[Federal Register Volume 66, Number 14 (Monday, January 22, 2001)]
[Proposed Rules]
[Pages 6502-6511]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-1607]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 1

[Docket No. 00N-1633]
RIN 0910-AB95


Marking Requirements for and Prohibitions on the Reimportation of 
Imported Food Products That Have Been Refused Admission into the United 
States

AGENCY: Food and Drug Administration, HHS.

ACTION: Proposed rule.

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SUMMARY: The Food and Drug Administration (FDA) is proposing to amend 
the food import regulations to require food products which, for safety 
reasons, are refused entry into the United States to be marked ``UNITED 
STATES REFUSED ENTRY.'' The proposed rule would also prohibit persons 
from refusing to affix this mark on refused food, from importing or

[[Page 6503]]

offering to import a previously refused food, and from altering, 
removing, tampering with, or concealing a mark. The proposed rule is 
intended to protect the public health against unsafe imported food 
products and to facilitate the examination of imported products.

DATES: Submit written comments by April 9, 2001.

ADDRESSES: Submit written comments to the Dockets Management Branch 
(HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, 
Rockville, MD 20852.

FOR FURTHER INFORMATION CONTACT: Philip L. Chao, Office of Policy, 
Planning, and Legislation (HF-23), Food and Drug Administration, 5600 
Fishers Lane, Rockville, MD 20857, 301-827-3380.

SUPPLEMENTARY INFORMATION:

I. Introduction

    Section 801 of the Federal Food, Drug, and Cosmetic Act (the act) 
(21 U.S.C. 381) authorizes FDA to examine foods, drugs, devices, and 
cosmetics imported or offered for import into the United States and to 
refuse admission to products under certain conditions. Imported 
products are subject to the same statutory and regulatory requirements 
as domestic products. For example, a domestic food product must not be 
adulterated or misbranded. Similarly, an imported food that is intended 
for sale in the United States must not be adulterated or misbranded.
    FDA's examination of imports often begins with a review of records 
to determine whether additional scrutiny is warranted. FDA may, based 
on its review of the records, permit the goods to proceed, visually 
examine or take samples of the goods for laboratory analysis, or verify 
the registration, listing, declarations, and certifications for the 
product. For food products, visual examinations may be inadequate for 
detecting suspected microbiological contamination, pesticide residues, 
and other toxic elements, so FDA may take samples of an imported food 
product for further examination. If the examination shows that the food 
product appears to be in compliance with U.S. requirements, FDA 
releases the shipment to proceed into U.S. commerce. If the food 
product appears to be not in compliance, the importer has an 
opportunity to provide evidence or testimony that the food product 
complies with U.S. requirements or to submit a plan to recondition the 
food product to bring it into compliance if such reconditioning is 
possible. If, after the importer has had an opportunity to present its 
views or if reconditioning failed to bring the food into compliance, 
the food product is not in compliance, FDA may refuse admission to the 
food product. If refused products are not reexported within 90 days of 
refusal, the U.S. Customs Service (Customs Service) will have the 
products destroyed.
    Additionally, under section 304 of the act (21 U.S.C. 334), FDA may 
initiate seizure and condemnation proceedings against any article of 
food that is adulterated or misbranded, or which may not be introduced 
into interstate commerce under section 404 of the act (21 U.S.C. 344). 
A court may, after seizure and condemnation of an imported article, 
order the article to be destroyed or permit the article to be 
reexported (see United States v. Food, 2,998 Cases, 64 F.3d 984 (5th 
Cir. 1995)). The Customs Service also has seizure procedures (see 19 
U.S.C. 1595a).
    In recent years, the demand on FDA's resources for reviewing food 
imports has increased significantly. For example, in 1985, 
approximately 950,000 line items of goods were offered for import into 
the United States. (A line item corresponds to a specific item on an 
invoice or shipping papers.) By 1998, the number of line items had 
increased to over 3 million (see statement by William B. Schultz, 
Deputy Commissioner for Policy, Food and Drug Administration, before 
the Permanent Subcommittee on Investigations, Senate Committee on 
Government Affairs, September 24, 1998). FDA's ability to inspect a 
sufficient proportion of imports has been severely hampered by this 
increase. Currently, FDA examines or samples less than 2 percent of 
imported foods for compliance with FDA requirements.
    FDA is aware that some unscrupulous importers use various measures 
to subvert this process in order to introduce unsafe food products into 
the United States. In April 1998, the General Accounting Office (GAO) 
issued a report entitled ``Food Safety: Federal Efforts to Ensure the 
Safety of Imported Foods are Inconsistent and Unreliable'' (GAO/RCED-
98-103). The GAO report stated that some importers evade import 
controls and are able to introduce contaminated, adulterated, or unsafe 
food into the United States even when FDA refused to admit the food and 
the Customs Service ordered the food to be reexported or destroyed. In 
particular, the GAO report noted that FDA does not require that refused 
foods be marked as ``refused entry.''
    Additionally, in 1998, the Senate Governmental Affairs Committee's 
Permanent Investigations Subcommittee held hearings on the safety of 
food imports. The Committee heard testimony about various methods used 
to avoid food safety inspections and to introduce adulterated food into 
the United States. These methods included reimporting refused goods 
through another U.S. port (``port shopping'') and substituting trash or 
other items for adulterated food products for which FDA has refused 
entry so that the trash and other items, rather than the adulterated 
food products, were destroyed or reexported (Ref. 2) (statement of 
``Former Customs Broker''). Placing a clearly identifiable mark on food 
imports that have been refused admission for safety reasons would help 
curtail the reintroduction of unsafe food products into the United 
States.
    On July 3, 1999, the President issued a memorandum to the Secretary 
of Health and Human Services and the Secretary of the Treasury (the 
Secretaries) on the safety of imported foods. The memorandum identified 
food safety as a high priority and, among other things, directed the 
Secretaries to take all actions available to ``prohibit the 
reimportation of food that has been previously refused admission and 
has not been brought into compliance with United States laws and 
regulations (so called `port shopping'), and require the marking of 
shipping containers and/or papers of imported food that is refused 
admission for safety reasons....''

