
[Federal Register: September 18, 2008 (Volume 73, Number 182)]
[Proposed Rules]               
[Page 54106-54118]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18se08-26]                         

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 1

[Docket No. FDA-2007-N-0465]
RIN 0910-AF61

 
Label Requirement for Food That Has Been Refused Admission into 
the United States

AGENCY:  Food and Drug Administration, HHS.

ACTION:  Proposed rule.

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SUMMARY:  The Food and Drug Administration (FDA) is issuing a proposed 
rule that would require owners or consignees to label imported food 
that is refused entry into the United States. The label would read, 
``UNITED STATES: REFUSED ENTRY.'' The proposal would describe the 
label's characteristics (such as its size) and processes for verifying 
that the label has been affixed properly. We are taking this action to 
prevent the reintroduction of refused food into the United States, to 
facilitate the examination of imported food, and to implement part of 
the Public Health Security and Bioterrorism Preparedness and Response 
Act of 2002.

DATES:  Submit written or electronic comments on the proposed rule by 
December 2, 2008. Submit comments on information collection issues 
under the Paperwork Reduction Act of 1995 October 20, 2008, (see the 
``Paperwork Reduction Act of 1995'' section of this document).

ADDRESSES:  You may submit comments, identified by Docket No. FDA-2007-
N-0465, by any of the following methods, except that comments on 
information collection issues under the Paperwork Reduction Act of 1995 
must be submitted to the Office of Regulatory Affairs, Office of 
Management and Budget (OMB) (see the ``Paperwork Reduction Act of 
1995'' section of this document).
Electronic Submissions
    Submit electronic comments in the following way:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
Written Submissions
    Submit written submissions in the following ways:
     FAX: 301-827-6870.
     Mail/Hand delivery/Courier (for paper, disk, or CD-ROM 
submissions): Division of Dockets Management (HFA-305), Food and Drug 
Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852.
    To ensure more timely processing of comments, FDA is no longer 
accepting comments submitted to the agency by e-mail. FDA encourages 
you to continue to submit electronic comments by using the Federal 
eRulemaking Portal or the agency Web site, as described previously, in 
the ADDRESSES portion of this document under Electronic Submissions.
    Instructions: All submissions received must include the agency name 
and docket number and Regulatory Information Number (RIN) for this 
rulemaking. All comments received may be posted without change to 
http://www.regulations.gov, including any personal information 
provided. For additional information on submitting comments, see the 
``Comments'' heading of the SUPPLEMENTARY INFORMATION section of this 
document.
    Docket: For access to the docket to read background documents or 
comments received, go to http://www.regulations.gov and insert the 
docket number, found in brackets in the heading of this document, into 
the ``Search'' box and follow the prompts and/or go to the Division of 
Dockets Management, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852.

FOR FURTHER INFORMATION CONTACT:  Philip L. Chao, Office of Policy and 
Planning (HF-23), Food and Drug Administration, 5600 Fishers Lane, 
Rockville, MD 20857, 301-827-0587.

SUPPLEMENTARY INFORMATION:

I. Introduction

A. How Did the Idea of Marking Refused Food Imports Originate?

    Section 801 of the Federal Food, Drug, and Cosmetic Act (the act) 
(21 U.S.C. 381) authorizes us to examine foods, drugs, devices, and 
cosmetics that are imported or offered for import into the United 
States and to refuse admission to products that appear, from 
examination or otherwise, to be (among other things) adulterated or 
misbranded.
    Our examination of food imports usually begins with an electronic 
prior notice and then an entry review to determine whether additional 
scrutiny at arrival or thereafter is warranted. We may, based on our 
review, permit the goods to proceed without further examination. We may 
take additional steps to determine whether the shipment appears to 
comply with the act, including: (1) Visually examining the goods; (2) 
taking samples of the goods for laboratory analysis; (3) verifying the 
registration, declarations, and certifications for the goods; and/or 
(4) requesting supporting documentation. If our additional

[[Page 54107]]

examination shows that the food appears to be in compliance with the 
act, we allow the shipment to proceed. If the food appears not to be in 
compliance, we issue a notice that the shipment has been detained, and 
the owner or consignee has an informal opportunity to provide evidence 
or testimony that the food complies with the act or to submit a plan to 
recondition the food (21 CFR 1.94 and 1.95). If the importer is unable 
to demonstrate that the food complies with the act and reconditioning 
has failed to bring the food into compliance, we refuse admission to 
the food. Section 801(a) of the act provides that, if refused foods are 
not re-exported within 90 days of refusal (or such other time as 
Customs and Border Protection (CBP) permits), CBP ensures that the food 
is destroyed.
    In the Federal Register of January 22, 2001 (66 FR 6502), we 
published a proposed rule (the 2001 proposed rule) that would require 
importers or consignees whose food is refused entry into the United 
States for safety reasons to mark the refused foods. The mark would 
state, ``UNITED STATES REFUSED ENTRY.'' The proposed rule also would 
prohibit persons from refusing to affix this mark on refused food, from 
importing or offering to import a previously refused food, and from 
altering, removing, tampering with, or concealing a mark.
    We issued the 2001 proposed rule to address a practice known as 
``port shopping.'' In general, when FDA refuses to admit a food into 
the United States, the food must be exported from the United States or 
destroyed. However, instead of simply exporting or destroying the 
refused food, some unscrupulous persons attempt to bring the refused 
food back into the United States by shipping it to another port in 
hopes that the food will be admitted into the United States at that 
other port.
    The 2001 proposed rule also was in response to an April 1998 report 
by the General Accounting Office (GAO), 1998 hearings held by the 
Senate Committee on Governmental Affairs' Permanent Subcommittee on 
Investigations, and a July 3, 1999, Presidential memorandum (see GAO, 
``Food Safety: Federal Efforts to Ensure the Safety of Imported Foods 
are Inconsistent and Unreliable'' (GAO/RCED-98-103); The Safety of Food 
Imports: Fraud & Deception in the Food Import Process; Hearings Before 
the Senate Committee on Governmental Affairs, Permanent Subcommittee on 
Investigations, September 10, 1998; ``Memorandum on the Safety of 
Imported Foods,'' Weekly Compilation of Presidential Documents, 
Administration of William J. Clinton, 1999, July 3, at pages 1277 
through 1278). The GAO report and the Senate subcommittee hearings 
discussed marking refused foods as a way to enhance the safety of 
imported foods (see 66 FR 6502 at 6503). The July 3, 1999, memorandum 
from then-President Clinton to the Secretary of Health and Human 
Services and the Secretary of the Treasury also discussed imported food 
safety. The memorandum identified food safety as a high priority and 
directed the Secretaries to take all actions available to ``prohibit 
the reimportation of food that has been previously refused admission 
and has not been brought into compliance with United States laws and 
regulations (so called ``port shopping''), and require the marking of 
shipping containers and/or papers of imported food that is refused 
admission for safety reasons'' (id.).

B. What Happened to the Previous Effort to Require Marking of Refused 
Food?

    We received 13 comments on the 2001 proposed rule and were nearing 
completion of a final rule when, on June 12, 2002, the Public Health 
Security and Bioterrorism Preparedness and Response Act of 2002 (the 
Bioterrorism Act) (Public Law 107-188) became law. Section 308(a) of 
the Bioterrorism Act created a new section 801(n) of the act, which 
provides additional express authority to require labels on refused 
foods. Section 801(n)(1) of the act states that we may require the 
owner or consignee of a food that had been refused admission into the 
United States to ``affix to the container of the food a label that 
clearly and conspicuously bears the statement: `UNITED STATES: REFUSED 
ENTRY'.'' Section 801(n)(2) of the act requires the owner or consignee 
of the food involved to pay all expenses in connection with affixing 
the label. Section 801(n)(3) of the act states that a requirement under 
section 801(n)(1) of the act remains in effect until we determine that 
the food has been brought into compliance with the act.
    The Bioterrorism Act made clear that the new provisions were not 
intended to detract from our existing authority to require refused food 
imports to be marked as such. Section 308(c) of the Bioterrorism Act 
states that, ``nothing in this section shall be construed to limit the 
authority of the Secretary of Health and Human Services or the 
Secretary of the Treasury to require the marking of refused articles of 
food under any other provision of law.'' Nonetheless, the new statutory 
requirements differed from our 2001 proposed rule in several ways, and 
these differences led us to withdraw the 2001 proposed rule on August 
21, 2002 (67 FR 54138), and re-examine how we should implement this 
authority.
    We summarize the principal differences between our earlier 2001 
proposed rule and the requirements in section 801(n) of the act here.

