2020 as the baseline year for calculating the adjustment. This may
include many CSAs and farm stands.
    (Comment 175) Some comments request that all small farms be exempt,
not only those that sell food directly to the consumer. The comments
assert that only ``hobby''-type farms that do not rely on food sales to
make a living can operate with only direct-to-consumer

sales. The comments maintain that even most farms that primarily sell
direct to consumers sell some of their products through wholesalers,
and that the paperwork for that portion of their sales would be too
burdensome.
    (Response 175) We understand that the exemption for direct-to-
consumer sales in Sec.  1.1305(b) will not fully exempt most farms from
the rule because farms that sell some product directly to consumers
also sell some of their product through wholesalers. However, as
discussed above, the final rule provides a complete exemption for
certain small producers (including farms) in Sec.  1.1305(a). There are
also other full and partial exemptions that may apply to many small
farms. Furthermore, as discussed below, the revised KDEs in the final
rule impose less of a burden than the proposed rule did on many farm
activities.
4. Inapplicability to Certain Food Produced and Packaged on a Farm
    Consistent with section 204(d)(6)(B) of FSMA, we proposed to
provide that the FTL traceability recordkeeping requirements would not
apply to food produced and packaged on a farm, provided that:
     The packaging of the food remains in place until the food
reaches the consumer, and such packaging maintains the integrity of the
product and prevents subsequent contamination or alteration of the
product (proposed Sec.  1.1305(c)(1)); and
     The labeling of the food that reaches the consumer
includes the name, complete address (street address, town, State,
country, and zip or other postal code for a domestic farm and
comparable information for a foreign farm), and business phone number
of the farm on which the food was produced and packaged (proposed Sec.
1.1305(c)(2)).
    We further proposed that, upon request, FDA would waive the
requirement to include a business phone number, as appropriate, to
accommodate a religious belief of the individual in charge of the farm
(proposed Sec.  1.1305(c)(2)).
    On our own initiative, we have slightly revised the provision
concerning waiving the requirement to provide a business phone number
to accommodate a religious belief, to align with the text of similar
language in Sec.  1.1455(c)(3)(iv) concerning a request for a sortable
electronic spreadsheet under certain circumstances. Thus, Sec.
1.1305(c)(2) of the final rule states, in part, that we will waive the
requirement to include a business phone number, as appropriate, to
accommodate a religious belief of the individual in charge of the farm.
We are finalizing the remainder of Sec.  1.1305(c) as proposed. We
respond to the comments on proposed Sec.  1.1305(c) in the following
paragraphs.
    (Comment 176) Some comments express general support for the
exemption for foods that are compliant with packaging and labeling
requirements. However, some comments maintain that the exemption is too
narrow, and some ask that FDA reconsider or delete the restrictions on
packaging in this exemption. Some comments assert that the proposed
rule requires firms to use plastic sealed packaging to qualify for the
exemption for identity-preserved food in proposed Sec.  1.1305(c), in
violation of FSMA. One comment contends that FSMA does not require new
packaging guidelines, while other comments assert that FSMA
specifically exempts certain identity-preserved foods and that there
should be no additional requirements on such foods.
    Some comments maintain that meeting the packaging requirements
would not be feasible for most smaller farms or even mid-size farms.
Some comments assert that the requirements only make sense for large,
national producers and the exemption does not benefit small, local
farms. Some comments maintain that the requirements may cost them
business and that it will be difficult to sustain environmentally
friendly niche markets. The comments state that some customers do not
want food in plastic packaging and that some may even have an allergy
to such packaging. Some comments contend that the required packaging is
expensive and resource-intensive, and would require investment in
expensive equipment and processes. One comment asserts that the
requirements will lead to an increase in production costs and to high
food prices.
    (Response 176) We appreciate the support that some comments
expressed for this exemption. Regarding some comments' assertions that
Sec.  1.1305(c) imposes packaging requirements that are not feasible
for all farms, we note that this provision does not establish packaging
requirements for farms; instead, it sets forth an exemption for foods
that are packaged and labeled in a certain way. Farms that do not
package and label their foods in this way are not in violation of
subpart S; they simply are not eligible for this exemption.
    Regarding some comments' assertions that the requirements are in
violation of FSMA, we conclude that the requirements to meet the
exemption in Sec.  1.1305(c) are appropriate and fully consistent with
section 204(d)(6)(B) of FSMA, which stipulates that packaging/labeling
that qualifies for the exemption should preserve the identity of the
farm that grew the product for purposes of traceability and also
maintain the integrity of the product and prevent subsequent
contamination or alteration of the product. The exemption is written as
narrowly as it is to ensure that all of these conditions are met (see
Response 178 regarding clamshell packaging).
    (Comment 177) One comment requests that FDA clarify the meaning of
product ``integrity.'' The comment asserts that Congress was referring
to packaging that maintains the food as a distinct unit rather than
packaging that prevents exposure to the environment, adding that all
produce is packaged in breathable packaging to prevent deterioration.
Some comments assert that the consideration should be traceability
(i.e., exposure of the product to the environment is irrelevant), and
as long as packaging and labeling is identity-preserving, it should be
allowed under the exemption, and additional packaging requirements
should be kept to a minimum. One comment suggests the exemption be
revised to refer to packaging that maintains the integrity of the lot
identity of the product and prevents subsequent alteration of the lot
identification of the product.
    (Response 177) We agree that maintaining the food as a distinct
unit and labeling the food so that the farm's identity is preserved to
aid in traceability are both important considerations for this
exemption. However, they are not the only considerations, and we
disagree with the assertion that exposure to the environment is
irrelevant. Section 204(d)(6)(B)(i) of FSMA specifies that the
packaging must prevent subsequent contamination or alteration of the
product. As discussed in Response 178, plastic clamshells and other
vented packaging will not necessarily prevent subsequent contamination.
    Regarding the comment about lot identity, section 204(d)(6)(B)(i)
of FSMA does not require that food be labeled to identify the lot
number in order to receive this exemption, and we have not included
such a requirement in the final rule. However, we agree that it is a
good practice, when possible, for foods to be labeled with information
regarding the lot number.
    (Comment 178) Some comments suggest that FDA allow the exemption in
Sec.  1.1305(c) to apply to foods packed in cardboard and clamshell
packing with holes. The comments assert that

the preamble to the proposed rule incorrectly states that vented
clamshells do not maintain the integrity of the product they contain.
Some comments request information on the contamination risks for food
in clamshells or bags with holes when that product is protected by an
outer container (cardboard box) and shipped directly to a retailer, and
they question how plastic packaging prevents contamination.
    (Response 178) As stated in the proposed rule, produce packed or
packaged in containers such as clamshells with holes, cardboard boxes,
vented crates, plastic bags with holes, or netted bags would not be
eligible for this exemption because such packaging does not necessarily
maintain the product's integrity and prevent subsequent contamination
and alteration. None of the comments presented information or arguments
that caused us to revise our understanding of this issue. Although
environmental exposure to produce packaged in vented clamshells or bags
with holes would be less than when produce is packed without packaging
in open crates, vented packaging can subject produce to contamination
in many ways, including from condensate in aerosols carried by the air
handling system, moisture dripping onto containers, particulates blown
through the facility by the air handling system, fingers of handlers
during handling of the packages, objects that may be inadvertently
inserted through the vents, and pests that can access the produce
through the vents. In contrast, sealed plastic packaging that remains
sealed throughout the supply chain will prevent contamination that
could occur through the vectors described above. Therefore, while
plastic clamshells and other vented packaging could maintain identity
preserving labeling through the supply chain, such packaging would not
necessarily maintain the integrity of the product and prevent
subsequent contamination, as required by the statute.
    (Comment 179) Some comments assert that the required packaging is
environmentally damaging and wasteful, and that the rule creates a bias
towards expensive, environmentally damaging packaging. Some comments
ask if FDA has considered the environmental impacts of the packaging
requirements. Some comments assert that individual item plastic
packaging is expensive and wasteful and that some commonly used
recyclable packaging will not be permitted under the proposed
exemption.
    (Response 179) As discussed in Response 176, this provision does
not establish a packaging requirement for farms; instead, it sets forth
one of several exemptions from the rule applicable to certain foods or
supply chain entities. Thus, Sec.  1.1305(c) does not require farms to
change how they package their food.
    Regarding the comment asking if we have considered the
environmental impact of Sec.  1.1305(c), as discussed in the
Categorical Exclusion Memorandum (Ref. 24) stating why neither an
environmental assessment (EA) nor an environmental impact statement
(EIS) is required for this rulemaking (see Section VIII of this
document), we think it is very unlikely that a significant number of
farms would change their packaging procedures just to avoid the subpart
S traceability recordkeeping requirements by making themselves eligible
for the exemption in Sec.  1.1305(c). The final rule provides full and
partial exemptions for certain farms, as well as a number of exemptions
for certain foods produced on farms (see Response 158). In addition,
the final rule imposes less burdensome requirements on farms than under
the proposed rule, including the elimination of proposed requirements
that would have required growers to maintain KDEs regarding the growing
of individual lots of food and that would have required the maintenance
of shipping and receiving KDEs before the initial packing of a food.
Therefore, we anticipate that most farms that are subject to the rule
will not conclude that the burden of compliance is so great that they
must significantly change their operations for certain foods just to
avoid having to keep the required traceability records. We also note
that changes to a farm's packaging procedures can themselves be costly
and resource-intensive, and might not be feasible for many types of
foods. We therefore do not expect the final rule to result in a
significant number of farms changing their practices in ways that could
cause environmental damage so as to avoid coverage under this rule.
    (Comment 180) Many comments support the exemption for products
packaged on a farm where the identity of the product is maintained on
the packaging all the way to the consumer, as long as the packaging
maintains the integrity of the product. Most of these comments also
request that these products be exempted throughout the supply chain.
The comments maintain that entities downstream in the supply chain from
the farm will have no way of knowing some of the traceability
information (e.g., the traceability lot code) unless the farm provides
the information. The comments assert that this would negate the
exemption and could cause firms to avoid buying from these farms. The
comments also maintain that buyers will ask non-farm entities to have
all of the farm-level information required by the rule if these
identity-preserved products are not exempt throughout the supply chain,
and claim that having to provide this information would drive some
small value-added farm operations out of business. Some comments assert
that Congress intended that these identify-preserved farm products
would retain their exemption throughout the supply chain. Some comments
maintain that distributors and retailers should not have to make
decisions about whether the farm-identity information on the packaging
and the packaging complies with the exemption criteria in Sec.
1.1305(c).
    (Response 180) We agree with the comments that products qualifying
for the exemption in Sec.  1.1305(c) are exempt throughout the entire
supply chain. This is why the provision states that ``[t]his subpart
does not apply to food'' that meets the relevant criteria for the
exemption. We believe that products qualifying for this exemption will
be relatively easy to identify as they move through the supply chain.
This can be accomplished through visual inspection or, if that is not
sufficient, through communication with the supplier. Though not
required by the rule, we encourage persons selling foods qualifying for
this exemption to provide information about their exempt status to
downstream entities in the supply chain.
    (Comment 181) One comment states that the proposed requirement in
Sec.  1.1305(c)(1) that the packaging remain in place until the food
reaches the consumer is beyond the scope of FSMA. The comment maintains
that some products are labeled but not packaged at all once the store
displays them, and these products should still be exempt.
    (Response 181) While section 204(d)(6)(B) of FSMA does not specify
that the packaging must remain in place until the food reaches the
consumer, the provision requires that packaging must maintain the
integrity of the product and prevent subsequent contamination or
alteration of the product. If the packaging is removed before the
product reaches the consumer, the integrity of the product might not be
maintained, and contamination or alteration could occur. This is the
case even if the food is still labeled with the required information
regarding the farm where it was produced and packaged. Therefore, to
effectively implement Congress's