II. Description of the Proposed Rule

A. Introduction

    FDA is proposing to amend its import regulations to create a new 
Sec. 1.98 entitled ``Marking Requirements for and Prohibitions on the 
Reimportation of Food Products That Have Been Refused Admission into 
the United States.'' The proposal would require importers or consignees 
to mark food (including animal feed) that FDA refuses to admit, for 
safety reasons, into the United States. The mark should make it more 
difficult for imported food products that have been refused admission 
into the United States to evade import controls and would complement 
FDA's efforts to monitor food imports more effectively. The proposed 
rule would also prohibit importers from reimporting refused shipments.
    FDA and the Customs Service held two public meetings to discuss 
imported food safety on February 10, 2000, in Los Angeles, CA, and on 
February 17, 2000, in Washington, DC. Several comments were made 
concerning marking refused food imports, and FDA addresses those

[[Page 6504]]

comments as part of this description of the proposed rule.

B. Who Must Affix the Mark?

    If you are an importer or consignee of a shipment of imported food 
that FDA has refused to admit for safety reasons, you would be subject 
to the rule. (For purposes of this rule, the reference to ``safety 
reasons'' means that consuming the imported food could adversely affect 
a person's health.) Under proposed Sec. 1.98(a), if FDA has refused to 
admit your imported food into the United States for safety reasons, you 
must mark the refused food as ``UNITED STATES REFUSED ENTRY.'' An FDA 
employee or FDA-designated official (such as an FDA-commissioned 
official) would supervise the marking process.
    In contrast, if FDA refused admission of your imported food for 
other nonsafety reasons, you would not be subject to this rule. For 
example, if FDA refused to admit your imported food because it was 
labeled in a foreign language, you would not have to mark the refused 
food product. If, however, FDA refused to admit your imported food 
because it contained an unsafe ingredient, you would have to mark the 
refused product in accordance with the regulation.

C. What Must the Mark Look Like?

    Proposed Sec. 1.98(b) would require you to make the mark in capital 
letters at least 2.5 centimeters (cm) or 1 inch high. The mark would 
state ``UNITED STATES REFUSED ENTRY.'' The mark's language and format 
are similar to those used by the U.S. Department of Agriculture on meat 
and meat food products that have been refused admission into the United 
States (9 CFR 327.26(c)).
    Some comments during a public meeting suggested that the mark 
include some indication of why the food product was refused entry 
instead of stating simply that the food was refused entry. FDA has not 
included this suggestion in the proposed rule because the text of the 
proposed mark, ``UNITED STATES REFUSED ENTRY,'' is applicable to all 
products that are refused entry for safety reasons and is similar to a 
mark used by the U.S. Department of Agriculture. If FDA required the 
mark to explain the reasons for the refusal, importers and consignees 
would need multiple marks (to cover the various possible reasons for 
refusing entry) or would need to use ``fill in the blank'' marks which 
could then be illegible (if the reasons are handwritten) or difficult 
to use (if the reasons are machine-printed). Nevertheless, FDA welcomes 
additional comment on this point.
    Proposed Sec. 1.98(b)(1) would require the mark to be permanent, 
clear, and conspicuous. This will help ensure that the mark is 
noticeable. For example, if the mark is affixed to a bill of lading, 
you could place the mark diagonally across the center of the document 
and use colored ink. However, the proposal would not specify any 
particular method of marking. In other words, you can use adhesive 
labels, ink stamps, or any other marking tool or device so long as the 
mark is at least 2.5 cm or 1 inch high, uses the correct language, is 
clear and conspicuous, and is permanently affixed to the refused 
imported food's container (where possible) and to shipping documents 
accompanying the imported food before it leaves the port of entry.
    Another comment at a public meeting suggested that the mark be in 
``invisible ink'' that FDA would be able to see through the use of some 
scanning device. Some individuals expressed concern about how a visible 
mark would affect the refused product's ability to enter a foreign 
country or return to the exporting country. This proposed rule does not 
include the use of ``invisible ink.'' One important benefit of the mark 
is that it is supposed to be clear and conspicuous; this will make it 
easier for FDA and the Customs Service to detect attempts to bring 
refused food products back into the United States. If the mark could 
only be seen by using some unspecified device, FDA and the Customs 
Service might find it difficult to determine whether the mark was 
correctly applied, to see the mark on goods that are being reintroduced 
into the United States in spite of an earlier refusal, or to readily 
distinguish between foods that should be admitted into the United 
States from foods that have already been refused entry. FDA invites 
comment on this point.
    FDA also invites comments on whether the rule should use or allow 
for different size requirements due to the variety of food packages and 
product sizes and whether the rule should require any particular form 
of marking.

D. Where Must the Mark Go?

    Proposed Sec. 1.98(b)(1) would require you to affix the mark 
permanently to the packing container holding the refused food and on 
invoices, bills of lading, and any other documents accompanying the 
food when it is exported from the United States. The proposal would 
explain that, for purposes of thois rule, a packing container is any 
container used to pack one or more immediate containers of the refused 
food and that an immediate container is any container which holds an 
imported food for sale to the ultimate consumer. For example, assume 
that you have a box that holds 24 cans of imported food. the box would 
be the packing container, and each can would be an immediate container. 
You would, under the proposal, mark the box rather than mark each can. 
FDA would not require you to mark every individual retail unit (unless 
the immediate container also happens to be the packing container, such 
as a large bag of rice or flour). If the mark cannot be permanently 
affixed to a packing container (as with bulk agricultural commodities, 
such as a railcar of wheat, a truckload of potatoes, or a tanker of 
corn syrup) you would only have to place the mark on documents 
accompanying the food when it leaves the United States.
    Several comments at the public meeting said the mark should go on 
cargo containers used to transport large amounts of imported food 
products. Others suggested using seals on cargo containers instead of 
merely marking the containers. FDA interpreted these comments 
concerning cargo containers as applying the mark or seal on items such 
as rail cars, containers to be attached to trucks, and other large, 
reusable containers. FDA has not included the comments' suggestions in 
this proposed rule. By proposing to require the mark to be clear, 
conspicuous, and permanent, FDA intends to make it difficult for a 
person to ``port shop'' or to conceal refused food. If the mark were 
placed on a large, reusable cargo container (such as a tractor trailer 
or rail car), it would be easy to defeat the rule simply by moving the 
refused food from the marked cargo container to an unmarked container. 
For example, if the mark is on a container attached to a truck instead 
of the packing containers holding the refused food product, the intent 
behind the rule could be defeated by shifting the refused food product 
from the marked tractor trailer to an unmarked one. In contrast, if the 
mark is on the packing containers (such as boxes or wrapped shipping 
palettes) holding the refused food, it will be more difficult, both in 
terms of time and cost, to open and repackage the refused food, and 
thus evade the rule's purpose. FDA invites additional comment on this 
point.

