January 2005

[EXECUTIVE SUMMARY]{.underline}

SUBJECT: FDA "Prior Notice" Requirements

The Food and Drug Administration ("FDA") Interim Final Rule requiring
"Prior Notice" on the importation of food into the United States should
not apply to the movement of food between Montreal, Canada and Atlantic,
Canada via Northern Maine when a dedicated train carrying the goods
operates under seal, in bond and pursuant to a U.S. Customs
"transportation and exportation" entry. The application of the rule to
this unique operation was not contemplated by Congress and will result
in financial harm to a Maine railroad.

The "Public Health Security and Bioterrorism Preparedness and Response
Act of 2002" (P.L. 107-188) is designed to prevent entry of tainted food
into the country, and therefore requires shippers to provide advance
notice about the goods they are entering. The FDA and Customs assess the
information provided, and determine if further inspection of a cargo is
required. As discussed below and in more detail in the attached
Memorandum, the dedicated "Sunbury Train" has ample controls in place to
protect its cargo and poses no threat to the U.S. food supply.

I. [Sunbury Train Operations]{.underline}

The Montreal, Maine & Atlantic Railway ("MMA") and the Eastern Maine
Railroad, both of Maine, operate a dedicated train -- the "Sunbury
Train" -- between the outskirts of Montreal and New Brunswick, Canada
via Northern Maine. U.S. Customs has designated Sunbury Transport, the
trucking company assembling the train, MMA Railway and the Eastern Maine
Railroad as bonded carriers. The "Sunbury Train" is the only railroad
operating between two points in Canada through the United States.
Typical operations of the railroad are as follows:

At Montreal, Sunbury Transport loads goods from its customers'
warehouses (approximately 50% of the cargo is food) onto truck trailers.
The trailers are sealed and moved to the rail yard where they are
shipped directly to New Brunswick. The train does not stop in the United
States to pick up or drop off any cars. It travels 201 miles within the
U.S. and only takes approximately twelve hours to transit Northern
Maine. The train enters and departs the U.S. under a Customs
"transportation and exportation" entry.

The Sunbury Train competes directly with the Canadian National Railway
which operates on an all-Canadian route. Sunbury's customers have
informed the company and the railroad that if they are compelled to
incur the cost and administrative burden imposed by the FDA "Prior
Notice" rule, they will move their business to the Canadian National
Railway. In fact, since the beginning of November 2004, business is down
on the train by 60 percent. There is great concern because the
railroad's financial condition is very fragile.

II\. [Customs Protection Against Terrorism]{.underline}

The statute applies to goods imported or offered for import into the
United States. This phrase should not be interpreted to apply to goods
traveling under seal, in bond, pursuant to a Customs "transportation and
exportation" entry. For more than 75 years, Customs has been
administering this type of entry which requires that goods be laden on a
conveyance that is sealed and remain under Customs supervision as it
moves through the U.S. Further, for many years, Customs has been charged
with enforcing laws of other agencies, and since adoption of the
Homeland Security Act of 2002, Customs has been responsible for
preventing the entry of instruments of terror and securing U.S. borders.
Accordingly, when Congress adopted the Bioterrorism Act, Members were
clearly aware of Customs' statutory responsibility and programs,
including the "transportation and exportation" entry, used to prevent
tainted or dangerous articles -- including food -- from entering the
country. The "Prior Notice" obligations were not designed to supersede
that existing mechanism.

Moreover, the FDA has already granted an exemption to goods that enter a
single port and then are exported from that location. That entry, an
"immediate exportation" entry, is essentially the same as a
"transportation and exportation" entry. The underlying principle
supporting both is that the goods remain in Customs' custody. They
cannot be released or diverted without Customs' authorization. There is
no difference if the products remain in a bonded warehouse under
Customs' supervision or if they are moved in a dedicated train under
Customs' supervision.

III\. [Request]{.underline}

To ensure the continued viable operation of the MMA Railway and the
continued security of the U.S. food supply, the FDA should take the
following actions:

> 1\. Exempt shipments of food on the "Sunbury Train" transiting the
> U.S. between two points in Canada under seal, in bond, and pursuant to
> a Customs "transportation and exportation" entry from the "Prior
> Notice" obligations; or
>
> 2\. In the alternative, accept the carrier's Automated Manifest as a
> proper substitute for the FDA "Prior Notice when goods are moving
> pursuant to a "transportation and exportation" entry;" and in either
> case,
>
> 3\. Reach an agreement with Customs to stay enforcement of the "Prior
> Notice" obligations for food transiting the U.S. on the "Sunbury
> Train" under seal, in bond, pursuant to a Customs "transportation and
> exportation" entry until such time as the Final FDA rule is issued.

Such an exemption would be very limited because it addresses very unique
circumstances and poses no threat to the U.S. food supply.

