Seafood Traceability Rule to Remain in Place, Says Court

  • As reported previously on this blog, concerns about illegal, unreported and unregulated (IUU) seafood fraud, led to a proposed rule to establish a traceability program for certain seafood species. The final rule establishing the Seafood Import Monitoring Program was published by the National Oceanic and Atmospheric Administration (NOAA), National Marine Fisheries Service (NMFS), Department of Commerce, in the December 9, 2016 Federal Register.
  • The Program established permitting, data reporting and recordkeeping requirements for the importation of certain priority fish and fish products—including abalone, several types of cod and tuna, red snapper, shrimp and swordfish—that were identified as being especially vulnerable to seafood fraud. The rule requires seafood importers to trace the origin of the fish they import to either the specific boat that caught the full fish or a “single collection point,” to the day the fish was caught, and to the sector of the specific ocean where the fish was caught.
  • On January 6, 2017, the National Fisheries Institute, Alfa International Seafood, Inc. and others filed a lawsuit in the U.S. District Court for the District of Columbia challenging what they called a “Midnight Final Rule.” In the suit, the plaintiffs questioned whether the Department of Commerce cut corners by, among other things, refusing to disclose for public comment the data that it relied on to identify the seafood species subject to the rule and by allowing “a low-level bureaucrat to issue a binding final rule absent a valid delegation of authority from the Secretary.”
  • In a June 22, 2017 ruling, Judge Amit P. Mehta did not overturn the final rule establishing the Seafood Import Monitoring Program (see undercurrentnews). Rather, Judge Mehta wrote: “The proper course at this juncture—just months before the rule goes into effect—is to defer ruling on Plaintiffs’ broader challenge to the agency’s authority to engage in rule-making and, instead, afford the federal defendants an opportunity to submit a signed statement from a principal officer within the Department of Commerce that ratifies the rule.”
  • The compliance date for most priority species is January 1, 2018. The plaintiffs stated in the complaint that the traceability requirements will “force seafood processors to adopt costly changes to the way in which seafood is processed, thereby significantly increasing the cost of seafood to the consumer.”

New “Natural” Lawsuit Targets Sanderson Farms’ “100 Percent Natural” Chicken

A leading poultry producer has been sued over “natural” claims on its chicken products.  (subscription to Law360 required)

  • Americans’ increasing appetite for clean label, ethically-raised foods has resulted in the continued proliferation of consumer advocacy litigation targeting “natural” claims for products containing synthetic ingredients or preservatives.  Adding fuel to the continued uptick in “natural” litigation is the fact that neither the U.S. Food and Drug Administration (FDA)  nor the U.S. Department of Agriculture (USDA) formally define the term “natural.” As previously covered on this blog, the FDA is considering whether to regulate the term “natural”.  USDA’s Food Safety & Inspection Service (FSIS), on the other hand – which regulates meat and poultry products – currently has in place an informal policy on “natural” which permits USDA-regulated products to be labeled “natural” when the product does not contain any artificial flavor or flavoring, coloring ingredient, chemical preservative (as defined in 21 C.F.R. 101.22), or any other artificial or synthetic ingredient; the policy also provides that the product and its ingredients cannot be more than minimally processed.  USDA-regulated products bearing “natural” claims must be specifically approved by FSIS before entering commerce.
  • Against this regulatory backdrop, on June 22, 2017, three consumer advocacy groups – the Organic Consumers Association, Friends of the Earth and Center for Food Safety – filed a complaint against Sanderson Farms Inc., the third largest poultry producer in the United States, accusing the company of falsely advertising its chicken as “100 percent natural” and misleading consumers about how the birds are raised by concealing the presence of antibiotics and other drugs in its chickens.  In particular, the complaint – filed in the U.S. District Court for the Northern District of California – alleges that FSIS National Residue Program testing in 2015 and 2016 identified 49 instances in which samples of Sanderson Farms chicken products tested positive for residues of synthetic drugs, including antibiotics used in both humans and animals and other drugs including the anesthetic ketamine.  The complaint also alleges that FSIS testing revealed an additional 82 instances of unconfirmed residues including pesticides.
  • In a statement released on June 23, 2017, Sanderson Farms denied the allegations, stating that it “does not administer the antibiotics, other chemicals and pesticides, or ‘other pharmaceuticals’ listed in the complaint to its flocks”.  The Company added, however, that its “veterinarians do, on rare occasions, prescribe penicillin to treat sick poultry flocks when in their professional judgement they consider it necessary for animal welfare” in line with FDA guidance.
  • This latest lawsuit represents a recent trend in “natural” litigation targeting USDA-regulated products.  As our readership will recall, just last Fall, a class action lawsuit was filed against Hormel Foods Corp. alleging that Hormel includes synthetic ingredients and preservatives in deli meat labeled as “100% Natural” or “No Preservatives”.  Key defenses there included federal preemption and primary jurisdiction.  Assuming the Sanderson Farms products at issue do not run afoul of the current USDA policy on “natural” and the labels themselves were specifically approved by USDA, we would expect Sanderson Farms to avail itself of similar defenses. In addition, because USDA is working to update the definition of “natural”, Sanderson Farms could potentially request a stay on the proceedings pending the issuance of the forthcoming definition as has been successfully done in a number of recent “natural” cases concerning FDA-regulated products, see e.g., here and here (although the difference in this case is that USDA has not yet formally published a document for public comment).
  • Given increasing consumer demand for “natural” products, and the corresponding increasing market share for such products, the ultimate disposition of the ongoing litigation will be of great interest to industry and consumers alike. We will be sure to keep a close eye on developments in this case and report them to you here.