E. When Must You Affix the Mark?

    Proposed Sec. 1.98(b)(2) would require you to affix the mark, under 
the supervision of an FDA employee or person designated by FDA, before 
the food is exported. This is to ensure that

[[Page 6505]]

you place the mark, as required, on the refused food before the food 
leaves the United States.

F. Enforcement Issues

    If this rule is finalized with a prohibition on the reimportation 
of refused food, reimportation of refused food in violation of this 
rule would constitute a violation of 19 U.S.C. 1595a which would then 
permit the Customs Service to seize, forfeit, and destroy the goods 
after following the appropriate procedures. Thus, proposed Sec. 1.98(c) 
would prohibit you from: (1) Importing or offering to import any food 
that has been previously refused admission into the United States and 
marked as ``UNITED STATES REFUSED ENTRY;'' and (2) altering, removing, 
tampering with, or concealing a mark. If you refuse to affix a mark on 
a refused food import, FDA and the Customs Service might deny 
permission to re-export the refused food product, order the product to 
be destroyed, and take other regulatory action against you and the 
refused food. The Customs Service might also assess civil money 
penalties under 19 U.S.C. 1592 or 1595a(b) if you alter, remove, tamper 
with, or conceal a mark.

G. Authority Citation Changes

    FDA is also proposing to amend the authority citation for 21 CFR 
part 1 to include references to sections 704 of the act (21 U.S.C. 374) 
and 801 of the act and section 361 of the Public Health Service Act 
(the PHS Act) (42 U.S.C. 264). These statutory provisions provide 
additional legal authority to issue the proposed rule (as explained in 
section III of this document).

III. Legal Authority

    Section 801(a) of the act states that FDA shall refuse to admit 
imported food into the United States if the imported food has been 
manufactured, processed, or packed under insanitary conditions, is 
forbidden or restricted in sale in the country in which it was produced 
or from which it was exported, or is adulterated or misbranded. 
Sections 402 and 403 of the act (21 U.S.C. 342 and 343) describe when a 
food is adulterated and misbranded respectively. Section 701(a) of the 
act (21 U.S.C. 371(a)) authorizes the agency to issue regulations for 
the efficient enforcement of the act, while section 701(b) of the act 
authorizes FDA and the Department of the Treasury to jointly prescribe 
regulations for the efficient enforcement of section 801 of the act.
    The proposed rule is within FDA's authority at sections 402, 403, 
701, and 801 of the act. Because marking refused goods would permit FDA 
to more efficiently enforce section 801 of the act, FDA is authorized 
to impose marking requirements on such food products. The mark would 
help ensure that food products that fail to meet the conditions for 
admission into the United States do not enter or reenter interstate 
commerce.
    Section 704 of the act authorizes FDA to conduct inspections for 
the efficient enforcement of the act. Assuming that the proposed rule 
is later finalized, FDA may need to conduct inspections to help enforce 
the rule. Thus, while section 704 of the act does not provide 
independent authority to mark refused food imports, it is relevant to 
FDA's enforcement of the rule.
    The proposed rule is also authorized by sections 301 of the PHS Act 
(42 U.S.C. 241) and 361 of the PHS Act. Section 301 of the PHS Act 
authorizes FDA to ``render assistance'' to appropriate public health 
authorities in the conduct of or to promote coordination of research, 
investigations, experiments, demonstrations, and studies relating to 
the causes, diagnosis, treatment, control, and prevention of disease. 
Section 361 of the PHS Act authorizes FDA to issue regulations to 
prevent the introduction, transmission, or spread of communicable 
diseases from foreign countries into the United States. Marking food 
products that have been refused entry into the United States would 
assist foreign public health officials to determine whether to take 
regulatory action against a particular product. The mark would alert 
foreign countries that the food product has already been refused 
admission into the United States. Marking such food products would also 
help prevent the introduction, transmission, or spread of communicable 
diseases into the United States by making it more difficult for such 
rejected food products to enter the United States through a different 
port or to escape detection.

IV. Environmental Impact

    FDA has determined under 21 CFR 25.30(a), 25.30(k), and 25.32(g) 
that this action is of a type that does not individually or 
cumulatively have a significant effect on the human environment. 
Therefore, neither an environmental assessment nor an environmental 
impact statement is required.

V. Paperwork Reduction Act of 1995

    FDA tentatively concludes that the marking requirements proposed in 
this document are not subject to review by the Office of Management and 
Budget (OMB) because they do not constitute a ``collection of 
information'' under the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501-3520). Rather, the proposed statements are ``public disclosure of 
information originally supplied by the Federal Government to the 
recipient for the purpose of disclosure to the public'' (5 CFR 
1320.3(c)(2)).

VI. Federalism

    FDA has analyzed this proposed rule in accordance with the 
principles set forth in Executive Order 13132. FDA has determined that 
the rule does not 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 has concluded 
that the proposed rule does not contain policies that have federalism 
implications as defined in the order and, consequently, a federalism 
summary impact statement is not required.

