## US BIOTERRORISM ACT AND ASSOCIATED PROPOSED REGULATIONS

# 

# Preamble

The Scotch Whisky Association (SWA) is the industry\'s officially
recognised representative body. Its 57 member companies, all of whom are
distillers, blenders, owners of proprietary brands, brokers and
exporters of Scotch Whisky, together comprise over 95% of Scotland's
distilling and blending capacity.

Each year the industry exports Scotch Whisky valued in excess of US\$
3.5 billion to over 200 world markets. In 2002; goods to the value of
some US\$ 476 million were exported to the United States, making it the
industry's single most valuable export market.

# Background to the legislation

The SWA understands that the FDA objective in formulating a strategy to
enhance the security of the US food supply is to protect US citizens
from the threat of bioterrorism and other such emergencies. It is not
opposed in principle to the imposition of new legislative requirements
governing the shipment of food products to the US, whether for import
into the US domestic market, for onward shipment outwith the US or for
re-export from the US, [provided]{.underline} that the specific
requirements are appropriate and proportionate to securing the desired
objective. In particular, it believes it is essential that the measures
are the least trade restrictive possible.

# The Bioterrorism Act (Act)

It should be noted at the outset that Scotch Whisky, together with all
other spirits and alcoholic beverages, remains subject to overall
regulation under the Alcohol and Tobacco Tax and Trade Bureau (TTB) in
accordance with Title 27 of the Code of Federal Regulations (CFR), while
Scotch Whisky and all other imported alcoholic beverage products are
also subject to the regulations of the US Customs Service (see below).
Additionally, each US State has its own Alcoholic Beverage Control
authority.

Despite the alcoholic beverage sector being thus highly regulated
already, the FDA Act sets out new requirements in the following four
areas:

(1) Detention

(2) Registration

(3) Record Keeping

(4) Prior Notice

To date only the proposed regulations for implementation of (2)
[Registration]{.underline} and (4) [Prior Notice]{.underline} have been
published. Accordingly, as invited, the SWA submits its comments on
these specific Dockets as separate Annexes attached herewith (see
**Annexes A** and **B** respectively). Closely related comments on the
relevance and application of the overall legislation to Scotch Whisky
(and all other alcoholic beverages) follow immediately.

# Overall Comments

> 1\. The SWA is concerned that the scope of the legislation extends
> beyond the boundaries of the USA, thereby requiring the
> extra-territorial application of US domestic legislation outwith the
> country. It believes this sets a troublesome precedent for the
> regulation of international trade.

2\. There appears to be a real risk of a proliferation of separate but
connected initiatives within the US designed to meet objectives similar
to that of the Bioterrorism Act, all of which impinge on each other. For
example, the processing of shipments in regard to the mandatory
requirements of the Container Security Initiative (CSI), with its
accompanying 24-hour Rule, varies in 'depth' and speed if the voluntary
provisions of the Customs-Trade Partnership Against Terrorism (C-TPAT)
are met as well.

> The SWA has no difficulty with the thorough efforts of US agencies to
> establish the desired degree of security in international and domestic
> trading channels. However, it has considerable difficulty with the
> uncoordinated and inconsistent manner in which such measures are being
> introduced, to the extent that it has the potential to impact in a
> confusing and adverse manner on both public and private sectors in
> countries outside the US. For example, it is understood that the US
> Customs Service has already engaged the UK (and certain other EU
> Member States) individually in the CSI while the EU Commission is
> concerned that US Customs has not approached the EU as a Customs
> region, a matter which, reportedly, is to be addressed; it is unclear
> what will happen in the intervening period.
>
> At the same time, on the European regional front, it is believed that
> the EU is working on its own security initiatives and that, in the
> international arena, bodies such as the International Maritime
> Organisation (IMO) and World Customs Organisation (WCO) also have
> potential action in hand. The SWA is unsighted of the details of all
> the various initiatives, but is concerned to ensure that the FDA
> Bioterrorism legislation does not lead to the creation of confusing,
> conflicting and/or duplicative requirements.

