
[Federal Register: July 9, 2009 (Volume 74, Number 130)]
[Rules and Regulations]               
[Page 33029-33101]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09jy09-9]                         


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Part II





Department of Health and Human Services





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Food and Drug Administration



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21 CFR Parts 16 and 118



Prevention of Salmonella Enteritidis in Shell Eggs During Production, 
Storage, and Transportation; Final Rule


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Parts 16 and 118

[Docket No. FDA-2000-N-0190] (Formerly Docket No. 2000N-0504)
RIN 0910-AC14

 
Prevention of Salmonella Enteritidis in Shell Eggs During 
Production, Storage, and Transportation

AGENCY: Food and Drug Administration, HHS.

ACTION: Final rule.

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SUMMARY: The Food and Drug Administration (FDA) is issuing a final rule 
that requires shell egg producers to implement measures to prevent 
Salmonella Enteritidis (SE) from contaminating eggs on the farm and 
from further growth during storage and transportation, and requires 
these producers to maintain records concerning their compliance with 
the rule and to register with FDA. FDA is taking this action because SE 
is among the leading bacterial causes of foodborne illness in the 
United States, and shell eggs are a primary source of human SE 
infections. The final rule will reduce SE-associated illnesses and 
deaths by reducing the risk that shell eggs are contaminated with SE.

DATES: This final rule is effective September 8, 2009. The Director of 
the Office of the Federal Register approves the incorporation by 
reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51 of 
certain publications in new 21 CFR 118.8 as of September 8, 2009. 
Please see section II.C of this document for the compliance dates of 
this final rule. Submit comments on information collection issues under 
the Paperwork Reduction Act of 1995 by August 10, 2009 (see the 
``Paperwork Reduction Act of 1995'' section of this document).

FOR FURTHER INFORMATION CONTACT: John Sheehan, Center for Food Safety 
and Applied Nutrition (HFS-315), Food and Drug Administration, 5100 
Paint Branch Pkwy., College Park, MD 20740, 301-436-1488.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
    A. FDA's Proposed Rule
    B. What Are Salmonella and SE Infection?
    C. What Is the Connection Between Salmonella and Shell Eggs?
    D. The U.S. Egg Industry
    E. Current On-Farm Practices
    F. Voluntary EQAPs
    G. The Food Code
    H. Rationale for the Final Rule
II. Highlights of the Final Rule and Summary of Significant 
Differences Between the Proposed and Final Rules
    A. Highlights of the Final Rule
    B. Significant Differences Between the Proposed and Final Rules
    C. Compliance Dates
III. Comments on the Proposed Rule
    A. General Comments
    B. Comments on ``Persons Covered by the Requirements in This 
Part'' (Proposed and Final Sec.  118.1)
    C. Comments on ``Definitions'' (Proposed and Final Sec.  118.3)
    D. Comments on ``Salmonella Enteritidis (SE) Prevention 
Measures'' (Proposed and Final Sec.  118.4)
    E. Comments on ``Environmental Testing for Salmonella 
Enteritidis (SE)'' (Proposed and Final Sec.  118.5)
    F. Comments on ``Egg Testing for Salmonella Enteritidis (SE)'' 
(Proposed and Final Sec.  118.6)
    G. Comments on ``Sampling Methodology for Salmonella Enteritidis 
(SE)'' (Proposed and Final Sec.  118.7)
    H. Comments on ``Testing Methodology for Salmonella Enteritidis 
(SE)'' (Proposed and Final Sec.  118.8)
    I. Comments on ``Administration of the Salmonella Enteritidis 
(SE) Prevention Plan'' (Proposed and Final Sec.  118.9)
    J. Comments on ``Recordkeeping Requirements for the Salmonella 
Enteritidis (SE) Prevention Plan'' (Proposed and Final Sec.  118.10)
    K. Comments on ``Registration Requirements for Shell Egg 
Producers Covered by the Requirements of This Part'' (Final Sec.  
118.11)
    L. Comments on ``Enforcement and Compliance'' (Proposed and 
Final Sec.  118.12)
    M. Comments on Request for Comments as to Whether FDA Should 
Mandate Special Requirements for Certain Food Establishments That 
Serve Highly Susceptible Populations
IV. Legal Authority
V. Analysis of Economic Impacts--Final Regulatory Impact Analysis
    A. Introduction
    B. Need for Regulation
    C. Comments on the Preliminary Regulatory Impact Analysis in the 
Proposed Rule and Responses
    D. Economic Analysis of Potential Mitigations: Overview
    E. Summary of Costs and Benefits of Regulatory Options and the 
Rule
    F. Benefits and Costs of Potential SE Prevention Measures: 
Detailed Analysis
    G. Summary of Benefits and Costs of the Final Rule
VI. Final Regulatory Flexibility Analysis
    A. Introduction
    B. Economic Effects on Small Entities
    C. Regulatory Options
    D. Description of Recordkeeping and Recording Requirements
    E. Summary
VII. Unfunded Mandates
VIII. Small Business Regulatory Enforcement Fairness Act
IX. Paperwork Reduction Act of 1995
X. Analysis of Environmental Impact
XI. Federalism
XII. References

I. Background

A. FDA's Proposed Rule

    On September 22, 2004, FDA proposed a rule to prevent SE 
contamination in shell eggs during production (the proposed rule) (69 
FR 56824). The proposed rule set out several measures to be taken by 
egg producers to prevent the contamination of shell eggs with SE during 
egg production, such as implementation of biosecurity and pest control 
programs, environmental and egg testing requirements, and requirements 
concerning refrigerated storage of eggs at the farm and diversion from 
the table egg market of eggs from flocks in which SE has been detected 
(69 FR 56824).
    In addition, in the proposed rule we solicited comments on whether 
we should include additional requirements in the final rule, 
particularly in two areas. First, we asked whether we should expand the 
proposed recordkeeping requirements to include a written SE prevention 
plan and records documenting compliance with the SE prevention measures 
(69 FR 56824 at 56825 and 56841 through 56842). Second, we asked 
whether the safe egg handling and preparation practices in FDA's Food 
Code (see http://www.cfsan.fda.gov/~dms/fc05-toc.html (accessed 
December 14, 2006)) should be federally mandated for establishments 
that specifically serve a highly susceptible population (such as 
nursing homes, hospitals, and daycare centers) (69 FR 56824 at 56825 
and 56849 through 56852).
    The proposed rule had a 90-day comment period, which ended on 
December 21, 2004. To discuss the proposed rule and solicit comments 
from interested stakeholders, FDA held three public meetings in 2004. 
Based on comments received in response to the proposed rule, FDA 
reopened the comment period on May 10, 2005, for the limited purpose of 
receiving comments and other information regarding industry practices 
and programs that prevent SE-monitored chicks from becoming infected by 
SE during the period of pullet rearing until placement into laying hen 
houses (70 FR 24490). The term ``pullet'' refers to a chicken less than 
20 weeks of age. On May 24, 2005, FDA received a request for an 
extension of the reopened comment period from two of the major trade 
associations representing egg producers and others affected by this

[[Page 33031]]

rule. We agreed to extend the reopened comment period until July 25, 
2005.

B. What Are Salmonella and SE Infection?

    As we described in greater detail in the proposed rule (69 FR 56824 
at 56825 through 56827), Salmonella microorganisms are ubiquitous and 
are commonly found in the digestive tracts of animals, especially birds 
and reptiles. Human illnesses are usually associated with ingesting 
food or drink contaminated with Salmonella, although infection also may 
be transmitted person-to-person through the fecal-oral route where 
personal hygiene is poor or by the animal-to-man route (Ref. 1-2).
    All people are at risk for salmonellosis, although the severity of 
the infection is influenced by a person's age and immune status. 
Salmonella infections are characterized by diarrhea, fever, abdominal 
cramps, headache, nausea, and vomiting. Symptoms usually begin within 6 
to 72 hours after consuming a contaminated food or liquid and last for 
4 to 7 days. Most healthy people recover without antibiotic treatment; 
however, the diarrhea can be severe, and the person may be ill enough 
to require hospitalization. In some patients, the infection can spread 
into the bloodstream, then to other areas of the body, such as the bone 
marrow or the meningeal linings of the brain. This infection can lead 
to a severe and fatal illness (Ref. 2). These complications associated 
with an infection are more likely to occur in children, the elderly, 
and persons with a weakened immune system.
    In addition, about 2 percent of those who recover from 
salmonellosis may later develop recurring joint pain and reactive 
arthritis (Ref. 3, 4).
    Salmonellosis is a serious health concern. It is a notifiable 
disease, i.e., physicians and health laboratories are required to 
report cases (single occurrences of illness) to local health 
departments in accordance with procedures established by each State. 
These cases are then reported to State health departments, and the 
Salmonella isolates are referred to State Public Health laboratories 
for serotyping (a method of distinguishing related organisms by their 
antigens). Each case and each serotyped isolate is reported to the U.S. 
Centers for Disease Control and Prevention (CDC). These reports are 
made only for diagnosed cases of Salmonella infection.
    A case of illness is confirmed as salmonellosis only if an isolate 
is confirmed by a laboratory as being Salmonella. Although all cases 
may not be confirmed, all confirmed cases are associated with isolates 
of Salmonella. Reported cases are likely to represent only a small 
portion of the actual number of illnesses that occur because of the 
following reasons: (1) Ill individuals do not always seek care by 
medical professionals, especially if the symptoms are not severe; (2) 
medical professionals may not establish the cause of the illness but 
may simply treat the symptoms; and (3) medical professionals do not 
always report Salmonella cases to public health officials. CDC 
estimates that there are 38 cases of salmonellosis for every reported 
culture-confirmed case (Ref. 5). The overall burden of salmonellosis in 
2001 was estimated to be 1,203,650 cases, including 14,000 
hospitalizations, and 494 deaths (Refs. 6 and 7). Updated Salmonella 
surveillance data for 2004 indicate that the burden of salmonellosis in 
2004 was somewhat higher, estimated to be 1,376,514 cases, including 
14,264 hospitalizations, and 427 deaths (Refs. 5 and 8).
    CDC surveillance data list close to 600 different Salmonella 
serotypes that have caused illness in the United States. Since 1995, 
Salmonella enterica serotype Enteritidis (SE) has been the second most 
frequently reported cause of Salmonella infection (Ref. 9). CDC 
reported that in 2008 SE was the leading reported cause of Salmonella 
infections, accounting for 20.1% of all of the Salmonella isolates that 
were serotyped (Ref. 10). The rate of SE isolates reported to CDC 
increased from 0.6 per 100,000 population in 1976 to 3.6 per 100,000 
population in 1996 (Ref. 11-12). In 2001 the isolation rate for SE was 
2.0 per 100,000 population, and the annual contribution of SE 
(corrected for underreporting) to salmonellosis was estimated to be 
193,463 illnesses, including 2,004 hospitalizations and 60 deaths 
(Refs. 5 and 8). Estimated incidence of Salmonella infection in 2008 
did not change significantly compared with estimates for the preceding 
3 years, and in particular the apparent increase in Salmonella 
infections was not significant. However, the incidence of SE did 
increase by 19% (CI = 3%-39%) (Ref. 10). These data confirm the 
continued significance of SE as a cause of human infection in the 
United States.
    In 1985, States reported to CDC 26 SE-related outbreaks (i.e., 
occurrences of 2 or more cases of a disease related to a common 
source); by 1990 the number of SE-related outbreaks reported to CDC had 
increased to 85. The number of outbreaks began declining in the 1990s; 
in 1995 there were 56 confirmed outbreaks of SE infection, in 2000 
there were 50, and in 2002 there were 32 (Ref. 13). The number of 
outbreaks has remained roughly constant since 2002; in 2004 there were 
28, in 2005 there were 35, and in 2006 there were 26 SE outbreaks in 
the United States (Ref. 13). Although these data indicate that there 
has been a decrease in reported outbreaks (and associated illness) 
linked to SE infection since the mid-1990s, the incidence of SE 
infection in the United States remains much higher than in the 1970s 
(Ref. 14), and the decrease in reported outbreaks of SE illness since 
1999 has appeared to slow or stop compared to decreases seen in the 
mid-1990s (Ref. 15). CDC recently reported that, of the four pathogens 
with HP2010 targets, Salmonella, with 16.2 cases per 100,000 in 2008, 
is the farthest from its 2010 target (6.8) (Ref. 10). If current trends 
continue, we will fall short of the public health and foodborne illness 
gains required to meet the Healthy People 2010 goal of a 50 percent 
reduction from the 1997 baseline in both the number of SE foodborne 
outbreaks and the rate of isolation in the population of foodborne 
Salmonella infections (Ref. 16).

C. What Is the Connection Between Salmonella and Shell Eggs?

    CDC established an epidemiological and laboratory association 
between eggs and Salmonella outbreaks in the mid-1980s (see 69 FR 56824 
at 56826 through 56827). Shell eggs are the predominant source of SE-
related cases of salmonellosis in the United States where a food 
vehicle is identified (a food vehicle is identified in approximately 
half of the outbreaks of illness associated with SE). Between 1985 and 
2002, a total of 53 percent of all SE illnesses identified through CDC 
outbreak surveillance are attributable to eggs. Where a vehicle of 
transmission was identified, 81 percent of outbreaks and 79 percent of 
illnesses identified through outbreaks were attributed to eggs (Ref. 
17). These data are in accord with a published analysis by CDC 
researchers reporting that between 1990 and 2001, 78 percent of 
vehicle-confirmed SE outbreaks were associated with eggs, primarily raw 
or undercooked (Ref. 15). Over that decade, 14,319 illnesses were 
attributed to SE associated with shell eggs (Ref. 15). Most of these 
attributed illnesses occurred before 1995 (10,406 illnesses), but 3,913 
occurred during 1996 through 2001. We believe egg quality assurance 
programs (EQAPs), consumer and retailer education, and Federal 
regulations requiring egg refrigeration have contributed to the 
decrease in SE

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illness since the mid-1990s, but that further reductions in SE illness 
and foodborne salmonellosis cannot be accomplished without additional 
Federal measures to address SE contamination of shell eggs.
    The surface of an egg can become contaminated with any 
microorganism that might be excreted by a laying hen or through contact 
with contaminated nesting materials, dust, feedstuff, shipping and 
storage containers, human beings, and other animals. The likelihood of 
trans-shell penetration increases with the length of time that the eggs 
are in contact with contaminating materials. This mechanism of 
contamination was previously considered the source of all SE 
contamination of eggs.
    However, while environmental contamination is still a route for 
Salmonella contamination, SE experts now believe that the predominant 
route through which eggs become contaminated with SE is the 
transovarian route. Although the mechanism is still not well 
understood, SE will infect the ovaries and oviducts of some egg-laying 
hens, permitting transovarian contamination of the interior of the egg 
while the egg is still inside the hen (Refs. 18 and 19). The site of 
contamination is usually the albumen (the egg white).
    Researchers believe that only a small number of hens in an infected 
flock shed SE at any given time and that an infected hen may lay many 
uncontaminated eggs (Ref. 20). In a farm-to-table risk assessment of SE 
in eggs which was conducted by FDA and the U.S. Department of 
Agriculture's (USDA's) Food Safety and Inspection Service (FSIS) (``the 
1998 joint SE risk assessment'') (Ref. 21), we estimated that of the 47 
billion shell eggs consumed annually as table eggs (eggs consumed as 
shell eggs, as opposed to eggs that are used to make egg products), 2.3 
million are SE-positive, exposing a large number of people to the risk 
of illness (Ref. 21). FDA and FSIS updated this risk assessment in 2005 
and derived this same estimate (Ref. 22). This figure is based on data 
compiled from 1991 to 1995 (Ref. 23).

D. The U.S. Egg Industry

    On a per capita basis, Americans consume about 234 eggs per year 
(Ref. 24). U.S. production is relatively stable and has increased only 
slightly over time. For example, it was at about 60 billion eggs in 
1984 and at 67.3 billion eggs in 1998 (Ref. 25). Generally, about 70 
percent of the edible shell eggs produced are sold as table eggs, while 
the remainder are processed into liquid, frozen, or dried pasteurized 
egg products. The majority of egg products are destined for 
institutional use or further processing into foods such as cake mixes, 
pasta, ice cream, mayonnaise, and bakery goods.
    Geographically, commercial egg production in the western United 
States is concentrated in California, and in the eastern United States 
is centered in Ohio, Indiana, Iowa, and Pennsylvania. Other States in 
which major producers are located include Texas, Minnesota, and 
Georgia. Over 4,000 farm sites have 3,000 or more egg-laying hens, 
representing 99 percent of all domestic egg-laying hens and accounting 
for 99 percent of total egg production. There are an additional 65,000 
farms with fewer than 3,000 egg-laying hens, accounting for the balance 
of eggs produced (Ref. 26).

E. Current On-Farm Practices

    In the proposed rule we described in detail current farm practices 
to address the risk of SE contamination (69 FR 56824 at 56830 through 
56831). Most of the information we provided came from a 1999 study (the 
Layers 99 study) (Refs. 27, 28, and 29) by USDA's Animal and Plant 
Health Inspection Service (APHIS) National Animal Health Monitoring 
System (NAHMS), as well as information on voluntary EQAPs, which are 
discussed more fully in section I.G of this document.
    The Layers 99 study was designed to include information from States 
that account for at least 70 percent of the animal and farm population 
in the United States (Refs. 27, 28, and 29). Each operation 
participating in the study had more than 30,000 laying hens. The study 
found that egg laying operations varied considerably in size and style 
of poultry house; approximately 34 percent of the houses had fewer than 
50,000 layers, 29 percent had 50,000 to 99,999 layers, 20 percent had 
100,000 to 199,999 layers, and 17 percent had 200,000 or more layers. 
One-third of farm sites surveyed had only one layer house, while 16.5 
percent had six or more layer houses. The study also found wide 
variability within the poultry houses with respect to style of housing 
and number and level of cages, although less than one percent were 
cage-free. Manure handling varied with house style and also varied 
regionally.
    The study found that, when a poultry house is repopulated with new 
laying hens (also known as ``layers''), most of the new layers come 
from a pullet raising facility. Less than 10 percent of layer farms 
raised pullets at the layer farm site, although some layer farms had 
their own pullet-raising facilities at other locations. Most (95 
percent) of pullets in pullet-raising facilities came as chicks from 
National Poultry Improvement Plan (NPIP) monitored breeder flocks. 
USDA's NPIP is a cooperative Federal-State-industry mechanism intended 
to prevent and control egg-transmitted, hatchery-disseminated poultry 
diseases. NPIP has monitoring programs for many avian diseases and 
pathogens, including SE. Chicks are SE-monitored if they are hatched 
from eggs from flocks that are certified through NPIP as ``U.S. S. 
Enteritidis Clean'' breeder flocks (9 CFR 145.23(d)).
    Many pullet-raising facilities in the Layers 99 study had their own 
programs for SE monitoring. In the West region, 83 percent of farms 
obtained layers from SE-monitored pullet facilities, and 70 percent of 
layers on all farms came from SE-monitored pullet facilities. Pullet 
facilities used one or more of the following methods to monitor SE: (1) 
Dead chick/chick paper testing, (2) environmental culture, (3) bird 
culture, and (4) serology. Some pullet facilities used competitive 
exclusion products and/or vaccines to protect pullets against SE.
    The study found that in 1997, the average flock was placed for its 
first production cycle at 17.5 weeks of age. Flocks in their first 
production cycle reached peak production around 29 weeks of age. At 
peak production, the average maximum number of eggs produced was 90 
eggs per 100 hens per day. Induced molting was used on many farms (83 
percent of farm sites). In the West and Southeast regions, 95 percent 
or more of farms molted birds, while in the Central region just over 
half (57 percent) of the farms molted birds. On average, molted flocks 
ended production at 111 weeks of age, while non-molted flocks ended 
production at 74 weeks of age.
    Approximately two-thirds of farms had biosecurity measures that did 
not allow visitors without a business reason to enter poultry houses. 
Sixty-two percent of farms that allowed visitors allowed business 
visitors provided they had not been on another poultry farm that day. 
Of the farms that allowed visitors in the layer house, most farms (76 
percent) required that visitors wear clean boots. The majority of farms 
prohibited employees from being around other poultry and from owning 
their own birds.
    With respect to pest control, the Layers 99 study estimated that 
rodents and flies had access to feed in feed troughs on nearly all 
farms. Fly control was practiced on 90 percent of all farms; baiting 
was the most common form of

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fly control (72 percent of farms). Essentially all farms used some type 
of rodent control. Chemicals and baits were used for rodent control by 
93 percent of farms. Professional exterminators were used on less than 
15 percent of farms that used rodent control. Producers rated almost 30 
percent of farms as having a moderate or severe problem with mice and 
almost 9 percent as having a moderate or severe problem with rats.
    The Layers 99 study found essentially all farms emptied feeders, 91 
percent emptied feed hoppers, 81 percent flushed water lines, 79 
percent dry cleaned cages, walls, and ceilings, and 71 percent cleaned 
fans and ventilation systems. Approximately one-third of farm sites 
never cleaned or disinfected egg belts/elevators between flocks. Down 
time between flocks varied regionally; most farms had a down time of 
more than 11 days, although some were down for less than 4 days.
    The Layers 99 study showed that, in 1997, 58 percent of farms 
tested for SE. The number of farms testing for SE varied by region. The 
number and regional distribution of farms doing testing for SE is very 
similar to the number and distribution of farms participating in an 
EQAP.

F. Voluntary EQAPs

    The Layers 99 study found that 51 percent of all farm sites 
participated in an EQAP sponsored by a State or commodity group (e.g., 
United Egg Producers). The Salmonella Enteritidis Pilot Project (SEPP), 
begun in 1992 by USDA with special funding from Congress, was one of 
the first EQAPs in the United States (in 1994, SEPP became the 
Pennsylvania Egg Quality Assurance Program (PEQAP)). Currently, there 
are at least nine voluntary EQAPs operated and administered by States 
or other organizations (Refs. 30 through 36). In addition, certain egg 
companies operate an EQAP within their own facilities (Ref. 28).
    Currently, EQAPs are voluntary for producers. These programs have 
similar requirements, but vary in how they implement these 
requirements. All programs require use of NPIP ``U.S. S. Enteritidis 
Clean'' chicks or equivalent, biosecurity, rodent control, and cleaning 
and disinfection of poultry houses. Although most programs require some 
environmental testing, the amount varies from once to four or five 
times during the life of a flock. If an environmental test is SE-
positive (i.e., SE is detected at any level in any sample), several 
programs require egg testing, with diversion if the egg testing is SE-
positive. Several programs also have State government oversight and 
recordkeeping requirements. All programs have some educational programs 
for participants.

G. The Food Code

    FDA regularly publishes the Food Code, which provides guidance on 
food safety, sanitation, and fair dealing that can be uniformly adopted 
by State and local governments for the retail segment of the food 
industry. The Food Code provisions are not Federal requirements; 
however, they are designed to be consistent with Federal food laws and 
regulations. The Food Code is written so that all levels of government 
can easily adopt its text into a legal requirement.
    Beginning with the 1993 edition, the Food Code was issued in its 
current format and was revised every 2 years. In 2002, with the support 
of the Conference for Food Protection, FDA decided to move to a 4-year 
interval between complete Food Code revisions. FDA published the 2005 
Food Code, which is the first full edition to publish since the 2001 
edition. During the 4-year interim period, a Food Code Supplement that 
updated, modified, and clarified certain provisions was made available. 
The provisions relevant to egg safety at establishments serving highly 
susceptible populations can be found in the 2001 Food Code in sections 
3-202.11(C), 3-202.13, 3-202.14(A), 3-401.11(A)(1)(a) and 3-
801.11(B)(1), (B)(2), (D)(1), (D)(2), (E)(1), and (E)(2). These Food 
Code provisions include the use of pasteurized eggs in recipes where 
eggs are raw or undercooked (e.g., Caesar salad, hollandaise sauce, 
eggnog), and if eggs are combined, unless the eggs are cooked to order 
and immediately served or combined immediately before baking and 
thoroughly cooked. The 2001 provisions all substantively remain the 
same in the 2005 Food Code, but sections 3-801.11(D)(1) and (D)(2) are 
now designated as 3-801.11(C)(1) and (C)(2), and sections 3-
801.11(E)(1) and (E)(2) are now designated as 3-801.11(F)(1) and 
(F)(2). In addition, FDA amended the definitions of ``Eggs'' and ``Egg 
Products'' in the 2005 edition of the Food Code to clarify the 
difference between ``egg'' (shell egg) and ``egg product'' (liquid, 
frozen, or dry egg). Also, FDA clarified that baluts and reptile eggs 
are excluded from the egg-related provisions of the Food Code.
    Through careful examination of State retail food codes, FDA has 
identified 47 States and territories (out of 56 States and territories) 
that have either adopted the 2005 Food Code or provisions that require 
the same prevention measures for highly susceptible populations (Ref. 
37).

H. Rationale for the Final Rule

    This rule is the most recent in a series of farm-to-table egg 
safety efforts begun by FDA and FSIS in the 1990s. These efforts are 
described in more detail in the proposed rule (69 FR 56824 at 56827 
through 56829). Among these initiatives was the FDA and FSIS 1998 joint 
SE risk assessment (Ref. 21), discussed in detail in the proposed rule 
(69 FR 56824 at 56829), which concluded that a broad-based policy, 
encompassing interventions from farm to table, is likely to be more 
effective in eliminating egg-associated SE illnesses than a policy 
directed solely at one stage of the production-to-consumption 
continuum. In 2004, after FDA's proposed rule was published, FSIS 
published a draft risk assessment for SE in shell eggs and Salmonella 
spp. in egg products. This risk assessment was then published as final 
in October 2005 (Ref. 22).
    There are currently several Federal regulations related to egg 
safety at the food service level. These regulations include a final 
rule issued by FSIS for refrigeration and labeling of eggs during 
transport and storage when packed for the ultimate consumer (63 FR 
45663, August 27, 1998) and an FDA final rule that requires labeling of 
eggs and refrigeration of eggs at retail establishments (65 FR 76092, 
December 5, 2000). However, this is the first and only Federal rule 
that addresses the introduction of SE into the egg during production. 
Interventions that can reduce the number of SE-contaminated eggs at the 
production phase are of particular interest. Because progress in 
reducing the number of illnesses and outbreaks appears to have slowed 
or stopped, these additional preventive measures are needed to reduce 
further the risk of SE illnesses and meet our public health goals. 
Because eggs remain the primary source of SE infections, continued 
actions to improve egg safety are the most effective way to reduce the 
overall number of SE infections and outbreaks and to achieve our public 
health goals.

II. Highlights of the Final Rule and Summary of Significant Differences 
Between the Proposed and Final Rules

A. Highlights of the Final Rule

    The provisions in the final rule are described briefly in the 
following paragraphs, and are discussed in more detail later in the 
preamble of this document.
     Persons who produce shell eggs from a farm operating with 
3,000 or

[[Page 33034]]

more laying hens, unless that farm sells all of its eggs directly to 
consumers or does not produce shell eggs for the table market, are 
subject to this final rule (21 CFR 118.1(a)).
     Shell egg producers need only comply with refrigeration 
and registration requirements if all of their shell eggs from a 
particular farm receive a treatment as defined in the final rule (Sec.  
118.1(a)(2)).
     Persons who transport or hold shell eggs for shell egg 
processing or egg products facilities are required to comply with the 
refrigeration requirements of this final rule (Sec.  118.1(b)).
     Shell egg producers are required to use the following SE 
prevention measures:
     Have and implement a written SE prevention plan that 
includes all mandatory SE prevention measures (21 CFR 118.4);
     Procure pullets that are SE-monitored, or raise pullets 
under SE-monitored conditions (Sec.  118.4(a));
     Use a biosecurity program, meaning a program that includes 
limiting visitors on the farm and in poultry houses; maintaining 
personnel and equipment practices that will protect against cross-
contamination from one poultry house to another; preventing stray 
poultry, wild birds, cats, and other animals from entering poultry 
houses; and prohibiting employees from keeping birds at home (Sec.  
118.4(b));
     Use a program to control rodents, flies, and other pests 
that includes monitoring for pest activity and removing debris and 
vegetation that may provide harborage for pests (Sec.  118.4(c)); and
     Clean and disinfect poultry houses before new laying hens 
are added if an environmental or egg test was positive for SE during 
the life of the flock; cleaning and disinfecting must include removing 
all visible manure, dry cleaning to remove dust, feathers, and old 
feed, and disinfecting (Sec.  118.4(d)).
     Shell eggs being held or transported are required to be 
refrigerated at or below 45 degrees Fahrenheit ([deg]F) ambient 
temperature beginning 36 hours after time of lay (Sec.  118.4(e)).
     Shell egg producers must conduct environmental testing for 
SE when laying hens are 40 to 45 weeks of age and 4 to 6 weeks after 
molt (21 CFR 118.5).
     Shell egg producers must conduct egg testing for SE when 
an environmental test is positive for SE (21 CFR 118.6).
     Administration of the SE prevention measures requires 
having one or more supervisory personnel, who do not have to be onsite 
employees, who are responsible for ensuring compliance with each farm's 
SE prevention plan (21 CFR 118.9).
     Shell egg producers must maintain a written SE prevention 
plan and records documenting compliance with the requirements in the 
plan (21 CFR 118.10).
     Shell egg producers must retain records for 1 year after 
the flock to which they pertain has been taken permanently out of 
production (Sec.  118.10(c)).
     Shell egg producers must make records available within 24 
hours from the time of receipt of the official request (Sec.  
118.10(d)).
     Shell egg producers must register with FDA (21 CFR 
118.11).

B. Significant Differences Between the Proposed and Final Rules

    The final rule reflects the following significant changes from the 
proposed rule:
     Persons who transport or hold shell eggs for shell egg 
processing or egg products facilities must comply with the 
refrigeration requirements. Only shell egg producers were subject to 
the proposed refrigeration requirements.
     Shell egg producers are required to have and implement 
written SE prevention plans.
    The proposed rule did not require that plans be written.
     The requirements for protective clothing and sanitizing 
stations have been removed from biosecurity program requirements.
     The requirement to ``wet clean the positive poultry 
house'' has been removed.
     Egg processors are now permitted to equilibrate 
refrigerated eggs to room temperature just prior to processing.
     The requirement to begin egg testing within 24 hours after 
notification of a positive environmental test has been changed to 
require that results of egg testing be obtained within 10 calendar days 
after receiving notification of the positive environmental test.
     The required time period to perform environmental testing 
for SE after molting has been changed from 20 weeks to 4 to 6 weeks 
after molt.
     Diverted eggs must have labeling on the shipping 
container, and all documents accompanying the shipment must state 
``Federal law requires that these eggs must be treated to achieve at 
least a 5-log destruction of Salmonella Enteritidis or processed as egg 
products in accordance with the Egg Products Inspection Act, 21 CFR 
118.6(f).''
     The requirement that one onsite supervisor at each farm be 
responsible for administration of the SE prevention measures has been 
changed to allow for more than one supervisor and for offsite 
supervisors to be responsible.
     Shell egg producers must document that pullets were SE-
monitored or raised under SE-monitored conditions.
     ``SE monitored'' has been defined to mean that pullets are 
raised under SE control conditions that prevent SE, including the 
following: (1) Procurement of chicks from SE-monitored breeder flocks 
that meet NPIP's standards for ``U.S. S. Enteritidis Clean'' status (9 
CFR 145.23(d)) or equivalent standard, (2) environmental testing, and 
(3) cleaning and disinfection of the environment as needed based upon 
the results of the environmental testing.
     Shell egg producers must maintain records documenting 
compliance with each of the SE prevention measures.
     Shell egg producers must maintain records documenting 
review and modifications of the SE prevention plan and corrective 
actions.
     Shell egg producers must register with FDA.

C. Compliance Dates

    The compliance date is July 9, 2010; except that, for producers 
with fewer than 50,000 but at least 3,000 laying hens, the compliance 
date is July 9, 2012. The compliance date for persons who must comply 
with only the refrigeration requirements is July 9, 2010.

III. Comments on the Proposed Rule

    FDA received approximately 2,000 timely submissions in response to 
the initial comment period on the proposed rule. In addition, 
approximately 20 timely submissions were received in response to the 
reopened comment period. The majority of submissions came from 
individuals and groups advocating animal welfare issues that, for 
reasons discussed later in this document, are outside the scope of this 
rulemaking. The remaining comments came from various trade 
associations, State government agencies, industry, consumer groups, 
scientific associations, and individual consumers. These comments 
raised approximately 60 major issues. To make it easier to identify 
comments and our response to the comments, the word ``Comment'' will 
appear in parentheses before the description of the comment, and the 
word ``Response'' will appear in parentheses before our response. We 
have also numbered each comment to make it easier to identify a 
particular comment. The number assigned to each comment is purely for 
organizational

[[Page 33035]]

purposes and does not signify the comment's value or importance or the 
order in which it was submitted.

A. General Comments

1. Enforcement by Voluntary EQAPs
    (Comment 1) Several comments stated that FDA should implement what 
some comments referred to as a ``recognition regime,'' under which 
parts of the final rule would not apply to (or would be presumptively 
complied with by) State and industry EQAPs with standards equivalent to 
the Federal rule. Some comments suggested that all shell egg producers 
should be subject to the testing and diversion requirements of the 
final rule, but that egg producers participating in recognized EQAPs 
would have to meet only the on-farm SE control measures specified by 
the EQAP. The comments suggested that, as part of the recognition of 
the EQAPs, FDA should also recognize audits and inspections conducted 
by State agencies to measure compliance with those programs, rather 
than conducting separate Federal inspections.
    (Response) FDA recognizes that existing voluntary EQAPs have been 
successful in reducing SE contamination in poultry houses in certain 
States (see discussion in section I.G of this document). However, for 
several reasons, we do not agree that States with EQAPs that are 
recognized by FDA should not be subject to this rule.
    First, as discussed, these programs are not uniformly administered 
or equally comprehensive in their prevention measures. In addition, 
currently the EQAPs that exist are voluntary for shell egg producers. 
Although the existing EQAPs all have similar requirements, they vary in 
how those requirements are implemented. This rule will establish 
uniform, nationwide requirements to prevent SE in shell eggs during 
production, storage, and transportation. FDA believes that these 
requirements will further reduce SE illness and deaths associated with 
egg consumption.
    On the other hand, we agree that we can enlist the assistance of 
existing EQAP organizations and officials in implementing FDA's 
regulation. The rule provides that a State or locality may, in its own 
jurisdiction, enforce this rule by carrying out inspections under Sec.  
118.12(b) (21 CFR 118.12(b)) and by using the administrative remedies 
in Sec.  118.12(a) unless FDA notifies the State or locality in writing 
that its assistance is no longer needed. FDA plans to provide guidance 
to States and localities through an enforcement and implementation 
guidance subsequent to this final rule.
2. Vaccination of Layers Against SE
    (Comment 2) Some comments agreed with FDA's conclusion, discussed 
in the proposed rule, that there is insufficient scientific support for 
a requirement that layers be vaccinated against SE (69 FR 56824 at 
56847). Some of these comments stated that FDA should encourage 
voluntary vaccination efforts by, for example, allowing producers that 
can demonstrate the effectiveness of their vaccination programs to 
follow an alternative protocol for environmental testing before 
depopulation. One comment encouraged the use of SE vaccinations as an 
added prevention measure against SE contamination of shell eggs and 
recommended that an option of using a vaccination program should be 
available to shell egg producers. In support, the comment stated that 
data exists from the United States and Europe that the comment said 
demonstrates the efficacy of vaccination programs. The comment did not 
provide additional data in support of these statements.
    Another comment stated that the available research and field 
evidence support a conclusion that vaccines used with other SE control 
measures will reduce SE.
    (Response) FDA agrees with the comments supporting only voluntary 
vaccination of layers. As we stated in the proposed rule, there are 
insufficient data on the efficacy of vaccines, particularly data 
reflecting field trials under ``real world'' conditions, to support a 
mandatory vaccination requirement (69 FR 56824 at 56847). We also 
believe that data on the efficacy of vaccines are insufficient to allow 
substitution of vaccination for any of the SE prevention measures 
required in this final rule. If individual producers have identified 
vaccines that are effective for their particular farms, we encourage 
the use of the vaccine as an additional SE prevention measure.
3. Delegation of Inspection Responsibilities to Other Federal or State 
Agencies
    (Comment 3) Two comments urged FDA to delegate farm inspection 
responsibilities to USDA's FSIS and Agricultural Marketing Service 
(AMS) or the State Departments of Agriculture, because these agencies 
are already involved in oversight of various aspects of egg production. 
Similarly, another comment stated that APHIS and FSIS are more 
qualified than FDA to address disease and pathogen risk reduction in 
live animal production operations.
    (Response) FDA disagrees with the suggestion that we should 
delegate inspection responsibilities under this rule to USDA or the 
States. Although we coordinate our respective egg safety efforts with 
FSIS and AMS, each agency has distinct responsibilities and skills, all 
of which benefit consumers of shell eggs and egg products. These 
responsibilities and skills do not necessarily overlap as a practical 
matter (for example, AMS personnel are in certain shell egg packing 
plants, but not in the layer houses). Furthermore, the rule provides 
that any State or locality that is willing and able to assist FDA in 
enforcing the rule may do so in its own jurisdiction.
4. Induced Molting
    (Comment 4) Several comments responded to the request in the 
proposed rule for comment and data concerning induced molting (69 FR 
56824 at 56846 through 56847). We received a number of comments 
encouraging FDA to ban induced molting of laying birds. These comments 
stated that this practice stresses the immune function of chickens, 
resulting in the promotion of SE contamination in shell eggs and egg 
products; that it leads to plucking and consumption of feathers that 
may be contaminated with Salmonella; and that the plucking may itself 
also stress the immune system. The comments provided some references 
for these assertions. Another comment stated that USDA supports 
elimination of forced molting to reduce SE contamination and that the 
American Veterinary Medical Association also opposes the practice.
    Other comments supported the absence in the proposed rule of 
provisions addressing molting. These comments stated that the research 
on which claims about post-molt SE shed are based have primarily been 
laboratory, rather than field research, involving large challenge doses 
of SE that would not be duplicated in the field and strains of chickens 
different from those common in commercial laying operations. The 
comments stated that there is only emerging research into how to use a 
variety of diets to control the natural process of molting in the egg 
production setting.
    (Response) We addressed the issue of induced molting at length in 
the proposed rule (69 FR 56824 at 56846 through 56847). We discussed 
the limitations of studies cited to support the assertion that induced 
molting increases SE contamination of eggs and stated that we did not 
believe that we had adequate data upon which to rely for a final 
decision on the issue of the

[[Page 33036]]

relationship between induced molting and SE contamination of the 
environment and of eggs. Although the proposed rule specifically 
requested comment and data related to our discussion of induced 
molting, we did not receive any new data on the relationship between 
induced molting and SE contamination of the laying environment and of 
eggs. As a result, we do not have adequate evidence to support 
including a prohibition on induced molting in the final rule.
5. Indemnification
    (Comment 5) One comment suggested that we research whether the 
Public Health Service Act (the PHS Act) would allow us to indemnify 
persons whose economic interests are adversely affected by this rule, 
for example, as a result of diversion of shell eggs to breaker 
facilities. The comment suggested that, should we conclude that we lack 
such legal authority, we should consider whether to request it from 
Congress. Another comment suggested that a Federal compensation package 
may be needed for smaller producers that lack pasteurization 
capability.
    (Response) Unlike APHIS, FDA is not required or explicitly 
authorized by Federal statute to compensate persons whose economic 
interests are adversely affected by certain Agency actions.\1\ Further, 
FDA notes that although some producers will face economic costs from 
the diversion of eggs to the table market, as discussed in section V of 
this document (Analysis of Economic Impacts), the economic benefit from 
illnesses averted is expected to greatly exceed the cost of this rule. 
The suggestion that FDA seek statutory authority to pay compensation to 
indemnify producers is outside the scope of this rule.
---------------------------------------------------------------------------

    \1\ Under the Animal Health Protection Act, USDA is required to 
compensate the owner for any animal, article, or means of conveyance 
that the Secretary of Agriculture requires to be destroyed (7 U.S.C. 
8306(d)). Under the Plant Protection Act, USDA is authorized to pay 
compensation to any person for economic losses incurred as a result 
of action taken by the Secretary of Agriculture under a declaration 
of extraordinary emergency (7 U.S.C. 7715).
---------------------------------------------------------------------------

B. Comments on ``Shell Egg Producers Covered by the Requirements in 
This Part'' (Proposed and Final Sec.  118.1)

Exemption of Producers With Small Flocks
    (Comment 6) Several comments addressed our proposed exemption of 
shell egg producers with small flocks, defined as flocks of less than 
3,000 laying hens at a particular farm. Most of these comments argued 
that these small flocks are less likely to have adequate SE prevention 
measures and that excluding them would be contrary to the public health 
goal of the rule. The comments suggested that smaller facilities are 
less likely to have adequate refrigeration capacity, effective rodent 
control, an effective biosecurity program, measures in place to limit 
laying hens' exposure to manure on building floors and exposure to the 
outdoors; that they may pose a greater risk that they will transport 
and hold eggs without proper refrigeration; and that they may be less 
likely to obtain replacement pullets or chicks from breeders who 
participate in the SE prevention programs. One comment similarly 
suggested that eggs from these smaller producers might be associated 
with a disproportionate share of sporadic illnesses and even some 
outbreaks. The comments did not provide data to support these concerns; 
one comment from one of the larger trade associations stated that it 
was not aware of research that would support any conclusion that 
smaller operations would be either more or less likely to have an SE 
problem than larger, commercial operations.
    One comment proposed that FDA reduce the exemption to producers 
with less than 500 chickens or require all producers not selling 
directly to consumers to comply with the rule. This comment suggested 
that FDA may not be aware of outbreaks associated with eggs from these 
producers because the eggs are not likely to be shipped interstate.
    One comment cited our $1.01 per hen ($0.05 per dozen) estimate of 
the cost to farms with between 3,000-19,999 layers as an illustration 
of the large financial burden that the rule imposes on these farms.
    (Response) We do not believe that there is at this time sufficient 
evidence to warrant extending the rule's coverage to producers with 
fewer than 3,000 laying hens. As we explained in the proposed rule (69 
FR 56824 at 56832), because producers with fewer than 3,000 layers do 
not contribute significantly to the table egg market, imposing any one 
or all of the restrictions on them will have little measurable impact 
on the incidence of SE. We have no information documenting that there 
is an elevated risk of sporadic illness or outbreaks associated with 
eggs sold directly from farmer to consumer or from a producer with 
fewer than 3,000 laying hens.
    FDA disagrees with the statement that we may be unaware of 
outbreaks associated with eggs from small producers because these 
producers are less likely to ship eggs interstate. The outbreak data 
relied on by FDA is in general submitted by State Departments of Health 
to CDC. As noted earlier, cases of salmonellosis must be reported to 
local health departments, who in turn provide information to States and 
to CDC.
    FDA recognizes that the cost per hen is higher for smaller farms. 
However, though not specifically broken out in the regulatory impact 
analysis, for farms with between 3,000 and 19,999 layers, the public 
health benefits of the rule exceed the costs by more than $90 million 
annually and costs do not exceed benefits for any of the individual 
provisions of the rule. There are a number of features of the rule 
itself and in our plans for implementation to facilitate smaller farms' 
compliance with the rule. For example, this final rule has a staggered 
compliance schedule, which provides smaller egg producers (those with 
between 3,000 and 49,999 layers) 3 years to comply with the final rule. 
FDA will continue to evaluate the impact of this rule on smaller farms 
and will consider taking appropriate steps to mitigate those impacts, 
where it is possible to do so without reducing safety. In addition, FDA 
intends to provide guidance on the recordkeeping and other provisions 
of the rule, including small entity compliance guidance. We plan to use 
guidance, to the extent feasible, as a vehicle to identify areas where 
compliance could be achieved via flexible approaches that would 
mitigate the financial impact while preserving the public health 
benefits of the rule. We plan to solicit public and industry input on 
this guidance.
    Therefore, FDA has retained the exemption from all provisions of 
this final rule for farms with fewer than 3,000 layers.

C. Comments on ``Definitions'' (Proposed and Final Sec.  118.3)

1. Poultry House
    (Comment 7) One comment questioned the proposed definition of a 
poultry house, which requires that different sections of a single 
building separated by walls be considered as separate houses. The 
comment noted that the definition would not address the risk of 
airborne transmission of SE. The comment stated that ``there is 
considerable evidence that SE can be transmitted through dust and other 
airborne particles,'' citing three references in support. The comment 
noted that the proposed rule did not require that separate sections in 
a building have separate ventilation systems, but did require 
biosecurity

[[Page 33037]]

procedures to ensure that there is no introduction or transfer of SE 
from one section to another. The comment suggested that the definition 
of a poultry house should clarify that the biosecurity procedures 
should include transfer through airborne particles.
    (Response) FDA recognizes that SE may be transmitted through dust 
and other airborne particles. However, FDA does not believe that 
separate ventilation for each section of a house should be mandated 
because there is great variation in design and placement of houses and 
ventilation systems, and separate ventilation may not be necessary in 
every circumstance. Depending on the layout of a farm and the type and 
number of houses, a producer should decide whether ventilation needs to 
be addressed as part of farm-specific biosecurity measures to prevent 
the introduction or transfer of SE from one section to another.
    The proposed definition of ``poultry house'' stated ``For 
structures comprising more than one section containing poultry, each 
section is enclosed and separated from the other sections, and each 
section has a biosecurity program in place to ensure that there is no 
introduction or transfer of SE from one section to another.'' (Emphasis 
added.) The final phrase has been removed from this section and added 
as an introduction to Sec.  118.4(b) (biosecurity) to make clear that 
you must ``take steps to ensure that there is no introduction or 
transfer of SE into or among poultry houses,'' and that ``[a]mong such 
biosecurity measures you must, at a minimum'' include a number of 
specific measures in the biosecurity plan. If the design of a farm and 
its poultry houses needs an additional measure of ventilation to 
prevent cross-contamination, then such a measure should be added to the 
biosecurity plan.
    In addition, in the final rule we have revised the definition of 
``poultry house'' to clarify that ``[f]or structures comprising more 
than one section containing poultry, each section that is separated 
from other sections is considered a separate house.''
2. Treatment
    (Comment 8) Some comments stated that a survey of egg processors to 
determine their current pasteurization practices supports a 5-log 
reduction, although many processors achieve a substantially greater 
pathogen reduction. The comments stated that the survey indicated that 
50 percent of survey respondents reported that they achieve a 5-log 
reduction, and the other 50 percent reported a 7-log or greater 
reduction. The comments stated that the current 5-log reduction 
requirement appears to provide an adequate margin of safety, because 
specified temperatures and holding times do not take into account the 
additional kill achieved in the product while it is heating up to, and 
cooling down from, the pasteurization temperature.
    (Response) FDA agrees with the comments that a 5-log reduction in 
SE via pasteurization or an alternative approach or the processing of 
egg products to achieve an equivalent level of protection is 
appropriate to ensure the safety of shell eggs. Therefore, we have 
retained the definition for the term ``treatment'' (or ``treated'') in 
Sec.  118.3 of the final rule as ``a technology or process that 
achieves at least a 5-log destruction of SE for shell eggs, or the 
processing of egg products in accordance with the Egg Products 
Inspection Act. We established this standard in 1997, in response to a 
USDA/AMS request to FDA on criteria for shell egg pasteurization. AMS 
then published this standard in its Federal Register notice on official 
identification of pasteurized shell eggs on September 24, 1997 (62 FR 
49955).
    Additionally, both FDA and FSIS are evaluating additional measures 
to improve egg safety, and FSIS intends to issue proposed rules in the 
near future for egg products plants and egg handlers, including egg 
handlers who operate in-shell pasteurization treatments. FDA and FSIS 
will continue to work closely together to ensure that our egg safety 
measures are consistent, coordinated, and complimentary.