intent to exempt only those products whose packaging maintains the
integrity of the product and prevents subsequent contamination or
alteration of the product, Sec.  1.1305(c)(1) of the final rule
requires that, to be eligible for this exemption, the packaging of the
food must remain in place until the food reaches the consumer.
5. Exemptions and Partial Exemptions for Foods That Will Receive
Certain Types of Processing
    We proposed to exempt from the FTL traceability recordkeeping
requirements produce and shell eggs that receive certain types of
processing. Under proposed Sec.  1.1305(d)(1), the requirements would
not apply to produce that receives commercial processing that
adequately reduces the presence of microorganisms of public health
significance, provided the conditions in Sec.  112.2(b) in the produce
safety regulation are met. Under proposed Sec.  1.1305(d)(2), the rule
would not apply to shell eggs when all the eggs produced at a
particular farm receive a treatment (as defined in Sec.  118.3 (21 CFR
118.3)) in accordance with Sec.  118.1(a)(2) of the shell egg
regulation.
    In a separate section (proposed Sec.  1.1355), we proposed to
specify that if a person applied a kill step to an FTL food, the rule
would not apply to the person's subsequent shipping of the food,
provided that the person maintained a record of application of the kill
step. We further proposed that if a person received an FTL food that
had been subjected to a kill step, the rule would not apply to that
person's receipt or subsequent transformation and/or shipping of the
food.
    As discussed in the following paragraphs, we have decided to move
these provisions regarding kill steps to the exemptions section of the
subpart S regulations. It is set forth in Sec.  1.1305(d) as a partial
exemption for food that a person subjects to a kill step, provided that
the person maintains a record of the application of the kill step
(Sec.  1.1305(d)(3)(ii)), and as a full exemption for food received
that has previously been subjected to a kill step (Sec.  1.1305(d)(5)).
We have also added a partial exemption to Sec.  1.1305(d) for food that
will be subjected to a kill step in the future, provided that shippers
and receivers of the food enter into written agreements stating that
the kill step will be applied by the receiver or an entity in the
supply chain (other than an RFE or restaurant) subsequent to the
receiver (Sec.  1.1305(d)(6)).
    We received comments that have persuaded us to add a partial
exemption for foods that in the future will be changed such that they
are no longer on the FTL (Sec.  1.1305(d)(6)). For example, as
discussed in Response 30, fresh spinach is on the FTL but frozen
spinach is not on the list. Under the final rule, fresh spinach that is
going to be frozen can be exempt from the rule even while it is still
fresh, provided that shippers and receivers of the fresh spinach enter
into written agreements stating that the spinach will be frozen by the
receiver or an entity in the supply chain (other than an RFE or
restaurant) subsequent to the receiver. This exemption is included
alongside the exemption for food that will receive a kill step in Sec.
1.1305(d)(6) of the final rule. The comments that prompted the addition
of this partial exemption are discussed below.
    (Comment 182) One comment opposes the commercial processing
exemption for produce. The comment asserts that if we maintain the
exemption in the final rule, the exemption should not apply until the
adequacy of commercial processes are verified and ``cross-scope''
inspection processes are clarified. Other comments request
clarification on the types of commercial processing that would be
covered under proposed Sec.  1.1305(d)(1).
    (Response 182) Under Sec.  1.1305(d)(1) of the final rule, subpart
S does not apply to produce that receives commercial processing that
adequately reduces the presence of microorganisms of public health
significance, provided the conditions set forth in Sec.  112.2(b) in
the produce safety regulation are met for the produce. As discussed in
the proposed rule (see 85 FR 59984 at 59996), we believe that because
of the lesser risk to public health posed by this produce (as reflected
in its being exempt from almost all of the requirements of the produce
safety regulation), it is not necessary to apply the additional
recordkeeping requirements to this food. Section 112.2(b)(1) explains
that examples of commercial processing that adequately reduces the
presence of microorganisms of public health significance are processing
in accordance with the requirements of 21 CFR parts 113, 114, or 120
(parts 113, 114, or 120); treating with a validated process to
eliminate spore-forming microorganisms (such as processing to produce
tomato paste or shelf-stable tomatoes); and processing such as
refining, distilling, or otherwise manufacturing/processing produce
into products such as sugar, oil, spirits, wine, beer, or similar
products.
    (Comment 183) One comment recommends that we include the kill step
exemption with other exemptions in proposed Sec.  1.1305.
    (Response 183) We agree with the comment, and because application
of a kill step involves certain types of processing, we have moved the
expanded kill step provisions to the exemptions and partial exemptions
for foods that receive certain types of processing in Sec.  1.1305(d)
of the final rule.
    (Comment 184) Many comments express support for the proposed kill
step exemption. One comment maintains that if an establishment
improperly performed the kill step for a food there would be
insufficient traceability for those food products.
    (Response 184) As discussed above, the final rule retains the
proposed rule's approach to foods that receive or have received a kill
step, and adds a partial exemption for foods that will receive a kill
step in the future. The final rule defines ``kill step'' to mean
``lethality processing that significantly minimizes pathogens in a
food'' (Sec.  1.1310). We think these exemptions and partial exemptions
are appropriate because applying a kill step to a food significantly
minimizes the presence of pathogens in the food, thus reducing the risk
posed by the food and reducing the likelihood that the food would be
involved in an outbreak, which in turn reduces the need for further
tracing of that food. Application of a kill step generally occurs in
accordance with other FDA regulations, such as those concerning
preventive controls for human food and LACF, which reduces the
likelihood that a kill step would be improperly performed. We note
that, if an outbreak were to occur in a food that was fully or
partially exempt under these provisions, various mechanisms exist that
would help FDA gain access to information regarding the affected foods,
as discussed in Response 163.
    (Comment 185) Several comments request clarification of the
definition of ``kill step'' and the use of the phrase ``significantly
minimizes,'' asking whether a log reduction is necessary to
significantly minimize pathogens. Several comments ask that we align
the definition of kill step with the seafood HACCP, preventive controls
for human food, and LACF regulations, or whether food processed under
those regulations would be considered kill steps. Several comments ask
whether certain processes, such as freezing, individually quick
freezing (IQF), drying, ozonated water, or ultraviolet (UV) light,
would be considered kill steps. One comment asks whether product
formulation, such as a product's pH level, water activity level, or use
of certain preservatives could be considered kill steps, particularly
for cheese. Several

comments ask whether cooking or shucking molluscan shellfish under the
Interstate Shellfish Sanitation Conference (ISSC) Model Ordinance would
count as kill steps. Another comment asks us to identify the kill step
for products with multiple cooking steps, such as steaming crabs to
pick crabmeat, pre-cooking raw tuna before canning, or post-harvest
processing of molluscan shellfish. Some comments ask that we provide a
list of approved kill steps.
    (Response 185) As discussed in Section V.F of this document, in the
final rule we are defining ``kill step'' as lethality processing that
significantly minimizes pathogens in a food. We added the term
``lethality'' to the proposed definition to clarify that a kill step
involves ``lethality processing,'' where the processing is robust
(significantly minimizes pathogens in a food) and not something that
simply reduces pathogens (e.g., a washing process). It is possible to
reduce or minimize pathogens in other ways, such as filtration, but we
would not consider that a kill step because it is not a lethality
processing. We are not requiring a specific log reduction for a kill
step as this depends on many factors, such as the food, the process,
the pertinent pathogen, the prevalence and concentration of a pathogen,
and other factors. Examples of kill steps include cooking,
pasteurization, other heat treatments, high-pressure processing, and
irradiation, as long as those processes are conducted in a manner that
results in a lethality treatment that significantly minimizes the
pertinent pathogen.
    Under this definition of ``kill step,'' processes such as freezing,
IQF, drying, ozonated water, or UV light generally would not be
considered kill steps because those processes usually would not involve
a lethality step that significantly minimizes pathogens. Similarly,
controlling hazards via a product's pH level, water activity level, use
of certain preservatives, or other types of product formulation
generally would not be considered kill steps. While those activities
may control the growth of the pathogen, they usually would not be
applied as kill steps.
    Regarding the application of specific other FDA regulations, any
LACF that has been processed to commercial sterility in accordance with
part 113 will have received a kill step as that term is defined in
subpart S. Any lethality step that has been validated to significantly
minimize or prevent a pathogen in accordance with the preventive
controls regulation would also be considered a kill step. While we
anticipate that in many cases a kill step will be performed in a
facility that is subject to the preventive controls regulation, the
LACF regulation, or both, we recognize that this will not always be the
case. (For example, many manufacturing facilities are not subject to
the LACF regulation, and a very small manufacturing facility might be
exempt from the preventive controls regulation but subject to subpart
S.) Any lethality processing that significantly minimizes pathogens in
a food will be considered a kill step for the purposes of subpart S,
regardless of whether it is performed in a facility that is subject to
these other FDA regulations.
    The seafood HACCP regulation requires seafood processors to control
for certain hazards, and in certain cases, this means processors need
to apply a lethality or kill step as a control. The Fish and Fishery
Products Hazards and Controls Guidance provides information regarding
control of pathogens through techniques such as cooking or
pasteurization, with the goal of either eliminating pathogenic bacteria
of public health concern or reducing their numbers to acceptable
levels. This information could be used to inform a determination of
whether or not a specific technique constituted a kill step as that
term is defined in subpart S.
    Regarding the comment that asked about cooking or shucking
molluscan shellfish under the ISSC Model Ordinance, as discussed in
Section V.E.7 below, the final rule exempts raw bivalve molluscan
shellfish that are covered by the requirements of the NSSP; subject to
the requirements of part 123, subpart C, and Sec.  1240.60; or covered
by a final equivalence determination by FDA for raw bivalve molluscan
shellfish.
    For products that receive multiple cooking steps, once the food
undergoes lethality processing that significantly minimizes pathogens
in the food, we will regard the food as having received a kill step.
Finally, because whether a process would be considered a kill step
depends on the application of the process to a specific food, we
decline to provide a list of approved kill steps.
    Some manufacturing processes can change the form of a food such
that it is no longer on the FTL. In those situations, subpart S would
no longer apply to the food under Sec.  1.1305(d)(4) of the final rule,
even if the manufacturing process did not constitute a kill step. For
example, fresh spinach is on the FTL, but frozen spinach is not. Frozen
spinach is therefore not covered by the subpart S requirements, even
though freezing is not a kill step.
    (Comment 186) Some comments ask for clarity about how the kill step
provision would apply to specific commodities such as fresh produce.
One comment asks how the kill step exemption would apply to finfish and
other seafood since the kill step would not eliminate or reduce fish
and other seafood-associated toxins such as histamine or ciguatoxin.
One comment asks whether application of a kill step would affect
whether a food was covered by the rule or not.
    (Response 186) If a kill step is applied to an FTL food, then the
food is partially exempt from the subpart S requirements under Sec.
1.1305(d) of the final rule. The person applying the kill step would
need to keep receiving records and a record of the application of the
kill step, but they would not need to keep transformation records or
shipping records related to the food that received the kill step.
Subsequent entities in the supply chain would not need to keep records
for that food. As discussed in Response 196, an additional partial
exemption would be available if it is known in advance that the food
will be subjected to a kill step.
    As previously stated, we are defining ``kill step'' to mean
lethality processing that significantly minimizes pathogens in a food.
Histamine and ciguatoxin are not pathogens; they are toxins, and we
agree with the comment that toxins are not controlled by the
application of lethality processing. Processes such as cooking will
constitute a kill step in situations where the relevant hazard relates
to pathogens, provided that the cooking is sufficient to constitute
lethality processing that significantly minimizes the pathogens in the
food. But with respect to a food that is associated with histamine or
ciguatoxin as a hazard--which is the case for some of the foods
currently on the FTL, as discussed below--cooking would not affect the
toxin and would not constitute a kill step. In general, cooking and
other lethality treatments do not significantly minimize non-
microbiological hazards, nor do they affect the toxins from
microbiological hazards that cause foodborne illness through the
formation of a heat-stable toxin in food, such as Staphylococcus aureus
and Bacillus cereus.
    For each of the commodities on the FTL, there are one or more
associated commodity-hazard pairs that drive the commodity risk score
and lead to the commodity being included on the FTL (see Refs. 10 and
15). Of the foods currently on the FTL, there are only two commodities
with such commodity-hazard pair(s) for which the associated hazards
include toxins: Finfish,

