(Response) FDA disagrees. The obligation to comply with applicable
regulations is on the parties subject to a regulation as specified
therein; FDA does not have an obligation to inform all prior notice
submitters of specific deficiencies in their submissions before
beginning enforcement of a rule. FDA and CBP, however, were cognizant
of the potential effect the prior notice IFR could have on trade and
thus, after publication of the IFR, FDA published guidance that
included a transition period during which we emphasized education to
achieve compliance, rather than general refusal of noncompliant
shipments (the December 2003 Prior Notice Interim Final Rule CPG) (68
FR 69708). In addition, during the prior notice transition periods from
April 2004 through April 2005, we provided compliance summaries that
informed submitters, and those who transmit on their behalf, of the
major areas of deficiencies with respect to missing data elements.
These represented the general deficiencies we were seeing in prior
notice submissions during the educational transition period (see http:/
/www.cfsan.fda.gov/~pn/pnsum.html). The compliance summaries also
generally described the deficiencies in prior notices that are not
confirmed for review (e.g., failure to provide a valid registration
number). However, we do not plan to communicate submission deficiencies
to other than the submitter and transmitter. FDA believes that the
effective date of 180 days after publication of the final rule provides
sufficient time for the business community to become familiar with all
the provisions of the final rule. Moreover, we plan to conduct outreach
after publication of the final rule to affected industry and other
governments, as resources allow. These efforts will focus on changes to
the final rule. Given the delayed effective date, the fact that the
changes in the final rule are not very extensive, and the public's
experience in complying with the IFR, FDA believes there is no need for
a phased-in enforcement approach similar to what was done for the IFR.
    (Comments) One comment states that if FDA discovers that a large
number of problems are experienced during the grace period between
publication of this final rule and the effective date, FDA should
consider extending the effective date, especially for first time
offenders.
    (Response) FDA believes that the 180 day delay in effective date is
adequate for affected parties to become familiar with all the
provisions in the Prior Notice Final Rule. While we do not anticipate
extending the effective date past 180 days, we intend to take into
account the circumstances of the violation in enforcing the final rule.
5. Enforcement Penalties
    (Comments) One comment requests that the agencies publish
procedures that clearly define what types of penalties will be issued
for failure to comply under Sec.  1.284 and to whom they will be
issued.
    (Response) Sections 1.283 and 1.284 of the final rule describe the
consequences for failing to submit adequate prior notice or otherwise
failing to comply with the final rule. We believe these adequately
describe the types of penalties. The Prior Notice Final Rule Draft CPG
describes our proposed enforcement policies, and states, for example,
that we intend to focus our resources on more serious violations and
repeat or flagrant violations.
    Civil monetary penalties, which are issued by CBP, may also be
assessed in response to a prior notice violation. CBP has posted a
variety of publications that explain both the administrative process
for fines, penalties, forfeitures, and liquidated damages, such as:
``What Every Member of the Trade Community Should Know About: Customs
Administrative Enforcement Process: Fines, Penalties, Forfeitures and
Liquidated Damages,'' which is posted at: http://www.cbp.gov/
linkhandler/cgov/trade/legal/informed_compliance_pubs/icp052.ctt/
icp052.pdf, and ``What Every Member of the Trade Community Should Know
About: Mitigation Guidelines: Fines, Penalties, Forfeitures and
Liquidated Damages,'' which is posted at http://www.cbp.gov/
linkhandler/cgov/trade/legal/informed_compliance_pubs/icp069.ctt/
icp069.pdf. (FDA has verified the Web site addresses, but FDA is not
responsible for any subsequent changes to the Web sites after this
document publishes in the Federal Register.)

N. The Joint FDA-CBP Plan for Increasing Integration and Assessing the
Coordination of Prior Notice Timeframes

    We stated in the preamble to the IFR (68 FR 58974 at 58995) that
FDA and CBP would publish a plan, including an implementation schedule,
to achieve the goal of a uniform, integrated system and to coordinate
prior notice timeframes for air and truck modes of transportation with
timeframes finalized by CBP when they finalize their rule entitled
``Required Advance Electronic Presentation of Cargo Information,'' all
while fulfilling the Bioterrorism Act mandates. For this reason, as
well as to obtain comments on other aspects of the rule, we issued an
IFR, with an opportunity for public comment for 75 days. Moreover, to
ensure that those who comment on this IFR would have had the benefit of
actual experience with the systems, timeframes, and data elements, FDA
also stated it intended to reopen the comment period for an additional
30 days to coincide with the issuance of the plan by FDA and CBP
relating to timeframes. We extended this comment period twice on April
14, 2004, and May 18, 2004, thereby providing an opportunity for
affected persons to comment for 165 days.
    In April 2004, FDA and CBP announced the Joint Food and Drug
Administration-Customs and Border Protection Plan for Increasing
Integration and Assessing the Coordination of Prior Notice Timeframes
(the Plan).
    The comments addressing the Plan are discussed in the following
paragraphs. Comments addressing our assessment of reducing the prior
notice timeframes are found earlier in section III.F (``When must prior
notice be submitted to FDA?'' (Sec.  1.279)) of this document. We
respond to the other questions (e.g., special programs and flexible
alternatives) raised in our April 14th reopening of the comment period
in sections III.D (``What is the Scope of this subpart?'' (Sec.
1.277)) and III.M (Outreach and Enforcement) of this document.

1. Increased Integration
    FDA and CBP have increased their integration and are continuing to
do so in the following ways:
     Co-location of all FDA Prior Notice staff with CBP's
targeting staff;
     Further refinement to FDA's targeting rule sets in CBP's
targeting system, coupled with additional training in targeting
techniques;
     Continued targeting support from CBP and other Federal law
enforcement analysts; and
     Enhancement of communications and cooperation with CBP to
facilitate information exchange and to ensure expeditious access and
examination of food shipments FDA has decided to inspect upon arrival.
    (Comments) One comment suggests that FDA should consider performing
the OASIS review concurrently with the ``FDA BTA review'' to eliminate
duplicative work and burdens on both the importing community and FDA.
Another comment suggests that FDA coordinate the prior notice procedure
with FDA's ``Hold Intact Notice'' so that FDA can avail itself of the
opportunity to identify in advance shipments for inspection, sampling
or detention, or permit the shipment to pass and be delivered without
delay.
    (Response) FDA disagrees. As we previously explained in an earlier
response in section III.J.11 of this document, FDA does not agree that
doing the OASIS review under section 801(a) of the act concurrently
with the prior notice review under section 801(m) of act would be
beneficial to industry or FDA. Because the section 801(m) review must
occur prior to arrival, concurrent section 801(a) and section 801(m)
reviews also would have to occur prior to arrival. FDA believes such a
concurrent process would be inefficient and impractical and would
likely increase congestion at the ports of arrival.
    (Comments) Comments state that co-locating FDA PNC staff with CBP's
targeting staff is a positive step because the two agencies' personnel
are both accountable for the risk analysis process, and thus, both
agencies' personnel can easily interact and share information, leading
to increased efficiencies and integration of the risk analysis process.
    (Response) FDA agrees and has co-located the PNC with CBP's
targeting staff.
    (Comments) Comments strongly support further refinement of FDA's
targeting rule sets in order to maintain and improve the risk analysis
system to flag specific shipments for security concerns. Comments
further support the continuing plan to target shipments for which
little is known, while maintaining expedited processing for those
shipments and importers that are well known and have provided FDA and
CBP with the means by which they can assure general compliance. These
comments also argue that products subject to FDA's prior notice
requirements should be eligible for full expedited processing and
information transmission benefits allowed with C-TPAT, FAST, and any
other similar programs established in the future. One comment
specifically encourages FDA and CBP to incorporate the current
information contained within these programs and allow for the removal
of the maximum number of flags within the risk analysis system for
those companies that demonstrate their compliance by participation in
these additional security programs.
    (Response) FDA agrees that refining our targeting rule sets helps
to improve both agencies' risk analysis systems. As we discussed
previously, FDA has decided not to consider any special programs, such
as C-TPAT and FAST, in implementing the prior notice rule.
    (Comments) All the comments favor initiatives to provide additional
training of FDA staff in targeting techniques that will increase the
efficiency and effectiveness of the border crossing systems. One
comment particularly notes that additional training should be targeted
towards those individuals and issues that will provide measurable
additional value to the prompt and efficient release of compliant
cargo.
    (Response) Any effective targeting technique allows for the
identification of food likely to be at risk for adulteration based on a
scientific risk assessment. Targeted training will be provided, as
resources permit.
    (Comments) Comments support enhanced communications and cooperation
with CBP to facilitate information exchange and ensure fast access to
foods that are subject to prior notice holds. Comments state that this
will be critical to the food industry, as any delays will translate
into added costs and inefficiencies to their current supply chain. One
comment encourages FDA and CBP to integrate technologies used for
implementing the Bioterrorism Act with NEXUS, US VISIT, FAST, C-TPAT,
and other programs at the border.
    (Response) FDA agrees that exchanging information between the
agencies is important to evaluation of and response to food safety and
security challenges.
    (Comments) One comment encourages FDA and CBP to work with their
Canadian counterparts to ensure that information is shared and
technologies are working in parallel to make crossing the border
seamless, efficient, and safe.
    (Response) FDA agrees that exchange of information between its
international counterparts, when feasible, is critical to evaluation
and response to food safety and security challenges.
    (Comments) One comment notes that FDA recently announced the
signing of an MOU with CBP to commission CBP officers in ports and
other locations to conduct investigations and examinations of imported
foods on behalf of FDA. The comment questions whether this would have
any consequences on the selections for controls by CBP officials
stationed in EU ports.
    (Response) Investigation and examination of food as a result of
prior notice is conducted upon or after arrival of the food in the
United States. Therefore, the MOU should not have any consequences on
CBP operations at EU ports.
2. General Comments on the Plan
    The Plan as announced in April 2004 and revised in November 2004
outlines the following:
     From November 1, 2004, to January 3, 2005, we plan to
assess existing procedures and staffing needed to receive, review, and
respond to the prior notices submitted in accordance with the Prior
Notice IFR (i.e., 2 hours before arrival by land by road; 4 hours
before arrival by air or by land by rail; and 8 hours before arrival by
water).
     From January 4, 2005, to February 3, 2005, we intend to
identify what changes to work practices and staffing would be necessary
to determine if FDA could continue to receive, review, and respond to
all prior notice submissions with reduced timeframes (e.g., 1 hour/30
minutes before arrival by land by road; 2 hours before arrival by land
by rail; and by ``wheels up'' for flights originating in North and
Central America, South America (north of the Equator only), the
Caribbean, and Bermuda; otherwise 4 hours before arrival by air).
     From February 4, 2005, to May 3, 2005, we plan to
implement necessary changes and make appropriate adjustments to ensure
we could receive, review, and respond to all prior notice submissions
with reduced timeframes.
    Under the Bioterrorism Act, any timeframe must be sufficient to
receive, review, and respond to prior notice submissions, as set out in
section 801(m)(2)(A) of the act (21 U.S.C. 801(m)(2)(A)). The agencies
emphasized that the evaluation of whether to reduce

