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6
Issues Raised by States, Consumers, and Industry

The charge to the Committee was to consider the adequacy of the Food and Drug Administration's (FDA) implementation of six provisions of Section 403 of the Food, Drug, and Cosmetic Act of 1938, as amended (FDCA), to determine whether State requirements of similar character should be preempted. There are two important changes in the legal environment that forms the context of this inquiry. The first change is that Congress has mandated a comprehensive and undoubtedly costly revamping of food labels to provide improved nutrition and other information on food products for consumers. The second change, as part of this requirement for new information, is that Congress has decided that States should no longer continue to enforce certain local food labeling requirements that are different from those of other States and/or the Federal government. The Nutrition Labeling and Education Act (NLEA) spoke clearly on uniformity (i.e., only one set of rules) and preemption (i.e., that those rules should be Federal). However, the Act also allowed States a role in both shaping (i.e., through the petition process) and enforcing those rules.

In the information obtained from States, localities, food and drug officials, and industry and consumer groups, the Committee received many comments on issues that were not directly related to its specific charge under NLEA. The Committee felt, however, that these issues were germane to the issue of uniform food labeling regulation and devoted considerable discussion to their significance in relation to the central topics of the study. As appropriate, these issues were taken into consideration in the discussion of the specific sections under study (Chapter 5). The Committee agreed that these issues should be of concern to FDA and has therefore included this discussion as part of its report. The various conflicting views are presented



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Food Labeling: Toward National Uniformity 6 Issues Raised by States, Consumers, and Industry The charge to the Committee was to consider the adequacy of the Food and Drug Administration's (FDA) implementation of six provisions of Section 403 of the Food, Drug, and Cosmetic Act of 1938, as amended (FDCA), to determine whether State requirements of similar character should be preempted. There are two important changes in the legal environment that forms the context of this inquiry. The first change is that Congress has mandated a comprehensive and undoubtedly costly revamping of food labels to provide improved nutrition and other information on food products for consumers. The second change, as part of this requirement for new information, is that Congress has decided that States should no longer continue to enforce certain local food labeling requirements that are different from those of other States and/or the Federal government. The Nutrition Labeling and Education Act (NLEA) spoke clearly on uniformity (i.e., only one set of rules) and preemption (i.e., that those rules should be Federal). However, the Act also allowed States a role in both shaping (i.e., through the petition process) and enforcing those rules. In the information obtained from States, localities, food and drug officials, and industry and consumer groups, the Committee received many comments on issues that were not directly related to its specific charge under NLEA. The Committee felt, however, that these issues were germane to the issue of uniform food labeling regulation and devoted considerable discussion to their significance in relation to the central topics of the study. As appropriate, these issues were taken into consideration in the discussion of the specific sections under study (Chapter 5). The Committee agreed that these issues should be of concern to FDA and has therefore included this discussion as part of its report. The various conflicting views are presented

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Food Labeling: Toward National Uniformity without evidence or examples because, in general, none were provided to the Committee. As part of its information-gathering activities, the Committee asked State and local officials and consumer groups to comment on the six questions that appear in Appendix C. One of those questions concerned whether there were any other issues that respondents believed should be brought to the Committee's attention as it deliberated on the adequacy of implementation of FDCA and preemption of State requirements. In response to this question, the following points were raised as being of major concern to respondents, although they recognized that these issues were beyond the specific charge of the Committee: The adequacy of the fiscal and personnel resources applied by FDA in enforcing its food labeling requirements as a dimension of implementation. The importance of the enforcement activities of the States to ensure consumer protection in the area of food labeling. The value of existing cooperative relationships between FDA and the States, which have been developed and strengthened over many years. The concerns of States about FDA's implementation of the petition process of NLEA for exemption of a State requirement from preemption and State enforcement of Federal requirements, so that these processes will be uncomplicated and well managed. The importance of these issues was reiterated through a variety of communications from professional food and drug regulatory groups, food companies, trade associations, and national consumer organizations. An additional issue of particular concern to the food industry was the economic cost of nonuniformity and the potential savings to be realized through increased national uniform food labeling. ENFORCEMENT AS A DIMENSION OF IMPLEMENTATION Many State officials and a number of consumer groups commented on the importance of enforcement and the future role of the States under NLEA. Commissioner Bob Crawford of the Florida Department of Agriculture and Consumer Services identified a number of problems in his letter to the Committee: The states are the foot soldiers in the area of food labeling review and enforcement and must be included as equal partners in implementation and enforcement. The states are the crucibles from which good national legislation in consumer issues