VII. Analysis of Impacts

A. Introduction

    FDA has examined the impacts of the proposed rule under Executive 
Order 12866, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the 
Unfunded Mandates Reform Act (2 U.S.C. 1501 et seq.). 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 
considers a rule to be a ``significant regulatory action'' if (among 
other things) it may have 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 arising out of legal mandates, the 
President's priorities, or the principles set forth in the Executive 
Order. OMB has determined that this proposed rule is a significant 
regulatory action as defined by Executive Order 12866.
    Under the Regulatory Flexibility Act, if a rule has a significant 
impact on a substantial number of small entities, an agency must 
analyze regulatory options that would minimize any significant impact 
of the rule on small entities. For reasons explained later in this 
section, FDA concludes that the proposed rule, if finalized, would not 
have a significant economic impact on a substantial

[[Page 6506]]

number of small entities. Therefore, a regulatory flexibility analysis 
is not required.
    Section 202(a) of the Unfunded Mandates Reform Act of 1995 (Public 
Law 104-4) requires that agencies prepare a written assessment of 
anticipated costs and benefits before proposing any rule that may 
result in an expenditure by State, local, and tribal governments, in 
the aggregate, or by the private sector, of $100 million in any one 
year (adjusted annually for inflation).
    The Unfunded Mandates Reform Act does not require FDA to prepare a 
statement of costs and benefits for the proposed rule because the 
proposed rule is not expected to result in any 1 year expenditure that 
would exceed $100 million adjusted for inflation. The current 
inflation-adjusted statutory threshold is $110 million.

B. The Rationale Behind This Proposed Rule

    The introduction to this proposed rule explains the reasons, such 
as ``port shopping'' and the President's July 3, 1999, memorandum on 
the safety of imported foods that prompted FDA, in conjunction with the 
Customs Service, to issue this regulation. FDA refers readers to that 
discussion if they seek details regarding the reasons for this proposal 
and the problems concerning the reimportation of previously refused 
imported food.

C. Regulatory Options Considered

    As described earlier, the proposed rule would require importers and 
consignees whose food products have been refused admission in to the 
United States for safety reasons to mark such products as ``UNITED 
STATES REFUSED ENTRY.'' This will make it easier for FDA and the 
Customs Service to detect attempts to re-introduce previously-refused 
imported food into the United States.
    In drafting this rule, FDA considered and rejected several 
alternatives. For example, one option would be to order the destruction 
of all refused food imports. While this would deter ``port shopping'' 
and similar illegal practices, this alternative is not feasible because 
it would require Federal resources to be diverted to supervising or 
otherwise ensuring that the refused food imports are stored until they 
can be destroyed and that they are actually destroyed. Additionally, 
the standard of proof to support the destruction of violative products 
is greater than the standard of proof for refusing to admit imported 
products, so ordering the destruction of refused food imports would 
increase, rather than decrease, the demands on government field 
resources. This alternative would also be extremely costly to importers 
since many refused shipments can be exported and legally sold or 
reconditioned for sale in other countries.
    Another alternative would be a ``no action'' option. This 
alternative was unacceptable because it would allow illegal practices, 
such as port shopping, to continue and would result in the reentry of 
previously refused food imports into the United States. Consumers who 
ingested those unsafe food imports would, in turn, be subject to 
foodborne illnesses. Consequently, a ``no action'' alternative would 
not further efforts to protect the public health.
    Another alternative would be to mark some, but not all, food 
refused for safety reasons. This alternative would be less costly, but 
would also be less efficient and less practical. This alternative was 
unacceptable because it would create an opportunity for some refused 
food imports to reenter the United States through port shopping (and to 
harm consumers) and because an unmarked, but previously-refused, food 
import would be difficult to detect compared to a previously-refused 
and marked food import. Additionally, marking some, but not all, 
refused food would inevitably create arguments as to FDA's criteria for 
deciding which refused foods should or should not be marked and whether 
a specific food import met that criteria.
    For example, if the alternative was to mark refused food depending 
on its geographic origin (under a theory that some foreign nations 
regulate exported food more rigorously than others so that the United 
States could relax its safeguards for foods from those countries), the 
result would be both inefficient and unfair. To illustrate this point, 
assume that country A has a food regulatory system while country B has 
a less demanding regulatory system. If an alternative would mark unsafe 
food from country B, but not mark a similar, unsafe food from country 
A, such an alternative would make it possible for unsafe food from 
country A to be port shopped, thereby defeating the intent of the rule. 
Marking would then depend on geographic origin rather than the safety 
of the food itself.
    As another example, if the alternative were to mark refused food 
imports based on their potential risk, such as marking refused foods 
which, if consumed, would cause death or serious illness in humans, 
such an approach would be impractical and difficult to apply. To 
illustrate this point, assume that an imported food product appears to 
be contaminated because mold is visible on the product. If marking 
depended on whether the moldy food would cause death or serious 
illness, arguments would inevitably arise concerning the identification 
of the mold, its toxicological properties (if any), the methodology or 
references used to analyze the mold or to determine the seriousness of 
the health risk associated with the mold, etc.

D. Benefit-Cost Analysis

1. Strategic Action by Importers
    Although the vast majority of importers and consignees comply with 
the act, some attempt to circumvent Federal law and introduce unsafe 
food into U.S. commerce through illegal means such as port shopping. 
For these importers and consignees, measures such as those contained in 
this proposed rule are necessary to deter illegal conduct.
    An importer's or consignee's decision on how to dispose of its 
cargo is influenced by changes in the expected profits associated with 
each of its choices. Requiring importers and consignees to mark 
``UNITED STATES REFUSED ENTRY'' on imported food which has been refused 
admission for safety reasons changes the expected profits associated 
with the initial decision to attempt to import unsafe food. A mark also 
affects the expected profits associated with the decision to 
recondition, re-export, or port shop after a shipment is found 
violative.
    The decision process of an importer of potentially unsafe food can 
be represented visually by a decision tree (see figure 1). This 
illustrates how requiring ``UNITED STATES REFUSED ENTRY'' on refused 
imports will alter an importer's or consignee's incentives. The same 
tree shows the possible outcomes and decisions an importer or consignee 
can make at each stage of the importation process. At point A, an 
importer or consignee with violative food first decides whether to 
attempt to import the food into the United States. This decision will 
be influenced by the price the importer or consignee can get for the 
food if it is successfully imported, the probability the cargo will be 
inspected, and the cost to the importer or consignee if the food is 
inspected and found violative. At point B, whether the cargo is 
inspected is a function of factors such as the port of entry, FDA's 
inspection rate, and the type of product. If it is found violative, the 
importer may choose to recondition the food to correct the violations. 
At point C, FDA refuses admission of the food. If the food is not 
destroyed, at