3\. The Scotch Whisky industry also notes that the Act specifically
excludes those foodstuffs under the jurisdiction of the US Department of
Agriculture (USDA), i.e. meats and poultry products as well as eggs. In
contrast, spirits, wines and other alcoholic beverages which fall within
the jurisdiction of another US agency, viz TTB under the US Department
of Treasury, have to comply in the same way as all other kinds of food
products. This inconsistency does not appear to be founded on any
objective criteria such as risk analysis. Indeed, the question could be
asked why the exception has been granted to USDA products and not to
alcoholic beverages given that the latter are already TTB-regulated
under the US Treasury.

4\. The traceability and security of Scotch Whisky and other EU spirits
(and wine) products are already provided for under a combination of EU
and US legislation and standard industry practice. For example, EU
legislation requires the inclusion of lot codes on their labels for the
purpose of traceability; containers are security sealed; US regulations
require tamper-proof closures on spirits (and wine) products and a
health warning (albeit against abuse of the product, not against
contamination) on the innermost container of all alcoholic beverages.

5\. The FDA Registration and Prior notice requirements under the Act
will entail the storage in one place of a huge amount of information on
the US food supply. The Scotch Whisky industry is concerned that
adequate measures are taken to protect this information.

> 6\. While acknowledging the validity of the policy objective of the
> Act, the SWA is obliged, on behalf of those of its respective members
> wishing to export to the US, to conclude that the detailed measures
> adopted by the FDA fail to meet the WTO requirement of being no more
> trade restrictive than necessary to meet the stated objective.

## 7. It is understood that the FDA intends to publish in the Federal Register proposed regulations for mandatory records to be created and maintained by all involved in the production and supply of food for human consumption on a 'one up', 'one down' basis. The Scotch Whisky industry will submit comments on the relevant Docket, once published, but wishes to take this opportunity to comment generally in advance of its publication.

> Under the TTB's existing regulations as set out in 27 CFR, the
> alcoholic beverage industry is required, to maintain records of
> production and importation. Given that this system, which establishes
> the immediate previous source and immediate subsequent recipient, is
> already in place and may even exceed the FDA's future requirements,
> little purpose would be served by introducing duplicative new
> regulations in this area. Again, the Scotch Whisky industry believes
> that any US agencies which impose similar requirements with the same
> motive, as in this case, should coordinate their responsibilites so
> that neither the duplication of government resources, manpower and
> regulations nor overlapping, conflicting or duplicative requirements
> for businesses becomes an issue.

## Overall Conclusions

The SWA, representing the Scotch Whisky industry, recognises the need
and desire in the current international climate for the US government to
take proportionate measures to enhance the security and safety of the
food supply chain in the US. Nevertheless, it wishes to draw attention
to the fact that spirits, wine and other alcoholic beverages are already
highly regulated by the TTB, to the extent that many of the existing
requirements imposed by the TTB upon the alcoholic beverage industry and
likewise by US Customs are now being required separately under the
Bioterrorism legislation for Scotch Whisky and all other alcoholic
beverages.

The Scotch Whisky industry is therefore concerned that the US Government
is failing to consider how the administration/responsibility for the
existing TTB regulations and Customs requirements can be harmonised
with, or incorporated into, the FDA requirements under the Act. It seems
only reasonable that alcoholic beverages should not be subject to
heavier demands than other foods in terms of registration, record
keeping and prior notice. In this regard it should be noted that the TTB
response to the FDA highlights the need to 'avoid duplication of efforts
and undue burden upon the alcohol industry' [^1].

Against the existing regulatory background for all alcoholic beverages,
the SWA believes that the scope of the Bioterrorism Act and its
associated regulations has the potential to cause disruption to trade
flows and that its impact might turn out to be disproportionate to its
stated objective. It would therefore be grateful if the FDA would give
consideration to how it may effectively resolve the issues raised in
this submission without undermining the objective of its legislation.

