International Sourcing: An Examination of FSMA

In 2011, the U.S. government enacted the most comprehensive food safety legislation in over half a century, the Food Safety Modernization Act (FSMA). The new regulations cover a wide berth of requirements and for the first time hold U.S. importers responsible and liable. “This is the first time since 1938 that the Food and Drug Administration (FDA) has updated the United States’ food safety regulations,” says Peter A. Hill, operations
manager Americas for Zespri in Newport Beach, CA.

These unprecedented regulations place new responsibilities on entities trading internationally for the U.S. market, in some cases redefining roles. “These new regulations are revolutionary, and if implemented and enforced as written, will have a major impact on the safety of produce,” says Domenic Veneziano, former and recently retired FDA director of the division of import operations (DIO) and consultant to Sandler, Travis & Rosenberg in Miami. “It represents an immense paradigm shift. Not only will importers of these products play a major role in the prevention of outbreaks by ensuring suppliers are in compliance with the new produce rule, but it will impact the entire supply chain.”

FSMA represents massive change greatly impacting U.S. fresh produce imports, agrees Valerie Hannig, food safety and government relations administrator for Oppenheimer in Newark, DE. “It shifts the focus from reacting to food safety events, to prevention across all phases of growing, harvesting, packing, shipping and receiving,” she says. “FSMA also holds corporate executives criminally liable for failure to comply with FSMA regulations and requirements.”

Though some may be opposed to these new rules, Robert Colescott, president and chief executive of Southern Specialties Inc. in Pompano Beach, FL, believes it to be a positive step due to the shift from reaction to prevention. “All parties involved throughout the supply chain —from seed to shelf — have a responsibility and role in controlling contamination hazards and in-turn, being required to support those efforts with written documentation,” he says. “In other words, say what you do, do what you say, and then validate what you do and say.”

A Quick Overview

While the new regulations are a Pandora’s box of requirements, exceptions and compliance dates, the general focus for imports revolves around a few key provisions. “For the first time, importers are required to verify their foreign suppliers have adequate preventive controls in place to ensure safety,” says Megan Arnold, director of food safety for Robinson Fresh in Solvang, CA. “Now importers are fully liable for the products they import into the United States and have a bigger stake in the game.”

According to Leanne Skelton, Agricultural Marketing Service (AMS) liaison to the FDA on FSMA with USDA in Washington, D.C., there are three principal provisions of the law pertaining to produce imports. “The importers must meet the Foreign Supplier Verification Rule and within that rule, their suppliers must meet either the Produce Safety Rule or the Preventive Control Rules, depending on the makeup of the operation,” she explains.

The regulations require substantial record keeping and verification. “Companies will be responsible for maintaining a number of food safety plans as part of their Quality System File/Food Safety Documentation,” explains Shelly Garg, attorney, FDA practice group at Sandler, Travis & Rosenberg. “This includes the Risk-Based Preventive Controls Plan, Sanitary Transport Plan, Recall Plan, Traceability Plan and Product File. These documents are being required not only by FDA, but also by large retailers.”

The law threatens major consequence for non-compliance. “FDA could suspend a food facility registration, which in effect prohibits a company from doing business in the United States,” says Garg. “Failure to comply with FSMA rules is also prohibited under the Food Drug & Cosmetic Act (FDCA), punishable by fines and other remedies.”

Frank A. Ramos, chief executive at The Perishable Specialist Inc. in Miami cautions importers failing to comply with FSMA requirements will face suspension of food facility registrations. “If your food facility registration is revoked, you cannot import, since all importations require Prior Notice of which the registration number is a key component,” he explains. “Failure to file a Prior Notice results in confiscation by Customs and Border Protection (CBP) of the imported product along with monetary penalty. Importers might also be placed on FDA import alerts and/or suffer product recall.”

