[Federal Register Volume 71, Number 196 (Wednesday, October 11, 2006)]
[Rules and Regulations]
[Pages 59653-59669]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-16830]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Parts 189 and 700

[Docket No. 2004N-0257]
RIN 0910-AF48


Recordkeeping Requirements for Human Food and Cosmetics 
Manufactured From, Processed With, or Otherwise Containing, Material 
From Cattle

AGENCY: Food and Drug Administration, HHS.

ACTION: Final rule.

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SUMMARY: The Food and Drug Administration (FDA) is requiring that 
manufacturers and processors of human food and cosmetics that are 
manufactured from, processed with, or otherwise contain, material from 
cattle establish and maintain records sufficient to demonstrate that 
the human food or cosmetic is not manufactured from, processed with, or 
does not otherwise contain, prohibited cattle materials. These 
recordkeeping requirements provide documentation for the provisions in 
FDA's interim final rule entitled ``Use of Materials Derived From 
Cattle in Human Food and Cosmetics.'' FDA is requiring recordkeeping 
because manufacturers and processors of human food and cosmetics need 
records to ensure that their products do not contain prohibited cattle 
materials, and records are necessary to help FDA ensure compliance with 
the requirements of the interim final rule.

DATES: This rule is effective on January 9, 2007.

FOR FURTHER INFORMATION CONTACT: Rebecca Buckner, Center for Food 
Safety and Applied Nutrition (HFS-306), Food and Drug Administration, 
5100 Paint Branch Pkwy., College Park, MD 20740, 301-436-1486.

SUPPLEMENTARY INFORMATION:

[[Page 59654]]

I. Background

    On July 14, 2004, FDA proposed a rule entitled ``Recordkeeping 
Requirements for Human Food and Cosmetics Manufactured From, Processed 
With, or Otherwise Containing, Material From Cattle'' (the proposed 
rule) (69 FR 42275) to require that manufacturers and processors of 
human food and cosmetics that are manufactured from, processed with, or 
otherwise contain, material from cattle establish and maintain records 
sufficient to demonstrate the food or cosmetic is not manufactured 
from, processed with, or does not otherwise contain, prohibited cattle 
materials. The proposed rule was a companion rulemaking to FDA's 
interim final rule (IFR) entitled ``Use of Materials Derived From 
Cattle in Human Food and Cosmetics'' (the IFR) (69 FR 42256). We 
believe that records sufficient to demonstrate the absence of 
prohibited cattle materials in human food and cosmetics are critical 
for manufacturers, processors, and FDA to ensure compliance with the 
ban on prohibited cattle materials. Therefore, we are finalizing the 
proposed rule to require that manufacturers and processors of human 
food and cosmetics that are manufactured from, processed with, or 
otherwise contain, material from cattle establish and maintain records 
sufficient to demonstrate that human food and cosmetics are not 
manufactured from, processed with, or do not otherwise contain, 
prohibited cattle materials. We also are finalizing the provision in 
the proposed rule that these records must be made available to FDA for 
inspection and copying. FDA notes that the requirement in the IFR that 
existing records relevant to compliance be made available to FDA 
remains and has been incorporated into the final record provisions.
    In response to the December 2003 finding of an adult cow--imported 
from Canada--that tested positive for bovine spongiform encephalopathy 
(BSE) in the State of Washington, FDA published the IFR requiring that 
specified risk materials (SRMs), small intestine of all cattle, tissue 
from nonambulatory disabled cattle, tissue from cattle not inspected 
and passed for human consumption, and mechanically separated beef (MS 
beef) not be used for FDA-regulated human food and cosmetics.\1\ SRMs 
include the brain, skull, eyes, trigeminal ganglia, spinal cord, 
vertebral column (excluding the vertebrae of the tail, the transverse 
process of the thoracic and lumbar vertebrae, and the wings of the 
sacrum), and dorsal root ganglia of cattle 30 months and older, as well 
as the tonsils and distal ileum of the small intestine of all cattle.
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    \1\ In June 2005, USDA confirmed the second case of BSE in the 
United States in a cow born in Texas.
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    The U.S. Department of Agriculture (USDA) also published an IFR (69 
FR 1862, January 12, 2004) to prohibit certain cattle material from use 
in human food. FDA's IFR extended the protection from BSE provided 
under USDA's BSE IFR to FDA-regulated human food and cosmetics. On 
September 7, 2005, both FDA (70 FR 53063) and USDA (70 FR 53043) 
published amendments to their respective IFRs to allow the use of small 
intestine in human food and cosmetics provided the distal ileum has 
been removed. This final rule on recordkeeping will help ensure 
compliance with the provisions of FDA's IFR and, thereby, will serve as 
an additional safeguard to reduce human exposure to the agent that 
causes BSE that may be present in human food and cosmetics that are 
manufactured from, processed with, or otherwise contain, material from 
cattle.
    FDA believes that these recordkeeping requirements are necessary 
for manufacturers and processors to ensure that all cattle material 
they use is free from prohibited cattle materials. Furthermore, these 
requirements are necessary for FDA to ensure compliance with the 
provisions of the IFR. There is currently no validated premortem test 
to reliably detect the presence of the BSE agent or the presence of 
prohibited cattle material in human food and cosmetics. Once cattle 
material such as brain or spinal cord is separated from the source 
animal, it may not be possible to determine the age of the animal from 
which the material came without records and, therefore, whether the 
material is an SRM. In addition, without records, it may not be 
possible to determine whether a product contains material from cattle 
that were not inspected and passed for human consumption. Also, a 
product might contain MS beef without its presence being evident from 
the appearance of the product.
    FDA received 32 responses, each containing one or more comments, 
from industry, consumers, and other stakeholder groups in response to 
the proposed rule. We have responded in this document to the comments 
that were within the scope of this rulemaking. We received several 
comments that pertained to the prohibitions on the cattle materials 
themselves, as opposed to the recordkeeping requirements, and other 
issues that are covered in the IFR. We will be responding to those 
comments when we finalize the IFR.

II. Response to Comments

A. Who Has to Keep Records? (Sec. Sec.  189.5(c)(1) and 700.27(c)(1) 
(21 CFR 189.5(c)(1) and 700.27(c)(1)))

    (Comment) We received several comments stating that only the 
manufacturer or processor of a finished product should have to maintain 
the required records. Conversely, other comments suggested that only 
the manufacturer or processor of an ingredient that directly 
incorporates cattle material from a slaughterhouse or a rendering 
establishment should have to keep records. The comments requesting that 
finished product manufacturers keep records stated that it was 
appropriate that the recordkeeping responsibility should be placed at 
the finished product stage because, in some cases, an ingredient 
manufacturer would be making an ingredient that may or may not be 
incorporated into a food or cosmetic; therefore, the ban on the use of 
prohibited cattle materials should not apply to the ingredient at the 
time of production. The comments that stated the opposite view 
maintained that only the ingredient manufacturers who are obtaining 
cattle material from slaughterhouses or rendering establishments know 
whether or not prohibited cattle materials were incorporated into the 
ingredient, so it is appropriate that the records be maintained by 
those who have firsthand knowledge of the source of the cattle 
material.
    Comments also requested that rendering establishments and other 
similar establishments maintain additional records because they handle 
prohibited cattle materials. These records would include plans to 
prevent cross-contamination and cleaning and disinfection records.
    We also received several comments requesting that we clarify that 
manufacturers and processors of certain cattle-derived products (e.g., 
tallow derivatives and milk and milk products) do not have to keep 
records because their products are exempt in the IFR.
    (Response) We believe that manufacturers and processors of human 
food and cosmetics as well as ingredients used to produce human food 
and cosmetics must maintain records. To ensure that a finished human 
food or cosmetic does not contain prohibited cattle materials, it is 
necessary to ensure that all of the ingredients are free of prohibited 
cattle materials. This

[[Page 59655]]

requires information from ingredient suppliers as well as from the 
finished product manufacturer. A buyer who purchases cattle material 
from its producer or manufacturer (e.g., from a slaughter or rendering 
establishment) is in a better position than subsequent purchasers 
further downstream in the distribution chain to ensure that the 
purchased cattle material is free from prohibited cattle material. 
Manufacturers and processors who use ingredients made of cattle 
material and incorporate it into final products can only ensure that 
the final products are free of prohibited cattle material if the 
upstream suppliers have done the same. Therefore, we have concluded 
that manufacturers and processors of finished human food and cosmetic 
products, as well as the manufacturers and processors who supply 
ingredients (e.g., tallow or gelatin) for those finished products, must 
maintain records.
    We are not specifying particular additional records that must be 
kept by establishments that handle both prohibited and nonprohibited 
cattle materials. We note that food establishments are subject to the 
current good manufacturing practice requirements in 21 CFR part 110 and 
that the failure to take adequate measures to prevent cross-
contamination could result in unsanitary conditions whereby the food 
may be rendered injurious to health and, therefore, adulterated under 
section 402(a)(4) of the Federal Food, Drug, and Cosmetic Act (the Act) 
(21 U.S.C. 342(a)(4)).
    Comments asked that we clarify that manufacturers and processors of 
certain cattle-derived products (e.g., tallow derivatives and milk and 
milk products) are exempt from the recordkeeping requirements because 
these products are exempt from the provisions of the IFR. In the 
Federal Register of September 7, 2005 (70 FR 53063), FDA published 
amendments to the IFR. In that document, we also clarified that milk 
and milk products, hides and hide-derived products, and tallow 
derivatives are excluded from the definition of prohibited cattle 
materials. We are not requiring that records be kept for cattle 
materials that are specifically exempted from the definition of 
``prohibited cattle material'' without restrictions, such as milk and 
milk products, hides and hide-derived products, and tallow derivatives. 
Although Sec. Sec.  189.5(a)(1) and 700.27(a)(1) exclude tallow that 
contains no more than 0.15 percent insoluble impurities from the 
definition of prohibited cattle materials, tallow is not exempt from 
records requirements because there are restrictions on either the 
amount of insoluble impurities it contains or the cattle material from 
which it is sourced.