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Food Labeling: Toward National Uniformity evolves. To provide total preemption that negates this extremely valuable function will be a disservice to the consumers of this nation. State legislators am not likely to fund state food programs in labeling unless they feel that the state has a voice and that the constituency's best interest will be served. It is critical that preemption not go beyond setting national standards and it is essential that them be a mechanism for states, with justifiable reason, to line a different standard. It is also crucial that the states be involved as full partners in developing any new standards (Crawford, 1991, p. 5). Betty Harden of the Maryland Division of Food Control also identified enforcement as critical to any successful implementation of NLFA. There were several differing opinions offered by the speakers and what seemed to me to be some worthwhile suggestions. However, the most important element in the implementation formula which I did not hear mentioned, is enforcement. If the Congressional intent of its charge to the Committee was to confine the determination of adequacy to assessing whether the Food and Drug Administration had promulgated the necessary regulations, then the real measure of adequate implementation will be overlooked and the determination will be superficial and based solely on a paper exercise. I would submit that fulfillment of the common goal of ensuring a safe and wholesome food supply demands enforcement and the degree of enforcement hinges on the availability of resources (Harden, 1991, p. 2). The Association of Food and Drug Officials' (AFDO) statement to the Committee commented favorably on the recent enforcement actions taken by FDA but expressed concern about what it perceived as FDA's recent history of inaction. AFDO reflected the view held by the State and local regulatory officials who are its members: The recent actions taken by the new FDA Commissioner David Kessler to crack down on deceptive food labeling have not gone unnoticed by AFDO. We commend the actions as both necessary and correct. However, as state officials we are also very much aware of the lack of enforcement and lack of ''adequacy'' of federal regulations which have resulted in the current state of affairs with respect to food labeling. It would be correct to assume that neither the states nor the state attorneys general would have become so involved in food labeling on a national level had it not been for the lack of federal enforcement. It would also be accurate to say that Congress would not have enacted the NLEA if the FDA had adequately enforced its regulations and had adopted new regulations as needed. The Office of Management and Budget further impeded the process by its inactivity with regard to newly proposed regulations (Sowards, 1991a, p. 4). In the May 1991 Final Report of the Advisory Committee on the Food and Drug Administration, that Committees Food Subcommittee recognized the key role enforcement plays in the implementation of the law and a vigorous FDA is the most effective deterrent to the adoption of diverse and inconsistent State requirements. The Subcommittee also indicated that FDA

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Food Labeling: Toward National Uniformity has not been a vigorous enforcer over the past decade (DHHS, 1991). The Advisory Committee further stated that: ... from its inception FDA has focused heavily on law enforcement.... The ability to detect violations of the low and deal with them vigorously and swiftly is central to the Agency's credibility.... Recent events have raised doubts about the FDA's current capacity to conduct effective law enforcement.... Another feature of the enforcement landscape that deserves notice is the need for priority setting in light of resource shortfalls. It is well known, for example, that the Agency has for several years largely abandoned efforts to combat economic deception in the sale of food and cosmetics choosing appropriately to allocate depleted resources to safety related violations (DHHS, 1991, p. 25–27). The comments made to this Committee reflect the fact that FDA's choice to direct priorities and enforcement actions toward health and safety violations first is not unfamiliar to State officials. States generally have understood the problems that FDA has faced in terms of continually reduced resources. Fortunately, and frequently, the combined resources of both Federal and State offices have been utilized to correct economic, as well as health and safety, violations. The Advisory Committee recognized the value of such cooperation and recommended that FDA develop programs to restore confidence, enlisting the continued cooperation of the States. The report further recommended new actions to be taken if FDA is to succeed in accomplishing the heavy responsibility NLEA has placed on an already beleaguered, understaffed agency (DHHS, 1991). STATE ACTION UNDER NLEA In the administrative process established by NLEA, Federal preemption is not intended to leave the States powerless, because they are provided with the opportunity to petition for exemption from preemption and enforce Federal requirements. State officials have raised some serious concerns, however, about how the procedure will work. NLEA Section 4, entitled "State Enforcement," outlined the process the States and FDA must follow if a State action is to be undertaken. NLEA allows a State to bring civil enforcement proceedings within its own jurisdiction or restrain violations of any labeling provisions if the food is subject to the proceedings of that State. Such proceedings, however, are not to be commenced (1) until 30 days after the State has notified FDA of its intention to begin such a proceeding, (2) before 90 days if the Secretary has commenced an informal or formal enforcement action pertaining to the food, or (3) if the Secretary is diligently prosecuting a case in court pertaining to such food or has settled such a case or enforcement action.