the timeframes for prior notice review will depend on the level of
compliance industry achieves during the assessment.
    (Comments) Numerous comments concur with the proposed joint FDA-CBP
plan for increasing integration of both agencies' activities, as this
would eliminate the requirement for importers to maintain two different
timeframes for submission of data. One comment concurs with the joint
plan and states that it would minimize procedures and costs for firms.
One comment states that it was confident that, with proper planning and
development, additional integration of the security processes and the
differing timeframes can be coordinated through the actions outlined in
the published joint plan.
    (Response) FDA agrees that increased integration of activities,
including timeframes when appropriate and feasible, would be
advantageous, provided FDA still is able to meet its statutory
obligation to receive, review, and respond to prior notice. As
discussed previously (see section III.F, When must prior notice be
submitted to FDA? (Sec.  1.279)), FDA conducted an assessment of FDA
response times with reduced timeframes and determined that if it
changed the prior notice timeframes to be consistent with those of
CBP's advance electronic information rule, the agency would not have
adequate time to receive, review, and respond to the prior notices.
Moreover, commerce actually would be adversely impacted by shorter
prior notice timeframes for submission, because this would
significantly increase the number of shipments where FDA would not be
able to decide whether it should examine the food at the port of
arrival by the end of the timeframe. Such shipments would be delayed at
the port of arrival until FDA has either completed its review or
decided to examine or not examine the food at the port or arrival
without the benefit of a complete review. Accordingly, FDA has retained
the timeframes in the IFR.
    (Comments) One comment requests that FDA explain why the maritime
transportation timeframe was not considered in the joint plan.
    (Response) FDA did not include the maritime transportation
timeframe because the CBP advance electronic information timeframe for
cargo arriving by water is 24 hours, which is significantly greater
than the time established by the prior notice IFR for this mode of
transportation (8 hours before arrival).
    (Comments) One comment suggests that assessment of the resources
encompass all potential resources available at the port, including
those of the Department of Homeland Security (DHS) in order to make
better use of DHS resources at the border. Another comment states that
any assessment taken up during this timeframe must take into account
the problems inherent in the current systems, as well as the fact that
not all submissions will be properly prepared or followed up on, as
this could potentially translate into current practices or staffing
appearing to be inadequate when, in fact, they may not be.
    Another comment asserts that some border crossings were not
designed for today's traffic volumes or the post 9-11 environment and
recommends that these physical resources be included in the assessment
of existing procedures. This comment also encourages CBP to audit
staffing levels at border crossings to determine if additional staff is
needed.
    (Response) FDA agrees that any assessment must take into account
the availability of all resources, including those resources of
agencies with which we maintain MOU or other agreements covering
inspection and sample collection, which can, or should, be devoted to
the receipt, review, and response of prior notice. Accordingly, DHS
resources are used in implementing this rule, as described elsewhere in
this preamble.
    (Comments) Two comments noted that they are experiencing
significant delays on shipments that cross the border on Fridays due to
FDA's limited hours on that day. The comments are concerned about
uncertainty regarding transit times and that customers' date-sensitive
orders will not be received on time. Another comment noted that waiting
times due to traffic volume has increased at the bridge at Detroit
because of the inability to move prior notice shipments through the
tunnel. The comment states that these delays have made it very
difficult to deliver to U.S. facilities that do not operate 24 hours
and that these delays will continue to cost exporters and importers and
may cause U.S. processing facilities to have unplanned downtime due to
a lack of raw material. Another comment notes that different FDA
locations ask for more information than the Bioterrorism regulations or
systems can process, thereby holding up shipments that move freely at
other border crossing locations.
    (Response) Prior notice is submitted electronically through ABI/ACS
or PNSI. There is no ability for individual ports to require different
information as part of the prior notice submission process. The PNC
directs all prior notice activities for FDA and ensures consistent
review of submitted prior notices. If industry is having difficulties
with a specific port, they should contact the PNC to have the issues
resolved. FDA believes it is likely that the concerns raised in the
comments relate to admissibility decisions being made under section
801(a) of the act, which is a separate review than the one made under
section 801(m) of the act, as described previously.
    (Comments) One comment states that FDA personnel should be assigned
to all arrival ports, particularly those where high risk shipments may
arrive.
    (Response) FDA does not have the personnel to cover all possible
ports of arrival. Accordingly, under the authority of section 314 of
the Bioterrorism Act, FDA and CBP signed an MOU in December 2003 that
allowed FDA to commission thousands of CBP officers in ports and other
locations to conduct, on FDA's behalf, investigations and examinations
of imported foods. This FDA-CBP collaboration significantly strengthens
the implementation of the Bioterrorism Act to assure the security of
imported foods. The MOU enables FDA to work more efficiently with CBP
and builds upon FDA's and CBP's long history of close cooperation.
Additionally, the MOU enhances the two agencies' teamwork in training,
day-to-day operations, and information sharing. As part of the MOU, FDA
and CBP provide specialized training for the commissioned CBP employees
who will carry out this work, and both agencies have expanded their
existing cooperative arrangements to directly share information
affecting the safety and security of imported foods. (See http://
www.fda.gov/oc/bioterrorism/moucustoms.html.)
    (Comments) One comment states that there were connection problems
with FDA's computer system, perhaps as a result of submission overloads
to the system, with session ``timeouts'' occurring. The comment notes
that it is crucial that an infrastructure with the capacity to deal
with the information being required by FDA be in place in order for
stakeholders to meet the requirements of prior notice.
    (Response) As discussed in section III.G, How must you submit the
prior notice? (Sec.  1.280), FDA has carefully monitored both PNSI and
OASIS system usage and performance since prior notice was implemented
in December 2003. During this period, no issues related to load on
these systems have been identified. Both systems have experienced
occasional outages (including planned down times for maintenance and
upgrades). During

these outages, messages between the CBP and FDA systems are held in a
queue, resulting in a backlog. Initially, we did experience some
difficulties when trying to clear the queue after returning to normal
operations, but these issues have been resolved. FDA and CBP also have
increased the capacity of the communications link between their systems
to ensure that additional bandwidth is available for future increases
in load. FDA continues to monitor the production system and to test for
performance as the system is upgraded and enhanced.
    (Comments) One comment suggests that FDA and CBP take the
integrated timeframes further and require only one notification that
should meet both FDA and CBP requirements and prevent confusion and
delays in the case of a bioterrorism event.
    (Response) FDA disagrees. The Bioterrorism Act and the Trade Act
have different statutory requirements. In implementing these laws, the
agencies require different information and use different targeting and
screening tools. FDA and CBP have discussed interfacing with AMS (the
module of ACS through which carriers, port authorities, or service
bureaus transmit electronically the cargo declaration portion of the
inward foreign manifest to CBP) for manifest data and determined that
the general cargo data in AMS are not suitable to accommodate the
detailed information requirements of section 801(m) of the act. For
example, AMS does not collect the country of origin. In addition, its
collection of the identities of the article of food and its
manufacturer differs from the way those are collected under the prior
notice interim final and final rules in such a way that the data would
not meet our needs in carrying out the purpose of section 801(m) of the
act.
    (Comments) One comment asserts that it is redundant for FDA to
repeat a feasibility analysis of submission timeframes because CBP has
clearly addressed those issues. Another comment proposes that FDA
accelerate the schedule for implementing the joint plan, and make this
evaluation with CBP as quickly as possible. One comment supports the
plan and suggested that any short term assessment take into account the
problems involved with the current systems. Another comment expresses
concern that full enforcement of the IFR will be in effect during the
proposed review period and that consequently, industry will be placed
in the difficult position of trying to comply with timeframe
requirements that are not synchronized. Another comment suggests that
other reasons for noncompliance, such as the need for additional
discretion on data and education, be included in the evaluation.
    In response to the agencies' statement that the evaluation of
timeframes will depend on the level of compliance industry achieves
during the assessment, one comment asserts that it is not appropriate
for the agencies to place the burden of compliance entirely on the
trade. The comment further states that the trade's ability to provide
the information required also depends on the systems working properly,
the efficiencies of the government personnel involved, the educational
outreach levels and the feedback individual importers receive in
relation to their current processes. These are areas that are
controlled and managed by the agencies, so they also must be considered
when assessing the probability of reducing timeframes. One comment
expresses concern that the implementation schedule of the Plan may be
delayed due to industry noncompliance with the IFR. Another comment
asserts that this lack of communication from the agencies to submitters
regarding errors could negatively impact the assessment of compliance
of the trade and subsequently, the agencies' decisions regarding the
trade's future ability to provide a high level of compliance.
    (Response) FDA disagrees. The obligation to comply with applicable
regulations is on the parties subject to a regulation as specified
therein; FDA does not have an obligation to inform all prior notice
submitters of specific deficiencies in their submissions before
beginning enforcement of a rule. Nonetheless, after publication of the
IFR, FDA published guidance that included a transition period during
which we emphasized education to achieve compliance, rather than
general refusal of noncompliant shipments (the December 2003 Prior
Notice Interim Final Rule CPG) (68 FR 69708). In addition, we have
provided compliance summaries that inform submitters, and those who
transmit on their behalf, of the major areas of deficiencies, in
general, that we were seeing in prior notice submissions during this
educational transition period (see http://www.cfsan.fda.gov/~pn/
pnsum.html), and generally advise the submitter of deficiencies in
prior notices that are not confirmed for review (e.g., failure to
provide a valid registration number). Moreover, FDA and CBP believe
that the level of compliance was sufficiently high during the
assessment period. The assessment period began almost a year after the
IFR went into effect. During that time, we resolved initial problems
with the government's prior notice systems and processes. Our extensive
outreach and focus on education instead of refusals and other
enforcement actions helped ensure that industry submission rates were
at or near 100 percent for most prior notice information by November
2004. In certain circumstances, such as with the manufacturer's
registration number, FDA and CBP continued to provide flexible
enforcement. With these measures, prior notice was operating smoothly
during the assessment period.
    (Comments) One comment fully supports this process and encourages
FDA to provide for any changes that may be needed to allow the timing
reductions that are critical to economic prosperity. The comment
suggests that once the program has been operational for a time, and the
systems glitches worked out from past experience, the assessment would
translate into a faster processing time.
    (Response) As stated previously, the prior notice timeframes must
ensure that we have sufficient time to receive, review, and respond to
the prior notice.
    (Comments) Several comments encourage both agencies to ensure that
they allow for the proper communications with the trade prior to
planning for or implementing any changes as a result of the previously
mentioned assessments, so that the interests of all parties involved
can be assessed and the best changes can be implemented. One comment
requests that sufficient resources be allocated by FDA and CBP to
implement the Plan.
    (Response) The IFR included an extended public comment period, and
comments were received and reviewed during the development of this
final rule. We also held numerous outreach meetings both domestically
and abroad--in person and by video conferencing--to explain the
requirements of the IFR to affected parties and answer questions of
clarification to ensure all were able to provide meaningful comment to
FDA and CBP. The final rule will not take effect until 180 days
following publication. The agencies plan additional outreach and
guidance during that 180-day period.
    (Comments) Some comments request that FDA issue a final prior
notice rule only after there has been a period of full enforcement
followed by an additional comment period. These comments argue that
both FDA and industry need the benefit of experience with active and
full enforcement before fine-tuning the prior notice regulation into a
final rule.

Comments suggest that FDA reopen the comment period for 60 days after
full enforcement has been in place for 90 to180 days or for at least 6
months. In the interim, the comments recommend that the rule should be
maintained as an IFR for a longer period of time with phased
implementation, as one comment suggests, while developing the final
rule.
    (Response) FDA reopened the comment period for a total period of
almost 6 months to allow parties an opportunity to provide meaningful
comment based on their experiences in complying with the IFR. FDA also
extended the initial eight-month transition period from August 2004 to
November 2004 for several of the data elements that our review
indicated had higher error submission rates while continuing
educational outreach activities. The implementation date for this final
rule is 180 days after publication. The IFR remains in effect until the
time the final rule takes effect. No comment period is associated with
the publication of the final rule.
    (Comments) One comment urges the FDA to build into the final rule
the capability to administratively amend the prior notice provisions
quickly, if needed. The comment notes that this would be particularly
important for imports from any country with which the FDA has reached a
bilateral arrangement. This arrangement would serve as the basis for
having different (e.g., more efficient, effective, or risk based) prior
notice requirements. The comment further notes that this ability to
administratively amend the rule would be important so that FDA could
adjust procedures quickly and efficiently to reflect actual reductions
in risks through such arrangements.
    (Response) FDA disagrees. The Bioterrorism Act requires that FDA
receive prior notice for every article of food imported or offered for
import into the United States. There are no exceptions based on the
country of production or the country from which the article of food is
shipped.
    To the extent that FDA and CBP believe that changes in our policies
related to enforcing this final rule are needed, we will announce those
as revisions to the Prior Notice Final Rule Compliance Policy Guide, a
draft of which we are announcing elsewhere in this issue of the Federal
Register.