B. What Type of Records Must Manufacturers and Processors of Human Food 
and Cosmetics Keep? (Sec. Sec.  189.5(c)(1) and 700.27(c)(1))

    (Comment) We received several comments related to the type of 
records that must be kept. Most stated that a requirement for lot-by-
lot records for human food and cosmetics was overly burdensome relative 
to the risk posed by BSE. Many comments suggested that maintenance of a 
continuing letter of guarantee, renewable annually, would be sufficient 
to ensure that manufacturers and processors are not using prohibited 
cattle materials in their products.
    Other comments stated that lot-by-lot records were necessary, 
particularly for imports. Some comments suggested that lot-by-lot 
records should be kept and should contain enough information to allow 
downstream tracing of the product and upstream tracing of products or 
ingredients.
    (Response) We are requiring in Sec. Sec.  189.5(c)(1) and 
700.27(c)(1) that manufacturers and processors of human food and 
cosmetics manufactured from, processed with, or that otherwise contain, 
material from cattle maintain records sufficient to demonstrate that 
the human food and cosmetics are not manufactured from, processed with, 
or otherwise contain, prohibited cattle material. We recommend that 
manufacturers and processors accomplish this in part by maintaining 
records, which they renew at least annually, from suppliers of cattle 
materials and of products that are manufactured from, processed with, 
or otherwise contain, cattle material documenting that the products 
obtained from the supplier do not contain prohibited cattle materials. 
In addition, we recommend that manufacturers and processors maintain a 
record of the source, type, volume, and date of receipt for the cattle 
material or product manufactured from, processed with, or otherwise 
containing, cattle material. We intend to publish guidance describing 
in detail the types of records we recommend that manufacturers and 
processors maintain to demonstrate compliance with the ban on 
prohibited cattle materials.
    Because we do not easily have access to records maintained at 
foreign establishments, we have included in this final rule a 
requirement, in Sec. Sec.  189.5(c)(6) and 700.27(c)(6), that when 
filing entry with U.S. Customs and Border Protection, the importer of 
record of a human food or cosmetic manufactured from, processed with, 
or otherwise containing, cattle material must affirm that the human 
food or cosmetic is manufactured from, processed with, or otherwise 
contains, cattle material and must affirm that the human food or 
cosmetic was manufactured in accordance with the applicable 
requirements. In addition, if a human food or cosmetic is manufactured 
from, processed with, or otherwise contains, cattle material, the 
importer of record must, if requested, provide within 5 days records 
sufficient to support the affirmation (i.e., to demonstrate that the 
human food or cosmetic is not manufactured from, processed with, or 
does not otherwise contain, prohibited cattle material). The importer 
of record must retain or have access to the same records that domestic 
manufacturers and processors must maintain to demonstrate compliance.
    We have made several changes to the import provision in the 
proposed rule. First, we have clarified that the import provision is 
applicable to the importer of record because the importer of record is 
responsible for compliance with import requirements. Second, we have 
added a requirement for the importer of record to affirm that a human 
food or cosmetic is manufactured from, processed with, or otherwise 
contains, cattle material. FDA believes that the addition of this 
affirmation will minimize the number of importers affirming compliance 
based on the complete absence of cattle material and will help FDA 
focus its compliance efforts on products manufactured from, processed 
with, or otherwise containing, cattle material. We have also changed 
the time period for providing records from a ``reasonable time'' to 5 
days. FDA believes that providing a specific time period will eliminate 
ambiguity and thereby facilitate compliance. FDA further believes that 
5 days is a reasonable amount of time for the importer of record to 
provide the records while still allowing FDA sufficient time to review 
the documents to make an initial admissibility decision before the 
conditional release period for the product expires. If the importer of 
record fails to provide adequate records within 5 days, the product 
will be subject to detention because it appears to be adulterated under 
section 801 of the act (21 U.S.C. 381), and the owner or consignee will 
be afforded notice and an opportunity for hearing in accordance with 
section 801(a) of the act.
    With regard to the comments that stated that the records required 
should allow tracing of the product in the event

[[Page 59656]]

of a recall, we agree that it is beneficial to have records that will 
allow for trace-back or trace-forward activities. We intend to 
recommend records in a guidance document that, in addition to being 
essential to ensure compliance, will provide useful information in the 
event of trace-back or trace-forward activities. We note that some 
manufacturers and processors of human food may already be maintaining 
such records as part of ordinary business practices to comply with 
FDA's recordkeeping requirements in ``Establishment and Maintenance of 
Records Under the Public Health Security and Bioterrorism Preparedness 
and Response Act of 2002'' (the Bioterrorism Act recordkeeping rule) 
(69 FR 71562, December 9, 2004).

C. Should There Be a Requirement That Records Be Certified?

    (Comment) Several comments suggested that any records required 
should be certified by an appropriate government authority or that the 
required records be traceable to a record certified by a government 
authority. Other comments requested that FDA accept the certification 
of records by foreign governments, if those authorities choose to 
certify compliance with our records requirements. One comment suggested 
that records be certified for compliance through independent audit, 
though not necessarily by a government, and that FDA require 
documentation of the certification.
    (Response) We do not agree that records need to be certified by an 
appropriate authority, governmental or otherwise. We did not propose 
certification in the proposed rule because we did not believe it was 
necessary to ensure compliance with the rule. In addition, we do not 
traditionally require certification for other FDA-regulated human food 
and cosmetic products with records requirements (e.g., seafood and 
juice hazard analysis critical control points (HACCP) records).

D. How Long Must the Records Be Kept? (Sec. Sec.  189.5(c)(2) and 
700.27(c)(2))

    (Comment) We received several comments regarding the length of time 
that records must be retained. Several comments stated that the 
required records should be maintained for 1 year after the date they 
were created to be consistent with USDA's IFR. One comment suggested 
that the required records be maintained for 3 years after the date they 
were created to cover the potential shelf life of the products and any 
potential need to trace back products. Another comment suggested that 
records be retained for 40 years after the date they were created 
because variant Creutzfeldt-Jakob disease (vCJD) has a long incubation 
period, and the records retention requirement should be commensurate 
with the potential for outbreak of disease. Finally, several comments 
requested that the records retention requirement vary with the expected 
shelf life of the human food or cosmetic, but should be no longer than 
2 years.
    (Response) We proposed in Sec. Sec.  189.5(c)(2) and 700.27(c)(2) 
that all required records be retained for 2 years after the date the 
records were created. The comments received have not persuaded us to 
change this requirement. The recordkeeping requirement is intended to 
ensure compliance with the ban on the use of prohibited cattle 
material. FDA will verify compliance during inspections of facilities 
that use cattle material directly or that use human food or cosmetics 
manufactured from, processed with, or that otherwise contain, cattle 
material. We believe that a 2-year record retention requirement is an 
appropriate length of time for achieving the goal of this rulemaking. A 
2-year record retention requirement will create a compliance history 
for the establishment. Furthermore, many of the products (e.g., canned 
soups, gelatin, dietary supplements, and cosmetics) that include 
material from cattle have shelf lives of several years. A 2-year record 
retention period will enable FDA to determine compliance of products on 
the market.
    We do not agree that the records retention time should vary with 
the shelf life of the product as it does in the Bioterrorism Act 
recordkeeping rule. It is the goal of that rule to allow for trace-back 
or trace-forward activities of food in an emergency; thus, shelf life 
of products was the critical determinant of the records retention 
period. In contrast, our goal in this rulemaking is to ensure 
compliance with the ban on the use of prohibited cattle material. As 
stated previously, the 2-year record retention requirement will enable 
creation of a compliance history for establishments over an extended 
period of time. Finally, we do not agree that the long incubation 
period of vCJD necessitates that records be retained for 40 years. This 
rulemaking is not intended to create a consumption or use history for 
individuals. Because vCJD has a long incubation period, potentially 
decades, it would be impractical to try to match disease development 
with previous consumption or use of a specific commodity.
    It will be necessary for inspectors to review and copy records 
during an inspection. A review of records is one way that we can 
determine whether an establishment is complying with the ban on the use 
of prohibited cattle material. It is also important that we be able to 
copy the required records. We may consider it necessary to copy records 
when, for example, our investigators need assistance in reviewing a 
certain record from relevant experts in our headquarters. If we are 
unable to copy records, we would have to rely solely on our 
investigator's notes and reports when drawing conclusions. Finally, 
copying records will facilitate followup regulatory actions.

E. When Do Manufacturers and Processors Have to Comply With the 
Recordkeeping Requirements?

    (Comment) We received several comments requesting that industry be 
given 90 days after publication of this final rule to comply with the 
recordkeeping requirements, rather than the proposed 30 days. The 
comments requested the additional time because they stated that 30 days 
was not long enough to implement a new recordkeeping protocol in their 
establishments.
    (Response) As we stated in the proposed rule, the agency believes 
that recordkeeping and records access requirements are necessary 
immediately. However, because we recognized that recordkeeping systems 
could not be put in place immediately, we did not include such 
provisions in the IFR but rather proposed them. The requirements in 
this rule are no more than are necessary for manufacturers, processors, 
and importers of record to ensure their compliance with the rule, and 
we informed industry of the anticipated timeframe for implementation in 
the proposed rule. These recordkeeping requirements are vital to 
ensuring compliance with the ban on the use of prohibited cattle 
material, and we strongly encourage industry to begin keeping them as 
soon as possible. However, in light of these comments we have decided 
to make these recordkeeping requirements become effective 90 days after 
the publication of this final rule in the Federal Register.

F. Legal Authority

    (Comment) We received a comment that maintained that FDA has no 
authority to require manufacturers to disclose company records to 
inspectors.
    (Response) We disagree with this comment because the agency has 
authority under the act both to require maintenance of records and to 
compel official access to such records for the

[[Page 59657]]

efficient enforcement of the act. The act's statutory scheme, taken as 
a whole, including provisions related to adulteration, prohibited acts, 
injunction, and seizure, makes clear that FDA has authority to issue a 
regulation requiring recordkeeping and access to the records that are 
kept. Viewing the act in its entirety, the United States Court of 
Appeals for the District of Columbia Circuit has found that the agency 
has authority to require records notwithstanding the act's lack of 
express, general authority for records. (National Confectioners Ass'n 
v. Califano, 569 F.2d 690 (DC Cir. 1978)). The Supreme Court has 
recognized that FDA has authority that ``is implicit in the regulatory 
scheme, not spelled out in haec verba'' in the statute (Weinberger v. 
Bentex Pharmaceuticals, Inc., 412 U.S. 645, 653 (1973)). Indeed, ``it 
is a fundamental principle of administrative law that the powers of an 
administrative agency are not limited to those expressly granted by the 
statutes, but include, also, all of the powers that may fairly be 
implied therefrom. * * * In the construction of a grant of powers, it 
is a general principle of law that where the end is required the 
appropriate means are given and that every grant of power carries with 
it the use of necessary and lawful means for its effective execution'' 
(Morrow v. Clayton, 326 F.2d 35, 44 (10th Cir. 1963)).
    In Toilet Goods Ass'n, Inc. v. Gardner (387 U.S. 158 (1967)), 
cosmetic manufacturers and distributors challenged an FDA regulation, 
issued under authority of the Color Additive Amendments of 1960 and 
section 701(a) of the act (21 U.S.C. 371(a)),\2\ authorizing FDA to 
stop certifying the color additives of any person who had refused to 
provide FDA with access to its manufacturing facilities, processes, and 
formulae. The cosmetic manufacturers and distributors argued that the 
regulation exceeded FDA's statutory authority and maintained that FDA 
had long sought Congressional authorization for the access required by 
the regulation but had been denied that power, except for prescription 
drugs (id. at 162). In finding that the controversy was not ripe for 
review, the Supreme Court set forth an approach to determining FDA's 
rulemaking authority under section 701(a) that extends beyond 
consideration of whether a specific section of the act includes a 
particular requirement. Rather, the approach extends to consideration 
of the act as a whole and the need to accomplish its purposes:

    \2\ Section 701(a) provides that ``[t]he authority to promulgate 
regulations for the efficient enforcement of this Act, except as 
otherwise provided in this section, is hereby vested in the 
Secretary.''
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    Whether the regulation is justified thus depends, not only, as 
petitioners appear to suggest, on whether Congress refused to 
include a specific section of the Act authorizing such inspections, 
although this factor is to be sure a highly relevant one, but also 
on whether the statutory scheme as a whole justified promulgation of 
the regulation. This will depend not merely on the inquiry into 
statutory purpose, but concurrently on an understanding of what 
types of enforcement problems are encountered by the FDA, the need 
for various sorts of supervision in order to effectuate the goals of 
the Act, and the safeguards devised to protect legitimate trade 
secrets.