   Table 1--Principal Differences Between FDA's January 22, 2001, Proposed Rule and Section 801(n) of the Act
----------------------------------------------------------------------------------------------------------------
    Provision in the January 22, 2001 Proposed Rule               Provision in Section 801(n) of the Act
----------------------------------------------------------------------------------------------------------------
Would authorize marking of food that was refused         Authorizes labels on the container of food that was
 admission into the United States for safety reasons      refused admission into the United States, except for
                                                          food that is required to be destroyed
----------------------------------------------------------------------------------------------------------------
Would require the mark to be at least 2.5 centimeters    Requires the label statement to be clear and
 or 1 inch high and to be clear, conspicuous, and         conspicuous
 permanently affixed
----------------------------------------------------------------------------------------------------------------
Mark would state, ``UNITED STATES REFUSED ENTRY''        Label states, ``UNITED STATES: REFUSED ENTRY''
----------------------------------------------------------------------------------------------------------------
No express provision regarding fees                      Requires owner or consignee of the food involved to pay
                                                          all expenses in connection with affixing the label and
                                                          authorizes liens in event of default of such payment
----------------------------------------------------------------------------------------------------------------

[[Page 54108]]


Would require the mark to go on the food's packing       Label to be affixed to the container
 container, if possible, and to an invoice, bill of
 lading, and any other shipping document accompanying
 the food when it is exported
----------------------------------------------------------------------------------------------------------------
Would prohibit altering, tampering with, or concealing   Food is misbranded if: it fails to bear a label
 a mark                                                   (concerning the fact that the food has been refused
                                                          admission); the food presents a threat of serious
                                                          adverse health consequences or death to humans or
                                                          animals; and, upon or after notifying the owner or
                                                          consignee involved that a label is required, the owner
                                                          or consignee is informed that the food presents such a
                                                          threat.
----------------------------------------------------------------------------------------------------------------

    On July 18, 2007, President George W. Bush established an 
Interagency Working Group on Import Safety to conduct a comprehensive 
review of import safety practices and to determine areas for 
improvement. On November 6, 2007, the Working Group submitted its 
report, Action Plan for Import Safety: A Roadmap for Continual 
Improvement, to the President. Publishing this proposed rule by mid-
2008 was a planned action in the report.
    This proposed rule would, among other things, implement section 
801(n) of the act and address labeling the documents associated with 
foods that have been refused admission, whether or not the foods have 
``containers'' as we propose to define that term for purposes of 
section 801(n) of the act.

II. Description of the Proposed Rule

A. Introduction

    We are proposing to amend our import regulations to create a new 
Sec.  1.98, entitled ``Label requirement on food imports refused 
admission into the United States.'' The proposal would require all 
owners or consignees to label the shipping container of food refused 
admission into the United States under section 801(a) of the act, as 
well as any documents (including electronic documents) accompanying the 
food. The label would make it more difficult for imported food that has 
been refused admission into the United States to evade import controls 
and would complement our other efforts to monitor food imports.
    There is no direct counterpart to section 801(n) of the act with 
respect to food that has been produced domestically rather than 
imported. Food produced domestically that is not in compliance with the 
act is subject to a range of regulatory and enforcement actions. For 
example, we may seek to seize the food under section 304 of the act (21 
U.S.C. 334), seek an injunction under section 302 of the act (21 U.S.C. 
332), or request that a firm voluntarily initiate a recall.

B. Who Is Subject to the Label Requirement? (Proposed Sec.  1.98(a))

    In general, proposed Sec.  1.98(a) would state that you are subject 
to the rule if you are an owner or consignee of an imported food 
(including food for animals) which we have refused to admit into the 
United States (other than a food which must be destroyed). The proposal 
would require you to affix labels stating, ``UNITED STATES: REFUSED 
ENTRY,'' as described in proposed Sec.  1.98(b) and (c) (which we 
discuss later in part II.C and II.D of this document).
    Under our pre-existing import program, when an FDA-regulated food 
product is offered for import, we review electronic information about 
the product provided under the prior notice procedures described in 21 
CFR 1.276 through 1.285. If prior notice requirements are satisfied, we 
then conduct an admissibility review to determine whether the food 
meets the safety and quality standards under the act and its 
implementing regulations that likewise apply to food produced or grown 
in the United States. If our review of that information determines that 
further evaluation of the information or article is unnecessary, we 
notify CBP that the article may proceed without further FDA 
examination. If further evaluation is deemed necessary, our staff may 
request additional information to make an admissibility determination 
or may examine or sample the product. Finally, if our review indicates 
that the product appears ``by examination or otherwise'' to be subject 
to refusal of admission under section 801(a) of the act (e.g., appears 
to be adulterated or misbranded), we will take appropriate action, and 
notify the owner or consignee and customs broker that we are detaining 
the shipment by sending a ``Notice of FDA Action.''
    The Notice of FDA Action specifies the nature of the violations 
identified through our evaluation and designates an address where the 
recipient may present information to us. If the person receiving the 
Notice of FDA Action accepts the refusal of admission or if our 
district office determines, after reviewing the information provided to 
it, that the imported food continues to appear to be in violation, we 
then issue a ``Notice of Refusal of Admission.'' The Notice of Refusal 
of Admission finalizes the charges and provides for the food's 
exportation or destruction within 90 days of the notice's date or 
within timeframes set by CBP. We intend to modify these types of 
notices to state that a refused food import is subject to the labeling 
requirements described in this proposal and to indicate whether a 
refused food presents a threat of serious adverse consequences or death 
to humans or animals because of the misbranding requirement seen at 
section 403(v) of the act (21 U.S.C. 343(v)). Under section 403(v) of 
the act, a food is misbranded if: (1) It fails to bear a label required 
by regulation under section 801(n)(1) of the act; (2) we find that the 
food presents a threat of serious adverse consequences or death to 
humans or animals; and (3) upon or after notification that the label is 
required, we inform the owner or consignee that the food presents such 
a threat.
    Proposed Sec.  1.98(a) reference to owners and consignees of an 
imported food reflects the language in section 801(n)(1) of the act. 
However, for purposes of proposed Sec.  1.98, we intend to interpret 
``owner'' and ``consignee'' to include persons acting on the owner's or 
consignee's behalf, such as the owner's employees and agents. This 
practical and common sense interpretation would preclude arguments we 
have seen in other regulatory contexts where parties have argued that a 
particular statutory or regulatory requirement is too burdensome 
because only the specific

[[Page 54109]]

individual owner, and not any employee or agent retained by the owner, 
can satisfy the requirement. Here, if an owner instructs its employee 
or agent to affix the label to a shipping container or documents, we 
would consider the employee or agent to be acting on the owner's behalf 
and the employee's or agent's action to be consistent with section 
801(n)(1) of the act and proposed Sec.  1.98(a).
    Proposed Sec.  1.98(a) also would state that imported food includes 
``food for animals.'' This reflects the fact that animal food or feed 
falls within the definition of ``food'' in section 201(f) of the act 
(21 U.S.C. 321(f)).

C. What Does the Label Look Like? (Proposed Sec.  1.98(b))

    Proposed Sec.  1.98(b) would require the label to state, ``UNITED 
STATES: REFUSED ENTRY'' in capital letters and in black ink on a white 
background. For labels that are to be affixed to shipping containers, 
proposed Sec.  1.98(b)(1) would require the label's letters to use 
either an Arial or Univers font style and be at least 72 points in 
size. The label would use uppercase letters only. (We discuss shipping 
containers and documents in greater detail in part II.D of this 
document.)
    For labels that are to be affixed to documents (including 
electronic documents), proposed Sec.  1.98(b)(2) would require the 
label's letters to be in black ink, use either an Arial or Univers font 
style, and be at least 36 points in size. The label would use uppercase 
letters only. We tentatively have decided to specify the label's fonts 
and sizes in proposed Sec.  1.98(b)(1) and (b)(2) because such a 
requirement would make the label clear, conspicuous, and easy to read 
and identify and would minimize uncertainty about what the terms 
``clear'' and ``conspicuous'' mean.
    Based on our experience with the 2001 proposed rule, we expect that 
some individuals may want the rule to require some indication of why 
the food was refused entry rather than limit the label to the language 
specified by section 801(n)(1) of the act. We tentatively have decided 
against requiring such explanations in the proposed rule because the 
words, ``UNITED STATES: REFUSED ENTRY,'' are specified in section 
801(n)(1) of the act. Unlike our 2001 proposed rule, the label would be 
applied to all foods that are refused entry. If we were to require the 
label to explain the reasons for refusing to admit the food into the 
United States, importers, owners, and consignees would have to have 
multiple labels (to cover the various possible reasons for refusing 
entry) or would have to use ``fill in the blank'' labels which could 
then be illegible (if the reasons are handwritten) or difficult to use 
(if the reasons are machine-printed). Such a result would be 
inconsistent with the statutory requirement that the label ``clearly 
and conspicuously'' bear the statement. Consequently, proposed Sec.  
1.98(b) would only require the label to say, ``UNITED STATES: REFUSED 
ENTRY.'' Nonetheless, neither the act nor this proposed rule would 
prohibit further statements as long as they are not false or misleading 
and do not prevent the label from being both clear and conspicuous.
    Although the proposal would specify the label's text, font style, 
size, and color(s), it would not specify any particular type of label. 
In other words, use of adhesive labels, ink stamps, paint and stencils, 
or any other tool or device would satisfy the rule's requirements as 
long as the label is permanent, is the correct size and color, and 
otherwise complies with the rule.
    As for the ink used for the label, we expect that, based on our 
experience with the 2001 proposed rule, we may receive comments 
requesting a rule that would require the label to use ``invisible ink'' 
that could be seen only by using some unspecified scanning device. In 
the past, some comments have expressed concern about how a visible 
label might affect the refused food's ability to enter a foreign 
country or return to the exporting country. We believe that the use of 
``invisible ink'' would be inconsistent with the statutory requirement 
that the label's text be clear and conspicuous. If the labels were 
invisible to the human eye, we would be obliged to scan every food 
product offered for import into the United States, and implementing 
section 801(n)(1) of the act in such a manner would be contrary to the 
statutory intent of enabling FDA to identify previously refused food 
quickly and easily.