Produce Safety and Preventive Control Rules

The first components of the regulations, the Produce Safety Rule and the Preventive Controls Rule, fall on the shoulders of the exporter. “The Produce Safety Rule formalizes the requirement that all farming operations have at least one person trained on and knowledgeable of food safety,” says Arnold. “Additionally, all growing and packing operations must be in compliance with the food safety practices of this rule, which emphasizes employee training, water microbiological analysis and the safety of food contact surfaces utilized at a farm.”

For packaged and processed food, Arnold explains the Preventive Controls Rule requires at least one person from the operation be a “qualified individual” through training on the rule, which details the food safety process steps within the facility. “Many produce and food importers already have robust supplier approval processes in place, but it’s anticipated others will need to more formally document their supplier-approval processes and the food safety aspects of their import supply chains,” she says.

Veneziano emphasizes exporters must understand their responsibility. “If they are responsible for Preventive Controls or Produce Safety and are not in compliance, it could impact all shipments with their customers,” he says. “They also need to know who is handling their shipments (i.e., importers and brokers) since they impact whether shipments are admitted into the United States or delayed or refused at the border.”

In the past, Colescott of Southern Specialties contrasts, retailers and foodservice operators depended on suppliers to provide food safety measures based on their word. “Now, all growers must have verifiable certifications,” he says. “This includes field and facility audits supported by proper recordkeeping and risk analysis conducted to identify potential hazards with the assurance of critical control steps being followed.”

Each rule has different compliance dates, and within each rule, the compliance dates are staggered based on business size. “Exporters must comply with whatever regulations apply to their operations,” says Jennifer McEntire, Ph.D., vice president for food safety and technology at the United Fresh Produce Association in Washington, D.C. “For example, a large fresh-cut processor exporting to the United States would have needed to be in compliance with the Preventive Controls Rule by Sept. 19, 2016. A small grower would need to comply with the Produce Safety Rule by January 2019. If the exporters aren’t the ones actually growing or processing produce, they don’t have a regulatory requirement, but their supplier — the grower or processor — still does if that food is destined for the United States.”

Though FSMA may present a new framework, globally savvy exporters report confidence in already meeting many expected requirements. “Most, if not all, global growers have third-party audits due to exporting to Europe,” says Mayda Sotomayor, chief executive of Seald Sweet in Vero Beach, FL. “Meeting FSMA needs may be less difficult for global growers because they are prepared and have many of these accreditations already.”

Overseas suppliers for I Love Produce, based in West Grove, PA, already comply with some aspects of the new law. “All our overseas partners have been registered with the FDA as food facilities for the past two years and are re-registering now as part of the biennial process,” says Jim Provost, president. “FDA offices and staff around the world have been making surprise visits to food facilities at our partners in China and Peru over the past two years.”

Likewise, growers for Don Limón — a grower, shipper and importer to the United States from Guatemala — are third-party certified through Global Gap, Primus Labs or GFSI (Global Food Safety Initiative). “For us, the new FSMA regulations are not ground- breaking,” says Diego Morales, vice president in Guatemala City. “The new regulations may clear the market a bit since there is now a bigger risk for importers. It is further incentive to take certifications seriously.”

Foreign Supplier Verification

Perhaps the biggest shift of the new regulations comes in the Foreign Supplier Verification Program Rule. “It requires whoever imports product in the United States now be responsible for ensuring food produced outside the United States is produced to the same standards as food in the United States,” says Jim Gorny, vice president of food safety and technology for Produce Marketing Association (PMA) in Newark, DE.

Under FSMA, importers are required to develop, maintain and follow a Foreign Supplier Verification Program (FSVP) to ensure imported food is in compliance with either the Produce Safety Rule or the Preventive Controls Rule. “Under the FSVP, importers must verify the food safety of their supply chain,” says Lance Jungmeyer, president of the Fresh Produce Association of the Americas (FPAA) in Nogales, AZ. “The importer can be legally liable for any foodborne illnesses resulting from lapses in food safety protocol.”