Id. at 163-64 (internal citation omitted).

    In National Confectioners Ass'n v. Califano (569 F.2d 690 (DC Cir. 
1978)), the United States Court of Appeals for the District of Columbia 
Circuit cited Toilet Goods in upholding an FDA regulation, issued under 
the authority of sections 701(a) and 402(a)(4) of the act,\3\ requiring 
recordkeeping by candy manufacturers (id. at 691). The Association 
challenged FDA's recordkeeping requirement on several grounds, 
including that it exceeded FDA's statutory authority. The DC Circuit 
rejected the Association's analysis of FDA's statutory authority as 
``unreasonably cramped'' and considered enforcement practicalities as 
suggested by the Supreme Court in Toilet Goods:

    \3\ Section 402(a)(4) states that a food shall be deemed 
adulterated ``if it has been prepared, packed, or held under 
insanitary conditions whereby it may have become contaminated with 
filth, or whereby it may have been rendered injurious to health.''
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    There is no persuasive evidence that Congress intended to 
immunize food manufacturers from * * * record-keeping. Therefore, in 
assessing the validity of regulations promulgated under section 
701(a) for the efficient enforcement of the Act, we must consider 
``whether the statutory scheme as a whole justified promulgation of 
the regulation.'' Toilet Goods Ass'n v. Gardner, 387 U.S. 158, 163 
(1967). The consideration concerns ``not merely an inquiry into 
statutory purpose'' but also practicalities, such as ``an 
understanding of what types of enforcement problems are encountered 
by the FDA (and) the need for various sorts of supervision in order 
to effectuate the goals of the Act.'' Id. at 163-64. The Act is not 
concerned with purification of the stream of commerce in the 
abstract. The problem is a practical one of consumer protection, not 
dialectics. United States v. Urbuteit, 335 U.S. 355, 357-58 (1948).

Id. at 613 (footnote omitted).

    In National Confectioners, the DC Circuit considered the act's 
statutory scheme as a whole, specifically citing certain of the act's 
provisions relating to adulteration, prohibited acts, injunction, and 
seizure. Viewing the act in its entirety, the court found no basis to 
distinguish between FDA's roles in preventing and in remedying commerce 
in adulterated foods (id. at 693). The court concluded that FDA's 
intention to prevent the introduction of adulterated foods into 
commerce and to hasten their removal from circulation once there 
``reflect the objective of the Act and carry out its mandate'' (id. at 
694). The regulation upheld in National Confectioners required the 
creation and retention of records by candy makers of the initial 
distribution of candy. Although FDA's access to the records was not 
explicitly addressed, the DC Circuit implicitly recognized that FDA had 
the authority to access those records: In particular, the court stated 
that ``[r]egulations that require source codes and distribution records 
may be based legitimately on the need to expedite seizure when 
voluntary recalls are refused'' (id. at 695). The only way for records 
to expedite seizure is if FDA has access to them.
    The comment questioning FDA's authority to inspect records cites 
the Bioterrorism Act's specific grant of authority to FDA to access 
certain records as ``proof that neither FDA nor Congress believes that 
the agency has general statutory power to require records inspection 
for food.'' FDA's belief in its statutory power to inspect food records 
is evident in the records requirements it has previously issued, such 
as regulations that provide FDA with access to records for fish and 
fishery products (21 CFR 123.9(c)) and records for juice (21 CFR 
120.12(e)). Further, the Bioterrorism Act provides in section 306 (21 
U.S.C. 414), Maintenance and Inspection of Records, that ``[t]his 
section shall not be construed * * * to limit the authority of the 
Secretary to inspect records or to require establishment and 
maintenance of records under any other provision of this Act.'' In 
addition, Congress indicated its understanding of FDA's records 
authority in the legislative history of the Bioterrorism Act. The 
Conference Committee responsible for the Bioterrorism Act acknowledged 
FDA's recordkeeping authority independent of the Bioterrorism Act in a 
joint explanatory statement:

    The Managers did not adopt a Senate proposal to authorize the 
Secretary to require the maintenance and retention of other records 
for inspection relating to food safety, because the Secretary has 
authority under section 701(a) of the [Act] to issue regulations for 
the ``efficient enforcement of this Act'' and this authority, in 
combination with other

[[Page 59658]]

provisions (such as section 402), gives the Secretary the authority 
to require appropriate record keeping in food safety regulations.

H.R. Conf. Rep. No. 107-481, at 135 (2002).

    The comment questioning FDA's authority to inspect food records 
further argues that ``if Congress had intended FDA to have broad 
records inspection authority, section 703, [Records of Interstate 
Shipment], would have been completely superfluous and meaningless.'' As 
FDA recognized in a previous rulemaking, the National Confectioners 
court concluded that ``the narrow scope of section 703 of the act is 
not a limitation on the right of the agency to require recordkeeping 
and have access to records that are outside the scope of section 703 of 
the act, so long as [1] the recordkeeping requirement is limited, [2] 
clearly assists the efficient enforcement of the act, and [3] the 
burden of recordkeeping is not unreasonably onerous'' (60 FR 65096 at 
65100 (citing National Confectioners, 569 F.2d at 693 n.9)).
    The recordkeeping requirement in this rule satisfies the three 
criteria in National Confectioners for the agency to require records 
and have access to records. First, the requirement is limited to only 
manufacturers and processors of human food and cosmetics that are 
manufactured from, processed with, or otherwise contain, material from 
cattle and to importers of record of human food and cosmetics that are 
manufactured from, processed with, or otherwise contain, material from 
cattle. FDA has excluded all of the other persons who may be involved 
in the distribution of human food or cosmetics before they reach 
consumers but who do not manufacture or process the food.
    Second, the recordkeeping requirement not only clearly assists the 
efficient enforcement of the act, but is critical to its enforcement 
because it is vital to determining compliance with the ban on 
prohibited cattle material. There is currently no test to detect 
reliably the presence of prohibited cattle material in human food and 
cosmetics. If FDA cannot require and access records demonstrating 
compliance, FDA may not be able to determine whether a human food or 
cosmetic contains cattle material that is prohibited. For example, 
without records, FDA may not be able to determine whether cattle 
material that may be specified risk material (e.g., brain or spinal 
cord) came from an animal that was less than 30 months old, whether the 
source animal for cattle material was inspected and passed, whether the 
source animal for cattle material was nonambulatory disabled, and 
whether tallow in a human food or cosmetic contains less than 0.15 
percent insoluble impurities.
    Under the IFR, failure of a manufacture or processor to operate in 
compliance with the ban on prohibited cattle materials renders a food 
or cosmetic adulterated as a matter of law. The introduction or 
delivery for introduction into interstate commerce of an adulterated 
food or cosmetic is a prohibited act under section 301(a) of the act 
(21 U.S.C. 331(a)), and the adulteration of any food or cosmetic in 
interstate commerce violates section 301(b) of the act (21 U.S.C. 
331(b)). Thus, in order for us to determine whether a human food or 
cosmetic is adulterated and whether a manufacturer or processor has 
committed a prohibited act, we must have access to the manufacturer or 
processor's records.
    Third, the burden of the recordkeeping requirement in this rule is 
not unreasonably onerous. The only records that must be retained are 
those sufficient to demonstrate that a human food or cosmetic is not 
manufactured from, processed with, or does not otherwise contain, 
prohibited cattle materials. First and foremost, FDA believes that it 
is only requiring records that a manufacturer or processor itself would 
need to keep to ensure its compliance with the rule. Just as there is 
no way for FDA to determine whether a product contains prohibited 
cattle material because there is currently no test to detect such 
material, there is no way for a manufacturer or processor to know 
without records. For example, without records, a manufacturer or 
processor of human food or cosmetics manufactured from, processed with, 
or otherwise containing, cattle material cannot determine whether 
cattle material that may be specified risk material (e.g., brain or 
spinal cord) came from an animal that was less than 30 months old, 
whether the source animal for cattle material was inspected and passed, 
whether the source animal for cattle material was nonambulatory 
disabled, and whether tallow in a human food or cosmetic contains less 
than 0.15 percent insoluble impurities.
    Further, the rule does not dictate specific records but allows for 
covered manufacturers and processors to comply in the way that is least 
burdensome for them while demonstrating compliance. Also, many of the 
records that covered manufacturers and processors of human food may 
choose to retain are similar to those that are required by FDA's 
Bioterrorism Act recordkeeping rule. Finally, by allowing for efficient 
enforcement of the requirements that minimize human exposure to 
materials that scientific studies have demonstrated are highly likely 
to contain the BSE agent in cattle infected with the disease, FDA's 
recordkeeping rule ``reflect[s] the objective of the [Federal Food, 
Drug, and Cosmetic] Act and carr[ies] out its mandate'' (National 
Confectioners, 569 F.2d at 694).