##### Proposed Solution

In light of the foregoing, the SWA wishes to propose to the US
authorities a solution along the following lines:

> *Given that all alcoholic beverages are tightly regulated by the
> Alcohol and Tobacco Tax and Trade Bureau under the US Treasury (27
> CFR),*
>
> **· secure a legislative amendment to the Bioterrorism Act that
> exempts Scotch Whisky and other alcoholic beverages from its
> application, in the same way as meat, poultry and egg products under
> the jurisdiction of the USDA are excluded from its scope;**

*failing which,*

**· include express language in the final Registration rule (Docket No
02N-0276) underthe Act which recognizes that a TTB alcoholic beverage
registration or permit meets the FDA registration requirement under the
Act, and**

> *given also that imported alcoholic beverages are already subject to
> US Customs notification requirements,*

**· include express language in the final Prior Notice rule (Docket No
02N-0278) under the Act which recognizes that the US Customs Service
existing notification requirements meet the FDA Prior notice requirement
under the Act;**

*failing which,*

**· the TTB, US Customs and FDA accept and meet their respective and
collective responsibilities to establish a co-ordinated system of
information inter-change between US government agencies so that
producers and exporters are not required to duplicate the information
that is already being provided (in the case of Scotch Whisky and all
other alcoholic beverages) to either the TTB or US Customs.**

The Scotch Whisky Association

20 Atholl Cresecent

Edinburgh EH3 8HF

Scotland, UK 3 April 2003

#### Annex A - Docket No 02N-0276

**Annex B - Docket No 02N-0278**

# FDA Bioterrorism Act: Regulations Annex A

# 

# Registration -- Docket No 02N-0276

The FDA proposed regulations include the following provisions:

• Foreign facilities that manufacture, process, pack, or hold food for
consumption must register with the FDA unless the food undergoes further
processing or packaging by another before it is exported to the US. A
*de minimis* packaging activity would thus require both the producer and
packager to register.

• Electronic registration is not mandatory but clearly recommended by
the FDA.

• A unique registration number will be assigned to each registered
facility.

• A US agent may be designated to effect the registration, in which case
FDA recommend a formal agreement between the relevant foreign and US
parties.

# Registration: Comments

The Scotch Whisky Association (SWA) wishes to comment as follows.

Although the information required by FDA for registration is extensive,
registration of a foreign facility is not of itself problematic if it is
only once. However, the SWA has reservations concerning the specific FDA
registration requirements.

1.  Principally, the FDA proposed registration regulations require the
    submission of a large

amount of company information that is already submitted to the TTB under
the latter agency's existing alcoholic beverage industry regulations,
reference to which is made in the Scotch Whisky industry's main paper.
There is therefore an unnecessary duplication and excessive overlap of
these two US government agencies' requirements, the resolution of which
could be achieved by any of the three proposed methods set out in the
industry's conclusion to the main paper.

2.  The SWA has a particular concern when the exporter is not one and
    the same as the producer because the registration requirements lead
    to a very burdensome situation, particularly in those instances when
    exporters bottle the product privately for labelling purposes. The
    requirement's potential impact would be to entail a far greater
    number of registrations for Scotch Whisky producers who may not know
    where their product will be shipped because they have sold it to a
    local company first. The consequent associated costs for those
    Scotch Whisky suppliers are much underestimated by the FDA.

> Also, there is an added complexity stemming from this kind of
> commercial arrangement because the last foreign facility would be
> required to register as well; this means that, in the event that a
> local Scotch Whisky distiller sells his Scotch Whisky for bottling and
> sale by a different local company, not only will he have to register
> but so will each of the local bottlers who buy his Scotch Whisky and
> export it to the US. This will culminate in a plethora of foreign
> facilities having to register, a dimension which FDA does not appear
> to have foreseen.