IV. Analysis of Economic Impacts

A. Final Regulatory Impact Analysis

    FDA has examined the impacts of the final rule under Executive
Order 12866 and the Regulatory Flexibility Act (5 U.S.C. 601-612), and
the Unfunded Mandates Reform Act of 1995 (Public Law 104-4). Executive
Order 12866 directs agencies to assess all costs and benefits of
available regulatory alternatives and, when regulation is necessary, to
select regulatory approaches that maximize net benefits (including
potential economic, environmental, public health and safety, and other
advantages; distributive impacts; and equity). The agency believes that
this final rule is not a significant regulatory action under the
Executive order.
    The Regulatory Flexibility Act (RFA) requires agencies to analyze
regulatory options that would minimize any significant impact of a rule
on small entities. The requirements of this final rule have not changed
significantly from the IFR, although there are changes, such as those
relating to the identity of the manufacturer. Because of these changes,
FDA has determined that this final rule may have a significant economic
impact on a substantial number of small entities. Under the
requirements of the RFA, and as explained in section IV.B of this
document, FDA has analyzed the economic impacts of this rule on small
entities.
    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires
that agencies prepare a written statement, which includes an assessment
of anticipated costs and benefits, before proposing ``any rule that
includes any Federal mandate that may result in the expenditure by
State, local, and tribal governments, in the aggregate, or by the
private sector, of $100,000,000 or more (adjusted annually for
inflation) in any one year.'' The current threshold after adjustment
for inflation is $130 million, using the most current (2007) Implicit
Price Deflator for the Gross Domestic Product. FDA does not expect this
final rule to result in any 1-year expenditure that would meet or
exceed this amount as compared to the IFR.
    In this regulatory impact analysis for the prior notice final rule
we: (1) Respond to comments on the economic analysis of the IFR, (2)
revise the economic analysis of the IFR using new data, (3) present an
economic analysis of the leading alternative to the IFR using new data,
and (4) explain the marginal benefits and costs of the final rule
itself, relative to the IFR.
1. Need for Regulation
    Section 307 of the Bioterrorism Act of 2002 requires prior notice
of all food imported or offered for import into the United States.
Before the prior notice requirement was instituted in 2003, there were
no security assessments made specifically on imported food products,
and all such shipments were allowed to move into the United States
prior to FDA being notified of their existence, which legally could
have occurred up to 15 days after the food had arrived in the United
States and been moved to its final destination. Requiring prior notice
of imported foods allows FDA to target food that may pose a significant
risk to public health and inspect it upon arrival. The prior notice
submission requirement protects the Nation's food supply against actual
or threatened terrorist acts and other food-related emergencies. It
helps ensure that imported food shipments that appear to pose a
significant threat to public health are stopped at the border upon
arrival before they are allowed to move into the United States. This
final rule replaces the IFR that is already in effect.
2. Final Rule Coverage
    This final rule applies to all food for humans and other animals
that is imported or offered for import into the United States for use,
storage, or distribution in the United States, including food for gifts
and trade and quality assurance or quality control samples, food for
transshipment through the United States to another country, food for
future export, and food for use in a U.S. Foreign Trade Zone.
    This final rule does not apply to food for an individual's personal
use when it is carried by or otherwise accompanies the individual when
arriving in the United States; food that was made by an individual in
his or her personal residence and sent by that individual as a personal
gift to an individual in the United States; or food that is imported
then exported without leaving the port of arrival until export.
    This final rule also does not apply to meat food products that at
the time of importation are subject to the exclusive jurisdiction of
USDA under the Federal Meat Inspection Act (21 U.S.C. 601 et seq.);
poultry products that at the time of importation are subject to the
exclusive jurisdiction of USDA under the Poultry Products Inspection
Act (21 U.S.C. 451 et seq.); or egg products that at the time of
importation are subject to the exclusive jurisdiction of USDA under the
Egg Products Inspection Act (21 U.S.C. 1031 et seq.).
    Finally, prior notice is not required for articles of food subject
to Art. 27(3) of The Vienna Convention on Diplomatic Relations (1961),
i.e., shipped as baggage or cargo constituting the diplomatic bag.
    As required by the Bioterrorism Act, prior notice submissions must
provide

the identity of the article, manufacturer, shipper, and grower (if
known), the FDA Country of Production, the country from which the
article is shipped, and the anticipated port of arrival. In addition,
the notification must provide the identity of the person who submits
and transmits the prior notice, the importer, the owner, the consignee,
the carrier, the CBP entry identifier, the anticipated time and date of
arrival, anticipated shipment information, and, if the food has been
refused admission and required to be held, the location where it is
held. For food shipments arriving in the United States through
international mail, notification of the import must be sent before the
article is mailed. Only the prior notice information that is relevant
to that type of shipment must be submitted for articles of food
arriving by international mail.
3. Comments on the Interim Final Regulatory Impact Analysis
    (Comment) The extra work of completing prior notices because each
separate food line in an entry needs a prior notice has forced brokers
to raise their fees to clients and forced manufacturers to raise their
prices to U.S. consumers.
    (Response) FDA agrees this is a possible impact of the rulemaking,
and noted in the IFR regulatory impact analysis that the costs of prior
notice would likely be partially passed on to consumers in the form of
higher retail prices for some foods (68 FR 58974 at 59024).
    (Comment) One comment states that smaller U.S. importers cannot
afford the additional costs charged by a broker to submit the FDA
information via the ABI system. As a result, they are having their
foreign suppliers submit prior notice. Some small companies estimate
that, including Web site disruptions, 80 packages would take 40 to 80
hours for prior notice. The comment believes that this is totally
unmanageable.
    (Response) We account for increase in broker costs due to prior
notice in our analysis; the comment estimate of the time it takes to
complete prior notice is accurately reflected in the IFR and final rule
analysis. FDA expects importers to modify their business practices to
find the most cost effective way to deal with prior notice
requirements. In this case, the small importer can avoid higher broker
fees by having the foreign supplier submit the prior notice. Another
alternative would be for the small importer to submit prior notice
themselves through PNSI. We would expect small firms would comply in
whichever manner is most cost effective. It is also possible some of
the costs of prior notice could be passed on to consumers in the form
of higher retail prices for some foods; in this case the small importer
would not feel the complete impact of the higher broker submission
costs.
    (Comment) The costs of the IFR were underestimated because some
types of imported fruits and vegetables were not included in the ``loss
of freshness, loss in value'' calculation.
    (Response) Some fruits and vegetables are regulated by USDA's APHIS
regulations (certain types of citrus, tomatoes, avocados, and other
products) and already have to be inspected or checked at the port of
entry regardless of the prior notice regulation. For importers of these
fruits and vegetables, the requirement to have certain documentation
available at the port of entry and coordinating times to be at the port
of entry is not new. Thus, persons importing fruits and vegetables
subject to APHIS' requirements are not included in the ``loss of
freshness'' calculation as these costs of doing business are already
taken into account when scheduling importation of the produce. FDA
believes we have accounted for every other type of possible instance
where a fruit or vegetable regulated under this rulemaking could
experience a loss in freshness or value.
    Several fresh produce importers commented on the IFR that they
considered prior notice redundant as their produce shipments already
have to be inspected at the port of entry by USDA. These comments
further support the exclusion of some fruits and vegetables from the
``loss of freshness'' cost calculations presented here and in the IFR's
regulatory impact analysis.
    (Comment) The cost to complete a prior notice to send food by mail,
for companies that ship low volumes of inexpensive food products, is
higher than the value of the product being shipped and therefore
shipping to the United States may be discontinued.
    (Response) FDA stated in the analysis of the IFR that the costs of
completing prior notice submissions may be partially passed along to
the consumer in the form of higher retail prices for some foods (68 FR
58974 at 59024). FDA's IFR analysis also acknowledged the possibility
that companies in the business of sending small shipments of food to
private individuals in the United States may stop shipping to U.S.
addresses (68 FR 58974 at 59067).
    (Comment) A number of postal services take issue with the requiring
of filing prior notice for personal food items. The comments state that
the labor-intensive process of mailing personal food items will cause a
decrease in the items being shipped, thus decreasing the business of
the mail system.
    (Response) When the cost of shipping increases, the number of items
shipped is indeed likely to decrease. Although some of the reduction in
postal revenues would represent a dead-weight loss, it is primarily a
transfer, not a social cost and therefore is not included in the cost
estimates for this analysis.
    (Comment) Several comments express concern about their continued
ability to import fine wine because although they can obtain the name
and address of the site-specific manufacturer of the wine, obtaining
the manufacturers' (i.e., the wineries') registration numbers for these
products often is difficult to those not in the winery's direct
distribution chain. The comments state that smaller importers,
wholesalers, retailers, restaurants, clubs or hotels will be negatively
affected by not having the registration number for the manufacturer of
the fine wine. The comments further state that the prior notice rule
will negatively impact small producers by reducing the number of
potential representatives and sales venues as secondary fine wine
market importers disappear.
    (Response) FDA does not believe that the fine wine industry will be
negatively affected by the prior notice final rule. The final rule at
Sec.  1.281(a)(6) requires the identity of the manufacturer as follows:
The name of the manufacturer and either: (1) The registration number,
city, and country of the manufacturer or (2) both the full address of
the manufacturer and the reason the registration number is not provided
(hereafter ``the identity of the manufacturer''). Even if a wine
importer, retailer, or wholesaler cannot obtain the registration number
(e.g., the winery refuses to disclose its registration number because
the importer, retailer, or wholesaler is outside the winery's
distribution chain), the prior notice can include the name and full
address of the winery, which comments stated is obtainable. We do not
include additional costs to fine wine manufacturers or importers in
this final rule analysis; however, we do refine the estimate of the
difference between the IFR requirements and this final rule
modification.
    (Comment) Smaller importers that buy from brokers and wholesalers
because they are too small to buy directly from larger food
manufacturers will be put out of business. These smaller importers
allege that they will not be able to provide the