III. Summary of Requirements

    The recordkeeping provisions of this rule apply to food and 
cosmetics covered by the IFR, including food additives, dietary 
supplements, and dietary ingredients.
    As discussed in section II of this document, we have modified the 
codified section based on comments we received on the proposed rule. In 
this final rule, in Sec. Sec.  189.5(c)(1) and 700.27(c)(1), we are 
requiring that manufacturers and processors of human food and cosmetics 
that are manufactured from, processed with, or otherwise contain, 
material from cattle establish and maintain records sufficient to 
demonstrate that the human food or cosmetic is not manufactured from, 
processed with, or does not otherwise contain, prohibited cattle 
materials. We intend to publish guidance that will describe in detail 
the records we recommend that manufacturers and processors maintain to 
demonstrate compliance with the ban on the use of prohibited cattle 
materials.
    In Sec. Sec.  189.5(c)(2) and 700.27(c)(2), we specify the period 
of time (2 years) that records must be retained. In Sec. Sec.  
189.5(c)(3) and 700.27(c)(3), we require that records be maintained at 
the manufacturing or processing establishment or at a reasonably 
accessible location. Sections 189.5(c)(4) and 700.27(c)(4) provide that 
maintenance of electronic records is acceptable and that electronic 
records are considered to be reasonably accessible if they are 
accessible from an onsite location. Sections 189.5(c)(5) and 
700.27(c)(5) provide that records required by these sections and 
existing records relevant to compliance with these sections must be 
available to FDA for inspection and copying.
    Because we do not easily have access to records maintained at 
foreign establishments, we are requiring in Sec. Sec.  189.5(c)(6) and 
700.27(c)(6), respectively, that when filing entry with U.S. Customs 
and Border Protection, the importer of record of a human food or 
cosmetic manufactured from, processed with, or otherwise containing, 
cattle material must affirm that the human food or cosmetic is 
manufactured from, processed with, or otherwise contains, cattle 
material and must affirm that the human food or cosmetic was

[[Page 59659]]

manufactured in accordance with this rule. In addition, if a human food 
or cosmetic is manufactured from, processed with, or otherwise 
contains, cattle material, then the importer of record must, if 
requested, provide within 5 days records sufficient to demonstrate that 
the human food or cosmetic is not manufactured from, processed with, or 
does not otherwise contain, prohibited cattle material.
    Sections 189.5(c)(7) and 700.27(c)(7) provide that records 
established or maintained to satisfy the requirements of this subpart 
that meet the definition of electronic records in part 11 (21 CFR part 
11) in Sec.  11.3(b)(6) are exempt from the requirements of part 11. 
Records that satisfy the requirements of this rulemaking, but that are 
also required under other applicable statutory provisions or 
regulations, remain subject to part 11.

IV. Regulatory Impact Analysis

A. Benefit-Cost Analysis

    FDA has examined the economic implications of this final 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 the following conditions: 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 final rule is a significant regulatory action 
because it raises novel policy issues; however, we have determined that 
this final rule is not an economically significant regulatory action.
    The Regulatory Flexibility Act requires agencies to analyze 
regulatory options that would minimize any significant impact of a rule 
on small entities. FDA finds that this final rule will have a 
significant economic impact on a substantial number of small entities.
    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires 
that agencies prepare a written statement, which includes an assessment 
of anticipated costs and benefits, before proposing ``any rule that 
includes any 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 one year.'' The current threshold after adjustment 
for inflation is $122 million, using the most current (2005) Implicit 
Price Deflator for the Gross Domestic Product (Ref 1). FDA does not 
expect this final rule to result in any 1-year expenditure that would 
meet or exceed this amount.
    The Small Business Regulatory Enforcement Fairness Act of 1996 
(Public Law No. 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 
or more; 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, OMB has determined that this final rule will not be a major rule 
for the purpose of congressional review.
1. Need for Regulation
    As explained in this document, USDA's amended BSE IFR requires that 
SRMs, tissue from nonambulatory disabled cattle, material from cattle 
not inspected and passed for human consumption, and MS beef not be used 
for human food. SRMs include the brain, skull, eyes, trigeminal 
ganglia, spinal cord, vertebral column (excluding the vertebrae of the 
tail, the transverse process of the thoracic and lumbar vertebrae, and 
the wings of the sacrum), and dorsal root ganglia of cattle 30 months 
and older, as well as the tonsils and distal ileum of the small 
intestine of all cattle. USDA's BSE IFR requires that all of the 
prohibited materials be destroyed or sent to inedible rendering. This 
final rule implements recordkeeping for the provisions of the IFR on 
use of materials from cattle and responds to the same public health 
concerns. This final rule will not affect the incidence of BSE in 
cattle, which is addressed in other FDA regulations. This final rule 
will serve as an additional safeguard to reduce human exposure to the 
agent that causes BSE that may be present in cattle-derived products 
from domestic and imported sources. Without the recordkeeping 
requirements in this final rule manufacturers and processors might not 
establish and maintain records to ensure that cattle material does not 
contain prohibited cattle materials, it may not be possible to 
determine whether cattle material that may be specified risk material 
(e.g., brain or spinal cord) came from an animal that was less than 30 
months old, it may not be possible to determine whether the source 
animal for cattle material was inspected and passed, and a product 
might contain MS beef without its presence being evident.
2. Final Rule Coverage
    This final rule will require recordkeeping to ensure and document 
compliance with the provisions of the IFR (on use of materials from 
cattle) that prohibit the use of ``prohibited cattle materials.'' This 
final rule will require that manufacturers and processors of human 
foods and cosmetics that are manufactured from, processed with, or 
otherwise contain, cattle materials maintain records indicating that 
prohibited cattle materials have not been used in the manufacture or 
processing of a human food or cosmetic, and make such records available 
to FDA for inspection and copying. Because we do not easily have access 
to records maintained at foreign establishments, we have included in 
this final rule a requirement that, when filing entry with U.S. Customs 
and Border Protection, importers of human food and cosmetics 
manufactured from, processed with, or otherwise containing, cattle 
material must affirm that the food or cosmetic was manufactured from, 
processed with, or otherwise contains, cattle material and must affirm 
that the food or cosmetic was manufactured in accordance with this 
rule. In addition, if a human food or cosmetic is manufactured from, 
processed with, or otherwise contains, cattle material, then the 
importer of record must, if requested, provide within 5 days records 
sufficient to demonstrate that the human food or cosmetic is not 
manufactured from, processed with, or does not otherwise contain, 
prohibited cattle material.
3. Comments Received on the Proposed Rule
    (Comment) We received several comments that stated that FDA 
underestimated the economic impact of the proposed rule by omitting 
entire industries that would be subject to the rule. According to the 
comments, FDA had only estimated the costs of the rule to end-users of 
cattle material and had not considered the costs of the rule to those 
persons that produce intermediate

[[Page 59660]]

cattle-derived products. Specifically, manufacturers of collagen 
casings, intestinal casings, flavoring extracts, and gelatin are not 
appropriately accounted for in the proposed rule analysis.
    (Response for gelatin) In the case of gelatin, FDA did estimate the 
impact of the proposed rule on food manufacturers of intermediate 
products that are from cattle-derived gelatin. Depending on the 
product, FDA had information on cattle-derived materials manufactured 
by intermediate producers (e.g., input suppliers to cosmetics 
manufacturers) or information on end products that contained cattle 
materials (e.g., foods). Whether our information was on intermediate 
manufacturers or end products, we estimated the impact of the rule on 
both the upstream and downstream facilities. FDA did not include 
estimates of bovine gelatin use in cosmetics in the analysis of the 
proposed rule. We have included these estimates in the final analysis.
    (Response for small intestine) FDA did not estimate any costs, 
other than recordkeeping, for the requirement that the distal ileum be 
removed from the small intestine because costs other than recordkeeping 
are linked to the prohibition in FDA's IFR.
    (Response for flavoring extracts) In the case of flavoring 
extracts, manufacturers and the buyers of flavoring extracts for use in 
food products were accounted for in the proposed rule. We assessed 
recordkeeping costs for the 32 facilities (out of 127 facilities) that 
we estimated were likely to manufacture flavoring extracts using 
cattle-derived materials and for the buyers of these flavoring 
extracts. FDA assumed three scenarios for sensitivity analyses: (1) 
Recordkeeping costs are borne entirely by the flavoring extract 
manufacturers as the input supplier, (2) recordkeeping costs are borne 
entirely by the manufacturers of products that use flavoring extracts 
as an ingredient in their products, and (3) recordkeeping costs are 
shared between the two types of firms.
    (Response for collagen) FDA did not estimate the impacts of our 
proposed rule on collagen manufacturers or collagen casing 
manufacturers. This rule does not require recordkeeping for hide-
derived collagen. Therefore we do not include the costs of 
recordkeeping to manufacturers who use hide-derived collagen. We do 
include costs for some collagen use in cosmetic manufacturing.
4. Costs and Benefits of the Final Rule
    This final rule will require manufacturers and processors of FDA-
regulated human food and cosmetics manufactured from, processed with, 
or otherwise containing, cattle material to maintain records 
demonstrating that prohibited cattle materials are not used in their 
products. This final rule will require that the manufacturer or 
processor retain records for 2 years from the date they were created. 
Records must be kept at the manufacturing or processing establishment 
or another reasonably accessible location. Manufacturers and processors 
must provide FDA with access to the required records and other records 
relevant to compliance for inspection and copying.
    a. Costs of final rule to domestic facilities. FDA used 
establishment data from the FDA Small Business Model (which includes 
information on all establishments in a manufacturing sector regardless 
of size) (Ref. 2) to determine the number of food manufacturers and 
processors that will need to comply with the proposed recordkeeping 
requirements. The model contains information on the number of 
establishments in certain food producing sectors, but does not have 
information on specific ingredients used by the food establishments in 
making products. Data from the model indicates that 181 establishments 
produce spreads, 127 establishments produce flavoring extracts, 40 
establishments produce canned soups and stews, 625 establishments 
produce nonchocolate candy, 88 establishments produce yogurt, and 451 
establishments produce ice cream. FDA cannot verify that all of these 
establishments actually use cattle materials that fall under the 
jurisdiction of this final rule; many may not. It is likely that some 
of the 132 establishments that produce fats and oils currently use 
tallow or tallow derivatives,\4\ so FDA assumes that records will be 
required to be kept by only 75 percent of the facilities (99 of 132) in 
this establishment group. We assume that only 25 percent of the 
establishments from the remaining production sectors listed previously 
actually produce food that is manufactured from, processed with, or 
otherwise contains, material from cattle and are therefore required to 
keep records. We include only 25 percent of the establishments in our 
estimates because most of the manufacturers likely do not use cattle-
derived materials in their products.
---------------------------------------------------------------------------

    \4\ Tallow derivatives are exempt from recordkeeping.
---------------------------------------------------------------------------