D. Comments on ``Salmonella Enteritidis (SE) Prevention Measures'' 
(Proposed and Final Sec.  118.4)

1. Chicks and Pullets (Sec.  118.4(a))
    FDA reopened the comment period on May 10, 2005, to seek further 
comment and information on industry practices and programs that prevent 
SE-monitored chicks from becoming infected by SE during the period of 
pullet rearing until placement into laying hen houses (70 FR 24490). We 
received approximately 20 submissions that provided additional 
information and data on the specific questions that FDA presented.
    (Comment 9) Several comments stated that on-farm prevention 
practices must address each stage in the life of laying flocks, 
including the pullet-rearing stage. These comments stated that applying 
the FDA-mandated practices to layers only after they have been placed 
in layer hen houses may be too late to ensure protection against SE, as 
the layers' ovaries may already be contaminated with the pathogen. The 
comments urged FDA to make clear in the rule that all of the SE 
prevention practices apply to both pullet rearing houses and layer 
houses. The comments noted that this approach would be consistent with 
the practice of existing EQAPs SE prevention measures that are 
applicable specifically to pullets.
    Many comments suggested that FDA add a new requirement that 
producers certify that pullets they procure have come from a facility 
that has an SE-monitoring program. The comments recommended that pullet 
houses undergo environmental tests for SE for each flock at 
approximately 10 weeks of age. The comments stated that, if the test is 
positive, the producer could still accept the pullets, but the producer 
should be required to test environmentally after placement. In 
addition, the comments suggested that FDA require that pullet houses 
should be cleaned and disinfected prior to placement of the next pullet 
flock. Finally, the comments suggested that FDA require testing for 
layers used to backfill (replacing dead or diseased layers with other 
layers) and older flocks that are moved to another facility.
    (Response) We agree that SE prevention measures should be in place 
during the pullet phase of shell egg production and have modified the 
rule accordingly. We believe this will reduce the risk of placing 
infected birds into poultry houses. The final rule requires producers 
to procure pullets from sources where the environment has been tested 
and found environmentally negative prior to introduction into the 
laying flock. The environmental testing is required of pullets at 14 to 
16 weeks of age and cleaning and disinfection of the pullet environment 
is required if the environmental test is positive. The cleaning and 
disinfection procedures include removing all manure, dry cleaning the 
positive pullet house to remove dust, feathers, and old feed, and 
following cleaning, disinfecting of the positive pullet house with 
spray, aerosol, fumigation, or another appropriate disinfection method. 
Additionally, if the environmental test is positive for SE, producers 
must begin egg testing within 2 weeks of the start of egg laying. The 
requirements also include procuring chicks from SE-monitored breeder 
flocks that meet standards set by NPIP for ``U.S. S. Enteritidis 
Clean'' status or equivalent standard.
    FDA does not agree that a specific requirement is needed to test 
birds used to backfill and to test older flocks that are moved to 
another facility. Section 118.5(a) of the final rule requires

[[Page 33038]]

producers to perform environmental testing for SE in a poultry house 
when any group of laying hens constituting the flock within the poultry 
house is 40 to 45 weeks of age. Therefore, any layers used to backfill 
and older layers moved into a poultry house will be, or would have 
been, environmentally tested at 40 to 45 weeks of age, as are all other 
layers.
    (Comment 10) Several comments supported the proposed requirement 
that all pullets and chicks be procured from a hatchery or breeding 
flock that participates in NPIP. These comments noted that NPIP 
participants have developed effective strategies that have reduced the 
prevalence of many poultry diseases including SE.
    (Response) We have retained the requirement that pullets that are 
purchased be procured as chicks from SE-monitored breeder flocks that 
meet NPIP's standards for ``U.S. S. Enteritidis Clean'' status or an 
equivalent standard.
2. Biosecurity (Sec.  118.4(b))
    (Comment 11) Some comments stated that FDA should revise its 
biosecurity requirements to allow egg producers greater flexibility. In 
addition, some comments challenged specific biosecurity measures as 
being insufficiently supported by data demonstrating their 
effectiveness in controlling or preventing SE contamination. 
Specifically, comments questioned the value of requiring personal 
protective equipment and sanitizing stations between houses on one 
farm, limiting visitors, controlling movement of workers from house to 
house, preventing employees from having poultry at home, and preventing 
stray poultry, wild birds, and other animals from entering the grounds. 
According to the comments, on a farm it is the presence of mice near 
chickens that maintains the SE infection and contributes to SE spread 
from building to building. One comment asserted that biosecurity 
efforts on the farm should be focused on ``rodents and other issues 
threatening to introduce or maintain SE.'' The comment does not explain 
what ``other issues'' the commenter is referring to. The comment also 
asserted that PEQAP does not have a biosecurity requirement.
    (Response) FDA agrees with the comments that biosecurity measures 
could be more flexible in the final rule without jeopardizing the 
effectiveness of the SE prevention measures. Specifically, we believe 
egg producers may be able to devise and implement effective means other 
than protective clothing and sanitization stations to prevent cross-
contamination between houses. For example, in some circumstances 
placing footbaths and farm-specific footwear at the entrance to a 
complex, maintaining house specific equipment, or using non-street 
clothing in the layer houses may be sufficient to prevent cross-
contamination between houses. Therefore, we have removed from the 
biosecurity provisions the requirements for the use of protective 
clothing and sanitizing stations between houses. This change addresses 
the diverse poultry housing situations that exist throughout the 
country by allowing each producer to implement biosecurity practices 
and procedures appropriate for a particular farm and situation. We also 
agree that it is impractical to require egg producers to prevent stray 
animals from entering the grounds. Therefore, we have narrowed the 
provision for stray animals to apply only to the poultry houses.
    However, FDA disagrees with the comments questioning the value of 
other specific biosecurity requirements. As discussed in the proposed 
rule (69 FR 56824 at 56835), limiting visitors on the farm and in 
poultry houses, maintaining practices that will protect against cross-
contamination when persons move between poultry houses, and prohibiting 
employees from keeping birds at home are all vital biosecurity 
provisions that are commonly in use. According to the Layers 99 study 
(Ref. 29), 66 percent of farm sites already practice some form of 
biosecurity; that study found that poultry houses where visitors were 
not allowed were less likely to test positive for SE.
    Biosecurity is a critical part of a farm's SE prevention measures. 
You must implement these biosecurity measures to prevent the 
introduction or transmission of SE into or between poultry houses. 
Furthermore, contrary to the comment, PEQAP requires all participants 
to maintain an acceptable biosecurity program (Ref. 30). As discussed 
in section I.G of this document, all current EQAPs require use of NPIP 
``U.S. S. Enteritidis Clean'' chicks or equivalent, biosecurity, rodent 
control, cleaning and disinfection of poultry houses, and many programs 
require some environmental testing as well.
    We will make further specific recommendations for biosecurity steps 
and options for achieving these steps, based on current science and 
best practices, in a guidance that we plan to issue subsequent to this 
final rule. We emphasize, however, that biosecurity is an important and 
integral part of any poultry farm's SE prevention program, and that the 
biosecurity requirements in the final rule are minimum standards; egg 
producers may incorporate additional biosecurity measures into their SE 
prevention plans if they believe such measures are warranted.
    (Comment 12) One comment stated that if FDA insists on a 
biosecurity requirement, it should address the movement of pullets, 
spent hens (hens that have permanently ceased egg production), people, 
equipment, eggs, flats (a receptacle for storing or transporting eggs 
most often constructed of cardboard or plastic), and egg shells.
    (Response) The comment was not specific as to how these matters 
should be addressed and did not provide any supporting data concerning 
the need for particular requirements. However, it was not our intention 
that the proposed rule's biosecurity provisions addressing the risk of 
cross-contamination from visitors or the movement of ``equipment'' be 
interpreted as an exclusive list of measures to take to prevent the 
introduction of SE into or among poultry houses. We have amended Sec.  
118.4(b) to make this clear, by adding general introductory language, 
moved from the proposed definition of ``poultry house,'' that producers 
must ``take steps to ensure that there is no introduction or transfer 
of SE into or among poultry houses.''
    (Comment 13) One comment suggested that the proposed rule is 
premised on a mistaken belief by FDA that biosecurity alone can prevent 
the introduction and spread of SE.
    (Response) As reflected in the rule, FDA understands that 
biosecurity is only one element of the measures that a producer must 
have to prevent SE. Producers must follow additional SE prevention 
measures, including pullet measures; rodent, fly and other pest 
control; cleaning and disinfection; and refrigeration.
    (Comment 14) One comment questioned whether organic poultry 
producers would be able to comply with the requirement in the proposed 
rule (Sec.  118.4(b)(4)) that requires egg producers to ``prevent stray 
poultry, wild birds, and other animals from entering grounds and 
facilities.'' The comment stated that this requirement is in conflict 
with a requirement under the USDA National Organic Program (7 CFR part 
205) that organic poultry producers must provide outside access for all 
livestock. The comment also stated that farms that are based on a 
pastured poultry system, which typically provides a substantial 
percentage of the birds' diet from pasture, would have difficulty 
complying with this requirement.
    (Response) We agree that it would be difficult to prevent stray 
poultry and

[[Page 33039]]

other animals from entering the grounds of the farm, and we believe it 
is sufficient to keep stray animals out of the poultry house. 
Therefore, in the final rule, we have changed the requirement for stray 
animals so that it applies only to poultry houses rather than the 
entire grounds. Further, we have consulted with AMS, which administers 
the National Organic Program, and AMS has informed us that this 
requirement would not make it impossible for eggs to qualify as organic 
(Ref. 38).
3. Pest Control (Sec.  118.4(c))
    (Comment 15) Some comments supported the rodent control program 
requirement in proposed Sec.  118.4(c)(1), but questioned the role of 
flies in the spread of SE and recommended elimination of the pest 
monitoring under proposed Sec.  118.4(c)(2). The comments further 
stated that if measured outside the poultry house, the fly count might 
reflect flies that are present from external locations, such as animal 
housing at adjacent properties.
    (Response) FDA disagrees that the provision for monitoring flies in 
Sec.  118.4(c)(2) should be removed or modified. In the proposed rule 
we described research by FDA and others showing that flies harbor SE 
within the poultry house environment (69 FR 56824 at 56835). According 
to the Layers 99 study, flies, like rodents, have access to feed 
troughs on nearly all farms. Further, the fly monitoring procedure can 
be performed inside the layer house, thus creating an accurate 
reflection of the presence of flies there.
    For clarification, FDA has replaced the term ``pest'' in Sec.  
118.4(c)(2) in the final rule with ``flies'' because ``pest,'' which is 
defined to mean any objectionable animal including, but not limited to, 
rodents, flies, and larvae, is too broad in the context of this 
specific provision.
    (Comment 16) One comment stated that PEQAP addresses rodent 
control, but does not address fly control. The comment recommended that 
fly control be included in the FDA regulation, but that the States 
individually and independently decide the number of flies allowed for 
maintaining compliance with the regulation. The comment suggested that 
under State or local requirements or when a farm has a problem, the 
spot cards be used to determine the numbers and, therefore, the 
appropriate control program.
    (Response) FDA disagrees with the comment that the States should 
individually and independently decide the number of flies allowed for 
maintaining compliance with the regulation. This rule establishes 
minimum national standards based on measures that have been shown to 
prevent SE. The comment did not provide any rationale for addressing 
flies on a State-by-State basis. Further, the rule provides flexibility 
in how fly presence is determined, allowing not just spot cards, but 
also Scudder grills, sticky traps, or other appropriate monitoring 
methods. FDA intends to publish guidance on the requirement to monitor 
for flies and on the level of fly activity considered acceptable.
    The literature suggests that 50 or fewer hits on a spot card or 
sticky trap per week or a count of less than 20 on a Scudder grill 
indicate satisfactory fly control ((Refs. 39 and 40).
4. Cleaning and Disinfection (Sec.  118.4(d))
    (Comment 17) One comment suggested that mandatory cleaning and 
disinfection measures should not require removal of ``all visible 
manure'' in a hen house following a positive environmental test and 
depopulation, but should allow for flexibility with respect to manure 
removal. The comment stated that complete removal of all manure would 
destroy biological controls for flies (such as parasitic wasps). The 
comment also argued that this requirement is impractical, because many 
producers only remove manure from the houses during those times of year 
when they can immediately apply it to fields. Several comments stated 
that the requirement to remove all visible manure is impractical for 
large, complex poultry farming operations, because commercial in-line, 
multi-tiered cage layer houses with related accessories and equipment 
for watering, feeding, egg collection, manure deflection, storage, and 
removal might be impossible to bring into compliance. The complex 
machinery (some electrical) is very difficult to clean at best and is 
just not compatible with wet cleaning. It would also be difficult to 
accomplish this cleaning in very cold climates because of freezing, in 
that the layers were an important source of house heat until they were 
removed for replacement. The comment also noted it might be difficult 
to enforce a requirement such as ``removal of all visible manure.''
    (Response) We disagree that flexibility should be allowed with 
respect to manure removal after a positive environmental test. First, 
even if it is true that complete removal of all manure would ``destroy 
biological controls for flies'' (presumably, by removing parasitic wasp 
larvae), the wasp population could be restored by the firm, if 
biological controls are an intended and effective component of the 
firm's fly control efforts. Data available to FDA indicate that there 
are non-biological methods of control available to producers (i.e., 
chemical and mechanical methods) and that these methods are used by 
most laying hen houses. Moreover, the available data indicate that the 
role of parasitic wasps in controlling flies is currently being debated 
in the scientific literature, with most of the work being done in 
cattle feedlots. Meyer et al. (1990) (Ref. 41) and Andress and Campbell 
(1994) (Ref. 42) found parasite treatments had no apparent affect on 
adult fly populations, while Weinzierl and Jones (1998) (Ref. 43) 
concluded that parasitism significantly reduced the fly population. In 
the one study we are aware of concerning the use of parasitic wasps to 
control flies in the context of poultry facilities, variable results 
were obtained (Kaufman et al., 2001) (Ref. 44).
    Furthermore, limited data suggest that total cleanout of manure is 
feasible even where parasitic wasps are used to control flies. A study 
by Hinton and Moon (2003) (Ref. 45) on the effect of a total cleanout 
on fly control in chicken houses compared the effect of a total 
cleanout of manure from chicken houses to two partial cleanout methods. 
Initially, the increase in flies was greatest in those houses with 
total cleanout, but subsequent differences between the three cleaning 
methods were small and the fly densities remained relatively stable for 
3 months in all houses. Although this study did not specifically 
evaluate parasitic wasps, it supports a finding that total cleanout of 
poultry houses will not adversely affect fly control efforts (Ref. 45).
    Second, the fact that manure cannot always be applied to fields 
does not mean that it should not be removed from poultry houses. Manure 
removed from a house can be composted, stored in a manure barn, or 
spread on a field depending on the time of year that it is removed.
    Finally, we do not understand why manure removal at a large 
operation would be impractical. We acknowledge that a large operation 
has more manure to handle, but FDA has visited large operations that do 
clean out the manure, and we are unaware of any unique problems for 
such operations.
    Because manure is a reservoir of SE that has been shed by infected 
laying hens, once a poultry house has had an SE-positive environmental 
or egg test, it is important that all visible manure be removed. 
Removing all visible manure before new laying hens are placed into a 
house will help to prevent the SE from

[[Page 33040]]

infecting the replacement flock via the manure and rodents.
    Therefore, FDA concludes that, to prevent the spread or 
perpetuation of SE from one flock to another, a producer must remove 
all visible manure from a poultry house before new laying hens are 
added to the house when an environmental test was positive for SE at 
any point during the life of the flock that was housed in the poultry 
house prior to depopulation. The agency realizes that the floor in a 
concrete-floored house could appear light gray, but we do not expect to 
see any accumulation of manure in a house that has had the manure 
removed, and we do not anticipate practical difficulties in our ability 
to enforce this requirement. We plan to publish guidance on acceptable 
manure removal subsequent to this final rule.
    (Comment 18) Several comments objected to the wet cleaning 
requirement in the proposed rule and suggested alternatives such as 
allowing flexibility so long as the cleaning and disinfection 
procedures are sufficient to eliminate SE. The comments stated that wet 
cleaning is impractical during the coldest months in some States; that 
it can encourage the growth of SE by creating an environment for growth 
of microorganisms in the poultry house; and that wet cleaning will harm 
some mechanical and electrical parts of equipment and cages. The 
comments argued that there is no scientific consensus in favor of wet 
cleaning.
    (Response) We agree that wet cleaning may not be practical in all 
situations and have removed the requirement from the final rule. As 
discussed in the proposed rule (69 FR 56824 at 56836), it is important 
that, once a poultry house has had an SE-positive environmental or egg 
test, a producer make every effort to rid the environment of SE before 
new laying hens are placed into that house to prevent the SE problem 
from being perpetuated in the replacement flock. The final rule retains 
the requirement in this circumstance to dry clean the poultry house to 
remove dust, feathers, and old feed prior to the addition of new laying 
hens to the house and following cleaning, to disinfect the positive 
poultry house with spray, aerosol, fumigation, or another appropriate 
disinfection method.
5. Refrigeration (Sec.  118.4(e))
    (Comment 19) Several comments raised concerns about the requirement 
in Sec.  118.4(e) of the proposed rule that egg producers should 
refrigerate shell eggs if they are held longer than 36 hours. Some 
comments urged FDA to change the time at which refrigeration is 
required to 72 hours after production. The comments noted that 72 hours 
would accommodate shell egg production over weekends and smaller 
producers that have pickups less frequent than daily, while at the same 
time ensuring that eggs are not accumulated and held over long periods 
without refrigeration.
    One comment argued that the requirement to refrigerate eggs within 
36 hours could actually be counter-productive with respect to the 
safety of eggs destined for use in the table market. The comment 
reasoned that more checks and cracks will occur when previously 
refrigerated eggs are washed due to the greater change in temperature. 
The comment recommended that FDA not set a prescriptive time 
requirement for refrigeration of table eggs unless further research 
justifies the need, but that if a time limit for refrigeration must be 
set, it should be set at 72, not 36, hours.
    (Response) We disagree that eggs should remain unrefrigerated for 
up to 72 hours after laying. Our proposed requirement that eggs be 
refrigerated if stored more than 36 hours was based on data indicating 
that, although fresh shell eggs provide an inhospitable environment for 
Salmonella to multiply, the chemical and physical barriers against 
bacterial movement and growth in shell eggs degrade as a result of the 
time and temperature of holding (69 FR 56824 at 56836 through 56887). 
As they degrade, shell eggs provide an increasingly more hospitable 
environment for the growth of SE. Studies have shown that SE, when 
inoculated into the albumen (whites) of whole shell eggs, multiplied to 
high numbers if the eggs were not properly refrigerated (Refs. 46, 47, 
and 48).
    The 36-hour limit for unrefrigerated holding is supported by a 
model, contained in the 1998 joint SE risk assessment (Ref. 21), which 
was developed to examine the relationship among holding time, holding 
temperature, and yolk membrane breakdown as an indicator of SE risk. 
(The yolk membrane separates the nutrient-rich yolk and any SE bacteria 
that might be present in the albumen; breakdown or loss of the yolk 
membrane results in rapid growth of SE present in the albumen.) The 
model showed that, at 70 to 90 [deg]F (i.e., temperatures that might be 
observed in unrefrigerated egg holding areas in farms or warehouses or 
in transport vehicles), there was much less breakdown of yolk membrane 
in eggs held no longer than 36 hours than in eggs held no longer than 
72 hours. According to the model, eggs held at 70 [deg]F will 
experience at least a 16-percent breakdown of yolk membrane after 36 
hours and a 25-percent breakdown after 72 hours. Eggs held at 80 [deg]F 
will suffer at least a 22-percent breakdown after 36 hours and a 39-
percent breakdown in the yolk membrane at 72 hours. At 90 [deg]F, there 
is at least a 33-percent breakdown after 36 hours and at least a 62-
percent breakdown of the yolk membrane after 72 hours. In the 2005 FSIS 
risk assessment (Ref. 22), refrigeration was modeled again; this risk 
assessment found that limiting eggs to just 12 hours without 
refrigeration, the shortest timeframe between laying and refrigeration 
that was evaluated, provided the greatest public health benefit among 
the time frames studied.
    Although, as we stated in the proposed rule, we believe that it is 
very important that eggs be placed into refrigerated storage as soon as 
possible after they are laid, we recognize that this may not be 
practical for all producers. It may take several hours or longer after 
the eggs are laid before they are collected or picked up for transport. 
According to the Layers 99 study (Ref. 28), almost half of the farm 
sites surveyed had egg pickups every 1 to 2 days. In light of all of 
these data, we are retaining in the final rule the requirement of 36 
hours as the maximum amount of time eggs may be held unrefrigerated on 
the farm.
    (Comment 20) Several comments questioned the proposed refrigeration 
temperature requirement of 45 [deg]F. One comment stated that holding 
eggs at 45 [deg]F would result in two problems related to egg quality 
and safety. First, the comment stated that ambient moisture would 
condense on the cold eggs and cause them to ``sweat'' before they are 
washed/sanitized, increasing the chance of surface contamination 
penetrating the eggs. Second, the comment stated that when cold eggs 
are moved into the egg washer, which uses hot water, checks or cracks 
can develop in the shell, lowering the quality of the egg and 
increasing the risk of future surface bacterial or fungal contamination 
getting into the interior of the eggs.
    (Response) FDA does not agree that a 45 [deg]F refrigeration 
requirement is too low. This requirement is consistent with FDA's final 
rule on refrigeration of shell eggs at retail (65 FR 76092), and like 
that requirement, the rule is based on research demonstrating that 
Salmonellae do not grow well or rapidly at temperatures less than or 
equal to 45 [deg]F. FDA finds that the scientific evidence on the 
growth of SE in eggs shows that control of storage temperature of shell 
eggs can significantly reduce the rate of

[[Page 33041]]

multiplication of any SE present (Refs. 46, 47, and 48).
    FDA agrees that there can be quality and safety problems such as 
thermal checks (hairline cracks in the shell) associated with 
refrigerating eggs immediately prior to processing into either table 
eggs or egg products. Therefore, FDA is modifying the rule to allow an 
equilibration step (a step during which the eggs reach room 
temperature) before eggs are processed. Specifically, under Sec.  
118.4(e) of the final rule, shell eggs that have been refrigerated may 
be held at room temperature for no more than 36 hours just prior to 
processing to temper them, which will reduce the risk of hairline 
cracks in the shell that could contribute to bacteria entering the egg 
during washing if the egg is too cold. We believe the benefits of 
refrigeration accompanied by equilibration outweigh any possible risk 
associated with sweating of the eggs.
    (Comment 21) One comment stated that the rule is silent on the 
refrigeration of eggs that are segregated at the grading operation for 
processing at egg products plants. These are the eggs that do not meet 
grade requirements, are checked (that is, the shell is cracked, but the 
shell membrane is intact), or have dirt on the shell. The comment 
explained that the last two types of eggs pose a significant food 
safety risk if handled improperly and can be processed only in a USDA-
inspected egg products plant. Additionally, the comment stated it may 
take several days to accumulate a quantity of checked and dirty eggs 
for shipment. Similarly, the comment stated that surplus eggs produced 
by hatchery flocks are accumulated and sent to egg products plants for 
processing and could present a hazard if not properly refrigerated. The 
comment noted that most shell egg packers and hatcheries currently 
refrigerate these eggs, but the comment urged FDA to amend the proposed 
rule to require that eggs segregated at grading operations and at 
hatcheries and intended for further processing also be subject to the 
refrigeration requirements proposed for on-farm storage.
    Another comment noted that USDA only requires refrigeration at the 
packer's facility after packing for the consumer. The comment stated 
that nest run eggs (eggs that are packed as they come from the 
production facilities without having been washed, sized, and/or candled 
for quality) and restricted eggs, (eggs whose use is limited by FSIS 
under the Egg Products Inspection Act because they are, for example, 
checked or dirty) are not required to be refrigerated. This comment 
further stated that to maintain the maximum benefit of SE illness 
reduction from refrigeration, eggs should be refrigerated throughout 
the distribution chain.
    (Response) We sought comment in the proposed rule on whether to 
require refrigerated transport of shell eggs not already required by 
regulation or within USDA's jurisdiction; for example, transport of 
shell eggs from a farm or a packer to a food manufacturing facility. We 
further stated that we would consider putting into place requirements 
similar to those we finalized for refrigerated storage of shell eggs at 
retail (i.e., transport of shell eggs at or below 45 [deg]F ambient 
temperature).
    FDA agrees with the comment that the refrigeration requirement in 
the proposed rule only addresses eggs held at the farm for more than 36 
hours after time of lay. The proposed requirement does not address 
nest-run eggs, surplus hatching eggs sent to the table egg market, eggs 
shipped to egg products facilities and then sent to the table egg 
market, or any other eggs that are held or transported at locations 
other than at the producer's layer farm. Holding or transporting these 
eggs without refrigeration allows growth of any SE that may be present 
in the eggs. We also agree with the comment that, to maintain the 
maximum benefit of SE illness reduction from refrigeration, eggs should 
be refrigerated throughout the distribution chain. Therefore, to reduce 
this potential growth of harmful bacteria, we have modified Sec.  
118.4(e) in the final rule to require refrigeration during all storage 
and transportation beginning at 36 hours after time of lay.
    Following are three examples of eggs requiring refrigeration under 
the final rule, which would not have required refrigeration previously: 
(1) Unwashed eggs more than 36 hours old from a farm with 3,000 or more 
layers that have left the producer's farm and are being transported to 
or are at a shell egg processing facility or are being held in a 
warehouse; (2) eggs from a farm with 3,000 or more layers that are more 
than 36 hours old and are being shipped from an egg products facility 
(USDA-inspected plant) to a shell egg processing facility; and (3) eggs 
from a hatchery that are more than 36 hours old, were never used for 
hatching, and are now being transported to a shell egg processing 
facility. For clarification, in the final rule we are defining ``egg 
products facility'' as ``a USDA-inspected facility where liquid, 
frozen, and/or dried egg products are produced,'' and ``shell egg 
processing facility'' as ``a facility that processes (e.g., washes, 
grades, packs) shell eggs for the table egg market.''
    In addition, as discussed in response to comment 20, for those eggs 
to be processed as table eggs but which are not processed for the 
ultimate consumer within 36 hours from the time of lay and therefore 
are required to be held and transported under refrigeration, we are 
permitting an equilibration step.

E. Comments on ``Environmental Testing for Salmonella Enteritidis 
(SE)'' (Proposed and Final Sec.  118.5)

    (Comment 22) Several comments challenged the proposed requirement 
that egg producers conduct environmental testing when a flock has 
reached 40 to 45 weeks of age, and if the flock has molted, 20 weeks 
after the end of the molting process. The comments suggested that 
instead FDA follow the practice of some EQAPs, which require testing of 
the layer house environment at the end of the laying period, prior to 
depopulation. One comment stated that environmental samples should be 
obtained anytime within the time period of active production, or 
between the 40th and 60th week of production. In addition, the comment 
stated that if the environmental samples taken at this time are 
negative there is no need to conduct additional samples for those birds 
that have undergone an induced molt.
    Another comment stated that the 1998 joint SE risk assessment (Ref. 
21), as well as draft 2004 USDA risk assessment (Ref. 49) support a 
revision to the proposed testing time for post-molt layers from 20 
weeks, as proposed, to a 4 to 6 week range post-molt. In support of 
this suggestion, the comment noted that the 2004 FSIS draft risk 
assessment finds the greatest risk of infected eggs immediately after 
molt, but at this time hens are laying few eggs. As a result, the 
comment estimated that if the increased risk used in the draft risk 
assessment is multiplied by expected lay post-molt, the greatest number 
of infected eggs from infected molted flocks will occur between 4 to 6 
weeks post-molt.
    (Response) We do not agree that the timing for environmental 
testing of unmolted flocks should be modified. As stated in the 
proposed rule, environmental testing for SE is an indicator of whether 
SE prevention measures are working effectively. Testing provides an 
opportunity for producers to evaluate the SE status of their poultry 
houses and to take appropriate action if their prevention measures are 
not preventing SE. Information from an EQAP with a testing protocol 
indicates that the

[[Page 33042]]

highest numbers of positive environmental samples are found when laying 
hens are 40 to 45 weeks of age (Ref. 50). Additionally, the Layers 99 
study found that flocks less than 60 weeks of age (younger flocks) were 
five times more likely to test positive for SE than older flocks (Refs. 
27 through 29). In the absence of any new data, we are retaining in the 
final rule the requirement that environmental testing for SE be 
conducted for the flock in each poultry house when each group of laying 
hens making up that flock is 40 to 45 weeks of age. An SE-positive 
environmental test at the 40 to 45 week time period notifies a producer 
that there is a problem with SE contamination. At this point, action 
can be taken to determine if there are SE-contaminated eggs and to keep 
SE-contaminated eggs out of the table egg market. Additionally, a 
positive environmental test during the 40 to 45 week period (just after 
peak lay) gives a producer sufficient notice to make arrangements for 
cleaning and disinfection of the contaminated poultry house at 
depopulation.
    FDA does, however, agree that the post-molt environmental test 
should be moved from 20 weeks post-molt to 4 to 6 weeks post-molt. As 
the comment noted, the FSIS 2004 draft risk assessment (Ref. 49) (as 
well as the final version of the risk assessment, Ref. 22, published in 
2005) described research by Ebel and Schlosser (Ref. 23) that indicated 
that ``[e]vidence from field studies suggests that molted flocks, in 
the first 20 weeks of post-molt production, will produce SE-
contaminated eggs more frequently than non-molted flocks'' (Ref. 22 at 
page 29). As FSIS explained in the draft and final risk assessments, 
``[t]he stress of molting is thought to result in an increased 
susceptibility of hens to SE infection'' (Id.). FSIS relied in its 
analysis on data contained in the ``Salmonella Enteritidis Pilot 
Project Progress Report'' (Ref. 51) and the study by Holt on 
immunological factors in laboratory hens (Ref. 52), which were 
referenced in the proposed rule. As we stated in our response to 
comment 4, the data underlying the FSIS risk assessment, which we 
reviewed in the proposed rule, do not support a prohibition on induced 
molting. However, these data do suggest that there may be some elevated 
risk that hens may become infected with SE in the post-molt period, 
before 20 weeks have passed. In light of these studies, we have decided 
that it would be prudent to conduct environmental SE testing earlier 
post-molt than was proposed. Therefore, to evaluate the status of a 
laying hen house post-molt to determine the effectiveness of SE 
prevention measures during the post-molt laying cycle, we have amended 
Sec.  118.5(b) to require an environmental test at 4 to 6 weeks after 
the end of any molting process.
    (Comment 23) Several comments suggested that FDA revise the 
proposed rule to make the environmental sampling plan flexible.
    In support of this suggestion, some comments stated that because 
the rule would cover very diverse egg laying facilities in the United 
States (e.g., free-range farms and confinement operations using cages 
or nesting boxes), one single sampling plan would not be effective. One 
comment recommended a different sampling plan requirement for each 
operation type. The comment suggested that all confinement ``barns'' 
could be sampled under the same plan, and recommended that for such 
operations FDA require that a minimum of one manure drag sample be 
obtained from each bank of cages. The comment stated that more research 
is needed to determine the most appropriate sample sites for operations 
that are cage-free, pasture-raised, or free-range. Another comment 
noted that the sampling plan should also be flexible because of 
variations in operations within geographic areas and across geographic 
regions, for example, difference in manure collection/disposal systems.
    (Response) FDA agrees that because the final rule covers very 
diverse egg laying facilities, the same sampling plan may not be 
practical for all operations and that the sampling plan requirement 
should be flexible to accommodate variations in housing styles. The 
proposed rule did not specify a particular plan; rather it provided at 
Sec.  118.7(a) that ``[w]ithin each poultry house, you must sample the 
environment using a scientifically valid sampling procedure.'' In the 
final rule, to make more clear that the appropriateness of a sampling 
plan depends on the house being sampled, we have modified the language 
in Sec.  118.7(a) to require ``a sampling plan appropriate to the 
poultry house layout.'' Specific sampling instructions have been 
incorporated into the environmental testing method, ``Environmental 
Sampling and Detection of Salmonella in Poultry Houses.''
    (Comment 24) One comment questioned whether FDA could appropriately 
determine whether a producer is using a ``scientifically valid sampling 
procedure,'' as required in proposed Sec.  118.7(a). The comment 
suggested that, for example, there might be no reason to believe that 
sampling every cage row is more effective than sampling 32 random sites 
in a laying house. Another comment stated that the only ways to 
generate drag samples that can be compared across the various types of 
poultry house are the two discussed in the proposal: Drag swabbing the 
aisles (the ``whole aisle'' method) and swabbing a certain number of 
feet of egg belt (the ``limited feet from 32 sites'' method) because 
eggs are collected by hand in only a few houses. Another comment stated 
that while the procedure for sampling manure pits in a high rise 
facility with caged layers is fairly straightforward, nonconfinement 
operations do not have a clear direction on what is the most 
appropriate sampling site. The comment asserted that it would be 
unreasonable to expect an operation with 10,000 layers to develop a 
scientifically valid sampling program when FDA cannot define what is 
scientifically valid.
    (Response) In the proposal FDA described the ``whole aisle'' and 
``limited feet from 32 sites'' swabbing methods and acknowledged 
differences in the types of poultry houses and the challenges involved 
in sampling all houses representatively and consistently. We asked for 
comments about the appropriateness of different methods of drag 
swabbing and received no comments that would support one method over 
the other. To specifically acknowledge differences between poultry 
houses, the rule now requires ``a sampling plan appropriate to the 
poultry house layout.'' FDA believes that there are sufficient data for 
producers to develop sampling plans for all poultry environments. Over 
the past ten years, FDA has performed environmental sampling in a 
variety of poultry houses, which have contained from 3,500 to 250,000 
birds and have varied from high rise to shallow pit to sunken water pit 
houses. The results of this sampling indicate that the manure area and 
eggbelts are the two best areas to sample (Ref. 53). FDA has 
incorporated specific sampling instructions into the environmental 
testing method, ``Environmental Sampling and Detection of Salmonella in 
Poultry Houses.''
    (Comment 25) One comment stated that because it is common for 
producers in Hawaii to have multi-age flocks in one poultry house, it 
would be difficult to perform SE testing for specific flocks that reach 
the age at which testing is required. The comment further stated that 
if there is an environmental positive test result for a typical farm in 
Hawaii (5 to 10 acres), there would be no space to store the eggs to 
wait for egg

[[Page 33043]]

test results. The comment argued that a positive environmental test 
result could mean depopulation of the entire farm and, even if the egg 
tests are negative, it could still mean the end of the farm.
    (Response) The comment reflects a misunderstanding of the rule. 
Section 118.5 requires environmental testing of the entire poultry 
house when any group of laying hens in that house is 40 to 45 weeks of 
age. If multi-age flocks are housed in the same poultry house, egg 
producers must perform environmental testing on the entire house 
whenever any group of laying hens in that house reaches 40 to 45 weeks 
of age. Furthermore, upon finding an environmental sample positive for 
SE, there is no requirement to store or otherwise hold the eggs. The 
eggs from a flock in a house that has tested environmentally positive 
for SE may continue to be marketed as table eggs until the producer is 
notified that an egg test is determined positive for SE. At that point, 
the producer must divert those eggs to treatment.
    (Comment 26) One comment argued that a testing regulatory scheme 
would not be effective in preventing illnesses from SE. This comment 
stated that environmental and egg testing only indicates the status of 
the house at the time of the test.
    (Response) Environmental and egg testing alone do not prevent SE, 
but instead serve as an indicator and verification step that the SE 
prevention plan is working properly. Further, a positive egg test can 
prevent contaminated eggs from reaching consumers and thereby protect 
the public health.
Diversion (Sec. Sec.  118.5 and 118.6)
    (Comment 27) We received many comments on our proposed requirement 
that eggs from a SE-positive layer house environment must be diverted 
to pasteurization, unless testing of four pools of 1,000 eggs each 
yields SE-negative results. One comment supported the diversion 
requirement as a reasonable way to keep higher-risk eggs out of the 
table egg market, but stated that the requirement could pose an 
economic risk to shell egg producers that do not have their own egg 
pasteurization capabilities. Other comments similarly noted that this 
requirement could have an economic impact on egg producers that lack 
ready access to egg pasteurization facilities, because they will have 
to sell their eggs to ``breakers'' who already have an adequate supply 
of eggs (through ownership of laying houses or pre-existing contacts 
with such houses). As a result of this arrangement, egg producers will 
have to take whatever price they can get from the breakers and the 
price will inevitably be much lower than the price they would have 
gotten if the eggs had not come from an SE-positive layer house. Some 
comments expressed concern that egg product buyers might not want to 
purchase product known to have come from eggs diverted because of SE, 
further reducing the breaker's incentive to buy the diverted eggs.
    Thus, these comments expressed concern that this diversion would 
result in a cost to the industry much greater than that projected by 
FDA in the proposal. One comment stated that, even if they were willing 
to buy the diverted eggs, breakers might offer a price too low to make 
it economically feasible to retain the flock. That same comment noted 
that diversion to the pet food supply chain would not be an option 
because SE-positive eggs would have to be run through the processing 
plant, and stated that destruction may be the only alternative in most 
cases.
    (Response) FDA recognizes that diversion of eggs may be expensive 
or impracticable. We do not agree that we have underestimated these 
costs. Further, these costs are outweighed by the public health benefit 
realized by diverting contaminated eggs.
    In addition, FDA believes there may be some confusion about the 
diversion requirement. Under the rule, diversion is required under the 
following three scenarios: (1) When the environment tests positive for 
SE, and the producer chooses not to test eggs from that house to 
determine whether the eggs are also positive; (2) when the eggs in a 
house test positive for SE; and (3) by order of an FDA, State, or local 
representative after a finding that shell eggs have been produced or 
held in violation of this regulation.
    (Comment 28) One comment requested that FDA include hard cooking as 
an acceptable method of diversion.
    (Response) If diversion is required, you do not necessarily have to 
send the eggs to a breaker. You may instead divert them to an 
alternative process that achieves at least a 5-log reduction in SE, 
using, for example, in-shell pasteurization of shell eggs or hard 
cooking of shell eggs.
    In the proposed rule, FDA defined treatment as ``a technology or 
process that achieves at least a 5-log destruction of SE for shell 
eggs, or the processing of egg products in accordance with the Egg 
Products Inspection Act.'' We have retained this definition in the 
final rule. Thus, as long as the hard-cooking process achieves at least 
a 5-log destruction of SE, it is an acceptable method of diversion.
    (Comment 29) One comment stated that Hawaii has no egg breaking 
facilities, and that the costs of shipping diverted eggs to breaking 
facilities in California or elsewhere in the continental United States 
would be prohibitive. The comment also noted that in the past some 
breaking facilities on the West coast have refused to accept eggs from 
Hawaii. The comment requested that the rule be made more flexible to 
address the situation facing Hawaii and other States with inadequate or 
no egg diversion capacity.
    (Response) FDA recognizes that there is regional variation in the 
cost of diversion for eggs. For a full discussion of this variation, 
see section V.F of this document. We understand that there are 
currently no breaking facilities in Hawaii and that it may not be 
economically feasible to ship diverted eggs to the continental United 
States or Canada. For egg producers in Hawaii, and for others also 
unable to avail themselves of breaker facilities, the cost of diversion 
per egg is the lost value of a table egg. In the proposed rule, we 
estimated that the price to a producer for one dozen diverted eggs in 
Hawaii is $0.53, or $0.044 per egg. We recognize that this cost is more 
than double the cost of diversion for egg producers in other regions; 
however, per our usual approach for public health regulations 
promulgated under the FFDCA and the PHS Act, we are establishing 
minimum national standards that will equally apply to all States. We 
acknowledge that diversion for egg producers in situations such as 
those in Hawaii may be particularly financially challenging. As 
discussed above, we will use guidance as appropriate to mitigate the 
impacts associated with implementation of the rule.

F. Comments on ``Egg Testing for Salmonella Enteritidis (SE)'' 
(Proposed and Final Sec.  118.6)

    (Comment 30) One comment agreed with the sampling protocol 
established in Sec.  118.6(c) for egg testing for SE, but stated that 
24 hours is not a practical timeline to begin egg testing after a 
positive environment is found. The comment suggested that Sec.  
118.6(c) require egg producers to immediately notify the appropriate 
state agency of the positive environmental findings and that egg 
sampling commence within 2 weeks after the environmental test results 
are received. Another comment suggested that FDA revise the time period 
allowed between receiving a positive environmental sample and 
conducting the required egg testing from

[[Page 33044]]

24 to 72 hours to allow for weekends or holidays when laboratory 
facilities would most likely not be available to complete the tests. 
Several comments further argued that the 24-hour requirement for 
initiating egg testing is impossible, as even collecting the eggs 
within 24 hours might be difficult at times. In addition, the comments 
argued that to arrange testing for 1,000 eggs requires scheduling of 
several items, including people, labs, and media, and cannot be done in 
24 hours.
    (Response) For the reasons identified in the comments, FDA agrees 
that 24 hours may not be practical to begin egg testing. Therefore, we 
have modified Sec.  118.5(a)(2)(ii) and (b)(2)(ii) in the final rule. 
Rather than setting a time when egg testing must begin, the rule 
establishes a deadline for conducting and completing such testing and 
receiving the results. The final rule requires that the results of egg 
testing for the first 1000 eggs must be obtained within 10 calendar 
days of receiving notification of the positive environmental test. This 
time period allows for the farm to obtain a laboratory to do the work 
and collect the eggs and for the laboratory to perform and complete the 
tests.
    (Comment 31) Two comments stated that the egg sampling procedure 
should be witnessed by a regulatory agency, such as a State Department 
of Agriculture.
    (Response) FDA disagrees. Other FDA regulations, such as Hazard 
Analysis and Critical Control Point (HACCP) Procedures for the Safe and 
Sanitary Processing and Importing of Juice (21 CFR part 120) and 
Procedures for the Safe and Sanitary Processing and Importing of Fish 
and Fishery Products (21 CFR parts 123 and 1240), do not require 
sampling and other testing to be overseen by FDA or State officials to 
be effective. The egg sampling requirement is expected to be routine 
and a regular component of the on-farm plan to prevent SE.
    Furthermore, to assist FDA in ensuring compliance, the final rule 
requires that each facility establish and maintain records of plan 
activities, including egg sampling. Such records will assist FDA in 
determining whether sampling was performed appropriately.

G. Comments on ``Sampling Methodology for Salmonella Enteritidis (SE)'' 
(Proposed and Final Sec.  118.7)

    (Comment 32) One comment stated that FDA should distinguish between 
a sampling plan used to verify or monitor an on-farm program and a 
sampling plan used for an SE outbreak trace back. The comment also 
asked for clarification of the scientific justification for the 
requirement in Sec.  118.7 that egg producers pull a 1,000 egg sample, 
regardless of the size of the operation. The comment questioned whether 
sampling for monitoring purposes needs to be as extensive as that 
undertaken for outbreak trace back situations.
    Another comment noted that due to potential breakage, a sample size 
of 1,050 eggs would eliminate the problem of having to use cracked or 
broken eggs (i.e., the laboratory can select 1,000 eggs from this 1,050 
egg pool).
    (Response) The rule requires egg testing after receipt of 
notification of a positive environmental test (unless the eggs are 
treated). Sampling after a positive environmental test is intended to 
effectively detect SE-positive eggs from a flock.
    The rule requires that egg producers collect and deliver for 
testing a minimum of 1,000 intact eggs representative of a day's 
production four times at 2-week intervals, resulting in a total test of 
4,000 eggs over an 8-week period. This sampling scheme is based on data 
from the SE risk assessment indicating that an SE-contaminated flock 
may be producing SE-contaminated eggs with a prevalence of 1 in 1,400 
(Ref. 54). The sampling scheme would result in a 95 percent probability 
of accurately detecting an SE-positive egg from a flock producing 
contaminated eggs with the prevalence calculated in the risk assessment 
(Ref. 54).
    We agree with the potential for breakage raised in the comment 
concerning the sample size for egg testing and have modified Sec.  
118.7(b) in the final rule so that the requirement is to ``collect and 
deliver for testing a minimum of 1,000 intact eggs representative of a 
day's production'' (Emphasis added).
    With regard to the comment regarding making a distinction between a 
sampling plan for monitoring SE on the farm and for an SE outbreak 
trace back, FDA notes that this final rule does not address SE outbreak 
trace backs and is solely designed for the prevention of SE in shell 
eggs during production, storage and transportation. SE outbreak trace 
back is beyond the scope of this regulation and will not be addressed 
here.

H. Comments on ``Testing Methodology for Salmonella Enteritidis (SE)'' 
(Proposed and Final Sec.  118.8)

    (Comment 33) One comment recommended that FDA modify its required 
environmental testing method to conform to the methods currently being 
used by the industry, states and laboratories. One such method is that 
used by the NPIP. The comment stated that the proposed environmental 
testing method requires the use of an extra selective agar, bismuth 
sulfate (BS) agar, which has not been proven to be effective in 
isolating SE from environmental samples. The comment argued that BS 
agar is the agar of choice for isolating S. Typhi from clinical 
samples, but that it is not effective for environmental samples of SE. 
The comment suggested that the isolation with BS agar is an unnecessary 
step that should be eliminated from the method.
    (Response) The method we proposed for environmental testing is set 
forth in ``Detection of Salmonella in Environmental Samples from 
Poultry Houses,'' which was proposed for inclusion in FDA's 
Bacteriological Analytical Manual (BAM), or an equivalent method with 
respect to accuracy, precision, and sensitivity in detecting SE. The 
environmental testing method FDA proposed was very similar to the NPIP 
environmental testing method. For example, it included the same pre-
enrichment and enrichment broth. It was different only in that it 
specified what specific plating agars should be used, and it required 
the use of three, not two, plating agars. The selective plating agars 
identified in the proposed rule method were brilliant green with 
novobiocin (BGN), xylose-lysine tergitol 4 (XLT4), and BS. BGN and XLT4 
are two of the selective plating agars that have been used by some 
laboratories using the NPIP method.
    With respect to the use of BS, FDA has performed additional plating 
with layer house environmental SE colonies on BS agar and has 
reconsidered the method for conducting environmental testing. As a 
result of this review FDA has eliminated the use of BS for 
environmental testing in the final rule and has changed the method to 
reflect the elimination of the BS agar. The method specified in the 
final rule, ``Environmental Sampling and Detection of Salmonella in 
Poultry Houses,'' requires only two agars, BGN and XLT4.
    The comment did not challenge the specification that BGN and XLT4 
be the plating agars used, and we have not changed this specific 
requirement in the final rule. As in the proposed rule, if other 
methods are at least equivalent to the specified method in accuracy, 
precision and sensitivity in detecting SE, they may be used instead of 
the method specified.
    (Comment 34) With respect specifically to environmental testing, a

[[Page 33045]]

comment noted that the test does not allow for pooling of samples, 
which the comment stated would reduce the number of samples the 
laboratory would have to run with no loss in sensitivity of the test. 
The comment stated that pooling would reduce costs by 75 percent.
    (Response) Although there are data showing that pooling of food 
samples, under specified conditions, does not compromise method 
sensitivity, we are not aware of any data, and the comment did not 
provide any such data, to support pooling for environmental sampling. 
Until such data become available, it would be imprudent of FDA to 
specify a test that includes compositing of environmental swabs.
    (Comment 35) One comment raised concerns about the proposed egg 
testing method. The comment stated that the method proposed by FDA 
differs from the method used by APHIS, as well as other methods used by 
industry, states and laboratories. In addition to the concern that the 
method that we proposed is not the same as that used by APHIS, the 
comment identified two other specific concerns with the proposed egg 
testing method. First, the comment stated that the proposed egg testing 
method requires the use of BS, an isolation media that is the media of 
choice for isolating Salmonella Typhi from clinical samples. Second, 
the comment stated that only two selective agar plates should be 
inoculated (BGN and XLT4) instead of the five proposed in the method 
for egg testing.
    (Response) Neither the description of the method discussed in the 
preamble of the proposed rule nor the reference to the method contained 
in the codified portion of the proposed rule are correct for the egg 
testing methodology. The method referred to in the codified portion of 
the proposed rule was actually a comparison study involving varying 
media and pre-enrichment. The method for testing eggs adopted in the 
final rule is the method in the BAM, chapter 5, ``Salmonella.''
    Addressing the comments in turn, we disagree that we should adopt 
the APHIS egg testing method. Like the BAM method, the APHIS method 
first involves the disinfection of eggs and then the cracking, pooling 
and mixing of eggs. The two methods diverge at the third step, which is 
incubation: In the BAM method the pools are incubated at room 
temperature for 96 hours, while in the APHIS method the pools are 
incubated for only 72 hours.
    The two methods also are different in subsequent steps. In the BAM 
method, there is a pre-enrichment step in which a portion of the egg 
pool is enriched with trypticase soy broth supplemented with ferrous 
sulfate and incubated for 24 hours, after which the pre-enriched sample 
is placed into 2 selective enrichment broths (tetrathionate and 
Rappaport-Vassiliades), and subsequent inoculation onto three selective 
media: BS, xylose lysine desoxycholate (XLD), and Hektoen enteric (HE). 
In the APHIS method, there is no pre-enrichment step. Instead, egg 
samples from the incubated eggs are inoculated onto 2 selective agars 
(brilliant green and XLD). In both methods colonies that grow on the 
agar plates are sampled to characterize the organism as Salmonella by 
the reaction on two agar slants.
    FDA believes that, for the purposes of this final rule, its method 
is preferable to the APHIS ``Egg Sampling Method'' (58 FR 41048, August 
2, 1993). First, the addition of ferrous sulfate at the pre-enrichment 
step in FDA's method provides iron, which is needed by Salmonella for 
growth and which may not be present in sufficient quantity in the egg; 
thus, this step may increase the likelihood of detection. Second, the 
two selective enrichment media (tetrathionate and Rappaport-
Vassiliades) used in FDA's method contain agents that are selective 
(inhibitory) against the non-Salmonella organisms. The inhibition of 
non-Salmonella organisms enhances the test by reducing competition and 
possible overgrowth from other organisms. Third, the use of three, 
rather than two, selective plating agars maximizes the possibility of 
detecting as many SE strains as possible. We note that the APHIS egg 
sampling method was developed and has been in use since 1993. While it 
has been and remains a valid sampling method, the FDA method is more 
sensitive and can better detect the presence of Salmonella in food, and 
our adoption of this newer and more sensitive test will better support 
the public health goals of this rule. In summary, FDA believes that the 
specific method prescribed for egg testing in this final rule is 
tailored to the goals of the rule.
    With respect to the two more specific comments, FDA does not agree 
with the recommendation to eliminate BS in the method for egg testing, 
for the reasons explained in the previous paragraphs. Nor do we agree 
that the other two selective agar plates should be BGN and XLT4, rather 
than HE and XLD. In a comparison study of selective plating agars using 
selected high moisture foods (Ref. 55), the newer selective plating 
agars performed comparably with the BAM recommended agars (BS, HE, and 
XLD) but offered no advantage. The BAM is a collection of procedures 
preferred by analysts in FDA laboratories for the detection in food and 
cosmetic products of pathogens and microbial toxins. With some limited 
exceptions, these methods have been used and peer reviewed by FDA 
scientists as well as by scientists outside FDA. A new agar such as 
that proposed in the comments would be added to the BAM only after 
research indicated superior performance in the context of a variety of 
foods, and where the agar has been validated by collaborative studies. 
Therefore, the final rule does not deviate from the proposal in 
recommending the use of the BAM-recommended plating agars. However, we 
note that another test that is equivalent to the specified test in 
accuracy, precision and sensitivity for detecting SE may be used.
    (Comment 36) One comment recommended that FDA allow for 
improvements in the methodology for Salmonella testing to be easily and 
quickly adopted by the industry upon validation of the new method, and 
that FDA work with other Federal agencies with approved testing 
methods, such as APHIS and FSIS, to facilitate approval of methods and 
to reduce the need for one facility to use several different methods 
for Salmonella testing. The comment stated that APHIS, FSIS, and 
scientific organizations all have approved methods for detecting 
Salmonella and SE. The comment further stated that methods need to 
provide consistent results, yet be flexible enough to allow the 
industry to adapt quickly when improvements are made. For example, 
rapid testing methods are available and approved by some Federal 
agencies (e.g., FSIS). The comment argued the current proposed rule 
would not allow a producer to use a rapid method for testing of 
environmental or egg samples. The comment recommended that FDA conduct 
a literature review and, if necessary, additional research to determine 
what methods are appropriate to detect SE in the environment and egg 
samples, with the goal of identifying methods that are appropriate for 
the purpose of the testing and less costly (in both time and money) to 
the industry.
    (Response) In the final rule, FDA is allowing for other methods to 
be used for both environmental and egg testing, provided they are 
equivalent to the methods we specify in accuracy, precision, and 
sensitivity in detecting SE.

[[Page 33046]]

I. Comments on ``Administration of the Salmonella Enteritidis (SE) 
Prevention Measures'' (Proposed and Final Sec.  118.9)

    (Comment 37) Several comments suggested that FDA modify the 
requirement in proposed Sec.  118.9 that one qualified individual at 
each farm have training equivalent to a standardized curriculum 
recognized by FDA or be otherwise qualified through job experience to 
administer the SE prevention measures. The comments proposed instead 
that FDA require training of a qualified individual responsible for 
each farm, even if that person is not an onsite employee. These 
comments noted that many producers employ one individual to oversee 
multiple farm locations, and that this person generally has more 
experience and training than the onsite employees and can provide 
better oversight on developing and implementing SE prevention measures.
    (Response) We agree and are amending the language in Sec.  118.9 in 
the final rule to allow for one or more supervisory personnel, who do 
not have to be onsite employees, to be responsible for ensuring 
compliance with each farm's SE prevention measures.
    (Comment 38) One comment expressed concern about the burden small 
producers may experience in complying with the proposed requirement 
that at least one individual at each farm must successfully complete 
standardized FDA-curriculum or equivalent training of up to 2 to 3 days 
on SE prevention measures for egg production. The comment requested 
that FDA consider developing a training program that could be 
implemented without requiring travel from the egg operation. Further, 
the comment requested that FDA not impose deadlines for such training 
that could be difficult for such small producers to meet.
    (Response) FDA plans to work with trade associations, State 
regulatory officials, and academia/extension officials to develop and 
offer training opportunities at venues that should satisfy the needs of 
small, medium, and large size facilities. Further, in the final rule, 
FDA has reduced the burden of the training requirement by allowing one 
or more supervisory personnel to serve as the trained administrator for 
all of the firm's facilities rather than requiring a dedicated, trained 
individual at each facility. FDA believes this will substantially 
reduce the burden for small producers to comply. Finally, FDA notes 
that the rule provides that equivalent job experience can be 
substituted for training.