D. Where Does the Label Go? (Proposed Sec.  1.98(c))

    Proposed Sec.  1.98(c) would require the label to be affixed to the 
shipping container of refused food and on invoices, bills of lading, 
and other documents accompanying the imported food. By ``shipping 
container,'' we mean ``an individual container designed for shipping 
one or more immediate containers of the refused food, and an immediate 
container is any container that holds an imported food for retail 
sale.'' This definition of ``shipping container'' would include items 
such as boxes, bags, bottles, jars, tanks, drums, barrels, and totes 
because such items are individual containers designed for shipping 
food. The definition would exclude items such as railroad cars, truck 
trailers and truck trailer bodies (also referred to as ``containers'' 
or ``intermodal shipping containers'' and including International 
Organization for Standardization (ISO) standard containers or 
``ISOtainers'' and other standardized containers that can be attached 
to a vehicle body), ship holds, and similar transportation-related 
items because those items are not individual containers designed for 
shipping food.
    Section 801(n)(1) of the act requires the label to be affixed to 
``the container of the food,'' but the act, the Bioterrorism Act, and 
the legislative history for the Bioterrorism Act do not define or 
otherwise explain what constitutes a ``container.'' By referring to the 
``shipping container,'' the proposal would require placement of the 
label on the container that would normally be used in commerce to ship 
food. For example, assume that an imported food shipment consists of 
cardboard cartons containing 24 cans of food and that we have refused 
to admit the food into the United States. The ``shipping containers'' 
would be the cartons containing the cans rather than each can, so the 
label would go on each carton. As another example, assume that an 
imported food shipment consists of plastic drums, each drum containing 
five gallons of vegetable oil, and that we have refused to admit the 
food into the United States. In this example, the ``shipping 
container'' is the individual plastic drum, so the label would go on 
the drums. Note, too, that, in this example, the plastic drums are also 
immediate containers, because it is likely that the plastic drums are 
the containers that hold the oil for sale to others.
    Consistent with section 801(n) of the act, the proposal also would 
require the label on the shipping container to be clear and 
conspicuous. While we believe that the specifications in proposed Sec.  
1.98(b) will establish what we mean by ``clear,'' we invite comment on 
whether the rule should attempt to explain what ``conspicuous'' means 
or does not mean. Our concern is that individuals may attempt to comply 
with the letter, but not the spirit, of the law by placing the labels 
on the bottom of the shipping container. However, it may be difficult 
to describe what ``conspicuous'' means for the range of shipping 
containers. For example, if we stated that the label cannot go on a 
shipping container's bottom to prevent the label from being obscured, 
such detail might tempt individuals to put the label on the container's 
top, and then stack containers so that the label is

[[Page 54110]]

obscured. Consequently, we invite comment on whether the final rule 
should define or explain what ``conspicuous'' means in terms of the 
label's placement on a shipping container and, if so, what that 
regulatory requirement would be.
    The proposal also would require the label to be permanently affixed 
to the shipping container, in addition to being clear and conspicuous. 
Although section 801(n)(1) of the act does not state that the label 
must be ``permanent,'' we believe that proposing to require the label 
to be permanently affixed to the refused food is consistent with the 
underlying statutory intent. Congress's goal, in enacting section 
801(n) of the act, was to identify refused foods and to preclude the 
reintroduction of refused foods into the United States. Without a 
requirement that the label be permanently affixed, then the statutory 
intent could be undermined easily because unscrupulous importers, 
owners, or consignees could simply use removable labels and remove them 
before attempting to bring the refused food back into the United 
States. We do not believe that Congress intended to create legal 
requirements that could be so easily defeated, and so the proposal 
would require the label to be permanent.
    To illustrate what we mean by ``permanent,'' printing ``UNITED 
STATES: REFUSED ENTRY'' on the shipping container in indelible ink 
would constitute a ``permanent'' label. In contrast, printing the same 
words in pencil on the shipping container would not be ``permanent'' 
because an individual could erase the words. As another example, using 
adhesive labels that cannot be removed from the shipping container 
after being affixed would be ``permanently'' affixing the label. In 
contrast, using hang tags would not be ``permanent'' because the tags 
can be removed easily.
    Based on our experience with the 2001 proposed rule, we anticipate 
that some individuals may argue that ``container'' should include cargo 
containers or vehicle components, such as railroad cars and trailers 
(which are often referred to as ``containers'') that are attached to 
trucks and that are used to transport large quantities of imported 
food. It would be both impractical and inappropriate to interpret or 
implement section 801(n)(1) of the act to require that the label be 
affixed to a railroad car, truck, ship, or other vehicle, vehicle 
component, or vehicle attachment rather than a food's shipping 
container. By specifying that the label be clear and conspicuous, 
Congress intended to make it difficult for a person to ``port shop'' or 
to conceal previously refused food. If the label were placed on a 
large, reusable cargo container (such as a tractor trailer or railroad 
car), one could easily defeat this statutory intent simply by 
transferring the refused food from the labeled cargo container to an 
unlabeled cargo container. For example, if the label is placed on a 
railroad car instead of the shipping containers holding the refused 
food inside the railroad car, the intent behind section 801(n)(1) of 
the act and this proposal could be defeated by shifting the refused 
food from the labeled railroad car to an unlabeled railroad car. In 
contrast, if the label is on the shipping containers (such as boxes or 
bags) holding the refused food, it would be more difficult or 
burdensome to unpackage and repackage the refused food. In addition, a 
cargo container generally is used to transport food to a specific 
location and, once it arrives at that location, the food is removed, 
and the cargo container is used to transport another product. Requiring 
labels on a cargo container also would inhibit typical business 
practices by requiring that the cargo container remain associated with 
the refused food until its exportation.
    There may be situations where the imported food has no shipping 
container. In these situations, requiring that the label be affixed to 
the documents accompanying the refused food is an appropriate mechanism 
to ensure that the fact of refusal is communicated to us, CBP, and 
others. Proposed Sec.  1.98(c) would require the label on all documents 
accompanying the refused food even when the shipping container is 
labeled. Examples of such documents include, but are not limited to, 
bills of lading, bills of sale, airway bills, packing lists, and 
invoices. This requirement would implement section 403(a)(1) of the act 
and provide additional protection against the re-importation of refused 
food because there are times when we, CBP, and others may see documents 
accompanying a shipment, but not examine the shipment itself. Section 
308(c) of the Bioterrorism Act states that we retain authority to 
require the marking of refused food ``under any other provision of 
law.'' As we explain in section III of this document, section 403(a)(1) 
of the act, along with other provisions, gives us ample legal authority 
to require the label on documents accompanying the refused food.
    In order for the label on the documents to be useful in notifying 
us, CBP, and any prospective purchasers of diverted food that the food 
has been refused admission into the United States, proposed Sec.  
1.98(c) also would require the label on the documents to be clear, 
conspicuous, and permanently affixed. Our concern is that unscrupulous 
importers may attempt to undermine a simple regulatory requirement that 
the label go on the documents by placing the labels on the back of 
documents or on one page of a multi-page document in an effort to 
conceal the label. As another example, if we stated that the label must 
go on the ``bill of sale,'' an individual might be tempted to place the 
bill of sale as page 37 in a 50-page set of documents to make the label 
more difficult to find or to refer to the bill of sale by ``sales 
receipt'' or other name and then argue that the label requirement is 
inapplicable because there is no ``bill of sale.'' Thus, we propose to 
require that the label be permanent and go on the top page of each 
document to ensure that the label on the document is clear and 
conspicuous. (By ``top page,'' we mean the page that is physically 
located at the top of any single or multi-page document. For example, 
if there are two documents accompanying the imported food, and one 
document consists of a single page and the other document consists of 
five pages, the label would go on the single-paged document and on the 
top page of the five-page document.) We also propose that the label be 
permanent because it would undermine the requirement that the label be 
affixed to the documents if importers could use labels that could be 
removed at any point before re-exportation or re-importation.