    FDA research shows that 42 establishments with U.S. addresses 
supply cattle-derived ingredients that are used in cosmetics (Ref. 3). 
These cattle-derived ingredients include bovine serum albumin, 
cholesterol and cholesterol compounds, fibronectin, sphingolipids, 
spleen extract, tallow, gelatin, and keratin and keratin compounds. 
From FDA's dietary supplement database (Ref. 4), we are able to tell 
that there are about 131 U.S.-based dietary supplement brand names that 
use cattle material as ingredients in their products. We assume that 
each brand name represents a facility that produces multiple dietary 
supplement products containing cattle-derived ingredients.
    Recordkeeping costs to domestic facilities. USDA's BSE rule 
requires that those establishments that slaughter cattle or that 
process the carcasses or parts of carcasses of cattle maintain daily 
records sufficient to document the implementation and monitoring of 
procedures for removal, segregation, and disposition of SRMs. USDA's 
BSE requirements will reduce, but likely not eliminate, the startup 
costs of recordkeeping required by this final rule. We do not expect 
the USDA rule to completely eliminate start-up costs to recordkeeping 
for this rule because the beef products under USDA's jurisdiction 
differ from the food products under FDA's jurisdiction. To the extent 
that manufacturers of products containing cattle-derived materials 
produce a variety of food products, some of which are under USDA 
jurisdiction and some of which are under FDA jurisdiction, the 
following estimates of recordkeeping costs (for foods only) are likely 
an over estimate.
    Recordkeeping costs include one-time costs and recurring costs. 
One-time costs include the costs of designing records and training 
personnel in the maintenance of the records. The recurring costs are 
the costs of ensuring that the records adequately document that the 
shipment of cattle materials to an FDA-regulated facility is free of 
prohibited cattle materials. The costs of retaining records and 
planning for an FDA request for records access are assumed to be 
negligible. Current business practices already dictate that records are 
kept for at least 1 year for tax purposes and product liability 
purposes. FDA has found that records are usually kept much longer for 
internal business purposes; therefore, in most cases the marginal 
private benefits to facilities from retaining records for a second year 
are apparently greater than the private marginal costs, so they keep 
most records. Because records retention is already standard practice in 
many cases, we assume that the additional retention costs associated 
with this final

[[Page 59661]]

rule are approximately zero. The rule provides no specific time period 
for providing records, except for importers of record, who are given 5 
days. In research conducted for FDA's Bioterrorism Act recordkeeping 
rule (69 FR 71562, December 9, 2004), FDA found that record request 
costs are not a significant burden under that rule's requirement to 
submit records to FDA within 24 hours of a request. Therefore, we 
assume the cost to provide records to FDA under the requirements of 
this final rule is approximately zero.
    We assume that the one-time training burden incurred for each 
facility is approximately one-third of an hour. This time includes both 
the training required for personnel to learn how to verify that the 
appropriate records have been received or created, and the training 
required for personnel to learn how to file and maintain those records. 
As part of current business practices, personnel are familiar with 
recordkeeping. Therefore, the requirement to maintain additional 
records will be learned quickly. This training burden estimated for 
recordkeeping in this final rule is consistent with the recordkeeping 
training burden in the analysis for the Bioterrorism Act recordkeeping 
rule and the records maintenance burden in the analysis of the juice 
hazard analysis critical control points (HACCP) rule (66 FR 6137-6202). 
Consistent with the analysis conducted for the Bioterrorism Act 
recordkeeping rule, FDA assumes an hourly cost of an administrative 
worker, $25.10 per hour, which includes overhead costs.
    We use the FDA Labeling Cost Model to estimate the one-time records 
design costs per facility of $1,190 per stock keeping unit (SKU) (Ref. 
5). It is likely that facilities using cattle-derived ingredients, 
whether the ingredients are for human food or cosmetics, will take 
advantage of their economies of scope and produce more than one product 
with these ingredients. It is probable that each establishment has 
several SKUs associated with products containing cattle-derived 
ingredients that will now require recordkeeping. To account for 
additional products and SKUs we take the record design costs per 
facility times 1.5 for a total design cost per facility of $1,785 
($1,095 in labor costs and $690 in capital costs).
    We multiplied the cost per product per SKU by 1.5 to account for 
the additional records design required for the additional SKUs. The 
record design cost for the first affected product or SKU will be more 
expensive than the marginal cost of adding records for additional SKUs. 
This marginal cost of record design for additional SKUs could be 
negligible, or it could come close to doubling the costs. We therefore 
pick 1.5, the midpoint of 1 and 2, to be the cost multiplier.
    Consistent with the analysis conducted for the Bioterrorism Act 
recordkeeping rule, this record design cost is assumed to be shared 
between two facilities--the upstream facility and the downstream 
facility--as both will need to be involved in record production that 
meets the needs of both the supplier and customer for the product 
containing cattle-derived material.
    Unlike for the analysis of the Bioterrorism Act recordkeeping rule 
(69 FR 71562, December 9, 2004), we do not have direct information on 
all the facilities covered; we do not have data on all the intermediate 
cattle material suppliers or finished product manufacturers that make 
use of cattle-derived material for human food and cosmetics under FDA 
jurisdiction. Using information on the number of human food 
manufacturers and cosmetic ingredient suppliers that may use cattle-
derived ingredients subject to this final rule, we can account for the 
total shared records costs by assuming that each food manufacturer or 
processor in table 1 of this document procures ingredients from one 
upstream input supplier for particular cattle-derived ingredients. Even 
if multiple input suppliers are used by the manufacturing facility, or 
an input supplier is used by multiple manufacturing facilities, the 
marginal record setup costs would decrease for additional suppliers or 
additional manufacturers. Once a facility has designed the required 
records, it is less costly to generate records for additional input 
suppliers or additional end product manufacturers. Table 1 of this 
document shows estimated set-up costs for U.S. facilities. Dietary 
supplement facilities listed represent end product manufacturers of 
dietary supplements that contain cattle-derived material; cosmetics 
facilities are represented by intermediate cattle-derived ingredients 
used in cosmetics products from domestic cosmetic input suppliers.

                           Table 1.--First-Year Records Costs for Domestic Facilities
----------------------------------------------------------------------------------------------------------------
                                                                                     Costs per
                                                     Number of       Costs per     facility for
                                                    facilities     facility for    training (\1/    Total setup
      Type of product using cattle material        estimated to      designing      3\  hour x         costs
                                                    use cattle        records       $25.10  per
                                                     materials                         hour)
----------------------------------------------------------------------------------------------------------------
Canned soups and stews..........................              10          $1,785           $8.37         $17,934
Fats and oils...................................              99           1,785            8.37         177,544
Flavoring extracts..............................              32           1,785            8.37          57,388
Spreads.........................................              45           1,785            8.37          80,702
Candy...........................................             156           1,785            8.37         279,766
Yogurt..........................................              22           1,785            8.37          39,454
Ice cream.......................................             113           1,785            8.37         202,651
Small intestine-derived casings.................              47           1,785            8.37          84,288
Dietary supplements.............................             131           1,785            8.37         234,931
Cosmetics.......................................              42           1,785            8.37          75,322
Color additives.................................               0           1,785            8.37  ..............
                                                 ---------------------------------------------------------------
    Total.......................................             697           1,785            8.37       1,249,978
----------------------------------------------------------------------------------------------------------------
Startup Costs Annualized over 10 years (7%).....................................................        177,969
Startup Costs Annualized over 10 years (3%).....................................................         146,536
----------------------------------------------------------------------------------------------------------------


[[Page 59662]]

    The recurring recordkeeping cost is the cost of ensuring that 
appropriate records document the absence of prohibited cattle materials 
in human food and cosmetics. The framework for estimating the amount of 
time required for FDA-regulated facilities to ensure adequate records 
for each shipment of materials is based on the regulatory impact 
analysis of the Bioterrorism Act recordkeeping rule (69 FR 71562, 
December 9, 2004). In that analysis we estimated that 30 minutes per 
week would be needed to ensure that records on each shipment to and 
from a facility contain adequate information regarding the contents of 
the package, the transporter, supplier, and receiver.
    The recordkeeping requirements of this final rule will cover only a 
small fraction of all ingredients used in food and cosmetic 
manufacturing and only require that records of cattle-derived 
ingredient origin from the input supplier be verified and maintained by 
the food or cosmetic manufacturer and processor. Because this 
recordkeeping requirement is less complex than the recordkeeping 
requirements under the Bioterrorism Act and affects fewer ingredients, 
we estimate the average burden per facility to be about one-half of the 
burden estimated for the Bioterrorism Act recordkeeping rule: 15 
minutes per week, or 13 hours per year. FDA assumes that this 
recordkeeping burden will be shared between two entities (i.e., the 
ingredient supplier and the manufacturer of finished products 
containing cattle-derived ingredients). For facilities using records 
that are renewable annually, the time pattern of the burden may be 
different from the assumed 15 minutes per week. We are, however, unable 
to quantify by how much time, if any, the annual burden will fall for 
those facilities using that option.
    In addition to the recurring costs to domestic firms in the 
industry, as new firms enter the industry they will bear one-time 
costs. As in the analysis of the Bioterrorism Act recordkeeping rule, 
we assume that the average annual rate of turnover is 10 percent. We 
therefore estimate the annual one-time costs for new domestic firms 
entering the industry to be 10 percent of the one-time costs of 
existing domestic firms estimated in table 1 of this document.
    Table 2 of this document shows the recurring recordkeeping costs 
that would be incurred by food and cosmetics input suppliers and 
manufacturers to comply with this final rule. As stated earlier, 
information on food producing facilities in table 2 represents U.S. 
facilities; dietary supplement facilities listed represent end product 
manufacturers of dietary supplements that contain cattle-derived 
material and cosmetics facilities are represented by intermediate 
cattle-derived ingredients used in cosmetics products from domestic 
cosmetic input suppliers.