histamine-producing species, and Finfish, species potentially
contaminated with ciguatoxin. Because the acute chemical toxins are not
eliminated by thermal processes, cooking these commodities does not
constitute a kill step. But for all of the other commodities currently
on the FTL, including seafood products on the FTL that are not in
either of these commodities, cooking would be considered a kill step as
long as the product is cooked sufficiently to constitute lethality
processing that significantly minimizes the pathogens in the food.
    As discussed in Section V.T of this document, we plan to
periodically review and update the FTL using the procedures set forth
in Sec.  1.1465. As a result of this process, it is possible that the
commodity-hazard pairs(s) that lead to a commodity being on the FTL
could change. In such cases, the determination of whether cooking is
considered a kill step would be re-evaluated and could change,
depending on whether the associated hazards include an acute chemical
toxin or a microbiological hazard that produces a heat-stable toxin in
food. Similarly, if new commodities are added to the FTL in the future,
we would evaluate the hazards associated with each new commodity to
determine whether cooking would be considered a kill step for that
commodity. As discussed above, currently the only commodities on the
FTL for which cooking (or other lethality processing) is not considered
a kill step are Finfish, histamine-producing species, and Finfish,
species potentially contaminated with ciguatoxin. This can only change
as a result of updates to the FTL that are carried out using the
procedures in Sec.  1.1465; and if it does change, we will communicate
clearly about which commodities on a revised FTL are in this situation.
    As discussed in Responses 27 and 185, some manufacturing processes
can change the form of a food such that it is no longer on the FTL. In
those situations, subpart S would no longer apply to the food, even if
the manufacturing process did not constitute a kill step. For example,
canned tuna is in the commodity ``canned seafood,'' which is not on the
FTL. Canned tuna has tuna as an ingredient, but not in any of the forms
(``fresh'' or ``frozen'') in which tuna appears on the FTL. Canned tuna
is therefore not on the FTL and is not covered by the subpart S
requirements, even though the canning process does not constitute a
kill step for histamine, which is a hazard among the commodity-hazard
pairs that lead to Finfish, histamine-producing species (e.g., tuna),
being included on the FTL. In many cases, the inquiry into whether or
not a process constitutes a kill step will not be relevant, because the
same process will have changed the food into a form that is not on the
FTL.
    (Comment 187) Some comments assert that in addition to the proposed
exemption associated with a ``kill step,'' products covered under the
LACF and acidified foods (AF) regulations (parts 113 and 114,
respectively) should be exempt from other recordkeeping requirements in
the proposed rule. The comments state that the processes required in
parts 113 and 114 exceed the exemption requirements included in
proposed Sec.  1.1305(d). In addition, the comments maintain that those
regulations require that the products be marked with a permanent code
on their containers and that records be maintained for 3 years. The
comments also propose that subpart S be modified to include provisions
for identifying foods intended to undergo LACF or AF processes.
    (Response 187) As discussed in Response 7, the RRM-FT uses a
categorization scheme that classifies FDA-regulated foods into 47
commodity categories. Within each commodity category, the RRM-FT
identifies individual commodities. Two of the 47 commodity categories
apply to products covered under the LACF and AF regulations:
``Acidified/LACF--Baby (Infant and Junior) Food Products'' and
``Acidified/LACF--NEC.'' These two commodity categories are associated
with eight different commodities: baby food; canned broth, chicken or
beef; canned fruits and vegetables; canned seafood; cheese sauce
(shelf-stable); diet and nutritional drinks (shelf-stable); milk
(shelf-stable, not condensed); and soups (canned). None of these
commodities had a risk score high enough to be included on the FTL.
Therefore, there are currently no products covered under the LACF and
AF regulations on the FTL, and such products are therefore not
currently subject to the final rule.
    We agree it is helpful to identify foods that are intended to
undergo processes that would either constitute a kill step or change
the food such that it is no longer on the FTL (or both). Therefore, as
discussed in Response 196, Sec.  1.1305(d)(6) of the final rule
provides a partial exemption for foods that will be subjected to a kill
step by an entity other than an RFE, restaurant, or consumer, or that
will be changed by an entity other than an RFE, restaurant, or consumer
such that the food is no longer on the FTL, provided that shippers and
receivers of the food enter into written agreements stating that the
food will receive a kill step or be changed such that it is no longer
on the FTL. This partial exemption can be used when it is known that an
FTL food will ultimately undergo processing under the LACF or AF
regulations, and will therefore no longer be on the FTL.
    (Comment 188) Some comments state that pasteurized crabmeat should
be exempt from subpart S because, in manufacturing the finished
product, the crabs must be cooked twice, first to allow removal of the
meat from the shell, and then a second time to pasteurize the finished
product. The reasons provided in the comment for the requested
exemption include that the second ``kill step'' was comparable to the
processes that allow for exemption of produce and egg products under
proposed Sec.  1.1305(d); that the seafood HACCP regulation requires
the maintenance of records for those products for 2 years; that the
seafood HACCP regulation requires processors to address all food safety
hazards, including hazards introduced from the growing environment; and
finally that the crabmeat is separated from the viscera, which
eliminates the need for traceback to the harvest environment.
    (Response 188) We agree that the cooking or pasteurization of
crabmeat products meets the definition of a kill step, provided that it
is done in a way that constitutes lethality processing that
significantly minimizes pathogens in the food. The exemptions in Sec.
1.1305(d) relating to the application of a kill step are therefore
applicable to cooked or pasteurized crabmeat products.
    (Comment 189) Some comments request that surimi analogue be
considered exempt from the rule. The comments maintain that exemption
would be appropriate because the process requires that the finished
product be cooked twice during production and the second pasteurization
process is comparable to the exemption requirements in Sec.  1.1305(d)
for produce and egg products, and the seafood HACCP regulation requires
the processor to address all food safety hazards associated with the
analogue and to maintain HACCP records for 2 years.
    (Response 189) We do not think it is appropriate to exempt surimi
analogue from the rule. Surimi analogue is a paste that is usually made
from fish. As with any food, if surimi analogue contains an FTL food as
an ingredient, it will be on the FTL (provided the FTL ingredient
remains in the same form in which it appears on the FTL).

    However, the final rule provisions relating to kill steps would
apply to surimi analogue just as they do to other foods. Surimi
analogue and its FTL ingredients therefore could be eligible for the
full and partial exemptions related to kill steps in Sec.
1.1305(d)(3), (d)(5), and (d)(6), if the relevant conditions are met.
    (Comment 190) Some comments recommend that seafood that has
undergone a cooking process (e.g., cooking, pasteurization, hot smoke)
should not be considered ``high risk'' under the rule. The comments
maintain that the seafood HACCP requirements and other regulatory
controls are sufficient to ensure the safety of these products.
    (Response 190) Thermal processes intended to eliminate or
significantly minimize pathogens meet the definition of a kill step.
This is true of cooking in many contexts. However, as discussed in
Response 186, cooking does not significantly minimize toxins such as
histamine and ciguatoxin. Cooking a product does not constitute a kill
step for foods on the FTL when acute chemical toxins or microbiological
hazards that produce heat-stable toxins are determined to be among the
commodity-hazard pair(s) that drive the commodity risk score and lead
to the commodity being included on the FTL. Of the foods currently on
the FTL, there are two commodities with such commodity-hazard pair(s)
for which the associated hazards include toxins: Finfish, histamine-
producing species, and Finfish, species potentially contaminated with
ciguatoxin. Because the acute chemical toxins in these types of finfish
are not eliminated by thermal processes, cooking or other thermal
processing of these commodities does not constitute a kill step. But
for seafood products on the FTL that are not in either of these
commodities, cooking or other thermal processing would be considered a
kill step as long as the product is cooked sufficiently to constitute
lethality processing that significantly minimizes the pathogens in the
food.
    As discussed in Response 73, smoked finfish (including both hot and
cold smoked finfish) is a commodity that was identified for inclusion
on the FTL due to its risk score. Therefore, hot smoked finfish is
covered by the subpart S requirements, and the hot smoking itself
cannot be considered a kill step.
    Notwithstanding the fact that other regulations are in place for
food safety, Congress instructed FDA to create a list of foods for
which additional recordkeeping requirements would be appropriate and
necessary to protect the public health, with the goal of improving
traceability. While the seafood HACCP regulations are intended to
ensure the safety of seafood products, the purpose of this final rule
is to improve traceability in the event of a foodborne illness outbreak
involving foods on the FTL. The seafood commodities on the FTL are on
the list because they have a risk score that meets the threshold for
the FTL. Consequently, persons who manufacture, process, pack, or hold
seafood products on the FTL must comply with the subpart S
requirements, unless an exemption applies.
    (Comment 191) Many comments maintain that downstream entities may
not know whether a kill step was applied to a particular food and that
distributors and retailers may not be able to create different systems
for receiving foods on the FTL and foods not on the FTL. But some
comments suggest that requiring shippers to communicate to receivers
that a food has undergone a kill step would still require
recordkeeping, resulting in this not being a true exemption. A few
comments request that FDA specify that downstream entities could rely
in good faith on the absence of subpart S records as an indication that
a kill step was applied. Some comments suggest that FDA exercise
enforcement discretion for those downstream entities that rely in good
faith on upstream entities to determine whether a product received a
kill step. One comment suggests that if the shipper does not provide
subpart S records, the receiver should be able to assume the records
are not required as long as the receiver does not have affirmative
knowledge that the food should be covered by the rule and the shipper
has provided a guaranty that it will provide traceability information
when required.
    A few comments ask us to require the person who applied the kill
step to provide a statement to subsequent entities in the supply chain
that a kill step had been applied. One comment asks that we require
anyone who received a food to which a kill step has been applied to
maintain lot-based traceability linking back to the entity that applied
the kill step.
    (Response 191) As discussed in Response 196, a person who applies a
kill step must maintain a record of the kill step, but they are not
required to keep records relating to the transformation or subsequent
shipping of the food. Under Sec.  1.1305(d)(5), subpart S does not
apply to food a person receives that has previously been subjected to a
kill step. As discussed above, we think these exemptions are
appropriate in light of the reduced risk associated with foods that
have received a kill step.
    We have not included a requirement for the person applying the kill
step to notify downstream entities that a kill step has been applied,
and we also decline to require subsequent entities to maintain
traceability records for products to which a kill step has been
applied. Receivers should not assume (in the absence of other evidence)
that just because they receive a product without subpart S records from
the shipper of the food that a kill step was applied. Persons covered
by the rule are responsible for knowing whether they need to keep
subpart S records. In cases where it is not clear whether a kill step
has been applied, firms should work with their suppliers to communicate
about the status of the product. If entities in a particular supply
chain wish to have documentation of a kill step, they can work that out
with their supply chain partners. As discussed previously, we encourage
persons selling exempt foods to provide information about their exempt
status to downstream entities in the supply chain.
    (Comment 192) A few comments request that FDA also provide an
exemption for foods that will receive a kill step from the consumer.
The comments argue that these foods are less likely to result in a
foodborne illness outbreak, making additional recordkeeping
requirements for traceability unnecessary.
    (Response 192) We decline to provide an exemption for FTL foods for
which the consumer will apply a kill step. The kill step exemption in
the final rule applies only to foods to which a kill step is applied by
a commercial entity, and the entity applying the kill step must
maintain a record of the application of the kill step. We anticipate
that entities applying a kill step will primarily include
manufacturers/processors producing food under existing regulations,
such as the preventive controls, LACF, and seafood HACCP regulations.
Those regulations include additional provisions to ensure that a kill
step was applied adequately. Consumers may not apply an adequate kill
step in the home or may not follow the cooking instructions; they also
might not apply a kill step at all, depending on the nature of the
food.
    (Comment 193) One comment suggests that the requirement to identify
a list of FTL foods to be shipped should not include foods that will
receive a kill step.