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Food Labeling: Toward National Uniformity Comments made during Senate debate on the bill supported the need of a state to be able to act on behalf of its constituents. In his statement, Senator Metzenbaum emphasized that: The first matter involves the subject of preemption. We want to clarify that nothing in Section 4 of the bill, as amended, prevents a State from acting under law to address an emergency. It is also important that this program, which requires nationally uniform nutritional labeling, is sensitive to the regulatory roles played by the States. This bill has been refined to provide national uniformity where it is most necessary, while otherwise preserving State regulatory authority where it is appropriate (U.S. Congress, 1990, p. 16609). A review of the comments submitted to the Committee revealed that there are differing opinions on the exact intent of the language of NLEA Section 4. Correspondence from AFDO's Food Labeling Committee raised a question concerning whether NLEA requires a State to give FDA 30 days' notice before the State undertakes an enforcement action under FDCA (AFDO, 1991). This question suggests confusion on the part of some State officials. NLEA clearly requires States to give FDA 30 days' notice before taking action under an FDCA provision. In their response to the Committee, some consumer groups predicted problems for those States without laws identical to the Federal provisions. The groups noted that even though States have the authority to enforce the Federal statute, the procedural process, involving FDA notification and the required delay of State agencies (in deference to Federal enforcement) until FDA replies, will place a strain on the financial and investigative resources of the States. Concern was expressed that there would be less State initiative in this area because of the required notification and the 30-day response period (Lindan, 1991). In a letter to the Committee, the Grocery Manufacturers of America (GMA) maintained that, by following correct procedures, States retain power to enforce a food labeling matter in a State court as long as the States are enforcing State provisions that are identical to the six designated Sections (Gardner and Guarino, 1991). Furthermore, in situations in which only intrastate commerce is involved, FDA has no jurisdiction, and State laws and regulations are not preempted. The importance of this section being clarified by FDA is reflected in the opinions expressed by two attorneys experienced in food law. When asked whether NLEA required a State to give FDA 30 days' notice before undertaking an enforcement action under its own statute or regulations, George Burditt (Partner, Burditt, Bowles & Radzius, Chartered) responded to the question with an unequivocal no. He stated that NLEA Section 4 authorizes States to enforce the Federal act if the food is located in that

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Food Labeling: Toward National Uniformity State and requires States to notify the Federal government only if they intend to enforce the Federal law, it makes no comment about the State law. Burditt pointed out that States have the right to enforce their own laws on labeling and denial of that right would be a "perfectly clear violation of the federalism system of our government if a State couldn't act to enforce its own laws without giving the Federal government 30 days notice" (Burditt, 1991). In response to Burditt's position, Merrill Thompson (Partner, Arnold Porter) agreed that a State may be unrestrained in its application of the law to intrastate commerce but that it is still just on the team in relation to interstate commerce. Thompson maintains that since NLEA gives the States total access to the Federal law and regulations, it is only logical "that the Congressional insistence on identical State requirements be understood to require the States to tie their implementation processes to the Federal processes including enforcement" (Thompson, 1991). Because of the apparent confusion over how NLEA Section 4 is to be implemented, the Committee welcomed the proposed regulations on State enforcement under NLEA, which were published by FDA on November 27, 1991 (FDA, 1991b). The proposed regulations outlined the procedures that States should follow in taking enforcement action. Beginning on November 8, 1992, States are authorized under NLEA to bring action on certain misbranding violations of FDCA in Federal court to supplement FDA's enforcement activities. A State's ability to exercise this new authority to enforce Federal law is predicated on certain conditions: A proceeding may not be commenced unless that State has given notice to FDA that it intends to bring such proceeding and waits 30 days after giving notice to institute action. After receiving notice, FDA has 30 days to commence an informal or formal enforcement action pertaining to the food in question, and if it does so, the State may not bring its proceeding until an additional 60 days have passed. Where FDA is actively prosecuting the case in court, has settled it, or settled the informal or formal enforcement action pertaining to the food, the State may not institute a proceeding. In the proposed regulation, FDA has interpreted informal enforcement actions to include Warning Letters, recalls, and detentions, which can all be taken administratively, formal action has been interpreted to involve seizures, injunctions, and prosecutions, which require initiation of judicial proceedings. The proposed regulation also delineates the procedures that a State must follow in notifying the agency of its intention to institute an