J. Comments on ``Recordkeeping Requirements for the Salmonella 
Enteritidis (SE) Prevention Measures'' (Proposed and Final Sec.  
118.10)

    (Comment 39) In the proposed rule, FDA proposed certain 
recordkeeping requirements and solicited comments on whether additional 
recordkeeping measures should be required for a comprehensive SE 
prevention plan, and whether a written SE prevention plan should be 
required. Several comments supported the proposed recordkeeping 
requirements but did not comment on expanding them; one comment stated 
that there is no need for FDA to expand its recordkeeping requirements 
beyond those proposed. In addition, several comments supported 
expanding the proposed recordkeeping requirements to include a written 
SE prevention plan and records for compliance with SE prevention 
measures. Several comments noted that such records have been very 
useful in conducting inspections of facilities to determine compliance 
with the egg quality assurance program requirements and for identifying 
problems in the producer's SE prevention plan when a test is positive. 
Another comment stated that records documenting compliance with all 
aspects of the SE prevention plan will be essential for a producer to 
determine if their plan is effective and in making adjustments to 
improve their plan. One comment opposed the requirement of a written SE 
prevention plan, stating that while a written plan would undoubtedly be 
an important management tool, and indeed many operations have such a 
plan, it is not necessary for FDA to mandate such a document. The 
comment stated FDA should not place undue emphasis on paperwork, as 
opposed to actual results. The comment suggested that FDA work with 
interested parties to develop a model SE prevention plan that could be 
provided to egg producers for their use.
    (Response) FDA agrees with the comments that the final rule should 
require a written SE prevention plan as well as records to document the 
effective implementation of that plan. This written SE prevention plan 
will set forth a producer's plan to implement the regulation's 
prevention, testing, and diversion measures. A written plan is 
necessary for producers to ensure that they have effectively and 
consistently implemented SE prevention measures. Further, a written 
plan greatly facilitates FDA inspection. SE prevention measures may be 
quite different among farms, given different facility design and size, 
and yet be equally effective in preventing SE contamination. Knowledge 
of the specific prevention measures taken on a farm, as discussed in an 
SE prevention plan, will assist FDA to assess compliance with the 
prevention measures.
    In addition, reviewing records of implementation of a facility's 
specific SE prevention measures is the best mechanism for FDA to use to 
determine whether preventive measures have been implemented over a 
period of time. These required documents include records of 
implementation and compliance with all SE prevention measures. Such 
documents, for example, would include documents that pullets were SE 
monitored or raised under SE monitored conditions, records of SE 
environmental and egg testing, and records of activities required by 
the rule, such as treatment or diversion of eggs, as well as records 
indicating review of the plan and any changes or modifications made to 
the plan. Keeping careful written records will help producers ensure 
that they have effectively and consistently implemented SE prevention 
measures and will also assist FDA in determining whether the plan is 
being followed and in identifying problems in the producer's plan when 
a test is positive. If changes or modifications need to be made, 
recording such changes or modifications will help ensure such changes 
are implemented.
    Therefore, under Sec.  118.10, FDA is requiring that egg producers 
covered by all of the requirements in the rule (Sec.  118.1(a)(1)) 
maintain the following records documenting their SE prevention 
measures: (1) A written SE prevention plan; (2) documentation that 
pullets were ``SE-monitored'' or were raised under ``SE-monitored'' 
conditions, including environmental testing records for pullets; (3) 
records documenting compliance with the SE prevention measures; and (4) 
records of review and of modifications of the SE prevention plan and 
corrective actions taken. FDA intends to issue guidance regarding the 
recordkeeping requirement.
    (Comment 40) Two comments stated that FDA should require purchasers 
of diverted eggs (e.g., egg breaking facilities, shell pasteurization 
facilities, hard-cooked operations, or other facilities where the eggs 
could be treated) to maintain records indicating that the diverted eggs 
have been treated. These comments, submitted by an agricultural 
department and poultry and livestock commission of two major shell egg 
producing states, argued that without records there would be no

[[Page 33047]]

ability to ensure the purchaser would treat the eggs and not simply 
divert them back to the table egg market.
    (Response) FDA agrees with the comments' concern that purchasers of 
diverted eggs might resell them for the table egg market without 
treating them and that buyers might not know that the eggs must receive 
a treatment. To address this concern, FDA has modified this final rule 
by adding Sec.  118.6(f), which requires that when shell egg producers 
divert eggs, the pallet, case, or other shipping container must be 
labeled and all documents accompanying the shipment must contain the 
following statement: ``Federal law requires that these eggs must be 
treated to achieve at least a 5-log destruction of Salmonella 
Enteritidis or processed as egg products in accordance with the Egg 
Products Inspection Act, 21 CFR 118.6(f).'' The statement must be 
legible and conspicuous. FDA believes this additional requirement will 
help reduce the likelihood that these eggs will end up on the market 
without having been treated. We note that USDA-FSIS, not FDA, regulates 
egg-breaking facilities under the Egg Products Inspection Act (21 
U.S.C. 1031 et seq.).
    The costs and benefits of this provision are addressed in section V 
of this document, Regulatory Impact Analysis.
    (Comment 41) One comment questioned the proposed rule to the extent 
it did not require an SE prevention plan until a producer has a 
positive environmental test. The comment stated that this delay 
increases the risk of producing SE-positive eggs that are distributed 
into the table egg market prior to the test and increases the 
difficulty of the producer reducing or eliminating SE from the 
environment and the flock.
    (Response) The assertion in the comment that the proposed rule did 
not require an SE prevention plan until a producer has a positive 
environmental test is incorrect. Neither the proposed nor final rules 
make having an SE prevention plan contingent upon a positive 
environmental test.
    (Comment 42) One comment commended FDA's statement that ``we intend 
to consider records that come into our possession under this rule as 
generally meeting the definition of a trade secret or commercial 
confidential materials'' (69 FR 56824 at 56841). However, the comment 
requested that FDA identify in the final rule what information will be 
considered confidential commercial information (CCI) or a trade secret, 
and under what legal authority FDA will defend this designation against 
any legal challenges.
    (Response) FDA's regulations in 21 CFR part 20 govern the 
disclosure of information under the Freedom of Information Act (FOIA), 
including the disclosure of CCI and trade section information. The 
agency's general policies, procedures, and practices relating to the 
protection of confidential information received from third parties 
apply to information received under this rule. It is not necessary that 
FDA designate information upfront as CCI or trade secret because these 
determinations can be made before releasing any information. If FDA 
denies a request under FOIA, it will rely on the provisions in that 
statute which permit the agency to withhold information.
    (Comment 43) One comment questioned FDA's assertion that section 
361 of the PHS Act (42 U.S.C. 264) gives it legal authority to inspect 
records. The comment argued that FDA's reliance upon section 361 of the 
PHS Act is misplaced and cannot be used to impose records inspection on 
food establishments where, according to the comment, such inspection is 
not allowed under section 704(a) of the Federal Food, Drug, and 
Cosmetic Act (FFDCA) (21 U.S.C. 374(a)).
    (Response) In the final rule, FDA relies on sections 402(a)(4) and 
701(a) of the FFDCA (21 U.S.C. 342(a)(4) and 371(a)) and sections 311, 
361, and 368 of the PHS Act (42 U.S.C. 243, 264, and 271) to require 
access to certain records. FDA does not rely on section 704(a) of the 
FFDCA for authority to access records in this rule. Furthermore, the 
PHS Act provides authority for records access that is independent of 
the FFDCA. Specifically, section 361 of the PHS Act authorizes the 
Secretary of Health and Human Services (the Secretary) to make and 
enforce such regulations as ``are necessary to prevent the 
introduction, transmission, or spread of communicable diseases from 
foreign countries into the States * * * or from one State * * * into 
any other State.'' The basis for the recordkeeping requirements in the 
final rule is further explained in section IV of this document, Legal 
Authority.
    (Comment 44) One comment encouraged FDA to incorporate an automated 
recordkeeping requirement into the proposed rule. The comment stated 
that an automated system would enhance and support the recordkeeping 
requirements outlined in the proposed rule. The comment argued that 
such a system could provide farm-specific data, and an efficient, cost-
effective way to research compliance. The comment stated that an 
automated system would greatly reduce the recordkeeping burden placed 
upon egg producers as well as the time, frequency, and cost associated 
with FDA inspections.
    (Response) FDA believes that the least burdensome way of 
implementing the recordkeeping requirements is to specify the 
information that must be contained in the records, but not the format 
in which the records are kept. Automated technology may not be 
available or within the means of all producers covered by the rule. We 
note that egg producers may choose to use automated recordkeeping as 
long as they maintain all of the required records.

K. Comments on Registration Requirements for Shell Egg Producers (Final 
Sec.  118.11)

    (Comment 45) In the proposed rule (69 FR 56841 at 56841 through 
56842), FDA solicited comments about whether we should require that 
shell egg producers register with FDA. Several comments supported 
requiring registrations by egg producers covered by the SE prevention 
measures. These comments stated that registration of all producers 
covered by any of the SE prevention measures would be the most 
efficient method of obtaining the information needed to conduct annual 
inspections and allocate resources.
    Further, several comments stated that such a requirement should be 
consistent with the program developed under the agency's bioterrorism 
regulations. The comments further stated that by identifying each 
farm's location and size, a registration requirement would enable more 
efficient inspection, as well as better management and oversight of a 
shell egg recall.
    One comment stated that, to create a level playing field across the 
United States, registering all producers is necessary and that FDA may 
be able to cooperate with USDA/APHIS, which is presently developing a 
premises identification program for all animal premises in the United 
States.
    (Response) FDA agrees with the comments and is requiring that egg 
producers who must comply with all of the SE prevention measures in 
this rule, and also those producers who must comply only with the 
refrigeration requirements in this rule, register with FDA and provide 
information on the name of each farm, its location, layer capacity, and 
the number of houses. Persons who transport or hold shell eggs for 
shell egg processing or egg products facilities but who are not egg 
producers are not required to register with FDA, although they are 
subject to the refrigeration requirements in Sec.  118.4.

[[Page 33048]]

    FDA intends to conduct inspections of egg farms to ensure that 
shell eggs are being produced under controls that will prevent SE 
contamination and reduce the likelihood that SE-contaminated eggs will 
cause foodborne illness. We will use the producer registration 
information to create a database used to efficiently conduct 
inspections and allocate inspection resources. Covered egg producers 
must register within 30 days of becoming an egg producer or, if already 
an egg producer, by the applicable effective date of the rule. 
Additionally, registered egg producers are required to notify FDA 
within 120 days of ceasing egg production (excluding seasonal egg 
producers or those who temporarily cease operation due to labor 
disputes, fire, natural disasters, or other temporary conditions).
    Producers can register online via the Internet, by completing a 
paper form and mailing or faxing it to FDA, or by sending a CD-ROM 
containing the relevant registration information to FDA. If ceasing egg 
production, producers can notify FDA either online via the Internet or 
by completing a paper form and mailing or faxing it to FDA.
    (Comment 46) One comment objected to requiring producers who pack 
eggs to register, stating that every producer with packing facilities 
is registered with the FDA under the registration rule and should not 
be required to register a second time. The comment agreed that 
producers that do not pack eggs, but sell eggs that will ultimately go 
into the table egg market, should be registered so that FDA can ensure 
these firms are following the on-farm production and testing 
requirements of the SE rule.
    (Response) Farms are not required to register under FDA's 
Registration of Food Facilities regulation (21 CFR 1.226(b)). If a farm 
also has a packing or processing facility, then only the packing or 
processing facility is required to register under the registration rule 
if those packing and processing activities do not qualify under the 
farm exemption (see ``farm'' definition for activities that are covered 
in the farm exclusion under 21 CFR 1.227(b)(3)). Because the packing/
processing facility registration information may not fully identify the 
farm location, FDA is requiring that information in this regulation. If 
the information that would be provided by an egg producer during 
registration has already been provided under the registration 
regulation, the producer may submit its registration number rather than 
registering again.
    (Comment 47) One comment objected to the proposed registration 
requirement as an unnecessary burden and an unreasonable invasion of 
privacy. The comment argued that FDA only should check for compliance. 
The comment further argued that ``unexpected visits are not appropriate 
as a respect for other people and the reality is that no one can hide 
what you want to see in 24 hours.'' The comment further argued that 
registration will result in a loss of privacy for the producer and is 
unnecessary for the success of the program.
    (Response) FDA disagrees with this comment. As stated above, 
registration will aid in the identification of egg producers for 
inspection and compliance purposes. We will use the producer 
registration information to create a database that we will use to 
efficiently conduct inspections and allocate inspection resources. With 
regard to ``unexpected visits,'' section 704 of the FFDCA (21 U.S.C. 
374) authorizes FDA inspections without advance notice and FDA's 
practice of making such inspections precedes this rule and is 
independent of whether registration is required.
    (Comment 48) One comment expressed concern that information 
submitted to register facilities would be subject to the Federal 
Freedom of Information Act (5 U.S.C. 552), and that public release of 
this information could result in a decrease of security at the producer 
sites. The comment stated that FDA has other means at its disposal to 
learn the site information needed to administer this program and still 
respect the need for security at the producer sites.
    (Response) FDA recognizes that this information may be subject to 
disclosure under FOIA, unless there is statutory authority there or 
elsewhere that protects it. However, we disagree that the risk of such 
disclosure outweighs the public health benefits of collecting this 
information. As stated previously, registration will facilitate FDA's 
identification of egg producers for inspection and compliance purposes. 
We will use the producer registration information to create a database 
that we will use to efficiently conduct inspections and allocate 
inspection resources.

L. Comments on ``Enforcement and Compliance'' (Proposed and Final Sec.  
118.12)

    There were no comments on this section.

M. Comments on Request for Comments as to Whether FDA Should Mandate 
Special Requirements for Food Establishments That Specifically Serve 
Highly Susceptible Populations

    (Comment 49) We received a number of responses to our request in 
the proposed rule for comments on whether the current FDA Food Code 
system (under which states may adopt and implement provisions of the 
FDA Food Code) is adequate to protect highly susceptible populations 
from salmonellosis, or whether instead we should establish mandatory 
Federal standards for food establishments that serve eggs to highly 
susceptible populations, such as the elderly. Several of these comments 
supported the Federal codification of the egg-related Food Code 
provisions for food establishments specifically serving highly 
susceptible populations, and one comment opposed codification.
    One comment supporting codification stated that egg producers do 
not have full control or responsibility for egg safety, and that food 
establishments and consumers must share in the responsibility for egg 
safety. The comment opposed to setting Federal standards stated that 
the egg safety goal cannot be achieved through mandatory Federal 
requirements at the food establishment level. The comment recommended 
continuing mandatory on-farm efforts while continuing educational 
efforts at retail and consumer levels.
    (Response) FDA agrees that food establishments that specifically 
serve highly susceptible populations can play an important role in egg 
safety As we discussed in section I.H., a majority of states and 
territories have adopted into their own retail food codes the relevant 
egg-associated provisions of the FDA Food Code (sections 3-202.11(C), 
3-202.13, 3-202.14(A), and 3-801.11(B)(1) and (B)(2), (C)(2), (E), and 
(F)(1) and (F)(2) of FDA's 2005 Food Code (see discussion under section 
I.H of this document regarding the changes made from the 2001 Food 
Code)). In addition, other state, local, Federal, or voluntary 
standards applicable to these facilities may have similar egg safety 
provisions, although we were not able to identify or quantify all such 
standards. We agree with the comment that encouraged us to continue 
education efforts at the retail and consumer levels. We also agree that 
codification of the FDA Food Code provisions is not a necessary 
exercise of our authority. Instead, we have determined that we will 
continue to encourage states to adopt the relevant provisions of the 
FDA Food Code.

[[Page 33049]]

    (Comment 50) One comment suggested that we make mandatory those 
parts of the Food Code related to the pooling of eggs in all 
institutions, including but not limited to those serving specifically 
at-risk populations in section 3-8 of the Food Code. The comment stated 
that many of the large outbreaks have been related to commercial or 
government institutions that misuse eggs, especially when they break 
and pool large numbers of eggs. The comment stated that even if the 
eggs are delivered SE-free, the hand breaking and pooling of eggs can 
result in a contaminated pool due to inadequate hand washing, unclean 
utensils, temperature abuse during the breaking process and cross-
contamination from other raw foods. The comment also stated that the 
FDA Food Code should be modified to incorporate a requirement that 
pasteurized egg products be substituted for shell eggs if the eggs are 
to be pooled, as a model for States to follow.
    (Response) FDA has determined that the relevant egg safety 
provisions of the Food Code should not be mandatory, for the reasons 
discussed in the preceding response, including those provisions related 
to the pooling of eggs.
    The comment concerning modification of the FDA Food Code is beyond 
the scope of this rule.

IV. Legal Authority

    As outlined in section II.B of this document, after considering 
comments received in response to the proposal, FDA made changes in the 
final rule, including the addition of some requirements. The proposed 
rule contained an explanation of its legal basis under authorities in 
sections 311, 361, and 368 of the PHS Act (42 U.S.C. 243, 264, and 271) 
and sections 402(a)(4) and 701(a) of the FFDCA (21 U.S.C. 342(a)(4) and 
371(a)). The PHS Act authorizes the Secretary to make and enforce such 
regulations as ``are necessary to prevent the introduction, 
transmission, or spread of communicable diseases from foreign countries 
into the States * * * or from one State * * * into any other State'' 
(section 361(a) of the PHS Act). This authority has been delegated to 
the Commissioner of Food and Drugs. Under section 402(a)(4) of the 
FFDCA, a food is adulterated if it is prepared, packed, or held under 
insanitary conditions whereby it may have been contaminated with filth 
or rendered injurious to health. Under section 701(a) of the FFDCA, FDA 
is authorized to issue regulations for the efficient enforcement of the 
FFDCA. These authorities, as well as others specified in the following 
paragraphs, support the new requirements in the final rule.
    Section 118.4(e) requires that persons who transport or hold shell 
eggs for shell egg processing or egg products facilities must comply 
with refrigeration requirements. It is well documented that shell eggs 
may contain Salmonella, including transovarian transmitted SE, which 
can result in serious, life-threatening illness. Temperature abuse of 
shell eggs, such as by failing to refrigerate eggs as required by the 
rule, can lead to the multiplication of SE in shell eggs, and thus, 
increase the likelihood of illness if the eggs are not thoroughly 
cooked. The refrigeration requirement in Sec.  118.4(e) prohibits food 
from being held under insanitary conditions and allows for the 
efficient enforcement of the FFDCA (21 U.S.C. 342(a)(4) and 371(a)). 
Further, this requirement is necessary to prevent the spread of 
communicable disease from one state into another state. (42 U.S.C. 
264).
    Section 118.10 requires that egg producers have written SE 
prevention plans and maintain records documenting compliance, as well 
as records of review and modification to the plan and any corrective 
actions taken. Through records maintenance and review, an egg producer 
can, over time, develop a comprehensive picture of its prevention 
measures and identify shortcomings or potential shortcomings. A written 
plan and records documenting implementation of that plan are necessary 
for producers to ensure that they have effectively and consistently 
implemented the plan. For example, without records documenting 
environmental sampling procedures, a producer cannot ensure that the 
environment was sampled using a plan appropriate to the poultry house 
layout.
    Similarly, records maintenance and access provide FDA with the 
opportunity to oversee, in a comprehensive way, the implementation of 
the producer's SE prevention plan, thereby preventing SE contamination 
of eggs. SE prevention measures may be quite different among farms, 
given different facility design and size, and yet be equally effective 
in preventing SE contamination. Knowledge of the specific prevention 
measures taken on a farm, as specified in an SE prevention plan, will 
assist FDA to assess compliance with the prevention measures. In 
addition, reviewing records is the best mechanism for FDA to use to 
determine whether preventive measures have been implemented over a 
period of time. Because the preventive measures are essential to the 
production of safe eggs as a matter of design, the statutory scheme is 
benefited by agency access to records that demonstrate that these 
measures are being systematically applied.
    By requiring records, we will be able to ensure that producers 
follow the SE prevention measures so that eggs are prepared, packed and 
held under sanitary conditions (21 U.S.C. 342(a)(4) and 371(a)) and in 
a manner designed to prevent the spread of communicable disease via SE-
contaminated eggs (42 U.S.C. 264).
    Section 118.11 requires registration by egg producers who must 
comply with either all of the SE prevention measures or only with the 
refrigeration requirements. It is essential that we know, via 
registration, certain information about egg producers, such as whether 
a producer has 3,000 or more laying hens at a particular farm, so that 
we can identify and inspect those farms subject to the rule. Inspection 
is necessary to ensure that shell eggs are being produced in compliance 
with SE prevention measures, thereby reducing the likelihood of 
foodborne illness. Therefore, the registration requirement is necessary 
to prevent the spread of communicable disease from one state into 
another state. (42 U.S.C. 264).
    Section 118.6(f) requires that for diverted eggs, the pallet, case, 
or other shipping container must be labeled and all documents 
accompanying the shipment must contain the specified statement to 
indicate that the eggs must be treated to destroy SE. This requirement 
is supported by sections 201(n), 403(a)(1), and 701(a) of the FFDCA (21 
U.S.C. 321(n), 343(a)(1), and 371(a)) and sections 311, 361, and 361 of 
the PHS Act. Under section 403(a)(1) of the FFDCA, a food is misbranded 
if its labeling is false or misleading in any particular. Section 
201(n) of the FFDCA provides that in determining whether labeling is 
misleading, the agency shall take into account not only representations 
made about the product, but also the extent to which the labeling fails 
to reveal facts that are material in light of such representations made 
or suggested in the labeling or material with respect to consequences 
that may result from use of the product under conditions of use 
prescribed in the labeling or under customary or usual conditions of 
use. FDA previously has relied on these authorities when it required 
label statements on shell eggs not processed to destroy all viable 
Salmonella (65 FR 76092, December 5, 2000).
    The rule requires eggs to be diverted in certain circumstances, 
including after a positive egg test, to ensure that SE will

[[Page 33050]]

be destroyed before the eggs are consumed. Without treatment, these 
eggs would present the greatest risk of causing SE illnesses. As 
discussed in section V of this document, the eggs that must be diverted 
to a treatment are worth less than eggs that may be used for the table 
egg market. This creates an economic incentive to send the eggs to the 
table egg market. Further, without labeling, a purchaser might not know 
that particular eggs are subject to the diversion requirement. 
Therefore, the agency concludes that information that the eggs must be 
treated to destroy SE is material information that must be provided on 
the shipping container and accompanying documentation and that the 
requirement is necessary to prevent the spread of communicable disease 
from one state into another state. (42 U.S.C. 264).
    As explained in the proposal, activities that are intrastate in 
character, such as the production and final sale of shell eggs to an 
institution for ultimate consumption by a consumer within one State, 
are subject to regulation under section 361 of the PHS Act (State of 
Louisiana v. Mathews, 427 F. Supp. 174, 176 (E.D.La. 1977)). The 
proposed rule explained FDA's reasoning for tentatively determining 
that the SE prevention measures in this rule must apply to producers of 
shell eggs who sell their eggs intrastate, other than directly to 
consumers. For the reasons discussed therein, we are making that 
determination final.

V. Analysis of Economic Impacts--Final Regulatory Impact Analysis

A. Introduction

    FDA has examined the impacts of the final rule under Executive 
Order 12866, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the 
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). 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). The agency believes that 
this final rule is an ``economically significant'' regulatory action as 
defined by Section 3(f)(1) of the Executive Order.
    The Regulatory Flexibility Act requires agencies to analyze 
regulatory options that would minimize any significant impact of a rule 
on small entities. Using the Small Business Administration (SBA) 
definitions of small for chicken and egg producers, FDA estimates that 
more than 99 percent of all egg farms are small. Though more than 
45,000 farms with less than 3,000 layers are exempt from all provisions 
of the rule, the agency certifies that the rule will have a significant 
economic impact on a substantial number of small entities. This is 
discussed further in section VI of this document.
    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires 
that agencies prepare a written statement, which includes an assessment 
of anticipated costs and benefits, before finalizing ``any rule that 
includes any Federal mandate that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100,000,000 or more (adjusted annually for 
inflation) in any one year.'' The current threshold after adjustment 
for inflation is $130 million, using the most current (2007) Implicit 
Price Deflator for the Gross Domestic Product. FDA expects this final 
rule to result in 1-year expenditures that would meet or exceed this 
amount. This is discussed further in section VII of this document.

B. Need for Regulation

    Private markets operating within the framework of the legal system 
promote the health and safety of consumers. Limitations of both the 
marketplace and the legal system, however, can result in inadequate 
control of some health and safety hazards, and reduce societal welfare.
    In a perfectly competitive market in which consumers and producers 
both have sufficient information, the optimal level of production of 
eggs will be provided at an optimal level of safety. In the egg market, 
however, consumers and producers do not have sufficient information on 
the SE status of particular eggs. In the case of SE-contaminated eggs, 
although farmers and producers do have an incentive to put safety 
programs into place, the lack of awareness and information about the 
risk suggests that an inefficiently high demand exists for eggs that 
are produced without using adequate measures to prevent SE.\2\ Because 
the demand for specific eggs is not sufficiently affected by safety 
considerations, the farmer's incentive to invest in safety measures is 
diminished. Consequently, the market does not provide the incentives 
necessary for optimal egg safety.
---------------------------------------------------------------------------

    \2\ For example, although many consumers may be generally aware 
of the association between shell eggs and SE, they may not know that 
a few common methods of preparing eggs for consumption will not 
eliminate SE in a contaminated egg.
---------------------------------------------------------------------------

    With sufficient information for consumers and producers, a legal 
system that awards compensation for harm done due to SE-contaminated 
eggs has the potential to remedy market imperfections by providing 
producers with incentives to provide the level of safety that is best 
for society. The legal system does not ensure the optimum level of 
shell egg safety because consumers who become ill due to SE 
contamination often do not know the reason for, or source of, their 
illness. Even in cases where consumers are aware that their illness was 
contracted from eggs, imperfect information makes it difficult to 
determine who is ultimately responsible for their illness, since the 
particular source of the SE contamination of the eggs is not known in 
many circumstances.
    In sum, the imperfect information about the risk associated with SE 
from particular shell eggs means that neither the legal system nor the 
marketplace may be able to provide adequate economic incentives for the 
production of eggs sufficiently free of SE contamination. The 
Government may therefore be able to improve social welfare through 
targeted regulation. In what follows, we will look at the costs and 
benefits of the provisions in the rule and comments addressing the 
benefits and costs of options presented in the proposed rule. We will 
also look at the costs and benefits of other measures to control SE 
that we considered, but did not include in this final rule.

C. Comments on the Preliminary Regulatory Impact Analysis in the 
Proposed Rule and Responses

    (Comment 51) One comment agreed that FDA should exempt small 
producers generally from the final rule, but suggested that the 
proposed testing and diversion requirements should apply to all egg 
producers, regardless of size. The comment argued that testing of the 
environment and shell eggs provides verification that on-farm 
sanitation programs are effective in controlling SE and allows for 
preventive measures including diversion if a positive test occurs, 
which could prevent illnesses and outbreaks. The comment suggested that 
imposing testing and diversion requirements on small producers would 
limit the burden on these small businesses without reducing the public 
health benefit from the final regulation.
    (Response) Some benefits would be derived by requiring farms with 
less than 3,000 layers to divert potentially positive eggs upon both a 
positive environmental and a positive egg test.

[[Page 33051]]

However, the cost per case averted on farms with less than 3,000 
layers, producing less than 1 percent of the shell eggs on the market 
(accounting for 300 to 1,000 SE-related illnesses per year and less 
than 1 death per year), is approximately $205,000 per case averted, 
which would not be a cost-effective public health intervention on over 
45,000 very small egg farms.
    (Comment 52) One comment noted that, over the last several years, 
numerous shell egg production facilities in the United States were 
built to produce eggs only for processing into egg products; these 
facilities may divert eggs for sale as table eggs when market 
conditions or seasonal production patterns warrant. The comment stated 
that this diversion is done when demand for egg products is weak and 
the producer can avoid or minimize potential economic loss by moving 
temporary surpluses to the table egg market. The comment stated that, 
although under the proposed rule producers whose entire production will 
be processed into egg products need comply only with the refrigeration 
requirements for on-farm storage, these producers who may divert their 
eggs to the table egg market must comply with all of the egg production 
requirements when any part of their production is not processed into 
egg products or does not receive a treatment that achieves at least a 
5-log destruction of SE. The comment stated that, while many firms that 
produce shell eggs for use primarily in the manufacture of egg products 
now have extensive on-farm programs to ensure the safety of eggs and 
egg products, some of these producers will need to impose additional 
food safety measures at the production site in order to be able to 
continue to occasionally divert eggs to the table egg market. The 
comment questions whether the agency considered these expenditures in 
determining total costs of the proposed rule on the egg industry.
    (Response) Those farms that produce only a portion of their eggs 
for sale on the table egg market have been covered within the scope of 
this rule and their costs are included in the costs and the benefits 
analysis of the final rule.
    (Comment 53) One comment states that the requirement that eggs be 
refrigerated at a temperature of no greater than 45 [deg]F within 36 
hours of laying is not realistic. The comment recommended instead that 
the rule require that eggs held at the farm be refrigerated at a 
temperature no greater than 55 degrees, provided the eggs are not to be 
stored on the farm for more than 4 days. The comment states that eggs 
are generally held in on-farm coolers for a relatively short period of 
time; that there is evidence that any low level of SE within a 
naturally infected egg will not undergo significant multiplication 
until the albumen begins to degrade; and that, even at room 
temperature, significant growth may take several weeks. The comment 
stated that the cost involved in remodeling and operating on-farm 
coolers to maintain a 45-degree ambient temperature, rather than a 55-
degree ambient temperature, would not show a reasonable cost/benefit 
ratio.
    (Response) Not all farms will need to remodel their on farm coolers 
to maintain a 45-degree ambient temperature. However, many will, and 
the costs associated with that remodeling are significant. In the 
analysis detailed in section V.F of this document, FDA estimates 
annualized costs for farms that build cooling facilities from scratch, 
remodel existing cooling facilities, use extra power to reduce 
temperature, use refrigerated shipping, and use refrigerated 
preproduction storage, to be $20.1 million using a 7 percent discount 
rate and $16.4 million using a 3 percent discount rate. Using the 2005 
FSIS risk assessment (Ref. 22), FDA estimated that the refrigeration at 
45 degrees within 36 hours of lay through the preproduction stage, in 
the absence of the other provisions in the final rule, would reduce the 
number of annual SE related illnesses by nearly 45,000. With all 
provisions in the final rule fully implemented, refrigeration would 
reduce the number of SE related illnesses by nearly 29,000. Including 
all costs of egg-related SE illnesses (i.e., both mild cases and the 
less frequent though more severe ones including hospitalization, 
chronic arthritis, or even death), FDA estimated the average cost of an 
SE illness to be $17,900. This provision, when implemented with the 
rest of the final rule, is estimated to provide nearly $520 million in 
benefits annually and nearly $500 million in annual net benefits.
    (Comment 54) One comment stated that, for environmental testing, 
consideration should be given to the sampling of a given proportion of 
available sites as opposed to a given number of samples regardless of 
the size of the flock or the number of houses. The comment stated that 
a farm may have a single age group in more than one house.
    (Response) This comment reflects a misunderstanding of the 
proposal. Sampling is performed on a per house basis. Section 118.7(a) 
requires that an environmental test must be done for each poultry house 
in accordance with Sec.  118.5(a) and (b). Within each poultry house, 
you must sample the environment using a sampling plan appropriate to 
the poultry house layout. We agree that sites/houses are the 
appropriate sampling location. Costs and benefits of environmental 
sampling are calculated on a per house basis.
    (Comment 55) Several comments stated that breaker eggs will sell 
for a lower price than table eggs, that diversion costs will vary by 
region, and that breaker eggs from SE-positive flocks will sell for 
even less than normal breaker eggs. One comment stated that the cost 
estimated for normal breaker eggs is underestimated in the analysis of 
the proposed rule. Data were provided to support the comment. One 
comment stated that processors are likely to refuse eggs from SE-
positive flocks.
    (Response) We agree with the comments and recognize differences 
exist regionally in the price received for eggs, in the price of 
breaker eggs, and in the price of eggs from SE-positive flocks. All of 
these costs, including regional differences in diversion costs, and the 
adverse effects of bad publicity, are discussed in the analysis. The 
additional data the comment provides are considered in the final rule. 
The expected cost of a diverted egg has increased in the new analysis 
to $0.23 per dozen eggs (drawn from a uniform range of $0.13 to $0.33 
per dozen eggs) from the proposed rule's estimate of $0.17 per dozen 
(drawn from a uniform range of $0.13 to $0.21 per dozen). The analysis 
and new results are detailed in table 22 and section V.F of this 
document.
    FDA does not agree with the comment that processors will refuse 
eggs from positive flocks. FDA is aware of at least one processor that 
will purchase eggs from SE-positive flocks, and FDA believes others 
will as well because the pasteurization process for breaker eggs is 
designed to achieve at least a 5-log reduction in any SE that may be in 
eggs. However, because of the restrictions placed on eggs from SE-
positive flocks, these eggs are intrinsically less valuable than normal 
shell eggs. This decrease in value, and cost burden likely to be 
transferred from egg processor to producer through a discount on eggs 
purchased from SE-positive flocks, is considered a cost of this 
rulemaking and is accounted for in the analysis and detailed in section 
V.F of this document.
    (Comment 56) One comment stated that, to replace diverted eggs for 
a farm's existing markets, other eggs would need to be purchased, 
probably at an inflated price.

[[Page 33052]]

    (Response) Although FDA recognizes this effect is possible in the 
rulemaking, it is a within-industry transfer of burden and is not 
counted as a cost in the analysis (the costs net out between 
producers).
    (Comment 57) One comment questioned the presumed number of houses 
on the ``larger than 3,000 hens'' farms, although the comment 
recognized that the number was estimated using the National Animal 
Health Monitoring System (NAHMS) study.
    (Response) The number of houses was estimated using the best data 
available, which the comment correctly identified as the NAHMS study.
    (Comment 58) One comment stated that all cost calculations are 
broken down by house capacities. Results are applied to each size 
category with no acknowledgement that within each category, 
considerable variation still exists.
    (Response) FDA agrees. There will be considerable variation of 
costs within groups. Costs in most cases will be smaller than average 
for the smaller than average farms within a size category and larger 
than average for larger than average farms. For rodent and other pest 
control, within group variation from the mean estimation is due to 
uncertainty about the extent to which current farm practices are 
adequate to meet the rule's requirements and costs of inputs, and due 
to variation in the number of houses. The variation is driven by the 
number of houses on a farm, so larger farms within a given size 
category will incur higher costs. The same is true for the biosecurity 
and cleaning and disinfecting provisions. Within group variation for 
the refrigeration provision is driven primarily by the variance in egg 
production and compliance. Farms that produce more eggs will require 
the construction of larger and more costly egg rooms than average. For 
testing and diversion, the within group variation is driven by the 
number of houses and egg production. Farms with more houses will have 
higher environmental testing costs, and farms with higher egg 
production per house will have a higher cost of diversion.
    (Comment 59) Several comments stated that the cost of testing eggs 
is underestimated in the proposed rule analysis. One comment noted 
that, although in the proposal FDA estimated lab costs at $30, the 
pilot project lab cost relied on in developing that estimate were for 
direct plating from the egg pool onto two plates, not for the testing 
proposed of one pre-enrichment followed by two enrichments followed by 
five plates for each enrichment broth and then inoculation onto two 
differential media.
    One comment stated that there would be start up costs for new labs 
entering the market due to increased demand for testing as a result of 
the rule.
    (Response) FDA agrees that the costs estimated in the proposed rule 
analysis refer to the costs of the testing regime outlined in the pilot 
project, a less intensive regime than the one required in the proposed 
and final rules. These cost estimates have been corrected in the 
analysis of the final rule. A detailed description of the analysis is 
located in section V.F of this document.
    We do not include start up costs for labs that enter the market or 
increase capacity due to increased testing demand as a result of the 
rule. The lab fees are set up by these firms to cover both the initial 
set up costs and the costs of each test. Counting these costs in 
addition to lab fees charged to egg producers would be double counting.

D. Economic Analysis of Potential Mitigations: Overview

    We considered many possible SE prevention measures. Because of the 
large number of provisions considered (and the large number in the 
rule) we begin our analysis in this section with an overview of our 
methods of estimating the benefits and costs of the various measures to 
control SE in shell eggs. In section V.F of this document, we summarize 
the benefits and costs of the rule and regulatory options. In section 
V.G of this document, we present the detailed analysis of SE prevention 
measures we considered (including both those included and not included 
in the final rule).
1. Measuring Benefits
    a. Modeling benefits. The primary benefit of the provisions in this 
rule (and the other possible measures) would be an expected decrease in 
the incidence of SE-related illnesses. The benefits will be calculated 
using the following model:

Benefits = base line risk x % risk reduced (C1, C2, C3, * * *) x value 
of risk reduced

Where:

 Benefits = annual health benefits realized due to this 
rule.
 Base line risk = the base line level of risk facing 
consumers today, expressed as the number of SE cases attributable to 
shell eggs consumption
 Risk reduced (C1, C2, C3, * * *) = the % of risk reduced 
from the baseline due to changes in production (C1, C2, C3, * * *)
 Value of risk reduced = the social cost of one 
representative case of salmonellosis. This cost includes medical 
costs, the value of lost production, and the loss of welfare the 
individual experiences due to pain and suffering and lost leisure 
time.

    We write the risk reduced component of the benefits equation in a 
general functional form rather than an additive form because 
combinations of the rule's components (C1, C2, C3, * * *) will usually 
not result in linear, proportional reductions of risk. Instead, we 
assume that some components are partial substitutes for one another 
while others complement each other.\3\ The total risk reduction will 
not be the sum of the individual components; the effectiveness of the 
rule could be less than or greater than the sum of its parts.
---------------------------------------------------------------------------

    \3\ An example of substitute components would be rodent poisons 
and traps. By themselves rodent poisons and traps may reduce the 
problem of SE contamination by X percent and Y percent, 
respectively. However, when used together the effect on SE 
contamination will be somewhat less than X percent + Y percent 
(though still higher than each component alone). When prevention 
measures are complements, the total prevention from using the two 
measures that reduce risk by A percent and B percent separately is 
greater than A percent + B percent.
---------------------------------------------------------------------------

    b. Base line risk from SE in eggs. We estimated the reduction in SE 
illnesses by applying the percentage prevention to the base line number 
of illnesses. We estimated the base line levels of egg contamination 
and the number of human illnesses that result from such contamination.
    The Centers for Disease Control and Prevention (CDC) passive 
surveillance system recorded 6,740 illnesses due to SE in 2006. Using 
the CDC multiplier (used to estimate total cases based on ratio of 
total to reported cases) derived by Voetsch, et al. (Ref. 5) of 38 
(with a 90 percent confidence interval of 23 to 61), we estimated the 
number of illnesses due to SE to have been 256,120 in 2006 (ranging 
between 155,020 and 411,140).\4\ Because SE is not unique to eggs, not 
all of the 256,120 illnesses due to SE in 2006 can be attributed to 
domestic shell eggs. CDC estimates that 16 percent of the cases 
reported were acquired outside of the United States. Consequently, the 
base line level of domestic SE cases is 215,140 (ranging between 
130,220 and 345,360). Between 1985 and 2002, a total of 53 percent of 
all SE illnesses identified through CDC outbreak surveillance are 
attributable to eggs. Where a vehicle of transmission was identified, 
81 percent of outbreaks and 79 percent of illnesses identified through 
outbreaks were attributed to eggs (Ref. 17). The midpoint between the 
lower bound (53 percent) and upper

[[Page 33053]]

bound (79 percent) estimates is 66 percent, which we assume to be the 
mean percent of domestic SE illnesses attributable to eggs. Using these 
figures we calculate a lower bound estimate of 69,020 (53 percent x 
130,220) and an upper bound estimate of 218,260 (79 percent x 345,360) 
cases due to SE in eggs. The CDC method generates a mean point estimate 
of 141,990 (66 percent x 215,140) cases for 2006.\5\ Table 1 of this 
document illustrates how we arrived at our base line.
---------------------------------------------------------------------------

    \4\ All data for the calculations in this paragraph and the 
following paragraph are from Meade (Ref. 6) and CDC (Refs. 8, 11, 
15, and 56).
    \5\ In the proposed rule, we adjusted the estimated number of 
cases downward to account for the projected effects of the 
refrigeration and labeling rule. After that rule took effect in 
2001, the estimated number of SE illnesses in the United States in 
2002 decreased by nearly 9 percent. However, since then the rate has 
remained relatively steady, implying that at least the short term 
effects of the refrigeration and labeling rule have been realized. 
We therefore do not adjust for the effects of the refrigeration and 
labeling rule in this final rule.

                        Table 1--Base Line Egg-Related Salmonella Enteritidis (SE) Cases
----------------------------------------------------------------------------------------------------------------
                                                              Low estimate          Mean          High estimate
----------------------------------------------------------------------------------------------------------------
2006 Passive Surveillance Cases...........................                          6,740
----------------------------------------------------------------------------------------------------------------
Multiplier................................................                23                38                61
Estimated SE Cases in 2006................................           155,020           256,120           411,140
----------------------------------------------------------------------------------------------------------------
Cases from Outside the United States......................                          -16%
                                                           -----------------------------------------------------
                                                                     130,220           215,140           345,360
----------------------------------------------------------------------------------------------------------------
Percent of SE cases from eggs.............................               53%               66%               79%
Egg Related SE cases in 2006..............................            69,020           141,990           272,830
----------------------------------------------------------------------------------------------------------------

    c. Measuring the health benefits from preventing salmonellosis.
    i. The economic impact of illness from SE in eggs. In measuring the 
economic impact of illness due to the consumption of SE-contaminated 
eggs, it is important that we include all of the effects of SE on human 
health. These effects include both monetary and nonmonetary losses and 
are both acute and chronic in nature.
    ii. The consequences of SE illness. We outline the consequences of 
SE illnesses in table 2 of this document. Table 2 includes the medical 
outcomes of SE illness, the duration of conditions acquired due to SE 
illness, and the probability of occurrence for each condition with a 
given level of severity.\6\
---------------------------------------------------------------------------

    \6\ We use recent data from CDC to estimate the relative 
prevalence of illnesses of different severities (Ref. 57). The 
expected duration of illness for each category of severity is taken 
from Zorn and Klontz (Ref. 4).
---------------------------------------------------------------------------

    The acute illness that accompanies SE generally causes 
gastrointestinal symptoms, which might be mild. However, SE infections 
can be severe and result in death, especially for the elderly, 
immunocompromised, and children (Ref. 58). Finally, a small percentage 
of all SE infections result in chronic reactive arthritis (Ref. 4).

                                      Table 2--Consequences of SE Infection
----------------------------------------------------------------------------------------------------------------
        Condition and severity                  Outcome            Duration  (days per year)    Percent of cases
----------------------------------------------------------------------------------------------------------------
Gastrointestinal Illness:
    Mild.............................  No physician visit......  1 to 3......................              90.7
    Moderate.........................  Physician visit.........  2 to 12.....................               8.1
    Severe...........................  Hospitalized............  11 to 21....................               1.2
Arthritis:
    Short-term.......................  Waxing and waning,        1 to 121....................               1.3
                                        eventually resolved.
    Long-term........................  Chronic arthritis.......  365.........................               2.4
Death................................  Death...................  ............................               0.04
----------------------------------------------------------------------------------------------------------------

    We classify the gastrointestinal illness caused by SE illness as 
mild, moderate, or severe. A mild case of SE is defined as a case that 
causes gastrointestinal symptoms, but is not severe enough to warrant 
visiting the doctor. An individual with a mild case of SE illness will 
be ill for 1 to 3 days. A moderate case of SE illness lasts for 2 to 12 
days and is characterized as a case severe enough to necessitate a trip 
to the doctor or other health care professional. A severe case of SE 
illness results in hospitalization and typically lasts from 11 to 21 
days.
    We do not have direct estimates of the distribution of outcomes of 
SE illnesses separate from the outcomes of illnesses for all 
nontyphoidal Salmonella. In the absence of better information we assume 
that all Salmonella serovars will result in similar distributions of 
illness severity. We therefore use information that applies either to 
all 1,400,000 estimated annual cases of salmonellosis or to the 
1,340,000 estimated annual foodborne cases of salmonellosis. Using 
general results for all diarrheal illnesses, CDC has estimated that 
113,000 of the 1,400,000 Salmonella illnesses in 1997 could have 
resulted in physician office visits, a rate of 8.1 percent (113,000 / 
1,400,000) (Ref. 15). CDC also has estimated that foodborne Salmonella 
cases lead to about 15,600 hospitalizations per year, which is about 
1.2 percent (15,600 / 1,340,000) of annual foodborne cases (Ref. 6). 
Based on this we can calculate that the remaining 90.7 percent of 
gastrointestinal illness cases occur without a visit to the doctor; 
that is, they are mild.
    SE may also result in reactive arthritis. This illness can manifest 
itself either as a relatively short-term bout of joint pain or as a 
chronic condition.

[[Page 33054]]

Studies of outbreaks imply that short-term reactive arthritis may last 
from 1 day to a total of 121 days. Chronic reactive arthritis can last 
from the time of onset until death. Overall, we estimate that 1 to 10 
percent of SE infections lead to some form of reactive arthritis. We 
expect two-thirds of these to be long-term and one-third to be short-
term (Ref. 4).
    The most severe potential result of SE infection is death. CDC 
estimated in 1999 that 553 deaths occur annually due to foodborne 
Salmonella (Ref. 6). The estimate suggests that about 0.04 percent (553 
/ 1,340,000) of foodborne cases of Salmonella result in death.\7\
---------------------------------------------------------------------------

    \7\ CDC updated the estimate of the overall burden of 
salmonellosis in 2004. The rates of death for both salmonellosis and 
SE were estimated to be 0.03 percent, a decrease of one one-
hundredth of a percent from the 1999 estimate. The rate of death may 
vary slightly from year to year. A decrease in the rate of death 
from SE by 0.01 percent would decrease the baseline mean estimated 
number of deaths related to consumption of eggs containing SE from 
44 to 32. Mean estimated annual benefits would decrease by roughly 
$35 million.
---------------------------------------------------------------------------

    iii. Quality adjusted life years (QALYs). The benefits from this 
regulation will be presented in both monetary and nonmonetary terms. In 
section V.G of this document, the benefits will be expressed in 
illnesses and deaths averted by each regulatory provision under 
consideration. In the summary of benefits due to the regulation, we 
present both a cost effectiveness framework (cost per illness averted 
and cost per QALY saved) and a monetary benefits estimation.
    One approach to estimating health benefits involves the use of 
QALYs. QALYs can be used to measure the loss of well-being that an 
individual suffers due to a disease or condition. QALYs do not include 
the value of health expenditures caused by the condition in question; 
we estimate health expenditures separately.\8\ QALYs range from 0 to 1 
where 0 is equivalent to death and 1 is equivalent to perfect health 
for 1 year.
---------------------------------------------------------------------------

    \8\ Although some QALY estimates include the value of medical 
expenditures, particularly QALY estimates derived from survey data, 
the QALY estimates used in this study do not.
---------------------------------------------------------------------------

    A number of methods have been constructed to measure QALYs. One 
class of methods uses surveys to ask doctors and the general population 
to use a QALY scale to estimate how much someone else who is afflicted 
with a given symptom or condition will suffer. This direct survey 
approach has been used widely, partly because surveys of QALY values 
for a large variety of symptoms and functional limitations have been 
published (Ref. 4). An alternative method used by Cutler and Richardson 
uses regression analysis to estimate the effect of particular 
conditions on overall health status (Ref. 59). In our analysis, we use 
both methods where appropriate.\9\
---------------------------------------------------------------------------

    \9\ The Cutler and Richardson approach has several advantages 
over the Kaplan, Anderson, and Ganiats approach. However, it is not 
clear that this approach is appropriate for valuing acute illnesses. 
Therefore the Kaplan, Anderson, and Ganiats approach is used for 
acute illnesses and the Cutler and Richardson approach is used for 
chronic conditions. See Scharff and Jessup for a discussion of the 
pros and cons of each approach (Ref. 60).
---------------------------------------------------------------------------

    In table 3 of this document, we present estimates of the number of 
quality adjusted life days (QALDs) lost due to SE. Total QALDs lost are 
derived by dividing the estimated number of QALYs lost by 365. Then, to 
calculate the disutility per day, or 1 QALD, we multiply by the average 
duration of the illness. Like QALYs, QALDs range from 0 to 1 where 0 is 
equivalent to death and 1 is equivalent to perfect health for 1 day. We 
report the loss in QALDs because most of the illnesses associated with 
SE last days rather than years. The QALD values listed for mild, 
moderate, and severe cases of SE infection were estimated by Zorn and 
Klontz using data from Kaplan, Anderson, and Ganiats (Ref. 4). This 
approach calculated that the acute effects of food poisoning (vomiting, 
diarrhea, and general gastrointestinal illness) lead to a loss of QALDs 
greater than 0.5 for each day of illness. Furthermore, these lost QALDs 
persist for 2 to 16 days. Thus, the total loss of QALDs from 
gastrointestinal illness is calculated to be 1 to 10.