[[Page 6507]]

point D the importer or consignee may have the option of re-exporting 
to a foreign country or port shopping.
[GRAPHIC] [TIFF OMITTED] TP22JA01.167

2. The Rule's Effect on Deterrence
    Labeling refused imported foods as``UNITED STATES REFUSED ENTRY'' 
alters the incentive structure that importers and consignees face when 
deciding whether to introduce their product into United States 
commerce. In particular, there are four ways that the rule would 
increase the deterrence value of the FDA inspection system.
    a. Port shopping will be reduced. One primary goal of this rule 
would be to reduce port shopping. Placing a mark on a refused food 
import will reduce the probability that the refused food import will be 
re-imported into the United States. The cost of port shopping will 
increase because resources would have to be expended to repackage a 
product that has been marked. Thus, port shopping will become 
relatively less attractive to importers and consignees.
    b. Decrease in the value of re-exported items. The value of a 
product destined for reexport will decrease if it is marked ``UNITED 
STATES REFUSED ENTRY.'' After the product has been marked, the importer 
or consignee has two costly choices: (1) Relabel containers or 
repackage the product into containers that do not bear the mark after 
the product leaves the United States, or (2) sell the goods abroad with 
the mark intact. It is likely that such a mark would be viewed less 
than favorably by food safety inspectors and importers in international 
markets. Thus, the expected profit from selling goods that are marked 
would be lower than if the mark did not exist, so this loss is in 
addition to the loss of value from refusal alone. Either of the 
importer's or consignee's choices (repackage or sell with the mark 
intact) would lower the expected profit of reexporting.
    c. Reconditioning will become a more favored alternative. The 
expected profit from reconditioning a refused food import is not likely 
to change with this rule. Consequently, since the expected profits from 
port shopping and re-exporting refused food imports are expected to 
fall, reconditioning the cargo becomes economically more attractive. 
FDA expects that more importers and consignees will choose to 
recondition their product.
    d. Decrease in the introduction of unsafe food into the United 
States. As with reconditioning, the expected profit from initially 
sending a potentially unsafe product to a foreign port is not expected 
to change significantly with this rule. Therefore, as the expected 
profit from attempting to import unsafe food into the United States is 
lowered (because the cost of re-importing and re-exporting unsafe food 
is increased), the incentive to ship one's product directly to a 
foreign (non-United States) market is increased. The net result of such 
a dynamic is that more unsafe food products will either be directly 
shipped to foreign markets or reconditioned at the point of export.
3. Benefits From The Rule
    a. Health benefits. As described earlier, the proposed rule, if 
finalized, would decrease the number of unsafe imported food products 
reaching the U.S. consumer. The rule should

[[Page 6508]]

discourage attempts to introduce or reintroduce unsafe imported food 
into the United States and encourage the reconditioning of imported 
food that FDA has refused to admit for safety reasons. Consequently, 
U.S. consumers would benefit through a reduction in the number of 
foodborne illnesses due to unsafe imported foods. Because FDA cannot 
quantify the amount of illegal re-importation of refused foods, the 
agency cannot make a definitive prediction of the value of the reduced 
illnesses arising from this proposed rule. Although foods that 
represent a direct and serious danger to public health are, in most 
cases, destroyed,\1\ refused food eligible for re-exportation may also 
present a health hazard. Typical reasons for refusal include illegal 
food or color additives, pesticide contamination, foreign objects, poor 
sanitation, and unregistered manufacturers or processes not filed. Each 
of these reasons for refusal may represent a health risk. Illegal food 
or color additives can cause allergic reactions in sensitive 
individuals. These allergic reactions can range from mild contact 
dermatitis to a severe allergy attack. Also, long-term exposure to some 
illegal color additives has been linked to cancer. Sanitation problems 
indicate the food was held in unsanitary conditions, which may indicate 
more serious problems such as contamination with microbial pathogens. 
Pesticide contamination may represent a long-term cancer risk. A single 
exposure to a violative pesticide level is very unlikely to result in 
cancer, but prolonged exposure over years may lead to increased risk. 
``Process not filed'' indicates that FDA has not approved the canning 
process the manufacturer uses. Without FDA approval, it is not known if 
the firm is using a canning process that may result in botulism 
contamination. Although the probability of contamination is low, 
botulism is a very severe illness that has a high mortality rate.
---------------------------------------------------------------------------

    \1\ Currently FDA is considering a policy that would recommend 
the destruction of hazardous food imports. Because dangerous foods 
may be re-exported without this policy there is the potential for 
these foods to be port shopped. This proposed rule, if finalized, 
would then also discourage the re-importation of foods that present 
a direct hazard to the public health, as well as foods representing 
an indirect threat, and the rule's benefits would be higher.
---------------------------------------------------------------------------

    Table 1 of this document shows some possible illnesses and injuries 
that can result from unsafe foods and includes their symptoms and an 
average cost per case. The quality-adjusted life days (QALD) (Ref. 8) 
column represents the lost utility per day to a consumer from an 
illness, essentially the loss to the consumer due to symptoms and 
problems associated with the illness. The QALD's are valued in dollars 
by multiplying the number of lost days by the value of statistical day, 
$630 (see 64 FR 36516 at 36523, (July 6, 1999)). This value of a 
statistical life day is drawn from the economic literature (Ref. 10). 
The medical cost column is the direct, medical cost of illness, which 
includes hospitalization and doctor visits. Most illnesses arising from 
E. Scherichia coli O157:H7 or Salmonella are self-limiting and short in 
duration, but some illnesses due to Salmonella or E. coli O157:H7 can 
be quite serious. E. coli in some cases can result in kidney damage or 
death. Salmonella can sometimes trigger chronic arthritis and in a very 
small percentage of cases can result in death.