                        Table 2.--Recurring Annual Records Costs for Domestic Facilities
----------------------------------------------------------------------------------------------------------------
                                                                                   Annual costs
                                                                                   per facility
                                                                                    of ensuring
                                                                                       that
                                                                                    appropriate        Total
    Type of product (from raw or rendered material that needs        Number of        records        recurring
                   accompanying documentation)                      facilities    accompany each   annual costs
                                                                                     shipment
                                                                                   received  (13
                                                                                  hours x $25.10/
                                                                                       hour)
----------------------------------------------------------------------------------------------------------------
Canned soups and stews..........................................              10         $326.30          $3,263
Fats and oils...................................................              99          326.30          32,304
Flavoring extracts..............................................              32          326.30          10,442
Spreads.........................................................              45          326.30          14,684
Candy...........................................................             156          326.30          50,903
Yogurt..........................................................              22          326.30           7,179
Ice Cream.......................................................             113          326.30          36,872
Small intestine-derived casings.................................              47          326.30          15,336
Dietary supplements.............................................             131          326.30          42,745
Cosmetics.......................................................              42          326.30          13,705
Color additives.................................................               0  ..............  ..............
                                                                 -----------------------------------------------
Total recurring costs for existing firms........................             697          326.30         227,430
----------------------------------------------------------------------------------------------------------------
One-time costs for new firms....................................................................        124,998
Total annual costs..............................................................................        352,428
Total costs of recordkeeping for domestic firms (annualized startup costs (7%) + annual costs)..        530,397
Total costs of recordkeeping for domestic firms (annualized startup costs (3%) + annual costs)..         498,964
----------------------------------------------------------------------------------------------------------------

    b. Costs of final rule to importers. This final rule requires that, 
when filing entry with U.S. Customs and Border Protection, importers of 
record of human food and cosmetics that are manufactured from, 
processed with, or otherwise contain, cattle material must affirm that 
the food or cosmetic was manufactured from, processed with, or 
otherwise contains, cattle material and must affirm that the human food 
or cosmetic was manufactured in accordance with this rule. If a human 
food or cosmetic is manufactured from, processed with, or otherwise 
contains, cattle material, then the importer of record must, if 
requested, provide within 5 days records sufficient to demonstrate that 
the human food or cosmetic is not manufactured from, processed with, or 
does not otherwise contain, prohibited cattle material.
    The affirmation that foods or cosmetics are manufactured from, 
processed with, or otherwise contain, cattle material and are 
manufactured in accordance with the rule will be made by the importer 
of record to FDA through the Agency's Operational and Administrative 
System for Import Support (OASIS). Table 3, using OASIS data from 
fiscal year 2004, shows 2,195,000 entry lines of food and cosmetics for 
the product codes that FDA expects may contain products with cattle 
materials entered the U.S.; 0 to

[[Page 59663]]

100 percent of these imported product lines will be for products that 
actually do contain cattle material and require affirmation. We use the 
information in table 3 to generate recordkeeping costs to importers (in 
tables 4 and 5) whose products actually do contain cattle-derived 
materials.

Table 3.--Annual Lines per FDA Industry Product Code for Which Importers
             Must Verify Use of Cattle-Derived Materials \1\
------------------------------------------------------------------------
                                                            Fiscal year
          Industry description             FDA industry      2004 line
                                           product code        count
------------------------------------------------------------------------
Bakery products, dough, mix, and icing..              03         700,222
Macaroni and noodle products............              04          24,011
Milk, butter, and dried milk products...              09          12,228
Cheese and cheese products..............              12           2,712
Ice cream products......................              13           2,698
Filled milk and imitation milk products.              14             990
Fishery and seafood products............              16           4,775
Meat, meat products and poultry.........              17           5,322
Vegetable protein products..............              18          16,702
Fruit and fruit products................              20          16,410
Fruit and fruit products................              21          13,112
Fruit and fruit products................              22           1,532
Nuts and edible seeds...................              23          24,216
Vegetables and vegetable products.......              24         323,004
Vegetables and vegetable products.......              25         321,032
Vegetable oils..........................              26           1,532
Dressings and condiments................              27          16,386
Spices, flavors, and salts..............              28             203
Candy (except chocolate candy), chewing               33         275,733
 gum....................................
Chocolate and cocoa products............              34         126,719
Gelatin, rennet, pudding mix, pie                     35          22,485
 filling................................
Multiple food dinners, gravy, and sauces              37          82,105
Soup....................................              38          37,923
Prepared salad products.................              39          13,357
Baby food products......................              40             576
Dietary convenience foods and meal                    41          18,189
 replacements...........................
Food additives (human use)..............              45          23,877
Food additives (human use)..............              46          14,699
Miscellaneous food related items........              52           1,501
Cosmetics...............................              53          27,867
Vitamins, minerals, proteins,                         54          63,184
 unconventional dietary specialties.....
                                         -------------------------------
    Total annual lines..................  ..............      2,195,302
------------------------------------------------------------------------
\1\ Note that not every import within each two-digit FDA product code
  will be required to make an affirmation of bovine materials in their
  products.

    Recordkeeping costs to foreign facilities. Facilities producing 
products required to give affirmation on import into the U.S. whose 
products actually do contain cattle-derived materials will have to 
create and maintain records of cattle-derived materials used in product 
production. Therefore, a certain percentage of the firms whose products 
are listed in Table 3 above will have to incur startup and recurring 
recordkeeping costs, as domestic facilities do, to comply with the 
recordkeeping requirements of this final rule.
    We do not expect many imported food products under FDA jurisdiction 
will actually contain cattle-derived materials. Table 4 below revises 
table 3 to only include the percentage (10 percent) of certain imported 
products likely to contain cattle materials and whose manufacturing 
firms will keep records. We do not include the categories of food from 
table 3 where affirmation could be required but it is not likely that 
products from that category actually contain cattle-derived materials. 
We estimate only 10 percent of lines rather than 25 percent or 75 
percent as we did for domestic products because import category codes 
tend to be broader in scope than the categories we used for determining 
the number of domestic facilities that produced products using cattle-
derived materials.
    To estimate the number of foreign firms associated with the 10 
percent of line entries listed in table 4, we take all foreign firms 
registered in the Food Facilities Registration Database as of the end 
of the fiscal year 2004 (approximately 125,000) and divide that number 
of firms by all imported food entry lines for fiscal year 2004 
(7,486,650).\5\ The result is a multiplier (0.0167) that we apply to 
entry lines to estimate the average number of firms by product category 
that exported food or cosmetics to the U.S. in fiscal year 2004, and 
whose products actually contained cattle-derived materials for which 
records would need to be kept.
---------------------------------------------------------------------------

    \5\ Cosmetic lines have been subtracted from the line total 
because cosmetics manufacturers do not have to register.
---------------------------------------------------------------------------

    Table 4 below shows that about 916 foreign firms will need to keep 
records of cattle-derived materials. The startup costs to keeping these 
records will be about $1.6 million. Since we do not have good 
information on the number of firms that actually produce and export 
products that contain cattle-derived materials to the U.S., the costs 
in table 4 below may overestimate recordkeeping costs to firms in some 
product categories and may

[[Page 59664]]

underestimate recordkeeping costs to firms in other product categories.

                            Table 4.--First Year Records Costs for Foreign Facilities
----------------------------------------------------------------------------------------------------------------
                                                    Fiscal year                                     Total setup
              Industry description                   2004 line     10 percent of     Number of     costs ($1,793
                                                       count           lines        facilities       per firm)
----------------------------------------------------------------------------------------------------------------
Milk, butter, and dried milk products...........          12,228           1,223              20         $36,614
Ice cream products..............................           2,698             270               5           8,079
Meat, meat products and poultry.................           5,322             532               9          15,936
Vegetable oils..................................           1,532             153               3           4,587
Dressings and condiments........................          16,386           1,639              27          49,065
Spices, flavors, and salts......................             203              20               0               0
Candy (except chocolate candy), chewing gum.....         275,733         27,5723             460         825,630
Gelatin, rennet, pudding mix, pie filling.......          22,485           2,249              38          67,327
Multiple food dinners, gravy, and sauces........          82,105           8,211             137         245,848
Soup............................................          37,923           3,792              63         113,553
Baby food products..............................             576              58               1           1,725
Cosmetics.......................................          27,867           2,787              47          83,442
Vitamins, minerals, proteins, unconventional              63,184           6,318             106         189,192
 dietary specialties............................
                                                 ---------------------------------------------------------------
    Total.......................................  ..............  ..............             916       1,640,999
----------------------------------------------------------------------------------------------------------------
Startup Costs Annualized over 10 years (7%).....................................................        233,641
Startup Costs Annualized over 10 years (3%).....................................................         192,375
----------------------------------------------------------------------------------------------------------------

    The recurring recordkeeping cost to importers whose products 
contain cattle-derived materials is the cost of ensuring that 
appropriate records document the absence of prohibited cattle materials 
in human food and cosmetics. We use the same method and rationale to 
calculate the recurring recordkeeping cost burden to foreign facilities 
that we used for domestic facilities.
    In addition to the recurring costs to foreign firms in the 
industry, as new firms enter the industry they will bear one-time 
costs. As in the analysis of the Bioterrorism Act recordkeeping rule, 
we assume that the average annual rate of turnover is 10 percent. We 
therefore estimate the annual one-time costs for new foreign firms 
entering the industry to be 10 percent of the one-time costs of 
existing foreign firms estimated in table 4.
    Also shown in table 5 are the annual costs to importers to affirm 
that the human food or cosmetics that they are importing do contain 
cattle material and are in compliance with this rule. Importers of 
approximately 54,825 lines of food and cosmetics are expected to affirm 
annually that the products they are importing contain cattle materials. 
This total represents 10 percent of the total lines imported for fiscal 
year 2004 for products under FDA product codes that FDA will be looking 
to for importer affirmation. Using an importer hourly wage cost of 
$46.58 (Ref. 6), which includes overhead, FDA estimates that importer 
affirmation will take about two minutes per line at a cost of $1.55 per 
affirmation for total annual affirmation costs of $84,979.

                         Table 5.--Recurring Annual Records Costs for Foreign Facilities
----------------------------------------------------------------------------------------------------------------
                                                                                                       Total
                                                    Fiscal year                                      recurring
              Industry description                   2004 line     10 percent of     Number of     annual costs
                                                       count           lines        facilities     ($326.30 per
                                                                                                       firm)
----------------------------------------------------------------------------------------------------------------
Milk, butter, and dried milk products...........          12,228           1,223              20          $6,663
Ice cream products..............................           2,698             270               5           1,470
Meat, meat products and poultry.................           5,322             532               9           2,900
Vegetable oils..................................           1,532             153               3             835
Dressings and condiments........................          16,386           1,639              27           8,929
Spices, flavors, and salts......................             203              20               0             111
Candy (except chocolate candy), chewing gum.....         275,733          27,573             460         150,253
Gelatin, rennet, pudding mix, pie filling.......          22,485           2,249              38          12,253
Multiple food dinners, gravy, and sauces........          82,105           8,211             137          44,741
Soup............................................          37,923           3,792              63          20,665
Baby food products..............................             576              58               1             314
Cosmetics.......................................          27,867           2,787              47          15,185
Vitamins, minerals, proteins, unconventional              63,184           6,318             106          34,430
 dietary specialties............................
                                                 ---------------------------------------------------------------
    Total.......................................  ..............          54,825             916         298,638
----------------------------------------------------------------------------------------------------------------
Total Annual Importer Affirmation Costs ($1.55 per line for 54,825 lines).......................          84,979
One-time costs for new firms....................................................................         164,100
Total annual costs..............................................................................         547,717
Total costs of recordkeeping for foreign firms (annualized startup costs (7%) + annual costs....         781,358
Total costs of recordkeeping for foreign firms (annualized startup costs (3%) + annual costs)...         740,092
----------------------------------------------------------------------------------------------------------------


[[Page 59665]]

    c. Benefits of the final rule. The benefits of this final rule are 
derived from the benefits of the interim final rule on use of material 
from cattle, which are the value of the public health benefits. The 
public health benefit is the reduction in the risk of the human illness 
associated with consumption of the agent that causes BSE.
    If we define the baseline risk as the expected annual number of 
cases of variant Creutzfeldt-Jakob disease (vCJD) per year, then the 
annual benefits of banning prohibited cattle materials for use in foods 
and cosmetics would be: (baseline annual cases of vCJD -annual cases of 
vCJD under FDA IFR on use of materials from cattle) x (value of 
preventing a case of vCJD).
    An alternative way to characterize benefits is:

(reduction in annual cases in vCJD under FDA IFR on use of materials 
from cattle) x (value of preventing a case of vCJD).