                               Table 3--Lost Quality Adjusted Life Days Due to SE
----------------------------------------------------------------------------------------------------------------
                                                  Disutility per day (QALDs lost)
                                 ----------------------------------------------------------------   Total QALDs
            Severity                                                               Average days      lost per
                                    Functional        Symptom          Total            Ill           illness
----------------------------------------------------------------------------------------------------------------
Illness:
    Mild........................            0.44            0.08           0.053               2               1
    Moderate....................            0.44            0.08           0.053               7               4
    Severe......................            0.53            0.09           0.062              16              10
Reactive Arthritis:
    Short-term..................  ..............  ..............            0.22              25               5
    Long-term...................  ..............  ..............            0.14          18,250           2,613
----------------------------------------------------------------------------------------------------------------

    For reactive arthritis, we used the regression approach of Cutler 
and Richardson (Ref. 59). The regression approach yields estimates of 
losses per day of 0.22 for short-term reactive arthritis and 0.14 for 
long-term reactive arthritis. We estimate that short-term reactive 
arthritis results in a loss of 5.4 to 10.8 QALDs while long-term 
reactive arthritis results in a loss of 2,613 to 5,223 QALDs.
    We do not present the estimated QALYs saved for each provision 
considered in this analysis. Instead, we present benefits by provision 
in an ``illnesses averted'' metric for each option and provision. This 
practice allows us to calculate cost per illness averted by each 
provision. In the summary we present the result of alternate valuation 
methods that do and do not rely on QALY estimates. Because a large 
portion of the loss due to chronic reactive arthritis is due to pain 
and suffering not associated with direct medical expenditures, it is 
difficult to capture the full economic loss due to SE related reactive 
arthritis without using QALYs or some other measure of morbidity 
effects. Benefit estimates not relying on QALY estimates will 
necessarily be significantly lower than estimates with QALYs. The 
results of all methods of valuation are presented in section V.F of 
this document.
    iv. Valuation of SE illnesses. Table 4 of this document illustrates 
how we calculate the dollar value of a typical case of SE. The first 
column of table 4 lists the type of ailment. The second and third 
columns of table 4 are taken from tables 2 and 3 of this document. The 
health loss per case is calculated by multiplying the value of a QALD 
by the

[[Page 33055]]

actual number of QALDs lost, and then discounting where appropriate 
(only values of chronic cases of reactive arthritis are affected by the 
discount rate). The values in this column will vary depending upon the 
particular estimates of the value of a statistical life (VSL), the 
value of a QALY, and the discount rate. The fifth column of table 4 
shows the annual medical costs of each condition that is caused by SE 
infection (long term reactive arthritis is the only condition where the 
afflicted will incur medical costs for more than a single year). The 
sixth column of table 4 shows the weighted dollar loss per outcome 
caused by SE. The probability that a case of SE infection results in a 
given outcome (column 2) is multiplied by the sum of the average health 
and medical costs per case. The weighted dollar values in column 6 are 
summed to calculate the total expected loss associated with a typical 
case of SE. We present the range of estimates of dollar losses per case 
in table 5 of this document.

                                Table 4--Valuing of a Typical Case of SE\1,\ \2\
----------------------------------------------------------------------------------------------------------------
                                       Case         Total QALDs                                      Weighted
        Type and severity            breakdown       lost per       Health loss    Medical costs    dollar loss
                                     (percent)        illness        per case        per case        per case
----------------------------------------------------------------------------------------------------------------
Illness:
    Mild........................           90.7             1.05            $864              $0            $780
    Moderate....................            8.1             3.68           3,025              92             250
    Severe......................            1.2             9.99           8,208           9,257             210
Arthritis:
    Short-Term..................            1.26            5.41           4,442             139              60
    Long-Term...................            2.40        2,613.12         592,411           9,536          14,460
Death...........................            0.04       18,250.00       5,000,000  ..............           2,140
                                 -------------------------------------------------------------------------------
        Total expected loss per   ..............  ..............  ..............  ..............          17,900
         case...................
----------------------------------------------------------------------------------------------------------------
\1\ The value of a typical case will actually vary widely depending on the values used for the VSL, QALY, and
  the discount rate. The figures presented here are based on VSL = $5 million, QALY = $300,000, and a discount
  rate of 7%.
\2\ ``Health Loss per Case'' and ``Weighted Dollar Loss per Case'' for ``Death'' are calculated using a VSL = $5
  million. If we use the QALD calculation, assuming the average decedent loses 50 years of life, the Health Loss
  per Case is $4.14 million and the Weighted Dollar Loss per Case is $1,773.

    Cost of illness estimates usually include the medical costs 
associated with SE. For example, Buzby et al. produced a summary of 
medical and other costs for U.S. salmonellosis cases (Ref. 58).\10\ The 
figures they estimated include the lost productivity of workers due to 
salmonellosis. Because we account for lost productivity separately, we 
must net out these costs.
---------------------------------------------------------------------------

    \10\ As with the CDC data, we assume that the characteristics of 
SE-related illnesses are similar to those of Salmonella in general.
---------------------------------------------------------------------------

    For mild SE illnesses, we assume that most persons will not obtain 
medical services. The cost estimated for this category chiefly reflects 
lost productivity (Ref. 58).
    For medical costs for those who contract moderate illnesses, we use 
figures from Williams (Ref. 61) updated with medical cost indices. In 
1996, the average total cost of treatment for a non-urgent medical 
problem, including physician's fees and medication, was $62. We adjust 
these numbers to account for the increased cost of medical care since 
1996. The consumer price index (CPI) for medical services rose from 
228.2 in 1996 to 323.8 in 2005 (Ref. 62).
    The data for the medical cost of a severe case of SE was obtained 
from the Health Cost and Utilization Project's Nationwide Inpatient 
Sample (Ref. 63) and updated to 2005 constant dollars using the CPI. 
Medical costs due to reactive arthritis are based on Zorn and Klontz 
(Ref. 4). Zorn and Klontz estimated that short-term reactive arthritis 
medical costs were approximately $100 per case in 1998. We adjust these 
numbers to account for the increased cost of medical care since 1998. 
We estimate that long-term reactive arthritis costs had a present value 
of $5,370 in 1992.\11\ We use the CPI for medical care in general to 
update this cost to current dollars. Between 1992 and 2005, the CPI for 
medical services rose from 190.1 to 323.8.
---------------------------------------------------------------------------

    \11\ This is based on the fact that in 1992 there were $64.8 
billion in costs due to arthritis, 24 percent of these costs were 
medical costs, and there were 40 million arthritis sufferers. This 
yields $389 per arthritis sufferer in direct medical costs. 
Discounted at 7 percent, the present value of medical expenditures 
for 50 years with reactive arthritis is $5,370.
---------------------------------------------------------------------------

    FDA uses a range to estimate the value of an additional year of 
life to reflect the uncertainty in the literature. As a low estimate, 
FDA uses $100,000 per QALY. Cutler and Richardson (Ref. 59) use a 
similar estimate, and Garber and Phelps (Ref. 64) conclude that 
estimates of the value of a life year are about twice the level of 
income, though they present a broad range to reflect uncertainty 
associated with risk aversion and discount rates. Updating Garber and 
Phelps' estimates suggests that $100,000 per life year is a reasonable 
estimate, given that median family income in 2002 was about $51,000 
(Ref. 65). Moreover, this estimate is close to the estimate used in 
FDA's economic analysis of the regulations implementing the Nutrition 
Labeling and Education Act of 1990. To reflect other underlying 
literature, and following suggestions from other Federal agencies, we 
begin with an estimate of the VSL of $6.5 million. This estimate is 
consistent with the survey by Aldy and Viscusi (Ref. 66) on the premium 
for risk observed in labor markets. Annualizing this value over 35 
years at 3 percent and at 7 percent discount rates implies estimates of 
a value of an additional year of life of about $300,000 and $500,000. 
Therefore, calculations for estimated benefits will reflect three 
estimates of the value of a statistical life year (VSLY): $100,000, 
$300,000 and $500,000, for both of the methods of estimating gains in 
life years. Total benefits differ from mortality-related benefits by 
including the value of reduced morbidity and health care costs. 
Furthermore, FDA uses values of a statistical life of $5 million and 
$6.5 million. This range of VSL estimates is consistent with a 
reasonable interpretation of studies of willingness to pay to reduce 
mortality risks (Refs. 66 and 67). FDA uses the lower value to reflect 
the fact that many of the estimates of willingness to pay to reduce 
mortality risk from papers not surveyed by Aldy and Viscusi are 
relatively low.

[[Page 33056]]

    In table 5 of this document the value of a typical case of SE under 
different assumptions is shown.

  Table 5--Value of a Typical Case of Salmonella Enteritidis Under Different Economic Assumptions\1,\ \2,\ \3\
----------------------------------------------------------------------------------------------------------------
                                      Discount rate = 3 percent                 Discount rate = 7 percent
                             -----------------------------------------------------------------------------------
                                VSL = $5 million    VSL = $6.5 million    VSL = $5 million    VSL = $6.5 million
----------------------------------------------------------------------------------------------------------------
VSLY = $100 thousand........              $11,900  ...................               $7,600  ...................
VSLY = $300 thousand........               30,400               31,000               17,900               18,500
VSLY = $500 thousand........  ...................               49,500  ...................               28,800
----------------------------------------------------------------------------------------------------------------
\1\ VSL means value of a statistical life.
\2\ VSLY means value of a statistical life year.
\3\ Values are only reported for most likely combinations. A VSLY of $100,000 is not consistent with a VSL of
  $6.5 million, and likewise, a VSLY of $500,000 is not consistent with a VSL of $5 million.

    The expected value of a typical case of SE varies greatly depending 
on the estimates used. The lowest expected value for a case of SE, 
$7,600, occurs when we use a VSL of $5 million, QALY of $100,000, and a 
discount rate of 7 percent. The highest expected value for a case of 
SE, $49,500, occurs when we use a VSL of $6.5 million, a QALY of 
$500,000, and a discount rate of 3 percent. For purpose of this 
analysis, we have chosen to use $17,900 per case as a central estimate. 
This value corresponds to where the VSL is $5.0 million, a QALY is 
valued at $300,000, and the discount rate is 7 percent.
    d. Other benefits. Pathogens other than SE have been associated 
with eggs. In particular, Campylobacter (Ref. 68) and non-SE Salmonella 
(Ref. 20) have been found on the shells of eggs. The presence of 
pathogens on the eggshell may be harmful to humans if one of two 
scenarios occurs. First, under certain conditions, pathogens may 
migrate through the shell of the egg to infect the egg's contents (Ref. 
69). Second, eggshell contamination could result in the contamination 
of egg contents if eggs are broken in such a way that the shell of the 
egg comes into contact with the contents of the egg (Ref. 69).\12\ 
Pathogen migration is unlikely given current USDA standards and 
industry practices.\13\ Regarding egg breaking, current USDA washing 
and sanitizing standards are designed to reduce pathogens on the 
exterior of the egg. Consequently, we do not expect benefits from the 
reduction of illnesses due to pathogens other than SE to be large.
---------------------------------------------------------------------------

    \12\ The use of centrifuges would cause this to occur.
    \13\ Most modern egg washing machines are spray-washers (63 FR 
27502 at 27505, May 19, 1998). Migration of SE through the eggshell 
is more commonly associated with immersion washing (Ref. 70).
---------------------------------------------------------------------------

2. Measuring Costs
    We measure costs based on the best available information from 
government, industry, and academic sources. Furthermore, we assume that 
total costs are typically the sum of the costs of individual 
provisions. What this assumption means is that, unlike benefits, the 
cost of one provision is generally independent of the cost of other 
provisions. Where economies of scope \14\ with respect to SE mitigation 
exist, we adjust the costs downward to account for the economies.\15\
---------------------------------------------------------------------------

    \14\ Economies of scope occur when more than one activity can be 
more efficiently performed at the same time, rather than one at a 
time.
    \15\ Where economies of scope with regard to SE mitigation 
occur, we observe that the incremental cost of one provision 
decreases with the implementation of another provision. For example, 
if rodent control decreases the chance of SE detection through 
environmental testing, we would expect the amount (and the cost) of 
follow-up egg testing to decline.
---------------------------------------------------------------------------

3. Coverage of the Analysis
    Two major sectors are affected by this rule: Farms that produce 
eggs for the retail markets and farms that raise pullets that become 
layers. We estimate costs and benefits of changing practices in each of 
these sectors separately.
    We estimate costs and benefits of potential prevention measures for 
all farms that produce eggs for distribution in retail markets. Because 
the rule exempts very small farms (< 3,000 layers) from all provisions, 
wherever the data permit, we calculate costs and benefits separately 
for both very small farms and for larger farms (>= 3,000 layers). The 
separation of costs and benefits by size of farm allows us to measure 
the regulatory relief provided by the exemption for very small 
farms.\16\ Farmers who sell all of their eggs directly to consumers are 
exempt from all provisions. Sales of eggs directly to consumers include 
sales of a farmer's own eggs to neighbors, at farmers markets, and at 
roadside stands. Farmers that sell their eggs to another person for 
distribution or resale are not assumed to be exempt from the listed 
provisions. We do not anticipate any control measures for farms that 
sell all of their eggs directly to consumers, so we exclude them from 
the analysis.
---------------------------------------------------------------------------

    \16\ A detailed breakdown of the estimated impact of each 
provision were they required for farms with less than 3,000 birds 
can be found in section VII of this document.
---------------------------------------------------------------------------

    We estimate that approximately 3,300 farm sites with roughly 7,400 
poultry houses will be covered by some or all parts of the rule. These 
figures are calculated as follows:
     We use the National Agricultural Statistics Service (NASS) 
2002 Census of Agriculture to determine the number of farm sites with 
layers on hand. NASS estimated that there are 98,315 farms with layers 
over 20 weeks old in their inventory (Ref. 71).
     Next, we adjust for the fact that a large portion of farms 
with fewer than 3,000 layers either sell their eggs directly to 
consumers or do not sell their eggs at all. We estimate that, of the 
approximately 94,300 farms with fewer than 3,000 layers,\17\ over 
48,600 of these farms sell their eggs, but not directly to 
consumers.\18\
---------------------------------------------------------------------------

    \17\ The NASS Census of Agriculture uses farms with 3,200 birds 
as its cutoff point for categorization. FDA uses 3,000 birds as its 
cutoff point for small versus large farms, because this is the 
measure that is used in other egg and poultry regulations. To adjust 
the NASS data, FDA assumes that all flocks are uniformly distributed 
across the 400 to 3,200 bird category. Using this assumption, 7.1 
percent (200 / 2,800) of these farms fall in the over 3,000 bird 
category while the remaining 92.9 percent fall in the small farm 
category.
    \18\ Based on assumptions that industry experts (Refs. 72, 73, 
and 74) validated as plausible, we have calculated that 
approximately 2,860 farms sell eggs via retail channels other than 
farmers markets, roadside stands, and neighborhood sales. Many of 
the remaining 91,400 very small farms sell their eggs to consumers 
indirectly at roadside stands or farmers markets (Ref. 71). In the 
absence of better information, we assume that half of those 
remaining 91,400 very small farms sell eggs indirectly to consumers.
---------------------------------------------------------------------------

     NASS data suggested that 83 percent of layers are table 
egg layers

[[Page 33057]]

(Ref. 75). For those farms with more than 3,000 layers, we adjust the 
estimated number of farms affected by the NASS estimate. The resulting 
estimated number of farm sites is illustrated in the first column of 
table 6 of this document.
     The estimated number of houses per farm site is broken 
down by size category in table 6 of this document. We use data from the 
1999 Table Egg Layer Management in the U.S. Survey (Refs. 27 and 28) to 
estimate the number of houses per farm site for those farms with more 
than 3,000 layers.\19\ For those farms with fewer than 3,000 layers, we 
assume that there is only one house per farm site.
---------------------------------------------------------------------------

    \19\ Data from the Layers study are used throughout this 
document. We acquired the data either directly from the NAHMS Web 
site or through direct correspondence with Lindsey Garber, Centers 
for Epidemiology and Animal Health, Veterinary Services, APHIS, 
USDA.
---------------------------------------------------------------------------

     We calculate the total number of poultry houses that will 
be affected by this rule by multiplying the adjusted number of farm 
sites by the expected number of houses per farm site.
    As Table 6 of this document demonstrates, the majority of the 
houses are on farm sites with fewer than 3,000 layers.

                                 Table 6--Farms Potentially Covered by the Rule
----------------------------------------------------------------------------------------------------------------
                                                                                                   Total number
                                                     Adjusted        Number of     Total number       of eggs
          Farm size (number of layers)               number of      houses per       of houses     produced  (in
                                                    farm sites         site                          millions)
----------------------------------------------------------------------------------------------------------------
3,000 to 19,999.................................           1,746             1.4           2,445           5,607
20,000 to 49,999................................             925             1.4           1,295           6,886
50,000 to 99,999................................             248             2.4             595           4,662
100,000 or more.................................             409             7.4           3,024          54,958
                                                 ---------------------------------------------------------------
    Total potential coverage....................           3,328             2.2           7,359          72,113
----------------------------------------------------------------------------------------------------------------

    We also estimate the costs and benefits of prevention measures on 
farms that raise pullets. Comments to the proposed rule stated that 
there are roughly one third as many pullets as there are layers at any 
given time. Further, there are roughly one third as many pullet houses 
as there are layer houses. FDA therefore estimates that 2,453 pullet 
houses (7,359 layer houses/3) will be covered under this provision.\20\ 
Some of the pullet houses are located onsite at layer farms and others 
are located on pullet growing facilities.
---------------------------------------------------------------------------

    \20\ Comments received on the number of pullet houses came 
primarily from large farm representatives. Farms with less than 
3,000 layers are not covered by this provision, so the pullet houses 
from which they procure their layers will either not be covered (if 
they sell only to farms with less than 3,000 layers) or will be 
covered by virtue of selling to larger farms. Therefore, FDA uses 
the number of houses located on farms with 3,000 layers or more to 
calculate the number of pullet houses affected by the provision.
---------------------------------------------------------------------------

E. Summary of Costs and Benefits of Regulatory Options and the Rule

    In this section we summarize the costs and benefits of the rule and 
the regulatory options. In section V.F of this document, we provide a 
detailed analysis of the costs and benefits of all of the SE prevention 
measures we considered, both those in and those not in the final rule.
    We considered a number of regulatory options that may be used to 
prevent the problem of SE in eggs, including no new regulatory action, 
classification of SE-positive eggs as restricted or SE-positive, HACCP, 
the final rule, more extensive on-farm prevention measures, less 
extensive on-farm prevention measures, and the inclusion of mandatory 
food establishment prevention measures.
1. No New Regulatory Action
    One possible alternative to the rule is to rely on current Federal, 
State, and industry efforts to control SE in shell eggs. These efforts 
include relying on an FDA final rule for labeling and refrigerating 
shell eggs, FDA educational programs, and the growth of membership in 
State and industry quality assurance programs. We believe these methods 
of control, while valuable, are unable to fully address the problem of 
SE contamination of shell eggs.
    FDA issued a related rule designed to help prevent the growth of SE 
in eggs by requiring refrigeration of shell eggs at retail and by 
requiring shell egg labeling (65 FR 76092, December 5, 2000). As part 
of that rule, we set refrigeration temperatures to reduce the potential 
growth of SE inside shell eggs at the retail level, and, to inform 
consumers, required safe handling instructions on all cases and cartons 
of shell eggs. Nevertheless, labeling and refrigeration standards do 
not prevent or limit the growth of SE while eggs are in production.
    FDA also is pursuing a program designed to inform consumers about 
microbial hazards in egg preparation. The nationally distributed 
``Fight BAC!'' program targets children in schools and television 
audiences with a more general food safety message that likely results 
in better egg handling practices. This program, although useful, does 
not prevent the initial contamination of eggs with SE.
    Several of the large egg-producing States and industry groups have 
encouraged producers of eggs to follow on-farm practices aimed at 
preventing SE in their flocks. One of the first States to implement a 
structured quality assurance program was Pennsylvania. Though 
voluntary, the implementation of the PEQAP has been accompanied by a 
significant decrease in SE-related illnesses in those areas where eggs 
from Pennsylvania are marketed. Industry groups also have drawn up 
quality assurance plans as guidelines for their members to follow. The 
voluntary programs have achieved some success in reducing SE 
contamination in eggs, and the more comprehensive plans contain many 
preventive measures similar to those in this rule (Ref. 76). These 
voluntary programs have now been in operation for many years and are 
well-known throughout the industry. Although the State and industry 
programs are potentially effective, many producers choose not to 
participate. As data from CDC show, SE illnesses continue to be 
associated with shell eggs even in those areas where voluntary programs 
are in place (Ref. 56). Option 1, relying on current Federal, State, 
and industry efforts to control SE in shell eggs, will be used as a 
baseline for the rest of the analysis.

[[Page 33058]]

2. HACCP
    We could, in theory, require that a HACCP system be implemented on 
layer farms. Although the general sanitation and hazard control 
measures in the rule are similar to aspects of existing HACCP programs 
in other areas, the agency has decided not to mandate HACCP on layer 
farms. To be effective, a HACCP system must be based on a foundation of 
prerequisite programs that provide basic environmental and operating 
conditions. Thus, to be technically and scientifically feasible for egg 
production, a HACCP system would require adoption of basic measures 
such as those required in this final rule, as well as several 
additional measures. Even if FDA were to provide less detail as to its 
expectations for compliance in the regulation and to require a HACCP 
plan rather than an SE prevention plan, these measures would certainly 
be required for producers to effectively prevent SE contamination of 
eggs.
    Furthermore, we are not aware of any precedent for use of a HACCP 
approach on egg farms, either voluntarily developed by individual 
businesses or required by states, and we note that FDA did not receive 
any comment suggesting that it attempt to apply a HACCP approach to egg 
farms.
    FDA considers that the level of scientific and technical knowledge 
needed to identify the range of possible hazards reasonably likely to 
occur and the critical control points needed for eliminating those 
hazards from shell eggs may not always be readily available on layer 
farms. Moreover, we believe that the HACCP plans that most layer farms 
would develop, if required to do so, would contain many if not all of 
the measures in this rule. We believe the targeted SE-prevention 
measures required by this final rule are as effective as any 
conceivable HACCP system, and avoid imposing on each layer farm the 
burden of developing scientific and technical knowledge required to 
develop an individualized HACCP system.
3. The Final Rule
    The rule includes the following requirements for farms with 3,000 
or more layers that do not have all of their eggs treated or do not 
sell all of their eggs directly to consumers: Rodent and other pest 
control, biosecurity, cleaning and disinfecting, use of SE-monitored 
chicks and pullets, testing and diversion, refrigeration during holding 
and transport, registration, and records with respect to compliance 
with each provision. Farms where all eggs are treated need only comply 
with the refrigeration requirements.
    The benefits from the SE prevention measures in the rule would take 
time to be fully realized, but the costs would be more immediately 
incurred. Table 7 of this document shows the initial costs and benefits 
and the eventual costs and benefits following implementation of the 
rule.\21\ Following are the detailed calculations underlying table 7, 
in section V.F. of this document.
---------------------------------------------------------------------------

    \21\ The discount rate is used here to annualize the costs of 
refrigeration equipment, plan designs, and training. For simplicity, 
subsequent summary tables will only include figures reflecting the 
discount rate of 7 percent. Those interested in the total cost 
number reflecting a 3-percent discount rate should subtract roughly 
$5 million from the calculations performed with a 7-percent discount 
rate. The exact difference is shown in section F of this document.

                                  Table 7--Final Rule Annual Costs and Benefits
----------------------------------------------------------------------------------------------------------------
                                                                                     Cost per
                                                    Total costs      Illnesses        illness     Total benefits
                                                   (in millions)      averted         averted      (in millions)
----------------------------------------------------------------------------------------------------------------
Initially (first four years):\1\
    Discount Rate = 3%..........................             $83          68,790          $1,200          $1,231
    Discount Rate = 7%..........................              88          68,790           1,300           1,231
Eventually (after four years):\1\
    Discount Rate = 3%..........................              76          79,170           1,000           1,417
    Discount Rate = 7%..........................              81          79,170           1,000          1,417
----------------------------------------------------------------------------------------------------------------
\1\ As explained in the detailed analysis in section V.F., some of the provisions, particularly rodent and pest
  control, will take up to 4 years to become fully effective. The effectiveness of the provisions affects the
  prevalence rate and thus affects both benefits and costs of each provision. Therefore, the costs and benefits
  are presented over two time frames: ``initially'' assuming an average effectiveness over the first 4 years,
  and ``eventually'' assuming full effectiveness after 4 years.

4. More Extensive On-Farm SE Prevention Measures
    FDA could issue a rule that is broader in scope and has more 
extensive provisions including: (1) Does not exempt farms with fewer 
than 3,000 layers from any provisions and (2) includes more on-farm 
provisions than those in the rule. Additional on-farm provisions 
include requiring the use of SE-negative feed and vaccinating flocks 
against SE.
    Such extensive controls would lead to total eventual costs of 
$274.0 million per year and eventual expected number of illnesses 
averted of 80,777, per year. This approach increases costs by more than 
$175 million, while only increasing the number of illnesses averted by 
556 cases (valued at a total of $10.0 million). These more extensive 
controls would result in a marginal cost-effectiveness of more than 
$315,000 per additional illness averted and a decrease in net benefits 
of over $100 million. The main reason for the small increase in 
benefits relative to costs is that much of the increase in costs comes 
from adding farms with fewer than 3,000 layers. The large number of 
such farms (over 45,000) means that requiring them to comply with all 
provisions of the rule would greatly increase costs. These farms, 
however, account for less than 1 percent of egg production. Requiring 
them to comply with all of the SE prevention measures would have a 
small effect on the volume of shell eggs that could be contaminated 
with SE. In addition, including these very small farms likely would 
result in the cessation of egg production at a large number of these 
farms. For these reasons, FDA has decided not to pursue this option.
5. Less Extensive On-Farm SE Prevention Measures
    We could also require fewer controls than are in the rule. Several 
provisions could be combined to provide a less extensive set of 
controls than in the rule. Many of the prevention measures could be put 
forth as stand-alone regulations. We have not presented each of these 
prevention measures as a separate option, but the reader can see the 
individual effects of the various on-farm prevention measures in table 
28 of this document. As documented in table 28, the various individual 
measures would, by themselves, generate lower

[[Page 33059]]

net benefits than the integrated program outlined in the rule.
6. Include Mandatory Provisions Applicable to Food Service 
Establishment Serving Highly Susceptible Populations
    We could require certain safe egg handling and preparation 
practices for food establishments that serve highly susceptible 
populations as part of custodial care, health care, assisted living, or 
nutritional or socialization services. These provisions would affect 
nearly 40,000 such establishments. In place with the other provisions 
of the final rule, the provisions pertaining to food service 
establishments serving a highly susceptible population would prevent 
1,052 illnesses annually at a cost of $16,700 per illness and $1.2 
million in annual net benefits (Ref. 77).
    As we discussed in section I.G., a majority of states and 
territories have adopted into their own retail food codes the relevant 
egg-associated provisions of the FDA Food Code. With most states 
adopting as mandatory the relevant sections of the FDA Food Code (or 
similar safety standards), FDA believes it would be an unnecessary 
exercise of authority to codify the FDA Food Code. We will continue 
education efforts at the retail and consumer levels. Further, we will 
continue to encourage states to adopt the relevant provisions of the 
FDA Food Code.

F. Benefits and Costs of Potential SE Prevention Measures: Detailed 
Analysis

    In this section, we describe the SE prevention measures that we 
considered, including provisions that were not included as requirements 
or that were only required for certain producers in the rule.
    For the costs and benefits of the provisions of the rule, we 
examine a number of on-farm measures including the following:
     Rodent and other pest control,
     Biosecurity measures,
     Cleaning and disinfecting of layer houses between flocks,
     Refrigeration of eggs,
     Layer house environmental testing,
     Follow-up egg testing,
     The diversion of SE-positive eggs,
     The use of SE monitored chicks or pullets, and
     Other provisions, including the use of SE negative feed, 
and vaccinating flocks against SE.
    For each of these on-farm measures we estimate the costs of the 
following administrative measures: Registration, training, plan design, 
and recordkeeping.
1. On-Farm SE Prevention Measures
    a. Interdependence of on-farm measures. Rodent and other pest 
control, biosecurity, and cleaning and disinfecting all have a role in 
eliminating SE in the poultry house. Although the actions taken under 
each heading may be distinct, the effects of each action are related. 
For example, a biosecurity plan may include provisions to limit 
standing water and high grass in areas adjacent to the poultry house. 
Although categorized as biosecurity measures, these practices also help 
control both rodents and pests. Similarly, cleaning and disinfecting 
remove not only SE, but also rodents and pests.
    This interdependence means that the total efficacy of on-farm 
controls cannot be determined by adding the effects of each provision 
(as determined by studies that focus on each provision separately). The 
measurement difficulty arises for two reasons. First, when two 
practices substitute or complement one another, the efficacy of the 
first practice is affected by the introduction of a second. Throughout 
the analysis, results for benefits calculations are presented for each 
provision standing alone as well as in the presence of all other 
provisions. Therefore, a provision that occurs later in the production 
chain than a provision that has already reduced the prevalence of SE 
will have less of an impact on total illnesses averted than if that 
provision stood alone. The hierarchy of provisions (first in production 
chain to last) is as follows:
    (1) Chicks and pullets procurement.
    (2) Testing, cleaning, disinfection of chicks and pullets.
    (3) Rodent control, biosecurity, cleaning and disinfection in layer 
houses.
    (4) Testing and diversion in layers.
    (5) Refrigeration.
    Second, a simple comparison of farms that use one given practice 
with farms that do not use that practice is insufficient in measuring 
the effectiveness of that individual practice. The use of one good 
practice tends to be positively correlated with the use of other good 
practices, and therefore a simple comparison between farms will 
overstate the effectiveness of any one practice. For example, those 
houses that use the best rodent control practices are also likely to be 
using other SE controls as well, so a measure of rodent control 
effectiveness is likely to pick up the effects of good biosecurity, 
pest control, and cleaning and disinfecting practices. On the other 
hand, a simple farm to farm comparison of practices that are correlated 
with lower prevalence of SE may understate the effectiveness of the 
practice. For example, a group of farms may have practices in place 
because they are part of a voluntary SE prevention plan, which may have 
been put in place in areas because they had higher than average 
prevalence of SE. In this case the practices would appear to be 
correlated with higher than average prevalence.
    b. Organization of economic analysis of potential provisions. FDA 
has considered a number of on-farm, administrative, and institutional 
SE prevention measures. The provisions that we considered are examined 
below. We have included some, but not all, of these provisions in the 
rule.
    Marginal costs and benefits are calculated for farms with less than 
3,000 layers, although these farms are exempt from the final rule. 
These results are presented in section VI of this document, where 
relief for small businesses is discussed.
    The costs and benefits of the provisions of the final rule as 
written are summarized in table 34 in section V.G of this document.
    c. Control of rodents and other pests, biosecurity, and cleaning 
and disinfection.--i. Rodent and other pest control provisions. One 
requirement of this final rule is that each layer house be under a pest 
control program. Such a program could include the use of traps or 
poisons to reduce rodents and other pests. Each farm must have a 
written control plan for rodents and other pests, and pest control 
records must be kept to verify that the program is accomplishing its 
goals.
    ii. Current industry practices--rodent and other pest control. Most 
farms currently address rodent and pest control problems to some 
extent. However, if SE-positive eggs are required to be diverted, there 
will be a financial incentive to find ways to prevent SE in poultry 
houses. As a result, the effectiveness of rodent and pest control in 
eliminating SE in the poultry house will lead many farms to institute 
rodent and pest control programs that are more stringent than those 
currently in place in order to achieve a higher level of rodent and 
other pest control.
    Currently, 99.2 percent of all commercial farms with more than 
30,000 layers use some form of rodent control, but not all methods of 
rodent control are compatible with the goal of eliminating SE in 
poultry houses.\22\ In

[[Page 33060]]

particular, we believe that biological predators, such as cats, should 
not be used as a method of rodent control because cats can be vectors 
for SE contamination.
---------------------------------------------------------------------------

    \22\ Only operations with 30,000 or more layers are included in 
the Layers study (Refs. 27 and 28).
---------------------------------------------------------------------------

    Table 8 of this document illustrates, by farm size, the number of 
programs that would satisfy the rodent control provisions in the rule. 
Farms that do not use rodent controls as specified in this provision 
(e.g., many farms primarily use cats as a rodent control measure) are 
counted as having unacceptable rodent control programs. Based on data 
from the Layers study (Refs. 27 and 28), we estimate that the number of 
farms with unacceptable rodent control programs will range from 1.8 
percent for farms with over 100,000 layers to 21.0 percent for farms 
with 20,000 to 49,999 layers.\23\ Furthermore, we believe that the 
potential costs of diversion of SE-positive eggs will encourage farmers 
currently using a level of rodent control that would satisfy the 
provision to increase their rodent control efforts. Without better 
information about the number of farms that would increase rodent 
control efforts, we assume the true number will lie between 0 percent 
and 100 percent of those currently using an acceptable level of rodent 
control.
---------------------------------------------------------------------------

    \23\ Our primary source for on-farm practices related to SE 
prevention measures is the Layers study (Refs. 27 and 28). As the 
only major current survey of the industry, this study has provided 
us with data that has allowed us to characterize the industry. The 
study, however, does not fully represent the industry. A total of 
526 farm sites responded to the first part of the survey and 252 
responded to the second part of the survey. Furthermore, only 
operations with more than 30,000 layers were included in the survey. 
Consequently, we approximate the practices of smaller farms based on 
a limited amount of information. Nonetheless, the Layers study has 
added greatly to our understanding of the industry and its 
practices.

                                             Table 8--Rodent Control
----------------------------------------------------------------------------------------------------------------
                                                            Unacceptable     Number of farms
              Farm size (number of layers)                 rodent control   with unacceptable   Number of farms
                                                               (in %)         rodent control   increasing effort
----------------------------------------------------------------------------------------------------------------
3,000 to 19,999........................................                 19                328                709
20,000 to 49,999.......................................                 21                194                365
50,000 to 99,999.......................................                  4                  9                119
100,000 or more........................................                  2                  7                201
                                                        --------------------------------------------------------
    All farms with 3,000 layers or more................  .................                539              1,394
----------------------------------------------------------------------------------------------------------------

    We assume that between 25 percent and 75 percent of very small 
farms (those with fewer than 3,000 layers) are using an acceptable 
level of rodent control.
    Pests, other than rodents, commonly found in poultry houses include 
flies, mites, beetles, and ants (Ref. 78). However, we chiefly are 
interested in the presence of flies and fly control because they have 
been implicated in the transmission of Salmonella (Ref. 79).\24\
---------------------------------------------------------------------------

    \24\ Beetles have also been shown to be a reservoir for SE 
(Refs. 80 and 81). Beetle populations can be controlled primarily by 
the removal of all visible manure upon a house cleaning, the costs 
and benefits of which are discussed later in this document. Other 
costs of control, as well as benefits, are assumed to be accounted 
for in the analysis of fly control.
---------------------------------------------------------------------------

    The survey used to develop the Layers study asked questions about 
on-farm fly control practices (Refs. 27 and 28). Using these data, we 
estimate that over 90 percent of those farms with over 3,000 layers use 
some form of fly control. Some of these methods, however, are not 
permitted by the final rule. In particular, the rule does not allow the 
use of biological predators, such as wild birds, for fly control 
because these predators may themselves be vectors for SE transmission 
(Ref. 79).

                                              Table 9--Fly Control
----------------------------------------------------------------------------------------------------------------
                                                                             Number of farms
              Farm size (number of layers)               Unacceptable  fly  with unacceptable   Number of farms
                                                          control  (in %)       fly control    increasing effort
----------------------------------------------------------------------------------------------------------------
3,000 to 19,999........................................                 27                470                638
20,000 to 49,999.......................................                 18                162                382
50,000 to 99,999.......................................                 12                 29                109
100,000 or more........................................                 22                 89                160
All farms..............................................  .................                750              1,289
                                                        --------------------------------------------------------
    All farms with 3,000 or more layers................  .................                750              1,289
----------------------------------------------------------------------------------------------------------------

    Table 9 of this document shows the number of farms with 
unacceptable (not sufficient to satisfy the rule) fly control programs. 
Farms that do use fly control or that use biological predators, such as 
birds, as their primary method of fly control, are not using acceptable 
methods. We estimate that a total of 750 farms with 3,000 or more 
layers are using unacceptable methods of fly control.
    The actual number of farms that are using unacceptable methods of 
fly control is likely to be higher than the estimates in table 9 of 
this document would suggest. The fact that a particular method is used 
does not automatically guarantee that it is used at its optimal level. 
As with rodent control, even farmers in compliance with the provision 
would be likely to increase their use of fly controls. In order to 
estimate the costs, we assume that the number of farms using acceptable 
fly control methods but will increase their fly control efforts is 
uniformly distributed between 0 and 100 percent. Consequently, at the 
mean estimate of 50 percent, an additional 1,289 farms will increase 
their fly control efforts.
    iii. Costs of rodent and other pest control.\25\ We estimate the 
cost of rodent

[[Page 33061]]

and other pest control to farms in table 10 of this document. We assume 
that a farm with an adequate control program for rodents and other 
pests will be using a combination of control measures.
---------------------------------------------------------------------------

    \25\ All cost estimates in this section are from data supplied 
to the FDA through a contract with Research Triangle Institute. 
Derivations of estimates are described more fully in a memorandum to 
the record (Ref. 82). Where applicable, costs are changed to year 
2005 constant dollars using the Gross Domestic Product (GDP) 
deflator.
---------------------------------------------------------------------------

    Included in the cost of rodent control are the costs of setting up 
and maintaining bait stations and of rodent indexing. The annual cost 
of rodent control ranges from $680 for the average farm with between 
3,000 and 20,000 layers to $5,860 for the typical farm with over 
100,000 layers. The costs of limiting rodent access to feed and 
patching holes in the walls of poultry houses are not included in our 
estimates.
    Pest control measures include the cost of sprays, baits, fly 
monitoring, and manure pit fans. We expect the annual cost of pest 
control to range from $4,600 for farms with between 3,000 and 20,000 
layers to $77,660 for farms with more than 100,000 layers.

                                 Table 10--Cost of Rodent and Other Pest Control
                                                 [In thousands]
----------------------------------------------------------------------------------------------------------------
                                          Rodent control                   Pest control
                                 ----------------------------------------------------------------
  Farm size (number of layers)     Unacceptable      Increased     Unacceptable      Increased         Total
                                     controls         effort         controls         effort
----------------------------------------------------------------------------------------------------------------
3,000 to 19,999.................            $222            $240          $2,160          $1,467          $4,089
20,000 to 49,999................             157             148           1,355           1,597           3,256
50,000 to 99,999................              12              76             460             859           1,408
100,000 or more.................              43             588           6,887           6,212          13,730
                                 -------------------------------------------------------------------------------
All farms with 3,000 or more                 434           1,052          10,861          10,136          22,483
 layers.........................
----------------------------------------------------------------------------------------------------------------

    The total cost of rodent and other pest control shown in table 10 
of this document, is found by multiplying the cost per farm by the 
number of farms affected. Some farms are already using acceptable 
rodent and other pest control methods, but they will increase their 
rodent and other pest control efforts in order to reduce the subsequent 
expected costs of testing and diversion. We estimate that their cost of 
rodent and other pest control enhancements will be approximately half 
of the cost of farms with unacceptable controls. This provision results 
in costs of $22.5 million for the effected farms.
    iv. Benefits of rodent control. Rodent control appears to be 
effective in controlling SE. As a critical vector, rodents may spread 
SE throughout a given poultry house and between houses. Rodents spread 
the disease through their droppings, which often are consumed by 
layers. In this section of the document, we merge field data with 
estimates of the current level of rodent infestation on farms to assess 
the benefits from increased rodent control.
    We used the Layers study (Refs. 27 and 28) to determine the 
magnitude of the rodent problem on farms. The first four rows of table 
11 of this document show the percentages of farms in four size 
categories with four severities of mouse or rat infestation.\26\ Table 
11 shows that larger farms are generally more likely to experience 
moderate or severe rodent problems. The greater prevalence in the 
larger houses means that, while only 17 percent of houses have moderate 
or severe rodent problems, 33 percent of all layers are currently in 
houses with moderate or severe problems.\27\
---------------------------------------------------------------------------

    \26\ Severity level is self-assessed by respondents to the 
survey.
    \27\ To determine the percent of houses affected, the percent of 
farms with a given rodent problem was weighted using the number of 
houses in each size category. The number of birds affected was 
determined by weighting the percent of farms with a given rodent 
problem in each size category by the number of birds in each size 
category.

                                      Table 11--Severity of Rodent Problem
----------------------------------------------------------------------------------------------------------------
                                                        Severity in %                               Number of
                             -------------------------------------------------------------------    houses in
                                   Severe          Moderate         Slight            None           category
----------------------------------------------------------------------------------------------------------------
Farm Size (Number of
 Layers):
    < 20,000................              0               14.8            81.7              3.5         48,145
    20,000 to 49,999........              9.1             13.2            70.1              7.6          1,295
    50,000 to 99,999........              1.2             28.4            52.3             18.1            595
    100,000 or more.........              1.5             32.1            60.1              6.3          3,024
Percent of houses affected..              0.5             16.9            78.7              3.8  ...............
Percent of layers affected..              2.9             31.4            60.2              5.5  ...............
Risk ratio..................              4.2              3.1             2.1              1            Total
Percent of layers in houses              19.2             14.3             9.5              4.6             11
 with positive environments.
Maximum expected SE                      38.1             34              25.8              0               27.3
 reduction from increased
 rodent control \1\.........
----------------------------------------------------------------------------------------------------------------
\1\ These values are calculated using the following equations:
Severe: [( 19.2-4.6) / 2] / 19.2 = 38.1%.
Moderate: [( 14.3-4.6) / 2] / 14.3 = 34.0%
Slight: [( 9.5-4.6) / 2] / 9.5 = 25.8%.
None: [( 4.6-4.6) / 2] / 4.6 = 0.0%.


[[Page 33062]]

    Henzler (Ref. 83) examined the link between rodents and SE, and 
found that environmental tests of manure in houses with large rodent 
populations were 4.2 times more likely to be positive for SE than 
similar tests in houses with small rodent populations.\28\ We assume 
that the risk ratio for SE can be linearly extrapolated between 1 for 
those farms with no rodent problem and 4.2 for those farms with a 
severe rodent control problem. This extrapolation is presented in table 
11 of this document along with the estimated level of rodent 
infestation for farms of different sizes.
---------------------------------------------------------------------------

    \28\ A total of 84 flocks were examined in Pennsylvania (Ref. 
83).
---------------------------------------------------------------------------

    The third section of the Layers study (Ref. 29) \29\ supports the 
Henzler study. The Layers study finds that farms with a rodent index of 
at least 20 mice have an SE prevalence rate of 10.1 percent, while 
farms with a rodent index of less than 20 mice have a prevalence of SE 
of only 2.0 percent.\30\ This difference is statistically significant.
---------------------------------------------------------------------------

    \29\ The third part of the Layers study (Ref. 29) provides 
estimates for the prevalence of SE on 200 farm sites with different 
management practices. For many of the variables analyzed, however, 
the sample size was too small for statistically significant 
differences to be measured.
    \30\ The standardized rodent index is calculated as (number of 
rodents trapped) x (7 / number of days) x (12 / number of functional 
traps). The index standardizes the number of rodents trapped to the 
equivalent of having 12 traps function for 7 days (Ref. 29).
---------------------------------------------------------------------------

    Using data from the Henzler study, we estimate the base level of 
environmental SE prevalence for houses without rodent problems to be 
4.6 percent when the overall prevalence of SE-positive houses is 11 
percent. We calculated the base as:

Base = Overall / [(preventionSEV x BirdsSEV) + 
(preventionMOD x BirdsMOD) + 
(preventionSLT x BirdsSLT) + 
(preventionNON x BirdsNON)];

Where:

 ``Base'' is the base level of prevalence for a rodent free 
house,
 ``Overall'' is the total prevalence for all houses,
 ``prevention'' is the risk ratio for each level of rodent 
infestation, and
 ``Birds'' is the percentage of layers in houses with a 
given rodent problem.

    The subscripts SEV, MOD, SLT, and NON refer to the cases of severe, 
moderate, slight, and no rodent problems, respectively.
    The percentage of layers in houses with environments positive for 
SE is found by multiplying the SE risk ratio times the base level of 
risk. Houses with severe rodent control problems are 4.2 times more 
likely to be positive for SE than houses with no problems (19.2 percent 
versus 4.6 percent).
    In the last row of table 11 of this document, we estimate the 
expected reduction in SE due to increased rodent control. If rodent 
control were wholly effective, we would assume that it would result in 
a drop in SE from current levels to 4.6 percent, the level associated 
with no rodent problem. For a severe rodent infestation, rodent control 
would therefore result in a 76.2 percent decline in SE, but such a 
large decline is not likely for most farms. Severe rodent infestations 
are probably caused by more than just the failure to have a rodent 
control program. House design (open walls, dirt floors, and other 
features), unfavorable location (near other rodent-infested entities, 
climate, and so on), and lack of knowledge regarding proper rodent 
control techniques are additional factors likely to diminish the 
effectiveness of rodent control. Consequently, we assume that the 
effectiveness of rodent control for a particular farm will be uniformly 
distributed between no reduction and reduction to an SE risk of 4.6 
percent. Overall, this leads to an estimated average 27.3 percent 
reduction in SE, as shown in table 11.
    Based on information from the egg industry, we believe that rodent 
control may take up to 4 years to be fully effective. During the 4-year 
transition period, we assume that the effectiveness of rodent control 
will average 13.7 percent, half of the eventual effectiveness.
    We use the baseline number of SE cases due to eggs and the value of 
a typical case of salmonellosis to estimate the value of rodent and 
other pest control benefits. On the affected farms, rodent and other 
pest control results in expected annual benefits of 19,433 illnesses 
averted initially to 38,954 illnesses averted eventually.
    The narrow definition of rodent control is limited to direct 
methods of catching, killing, and blocking rodents from entering a 
poultry house. Measures such as pest control, biosecurity, and cleaning 
and disinfecting also affect rodent control. Cleaning and disinfecting 
a house, when done properly, removes rodents and their nests from an 
infested house. Similarly, biosecurity makes rodent penetration of a 
house more difficult. As a result, the benefits estimated for rodent 
control are partly due to the adoption of other measures that may be 
required. We therefore believe that the expected effect of rodent 
control by itself (assuming no other control measures) would be smaller 
than our estimates suggest.
    v. Benefits of other pest control. Pests other than rodents also 
have been shown to be vectors in the spread of SE. In particular, 
Davies and Wray showed that the ingestion of SE-contaminated maggots by 
a chicken protects Salmonella from the stomach acids of the chicken and 
aids in the establishment of SE in the chicken's gut (Ref. 84).\31\ 
Beetles and wild birds have also been implicated in the transmission of 
SE (Ref. 79). Wild birds currently have access to layer feed troughs on 
23.5 percent, and flies have access to layer feed troughs on 91.3 
percent, of farms (Refs. 27 and 28).
---------------------------------------------------------------------------

    \31\ See also Olsen (2000) (Ref. 85).
---------------------------------------------------------------------------

    Despite the high prevalence of pests other than rodents on farms, 
most farms attempt to limit their presence. For example, approximately 
82 percent of farms currently use fly control methods other than the 
use of biological predators (Refs. 27 and 28).\32\
---------------------------------------------------------------------------

    \32\ Use of biological predators is not seen as an effective 
pest control technique because the predators may themselves become a 
vector for SE transmission.
---------------------------------------------------------------------------

    The third section of the Layers study (Ref. 29) illustrates the 
effect of other pest control. On those farms in which pests have access 
to feed storage sites, the prevalence of SE is estimated to be higher 
than on farms where pests do not have access to feed in storage. 
Because the practices and effects of other pest control are highly 
correlated with rodent control we do not estimate the benefits 
separately.
    vi. Other benefits of rodent and other pest control. The rodent 
control provisions are expected to decrease the rodent population in 
poultry houses. Because rodents consume large amounts of feed, this 
reduction will benefit producers by lowering their feed costs.
    The Cooperative Extension Service of Oklahoma State University 
estimated that each rat in a poultry house consumed $2.18 worth of feed 
annually (Ref. 86) in 1987. This amount is equivalent to $3.75 in the 
year 2005 constant dollars.\33\ Because mice eat 5 to 10 percent as 
much as rats (Ref. 78), the expected annual loss of feed for each mouse 
in a house is estimated to cost $0.19 to $0.38.
---------------------------------------------------------------------------

    \33\ Nominal 1987 dollars are converted to 2005 constant dollars 
by multiplying the amount as estimated in 1987 by the ratio of the 
GDP deflator in 2005 to the GDP deflator in 1987 ($2.18 x 113.386/
65.958).
---------------------------------------------------------------------------

    We estimate that an infested house may have over 1,000 mice (Ref. 
83). This infestation will cost a farmer approximately $285 for that 
house (1,000 x $.285). A house infested with rats may have as many as 
700 rats (Ref.

[[Page 33063]]

87). In this case, the infestation costs the farmer $2,625 (700 x 
$3.75).

                                                       Table 12--Feed Savings From Rodent Control
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                           Houses in     Cost to  houses
                              Problem                                  Rodents in a     Feed savings   % of houses \1\   classifiction          in
                                                                          house          per house                            \2\         classification
--------------------------------------------------------------------------------------------------------------------------------------------------------
Mice:
    Severe.........................................................            1,000             $285              2.4              105          $30,000
    Moderate.......................................................              500              143             25.5            1,118          159,800
    Slight.........................................................              250               71             62.4            2,735          194,200
    None...........................................................                0                0              9.7              425                0
Rats:
    Severe.........................................................              700            2,625              1.6               70          184,100
    Moderate.......................................................              350            1,313              6.9              302          397,100
    Slight.........................................................              175              656             43.7            1,915        1,256,500
    None...........................................................                0                0             47.8            2,095                0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total cost of rodents..................................................................................................................        2,221,700
--------------------------------------------------------------------------------------------------------------------------------------------------------
Expected savings from control (assumes 50% reduction)..................................................................................       1,110,850
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The percentages are from the Layers study (Refs. 27 and 28).
\2\ Because rodent populations are estimated for large houses only (over 54,000 layers), we estimate the number of houses to be the number of large
  house equivalents. This implies that two 27,000-bird houses are counted as one house in this analysis.

