[Federal Register: September 18, 2008 (Volume 73, Number 182)]
[Proposed Rules]
[Page 54106-54118]
[DOCID:fr18se08-26]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 1

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

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

AGENCY:  Food and Drug Administration, HHS.

ACTION:  Proposed rule.

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

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

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

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

SUPPLEMENTARY INFORMATION:

I. Introduction

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

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

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

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

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

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

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

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

II. Description of the Proposed Rule

A. Introduction

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

III. Legal Authority

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

What Are the Consequences of Failing to Affix the Labels?

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

IV. Environmental Impact

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

V. Paperwork Reduction Act of 1995

    We tentatively conclude that the labeling requirements proposed in
this document are not subject to review by the Office of Management and
Budget because they do not constitute a ``collection of information''
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).
Rather, the statements are ``public disclosure of information
originally supplied by the Federal government to the recipient for the
purpose of disclosure to the public'' (5 CFR 1320.3(c)(2)).
    Interested persons are requested to fax comments regarding
information collection by October 20, 2008, to the Office of
Information and Regulatory Affairs, OMB. To ensure that comments on
information collection are received, OMB recommends that written
comments be faxed to the Office of Information and Regulatory Affairs,
OMB, Attn: FDA Desk Officer, FAX:<PHONE_NUMBER>.

VI. Federalism

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

VII. Analysis of Impacts

A. Preliminary Regulatory Impact Analysis

    We have examined the impacts of the proposed rule under Executive
Order 12866 and the Regulatory Flexibility Act (5 U.S.C. 601-612), and
the Unfunded Mandates Reform Act of 1995 (Public Law 104-4). Executive
Order 12866 directs agencies to assess all costs and benefits of
available regulatory alternatives and, when regulation is necessary, to
select regulatory approaches that maximize net benefits (including
potential economic, environmental, public health and safety, and other
advantages; distributive impacts; and equity). We believe that this
proposed rule is not a significant regulatory action as defined by the
Executive order.
    The Regulatory Flexibility Act requires agencies to analyze
regulatory options that would minimize any significant impact of a rule
on small entities. Because we do not expect this cost for any one small
owner or consignee to be excessive, we certify that the proposed rule
will not have a significant economic impact on a substantial number of
small entities.
    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires
that agencies prepare a written statement, which includes an assessment
of anticipated costs and benefits, before proposing ``any rule that
includes any Federal mandate that may result in the expenditure by
State, local, and tribal governments, in the aggregate, or by the
private sector, of $100,000,000 or more (adjusted annually for
inflation) in any one year.'' The current threshold after adjustment
for inflation is $130 million, using the most current (2007) Implicit
Price Deflator for the Gross Domestic Product. We do not expect this
proposed rule to result in any 1-year expenditure that would meet or
exceed this amount.
1. Need for Regulation
    We are taking this action to assist in the enforcement of our
admissibility decisions. Without a label requirement for food that has
been refused admission, owners or consignees whose shipments are
refused admission could simply move their shipment to another port and
attempt entry again. Without labeling violative food products, the
importer or consignee knows that a shipment has been refused, but
personnel in the next port where the food is offered for import would
not readily know that the shipment has been refused. Labeling violative
food products will help reduce this problem. In addition, as discussed
in section VII.A.4 of this document, this rule would help correct both
of these behaviors by making the importation of violative food
relatively more expensive.
2. Proposed Rule Coverage
    The proposed rule would require owners and consignees whose food
has been refused admission into the United States to label such food as
``UNITED STATES: REFUSED ENTRY.'' This

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

[GRAPHIC] [TIFF OMITTED] TP18SE08.000

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

B. Preliminary Regulatory Flexibility Analysis

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

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

Regulatory Alternative Considered for Small Businesses

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

C. Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 (Public Law 104-4),
requiring cost-benefit and other analyses, in section 1531(a) defines a
significant rule as ``a Federal mandate that may result in the
expenditure by State, local, and tribal governments in the aggregate,
or by the private sector, of $100,000,000 (adjusted annually for
inflation) in any 1 year.'' We have determined that this proposed rule
does not constitute a significant rule under the Unfunded Mandates
Reform Act.

VIII. Comments

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

IX. References

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

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

List of Subjects in 21 CFR Part 1

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

PART 1--GENERAL ENFORCEMENT REGULATIONS

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

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

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

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

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

BILLING CODE 4160-01-S