Food, Drug and Cosmetic Safety Enhancement Bill would Impose New Fees, Requirements, and Penalties on Importers and Customs Brokers Alike

June 10, 2009

The House Energy and Commerce Committee is proceeding with mark-up of a comprehensive food, drug and cosmetic safety reform bill, despite concerns over the legislation’s implication for customs brokers and food importers. Many of these concerns center on provisions that would require food importers and customs brokers to register with the Food and Drug Administration (FDA), pay an annual fee, and subject both of them to expanded penalties.

Based on a discussion draft of the Food Safety Enhancement Act of 2009 (H.R. 2749) posted to the Committee’s website, importers and customs filers should be aware of the following provisions being considered:

• Require commercial importers of drugs, devices, and food, as well as customs brokers handling such entries to register annually with the FDA.
• Require importers to maintain good importer practices, including the verification of good manufacturing practices and preventative controls of their foreign suppliers
• Require importers, customs brokers or filers to pay an annual registration fee.
• Empower the FDA to suspend or cancel registrations if the Act is violated for making an inaccurate or incomplete statement on a submission of information relating to the importation of food, drugs, or devices.
• Amend the list of prohibited acts in 21 USC 331 to include:
  • Submission of information required under section 801 (Imports and Exports), 802 (Export of Certain Unapproved Products), or 803 (Importation of Prescription Drugs) that is inaccurate or incomplete.
  • Or the failure to submit information required under section 801, 802, or 804.
  • Subject customs brokers to the new requirements in section 801.
• New criminal penalties for adulterated, misbranded foods.
• Expand the standard for administrative detention to a “reason to believe that an article is adulterated, misbranded, or otherwise in violation of the Food, Drug and Cosmetic Act (“FD&C Act”).”
• Require all imported food to be certified as meeting all U.S. food safety standards by the country of origin’s government or by an accredited third body.
• Require all processed food labels to indicate the country in which final processing occurred.
• Require all food manufactures to identify the country of origin for all ingredients used on their website.
• Require a country of origin label (COOL) to accompany all produce.
• Establish a dedicated foreign inspectorate to monitor foreign facilities producing food, drugs, devices, and cosmetics to American consumers.

While many of these provisions will prove onerous for food importers and the logistics experts handling their customs entries, failure to comply could be deemed a prohibited act under Section 303 of the FD&C Act. Under the new legislation, any person who commits a prohibited act, including the importer and customs broker, relating to food wood be subject to a civil penalty for each violation of not more than (i)$100,000 in the case of an individual; and (ii) $500,000 in the case of any other person. Each violation and each day during which the violation continues would be a considered a separate offences.

As previously mentioned, the draft legislation will require customs brokers to register, pay an annual fee, and subject them to Section 303 on Prohibited Acts. In effect, this would require brokers to guarantee the supply chains and the statements made by the importers they represent. Any mistake described in Section 303, by either the importer or customs broker, could cause the broker to lose his FDA registration and the right to process any FDA-related entries in addition to the penalties described above.