    The total feed savings from rodent control are illustrated in table 
12 of this document. If rodent control leads to just half of all 
rodents being eliminated, the savings in lost feed from rodent control 
are estimated to be more than $1.1 million annually.
    vii. Biosecurity provisions. We have examined the effects of 
several biosecurity provisions. These include the following effects: 
(1) Limiting visitor access; (2) avoiding the movement of contaminated 
equipment between poultry houses; (3) ensuring that employees are 
hygienic; (4) keeping stray poultry, birds, and other animals from 
entering poultry houses; and (5) prohibiting employees from keeping 
birds at home.
    The first biosecurity measure we examine is the limitation of 
visitors' access on poultry farms. Limiting a visitor's access may 
include prohibiting a visitor from entering a house on one farm if that 
person has already entered a house on another farm. Also, visitors may 
be banned from entering poultry houses altogether.
    Contaminated equipment can also spread SE on a farm. One way to 
mitigate this problem is to ensure that equipment that is used in 
multiple houses (such as forklifts and manure removing equipment) is 
kept clean.
    The hygiene of persons moving between houses affects the likelihood 
of cross-contamination. To protect against cross-contamination, farms 
may require that employees and visitors use footbaths, change their 
clothing, or use protective clothing when on the farm. Farms also may 
choose to require that their employees work on only one farm site on a 
given day. Although it is impossible to predict what measures each farm 
will take to guarantee the hygiene of persons moving between houses, 
for the purposes of calculating the costs of this provision, discussed 
in detail in the following paragraphs, we assume that farms will use 
footbaths and have visitors wear protective clothing.
    Stray poultry, wild birds, cats, and other animals must also be 
prevented from entering the farm's poultry houses. This may be done by 
keeping grass and weeds cut, minimizing the existence of standing pools 
of water near poultry houses, repairing holes on poultry houses, and 
keeping doors closed on poultry houses.
    Finally, biosecurity precludes employees of the farm from keeping 
any birds as domestic animals at home.
    viii. Current industry practices; biosecurity. Most farms already 
practice some form of biosecurity.\34\ Roughly 68.1 percent of farms do 
not allow nonbusiness visitors and 22.1 percent do not allow business 
visitors into poultry houses. Of those that do allow visitors to enter, 
65.6 percent have biosecurity rules for nonbusiness visitors and 69.5 
percent have biosecurity rules for business visitors.
---------------------------------------------------------------------------

    \34\ All data in this section are from the Layers study (Refs. 
27 and 28).
---------------------------------------------------------------------------

    Farms use different methods to keep employee, contract crew, and 
visitor hygiene at an acceptable level. The Layers study estimates that 
24.5 to 24.6 percent use footbaths, 3.9 to 4.8 percent require showers 
to be taken, and 17.6 to 32.0 percent require persons to change clothes 
or wear coveralls.
    Many farms use biosecurity measures aimed at keeping stray poultry, 
birds, and other animals away from the poultry houses. While data on 
the number of farms that trim grass and discourage standing pools of 
water are not available, the Layers study did estimate that fencing is 
currently used at 26.7 percent of farms.
    Finally, 75.7 percent of farms do not allow employees to keep their 
own layers at home.
    ix. Costs of biosecurity. It is difficult to quantify many of the 
costs of biosecurity. This is especially true because the biosecurity 
measures may be implemented in different ways, allowing each farm to 
adapt the measures to their operation, as appropriate. However, a few 
of the costs can be quantified.
    First, the cost of restricting visitors can be estimated as the 
cost of monitoring and providing protective clothing to visitors who 
are allowed on the farm. The cost of monitoring visitors includes the 
cost of posting signs asking visitors to check in, the cost of having 
visitors sign in, and the cost of accompanying visitors around the 
farm. One estimate of protective clothing found costs of $102.75 for a 
box of 25 disposable coveralls and $112.97 for a box of 200 plastic 
shoe covers (Ref. 88). Because farms will choose to implement this part 
of biosecurity in different ways, it is impossible to determine what 
the actual cost will be.
    The cost of cleaning contaminated equipment is uncertain because we 
do not know how individual farmers will

[[Page 33064]]

choose to do this. We assume that the amount of equipment that needs to 
be kept clean increases linearly with the number of houses on a farm. 
In particular, we assume that a farm with two houses requires 1 hour of 
cleaning per week, a farm with three houses requires 2 hours, and so 
on. Using data from the Layers study, we find that the average farm 
will devote 69 labor hours annually to cleaning equipment. At a labor 
rate of $9.56 per hour (Ref. 89), plus 50 percent to include overhead 
costs, the total expected labor cost of this provision is $990 per 
farm, or $3.3 million for all affected farms.
    The cost of chlorine footbaths also can be estimated. We calculate 
the cost of a footbath as the sum of the cost of the plastic vessel, 
the cost of bleach, and the cost of the labor needed to fill footbaths. 
We estimate the total cost per house to be $360 per year.\35\ Because 
only 24.6 percent of houses currently use footbaths, the total annual 
cost of footbaths is estimated to be (100 - 24.6 percent) x 7,359 
houses x $360 per house = $2.0 million.
---------------------------------------------------------------------------

    \35\ This estimate is based on the following assumptions: (1) 
The plastic vessel costs $5 and is replaced annually; (2) bleach 
costs $1 a gallon; a gallon is used per footbath, and it is changed 
once a week; (3) there are two footbaths per house; (4) labor costs 
$9.56 an hour (Ref. 89) plus 50 percent to include overhead; and (5) 
changing the bleach-water mixture takes 10 minutes. The estimate in 
the text is calculated as 2 x [($5 x 1) + ($1 x 52) + ($14.34 x 
0.167 x 52)] = $360 per year.
---------------------------------------------------------------------------

    Finally, the cost of preventing stray poultry, wild birds, cats and 
other animals from entering poultry houses already is accounted for 
under rodent and other pest control costs. The estimated cost for a 
complete rodent and other pest control program includes all biosecurity 
measures that contribute to rodent and other pest control.
    The total measured costs of biosecurity provisions are $5.3 million 
for affected farms.
    x. Benefits of biosecurity. The importance of biosecurity in the 
reduction of disease transmission is well established.\36\ For example, 
the Layers study (Ref. 29) estimates that farms allowing nonbusiness 
visitors onsite are five times more likely to test positive for SE than 
farms that ban such visitors. Farms allowing nonbusiness visitors have 
a prevalence of SE of 17.0 percent while farms that do not only have an 
SE prevalence of 3.6 percent. We include the benefits from biosecurity 
with those of rodent control, because the practices and effects are 
highly correlated and cannot be estimated separately.
---------------------------------------------------------------------------

    \36\ A number of State extension services have written 
extensively about the importance of biosecurity (Refs. 79, 80, and 
90).
---------------------------------------------------------------------------

    xi. Cleaning and disinfecting provisions. Specific cleaning and 
disinfecting provisions include the removal of all visible manure, and 
a dry clean and disinfection of the house.
    xii. Current industry practices; cleaning and disinfecting. To a 
large extent the layer industry already performs adequate cleaning and 
disinfecting procedures. For larger houses, the Layers study (Refs. 27 
and 28) estimates that, every year or two, manure is removed from 100 
percent of houses, 80.5 percent of houses are dry cleaned annually, 
53.6 percent of houses are wet cleaned annually, and 65.1 percent of 
houses are disinfected. The prevalence of these practices on affected 
farms is illustrated in table 13 of this document.

                              Table 13--Current Cleaning and Disinfecting Practices
----------------------------------------------------------------------------------------------------------------
                                                      Manure
                                                    removal (%)    Dry clean (%)   Wet clean (%)   Disinfect (%)
----------------------------------------------------------------------------------------------------------------
Between each flock (cleaned annually)...........            96.6            79.4            30.6            44.5
After two or more flocks (cleaned occasionally).             3.4             1.1              23            20.6
Never...........................................               0            19.5            46.4            34.9
----------------------------------------------------------------------------------------------------------------

    xiii. Costs of cleaning and disinfecting. The cost of cleaning and 
disinfecting houses is illustrated in table 14 of this document. For 
each component of cleaning and disinfecting, we estimate the annual 
cost as the number of houses that this provision will affect each year 
times the cost per house. We calculate the number of houses affected as 
the product of the percent of houses not using a practice (100 minus 
the percent using the practice in table 14 of this document), the 
probability of a positive flock, and the number of affected houses 
(7,359, calculated from data in table 6 of this document).

                      Table 14--Cost of Cleaning and Disinfecting Houses on Affected Farms
----------------------------------------------------------------------------------------------------------------
                                                  Probability of
                                   Houses using     a positive       Number of                        Cost to
                                   practice (%)    environmental      houses      Cost per house     industry
                                                     test (%)        affected
----------------------------------------------------------------------------------------------------------------
Dry clean.......................            79.8             8.4             125          $1,200        $130,300
Disinfect.......................            51.4             8.4             300             600         152,300
                                 -------------------------------------------------------------------------------
    Total cost..................  ..............  ..............  ..............  ..............         282,600
----------------------------------------------------------------------------------------------------------------

    The percentages of houses engaged in the different cleaning and 
disinfecting practices (the first column of numbers in table 14 of this 
document) is based on the first two rows of table 13 of this document. 
In table 14 we calculate the percent as follows:
    CA + (CO x PC), where

CA is the percent of farms that are cleaned and disinfected 
annually, (see table 13 of this document)
CO is the percent of farms that are cleaned and disinfected 
occasionally, (see table 13), and
PC is the probability that a farm that is cleaned occasionally would 
have been cleaned in a year that it had a positive environmental 
test. We assume that PC is distributed uniformly between 0 and 
0.667, with a mean value of 0.333.

    The per-house cost for each component is taken from Morales and 
McDowell (Ref. 91) and is converted to year 2005 constant dollars using 
the GDP deflator. We assume that the true

[[Page 33065]]

cost of each component is distributed uniformly between the low and the 
high estimates given.
    xiv. Benefits of Cleaning and Disinfecting. Cleaning and 
disinfecting is another tool that may decrease or eliminate SE in an 
infected house. Schlosser et al. estimate that cleaning and 
disinfecting a house reduces by 50 percent the probability that a 
previously infected house will test positive (Ref. 92). Because they do 
not address cross-contamination, the 50 percent reduction is likely to 
be an overestimate of the actual efficacy of cleaning and disinfecting. 
Furthermore, the same study estimates that 28 percent of negative 
houses tested positive after cleaning and disinfecting.
    The Layers study (Ref. 29) finds that farms that are cleaned and 
disinfected are less likely to be contaminated with SE. No surveyed 
farms that performed washes of houses between flocks were found to be 
positive. By contrast, houses that neither wash nor fumigate between 
flocks had SE prevalence rates of 12.2 percent. These results suggest 
that cleaning and disinfecting a layer house is negatively correlated 
with SE prevalence. However, because the practices and effects of 
cleaning and disinfecting are highly correlated with rodent control we 
do not estimate the benefits separately.
    xv. Total and net benefits of rodent and other pest control 
programs, biosecurity, and cleaning and disinfecting. The total annual 
cost for all three provisions is $28.1 million.
    As discussed in detail under rodent control, the benefits of these 
provisions are highly correlated. The data attributing a correlation 
between any one practice and a decrease in SE prevalence is probably 
overstating the effect because, for instance, farms with a good 
biosecurity system tend to have good rodent and other pest control 
programs. In order to avoid the double counting of benefits, we use 
only the benefits estimated for rodent control as a proxy for the 
benefits of all three provisions implemented correctly. Therefore all 
three provisions implemented together are estimated to reduce the 
number of SE related illnesses every year by nearly 39,000 for total 
estimated annual benefits of more than $697.3 million. The provisions 
would cost about $690 per illness averted and have net benefits of 
about $675.9 million.
    If we account for estimated reductions in SE prevalence due to the 
chick and pullet provisions (an estimated decrease of 0.23 percent, 
discussed in detail in section V.F.1.i), occurring earlier in the 
production cycle, these three provisions would prevent about 90 less 
illnesses than they would standing alone ((1-0.0023) x 39,000 
illnesses). Costs would only decrease slightly, as cleaning and 
disinfecting costs are the only ones that are a function of SE 
prevalence. In place with the other provisions of the final rule, these 
three provisions will cost about $700 per illness averted and have net 
benefits of about $674.3 million.
    d. Refrigeration.--i. Refrigeration provisions. This rule requires 
that shell eggs being held or transported must be refrigerated at or 
below 45 [deg]F ambient temperature beginning 36 hours after time of 
lay.
    ii. Current industry practices; refrigeration. Because eggs packed 
on the farm do not have to be transported to a packing plant, we assume 
that eggs on these farms are packed for sale within 36 hours of lay. 
Accordingly, we assume that this provision would impose additional 
costs only on those farms that do not pack their eggs for the ultimate 
consumer, are currently storing their eggs for longer than 36 hours, 
and currently do not refrigerate their eggs at an ambient temperature 
at or below 45 [deg]F, either on-farm, during shipment, or during 
holding before shell egg processing or entering egg products 
facilities. We use data from the Layers study (Refs. 27 and 28), shown 
in table 15 of this document, to determine the percentage of farms 
affected by the on-farm storage temperature requirements.

                    Table 15--Farms Affected by On-Farm Egg Storage Temperature Requirements
----------------------------------------------------------------------------------------------------------------
                                                                 Stored
                                                 Packed  off- longer than   Temp >  45   Percent of   Number of
          Farm size (number of layers)            farm  (%)     36 hours   [deg]F  (%)     farms        farms
                                                                  (%)                     affected     affected
----------------------------------------------------------------------------------------------------------------
3,000 to 19,999................................         98.3         98.2         78.1         75.4        1,317
20,000 to 49,999...............................         96.3          100         75.8         73.0          675
50,000 to 99,999...............................         83.1         83.4         92.1         63.8          158
100,000 or more................................         65.6           75         72.6         35.7          146
                                                ----------------------------------------------------------------
    Total......................................         81.2         87.3         81.2         57.6        2,296
----------------------------------------------------------------------------------------------------------------

    The first three columns of table 15 of this document are taken 
directly from data collected for the Layers study. The percentage of 
farms affected (fourth column) is the product of multiplying the first 
three columns. The number of farms affected (final column) is estimated 
by multiplying the percent of farms affected by this provision by the 
total number of farms covered by the provision.
    Due to current rules on refrigeration, most farms currently ship 
eggs from the farm in refrigerated freight at 45 [deg]F, even though 
they are not required to do so until the eggs have been packaged or 
further processed.\37\ Farms with more than 10,000 layers are likely to 
be currently in compliance with this provision. Some smaller farms, 
those with 10,000 layers or less, which account for roughly 5 percent 
of current egg production, may be out of compliance. It is unlikely 
that even the smallest farms that are currently refrigerating eggs 
onsite would ship eggs on unrefrigerated trucks. As a high estimate of 
the costs of this provision, FDA assumes that producers with 10,000 
layers or less, who are currently not in compliance with the on-farm 
refrigeration part of this provision (all farms with less than 3,000 
layers and 75.4 percent of farms with between 3,000 and 20,000 layers) 
\38\ are not in compliance with the refrigerated shipping requirement.
---------------------------------------------------------------------------

    \37\ Current industry practices and the costs of egg 
transportation are based on information gained from telephone 
conversations between FDA, an egg processor, and a shipper.
    \38\ See table 16 of this document.
---------------------------------------------------------------------------

    There are 514 producers, packers, and grading stations that will be 
affected by this provision (Ref. 93). While the majority of eggs in the 
United States are processed within 2 to 3 days, some cases arise where 
eggs are held longer. Seasonal fluctuations in demand or within 
industry egg trading, at times causes eggs to be held for more than 36

[[Page 33066]]

hours between lay and processing \39\ (Ref. 94).
---------------------------------------------------------------------------

    \39\ Within industry egg trading refers to trading between firms 
to meet unexpected demand or get rid of excess supply.
---------------------------------------------------------------------------

    There is currently no regulation requiring a specific temperature 
for preprocessed eggs. Eggs are typically held between 55 and 60 [deg]F 
(Ref. 94). FDA believes most producers will have to decrease the 
holding temperature for their eggs.
    iii. Cost of on-farm refrigeration.\40\ The refrigeration provision 
will cause producers to choose to perform one of the following tasks: 
(1) Turn down the thermostats in their coolers, (2) install new 
refrigeration, or (3) renegotiate their shipping contracts to require 
more frequent pickup of unpacked eggs. In addition, producers that do 
not currently ship in refrigerated freight will need to do so. 
Furthermore, producers, packers, and egg grading stations will have to 
refrigerate eggs at no more than 45 [deg]F if they hold the eggs for 
more than 36 hours prior to processing.
---------------------------------------------------------------------------

    \40\ All cost estimates regarding on farm storage are from data 
supplied to FDA through a contract with the Research Triangle 
Institute. Derivation of estimates is more fully described in a 
memorandum to the record (Ref. 95).
---------------------------------------------------------------------------

    In table 15 of this document, we estimate that almost 2,300 farms 
do not meet the on-farm standards set by the refrigeration provision. 
Of these farms, some are currently using refrigeration, albeit at 
higher temperatures than the provision would permit. Others do not have 
any refrigeration installed on their farms. We assume that those farms 
that report storing their eggs between 45 and 60 [deg]F already have 
refrigeration installed. For these farms, the cost of complying with 
the refrigeration provision is the cost of increasing electricity usage 
to further cool their eggs. For farms that store their eggs at a 
temperature greater than or equal to 60 [deg]F, we assume that no 
refrigeration is currently installed. The cost to these farms includes 
the cost of installing an insulated egg room with refrigeration units.
    In table 16 of this document, we use data from the Layers study to 
determine how many farms will have to install refrigeration and how 
many will only have to reduce the temperatures in their egg rooms. The 
majority of smaller farms lack refrigeration facilities, while larger 
farms are more likely to use refrigeration at an inadequate level.
    The cost of this provision to farms that are using refrigeration at 
an inadequate level is assumed to be the cost of increased energy 
usage.\41\ If temperatures in egg rooms on these farms are uniformly 
distributed between 45 and 60 [deg]F, the average reduction in 
temperature is 7.5 [deg]F. If the electricity rate is $0.057 per 
kilowatt-hour (Ref. 96), farms will spend between about $130 for farms 
with between 3,000 and 20,000 layers to a little over $1,400 for farms 
with more than 100,000 layers. These estimates are based on the 
assumption that refrigeration must be run 18 hours a day to achieve the 
45 [deg]F mark, while it must be run 15 hours a day to achieve the 60 
[deg]F mark. We estimate that the average farm with 20,000 to 50,000 
layers would need to run one 5-horsepower refrigeration unit and one 1-
horsepower unit to sufficiently cool its egg room. A 5-horsepower unit 
uses 4.83 kilowatt hours per hour of operation, while a 1-horsepower 
unit only uses 1.73 kilowatt hours. Therefore, the cost of cooling to 
60 [deg]F is about $168 per month, or about $2,020 per year.\42\ The 
cost of cooling to 45 [deg]F is about $202 per month, or about $2,420 
per year.\43\ The resulting cost of decreasing the ambient temperature 
in the egg cooler by 15 [deg]F is approximately $400. Using a linear 
relationship between refrigeration and cost gives us an estimate of 
approximately $200 for a 7.5 [deg]F reduction.\44\
---------------------------------------------------------------------------

    \41\ We recognize that some of these farms may require 
additional refrigeration units to achieve the 45 [deg]F threshold. 
However, because we do not currently have information that allows us 
to estimate how many farms fall into this category, we assume that 
the only cost facing farms that use an inadequate level of 
refrigeration will be the cost of increased energy usage. As such, 
actual refrigeration costs will be higher than estimated. As most 
farms currently using refrigeration will simply have to increase 
their energy usage, we believe the difference between actual costs 
and costs estimated using energy usage as a proxy is small. 
Furthermore the underestimate will be at least somewhat offset by 
the use of newer, more efficient equipment, and overestimates in 
other parts of this calculation (see footnote 44 of this document).
    \42\ (4.83 + 1.73) kilowatt hours used per hour x 15 hours of 
operation x $0.057 per kilowatt hour used x 30 days.
    \43\ (4.83 + 1.73) kilowatt hours used per hour x 18 hours of 
operation per day x $0.057 per kilowatt hour x 30 days.
    \44\ In actuality, the relationship between refrigeration and 
cost is increasing at an increasing rate, so that our use of a 
linear relationship somewhat overstates the cost of lowering 
refrigeration temperatures.

                                              Table 16--Annual Cost of On-Farm Refrigerating Affected Farms
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         No refrigeration                    Inadequate refrigeration       Total cost  (in thousands)
                                         ---------------------------------------------------------------------------------------------------------------
      Farm size (number of layers)                         Cost per farm   Cost per farm
                                              Number       (7% discount    (3% discount       Number       Cost per farm   (7% discount    (3% discount
                                                               rate)           rate)                                           rate)           rate)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3,000 to 19,999.........................             720          $6,979          $5,074             597            $128          $5,102          $3,730
20,000 to 49,999........................             201          13,793           9,779             474             203           2,868           2,062
50,000 to 99,999........................              65          26,359          18,500              93             352           1,746           1,235
100,000 or more.........................              32         112,681          78,595             114           1,413           3,767           2,676
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The fixed cost of new refrigeration includes the cost of 
constructing an egg room, insulating that room, and installing 
refrigeration units. Storage rooms and their insulation are assumed to 
last 30 years. Refrigeration units last from 10 to 20 years. Using 
these values, along with a 7 percent discount rate, we estimate that 
the annualized cost of installing new refrigeration would be about 
$1,300 for a farm with 20,000 to 50,000 layers.
    The cost of constructing an egg room equals the number of square 
feet required times the construction cost per square foot. The number 
of square feet required is estimated as the number of square feet 
required per 1,000 dozen eggs (294 square feet) times the number of 
eggs produced in a 24-hour period (1,700 dozen eggs) times the number 
of days the eggs are expected to be stored (about 4 days). The average 
cost of construction per square foot has been estimated to be between 
$50 and $75. Therefore, for the average farm with 20,000 to 50,000 
layers the cost of construction is $125,000. The amortized cost over 30 
years at 7 percent is approximately $10,050.
    The cost of insulating an egg room equals the number of square feet 
to be covered times the insulation cost per square foot. Insulation 
costs $13.38 for a 32 square foot sheet. For a farm with 20,000 to 
50,000 layers requiring 3,670

[[Page 33067]]

square feet of insulation, the expected cost of insulation is therefore 
$1,540. The annualized cost of insulation (amortized over 30 years at 7 
percent) is $125.
    The fixed cost of refrigeration for an egg room is the cost of 
buying and installing refrigeration units. We assume that installation 
costs are approximately 5 percent of the purchase price of the unit. 
For a farm with 20,000 to 50,000 layers, the cost of refrigeration is 
the purchase price for needed refrigeration units ($10,300) plus the 
cost of installation ($10,300 x 5 percent) for a total of $10,816. 
Amortizing this cost over 15 years at 7 percent yields an annual cost 
of $1,190.
    The total annualized cost of installing a refrigerated egg room on 
a farm with 20,000 to 50,000 layers is estimated to be approximately 
$11,350. Including the cost of energy increases the total cost to 
$13,800.
    For all types of refrigeration, there also will be a cost 
associated with the use of electricity to run the cooling units. Given 
that electricity costs $0.057 per kilowatt-hour, we estimate that farms 
not currently using refrigeration will spend an additional $1,500 to 
$17,000 annually for power.\45\ Farms that currently use refrigeration, 
but at higher temperatures than 45 [deg]F, will spend an additional 
$130 to $1,400 annually for power.\46\
---------------------------------------------------------------------------

    \45\ As noted previously, for a farm with 20,000 to 50,000 
layers the annualized cost of cooling an egg room to 45 [deg]F is 
(4.83 + 1.73) kilowatt hours used per hour x 18 hours of operation 
per day x $0.057 per kilowatt hour x 30 days [ap] $202 per month, or 
about $2,420 per year. Using similar calculations, average annual 
energy costs for refrigeration on farms that previously did not use 
refrigeration are estimated to be $1,540 on farms with 3,000 to 
19,999 layers, $4,230 on farms with 50,000 to 99,999 layers, and 
$16,950 on farms with 100,000 layers or more.
    \46\ Using a calculation similar to the one illustrated in the 
discussion of the costs of inadequate refrigeration for farms with 
20,000 to 50,000 layers, average annual energy costs for farms with 
inadequate refrigeration are estimated to be $130 on farms with 
3,000 to 19,999 layers, $350 on farms with 50,000 to 99,999 layers, 
and $1,400 on farms with $100,000 layers or more.
---------------------------------------------------------------------------

    The cost of this provision to a farm without any refrigeration in 
place is estimated to range from about $7,000 for farms with between 
3,000 and 20,000 layers to over $112,600 for farms with more than 
100,000 layers. The cost of this provision to a farm with adequate 
refrigeration is simply the cost of the additional energy, ranging from 
about $130 for farms with between 3,000 and 20,000 layers to over 
$1,400 for farms with more than 100,000 layers.
    iv. Cost of refrigerated shipping. The average cost of refrigerated 
shipment at 45 [deg]F is $0.12 per dozen eggs. Unrefrigerated shipments 
cost 20 percent less than refrigerated shipments. Therefore, the 
difference in cost between refrigerated and unrefrigerated shipments is 
$0.024 per dozen eggs. Since farms with 10,000 layers or less produce 
roughly 1.5 percent of the eggs sold annually (93 million dozen eggs), 
the additional cost of refrigerated shipping on these farms is $1.7 
million (93 million dozen eggs x $0.024 x 0.754 not in compliance).
    v. Cost of preprocessing storage. The cost of this provision to 
facilities holding eggs at above 45 [deg]F for shell egg processing or 
before entering egg products facilities is assumed to be the cost of 
increased energy usage. If temperatures in egg rooms at these 
facilities are uniformly distributed between 55 and 60 [deg]F, the 
average reduction in temperature is 7.5 [deg]F. If the electricity rate 
is $0.057 per kilowatt-hour, facilities holding 100 dozen eggs at a 
time will spend $35 annually while facilities holding 1,000 dozen eggs 
at a time will spend nearly $20,000 annually. Using calculations 
similar to those described previously for on-farm holding, it is 
estimated that the average annual cost of additional refrigeration is 
about $9,700 per facility. The total annual cost for the 514 facilities 
holding eggs at above 45 [deg]F is expected to be $5 million.
    vi. Total cost of refrigeration provisions. The total cost of the 
refrigeration provision, using a 7 percent discount rate, is 
approximately $20.2 million.\47\ Using a 3 percent discount rate, the 
cost is approximately $16.4 million. However, some farms will choose to 
increase the frequency of egg pickups instead of installing additional 
refrigeration to remain in compliance with the provision. If more 
frequent egg pickups are a lower cost alternative to refrigeration 
installation, the previously mentioned figures may overstate the actual 
cost of increased refrigeration.
---------------------------------------------------------------------------

    \47\ For ease of explanation, the total new burden of the 
refrigeration requirement is assumed to be carried by the farmers. 
In reality, this burden, although equal in total, might be spread 
among the farmer, shipper, producer, retailer, and consumer.
---------------------------------------------------------------------------

    vii. Benefits of refrigeration. The probability that an individual 
will become ill from an SE-contaminated egg depends, among other 
things, on the number of bacteria within the infected egg. 
Refrigeration of eggs at 45 [deg]F significantly slows the reproduction 
of the SE bacteria (Ref. 22). This provision would require that eggs 
that are stored for more than 36 hours after laying be refrigerated at 
45 [deg]F through the preproduction stage. We use the USDA SE risk 
assessment model (Ref. 22), a model designed, in part, to estimate the 
effects of refrigeration on the number of SE illnesses. The FSIS risk 
assessment estimates that if all eggs on farms affected by the final 
rule are refrigerated at 45 [deg]F within 36 hours of lay to the time 
they were processed, we would see a 31 percent decline in annual SE 
illnesses. This translates to nearly 45,000 illnesses avoided annually, 
or about $800.6 million in annual benefits. Standing alone, the 
refrigeration provisions would cost about $450 per illness avoided and 
provide $780.4 million in net benefits.
    If we account for estimated reductions in SE prevalence due to the 
provisions pertaining to chicks and pullets, rodent and pest control, 
biosecurity, cleaning and disinfecting, and testing and diversion (a 35 
percent reduction in prevalence when all provisions are in place and 
fully effective), all occurring earlier in the production cycle, the 
refrigeration provisions would provide a 20 percent decline in SE 
illness, preventing about 29,000 illnesses annually ((1-0.35) x 45,000 
illnesses). Costs of refrigeration are not a function of SE prevalence 
and remain constant. In place with the other provisions of the final 
rule, the cost per illness averted on farms with more than 3,000 layers 
is estimated to be roughly $700.\48\ The annual net benefit of the 
provision is $496.9 million.
---------------------------------------------------------------------------

    \48\ This estimate assumes a 7-percent discount rate.
---------------------------------------------------------------------------

    e. Routine environmental testing. Environmental testing does not 
serve directly as an SE prevention measure. Testing serves primarily as 
an indicator of the effectiveness of the SE prevention measures.
    i. Environmental testing provision. This provision would require 
every farm to routinely test the environment of their layers for SE. 
For flocks that do not undergo a molt, this requirement would be 
limited to a test for SE in the environment when each group of layers 
in the flock is 40 to 45 weeks of age. For those flocks that do undergo 
a molt, testing would be required when each group of layers is 40 to 45 
weeks of age and 4 to 6 weeks after molting for each group is 
completed.\49\
---------------------------------------------------------------------------

    \49\ In the proposed rule, molted flocks were to undergo 
environmental testing at 20 weeks post molt. Changing the time from 
20 weeks to 4 to 6 weeks post molt increases the costs to farms that 
test environmentally positive, egg positive, and continue to test 
egg positive. For these farms, earlier testing means more eggs 
diverted over the life of the flock and more egg tests. However, the 
benefit of diverting more potentially positive eggs is greater than 
the additional costs.
---------------------------------------------------------------------------

    Environmental sampling would be accomplished by a method such as 
swabbing manure piles in the poultry

[[Page 33068]]

house and then culturing those swabs using a primary enrichment testing 
method. We consider variants of sampling protocols that are currently 
in use. The California Quality Assurance program currently requires a 
sampling plan that relies on randomly swabbing 30-foot sections of the 
poultry house (Ref. 97). To obtain a 95 percent probability of finding 
a house that is 10 percent infected, we estimate that 32 samples would 
have to be taken. Many other State quality assurance plans, including 
Pennsylvania's, require the span of each row of the layer house to be 
swabbed with one swab, regardless of row length (Ref. 92).
    ii. Current industry molting practices. Molted flocks face 
additional testing under this provision. Overall, 62 percent of all 
large flocks are molted once and 12 percent are molted twice before 
depopulation (Refs. 27 and 28). Industry molting practices, however, 
vary by region and by farm size.
    Farms in the Central and Great Lakes regions are least likely to 
molt their flocks while farms in the Southeast and West are most likely 
to use molting as a practice. See table 17 of this document.

                Table 17--Regional Molting Practices \1\
------------------------------------------------------------------------
                                                Times molted
              Region              --------------------------------------
                                        0            1            2
------------------------------------------------------------------------
Great Lakes......................          30%          65%           5%
Southeast........................           7%          80%          13%
Central..........................          49%          51%           0%
West.............................          18%          50%          32%
------------------------------------------------------------------------
\1\ Layers study data provided by APHIS.

    Molting practices also vary by farm size. As table 18 of this 
document illustrates, smaller farms are less likely to molt their 
layers than are larger farms. While almost 85 percent of all farms with 
50,000 or more layers molt their layers, only 28 percent of farms with 
fewer than 20,000 layers molt their flocks. This disparity plays a 
significant role in the determination of the expected cost of testing 
and diversion.

              Table 18--Molting Practices by Farm Size \1\
------------------------------------------------------------------------
                                                Times molted
   Farm size (number of layers)   --------------------------------------
                                        0            1            2
------------------------------------------------------------------------
Fewer than 20,000................          72%          28%           0%
20,000 to 49,999.................          35%          54%          11%
50,000 to 99,999.................          14%          68%          18%
100,000 or more..................          16%          72%          12%
------------------------------------------------------------------------
\1\ Layers Study data provided by APHIS.

    iii. Current environmental testing practices. According to the 
Layers study, approximately 52 percent of all farms with more than 
30,000 layers currently conduct some routine environmental tests for SE 
(Refs. 27 and 28). The vast majority of these producers are also 
members of formal quality assurance programs.
    iv. Environmental testing costs. The cost of routine environmental 
testing depends on how many samples are tested, the labor cost of 
collecting the samples, the cost of shipping the samples to a 
laboratory, and the laboratory cost per sample tested.
    We estimate that it will take approximately 15 minutes to collect 
and pack each sample. Because the wage for a typical livestock and 
poultry worker is approximately $9.56 per hour (Ref. 89), after adding 
50 percent to reflect overhead costs, we assume that the cost of labor 
is $3.59 per sample collected.\50\
---------------------------------------------------------------------------

    \50\ (15 / 60) x $14.34.
---------------------------------------------------------------------------

    The cost of shipping samples will vary by the weight of the 
shipment. We assume that a swab, with its packing material, weighs 
approximately 1 pound. To calculate the cost of shipping, we estimate 
the average number of swabs sent per shipment and use rate tables (Ref. 
98) to determine the cost of shipment.
    We estimate the laboratory cost of testing for SE that has been 
collected from the environment to be approximately $36.00 per sample 
(Ref. 99).
    The average cost of routine testing for SE in a given house is 
determined by multiplying the number of tests required for that house 
by the expected cost per test. For any plan that is used, the per house 
cost of testing is estimated to be

Cost = SWABS x (LABOR + MAIL + LAB)

Where:

SWABS is the number of required swabs,
LABOR is the cost of labor per test,
MAIL is the cost of shipping samples to a lab, and
LAB is the laboratory costs of testing for SE.

    To determine the testing cost of the row-based plan, we multiply 
the cost per test by the estimated number of rows that will have to be 
swabbed. We assume that all farms that are currently conducting routine 
testing (52 percent) (Refs. 27 and 28) are using a row-based plan.
    The number of rows that will have to be swabbed in larger houses is 
estimated in table 19 of this document. Information for the first three 
columns is drawn from the Layers study (Refs. 27 and 28). We estimate 
the number of houses affected by the provision (the fourth column) by 
multiplying the number of large houses (7,315) by the percent of houses 
affected by the provision (48 percent), and then multiplying the 
product by the percent of houses in the given category. We estimate the 
number of rows that will have to be swabbed because of the provision as 
the number of rows per house times the number of houses affected by the 
provision. We estimate

[[Page 33069]]

that a total of 21,325 rows would have to be swabbed due to this 
provision.

                                     Table 19--Number of Rows To Be Swabbed
                                       [Houses with 3,000 or more layers]
----------------------------------------------------------------------------------------------------------------
                                                      Average                        Number of
      Number of rows or batteries of cages        number of rows    Percent of        houses      Number of rows
                                                        \1\           houses         affected        affected
----------------------------------------------------------------------------------------------------------------
1...............................................             1.0             1.9              67              67
2 to 3..........................................             2.5            12.5             442           1,105
4 to 5..........................................             4.5            50.8           1,794           8,073
6 or more.......................................            10.0            34.2           1,208          12,080
                                                 ---------------------------------------------------------------
    Total.......................................             6.1  ..............           3,511          21,325
----------------------------------------------------------------------------------------------------------------
\1\ The average number of rows per house is estimated as the midpoint of the range estimated by Layers study.
  For the ``6 or more'' category we assume that these houses have an average of 10 rows each.

    Because each row has two sides, each of which we assume will have 
to be swabbed, the total number of swabs required is estimated to be 
approximately 42,650. On average, 12.2 swabs will be used for each 
house with more than 3,000 layers. The total cost of testing the 
average large house is $532 (12.2 swabs x ($3.59 labor + $3.98 shipping 
+ $36.00 lab culture)) when two swabs are used per row.\51\
---------------------------------------------------------------------------

    \51\ The cost of shipping 12 swabs (12 pounds) overnight is 
estimated to be between $25.58 and $70.73, including pickup charges 
(Ref. 98). We divide the average cost of shipping by 12 to obtain 
the cost per swab ($3.98).
---------------------------------------------------------------------------

    The random swabbing plan requires that 32 samples be taken per 
house. Although 52 percent of houses conduct some routine environmental 
testing, far fewer are likely to follow the random swabbing plan. In 
the absence of better information, we assume that between 0 and 52 
percent (uniformly distributed) of large houses that are currently 
testing use random swabbing plans. The cost per swab under the random 
swabbing sampling plan is about $42 ($3.59 labor + $2.42 shipping \52\ 
+ $36.00 lab culture). The total cost of one round of testing under the 
random swabbing plan is calculated to be $1,344 per house, regardless 
of size (32 swabs per house x $42 cost per swab).
---------------------------------------------------------------------------

    \52\ The cost of shipping 32 swabs (32 pounds) overnight is 
estimated to be between $42.10 and $114.65, including pickup charges 
(Ref. 98). We divide the average cost of shipping ($77.44) by 32 to 
obtain the cost per swab ($2.42).
---------------------------------------------------------------------------

    f. Follow-up egg testing.--i. Egg testing provisions. Follow-up egg 
testing would occur if an environmental test is positive for SE. If egg 
testing is triggered, the following protocol must be followed. First, 
the farmer must submit 1,000 eggs to a lab both initially and 
subsequently every 2 weeks for a total of 4,000 eggs. Consistent with 
the method described in chapter 5 of FDA's Bacteriological Analytical 
Manual (BAM) the eggs that are submitted for testing may be pooled in 
samples of 20 eggs each. If pooled into samples of 20 eggs each, a 
total of 200 egg tests are conducted. If any of these egg tests are 
positive, the farm will be required to divert its eggs until four 
consecutive rounds of egg tests are found to be negative. Furthermore, 
a farm that has had a positive egg test must continue to test 1,000 
eggs each month for the life of the flock.
    If the cost of egg testing is high enough, however, the farmer may 
simply choose to forego egg testing and divert all eggs for the life of 
the flock.\53\
---------------------------------------------------------------------------

    \53\ Under the provision on diversion, farms that test positive 
for SE in their eggs would be required to divert their eggs for 
treatment until they are able to show via testing that SE is not 
present in the eggs produced in the infected house. This is 
discussed in detail in the following section on diversion costs.
---------------------------------------------------------------------------

    ii. Current industry practices; Follow-up egg testing. We assume 
that those farms currently under a recognized quality assurance plan 
that mandates egg testing following a positive environmental test are 
currently in partial compliance with this provision. Of the major 
plans, only the Pennsylvania and Maryland plans have follow-up testing 
provisions that are largely the same as this provision (Ref. 76). 
According to ``Chicken and Eggs'' (Ref. 75), egg production in Maryland 
and Pennsylvania accounted for 9.7 percent of the U.S. total. Only 85 
percent of the eggs in these States fall under the State quality 
assurance programs. We therefore estimate that 8.2 percent (9.7 percent 
x 85 percent) of all eggs are currently in partial compliance. Because 
farms with fewer than 3,000 layers are not currently in these quality 
assurance programs, we assume that no farms with fewer than 3,000 
layers conduct follow-up egg tests.
    Farms using the number of eggs for sampling required by the 
Pennsylvania and Maryland plans are sampling fewer eggs than are 
required by this rule. Specifically, this provision would require that 
batches of 1,000 eggs be tested if egg testing is required, while the 
Pennsylvania and Maryland plans only require 480 eggs to be tested in 
each batch. Farms on either the Pennsylvania or the Maryland plans are 
only 48 percent (480 / 1000) in compliance with the provision. 
Furthermore, the testing protocol used in Pennsylvania and Maryland is 
less rigorous than the one prescribed by FDA. Therefore, farms 
currently testing under the Pennsylvania and Maryland plans will also 
have to change their testing protocol. Because these farms are already 
paying for egg testing, however, not all costs of the new testing plan 
will be new costs. The tests under the Pennsylvania plan cost about 71 
percent as much as the test required under the FDA plan.
    These numbers suggest that the current net level of compliance with 
the provision is 2.8 percent (8.2 percent under state quality control 
plans x 48 percent as many eggs tested as required by this rule x 71 
percent the cost of FDA test) for farms with more than 3,000 layers.
    iii. Egg testing costs. The cost of follow-up egg testing is 
composed of the following: (1) The labor cost of collecting the eggs, 
(2) the value of the eggs being tested, (3) the cost of shipping the 
eggs to a qualified laboratory, and (4) the lab costs of testing the 
eggs. The cost of collecting the eggs is the hourly cost of labor times 
the number of hours spent collecting the eggs. We estimate that it will 
take the typical farmhand approximately one-half minute per egg to 
select eggs for testing, so the labor cost of egg testing is $119.50 
per 1,000 eggs tested (50 samples x 20 eggs per sample x 0.0083 hours 
per egg x $14.34 dollars per hour) (Ref. 89).
    The lost value of the eggs used for testing is the number of eggs 
tested

[[Page 33070]]

times the producer price of an egg.\54\ To avoid double counting of the 
cost of diversion (for those eggs being tested), we modify this value 
to account for the fact that as many as 26 percent of eggs being tested 
may be required to be diverted at the time of testing. The price that 
the typical producer receives for table eggs is about $0.43 per dozen, 
while the price a producer receives for diverted eggs is about $0.26 
per dozen eggs (see table 21 of this document). The expected value of a 
tested egg is the weighted average of the value of a table egg and a 
diverted egg, or about $0.03 per egg.\55\ The value of the eggs tested 
is the value per egg times the number of eggs tested. The value of 
every 1,000 eggs tested is $32.15.
---------------------------------------------------------------------------

    \54\ Using the producer price of the egg may slightly 
underestimate the value of the lost egg. Although much of the price 
increase between producer and consumer includes transfers, there is 
real value added during some processing.
    \55\ The following calculation is used to reach this figure. 
[(74 percent of eggs not diverted x $0.43 per dozen table eggs) + 
(26 percent of eggs diverted x $0.26 per dozen diverted eggs)] / 12 
eggs in a dozen = $0.03215 per egg.
---------------------------------------------------------------------------

    Eggs that are collected will have to be shipped to a laboratory for 
analysis. The cost of shipping these eggs depends on the weight of the 
eggs being shipped. We estimate that 1,000 large eggs weigh 
approximately 111 pounds. The cost of shipping these eggs in two 60-
pound packages (including packing) to the laboratory is approximately 
$260.\56\
---------------------------------------------------------------------------

    \56\ The cost of shipping a 60-pound package overnight is 
between $67.35 and $191.70, including pickup charges (Ref. 98). We 
multiply the average cost of shipping ($129.52) by 2 to obtain the 
total cost of $259.05.
---------------------------------------------------------------------------

    The largest cost of egg testing is the laboratory; we estimate the 
average lab cost for 1 batch of 20 eggs to be $35.16.\57\ Hence, for 50 
tests the laboratory cost of eggs testing is $1,758 per 1,000 eggs 
tested (50 batches x $35.16 per test).
---------------------------------------------------------------------------

    \57\ For the testing method FDA prescribes, the lab cost per 20 
egg pool is $35 initially and an additional $30 for confirmation if 
the pool tests positive (Ref. 100). Upon an environmental positive, 
eggs will test positive at a rate of 2.75 per 10,000 (Ref. 92). 
Therefore the probability of a pool of 20 eggs testing negative is 
99.45 percent ((1 - (2.75/10,000))-20). Conversely the probability 
of a pool testing positive is 0.55 percent. So the expected cost of 
a test is $35.16 (($35 x 0.9945) + ($65 x 0.0055)).
---------------------------------------------------------------------------

    The total cost of egg testing is the sum of each of the previously 
stated costs. Therefore, the cost of egg testing is $2,169 per 1,000 
eggs tested ($119.50 collection costs + $32.37 lost income from egg 
sales + $259.05 shipping costs + $1,758 lab costs).
    g. Diversion.--i. Diversion provisions. Under this provision, farms 
that test positive for SE in their eggs would be required to divert 
their eggs for treatment until they are able to determine via testing 
that SE is not present in the eggs produced in the infected house. Both 
the expected level of diversion and the expected cost of diversion will 
vary by each operation's location and size.
    ii. Regional differences in the cost of diversion. Regional 
differences in the cost of production have led to the centralization of 
the breaker industry in the North Atlantic and North Central regions of 
the United States. As table 20 of this document shows, these regions 
are responsible for only 52 percent of overall egg production, but over 
86 percent of breaker eggs.\58\ The centralization of the breaker 
industry is even more clearly illustrated in the fourth column of table 
20. While 36 to 44 percent of eggs make it to breaker plants in the 
northern regions, the corresponding figures for the West and South are 
only 10 percent and 6 to 7 percent. The primary purpose of breaker 
plants outside of the North appears to be as an outlet for eggs not 
suitable for retail sale as table eggs.
---------------------------------------------------------------------------

    \58\ In table 20 of this document, the number of eggs produced 
includes hatching eggs as well as table eggs. Because most hatching 
eggs are produced in the South and hatching eggs do not go to 
breaker plants, the percentages of eggs going to breaker plants are 
biased downward for the southern regions.

                                    Table 20--Production and Breaking of Eggs
----------------------------------------------------------------------------------------------------------------
                                           Eggs produced                    Eggs broken             Percent of
                                 ----------------------------------------------------------------  eggs produced
             Region                 Millions of                    Thousands of                      that are
                                      eggs\1\         Percent       dozens \2\        Percent         broken
----------------------------------------------------------------------------------------------------------------
North Atlantic..................          10,106            12.3         300,406            17.1            35.7
North Central...................          32,869            40.0       1,212,758            69.1            44.3
South Atlantic..................          13,979            17.0          69,774             4.0             6.0
South Central...................          14,512            17.7          84,071             4.8             7.0
West............................          10,636            13.0          87,662             5.0             9.9
                                 -------------------------------------------------------------------------------
    Total.......................          82,102           100.0       1,754,671           100.0            25.7
----------------------------------------------------------------------------------------------------------------
\1\ National Agricultural Statistical Services (NASS) (Ref. 75).
\2\ NASS (Ref. 101).

    To predict how the industry will respond to a provision mandating 
diversion, it is important to consider the following information: (1) 
Why the breaker egg industry is regionally concentrated while the shell 
egg industry is distributed more evenly throughout the United States 
and (2) Why the concentration has occurred in the northern regions of 
the United States.
    There are several reasons why the breaker industry is centralized 
and the shell egg industry is not. First, it is much more expensive to 
transport shell eggs than it is to transport egg products. Shell eggs 
are relatively bulky and are susceptible to breakage in transit. 
Second, shell eggs are ultimately delivered directly to consumers in 
their natural state, while egg products are often used as ingredients 
in large-scale food manufacturing operations. Because processed foods 
are less costly to transport than are their ingredients, it makes sense 
to locate processed food facilities in areas where ingredients are 
locally available. To the extent that these ingredients are available 
in the northern regions, processed food plants will locate there. 
Consequently, it makes sense to locate breaker plants in this region as 
well.
    If centralization of breaker plants is going to occur, it will 
likely occur in the northern regions, for several reasons. The cost of 
egg production is lowest in the north, partly because feed grains (such 
as corn and wheat) are locally available at low prices in this 
region.\59\ Also, farms in the north are more likely to be 
characterized by large in-line houses (up to 250,000 layers). These 
houses take advantage of economies of scale to produce more eggs more

[[Page 33071]]

cheaply. Furthermore, because the demand for egg products is higher in 
the northern regions, breaker plants can avoid the high transportation 
costs of shipping to food processors by locating closer to their 
customers.
---------------------------------------------------------------------------

    \59\ Shipping grains from the Midwest to the West Coast by rail 
car cost over $1 per bushel (Ref. 102).
---------------------------------------------------------------------------

    The implication of the industry structure is that there are likely 
to be regional disparities in the cost of diversion. Egg products and, 
hence, breaker egg prices are not expected to vary regionally by as 
much as shell egg prices. Where the cost of egg production and freight 
for diverted eggs is relatively high (such as in California), the cost 
of diversion is likely to be high. Similarly, where the price of egg 
production and freight is low (such as in Ohio and Pennsylvania), the 
cost of diversion is likely to be low. Furthermore, there are some 
remote areas, such as Hawaii, where the absence of breaker plants makes 
local diversion impossible. Because it is not economical to ship these 
eggs to breaker plants in the continental United States, the cost of 
diversion is simply the lost value of a clean table egg.
    FDA met with industry representatives in each of the previously 
mentioned regions and was given estimates of diversion costs that are 
consistent with the above reasoning. The diversion cost per dozen eggs 
in Pennsylvania was estimated to be insignificant while the diversion 
cost in California was estimated to be $0.21 to $0.42 per dozen.
    iii. Effect of operation size on diversion costs. Operation size 
can have a significant effect on average diversion costs for a given 
producer. A large producer is less likely to be affected by an 
individual house that tests positive, because the cost is generally 
spread across many houses and farm sites. Furthermore, in areas where 
it is economically feasible to produce eggs that are dedicated to 
breaker plants, large operations are less likely to have contract 
problems \60\ because they can substitute SE-positive eggs for the eggs 
that originally were contracted to go to the breaker plant. By 
contrast, the economic losses from a positive house may cause a small 
farm with one house to incur significant losses for that farm.
---------------------------------------------------------------------------

    \60\ Filling orders for table eggs when eggs from one house must 
be diverted.
---------------------------------------------------------------------------

    iv. Effect of SE-positive status on diversion costs. It has been 
suggested that eggs from an SE-positive flock will command a lower 
price at the breaker than will other eggs. The pasteurization process 
for breaker eggs is designed to achieve at least a 5-log reduction in 
any SE that may be in eggs. Further, the actual cost of marking the 
shipments and stamping documents accompanying diverted eggs as ``these 
eggs must be treated to achieve at least a 5-log destruction of 
Salmonella Enteritidis or processed as egg products in accordance with 
the Egg Products Inspection Act'' will be insubstantial.\61\ However, 
because these eggs are limited in how they may be used, SE-positive 
eggs are intrinsically less valuable than SE-negative eggs.
---------------------------------------------------------------------------

    \61\ Eggs are typically shipped on palates holding 900 dozen 
eggs. The palates are shrink-wrapped. Diverted eggs will need to be 
marked somewhere on the shrink wrapping. Based on FDA's estimate of 
474 million eggs diverted annually (discussed in detail in section 
F.1.h of this document), between 45,000 and 60,000 labels would have 
to be affixed to palates each year. This estimate accounts for the 
fact that some shipments may use partially full palates. The labels 
themselves will cost about $0.025 each and require less than 30 
seconds to apply. Thus, a conservative estimate puts the cost at 
less than $8,000 annually across the entire industry, or less than 
two one-thousandths of a cent additional cost per egg. Each farm 
will need to buy a label gun for a one time cost of approximately 
$100. Amortized over 10 years, this cost is less than $15 per year, 
per farm. The cost of stamping the accompanying documents is 
discussed in the recordkeeping section F.2.a of this document.
---------------------------------------------------------------------------

    v. Cost of a diverted egg. Given all of the factors stated in the 
previous paragraphs, we estimate that, on average, breaker eggs from an 
SE-positive flock will command a price below that received for shell 
eggs. Table 21 of this document illustrates the prices that producers 
receive for shell and breaker eggs by region. As expected, the north-
central region, with its proximity to inexpensive feed and a large food 
processing industry, has the highest level of production, the lowest 
prices for eggs, and the lowest cost for diversion. The West, with its 
higher feed costs and smaller layer houses, has the highest prices for 
eggs and the highest cost of diversion. We find the weighted average 
cost of diversion to be between $0.13 and $0.23 per dozen eggs. If 
there is an additional discount for those eggs with SE, the total cost 
could rise as high as $0.33 per dozen eggs.

