FARFA Files Joint Comments Urging FDA to Waive or Reduce Fees for Re-Inspections of Small Businesses

October 16, 2011

Submitted through www.Regulations.gov

Re: Food and Drug Administration
Docket No. FDA-2011-N-0529
Request for Comment, 76 Fed. Reg. 45818 (Aug. 1, 2011)

Dear FDA:

The Weston A. Price Foundation, the Farm and Ranch Freedom Alliance, and the Farm-to-Consumer Legal Defense Fund jointly submit these comments on fees imposed under the FDA Food Safety Modernization Act.

The Weston A. Price Foundation (WAPF) is a nonprofit organization with members in every state and internationally. WAPF was founded in 1999 to disseminate the research of Dr. Weston Price, whose studies of isolated nonindustrialized peoples established the parameters of human health and determined the optimum characteristics of human diets. WAPF is dedicated to restoring nutrient-dense foods to the human diet through education, research and activism.

The Farm and Ranch Freedom Alliance (FARFA) is a non-profit organization headquartered in Texas with members in 45 states. FARFA advocates for farmers, ranchers, and homesteaders through public education and lobbying to assure their independence in the production and marketing of their food, and to prevent the imposition of unnecessary regulatory burdens that are not in the public interest. FARFA also advocates for consumers’ access to information and resources to obtain healthy foods of their choice.

The Farm-to-Consumer Legal Defense Fund (FTCLDF) is a nonprofit organization that protects the rights of farmers and consumers to engage in direct commerce, including the rights of farmers to sell the products of the farm and the rights of consumers to access the foods of their choice from the source of their choice.

I. Concerns

In the current notice, the agency indicates that it will issue a guidance document addressing when fees would be imposed. We urge the agency to impose re-inspection fees only when there was a violation that posed a credible risk of serious illness or injury to the public during the initial inspection.

We also urge the agency to do a thorough analysis of its activities to determine what costs can be reduced or eliminated. The claim that, to cover its costs, the agency would need to charge $224 per hour for re-inspections is deeply concerning. Moreover, by imposing fees on an hourly basis, the agency creates an incentive for inefficiencies. For example, an hourly fee encourages agency officials to utilize multiple inspectors when only one may be needed. Agency officials and inspectors should be provided with incentives to be efficient, both in preparing for re-inspections and in conducting them.

With respect to the issue of small businesses in particular, it is critical that the agency provide for fee waivers and reductions for small businesses. Many small businesses cannot absorb new costs. Given FDA’s published intention to charge $224 per hour for a wide range of activities, the fees for re-inspection could easily be several tens of thousands of dollars. Such a fee would quickly drive many small businesses out of business.

At a time when Congress is debating how to reduce the regulatory burdens on small businesses, it is wholly counter-productive for the agency to create a fee structure that makes it impossible for a small business to survive a simple re-inspection.

In contrast, large businesses are more able to absorb additional costs and already have a competitive advantage due to economies of scale. The fee provisions under FSMA should not be applied in a way that favors, yet again, large businesses over small.

In addition, the imposition for fees based on travel time unfairly penalizes rural businesses. Many small food producers are located in remote rural areas, many hours’ drive from the nearest FDA offices. If the agency imposes fees based on the time it takes for its agents to travel to the facility, then these rural businesses could face thousands of dollars in fees simply because of where they are located. Rural communities are already struggling, and these small, local food producers are vital to the local economies in their areas.

The notice specifically requested comments on the issue of defining small businesses and raised the possibility of defining businesses differently based on their industry classification. However, using multiple definitions could pose significant problems for diversified businesses. There is a growing trend in local food production towards diversification, rather than specialization, and these business often do not fit the categories that FDA and other agencies have developed based on the industrial food supply model.

By adopting the Tester-Hagan amendment, Congress has recognized that businesses that gross under $500,000 annually (to be adjusted for inflation) are in a special category. Given the small profit margins many such businesses have, any fees imposed by FDA could be destructive. Congress also recognized that businesses that sell directly to consumers are accountable to their customers through an efficient, transparent system that cannot be duplicated by government regulation or inspections.

Even as the businesses grow, a bill for several tens of thousands of dollars for a re-inspection would be prohibitively expensive. The Small Business Administration (SBA) uses a range of definition for what constitutes a “small business” in the field of agriculture and food. For food manufacturing, SBA generally provides that businesses qualify as “small” when they have between 500 and 1,000 employees, depending on the precise industry classification. (See http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf, Subsector 311.)

In order to pay that many employees’ wages in addition to the facility and input costs, these “small businesses”
presumably have a gross income of several tens of millions of dollars. While this amount may not seem small, it is understandable in the context of the food industry, in which the dominant companies have gross incomes in the billions of dollars.

II. Recommendations

1. The definition for small businesses should be based on a simple, multi-industry approach.
2. The fees should be completely waived for facilities grossing under $500,000.
3. The fees should be reduced for businesses above that amount based on a graduating scale:

a. 75% reduction in fees ($56/hr) for businesses grossing between $500,000 and $5 million annually.
b. A 50% reduction in fees ($112/hr) for businesses grossing between $5 million and $15 million annually.
c. A 25% reduction in fees ($168/hr) for businesses grossing between $15 million and $25 million annually.

4. The cut-offs for gross income should be adjusted annually for inflation.
5. Gross income levels should include subsidiaries and affiliates so that the large companies cannot manipulate the fee structure by having multiple different facilities.
6. No fees should be imposed for travel time.
7. Total fees for re-inspections should be capped at no more than 0.25% of the facility’s gross income per year.
8. Additional reductions or exemptions should be considered for facilities that market exclusively direct to consumers.

III. Conclusion

In adopting the Tester-Hagan amendment and other provisions of the FSMA, Congress clearly established its intent to reject a one-size-fits-all approach and recognized that differences in scale and distribution are important. We urge FDA to respect that principle in the imposition of the new fees.

Sincerely,

Sally Fallon
President, Weston A. Price Foundation
PMB 106-380
4200 Wisconsin Ave., NW
Washington, DC 2001

Pete Kennedy
President, Farm-to-Consumer Legal Defense Fund
8116 Arlington Blvd, Ste. 263
Falls Church, VA 22042

Judith McGeary
President, Farm and Ranch Freedom Alliance
P.O. Box 809
Cameron, TX 76520