manufacturers' registration numbers on their prior notices as required
by the final rule. The comments argue that the registration number
requirement interferes with small businesses' rights to free trade
because now only larger businesses that deal with the manufacturers
directly, rather than buying through brokers and wholesalers, will be
able to obtain the manufacturer's information that is required for
prior notice.
    (Response) The final rule provides an alternative for submitters to
provide the identity of the manufacturer when the manufacturer's
registration number is not obtainable. Under the final rule, submitters
may provide the name and full address of the site-specific
manufacturing facility along with a reason as to why the registration
number was not used in the prior notice.
    (Comment) While most comments state that the name and address of
the manufacturer could be submitted in prior notice, one comment states
that re-sellers will not normally supply the name of their supplier or
the name of the manufacturer of a particular product to their
customers. The comment asserts that supplying the name of the
manufacturer would allow that customer to circumvent the re-seller and
attempt to make direct contact with the supplier or manufacturer, thus
taking business away from the re-seller. Another comment states,
however, that smaller importers buy from brokers and wholesalers
specifically because they are too small to buy directly from larger
manufacturers and other corporations, as large entities typically would
not find it cost-effective to deal with smaller importers.
    (Response) Depending on the business atmosphere, FDA believes that
it is likely that many resellers will be willing to supply the name and
the address of the manufacturers of the products they sell. Unlike the
manufacturer's registration number, which many may view as confidential
business information that is to be disclosed only on a ``need to know''
basis, the name and full address of a facility is public information
that not only is typically in phone books and on the Internet, but it
also often is provided on documents typically exchanged between buyers
and sellers (e.g., receipts, purchase orders, and bills of lading). The
issues discussed in these comments are addressed further in Options 1
and 3.
4. Regulatory Options Considered
    In the analysis of the IFR, FDA analyzed 12 options. The 12 options
focused on varying timeframes for prior notice submission and prior
notice submission by transport type. The options regarding shorter
submission timeframes by transport type are similar to the options
presented in this analysis; we do not analyze those options with longer
minimum submission timeframes (e.g. 8 hours, 12 hours) or options that
do not vary prior notice submission timeframe by transport type again
here, although this final rule analysis updates the analysis of the
chosen IFR option. The costs and benefits of all twelve options
analyzed for the prior notice IFR can be found in the Federal Register
of October 10, 2003 (68 FR 58974 at 59025).
    This final regulatory impact analysis emphasizes the differences
between the IFR and final rule, and compares new options against the
IFR. Each option covers all food subject to the final rule that is
imported or offered for import into the United States; the mode of
transportation for the food is specifically addressed in options where
minimum prior notice time constrains importation.
    Option 1 (IFR). The minimum prior notice time will be 2 hours for
articles of food arriving by land by road, 4 hours for articles of food
arriving by land by rail and by air, and 8 hours for articles of food
arriving by water, with electronic submission of information. Most
changes in prior notice information require resubmission of corrected
or new information.\6\
---------------------------------------------------------------------------

    \6\ You do not have to resubmit your prior notice if there are
changes in: (1) The estimated quantity of product, (2) the
anticipated arrival information, (3) the planned shipment
information, or (4) the anticipated date of mailing for shipments by
mail.
---------------------------------------------------------------------------

    Option 2. This option includes all components of Option 1, but
would reduce the minimum prior notice time for food arriving by land by
road to 1 hour for general entries and 30 minutes for FAST\7\
participants, reduce minimum prior notice time for food arriving by
land by rail to 2 hours, and reduce the minimum prior notice time for
food arriving by air on flights originating in North and Central
America, South America (north of the equator only), the Caribbean, and
Bermuda to ``wheels-up''. This option would integrate FDA's prior
notice timeframes with the timeframes required by CBP's Advance
Manifest Rule.
---------------------------------------------------------------------------

    \7\ The Free and Secure Trade (FAST) program is a Border Accord
Initiative between the United States, Mexico, and Canada designed to
ensure security and safety of imported and exported products.
Eligibility for the FAST program requires participants (carrier,
drivers, importers, and southern port of entry manufacturers) to
submit an application, agreement, and security profile depending on
their role in the Customs and Trade Partnership Against Terrorism
(C-TPAT) and FAST programs. The FAST program allows known low risk
participants to receive expedited CBP entry processing. (Ref. 2)
---------------------------------------------------------------------------

    Option 3 (Final Rule). This option includes all components of
Option 1, except the final rule now allows, when the submitter is
unable to determine the registration number of the manufacturer, the
site-specific facility name and full address instead of the facility's,
name, partial address, and registration number.
Option 1: Minimum prior notice time is 2 hours for articles of food
arriving by land by road, 4 hours for articles of food arriving by land
by rail and by air, and 8 hours for articles of food arriving by water;
information is submitted electronically, most changes in information
require resubmission.
    This option is already in place as the IFR and will be compared
against other options for assessing costs and benefits of the changes
between the IFR and final rule.
    a. Option 1--Prior Notice IFR. In the economic analysis of the IFR
we calculated the number of entities that would submit prior notice and
the costs to those entities of: Learning prior notice, computer
acquisition, information coordination, submitting prior notice,
creating the PNSI, not being able to use CBP's BRASS\8\ system, and
loss of value to fresh produce that waits longer at the port of arrival
than before prior notice was required.
---------------------------------------------------------------------------

    \8\ Border Release Advance Screening and Selectivity (BRASS) is
a CBP program that allows expedited arrival processing for high-
volume, repetitive shipments that have been judged by CBP to be low
risk.
---------------------------------------------------------------------------

    i. Number of entities affected. Prior Notice for an article of food
may be submitted by any person with knowledge of the required
information, e.g., a foreign food manufacturer, a food exporter or
importer, a consignee. The flexibility of the identity of the prior
notice submitter makes it difficult to get a precise count of the
number of unique people or firms who submit at least one prior notice
annually. In the IFR we estimated, based on FDA OASIS data from 2001,
that there were 77,427 unique people or firms who submitted prior
notice. To update the number of prior notice submitters in the final
rule we use two sources of data: U.S. Census data and data from OASIS.
    First we use U.S. Census data by North American Industry
Classification System (NAICS) codes. Six-digit NAICS codes for
Industry, 42-Food Wholesalers, indicates that there are 68,651 U.S.
businesses registered under this code. We use this information because,
in general, establishments importing products into the United States
are classified in Wholesale Trade

(Ref. 3) (http://www.naics.com). Thus the number of U.S. businesses
engaged in the wholesale food industry could likely be the number of
persons who submit prior notice for the goods they receive. Table 3 of
this document shows a breakdown of business by six-digit NAICS code for
food wholesalers.

    Table 3.--Updated Estimate for Number of Prior Notice Submitters
     NAICS Codes for Wholesale Trade Related to Food From the NAICS
                             Association\1\
------------------------------------------------------------------------
                                                            Numbers of
 6 digit NAICS                                                 U.S.
     Code                                                   Businesses
------------------------------------------------------------------------
424210          Drugs and Druggists' Sundries Merchant             8,288
                 Wholesalers\2\
424410          General Line Grocery Merchant                      8,061
                 Wholesalers
424420          Packaged Frozen Food Merchant                      1,250
                 Wholesalers
424430          Dairy Product (except Dried or Canned)             2,195
                 Merchant Wholesalers
424440          Poultry and Poultry Product Merchant                 899
                 Wholesalers
424450          Confectionery Merchant Wholesalers                 3,202
424460          Fish and Seafood Merchant Wholesalers              4,157
424470          Meat and Meat Product Merchant                     3,299
                 Wholesalers
424480          Fresh Fruit and Vegetable Merchant                 5,494
                 Wholesalers
424490          Other Grocery and Related Products                14,763
                 Merchant Wholesalers
424510          Grain and Field Bean Merchant                      5,217
                 Wholesalers
424520          Livestock Merchant Wholesalers                     5,106
424590          Other Farm Product Raw Material Merchant           2,158
                 Wholesalers
424810          Beer and Ale Merchant Wholesalers                  2,181
424820          Wine and Distilled Alcoholic Beverage              2,381
                 Merchant Wholesalers
------------------------------------------------------------------------
Total Number of Businesses                                        68,651
------------------------------------------------------------------------
\1\ Source of original data: NAICS Association, September 29, 2008,
  available online at http://www.naics.com/naics42.htm.
\2\ This category is included to capture wholesale merchants of
  botanicals, herbs, and vitamins.

    Next, using OASIS data, we are able to estimate that there were
123,063 unique manufacturers and 25,929 unique importers of food in FY
2007. Combining the OASIS data with the Census data we estimate that
the number of prior notice submitters annually ranges from 68,000 to
149,000. We use the average of this range, 108,500, as the number of
entities likely affected by having to submit prior notice.
    ii. Costs to entities. We update the cost calculations to the new
number of entities affected for learning prior notice, buying
computers, and information coordination. We do not update the costs of
FDA information technology here. Table 4 of this document shows these
cost calculations; for a complete discussion of how these costs were
calculated refer to the preamble in the prior notice IFR (68 FR 58974
at 59025).

  Table 4.--Cost Calculations for Learning PN, Information Technology,
             Information Coordination, and FDA System Costs
Cost to Learn About the Prior Notice Requirements
------------------------------------------------------------------------
                                       Manager cost   Admin. Worker cost
                                                         (two workers)
------------------------------------------------------------------------
Number of firms                       108,500         108,500
------------------------------------------------------------------------
Wage rate per hour for manager and    $56.74          $25.10
 admin. worker (including overhead)
------------------------------------------------------------------------
1-day learning seminar                8 hours         8 hours
------------------------------------------------------------------------
First year one time learning costs    $49,250,320     $21,786,800
------------------------------------------------------------------------
Total first year learning costs for learning          $71,037,000
------------------------------------------------------------------------
Annual learning costs for new entrants                $7,103,700
¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤
Facilities and Responsible Parties Without Initial Internet Access
------------------------------------------------------------------------
  Number of facilities                                4,340
  Computer equipment cost per facility                $2,000
  Annual cost of Internet access ($20 per month x     $240
   12)
  Search costs for equipment and access ($25.10 x 8   $201
   hours)
  Total first year one time cost of electronic        $10,593,940
   transmitting capacity
  Annual one time cost of electronic transmitting     $1,059,394
   capacity for firms entering industry in
   subsequent years
¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤
Information Gathering and Coordination Costs
------------------------------------------------------------------------
  Number of firms submitting notices                  108,500
  Administrative worker wage rate (doubled to         $25.10
   include overhead)
  Time to coordinate existing accounts                16 hours

  First year cost of coordination of information on   $43,573,600
   current accounts
  Annual cost of coordination of information on new   $4,357,360
   accounts
¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤
FDA Prior Notice System Costs
------------------------------------------------------------------------
  Infrastructure design and implementation            $7,400,000
  Contractor services                                 $5,100,000
  FDA PN system interface cost                        $12,500,000
  CBP ABI/ACS system modification costs               $500,000
  Total prior notice system cost                      $13,000,000
------------------------------------------------------------------------

    We also have new data on the number of prior notices submitted
based on 2007 data collected by FDA's PNC. Therefore, we do update, for
the IFR and all other options, the costs of submitting prior notices,
the costs of not being able to use CBP's BRASS system, and the lost
value of fresh produce and seafood.
    Also, due to an oversight in the calculation of the costs for the
IFR, FDA did not calculate the costs to importers of providing the
imported product's manufacturer registration number and full facility
address on prior notice. We correct that oversight here.
    b. Updated annual costs to submit prior notice. FDA's PNC received
9,804,050 prior notices for FY 2007, which is about 3 million more
prior notices than we estimated in the analysis of the IFR. The
difference in number of submissions is in part due to an increase in
the number of prior notices submitted for each imported food entry. In
the IFR analysis, we estimated that there were about 2.6 lines (prior
notices) submitted for each food shipment.\9\ New OASIS shipment data
show that for 2007, the average number of lines per entry for food,
food related, infant food, and food additive industry codes is 3.6
lines per entry.
---------------------------------------------------------------------------

    \9\ As explained in more detail in the economic analysis of the
interim final rule, OASIS data indicate there are typically more
than two different articles of food per import entry; e.g., 100
cases of canned tuna and 50 cases of canned peaches in the same
shipment. A prior notice must be filed for each of the lines in an
entry.
---------------------------------------------------------------------------

    We use these new data on entry lines to estimate that FDA receives
9,804,050 prior notices per year, which translates into approximately
2.7 million imported food entries (based on 3.6 lines per entry\10\)
annually. Table 5 of this document shows that the annual costs to
complete a prior notice will be $202.5 million instead of the $187.5
million estimated in the IFR.
---------------------------------------------------------------------------

    \10\ This is likely a slight overestimate of prior notices per
entry because food-related items (such as eating utensils) are not
subject to prior notice.

