On June 10, the Agricultural Marketing Service (AMS), which administers the Shell Egg Surveillance Program (a mandatory inspection program for shell egs), published a proposed rule that would streamline the importation of table eggs, hatching eggs, and inedible liquid eggs. The proposed rule is intended to shorten the importation process by requiring that applications for inspection be submitted electronically.

This proposed rule conforms to Executive Order 13659, which aims to streamline the import/export process by using the International Trade Data System (ITDS). ITDS allows importers and exporters to complete a single electronic report that will distribute the appropriate data to relevant agencies. The goal of this streamlined process is to not only reduce cargo processing time, but also to increase the safety of the US public by identifying unsafe, dangerous, or prohibited cargo. Thus, AMS will integrate its system into ITDS to reduce processing time and increase safety by identifying restricted eggs that may contain dirty or cracked shells, leaking eggs, and eggs with interior meat or blood spots.

In a related measure, the USDA announced for the first time in a decade that it will allow imported pasteurized eggs from a European nation: The Netherlands. Prior to this announcement, only Canada was certified to export liquid, dried, and frozen eggs to the United States. The Netherlands was previously certified to export pasteurized egg products to the United States in 1987 but voluntarily stopped. In 2014, the Netherlands requested reinstatement. Subsequently, the USDA’s Food Safety and Inspection Service reassessed the laws, regulations, and inspection procedures in the Netherlands and conducted an on-site audit June 2–26, 2014. The review procedures confirmed that “The Netherlands’ processed egg products inspection system continues to be equivalent and to employ the necessary verification activities to result in safe product.” The final report on the Netherlands’ reinstatement can be found here.

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Thousands of school districts in the country—including the DC school system—outsource food services for their school meal programs. These contracts with private vendors are subject to the DC False Claims Act, which, like the Federal False Claims Act, allows whistleblowers to bring suit in the name of the government. Such a suit was brought by a DC school system employee against Chartwells-Thompson Hospitality (Chartwells), a division of Compass Food Group USA, Inc. The DC government later intervened in the case, alleging that Chartwells charged prices that were significantly inflated when compared to the amounts projected in its bid, and that it performed poorly—repeatedly delivering food late, in insufficient quantities, and spoiled.

In settling the case, Chartwells denied any wrongdoing. DC’s Attorney General acknowledged the company’s remedial actions to address contract management problems, and, at this juncture, the company’s contract has not been terminated. However, it is unknown whether further action will be taken. According to a June 10 editorial in The Washington Post, the DC auditor has been asked for an opinion as to whether Chartwells’ actions should bar it from receiving future contracts.

This case may be a harbinger of similar cases in other jurisdictions. Following announcement of the $19.4 million settlement, the whistleblower claimed that food vendors putting profits over the well-being of students is a national concern and urged all school districts contracting with private food service companies to examine the performance of those companies under their contracts. Companies that sell food or food services to government agencies not only run the risk that complaints of this type will result in termination and non-responsibility determinations in future contract competitions, they also risk that a history of poor performance will be elevated to allegations of recklessness or fraud (which could lead to False Claims Act liability and potential debarment proceedings).

In light of the attention that the Chartwells case has received, it would be prudent for food service contractors to review their operations to ensure compliance with their contractual and regulatory obligations and look closely at complaints about their performance for potential whistleblower activity.

Under federal debarment regulations (and in jurisdictions that pattern their debarment rules after federal law), a conviction—including one based on a plea agreement or a civil judgment for fraud in connection with the performance of a public contract—is grounds for debarment and may be imputed to affiliates, including individuals and corporate affiliates. Moreover, a federal debarment has far-reaching effects, including debarment from federal non-procurement programs implemented by the states, such as assistance programs and programs subsidized by the federal government.