USDA Halts Brazilian Fresh Beef Imports Amid Safety Concerns

  • As previously covered on this blog, Brazilian federal police raided several meat producers earlier this year for allegedly doling out bribes to inspectors to certify meat that was either rotten or tainted with Salmonella.  Following the bribery scandal, USDA’s Food Safety and Inspection Service (FSIS) instituted 100% point-of-entry re-inspection of all Brazilian meat products imported into the United States and – since then – has refused entry to approximately 1.9 million pounds of Brazilian beef products due to public health concerns, sanitary conditions and animal health issues.
  • Yesterday, USDA Secretary Sonny Perdue announced the suspension of all imports of fresh beef from Brazil because of recurring concerns about the safety of the products intended for the American market.  According to a statement from USDA, the suspension of shipments will remain in place until the Brazilian Ministry of Agriculture takes corrective action which the USDA finds satisfactory.  On the heels of a number of other global buyers of Brazilian beef – including China, Egypt and Chile – having recently curtailed imports, the U.S. ban announced yesterday could come as a blow to Brazil – one of the world’s top exporters of beef and poultry.
  • We will continue to monitor developments on this issue as they unfold and report them to you here.

FDA Launches Accredited Third-Party Certification Website

  • As previously covered on this blog, in November 2015, the U.S. Food and Drug Administration (FDA) finalized The Food Safety Modernization Act (FSMA) rule on Accredited Third-Party Certification that established a program for the accreditation of third-party certification bodies to conduct food safety audits and to certify that foreign food facilities and food produced by such facilities meet applicable FDA food safety requirements.  Subsequently, in December 2016, FDA issued a corresponding final guidance document to facilitate compliance with the rule.
  • On June 21, 2017, FDA announced that the Agency has launched a website where organizations can apply to be recognized as a Third-Party accreditation body. The launch of this website effectively implements the Accredited Third-Party Certification program. Foreign governments and agencies or private third-parties may apply to be recognized as an accreditation body. The process includes a web-based application and a user fee. For additional information click here.
  • Accreditation bodies recognized by FDA will have the ability to accredit third-party certification bodies, also known as third-party auditors. These accredited certification bodies will, in turn, conduct food safety audits of foreign food entities and are permitted – under the rule – to issue certifications of those entities and the foods for humans and animals that they produce.  Such certifications may be used to help establish eligibility for participation in FDA’s Voluntary Qualified Importer Program (VQIP) (also established by FSMA).  In addition, such certifications may be useful in those circumstances where FDA requires that an imported product be certified to prevent a potentially harmful food from entering the U.S.
  • Keller and Heckman attorneys regularly advise on FSMA-related compliance, including the third-party certification final rule, and stand ready to assist interested parties.