January 2005

[MEMORANDUM]{.underline}

SUBJECT: FDA "Prior Notice" Interim Rule on Food Imports

The "Public Health Security and Bioterrorism Preparedness and Response
Act of 2002" (P.L. 107-188) (the "Bioterrorism Act") requires importers
to provide the Food and Drug Administration ("FDA") with information
about food that is to be imported or offered for import into the United
States. The information is due in advance of the imported food's arrival
into the country so that Customs and Border Protection ("CBP" or
"Customs"), acting on behalf of the FDA, can determine whether
inspection of particular entries is necessary. On October 10, 2003, the
FDA issued the "Prior Notice Interim Final Rule" that implements the
statutory mandate.[^1]

However, it appears that the rule has been more broadly interpreted than
was contemplated by Congress, and, as a result, has not recognized the
security of commodities when transported under seal and in bond under
Customs supervision pursuant to a "transportation and exportation"
entry. In particular, when sealed in-bond cargoes are transported via
rail over a very limited distance and for a brief time in the
United States, the risk of diversion is negligible. Accordingly, the
FDA, in the Final Rule, should exclude carriage of food moving between
two points in Canada, via the United States, under seal and pursuant to
Customs bond from the "Prior Notice" obligations. Such an exemption
would be very limited because the circumstances associated with the
dedicated railroad described below are unique, and the exemption will
not diminish protection of the U.S. food supply.

I. [Relevant Facts]{.underline}

As indicated in prior comments submitted to the FDA,[^2] the Montreal
Maine & Atlantic Railway ("MMA"), based in Bangor, Maine, operates
between St. Jean, Quebec (outside of Montreal) and Brownville Junction,
Maine, where it connects to the Eastern Maine Railroad operating between
Brownville Junction, Maine and New Brunswick, Canada just across the
Canadian Border. The line is a vital commercial asset in Northern Maine.
It competes directly with the Canadian National Railway which runs along
an all-Canadian route and does not enter the United States.

In 2003, MMA commenced a "rail intermodal service" in which truck
trailers are placed on flatbed railcars and moved directly between
Quebec and New Brunswick, via Northern Maine. The railroad provides the
service under contract with Sunbury Transport Limited, a trucking firm.
The "Sunbury Train" is dedicated solely to moving the goods of Sunbury's
customers and does not stop in the United States to pick up or drop off
other railcars. To the best of the railroad's knowledge, the "Sunbury
Train" is unique; no other freight line moves between points in Canada
through the United States.

An example of the train's operation is as follows:

When the train goes east, the trucking company's customers load food and
other items onto the trailers which are then sealed. The trucking
company moves the trailers from the customer's facilities to the rail
yard outside of Montreal and facilitates the placement of the trailers
onto the flatbed railcars and assembles the "Sunbury Train." The Sunbury
dedicated train transits Northern Maine and runs directly to
New Brunswick. Indeed, when the train moves through Northern Maine,
there is no equipment that can be used to load or unload trailers from
the train. The trip through Maine is typically no more than twelve
hours, crossing 201 miles of U.S. territory.

Sunbury and MMA have been told by companies shipping on the line that
the cost of compliance with the FDA "Prior Notice Rule" is substantial,
and they are examining alternative ways of moving their products.
Indeed, they can move them directly on the [all-Canada
route]{.underline} offered by the competing Canadian National Railway.
Since implementation of the Interim Final Rule, trailer loadings on the
Sunbury Train have declined by over 60%. The dedicated train is
operating at a substantial loss due to the lower volumes. There is great
concern as the Railway's financial condition is very fragile.

II\. [Customs "Transportation and Exportation" Entry]{.underline}

Sunbury, MMA Railway and Eastern Maine Railway are bonded by U.S.
Customs and follow detailed procedures mandated by Customs in loading,
assembling and sealing the railcars. As this dedicated train moves
through Northern Maine, it is within the custody of U.S. Customs. MMA
Railway files a "transportation and exportation" entry with U.S. Customs
-- indicating that the sealed train will not offload any of its
commodities in the United States without Customs' approval. Moreover,
the seals affixed on the trailers by Sunbury prevent tampering by third
parties.[^3]

III\. [Scope of The Rule]{.underline}

The Bioterrorism Act states that the new obligations will apply to food
"imported or offered for import into the United States."[^4] However,
Congress did not define or provide any greater specificity about the
phrase "imported or offered for import into the United States." Section
1.277(a) of the FDA Interim Rule interprets the "Prior Notice"
obligation broadly and applies it to:

> all food for humans and other animals that is imported or offered for
> import into the United States for use, storage or distribution in the
> United States, including food for gifts and trade and quality
> assurance/quality control samples, [food for transshipment through the
> United States for another country]{.underline}, food for future
> export, and food for use in a U.S. Foreign Trade Zone.