3.  Processing the registration applications of all the facilities
    subject to the Act is self-evidently a mammoth task for the FDA.
    Businesses may therefore be affected by delays in this process
    during the relatively short period of 2 months during which
    registration must be effected, ie October to December 2003. The
    period in question is a peak time for the alcoholic beverage
    industry in the run up to Christmas and the New Year. Thus, any
    significant delay in the registration process could impact adversely
    on exports of Scotch Whisky (and all other alcoholic beverages) to
    the US.

In this regard, the Scotch Whisky industry would welcome the FDA's
assurance that it has the capacity to handle the overwhelming number of
facility registrations that will ensue from the legislation and, in
particular, that hard copy registration applications will not receive
second-class treatment by being placed at the bottom of the pile.

4.  There must also be serious doubts about whether the time constraints
    of the registration process will allow thorough and meaningful
    examination of all the applications received by the FDA. It is not
    evident how the integrity of companies wishing to register will be
    audited or verified. Indeed, it is stated that assignment of a
    registration number does not denote FDA approval or endorsement of a
    facility or its products. It must therefore be open to question
    whether registration will materially enhance security of the food
    supply chain.

5.  The industry agrees with the FDA recommendation that some kind of
    agreement or authorisation between a foreign facility and its
    designated US agent is desirable, but wishes to highlight the fact
    that, under TTB regulations, the importer is already charged with
    this responsiblility.

6.  Given that the FDA is proposing to require registration information
    to be kept updated, it is not clear whether historic registration
    information will be retained. This would appear to be essential if
    the process of tracing is to be effective.

7\. The SWA shares with other EU alcoholic beverage interests certain
specific concerns relating to the UK/EU spirits industries which, in
order of importance, are outlined as follows:

> \- Since the requirement for a foreign facility to appoint a single
> agent does not always match business practice, where two or more
> importers may handle a foreign company's different products within the
> same region, it is neither practicable nor commercially acceptable.
>
> \- Consideration and clarification of the requirements for limited
> quantities of samples (e.g. for market testing, tasting or analysis
> purposes as opposed to sale) is requested since any requirement to
> comply with the registration provision before their importation could
> create a serious impediment to the introduction of new products or the
> promotion of products already in the market.
>
> \- The FDA's claim that, in most cases, importers or business partners
> will act as agents with their foreign principals is disputed on the
> grounds that this could be difficult for some importers who might not
> wish to run any risk of legal consequences. This means that many small
> exporters may be compelled to face the additional cost of appointing
> an agent for the sole purpose of meeting the FDA requirements.
>
> \- The non-discriminatory status of the legislation is challenged
> since it appears that foreign facilities will bear most related costs
> (Table 42 refers), which are in any event underestimated.

## Registration: Conclusion

## As set out in the main paper, the SWA proposes a solution along the following lines:

> Given that all alcoholic beverages are tightly regulated by the
> Alcohol and Tobacco Tax and Trade Bureau (TTB) under the US Treasury
> (27 CFR),
>
> · secure a legislative amendment to the Bioterrorism Act that exempts
> Scotch Whisky and other alcoholic beverages from its scope, in the
> same way as meat, poultry and egg products under the jurisdiction of
> the USDA are excluded from it;

*failing which,*

> · include express language in the final Registration rule (Docket No
> 02N-0276) under the Act which recognizes that a TTB alcoholic beverage
> registration or permit meets the FDA registration requirements under
> the Act;

*failing which,*

> · the TTB, US Customs Service and FDA accept and meet their respective
> and collective responsibilities to establish a coordinated system of
> information inter-change between US government agencies so that
> producers and exporters are not required to duplicate the information
> that is already being provided (in the case of Scotch Whisky and all
> other alcoholic beverages) to either the TTB or US Customs.