Oppenheimer’s Hannig clarifies importers or consignees must perform a hazard analysis on risks per type of produce per supplier and cut off suppliers if they believe produce is at risk of contamination or other issues. “They must also ensure third-party audits are completed prior to shipments, analyze for potential risk, and follow up on corrective actions,” she says.

Additionally, Hannig notes importers must monitor potential food adulteration, such as pesticides exceeding MRLs (minimum residue levels) or No Tolerance. “They must ensure preventive controls such as pesticide analysis and environmental microbiological testing are implemented by suppliers, ensure a written recall plan is implemented and tested, and ensure all growers understand and implement FSMA regulations, including the Produce Rule, Preventive Controls, Foreign Supplier Verification Program, Transportation Rule and Food Defense,” she says.

Gorny breaks the importer’s role into several key areas. “Importers must first complete a Hazard Analysis evaluating food risk and the supplier’s performance. Secondly, verify what the supplier and/or exporter is doing. Thirdly, be ready to take corrective actions if something goes wrong. And lastly, keep records on all this.”

Recordkeeping is a crucial aspect of the regulation and United’s McEntire warns the extent of records could be enormous when multiple suppliers or commodities are involved. “FDA doesn’t specify the format or prescribe a particular system, but if an importer sources many products from many suppliers, it could be challenging to keep track of,” she states. “Importers should also consider if their export partner is considered the ‘supplier.’ A supplier is defined as the one actually growing or processing the food. An exporter may be sourcing from several ‘suppliers’ and thus the importer needs to know, approve and verify all of them.”

Ramos of The Perishable Specialist emphasizes an FSVP must be established for each commodity from each supplier. “It should not be category-based, but supplier level,” he says. “If you have three suppliers for the same commodity, three separate verification programs should be in place.

Third-Party Audits

Technically, the regulations hold no specific provision requiring all produce items be accredited by a third-party. “Importers need to assess the risk of the imports and suppliers, and determine appropriate verification activities,” says McEntire. “If the produce is associated with a hazard causing a serious adverse health consequence or death (for example, salmonella or listeria monocytogenes), then FDA expects the importer to require an annual on-site audit of the grower or processor. This can be done by any ‘qualified auditor,’ including the importer or a third-party. The auditor doesn’t need to be accredited, but must meet the FDA definition of a qualified auditor.”

Robinson Fresh’s Arnold further clarifies third-party audits are one way of verifying foreign suppliers, but references a provision in the rules allowing for second-party audits. “These are audits conducted by trained, knowledgeable representatives of the importer or a consultant acting on the importer’s behalf,” she says. “The intent of the audits is to verify the foreign supplier is in compliance with the Produce Safety or Preventive Controls requirements. Various food safety documents can be used such as water testing results, product testing, environmental and food contact testing results, and other relevant food safety records.”

While all farms may not require a third-party audit, Skelton emphasizes the importer must conduct some type of supplier verification and highlights a few other alternatives. “You can also sample and test, or you can review a supplier’s food safety records,” she explains. “If you’re importing from a country like New Zealand, where the FDA has a comparability determination between the two countries, you can use that information.”

The Importer Role

U.S. importers and buyers may be surprised to learn FSMA redefines who is the “importer” under the new regulation, moving responsibility from the “importer-of-record” to whatever entity actually owns the product when it crosses the border. “For the purposes of FDA and this regulation, the importer is defined as the owner of the product when it crosses the border,” explains PMA’s Gorny. “Up until now, a number of different entities or people may act as ‘importer-of-record.’ Under this new definition, large entities buying direct may now be liable, regardless of whether they are the actual importer-of-record. If they’re buying FOB directly and bringing it on a truck, then they own it when it crosses the border and they’ll be responsible.”