IV\. [Low Risk Imports]{.underline}

Some members of the regulated community recommended that "Prior Notice"
should be waived for those situations that pose low risk of diversion or
contamination by third parties. The FDA preamble identifies those types
of situations: (1) exports by U.S.-owned foreign companies,
(2) transfers between commonly owned facilities (intra-company
transfers), (3) cargoes subject to high quality control standards and/or
produced in highly regulated businesses, (4) articles shipped under seal
or in bond, (5) products entered as high-volume, repetitive shipments,
(6) commodities processed through CBP's Border Release Advanced
Selectivity Screening ("BRASS"), (7) commodities associated with a
program of assessment of low risk, such as the Customs-Trade Partnership
Against Terrorism ("C-TPAT"), or Free and Secure Trade Program ("FAST").
FDA disagreed with the comments. FDA explained that the statute did not
authorize an exemption for articles of food that are low risk or covered
by programs of other agencies.

FDA is correct that no special exemption is provided in the statute.
However, a distinction should be made between the low-risk situations
identified by commenters and shipments traveling "under seal and in
Customs bond." All other programs identified are based on a
determination that the importer is a responsible entity and takes care
to ensure the security of its imports. However, none of these programs
provides the same degree of protection as goods moving under Customs
supervision under seal and in bond.

V. [Gaming The System]{.underline}

In the preamble,[^5] FDA notes that Congress did not explicitly limit
the scope of the statute to articles of food that are intended for
consumption within the United States. Therefore, the Agency finds that
excluding food brought into the United States for transshipment or
further processing from the regulation would run counter to the purpose
of the Bioterrorism Act. FDA discusses how importers could avoid the
"Prior Notice" obligations by initially making "a transportation and
exportation" entry and subsequently, as is permitted by Customs'
regulations, changing the shipment to a consumption or other entry.

It is certainly possible that food shipped under seal and in bond could
be diverted at some point, but it is [highly]{.underline}
[unlikely]{.underline}. However, to prevent the "loophole" that could
occur if an importer changed its type of entry and avoided the "Prior
Notice" obligations discussed in the preamble, FDA could require, in the
Final Rule, that such importer becomes subject to the "Prior Notice"
requirements within a specific period of time before such a change could
be made.

VI\. [Customs Enforcement of U.S. Laws]{.underline}

U.S. Bureau of Customs and Border Protection is charged with
administering and enforcing U.S. laws at the borders. Accordingly,
Customs routinely enforces laws associated with imports and exports.
Under one of these laws, the Tariff Act of 1930, as amended, Customs is
required to implement a mechanism for the transportation through and
exportation from the United States of merchandise "in bond." When
cargoes are moved in this fashion, they move under seal and Customs
supervision.

In addition, the statute and the regulations provide for civil, as well
as criminal penalties, for unauthorized unlading of sealed conveyances
and/or diversion of products transported in bond. Customs has almost
[seventy-five years]{.underline} of experience in administering and
enforcing transportation and exportation bonds.

Moreover, since the adoption of the Homeland Security Act of 2002,
Customs has also been officially responsible for preventing the entry of
instruments of terror into the United States and for securing the U.S.
borders. This responsibility is not new to Customs; U.S. statutes have
long mandated that Customs enforce the laws of other agencies - such as
the Food and Drug Administration -- to prevent potentially harmful goods
from entering the United States. In adopting the Bioterrorism Act,
Congress was clearly cognizant of Customs' statutory responsibility and
that Congress had confidence in Customs' ability to prevent the entry
for U.S. consumption of tainted foods transiting the U.S. pursuant to a
Customs "transportation and exportation" entry.

VII\. [Import/Export Exemption]{.underline}

In the Interim Rule (Section 1.277(b)(3)), the FDA provided a meaningful
exemption that should serve as a precedent in the instant case. FDA
permits articles that are imported and then exported directly from the
port of arrival to be excluded from the "Prior Notice" requirements.
Those articles are entered under an "Immediate Export" entry. Under this
entry, goods may not leave the port of arrival unless exported.

The underlying principle supporting this exemption is that the articles
entered for "Immediate Export" remain under Customs' custody in a bonded
warehouse. They cannot be released without Customs' consent. There is no
difference, and certainly no greater risk of diversion, between such
custody at a single port and the transportation between two points in
Canada, through a portion of the United States, when that transshipment
is under seal, in bond, and the conveyance does not pick up or drop off
railcars in the United States. Again, Customs supervises this cargo, and
it cannot be diverted. Therefore, the single-port entry/import exemption
should be extended to cover "transportation and exportation" entries
when such entries cover goods transiting through a limited area of the
U.S. for a relatively brief time.

VIII\. [Alternative Method of Compliance]{.underline}

As FDA is aware, Customs also imposes a prior notice obligation on
importers of all commodities. It requires a carrier to submit its
manifest in advance of the entry. This program, known as the "Automated
Manifest System" (AMS) serves the same purpose as the FDA "Prior Notice"
obligation for food.

