[Federal Register Volume 78, Number 149 (Friday, August 2, 2013)]
[Notices]
[Pages 46966-46969]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-18622]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2013-N-0007]


Food Safety Modernization Act Domestic and Foreign Facility 
Reinspection, Recall, and Importer Reinspection Fee Rates for Fiscal 
Year 2014

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

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SUMMARY: The Food and Drug Administration (FDA) is announcing the 
fiscal year (FY) 2014 fee rates for certain domestic and foreign 
facility reinspections, failures to comply with a recall order, and 
importer reinspections that are authorized by the Federal Food, Drug, 
and Cosmetic Act (the FD&C Act), as amended by the FDA Food Safety 
Modernization Act (FSMA). These fees are effective on October 1, 2013, 
and will remain in effect through September 30, 2014.

FOR FURTHER INFORMATION CONTACT: Hunter Herrman, Office of Resource 
Management, Office of Regulatory Affairs, Food and Drug Administration, 
12420 Parklawn Dr., rm. 2049, Rockville, MD 20857, 240-402-3102, email: 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    Section 107 of FSMA (Pub. L. 111-353) added section 743 to the FD&C 
Act (21 U.S.C. 379j-31) to provide FDA with the authority to assess and 
collect fees from, in part: (1) The responsible party for each domestic 
facility and the U.S. agent for each foreign facility subject to a 
reinspection, to cover reinspection-related costs; (2) the responsible 
party for a domestic facility and an importer who does not comply with 
a recall order, to cover food \1\ recall activities associated with 
such order; and (3) each importer subject to a reinspection to cover 
reinspection-related costs (sections 743(a)(1)(A), (B), and (D) of the 
FD&C Act). Section 743 of the FD&C Act directs FDA to establish fees 
for each of these activities based on an estimate of 100 percent of the 
costs of each activity for each year (section 743(b)(2)(A), (B), and 
(D)), and these fees must be made available solely to pay for the costs 
of each activity for which the fee was incurred (section 743(b)(3)). 
These fees are effective on October 1, 2013, and will remain in effect 
through September 30, 2014. Section 743(b)(2)(B)(iii) of the FD&C Act 
directs FDA to develop a proposed set of guidelines in consideration of 
the burden of fee amounts on small businesses. As a first step in 
developing these guidelines, FDA invited public comment on the 
potential impact of the fees authorized by section 743 of the FD&C Act 
on small businesses (76 FR 45818, August 1, 2011). The comment period 
for this request ended November 30, 2011. As stated in FDA's September 
2011 ``Guidance for Industry: Implementation of the Fee Provisions of 
Section 107 of the FDA Food Safety Modernization Act,'' (http://www.fda.gov/Food/GuidanceRegulation/GuidanceDocumentsRegulatoryInformation/FoodDefense/ucm274176.htm), 
because FDA recognizes that for small businesses the full cost recovery 
of FDA reinspection or recall oversight could impose severe economic 
hardship, FDA intends to consider reducing certain fees for those 
firms. FDA is currently developing a guidance document to outline the 
process through which firms may request such a reduction of fees. FDA 
does not intend to issue invoices for reinspection or recall order fees 
until this guidance document has been published.
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    \1\ The term ``food'' for purposes of this document has the same 
meaning as such term in section 201(f) of the FD&C Act (21 U.S.C. 
321(f)).
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    In addition, as stated in the September 2011 Guidance, FDA is in 
the process of considering various issues associated with the 
assessment and collection of importer reinspection fees. FDA is 
currently developing a guidance document that will provide information 
regarding fees that the Agency may assess and collect from importers to 
cover reinspection-related costs. The fee rates set forth in this 
notice will be used to determine any importer reinspection fees 
assessed in FY 2014.

II. Estimating the Average Cost of a Supported Direct FDA Work Hour for 
FY 2014

    FDA is required to estimate 100 percent of its costs for each 
activity in order to establish fee rates for FY 2014. In each year, the 
costs of salary (or personnel compensation) and benefits for FDA 
employees account for between 50 and 60 percent of the funds available 
to, and used by, FDA. Almost all of the remaining funds (or the 
operating funds) available to FDA are used to support FDA employees for 
paying rent, travel, utility, information technology, and other 
operating costs.