Southern Specialties’ Colescott believes this redefinition means an increasing opportunity for traditional importers. “Importers will now act as gatekeepers for fresh produce sourced from foreign sources and be expected to have personnel properly trained and experienced in ensuring foreign supplier standards,” he says. “This includes trained, certified staff inspecting farms and packing houses, approving documentation, and assuring mock recalls produce accurate information. If managed properly, importers can turn this situation into an opportunity by creating transparency between the farm and customer, both in retail and foodservice.”

Importers may be accustomed to dealing with risk, but Don Limón’s Morales points out now the liability has increased. “This, of course, is a higher risk,” he says. “There will be a higher level of responsibility throughout the supply chain management.”

Ramos suggests importers without a quality control program in place hire a third party to assist in establishing quality control and correct deficiencies within the importing entity. “Even if you are exempt from this rule, an importer following good practices will have these verifications and certifications in place,” he adds.

Compliance Dates

Understanding what needs to be done and when is more complex due to FDA’s staggering of compliance dates. “Not everyone has to comply at once,” says AMS’s Skelton. “It’s a three-factor piece: the size of the importer, the food being imported and the size of the operation growing or processing the food. Generally, the largest operations must comply first.”

For an importer bringing in different types of products from different-sized exporters, United’s McEntire points out it may be tricky to figure out their compliance date. “They probably have several,” she says. “The earliest an importer needs to comply with FSVP is May 30, 2017. However, since it wouldn’t be fair for an importer to verify suppliers until the suppliers comply, importer compliance dates are six months after their suppliers need to comply. This means an importer could have several different compliance dates, driven by the different products and business sizes.”

Regardless, former FDA director Veneziano encourages the industry to start working on plans and ensuring compliance as soon as possible. “The Preventive Controls Rules became effective in September and the Foreign Supplier Verification Program takes effect in May,” he says. “FDA will begin inspecting facilities and will take appropriate action.”

Jennifer Janzen, key account manager for Summit Produce Inc. in Fresno, CA, points out the time an importer needs to implement necessary changes may depend on how many preventive controls they already have in place. “We are in the process of analyzing the standards and implementing changes,” she says. “Some of our staff have already successfully completed courses in the Food Safety Preventive Controls, and we continue to add more staff as necessary.”

However, I Love Produce’s Provost expresses concern about obtaining FSMA details and having ample time to comply prior to deadlines, especially relating to recognition of already attained certifications such as GFSI. “The announced regulations provide a skeleton for the final regulations,” he says. “But some parts may not be announced until two years after the initial regulations were signed.”

What Will It Cost?

In addition to the onus of understanding the complex regulations, companies express concern over how much additional cost they add to doing business. In the rule itself, FDA estimates about $430 million per year for firms to implement it, according to PMA’s Gorny. “However, if you divide this by the value of overall food imports, it’s a miniscule percentage,” he says.

Industry experts note some aspects of implementation are already in place, thus mitigating costs somewhat. “Reputable importers should already be verifying the food safety practices of their supply chain partners,” states United’s McEntire. “They may need to become more diligent around the documentation of these practices; it shouldn’t markedly shift what’s being done today as much as the way it’s substantiated. When it comes to growing, harvesting, packing and processing operations, again, food safety practices should already be in place.”

However, McEntire recognizes some nuances to the new rules could be challenging. “Especially some of the water testing requirements in the Produce Safety Rule and the documented justification and associated recordkeeping in the Preventive Controls Rule,” she says.

Sotomayor of Seald Sweet predicts added costs in the collection and maintenance of documents, as well as the handling of compliancy. Recently, Seald Sweet expanded its compliance system to better manage FSMA required documentation. “This ensures all our growers and partners are compliant with FSMA regulations and further supports our food safety protocol systems and commitment to only working with safe, reliable growing sources,” she notes.

According to Oppenheimer’s Hannig, companies could incur several new costs, including training an employee as a Preventive Controls Qualified Individual and hiring additional staff for the additional administration workload. “There may also be costs involved in obtaining legal advice and travel costs if staff need to verify compliance onsite at farm, storage and pack facilities,” she adds.