E. How Do You Show You Complied With the Label Requirements? (Proposed 
Sec.  1.98(d))

    Section 801(n)(1) of the act authorizes us to require owners and 
consignees to affix the label to a refused food. Consequently, the 
proposed rule would establish clear standards for when food must be 
labeled as ``UNITED STATES: REFUSED ENTRY.'' We note that neither of 
the misbranding provisions upon which we rely for the proposed labeling 
requirement hinges on whether the refused food is re-offered for import 
(compare section 403(a)(1) and (v) of the act with section 402(h) of 
the act (21 U.S.C. 342(h))). To ensure that we can track compliance 
with the label requirement efficiently, proposed Sec.  1.98(d)(1) would 
establish several mechanisms for demonstrating that the label was 
properly affixed to the shipping containers and documents for the 
refused food. For example, the owner or consignee could contact the FDA 
district office responsible for the food's entry and:

[[Page 54111]]

     Arrange to affix the labels in our presence or under our 
supervision. This method would probably be used in situations where the 
refused food presents a public health hazard or where the owner or 
consignee has a history of violations of the act or the Public Health 
Service Act (PHS Act);
     Submit photographs or other visual evidence to us to show 
that it affixed the label to the shipping containers and documents. 
This method could, for example, be used in situations where the owner 
or consignee has a good record of compliance with the act and the PHS 
Act and the refused food does not present a public health hazard; or
     Develop another means to show that it affixed the labels 
to the shipping containers and documents to FDA's satisfaction. For 
example, we could agree to have commissioned State or Federal officials 
supervise the labeling process.

Proposed Sec.  1.98(d)(1) is intended to ensure that the shipping 
container and documents for a refused food are identified and labeled 
correctly. The provision would give us the option to verify that the 
labels were affixed correctly to the shipping container and documents 
by supervision, by reviewing visual evidence, or by other means. This 
flexibility would reduce the potential burden on owners or consignees.
    Proposed Sec.  1.98(d)(2) would require that the labels be affixed 
promptly. We invite comment on how we might interpret ``promptly.'' 
Under section 801(a) of the act, the exportation of any refused article 
is require within 90 days of the date of notice of such refusal or 
within such additional time as may be permitted pursuant to CBP 
regulations. We invite comment on how to frame a regulatory requirement 
to ensure that the owner or consignee has a reasonable amount of time 
to affix the required labels and that FDA has sufficient advance time 
to make arrangements to verify that the labels are affixed properly in 
light of the 90-day deadline specified in section 801(a) of the act. 
Any regulatory standards established for compliance with the label 
requirements will establish an obligation under the CBP bond to label 
the merchandise.
    Proposed Sec.  1.98(d)(2) would also require that the food not be 
moved until the owner or consignee has complied with the labeling 
requirements. This requirement would mean that the labels must be 
affixed before the food leaves the port of entry or, if the food has 
already been moved from the port of entry to another location for 
storage, before the food leaves that storage area to be re-exported.

F. What Fees May We Impose Under the Rule? (Proposed Sec.  1.98(e))

    Section 801(n)(2) of the act expressly states that all expenses in 
connection with affixing a label under section 801(n)(1) of the act 
``shall be paid by the owner or consignee of the food involved, and in 
default of such payment, shall constitute a lien against future 
importations made by such owner or consignee.'' Section 801(c) of the 
act also provides authority for imposing expenses on owners and 
consignees for labor with respect to any article refused under section 
801(a) of the act. Consequently, proposed Sec.  1.98(e) would allow us 
to seek reimbursement for our expenses when we impose the label on 
shipping containers or when we supervise an importer's affixing of 
labels on shipping containers and documents. These costs would normally 
consist of our inspector's time, the per diem allowance under 
government travel regulations, travel expenses (actual cost of travel 
for travel other than by automobile, or mileage, toll fees, etc. if 
travel was by automobile), and administrative support costs.
    We currently operate a similar reimbursement program for costs 
associated with our supervision of reconditioning imported articles for 
possible admission into the United States (see 21 CFR 1.99); thus, the 
fees we would seek under proposed Sec.  1.98(e) would be consistent 
with existing programs.

III. Legal Authority

    Several sections of the act give us the legal authority to issue 
this rule. First, section 801(n) of the act states (among other things) 
that if a food, other than a food that is required to be destroyed, is 
refused admission under section 801(a) of the act, we may require the 
owner or consignee of the food to affix to the food's container a label 
that states, ``UNITED STATES: REFUSED ENTRY.'' Section 403(v) of the 
act provides that food is misbranded if: (1) It fails to bear a label 
required under section 801(n)(1) of the act (concerning the fact that 
the food has been refused admission); (2) the food presents a threat of 
serious adverse health consequences or death to humans or animals; and 
(3) upon or after notifying the owner or consignee involved that a 
label is required, the owner or consignee is informed that the food 
presents such a threat. In addition, section 801(a) of the act 
authorizes us to refuse to admit imported food into the United States 
if the imported food appears to have been manufactured, processed, or 
packed under insanitary conditions, is forbidden or restricted in sale 
in the country in which it was produced or from which it was exported, 
or is adulterated or misbranded. Sections 402 and 403 of the act 
describe when a food is adulterated and misbranded, respectively.
    Under section 403(a)(1) of the act, a food is misbranded if its 
labeling is false or misleading in any particular. Section 201(n) of 
the act states that, in determining whether labeling is misleading, we 
look not only at the affirmative representations made in or suggested 
by the labeling, but also ``the extent to which the labeling * * * 
fails to reveal facts material in light of such representations or 
material with respect to consequences which may result from the use or 
the article * * *.'' We tentatively conclude that the failure to 
reveal, in each document accompanying the shipment of food, that the 
food has been refused admission would misbrand the food because 
otherwise the labeling would imply that the food may be sold legally in 
the United States when, in fact, we have determined that the food may 
not.
    Section 701(a) of the act (21 U.S.C. 371(a)) also authorizes 
promulgation of regulations for the efficient enforcement of the act, 
and section 701(b) of the act specifically authorizes promulgation of 
regulations for the efficient enforcement of section 801 of the act. 
Because labeling refused foods would permit us and CBP to efficiently 
enforce sections 403 and 801 of the act and is expressly authorized 
under section 801 of the act, we are authorized to impose labeling 
requirements on such food. The label would help ensure that foods that 
fail to meet the conditions for admission into the United States are 
not re-imported and do not enter or reenter domestic commerce. Sections 
801(c) and (n)(2) of the act also provide the authority to impose the 
costs of supervising compliance with such labeling requirements on 
owners and consignees.
    Finally, the proposed rule also is authorized by section 361 of the 
PHS Act (42 U.S.C. 264). Section 361 of the PHS Act authorizes us to 
issue regulations to prevent the introduction, transmission, or spread 
of communicable diseases from foreign countries into the United States. 
Labeling food that has been refused entry into the United States will 
help prevent the introduction, transmission, or spread of communicable 
diseases into the United States by making it more difficult for such 
rejected food to enter the United States through a different port or to 
escape detection.

[[Page 54112]]

What Are the Consequences of Failing to Affix the Labels?

    Under section 403(v) of the act, a food is misbranded if: it fails 
to bear a label required under section 801(n)(1) of the act (concerning 
the fact that the food has been refused admission); the food presents a 
threat of serious adverse health consequences or death to humans or 
animals; and, upon or after notifying the owner or consignee involved 
that a label is required, the owner or consignee is informed that the 
food presents such a threat. As discussed previously, we intend to 
provide notification of the label requirement and, when appropriate, 
notice that the refused food presents a threat of serious adverse 
health consequences when we issue notices of refusal. If you receive 
notice to label the shipping container along with a notice that the 
refused food presents a threat of serious adverse health consequences 
and you fail to label the shipping container as required, the refused 
food is misbranded under section 403(v) of the act, and we may 
administratively detain the food under section 304(h) of the act and 
seize the food before it is exported or after it is re-imported under 
section 304(a) of the act.
    Two situations are not covered by the misbranding provision in 
section 403(v) of the act: (1) Failure to label refused food that we 
have not found to present a threat of serious adverse health 
consequences; and (2) failure to label the documents. As set forth 
previously, we believe that the failure to label the shipping container 
or documents in accordance with proposed Sec.  1.98 would misbrand the 
food under section 403(a)(1) of the act. Accordingly, if you fail to 
label the shipping container or documents, the refused food would be 
misbranded under section 403(a)(1) of the act and subject to seizure 
under section 304 of the act. Furthermore, the prohibited acts 
pertaining to misbranded food in section 301 of the act (21 U.S.C. 331) 
would also apply, and anyone who commits a prohibited act with respect 
to the food would be subject to an injunction under section 302 of the 
act or prosecution under section 303 of the act (21 U.S.C. 333).
    In addition, if the food has been conditionally released under a 
customs bond, the failure to comply with any requirement of this 
proposed rule may be a violation of that bond (see 19 CFR 113.62(e)), 
and we could ask CBP to pursue liquidated damages from the importer of 
record under 19 CFR 113.62(l).