                                     Table 21--Total Cost of Diverting Eggs
----------------------------------------------------------------------------------------------------------------
                                                                                                     Cost of
                 Region                   Regional weight    Shell egg price    Breaking eggs   diversion  (nest
                                               (in %)        to producer \1\   (nest run) \2\         run)
----------------------------------------------------------------------------------------------------------------
North-Atlantic.........................               12.3             $0.42             $0.31             $0.11
North-Central..........................               40                0.39              0.30              0.09
South-Atlantic.........................               17                0.43              0.31              0.12
South-Central..........................               17.7              0.47              0.30              0.17
West...................................               13                0.53              0.31              0.22
----------------------------------------------------------------------------------------------------------------
Average Cost of Diverting Eggs \3\............................................................         0.13-0.23
Additional Discount for SE+ Eggs \4\..........................................................         0.00-0.10
Total Cost of Diverting Eggs..................................................................         0.13-0.33
----------------------------------------------------------------------------------------------------------------
\1\ The shell egg price paid to producers for the north-central region was estimated as equivalent to the prices
  AMS reported as paid in Iowa, Minnesota, and Wisconsin. For regions other than the north-central region, the
  shell egg price to the producer was calculated by discounting the price to retailer by a percentage equal to
  the percent difference between the price to the producer and the price to retailer in the north-central
  region. All figures were taken from AMS data accessed through The Institute of Food and Agricultural Services
  at the University of Florida (Ref. 103).
\2\ All figures are from AMS data accessed through the North Carolina Department of Agriculture (Ref. 104).
\3\ The lower bound of this range is the average cost of diverting eggs calculated as described above, and is
  weighted by regional production (Ref. 75). The upper bound of this range is calculated using data from
  comments to the analysis of the proposed rule, suggesting that the difference between the value of shell eggs
  and breakers has been greater recently. Because prices tend to fluctuate, and therefore differences in the
  price between shell eggs and breaker eggs fluctuate, the full range of estimated price differences is used in
  the calculation of the total cost of diverting eggs.
\4\ Ref. 91 and comment to analysis of the proposed rule.


[[Page 33072]]

    vi. Expected cost of diversion. The expected cost of diversion is 
determined by the cost of diverting an egg, the number of eggs in 
commerce affected by the provision, and the probability that a given 
egg will be diverted.
    h. A model of testing and diversion costs.--i. The model. We use a 
dynamic model for estimating testing and diversion costs. We model 
these costs as depending on the probability of SE detection, farm size, 
molting practices, and the farmer's choice between conducting follow-up 
egg tests and diverting until depopulation of the contaminated house.
    In the first stage of the model, we estimate the probabilities 
associated with environmental and egg tests. For environmental tests, 
we estimate that 9.7 percent of all flocks currently test positive. We 
then adjust this estimate downwards to 8.4 percent initially and 7.0 
percent eventually to account for the expected reduction of SE on the 
farm due to the adoption of other provisions of the rulemaking to 
reduce SE. In the experience of Pennsylvania, a flock with at least one 
environmental positive is likely to have at least one egg test positive 
26 percent of the time (Ref. 105). We do not know if the experience of 
Pennsylvania is representative of the nation as a whole. In the absence 
of better information, we use the Pennsylvania figure.
    In the next stage of the dynamic model, the expected cost of 
testing and diversion is calculated for farms in each of the five size 
categories used throughout this analysis. There are two reasons why 
this is a necessary step. First, the estimation of cost for different 
size categories allows for the explicit representation of the fact that 
both the number of tests required and the cost of diversion are 
directly related to the number of layers on the farm. Second, using 
different size categories facilitates an algebraic model design that 
uses logical operators to allow farmers (in the model) to make the low 
cost choice between egg testing and diversion.
    Molting practices are accounted for in the next stage. The 
different testing protocols for molted and non-molted layers make it 
necessary to look at the cost of testing and diversion separately for 
each of these types of flocks. At this stage of the model, we set out 
the possible scenarios for testing and diversion, derive the expected 
cost of each scenario, and calculate the statistical probability that 
each scenario will occur.\62\
---------------------------------------------------------------------------

    \62\ For a detailed look at the mathematical model for this 
stage, see Ref. 106.
---------------------------------------------------------------------------

    In the final stage of the testing cost model, we insert logical 
operators into the model in such a way that farmers are given the 
choice of diverting rather than testing eggs when it is cost-efficient 
to do so. Failure of the model to give the farmer this choice may lead 
to estimated costs that are up to double the actual expected costs.\63\
---------------------------------------------------------------------------

    \63\ A further refinement of the model would be to include the 
option of depopulating the flock and starting over with a new flock. 
There is a large degree of uncertainty over whether this is feasible 
given that the growing cycle of chicks and pullets must be 
coordinated with the laying cycle of flocks. Therefore, we did not 
include this option in our analysis. We invited comment on the 
feasibility of this option in the analysis of the proposed rule but 
did not receive any responses.
---------------------------------------------------------------------------

    ii. The costs of testing and diversion. The model described in the 
previous paragraph produces estimates of the annual expected cost of 
testing and diversion for layer houses. Estimates are obtained for each 
of the size categories by molting practice.
    As tables 22 and 23 of this document illustrate, the expected costs 
of testing and diversion for a poultry house range from $160 to over 
$5,500, depending on house size, environmental testing protocol, and 
molting practices.\64\ The low figures in the environmental testing and 
total cost columns represent costs given the row-based sampling scheme, 
while the high estimates represent the random swab sampling method. The 
costs for molted houses are annualized for the purpose of comparison.
---------------------------------------------------------------------------

    \64\ Tables 22 and 23 of this document present the cost 
estimates for houses based on the current estimated prevalence of 
SE. In the total cost tables (24 and 25 of this document), we also 
present an estimate that reflects the expected prevalence following 
the full implementation of this rule.

                                                                Table 22--Cost per House
                                                                   [Non-molted flocks]
--------------------------------------------------------------------------------------------------------------------------------------------------------
   Farm size  (number of layers)       Environmental testing       Egg testing      Diversion         Dynamic total cost           Static total cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fewer than 3,000..................  $150 to $1,340.............              $0              $6  $156 to $1,346.............  $1,313 to $2,503.
3,000 to 19,999...................  $530 to $1,340.............             843             311  $1,684 to $2,494...........  $1,885 to $2,695.
20,000 to 49,999..................  $530 to $1,340.............             843             722  $2,095 to $2,905...........  $2,140 to $2,950.
50,000 to 99,999..................  $530 to $1,340.............           1,124             556  $2,210 to $3,020...........  $2,352 to $3,162.
Over 100,000......................  $530 to $1,340.............           1,124           1,288  $2,942 to $3,752...........  $3,223 to $4,033
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                Table 23--Cost per House
                                                                     [Molted flocks]
--------------------------------------------------------------------------------------------------------------------------------------------------------
   Farm size  (number of layers)       Environmental testing       Egg testing      Diversion         Dynamic total cost           Static total cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
3,000 to 19,999...................  $530 to $1,340.............          $1,378            $537  $2,454 to $3,314...........  $2,522 to $3,332.
20,000 to 49,999..................  $530 to $1,340.............           1,597             766  $2,893 to $3,703...........  $2,955 to $3,765.
50,000 to 99,999..................  $530 to $1,340.............           1,597           1,129  $3,256 to $4,066...........  $3,315 to $4,125.
Over 100,000......................  $530 to $1,340.............           1,597           2,618  $4,745 to $5,555...........  $4,793 to $5,603
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The inclusion of a choice to opt out of egg testing also results in 
egg testing costs that increase with farm size. The choice to opt out 
of egg testing significantly increases diversion costs for smaller 
farms while having a limited effect on larger farms.\65\ This 
difference is apparent in the comparison between dynamic total costs 
and static total costs. If the option to switch from egg testing into 
diversion were removed, the costs incurred would be the static total

[[Page 33073]]

costs. Nonetheless, diversion costs also generally rise with farm size.
---------------------------------------------------------------------------

    \65\ It is never in the interest of the smallest farms to test 
eggs because the expected cost of testing exceeds the revenue loss 
from simply diverting all eggs for the life of the flock.
---------------------------------------------------------------------------

    Whether or not a farmer chooses to molt the flock also has an 
effect on cost. The annual cost of testing and diversion for a molted 
flock is greater than that for a non-molted flock, largely because a 
molted flock forced to divert for the life of the flock is expected to 
experience diversion for a longer time. In the dynamic model, where the 
farmer can opt out of testing, molting has a secondary effect of 
increasing egg-testing costs due to the high expected cost of opting 
out.
    For comparison with dynamic costs, the static cost of testing and 
diversion is included in the final column of tables 22 and 23 of this 
document. As expected, when the producer is given the choice of opting 
out of egg testing the total cost of testing and diversion falls. The 
savings to the farmer are greatest on the smallest farms, where 
expected costs may fall by over 60 percent.\66\ On the largest farms, 
it is less economical to divert, and thus the cost savings can be 
insignificant.
---------------------------------------------------------------------------

    \66\ This conclusion assumes that the farmer will be paying all 
of the costs of testing and diversion.
---------------------------------------------------------------------------

    To obtain the total cost of testing and diversion for all houses on 
all farms we multiply the cost per house in each category by the number 
of houses in each category and the percentage of houses that would be 
affected by the provision. These costs are summarized in tables 24 and 
25 of this document.

                                            Table 24--Total Cost of Testing and Diversion: Row-Based Sampling
                                                                 [Thousands of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Number of                     Environmental
              Farm size (number of layers)                    houses      Percent molted      testing       Egg testing      Diversion      Total cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fewer than 3,000........................................          45,700               0          $6,798              $0            $271          $7,069
3,000 to 19,999.........................................           2,445              28             617           2,357             839           3,813
20,000 to 49,999........................................           1,295              65             327           1,675             892           2,894
50,000 to 99,999........................................             595              86             150             886             574           1,610
Over 100,000............................................           3,024              84             763           4,476           6,687          11,926
--------------------------------------------------------------------------------------------------------------------------------------------------------
Farms with >= 3,000 layers, Initially...................................................           1,857           9,393           8,992          20,242
Farms with >= 3,000 layers, Eventually..................................................           1,857           6,812           6,512          15,181
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                           Table 25--Total Cost of Testing and Diversion: Random Swab Sampling
                                                                 [Thousands of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Number of                     Environmental
              Farm size (number of layers)                    houses      Percent molted      testing       Egg testing      Diversion      Total cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fewer than 3,000........................................          45,700               0         $61,425              $0            $271         $61,696
3,000 to 19,999.........................................           2,445              28           2,432           2,357             839           5,627
20,000 to 49,999........................................           1,295              65           1,288           1,675             892           3,855
50,000 to 99,999........................................             595              86             592             886             574           2,051
Over 100,000............................................           3,024              84           3,008           4,476           6,687          14,171
--------------------------------------------------------------------------------------------------------------------------------------------------------
Farms with >= 3,000 layers, Initially...................................................           7,319           9,393           8,992          25,704
Farms with >= 3,000 layers, Eventually..................................................           7,319           7,319           7,319          21,958
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As shown in table 24 of this document, the estimated eventual total 
cost of testing and diversion is approximately $15.2 million when row-
based sampling is used. When we assume that a random swab method of 
environmental sampling is used, as in table 25 of this document, the 
eventual estimated costs increase to $22.0 million.
    iii. Benefits of testing and diversion. While the primary purpose 
of testing is to obtain an indication of the effectiveness of the 
farm's SE prevention measures, the testing and diversion program would 
also directly reduce SE infection by preventing SE-positive eggs from 
reaching consumers. To the extent that SE-positive eggs are diverted 
for treatment, the number of these eggs that reach the consumer in an 
untreated form will decline. We estimate the benefits from diversion 
using the experience of the states.
    The first key measure to be determined is the probability that the 
environment of a flock will test positive. We used two sources to 
estimate the current prevalence of SE-positive houses. Our first source 
is the Layers study (Ref. 29), which recruited 200 farm sites to be 
tested across the United States. We also use estimates based on the 
experience of testing under quality assurance plans.
    The Layers study estimates that 7.1 percent of all houses are 
positive for SE. Regionally, SE prevalence ranges from a low of 0 
percent in the Southeast to a high of 17.2 percent in the Great Lakes 
region. Nonetheless, because only 200 of an original sample of 526 farm 
sites chose to participate in this phase of the study, we are hesitant 
to rely solely on this figure for SE prevalence (for example, those 
that chose to participate may be a biased sample who are more likely to 
have cleaner houses).
    Regional quality assurance programs have also collected data on SE 
prevalence on farms. As an upper bound, Pennsylvania experienced a 
prevalence of 40 percent in the early 1990's (Ref. 107). As a lower 
bound, we use 1 to 3 percent, which is the current prevalence of houses 
with SE-positive environments in Maine (Ref. 108). We believe that 
Pennsylvania's current prevalence of 7 to 9 percent (Ref. 105) is a 
mode for the nation as a whole.\67\ When we put this data into a Beta-
Pert probability distribution using a uniform distribution over 1 to 3 
percent as the lower bound, 40 percent as the upper bound, and a 
uniform distribution over 7 to 9 percent as the mode, or most

[[Page 33074]]

likely value, we estimate a national prevalence rate of 12.3 percent.
---------------------------------------------------------------------------

    \67\ This assumption is based on the fact that the number of 
outbreaks in the Northeast (where Pennsylvania is located) has 
fallen to a level equivalent with the rest of the nation (Ref. 11).
---------------------------------------------------------------------------

    We consider that the Layers study and quality assurance program 
estimates are equally likely to be valid. Therefore, we put these 
values in a uniform distribution (7 to 12.3 percent) to estimate that 
an expected 9.7 percent of farms would currently test SE-positive. 
Based on the experience of Pennsylvania, we estimate that 26 percent of 
houses that are environmentally positive also will have eggs that test 
positive (Ref. 105).
    These figures imply that 469 million eggs from affected farms,\68\ 
or 0.5 percent of all shell eggs,\69\ would be diverted initially 
following the initial effective date of the provision. Of these eggs, 
we expect eggs to be positive at a rate of 2.75 per 10,000 (Ref. 92). 
Consequently, we estimate that an average of 129,000 SE-positive eggs 
would be diverted annually. Given a total estimated number of positive 
eggs of 1.5 million, we estimate that diversion would initially 
decrease the number of SE-related illnesses by 10.8 percent. This 
translates to potentially 15,300 illnesses (valued at $274.1 million) 
prevented each year. Standing alone, the testing and diversion 
provisions would cost about $1,300 per illness avoided and provide 
about $261.6 million in net benefits.
---------------------------------------------------------------------------

    \68\ The total cost of diversion is divided by the cost of 
diversion per egg to obtain the number of eggs diverted.
    \69\ The percent of shell eggs that are diverted is determined 
by dividing the number of eggs diverted by the total number of shell 
eggs produced (90,772 million) as published in the USDA's Chicken 
and Eggs report (Ref. 75).
---------------------------------------------------------------------------

    If we account for estimated reductions in SE prevalence due to the 
provisions pertaining to chicks and pullets, rodent and pest control, 
biosecurity, and cleaning and disinfecting, (a 28 percent reduction in 
prevalence when all provisions are in place and fully effective), all 
occurring earlier in the production cycle, the refrigeration provisions 
would provide a nearly 8 percent decline in SE illness, preventing 
about 11,000 illnesses annually ((1-0.28) x 15,300 illnesses). Because 
the baseline SE prevalence will be reduced by other provisions, FDA 
expects that over 40 million less eggs will be diverted once the rule 
is fully effective. Furthermore, less egg tests will be necessary. 
Therefore we expect annual costs to decrease by $3.5 million once all 
provisions are fully effective. In place with the other provisions of 
the final rule, the cost of testing and diversion is about $1,900 per 
SE case prevented. The eventual net benefits of testing and diversion 
are about $189.6 million per year.
    i. SE-Monitored chicks and pullets.--i. Chick and pullet 
provisions. Under the final rule, farms must procure pullets that are 
SE monitored or raise pullets under SE monitored conditions. Pullets to 
be used as layer hens must be raised under SE control conditions that 
prevent SE, including (1) procurement of chicks from SE-monitored 
breeder flocks,\70\ (2) cleaning and disinfection, and (3) 
environmental testing at 14 to 16 weeks of age. If the environmental 
test is negative, the farm will not need to perform any additional 
testing of those birds or their environment until the environmental 
test at 40 to 45 weeks of age. If the 14 to 16 week environmental test 
is positive, farms must begin egg testing within 2 weeks of the start 
of egg laying. A positive egg test triggers diversion.
---------------------------------------------------------------------------

    \70\ NPIP certified or the equivalent.
---------------------------------------------------------------------------

    ii. SE-Monitored chicks. Farms must procure pullets that have been 
raised from chicks from SE-monitored breeder flocks that meet the 
NPIP's standards for ``U.S. S. Enteritidis Clean'' status (9 CFR 
145.23(d)) or equivalent standard.
    iii. Current industry practices--SE-monitored chicks. According to 
the Layers study (Refs. 27 and 28), 94.6 percent of farm sites 
representing 94.5 percent of layers received their chicks from flocks 
that were bred under the NPIP program. Furthermore, NPIP has 
successfully integrated all of these layers into the NPIP U.S. 
Salmonella Enteritidis monitored program (Ref. 109).
    NASS estimates that a total of 138,292,380 chicks were sold in 1997 
(Ref. 26). If 94.5 percent of these birds were purchased from breeder 
facilities that are NPIP SE monitored, then 5.5 percent (7,606,080) of 
chicks are not currently monitored for SE.
    iv. Costs of SE-monitored chicks. We do not have data for the cost 
of monitoring chicks for SE. However, Morales and McDowell (Ref. 91) 
estimated that pullets monitored for SE cost approximately $0.003 to 
$0.02 more per pullet. If we assume the cost difference is the same for 
chicks, the total increased annual cost of requiring SE-monitored 
chicks is estimated to be about $87,000.\71\ This cost would be borne 
by pullet growers but could be passed on to egg farms depending on 
market conditions.
---------------------------------------------------------------------------

    \71\ If monitoring costs $0.003 per layer, the total cost is 
7,606,080 layers x $0.003 = $22,820. If monitoring costs $0.02 per 
layer, the total cost is 7,606,080 layers x $0.02 = $152,120. The 
average of these two figures is $87,470.
---------------------------------------------------------------------------

    v. Benefits of SE-monitored chicks. The prevalence of SE in breeder 
flocks is relatively low.\72\ Between 1994 and 1996 only 2 out of 847 
breeder flocks (0.2 percent) had layers that tested positive for SE. 
For our estimate of benefits, we used this figure because breeders 
under the NPIP program must destroy their flocks when layers test 
positive.\73\
---------------------------------------------------------------------------

    \72\ The data for this paragraph is drawn from Rhorer (Ref. 
110).
    \73\ Under the NPIP program a flock only loses its certification 
as a NPIP SE-monitored flock if birds test positive.
---------------------------------------------------------------------------

    The 0.2 percent estimate understates the probability that a farm 
not currently using NPIP SE-monitored layers will test positive. To the 
extent that farmers obtain their chicks from multiple sources,\74\ we 
would expect the probability that a farm obtains SE-positive chicks to 
be greater than the underlying prevalence of SE in hatchery flocks.\75\
---------------------------------------------------------------------------

    \74\ The Layers study estimates that 38.2 percent of farms 
obtain pullets from multiple sites (Refs. 27 and 28).
    \75\ The following example illustrates this point. If a farmer 
obtains pullets from two different flocks, each of which has a 0.2 
percent chance of having SE-positive birds, the probability that the 
farm will obtain SE-positive birds is 0.2 percent + 0.2 percent -
0.04 percent = 0.36 percent.
---------------------------------------------------------------------------

    We calculated the expected benefit of this provision using the 
percentage of farms affected by the provision multiplied by the 
probability of a positive test. Because only 5.5 percent of farms 
receive birds from breeder flocks that are not SE monitored, the 
expected effect of this provision on SE contamination on the farm and, 
hence, human illness, is projected to be slightly greater than 0.01 
percent (5.5 percent x 0.2 percent). This percent translates into an 
expected benefit of 14 illnesses averted on affected farms (valued at 
about $0.3 million). This provision attempts to bar the introduction of 
SE onto the farm. SE can be difficult to control once it has been 
introduced onto a farm, but if SE is never introduced, it is impossible 
for it to spread. For this reason, effective SE control in chick 
populations has been cited as critical.
    vi. Cleaning and disinfecting, and environmental testing in pullet 
houses. To ensure that pullets about to begin the laying cycle are SE 
free, egg producers must only use pullets whose environments were 
tested for SE when the pullets were 14 to 16 weeks old. There are two 
consequences to a positive environmental test. First, an egg producer 
who uses those pullets must begin egg testing on the positive flock 
within 2 weeks of the start of egg laying. Second, the pullet house 
must have all manure removed, and be cleaned and disinfected before a 
new flock is added.

[[Page 33075]]

    vii. Current industry practices--Cleaning and disinfecting, and 
environmental testing in pullet houses. FDA does not have detailed 
information on SE monitoring practices in pullet houses. However, 
comments from state run programs and industry stated that pullet houses 
are typically subject to the same provisions as layer houses under 
state Egg Quality Assurance Programs (EQAPs) and other programs for egg 
farmers. Therefore, FDA estimates that pullet houses will be in 
compliance with these provisions at the same rate as estimated for 
layer houses in previous sections of this analysis.
    FDA does not have specific data on the number of pullets and pullet 
houses there are in the United States. However, multiple comments 
stated that there are roughly one-third as many pullets as there are 
layers at any given time. Further, there are roughly one-third as many 
pullet houses as there are layer houses. FDA therefore estimates that 
2,453 pullet houses (7,359 layer houses covered/3) will be covered 
under this provision. Some of the pullet houses are located onsite at 
layer farms and others are located on pullet growing facilities.
    viii. Costs of environmental testing in pullet houses. Because the 
requirements for tests will be the same for both pullet and layer 
houses, per house costs are calculated the same way. As in layer 
houses, the cost of routine environmental testing in pullet houses 
depends on how many samples are tested, the labor cost of collecting 
the samples, the cost of shipping the samples to a laboratory, and the 
laboratory cost per sample tested.\76\ The total annual cost of 
environmental testing in pullet houses is estimated to be $1.3 million.
---------------------------------------------------------------------------

    \76\ For a detailed breakdown of per house environmental testing 
costs, see section V.F.1.e of this document.
---------------------------------------------------------------------------

    ix. Costs of cleaning and disinfecting in pullet houses. The rule 
requires a similar cleaning and disinfecting routine for both pullet 
houses and layer houses. Therefore, the per house costs and the number 
of houses affected are calculated similarly to the costs for cleaning 
and disinfecting a layer house. We calculate the number of houses 
affected as the product of the percent of houses not using a practice 
(100 minus the percent using the practice in Table 14 of this 
document), the probability of a positive flock, and the number of 
pullet houses.\77\ The total annual cost of cleaning and disinfecting 
pullet houses that test environmentally positive is $226,000.
---------------------------------------------------------------------------

    \77\ For a detailed discussion of cleaning and disinfecting 
costs, see previous section on cleaning and disinfecting costs for 
layer houses.
---------------------------------------------------------------------------

    x. Follow-up egg testing and diversion. Upon an environmental 
positive, farms must begin egg testing on the positive flock within 2 
weeks of the start of egg laying. Farms that test positive for SE in 
their eggs would be required to divert their eggs for treatment until 
they are able to show via testing that SE is not present in the eggs 
produced in the infected house.
    xi. Current Industry Practices--Follow-up egg testing and 
diversion. Comments to the proposed rule suggest that farms do not 
typically test eggs when a pullet house tests positive for SE. FDA 
therefore estimates that all pullet flocks in houses that test 
environmentally positive will be affected by this provision.
    xii. Cost of egg testing and diversion. Total costs are estimated 
once again using the testing and diversion model described in section 
V.F.1.l of this document. The model takes into account prevalence of SE 
in the environment and the farmer's decision between egg testing and 
immediate diversion to minimize costs.\78\ The prevalence of SE in 
pullet flocks is relatively low compared to layer flocks. Data gathered 
from comments, citing PEQAP and CEQAP databases, show that the 
environmental prevalence of SE in pullet houses ranges from 0 to 1.5 
percent. We use a uniform distribution bound between 0 and 1.5 percent 
to estimate that 0.75 percent of pullet houses would currently test 
environmentally positive.
---------------------------------------------------------------------------

    \78\ The choice on whether to destroy the flock or move it to 
the layer house is also included in the pullet section of the 
testing and diversion model. However, except for very small flocks 
not covered by this rule, the cost of flock destruction, including 
the cost of disposal, bird replacement costs, and lost production, 
is much greater than the costs of egg testing and diversion. 
Therefore, FDA believes nearly all farms covered by this rule will 
choose to test eggs rather than destroying the flock upon and 
environmental positive in the layer flock.
---------------------------------------------------------------------------

    The per test cost of egg testing is discussed in detail in section 
V.F.1.f of this document. The cost of diverted eggs is discussed in 
detail in section V.F.1.g of this document. To summarize, we find the 
weighted average cost of diversion to be between $0.13 and $0.23 per 
dozen eggs. If there is an additional discount for those eggs with SE, 
the total cost could rise as high as $0.33 per dozen eggs.
    To obtain the total cost of testing and diversion for all houses on 
all farms, we multiplied the cost per house in each category by the 
number of houses in each category and the percentage of houses that 
would be affected by the provision. These costs are summarized in 
tables 26 and 27 of this document.

   Table 26--Total Cost of Testing in Pullet Houses, Follow-Up Egg Testing, and Diversion: Row-Based Sampling
                                             [Thousands of dollars]
----------------------------------------------------------------------------------------------------------------
                                     Number of     Environmental
  Farm size (number of layers)        houses          testing       Egg testing      Diversion      Total cost
----------------------------------------------------------------------------------------------------------------
3,000 to 19,999.................             815             $58             $53             $50            $161
20,000 to 49,999................             432              31              47              18              96
50,000 to 99,999................             198              14              22              12              48
Over 100,000....................           1,008              72             111             144             326
----------------------------------------------------------------------------------------------------------------
Farms with >= 3,000 layers......................             174             233             225             632
----------------------------------------------------------------------------------------------------------------


[[Page 33076]]


  Table 27--Total Cost of Testing in Pullet Houses, Follow-Up Egg Testing, and Diversion: Random Swab Sampling
                                             [Thousands of dollars]
----------------------------------------------------------------------------------------------------------------
                                     Number of     Environmental
  Farm size (number of layers)        houses          testing       Egg testing      Diversion      Total cost
----------------------------------------------------------------------------------------------------------------
3,000 to 19,999.................             815            $811             $53             $50            $914
20,000 to 49,999................             432             429              47              18             495
50,000 to 99,999................             198             197              22              12             231
Over 100,000....................           1,008           1,003             111             144           1,258
----------------------------------------------------------------------------------------------------------------
Farms with >= 3,000 layers......................           2,440             233             225           2,897
----------------------------------------------------------------------------------------------------------------

    Table 26 of this document shows that the estimated eventual total 
cost of testing in the pullet house and diversion is approximately $0.6 
million when row-based sampling is used. If a random swab method of 
environmental sampling is used, as in table 27 of this document, the 
estimated costs increase to $2.9 million.
    xiii. Benefits of SE-monitored chicks and pullets. While the 
primary purpose of an SE monitoring program is to ensure that pullets 
entering layer houses producing table eggs are SE free, testing and 
diversion will also directly reduce SE infection by preventing SE-
positive eggs from reaching consumers. Furthermore, cleaning and 
disinfecting a house after an environmental positive will help ensure 
SE does not spread and infect current and future flocks on the same 
farm.
    As stated in the previous section, FDA estimates that the national 
prevalence of SE in pullet houses varies uniformly from 0 to 1.5 
percent, for an average of 0.75 percent. As with layer houses, we 
estimate that 26 percent of houses that are environmentally positive 
also will have eggs that test positive (Ref. 105).
    These figures imply that 12 million eggs from affected farms would 
be diverted due to environmental testing in the pullet house and 
follow-up eggs testing and diversion. We expect eggs to be positive at 
a rate of 2.75 per 10,000 in an SE-positive house (Ref. 92). Therefore, 
we estimate that an average of 3,200 SE-positive eggs would be diverted 
annually. Given a total estimated number of positive eggs of 1.5 
million, we estimate that diversion would decrease the number of SE-
related illnesses by 0.2 percent. This translates to potentially 306 
illnesses (valued at about $5.5 million) prevented annually.
    The chick and pullet program will potentially prevent 320 illnesses 
per year, for a total benefit of about $5.7 million. The total annual 
cost per illness of the program is $6,500. The annual net benefits for 
the chick and pullet provisions are $3.6 million.\79\
---------------------------------------------------------------------------

    \79\ These figures are correct if the chick procurement 
provisions and the pullet provisions are put in place 
simultaneously, so the costs and benefits of the pullet provisions 
are net the effect of the change in SE prevalence due to the chick 
procurement provision. Because the chick procurement provisions 
alone only reduce prevalence by about 0.01 percent, the difference, 
if calculated separately, is less than 1 illness per year.
---------------------------------------------------------------------------

    j. Summary of costs and benefits of on-farm SE prevention measures. 
Table 28 of this document summarizes the costs and benefits of the on-
farm SE prevention measures. In this paragraph we emphasize some of the 
key features of these summary estimates. First, because the 
effectiveness of rodent and other pest control is strongly linked to 
biosecurity and cleaning and disinfecting practices, we estimated the 
benefits of these provisions jointly. Second, we derive benefits 
without taking into account the interdependence of all provisions. 
Therefore, table 28 reflects the incremental effects of each provision 
starting from a baseline of no new regulation. The benefits reported 
for the provisions in table 28 can be added together, mixed and 
matched, to achieve a rough upper bound estimate of the effectiveness 
of different combinations of provisions. Because some of the provisions 
are substitutes in benefits, particularly diversion and rodent and 
other pest control, the actual benefits of combinations of provisions, 
as well as the final rule, will be somewhat smaller than what is 
reflected in table 28. A rough lower bound estimate of the incremental 
effect of each provision when combined with another is shown in table 
33 of this document.

                       Table 28--Summary of Annual Costs and Benefits of On-Farm Measures
----------------------------------------------------------------------------------------------------------------
                                                    Cases of SE                   Total benefits   Net benefits
                                 Costs (millions      averted      Cost per case   (millions of    (millions of
                                   of dollars)      (eventual)     of SE averted     dollars)        dollars)
----------------------------------------------------------------------------------------------------------------
Rodent and Pest Control \4\....            $21.4          38,954            $529          $697.3          $675.9
Biosecurity....................  ...............            _ _1            _ _1            _ _1            _ _1
Cleaning and Disinfecting......              0.3            _ _1            _ _1            _ _1            _ _1
Refrigeration..................             20.2          44,727             451           800.6           780.4
Environmental Tests (average)..              4.6         _ _2, 3         _ _2, 3         _ _2, 3         _ _2, 3
Egg Tests......................              9.7            _ _2            _ _2            _ _2            _ _2
Diversion......................             12.5          15,312           1,343           274.1           261.6
SE Monitored Chicks and Pullets              2.1             320           6,494             5.7             3.6
----------------------------------------------------------------------------------------------------------------
\1\ Estimated rodent control benefits also include benefits from biosecurity and cleaning and disinfecting.
\2\ The benefits from all elements of the testing and diversion program are reported jointly under diversion.
\3\ The environmental testing cost number reported is the average of the costs of the random swab and row based
  sampling methods.
\4\ This calculation nets out feed savings.


[[Page 33077]]

    k. Other on-farm prevention measures considered. This section 
analyzes the costs and benefits of two prevention measures, SE-
monitored feed, and flock vaccination, considered by the FDA, but not 
required by the final rule.
    i. SE-negative feed provisions. We considered requiring the use of 
feed that meets the standards for SE-negative feed, as defined by FDA's 
Center for Veterinary Medicine (CVM). CVM defines SE-negative as 10 
subsamples that are negative for SE (measured using the BAM method) 
collected for a lot of feed (60 FR 50098, September 28, 1995). 
Composite samples may be used to reduce testing costs. We received 
comments that SE-negative feed is not currently available commercially.
    ii. Current industry practices--SE monitoring of feed. The layer 
industry obtains feed from both independent feed mills and from egg 
farmers that produce feed in their own mills. The Economic Research 
Service report on the feed manufacturing industry estimates that egg 
producers operated a total of 144 feed mills in 1984 (Ref. 111). In the 
absence of more recent data, we assume that they operated the same 
number in 2006. To isolate the number of independent feed mills 
operating in the United States, we used the July 2000 version of Dun's 
Market Identifiers (Ref. 112). Using this database, we were able to 
isolate 210 mills that primarily produce poultry and chicken feeds. 
This figure is our low estimate of the number of independent feed mills 
producing layer feed. For a high estimate, we assume that all 2,459 
establishments that Dun's Market Identifiers reports as producers of 
animal feed produce layer feed.\80\ This estimate is similar to the 
1984 Economic Research Service estimate of 2,432 primary feed 
manufacturers. Assuming that the true number of feed mills producing 
layer feed is uniformly distributed between the low and high estimates, 
we estimate that approximately 1,300 feed mills produce layer feed.
---------------------------------------------------------------------------

    \80\ The low estimate is likely to underreport the number of 
mills producing layer feed because most firms did not report to 
Dun's Market Identifiers what kinds of feeds they produced.
---------------------------------------------------------------------------

    iii. Costs of monitoring feed for SE. The cost of this provision to 
a feed mill would be the sum of the labor, laboratory, and shipping 
costs for testing, multiplied by the number of lots tested. In 
addition, SE-positive feed would have to be treated or destroyed.
    The laboratory cost per test has been estimated to be approximately 
$61.00 per sample.\81\ In addition, we estimate that the collection and 
preparation of each subsample will take approximately 10 minutes. Given 
an hourly wage of $15.51 for production inspectors at grain and feed 
mills (Ref. 113), plus 50 percent to include overhead costs, we 
estimate the cost of labor to be $38.78 ($23.27 x 1.667 hours) for each 
full sample. The cost of shipping each sample to a lab is estimated to 
be $30.20.\82\ The total cost per composite sample is about $130 
($61.00 + $38.78 + $30.20).
---------------------------------------------------------------------------

    \81\ This is the cost of an Association of Official Analytical 
Chemists test for Salmonella genus and a serotype test at Silliker 
Laboratories (Ref. 99). One option that mills have is to initially 
test for the genus of Salmonella ($28.00) and then, if the test is 
positive, follow through with a test for the serotype enteritidis 
($33.00). We assume that mills will not choose this option because 
Salmonella positive feed is considered adulterated and firms will 
not want to test to see if their feed is adulterated unless mandated 
to do so by FDA.
    \82\ The cost of shipping a 2-pound package overnight in the 
United States ranges from $21.15 to $39.25. These figures include a 
$6 pickup charge. The average charge is estimated to be $30.20 (Ref. 
98).
---------------------------------------------------------------------------

    Samples must be taken for each lot of feed. We expect that, because 
of limited storage space for finished feed, a lot of feed will not 
exceed 3 days worth of production for most large mills. For some small 
mills, however, a lot may be a week's worth of production; for some 
large mills a lot may be a day's worth of production. Given these 
parameters, we assume that the frequency of feed testing will be 
distributed uniformly between once a week and five times a week with a 
mean frequency of three times a week. Consequently, the expected annual 
cost of testing for a typical feed mill is calculated to be 
approximately $20,300 ($130 per sample x 52 weeks x 3 times a week). 
The cost of testing all of the approximately 1,450 entities that 
produce feed is estimated to be $29.4 million. If these costs are 
passed on to farmers at a rate proportional to the number of layers on 
the farm, the total cost to affected farms would be $29.2 million.
    In the event of a positive feed test, feed mills would have to 
treat or destroy the suspect feed. It is also likely that the mill 
would take action to address the problem at its source. Furthermore, we 
assume that the mill would recall this feed and treat or dispose of it, 
which could be very costly.
    iv. Benefits of monitoring feed for SE. Feed contaminated with SE 
is theoretically also a vehicle for the introduction of SE on the farm. 
Testing for SE in finished layer feed at mills has almost never yielded 
positive results. However, SE has been isolated in ingredients at feed 
mills so SE contamination of feed is a potential problem (Ref. 114).
    If finished feed is contaminated with SE, the consequences for 
human health are potentially large. A feed mill that does not test feed 
for SE and becomes contaminated with SE could deliver a large number of 
shipments of contaminated feed before the problem is uncovered. The 
potential financial consequences to the farms using the feed include 
costs due to increased cleaning and disinfecting, egg testing, and 
diversion of eggs. Also, there likely would be adverse health effects 
from the consumption of SE-positive eggs.
    v. Vaccination provision. Inoculating layers with vaccines is 
another potential way of preventing the growth of SE in layers. FDA 
could mandate that all layers be inoculated against SE.
    vi. Current industry practices; vaccination of flocks. The Layers 
study (Refs. 27 and 28) estimates that at least 14.6 percent of all 
layers on farms with 3,000 or more layers are vaccinated against SE.
    vii. Cost of vaccinating flocks. Estimation of vaccination costs 
range from approximately $0.13 per layer (Ref. 115) to $0.15 per layer 
\83\ for an inoculation. The average of these estimates is an expected 
vaccination cost of $0.14 per layer for an inoculation.\84\ Given 272.1 
million layers on larger farms and 1.4 million layers on smaller farms, 
we expect that this provision would result in 232.2 million new 
vaccinations on larger farms and 1.4 million new vaccinations on 
smaller farms. Consequently, the cost of vaccination on farms with at 
least 3,000 layers would be $31.2 million.
---------------------------------------------------------------------------

    \83\ This is based on a per layer cost of $0.035 for vaccine 
plus $0.10 for labor (Ref. 115), adjusted for inflation.
    \84\ These costs are recalculated in terms of year 2005 constant 
dollars using the GDP deflator.
---------------------------------------------------------------------------

    viii. Benefits of vaccinating flocks. While vaccines have shown 
some promise in the lab, there is insufficient evidence from field 
trials about their efficacy to estimate any benefit from their use.
    In a controlled environment vaccines were found to reduce incidence 
of intestinal colonization and mean number of SE shed in the feces. 
Further, in a controlled setting, the same vaccines have been shown to 
reduce the number of SE-positive eggs laid when compared to non-
vaccinated controls (Ref. 116). Hens were vaccinated at 38 weeks of age 
followed by a booster 4 weeks later and subsequently challenged 
intravaginally 2 weeks later. Despite the high level of SE recovery 
from cloacal and vaginal swabs of vaccinated and unvaccinated hens, 
vaccination resulted in a significant

[[Page 33078]]

decrease in the number of SE-positive eggs when compared to non-
vaccinated controls (19 percent versus 37 percent, respectively). The 
degree of protection was only partial though, because more than half 
the population was still shedding SE at a high rate (Ref. 116).
    However, the primary test for efficacy of a vaccine is a field 
trial, and it is common for vaccines to be effective in the laboratory 
but fail to perform up to expectations under field conditions. In a 
series of Pennsylvania field studies, despite the use of SE vaccine, 
63.6 percent of the houses had SE-positive environmental cultures and 
100 percent of the flocks had SE organ positive birds. With regard to 
all parameters tested, there were no statistical differences between 
vaccinated or unvaccinated controls--indicating the ineffectiveness of 
either commercially available bacterins or autogenously manufactured SE 
vaccines (Ref. 117). Lab results show promise for vaccines to become a 
useful tool in fighting SE transmission to eggs in the future. However, 
currently, there is no vaccine that has been shown to be efficacious in 
the field. Therefore, FDA is not requiring vaccination in this final 
rule.
2. Administrative Measures
    a. Plan design and recordkeeping.--i. Plan design and recordkeeping 
provisions. Each farm site with 3,000 or more layers that sells raw 
eggs to the table egg market, other than directly to the consumer, and 
does not have the eggs treated, must design and monitor an SE 
prevention plan. This prevention plan includes all measures the farm is 
taking to prevent SE in its flock. The following information includes 
potential components of the plan: (1) Chicks and pullets, (2) 
biosecurity, (3) rodent and other pest control, (4) cleaning and 
disinfecting, (5) refrigeration, and (6) testing and diversion. Records 
are also required for review and of modifications of the SE prevention 
plan and corrective actions taken. Farms are required to have a trained 
or experienced supervisor that would be responsible for overseeing the 
plan.
    ii. Current industry practices; plan design and recordkeeping. We 
assume that those farms that are currently operating according to 
recognized industry or State quality assurance plans are already 
largely in compliance with the plan design and recordkeeping provisions 
discussed in this section, and therefore would not experience 
additional costs to comply with record keeping provisions. Using data 
from the Layers study (Refs. 27 and 28), we find that 59 percent of 
farms with more than 50,000 layers are currently members of State or 
industry quality assurance plans. Fewer than 8 percent of farms with 
fewer than 50,000 layers are currently members of quality assurance 
plans.\85\ The estimated number of farms and houses affected by plan 
design and recordkeeping provisions is shown in table 29 of this 
document.
---------------------------------------------------------------------------

    \85\ We do not have data on participation by farms with fewer 
than 3,000 layers. We assume that none of these farms are currently 
members of recognized quality assurance programs.

                      Table 29--Farms Affected by Plan Design and Recordkeeping Provisions
----------------------------------------------------------------------------------------------------------------
                                                                    Percent of
                                                                    farms on a                        Houses
  Farm size (number of layers)       Number of      Houses per        quality     Farms affected    affected by
                                       farms           farm          assurance      by the rule      the rule
                                                                      program
----------------------------------------------------------------------------------------------------------------
3,000 to 19,999.................           1,746             1.4             4.9           1,661           2,325
20,000 to 49,999................             925             1.4            27.7             669             936
50,000 to 99,999................             248             2.4              58             104             250
100,000 or more.................             409             7.4            59.7             165           1,219
All farms.......................           3,328             1.4            21.9           2,599           4,730
----------------------------------------------------------------------------------------------------------------

    As table 29 of this document shows, we expect that a total of 2,598 
farm sites with 4,730 poultry houses would be affected by plan design 
and recordkeeping provisions.
    iii. Plan design costs. The per provision plan design cost is 
calculated in table 30 of this document. Because information on the 
costs of designing the SE prevention plan for eggs is not available, we 
base these costs on assumptions used to analyze the design of HACCP 
programs (63 FR 24253 at 24275 to 24285, May 1, 1998). In particular, 
we assume that each plan component will take approximately 20 labor 
hours to design. We add 50 percent to the cost of labor for designing 
the plan to account for overhead. The cost of designing a plan with one 
component is expected to be $560 ($27.98 x 20) (Ref. 89). Amortized 
over 10 years at 7 percent, the total cost of plan design will be about 
$207,000 ($80 per farm) per provision. Amortized over 10 years at 3 
percent, the total cost of plan design for all farms will be about 
$171,000 ($66 per farm) per provision. For six provisions (rodent and 
other pest control, biosecurity, cleaning and disinfecting, chick and 
pullet procurement, refrigeration, and testing and diversion), the 
total cost of the plan design would be $1.2 million when amortized over 
10 years at 7 percent ($1.0 million when amortized over 10 years at 3 
percent).

                                   Table 30--Cost of Plan Design per Provision
----------------------------------------------------------------------------------------------------------------
                                                                  Farms affected                    Total costs
                  Farm size (number of layers)                        by the       Cost per farm   (in thousands
                                                                     proposal                       of dollars)
----------------------------------------------------------------------------------------------------------------
3,000 to 19,999.................................................           1,661            $560            $930
20,000 to 49,999................................................             669             560             375
50,000 to 99,999................................................             104             560              58
100,000 or more.................................................             165             560              92
All farms.......................................................           2,599             560           1,455
Amortized over 10 years at 7%...................................  ..............  ..............             207
----------------------------------------------------------------------------------------------------------------


[[Page 33079]]

    iv. Recordkeeping costs. We assume that the time required for 
recordkeeping is roughly equivalent to the time necessary to monitor 
and document the food safety provisions of a HACCP plan (63 FR 24253 at 
24275 to 24286). Because the HACCP time estimate upon which we are 
basing our estimate involves multiple control points and monitoring, 
this assumption tends to overstate the cost of recordkeeping for a 
provision of this final rule. In particular, we expect that, for each 
house affected, recordkeeping will take one half hour per week per 
required provision for provisions that would require weekly or daily 
monitoring. Records kept for biosecurity measures, rodent and other 
pest control and refrigeration are assumed to be recorded on a weekly 
basis.
    The cost of weekly recordkeeping for biosecurity and rodent and 
other pest control, assuming $18.65 an hour for labor, plus 50 percent 
to reflect overhead costs, would be $727 ($27.98 x 0.5 hours x 52 
weeks) per record, per house. The total annual cost for all houses for 
these two records is $3.4 million ($27.98 x 0.5 hours x 52 weeks x 
4,730 houses). Refrigeration records, collected weekly on a farm-by-
farm basis, rather than by-house, will cost $1.9 million annually 
($27.98 x 0.5 hours x 52 weeks x 2,598 farms).
    Environmental and egg sampling and testing, diversion and treatment 
records \86\ together have daily, weekly, and monthly aspects, in the 
event of an environmental positive. In the case of an environmental 
positive, the records' annual cost is assumed to be similar to the cost 
estimated for the weekly records discussed previously, $727 per record, 
per house. However, as discussed previously in this document FDA 
estimated that 9.7 percent of houses will test environmentally positive 
initially and 7.0 percent will test positive after the provisions of 
this rule have taken effect. Additionally, farms would have to keep 
records of egg testing, diversion, and treatment if they receive 
pullets from a house that has tested environmentally positive; FDA 
estimated that pullet houses will test positive 0.75 percent of the 
time. The cost for houses that test negative would be similar to 
keeping an annual record \87\; at a half hour per record the annual 
cost would be $14 per record, per house. The initial total annual cost 
of the environmental and egg testing, diversion, and treatment records 
is $0.4 million (((0.097 x $727) + (0.903 x $14) + (0.0075 x $727)) x 
4,730 houses). The eventual total expected cost of the environmental 
and egg testing, diversion, and treatment records is about $0.3 million 
(((0.070 x $727) + (0.930 x $14) + (0.0075 x $727)) x 4,730 houses).
---------------------------------------------------------------------------

    \86\ Including stamping documents accompanying diverted egg 
shipments. The cost of the actual rubber stamp is assumed to be 
negligible.
    \87\ The cost of environmental tests to pullet houses is 
discussed in a separate paragraph.
---------------------------------------------------------------------------

    Records of chick and pullet procurement and records of cleaning and 
disinfection will take one half hour each, per year, per house. At a 
half hour per record, the annual cost will be $14 per record, per 
house. These two records will cost farms $0.1 million (2 records x $14 
x 4,730 houses).
    In the event of an environmental positive, the farm must review and 
modify as necessary its plan design. FDA estimates this will take 
roughly half the time (10 hours per provision) than it took to 
originally draft the plan. To calculate how many farms will need to 
review their plans, the estimation of 9.7 percent of houses testing 
positive initially and 7.0 percent of houses testing positive 
eventually is applied.\88\ The initial total expected cost of the plan 
design review and modification records is $0.8 million (0.097 x ($280 x 
6 provisions) x 4,730 houses). The eventual total expected cost of the 
plan design review and modification records is $0.6 million (0.070 x 
($280 x 6 provisions) x 4,730 houses).
---------------------------------------------------------------------------

    \88\ This may tend to overstate costs because farms with 3,000 
layers or more have on average more than one house per farm. Some of 
the 459 (0.097 x 4,730 houses) houses expected to test positive 
initially could be located on the same farm and test positive at 
roughly the same time as one or more other SE-positive houses. This 
would require only one review and modification of the entire plan.
---------------------------------------------------------------------------

    We assume that pullet growers will keep a record of each 
environmental test performed on a per house, per flock basis. Each 
house can hold approximately 3 flocks per year and, as comments to 
proposed rule state, there are roughly one third as many pullet houses 
as there are layer houses. At a half hour per record, the annual cost 
would be $42 per pullet house ($14 x 3 records annually). The total 
annual expected cost of environmental testing records for pullet houses 
is $66,200 ($42 x 1,577 houses).
    The calculation of the initial and eventual costs of $10.2 million 
and $9.8 million, respectively, for all records for affected farms is 
shown in table 31 of this document.