[[Page 46967]]

A. Estimating the Full Cost per Direct Work Hour in FY 2012

    In general, the starting point for estimating the full cost per 
direct work hour is to estimate the cost of a full-time-equivalent 
(FTE) or paid staff year for the relevant activity. This is most 
reasonably done by dividing the total funds allocated to the elements 
of FDA primarily responsible for carrying out the activities for which 
fees are being collected by the total FTEs allocated to those 
activities, using information from the most recent FY for which data 
are available. For the purposes of the reinspection and recall order 
fees authorized by section 743 of the FD&C Act (the fees that are the 
subject of this notice), primary responsibility for the activities for 
which fees will be collected rests with FDA's Office of Regulatory 
Affairs (ORA), which carries out inspections and other field-based 
activities on behalf of FDA's product centers, including the Center for 
Food Safety and Applied Nutrition (CFSAN) and the Center for Veterinary 
Medicine (CVM). Thus, as the starting point for estimating the full 
cost per direct work hour, FDA will use the total funds allocated to 
ORA for CFSAN and CVM related field activities. The most recent FY with 
available data is FY 2012. In that year, FDA obligated a total of 
$697,628,866 for ORA in carrying out the CFSAN and CVM related field 
activities work, excluding the cost of inspection travel. In that same 
year, the number of ORA staff primarily conducting the CFSAN and CVM 
related field activities was 2,944 FTEs or paid staff years. Dividing 
$697,628,866 by 2,944 FTEs, results in an average cost of $236,966 per 
paid staff year, excluding travel costs.
    Not all of the FTEs required to support the activities for which 
fees will be collected are conducting direct work such as inspecting or 
reinspecting facilities, examining imports, or monitoring recalls. Data 
collected over a number of years and used consistently in other FDA 
user fee programs (e.g., under the Prescription Drug User Fee Act 
(PDUFA) and the Medical Device User Fee and Modernization Act (MDUFA)) 
show that every seven FTEs who perform direct FDA work require three 
indirect and supporting FTEs. These indirect and supporting FTEs 
function in budget, facility, human resource, information technology, 
planning, security, administrative support, legislative liaison, legal 
counsel, program management, and other essential program areas. On 
average, two of these indirect and supporting FTEs are located in ORA 
or the FDA center where the direct work is being conducted, and one of 
them is located in the Office of the Commissioner. To get the fully 
supported cost of an FTE, FDA needs to multiply the average cost of an 
FTE by 1.43, to take into account the indirect and supporting 
functions. The 1.43 factor is derived by dividing the 10 fully 
supported FTEs by 7 direct FTEs. In FY 2012, the average cost of an FTE 
was $236,966. Multiplying this amount by 1.43 results in an average 
fully supported cost of $338,861 per FTE, excluding the cost of 
inspection travel.
    To calculate an hourly rate, FDA must divide the average fully 
supported cost of $338,861 per FTE by the average number of supported 
direct FDA work hours. See Table 1.

      Table 1--Supported Direct FDA Work Hours in a Paid Staff Year
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Total number of hours in a paid staff year.....................    2,080
Less:                                                            .......
  10 paid holidays.............................................       80
  20 days of annual leave......................................      160
  10 days of sick leave........................................       80
  10 days of training..........................................       80
  2 hours of meetings per week.................................       80
                                                                --------
  Net Supported Direct FDA Work Hours Available for Assignments    1,600
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    Dividing the average fully supported cost of an FTE in FY 2012 
($338,861) by the total number of supported direct work hours available 
for assignment (1,600) results in an average fully supported cost of 
$212 (rounded to the nearest dollar), excluding inspection travel 
costs, per supported direct work hour in FY 2012--the last FY for which 
data are available.