IV. Environmental Impact

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

V. Paperwork Reduction Act of 1995

    We tentatively conclude that the labeling requirements proposed in 
this document are not subject to review by the Office of Management and 
Budget because they do not constitute a ``collection of information'' 
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). 
Rather, the statements are ``public disclosure of information 
originally supplied by the Federal government to the recipient for the 
purpose of disclosure to the public'' (5 CFR 1320.3(c)(2)).
    Interested persons are requested to fax comments regarding 
information collection by October 20, 2008, 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.

VI. Federalism

    We have analyzed this proposed rule in accordance with the 
principles set forth in Executive Order 13132. We have determined that 
the rule does not contain policies that have substantial direct effects 
on the States, on the relationship between the National Government and 
the States, or on the distribution of power and responsibilities among 
the various levels of government. Accordingly, we have concluded that 
the rule does not contain policies that have federalism implications as 
defined in the Executive order and, consequently, a federalism summary 
impact statement is not required.

VII. Analysis of Impacts

A. Preliminary Regulatory Impact Analysis

    We have examined the impacts of the proposed rule under Executive 
Order 12866 and the Regulatory Flexibility Act (5 U.S.C. 601-612), and 
the Unfunded Mandates Reform Act of 1995 (Public Law 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). We believe that this 
proposed rule is not a significant regulatory action as defined by 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. Because we do not expect this cost for any one small 
owner or consignee to be excessive, we certify that the proposed rule 
will not have a significant economic impact on a substantial number of 
small entities.
    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 $130 million, using the most current (2007) Implicit 
Price Deflator for the Gross Domestic Product. We do not expect this 
proposed rule to result in any 1-year expenditure that would meet or 
exceed this amount.
1. Need for Regulation
    We are taking this action to assist in the enforcement of our 
admissibility decisions. Without a label requirement for food that has 
been refused admission, owners or consignees whose shipments are 
refused admission could simply move their shipment to another port and 
attempt entry again. Without labeling violative food products, the 
importer or consignee knows that a shipment has been refused, but 
personnel in the next port where the food is offered for import would 
not readily know that the shipment has been refused. Labeling violative 
food products will help reduce this problem. In addition, as discussed 
in section VII.A.4 of this document, this rule would help correct both 
of these behaviors by making the importation of violative food 
relatively more expensive.
2. Proposed Rule Coverage
    The proposed rule would require owners and consignees whose food 
has been refused admission into the United States to label such food as 
``UNITED STATES: REFUSED ENTRY.'' This

[[Page 54113]]

would make it easier for us and CBP to detect attempts to introduce 
previously refused imported food into the United States.
    By making importation of previously refused food more difficult and 
expensive for importers, we expect that reconditioning or destruction 
of refused food will become more favored alternatives. We also expect 
that with this system in place, importers would be less likely to 
attempt to import violative food into the United States in the first 
place.
3. Regulatory Options Considered
    As described earlier, the proposed rule would require owners and 
consignees whose food shipments have been refused admission into the 
United States to label such products as ``UNITED STATES: REFUSED 
ENTRY.'' This would make it easier for us and CBP to detect attempts to 
introduce previously refused imported food into the United States. In 
drafting this proposed rule, we considered several regulatory 
alternatives in addition to the proposed rule. We considered: (1) No 
additional regulatory action; (2) selective enforcement that would 
allow the decision to affix the label to be made at the level of 
individual refused food shipments; and (3) the destruction of all 
shipments of food refused admission into the United States. Because 
this proposed rule would not be an economically significant regulatory 
action, we do not quantitatively estimate the benefits and costs of the 
regulatory alternatives to the proposed rule. In what follows, we 
qualitatively compare the costs and benefits of the regulatory options 
to the costs and benefits of the proposed rule.
    The first option would be no action. This alternative would not 
affect current practices, such as port shopping, and would result in 
the introduction of previously refused food imports into the United 
States. Consumers who ingested those unsafe food imports would, in 
turn, be subject to the risk of foodborne illnesses.
    A second option would be a selective enforcement mechanism that 
would allow the decision to label to be made at the level of individual 
shipments. This alternative would require fewer resources for labeling 
shipments, but would require more resources for deciding which 
shipments should be labeled. The decision to label would be based on 
factors other than refusal. For example, refused food might be labeled 
because it poses a safety risk. The decision to label an individual 
refused food shipment could be complex. For example, whether a shipment 
contaminated with mold constitutes a safety risk depends upon the 
identification of the mold, its toxicological properties, and the 
probability of illness resulting from exposure to the mold. Deciding 
whether or not the same shipment is adulterated and violative is a 
simpler process. Selective enforcement could also lead to inconsistent 
standards between ports of entry, which would exacerbate the problem of 
importers choosing ports of entry based on the likelihood their cargo 
will be accepted. Finally, the incentive for port shopping would be 
higher under this alternative than in the proposed rule. This option 
would be close to the proposed rule in costs but would generate smaller 
benefits.
    A third option would be to order the destruction of food imports 
refused for safety reasons. While this would deter ``port shopping'' 
and similar practices, this alternative would be costlier than the 
proposed rule for three reasons. First, it would require more Federal 
resources for supervision of destruction than the proposed rule. 
Second, the standard of proof to support the destruction of violative 
products is greater than the standard of proof for refusing to admit 
imported products. Because the standard of proof is higher for 
destruction than for marking, this would lead to more challenges to the 
FDA's policy and require resources from FDA both in establishing the 
basis for its action and defending challenges to such action. Third, 
the costs of this proposed rule in destroyed shipments would be high. 
For fiscal year 2006, data drawn from the Operation and Administrative 
System for Import Support (OASIS) database (Ref. 1) show that 10,340 
shipments were initially refused at the intended U.S. port of entry for 
safety or security reasons. The threat of destruction should deter 
importers to attempt to import violative food. If we assume the number 
of violative imports will decrease by 75 percent and value the 
shipments conservatively at an average value of $500,000, the cost of 
this alternative in destroyed cargo alone would be about 1.3 billion 
dollars ((10,340 shipments) x (25 percent) x ($500,000)).
4. Strategic Action by Owners and Consignees
    Although the vast majority of owners and consignees comply with the 
act, some attempt to circumvent Federal law and introduce violative 
food into United States commerce through means such as port shopping. 
For these owners and consignees, measures such as those contained in 
this proposed rule are necessary to deter port shopping.
    An owner's or consignee's decision on how to dispose of its cargo 
is influenced by changes in the expected profits associated with each 
of its choices. Requiring owners and consignees to affix a ``UNITED 
STATES: REFUSED ENTRY'' label on imported food that has been refused 
admission would change the expected profits associated with the initial 
decision to attempt to import violative food. A label also would affect 
the expected profits associated with the decision to recondition, re-
export, or port shop after a shipment is found violative.
The decision process of an owner or consignee of violative food can be 
represented visually by a decision tree (see Figure 1). This decision 
tree illustrates how requiring ``UNITED STATES: REFUSED ENTRY'' on 
refused imports would alter an owner's or consignee's incentives. The 
decision tree shows the possible outcomes and decisions an owner or 
consignee can make at each stage of the importation process. At point 
A, an owner or consignee of violative food first decides whether to 
attempt to import the food into the United States. This decision is 
influenced by the price the owner or consignee can get for the food if 
it is successfully imported, the probability the cargo will be 
inspected, and the cost to the owner or consignee if the food is 
inspected and found violative. At point B, whether the cargo is 
inspected is a function of factors such as the port of entry, FDA's 
inspection rate, and the type of product. At point C, FDA refuses 
admission of the food. If the food is not destroyed, at point D, the 
owner or consignee may have the option of exporting to a foreign 
country, reconditioning the food, or port shopping.