FDA: No Plans to Reopen Nutrition Facts Label Rule

  • In May 2016, FDA issued final rules to implement changes to the nutrition labeling and serving size regulations. Mandatory compliance with the new nutrition labeling requirements for food products was initially slated for July 26, 2018 (or July 26, 2019 for manufacturers with less than $10 million in annual food sales).  As covered on this blog last week, however, FDA announced that the compliance dates for the new nutrition labeling requirements will now be extended, although the Agency has not yet specified the length of the extension.
  • Yesterday, FDA Commissioner Scott Gottlieb assured the Senate appropriations subcommittee that although the Nutrition Facts label rule is being delayed, FDA has no plans to reopen the rule.  Gottlieb explained that the delay was implemented simply as a means to carve out additional time to develop and provide “additional guidance to sponsors on how to interpret aspects of the new Nutrition Facts label.”  Gottlieb further stated that: “This is a time-limited delay. This is not a suspension of the regulation. We are not reopening the regulation.”  Gottlieb’s remarks mean that FDA has no intention of changing the substance of the nutrition labeling requirements as currently drafted.
  • In the lead up to FDA’s decision to delay the rule, many food industry leaders have urged the administration to align the compliance dates for changes to the Nutrition Facts Label and USDA’s GMO labeling disclosure requirements.  USDA AMS is required by law to publish a final rule by July 2018 but the compliance date for GMO labeling disclosure requirements will likely be well beyond July 2018.  It remains to be seen how or whether FDA will ultimately elect to delay the nutrition labeling compliance date to align with the compliance date of USDA’s GMO labeling disclosure requirements.

Dairy Terms Cannot be Used to Market Plant-Based Products Under EU Law, Says Court

  • The Court of Justice of the European Union ruled that purely plant-based products cannot be marketed with designations such as “milk,” “cream,” “butter,” “cheese” or “yogurt,” unless an exemption is listed in Regulation (EU) No 1308/2013. The decision stems from a lawsuit filed by a German association that combats unfair competition against TofuTown, a German company that distributes vegetarian and vegan foods.
  • TofuTown, which markets its products under terms such as “tofu butter,” “plant cheese” and “veggie cheese,” claimed that its advertising does not infringe on the legislation since the dairy terms are not used on their own, but only in association with words referring to the plant origin of the products concerned. The company added that the way in which consumers understand dairy terms has changed considerably in recent years.
  • In its June 14 ruling, the Court stated that “the relevant legislation reserves the term ‘milk’ only for milk of animal origin” and that descriptive or clarifying additions indicating plant origin have no influence on that prohibition.  The Court also noted that soya and tofu are not on the list of exceptions in the legislation. Furthermore, the Court expressly stated that “the addition of descriptive or explanatory terms cannot completely exclude the likelihood of confusion on the part of consumers.” (An EU Court of Justice press release on the case, with a link to the ruling, can be found here.)
  • Controversy on the use of dairy-related terms for plant-based products is also occurring in the U.S. Most recently, we reported on State Regulators Chime in on Plant-based Milk Labeling Debate. The DAIRY PRIDE Act, which would ban the use of dairy terms for non-dairy products made from nuts, seeds, plants, and algae, was introduced in the U.S. Senate at the beginning of the year (see our January 31, 2017 blog entry). However, it was referred to the Committee on Health, Education, Labor, and Pensions January 12 and no further action on the legislation has been taken since then. We will continue to report on developments in this area in both the U.S. and the EU.

USDA Advances “Modernization of Pork Slaughter” Rule

  • Earlier this Spring, we reported that USDA’s Food Safety & Inspection Service intends to move forward with plans to modernize swine slaughter inspections by way of a “Modernization of Pork Slaughter” rule. The new rule – which has garnered significant industry support – aims to increase the efficiency and effectiveness of the federal inspection process and to allow for the rapid adoption of new food safety technologies in pork slaughter.  The rule could potentially lead to an increase in U.S. hog slaughter capacity.  The rule also calls for certain food safety responsibilities to be shifted from federal inspectors to packing plant workers and could thus lead to faster pork production lines.
  • On June 10, 2017, FSIS submitted a copy of the rule to the Office of Management and Budget (OMB) for final review.
  • Although some pushback is expected from food and worker safety advocates, the “Modernization of Pork Slaughter” rule – which bears many similarities to the “Modernization of Poultry Slaughter Inspection” rule – is anticipated to ultimately become law.  (As our readership will recall, food and worker safety advocates met with OMB officials in 2012 seeking to upend USDA’s efforts to implement the poultry rule which has since become law).  We will, of course, continue to keep an eye on any developments related to this rule as they unfold and report them to you here.