    (Response 193) As discussed in Section V.G of this document, the
final rule omits the proposed requirement to maintain a list of FTL
foods shipped.
    (Comment 194) One comment suggests that we revise the definition of
the ``Food Traceability List'' to make clear that if a food on the FTL
receives a kill step, it is not covered by the rule.
    (Response 194) We decline to revise the definition of ``Food
Traceability List'' as suggested. Instead, as discussed above, the
final rule provides a complete exemption for food a person receives
that has previously been subjected to a kill step, as well as partial
exemptions for food a person subjects to a kill step and food that will
be subjected to a kill step in the future. We think these exemptions
provide an appropriate level of traceability for these foods, while
taking into account the reduced risk associated with these foods.
    We note that in some cases, the application of a kill step
coincides with a food being changed such that it is no longer on the
FTL. For example, as discussed in Response 30, fresh spinach is on the
FTL because it is part of the commodity ``leafy greens,'' but canned
spinach is not on the FTL because it is part of the commodity ``canned
fruits and vegetables.'' Moreover, the fact that canned spinach
contains spinach as an ingredient does not place it on the FTL, because
the spinach is not in the same form (``fresh'') in which it appears on
the FTL. The canning process (and related cooking) constitutes a change
to the food such that it is no longer on the FTL; consequently, canned
spinach is not covered by the rule. It therefore might not be necessary
to inquire whether the canned food received a kill step, though we note
that the processes associated with making canned spinach under the LACF
regulation do constitute a kill step.
    (Comment 195) Some comments suggest that we should exempt dietary
supplements and dietary ingredients from the rule because dietary
ingredient manufacturing involves steps to reduce the presence of
microorganisms of public health significance.
    (Response 195) We decline to exempt dietary supplements or dietary
ingredients from the rule. As discussed in Response 78, dietary
supplements are a separate commodity in the Model and they do not have
a risk score high enough to merit inclusion on the FTL. However, if a
dietary supplement uses an ingredient that is on the FTL, and that
ingredient is in the same form in which it appears on the FTL (e.g.,
``fresh''), then the dietary supplement would be covered by the rule.
For example, some refrigerated dietary supplements contain fresh herbs
and are therefore on the FTL and covered by the rule.
    (Comment 196) Multiple comments assert that, in addition to
providing a partial exemption for foods that receive a kill step, we
should also exempt, throughout the supply chain, foods that will
receive a kill step in the future. The comments argue that because a
kill step will be applied, there is no public health benefit to
requiring additional traceability records for those foods. The comments
also suggest that receiving and transformation records, including
maintaining a lot code, should not be required for foods that will
receive a kill step in the future. The comments note that we already
allow for an exemption for certain produce and eggs that will receive
commercial processing in the future.
    (Response 196) We agree with the comments that full traceability
records are not necessary for foods that will receive a kill step in
the future. Under the final rule, once it becomes known that an FTL
food will receive a kill step in the future, the food becomes eligible
for the partial exemption in Sec.  1.1305(d)(6), provided that written
agreements are in place, as described below, to indicate the intent
that the food will be subjected to a kill step. The person who applies
the kill step would still need to maintain a record of the kill step,
as specified in Sec.  1.1305(d)(3)(ii); however, because of the
existence of the written agreement, the person applying the kill step
would not need to keep receiving records for the food, as specified in
Sec.  1.1305(d)(3)(i). (Furthermore, as discussed in the introduction
to Section V.E.5 of this document, the person who applies a kill step
is never required to keep transformation or shipping records relating
to the food, provided they maintain a record of the kill step.) If the
entity applying the kill step does not have a written agreement in
place with the shipper of the food, the entity must maintain receiving
records for the food, as stated in Sec.  1.1305(d)(3)(i). Once the kill
step has been applied, subsequent entities who receive the food would
not need to keep subpart S records for the food, as specified in Sec.
1.1305(d)(5).
    To ensure that a kill step will be applied, Sec.  1.1305(d)(6) of
the final rule requires, for the exemption to apply, that the shipper
and receiver of the FTL food enter into a written agreement stating
that a kill step will be applied to the FTL food by an entity other
than an RFE, restaurant, or consumer. The written agreement can either
specify that the receiver will apply a kill step, or that the receiver
will only ship the food to another entity that agrees, in writing, that
it will either apply a kill step or enter into a similar written
agreement with the subsequent receiver stating that a kill step will be
applied to the food. The food might move through several steps in the
supply chain before it reaches the entity that applies the kill step,
and the first shipper might not be aware of who will eventually apply
the kill step. However, for each shipping event that is covered by a
written agreement between the shipper and the receiver, there must be a
shared understanding that the food will eventually be subjected to a
kill step by an entity that is not an RFE, restaurant, or consumer.
RFEs, restaurants, and consumers are not included because we expect the
kill step to be applied under controlled conditions, which may not
always be the case in a retail food setting or in the home. As
discussed in Response 185, we anticipate that entities applying a kill
step will primarily be manufacturers/processors producing food under
existing regulations, such as those on preventive controls, LACF, and
seafood HACCP, which will help ensure that the kill step is applied
adequately.
    As specified in Sec.  1.1305(d)(6)(iii), a written agreement under
these provisions must include the effective date, printed names and
signatures of the persons entering into the agreement, and the
substance of the agreement. We consider electronic signatures to meet
the signature requirement of this provision, and another entity (e.g.,
corporate headquarters) may sign the agreement on behalf of a shipper
or receiver provided the agreement is specific to the shipper and
receiver. To ensure the agreement reflects the current understanding
between the parties, the written agreement must be renewed at least
once every 3 years, as set forth in Sec.  1.1305(d)(6)(iv). That
provision also specifies that the written agreement must be maintained
by both parties for as long as it is in effect.
    We are providing flexibility for written agreements to be entered
into in a variety of ways, depending on the business practices of the
supply chain partners. The written agreement can be a new agreement
developed for the purposes of this regulation or it can be written into
existing contracts or other documents between the shipper and receiver.
The written agreement can be written to cover the FTL food on a per-
lot, per-shipment, or other basis (e.g., all products the shipper
provides to the receiver will receive a kill step), depending on what
makes the most sense for the shipper and receiver.

However, the written agreement must represent the current understanding
of the parties. If circumstances change such that the substance of the
written agreement is no longer accurate, the agreement must be updated
even if the 3 years has not expired. As with all records required under
subpart S, written agreements must be provided to FDA upon request in
accordance with Sec.  1.1455(c).
    This approach aligns with our exemptions in Sec.  1.1305(d)(1) and
(2) for produce that is eligible for the commercial processing
exemption under Sec.  112.2(b) of the produce safety regulation, and
for shell eggs when all eggs produced at a particular farm will receive
a treatment. We agree with the comments that it makes sense to add this
new partial exemption to broaden the situations in which the
recordkeeping burden can be reduced due to advance knowledge that a
food will receive a kill step. This new partial exemption is available
in situations that are not covered by the two other exemptions in Sec.
1.1305(d), including situations where it does not become known that the
food will receive a kill step until after it leaves the farm or other
point of origination.
    As discussed in Response 194, the partial exemption in Sec.
1.1305(d)(6) is available not only to food that will receive a kill
step, but also to food that will be changed such that it is no longer
on the FTL.
    (Comment 197) One comment requests that FDA expand the kill step
exemption to include FTL foods that received a kill step in compliance
with the preventive controls for human food regulation in part 117,
subpart C (21 CFR part 117, subpart C), or related regulations. The
comment argues that this would be consistent with the commercial
processing exemption for produce in the proposed rule and would exclude
foods that will be prepared under food safety plans that require a kill
step, either through processing or validated cooking instructions to
the consumer.
    (Response 197) As discussed above, we are providing a set of full
and partial exemptions relating to foods that receive a kill step. Such
kill steps will often, though not always, be applied in facilities that
are subject to the preventive controls regulation. We are not exempting
FTL foods for which the consumer is expected to apply a kill step, as
discussed in Response 192.
6. Exemption for Produce That Is Rarely Consumed Raw
    We proposed to exempt from subpart S produce that is listed as
rarely consumed raw (RCR) in Sec.  112.2(a)(1) of the produce safety
regulation (proposed Sec.  1.1305(e)). We stated that due to the lesser
risk to public health posed by such produce (as reflected in its being
exempt from the produce safety regulation), it was not necessary to
apply the additional recordkeeping requirements to these foods. The
final rule maintains this exemption in Sec.  1.1305(e).
    (Comment 198) Some comments support exemption of produce that is
rarely consumed raw. Some comments also suggest revisiting the RCR list
and request that we evaluate a broader range of crops than the
commodities found in the National Health and Nutrition Examination
Survey, What We Eat in America (NHANES/WWEIA) dataset. One comment
suggests exemption of foods that contain an ingredient that is on the
FTL if the food is rarely consumed raw (even if the food is not listed
on the RCR list in Sec.  112.2(a)(1)), for example, frozen pizza
containing an ingredient on the FTL. One comment requests that we apply
our exemption for RCR produce to all foods on the FTL that are rarely
consumed raw. The comment asserts that this would reduce the number of
foods covered by the FTL that have never been associated with a
foodborne illness outbreak. The comment maintains that because foods
like frozen pizza are usually cooked by the consumer before being
consumed, they should not be covered. Other comments maintain that most
seafood should not be covered by the rule because it is cooked before
consumption.
    (Response 198) Produce that is on the RCR list as not covered under
the produce safety regulation in Sec.  112.2(a)(1) is exempt from the
subpart S requirements under Sec.  1.1305(e). Reevaluation of the RCR
list is beyond the scope of this rulemaking. The RCR list is an
exhaustive list containing fruits and vegetables that are almost always
cooked before being consumed. The list was developed using national
food survey data from the NHANES/WWEIA that was conducted in
partnership between the U.S. Department of Health and Human Services
(HHS) and the USDA. NHANES/WWEIA examines a nationally representative
sample of about 5,000 persons each year located across the country. The
sample is selected to represent the U.S. population of all ages. More
information, data, and other details about how the RCR list was
developed are available in the final rule establishing the produce
safety regulation (80 FR 74353).
    As discussed in Response 192, we are not creating a broader
exemption to the subpart S requirements for foods that are expected to
receive a consumer kill step. We also decline to create a ``rarely
consumed raw'' exemption for non-produce foods. As discussed above, FDA
developed an exhaustive list of produce that is designated as RCR in
the produce safety regulation, and those products are exempt from the
subpart S requirements. However, we have not developed an exhaustive
list for other types of foods, such as frozen pizza or specific types
of finfish, that are rarely consumed raw, and it would not be feasible
to do so at this time. Moreover, although the Agency determined in the
produce safety regulation that there was relatively low risk associated
with produce that is rarely consumed raw, it does not necessarily
follow that this is the case for non-produce items that are rarely
consumed raw. Shell eggs are not intended to be consumed raw, and
indeed for many years FDA has required that all shell eggs be labeled
with safe handling instructions requiring that they be cooked
thoroughly (see 21 CFR 101.17(h)). However, subsequent to the issuance
of that regulation, shell eggs were nonetheless involved in numerous
foodborne illness outbreaks. Furthermore, as discussed above, many
types of seafood are associated with hazards that are not addressed by
cooking. These are some of the complexities that have led us to decide
not to identify and exempt a list of non-produce items that are rarely
consumed raw.
    The coverage of seafood on the FTL is discussed in several
responses in this document. We note that ``Pizza (Frozen)'' is a
commodity that was evaluated by the Model, and it did not receive a
risk score high enough to be on the FTL. And because all of its
ingredients are frozen, a frozen pizza could only be on the FTL if it
contained an FTL ingredient that is on the FTL in its frozen form
(e.g., finfish).
    (Comment 199) Some comments maintain that the majority of seafood
products are cooked prior to consumption and are rarely consumed raw
(e.g., shrimp, lobster, crab, crayfish), yet the exemption in proposed
Sec.  1.1305(e) only addresses produce that is rarely consumed raw.
Some comments further maintain that NHANES did not accurately capture
consumption patterns of shrimp and the extent to which shrimp is
consumed cooked or raw. The comments suggest opening a public comment
period for stakeholders to help identify seafood products that are
rarely consumed raw