[[Page 54114]]

[GRAPHIC] [TIFF OMITTED] TP18SE08.000


    The proposed rule's effect on deterrence: Labeling refused imported 
foods as ``UNITED STATES: REFUSED ENTRY'' would alter the incentive 
structure that owners and consignees face when deciding whether to 
introduce their product into United States commerce. In particular, 
there are four ways that the proposed rule would increase the 
deterrence value of the FDA inspection system.
    i. Port shopping would be reduced. One primary goal of this 
proposed rule would be to reduce port shopping. Requiring a label to be 
affixed to a refused imported food would reduce the probability that 
the refused imported food would be reoffered for import into the United 
States. The cost of port shopping would increase because resources 
would have to be expended to repackage a product that had been labeled. 
Thus, port shopping would become relatively less attractive to owners 
and consignees.
    ii. Decrease in the value of re-exported items. The value of a 
product destined for re-export would decrease if it were labeled 
``UNITED STATES: REFUSED ENTRY.'' After the product had been labeled, 
the owner or consignee has two costly choices: (1) After the product 
leaves the United States, relabel containers or repackage the product 
into containers that do not bear the label; or (2) sell the goods 
abroad with the label intact. It is likely that food with such a label 
would be viewed less than favorably by food safety inspectors and 
importers in international markets. Thus, the expected profit from 
selling goods that are labeled would be lower than if the label was not 
present, so this loss is in addition to the loss of value from refusal 
alone. Either of the owner's or consignee's choices (repackage or sell 
with the label intact) would lower the expected profit of re-exporting.
    iii. Reconditioning would become a more favored alternative. The 
expected profit from reconditioning a refused food import would not 
likely change with this proposed rule. Consequently, because the 
expected profits from port shopping and re-exporting refused imported 
food would be expected to fall, reconditioning the food would become 
economically more attractive. We expect that more owners and consignees 
would choose to recondition their product.
    iv. Decrease in the introduction of violative food into the United 
States. As with reconditioning, the expected profit from initially 
sending a violative and potentially unsafe or mislabeled product to a 
foreign port would not be expected to change significantly with this 
proposed rule. Therefore, as the expected profit from attempting to 
import violative food into the United States is lowered (because the 
cost of re-importing and re-exporting violative food is increased), the 
incentive to ship one's product directly to a foreign (non-United 
States) market would increase. The net result of such a dynamic would 
be that more violative food products would be either directly shipped 
to foreign markets or reconditioned at the point of export.
5. Benefits from the Proposed Rule
    a. Health benefits. As described earlier, the proposed rule, if 
finalized, would decrease the number of refused imported food products 
reaching the United States consumer. The proposed rule would discourage 
attempts to offer or reoffer violative imported food into the United 
States and encourage the reconditioning of imported food which we have 
refused to admit. Consequently, United States consumers would benefit 
through a reduction in the number of foodborne illnesses due to unsafe 
or mislabeled imported foods. Because we cannot quantify the amount of 
re-importation of refused imported foods, we cannot make a definitive 
prediction of the value of the reduced illnesses

[[Page 54115]]

arising from this proposed rule. Although foods that represent a direct 
and serious danger to public health may be destroyed, refused food 
eligible for re-exportation may also present a health hazard. Typical 
reasons for refusing entry include illegal food or color additives, 
contamination by a pesticide residue or poisonous substance, foreign 
objects, poor sanitation in the manufacture of the food, improper 
labeling, and unregistered manufacturers. Each of these reasons for 
refusal may represent a health risk. Long term exposure to some illegal 
color additives has been linked to cancer. Sanitation problems indicate 
the food was held in unsanitary conditions, which may suggest more 
serious problems such as contamination with microbial pathogens. A 
single exposure to a violative pesticide level is very unlikely to 
result in cancer, but prolonged exposure over years may lead to 
increased risk of illness, including cancer. Improperly labeled food, 
among other things, may contain allergens without duly alerting the 
consumer. Sensitive individuals may experience allergic reactions 
ranging from mild contact dermatitis to a severe allergy attack.
    Table 2 shows some possible illnesses and injuries that may result 
from violative foods and includes their symptoms and an average cost 
per case. The quality-adjusted life days (QALDs) (Ref. 2) column 
represents the lost utility per day to a consumer from an illness, 
essentially the loss to the consumer due to symptoms and problems 
associated with the illness. The QALDs are valued in dollars by 
multiplying the number of lost days by the value of a statistical life 
day, $622. This value of a statistical life day is drawn from the 
economic literature (Ref. 3). The medical cost column is the direct 
medical cost of illness, which includes hospitalization and doctor 
visits. Most illnesses arising from E. coli O157:H7 or Salmonella are 
self-limiting and short in duration, but some illnesses due to 
Salmonella or E. coli O157:H7 can be quite serious. E. coli in some 
cases can result in kidney damage or death. Salmonella can trigger 
chronic arthritis and, in a very small percentage of cases, can result 
in death.

                    Table 2.--Cost of Some Illnesses Potentially Averted by the Proposed Rule
----------------------------------------------------------------------------------------------------------------
                                                                              Dollar
                    Potential harm           Symptoms          QALD loss     value of     Medical     Total cost
                                                                            lost QALDs     Costs
----------------------------------------------------------------------------------------------------------------
Allergens         Contact            Reddening, swelling,            2.1        $1,726         $125       $1,851
                   dermatitis         itching of skin
                 -----------------------------------------------------------------------------------------------
                  Allergic reaction  Difficulty breathing,           1.03         $847         $550       $1,397
                                      asthma, rash, possible
                                      shock
----------------------------------------------------------------------------------------------------------------
Objects in food   Simple dental      Toothache, headache             0.23         $189           $0         $189
                   injury
                 -----------------------------------------------------------------------------------------------
                  Complex dental     Simple, plus infection          3.47       $2,852       $3,540       $6,392
                   injury
                 -----------------------------------------------------------------------------------------------
                  Oral emergency     Sharp pain in mouth,            4.27       $3,510       $3,540       $7,050
                                      face, neck, bleeding,
                                      plus possible
                                      metastatic or local
                                      infection
                 -----------------------------------------------------------------------------------------------
                  Tracheo-           Choking, difficulty             0.48         $395           $0         $395
                   esophageal         breathing, cyanosis,
                   obstruction        hypertension
                 -----------------------------------------------------------------------------------------------
                  Esophageal         Pain in chest, bleeding        13.93      $11,450      $14,160      $25,610
                   perforation        aspiration pneumonia,
                                      requires surgery
----------------------------------------------------------------------------------------------------------------
Canning           Botulism           Nausea, diplopia,             667.94     $549,047      $29,526     $578,573
 processes                            blurred vision, lack
                                      of coordination, Can
                                      include loss of muscle
                                      strength, paralysis,
                                      death
----------------------------------------------------------------------------------------------------------------
Filth             Salmonella         Vomiting, nausea,              72.04      $17,558         $321      $17,880
                                      possible arthritis,
                                      low probability of
                                      death
----------------------------------------------------------------------------------------------------------------
Filth             E. coli            Vomiting, nausea,              19.56       $7,750         $485       $8,235
                                      bloody stools,
                                      possible kidney
                                      damage, low
                                      probability of death
----------------------------------------------------------------------------------------------------------------
Sources: We calculated E. coli and Salmonella costs by assuming a QALD value of $822 and a value of a
  statistical life of $5 million. Objects in food, allergens and botulism costs were taken from RTI, Estimating
  the Value of Consumers' Loss from Foods Violating the Federal Food, Drug, and Cosmetic Act (Ref. 4).

    b. Other consumer benefits. While problems such as insects or filth 
in food may not always represent a direct health threat, they call into 
question the conditions to which the food was exposed. Moreover, 
consumers who purchase food expect it to be clean and sanitary. 
Consumer research shows cleanliness is important to consumers. For 
example, the Food Marketing Institute found 89 percent of consumers 
surveyed ranked a clean, neat store as a very important factor in 
selecting their primary supermarket (Ref. 5). If consumers pay a 
premium because they believe that their food is sanitary and the food 
is not, this payment represents a social loss. However, we cannot 
quantify this economic loss because we do not know what percentage of 
the price of food is a ``cleanliness premium.''
6. Costs of the proposed rule
    Costs would include both materials and time and would be incurred 
by both FDA and owners or consignees. The owners and consignees would 
bear the responsibility for affixing the labels; we would verify that 
the label is affixed. It is not clear which method owners and 
consignees would use to label refused food imports. Therefore, we have, 
for purposes of this analysis, used an

[[Page 54116]]

inexpensive and quick method of labeling to estimate costs.
    a. Materials. Placing labels on all the packages would require the 
use of a label gun and printed labels. Label guns cost approximately 
$100, and three label guns would be needed at each of the 132 ports. 
Labels reading ``UNITED STATES: REFUSED ENTRY'' would also have to be 
printed at an approximate cost of $0.025 per label. We invite comment 
on the estimation that three label guns per port will be sufficient to 
accomplish the labeling necessary to comply with the rule.
    b. Time. i. Owner's or Consignee's Time. The number of hours spent 
applying labels would be a function of the number of rejected shipments 
and their size. We assume that the average shipment consists of 500 
cartons and would take approximately 3 hours to label. FDA requests 
comment on this assumption. We also assume that the owner or consignee 
would hire labor at the average wage rate for transportation and moving 
occupations published by the Bureau of Labor Statistics, $13.58, plus 
30 percent in benefits (Ref. 6). Under these assumptions, it would cost 
approximately $53 in labor (3 hours x $17.65 per hour) to label each 
shipment. As a baseline, we estimate that 10,340 shipments would be 
refused annually. However, data drawn from the OASIS database (Ref. 1) 
show that in 2006, 6,318 of the refused shipments were destroyed and 
438 were released, 176 due to successful reconditioning and 262 for 
another reason.\1\ Most refused shipments would not have to be labeled. 
However, if the food is reconditioned at a different site, then the 
proposed rule would require that food to be labeled. In the absence of 
information, we assume that 50 percent of the reconditioned shipments 
would be subject to the proposed rule's label requirement. We invite 
comment on this assumption.
---------------------------------------------------------------------------