    We do not know the baseline expected annual number of cases. But 
based on the epidemiology of vCJD in the United Kingdom, we anticipate 
much less than one case of vCJD per year in the United States. Because 
the IFR on use of materials from cattle and this final rule will 
reduce, rather than eliminate, risk of exposure to BSE infectious 
materials, the reduction in the number of cases will be some fraction 
of the expected number. The value of preventing a case of vCJD is the 
value of a statistical life plus the value of preventing a year-long or 
longer illness that precedes certain death for victims of vCJD. In a 
recent rulemaking regarding labeling of trans fatty acids (68 FR 41434, 
July 11, 2003), we used a range of $5 million to $6.5 million for the 
value of a statistical life. The value of preventing a vCJD case may be 
similar. FDA uses the concept of the Value of a Statistical Life (VSL) 
in order to describe the value of preventing a case of vCJD. This term 
refers to the sum of risk reductions expected in a population exposed 
to small changes in risk. It has no application to identifiable 
individuals or large reductions in risk. Most recent studies suggest 
values ranging from about $1 million to $10 million. In recent 
rulemakings, we have used $5 million and $6.5 million as the value of a 
statistical life, and we believe it is reasonable to use a similar VSL 
to value the cases of vCJD avoided.
    As discussed in FDA's IFR on use of materials from cattle, the 
Harvard-Tuskegee study has stated that a ban on SRMs, including cattle 
brains, spinal cord, and vertebral column, from inclusion in human and 
animal food would reduce the very few potential BSE cases in cattle by 
88 percent and potential human exposure to infectivity in meat and meat 
products by 95 percent (Ref. 7). The FDA IFR on use of materials from 
cattle, in conjunction with USDA's BSE IFR, will help achieve this 
reduction in potential human exposure. FDA's IFR on use of materials 
from cattle will also reduce potential human exposure to BSE 
infectivity in other human food not covered by the Harvard-Tuskegee 
study and from cosmetics. This final rule will help ensure that the 
provisions of the IFR on use of materials from cattle are carried out. 
For example, this final rule will require documentation that a 
domestically-produced or foreign-produced dietary supplement or 
ingredient contains cattle material (e.g., brain) only from animals of 
an appropriate age.
    d. Summary of costs and benefits of the final rule. For this final 
rule, the costs are to set up and then to maintain a recordkeeping 
system to document that cattle-derived ingredients used in FDA-
regulated food and cosmetics do not contain prohibited cattle material. 
The first year costs of this final rule are about $1.2 million to 
domestic facilities and about $1.6 million to foreign facilities. The 
annual costs of this final rule are about $352 thousand in 
recordkeeping costs to domestic facilities, $548 thousand in 
recordkeeping costs to foreign facilities. Costs of this final rule 
annualized at 7 percent over 10 years are about $530 thousand to 
domestic facilities and $781 thousand to foreign facilities; costs 
annualized at 3 percent over 10 years are $500 thousand to domestic 
facilities and $740 thousand to foreign facilities.
    The benefits of this final rule are to ensure that cattle-derived 
products that may possibly be contaminated with BSE do not find their 
way into food and cosmetic products, thus further reducing the risk of 
vCJD to humans.

                                     Table 6.--Summary of Costs and Benefits
----------------------------------------------------------------------------------------------------------------
                                                                                    Total costs     Total costs
                                     Number of       Start-up        Recurring     annualized at   annualized at
                                    facilities     recordkeeping   recordkeeping     7% for 10       3% for 10
                                                       costs           costs           years           years
----------------------------------------------------------------------------------------------------------------
Costs to Domestic Facilities....             697      $1,249,978        $352,428        $530,397        $498,964
Costs to Foreign Facilities.....             916      $1,640,999        $547,717        $781,358         740,092
                                 -------------------------------------------------------------------------------
    Total.......................            1613      $2,890,977        $900,145      $1,311,755       1,239,056
----------------------------------------------------------------------------------------------------------------
Benefits--To ensure that cattle-derived products that may possibly be contaminated with BSE do not find their
  way into food and cosmetic products, thus further reducing the risk of vCJD to humans.

B. Regulatory Flexibility Analysis

    FDA has examined the economic implications of this final 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 final rule will have a significant 
economic impact on a substantial number of small entities.
    First-year costs of this final rule are about $1,800 per facility 
pair, with this cost divided between the upstream facility (ingredient 
input supplier) and downstream facilities (manufacturers of food or 
cosmetics). FDA cannot determine if the cost sharing between the two 
firms would be equal. If the cost sharing is equal, then each facility 
would have to bear about a $900 first-year cost to comply with the 
recordkeeping required by the final rule; if the cost sharing is not 
equal, then one facility in the partnership may bear zero costs all the 
way up to the total first-year costs of $1,800. Recurring costs of this 
final rule are about $326 per facility relationship, which may be borne 
by only one facility or may be shared between facilities.
    Using FDA's Small Business Model, we can estimate, when 
recordkeeping costs are shared and when they are not shared, the number 
of facilities that may go out of business as a result of this final 
rule. Table 7 of this document shows

[[Page 59666]]

that if facilities are only responsible for one-half of the 
recordkeeping cost burden (the burden is equally shared between the 
upstream and downstream facilities), then only two very small 
facilities (fewer than 20 employees) may be affected by having to 
comply with this final rule. If the recordkeeping cost burden is borne 
by only one facility in the business relationship (either the upstream 
or the downstream firm), then six very small facilities (fewer than 20 
employees) may have trouble complying with this final rule and staying 
in business. The option to use a continuing letter of guarantee, 
however, may introduce sufficient flexibility to reduce the burden on 
some small facilities, which may reduce the number of very small 
facilities that will have trouble staying in business. Facilities with 
20 to 499 employees and facilities with at least 500 employees that 
must comply with this final rule are not in danger of having to stop 
operating as a result of the final rule.

                               Table 7.--Potential for Domestic Facility Shutdown
----------------------------------------------------------------------------------------------------------------
                                                                                    Regulation
                                                                     Estimated    burden on each     Number of
                                                                     number of       facility     facilities  in
                            Industry                                facilities        (shared      industry that
                                                                     affected        burden or     may shut down
                                                                                   total burden)
----------------------------------------------------------------------------------------------------------------
Canned soups and stews..........................................              10            $900               0
Canned soups and stews..........................................              10           1,800               0
Fats and oils...................................................              99             900               0
Fats and oils...................................................              99           1,800               0
Flavoring extracts..............................................              32             900               0
Flavoring extracts..............................................              32           1,800               0
Spreads.........................................................              45             900               0
Spreads.........................................................              45           1,800               1
Candy...........................................................             156             900               1
Candy...........................................................             156           1,800               2
Yogurt..........................................................              22             900               0
Yogurt..........................................................              22           1,800               0
Ice cream.......................................................             113             900               0
Ice cream.......................................................             113           1,800               1
Small intestine-derived casings.................................              47             900               0
Small intestine-derived casings.................................              47           1,800               0
Dietary supplements.............................................             131             900               1
Dietary supplements.............................................             131           1,800               2
Cosmetics.......................................................              42             900               0
Cosmetics.......................................................              42           1,800               0
----------------------------------------------------------------------------------------------------------------

    We would expect the potential for small business shutdown would be 
similar for foreign firms that continue to import their products with 
cattle-derived materials into the United States. It is possible that 
some foreign firms would choose to cease doing business with the United 
States if the recordkeeping requirements of this rule are too 
burdensome.

V. Paperwork Reduction Act Analysis

    This final 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 follows 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.
    Title: Recordkeeping Requirements for Human Food and Cosmetics 
Manufactured From, Processed With, or Otherwise Containing, Material 
from Cattle.
    Description: This final rule will require records on FDA-regulated 
human food, including dietary supplements, and cosmetics that are 
manufactured from, processed with, or otherwise contain, material 
derived from cattle. This final rule implements recordkeeping for the 
provisions of FDA's interim final rule entitled ``Use of Materials 
Derived From Cattle in Human Food and Cosmetics.'' This final rule will 
require that manufacturers and processors of human food and cosmetics 
manufactured from, processed with, or that otherwise contain, material 
from cattle maintain records demonstrating that the food or cosmetic 
has not been manufactured from, processed with, or does not otherwise 
contain, prohibited cattle materials and make such records available to 
FDA for inspection and copying.
    These requirements are necessary because, once materials are 
separated from an animal, it may not be possible without records to 
know the following: (1) Whether cattle material that may be specified 
risk material (e.g., brain or spinal cord) came from an animal that was 
less than 30 months old, (2) whether the source animal for cattle 
material was inspected and passed, (3) whether the source animal for 
cattle material was nonambulatory disabled, and (4) whether tallow in a 
human food or cosmetic contains less than 0.15 percent insoluble 
impurities. Under the final rule, manufacturers and processors must 
retain records for 2 years at the manufacturing or processing 
establishment or another reasonably accessible location.

A. Information Collection Burden Estimate

    FDA estimates the burden for this information collection as 
follows:

[[Page 59667]]



                               Table 8.--Estimated Annual Recordkeeping Burden \1\
----------------------------------------------------------------------------------------------------------------
                                                    Annual       Total                     Total
        21 CFR Section             Number of      frequency      annual     Hours per     capital    Total hours
                                 recordkeepers    per record    records       record       costs
----------------------------------------------------------------------------------------------------------------
189.5(c) and 700.27(c)........              697            1          697        44.33     $480,930       30,898
189.5(c) and 700.27(c)........              697           52       36,244         0.25            0        9,061
189.5(c)(6) and 700.27(c)(6)..           54,825            1       54,825        0.033            0        1,809
189.5(c) and 700.27(c)........             69.7            1         69.7        44.33       48,093        3,090
                               ---------------------------------------------------------------------------------
    Total one time burden       ...............  ...........  ...........  ...........  ...........       30,898
     hours....................
    Total recurring burden      ...............  ...........  ...........  ...........  ...........       13,960
     hours....................
----------------------------------------------------------------------------------------------------------------
\1\ There are no operating and maintenance costs associated with this collection of information.