and develop a list similar to that for produce in part 112.
    (Response 199) As discussed above, we decline to identify and
exempt seafood products that are rarely consumed raw. Under the seafood
HACCP regulations, the identification of products that will be cooked
before consumption occurs during the individual processor's hazard
analysis where hazards and controls are identified. In the absence of
an RCR list identifying specific species of seafood that are unlikely
to be consumed raw, the Model identified seafood commodities (e.g.,
several finfish commodities and crustaceans) as having a risk score
that meets the criteria for the FTL based on data related to
consumption and six other criteria (Ref. 10), which resulted in those
foods being included on the FTL. Further, we believe NHANES is
currently the best data source available for estimating consumption
across the commodities in the RRM-FT, including the commodity
``Crustaceans,'' which includes shrimp. The RRM-FT does not consider
consumer cooking because the commodity in the Model is defined as foods
available for purchase by the consumer. Therefore, we used data from
NHANES regardless of whether the product is consumed cooked or raw by
the consumer to score Criterion 6 (Consumption) for ``Crustaceans.''
7. Exemption for Raw Bivalve Molluscan Shellfish
    The proposed rule did not include an exemption for molluscan
shellfish. However, we received many comments requesting such an
exemption. In response to the comments, the final rule includes an
exemption for certain raw bivalve molluscan shellfish, as discussed in
the following paragraphs.
    (Comment 200) One comment maintains that although existing
regulations applicable to shellfish are adequate, application of the
rule to shellfish could produce potential benefits. On the other hand,
several comments ask that we exempt from the rule shellfish that is
subject to the NSSP. Several comments compare the existing raw
molluscan shellfish safety and traceability requirements to the
proposed rule and ask that we exempt raw molluscan shellfish from the
rule. One comment maintains that current Louisiana laws and regulations
cover most of the proposed requirements for the shellfish industry
operating in accordance with the NSSP requirements. Some comments
assert that there are conflicts between the proposed rule and the
requirements in the seafood HACCP regulation and the NSSP Model
Ordinance (recognized by the ISSC), and maintain that the information
required by the proposed rule should already be contained in records
required by the NSSP. The comments maintain that the current NSSP
requirements and local laws regarding traceability and recordkeeping
require traceability back to harvesters and harvest waters, adding that
processors also must meet the requirements of the NSSP Guide for the
Control of Molluscan Shellfish (NSSP Guide) and the seafood HACCP
regulation to address food safety hazards associated with raw molluscan
shellfish. The comments assert that adding the subpart S requirements
would cause financial burdens and further confuse the regulatory
environment. One comment asserts that not granting a ``waiver'' for
shellfish would establish dual conflicting traceability requirements.
One comment maintains that if FDA thinks different traceback
information is needed for raw molluscan shellfish, we should use the
process for making changes to the NSSP through the ISSC. However, one
comment asserts that changes to the NSSP Guide or additional, redundant
requirements would cause confusion in both the regulatory community and
the shellfish industry. Many of the comments maintain that the proposed
traceability requirements would not provide any additional safety
benefits regarding raw molluscan shellfish. One comment suggests the
use of State-designated harvest areas and NSSP lease numbers as harvest
locations. One comment suggests that the rule specifically exempt
``shellfish harvesters and dealers that are regulated pursuant to the
National Shellfish Sanitation Program and are listed on the Interstate
Certified Shellfish Shippers List published by the U.S. Food and Drug
Administration.''
    (Response 200) We recognize that the NSSP is a longstanding, well-
established Federal-State cooperative program for the sanitary control
of shellfish produced and sold for human consumption with broad
participation from agencies from shellfish-producing and non-producing
States, FDA, the Environmental Protection Agency (EPA), NOAA, foreign
governments, and the shellfish industry. Specifically, the NSSP
provides a broad framework of raw molluscan shellfish sanitation
standards through the NSSP Guide. The NSSP Guide contains within it all
relevant federal requirements concerning, among other things, current
good manufacturing practice (CGMP), hazard analysis and HACCP plans,
recordkeeping, sanitation control procedures, and the restriction of
interstate transport of shellfish in an insanitary manner. Importantly,
the NSSP Guide also allow products in the program to be traced from
harvest to retail. We conclude that applying the requirements of this
rule to such molluscan shellfish covered by NSSP would be unnecessary
and duplicative in light of those existing controls.
    Further, we recognize that under the seafood HACCP regulations,
processors of fishery products that meet the definition of ``molluscan
shellfish'' in Sec.  123.3(h) (21 CFR 123.3(h)) are required by subpart
C of part 123 to maintain records documenting certain required
traceability information relating to the shellstock. Additionally,
Sec.  1240.60 requires that shipments of molluscan shellstock or
containers of shucked molluscan shellfish be accompanied by tags,
labels, BOLs, or similar shipping documents that bear certain required
traceability information. Therefore, we conclude that applying the
requirements of this rule to raw bivalve molluscan shellfish that is
subject to the requirements of part 123, subpart C, and Sec.  1240.60
would be unnecessary and duplicative in light of those existing
controls.
    We also recognize that there are raw bivalve molluscan shellfish
that are covered by a final equivalence determination by FDA, meaning
that FDA has found that a foreign country has adopted and implemented a
system of food safety control measures for raw bivalve molluscan
shellfish that provides at least the same level of sanitary protection
as comparable food safety measures in the United States (i.e., those
applied through the NSSP and those required by subpart C of part 123
and Sec.  1240.60). We therefore conclude that applying the
requirements of this rule to raw bivalve molluscan shellfish that are
covered by a final equivalence determination by FDA would be
unnecessary and duplicative.
    Therefore, Sec.  1.1305(f) of the final rule provides that the
subpart S requirements do not apply to raw bivalve molluscan shellfish
that are covered by the requirements of the NSSP; subject to the
requirements of part 123, subpart C, and Sec.  1240.60; or covered by a
final equivalence determination by FDA for raw bivalve molluscan
shellfish. This exemption holds throughout the supply chain, including
subsequent receivers of raw bivalve molluscan shellfish.
    (Comment 201) One comment asserts that the State of Louisiana
regulates oyster harvesting, including traceability requirements that
require oyster tags to

be kept for 90 days. The comment maintains that the Louisiana
recordkeeping requirements (including those concerning commercial trip
tickets, oyster tags, and time-temperature logs) help ensure that
oysters are tracked from harvest to consumption to protect the public
health. The comment asserts that these traceability requirements cover
the goals of the proposed rule.
    (Response 201) As stated in Response 200, raw bivalve molluscan
shellfish covered by the requirements of the NSSP are exempt from
subpart S under Sec.  1.1305(f). Through their participation in the
NSSP and membership in the ISSC, States such as Louisiana have agreed
to adopt the NSSP Model Ordinance into State law and enforce NSSP
requirements for the sanitary control of molluscan shellfish.
    (Comment 202) One comment recommends that all shellfish harvesters
and shellfish farmers be exempt from the requirement to create lot
codes and instead, the comment asserts, they should keep records under
Sec.  1.337, consistent with existing subpart J requirements. The
comment asserts that asking each shellfish harvester and shellfish
farmer to register with FDA is duplicative because they already have to
be licensed by their State shellfish control authorities.
    (Response 202) Under Sec.  1.1305(f), and as stated in Response
200, subpart S does not apply to raw bivalve molluscan shellfish that
are covered by the requirements of the NSSP; subject to the
requirements of part 123, subpart C, and Sec.  1240.60; or covered by a
final equivalence determination by FDA for raw bivalve molluscan
shellfish. However, we decline the recommendation to exempt all
shellfish harvesters and shellfish farmers from the requirement to
assign traceability lot codes. The FTL contains types of shellfish that
are not molluscan shellfish (specifically crustaceans, including, but
not limited to, shrimp, crab, lobster, and crayfish) and that are
therefore not exempt under Sec.  1.1305(f), and for those types of
shellfish, the requirement to assign traceability lot codes is the same
as for any other food on the FTL. Shellfish harvesters and shellfish
farmers that initially pack a RAC (other than a food obtained from a
fishing vessel), perform the first land-based processing of a food
obtained from a fishing vessel, or transform a food would be required
to assign traceability lot codes in accordance with Sec.  1.1320.
    This rule does not establish a requirement for shellfish harvesters
and farmers to register with FDA. Food facility registration is
addressed in subpart H. We note that subpart H does not apply to farms
(see Sec.  1.226(b) (21 CFR 1.226(b)) or to certain fishing vessels
(see Sec.  1.226(f)).
    (Comment 203) One comment asks if the proposed traceability lot
code would be required to travel with oysters after they are shucked.
The comment mentions that the shellfish industry commonly commingles
shellfish based on grade and order, and maintains that requiring a
vessel-specific traceability lot code would be burdensome. One comment
asks FDA to clarify if receiver requirements would apply to a shucker
of raw molluscan shellfish destined for a restaurant.
    (Response 203) As stated in Response 200, subpart S does not apply
to raw bivalve molluscan shellfish that are covered by the requirements
of the NSSP; subject to the requirements of part 123, subpart C, and
Sec.  1240.60; or covered by a final equivalence determination by FDA
for raw bivalve molluscan shellfish. This exemption applies throughout
the supply chain, including subsequent receivers, shippers, and
transformers of the shellfish. Therefore, a traceability lot code will
not be required to travel with oysters (or other raw bivalve molluscan
shellfish) after they are shucked, and receiver requirements will not
apply to apply to a shucker of raw bivalve molluscan shellfish destined
for a restaurant.
    Regarding the comment's observation that all shellfish, not
specifically oysters, are commonly commingled, we note that not all
shellfish are exempt, as discussed in more detail in Response 202
above. Specifically, the FTL also includes crustacean shellfish, which
are not exempt under Sec.  1.1305(f). For crustacean shellfish, the
requirement to assign traceability lot codes is the same as for any
other food on the FTL. As discussed in Section V.E.9 of this document,
some seafood will be able to meet the definition of ``commingled raw
agricultural commodity'' in this rule and will therefore be eligible
for the partial exemption in Sec.  1.1305(h).
8. Exemption for Persons Who Manufacture, Process, Pack, or Hold
Certain Foods Subject to USDA Regulation
    Although the proposed rule did not include an exemption for foods
that are subject to regulation by the USDA, in response to a comment,
the final rule specifies that the subpart S requirements do not apply
to persons who manufacture, process, pack, or hold FTL foods during or
after the time when the food is within the USDA's exclusive
jurisdiction, as discussed in the following paragraphs.
    (Comment 204) One comment asks whether facilities regulated by the
USDA's FSIS are covered by the rule.
    (Response 204) Facilities that are exclusively regulated by FSIS
are not covered by this rule. See Response 83 for further discussion of
Sec.  1.1305(g), which states that the subpart S requirements do not
apply to persons who manufacture, process, pack, or hold food on the
FTL during or after the time when the food is within the exclusive
jurisdiction of the USDA under the Federal Meat Inspection Act (21
U.S.C. 601 et seq.), the Poultry Products Inspection Act (21 U.S.C. 451
et seq.), or the Egg Products Inspection Act (21 U.S.C. 1031 et seq.).
If FDA and FSIS share joint regulatory oversight of a particular
facility, FTL foods produced under exclusive FSIS oversight in that
facility would not be covered by the final rule.
    The requirements of subpart S apply to FTL foods that have not yet
arrived at a facility where they will be exclusively regulated by FSIS.
For example, if an FDA-regulated facility sends an FTL food to a
facility where it will be exclusively regulated by FSIS, the shipper
must maintain the required shipping KDEs and provide the required KDEs
to the FSIS facility in accordance with Sec.  1.1340 of the final rule.
This will help ensure that the FSIS facility has a record of the
shipment of the food in the event a traceback of the food products is
necessary. However, neither the FSIS facility nor any subsequent
entities in the food's supply chain would be required to keep subpart S
records for the food.
9. Partial Exemption for Commingled Raw Agricultural Commodities
    In accordance with section 204(d)(6)(D) of FSMA, we proposed to
partially exempt certain commingled RACs from subpart S (proposed Sec.
1.1305(f)). For purposes of the partial exemption, and in keeping with
Congress's language in section 204(d)(6)(D) of FSMA, we proposed to
define ``commingled raw agricultural commodity'' as any commodity that
is combined or mixed after harvesting but before processing, except
that the term would not include types of fruits and vegetables that are
RACs to which the standards for the growing, harvesting, packing, and
holding of produce for human consumption in part 112 apply (proposed
Sec.  1.1305(f)(1)). As a result, the proposed exemption would not
apply to produce subject to the produce safety regulation. Also in
keeping with section 204(d)(6)(D) of FSMA, the proposed rule

