Document ID: FDA-2016-N-4119-0001
Agency: fda
Document Type: Notice
Title: Food Safety Modernization Act Third-Party Certification Program User Fee
Rate for Fiscal Year 2017
Posted Date: 2016-12-14T05:00Z

[Federal Register Volume 81, Number 240 (Wednesday, December 14, 2016)]
[Notices]
[Pages 90363-90365]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-30034]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2016-N-4119]

Food Safety Modernization Act Third-Party Certification Program 
User Fee Rate for Fiscal Year 2017

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

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SUMMARY: The Food and Drug Administration (FDA) is announcing the 
fiscal year (FY) 2017 fee rate for accreditation bodies applying to be 
recognized in the third-party certification program that is authorized 
by the Federal Food, Drug, and Cosmetic Act (the FD&C Act), as amended 
by the FDA Food Safety Modernization Act (FSMA).

FOR FURTHER INFORMATION CONTACT: Sylvia Kim, Office of Foods and 
Veterinary Medicine, Food and Drug Administration, 10903 New Hampshire 
Ave., Bldg. 1, Rm. 3212, Silver Spring, MD 20993, 301-796-7599.

DATES: This fee is effective January 13, 2017, and will remain in 
effect through September 30, 2017.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 307 of FSMA, Accreditation of Third-Party Auditors, amends 
the FD&C Act to create a new provision, section 808, under the same 
name. Section 808 of the FD&C Act (21 U.S.C. 384d) directs us to 
establish a new program for accreditation of third-party certification 
bodies \1\ conducting food safety audits and issuing food and facility 
certifications to eligible foreign entities (including registered 
foreign

[[Page 90364]]

food facilities) that meet our applicable requirements. Under this 
provision, we will recognize accreditation bodies to accredit 
certification bodies, except for limited circumstances in which we may 
directly accredit certification bodies to participate in the third-
party certification program.
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    \1\ For the reasons explained in the third-party certification 
final rule (80 FR74570 at 74578-74579, November 27, 2015), and for 
consistency with the implementing regulations for the third-party 
certification program in 21 CFR parts 1, 11, and 16, this notice 
uses the term ``third-party certification body'' rather than the 
term ``third-party auditor'' used in section 808(a)(3) of the FD&C 
Act.
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    Section 808(c)(8) of the FD&C Act directs FDA to establish a 
reimbursement (user fee) program by which we assess fees and require 
reimbursement for the work FDA performs to establish and administer the 
third-party certification program under section 808 of the FD&C Act. 
The FSMA FY 2017 third-party certification program user fee rate 
announced in this notice is effective on January 13, 2017, and will 
remain in effect through September 30, 2017. We plan to publish the 
FSMA third-party certification program user fee rates for FY 2018 prior 
to the beginning of the next fiscal year.
    Section 808(c)(8) of the FD&C Act requires FDA to establish the 
user fee program for the third-party certification program by 
regulation. Elsewhere in this issue of the Federal Register we are 
issuing a final rule entitled ``Amendments to Accreditation of Third-
Party Certification Bodies to Conduct Food Safety Audits and To Issue 
Certifications to Provide for the User Fee Program.''

II. Estimating the Average Cost of a Supported Direct FDA Work Hour for 
FY 2017

    In each year, the costs of salary (or personnel compensation) and 
benefits for FDA employees account for between 50 and 60 percent of the 
funds available to, and used by, FDA. Almost all of the remaining funds 
(operating funds) available to FDA are used to support FDA employees 
for paying rent, travel, utility, information technology, and other 
operating costs.