    \1\ There are many reasons a shipment may be initially refused 
and subsequently released. For example, a violative shipment may be 
reconditioned successfully, samples of food suspected to be in 
violation may test negative, or paperwork, originally insufficient, 
might be corrected.
---------------------------------------------------------------------------

    As shown in table 3 of this document, we estimate that roughly 
3,672 shipments would need to be labeled initially. This number is used 
to calculate the ``static'' annual cost shown in table 4 of this 
document. The annual cost of labeling these shipments would be nearly 
$195 thousand in labor costs and nearly $46 thousand for labels. It 
would cost the government more than $55 thousand to confirm the labels 
had been affixed. The sum of these costs is about $296 thousand. The 
static annual cost should be viewed as the likely cost in the first few 
years after the proposed rule becomes final and as a high estimate for 
costs in later years. We invite comment on the data used in these 
calculations, including the percentage of reconditioned shipments 
subject to the label requirement and the labor cost to owners and 
consignees.
    As discussed in part VII.A.4 of this document, because the relative 
price of refusal would increase due to this proposed regulation, we 
expect more owners and consignees would decide to recondition after 
refusal, or will not attempt to import potentially violative food. The 
``dynamic'' annual cost is the ``static'' annual cost reduced by the 
expected percentage decrease (expected avoidance) in initial 
importation attempts and the increased number of successful 
reconditioning attempts. We do not have the data to predict the precise 
reaction of importers to this proposed rule. However, if we assume that 
owners and consignees would decrease attempts to import violative food 
by between 25 and 75 percent and that they would increase their 
attempts to recondition refusals by between 25 and 75 percent, we 
estimate that the number of shipments to require marking would drop to 
between 902 and 2,738 (1,814 for a mean change in imports and 
recondition attempts of 50 percent) annually.\2\ This ``if-then'' 
scenario yields a mean ``dynamic'' annual cost of $146 thousand. We 
invite comment on our estimates of a 25 to 75 percent decrease in 
violative imports and of a 25 to 75 percent increase in reconditioning 
attempts. Added to these costs is a fraction of the cost of the label 
guns (shown in table 5 of this document). Because label guns are 
durable goods, the value of a label gun should not be added to the cost 
of marking each shipment.
---------------------------------------------------------------------------

    \2\ Given a 1 percent inspection rate, an importer has a 99 
percent chance of getting violative shipment into the United States. 
One out of every 100 shipments gets caught. Without this rule, the 
odds of getting into the next port, given a refusal, are roughly the 
same as the first port. So if an importer plans to port shop a 
violative shipment at least once, they have a 99.9999 percent chance 
to successfully get the shipment into the United States. Therefore 
this proposed rule increases the risk of getting caught when 
shipping a violative shipment by a factor of 100 for those that plan 
on port shopping. FDA believes this would yield a heavy enough 
disincentive to warrant the use of 25 to 75 percent in an ``if-
then'' scenario.
---------------------------------------------------------------------------





       Table 3.--Annual Number of Refused Shipments to be Labeled
------------------------------------------------------------------------

------------------------------------------------------------------------
Refusals in 2006                                      10,340
------------------------------------------------------------------------
Shipments Released After Refusal
------------------------------------------------------------------------
  Total Recondition Attempts                          185
------------------------------------------------------------------------
  Reconditioned Unsuccessfully                        9
------------------------------------------------------------------------
  Reconditioned and Released                          176
------------------------------------------------------------------------
  Released After Initial Refusal for Other Reason     262
------------------------------------------------------------------------
Total Released                                        438
------------------------------------------------------------------------
Shipments Destroyed After Refusal                     6,318
------------------------------------------------------------------------
Static Total Number of Refusals to be Labeled\1\      3,672
------------------------------------------------------------------------
Expected Increase in Reconditioning Attempts and      50.0%
 Avoidance
------------------------------------------------------------------------
Mean Dynamic Total of Refusals to be Labeled\2\       1,814
------------------------------------------------------------------------
\1\ This number is calculated by subtracting the number of shipments
  destroyed, the number of shipments released for ``other reason'', and
  half of the shipments that were reconditioned and released from the
  total refusals in 2006.
\2\ This number is calculated by decreasing the number of refusal by 50
  percent and increasing the percentage of total reconditioning attempts
  by 50 percent.

    ii. FDA inspector's time. The proposed rule would require us to 
confirm that the owner or consignee affixes the label to the refused 
food import or otherwise complies with the label requirement.\3\ We 
estimate that this process would require approximately 30 minutes per 
shipment. We estimate the value of an FDA inspector's time based on a 
GS-10, step 5 rate, plus 30 percent in benefits. At this hourly rate, 
FDA's labor costs for each shipment would be $15 (0.5 hours x $30 per 
hour). We request comment on these estimates.
---------------------------------------------------------------------------

    \3\ There are several ways of verifying that the label has been 
affixed. For the purpose of this analysis, our estimates are based 
on a scenario where FDA inspectors supervise the labeling of refused 
food.

              Table 4.--Mean Annual Labeling Cost Estimates
------------------------------------------------------------------------
                                         Static             Dynamic
------------------------------------------------------------------------
Number of Refusals to be Labeled   3,672               1,814
------------------------------------------------------------------------
FDA Labor Cost per Refusal         $15                 $15
------------------------------------------------------------------------
Total FDA Cost                     $55,080             $27,210
------------------------------------------------------------------------

[[Page 54117]]


Owner/Consignee Labor Cost per     $53                 $53
 Refusal
------------------------------------------------------------------------
Total Owner/Consignee Labor Cost   $194,616            $96,142
------------------------------------------------------------------------
Label Cost per Refusal             $12.50              $12.50
------------------------------------------------------------------------
Total Label Cost                   $45,900             $22,675
------------------------------------------------------------------------
Total Owner/Consignee Cost         $240,516            $118,817
------------------------------------------------------------------------
Total Annual Cost                  $295,609            $146,040
------------------------------------------------------------------------


                     Table 5.--Fixed Labeling Costs
------------------------------------------------------------------------

------------------------------------------------------------------------
Number of Ports                                     132
------------------------------------------------------------------------
Label Guns Needed per Port of Entry                 3
------------------------------------------------------------------------
Cost per Label Gun                                  $100
------------------------------------------------------------------------
Total Label Gun Costs                               $39,600
------------------------------------------------------------------------

    c. Increased cost of shipments. Foods labeled as ``UNITED STATES: 
REFUSED ENTRY'' would lose value due to diminished value in foreign 
ports, in addition to the loss of the United States market for the 
product. The owner or consignee would suffer an initial loss of value 
due to rejection of its cargo, regardless of the label. How the label 
decreases the value of the food would be a function of the initial 
value of the food, type of food, reason for refusal, and the reluctance 
of the new buyer to purchase previously refused merchandise. This cost 
represents a transfer from the owner or consignee to the ultimate 
purchaser of the product. However, there would be an additional cost of 
this proposed rule that is borne directly by the owner or consignee, 
but may be passed on to consumers in the form of higher food prices. 
This cost is difficult to quantify but it includes the increased cost 
of importing goods because of the increased likelihood of refusal. It 
also includes the costs of any additional preventive measures taken at 
the point of origin for the shipment.
7. Summary of Benefits and Costs
    The uncertain nature of the number of illnesses prevented and the 
difficulty in quantifying the benefits to consumers of having clean 
foods, regardless of the danger, prevents a definitive statement about 
benefits and costs. We expect the static costs to be about $300,000; 
this sets a threshold value for the benefits. For two reasons, the 
annual benefits would probably be greater than these estimated annual 
costs. First, the costs are likely to decrease over time, perhaps to as 
low as $70 thousand, as owners and consignees decrease shipments of 
violative food and increase efforts to recondition refusals. Second, 
stopping just one violative shipment from entering the United States 
after refusal could cover the costs. For example, in 2006, nearly 800 
food shipments were refused because the food contained salmonella (Ref. 
1). For the period between 1996 and 2006, we calculate that salmonella 
outbreaks caused from 2 to 688 confirmed illnesses (with an average of 
46 confirmed illnesses) per outbreak (Ref. 7). Therefore, if stopping 
just one of the 800 shipments refused for containing salmonella from 
entering the United States would avert an outbreak, the result would be 
a savings of over $822,000 ($17,880 per illness x 46 illnesses) in 
direct medical and health costs. This is simply an example, using a 
single reason for refusal, that illustrates how high the benefits from 
this proposed rule are likely to be. If multiple outbreaks are averted 
in a given year, or even a single outbreak involving fatalities, the 
benefits could easily reach the hundreds of millions.