B. Adjusting FY 2012 Costs for Inflation To Estimate FY 2014 Costs

    To adjust the hourly rate for FY 2014, FDA must estimate the cost 
of inflation in each year for FY 2013 and FY 2014. FDA uses the method 
prescribed for estimating inflationary costs under the PDUFA provisions 
of the FD&C Act (section 736(c)(1) (21 U.S.C. 379h(c)(1)), the 
statutory method for inflation adjustment in the FD&C Act that we have 
used consistently. FDA previously determined the FY 2013 inflation rate 
to be 2.01 percent; this rate was published in the FY 2013 PDUFA user 
fee rates notice in the Federal Register of August 1, 2012 (77 FR 
45639). Utilizing the method set forth in section 736(c)(1) of the FD&C 
Act, FDA has calculated an inflation rate of 2.20 percent for FY 2014 
and FDA intends to use this inflation rate to make inflation 
adjustments for FY 2014 for several of its user fee programs; the 
derivation of this rate is published elsewhere in this issue of the 
Federal Register in the FY 2014 notice for the PDUFA user fee rates. 
The compounded inflation rate for FYs 2013 and 2014, therefore, is 4.25 
percent (one plus 2.01 percent times one plus 2.20 percent).
    Increasing the FY 2012 average fully supported cost per supported 
direct FDA work hour of $212 (excluding inspection travel costs) by 
4.25 percent yields an inflationary adjusted estimated cost of $221 per 
a supported direct work hour in FY 2014, excluding inspection travel 
costs. This is the base unit fee that FDA will use in determining the 
hourly fee rate for reinspection and recall order fees for FY 2014, 
prior to including domestic or foreign travel costs as applicable for 
the activity.
    In FY 2012, ORA spent a total of $5,399,442 for domestic regulatory 
inspection travel costs and General Services Administration Vehicle 
costs related to FDA's CFSAN and CVM field activities programs. The 
total ORA domestic travel costs spent is then divided by the total of 
12,302 CFSAN and CVM domestic inspections, which averages a total of 
$439 per inspection. These inspections average 29.19 hours per 
inspection. Dividing $439 per inspection by 29.19 hours per inspection 
results in a total and an additional cost of $15 per hour spent for 
domestic inspection travel costs in FY 2012. To adjust $15 for 
inflationary increases in FY 2013 and FY 2014, FDA must multiply it by 
the same inflation factor mentioned previously in this document 
(1.0425) which results in an estimated cost of $16 dollars per paid 
hour in addition to $221 for a total of $237 per paid hour ($221 plus 
$16) for each direct hour of work requiring domestic inspection travel. 
These are the rates that FDA will use in charging fees in FY 2014 when 
domestic travel is required.
    In FY 2012, ORA spent a total of $2,831,056 on a total of 301 
foreign inspection trips related to FDA's CFSAN and CVM field 
activities programs, which averaged a total of $9,406 per foreign 
inspection trip. These trips averaged 3 weeks (or 120 paid hours) per 
trip. Dividing $9,406 per trip by 120 hours per trip results in a total 
and an additional cost of $78 per paid hour spent for foreign 
inspection travel costs in FY 2012. To adjust $78 for inflationary 
increases in FY 2013 and FY 2014, FDA must multiply it by the same 
inflation factor mentioned previously in this document (1.0425) which 
results in an estimated cost of

[[Page 46968]]

$81 dollars per paid hour in addition to $221 for a total of $302 per 
paid hour ($221 plus $81) for each direct hour of work requiring 
foreign inspection travel. These are the rates that FDA will use in 
charging fees in FY 2014 when foreign travel is required.

                 Table 2--FSMA Fee Schedule for FY 2014
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                                                               Fee rates
                        Fee category                            for FY
                                                                 2014
------------------------------------------------------------------------
Hourly rate if domestic travel is required..................        $237
Hourly rate if foreign travel is required...................         302
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III. Fees for Reinspections of Domestic or Foreign Facilities Under 
Section 743(a)(1)(A)

A. What will cause this fee to be assessed?

    The fee will be assessed for a reinspection conducted under section 
704 of the FD&C Act (21 U.S.C. 374) to determine whether corrective 
actions have been implemented and are effective and compliance has been 
achieved to the Secretary of Health and Human Services' (the Secretary) 
(and, by delegation, FDA's) satisfaction at a facility that 
manufactures, processes, packs or holds food for consumption 
necessitated as a result of a previous inspection (also conducted under 
section 704) of this facility which had a final classification of 
Official Action Indicated (OAI) conducted by or on behalf of FDA, when 
FDA determined the non-compliance was materially related to food safety 
requirements of the FD&C Act. FDA considers such non-compliance to 
include non-compliance with a statutory or regulatory requirement under 
section 402 of the FD&C Act (21 U.S.C. 342) and section 403(w) of the 
FD&C Act (21 U.S.C. 343(w)). However, FDA does not consider non-
compliance that is materially related to a food safety requirement to 
include circumstances where the non-compliance is of a technical nature 
and not food safety related (e.g., failure to comply with a food 
standard or incorrect font size on a food label). Determining when non-
compliance, other than under sections 402 and 403(w) of the FD&C Act, 
is materially related to a food safety requirement of the FD&C Act may 
depend on the facts of a particular situation. FDA intends to issue 
guidance to provide additional information about the circumstances 
under which FDA would consider non-compliance to be materially related 
to a food safety requirement of the FD&C Act.
    Under section 743(a)(1)(A) of the FD&C Act, FDA is directed to 
assess and collect fees from ``the responsible party for each domestic 
facility (as defined in section 415(b) (21 U.S.C. 350d)) and the United 
States agent for each foreign facility subject to a reinspection'' to 
cover reinspection-related costs.
    Section 743(a)(2)(A)(i) of the FD&C Act defines the term 
``reinspection'' with respect to domestic facilities as ``1 or more 
inspections conducted under section 704 subsequent to an inspection 
conducted under such provision which identified non-compliance 
materially related to a food safety requirement of th[e] Act, 
specifically to determine whether compliance has been achieved to the 
Secretary's satisfaction.''
    The FD&C Act does not contain a definition of ``reinspection'' 
specific to foreign facilities. In order to give meaning to the 
language in section 743(a)(1)(A) of the FD&C Act to collect fees from 
the U.S. agent of a foreign facility subject to a reinspection, the 
Agency is using the following definition of ``reinspection'' for 
purposes of assessing and collecting fees under section 743(a)(1)(A), 
with respect to a foreign facility: ``1 or more inspections conducted 
by officers or employees duly designated by the Secretary subsequent to 
such an inspection which identified non-compliance materially related 
to a food safety requirement of the FD&C Act, specifically to determine 
whether compliance has been achieved to the Secretary's (and, by 
delegation, FDA's) satisfaction.''
    This definition allows FDA to fulfill the mandate to assess and 
collect fees from the U.S. agent of a foreign facility in the event 
that an inspection reveals non-compliance materially related to a food 
safety requirement of the FD&C Act, causing one or more subsequent 
inspections to determine whether compliance has been achieved to the 
Secretary's (and, by delegation, FDA's) satisfaction. By requiring the 
initial inspection to be conducted by officers or employees duly 
designated by the Secretary, the definition ensures that a foreign 
facility would be subject to fees only in the event that FDA, or an 
entity designated to act on its behalf, has made the requisite 
identification at an initial inspection of non-compliance materially 
related to a food safety requirement of the FD&C Act. The definition of 
``reinspection-related costs'' in section 743(a)(2)(B) of the FD&C Act 
relates to both a domestic facility reinspection and a foreign facility 
reinspection, as described in section 743(a)(1)(A).