                        Table 1.--Cost of Some Illnesses Potentially Averted by the Rule
----------------------------------------------------------------------------------------------------------------
                                                                                 Dollar
            Potential Harm                       Symptoms          QALD Loss    Value of    Medical   Total Cost
                                                                              Lost QALD's    Costs
----------------------------------------------------------------------------------------------------------------
Allergens: Contact dermatitis.........  Reddening, swelling,            2.10       $1,325       $125      $1,450
                                         itching of skin.
Allergens: Allergic reaction..........  Difficulty breathing,           1.03         $646       $550      $1,196
                                         asthma, rash, possible
                                         shock.
Objects in food: Simple dental injury.  Toothache, headache......       0.23         $145         $0        $145
Objects in food: Complex dental injury  Simple, plus infection...       3.47       $2,187     $3,540      $5,727
Objects in food: Oral emergency.......  Sharp pain in mouth,            4.27       $2,687     $3,540      $6,227
                                         face, neck, bleeding,
                                         plus possible metastatic
                                         or local infection.
Objects in food: Tracheo-esophageal     Choking, difficulty             0.48         $304         $0        $304
 obstruction.                            breathing, cyanosis,
                                         hypertension.
Objects in food: Esophageal             Pain in chest, bleeding        13.93       $8,776    $14,160     $22,936
 perforation.                            aspiration pneumonia,
                                         requires surgery.
Canning processes: Botulism...........  Nausea, diplopia, blurred     667.94     $420,801    $29,526    $450,327
                                         vision, lack of
                                         coordination, Can
                                         include loss of muscle
                                         strength, paralysis,
                                         death.
Filth: Salmonella.....................  Vomiting, nausea,              24.37      $15,357     $2,289     $17,646
                                         possible arthritis, low
                                         probability of death.
Filth: E. coli........................  Vomiting, nausea, bloody       10.79       $6,797     $4,829    $11,626
                                         stools, possible kidney
                                         damage, low probability
                                         of death.
----------------------------------------------------------------------------------------------------------------
\1\ Sources: E. coli and Salmonella costs were taken from ``Flexibility Analysis of the Proposed Rules to Ensure
  the Safety of Juice and Juice Products,'' 963 FR 24254 at 24259-24267, (May 1, 1998).
\2\ Objects in food, allergens, and botulism costs were taken from Research Triangle Institute. Estimating the
  Value of Consumers' Loss from Foods Violating the Federal Food, Drug, and Cosmetic Act.

    b. Other consumer benefits. While problems such as insects or filth 
in food may not always represent a direct health threat, they show that 
the food was not held in sanitary conditions. Moreover, consumers who 
purchase food expect it to be clean and sanitary. Consumer research 
shows cleanliness is important to consumers. For example, the Food 
Marketing Institute found 89 percent of consumers surveyed ranked a 
clean, neat store as a very important factor in selecting their primary 
supermarket. If consumers pay a premium believing their food is 
sanitary and the food is not, this payment represents a social loss. 
However, FDA cannot quantify this economic loss because FDA does not 
know what percentage of the price of food is a ``cleanliness premium.''
4. Costs of the Rule
    Costs include both materials and time and would be incurred by both 
FDA and importers or consignees. The importers and consignees would 
bear the responsibility for marking; FDA would verify that the mark is 
affixed to the refused food. It is not clear which method importers and 
consignees will use to mark refused food imports, so FDA has, for 
purposes of this analysis, used labeling, an inexpensive and time 
efficient method, to estimate costs.
    a. Materials. Placing labels on all the packages would require the 
use of a label gun and printed labels. Label guns cost approximately 
$100, and FDA assumes that three label guns would be needed at each of 
the 132 ports. Labels reading ``UNITED STATES REFUSED ENTRY'' would 
also have to be printed

[[Page 6509]]

at an approximate cost of $0.025 per label.
    b. Time--i. Importer's time. The number of hours spent applying 
labels is a function of the number of rejected shipments and their 
size. FDA assumes the average shipment consists of 500 cartons and will 
take approximately 3 hours to mark. FDA also assumes the importer or 
consignee will hire labor at the average hourly cost for transportation 
and moving occupations published by the Bureau of Labor Statistics 
(BLS), $17.64 (BLS, ``Employer Costs for Employee Compensation 
Summary,'' 1999). Under these assumptions, it will cost approximately 
$53 in labor (3 hours x $17.64 per hour) to mark each shipment. It is 
not clear how many shipments will need to be marked. As a baseline, FDA 
estimates that 7,338 shipments would be marked. However, FDA expects 
more importers and consignees will decide to recondition after 
rejection (percent correctable in table 2 of this document), or will 
not attempt to import previously refused or unsafe food (expected 
avoidance in table 2 of this document), due to the higher cost of 
shipments being rejected. The ``static annual cost'' is the cost 
assuming more of the shipments found violative are corrected at the 
port. The ``dynamic annual cost'' is the ``static annual cost'' reduced 
by the percentage decrease (expected avoidance) we expect in initial 
importation attempts. Based on FDA's experience, the agency can 
estimate the number of shipments that can be reconditioned rather than 
re-exported. The percentage of shipments that can be reconditioned is a 
function of the reason for refusal. Also, the reduction in the number 
of attempted imports of violative shipments, ``expected avoidance,'' is 
a function of the ease of correcting the violation before shipment. 
Again, FDA bases its estimates on the agency's experience. For example, 
in fiscal year 1999, FDA refused admission to 2,260 shipments because 
the manufacturer was not registered or the process was not filed. 
Approximately 80 percent of these shipments can be corrected before 
importation or at the port by filing for process approval or by 
registering the manufacturer. This would reduce the number of shipments 
that could be marked from 2,260 to 452. The cost of marking these 
shipments would then be $23,925 in labor costs and $5,651 for labels 
for importers. It would cost FDA $33,229 to confirm the marks had been 
made. The sum of these costs is $62,805. However, because FDA expects 
importers and consignees will be less likely to attempt to import 
unsafe food initially (expected avoidance), FDA then reduces this cost 
by 50 percent, which is then $31,402. Added to this cost is a fraction 
of the cost of the label guns. Label guns are durable goods and so the 
value of a label gun should not be added to the cost of marking each 
shipment.
    ii. FDA inspector's time. The proposed rule would require FDA to 
confirm that the importer or consignee marks the refused food import. 
FDA estimates that this process would require approximately 60 minutes 
in travel time and 30 minutes to confirm marking per shipment. FDA 
estimates the value of a FDA inspector's time based on a GS-10, step 5 
rate, plus 100 percent in overhead. At this hourly rate, FDA's labor 
costs for each shipment would be $74.

