drug, and Cosmetic Act and under 
authority delegated to the Commissioner of Food and Drugs, it is 
proposed that 21 CFR part 101 be amended as follows:

PART 101--FOOD LABELING

    1. The authority citation for 21 CFR part 101 continues to read as 
follows:

    Authority: 15 U.S.C. 1453, 1454, 1455; 21 U.S.C. 321, 331, 342, 
343, 348, 371; 42 U.S.C. 243, 264, 271.
    2. Section 101.17 is amended by revising paragraph (h)(2) to read 
as follows:


Sec.  101.17  Food labeling warning, notice, and safe handling 
statements.

* * * * *
    (h) * * *
    (2) The label statement required by paragraph (h)(1) of this 
section shall appear prominently and conspicuously, with the words 
``SAFE HANDLING INSTRUCTIONS'' in bold type, on the principal display 
panel, the information panel, or on the inside of the lid of egg 
cartons. If this statement appears on the inside of the lid, the words 
``Keep Refrigerated'' must appear on the principal display panel or 
information panel.
* * * * *

    Dated: October 12, 2004.
Jeffrey Shuren,
Assistant Commissioner for Policy.
[FR Doc. 05-8907 Filed 5-4-05; 8:45 am]
BILLING CODE 4160-01-S