A. Estimating the Full Cost per Direct Work Hour in FY 2015

    In general, the starting point for estimating the full cost per 
direct work hour is to estimate the cost of a full-time equivalent 
(FTE) or paid staff year for the relevant activity. This is done by 
dividing the total funds allocated to the elements of FDA primarily 
responsible for carrying out the activities for which fees are being 
collected by the total FTEs allocated to those activities. For the 
purposes of the third-party certification program user fees authorized 
by section 808(c)(8) of the FD&C Act (the fees that are the subject of 
this notice), primary responsibility for the activities for which fees 
will be collected rests with FDA's Office of Regulatory Affairs (ORA). 
ORA carries out field-based activities on behalf of FDA's product 
centers, including the Center for Food Safety and Applied Nutrition 
(CFSAN) and the Center for Veterinary Medicine (CVM). Thus, as the 
starting point for estimating the full cost per direct work hour, FDA 
will use the total funds allocated to ORA for CFSAN and CVM related 
field activities. The most recent fiscal year with available data was 
FY 2015. In that year, FDA obligated a total of $666,722,326 for ORA in 
carrying out the CFSAN and CVM related field activities work, excluding 
the cost of inspection travel. In that same year, the number of ORA 
staff primarily conducting the CFSAN and CVM related field activities 
was 3,022 FTEs or paid staff years. Dividing $666,722,326 by 3,022 FTEs 
results in an average cost of $220,623 per paid staff year, excluding 
travel costs.
    Not all of the FTEs required to support the activities for which 
fees will be collected are conducting direct work such as conducting 
onsite assessments. Data collected over a number of years and used 
consistently in other FDA user fee programs (e.g., under the 
Prescription Drug User Fee Act (PDUFA) and the Medical Device User Fee 
and Modernization Act (MDUFA)) show that every seven FTEs who perform 
direct FDA work require three indirect and supporting FTEs. These 
indirect and supporting FTEs function in budget, facility, human 
resource, information technology, planning, security, administrative 
support, legislative liaison, legal counsel, program management, and 
other essential program areas. On average, two of these indirect and 
supporting FTEs are located in ORA or the FDA center where the direct 
work is being conducted, and one of them is located in the Office of 
the Commissioner. To get the fully supported cost of an FTE, FDA needs 
to multiply the average cost of an FTE by 1.43, to take into account 
the indirect and supporting functions. The 1.43 factor is derived by 
dividing the 10 fully supported FTEs by 7 direct FTEs. In FY 2015, the 
average cost of an FTE was $220,623. Multiplying this amount by 1.43 
results in an average fully supported cost of $315,491 per FTE, 
excluding the cost of travel.
    To calculate an hourly rate, FDA must divide the average fully 
supported cost of $315,491 per FTE by the average number of supported 
direct FDA work hours. See table 1.

      Table 1--Supported Direct FDA Work Hours in a Paid Staff Year
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Total number of hours in a paid staff year.....................    2,080
Less:
  10 paid holidays.............................................       80
  20 days of annual leave......................................      160
  10 days of sick leave........................................       80
  10 days of training..........................................       80
  2 hours of meetings per week.................................       80
                                                                --------
    Net Supported Direct FDA Work Hours Available for              1,600
     Assignments...............................................
------------------------------------------------------------------------

    Dividing the average fully supported cost of an FTE in FY 2015 
($315,491) by the total number of supported direct work hours available 
for assignment (1,600) results in an average fully supported cost of 
$197 (rounded to the nearest dollar), excluding travel costs, per 
supported direct work hour in FY 2015--the last fiscal year for which 
complete data are available.

B. Adjusting FY 2015 Costs for Inflation To Estimate FY 2017 Costs

    To adjust the hourly rate for FY 2017, FDA must estimate the cost 
of inflation in each year for FY 2016 and FY 2017. FDA uses the method 
prescribed for estimating inflationary costs under the PDUFA provisions 
of the FD&C Act (section 736(c)(1) (21 U.S.C. 379h(c)(1)), the 
statutory method for inflation adjustment in the FD&C Act that FDA has 
used consistently. FDA previously determined the FY 2016 inflation rate 
to be 2.0266; this rate was published in the FY 2016 PDUFA user fee 
rates notice in the Federal Register of August 3, 2015 (80 FR 46028). 
Utilizing the method set forth in section 736(c)(1) of the FD&C Act, 
FDA has calculated an inflation rate of 1.5468 percent for FY 2017 and 
FDA intends to use this inflation rate to make inflation adjustments 
for FY 2017 for several of its user fee programs; the derivation of 
this rate is published in the Federal Register in the FY 2017 notice 
for the PDUFA user fee rates (81 FR 49674). The compounded inflation 
rate for FYs 2016 and 2017, therefore, is 3.6047 percent (1 plus 2.0266 
percent times 1 plus 1.5468 percent).
    Increasing the FY 2015 average fully supported cost per supported 
direct FDA work hour of $197 (excluding travel costs) by 3.6047 percent 
yields an inflationary adjusted estimated cost of $204 per a supported 
direct work hour in FY 2017, excluding travel costs. FDA will use this 
base unit fee in determining the hourly fee rate for third-party 
certification program fee for FY 2017 prior to including travel costs 
as applicable for the activity. For the purpose of estimating the fee, 
we are

[[Page 90365]]

using the travel cost rate for foreign travel, because we anticipate 
that the vast majority of onsite assessments made by FDA under this 
program will require foreign travel. In FY 2015, ORA spent a total of 
$2,521,216 on 269 foreign inspection trips related to FDA's CFSAN and 
CVM field activities programs, which averaged a total of $9,373 per 
foreign inspection trip. These trips averaged 3 weeks (or 120 paid 
hours) per trip. Dividing $9,373 per trip by 120 hours per trip results 
in a total and an additional cost of $78 per paid hour spent for 
foreign inspection travel costs in FY 2015. To adjust $78 for 
inflationary increases in FY 2016 and FY 2017, FDA must multiply it by 
the same inflation factor mentioned previously in this document 
(1.036047), which results in an estimated cost of $81 dollars per paid 
hour in addition to $204 for a total of $285 per paid hour ($204 plus 
$81) for each direct hour of work requiring foreign inspection travel. 
FDA will use these rates in charging fees in FY 2017 when travel is 
required for the third-party certification program.