                                    Table 2.--Annual Labeling Cost Estimates
----------------------------------------------------------------------------------------------------------------
                                               Reason for Refusal
-----------------------------------------------------------------------------------------------------------------
                                              Manufacturer
                                                   Not      Illegal Food/                                Total
                                               Registered/      Color       Pesticide     Sanitation     Annual
                                               Process Not    Additives   Contamination                 Refusals
                                                  Filed
----------------------------------------------------------------------------------------------------------------
Estimated refusals..........................      2,260         1,530            873         2,675         7,338
Percent correctable.........................        80%            0%             0%           50%
Number of refusals to be marked.............        452         1,530            873         1,337         4,192
----------------------------------------------------------------------------------------------------------------
                                                                                                FDA
 Costs...............................................................................................
----------------------------------------------------------------------------------------------------------------
FDA hours per refusal.......................          1.5           1.5            1.5           1.5
FDA hourly rate.............................        $49           $49            $49           $49
Total FDA cost..............................    $33,229      $112,445        $64,160       $98,297      $308,131
----------------------------------------------------------------------------------------------------------------
                                                                                                Impor
 ter Costs...........................................................................................
----------------------------------------------------------------------------------------------------------------
Importer hours per refusal..................          3             3              3             3
Importer hourly rate........................        $17.64        $17.64         $17.64        $17.64
Label costs.................................     $5,651       $19,123        $10,912       $16,717
Total importer cost.........................    $29,576      $100,083        $57,106       $87,491      $274,257
Static annual cost..........................    $62,805      $212,528       $121,266      $185,789      $582,388
Expected avoidance..........................        50%           50%            15%           15%
Dynamic annual cost.........................    $31,402      $106,264       $103,076      $157,921      $398,663
----------------------------------------------------------------------------------------------------------------


                     Table 3.--Fixed Labeling Costs
------------------------------------------------------------------------
        Labeling Guns for Importers
------------------------------------------------------------------------
Number of ports                                         132
Label guns needed per port of entry                       3
Cost per label gun                                     $100
Total label gun costs = Number of Parts x           $39,600
 label guns needed per port of entries x
 cost per label gun
------------------------------------------------------------------------


                         Table 4.--Total Costs
------------------------------------------------------------------------
        Labeling Guns for Importers
------------------------------------------------------------------------
Annual costs                                       $398,663

[[Page 6510]]

 
Other costs                                         $39,600
Total first-year costs                             $438,263
------------------------------------------------------------------------

    c. Diminished value of shipments. Cargo marked ``UNITED STATES 
REFUSED ENTRY'' will lose value due to diminished value in foreign 
ports, in addition to the loss of the U.S. market for the product. The 
importer or consignee suffers an initial loss of value due to rejection 
of its cargo, regardless of the mark. However, there is an additional 
loss of value attributable to the marking that is a cost of this rule. 
This loss of value is a cost of the rule that is borne directly by the 
importer or consignee, but may be passed on to consumers in the form of 
higher food prices. This loss ofvalue is difficult to quantify. How the 
mark decreases the value of the cargo would be a function of the 
initial value of the cargo, type of product, reason for refusal, and 
the reluctance of the new buyer to purchase previously refused 
merchandise.
5. Summary of Benefits and Costs
    The uncertain nature of the number of illnesses prevented and the 
difficulty in quantifying the benefits to consumer of having clean 
foods, regardless of the danger, prevents a definitive statement about 
benefits and costs. Because FDA expects the costs to be approximately 
$438,263, this sets a threshold value for the benefits. If the benefits 
due to reduced illness and consumer valuation of clean food exceed 
$438,263, the rule's benefits will exceed its costs.

E. Initial Regulatory Flexibility Analysis

1. Introduction
    FDA has examined the economic implication of these proposed rules 
as required by the Regulatory Flexibility Act (5 U.S.C. 601-612). If a 
rule would have 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.
2. Economic Effects on Small Entities
    The proposed rule, if finalized, would affect many small entities, 
primarily food importers or consignees. More than 95 percent (1,690 of 
1,725 importers identified through a search in Dialog Classic) of food 
importers are small (Ref. 3) as defined by the Small Business 
Administration (establishments with less than 100 employees). These 
small importers or consignees will face a cost of approximately $75 per 
unsafe food shipment in time and materials. In addition, the value of 
their unsafe food shipment will fall. This cost is difficult to 
quantify, but can be bounded by the cost of repackaging the 
merchandise. FDA does not expect this cost for any one small importer 
or consignee to be significant, so the agency concludes that this 
proposed rule does not place a disproportionate burden on small 
businesses. Furthermore, this cost is borne only by small businesses 
that attempt to re-import unsafe, and previously refused, foods.
3. Regulatory Options
    Exempting small businesses from the proposed rule would lift the 
burden on small entities. However, since most entities affected by the 
rule are small, this would effectively negate the rule's purpose. For 
reasons already discussed in section VII.C of this document, other 
regulatory options, such as destroying all refused food imports, taking 
no action, marking some but not all refused food imports, and marking 
based on geographic origin, are not feasible in light of the proposed 
rule's purposes. FDA also notes that the proposal contains options 
(with respect to the method used to affix the mark) for importers and 
consignees, and importers and consignees whose shipments are refused 
admission for safety reasons may decide to re-condition, destroy, or 
re-export an unsafe food import. Given these options available to small 
entities, FDA did not consider additional options.
4. Relevant Federal Rules Which May Duplicate, Overlap, or Conflict 
With the Proposed Rule
    FDA is not aware of any relevant Federal rule which may duplicate 
or conflict with the proposed rule. The exportation of refused food 
products must also comply with Customs rules for exportation of refused 
imports at 19 CFR 12.4, 18.25, 18.26, and 158.45. In addition, Customs 
routinely orders redelivery of refused merchandise under to the 
conditions contained in the basic importation and entry bond. 
Therefore, importers of refused food imports must comply with the bond 
conditions contained in 19 CFR 113.62, as required by 19 CFR 12.3.