B. Hour Burden Estimate

    FDA has determined that there are 697 domestic facility 
relationships, consisting of the following facilities: An input 
supplier of cattle-derived materials that require records (the upstream 
facility) and a purchaser of cattle-derived materials requiring 
documentation--this may be a human food or cosmetic manufacturer or 
processor. Together, the upstream and downstream facilities are 
responsible for designing records, verifying records, and storing 
records that contain information on sources of cattle materials.
    In this hour burden estimate, as in the economic analysis, we treat 
these recordkeeping activities as shared activities between the 
upstream and downstream facilities. It is in the best interests of both 
facilities in the relationship to share the burden necessary to comply 
with this final rule; therefore we estimate the time burden of 
developing these records as a joint task between the two facilities.

C. One Time Burden

    The one-time burden of the final recordkeeping requirement consists 
of the facilities training their employees on how to keep the records 
necessary to comply with this rule and designing the records. The one-
time training burden incurred for each facility is assumed to be 
approximately one-third of an hour. This time includes both the 
training required for personnel to verify that appropriate records have 
been received or created, and also the training required by personnel 
to file and maintain those records. Therefore, the total one-time 
training burden is 697 x 0.33 hrs = 230 hours.
    We use the FDA Labeling Cost Model to estimate the one-time records 
design costs per facility of $1,785 (Ref. 5). This cost includes the 
costs of designing records for multiple products and consists of $1,095 
in labor costs (and $690 in capital costs which we deal with in the 
next section of this document). Dividing the $1,095 of labor costs by 
the hourly wage for workers of $25.10 (doubled to include overhead), we 
have a design-time burden per facility of about 44 hours; we multiplied 
the burden per facility by 697 facilities to get an estimated total 
training and design burden of 30,668 hours.
    Row 1 of table 8 of this document shows the total hour burden from 
training and records design to be 44.33 hours per facility x 697 
recordkeepers = 30,898 hours for the year.

D. Recurring Burden

    The recurring recordkeeping burden is the burden of sending and 
verifying documents regarding shipments of cattle material that is to 
be used in human food and cosmetics. We estimate that this recurring 
recordkeeping burden will be about 15 minutes per week, or 13 hours per 
year. FDA assumes that this recordkeeping burden will be shared between 
two entities (i.e., the ingredient supplier and the manufacturer of 
finished products). Therefore the total recurring burden will be 13 
hours x 697 = 9,061 hours, as shown in row 2 of table 8 of this 
document.
    There will also be a recurring recordkeeping burden for importers 
of human food and cosmetics that are manufactured from, processed with, 
or otherwise contain, cattle material. Importers of these products must 
affirm that the food or cosmetic is not manufactured from, processed 
with, or does not otherwise contain, prohibited cattle materials. 
Affirmation by importers is expected to take approximately 2 minutes 
per entry line. Row 3 of table 8 of this document shows that 54,825 
lines of food and cosmetics that likely contain cattle materials are 
imported annually. This total represents 10 percent of the total lines 
imported for fiscal year 2004 for products under FDA product codes that 
FDA will be looking to for importer affirmation. The annual reporting 
burden of affirming whether import entry lines contain cattle-derived 
materials is estimated to take 1,809 hours annually (54,825 lines x 2 
minutes per line).
    In addition, there will be an annual burden associated with new 
firms entering the industry. As in the analysis of the Bioterrorism Act 
recordkeeping rule, we assume that the average annual rate of turnover 
is 10 percent. We therefore estimate (row 4 of table 8 of this 
document) the annual one-time burden for new firms entering the 
industry to be 10 percent of the one-time burden of existing firms 
estimated.

E. Capital Cost and Operating and Maintenance Cost Burden

    We use the FDA Labeling Cost Model to estimate the one-time record 
design costs per facility of $1,875 per facility, based on the facility 
producing multiple products with ingredients that now require records 
(Ref. 5). Over $1,000 of the record design cost is due to labor, but 
$690 of the records design represents capital costs to each facility. 
The total capital costs for records design for all facilities is $690 x 
697 = $480,930. These one time costs are shown in row 1 of table 5 of 
this document. We estimate the annual capital costs for new firms 
entering the industry to be 10 percent of the one-time burden of 
existing firms, or $48,093. These annual costs are shown in row 4 of 
table 8.
    The information collection provisions of this final rule have been 
submitted to OMB for review. Prior to the effective date of this final 
rule, FDA will publish a notice in the Federal Register announcing 
OMB's decision to approve, modify, or disapprove the information 
collection provisions in this final rule. An agency may not conduct or 
sponsor, and a person is not required to respond to, a collection of 
information unless it displays a currently valid OMB control number.

VI. Federalism

    FDA has analyzed this final rule in accordance with the principles 
set forth in Executive Order 13132. FDA has determined that the final 
rule does not

[[Page 59668]]

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 concludes that the final 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. References

    The following references have been placed on public 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. 
(FDA has verified the Web site addresses, but FDA is not responsible 
for any subsequent changes to the Web sites after this document 
publishes in the Federal Register.)

    1. Department of Commerce, Bureau of Economic Analysis, National 
Economic Accounts, http://www.bea.gov/bea/dn.1.htm.
    2. Model for Estimating the Impacts of Regulatory Costs on the 
Survival of Small Businesses and its Application to Four FDA-
Regulated Industries, Final Report, Eastern Research Group, July 
2002.
    3. CTFA International Buyer's Guide, produced by the Cosmetic, 
Toiletry, and Fragrance Association (CTFA), http://www.ctfa-buyersguide.org.
    4. FDA Database of Dietary Supplement Products that Contain 
Animal Ingredients (DSPD-A), RTI International, September 2002.
    5. FDA Labeling Cost Model, Final Report, RTI International, 
January 2003.
    6. May 2004 Occupational Employment and Wage Estimates, National 
Cross-Industry estimates, U.S. Department of Labor, Bureau of Labor 
Statistics, accessed October 2, 2006, http://www.bls.gov/oes/oes_dl.htm.
    7. Harvard Center for Risk Analysis, Harvard School of Public 
Health, ``Evaluation of the Potential for Bovine Spongiform 
Encephalopathy in the United States,'' accessed online at http://www.hcra.harvard.edu/pdf/madcow.pdf, 2003.

List of Subjects

21 CFR Part 189

    Food additives, Food packaging, Reporting and recordkeeping 
requirements.

21 CFR Part 700

    Cosmetics, Packaging and containers, Reporting and recordkeeping 
requirements.

0
Therefore, under the Federal Food, Drug, and Cosmetic Act, and under 
authority delegated to the Commissioner of Food and Drugs, the Food and 
Drug Administration amends 21 CFR parts 189 and 700 as follows:

PART 189--SUBSTANCES PROHIBITED FROM USE IN HUMAN FOOD

0
1. The authority citation for 21 CFR part 189 is revised to read as 
follows:

    Authority: 21 U.S.C. 321, 342, 348, 371, 381.


0
2. Section 189.5 is amended by revising paragraph (c) to read as 
follows:


Sec.  189.5  Prohibited cattle materials.

* * * * *
    (c) Records. (1) Manufacturers and processors of a human food that 
is manufactured from, processed with, or otherwise contains, material 
from cattle must establish and maintain records sufficient to 
demonstrate that the food is not manufactured from, processed with, or 
does not otherwise contain, prohibited cattle materials.
    (2) Records must be retained for 2 years after the date they were 
created.
    (3) Records must be retained at the manufacturing or processing 
establishment or at a reasonably accessible location.
    (4) The maintenance of electronic records is acceptable. Electronic 
records are considered to be reasonably accessible if they are 
accessible from an onsite location.
    (5) Records required by this section and existing records relevant 
to compliance with this section must be available to FDA for inspection 
and copying.
    (6) When filing entry with U.S. Customs and Border Protection, the 
importer of record of a human food manufactured from, processed with, 
or otherwise containing, cattle material must affirm that the food was 
manufactured from, processed with, or otherwise contains, cattle 
material and must affirm that the food was manufactured in accordance 
with this section. If a human food is manufactured from, processed 
with, or otherwise contains, cattle material, then the importer of 
record must, if requested, provide within 5 days records sufficient to 
demonstrate that the food is not manufactured from, processed with, or 
does not otherwise contain, prohibited cattle material.
    (7) 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.
* * * * *

PART 700--GENERAL

0
3. The authority citation for 21 CFR part 700 continues to read as 
follows:

    Authority: 21 U.S.C. 321, 331, 352, 355, 361, 362, 371, 374.

0
4. Section 700.27 is amended by revising paragraph (c) to read as 
follows:


Sec.  700.27  Use of prohibited cattle materials in cosmetic products.

* * * * *
    (c) Records. (1) Manufacturers and processors of a cosmetic that is 
manufactured from, processed with, or otherwise contains, material from 
cattle must establish and maintain records sufficient to demonstrate 
that the cosmetic is not manufactured from, processed with, or does not 
otherwise contain, prohibited cattle materials.
    (2) Records must be retained for 2 years after the date they were 
created.
    (3) Records must be retained at the manufacturing or processing 
establishment or at a reasonably accessible location.
    (4) The maintenance of electronic records is acceptable. Electronic 
records are considered to be reasonably accessible if they are 
accessible from an onsite location.
    (5) Records required by this section and existing records relevant 
to compliance with this section must be available to FDA for inspection 
and copying.
    (6) When filing entry with U.S. Customs and Border Protection, the 
importer of record of a cosmetic manufactured from, processed with, or 
otherwise containing, cattle material must affirm that the cosmetic was 
manufactured from, processed with, or otherwise contains, cattle 
material and must affirm that the cosmetic was manufactured in 
accordance with this section. If a cosmetic is manufactured from, 
processed with, or otherwise contains, cattle material, then the 
importer of record must, if requested, provide within 5 days records 
sufficient to demonstrate that the cosmetic is not manufactured from, 
processed with, or does not otherwise contain, prohibited cattle 
material.
    (7) 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

[[Page 59669]]

provisions or regulations remain subject to part 11 of this chapter.
* * * * *

    Dated: October 4, 2006.
Jeffrey Shuren,
Assistant Commissioner for Policy.
 [FR Doc. E6-16830 Filed 10-10-06; 8:45 am]
BILLING CODE 4160-01-P