              Table 31--Total Cost of On-Farm Recordkeeping
------------------------------------------------------------------------
                                          Total cost (in thousands of
                                                   dollars)
             Record kept             -----------------------------------
                                           Initial          Eventual
------------------------------------------------------------------------
Chick and pullet procurement........               $66               $66
Rodent and pest control.............             3,440             3,440
Biosecurity.........................             3,440             3,440
Cleaning and disinfection...........                66                66
Refrigeration.......................             1,890             1,890
Testing, diversion, and treatment...               419               328
Design plan review and modification.               770               556
Environmental testing for pullet                    66                22
 houses.............................
                                     -----------------------------------
    Total...........................            10,158             9,809
------------------------------------------------------------------------

    b. Training. The person responsible for overseeing the SE 
prevention measures will have to be trained or have equivalent job 
experience. Under the final rule, one person may oversee the SE 
prevention measures on more than one farm. Alternatively, more than one 
person may be trained to oversee a single farm. The latter is likely on 
some of the larger operations. FDA assumes that, on average, one person 
will need to be trained to oversee preventions measures on each farm 
covered by the rule. A training course would last 2 to 3 days. The cost 
of taking a course

[[Page 33080]]

consists of tuition, the cost of the supervisor's labor while in class 
(opportunity cost), and any travel related expenditures that may be 
incurred.
    The cost of a recent 3-day HACCP training course was advertised to 
be $600 to $650 (Ref. 118).\89\ The cost of the supervisor's labor is 
estimated to be $895 (32 hours \90\ x $27.98 an hour).
---------------------------------------------------------------------------

    \89\ The cost of a similar 3-day HACCP training course for egg 
processors was advertised to be $450 to $550 in 2000 (Ref. 119) and 
was offered through the U.S. Poultry and Egg Association. It is no 
longer offered. The course sited above is a course geared towards 
meat processors. In a conversation with the International HACCP 
Alliance, FDA confirmed that a similar course geared towards egg 
farmers, if offered today, would cost roughly the same amount ($600 
to $650).
    \90\ The number of hours is estimated as 24 hours of class time 
plus 8 hours of travel time.
---------------------------------------------------------------------------

    Travel expenditures consist of transportation, hotel, and 
miscellaneous expenses. These costs range from insignificant 
(reimbursement for minimal mileage) to $1,000 ($400 airfare + $400 
hotel expenses + $200 expenses). We believe that most training will be 
relatively close to where producers are located. In addition, training 
is likely to take place in rural areas where lodging is relatively 
inexpensive. Therefore, we estimate that the most likely travel expense 
will be roughly $200 to $300. We use a Beta-Pert distribution to 
estimate that the expected cost of travel is $330.
    The average cost of attending a training class is estimated to be 
$1,850 ($625 tuition + $895 labor + $330). Not all producers will have 
to send a supervisor to a class. The 12 percent of large farms with 
established quality assurance programs will have a trained supervisor 
already running the program. Of the remaining farms, some have 
experienced personnel who do not need formal training. Without better 
information, we assume that the true number of establishments that will 
need to formally train a supervisor will be uniformly distributed 
between 0 and 100 percent for all sizes of farms. Therefore, we expect 
1,299 farms with 3,000 or more layers to incur training expenses. This 
cost will have to be incurred only at the outset of the program, and 
then again when a farm loses a trained supervisor. The total cost for 
all farms training a supervisor every 10 years, whether amortized at 7 
percent or 3 percent, is estimated to be $0.3 million.
    c. Registration.--i. Registration provision. Under this provision, 
all farms covered by any part of the rule are required to register with 
FDA. Registration of all producers covered by any of the SE prevention 
measures will enable more efficient inspection, as well as better 
management and oversight of a shell egg recall.
    ii. Current industry practices--registration. FDA assumes that no 
farms are currently registered with the FDA.\91\ Therefore, this 
provision will affect all farms with 3,000 or more layers.
---------------------------------------------------------------------------

    \91\ Farms are not required to register under FDA's Registration 
of Food Facilities regulation (68 FR 5378 at 5392 to 5403). If a 
farm also has a packing or processing facility, then only the 
packing or processing facility is required to register under the 
registration rule (68 FR 5378 at 5392 to 5403). If the information 
that would be provided by an egg producer during registration has 
already been provided under the registration regulation, the 
producer may submit its registration number rather than registering 
again.
---------------------------------------------------------------------------

    iii. Registration costs. We assume that the time required for 
registration under this rule is roughly equivalent to the time 
necessary to register a domestic facility under the Registration of 
Food Facilities under the Public Health Security and Bioterrorism 
Preparedness and Response Act of 2002 rule (68 FR 5378 at 5392 to 5403, 
February 3, 2003) (BT registration rule). In particular, FDA expects 
that it will take farms with access to the Internet, either through 
their own computer, or through a friend, public library, or internet 
caf[eacute], 2 hours to research the requirements, fill out the form 
and send it in. We expect that for farms without easy access to the 
Internet, due to increased time for research and to send the documents, 
the process will take 3 hours.
    FDA assumes the number of farms with easy access to the Internet is 
similar to the number used in the BT Registration Rule (68 FR 5378 at 
5392 to 5403), that is, 71 percent of farms. This number has two 
potential biases. The first is that the 71 percent of farms used in the 
BT Registration Rule is related to small businesses in general, not 
specifically to farms. Because farms are typically rural, whereas small 
business in general may be rural or urban, the estimate for all small 
businesses may overstate the Internet access for farmers. That being 
said, FDA believes that the small business estimate is a good proxy for 
farms, and it is the most detailed data available. The second bias 
comes from the fact that the survey data used in the BT regulations is 
relevant to the year 2002. Internet access has certainly increased 
since that particular data was published.
    We estimate that approximately 3,328 farms with 3,000 or more 
layers are covered by a registration provision. We assume the value of 
labor is $18.65 per hour, plus 50 percent for overhead costs, for a 
total cost of $55.95 per producer with Internet access and $83.93 for 
producers with no Internet access. The total one-time cost to the 
industry is $0.2 million (($27.98 x 3,328 farms) x ((0.71 x 2) + (0.29 
x 3))). Amortized at 7 percent, the annual cost of one-time 
registration is $30,400. Amortized at 3 percent, the annual cost of 
registration is expected to be $25,000.
    d. Summary of costs and benefits of administrative provisions. The 
costs of administrative provisions are summarized in table 32 of this 
document. These provisions do not have independently quantifiable 
benefits. The provisions would be likely to generate benefits because 
administrative provisions are essential for farmers to effectively 
implement SE prevention measures. Further, the administrative measures 
are critical for FDA to be able to ensure compliance, and thus for the 
benefits of the SE prevention measures to be realized.

           Table 32--Annual Cost of Administrative Provisions
                         [Thousands of dollars]
------------------------------------------------------------------------

------------------------------------------------------------------------
Plan design.............................................          $1,243
Recordkeeping...........................................           9,809
Training................................................             343
Registration............................................              30
                                                         ---------------
    Total...............................................          11,425
------------------------------------------------------------------------

G. Summary of Benefits and Costs of the Final Rule

    In the previous section of this document, we described and 
estimated the benefits and costs of all of the SE prevention measures 
we have considered. Here, we summarize and estimate the benefits and 
costs of the final rule.
1. Coverage
    All of the on-farm SE prevention measures in the final rule apply 
to farms with at least 3,000 layers that do not have all of their eggs 
treated, do not sell all of their eggs directly to consumers, and 
produce shell eggs for the table market. Only the refrigeration and 
registration requirements apply to farms whose eggs all receive a 
treatment to destroy SE. Only the refrigeration requirement applies to 
persons who transport and supply shell eggs for shell egg processing or 
egg products facilities.
2. Provisions of the Final Rule
    a. On-Farm preventive controls. Many of the on-farm preventive 
controls examined previously are included in this final rule. 
Provisions included in the final rule are rodent and other pest 
control, biosecurity, cleaning and disinfecting, and procurement of 
chicks and pullets from SE-monitored breeders.

[[Page 33081]]

    b. On-Farm SE prevention measures. The rule also contains most of 
the on-farm SE prevention measures described previously. In particular, 
the refrigeration, sampling, testing, and diversion provisions are 
included in the final rule.
    c. Administrative provisions. All of the administrative provisions 
discussed in this analysis are required by the final rule. In 
particular, the rule requires that producers maintain records for chick 
and pullet procurement, biosecurity, rodent and other pest control, 
cleaning and disinfecting, refrigeration, and testing and diversion.
    Farms are required to use SE prevention measures and are required 
to have a written SE prevention plan. Each farm is required to have a 
trained or otherwise qualified individual to administer the prevention 
measures required by the final rule.
    Furthermore, all farms covered by any part of the rule are required 
to register with FDA.
3. Summary of Costs and Benefits
    In table 33 of this document, we summarize the costs and illnesses 
averted of this final rule and its provisions. After the on-farm 
adjustment phase (up to 4 years), we expect costs to fall and illnesses 
averted to increase. Eventually, the final rule will prevent 
approximately 79,170 cases of SE per year at a cost of $1,000 per 
illness averted. This value is less than the lowest estimate of the 
expected value of an SE related illness, shown in table 5 of this 
document. Furthermore, table 34 shows the cost per estimated QALY 
saved. Assuming a 7-percent discount rate, we estimate the rule will 
save approximately 5,055 QALYs annually. Assuming a 3-percent discount 
rate, the estimated number of QALYs saved annually is 8,708. This 
translates to $16,100 per QALY saved using a 7-percent discount rate 
and $9,300 per QALY saved using a 3-percent discount rate.\92\ Either 
estimate falls well below our most conservative estimate of $100,000 
for the value of a quality adjusted statistical life year.
---------------------------------------------------------------------------

    \92\ QALDs were converted back to QALYs for each possible 
outcome by multiplying by 365. Annual QALYs lost for a case of 
chronic arthritis (0.14) and for death (1.0) were summed and 
subsequently discounted (at 3 percent and 7 percent) over 50 years.

---------------------------------------------------------------------------

[[Page 33082]]

[GRAPHIC] [TIFF OMITTED] TR09JY09.001

BILLING CODE 4164-01-C

                                         Table 34--Costs per QALY Saved
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
                                  Eventual costs
                                    (millions of
                                        dollars)            QALYs saved
                                        Cost per QALY saved
                                      (thousands of dollars)
----------------------------------------------------------------------------------------------------------------
Discount rate                     ..............              3%              7%              3%              7%
----------------------------------------------------------------------------------------------------------------
Provision
----------------------------------------------------------------------------------------------------------------
On-Farm Measures
----------------------------------------------------------------------------------------------------------------
Rodent and Pest Control \1\.....           $21.4           4,275           2,481            $6.3           $10.9
----------------------------------------------------------------------------------------------------------------
Biosecurity.....................             5.3               _ _1
                                               _ _1
----------------------------------------------------------------------------------------------------------------
Cleaning and Disinfecting.......             0.3               _ _1
                                               _ _1
----------------------------------------------------------------------------------------------------------------


[[Page 33083]]


                                    Table 34--Costs per QALY Saved--Continued
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
                                  Eventual costs
                                    (millions of
                                        dollars)            QALYs saved
                                        Cost per QALY saved
                                      (thousands of dollars)
----------------------------------------------------------------------------------------------------------------
Discount rate                     ..............              3%              7%              3%              7%
----------------------------------------------------------------------------------------------------------------
                                             0.0
----------------------------------------------------------------------------------------------------------------
Refrigeration...................            20.2           3,177           1,844             6.3            10.9
----------------------------------------------------------------------------------------------------------------
Environmental Testing (Average).             4.6              _ _2, 3
                                              _ _2, 3
----------------------------------------------------------------------------------------------------------------
Egg Testing.....................             7.0               _ _2
                                               _ _2
----------------------------------------------------------------------------------------------------------------
Diversion.......................             9.0           1,221             708            16.9            29.0
Procurement of SE-Monitored                  2.1              35              20            59.0           101.7
 Chicks and Pullets.............
----------------------------------------------------------------------------------------------------------------
On-Farm Administrative Measures
----------------------------------------------------------------------------------------------------------------
Plan Design.....................             1.2

----------------------------------------------------------------------------------------------------------------
Recordkeeping...................             9.8

----------------------------------------------------------------------------------------------------------------
Training........................             0.3

----------------------------------------------------------------------------------------------------------------
Registration....................             0.0

----------------------------------------------------------------------------------------------------------------
    Total.......................            81.2           8,708           5,055             9.3            16.1
----------------------------------------------------------------------------------------------------------------
\1\ Estimated rodent control benefits also include benefits from biosecurity and cleaning and disinfecting.
\2\ The benefits from all elements of the testing and diversion program are reported jointly under diversion.
\3\ The environmental testing cost number reported is the average of the costs of the random swab and row based
  sampling methods.

    The mean estimated dollar values of the benefits, the complete 
range and discussion of which is shown in table 37 of this document, 
range from $228 million to over $9.5 billion, depending on the 
uncertainty in the efficacy of the provisions and baseline number of 
illnesses, and the assumptions made about VSL, QALY, and the discount 
rate. The lowest estimate of annual benefits is well above the high 
estimate of $117 million estimated annual costs of the rule. Using the 
assumption set resulting in our central estimate (VSL of $5 million, a 
VSLY of $300,000, and a discount rate of 7 percent) gives us estimated 
benefits of $1.5 billion, or net benefits in excess of $1.4 billion. 
Considering the widest range of benefits and costs, net benefits of the 
final rule could be as low as $111 million annually and as high as $9.4 
billion annually.
    The benefits of some provisions in the final rule are slightly 
lower in table 33 of this document than are the benefits listed in the 
analysis of potential provisions. This difference arises from the fact 
that each provision in the rule reduces the base line number of 
illnesses that is used to estimate the benefits of the next provision 
in the list. In this way, table 33 can also be used to illustrate the 
costs and lower incremental benefits of individual provisions or 
combinations of provisions. Because table 33 shows the effects of each 
provision when all are enacted, and the interdependence of each is 
accounted for, these estimates can be added together, or mixed and 
matched, to achieve a rough estimate of the lower bound effects of 
different combinations of provisions. Between table 28 of this document 
and table 33, a bounded estimate of the incremental effect of each 
provision is achieved.
    Table 33 illustrates that we have not explicitly determined the 
benefits for the administrative provisions. The administrative 
provisions enhance the effectiveness of the SE prevention measures 
mandated by the rule, and the benefits are therefore embedded in the 
benefits estimates for each control measure.
4. Analysis of Uncertainty
    In table 33 of this document and elsewhere we present the expected 
effects of the final rule as point estimates. While this is a 
convenient way to summarize the effects of individual provisions and 
alternative regulatory options, the use of point estimates neglects the 
large degree of uncertainty intrinsic to the underlying analysis. In 
table 35 of this document, we present the results of a Monte Carlo 
simulation of uncertainty for the eventual annual costs of the rule. 
Results are reported for the 5th and 95th percentiles, as well as for 
the mean value. Because many uncertainties could not be measured, this 
table should not be seen as a complete characterization of the 
uncertainty underlying the analysis. Nonetheless, table 34 is a good 
illustration of the effect of the uncertainties we know to exist. Based 
on the data for which we have been able to characterize uncertainty, we 
believe that the eventual annual cost of the final rule will lie 
between $57.5 million and $116.5 million. A complete description of the 
distributions underlying the estimates of uncertainty can be found in 
Ref. 106. While some of the range is driven by uncertainty in unit 
costs of adopting the provisions, much of the range is a product of 
uncertainty in baseline practices. Indeed, the largest contributor to 
the range in total cost, the uncertainty in the cost of the rodent and 
pest control provisions, is due in large part to the uncertainty in the 
current baseline practices and extent of current rodent and pest 
problems.

[[Page 33084]]



                           Table 35--Costs of the Final Rule: Analysis of Uncertainty
                                            [Millions of dollars] \1\
----------------------------------------------------------------------------------------------------------------
                                                                                                       95th
                        On-farm measures                          5th Percentile       Mean         Percentile
----------------------------------------------------------------------------------------------------------------
Rodent and Pest Control.........................................           $12.0           $22.5           $36.1
Biosecurity.....................................................             4.9             5.3             5.7
Cleaning and Disinfecting.......................................             0.1             0.3             0.5
Refrigeration...................................................            15.6            20.2            24.7
Environmental Testing...........................................             3.4             4.6             5.7
Egg Testing.....................................................             4.6             7.0            12.1
Diversion.......................................................             4.9             9.0            16.1
SE Monitoring of Chicks and Pullets.............................             1.9             2.1             2.2
On-Farm Administrative Measures.................................            10.0            11.3            13.2
                                                                 -----------------------------------------------
    Total Costs of Final Rule...................................            57.5            82.2           116.5
----------------------------------------------------------------------------------------------------------------
\1\ See Ref. 106 for a description of the distributions underlying this table.

    In tables 36 and 37 of this document, we characterize the 
uncertainties associated with the benefits of the final rule. The 
expected annual benefits in terms of illness averted from the final 
rule range from nearly 30,000 SE illnesses averted to over 191,000 
cases of SE illnesses averted.

                    Table 36--Illnesses Averted by the Final Rule: Analysis of Uncertainty\1\
----------------------------------------------------------------------------------------------------------------
                                                                                                       95th
                   Provision on-farm measures                     5th Percentile       Mean         Percentile
----------------------------------------------------------------------------------------------------------------
Rodent and Pest Control.........................................           6,405          38,866         123,772
----------------------------------------------------------------------------------------------------------------
Biosecurity.....................................................        Included in Rodent and Pest Control
----------------------------------------------------------------------------------------------------------------
Cleaning and Disinfecting.......................................        Included in Rodent and Pest Control
----------------------------------------------------------------------------------------------------------------
Refrigeration...................................................           9,305          28,888          73,724
Testing and Diversion...........................................           3,382          11,096          46,634
SE Monitoring of Chicks and Pullets.............................              21             320           1,233
                                                                 -----------------------------------------------
    Total.......................................................          29,853          79,170         191,273
----------------------------------------------------------------------------------------------------------------
\1\ See Ref. 106 for a description of the distributions underlying this table.

    Table 37 of this document shows the estimated annual benefits in 
constant 2005 dollars range from $228 million to $9.5 billion. A 
complete description of the distributions underlying the estimates of 
uncertainty can be found in Ref. 106. The large range is due in great 
part to the uncertainties underlying the economic assumptions and 
number of baseline illnesses. The range is also affected by the 
uncertainty that expected target efficacies are met (e.g.: rodent and 
pest control, biosecurity, and cleaning and disinfecting, and 
refrigeration), the underlying prevalence of SE (e.g.: testing and 
diversion), and the uncertainty in baseline practices of all 
provisions. Under very reasonable economic assumptions, the expected 
benefits of the final rule exceed the expected costs, regardless of 
uncertainty in efficacy of the provisions, the underlying prevalence of 
SE on farms, baseline practices, or even the uncertainty inherent in 
the estimation of baseline number of illnesses.

                                Table 37--Estimated Value of All Illnesses Averted, Given Different Economic Assumptions
                                                            [Millions of dollars] 1, 2, 3, 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Discount rate = 3%
                                                         -----------------------------------------------------------------------------------------------
                                                                         VSL = $5 million                               VSL = $6.5 million
                                                         -----------------------------------------------------------------------------------------------
                                                                                               95th                                            95th
                                                          5th Percentile       Mean         Percentile    5th Percentile       Mean         Percentile
--------------------------------------------------------------------------------------------------------------------------------------------------------
VSLY = $100 thousand....................................          $355.9          $943.8        $2,280.2           -- --           -- --           -- --
VSLY = $300 thousand....................................           907.5         2,406.7         5,814.6           926.7         2,457.6         5,937.5
VSLY = $500 thousand....................................           -- --           -- --           -- --         1,478.3         3,920.5         9,471.9
--------------------------------------------------------------------------------------------------------------------------------------------------------



                                                                                                Discount rate = 7%
                                                         -----------------------------------------------------------------------------------------------
                                                                         VSL = $5 million                               VSL = $6.5 million
                                                         -----------------------------------------------------------------------------------------------
                                                                                               95th                                            95th
                                                          5th Percentile       Mean         Percentile    5th Percentile       Mean         Percentile
--------------------------------------------------------------------------------------------------------------------------------------------------------
VSLY = $100 thousand....................................          $227.6          $603.5        $1,458.1           -- --           -- --           -- --
VSLY = $300 thousand....................................           534.4         1,417.1         3,423.8           553.6         1,468.0         3,546.7

[[Page 33085]]


VSLY = $500 thousand....................................           -- --           -- --           -- --           860.4         2,281.7         5,512.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ See Ref. 106 for a description of the distributions underlying this table.
\2\ VSL means Value of a Statistical Life.
\3\ VSLY means Value of a Statistical Life Year.
\4\ VSL and effects of long term arthritis are annualized over 50 years.

    Tables 35 through 37 of this document show that the range of 
potential costs is much narrower than the range of potential benefits. 
The monetary estimates of benefits cover a broad range largely because 
of the different values placed on cases of chronic reactive arthritis 
that result from SE illness. The higher the VSLY used to value the 
health effects of chronic reactive arthritis, the higher the estimated 
monetary benefits of this final rule.
    Even the lowest 5th percentile of estimated benefits, under the 
most conservative reasonable assumptions, exceeds the 95th percentile 
of estimated costs.
5. Rule as Final Versus Rule as Proposed
    Table 38 of this document shows the estimated costs and benefits of 
the final rule versus the proposed rule. The proposed rule estimates 
have been updated to correct model errors, add new data, and express 
costs and benefits in terms of 2005 constant dollars.

                              Table 38--Summary of Annual Costs and Benefits as Estimated for the Final and Proposed Rules
                                                                  [Millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs           Illnesses averted      Total benefits         Net benefits
                            Provision                            ---------------------------------------------------------------------------------------
                                                                    Final     Proposed    Final     Proposed    Final     Proposed    Final     Proposed
--------------------------------------------------------------------------------------------------------------------------------------------------------
On-Farm Measures
--------------------------------------------------------------------------------------------------------------------------------------------------------
Rodent and Pest Control \1\.....................................      $21.4      $21.4     38,866     38,950     $695.7     $697.2     $668.7     $659.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Biosecurity.....................................................        5.3       13.7          _ _1
                                                                          _ _1
                                                                          _ _1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cleaning and Disinfecting.......................................        0.3        2.8          _ _1
                                                                          _ _1
                                                                          _ _1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Refrigeration...................................................       20.2       13.5     28,888     20,286      517.1      363.1      496.9      349.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Environmental Testing (Average).................................        4.6        4.6         _ _2, 3
                                                                         _ _2, 3
                                                                         _ _2, 3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Egg Testing.....................................................        7.0        6.9          _ _2
                                                                          _ _2
                                                                          _ _2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Diversion.......................................................        9.0        8.0     11,096      9,541      198.6      170.8      178.1      151.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Procurement of SE-Monitored Chicks and Pullets..................        2.1        0.1        320         14        5.7        0.3        3.6          0
--------------------------------------------------------------------------------------------------------------------------------------------------------
On-Farm Administrative Measures
--------------------------------------------------------------------------------------------------------------------------------------------------------
Plan Design.....................................................        1.2        1.2           _ _
                                                                           _ _
                                                                           _ _
--------------------------------------------------------------------------------------------------------------------------------------------------------
Recordkeeping...................................................        9.8        9.8           _ _
                                                                           _ _
                                                                           _ _
--------------------------------------------------------------------------------------------------------------------------------------------------------
Training........................................................        0.3        0.3           _ _
                                                                           _ _
                                                                           _ _
--------------------------------------------------------------------------------------------------------------------------------------------------------
Registration....................................................       0.03          0           _ _
                                                                           _ _
                                                                           _ _
                                                                 ---------------------------------------------------------------------------------------
    Total.......................................................       81.2       82.2     79,170     68,791    1,417.1    1,231.4    1,335.9   1,149.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Estimated rodent control benefits also include benefits from biosecurity and cleaning and disinfecting.
\2\ The benefits from all elements of the testing and diversion program are reported jointly under diversion.
\3\ The environmental testing cost number reported is the average of the costs of the random swab and row based sampling methods.

    The annual costs are about $1.0 million higher for the final rule, 
as provisions were added that were not included in the proposed rule; 
the most notable additions are the additional refrigeration provisions. 
However, some costs associated with the biosecurity and cleaning and 
disinfecting provisions decrease between the proposed and final rule. 
Cost decreased because, as suggested by comments to the proposed rule, 
some of the more prescriptive or less effective elements of the 
provisions were removed.
    Illnesses averted (and therefore total benefits) as well as net 
benefits are much higher in the final rule, due mainly to increased 
refrigeration provisions and the earlier required environmental test 
for flocks post-molt. We estimate that the final rule will avert about 
10,400 additional illnesses annually and provide for more than $185 
million in additional annual net benefits, when compared to the 
proposed rule.

[[Page 33086]]

    Table 38 of this document shows the benefits of the rules, with all 
provisions in place simultaneously. This is worth noting because it 
appears that the rodent and other pest control, biosecurity, and 
cleaning and disinfecting provisions are less effective in the final 
rule. However, this is simply because the chick and pullet provision is 
more effective in the final rule, so the baseline SE prevalence in 
flocks upon entry to the layer house is lower in the final rule than in 
the proposed rule. For the same reason, table 38 likely understates the 
effectiveness of the refrigeration, and testing and diversion, and 
other provisions if they were implemented on their own.

VI. Final Regulatory Flexibility Analysis

A. Introduction

    The Regulatory Flexibility Act requires agencies to analyze 
regulatory options that would minimize any significant impact of a rule 
on small entities. The agency believes that this final rule will have a 
significant economic impact on a substantial number of small entities. 
The comments received concerning the Initial Regulatory Flexibility 
Analysis (IRFA) and Proposed Regulatory Impact Analysis (PRIA) are 
contained in Section V.C.

B. Economic Effects on Small Entities

1. Regulated Entities
    a. Number of small entities affected.\93\ The Small Business 
Administration (SBA) defines chicken and egg producers to be small if 
their total revenues are less than $11.5 million (Ref. 120). A producer 
that receives $0.45 per dozen eggs and has layers that produce 265 eggs 
per year would have to have over 1,100,000 layers in production to earn 
revenues of over $11.5 million. Because only about 400 farms fall into 
the category of 100,000 or more layers, more than 99 percent of the 
farms with more than 3,000 layers are considered small by SBA 
standards, and account for roughly 60 percent of all production.\94\
---------------------------------------------------------------------------

    \93\ Please refer to Table 6 for a breakdown of the size of 
layer farms affected by the rule.
    \94\ FDA does not know the exact percentage of production that 
comes from farms with more than 1.1 million layers, since the NASS 
Census of Agriculture (Ref. 71) does not include detail on the 
industry above 100,000 layers. For the purpose of this calculation, 
we assume that half of the eggs produced on farms with more than 
100,000 layers are produced on farms that are small by SBA 
definition.
---------------------------------------------------------------------------

    b. Costs to small entities. The final rule will result in costs to 
small businesses. These costs are presented in Table 39 of this 
document. For the industry as a whole, the average annual cost of the 
final rule is estimated to be about $24,100 per farm site covered by 
the rule. This translates into an average cost of $0.30 per layer. 
Because almost all farms are defined by SBA to be small, these overall 
industry costs are representative of the average costs to small farms.

                   Table 39--Distribution of Cost by Farm Size, and as a Percentage of Revenue
----------------------------------------------------------------------------------------------------------------
                                                                    Annual per      Annual per       Cost as a
                  Farm size (number of layers)                     farm cost of    layer cost of   percentage of
                                                                     rule \1\          rule         revenue \2\
----------------------------------------------------------------------------------------------------------------
Less than 3,000.................................................              $0              $0              $0
3,000 to 19,999.................................................          12,295            1.01           7.95%
20,000 to 49,999................................................          13,899            0.49           3.86%
50,000 to 99,999................................................          25,794            0.36           2.83%
100,000 or more.................................................          96,847            0.19           1.50%
All farms.......................................................          24,130            0.30           2.36%
----------------------------------------------------------------------------------------------------------------
\1\ These figures are derived from calculations made in the Regulatory Impact Analysis (RIA).
\2\ The average revenue between 2001-2008 was $12.40 per hen. For the purposes of calculating cost as a
  percentage of revenue, before dividing categorical costs by average revenue, FDA adds the average per hen cost
  to the average per hen revenue. Thus, we implicitly assume that the costs of the rule will be passed on to the
  consumer. Although not quantified, it is possible that revenues actually increase after the publication of the
  rule, as consumers perceive eggs to be safer.

2. Other Affected Entities \95\
---------------------------------------------------------------------------

    \95\ The costs calculated for layer farms in Table 39 include 
the costs to chick and pullet farms, transport companies, and 
holding facilities. FDA believes that layer farms will absorb much 
of the costs associated provisions affecting these other entities.
---------------------------------------------------------------------------

    a. Number of small entities affected. i. Introduction. The final 
rule requires that layer farms use layers that were raised in SE-
monitored chick and pullet flocks and that they hold and ship shell 
eggs under proper refrigeration. In addition to affecting layer farms, 
the final rule will likely have an impact on some small chick and 
pullet farmers, trucking companies, and holding facilities.
    ii. Chick and pullet farms. As with layer farms, nearly 100 percent 
of all chick and pullet farms are considered small by SBA definition. 
We were unable to break out the number of chick and pullet farms by 
data from NAICS or NASS,\96\ but, based on comments received, we 
estimate that there are roughly one third as many pullet-raising farms 
and chick-raising farms as there are layer farms affected by the rule. 
Also from comments, we learned that pullet farms participate in state 
EQAPS at the same rate as layer farms. Accordingly, approximately 1,000 
pullet houses will be affected by the rule. Because nearly all chicks 
are currently raised as certified SE-monitored (95 percent), some 50 or 
fewer of these facilities will be affected.
---------------------------------------------------------------------------

    \96\ NASS does not break pullet farms down by size of operation. 
The 25,624 pullet farms listed in the 2002 NASS (Ref. 71) are 
roughly one fourth the total number of layer farms listed. For the 
purposes of this analysis, we used data received from public comment 
that indicated there are roughly one third as many pullet farms as 
there are farms affected by the rule.
---------------------------------------------------------------------------

    iii. Trucking companies and holding facilities. SBA defines 
trucking companies and holding facilities for farm products to be small 
if their total revenues are less than $23.5 million annually (Ref. 
120). By this definition, FDA estimates that over 80 percent of 
trucking companies and over 60 percent of holding facilities are small 
(Ref. 121). Thus, more than 300 holding facilities that are affected by 
the final rule are small by SBA definition.\97\
---------------------------------------------------------------------------

    \97\ FDA only estimated the number of new refrigerated shipments 
necessary due to the final rule. There are nearly 57,000 general 
freight trucking establishments (ref. 121). More than 47,000 of 
these are small by SBA definition. We do not have information on the 
number of trucking companies that specifically ship eggs from farms 
with 3,000 or more layers and will therefore be affected by the 
final rule.

---------------------------------------------------------------------------

[[Page 33087]]

    b. Costs to small entities. i. Chick and pullet farms. We do not 
have data for the cost of monitoring chicks for SE. However, Morales 
and McDowell (Ref. 91) estimated that pullets monitored for SE cost 
approximately $0.003 to $0.02 more per pullet. If we assume the cost 
difference is the same for chicks, the total increased annual cost of 
requiring SE-monitored chicks is estimated in the RIA for this rule to 
be about $87,000, for a cost of about $1,700 per chick farm if roughly 
50 are affected. This cost will be borne by pullet growers but could be 
passed on to egg farms depending on market conditions.
    In addition, pullet houses must be tested for environmental SE 
before the pullets are transferred to the layer houses. If the 
environment tests positive, the house must be cleaned and disinfected 
before another flock enters the house. Furthermore, upon an 
environmental positive in the pullet house, layer farms must begin egg 
testing on the positive flock within 2 weeks of the start of egg 
laying. Farms that test positive for SE in their eggs would be required 
to divert their eggs for treatment until they are able to show via 
testing that SE is not present in the eggs produced in the infected 
house. The cost of the additional steps, cleaning and disinfecting, and 
egg testing and diversion, depends on the prevalence of SE in pullet 
houses. From data gathered from comments, FDA estimates that the 
prevalence of SE in pullet houses is 0 to 1.5 percent. Based on these 
factors, as shown in detail in the RIA for this rule, FDA estimates the 
total costs generated by the provisions addressing pullets is about $2 
million annually, or about $2,000 per pullet farm, per year. FDA 
expects that some of these costs could be passed on to the layer 
farms.\98\
---------------------------------------------------------------------------

    \98\ To see the effects of the costs if passed completely to 
layer farms, please refer to Tables 39 and 33.
---------------------------------------------------------------------------

    ii. Trucking companies and holding facilities. Based on the cost 
per cubic foot of extra refrigeration necessary to meet the 45 [deg]F 
threshold, FDA estimates that the refrigeration requirement will cost 
the smallest holding facilities less than $500 annually and the largest 
holding facilities (those holding more than 1 million eggs at a time) 
more than $18,000 annually, for an industry average of nearly $10,000 
in increased costs per facility each year. If we assume that the costs 
for increased refrigeration are proportional to revenues (because costs 
are directly proportional to the volume of eggs held) the smallest 60 
percent of holding facilities will incur increased annual costs of 
between $500 and $11,000. The larger numbers in this range will be 
incurred by the larger facilities still meeting SBA's definition of 
small.
    FDA does not have information on the cost of the refrigeration 
provision to trucking companies. However, FDA estimates that the large 
majority of eggs are currently shipped in refrigerated trucks. For eggs 
that are not currently shipped at 45 [deg]F, FDA estimates that the 
provision will cost approximately $0.02 per dozen eggs shipped, or $1.7 
million across the industry.

C. Regulatory Options

1. Exemption for Small Entities
    i. One possible approach to reduce the impact on small entities 
would be to exempt all small entities from the rule. Although this 
would significantly reduce costs, it would also significantly reduce 
benefits. As mentioned previously, under the SBA size standards the 
vast majority of entities affected by this final rule are small. Small 
farms include not only farms with a few hundred layers, but also some 
larger farms with over 100,000 layers.
    An alternative approach, implemented in the final rule, exempts 
producers with fewer than 3,000 layers at a particular farm.\99\ While 
over 90 percent of farm sites have fewer than 3,000 layers, less than 1 
percent of the eggs produced in the United States are produced on these 
farms.
---------------------------------------------------------------------------

    \99\ An exemption for farms with fewer than 3,000 birds is 
consistent with the exemption given by the EPIA for egg farms that 
are also egg processors.
---------------------------------------------------------------------------

    FDA has decided to exempt all farms with fewer than 3,000 layers 
and those farms that sell all of their eggs directly to consumers.
    By exempting these farms, we reduce expected benefits by less than 
1 percent while reducing expected costs by more than one half. Table 40 
of this document shows a detailed breakdown of the potential costs and 
benefits of regulating farms with less than 3,000 layers.

    Table 40--Summary of Annual Costs Averted and Benefits Foregone by Exempting Farms Less Than 3,000 Layers
                                              [Millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                     Illnesses
                                                        Costs         averted     Total benefits   Net benefits
----------------------------------------------------------------------------------------------------------------
Provision
----------------------------------------------------------------------------------------------------------------
On-Farm Measures
----------------------------------------------------------------------------------------------------------------
Rodent and Pest Control \1\.......................        $16.0              189            $3.4          -$21.5
Biosecurity.......................................          8.3             _ _1            _ _1            _ _1
Cleaning and Disinfecting.........................          0.5             _ _1            _ _1            _ _1
Refrigeration.....................................          6.1              147             2.6            -3.5
Environmental Testing (Average)...................          6.8          _ _2, 3         _ _2, 3         _ _2, 3
Egg Testing.......................................          0.0             _ _2            _ _2            _ _2
Diversion.........................................          0.3              198             3.6            -3.5
Procurement of SE-Monitored Chicks and Pullets....          2.3               21             0.4            -1.9
----------------------------------------------------------------------------------------------------------------
On-Farm Administrative Measures
----------------------------------------------------------------------------------------------------------------
Plan Design.......................................         10.9            -- --           -- --           -- --
Recordkeeping.....................................         56.9            -- --           -- --           -- --
Training..........................................          6.7            -- --           -- --           -- --
Registration......................................          0.42           -- --           -- --           -- --
----------------------------------------------------------------------------------------------------------------

[[Page 33088]]


    Total.........................................        115.3              556             9.9          -105.3
----------------------------------------------------------------------------------------------------------------
\1\ Estimated rodent control benefits also include benefits from biosecurity and cleaning and disinfecting.
\2\ The benefits from all elements of the testing and diversion program are reported jointly under diversion.
\3\ The environmental testing cost number reported is the average of the costs of the random swab and row based
  sampling methods.

    The exemption of farms with less than 3,000 layers carries over to 
entities potentially affected by, but not directly regulated by, the 
rule. Pullet farms supplying layer farms with less than 3,000 layers, 
will not necessarily need to prove SE-monitored status. Trucks and 
storage facilities holding eggs only for farms with less than 3,000 
layers need not be refrigerated at 45 [deg]F.
2. Longer Compliance Periods
    We recognize that it may be more difficult for some small farms to 
learn about and implement these SE prevention measures than it will be 
for other farms. Because of this, FDA is giving farm sites with 3,000 
or more, but fewer than 50,000 layers, 3 years (as opposed to 1 year 
for larger farm sites) to comply with this rule. The longer compliance 
period also affects chick and pullet flocks supplied to farms, and the 
shipment and storage of eggs for farms with between 3,000 and 50,000 
layers.
    FDA will continue to evaluate the impact of this rule on smaller 
farms and will consider taking appropriate steps to mitigate those 
impacts, where it is possible to do so without reducing safety. 
Further, FDA will publish guidance for all covered egg producers, and 
small entity compliance guides, which will help inform and educate 
small businesses on the requirements of the rule. We plan to use 
guidance, to the extent feasible, as a vehicle to identify areas where 
compliance could be achieved via flexible approaches that would 
mitigate the financial impact while preserving the public health 
benefits of the rule. Stakeholder participation in these documents will 
be solicited and considered.

D. Description of Recordkeeping and Recording Requirements

    The Regulatory Flexibility Act requires a description of the 
recordkeeping required for compliance with this final rule. Each farm 
site that sells raw (untreated) eggs to the table egg market, other 
than directly to the consumer, must design and monitor an SE-prevention 
plan. This prevention plan includes all measures the farm is taking to 
prevent SE in its flock. The following elements must be included in the 
plan: (1) Chicks and pullets, (2) biosecurity, (3) rodent and other 
pest control, (4) cleaning and disinfecting, (5) refrigeration, and (6) 
testing and diversion. Records are also required for review and of 
modifications of the SE-prevention plan and corrective actions taken. 
Farms are required to have a trained or experienced supervisor that 
would be responsible for overseeing the plan. Furthermore, all farms 
covered by any part of the rule are required to register with FDA. The 
cost of recordkeeping is exhibited in Table 41 of this document. We 
detail in section V.F of this document how recordkeeping costs are 
calculated.

              Table 41--Cost of Recordkeeping by Farm Size
------------------------------------------------------------------------
                                          Per farm  cost     Per layer
      Farm size (number of layers)              of            cost of
                                           recordkeeping   recordkeeping
------------------------------------------------------------------------
Less than 3,000.........................              $0           $0.00
3,000 to 19,999.........................           2,070            0.17
20,000 to 49,999........................           2,070            0.07
50,000 to 99,999........................           3,143            0.04
100,000 or more.........................           8,509            0.02
All Farms...............................           2,941            0.04
------------------------------------------------------------------------

E. Summary

    FDA finds that, under the Regulatory Flexibility Act (5 U.S.C. 
605(b)), this final rule will have a significant impact on a 
substantial number of small entities. More than 1,000 small farms will 
be affected by the final rule.

VII. Unfunded Mandates

    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires 
that agencies prepare a written statement, which includes an assessment 
of anticipated costs and benefits, before proposing ``any rule that 
includes any Federal mandate that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100,000,000 or more (adjusted annually for 
inflation) in any one year.'' The current threshold after adjustment 
for inflation is $127 million, using the most current (2006) Implicit 
Price Deflator for the Gross Domestic Product.\100\ FDA has determined 
that this final rule is significant under the Unfunded Mandates Reform 
Act. FDA has carried out the cost-benefit analysis in preceding 
sections. The other requirements under the Unfunded Mandates Act of 
1995 include assessing the rule's effects on:
---------------------------------------------------------------------------

    \100\ In table 7 of this document, describing the total costs of 
the rule, costs are annualized. When costs are not annualized, 
particularly the first year costs of refrigeration, the total 
initial costs are clearly more than $127 million.
---------------------------------------------------------------------------

     Future costs;
     Particular regions, communities, or industrial sectors;
     National productivity;
     Economic growth;
     Full employment;
     Job creation; and
     Exports.
    The issues listed above are covered in detail in the cost benefit 
analysis of the

[[Page 33089]]

preceding sections, with the exception of the trade effects of this 
final rule, which we will discuss here.
    Given the fragile and highly perishable nature of table eggs and 
the restrictions imposed by USDA to ensure safety of imported animals 
and animal products (9 CFR part 94), few eggs are imported into the 
United States. Only three countries, Canada, Mexico, and New Zealand 
are permitted to export shell eggs to the United States. Further, since 
2004, only New Zealand continues to send shell eggs to the United 
States (Ref. 122). In 2006, a firm from New Zealand shipped 55,112 
dozen eggs to the United States. These eggs originated from a single 
farm in New Zealand with a little more than 3,000 layers (Ref. 122). 
These eggs represent about one one-thousandth of the eggs produced in 
the United States annually.
    In order to qualify to export eggs to the United States, New 
Zealand egg production is already highly regulated. Therefore, it is 
unlikely the farm that produces the exports to the United States would 
bear even the average cost estimated for a similar sized farm in the 
United States. However, if we assume the costs are similar across 
countries, the final rule would cost the New Zealand farm, or similar 
exporting farms, about $3,000 annually, or about $0.04 per dozen eggs 
produced.

VIII. Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(Public Law 104-121) defines a major rule for the purpose of 
congressional review as having caused or being likely to cause one or 
more of the following: An annual effect on the economy of $100 million 
or more; a major increase in costs or prices; significant adverse 
effects on competition, employment, productivity, or innovation; or 
significant adverse effects on the ability of United States-based 
enterprises to compete with foreign-based enterprises in domestic or 
export markets. In accordance with the Small Business Regulatory 
Enforcement Fairness Act, the Office of Management and Budget (OMB) has 
determined that this final rule is a major rule for the purpose of 
congressional review.

IX. Paperwork Reduction Act of 1995

    This final rule contains information collection provisions that are 
subject to review by OMB under the Paperwork Reduction Act of 1995 (44 
U.S.C. 3501-3520). A description of these provisions is given in the 
following paragraphs with an estimate of the annual recordkeeping and 
reporting burdens. Included in the estimate is the time for reviewing 
instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing each 
collection of information.
    FDA invites comments on: (1) Whether the proposed collection of 
information is necessary for the proper performance of FDA's functions, 
including whether the information will have practical utility; (2) the 
accuracy of FDA's estimate of the burden of the proposed collection of 
information, including the validity of the methodology and assumptions 
used; (3) ways to enhance the quality, utility, and clarity of the 
information to be collected; and (4) ways to minimize the burden of the 
collection of information on respondents, including through the use of 
automated collection techniques, when appropriate, and other forms of 
information technology.
    Title: Prevention of Salmonella Enteritidis in Shell Eggs During 
Production, Storage, and Transportation--Recordkeeping and Registration 
Provisions Under 21 CFR Part 118.
    Description: FDA is requiring shell egg producers to implement 
measures to prevent SE from contaminating eggs on the farm and from 
further growth during storage and transportation. Each farm site with 
3,000 or more egg laying hens that sells raw eggs to the table egg 
market, other than directly to the consumer, and does not have all of 
the eggs treated, must design and monitor an SE prevention plan. This 
prevention plan includes all measures the farm is taking to prevent SE 
in its flock. Records are also required for each of the provisions 
included in the plan and for plan review and modifications if 
corrective actions are taken. Furthermore, all farms covered by any 
part of the rule are required to register with FDA.
    We have concluded that recordkeeping is necessary for the success 
of the SE prevention measures. Written SE prevention plans and records 
of actions taken due to each provision are essential for farms to 
implement SE prevention plans effectively. Further, they are essential 
for FDA to be able to determine compliance.
    Description of Respondents: Businesses or other for-profit 
organizations.
    FDA estimates the burden of this collection of information as 
follows:

                              Table 42--Estimated Annual Recordkeeping Burden 1, 6
----------------------------------------------------------------------------------------------------------------
                                     Number of        Annual
         21 CFR section            recordkeepers   frequency of    Total annual      Hours per      Total hours
                                        \2\        recordkeeping      records      recordkeeper
----------------------------------------------------------------------------------------------------------------
118.10(a)(1) \5\................           2,600               1           2,600              20          52,000
118.10(a)(2)....................           4,731               1           4,731             0.5           2,366
118.10(a)(3)(ii)................           4,731              52         246,012             0.5         123,006
118.10(a)(3)(i).................           4,731              52         246,012             0.5         123,006
118.10(a)(3)(iii) \5\...........             459               1             459             0.5             230
118.10(a)(3)(iii)...............             331               1             331             0.5             166
118.10(a)(3)(iv)................           2,600              52         135,200             0.5          67,600
118.10(a)(3)(v) through                      471              52          24,492             0.5          12,246
 (a)(3)(viii) 3, 4, 5...........
                                           5,837               1           5,837             0.5           2,919
118.10(a)(3)(v) through                      343              52          17,836             0.5           8,918
 (a)(3)(viii) 3, 4..............
                                           5,965               1           5,965             0.5           2,983
118.10(a)(4) \5\................             459               1             459              10           4,590
118.10(a)(4)....................             331               1             331              10           3,310
    Total hours for first year..  ..............  ..............  ..............  ..............         387,962
    Total recurring hours.......  ..............  ..............  ..............  ..............         331,354
----------------------------------------------------------------------------------------------------------------
\1\ There are no capital costs or operating and maintenance costs associated with this collection of
  information.
\2\ Some records are kept on a by-farm basis and others are kept on a by-house basis. See section V.F of this
  document for a detailed description of the breakdown.
\3\ The annual frequency of records kept for this provision depends on whether the house actually tests positive
  for SE.

[[Page 33090]]


\4\ Calculations include requirements for pullet and layer houses.
\5\ First year burden.
\6\ Calculations include the burden on foreign firms. FDA identified a single farm with more than 3,000 layers
  in New Zealand that exports shell eggs to the United States.

    FDA estimates the recordkeeping burden of this final rule to be 
387,962 hours in the first year, and 331,354 each year thereafter, as 
shown in table 42 of this document.
    The number of recordkeepers estimated in column 2 of table 42 of 
this document are based on estimates of the total number of layer and 
pullet houses affected by this final rule from statistics obtained from 
the Layers study, NASS, and comments to the proposed rule. We assume 
that those farms that are currently operating according to recognized 
industry or State quality assurance plans are already largely in 
compliance with the plan design and recordkeeping provisions discussed 
in this section, and therefore would not experience additional costs to 
comply with recordkeeping provisions. Using data from the Layers study 
(Refs. 27 and 28), we find that 59 percent of farms with more than 
50,000 layers are currently members of State or industry quality 
assurance plans. Fewer than 8 percent of farms with fewer than 50,000 
layers are currently members of quality assurance plans. The estimated 
number of layer farms incurring a new recordkeeping burden because of 
this rule is 2,600, and the number of houses affected is 4,731. A 
detailed breakdown of this estimation is shown in table 29 of this 
document.
    Plan design (Sec.  118.10(a)(1)) and refrigeration records (Sec.  
118.10(a)(3)(iv)) will be kept on a per farm basis, so the number of 
recordkeepers for these provisions is 2,600. Plan design is a first 
year burden only.
    Records of chick and pullet procurement (Sec.  118.10(a)(2)), 
rodent and other pest control (Sec.  118.10(a)(3)(ii)), and biosecurity 
(Sec.  118.10(a)(3)(i)) will be kept on a per house basis, so the 
number of recordkeepers for these provisions is 4,731.
    Records of cleaning and disinfection (Sec.  118.10(a)(3)(iii)) will 
also be kept on a per house basis, but will only need to be kept in the 
event that a layer house tests environmentally positive. Design plan 
and review (Sec.  118.10(a)(4)) will also need to be performed every 
time a house tests positive. As discussed in section V.F of this 
document, FDA estimates that 9.7 percent of houses will test 
environmentally positive initially and 7.0 percent will test positive 
after the provisions of this rule have taken effect. Therefore, the 
number of recordkeepers for these provisions is estimated to be 459 
(4,731 houses x 0.097) in the first year and 331 (4,731 houses x 0.070) 
annually after the first year.
    Records of testing, diversion, and treatment (Sec.  118.10(a)(3)(v) 
through (a)(3)(viii)) will be kept on a per house basis and will 
include records on flocks from pullet houses. From data provided by 
comments, FDA estimates that there are one third as many pullet houses 
as there are layer houses. Therefore the total number of recordkeepers 
for these provisions is 6,308 (4,731 + (4,731/3)). The number of annual 
records kept depends on whether houses test positive for SE or not. 
This is further discussed in the following paragraphs.
    Because information on the costs of designing the SE prevention 
plan for eggs is not available, we base these costs on assumptions used 
to analyze the design of HACCP programs (63 FR 24253 at 24275 to 
24285). In particular, we assume that each plan component will take 
approximately 20 hours to design. In the event of an environmental 
positive, the farm must review and modify as necessary its plan design. 
FDA estimates this will take roughly half the time (10 hours per 
provision) that it took to originally draft the plan.
    We assume that the time required for recordkeeping is roughly 
equivalent to the time necessary to monitor and document the food 
safety provisions of a HACCP plan (63 FR 24253 at 24275 to 24286). 
Because the HACCP time estimate upon which we are basing our estimate 
involves multiple control points and monitoring, this assumption tends 
to overstate the cost of recordkeeping for a provision of this final 
rule. In particular, we expect that, for each house affected, 
recordkeeping will take one half hour per week per provision that would 
require weekly or daily monitoring. Records kept for biosecurity 
measures, rodent and pest control, and refrigeration are assumed to be 
recorded on a weekly basis.
    Records for chick and pullet procurement and cleaning and 
disinfection will only have to be collected roughly once per year and 
are assumed, as above, to require one half hour to produce each record.
    Environmental and egg sampling and testing, diversion and treatment 
records together have daily, weekly, and monthly aspects, in the event 
of an environmental positive. In the case of an environmental positive, 
the record's annual burden is assumed to be similar to the burden 
estimated for the weekly records discussed previously. If a house tests 
environmentally negative, the burden is similar to the yearly burden 
estimated above. In the first year, 471 layer and pullet houses ((4,731 
layer houses x 0.097) + ((4731/3 pullet houses) x 0.0075)) are expected 
to test positive and 5,837 are expected to test negative ((4,731 layer 
houses x 0.903) + ((4731/3 pullet houses) x 0.9925)). In following 
years 343 layer and pullet houses ((4,731 layer houses x 0.070) + 
((4731/3 pullet houses) x 0.0075)) are expected to test positive \101\ 
and 5,965 are expected to test negative ((4,731 layer houses x 0.930) + 
((4731/3 pullet houses) x 0.9925)).
---------------------------------------------------------------------------

    \101\ As discussed in section V.F.1.i of this document, the 
pullet houses are estimated to test positive at only a rate of 0.75 
percent.
---------------------------------------------------------------------------

    The reporting burden due to the registration requirement is shown 
in table 43 of this document.

                                                    Table 43--Estimated Annual Reporting Burden 1, 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Number of       Annual frequency per      Total annual
   21 CFR section         FDA form No.           respondents            response              responses        Hours per  response       Total hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
       118.11 \3\          FDA 3733 \2\                 3,329                     1                 3,329                   2.3                 7,657
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ There are no capital costs or operating and maintenance costs associated with this collection of information.
\2\ The term ``Form FDA 3733'' refers to both the paper version of the form and the electronic system known as the Shell Egg Producer Registration
  Module, which will be available at http://www.access.fda.gov per Sec.   118.11(b)(1).
\3\ First year burden.

[[Page 33091]]


\4\ Calculations include the burden on foreign firms. FDA identified a single farm with more than 3,000 layers in New Zealand that exports shell eggs to
  the United States.

    The registration requirement will be a new, one time reporting 
burden for all farms with more than 3,000 layers. FDA used NASS to 
estimate that there are 3,329 such farms, as detailed in section V.D of 
this document. Using experience gained from implementing section 415 of 
the FFDCA (21 U.S.C. 350d), FDA estimates that listing the information 
required by the final rule and presenting it in a format that will meet 
the agency's registration regulations will require a burden of 
approximately 2.3 hours per average facility registration. As detailed 
in section V.F of this document, FDA expects that it will take farms 
with access to the Internet 2 hours to register and for farms without 
easy access to the Internet it will take 3 hours to register. FDA 
assumes the number of farms with easy access to the Internet is similar 
to the number used in the BT Registration Rule (68 FR 5378 at 5392 to 
5403), that is, 71 percent of farms. The average facility burden hour 
estimate of 2.3 hours takes into account that some respondents 
completing the registration may not have readily available Internet 
access (29 percent).
    In compliance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507(d)), the agency has submitted the information collection 
provisions of this final rule to OMB for review. Interested persons are 
requested to fax comments regarding information collection by (see 
DATES), to the Office of Information and Regulatory Affairs, OMB. To 
ensure that comments on information collection are received, OMB 
recommends that written comments be faxed to the Office of Information 
and Regulatory Affairs, OMB, Attn: FDA Desk Officer, FAX: 202-395-6974.
    Prior to the effective date of this final rule, FDA will publish a 
notice in the Federal Register announcing OMB's decision to approve, 
modify, or disapprove the information collection provisions in this 
final rule. An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it displays 
a currently valid OMB control number.