VIII. Comments

    Interested persons may submit to the Dockets Management Branch 
(address above) written comments regarding this proposal by April 9, 
2001. Two copies of any comments are to be submitted, except that 
individuals may submit one copy. Comments are to be identified with the 
docket number found in brackets in the heading of this document. 
Received comments may be seen in the office above between 9 a.m. and 4 
p.m., Monday through Friday.

References

    The following references have been placed on display in the Dockets 
Management Branch (address above) and may be seen by interested persons 
between 9 a.m. and 4 p.m., Monday through Friday.
    1. Bureau of Labor Statistics, Employer Costs for Employee 
Compensation Summary, http://stats.bls.gov/news.release/ecec.nws.htm 
(1999).
    2. Congressional Hearing, The Safety of Food Imports: Fraud and 
Deception in the Food Import Process; Hearing Before the Senate 
Committee on Governmental Affairs, Permanent Subcommittee on 
Investigations, September 10, 1998.
    3. Dialog Classic. Search of wholesalers who import with SIC codes 
between 5141 to 5149 that are importers, February 29, 2000.
    4. Food and Drug Administration, ``Preliminary Regulatory Impact 
Analysis and Initial Regulatory Flexibility Analysis of the Proposed 
Rules to Ensure the Safety of Juice and Juice Products,'' (63 FR 24254, 
May 1, 1998).
    5. Food and Drug Administration, ``Preliminary Regulatory Impact 
Analysis and Initial Regulatory Flexibility Analysis of the Proposed 
Rule to Require Refrigeration of Shell Eggs at Retail and Safe Handling 
Labels,'' (64 FR 36516, July 6, 1999).
    6. Food Marketing Institute, 1999. Consumer Attitudes and the 
Supermarket. Research International USA.
    7. GAO Report, ``Food Safety: Federal Efforts to Ensure the Safety 
of Imported Foods are Inconsistent and Unreliable'' (GAO/RCED-98-103).
    8. Kaplan, R. M., J. P. Anderson, and T. G. Ganiats, ``The Quality 
of Well-

[[Page 6511]]

Being Scale: Rationale for a Single Quality of Life Index,'' edited by 
Walker, S. R. and Rosser, R. M., Quality of Life Assessment: Key Issues 
in the 1990s; The Netherlands: Kluwer Academic Publishers, 1993.
    9. Mauskopf, J.A., Mt French, A. S. Ross, D. M. Maguire, R. W. 
Leukrith, Jr., and K. D. Fisher, ``Estimating the Value of Consumers' 
Loss from Foods Violating the Federal Food, Drug, and Cosmetic Act,'' 
Research Triangle Report to the Center for Food Safety and Applied 
Nutrition, U.S. Food and Drug Administration, September 1988.
    10. Viscusi, W. K., ``The Value of Risks to Life and Health.'' 
Journal of Economic Literature, Volume 31, pp. 1912-1946, December 
1993.

List of Subjects in 21 CFR Part 1

    Cosmetics, Drugs, Exports, Food labeling, Imports, Labeling, 
Reporting and recordkeeping requirements.
    Therefore, under the Federal Food, Drug, and Cosmetic Act, the 
Public Health Service Act, and under authority delegated to the 
Commissioner of Food and Drugs, it is proposed that 21 CFR part 1 be 
amended as follows:

PART 1--GENERAL ENFORCEMENT REGULATIONS

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

    Authority: 15 U.S.C. 1453, 1454, 1455; 21 U.S.C. 321, 343, 352, 
355, 360b, 362, 371, 374, 381; 42 U.S.C. 216, 264.

    2. Add section 1.98 to subpart E to read as follows:


Sec. 1.98  Marking of food imports refused entry into the United 
States.

    (a) If you are an importer or consignee and your imported food has 
been refused admission into the United States for safety reasons and 
you want to reexport the food, you must mark the refused food, before 
you reexport it, with the following mark:
[GRAPHIC] [TIFF OMITTED] TP22JA01.168

    (b) You must make the mark at least 2.5 cm. or 1 inch high in 
capital or uppercase letters. The mark must be clear, conspicuous, and 
permanently affixed. You also must:
    (1) Affix the mark to the packing container of the food, if 
possible, and to an invoice, bill of lading, and any other shipping 
document accompanying the food when it is exported. For purposes of 
this rule, a packing container is any contaner used to pack one or more 
immediate containers of the refused food, and an immediate container is 
any container which holds an imported food for sale to the ultimate 
consumer. the term ``packing container'' excludes trailers, railroad 
cars and similar transportation-related items, and
    (2) Affix the mark, under the supervision of a FDA employee or 
individual designated by FDA, before the food is exported.
    (c) You must not:
    (1) Import or offer to import any food that has been previously 
refused admission into the United States and marked as ``UNITED STATES 
REFUSED ENTRY;'' or
    (2) Alter, remove, tamper with, or conceal a ``UNITED STATES 
REFUSED ENTRY'' mark.

    Dated: November 28, 2000.
Margaret M. Dotzel,
Associate Commissioner for Policy.
    January 9, 2001,
Timothy E. Skud,
Acting Deputy Assistant Secretary. Department of the Treasury.
[FR Doc. 01-1607 Filed 1-19-01; 8:45 am]
BILLING CODE 4160-01-F