stated that the term ``processing'' would mean operations that alter
the general state of the commodity, such as canning, cooking, freezing,
dehydration, milling, grinding, pasteurization, or homogenization
(proposed Sec.  1.1305(f)(1)). In the preamble to the proposed rule, we
stated that for the purposes of this definition of ``commingled raw
agricultural commodity,'' a commodity would be regarded as combined or
mixed before processing only when the combination or mixing involved
food from different farms (see 85 FR 59984 at 59996).
    Also, in keeping with section 204(d)(6)(D) of FSMA, proposed Sec.
1.1305(f)(2) specified that, with respect to a commingled RAC that
receives the exemption in proposed Sec.  1.1305(f)(1), if a person who
manufactures, processes, packs, or holds such commingled RAC is
required to register with FDA under section 415 of the FD&C Act in
accordance with subpart H with respect to the relevant RAC, such person
must maintain records (for 2 years) identifying the immediate previous
source of such RAC and the immediate subsequent recipient of such food
in accordance with the subpart J traceability requirements in
Sec. Sec.  1.337 and 1.345.
    As discussed in the following paragraphs, consistent with changes
we are making in response to comments in Section V.E.5 of this document
to exempt foods that will be subjected to a kill step (see Response
196), we are expanding the partial exemption for commingled RACs to
include RACs that will become commingled in the future, provided that
there is a written agreement in place between the shipper and receiver
of the RAC, as specified in Sec.  1.1305(h)(2) of the final rule. In
response to comments, we have made other minor changes to the proposed
partial exemption for commingled RACs and to the definition of
``commingled raw agricultural commodity,'' as discussed in the
following paragraphs.
    (Comment 205) One comment suggests expanding the proposed
definition of ``commingled raw agricultural commodity'' to include bulk
and commingled ingredients after they are first combined and
subsequently transformed.
    (Response 205) We decline to make this change to the proposed
definition of ``commingled raw agricultural commodity.'' In section
204(d)(6)(D)(ii)(I) of FSMA, Congress defined ``commingled raw
agricultural commodity'' for purposes of this partial exemption as any
commodity that is combined or mixed after harvesting but before
processing. We incorporated this definition in proposed Sec.
1.1305(f)(1), and we continue to incorporate it in the final rule,
although we have moved it to the ``Definitions'' section of subpart S
(Sec.  1.1310). We conclude that it would not be appropriate to broaden
the scope of the exemption to include RACs that are commingled after
processing, as the comment appears to suggest, because this would
result in more FTL foods for which subpart S traceability records would
not be available in the event of a foodborne illness outbreak involving
such a food. However, we note that the partial exemption applies to
commingled RACs as they move through the supply chain. Therefore, to
the extent that the comment is suggesting that commingled RACs should
continue to be exempt after they are shipped by the entity that
performed the commingling, this is already part of the stated
exemption.
    We note that although farms and firms are not required to keep
subpart S records for commingled RACs exempted under Sec.  1.1305(h),
maintaining traceability records as a best practice can be beneficial
in the event that a traceback or recall is required.
    (Comment 206) One comment requests that we clarify how the
commingled RAC exemption will apply to eggs. The comment asks whether
eggs from separate farms under different company management, commingled
before packing, are eligible for the exemption. The comment also asks
whether, if a processor uses eggs grown on his farm and mixes them with
eggs from another farm that are exempted under this commingled RAC
exemption, the exemption extends to the processor's mixed eggs.
    (Response 206) In the preamble to the proposed rule (85 FR 59984 at
59997), we stated that we would consider commingled shell eggs to be
eggs from separate farms under different company management that are
physically mixed before packing, while packed eggs that are from a
single farm or from separate farms under the same management would not
be considered commingled shell eggs. Therefore, if a processor mixes
eggs collected on her farm with eggs from another farm under different
company management, and she does so before packing the eggs, the eggs
so combined would be eligible for the exemption in Sec.  1.1305(h).
This is true regardless of whether the eggs from the other farm were
already considered to be exempt under this provision.
    Although we believe it is likely that most people would understand
the phrase ``different farms'' to mean farms under different company
management, because there are many different business models for farms,
we believe the definition should provide greater clarity on the meaning
of ``different farms.'' Therefore, the final rule's definition of
``commingled raw agricultural commodity'' specifies that a commodity is
``combined or mixed'' only when the combination or mixing involves food
from different farms under different company management (except with
respect to food obtained from a fishing vessel, as discussed in
Response 208).
    (Comment 207) One comment asks FDA to clarify situations under
contract manufacturing with regard to egg production, specifically in-
line production (when the henhouse and shell egg processing plant are
on the same site) and off-line production (when a shell egg processing
plant receives eggs from nearby farms). The comment states that the
farms may be under the same ownership as the shell egg processing
plant, or the shell egg processing plant may own the laying hens but
not the land or the site. The comment maintains that if a farm is
operating a shell egg processing plant, the records of contract farms
must be sent to the immediate subsequent recipients (retail grocery
store or food service company) of eggs, because the eggs in question
will have ``originated'' on the contract farms, since the originator is
where the eggs are harvested. The comment maintains that in the off-
line setting, the shell egg processing plant would have to provide
records to immediate subsequent recipients (customers). However, the
comment does not believe that this information is relevant or needs to
be passed along to the customers, because the processing plant will
have those records.
    (Response 207) As discussed above, when eggs from different farms
under different company management are combined or mixed before they
are processed, they are eligible for the partial exemption under Sec.
1.1305(h). Therefore, in the off-line production systems described in
the comment, if the eggs come from different farms under different
company management and they are combined or mixed at the processing
plant before they are processed, they would be eligible for the partial
exemption. For the in-line production systems described in the comment,
if the eggs being processed are all from the same farm, then they are
not eligible for the partial exemption.
    For eggs that are not subject to the partial exemption, the
requirements of subpart S would apply. As described in Response 271,
the final rule does not use the concept of ``origination'' that is

mentioned in the comment. Sections V.J and V.K of this document discuss
how the revised KDEs apply to RACs such as eggs. We do not agree that
sending traceability information through the supply chain is
unnecessary in situations where the processing plant maintains the
records. Traceback often begins at RFEs or restaurants, and it is
important for those entities to have the relevant traceability records.
    (Comment 208) Some comments suggest that the partial exemption for
commingled RACs should apply to seafood. The comments maintain that
commingling of seafood occurs at different stages after harvesting and
before processing. The comments assert that the originating source may
not be a farm but a landing source that might range from several docks
to fishing vessels. The comments ask whether products produced by
factory trawlers and at-sea processing vessels that harvest and process
the fish will be eligible for the partial exemption.
    (Response 208) The preamble to the proposed rule did not discuss
application of the partial exemption for commingled RACs to commingled
seafood, and we agree with the comments that we should provide clarity
on this matter. We further agree that some seafood will be able to meet
the definition of ``commingled raw agricultural commodity'' in this
rule and will therefore be eligible for the partial exemption in Sec.
1.1305(h). For seafood that is not obtained from a fishing vessel
(e.g., seafood that is farmed in an aquaculture operation), the
application of the partial exemption would be similar to what is
described above for eggs.
    We conclude that we should modify the definition of ``commingled
raw agricultural commodity'' as it applies to food obtained from a
fishing vessel to reflect the unique circumstances of such food,
including the fact that fishing vessels are partially exempt from the
rule under Sec.  1.1305(m). Therefore, we have revised the definition
of ``commingled raw agricultural commodity'' to specify that for food
obtained from a fishing vessel, a commodity is ``combined or mixed''
only when the combination or mixing involves food from different
landing vessels and occurs after the vessels have landed. We believe
that the requirement that the combination or mixing involve food from
different landing vessels and occur after the vessels have landed
generally parallels the requirement that the combination or mixing of a
RAC not obtained from a fishing vessel must involve food from different
farms under different company management. Applying this revised
definition of ``commingled raw agricultural commodity'' to the comment
concerning products produced by factory trawlers and at-sea processing
vessels, we note that the seafood would not be subject to the partial
exemption for commingled RACs if the combination or mixing of the
seafood occurs before the vessels have landed. We recognize that
commingling of seafood often occurs on fishing vessels prior to
landing. However, fishing vessels are exempt from subpart S under Sec.
1.1305(m) and therefore are not required by this rule to keep records
of any commingling or processing that occurs on the fishing vessel.
Under this regulation, the chain of traceability records for food
obtained from a fishing vessel does not begin until the vessel lands,
as described in Section V.L of this document. Therefore, for food
obtained from a fishing vessel, we have defined commingling to mean the
combining or mixing of food from different landing vessels that occurs
after the vessels have landed. See Response 385 for an explanation of
how the first land-based processor of food obtained from a fishing
vessel would record KDEs, such as the harvest date range and locations,
in situations where the food was caught by different vessels and
combined onto a single vessel before coming to land.
    (Comment 209) One comment maintains that spices are consolidated/
commingled at various steps in the supply chain before processing and
therefore should be eligible for the partial exemption for commingled
RACs.
    (Response 209) ``Spices'' is a commodity that was considered in the
Model but that did not receive a high-enough risk score to be included
on the FTL; therefore, spices are not currently subject to the rule. If
spices were to be added to the FTL in the future, any spices that met
the definition of a commingled RAC would be eligible for the partial
exemption. We note that herbs are distinct from spices, and herbs are
explicitly covered by the produce safety regulation (see Sec.
112.1(b)(1) (21 CFR 112.1(b)(1)). Therefore, herbs--such as fresh
herbs, which are currently on the FTL--are not eligible for the partial
exemption for commingled RACs.
    (Comment 210) Some comments suggest that we establish a partial
exemption for commingled RACs (other than fruits and vegetables that
are subject to the produce safety regulation) such as grains and
oilseeds that are not currently on the FTL but could be added to the
list in the future.
    (Response 210) We do not think it is necessary to adopt a specific
exemption for grains, oilseeds, and other potentially commingled RACs
that are not on the FTL but could be added to the FTL in a future
update of the list. If a RAC not on the FTL is added to the FTL in the
future, and if that RAC is not subject to the produce safety
regulation, a mixture or combination of that RAC that met the
definition of a commingled RAC would be eligible for the partial
exemption at that time.
    On our own initiative, we are revising the partial exemption for
commingled RACs to extend it to RACs that that will become commingled
RACs in the future, provided that there is a written agreement in place
between the shipper and receiver of the RAC, as specified in Sec.
1.1305(h)(2) of the final rule. We are making this revision to be
consistent with changes we are making to proposed Sec.  1.1305(d) to
provide for an exemption for food that will be subjected to a kill step
or that will be changed such that the food is no longer on the FTL (see
Section V.E.5 of this document). As with food that will become exempt
because a kill step will be applied, or because the food will be
changed so that it is no longer an FTL food, we conclude that it is not
necessary to apply the subpart S requirements to food that will become
partially exempt as a commingled RAC, and we think that written
agreements can be used to ensure that supply chain partners share the
expectation that the RAC will be commingled before it is processed.
Therefore, Sec.  1.1305(h)(2)(i)-(ii) of the final rule provides that,
except as specified in Sec.  1.1305(h)(3), subpart S does not apply to
a RAC that will become a commingled RAC provided that: there is a
written agreement between the shipper of the RAC and the receiver
stating that the receiver will include the commodity as part of a
commingled RAC; or there is a written agreement between the shipper of
the RAC and the receiver stating that an entity in the supply chain
subsequent to the receiver will include the commodity as part of a
commingled RAC and that the receiver will only ship the RAC to another
entity that agrees, in writing, it will either include the RAC as part
of a commingled RAC or enter into a similar written agreement with the
subsequent receiver stating that the RAC will become part of a
commingled RAC.
    The written agreement must include the effective date, printed
names and signatures of the persons entering into the agreement, and
the substance of the agreement (Sec.  1.1305(h)(2)(iii)), and it must
be maintained by both parties for as long as it is in effect and
renewed at

least once every 3 years (Sec.  1.1305(h)(2)(iv)). As discussed in
Response 196, we are providing flexibility for written agreements to be
entered into in a variety of ways, depending on the business practices
of the supply chain partners. The discussion in Response 196 regarding
that flexibility in the context of Sec.  1.1305(d)(3) also applies to
written agreements under Sec.  1.1305(h)(2).
    Because the definition of commingled RAC only applies when the
commodity is combined or mixed after harvesting but before processing,
the partial exemption in Sec.  1.1305(h)(2) is only available in
situations where the RAC is moving through the supply chain without
having yet been processed by anyone in the supply chain, and with the
intent that it will be combined or mixed before being processed. Once
that combining or mixing occurs, the partial exemption in Sec.
1.1305(h)(1) applies.
    We did not receive any comments on proposed Sec.  1.1305(f)(2),
which specified that with respect to a commingled RAC that receives the
exemption in proposed Sec.  1.1305(f)(1), if a person who manufactures,
processes, packs, or holds such commingled RAC is required to register
with FDA as a food facility with respect to activities concerning the
applicable RAC, such person must maintain records (for 2 years)
identifying the immediate previous source of such RAC and the immediate
subsequent recipient of such food in accordance with Sec. Sec.  1.337
and 1.345 of subpart J. This language, which is based on section
204(d)(6)(F) of FSMA, has been retained in the final rule as Sec.
1.1305(h)(3). Because we have added the partial exemption for RACs that
will become commingled RACs in Sec.  1.1305(h)(2) of the final rule, we
have expanded Sec.  1.1305(h)(3) to specify that the requirement for
registered facilities to record the immediate previous source and
immediate subsequent recipient of the commingled RAC applies with
respect to a commingled RAC that receives either of the exemptions in
Sec.  1.1305(h)(1) or (h)(2). This will ensure that when a RAC is
exempt from the subpart S requirements either because it has already
been commingled or because it will be commingled in the future, some
amount of traceability records will still be available from entities
that are required to register under subpart H.
10. Exemption for Small RFEs and Restaurants
    In Sec.  1.1305(g) of the proposed rule, we presented the option of
adopting either a full exemption or a partial exemption from the
proposed subpart S requirements for RFEs that employ 10 or fewer FTE
employees. Option 1 would completely exempt from subpart S RFEs that
employ 10 or fewer FTEs (the number of FTEs would be based on the
number of such employees at each RFE and not the entire business).
Option 2 would only exempt such RFEs from the requirement in proposed
Sec.  1.1455(b)(3) to make available to FDA under specified
circumstances an electronic sortable spreadsheet containing the
information required to be maintained under subpart S (for the foods
and date ranges specified in FDA's request).
    In response to comments, we are establishing a full exemption from
subpart S for certain small RFEs, creating an exemption from the
electronic sortable spreadsheet requirement for larger but still
relatively small RFEs, and making several other changes regarding the
proposed exemption for small RFEs, as discussed in the following
paragraphs.
    (Comment 211) Some comments voice support for Option 1 in proposed
Sec.  1.1305(g), which would provide a full exemption from the rule for
RFEs with 10 or fewer FTEs. These comments maintain that requiring
small RFEs to comply with the rule would be an undue burden, as many of
these entities have few resources; that tracebacks rarely affect small
retailers; that complying with the rule would be costly and infeasible
for these entities; that there is no need for the regulation to apply
to small retailers; and that small retailers in particular should
receive a full exemption as many of them have been heavily affected by
the COVID-19 pandemic. Some comments maintain that small convenience
stores in particular should be eligible for this exemption because they
would not be able to comply with the rule due to increased costs
associated with equipment, maintenance, and labor.
    On the other hand, some comments support Option 2, which would only
exempt small RFEs from the sortable spreadsheet requirement in proposed
Sec.  1.1455(b)(3). These comments maintain that requirements for small
RFEs to comply with the sortable spreadsheet requirements would be
unduly burdensome and effectively require the use of electronic records
in violation of section 204(d)(1)(C) and (E) of FSMA. In support of
Option 2, some comments assert that this option provides the
appropriate balance between maintaining a diverse market and achieving
widespread adoption of traceability standards, and that small
businesses still have the ability to impact public health, particularly
in rural communities where they may be the sole source of food. These
comments also suggest that compliance with the other subpart S
requirements would not require too much effort for these entities, and
that records besides the sortable spreadsheet would still be necessary
if an outbreak is associated with a small retailer. Further, some
comments suggest that with improvements in technology, there is the
potential for large businesses to be run with fewer FTEs, which would
make more firms eligible for the proposed exemption.
    Some comments suggest that FDA consider another option, in which
small RFEs would be required to provide to FDA, within 24 hours,
records relating to the receipt of a product if they were unable to
provide the traceability lot code for the product. The comments suggest
that this option would limit the recordkeeping burden on small RFEs
while still enabling FDA to readily access traceability information
when needed.
    (Response 211) We acknowledge that many small RFEs may have limited
resources with which to comply with the FTL traceability recordkeeping
requirements. In addition, and as stated in the preamble to the
proposed rule (85 FR 59984 at 59997), we recognize that because smaller
RFEs might handle a lesser volume of food than larger establishments,
it is possible that requiring the smaller establishments to comply with
subpart S would impose costs that would outweigh the benefits of such
compliance. Moreover, because many of the foods sold at small RFEs are
nationally distributed and are also sold at larger RFEs, we may be able
to obtain relevant information about the source of a foodborne illness
outbreak from a larger establishment that sold the same food using the
same distributor.
    However, we also recognize that in some cases, it might be helpful
to traceback efforts for smaller RFEs to have traceability records in
place, particularly if the establishments are associated with an
outbreak. Keeping small RFEs within the scope of the rule but exempting
them from the requirement to provide FDA with an electronic sortable
spreadsheet containing requested traceability information would reduce
their burden of complying with the subpart S requirements while still
providing the Agency with access to tracing information when
investigating foodborne illness outbreaks involving listed foods
received by such RFEs.
    We decline to adopt the approach suggested by comments that would
allow small RFEs to provide, within 24 hours, records relating to
receipt of a