The Scotch Whisky Association

20 Atholl Cresecent

Edinburgh EH3 8HF

Scotland, UK 3 April 2003

**FDA Bioterrorism Act: Regulations Annex B**

### Prior Notice -- Docket No 02N-0278

The FDA proposed regulations include the following provisions:

• The FDA requires the immediate prior notification to it of every
single food shipment, on an [article-by-article]{.underline} basis, by
the US importer within a tight timescale. Only one 'Amended' notice to
the 'Initial' information notice is permitted, other than 'Updated'
arrival details all within a minimum timescale, and, if notice is not
provided, the article of food will be refused admission.

• Notifications may be submitted by an importer or US agent but, whether
'Initial', 'Amended' or 'Updated', they must all be submitted
electronically. This may be problematic for some smaller traders.

• It is instructive that the FDA considers it necessary to specify
notification by means of an agent in order to limit the sources of
notifications, degree of information, and number of delays that are
likely to arise from the requirement.

• The information that must be supplied in the prior notice is
excessively burdensome. A prior notice that is deemed 'inadequate' for
e.g. untimeliness, inaccuracy or incompleteness, will result in the
shipment not being admitted and possibly having to be removed by the US
agent to temporary secure storage at his expense.

## Prior notice: Comments

The Scotch Whisky Association (SWA) wishes to comment as follows.

1.  The Prior Notice requirement is considered the most burdensome
    feature of the Bioterrorism legislation. Principally once again, the
    consequent duplication and overlap of existing requirements is the
    issue. Most of the information to be provided in the Prior Notice
    about the contents and the logistics of the shipment is already
    included in the commercial invoice data usually supplied for US
    Customs by importers when goods arrive in the US. The FDA is now
    requiring that it receives such information in advance on shipments
    to the US.

In this connection, at a meeting with FDA on 5 March, representatives of
the EU spirits (and wine) industries were informed that the FDA Prior
Notice requirement will not be integrated with US Customs current
requirements and, further, that the US Customs existing system (ACS)
cannot be modified to accommodate the FDA Prior Notice data requirements
in time to meet the FDA statutory deadline of December 12, 2003.

> Notwithstanding, it is understood that US Customs is in the process of
> developing a new system to replace the ACS but that, regrettably, this
> new Customs system will not be implemented until 2005; also, that the
> FDA will discontinue its Prior Notice system when the new all
> encompassing Customs system comes on line in 2005. However, in the
> meantime, the alcoholic beverage industry will be compelled to bear
> the burden and associated costs arising from the US Administration's
> internal software problems which result in a double, but unnecessary
> and unconnected, notification requirement to two different US
> authorities -- Customs and FDA - for shipments to the US over a period
> of at least 2 years. Ensuring the requisite data flows should be the
> concern of the US authorities and not of US importers on behalf of
> third-country producers/
>
> exporters.

2.  The Scotch Whisky industry wishes to be assured that the FDA will
    have the administrative/logistical capability to handle a constant
    and vast quantity of 'Initial', 'Amended' and 'Updated' Prior
    notices. Further, it would seem that, if they are to provide any
    measure of increased security, all these notices will have to be
    effectively scrutinised. In fact, there is no indication of how the
    excessive detail in the notices will be checked/verified.

> Given the variables and imponderables associated with any form of
> transportation, particularly by ship, the FDA expectation for accurate
> notification of arrival time, within minor margins, is unrealistic.
> The Scotch Whisky industry wishes to be assured that arrival in port
> at a time inconsistent with that notified and/or at a different port
> would not entail a shipment being refused clearance without there
> being further cause for its detention, since such action would incur
> unjustifiable expense for the importer due to temporary storage costs
> and delay in the goods reaching the market.

3.  So far as Scotch Whisky and other imported spirits are concerned,
    much of the information required in the Prior Notice, together with
    certain additional details, is already provided to the US
    authorities under existing regulations, viz:

> \(a\) The TTB has to approve and register labels (including bottle
> sizes) for all alcoholic
>
> beverages imported into the US. The process involves the submission of
> substantial
>
> information relating to the company and its products.