If a company is facing criminal charges relating to its performance of a public contract and contemplating a plea, the possibility of debarment based on a conviction should be addressed head-on. By comparison, the agency must prove the underlying misconduct in cases where it declares a company ineligible for contracts or subcontracts based on allegations brought against the company in a civil suit that was settled without an admission of liability. Although a company could be proposed for debarment after reaching a settlement without an admission of liability—as was the case here—it is less likely than if the allegations were already adjudicated and the company was found liable (or the settlement contained an admission).

Accordingly, the prospect of debarment should be considered carefully when strategizing a response to a federal or state civil False Claims Act suit.

On June 5, the Food and Drug Administration (FDA) published its Draft Guidance for Voluntary Qualified Food Importer Program (the Draft Guidance). A copy of the Draft Guidance can be found here.

A central goal of the Food Safety Modernization Act (FSMA) is to establish a proactive focus on preventing food safety problems rather than relying on a reactive approach. In this context, FSMA required FDA to establish a voluntary, fee-based program for the expedited review and importation of foods from importers that maintain a high level of security and safety in their supply chains as part of FSMA’s Quality Assurance Program. Along the same lines, FDA has issued the Draft Guidance to establish and provide guidance regarding the Voluntary Qualified Importer Program (VQIP).

FDA asserts that the VQIP will benefit both consumers and industry. Industry will benefit because qualified importers will receive expedited review, resulting in their product getting to market faster. Consumers will benefit because food safety protections will be strengthened by requiring high levels of security and safety for VQIP members. On the other side of the coin, the program will help FDA and consumers identify importers that do not participate in the VQIP as potentially more likely to present a food safety public health risk.

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Just in time for the spring produce season, on April 9, FDA issued a proposed rule to amend its regulation on registration of food facilities. Among other things, the rule would amend the definition of a “retail food establishment” to expand the number of establishments considered “retail food establishments” and thus not required to register with the Agency. Under the expanded definition, establishments that sell food directly to consumers from an on-farm establishment at direct sales platforms (think roadside stands, farmers markets, and Community Supported Agriculture (CSA) programs) would be exempt from the requirement to register with FDA. It is important to note that in light of this definition change, these establishments would also not be subject to the requirements of the Food Safety Modernization Act’s preventive controls rulemakings (e.g., produce risk-prevention measures) (see our LawFlash on the topic) because the amended definition would exempt additional establishments from the requirement to register with FDA.

Currently, a “retail food establishment” is defined as an establishment that sells food products directly to consumers as its primary function. An establishment’s primary function is to sell food directly to consumers if the annual monetary value of sales of food products directly to consumers exceeds the annual monetary value of sales of food products to all other buyers. The proposed rule would clarify that, in determining an establishment’s primary function, the sale of food directly to consumers from an on-farm establishment includes sales at direct sales platforms, like those described above. Specifically, proposed § 1.227(b)(11) clarifies that all sales by an on-farm establishment do not have to be on the farm by specifically addressing how off-farm sales directly to consumers should be counted to determine whether the on-farm establishment is a retail food establishment (i.e., the roadside stand or farmers market would not need to be on the farm where the establishment is located).

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On March 6, the Pennsylvania Liquor Control Board (PLCB) in Opinion No. 15-77 shook up the alcoholic beverage industry in Pennsylvania by opining that beer distributors may sell 12-pack cases of beers. This is a bold move in a state that has historically been conservative when it comes to the sale of alcoholic beverages. Unlike many other states, beer and liquor in Pennsylvania are not sold in grocery or convenience stores. Wine and other liquors are sold through the state-run Wine & Spirits stores only. Beer distributors, although not state-run, have historically been limited to selling either 24-pack cases or kegs. Brewers are permitted to sell in quantities less than a 24-pack case at their facilities.