USDA Releases Proposed Rule to Facilitate Cooked Chinese Chicken Imports

  • As part of a deal to resume U.S. Beef exports to China, the U.S. recently pledged that it would remove obstacles to importing cooked Chinese poultry meat. (See previous blog coverage here.) Currently, China is only eligible to export poultry products to the U.S. that have been processed from birds slaughtered in U.S. establishments or at slaughter facilities in other U.S.-eligible countries.
  • Today, USDA’s Food Safety and Inspection Service (FSIS) published a proposed rule (82 FR 27625) amending its inspection regulations to list China as eligible to export poultry products derived from birds slaughtered in that country to the U.S.  Under the proposed rule, slaughtered poultry or poultry products processed in certified Chinese establishments would still need to comply with all other applicable U.S. requirements including those of USDA’s Animal and Plant Health Inspection Service before entering the U.S., and all such products would be subject to re-inspection at U.S. ports of entry by FSIS inspectors.  The Agency will be accepting comments through August 15, 2017.
  • The U.S. poultry industry is optimistic that this latest action by the USDA will set the stage for the restoration of U.S. broiler access to the lucrative Chinese market. U.S. chicken has been blocked by China since January 2015 when China issued a blanket ban on all U.S. poultry over issues related to avian influenza.

Court Upholds Philly Soda Tax

  • As previously covered on this blog, on June 16, 2016, the Philadelphia city council voted 13-4 to approve a 1.5 cent per ounce tax on sugar-sweetened beverages.  The tax – which took effect on January 1, 2017 – is levied on distributors and covers a variety of beverages, including soda and diet soda, non-100% fruit drinks; sports drinks; flavored water; energy drinks; pre-sweetened coffee or tea; and non-alcoholic beverages intended to be mixed into alcoholic drinks.  Prior to the January 1, 2017 effective date, the American Beverage Association (ABA) together with retailers, distributors and consumers filed a complaint in September 2016 in the Philadelphia Court of Common Pleas challenging Philadelphia’s soda tax (see previous blog coverage here).  On December 19, 2016, the Philadelphia County Court of Common Pleas issued a decision upholding the Philadelphia Beverage Tax and dismissing the complaint challenging the tax in its entirety.  The decision was subsequently appealed.
  • Yesterday, the Pennsylvania Commonwealth Court upheld Philadelphia’s beverage tax, dismissing contentions from the American Beverage Association and local retailers that the levy is unlawful.  Against this backdrop, it is notable that whereas Philadelphia’s mayor previously indicated that the goal of the tax is revenue generation, the 1.5-cent per ounce tax is predicted to fall short of a projected $46.2 million for fiscal year 2017 (which ends June 30) – bringing in just $25.6 million.
  • Looking ahead, it remains to be seen what, if any, impact the outcome of this lawsuit will have on the appetite of other U.S. jurisdictions to pursue such legislation, particularly in light of the noted shortfalls in earnings from the Philadelphia tax.

U.S. and China Finalize Details to Facilitate Resumption of U.S. Beef Exports to China

  • As previously covered on this blog, U.S. beef has been denied access to China for nearly 14 years due to concerns stemming from a case of bovine spongiform encephalopathy that occurred in Washington state in December 2003.  Following a series of talks between U.S. and Chinese officials, the White House recently announced that China would resume beef imports no later than July 16, 2017 as part of a broader trade agreement with China.
  • Yesterday, U.S. Secretary of Agriculture Sonny Perdue announced that USDA has reached an agreement with Chinese officials on the final technical details of a protocol to facilitate the resumption of U.S. beef exports to China.  In particular, beef exports to the People’s Republic of China must meet specified requirements under the USDA Export Verification (EV) Program set forth here.  In addition, FSIS has posted China’s requirements for certifying U.S. beef being shipped to China (available here).
  • The National Cattlemen’s Beef Association and other leading beef industry trade associations have all praised the reopening of the very lucrative Chinese market which has been a top industry priority for years.
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