Getting Help

The seemingly complex nature of the regulations begs the question if companies need to hire a food safety expert. “It really depends on the operation,” says AMS’s Skelton. “If a company operates something streamlined and simple, maybe not. The best way to answer this question is to talk to trade associations, who have a better idea of what is involved.”

A handful of industry associations and alliances already portend training. “United Fresh plans to offer special training and outreach encompassing what types of records need to be kept, how importers need to evaluate risk and the options available to verify suppliers,” says McEntire. “There are probably many importers unaware FSVP exists and applies to them.”

FDA has committed to issuing guidance to interpret the regulations. “It seems reasonable to assume the components of the plans will be somewhere identified in this guidance,” says Skelton. “The regulation tells you what and the guidance tells you how.”

FDA has also established training alliances for farmers and processors, and is working on training for the importer community. “Importer training is likely to be modules linked to the Food Safety Preventive Controls Alliance curriculum,” says AMS’s Skelton. “On the fresh produce side, FDA and USDA are jointly funding the Produce Safety Alliance (PSA), a collaborative project between Cornell University, USDA and FDA.”

AMS reports being in the final stages of a joint GAPs alignment project with FDA colleagues allowing USDA AMS GAPs audits to align with the FDA Produce Safety Rule requirement minimums. “So in effect, farmers meeting the USDA AMS GAPs program requirements could conclude they are in compliance with the FDA Produce Safety Rule,” explains Skelton. “We should be offering the revised version next year prior to FDA’s compliance dates.

Skelton recommends several online resources, including FDA’s Imports Page and Fact Sheets, and recommends AMS webinars informing stakeholders and the public on various topics. “There are also Technical Assistance Networks (TANS) established by FDA where individuals can submit questions,” she adds.

Effects In The Marketplace

Perhaps the biggest question hovering over the regulations is what effect they may have on the marketplace both in terms of suppliers and buyers. “FSMA will weed out some exporters who are not careful enough or maybe don’t have the resources to implement certain steps,” says Don Limón’s Morales.

Importers speculate the new regulations may level the playing field by impeding less than desirable exporters. “Companies investing heavily and wisely in food safety measures will no longer have to compete in price against growers without similar business practices,” states Southern Specialties’ Colescott.

Fresh Produce’s Jungmeyer agrees, since most commercial growers have adequate food safety protocols, FSMA should keep out produce from smaller farms without a demonstrated history of HACCP. “The Produce Safety Rule, coupled with the FSVP, will limit the fly-by-night imports that have been the cause of some foodborne illness in the past,” he says.

Traders such as Summit Produce’s Janzen suggest the new standards may affect the number of suppliers an importer deals with. “Since the importers take responsibility for verifying their imports meet U.S. safety standards, the possibility remains for the importers to reduce risk by limiting their exporters,” she explains.

The new regulations may even cause some buyers to re-examine if they want to import or not. “Due to the requirements, some companies may see being an importer as a disincentive,” says United’s McEntire.

Southern’s Colescott predicts legal departments of major retailers importing product direct from foreign suppliers may be re-evaluating their business practices based on the risk/reward associated with direct sourcing. “I would think they will soon realize the grower community is a very fragmented industry and requires numerous experienced staff to properly manage efforts of mitigating their risks,” he says. “After they fully evaluate risk factors and analyze their business model, supply chains and service providers, they may reassess their business practices and resort back to what they know and do best, fresh produce retailing.”

Oppenheimer’s Hannig poses the question of whether or not retailers really want to take on increased responsibility and potential criminal liability of acting as the consignee or importer. “Or will they transfer this burden to other service provider companies?” she asks. “A related question for retailers, wholesale and foodservice is how they handle buying ‘shorts’ on the spot market. Do they want to shoulder the liability and due diligence required to vet out every grower they buy from? Or will they offload this responsibility to a company that can procure fresh produce on their behalf?”