   Table 5.--Cost to Complete a Prior Notice by Import Entry (Must be
                               Electronic)
Broker cost per entry to submit prior notice  $75
------------------------------------------------------------------------
Entry total based on 9.8 million lines        2,700,000
------------------------------------------------------------------------
Total annual costs of all prior notices,      $202,500,000
 including updates to the information
------------------------------------------------------------------------

    c. Updated costs to BRASS users. Under the prior notice rule, no
food product shipments imported into the United States are eligible to
take advantage of CBP's BRASS system. We update the number of entries
that used the BRASS system in FY 2002 (242,000) to estimate the number
of imported food entries that would have used the BRASS system in FY
2007 (305,000) if it would have been available to them. Table 6 of this
document shows that the updated costs to BRASS users are $61 million
annually; the previous estimate was about $48 million annually.

           Table 6.--Updated Additional Costs for BRASS Users
Additional Submission Costs
------------------------------------------------------------------------
Total Cost per import entry                    $75
FY2002 BRASS line total for FDA-regulated      1,098,054
 products
BRASS yearly entry total (3.6 lines per        305,015
 entry)
Additional annual costs of submissions for     $22,876,125
 BRASS users
¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤
Additional Border Wait Time
------------------------------------------------------------------------
Cost per half hour                             $125
BRASS yearly entry total                       305,015
Additional annual border wait costs for        $38,126,875
 former BRASS users
Total Annual additional food importing costs   $61,003,000
 for BRASS users
------------------------------------------------------------------------

    d. Updated costs to submit prior notice by mode of transport.
    i. 2-hour minimum prior notice time for food arriving by land by
road. Prior notices for perishable articles of food from Canada and
Mexico that arrive in the United States by land by road must be
submitted at least 2 hours before the food arrives in the United
States. In the analysis of the IFR, we assumed that this minimum
submission time should eliminate the probability of having to resubmit
prior notice (due to proximity to the U.S. port of entry) for all but 5
percent of those perishable products imported from Canada and Mexico.
    Data from the FDA PNC for 2007 indicate that 85 percent of the
articles of food arriving from Canada enter the United States by land
by road; and approximately 94 percent of the articles of food arriving
from Mexico enter the United States by land by road.\11\ Using these
updated estimates, we calculate the proportion of the total retail
value of highly perishable produce and seafood from Canada and Mexico
that arrive in the United States by land by road. We then calculate the
lost product value for the 5 percent of highly perishable produce and
seafood from Canada and Mexico for which importers may have to resubmit
the prior notice when the minimum submission time is 2 hours. Table 7
of this document shows the revised estimated loss in value caused by
the cancelled and resubmitted prior notice information for the 5
percent of imported Mexican and Canadian perishable seafood and produce
affected.
---------------------------------------------------------------------------

    \11\ The mode of transportation field in prior notice is user
defined; thus, the person submitting the prior notice is responsible
for informing FDA by what mode of transport the food will enter the
United States. As mode of transport is user defined, there is a
possibility of error.
---------------------------------------------------------------------------

    We do not include the lost value for perishable seafood and produce
imported from Central America because perishable products from Central
America are most likely to arrive by air into the United States. We
also do not include the cost of additional truck time

with this option because the minimum prior notice time for articles of
food arriving by vehicle is only 2 hours.

 Table 7.--Loss in Value Caused by Resubmitted Prior Notice Under Option
 1 for Articles of Food Arriving by Land by Road (2-hour Minimum Notice
                              Requirement)
Perishable Produce                                               Dollars
------------------------------------------------------------------------
2001 Imported Mexican produce total retail value          $3,458,525,000
------------------------------------------------------------------------
94% of total retail value for Mexican produce             $3,251,014,000
------------------------------------------------------------------------
1.2% Reduction in value for 5% of Mexican produce             $1,951,000
------------------------------------------------------------------------
2001 Imported Canadian produce total retail value           $401,826,000
------------------------------------------------------------------------
85% of total retail value for Canadian produce              $341,552,000
------------------------------------------------------------------------
1.2% Reduction in value for 5% of Canadian produce              $205,000
------------------------------------------------------------------------
Total lost value for produce                                  $2,156,000
¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤
Perishable Seafood                                               Dollars
------------------------------------------------------------------------
2001 Imported Mexican seafood total retail value            $112,277,000
------------------------------------------------------------------------
94% of total retail value for Mexican seafood               $105,540,000
------------------------------------------------------------------------
4.2% Reduction in value for 5% of Mexican seafood               $222,000
------------------------------------------------------------------------
2001 Imported Canadian seafood total retail value         $1,863,218,000
------------------------------------------------------------------------
85% of total retail value for Canadian seafood            $1,583,735,000
------------------------------------------------------------------------
4.2% Reduction in value for 5% of Canadian seafood            $3,326,000
------------------------------------------------------------------------
Total lost value for seafood                                  $3,548,000
------------------------------------------------------------------------

    ii. 4-hour minimum prior notice time for food arriving by land by
rail and by air. The 4-hour minimum submission time for prior notice
applies to articles of food imported or offered for import by land by
rail and by air. A 4-hour minimum prior notice time for railroads and
airplanes could constrain products arriving from the countries
bordering the United States. Data from the PNC for 2007 show that about
4 percent of the articles of food arriving from Canada were imported
into the United States by land by rail and only about 2 percent of the
articles of food arriving from Mexico were imported into the United
States by land by rail. Similarly, about 8 percent of the articles of
food arriving from Canada were imported into the United States by air,
while only about 3 percent of the articles of food arriving from Mexico
were imported into the United States by air.
    To estimate potential lost value for produce imported from Canada
and Mexico by rail and air, we adjust the total retail value of highly
perishable produce and seafood from Canada and Mexico to account for
the 12 percent from Canada and the 5 percent from Mexico that are
imported by land by rail or by air. Table 5 of this document shows the
articles of food arriving by rail and air from Canada and Mexico that
may have to resubmit prior notice when the minimum prior notice
timeframe is 4 hours before arrival in the United States.
    For Central American and Caribbean countries, most, if not all, of
their perishable products are imported to the United States by air.
Table 8 of this document shows the loss of value for the estimated 20
percent of air shipments from Central America for which prior notice
needs to be resubmitted under Option 1.\12\
---------------------------------------------------------------------------

    \12\ The estimated 20 percent cancellation and resubmission rate
for prior notices when the minimum submission time is 4 hours is
used in the IFR analysis. (See 68 FR 58974 at 59045.)

 Table 8.--Loss in Value Caused by Resubmitted Prior Notice Under Option
   1 for Shipments Arriving by Air and by Land by Rail (4-hour Minimum
                           Notice Requirement)
Perishable Produce                                               Dollars
------------------------------------------------------------------------
2001 Imported Mexican produce total retail value          $3,458,525,000
------------------------------------------------------------------------
5% of total retail value for Mexican produce                $172,926,000
------------------------------------------------------------------------
2.4% reduction in value for 20% of Mexican produce              $830,000
------------------------------------------------------------------------
2001 Imported Canadian produce total retail value           $401,826,000
------------------------------------------------------------------------

12% of total retail value for Canadian produce               $48,219,000
------------------------------------------------------------------------
2.4% reduction in value for 20% of Canadian                     $231,000
 produce
------------------------------------------------------------------------
2.4% reduction in value for 20% of Central                    $1,044,000
 American and Caribbean produce
------------------------------------------------------------------------
Total lost value for produce                                  $2,105,000
¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤
Perishable Seafood                                               Dollars
------------------------------------------------------------------------
2001 Imported Mexican seafood total retail value            $112,277,000
------------------------------------------------------------------------
5% of total retail value for Mexican seafood                  $5,614,000
------------------------------------------------------------------------
8.3% reduction in value for 20% of Mexican seafood               $93,000
------------------------------------------------------------------------
2001 Imported Canadian seafood total retail value         $1,863,218,000
------------------------------------------------------------------------
12% of total retail value for Canadian seafood              $204,954,000
------------------------------------------------------------------------
8.3% Reduction in value for 20% of Canadian                   $3,712,000
 seafood
------------------------------------------------------------------------
2001 Imported Central American and Caribbean                $251,796,000
 seafood total retail value
------------------------------------------------------------------------
8.3% Reduction in value for 20% of Central                    $4,180,000
 American and Caribbean seafood
------------------------------------------------------------------------
Total lost value for seafood                                  $7,985,000
------------------------------------------------------------------------

    e. Updated IFR costs to include the costs of manufacturer name,
registration number and partial address on prior notice. Section
1.281(a)(6), (b)(5), and (c)(6) of the IFR requires that prior notice
for an article of food that is no longer in its natural state include
the name and address of the manufacturer and the registration number
assigned to the facility that is associated with the article of
food.\13\ This IFR requirement has not been fully enforced by FDA, as
described in CPG Sec. 110.310; however, it is a requirement of the rule
and therefore we evaluate it as a cost of the IFR. We correct an
oversight in the calculation of the costs of the IFR by including the
costs of submitting the food manufacturer registration number and
facility address on prior notice here.
---------------------------------------------------------------------------

    \13\ The interim final rule further states that a registration
number is not required for a facility associated with an article of
food if the article is imported or offered for import for
transshipment, storage, and export, or further manipulation and
export. The interim final rule also provides that if the article of
food is sent by an individual as a personal gift (i.e., for
nonbusiness reasons) to an individual in the United States, he or
she may provide the name and address of the firm that appears on the
label under Sec.  101.5 instead of the name, address, and
registration number of the manufacturer. If a registration number is
provided, city and country may be provided instead of the full
address.
---------------------------------------------------------------------------

    f. How some importers will be affected. The November 2004 revision
of the IFR CPG stated that if the manufacturer's registration number
was not given on the prior notice, the submitter should select the
appropriate reason identifying why the manufacturer's registration
number and/or name and address was not provided. The reason codes
provided by PNSI and ABI/ACS were:
     A--facility is out of business
     B--facility is a private residence
     C--facility is a restaurant
     D--facility is a retail food establishment
     E--facility is a nonprocessing fishing vessel
     F--Facility is nonbottled water collection and
distribution establishment
     G--Individual gift-label name/address
     H--Grower-satisfies farm exemption
     I--Samples-quality assurance, research or analysis
purposes only
     J--U.S. manufacturing facility that is not required to
register
     K--Unable to determine the registration number of the
manufacturer
     L--Unable to determine identity of manufacturer-providing
identity of manufacturer's headquarters
     M--Unable to determine identity of manufacturer or
headquarters-providing invoicing firm's identity
     O--Gift pack for nonbusiness purposes-providing single
prior notice and identity of packer
    Prior notices submitted without manufacturer registration numbers
but using reason codes A through F, H, and J would be compliant with
IFR requirements because the manufacturer would be exempt from being
registered according to the Registration of Food Facilities rule (21
CFR part 1, subpart H). Prior notices submitted without manufacturer
registration numbers but using reason code G would be compliant with
IFR requirements because the prior notice IFR allows that if an article
of food is sent by an individual as a personal gift (i.e., for
nonbusiness reasons) to an individual in the United States, the
submitter may provide the name and address of the firm that appears on
the label instead of the name, address, and registration number of the
manufacturer. A prior notice submitted without the manufacturer name,
address, and/or registration number but using reason code I, K through
M, or O would not be compliant with IFR requirements. However, FDA's
enforcement policy was that it should typically consider not taking any
regulatory action for prior notice violations in these cases.
    We can use information from the PNC on the CPG code reasons given
for FY 2007 to determine how many submitters had trouble providing the
manufacturer registration number and facility address as is required by
the IFR (submitters who used reason codes I, K through M, and O).