B. Preliminary Regulatory Flexibility Analysis

    As discussed in detail in section VII.A of this document, we find 
that this proposed rule would affect up to 1,184 owners or consignees 
annually.\4\ Most of these owners or consignees are small businesses as 
defined by the Small Business Administration. For the purpose of this 
analysis, we assume that all 1,184 affected businesses are small.\5\ 
These small owners or consignees would face a cost of approximately $65 
per labeled violative food shipment in time and materials as calculated 
in section VII.A of this document. In addition, the value of their 
violative food shipment would fall. This cost is difficult to quantify, 
but can be bounded by the cost of repackaging the merchandise. FDA 
seeks comment on the estimates used to calculate the cost per labeled 
shipment. We do not expect this cost for any one small owner or 
consignee to be excessive, so we conclude that this proposed rule would 
not place a disproportionate burden on small businesses.
---------------------------------------------------------------------------

    \4\ Using total shipments labeled as a proxy for the number of 
importers affected is an overestimate in the sense that some owners 
or consignees may accrue multiple violations.
    \5\ Unless the businesses are repeat offenders, the same 
business will not be affected each year. The rule does not affect 
all owners and consignees of shipments, but only those shipments 
that have been refused admission.
---------------------------------------------------------------------------

Regulatory Alternative Considered for Small Businesses

    Exempting small businesses from the proposed rule would lift the 
burden on some small entities. However, because most entities affected 
by the proposed rule are small, such an exemption would effectively 
negate the proposed rule. We also note that the proposed rule would not 
prescribe any particular method for affixing the label, and owners and 
consignees whose shipments are refused admission may decide to re-
condition, destroy, or re-export a violative food import. Given these 
flexible alternatives available to small entities and the small 
compliance cost of the proposed rule, we did not consider additional 
options.

C. Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 (Public Law 104-4), 
requiring cost-benefit and other analyses, in section 1531(a) defines a 
significant rule as ``a 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 (adjusted annually for 
inflation) in any 1 year.'' We have determined that this proposed rule 
does not constitute a significant rule under the Unfunded Mandates 
Reform Act.

VIII. Comments

    Interested persons may submit to the Division of Dockets Management 
(see ADDRESSES) written or electronic comments regarding this document. 
Submit a single copy of electronic comments or two paper copies of any 
mailed comments, except that individuals may submit one paper copy. 
Comments are to be identified with the docket number found in brackets 
in the heading of this document. Received comments may be seen in the 
Division of Dockets Management between 9 a.m. and 4 p.m., Monday 
through Friday.
    Please note that on January 15, 2008, the FDA Division of Dockets 
Management Web site transitioned to the Federal Dockets Management 
System (FDMS). FDMS is a Government-wide, electronic docket management 
system. Electronic comments or submissions will be accepted by FDA only 
through FDMS at http://www.regulations.gov.

IX. References

    The following references have been placed on display in the 
Division of Dockets Management (see ADDRESSES) and may be seen by 
interested persons

[[Page 54118]]

between 9 a.m. and 4 p.m., Monday through Friday. (FDA has verified the 
Web site address, but FDA is not responsible for any subsequent changes 
to the Web site after this document publishes in the Federal Register.)
    1. U.S. Food and Drug Administration, Operational and 
Administrative System for Import Support (OASIS), Available at: 
http://www.accessdata.fda.gov/scripts/ora/pcb/tutorial/les2_
oasis.htm.
    2. Kaplan, R.M., J.P. Anderson, and T.G. Ganiats, ``The Quality 
of Well-being Scale: Rationale for a Single Quality of Life Index,'' 
in Walker, S.R. and Rosser, R.M., eds. Quality of Life Assessment: 
Key Issues in the 1990s, The Netherlands: Kluwer Academic 
Publishers, 1993.
    3. Viscusi, W.K., ``The Value of Risks to Life and Health.'' 
Journal of Economic Literature, vol. 31, pp. 1912-1946, December 
1993.
    4. Mauskopf, J.A., Mt French, A.S. Ross, D.M. Maguire, R.W. 
Leukrith, Jr., and K.D. Fisher, ``Estimating the Value of Consumers' 
Loss from Foods Violating the Federal Food, Drug, and Cosmetic 
Act,'' Research Triangle Report to the Center for Food Safety and 
Applied Nutrition, U.S. Food and Drug Administration, September 
1988.
    5. Food Marketing Institute, 1999, Consumer Attitudes and the 
Supermarket. Research International USA.
    6. Bureau of Labor Statistics, 2004 National Occupational and 
Wage Estimates, http://www.bls.gov/oes/, March 2006.

List of Subjects in 21 CFR Part 1

    Cosmetics, Drugs, Exports, Food labeling, Imports, Labeling, 
Reporting and recordkeeping requirements.
    Therefore, under the Federal Food, Drug, and Cosmetic Act, the 
Public Health Service Act, and under authority delegated to the 
Commissioner, we propose to amend part 1 as follows:

PART 1--GENERAL ENFORCEMENT REGULATIONS

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

    Authority: 15 U.S.C. 1453, 1454, 1455; 19 U.S.C. 1490, 1491; 21 
U.S.C. 321, 331, 332, 333, 334, 335a, 343, 350c, 350d, 352, 355, 
360b, 362, 371, 374, 381, 382, 393; 42 U.S.C. 216, 241, 243, 262, 
264.
    2. Section 1.98 is added to subpart E to read as follows:


Sec.  1.98   Label requirement on food imports refused admission into 
the United States.

    (a) Who is subject to this label requirement and what does the 
label say?--You are subject to this rule if you are an owner or 
consignee of an imported food, including food for animals, which has 
been refused admission into the United States (other than a food that 
must be destroyed). In such situations, you must affix a label stating, 
``UNITED STATES: REFUSED ENTRY'', as described in paragraphs (b), (c), 
and (d) of this section.
    (b) What does the label look like?--(1) Labels for shipping 
containers--For labels that are to be affixed to shipping containers 
(as required by paragraph (c) of this section), the letters in the 
label must be at least 72 points in size, appear in either an Arial or 
Univers font, and use black ink against a white background. The label 
must use uppercase letters only.
    (2) Labels for documents--For labels to be affixed to documents 
(i.e., invoices, packing lists, bills of lading, and any other 
documents accompanying the refused food, as required by paragraph (c) 
of this section), the letters in the label must be in black ink, must 
use either an Arial or Univers font style, and must be at least 36 
points in size. The label must use uppercase letters only.
    (c) Where does the label go?--For foods that are packaged, the 
label described in paragraph (b)(1) of this section must be clear, 
conspicuous, and permanently affixed to the food's shipping container. 
For purposes of this section, the term ``shipping container'' is any 
container used to pack one or more immediate containers of the refused 
food, and an immediate container is any container that holds an 
imported food for retail sale. In some situations, the food's immediate 
container may be the same as the shipping container. The term 
``shipping container'' excludes trailers, railroad cars, ships, and 
similar vehicles, vehicle components, and transportation-related items. 
For all foods, regardless of whether they are packaged in shipping 
containers, the label described in paragraph (b)(2) of this section 
must be clear, conspicuous, and permanently affixed to the top page of 
each document accompanying the refused food.
    (d) How do you show that you complied with the label 
requirements?--(1) To comply with the label requirement described in 
paragraphs (a) and (b) of this section, you must contact the FDA 
district office responsible for the food's entry and arrange to:
    (i) Affix the label(s) in our presence or under our supervision;
    (ii) Submit photographs or other visual evidence to us to show that 
you affixed the label(s); or
    (iii) Develop another means of showing, to FDA's satisfaction, that 
you affixed the label(s).
    (2) You must affix the label(s) promptly, and you must not move the 
food until you have complied with the label requirements.
    (e) What fees may we impose?--We may seek reimbursement from the 
owner or consignee for expenses connected to the affixing of a label 
under this section. These expenses will be computed on the basis of our 
inspector's time, the per diem allowance under government regulations, 
travel costs, and administrative support costs. We will submit a list 
of expenses incurred to the owner or consignee.

    Dated: September 12, 2008.
Jeffrey Shuren,
Associate Commissioner for Policy and Planning.
[FR Doc. E8-21813 Filed 9-17-08; 8:45 am]

BILLING CODE 4160-01-S