                 Table 2--FSMA Fee Schedule for FY 2017
------------------------------------------------------------------------
                                                           Fee rates for
                      Fee category                            FY 2017
------------------------------------------------------------------------
Hourly rate without travel..............................            $204
Hourly rate if travel is required.......................             285
------------------------------------------------------------------------

III. Application Fee for Accreditation Bodies Applying for Recognition 
in the Third-Party Certification Program Under Section 808(c)(8) of the 
FD&C Act

    In FY 2017 (the first fiscal year in which the program will 
operate), the only fee that will be collected by FDA under section 
808(c)(8) of the FD&C Act is the initial application fee for 
accreditation bodies seeking recognition. Section 1.705(a)(1) 
establishes an application fee for accreditation bodies applying for 
initial recognition that represents the estimated average cost of the 
work FDA performs in reviewing and evaluating initial applications for 
recognition of accreditation bodies.
    The fee is based on the fully supported FTE hourly rates and 
estimates of the number of hours it would take FDA to perform relevant 
activities. These estimates represent FDA's current thinking, and as 
the program evolves, FDA will reconsider the estimated hours. We 
estimate that it would take, on average, 60 person-hours to review an 
accreditation body's submitted application, 48 person-hours for an 
onsite performance evaluation of the applicant (including travel and 
other steps necessary for a fully supported FTE to complete an onsite 
assessment), and 45 person-hours to prepare a written report 
documenting the onsite assessment.
    FDA employees are likely to review applications and prepare reports 
from their worksites, so we use the fully supported FTE hourly rate 
excluding travel, $204/hour, to calculate the portion of the user fee 
attributable to those activities: $204/hour x (60 hours + 45 hours) = 
$21,420. FDA employees will likely travel to foreign countries for the 
onsite performance evaluations because most accreditation bodies are 
located in foreign countries. For this portion of the fee we use the 
fully supported FTE hourly rate for work requiring travel, $285/hour, 
to calculate the portion of the user fee attributable to those 
activities: $285 x 48 hours (i.e., 2 fully supported FTEs x (2 travel 
days + 1 day onsite)) = $13,680. The estimated average cost of the work 
FDA performs in total for reviewing an initial application for 
recognition for an accreditation body based on these figures would be 
$21,420 + $13,680 = $35,100. Therefore the application fee for 
accreditation bodies applying for recognition in FY 2017 will be 
$35,100.

IV. Estimated Fees for Accreditation Bodies and Certification Bodies in 
Fee Categories Not Applicable in FY 2017

    The third-party certification program will also assess other 
application fees and annual fees in future years of this program. 
Section 1.705(a) also establishes application fees for recognized 
accreditation bodies submitting renewal applications, certification 
bodies applying for direct accreditation, and certification bodies 
applying for renewal of direct accreditation. Section 1.705(b) 
establishes annual fees for recognized accreditation bodies, 
certification bodies directly accredited by FDA, and certification 
bodies accredited by recognized accreditation bodies.
    Although we will not be collecting these other fees in FY 2017, for 
transparency and planning purposes, we have provided an estimate of 
what these fees could have been for FY 2017 based on the fully 
supported FTE hourly rates for FY 2017 and estimates of the number of 
hours it would take FDA to perform relevant activities as outlined in 
the Final Regulatory Impact Analysis for the Third-Party Certification 
Regulation. Table 3 provides an overview of the estimated fees for 
other fee categories.

------------------------------------------------------------------------
                                                           Estimated fee
                      Fee category                         rates for FY
                                                               2017
------------------------------------------------------------------------
Renewal application fee for recognized accreditation             $18,855
 body...................................................
Initial application fee for certification body seeking            35,100
 direct-accreditation from FDA..........................
Renewal application fee for directly-accredited                   26,460
 certification body.....................................
Annual fee for recognized accreditation body............           1,579
Annual fee for certification body directly-accredited by          20,208
 FDA....................................................
Annual fee for accredited certification body............           1,974
------------------------------------------------------------------------

V. How Must the Fee Be Paid?

    Accreditation bodies seeking initial recognition must submit the 
application fee with the application.

VI. What Are the Consequences of Not Paying This Fee?

    The consequence of not paying this fee is outlined in Sec.  1.725. 
If FDA does not receive an application fee with an application for 
recognition, the application will be considered incomplete and FDA 
would not review the application.

    Dated: December 9, 2016.
Leslie Kux,
Associate Commissioner for Policy.
[FR Doc. 2016-30034 Filed 12-13-16; 8:45 am]
 BILLING CODE 4164-01-P