X. Analysis of Environmental Impact

    The agency has determined under 21 CFR 25.30(j) 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.

XI. Federalism

    FDA has analyzed this final rule in accordance with the principles 
set forth in Executive Order 13132 on federalism. We have examined the 
effects of the requirements of this rule on the relationship between 
the Federal Government and the States. The agency concludes that 
preemption of State or local rules that establish requirements for the 
prevention of Salmonella Enteritidis (SE) in shell eggs during 
production, storage, or transportation that are less stringent than 
those in this rule is consistent with this Executive order and has 
added Sec.  118.12(d) to the rule to reflect this preemptive effect.
    Section 3(b) of Executive Order 13132 recognizes that Federal 
action limiting the policymaking discretion of States is appropriate 
``where there is constitutional and statutory authority for the action 
and the national activity is appropriate in light of the presence of a 
problem of national significance.'' The constitutional basis for FDA's 
authority to regulate the safety and labeling of foods is well 
established.
    Section 4(a) of Executive Order 13132 expressly contemplates 
preemption where the exercise of State authority conflicts with the 
exercise of Federal authority under a Federal statute. Moreover, 
section 4(b) of Executive Order 13132 authorizes preemption of State 
law by rulemaking when the exercise of State authority directly 
conflicts with the exercise of Federal authority under the Federal 
statute or there is clear evidence to conclude that Congress intended 
the agency to have the authority to preempt State law.
    State and local laws and regulations that would impose less 
stringent requirements for prevention of SE in shell eggs during 
production, storage, and transportation would undermine the agency's 
goal of ensuring that shell eggs are produced, stored, and transported 
using measures that will prevent their contamination with SE. These 
requirements are the minimal national prevention measures that we 
believe are necessary to ensure safety. However, the requirements of 
this final rule do not preempt State and local laws, regulations, and 
ordinances that establish more stringent requirements with respect to 
prevention of SE in shell eggs during production, storage, or 
transportation.
    Section 4(e) of the Executive order provides that, ``when an agency 
proposes to act through adjudication or rulemaking to preempt State 
law, the agency shall provide all affected State and local officials 
notice and an opportunity for appropriate participation in the 
proceedings.'' As required by the Executive order, FDA provided the 
States and local governments with an opportunity for appropriate 
participation in this rulemaking when it sought input from all 
stakeholders through publication of the proposed rule in the Federal 
Register on September 22, 2004 (69 FR 56824 at 56889). In the proposal, 
FDA specifically described this preemptive effect. The proposal stated 
that, through this notice of proposed rulemaking, State and local 
governments have a chance to participate in the proceedings, and that 
in addition, ``appropriate officials and organizations will be 
consulted before this proposed action is implemented; the agency plans 
to have public meetings specifically addressing the issue of 
implementation of these proposed regulations.''
    The agency consulted with a working group comprised of State 
officials in developing the provisions of that proposed rule. In 
addition, we sent facsimiles of a Federal Register document announcing 
a public meeting of egg safety and the availability of egg safety 
``current thinking'' documents prepared by FDA and USDA to Governors, 
State health and agriculture commissioners, State attorneys general, 
and State food program coordinators.
    Further, subsequent to the publication of the proposed rule, the 
agency held three public meetings to discuss the provisions of the 
rule, answer questions, and solicit comments from stakeholders. 
Meetings were held October 28, 2004, in College Park, MD; November 9, 
2004, in Chicago, IL; and November 16, 2004, in Los Angeles, CA. 
Additionally, presentations on the proposed rule were made to the 
following groups: Iowa Egg Industry Symposium in Ames, IA, on November 
10, 2004; Central Atlantic States Association of Food and Drug 
Officials Meeting in Laurel, MD, in December 2004; Agricultural 
Research Service--Food Safety and Inspection Service Joint Food Safety 
Meeting in Shepherdstown, WV, in Spring 2005; National Egg Regulatory 
Officials Meeting in Orlando, FL, in March 2005; National Egg Quality 
School in Indianapolis, IN, in May 2005; and National Egg Regulatory 
Officials Meeting in Oklahoma City, OK, in March 2006. Both State and 
local government officials attended and participated in these meetings.

[[Page 33092]]

    As a result of the extensive outreach FDA conducted during the 
proposed rule notice and comment period to provide State and local 
officials with the opportunity for meaningful input, we received 
comments from numerous State government agencies. Many of the comments 
support FDA in developing a national standard for the prevention of SE 
in shell eggs during production, storage, and transportation. In fact, 
one State agency commented that ``we completely agree with proposed 
regulations that make measures already taken by many producers 
voluntarily, mandatory for all producers * * *.'' Another State agency 
stated that, ``Overall FDA's proposal to require SE prevention measures 
for egg production would provide for an effective nationwide program to 
reduce SE. The prevention measures outlined in the proposal have proven 
to be effective in the existing State programs.''
    FDA recognizes that existing voluntary State programs using egg 
quality assurance plans (EQAPs) have been successful in reducing SE 
contamination in poultry houses in certain states, as discussed in 
section I.G of this document. However, as discussed in response to 
comment 1 in section III of this document, these programs are not 
uniformly administered or equally comprehensive in their prevention 
measures. In addition, currently the EQAPs that exist are voluntary for 
shell egg producers. Although the existing EQAPs have similar 
requirements, they vary in how those requirements are implemented. This 
rule will establish uniform, nationwide requirements to prevent SE in 
shell eggs during production, storage, and transportation. FDA believes 
that these uniform, nationwide requirements will further reduce SE 
illness and deaths associated with egg consumption.
    Although comments received from the State agencies agreed that 
uniform, nationwide requirements would be most effective, many States 
commented that inspections and enforcement by State Departments of 
Agriculture would be the most effective method of implementing these 
nationwide requirements. They commented that many States have been 
conducting similar inspections to ensure compliance with state EQAPs 
and have the expertise and knowledge to conduct inspections for FDA. We 
agree that we can enlist the assistance of existing EQAP organizations 
and State and/or local officials in implementing FDA's regulation. The 
rule provides that a State or locality may, in its own jurisdiction, 
enforce this rule by carrying out inspections under Sec.  118.12(b) and 
by using the administrative remedies in Sec.  118.12(a) unless FDA 
notifies the State or locality in writing that its assistance is no 
longer needed. FDA plans to provide guidance to States and localities 
through an enforcement and implementation guidance subsequent to this 
final rule.
    In conclusion, the agency has determined that the preemptive 
effects of this final rule are consistent with Executive Order 13132.

XII. References

    The following references have been placed on display in the 
Division of Dockets Management (see ADDRESSES) and may be seen by 
interested persons between 9 a.m. and 4 p.m., Monday through Friday. 
(FDA has verified the Web site addresses, but FDA is not responsible 
for any subsequent changes to the Web site after this document 
publishes in the Federal Register.)

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Salmonella,'' Office of Communication Media Relations, July 16, 
1999.
2. Centers for Disease Control and Prevention Memorandum from Chief, 
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``Reactive Anthropathy Following a Multistate Outbreak of Salmonella 
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Conference on Antimicrobial Agents and Chemotherapy.
4. Zorn, D.J. and K. Klontz, Appendix: The Value of Consumer Loss to 
Foodborne Reactive Arthritis (63 FR 24253, May 1, 1998).
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Shallow, R. Marcus, P.R. Cieslak, V.C. Deneen, R.V. Tauxe, for the 
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Data on the Incidence of Infection with Pathogens Transmitted 
Commonly Through Food--10 States, 2008. MMWR 2009; 58:333-337.
11-12. Centers for Disease Control and Prevention, ``Outbreaks of 
Salmonella Serotype Enteritidis Infection Associated with Eating Raw 
or Undercooked Shell Eggs--United States, 1996-1998'', MMWR 2000; 
49:73-79.
13. CDC memorandum, Frederick J. Angulo to the Record, July 10, 
2007.
14. Mishu, B., J. Koehler, L.A. Lee, D. Kodrigue, F., Hickman 
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for ``Prevention of Salmonella Enteritidis in Shell Eggs During 
Production; Proposed Rule'', Oct. 28, 2004, Nov. 9, 2004, and Nov. 
16, 2004.
18. Keller, L.H., C.E. Benson, K. Krotec, and R.J. Eckroade, 
``Salmonella enteritidis Colonization of the Reproductive Tract and 
Forming of Freshly Laid Eggs of Chickens,'' Infection and Immunity 
7:2443-2449, 1995.
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21. Baker Jr., A.R., E.D. Ebel, R.M. McDowell, R.A. Morales, W.D. 
Schlosser, and R. Whiting, Salmonella Enteritidis Risk Assessment 
Team, Salmonella Enteritidis Risk Assessment: Shell Eggs and Egg 
Products, Washington, DC: United States Department of Agriculture, 
June 12, 1998.
22. Coleman, M., E. Ebel, N. Golden, A. Hogue, A. Kadry, J. Kause, 
H. Latimer, H. Marks, N. Quiring, W. Schlosser, and C. Schroeder, 
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Salmonella spp. in Egg Products, Washington, DC: United States 
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23. Ebel, E. and Schlosser, W. ``Estimating the annual fraction of 
eggs contaminated with SE in the U.S.'' International Journal of 
Food Microbiology. 61:51-62, 2000.

[[Page 33093]]

24. American Egg Board, ``Egg Industry Facts Sheet,'' February 3, 
2000.
25. National Agricultural Statistics Service, United States 
Department of Agriculture, Layers and Egg Production 1998 Summary, 
January 1999.
26. National Agricultural Statistics Service, ``Table 20. Poultry 
Inventory and Sales: 1997 and 1992,'' 1997 Census of Agriculture: 
United States Summary and State Data, vol. 1, part 51, U.S. 
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us-51/us1_19.pdf, June 2009.
27. National Animal Health Monitoring System, Animal and Plant 
Health Inspection Service, United States Department of Agriculture, 
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in the U.S.'' October 1999.
28. National Animal Health Monitoring System, Animal and Plant 
Health Inspection Service, United States Department of Agriculture, 
``Layers '99, Part II: Reference of 1999 Table Egg Layer Management 
in the U.S.'' January 2000.
29. National Animal Health Monitoring System, Animal and Plant 
Health Inspection Service, United States Department of Agriculture, 
``Layers '99: Salmonella enterica serotype Enteritidis in Table Egg 
Layers in the U.S.'' October 2000.
30. Pennsylvania Poultry Federation, ``Pennsylvania Egg Quality 
Assurance Program,'' revised April 1997, 500 N. Progress Ave., 
Harrisburg, PA 17109.
31. California Egg Industry, ``California Egg Quality Assurance 
Program,'' California Department of Food and Agriculture, 1220 N 
Street, rm. A-107, Sacramento, CA 95814.
32. New York State, ``New York State Egg Quality Assurance 
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33. Maryland Department of Agriculture, ``Egg Quality Assurance 
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34. Ohio Poultry Association, ``Ohio Egg QA Program,'' 5930 Sharon 
Woods Blvd., Columbus, OH 43229.
35. United Egg Producers, ``UEP 5-Star Total QA Program,'' 1303 
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36. United States Animal Health Association, ``National Standardized 
Salmonella Enteritidis Reduction Program for Eggs,'' 8100 3 Chopt 
Rd., suite 203, P.O. Box K227, Richmond, VA 23288.
37. E-mail Correspondence between J. Bradley Brown, FDA, and Jim 
Austin, June 21 and October 13, 2005.
38. E-mail memorandum dated February 16, 2007 from Barbara Robinson 
of Agricultural Marketing Service to John Sheehan of Center for Food 
Safety and Applied Nutrition.
39. Axtell, R.C., ``Integrated Fly-Control Program for Caged-Poultry 
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41. Meyer, J.A., B.A. Mullens, T.L. Cyr, and C. Stokes (1990) 
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Flies (Diptera: Muscidae) on California Dairies, Journal of Economic 
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42. Andress, E.R. and J.B. Campbell (1994) Inundative Releases of 
Pteromalid Parasitoids (Hymenoptera: Pteromalidae) for the Control 
of Stable Flies, Stomoxys calcitrans (L.) (Diptera: Muscidae) at 
Confined Cattle Installations in West Central Nebraska, Journal of 
Economic Entomology 87(3):714-722.
43. Weinzierl, R.A. and C.J. Jones (1998) Releases of Spalangia 
nigroaenea and Muscidifurax zaraptor (Hymenoptera: Pteromalidae) 
Increase Rates of Parasitism and Total Mortality of Stable Fly and 
House Fly (Diptera: Muscidae) Pupae in Illinois Cattle Feedlots, 
Journal of Economic Entomology 91(5):1114-1121.
44. Kaufman, P.E., S.J. Long, D.A. Rutz, and J.K. Waldron (2001) 
Parasitism Rates of Muscidifurax raptorellus and Nasonia vitripennis 
(Hymenoptera: Pteromalidae) After Individual and Paired Releases in 
New York Poultry Facilities, Journal of Economic Entomology 
94(2):593.598.
45. Hinton, J.L. and R.D. Moon (2003) Arthropod Populations in High-
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List of Subjects

21 CFR Part 16

    Administrative practice and procedure.

21 CFR Part 118

    Eggs and egg products, Incorporation by reference, Recordkeeping 
requirements, Safety.


0
Therefore, under the Federal Food, Drug, and Cosmetic Act and the 
Public Health Service Act, and under the authority delegated to the 
Commissioner of Food and Drugs, 21 CFR parts 16 and 118 are amended as 
follows:

PART 16--REGULATORY HEARING BEFORE THE FOOD AND DRUG ADMINISTRATION

0
1. The authority citation for 21 CFR part 16 continues to read as 
follows:

    Authority: 15 U.S.C. 1451-1461; 21 U.S.C. 141-149, 321-394, 
467f, 679, 821, 1034; 28 U.S.C. 2112; 42 U.S.C. 201-262, 263b, 364.


0
2. Section 16.5 is amended by adding paragraph (a)(5) to read as 
follows:


Sec.  16.5   Inapplicability and limited applicability.

    (a) * * *
    (5) A hearing on an order for diversion or destruction of shell 
eggs under section 361 of the Public Health Service Act (42 U.S.C. 
264), and Sec.  118.12 of this chapter.
* * * * *

0
3. Part 118 is added to read as follows:

PART 118--PRODUCTION, STORAGE, AND TRANSPORTATION OF SHELL EGGS

Sec.
118.1 Persons covered by the requirements in this part.
118.3 Definitions.
118.4 Salmonella Enteritidis (SE) prevention measures.
118.5 Environmental testing for Salmonella Enteritidis (SE).
118.6 Egg testing for Salmonella Enteritidis (SE).
118.7 Sampling methodology for Salmonella Enteritidis (SE).
118.8 Testing methodology for Salmonella Enteritidis (SE).
118.9 Administration of the Salmonella Enteritidis (SE) prevention 
plan.
118.10 Recordkeeping requirements for the Salmonella Enteritidis 
(SE) prevention plan.
118.11 Registration requirements for shell egg producers covered by 
the requirements of this part.
118.12 Enforcement and compliance.

    Authority: 21 U.S.C. 321, 331-334, 342, 371, 381, 393; 42 U.S.C. 
243, 264, 271.


Sec.  118.1   Persons covered by the requirements in this part.

    (a) If you are a shell egg producer with 3,000 or more laying hens 
at a particular farm that does not sell all of your eggs directly to 
consumers and that produces shell eggs for the table market, you are 
covered by some or all of the requirements in this part, as follows:
    (1) If any of your eggs that are produced at a particular farm do 
not receive a treatment as defined in Sec.  118.3, you must comply with 
all of the requirements of this part for egg production on that farm.
    (2) If all of your eggs that are produced at the particular farm 
receive a treatment as defined in Sec.  118.3, you must comply only 
with the refrigeration requirements in Sec.  118.4(e) for production of 
eggs on that farm and with the registration requirements in Sec.  
118.11.
    (b) If you transport or hold shell eggs for shell egg processing or 
egg products facilities, you must comply with the refrigeration 
requirements in Sec.  118.4(e). This section applies only to eggs from 
farms with 3,000 or more laying hens.


Sec.  118.3   Definitions.

    The definitions and interpretations of terms in section 201 of the 
Federal Food, Drug, and Cosmetic Act (the FFDCA) (21 U.S.C. 321) are 
applicable to such terms when used in this part, except where they are 
redefined in this part. The following definitions also apply:
    Biosecurity means a program, including the limiting of visitors on 
the farm and in poultry houses, maintaining personnel and equipment 
practices that will protect against cross contamination from one 
poultry house to another, preventing stray poultry, wild birds, cats, 
and other animals from entering poultry houses, and not allowing 
employees to keep birds at home, to ensure that there is no 
introduction or transfer of Salmonella Enteritidis (SE) onto a farm or 
among poultry houses.
    Egg products facility means a USDA-inspected egg products plant 
where liquid, frozen, and/or dried egg products are produced.
    Farm means all poultry houses and grounds immediately surrounding 
the poultry houses covered under a single biosecurity program.
    Flock means all laying hens within one poultry house.
    Group means all laying hens of the same age within one poultry 
house.
    Induced molting means molting that is artificially initiated.
    Laying cycle means the period of time that a hen begins to produce 
eggs until it undergoes induced molting or is permanently taken out of 
production and the period of time that a hen produces eggs between 
successive induced molting periods or between induced molting and the 
time that the hen is permanently taken out of production.
    Molting means a life stage during which hens stop laying eggs and 
shed their feathers.
    Pest means any objectionable animal including, but not limited to, 
rodents, flies, and larvae.
    Positive flock means a flock that has had an egg test that was 
positive for SE. A flock is considered positive until that flock meets 
the egg testing requirements in Sec.  118.6(c) to return to table egg 
production.
    Positive poultry house means a poultry house from which there has 
been an environmental test that was positive for SE at any time during 
the life of a group in the poultry house until that house is cleaned 
and disinfected according to Sec.  118.4(d).
    Poultry house means a building, other structure, or separate 
section within a structure used to house poultry. For structures 
comprising more than one section containing poultry, each section that 
is separated from the other sections is considered a separate house.
    Producer means a person who owns and/or operates a poultry house 
containing laying hens which produce shell eggs for human consumption.
    Shell egg (or egg) means the egg of the domesticated chicken.
    Shell egg processing facility means a facility that processes 
(e.g., washes, grades, packs) shell eggs for the table egg market.
    Treatment (or treated) means a technology or process that achieves 
at least a 5-log destruction of SE for shell eggs, or the processing of 
egg products in accordance with the Egg Products Inspection Act.


Sec.  118.4   Salmonella Enteritidis (SE) prevention measures.

    You must follow the SE prevention measures set forth in this 
section. In addition, you must have and implement a written SE 
prevention plan that is

[[Page 33096]]

specific to each farm where you produce eggs and that includes, at a 
minimum, the following SE prevention measures:
    (a) Pullets. You must procure pullets that are SE monitored or 
raise pullets under SE monitored conditions. ``SE monitored'' means the 
pullets are raised under SE control conditions that prevent SE, 
including:
    (1) Procurement of chicks. Chicks are procured from SE-monitored 
breeder flocks that meet the National Poultry Improvement Plan's 
standards for ``U.S. S. Enteritidis Clean'' status (9 CFR 145.23(d)) or 
equivalent standard;
    (2) Environmental testing.
    (i) The pullet environment is tested for SE when pullets are 14 to 
16 weeks of age;
    (ii) If the environmental test required in paragraph (a)(2)(i) of 
this section is negative, you do not need to perform any additional 
testing of those birds or their environment until the environmental 
test at 40 to 45 weeks of age specified in Sec.  118.5(a); and
    (iii) If the environmental test required in paragraph (a)(2)(i) of 
this section is positive, you must begin egg testing, as specified in 
Sec.  118.6, within 2 weeks of the start of egg laying.
    (3) Cleaning and disinfection. If the environmental test required 
in paragraph (a)(2) of this section is positive, the pullet environment 
is cleaned and disinfected, to include:
    (i) Removal of all visible manure;
    (ii) Dry cleaning the positive pullet house to remove dust, 
feathers, and old feed; and
    (iii) Following cleaning, disinfection of the positive pullet house 
with spray, aerosol, fumigation, or another appropriate disinfection 
method.
    (b) Biosecurity. As part of this program, you must take steps to 
ensure that there is no introduction or transfer of SE into or among 
poultry houses. Among such biosecurity measures you must, at a minimum:
    (1) Limit visitors on the farm and in the poultry houses;
    (2) Maintain practices that will protect against cross 
contamination when equipment is moved among poultry houses;
    (3) Maintain practices that will protect against cross 
contamination when persons move between poultry houses;
    (4) Prevent stray poultry, wild birds, cats, and other animals from 
entering poultry houses; and
    (5) Not allow employees to keep birds at home.
    (c) Rodents, flies, and other pest control. As part of this 
program, you must:
    (1) Monitor for rodents by visual inspection and mechanical traps 
or glueboards or another appropriate monitoring method and, when 
monitoring indicates unacceptable rodent activity within a poultry 
house, use appropriate methods to achieve satisfactory rodent control;
    (2) Monitor for flies by spot cards, Scudder grills, or sticky 
traps or another appropriate monitoring method and, when monitoring 
indicates unacceptable fly activity within a poultry house, use 
appropriate methods to achieve satisfactory fly control.
    (3) Remove debris within a poultry house and vegetation and debris 
outside a poultry house that may provide harborage for pests.
    (d) Cleaning and disinfection. You must clean and disinfect the 
poultry house according to these procedures before new laying hens are 
added to the house, if you have had an environmental test or an egg 
test that was positive for SE at any point during the life of a flock 
that was housed in the poultry house prior to depopulation. As part of 
the cleaning and disinfection procedures, you must:
    (1) Remove all visible manure;
    (2) Dry clean the positive poultry house to remove dust, feathers, 
and old feed; and
    (3) Following cleaning, disinfect the positive poultry house with 
spray, aerosol, fumigation, or another appropriate disinfection method.
    (e) Refrigeration. You must hold and transport eggs at or below 45 
[deg]F ambient temperature beginning 36 hours after time of lay. If the 
eggs are to be processed as table eggs and are not processed for the 
ultimate consumer within 36 hours from the time of lay and, therefore, 
are held and transported as required at or below 45 [deg]F ambient 
temperature, then you may then hold them at room temperature for no 
more than 36 hours just prior to processing to allow an equilibration 
step to temper the eggs.


Sec.  118.5  Environmental testing for Salmonella Enteritidis (SE).

    (a) Environmental testing when laying hens are 40 to 45 weeks of 
age. As one indicator of the effectiveness of your SE prevention plan, 
you must perform environmental testing for SE (as described in 
Sec. Sec.  118.7 and 118.8) in a poultry house when any group of laying 
hens constituting the flock within the poultry house is 40 to 45 weeks 
of age.
    (1) If an environmental test at 40 to 45 weeks is negative and your 
laying hens do not undergo induced molting, then you do not need to 
perform any additional environmental testing within that poultry house, 
unless the poultry house contains more than one group of laying hens. 
If the poultry house contains more than one group of laying hens, then 
you must perform environmental testing on the poultry house when each 
group of laying hens is 40 to 45 weeks of age.
    (2) If the environmental test at 40 to 45 weeks is positive, then 
you must:
    (i) Review and make any necessary adjustments to your SE prevention 
plan to ensure that all measures are being properly implemented and
    (ii) Begin egg testing (described in Sec.  118.6), unless you 
divert eggs to treatment as defined in Sec.  118.3 for the life of the 
flock in that poultry house. Results of egg testing must be obtained 
within 10-calendar days of receiving notification of the positive 
environmental test.
    (b) Environmental testing after an induced molting period. If you 
induce a molt in a flock or a group in a flock, you must perform 
environmental testing for SE in the poultry house at 4 to 6 weeks after 
the end of any molting process.
    (1) If an environmental test at 4 to 6 weeks after the end of the 
molting process is negative and none of your laying hens in that 
poultry house is molted again, then you do not need to perform any 
additional environmental testing in that poultry house. Each time a 
flock or group within the flock is molted, you must perform 
environmental testing in the poultry house at 4 to 6 weeks after the 
end of the molting process.
    (2) If the environmental test at 4 to 6 weeks after the end of a 
molting process is positive, then you must:
    (i) Review and make any necessary adjustments to your SE prevention 
plan to ensure that all measures are being properly implemented; and
    (ii) Begin egg testing (described in Sec.  118.6), unless you 
divert eggs to treatment as defined in Sec.  118.3 for the life of the 
flock in that poultry house. Results of egg testing, when conducted, 
must be available within 10-calendar days of receiving notification of 
the positive environmental test.


Sec.  118.6  Egg testing for Salmonella Enteritidis (SE).

    (a)(1) If the environmental test for pullets at 14 to 16 weeks of 
age required by Sec.  118.4(a) is positive, you must divert eggs to 
treatment (defined in Sec.  118.3) for the life of any flock or conduct 
egg testing within 2 weeks of the start of egg laying, as specified in 
paragraphs (b) through (e) of this section.
    (2) If you have an SE-positive environmental test at any time 
during the life of a flock, you must divert eggs to treatment (defined 
in Sec.  118.3) for the life of the flock in that positive poultry

[[Page 33097]]

house or conduct egg testing as specified in paragraphs (b) through (e) 
of this section.
    (b) Eggs must be sampled as described in Sec.  118.7 and tested 
using methodology as described in Sec.  118.8.
    (c) You must conduct four egg tests, using sampling and methodology 
in Sec. Sec.  118.7 and 118.8, on the flock in the positive poultry 
house at 2-week intervals. If all four tests are negative for SE, you 
are not required to do further egg testing.
    (d) If any of the four egg tests is positive for SE, you must 
divert, upon receiving notification of an SE-positive egg test, all 
eggs from that flock to treatment (defined in Sec.  118.3) until the 
conditions of paragraph (c) of this section are met.
    (e) If you have a positive egg test in a flock and divert eggs from 
that flock and later meet the negative test result requirements 
described in paragraph (c) of this section and return to table egg 
production, you must conduct one egg test per month on that flock, 
using sampling and methodology in Sec. Sec.  118.7 and 118.8, for the 
life of the flock.
    (1) If all the monthly egg tests in paragraph (e) of this section 
are negative for SE, you may continue to supply eggs to the table 
market.
    (2) If any of the monthly egg tests in paragraph (e) of this 
section is positive for SE, you must divert eggs from the positive 
flock to treatment for the life of the flock or until the conditions of 
paragraph (c) of this section are met.
    (f) If you are diverting eggs, the pallet, case, or other shipping 
container must be labeled and all documents accompanying the shipment 
must contain the following statement: ``Federal law requires that these 
eggs must be treated to achieve at least a 5-log destruction of 
Salmonella Enteritidis or processed as egg products in accordance with 
the Egg Products Inspection Act, 21 CFR 118.6(f).'' The statement must 
be legible and conspicuous.


Sec.  118.7  Sampling methodology for Salmonella Enteritidis (SE).

    (a) Environmental sampling. An environmental test must be done for 
each poultry house in accordance with Sec.  118.5 (a) and (b). Within 
each poultry house, you must sample the environment using a sampling 
plan appropriate to the poultry house layout.
    (b) Egg sampling. When you conduct an egg test required under Sec.  
118.6, you must collect and test the following number of eggs from the 
positive poultry house:
    (1) To meet the egg testing requirements of Sec.  118.6(c), you 
must collect and deliver for testing a minimum of 1,000 intact eggs 
representative of a day's production. The 1,000-egg sample must be 
tested according to Sec.  118.8. You must collect and test four 1,000-
egg samples at 2-week intervals for a total of 4,000 eggs.
    (2) To meet the monthly egg testing requirement of Sec.  118.6(e), 
you must collect and deliver for testing a minimum of 1,000 intact eggs 
representative of a day's production per month for the life of the 
flock. Eggs must be tested according to Sec.  118.8.


Sec.  118.8  Testing methodology for Salmonella Enteritidis (SE).

    (a) Testing of environmental samples for SE. Testing to detect SE 
in environmental samples must be conducted by the method entitled 
``Environmental Sampling and Detection of Salmonella in Poultry 
Houses,'' April 2008, or an equivalent method in accuracy, precision, 
and sensitivity in detecting SE. The April 2008 Environmental Sampling 
and Detection of Salmonella Web site is located at http://www.fda.gov/
Food/ScienceResearch/LaboratoryMethods/ucm114716.htm, current as of 
June 26, 2009. The Director of the Federal Register approves the 
incorporation by reference of ``Environmental Sampling and Detection of 
Salmonella in Poultry Houses,'' April 2008, in accordance with 5 U.S.C. 
552(a) and 1 CFR part 51. The FDA will request approval to incorporate 
by reference any updates to this Web site. The FDA will change the date 
of the Web site in this paragraph with each update. You may obtain a 
copy from Division of Microbiology (HFS-710), Center for Food Safety 
and Applied Nutrition, Food and Drug Administration, 5100 Paint Branch 
Pkwy., College Park, MD 20740, 301-436-2364, or you may examine a copy 
at the Center for Food Safety and Applied Nutrition's Library, 5100 
Paint Branch Pkwy., College Park, MD, 301-436-2163, or at the National 
Archives and Records Administration (NARA). For information on the 
availability of this material at NARA, call 202-741-6030, or go to: 
http://www.archives.gov/federal_register/code_of_federal_
regulation/ibr_locations.html.
    (b) Testing of egg samples for SE. Testing to detect SE in egg 
samples must be conducted according to Chapter 5 of FDA's 
Bacteriological Analytical Manual (BAM), December 2007 Edition, or an 
equivalent method in accuracy, precision, and sensitivity in detecting 
SE. Chapter 5 of FDA's Bacteriological Analytical Manual, December 2007 
Edition, is located at http://www.fda.gov/Food/ScienceResearch/
LaboratoryMethods/BacteriologicalAnalyticalManualBAM/ucm070149.htm, 
current as of June 26, 2009. The method is incorporated by reference in 
accordance with 5 U.S.C. 552(a) and 1 CFR part 51. The FDA will request 
approval to incorporate by reference any updates to this Web site. The 
FDA will change the date of the Web site in this paragraph with each 
update. You may obtain a copy from Division of Microbiology (HFS-710), 
Center for Food Safety and Applied Nutrition, Food and Drug 
Administration, 5100 Paint Branch Pkwy., College Park, MD 20740, 301-
436-2364, or you may examine a copy at the Center for Food Safety and 
Applied Nutrition's Library, 5100 Paint Branch Pkwy., College Park, MD, 
301-436-2163, or at the National Archives and Records Administration 
(NARA). For information on the availability of this material at NARA, 
call 202-741-6030, or go to: http://www.archives.gov/federal_register/
code_of_federal_regulation/ibr_locations.html.


Sec.  118.9  Administration of the Salmonella Enteritidis (SE) 
prevention plan.

    You must have one or more supervisory personnel, who do not have to 
be on-site employees, to be responsible for ensuring compliance with 
each farm's SE prevention plan. This person must have successfully 
completed training on SE prevention measures for egg production that is 
equivalent to that received under a standardized curriculum recognized 
by the Food and Drug Administration or must be otherwise qualified 
through job experience to administer the SE prevention measures. Job 
experience will qualify this person to perform these functions if it 
has provided knowledge at least equivalent to that provided through the 
standardized curriculum. This person is responsible for:
    (a) Development and implementation of an SE prevention plan that is 
appropriate for your specific farm and meets the requirements of Sec.  
118.4;
    (b) Reassessing and modifying the SE prevention plan as necessary 
to ensure that the requirements in Sec.  118.4 are met; and
    (c) Review of records created under Sec.  118.10. This person does 
not need to have performed the monitoring or created the records.


Sec.  118.10  Recordkeeping requirements for the Salmonella Enteritidis 
(SE) prevention plan.

    (a) Records: You must maintain the following records documenting 
your SE prevention measures:
    (1) A written SE prevention plan required by Sec.  118.4;

[[Page 33098]]

    (2) Documentation that pullets were ``SE monitored'' or were raised 
under ``SE monitored'' conditions, including environmental testing 
records for pullets, as required by Sec.  118.4(a)(2);
    (3) Records documenting compliance with the SE prevention measures, 
as follows:
    (i) Biosecurity measures;
    (ii) Rodent and other pest control measures;
    (iii) Cleaning and disinfection procedures performed at 
depopulation, when applicable;
    (iv) Refrigeration requirements;
    (v) Environmental and egg sampling procedures, when applicable, 
performed under Sec.  118.7;
    (vi) Results of SE testing, when applicable, performed under Sec.  
118.8 as required in Sec. Sec.  118.4(a)(2), 118.5, and 118.6;
    (vii) Diversion of eggs, if applicable, as required in Sec.  118.6; 
and
    (viii) Eggs at a particular farm being given a treatment as defined 
in Sec.  118.3, if you are a producer complying with the requirements 
of this section as described in Sec.  118.1(a)(2).
    (4) Records of review and of modifications of the SE prevention 
plan and corrective actions taken.
    (b) General requirements for records maintained by shell egg 
producers. All records required by Sec.  118.10(a) must include:
    (1) Your name and the location of your farm,
    (2) The date and time of the activity that the record reflects,
    (3) The signature or initials of the person performing the 
operation or creating the record. The written SE prevention plan must 
be dated and carry the signature(s) (not initials) of the person(s) who 
administers the plan as described in Sec.  118.9, and
    (4) Data and information reflecting compliance activities must be 
entered on records at the time the activity is performed or observed, 
and the records must contain the actual values observed, if applicable.
    (c) Length of time records must be retained. You must retain all 
records required by this part at your place of business, unless stored 
offsite under Sec.  118.10(d), for 1 year after the flock to which they 
pertain has been taken permanently out of production.
    (d) Offsite storage of records. You may store the records required 
by this part, except for the written SE prevention plan, offsite. You 
must be able to retrieve and provide the records at your place of 
business within 24 hours of request for official review. Electronic 
records are considered to be onsite if they are accessible from an 
onsite location.
    (e) Official review of records. You must have all records required 
by this part available for official review and copying at reasonable 
times.
    (f) Public disclosure of records. Records required by this part are 
subject to the disclosure requirements under part 20 of this chapter.


Sec.  118.11  Registration requirements for shell egg producers covered 
by the requirements of this part.

    (a) Shell egg producers covered under Sec.  118.1(a) of this part 
are required to register their farms with the FDA within 30 days of 
becoming an egg producer or, if already an egg producer, by the 
applicable effective date of this regulation.
    (b) Shell egg producers may register their farms by any of the 
following means:
    (1) Electronic registration. To register electronically, you must 
register at http://www.access.fda.gov, which will be available for 
registration 24 hours a day, 7 days a week beginning May 10, 2010. This 
Web site is available from wherever the Internet is accessible, 
including libraries, copy centers, schools, and Internet cafes.
    (i) An individual authorized by the owner or operator of a farm, 
such as an agent in charge, may also register a farm electronically.
    (ii) FDA strongly encourages electronic registration for the 
benefit of both FDA and the registrant.
    (iii) Once you complete your electronic registration, FDA will 
automatically provide you with an electronic confirmation of 
registration and a permanent registration number.
    (iv) You will be considered registered once FDA electronically 
transmits your confirmation and registration number.
    (2) Registration by mail or by fax. If, for example, you do not 
have reasonable access to the Internet through any of the methods 
described in paragraph (b)(1) of this section, an individual authorized 
by the owner or operator of a farm, such as an agent in charge, may 
register by mail or fax.
    (i) You must register using FDA Form No. 3733. You may obtain a 
copy of this form by writing to the U.S. Food and Drug Administration, 
10903 New Hampshire Ave., Silver Spring, MD 20993, or by requesting the 
form by phone at 1-888-INFO-FDA (1-888-463-6332).
    (ii) When you receive the form, you must fill it out completely and 
legibly and either mail it to the address in paragraph (b)(2)(i) of 
this section or fax it to the number on the form.
    (iii) If any required information on the form is incomplete or 
illegible when FDA receives it, FDA will return the form to you for 
revision, provided that your mailing address or fax number is legible 
and valid. When returning a registration form for revision, FDA will 
use the means by which the form was received by the agency (i.e., by 
mail or fax).
    (iv) FDA will enter complete and legible mailed and faxed 
registration submissions into its registration system, along with CD-
ROM submissions, as soon as practicable, in the order FDA receives 
them.
    (v) FDA will then mail to the address or fax to the fax number on 
the registration form a copy of the registration as entered, 
confirmation of registration, and your registration number. When 
responding to a registration submission, FDA will use the means by 
which the registration was received by the agency (i.e., by mail or 
fax).
    (vi) If any information you previously submitted was incorrect at 
the time of submission, you must immediately update your facility's 
registration. If any information you previously submitted that was 
correct at the time of submission subsequently changes, you must update 
your facility's registration within 60 calendar days.
    (vii) Your facility is considered registered once FDA enters your 
facility's registration data into the registration system and the 
system generates a registration number.
    (3) Registration by CD-ROM for multiple submissions. If, for 
example, you do not have reasonable access to the Internet through any 
of the methods provided under paragraph (b)(1) of this section, you may 
register by CD-ROM.
    (i) Registrants submitting their registrations in CD-ROM format 
must use ISO 9660 (CD-R or CD-RW) data format.
    (ii) These files must be submitted on a portable document format 
(PDF) rendition of the registration form (FDA Form No. 3733) and be 
accompanied by one signed copy of the certification statement that 
appears on the registration form.
    (iii) Each submission on the CD-ROM must contain the same preferred 
mailing address in the appropriate block on FDA Form No. 3733.
    (iv) A CD-ROM may contain registrations for as many facilities as 
needed up to the CD-ROM's capacity.
    (v) The registration on the CD-ROM for each separate facility must 
have a unique file name up to 32 characters long, the first part of 
which may be used to identify the parent company.
    (vi) You must mail the CD-ROM to the U.S. Food and Drug 
Administration,

[[Page 33099]]

10903 New Hampshire Avenue, Silver Spring, MD 20993.
    (vii) If FDA receives a CD-ROM that does not comply with these 
specifications, it will return the CD-ROM to the submitter unprocessed.
    (viii) FDA will enter CD-ROM submissions that comply with these 
specifications into its registration system, along with the complete 
and legible mailed and faxed submissions, as soon as practicable, in 
the order FDA receives them.
    (ix) For each facility on the CD-ROM, FDA will mail to the 
preferred mailing address a copy of the registration(s) as entered, 
confirmation of registration, and each facility's assigned registration 
number.
    (x) If any information you previously submitted was incorrect at 
the time of submission, you must immediately update your facility's 
registration. If any information you previously submitted that was 
correct at the time of submission subsequently changes, you must update 
your facility's registration within 60 calendar days.
    (xi) Your facility is considered registered once FDA enters your 
facility's registration data into the registration system and the 
system generates a registration number.
    (c) No registration fee is required.
    (d) You must submit all registration information in the English 
language. All information must be submitted using the Latin (Roman) 
alphabet.
    (e) Each registrant must submit the following information through 
one of the methods described in paragraph (b) of this section:
    (1) The name, full address, and phone number of the farm; and
    (2) The average or usual number of layers of each house and number 
of poultry houses on the farm.
    (3) A statement in which the shell egg producer certifies that the 
information submitted is true and accurate. If the individual 
submitting the form is not the shell egg producer in charge of the 
farm, the registration must also include a statement in which the 
individual certifies that the information submitted is true and 
accurate, certifies that he/she is authorized to submit registration, 
and identifies by name, address, and telephone number, the individual 
who authorized submission of the registration. Each registration must 
include the name of the individual registering the farm submitting the 
registration, and the individual's signature (for paper and CD-ROM 
options).
    (f) Registered egg producers must submit an update to a 
registration within 60-calendar days of any change to any of the 
information previously submitted by any of the means as provided in 
Sec.  118.11(b).
    (g) Registered egg producers must notify FDA within 120 days of 
ceasing egg production by completing sections 1b, 1c, and 2 of Form 
3733. This notification is not required if you are a seasonal egg 
producer or you temporarily cease operation due to labor disputes, 
fire, natural disasters, or other temporary conditions.


Sec.  118.12  Enforcement and compliance.

    (a) Authority. This part is established under authority of the 
Public Health Service Act (the PHS Act). Under the FFDCA, the Food and 
Drug Administration (FDA) can enforce the food adulteration provisions 
under 21 U.S.C. 331 through 334 and 342. Under the PHS Act (42 U.S.C. 
264), FDA has the authority to make and enforce regulations for the 
control of communicable diseases. FDA has established the following 
administrative enforcement procedures for the diversion or destruction 
of shell eggs and for informal hearings under the PHS Act:
    (1) Upon a finding that any shell eggs have been produced or held 
in violation of this part, an authorized FDA representative or a State 
or local representative in accordance with paragraph (c) of this 
section may order such eggs to be diverted, under the supervision of 
said representative, for processing in accordance with the Egg Products 
Inspection Act (EPIA) (21 U.S.C. 1031 et seq.) or by a treatment that 
achieves at least a 5-log destruction of SE or destroyed by or under 
the supervision of an officer or employee of FDA, or, if applicable, of 
the State or locality in accordance with the following procedures:
    (i) Order for diversion or destruction under the PHS Act. Any 
district office of FDA or any State or locality acting under paragraph 
(c) of this section, upon finding shell eggs that have been produced or 
held in violation of this regulation, may serve a written order upon 
the person in whose possession the eggs are found requiring that the 
eggs be diverted, under the supervision of an officer or employee of 
the issuing entity, for processing in accordance with the EPIA (21 
U.S.C. 1031 et seq.) or by a treatment that achieves at least a 5-log 
destruction of SE or destroyed by or under the supervision of the 
issuing entity, within 10-working days from the date of receipt of the 
order, unless, under paragraph (a)(2)(iii) of this section, a hearing 
is held, in which case the eggs must be diverted or destroyed 
consistent with the decision of the Regional Food and Drug Director 
under paragraph (a)(2)(v) of this section. The order must include the 
following information:
    (A) A statement that the shell eggs identified in the order are 
subject to diversion for processing in accordance with the EPIA or by a 
treatment that achieves at least a 5-log destruction of SE or 
destruction;
    (B) A detailed description of the facts that justify the issuance 
of the order;
    (C) The location of the eggs;
    (D) A statement that these eggs must not be sold, distributed, or 
otherwise disposed of or moved except as provided in paragraph 
(a)(1)(iv) of this section;
    (E) Identification or description of the eggs;
    (F) The order number;
    (G) The date of the order;
    (H) The text of this entire section;
    (I) A statement that the order may be appealed by written appeal or 
by requesting an informal hearing;
    (J) The name and phone number of the person issuing the order; and
    (K) The location and telephone number of the office or agency 
issuing the order and the name of its Director.
    (ii) Approval of District Director. An order, before issuance, must 
be approved by FDA's District Director or the Acting District Director. 
If prior written approval is not feasible, prior oral approval must be 
obtained and confirmed by written memorandum as soon as possible.
    (iii) Labeling or marking of shell eggs under order. An FDA, State, 
or local representative issuing an order under paragraph (a)(1)(i) of 
this section must label or mark the shell eggs with official tags that 
include the following information:
    (A) A statement that the shell eggs are detained in accordance with 
regulations issued under section 361(a) of the PHS Act (42 U.S.C. 
264(a)).
    (B) A statement that the shell eggs must not be sold, distributed 
or otherwise disposed of or moved except, after notifying the issuing 
entity in writing, to:
    (1) Divert them for processing in accordance with the EPIA or by a 
treatment that achieves at least a 5-log destruction of SE or destroy 
them or
    (2) Move them to another location for holding pending appeal.
    (C) A statement that the violation of the order or the removal or 
alteration of the tag is punishable by fine or imprisonment or both 
(section 368 of the PHS Act (42 U.S.C. 271)).
    (D) The order number and the date of the order, and the name of the 
government representative who issued the order.

[[Page 33100]]

    (iv) Sale or other disposition of shell eggs under order. After 
service of the order, the person in possession of the shell eggs that 
are the subject of the order must not sell, distribute, or otherwise 
dispose of or move any eggs subject to the order unless and until 
receiving a notice that the order is withdrawn after an appeal except, 
after notifying FDA's district office or, if applicable, the State or 
local representative, in writing, to:
    (A) Divert or destroy them as specified in paragraph (a)(1)(i) of 
this section, or
    (B) Move them to another location for holding pending appeal.
    (2) The person on whom the order for diversion or destruction is 
served may either comply with the order or appeal the order to the 
Regional Food and Drug Director in accordance with the following 
procedures:
    (i) Appeal of a detention order. Any appeal must be submitted in 
writing to FDA's District Director in whose district the shell eggs are 
located within 5-working days of the issuance of the order. If the 
appeal includes a request for an informal hearing, the hearing must be 
held within 5-working days after the appeal is filed or, if requested 
by the appellant, at a later date, which must not be later than 20-
calendar days after the issuance of the order. The order may also be 
appealed within the same period of 5-working days by any other person 
having an ownership or proprietary interest in such shell eggs. The 
appellant of an order must state the ownership or proprietary interest 
the appellant has in the shell eggs.
    (ii) Summary decision. A request for a hearing may be denied, in 
whole or in part and at any time after a request for a hearing has been 
submitted, if the Regional Food and Drug Director or his or her 
designee determines that no genuine and substantial issue of fact has 
been raised by the material submitted in connection with the hearing or 
from matters officially noticed. If the Regional Food and Drug Director 
determines that a hearing is not justified, written notice of the 
determination will be given to the parties explaining the reason for 
denial.
    (iii) Informal hearing. Appearance by any appellant at the hearing 
may be by mail or in person, with or without counsel. The informal 
hearing must be conducted by the Regional Food and Drug Director or his 
designee, and a written summary of the proceedings must be prepared by 
the Regional Food and Drug Director.
    (A) The Regional Food and Drug Director may direct that the hearing 
be conducted in any suitable manner permitted by law and by this 
section. The Regional Food and Drug Director has the power to take such 
actions and make such rulings as are necessary or appropriate to 
maintain order and to conduct an informal, fair, expeditious, and 
impartial hearing, and to enforce the requirements concerning the 
conduct of hearings.
    (B) Employees of FDA will first give a full and complete statement 
of the action that is the subject of the hearing, together with the 
information and reasons supporting it, and may present oral or written 
information relevant to the hearing. The party requesting the hearing 
may then present oral or written information relevant to the hearing. 
All parties may conduct reasonable examination of any person (except 
for the presiding officer and counsel for the parties) who makes any 
statement on the matter at the hearing.
    (C) The hearing shall be informal in nature, and the rules of 
evidence do not apply. No motions or objections relating to the 
admissibility of information and views will be made or considered, but 
any party may comment upon or rebut any information and views presented 
by another party.
    (D) The party requesting the hearing may have the hearing 
transcribed, at the party's expense, in which case a copy of the 
transcript is to be furnished to FDA. Any transcript of the hearing 
will be included with the Regional Food and Drug Director's report of 
the hearing.
    (E) The Regional Food and Drug Director must prepare a written 
report of the hearing. All written material presented at the hearing 
will be attached to the report. Whenever time permits, the Regional 
Food and Drug Director may give the parties the opportunity to review 
and comment on the report of the hearing.
    (F) The Regional Food and Drug Director must include as part of the 
report of the hearing a finding on the credibility of witnesses (other 
than expert witnesses) whenever credibility is a material issue, and 
must include a recommended decision, with a statement of reasons.
    (iv) Written appeal. If the appellant appeals the detention order 
but does not request a hearing, the Regional Food and Drug Director 
must render a decision on the appeal affirming or revoking the 
detention order within 5-working days after the receipt of the appeal.
    (v) Regional Food and Drug Director decision. If, based on the 
evidence presented at the hearing or by the appellant in a written 
appeal, the Regional Food and Drug Director finds that the shell eggs 
were produced or held in violation of this section, he must affirm the 
order that they be diverted, under the supervision of an officer or 
employee of FDA for processing under the EPIA or by a treatment that 
achieves at least a 5-log destruction of SE or destroyed by or under 
the supervision of an officer or employee of FDA; otherwise, the 
Regional Food and Drug Director must issue a written notice that the 
prior order is withdrawn. If the Regional Food and Drug Director 
affirms the order, he must order that the diversion or destruction be 
accomplished within 10-working days from the date of the issuance of 
his decision. The Regional Food and Drug Director's decision must be 
accompanied by a statement of the reasons for the decision. The 
decision of the Regional Food and Drug Director constitutes final 
agency action, subject to judicial review.
    (vi) No appeal. If there is no appeal of the order and the person 
in possession of the shell eggs that are subject to the order fails to 
divert or destroy them within 10-working days, or if the demand is 
affirmed by the Regional Food and Drug Director after an appeal and the 
person in possession of such eggs fails to divert or destroy them 
within 10-working days, FDA's district office or, if applicable, the 
State or local representative may designate an officer or employee to 
divert or destroy such eggs. It shall be unlawful to prevent or to 
attempt to prevent such diversion or destruction of the shell eggs by 
the designated officer or employee.
    (b) Inspection. Persons engaged in production of shell eggs must 
permit authorized representatives of FDA to make, at any reasonable 
time, an inspection of the egg production establishment in which shell 
eggs are being produced. Such inspection includes the inspection and 
sampling of shell eggs and the environment, the equipment related to 
production of shell eggs, the equipment in which shell eggs are held, 
and examination and copying of any records relating to such equipment 
or eggs, as may be necessary in the judgment of such representatives to 
determine compliance with the provisions of this section. Inspections 
may be made with or without notice and will ordinarily be made during 
regular business hours.
    (c) State and local cooperation. Under sections 311 and 361 of the 
Public Health Service Act, any State or locality that is willing and 
able to assist the agency in the enforcement of Sec. Sec.  118.4 
through 118.10, and is authorized to inspect or regulate egg production 
establishments, may, in its own jurisdiction, enforce Sec. Sec.  118.4 
through

[[Page 33101]]

118.10 through inspections under paragraph (b) of this section and 
through administrative enforcement remedies specified in paragraph (a) 
of this section unless FDA notifies the State or locality in writing 
that such assistance is no longer needed. A state or locality may 
substitute, where necessary, appropriate State or local officials for 
designated FDA officials in this section. When providing assistance 
under paragraph (a) of this section, a State or locality may follow the 
hearing procedures set out in paragraphs (a)(2)(iii) through (a)(2)(v) 
of this section, or may utilize comparable State or local hearing 
procedures if such procedures satisfy due process.
    (d) Preemption. No State or local governing entity shall establish, 
or continue in effect any law, rule, regulation, or other requirement 
regarding prevention of SE in shell eggs during production, storage, or 
transportation that is less stringent than those required by this part.

    Dated: July 2, 2009.
Jeffrey Shuren,
Associate Commissioner for Policy and Planning.
[FR Doc. E9-16119 Filed 7-7-09; 1:30 pm]

BILLING CODE 4164-01-P