Importers should also bear in mind, cautions McEntire, that their customers may be required to know the “supplier” and also conduct verification. “This will require an unprecedented level of transparency in the supply chain that could stress some business relationships,” she says. “The FSVP requirements and supply chain program requirements in the Preventive Controls Rule will substantially change the way business is conducted and maybe even the way supply chains work over the course of the next five to 10 years.”

Key New Components

The following are among FDA’s key new import authorities and mandates.

Importer Accountability: For the first time, importers have an explicit responsibility to verify that their foreign suppliers have adequate preventive controls in place to ensure that the food they produce is safe.

Third-Party Certification: The FSMA establishes a program through which qualified third parties can certify that foreign food facilities comply with U.S. food safety standards. This certification may be used to facilitate the entry of imports.

Certification for High-Risk Foods: FDA has the authority to require that high-risk imported foods be accompanied by a credible third-party certification or other assurance of compliance as a condition of entry into the United States.

Voluntary Qualified Importer Program: FDA must establish a voluntary program for importers that provides for expedited review and entry of foods from participating importers. Eligibility is limited to, among other things, importers offering food from certified facilities.

Authority to Deny Entry: FDA can refuse entry into the United States of food from a foreign facility if the FDA is denied access by the facility or the country in which the facility is located.

China’s Berry Expansion

Will increased market access in China for berries affect U.S. availability?

Continued increasing exports of Mexican and Peruvian blackberries and raspberries to China paint an increasingly competitive berry market in the future. “Once China’s economy begins to gain some steam again and their middle class begins to grow, we will feel the impact on all items,” says Robert Colescott, president and chief executive of Southern Specialties Inc. in Pompano Beach, FL. “A combination of rapid urbanization, a growing middle class, increasing incomes and changing dietary patterns, has led to greater food demand in China.”

Whenever a new market opens, according to Ray Griffin, director of global sourcing for Robinson Fresh in Eden Prairie, MN, it will increase demand from that supply base. “Due to proximity, the U.S. market will feel the impact moreso with Mexican supply than Peruvian,” he adds. “With 1.4 billion consumers in China, Mexican berry growers will certainly have options on where to export their product.”

However, short-term and long-term effects may differ. “In the short term, the acceptance of Mexican and Peruvian berries by China could tighten the market over the next couple of years,” says Craig Carlson, president and chief executive of Carlson Produce Consulting LLC in Chicago. “In the long term, I would expect the market to expand to meet demand.”

Industry experts expect increased production and supply management to fill U.S. demand without significant market interruption. “Most commercial berries in Mexico are grown for export,” says Lance Jungmeyer, president of the Fresh Produce Association of the Americas (FPAA) in Nogales, AZ. “With the extreme growth in the category, there should be ample supply to export to other markets.”

The Oppenheimer Group views the increased access as good news. “An increase in global berry consumption helps everybody and is needed to absorb the increases in hectares planted in Mexico and Peru,” says Matthew Giddings, berry category manager in Tampa, FL. “It should be similar to what we saw out of China on Chilean cherries. The competition for fruit should create a more stable market and better returns for the grower, and the competition for business should create a better quality and eating experience.”

The announcement is also viewed as terrific for Naturipe Farms LLC’s Mexican and Peruvian growers. “It will give them greater reach in terms of the world markets,” says Clay Wittmeyer, director of international sales, working out of Salinas, CA. “The United States is a black hole of demand for fresh berries and continues to dominate the consumption stats of both domestic berry production and imported fruit. The China volume, while important, is likely not going to have much affect at least for a few years in terms of diverting volumes away from the U.S. marketplace.”

Wittmeyer reports the berry category in the United States, as a whole, is leading retail sales in dollar volume (more than $5 billion) over other fruit categories. “This shows the U.S. consumer will continue to demand a 12-month supply,” he adds. “Having farms in Chile, Peru, Argentina and Mexico will continue to be necessary to satisfy that demand.”