    The PNC was able to determine that about 92.5 percent of prior
notices contained the manufacturer's name, address, and registration
number as required by the IFR. Table 9 of this document shows that
about 2.9 percent of prior notice submissions (2.91 percent) for 2007
used reason codes I, K, L, M, and O.

        Table 9.--No Manufacturer Registration Number on Prior Notice, Reason Code Line Count for FY 2007
----------------------------------------------------------------------------------------------------------------
                                                                                % of Total
        Reason Code                              Description                      PN Lines Count       Lines
----------------------------------------------------------------------------------------------------------------
Total prior notice submissions for fiscal year 2007                                    9,804,050  ..............
----------------------------------------------------------------------------------------------------------------
A                           Facility is out of business                                   43,479           0.44%
----------------------------------------------------------------------------------------------------------------
B                           Facility is a private residence                               30,801           0.31%
----------------------------------------------------------------------------------------------------------------
C                           Facility is a restaurant                                       5,146           0.05%
----------------------------------------------------------------------------------------------------------------
D                           Facility is a retail food establishment                       47,705           0.49%
----------------------------------------------------------------------------------------------------------------
E                           Facility is a nonprocessing fishing vessel                     2,488           0.03%
----------------------------------------------------------------------------------------------------------------
F                           Facility is a nonprocessing drinking water                     1,417           0.01%
                             collection and distribution establishment
----------------------------------------------------------------------------------------------------------------
G                           Individual gift label name/address in lieu of                 36,808           0.38%
                             registration number
----------------------------------------------------------------------------------------------------------------
H                           Grower satisfies farm exemption                              267,369           2.73%
----------------------------------------------------------------------------------------------------------------
I                           Samples--quality assurance, research or analysis              55,374           0.56%
                             purposes only
----------------------------------------------------------------------------------------------------------------
J                           U.S. manufacturing facility that is not required to           15,142           0.15%
                             register
----------------------------------------------------------------------------------------------------------------
K                           Unable to determine the registration number of the           166,647           1.70%
                             manufacturer
----------------------------------------------------------------------------------------------------------------
L                           Unable to determine identity of the manufacturer--            15,674           0.16%
                             providing identity of manufacturer's headquarters
----------------------------------------------------------------------------------------------------------------
M                           Unable to determine identity of manufacturer or               15,839           0.16%
                             headquarters providing invoicing firms identity
----------------------------------------------------------------------------------------------------------------
O                           Gift pack for nonbusiness purposes--providing single          32,371           0.33%
                             prior notice and identity of packer
----------------------------------------------------------------------------------------------------------------
Total times a reason code was given (includes submission for PNSI and ABI/ACS)           637,153           7.51%
 for fiscal year 2007
----------------------------------------------------------------------------------------------------------------

    FDA posits that larger entities (e.g., medium to large importers)
that deal directly with foreign manufacturers will not be impacted by
this IFR requirement (are not part of the 2.91 percent) as they will be
able to obtain the manufacturers' registration numbers and facility
addresses for the products they are importing. Therefore, it is mostly
the small U.S. retailers or individuals that buy from other wholesalers
or retailers in foreign countries that may have a problem obtaining the
registration number, city, and country of the actual food manufacturing
facility.
    Using data from the U.S. Census Bureau, FDA was able to determine
that for 2006, about $64.8 billion foods, feeds, and beverages were
imported into the United States. Some of this value of imported food
could be affected by the IFR requirement that the registration number,
city, and country of the manufacturer be provided on prior notice; to
assess how this imported value may be affected, we present best and
worst case scenarios.
    In our best case scenario, few imported foods would be affected by
manufacturer registration number, name and partial address being
required on prior notice. For our best case scenario we subtract the
full import value of the potentially ``unaffected'' categories listed
in table 10 of this document from $64.8 billion, the total value of
food, feeds, and beverages imported into the United States in 2006
(Ref. 4). In essence, we subtract out those food categories that are
likely comprised of foods that are still in their natural state such
that a manufacturer is not required for the prior notice (e.g., green
coffee). This is our ``best case'' scenario because not all foods
imported from the categories below will come from facilities that are
not required to be registered (i.e., vegetables could be farm
commodities or could be processed). The remaining imported foods value,
about $29 billion, represents the value of alcoholic beverages, bakery
products, non-agricultural, and ``other'' imported foods, which are
products from facilities more likely to be subject to the food facility
registration requirements.
    About 2.91 percent of the prior notice submissions for FY 2007
indicated that the importer could not provide the name, address, and/or
registration number of the actual manufacturing facility. While we do
not know the value of imported foods for each of the prior notice
submissions in the 2.91 percent affected, in the absence of better
information, for our best case scenario we reduce the value of imported
foods affected to $843 million, or 2.91 percent of $29 billion. For the
worst case scenario, we apply the 2.91 percent of import lines for 2007
that could not provide the registration number, city, and country of
the actual manufacturer to the entire value of FDA-regulated imported
food shipments, $59 billion, giving us a possible $1.7 billion in
imported foods value that could be affected by the prior notice IFR
requiring the name, registration number, and partial address of the
manufacturing facility on most prior notices.
    The estimated $843 million to $1.7 billion in imported food
affected by the facility name, registration number, and partial address
requirement for prior notice is an overestimate of the imported value
likely affected for two

reasons. First, the 2.91 percent of prior notice submissions that could
not supply the information required by the IFR are most likely goods
imported by small or very small U.S. retailers or individuals. These
goods are likely purchased for import not through the manufacturer but
through middlemen, thus the importers often do not have access to, or
knowledge of, the manufacturer registration number and facility
address. These small U.S. retailers or individuals would not be
importing large quantities of food; therefore, the value of their
imported shipments should be small, much smaller in total than the $843
million to $1.7 billion estimate.
    Second, we expect that most of those persons importing without
knowledge of the manufacturing facility's registration number or
address will adjust business practices, and perhaps their supply chain,
to other entities in the supply chain that will provide them with this
information for prior notice submissions. For the persons who can
adjust business practices, the value of the food imported will be
affected by prior notice, but not lost, because importation of those
products will not cease. However, some of these businesses will find
that the costs associated with changing business practices to supply
the necessary information on prior notice will cause importing food
products into the United States to no longer be profitable. These
persons will cease importing and the value of these imported goods that
is lost will be a cost of the rule. Thus we must adjust our value of
imported food affected by the manufacturer identity requirement to
reflect that: (1) Most importers will adjust business practices to
continue importing and (2) some importers will cease doing so.
    To account for the businesses that cease importing food into the
United States, we estimate that 3 percent of the possible $843 million
to $1.7 billion of imported food value is lost. We do this because
according to the Small Business Administration, about 3 percent of
small businesses closed between 2003 and 2007 (Ref 5). We estimate this
value to be $25 million to about $52 million.
    To account for the businesses that change importing practices, we
estimate that 3,157 prior notice submitters (2.91 percent of the
estimated 108,500 submitters) will spend 80 hours adjusting their
supply chain.\14\ As with table 4 of this document, we use the manager
wage rate, including overhead, of $56.74 per hour.
---------------------------------------------------------------------------

    \14\ These costs are costs incurred beyond the information
gathering and coordination costs presented in table 4 of this
document.
---------------------------------------------------------------------------

    Taking the midpoint of the lost value due to cessation of
importation ($38.5 million) plus the costs to the 3,157 firms to change
business practices, we estimate that the cost of the manufacturer
identity requirement in the IFR to be about $52.8 million.

   Table 10.--Imports of Goods by End Use Category and Commodity (2006
                        Seasonally Adjusted Data)
------------------------------------------------------------------------
                                        Best Case          Worst Case
                                         Scenario           Scenario
                                        (Millions)         (Millions)
------------------------------------------------------------------------
Foods, feeds, and beverages (FFB)             $64,782            $64,782
 total\1\
------------------------------------------------------------------------
Categories of imported food
 products subtracted
  Meat products                                $5,611             $5,611
  Fish and shellfish                           $9,867  .................
  Vegetables                                   $4,943  .................
  Cane and beet sugar                          $1,121  .................
  Cocoa beans                                    $520  .................
  Tea, spices, etc.                              $715  .................
  Food oils, oilseeds                          $1,999  .................
  Feedstuff and food grains                    $1,577  .................
  Fruits, frozen juices                        $5,503  .................
  Nuts                                           $856  .................
  Green coffee                                 $2,035  .................
  Dairy products and eggs                      $1,070  .................
------------------------------------------------------------------------
Remaining value of imports that               $28,965            $59,171
 may be affected by the IFR
 identity of the manufacturer
 requirement
------------------------------------------------------------------------
Imported value reduced further to                $843             $1,722
 represent that 2.91% of prior
 notice submissions could not
 provide registration number and
 site-specific information on
 prior notice for fiscal year 2007
------------------------------------------------------------------------
3 percent of imported food value
 lost through cessation of
 importation into U.S.                     $25.3 to $51.7 million
------------------------------------------------------------------------
Costs that reflect change in
 business practices for 3,157
 submitters (80 hours x $56.74 per
 hour)                                          $14.3 million
------------------------------------------------------------------------
Total Value Affected                            $52.8 million
------------------------------------------------------------------------
\1\ Source of original data: U.S. Census Bureau, U.S. Bureau of Economic
  Analysis, US DOC News, November 9, 2007, pages 12 and 15, available
  online at http://www.bea.gov/newsreleases/international/trade/2007/pdf/
  trad0907.pdf. (FDA has verified the Web site address, but FDA is not
  responsible for any subsequent changes to the Web site after this
  document publishes in the Federal Register.)

    Table 11 of this document presents a summary of the revised
estimated costs associated with Option 1, including the marginal costs
to importers who may be affected by the IFR requirement that a
facility's name, registration number and partial address be provided on
prior notice. Also included in the summary table 11 of this document
are the discounted present value of the costs at the OMB-recommended
discount rates of 3 and 7 percent.

          Table 11.--Summary of Updated Costs for Option 1--IFR
------------------------------------------------------------------------
                                                     (In Thousands of
                                                         Dollars)
------------------------------------------------------------------------
Learning costs                                   $71,037
------------------------------------------------------------------------
Coordination costs                               $43,574
------------------------------------------------------------------------
Computer acquisition costs                       $10,594
------------------------------------------------------------------------
FDA prior notice system cost                     $13,000
------------------------------------------------------------------------
Annual costs to fill out prior notice screens    $202,500
------------------------------------------------------------------------
Additional costs for BRASS users                 $61,003
------------------------------------------------------------------------
Lost value for produce                           $4,261
------------------------------------------------------------------------
Lost value for seafood                           $11,533
------------------------------------------------------------------------
Cost for truck time                              $0
------------------------------------------------------------------------
Costs of manufacturer registration number and    $52,800
 full facility address requirement
------------------------------------------------------------------------
Total first year costs for Option 1              $470,302
------------------------------------------------------------------------
Annual costs after first year\1\                 $293,118
------------------------------------------------------------------------
PV of costs at 7% for 20 years                   $3,270,884
------------------------------------------------------------------------
PV of costs at 3% for 20 years                   $4,532,872
------------------------------------------------------------------------
\1\ Annual costs include the start-up costs of prior notice to the
  estimated 10 percent of new businesses that enter the market each
  year.

    g. Benefits of Option 1. FDA's prior notice system provides us with
enhanced knowledge of what articles of food are being imported or
offered for import into the United States. Requiring prior notice of
imported food shipments and defining the required data information
improves our ability to detect accidental and deliberate contamination
of food and to deter deliberate contamination.
    Before prior notice was required, FDA received almost no advance
notice information about food products entering the United States from
foreign sources, or the location of the food's anticipated port of
arrival. With the information required by prior notice, FDA does know
what articles of food are being imported or offered for import before
they arrive at the port. In the event of a credible threat for a
specific product or a specific manufacturer or processor, for example,
FDA will be able to mobilize and assist in the detention and removal of
products that may pose a serious health threat to humans or animals.
    FDA's PNC reviews prior notices and assesses the risk related to
imported food shipments. Personnel at the PNC decide on a case-by-case
basis whether the article of food needs to be held for examination upon
arrival at the port. Having notice of an article of food imported or
offered for import into the United States before it reaches a U.S. port
allows FDA personnel to be ready at any time to respond to shipments
that appear to pose a significant health risk to humans or animals.
    h. Cost benefit summary table. Table 12 presents the costs of
Options 1 annualized over 20 years.