product if they were unable to provide the traceability lot number for
the product. We note that receiving records maintained by RFEs should
already contain the traceability lot code, and commenters did not
provide a reason why small RFEs might then be unable to provide that
information upon request. Therefore, it is unclear why, if small RFEs
would already have this information, it would not be appropriate to
require them to make this information available to us. Moreover, having
access to both the traceability lot code and the KDEs containing
information on the food and its handlers is essential to conducting
fast and efficient traceback operations. For these reasons, we decline
to adopt the suggested alternative requirements.
    Having carefully considered the comments regarding the proposed
options for exemption of small RFEs, we conclude that it is appropriate
to establish a full exemption for certain small RFEs and restaurants
(in Sec.  1.1305(i) of the final rule) and an exemption from the
electronic sortable spreadsheet requirement for larger but still
relatively small RFEs and restaurants (in Sec.  1.1455(c)(3)(iii)(B)).
The eligibility ceilings for these exemptions for small RFEs and
restaurants are discussed in response to the comments below.
    We note that while proposed Sec.  1.1305(g) only mentioned RFEs,
the exemptions in Sec. Sec.  1.1305(i) and 1.1455(c)(3)(iii)(B) of the
final rule refer to both RFEs and restaurants. As discussed in Section
V.F of this document, we have removed restaurants from the definition
of ``retail food establishment'' in the final rule, and we have instead
added a separate definition for the term ``restaurant.'' Therefore, in
places where the proposed rule only used the term RFE (which
encompassed restaurants), we are now using the phrase ``RFEs and
restaurants.''
    (Comment 212) Some comments support basing the exemption for small
RFEs on the number of FTEs, particularly if based, as proposed, on the
number of FTEs at each establishment and not the entire business. Some
comments request clarification on the methodology used to equate part-
time employees to FTEs, while other comments ask that we define or
provide a reference for the term ``full-time equivalent employee.''
Other comments assert that a ceiling of fewer than 10 FTEs would cover
only a very small portion of the industry and would detract from RFEs
focusing on food safety. These comments also suggest that the 10-FTE
ceiling seems arbitrary when supply chains are similar across RFEs,
regardless of how many FTEs they have. Some comments recommend raising
the ceiling so that RFEs with more FTEs would be eligible for the
proposed exemption, such as by using the Organization for Economic
Cooperation and Development (OECD) ceiling for ``small business'' of
fewer than 49 FTEs. Other comments suggest adopting an alternate
standard for the RFE exemption, such as one that aligns with FDA's menu
labeling regulation, which only covers restaurants and similar RFEs
that are part of a chain with 20 or more locations (see 21 CFR
101.11(a)). These comments suggest that using this standard would be
easier for industry to understand, as they should already be familiar
with it. However, the comments maintain that labeling and food safety
regulations may differ in approach and therefore might not be directly
applicable to each other.
    Some comments suggest other eligibility standards, such as those
based on annual sales, volume of product sold, or how many customers an
RFE serves. Some comments suggest that an income-based standard would
be more appropriate than one based on number of FTEs, as new
technologies and automation may reduce the number of employees needed.
The comments also claim that use of an income-based standard is a good
proxy for volume of food produced as well as an RFE's ability to comply
with the rule. Some comments suggest adopting thresholds used
elsewhere, such as those used in certain rules issued under FSMA that
consider ``very small businesses'' to be those with less than $1
million in annual food sales, or an SBA standard (less than $7.5
million in annual receipts). However, some comments assert that the
vast majority of retailers have receipts totaling less than $7.5
million, and that these retailers are responsible for greater than 40
percent of food sales.
    Some comments suggest adding an income-based ceiling to the
proposed threshold of fewer than 10 FTEs to keep the exemption narrow.
Other comments suggest that all RFEs should be exempt; still others
simply request that the exemptions for RFEs be size- and risk-
appropriate.
    (Response 212) We recognize that variation in revenues earned at
any FTE level, due to differences in business practices, automation,
and other factors, can make the number of FTEs a firm has an unreliable
indicator of the true size and viability of the business. Further, the
variation in revenues and production capacity at any FTE level make the
number of FTEs an unreliable indicator of the public impact of a size-
based exemption. We decline the suggestion of some comments that the
small RFE eligibility standard be based on the number of customers
served, as we believe that this too may not be an accurate indicator of
the true size of the business. In addition, we believe that use of the
standard from the menu labeling regulation is not appropriate for this
rule because doing so would exempt a large portion of the food supply
(likely over 99 percent of restaurants) and significantly affect FDA's
ability to conduct a traceback in the event of an outbreak.
    Having considered the suggestions provided in the comments, we
conclude that it is appropriate to adopt an eligibility standard for
small RFEs and restaurants that is based on the average annual monetary
value of food sold or provided by the business. Annual sales are used
in several other regulations issued under FSMA, and we consider them to
be a valid indicator of a firm's available resources to comply with the
rule as well as the volume of product contributed to the marketplace
that could become contaminated. We include the value of food provided
to capture food that may be provided as part of a service, but not
specifically sold to a consumer. For example, the value of food
provided may be included in the price of an overnight stay at a
hospital or included in the price of membership of a club that serves
food, but not specifically broken out in billing for those services.
    Regarding the appropriate limit for annual sales for determining
eligibility for exemptions for small RFEs and restaurants, we
considered various options, including $100,000, $250,000, $500,000, and
$1 million. We estimate that a $1 million threshold would cover 50
percent of RFEs and 6 percent of RFE sales; a $500,000 threshold would
cover 36 percent of RFEs and 3 percent of RFE sales; a $250,000
threshold would cover 19 percent of RFEs and 1 percent of RFE sales;
and a $100,000 threshold would cover 8 percent of RFEs and less than 1
percent of RFE sales. We do not believe a $500,000 or $1 million
ceiling would be appropriate for a full exemption because they would
exempt a significant portion of RFEs and restaurants from the
requirements to keep records necessary to help ensure effective
traceability of FTL foods, significantly affecting our ability to
conduct fast, efficient, and thorough traceback investigations. For
this same reason, we decline to adopt an eligibility ceiling of $7.5
million (as used in certain SBA regulations).
    We conclude that a $250,000 ceiling for annual sales is appropriate
for a full exemption for RFEs and restaurants

from the subpart S requirements, as it balances our need to be able to
conduct effective traceback with providing relief for small entities
that make up a small portion of total RFEs and restaurants. As
discussed above, the value of food in the final rule includes the value
of food provided to consumers (as well as the value of food sold), to
capture the value of food that is provided as part of a service but not
specifically sold to a consumer. Therefore, Sec.  1.1305(i) of the
final rule provides that subpart S does not apply to RFEs and
restaurants with an average annual monetary value of food sold or
provided during the previous 3-year period of no more than $250,000 (on
a rolling basis), adjusted for inflation using 2020 as the baseline
year for calculating the adjustment.
    However, while we conclude that it would not be appropriate to
provide a full exemption to RFEs and restaurants with more than
$250,000 in annual sales, we conclude that it would be appropriate to
reduce the burden of the rule on establishments that are somewhat
larger but still relatively small. Therefore, Sec.
1.1455(c)(3)(iii)(B) of the final rule exempts RFEs and restaurants
with food revenues of no more than $1 million from the requirement to
provide to FDA in certain circumstances an electronic sortable
spreadsheet containing requested traceability information. The
electronic sortable spreadsheet requirement and the exemptions from
this requirement are discussed in Section V.R of this document.
    (Comment 213) Some comments maintain that the rule would overburden
small cottage food producers, would be difficult for them to comply
with, would cause businesses to close, and would hinder small
businesses from starting up. Some comments contend that the rule will
create particular difficulties for certain small cottage producers,
such as bakers tracking ingredients like eggs. Some comments suggest
that if FDA considers exemptions for small RFEs with fewer than 10
FTEs, the Agency should also consider an exemption for small cottage
producers. Some comments state that they are very small businesses,
some are single-person operations, and some make less than $20,000 per
year in revenue. Some comments maintain that their small cottage
businesses are already covered by State cottage business laws and that
FDA should defer to these State regulations. One of these comments
asserts that the burden of ensuring traceability should be on the
supplier to keep records of the persons to whom they sell their food.
    Some comments suggest that FDA reconsider the small business size
thresholds for cottage food producers. Some comments suggest that small
cottage producers should be exempt if they make less than $100,000 in
annual revenue and are covered by their State cottage business laws;
other comments maintain that the rule will be overly burdensome on any
business making less than $50,000 in annual revenue.
    Some comments assert that cottage food producers with short, local
supply chains are not a food safety risk and are easy to trace, while
large, conventional producers are the ones that pose a food safety
risk. Some comments claim that baked goods are not risky.
    (Response 213) FDA agrees with the importance of reducing the
burden, where appropriate, on businesses that may have fewer resources
to apply to complying with the requirements of the regulation, while
minimizing the additional health risk caused by exposure to products
that would otherwise be covered by the regulation. As discussed in
Response 212, the final rule fully exempts small RFEs and restaurants
making no more than $250,000 in annual sales (Sec.  1.1305(i)), and
also exempts RFEs and restaurants with no more than $1 million in
annual sales from the requirement to provide an electronic sortable
spreadsheet containing traceability information FDA may request in
certain circumstances (Sec.  1.1455(c)(3)(iii)(B)). Because most State
cottage food programs set a ceiling for participation at no more than
$50,000 in annual sales, we believe most cottage food producers will be
fully exempt from this rule.
    (Comment 214) Some comments request clarification on whether farms
with fewer than 10 FTEs are eligible for the proposed exemption for
RFEs in Sec.  1.1305(g). The comments maintain that eligibility should
be based on the nature of the supply chain, and that farms that sell
directly to consumers but also through short, local supply chains
should be exempt. Other comments assert that appropriate treatment of
RFEs under subpart S is important for farms because many farms sell
their produce to RFEs such as grocery stores.
    (Response 214) Section 1.1310 of the final rule defines ``retail
food establishment,'' in part, as an establishment that sells food
products directly to consumers as its primary function. The definition
further states that the term ``retail food establishment'' includes
facilities that manufacture, process, pack, or hold food if the
establishment's primary function is to sell from that establishment
food, including food that it manufactures, processes, packs, or holds,
directly to consumers. Sale of food directly to consumers can include
sale of food by a farmer at a roadside stand, farmers' market, or CSA.
In addition, the definition states that a ``retail food establishment''
includes certain farm-operated businesses selling food directly to
consumers as their primary function, with ``farm-operated business''
meaning a business that is managed by one or more farms and conducts
manufacturing/processing not on the farm(s). If a farm meets the
definition of ``retail food establishment'' in Sec.  1.1310 and meets
the criteria for an exemption for RFEs in Sec.  1.1305(i) or Sec.
1.1455(c)(3)(iii)(B), it would be eligible for such exemption.
Moreover, as previously discussed, under Sec.  1.1305(b) of the final
rule, the subpart S requirements do not apply to a farm with respect to
food produced on the farm that is sold or donated directly to a
consumer by the owner, operator, or agent in charge of the farm.
    (Comment 215) One comment asserts that restaurants and RFEs that
only receive food should not have to maintain traceability records. The
comment claims that logistics is not a core business function of
restaurants or RFEs and that those businesses are not equipped to scan
or manually enter data for each delivery. The comment maintains that
including these entities in the final rule would result in significant
cost, training, and equipment needs.
    (Response 215) We do not agree. RFEs and restaurants are often our
first point of contact in an outbreak, recall, or other situation
requiring fast, efficient traceback. They frequently serve as the first
point in the supply chain to provide the traceability information
needed by FDA investigators to launch a traceback investigation. Having
traceability records at these establishments linking the food they sell
to the previous link in the supply chain and ultimately the source of
the food is necessary for effective traceback and the protection of
public health (Ref. 25). However, as previously stated, we recognize
the importance of reducing the burden of the rule, where appropriate,
on businesses that may have fewer resources to apply to complying with
the rule, while minimizing the additional health risk caused by
exposure to products that would otherwise be covered by the regulation.
Consequently, as discussed above, the final rule includes several full
or partial exemptions from the rule for certain restaurants and RFEs.
    (Comment 216) Some comments suggest that the Agency incorporate