\(b\) The US Customs Service receives advance notice of a ship's arrival
and of its manifest well ahead of its actual arrival. Its Container
Security Initiative (CSI) requires the presentation of cargo details 24
hours before loading onto the vessel. The checklist covers a total of 15
items of information that exceed the detail required under the Act.

> Apart from burdensomeness in terms of labour, time and cost, such
> duplication could lead to errors and omissions due to slight
> inconsistencies between the sets of requirements and so defeat the
> purpose of strengthening security and safety. A solution to this
> potential problem might be for the US Government to:
>
> · ensure consistency between the various legislative requirements;
>
> · require all US government agencies that have regulations and
> jurisdictions addressing the same objectives to coordinate their
> responsibilities in order to avoid a duplication of government
> resources, manpower and regulations; and,
>
> · ensure that businesses are not subject to overlapping, conflicting
> or duplicative requirements.

4.  The Scotch Whisky industry notes that there are domestic exemptions
    to the Prior Notice procedures, eg individual travellers, and can
    recognise that, at a practical level, these are justifiable.
    However, these exemptions merely serve to underline the need to
    ensure that the imposition of new regulatory requirements to the
    food supply chain must be as reasonable as possible.

5\. Again, the SWA is concerned about the treatment of samples under the
Prior Notice regulations. Clarification is requested on whether
shipments of small quantities for market testing, tasting or analysis
purposes (as opposed to sale) will be permitted without being subject to
Prior Notice requirements.

> 6\. Joining the Customs-Trade Partnership Against Terrorism (C-TPAT)
> is likely to become increasingly attractive for many traders because a
> potential consequence of membership is the speedier handling by
> Customs of a member's shipments. However, this initiative has the
> potential to create another unavoidable layer of bureaucracy and add
> to the growing complexity of trading with the US.

7\. The FDA claims that advance information of a food shipment will
allow the FDA to target arrival inspections more effectively before
products enter domestic commerce. However, the CSI involves *inter alia*
the possible inspection of shipments destined for the US by US Customs
personnel based overseas. It is unclear to what extent these inspections
will be coordinated.

##### Prior notice: Conclusion

In sum, the Scotch Whisky industry believes that it is unnecessary and
potentially confusing for broadly parallel (but not identical)
information concerning shipments to the US to be notified separately to
different government departments/agencies.

## As set out in the main paper, the SWA proposes a solution along the following lines:

> Given that all alcoholic beverages are tightly regulated by the
> Alcohol and Tobacco Tax and Trade Bureau (TTB) under the US Treasury
> (27 CFR),
>
> · secure a legislative amendment to the Bioterrorism Act that exempts
> Scotch Whisky and other alcoholic beverages from its scope, in the
> same way as meat, poultry and egg products under the jurisdiction of
> the USDA are excluded from it;

*failing which,*

> *given also that imported alcoholic beverages are already subject to
> US Customs notification requirements,*
>
> · include express language in the final Prior Notice rule (Docket No
> 02N-0278) under the Act which recognizes that the US Customs Service
> existing notification requirements meet the FDA Prior notice
> requirements under the Act;

*failing which,*

> · the TTB, US Customs Service and FDA accept and meet their respective
> and collective responsibilities to establish a coordinated system of
> information inter-change between US government agencies so that
> producers and exporters are not required to duplicate the information
> that is already being provided (in the case of Scotch Whisky and all
> other alcoholic beverages) to either the TTB or US Customs.

The Scotch Whisky Association

20 Atholl Cresecent

Edinburgh EH3 8HF

Scotland, UK 3 April 2003

[^1]: ^1^ [www.fda.gov](http://www.fda.gov/) /Bioterrorism Act/section
    307/view comments : document ref C24 09/12/02 09/04/02 Dept of
    Treasury, ATF