       Table 12.--Updated Cost Benefit Summary Table for Option 1
------------------------------------------------------------------------
                                            Annualized      Annualized
                                           Costs Over 20   Costs Over 20
                                            Years at 7%     Years at 3%
                                           Discount Rate   Discount Rate
                                            (Millions)      (Millions)
------------------------------------------------------------------------
Option 1--2 hour prior notice for                   $304            $301
 vehicle, 4 hour for rail and air, 8
 hour for vessels (IFR)
------------------------------------------------------------------------
Benefits--FDA will know what articles of food are being imported or
 offered for import, before they arrive at the port. In the event of a
 threat of significant public health risk to humans or animals, FDA and
 CBP will be able to mobilize and assist each other in the detention and
 removal of those products.
------------------------------------------------------------------------

Option 2 (A and B): Minimum prior notice time frame would be 1 hour
before arrival for articles of food arriving by land by road or 30
minutes for FAST participants, 2 hours before arrival for articles of
food arriving by land by rail, ``wheels-up'' for flights originating in
North and Central America, South America (north of the equator only),
the Caribbean, and Bermuda; 4 hours for all other flights, and 8 hours
before arrival for vessels; information would be submitted
electronically, most changes in information would require resubmission
    This option coordinates FDA minimum prior notice times with those
of CBP for imports arriving by land by road, by land by rail, and by
air.\15\ For this option's timeframes we present two scenarios: (1) The
costs and benefits of Option 2 when FDA's PNC is staffed at its current
level and must review and respond to prior notices received within the
minimum timeframe required and (2) the costs and benefits of Option 2
when the PNC has increased its staff to review and respond to prior
notices received within the minimum timeframe required.
---------------------------------------------------------------------------

    \15\ We do not examine or integrate timeframes for products
arriving by water. Persons that use vessels to import their products
are usually dealing with merchandise that is not highly perishable
in nature and thus less time-sensitive. FDA did not receive comments
requesting the coordination of FDA and CBP timeframes for food
arriving by water. FDA's current minimum prior notice timeframe for
notification of food being imported by water is 8 hours before
arrival; CBP's current minimum prior notice timeframe for articles
being imported by water is 24 hours before arrival.
---------------------------------------------------------------------------

Option 2A: PNC is Staffed at its Current Level and Must Review and
Respond to Prior Notices Within the Minimum Timeframe Required
    a. Costs of Option 2A.
    i. 1-hour or 30 minute minimum prior notice time for food arriving
by land by road. A significant portion (approximately 31 percent) of
the prior notices reviewed by the PNC on a daily basis is for articles
of food that arrive in the United States by land by road. The PNC
conducts a more intensive security review on at least 225 to 250 prior

notices per day. Of these prior notices that are flagged as potentially
high-risk and require a more intensive security review, about 77 (31
percent of 250) are for articles of food arriving by land by road.
Complicating matters further is that prior notice submissions and
expiration times are not evenly distributed over an 8-hour shift or 24-
hour day; an overwhelming majority of prior notice submissions arrive
during a certain 12-hour time period.
    The PNC has estimated using 2007 data that most prior notices
submitted for land border entries took between 30 and 110 minutes to
review. This range indicates that if the prior notice minimum
submission time frames were reduced from 2 hours to 1 hour,
approximately 27 percent of those high risk prior notices for articles
of food arriving by land by road that are selected for a more intensive
review would exceed the minimum prior notice timeframe and would have
to be delayed at the port of arrival while the PNC completes its review
and risk assessment, as discussed earlier in this document.
    If the minimum prior notice submission time for articles of food
arriving by land by road is shortened to 30 minutes, the intensive
security reviews (described previously) on approximately 69 percent of
the high-risk targeted land border prior notices would not be completed
within the prior notice timeframe. Again, as a result of the shorter
timeframe, it would be necessary for the PNC to delay the movement of
these shipments at the port of arrival in order to complete their
review and risk assessment.
    The synopsis stated in the previous paragraph implies that the PNC
likely will not be able to review and respond to all prior notices
received for articles of food arriving by land by road within the
minimum time if the minimum prior notice submission time for articles
of food arriving by land by road is either 1 hour or 30 minutes. The
loss of value to fresh produce and seafood calculated in table 8 of
this document reflects that some articles of food (about 27 to 69
percent of high risk prior notices) will be held at the port of arrival
past the 30 minutes or 1 hour minimum prior notice submission time
frame while the PNC completes its review.
    In table 13 of this document, we first calculate the lost value to
fresh produce and seafood as if FDA had the additional staff necessary
to receive, review, and respond to prior notices within the minimum
prior notice submission time\16\ and then increase those costs (in
terms of lost value to perishable produce and seafood arriving in the
United States by land by road by 48 percent--the average of 27 and 69
percent) to account for the fact that some of these articles of food
will be held up at the port pending prior notice review completion
given the current PNC staffing level.
---------------------------------------------------------------------------

    \16\ We use the same probability of resubmission structure
established in the analysis of the IFR (68 FR 58974 at 59025). This
minimum submission time should eliminate the probability of having
to resubmit prior notice for all but 2.5 percent of those perishable
products imported from Canada and Mexico by land by road.
---------------------------------------------------------------------------

    We note that we base this analysis on the typical (average) prior
notice review time. Given that most prior notices for land border
entries took between 30 and 110 minutes to review, the typical article
of food arriving by land by road should not have to wait longer than 2
hours to enter; which is equivalent to the time that articles of food
arriving by land by road will have to wait to enter the United States
under Option 1. However, no matter what the minimum prior notice
submission timeframes are, there will always be some articles of food
whose review will take longer than the minimum allotted prior notice
review timeframes.

Table 13.--Loss in Value Caused by Resubmitted Prior Notice Under Option
 2A for Shipments Arriving by Land by Road (1-Hour or 30-Minute Minimum
                           Notice Requirement)
Perishable Produce                                               Dollars
------------------------------------------------------------------------
2001 Imported Mexican produce total retail value          $3,458,525,000
------------------------------------------------------------------------
94% of total retail value for Mexican produce             $3,251,014,000
------------------------------------------------------------------------
0.6% Reduction in value for 2.5% of Mexican                     $488,000
 produce
------------------------------------------------------------------------
48% Increase in lost value due wait time past                   $234,000
 minimum submission timeframe
------------------------------------------------------------------------
Total lost value for Mexican produce                            $722,000
------------------------------------------------------------------------
2001 Imported Canadian produce total retail value           $401,826,000
------------------------------------------------------------------------
85% of total retail value for Canadian produce              $341,552,000
------------------------------------------------------------------------
0.6% Reduction in value for 2.5% of Canadian                     $51,000
 produce
------------------------------------------------------------------------
48% Increase in lost value due wait time past                    $24,000
 minimum submission timeframe
------------------------------------------------------------------------
Total lost value for Canadian produce                            $75,000
------------------------------------------------------------------------
Total lost value for produce                                    $797,000
¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤
Perishable Seafood                                               Dollars
------------------------------------------------------------------------
2001 Imported Mexican seafood total retail value            $112,277,000
------------------------------------------------------------------------
94% of total retail value for Mexican seafood               $105,540,000
------------------------------------------------------------------------

[[Continued on page 66393]]

]

[[pp. 66393-66410]] Prior Notice of Imported Food Under the Public Health Security
and Bioterrorism Preparedness and Response Act of 2002

[[Continued from page 66392]]

2.1% Reduction in value for 2.5% of Mexican                      $55,000
 seafood
------------------------------------------------------------------------
48% Increase in lost value due wait time past                    $26,000
 minimum submission timeframe
------------------------------------------------------------------------
Total lost value for Mexican seafood                             $81,000
------------------------------------------------------------------------
2001 Imported Canadian seafood total retail value         $1,863,218,000
------------------------------------------------------------------------
85% of total retail value for Canadian seafood            $1,583,735,000
------------------------------------------------------------------------
2.1% Reduction in value for 2.5% of Canadian                    $831,000
 seafood
------------------------------------------------------------------------
48% Increase in lost value due wait time past                   $399,000
 minimum submission timeframe
------------------------------------------------------------------------
Total lost value for Canadian seafood                         $1,230,000
------------------------------------------------------------------------
Total lost value for seafood                                  $1,311,000
------------------------------------------------------------------------

    ii. 2-hour minimum prior notice time for food arriving by land by
rail and ``wheels-up'' or 4-hour minimum prior notice time by air. The
2-hour minimum submission time for food imported by land by rail should
reduce the probability of having to resubmit prior notice for virtually
all articles of food imported from Canada and Mexico by rail. However,
with current staffing levels at the PNC, the possibility exists that
some articles of food arriving by rail may be held at the minimum prior
notice submission timeframe.
    Data from the PNC for 2007 show that only about 4 percent of the
articles of food imported from Canada and only about 2 percent of the
articles of food imported from Mexico are imported by land by rail.
Thus, articles of food arriving by land by rail represent only a slight
fraction of all prior notices received and are therefore not
necessarily the constraining factor when the PNC is staffed at its
current level. Although we cannot rule out the possibility that some
additional effects may be associated with articles of food imported
from by land by rail under Option 2A, we assume those effects would be
negligible. We therefore do not estimate additional costs for articles
of food arriving by land by rail for Option 2A.
    Reducing the prior notice submission timeframe to ``wheels-up'' for
food imported by air on flights originating in North and Central
America, South America (north of the equator only), the Caribbean, and
Bermuda will eliminate the need for any resubmission of prior notice
information for those shipments. Because prior notice does not need to
be submitted until ``wheels-up,'' the probability of not having the
correct prior notice information on the shipment is eliminated.
    However, according to 2007 data from the PNC, if the minimum prior
notice submission time is reduced from 4 hours to ``wheels up'' for
some articles of food arriving by air, approximately 5 percent of the
prior notice reviews would not be completed in time if flight time was
less than 3 hours given the current PNC staffing level. Perishable
produce and seafood imported into the United States from the Bahamas,
Belize, the Dominican Republic, El Salvador, Haiti, Honduras, Jamaica,
and Nicaragua can all be flown to Miami, Florida in less than 3 hours.
Perishable produce and seafood imported by air from Canada and Mexico
also can be flown into the United States in less than 3 hours.
    Table 14 of this document shows that while there is no value loss
from perishable produce and seafood having to resubmit prior notice
(because the minimum prior notice submission timeframe is ``wheels-
up''), there may be a loss of value for about 5 percent of perishable
produce and seafood coming from the locations listed previously if the
PNC does not have more than its current level of personnel to review
and respond to prior notices when the minimum prior notice time frame
is ``wheels-up.'' Even if the PNC cannot respond to all prior notices
for articles of food arriving in the United States by air when the
flight time is less than 3 hours, we would still not expect the costs
(value loss on perishable produce and seafood) to importers of these
articles of food to be less than the costs in Option 1 where the
minimum prior notice time frame is 4 hours for articles of food
arriving by air. Again we note that this analysis is based on the
typical review time for prior notice for articles of food arriving by
air. No matter what the minimum prior notice submission timeframe,
there will always be some articles of food for which the PNC will not
be able to respond and complete its risk assessment within the
timeframe allotted.
    To estimate the potential loss in value for perishable products due
to a delay in PNC review, we use the following information in table 14
of this document: (1) The total retail value of the perishable products
from Central America, adjusted to encompass perishable products coming
from countries whose flight times to the United States are less than 3
hours; (2) the total retail value of perishable products from Canada
and Mexico, adjusted to reflect the proportion of these articles of
food that arrive into the United States by air (8 percent for Canada
and 3 percent for Mexico); and (3) the estimated loss for the delay in
review, which we equate to 1 hour\17\ of the perishable product's
lifespan.
---------------------------------------------------------------------------

    \17\ We chose 1 hour as the loss in value because the PNC,
staffed at its current level, will not complete its review for
articles of food arriving by air when flights are less than 3 hours
and prior notice is required at ``wheels-up,'' but generally will
complete its review when the minimum prior notice time for articles
of food arriving by air is 4 hours.