B. Who will be responsible for paying this fee?

    The FD&C Act states that this fee is to be paid by the responsible 
party for each domestic facility (as defined in section 415(b) of the 
FD&C Act) and by the U.S. agent for each foreign facility (section 
743(a)(1)(A) of the FD&C Act). This is the party to whom FDA will send 
the invoice for any fees that are assessed under this section.

C. How much will this fee be?

    The fee is based on the number of direct hours spent on such 
reinspections, including time spent conducting the physical 
surveillance and/or compliance reinspection at the facility, or 
whatever components of such an inspection are deemed necessary, making 
preparations and arrangements for the reinspection, traveling to and 
from the facility, preparing any reports, analyzing any samples or 
examining any labels if required, and performing other activities as 
part of the OAI reinspection until the facility is again determined to 
be in compliance. The direct hours spent on each such reinspection will 
be billed at the appropriate hourly rate shown in table 2 of this 
document.

IV. Fees for Non-Compliance With a Recall Order Under Section 
743(a)(1)(B)

A. What will cause this fee to be assessed?

    The fee will be assessed for not complying with a recall order 
under section 423(d) (21 U.S.C. 350l(d)) or section 412(f) of the FD&C 
Act (21 U.S.C. 350a(f)) to cover food recall activities associated with 
such order performed by the Secretary (and by delegation, FDA) (section 
743(a)(1)(B) of the FD&C Act). Non-compliance may include the 
following: (1) Not initiating a recall as ordered by FDA; (2) not 
conducting the recall in the manner specified by FDA in the recall 
order; or (3) not providing FDA with requested information regarding 
the recall, as ordered by FDA.

B. Who will be responsible for paying this fee?

    Section 743(a)(1)(B) of the FD&C Act states that the fee is to be 
paid by the responsible party for a domestic facility (as defined in 
section 415(b) of the FD&C Act) and an importer who does not comply 
with a recall order under section 423 or under section 412(f) of the 
FD&C Act. In other words, the party paying the fee would be the party 
that received the recall order.

[[Page 46969]]

C. How much will this fee be?

    The fee is based on the number of direct hours spent on taking 
action in response to the firm's failure to comply with a recall order. 
Types of activities could include conducting recall audit checks, 
reviewing periodic status reports, analyzing the status reports and the 
results of the audit checks, conducting inspections, traveling to and 
from locations, and monitoring product disposition. The direct hours 
spent on each such recall will be billed at the appropriate hourly rate 
shown in table 2 of this document.

V. How must the fees be paid?

    An invoice will be sent to the responsible party for paying the fee 
after FDA completes the work on which the invoice is based. Payment 
must be made within 90 days of the invoice date in U.S. currency by 
check, bank draft, or U.S. postal money order payable to the order of 
the Food and Drug Administration. Detailed payment information will be 
included with the invoice when it is issued.

VI. What are the consequences of not paying these fees?

    Under section 743(e)(2) of the FD&C Act, any fee that is not paid 
within 30 days after it is due shall be treated as a claim of the U.S. 
Government subject to provisions of subchapter II of chapter 37 of 
title 31, United States Code.

    Dated: July 29, 2013.
Leslie Kux,
Assistant Commissioner for Policy.
[FR Doc. 2013-18622 Filed 8-1-13; 8:45 am]
BILLING CODE 4160-01-P