Wednesday 24 January 2018

Foreign Supplier Verification Program Proposed Rule’s Liability Triggers

Food Court continues its series discussing the new Foreign Supplier Verification Program (FSVP) rule issued by the US FDA under the Food Safety Modernization Act (FSMA). To read the previous posts click herehere, here and here. Before leaving the high level discussion of how the rule works and who is affected it’s important to discuss the impact of the potential rule. The rule is quite clear in shifting the responsibility for safe imports from the FDA to industry. The NY Times Editorial Board touched on this point yesterday. The motivation to comply, however, won’t arise out of a need to reassure worried customers as the Board suggested. It will come from a risk avoidance strategy that seeks to minimize an importer’s litigation exposure. Marc has discussed at length the enforcement of FSMA lies in new litigation (see Food Product Design article). Below are his comments on the litigation and liability triggers in the proposed FSVP.

Reading the FSVP proposed rule from an importer’s perspective made me cringe a little. The rule uses strong language and clear standards that will make litigation much easier. For example, the rule states an audit should be “systematic, independent, and documented” or the hazards identified in a verification program should be those a “prudent importer would identify.” There are many other examples where the rule uses language like prudent, responsible, and careful. This type of language along side new mandatory standards confirm the FSVP rule will be enforced, and widely litigated, by plaintiffs not the FDA.

The current framework relies on whether an imported product was adulterated. Adulteration is only discovered if there is a major outbreak. In which case its necessary to determine what the importer new about the food imported, where it was produced, or how the importer would become aware of issues that could lead them to determine it was adulterated. This line of questioning is difficult to answer, especially where there are no record-keeping requirements. It’s also difficult to prove liability when the importer is under no statutory obligation to verify its foreign supplier is producing food safely. The current system relies on an importer to overlook economic incentives of importing cheaply and add costly layers of verification without any incentive to do so. The proposed FSVP rule adds the incentive to introduce verification activities. Once finalized a plaintiff who becomes ill, possibly even with a minor case of food poisoning, can now initiate litigation asking whether the importer was “prudent” in identifying hazards “systematic” in conducting audits or careful in documenting and reverifying the supplier was producing food safely. The standards will come to have a depth of legal meaning both new and borrowed from tort law. The type of cases brought under the FSVP rule will vary – class actions akin to labeling lawsuits for minor illnesses, large class actions in the case of a major outbreak like the Hep A outbreak linked to pomegranate seeds, and undeclared allergy suits are all possible.

Importers reading the proposed FSVP rule should see it through two lenses. The first is a regulatory lens, which accounts for the cost of compliance with the FDA. This would include the traditional 483s, Warning Letters, Detention Notices, Import Alerts, and the costs of import refusals. It will also include new penalties under FSMA like high risk facility designation, mandatory recalls, and a lower threshold for administrative detention. The second is a litigation lens, which accounts for the wide range of potential lawsuits possible under the FSVP and all of FSMA.

Yes, importers will be worried about assuring customers their food is safe and to trust the brand, but avoiding litigation will likely play the most crucial role to achieving that end.

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