  Table 14.--Loss in Value Caused by Delayed Prior Notice Review Under
   Option 2A for Shipments Arriving by Air (``Wheels-Up Minimum Notice
                             Requirement'')
Perishable Produce                                               Dollars
------------------------------------------------------------------------
2001 Imported Mexican produce total retail value          $3,458,525,000
------------------------------------------------------------------------
3% of total retail value for Mexican produce                $103,756,000
------------------------------------------------------------------------
5% Experience a 0.6% loss in value due wait time
 past minimum submission timeframe
------------------------------------------------------------------------
Total lost value for Mexican produce                             $31,000
------------------------------------------------------------------------
2001 Imported Canadian produce total retail value           $401,826,000
------------------------------------------------------------------------
8% of total retail value for Canadian produce                $32,146,000
------------------------------------------------------------------------
5% Experience a 0.6% in value due wait time past
 minimum submission timeframe
------------------------------------------------------------------------
Total lost for Canadian produce                                  $10,000
------------------------------------------------------------------------
2001 Imported Central American produce total                 $62,510,000
 retail value (coming from countries that are less
 than 3 hours by air to U.S.)
------------------------------------------------------------------------
5% Experience a 0.6% loss in value due wait time
 past minimum submission timeframe
------------------------------------------------------------------------
Total lost value for Central American produce                    $19,000
------------------------------------------------------------------------
Total lost value for produce                                     $60,000
¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤
Perishable Seafood                                               Dollars
------------------------------------------------------------------------
2001 Imported Mexican seafood total retail value            $112,277,000
------------------------------------------------------------------------
3% of total retail value for Mexican seafood                  $3,368,000
------------------------------------------------------------------------
5% Experience a 2.1% loss in value due wait time
 past minimum submission timeframe
------------------------------------------------------------------------
Total lost value for Mexican seafood                              $4,000
------------------------------------------------------------------------
2001 Imported Canadian seafood total retail value         $1,863,218,000
------------------------------------------------------------------------
8% of total retail value for Canadian seafood               $149,057,000
------------------------------------------------------------------------
5% Experience a 2.1% loss in value due wait time
 past minimum submission timeframe
------------------------------------------------------------------------
Total lost value for Canadian seafood                           $157,000
------------------------------------------------------------------------
2001 Imported Central American seafood total                 $73,021,000
 retail value (coming from countries that are less
 than 3 hours by air to U.S.)
------------------------------------------------------------------------
5% Experience a 2.1% loss in value due wait time
 past minimum submission timeframe
------------------------------------------------------------------------
Total lost value for Central American seafood                    $77,000
------------------------------------------------------------------------
Total lost value for seafood                                    $238,000
------------------------------------------------------------------------

    Table 15 of this document presents a summary of the costs
associated with Option 2A, including the costs of the option at the
OMB-recommended discount rates of 3 and 7 percent.

                Table 15.--Summary of Costs for Option 2A
------------------------------------------------------------------------
                                                     (In Thousands of
                                                         Dollars)
------------------------------------------------------------------------
Learning costs                                   $71,037
------------------------------------------------------------------------
Coordination costs                               $43,574
------------------------------------------------------------------------
Computer acquisition costs                       $10,594
------------------------------------------------------------------------
FDA prior notice system cost                     $13,000
------------------------------------------------------------------------
Annual costs to fill out prior notice screens    $202,500
------------------------------------------------------------------------
Additional costs for BRASS users                 $0
------------------------------------------------------------------------
Lost value for produce                           $857
------------------------------------------------------------------------
Lost value for seafood                           $1,549
------------------------------------------------------------------------
Cost for truck time                              $0
------------------------------------------------------------------------
Costs of manufacturer registration number and    $52,800
 full facility address requirement
------------------------------------------------------------------------

Total first year costs for Option 2              $395,911
------------------------------------------------------------------------
Annual costs after first year                    $218,727
------------------------------------------------------------------------
PV of costs at 7% for 20 years                   $2,482,785
------------------------------------------------------------------------
PV of costs at 3% for 20 years                   $3,426,122
------------------------------------------------------------------------

    b. Implications for the benefits of Option 2A. If FDA cannot
appropriately review and respond to submitted prior notices within the
reduced submission times frames under Option 2A given current FDA PNC
staffing, there are two possible outcomes:
    (1) Prior notice screening and risk assessment requirements will
have to be relaxed so that fewer prior notices are forwarded to the PNC
for intensive review. Taking this action will reduce the social
benefits of the rule by increasing the probability that an article of
food posing a significant health threat to humans or animals will enter
the United States unchecked; or
    (2) The PNC will be unable to complete its intensive review process
for some or all of the prior notices forwarded to it within the
shortened timeframes, and will frequently cause an unpredictable delay
in the movement of these articles of food at the port of arrival until
the PNC completes its review. This additional time for review will
result in higher private costs to individuals importing articles of
food into the United States than implied by the prior notice times.
    Had the shortened review time frames in Option 2A been in effect in
FY 2007, the PNC would have held at least 6,000 to 16,000 articles of
food arriving by land by road. For air shipments, if the minimum prior
notice submission time frame had been shortened to ``wheels-up'',
approximately 728 prior notice reviews in FY 2007 would not have been
completed for flights less than 3 hours. As a result, it would have
been necessary for the PNC to delay the movement of these shipments at
the port of arrival in order to complete their review and risk
assessment.
    To be able to review prior notices within a 1 hour prior notice
submission time for articles of food arriving by land by road (given
the current number and dispersion of prior notices by land by road and
by other modes of transportation), the PNC estimates that it would need
more than twice its current level of resources. The additional
resources needed would include increasing the number of permanent
employees who review prior notices from 27 to at least 50 FTEs, an
increase in the number of first line supervisors, a tripling of
computer access to both FDA and CBP systems, and a tripling of the
current number of telephone lines.
    If the minimum timeframe to submit prior notices for articles of
food arriving by land by road was reduced to 30 minutes, the PNC may
need 3 times the number of staff to handle the prior notice review
volume within this timeframe.
    c. Cost benefit summary table. Table 16 presents the costs of
Options 2A annualized over 20 years.

       Table 16.--Updated Cost Benefit Summary Table for Option 2A
------------------------------------------------------------------------
                                     Annualized Costs   Annualized Costs
                                     Over 20 Years at   Over 20 Years at
                                     7% Discount Rate   3% Discount Rate
                                        (Millions)         (Millions)
------------------------------------------------------------------------
Option 2A--1 hour or 30 minute                   $230               $227
 prior notice for food arriving by
 land by road, 2 hours for rail,
 ``wheels-up'' or 4 hours for air,
 8 hour for vessels; The PNC is
 staffed at its current level
------------------------------------------------------------------------
Benefits--FDA will know what articles of food are being imported or
 offered for import, before they arrive at the port. In the event of a
 potential threat of significant health risk to humans or animals, FDA
 will be able to mobilize and assist in the detention and removal of
 those products from U.S. commerce.
------------------------------------------------------------------------

Option 2B: PNC has Increased Staff to Review and Respond to Prior
Notices within the Minimum Time Frame Required
    a. Costs of Option 2B. For Option 2B we assume the PNC staff has
been at least doubled, if not tripled. As stated earlier in this
analysis, the PNC estimates that it would need more than twice, and
possibly three times its current number of permanent employees to
review prior notices if the minimum submission timeframe was 1 hour or
30 minutes before arrival for articles of food arriving by land by
road, ``wheels-up'' for food arriving by air, and 2 hours for food
arriving by land by rail. In addition to increasing prior notice
permanent review staff from 27 to 50 or even 100 or more FTEs, an
increase in the number of first line supervisors would be necessary, as
would a corresponding increase in both computer access and telephone
lines to FDA and CBP systems.
    Assuming that the costs to hire additional FTEs including overhead
is $150,000 per FTE, then doubling the number of prior notice reviewers
by adding an additional 27 permanent employees to the existing 27
employees would cost at least $4,050,000; tripling the number of prior
notice reviewers would cost at least $8,100,000. These costs could be
higher if additional overhead is required. We include $6,075,000 in our
summary cost table for Option 2B as this represents the midpoint in
costs between doubling and tripling the number of permanent employees
at the PNC. These costs could be higher if additional overhead is
required.
    i. 1-hour or 30-minute minimum prior notice time for food arriving
by land by road. Under this option, prior notices for perishable
articles of food from Canada and Mexico that arrive in the United
States by land by road must be submitted 1 hour or 30 minutes before
the food arrives in the United States. Using the same probability of
resubmission structure established in the analysis of the IFR (68 FR
58974 at 59025), this minimum submission time should eliminate the
probability of having to resubmit prior notice for all but 2.5 percent
of those perishable products imported from Canada and Mexico by land by
road.
    Using the same formula we used in the analysis of Option 1, we
calculate the proportion of the total retail value of highly perishable
produce and seafood from Canada and Mexico that arrives in the United
States by land by road. We then adjust the new retail value, to
calculate the lost product value (1 hour out of 168 hours for produce,
1 hour out

of 48 hours for seafood) for the 2.5 percent of highly perishable
produce and seafood from Canada and Mexico for which prior notices
would have to be resubmitted due to changes in the shipment when the
minimum submission time is 1 hour or 30 minutes.\18\
---------------------------------------------------------------------------

    \18\ In the IFR, we assumed a 2.5 percent prior notice
resubmission rate when the minimum notice submission time for food
imported by land by road was 1 hour. In this option, that minimum
submission timeframe is 1 hour or 30 minutes for participants of
CBP's accelerated entry programs.
---------------------------------------------------------------------------

    Table 17 of this document shows the loss in value caused by the
cancelled and resubmitted prior notice information for the 2.5 percent
of imported Mexican and Canadian perishable seafood and produce
affected. We do not include the cost of truck time for this option,
because the minimum prior notice time for articles of food arriving by
vehicle is only 1 hour or 30 minutes.

Table 17.--Loss in Value Caused by Resubmitted Prior Notice Under Option
 2B for Shipments Arriving by Land by Road (1-Hour or 30-Minute Minimum
                           Notice Requirement)
Perishable Produce                                               Dollars
------------------------------------------------------------------------
2001 Imported Mexican produce total retail value          $3,458,525,000
------------------------------------------------------------------------