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Confirming what coffee and tea connoisseurs have long known, the European Food Safety Authority (EFSA) in January declared that 400mg of caffeine per day is not a safety concern. A 98-page draft assessment indicates the same for a single dose of up to 200mg for adults ages 18–65, even when consumed less than two hours before strenuous exercise. For pregnant women, caffeine intakes of up to 200mg per day additionally raised no safety concerns. And, finally, for all junior coffee lovers (ages 3–18), a dose of 3mg per kg of body weight per day is considered safe. Although the report confirmed that a dose of 100mg may affect sleep patterns, the report’s overall message appears to show that European regulators may be less concerned with caffeine intake than their U.S. counterparts.

As food industry observers know, caffeine has become an increasingly hot topic in U.S. food regulation. For example, the Institute of Medicine conducted a 2013 workshop on caffeine in food and dietary supplements that presented statements, recommendations, and opinions of individual participants on (1) regulation of caffeine in the United States, (2) intake and exposure to caffeine, (3) safety signals and surveillance, (4) safe caffeine exposure levels for vulnerable populations, (5) caffeine’s effects on the cardiovascular system, (6) caffeine’s effects on the central nervous system and behavioral effects associated with caffeine consumption, and (7) other compounds impacting caffeine’s effects.

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Calling food industry professionals! Keeping abreast of the latest developments in food laws, regulations, and policy initiatives is absolutely critical for being compliant and anticipating that next step. Presented as a one-day program, the Institute of Food Technologists’ (IFT’s) Food Policy Update is an opportunity to hear from and network with officials from the FDA Center for Food Safety and Applied Nutrition (CFSAN) and the USDA Food Safety and Inspection Service (FSIS), along with leading lawyers and industry leaders.

Topics will include:

• Regulatory Update from FDA CFSAN
• Regulatory Update from USDA FSIS
• Lunch & GMO Legislative Update: Keynote Speaker John Bode
• GRAS Update – Building GRAS for the Future
• FDA’s Menu & Vending Labeling Rules – Overview and Challenges

Come and make new connections with your colleagues.

This program is targeted for professionals in regulatory, marketing, product development, quality assurance/quality control, and supply chain fields.

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Earlier this month, the U.S. District Court for the Central District of California agreed with a group of foie gras producers that California’s ban on the product’s sale was preempted by federal law, and the court overturned the ban that has been in place since July 1, 2012. The plaintiffs—foie gras producers from Canada and New York and a California restaurant owner—challenged the portion of California’s Health & Safety Code § 25982, which banned the sale of products made through gavage, the practice of feeding geese through an esophageal tube to fatten their livers.

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On New Year’s Eve, the USDA’s (Department’s) Food Safety and Inspection Service (FSIS) released its final rule requiring meat and poultry processors to include added solutions in their product labeling.

FSIS issued the added solutions proposed rule on July 27, 2011, in response to petitions calling on the Department to address the notion that some product labels may not clearly and conspicuously identify that the raw meat or poultry products contain added solution.

The original petitions were driven by competitive disagreements within the poultry industry. More specifically, the petitioners originally asserted that some companies were marketing fresh chicken items extended with broth in a manner that confused such products with traditional single-ingredient products. Nevertheless, FSIS extended the scope of both the proposed and final rules to encompass the broader range of meat and poultry products within its jurisdiction. In doing so, FSIS chose to more formally codify a number of longstanding labeling precedents and guidance within this area.

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As our readers are aware, many states have introduced legislation that would mandate genetically modified organism (GMO) labeling requirements. There is much uncertainty surrounding state GMO-labeling initiatives, with Vermont successfully enacting legislation (that is being challenged in court) and several high-profile failures in California and, more recently, in Oregon. Although the Organic Foods Production Act sets a clear non-GMO standard for certified organic food, a lack of a clear federal definition or preemption for conventional foods has contributed to a wave of costly litigation in this area. As a result, industry is left with the threat of state-based initiatives that have the potential to create the same unworkable patchwork of laws that prompted the Nutrition Labeling and Education Act in the 1990s and the recently finalized Menu Labeling Rule, both of which have federal preemptive effect.

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