Congressman Billy Tauzin (R-LA), author of the Bioterrorism legislation,
Chairman of the House Committee on Commerce (the Committee with
jurisdiction over such imports) and Chairman of the Conference Committee
on the Bioterrorism Act, addressed the Prior Notice obligations on the
floor of the House of Representatives. He

stated, "in developing such a regulation, the Secretary of Health and
Human Services should coordinate and consult with the Secretary of the
Treasury regarding the notifications already required by the U.S.
Customs Service, with the goal of eliminating, reducing or consolidating
duplicative or unnecessary notice requirements and minimizing potential
trade impacts of the prior notice requirements of this section."[^6]

Accordingly, in this instance, FDA should, as an alternative, accept the
railroad's AMS advanced manifest and deem it to be in full compliance
with the "Prior Notice" obligations.

IX\. [Enforcement Discretion -- Coordination With Customs]{.underline}

To facilitate implementation of the "Prior Notice" program, FDA and
Customs entered into an agreement whereby, relying on enforcement
discretion, the agencies spent time educating the regulated community
about the rule and deferred any enforcement actions due to
non-compliance. Effective November 1, 2004, the agencies began enforcing
the provisions.

To prevent adverse consequences to the dedicated train and the railroad,
FDA and Customs should agree to exercise discretion and forego future
enforcement of the "Prior Notice" obligations as they apply currently to
food shipments coming into the country on the "Sunbury Train" under a
Customs "transportation and exportation" entry ([i.e.]{.underline},
entering the country under seal and in bond) until the Final Rule is
promulgated. Such an approach would (1) allow the railroad to remain
financially viable while FDA is considering the matter, and (2) pose a
minimal risk of diversion because the commodities are transiting the
U.S. between two points in Canada under seal and in bond.

X. [Requests]{.underline}

Based on the foregoing, the following actions are requested:

> 1\. FDA exempt shipments of food transiting the U.S. between points in
> Canada under seal and in bond from the "Prior Notice" obligations; or
>
> 2\. In the alternative, FDA accept the carrier's Automated Manifest as
> a proper substitute for the FDA "Prior Notice" when goods are moving
> pursuant to a Customs "transportation and exportation" entry;" and
>
> 3\. FDA and Customs agree to stay enforcement of the FDA "Prior
> Notice" obligations for food transiting the U.S. between points in
> Canada under seal and in bond on the "Sunbury Train" until such time
> as the Final FDA rule is issued.

[^1]: [See]{.underline} 68 [Fed]{.underline}. [Reg]{.underline}. 58894
    (October 10, 2003).

[^2]: "Comments on Interim Final Rule Regarding Prior Notice of Imported
    Food Under the Public Health Security and Bioterrorism Preparedness
    and Response Act of 2002" (May 12, 2004) submitted by Sunbury
    Transport Limited, New Brunswick Southern Railway Company Limited,
    Eastern Maine Railway Company and Montreal Maine & Atlantic Railway
    Limited in Docket No. 2002N-0278; and "Supplemental Comments on
    Interim Final Rule Regarding Prior Notice of Imported Food Under the
    Public Health Security and Bioterrorism Preparedness and Response
    Act of 2002" (July 13, 2004) submitted by Sunbury Transport Limited,
    New Brunswick Southern Railway Company Limited, Eastern Maine
    Railway Company and Montreal Maine & Atlantic Railway Limited in
    Docket No. 2002N-0278.

[^3]: Customs imposes rigorous requirements with respect to the seals
    that are used to secure movements of goods under a transportation
    and exportation bond. Only authorized manufacturers are permitted to
    produce and sell such seals. The seals must undergo tests for the
    following criteria before they may be offered for sale to bonded
    carriers: (1) strength and durability; (2) ease of affixation;
    (3) ease of identification ([e.g.]{.underline}, logotype, other
    unique marks); (4) resistance to removal or undoing, breaking or
    tampering without leaving traces; (5) no capacity for repeat use;
    and (6) difficulty of copying or counterfeiting.

    In addition, certain Customs standards must be met with respect to
    the shape and size of the seal, the integrity of its fasteners, the
    material to be used, the color code for different types of movements
    and the identification to be printed on the seal. Customs also
    strictly regulates the sale and distribution of the seals, requiring
    the manufacturers to notify the Port Director regarding the quantity
    and kind sold, serial numbers, port, name and address of the
    purchaser and date that the seals were shipped.

[^4]: Section 307(a), P.L. 107-188.

[^5]: [See]{.underline} 68 [Fed]{.underline}. [Reg]{.underline}. 58894,
    58991 (October 10, 2003).

[^6]: 148 Congressional Record H 2845 (daily ed. May 22, 2002)
    (Statement of Rep. Tauzin).