additional flexibilities into the rule specifically for the airline
catering industry. The comments suggest that one way of doing so would
be to amend the definitions of ``retail food establishment'' and
``shipping'' to state that airline caterers are considered RFEs and
specify that they do not engage in shipping when they send foods to
airline customers for consumption by passengers. Alternatively, the
comments suggest that we add a partial exemption to the rule specifying
that entities that prepare foods for airlines that are intended for
immediate consumption by passengers would not have to maintain
transformation, creation, or shipping KDEs, but would only be required
to maintain receiving KDEs and traceability program records.
    (Response 216) We decline to redefine ``retail food establishment''
to include airline caterers. As previously stated, we proposed to
define ``retail food establishment'' as it is defined in the food
facility registration regulation (Sec.  1.227 (21 CFR 1.227)), i.e., an
establishment whose primary function is to sell food products directly
to consumers from that establishment. Most airline caterers prepare
meals and other foods for sale to airlines, rather than directly to
consumers. Because airline caterers generally are not RFEs but
manufacturers/processors subject to the regulations on preventive
controls for human food in part 117, we find no basis for regarding
them as RFEs for purposes of the subpart S traceability recordkeeping
requirements. For this reason, we also conclude that it would not be
appropriate to provide that airline caterers do not engage in
``shipping'' as defined in the rule when they send foods to airlines
for consumption by passengers. As discussed in Section V.E of this
document, the definition of ``shipping'' states, in part, that shipping
does not include the sale or shipment of a food directly to a consumer;
however, most airline caterers do not sell food directly to consumers.
To the extent an airline caterer meets the definition of an RFE, the
traceability recordkeeping requirements for an RFE will apply. Some
airline caterers might be eligible for the exemption (discussed in
Section V.R.3 of this document) under which entities other than farms,
RFEs, or restaurants with no more than $1 million in annual sales would
not be required to provide to FDA, under certain circumstances, an
electronic sortable spreadsheet containing requested traceability
information (Sec.  1.455(c)(3)(iii)(C)).
    (Comment 217) Some comments ask FDA to clarify that RFEs need only
keep invoices/receipts, not full traceability logs, to document receipt
of FTL foods. The comments assert that it would be an unrealistic and
unnecessary burden for small RFEs to keep copies or records
establishing where FTL foods were purchased for 180 days.
    (Response 217) As discussed in Response 211, the final rule exempts
small RFEs and restaurants from the subpart S requirements. With
respect to larger RFEs and restaurants that are not exempt from the
rule, the rule does not require firms to maintain a ``traceability
log'' for their handling of FTL foods. Instead, firms will need to
establish and maintain a traceability plan in accordance with Sec.
1.1315, and they will need to keep certain KDEs associated with CTEs,
which in the case of RFEs and restaurants generally will be the KDEs
associated with receiving in Sec.  1.1345. As with other types of
supply chain entities subject to the rule, we anticipate that RFEs and
restaurants will be able to rely on records they already use to meet
most of their requirements under subpart S. In addition, as discussed
in Section V.N of this document, almost all of the receiving KDEs that
RFEs and restaurants are required to maintain under Sec.  1.1345 are
KDEs that their suppliers will be required to send them under Sec.
1.1340(b).
    In general, all subpart S records must be maintained for 2 years
(see Sec.  1.1455(d)). However, as discussed below, when an RFE or
restaurant purchases food directly from the farm where it was produced,
they are only required to maintain a record documenting the name and
address of the farm that was the source of the food, and they must
maintain that record for only 180 days.
11. Partial Exemption for RFEs and Restaurants Purchasing Food Directly
From a Farm
    In addition to the full or partial exemption for small RFEs in
proposed Sec.  1.1305(g), in accordance with section 204(d)(6)(G) of
FSMA, we proposed to adopt a partial exemption from the subpart S
requirements for all RFEs when they receive FTL foods directly from a
farm. Proposed Sec.  1.1305(h)(1) provided that subpart S would not
apply to an RFE with respect to foods on the FTL that are produced on a
farm (including foods produced and packaged on the farm) and sold
directly to the RFE by the owner, operator, or agent in charge of that
farm, except as specified in proposed Sec.  1.1305(h)(2). Under
proposed Sec.  1.1305(h)(2), when an RFE purchased an FTL food directly
from the owner, operator, or agent in charge of a farm, the RFE would
be required to establish and maintain a record documenting the name and
address of the farm that was the source of the food. Consistent with
section 204(d)(6)(G) of FSMA, RFEs would be required to maintain these
farm identification records for 180 days.
    Although section 204(d)(6)(G) of FSMA specifies that this limited
tracing requirement to document the farm that was the source of the
food applies to grocery stores, we proposed to broaden the application
of this partial exemption to include all RFEs purchasing food directly
from farms.
    (Comment 218) Some comments ask whether the partial exemption for
RFEs purchasing directly from a farm would include food that first goes
through a broker, warehouse, or distribution center that is part of the
RFE's network. Some comments maintain that the partial exemption should
apply to food purchased by a broker if the food is shipped directly
from the farm to the RFE. Some comments assert that the exemption
should apply to food shipped directly from the farm to the RFE even
when the purchasing entity is the RFE's parent company.
    (Response 218) We do not agree with the comments. The intent of the
partial exemption is to reduce the number of records required for
direct sales of FTL foods from farms to RFEs or restaurants, for which
the supply chain is extremely simple, covering a single transaction.
This direct connection between a farm and an RFE or restaurant is not
present when: (1) an FTL food is shipped to a broker, warehouse, or
distribution center before being sent to the RFE, even if such entity
is in the same corporate structure as the RFE; or (2) a broker or the
RFE's parent company buys the food and arranges for its shipment from
the farm to the RFE. Therefore, the exemption does not apply to food
purchased by a broker or parent company even if the food is shipped
directly from a farm to an RFE or restaurant, even if no third party
ever takes physical possession of the food. Similarly, the exemption
does not apply to food that is not shipped directly from the farm
growing the food to the RFE making the purchase, e.g., food that goes
through a broker, a warehouse, or a distribution center, even if these
entities are part of the parent company. To make this clear, Sec.
1.1305(j)(1) of the final rule states that except as specified in Sec.
1.1305(j)(2), subpart S does not apply to an RFE or restaurant with
respect to a food that is produced on a farm (including food produced
and packaged on the farm) and is both sold and shipped directly to the
RFE or restaurant by the owner, operator, or

agent in charge of that farm. Section 1.1305(j)(2) provides that when
an RFE or restaurant purchases a food directly from a farm in
accordance with Sec.  1.1305(j)(1), the RFE or restaurant must maintain
a record documenting the name and address of the farm that was the
source of the food. Section 1.1305(j)(2) further specifies that the RFE
or restaurant must maintain such a record for 180 days, as we had
proposed. Throughout Sec.  1.1305(j), and consistent with the rest of
the final rule as discussed in Response 285, we refer to both RFEs and
restaurants, as opposed to using RFE as an umbrella term that
encompasses restaurants, as was done in the proposed rule.
    (Comment 219) Some comments request clarification on whether the
partial exemption for RFEs that receive FTL foods directly from a farm
includes e-commerce sales.
    (Response 219) The partial exemption in Sec.  1.1305(j) applies any
time food is produced on a farm and then sold and shipped directly to
an RFE or restaurant by the owner, operator, or agent in charge of that
farm. Whether or not the sale was made online is not relevant as long
as the conditions of Sec.  1.1305(j) are met. For example, when a farm
sells its food directly to an RFE through the farm's website, the RFE
could be eligible for the exemption as long as they bought the food
directly from the farm (through the farm's website) and the food was
shipped directly to the RFE by the farm.
    (Comment 220) Some comments suggest that in addition to requiring
RFEs under the partial exemption to maintain the name and address of
the farm that sold the food, the RFEs should be required to maintain
the lot code and harvest or pack date associated with the food, because
the comments assert that this information is the most important to have
for traceability purposes.
    (Response 220) We decline to make this change because section
204(d)(6)(G) of FSMA requires that if food is sold directly from a farm
to a grocery store, the grocery store must not be required to maintain
records other than those documenting the farm that was the source of
the food. (As previously discussed, we have broadened this partial
exemption to apply to all RFEs and restaurants.)
    (Comment 221) Some comments request that we expand this partial
exemption so that it would also apply to RFEs that purchase wild-caught
American shrimp directly from local processors. The comments also
suggest that the processors themselves be eligible for the partial
exemption.
    (Response 221) We decline to make this change. We conclude that it
would not be appropriate to expand the partial exemption for RFEs and
restaurants purchasing food directly from a farm to apply to RFEs and
restaurants that receive food from entities other than farms, such as
shrimp processors, or to such other entities themselves. The intent of
the partial exemption is to reduce the number of records required when
FTL foods are sold and shipped directly from the producing farms to an
RFE or restaurant. In such a situation, the supply chain is extremely
simple, covering a single transaction. This direct connection between a
farm and an RFE or restaurant is not present when the food moves
through a processor.
12. Partial Exemption for RFEs and Restaurants Making Certain Purchases
From Another RFE or Restaurant
    In response to comments expressing concerns about application of
the subpart S requirements to certain purchases of food by RFEs from
other RFEs, we are adopting a partial exemption as discussed in the
following paragraphs.
    (Comment 222) Some comments ask that we clarify what RFEs should do
if they purchase a listed food from a grocery store or another RFE that
does not provide the KDEs required under the proposed rule. One comment
asks whether RFEs will be considered to be in compliance with the rule
if they keep receipts or invoices for these purchases. Some comments
maintain that there is no batch level data available for RFEs that make
``cash and carry'' purchases from other RFEs.
    (Response 222) Under the final rule, RFEs and restaurants that
receive food (under the definition of ``receiving'' in Sec.  1.1310)
are required to keep receiving records under Sec.  1.1345 unless they
are exempt. However, we recognize that RFEs, and particularly
restaurants, may purchase foods on the FTL on an ad hoc basis to meet
immediate operational needs when they run out of an item purchased from
a regular supplier. We recognize that it might not be feasible for RFEs
or restaurants to keep the full ``receiving'' records of such purchases
in accordance with Sec.  1.1345 of the final rule (see Section V.N of