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Food Labeling: Toward National Uniformity enforcement action, including a standard format and information for the letter of notification, signed by a State official authorized to institute the proposed action. In addition, the agency has proposed the procedures it will follow in responding to a States notification to ensure that the State knows the status of the agency's intent concerning the State's proposed action. FDA has stated its belief that an FDA action anywhere in the country against the food in question would bar a State action against the food in Federal court. The agency notes, however, that provisions of NLEA do not preclude State enforcement under its own identical statute or regulations in state court (FDA, 1991b). All concerned parties should have commented on the proposed regulations on State enforcement procedures (by the February 25, 1992 deadline). FDA will need to follow implementation of these requirements closely to allow the States to play an effective role in enforcement. Concomitantly, although NLEA and the proposed regulations do not require FDA notification for a State to take action under its own statutes and regulations in a State court, it seems reasonable, in the interest of the goals of national uniformity and cooperation, that some mechanism should be established for States to apprise FDA and other States of actions taken in State courts. COOPERATIVE RELATIONSHIPS BETWEEN FDA AND THE STATES It is also important that FDA and the States enhance the mechanisms available for cooperative working relationships. Open communication channels are needed to address emerging issues on a regular basis. Active dialogue to handle issues before they are either addressed by one jurisdiction or the petition process will allow for early input from State regulators in the development of Federal responses to these emerging issues. In recent years, the States and FDA have jointly planned their programs to "effectively utilize their combined minimal resources to obtain maximum results" (Wilms, 1991a). State programs have augmented those of FDA and extended consumer protection beyond what the Federal government alone could provide. In a speech to the American Legislative Exchange Council in April 1989, then FDA Commissioner Frank E. Young stressed the importance of cooperative efforts among FDA and State and local officials to ensure consumer protection, given the great challenges to be faced with limited resources. In underlining the importance of these relationships, he recalled the words of President Theodore Roosevelt: "How much good for the whole people results from the hearty cooperation of the federal and state officials in securing a given reform ... there must be the closest

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Food Labeling: Toward National Uniformity cooperation between the national and state governments in administering these laws" (Young, 1989). In his comments to the Committee, Heinz Wilms, FDA's Director of Federal-State Relations, noted that Federal and State officials, along with support from the regulated industry, have worked for many years "to establish uniform legal codes on which to base enforcement procedures." He highlighted a number of initiatives and programs that are funded or supported by FDA and aimed at promoting uniform procedures: Joint FDA/State inspections Regional and district conferences FDA formal training courses Communication systems such as NRSTEN (National, Regional, and State Telecommunications Network) Coordinated Operations Plan for Emergencies (COPE) State contract program Wilms concluded that "the continuation of these State and Federal cooperative efforts is important to the enforcement of the statute. The passage of NLEA hopefully will not weaken the States' resolve to be a strong participant and partner in the process of implementing that law" (Wilms, 1991b). In comments received by the Committee, State officials and consumer groups generally agreed that Federal preemption under NLEA is unlikely to be accompanied or followed by major new FDA funding to allow the agency to increase its regulatory efforts to make up for a perceived decrease in State regulatory efforts because of preempted requirements. They express concern that State legislatures that are anxious to find cost-saving measures may redirect the appropriations for food labeling regulation to other State programs, resulting in a decrease in consumer protection. Many State officials fear this elimination of State-funded programs and are skeptical about the future of enforcement, the subsequent implementation of the statute, and, ultimately, consumer protection (i.e., Corbin, 1991; Crawford, 1991; Harden, 1991; Lindan, 1991; Masso, 1991, McClellan, 1991; Niles, 1991; Rudd, 1991; Sevchik, 1991; Sowards, 1991b). It is not yet possible to predict the possible loss of State resources, participation, and involvement in the food regulation scheme set into motion by NLEA. State food regulation programs address both misbranding and adulteration activities without delineating the amount of funds spent in each area. 'Me importance of States' efforts in food safety regulation, which was not changed by NLEA, suggests that there could be relatively little decrease in total State funding of food regulation activities. Only future events will

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Food Labeling: Toward National Uniformity provide the answer to those who have expressed concerns. Meanwhile, both Federal and State officials have emphasized that cooperation, and sharing of responsibilities and programs, should be both continued and enhanced (Crawford, 1991; Heffron 1991; Sevchik, 1991; Wilms, 1991a). PREEMPTION AND THE PETITION PROCESS In general, consumer groups who provided comments to the Committee are opposed to the preemption of State and local laws by the Federal government. In their responses, these groups argued that State and local governmental bodies can react more quickly and effectively than Federal agencies to protect consumers. In addition, they can encourage the Federal government to improve national standards and address newly emerging issues. Consumer groups have thus called for an expeditious petitioning process that would allow States wide latitude in exemptions from preemption under NLEA to protect consumers (CSPI/CNI/CFA/NCL, 1991). One principle of particular importance expressed by the consumer groups is the right of citizens to have State and local governments that are responsive to their needs. In support of this view, they cited a recent article in which Bruce Silverglade of the Center for Science in the Public Interest argued that "[s]tates should be free to address local concerns in a manner they believe is appropriate. The ability to address local needs is especially appropriate because state officials are often closer to the people they are trying to serve than the officials in Washington, D.C." (Silverglade, 1990, p. 145). Another group, Public Voice for Food and Health Policy, took the position that preemption has the potential to drain innovation and vigor from the consumer protection system. One result of such a drain would be that future marketing schemes that hurt consumers would be left largely unchallenged (Haas, 1991). Using examples from different areas of regulation in support of their positions, especially food safety, the consumer groups emphasized the importance of vigorous State and local action in the national consumer protection regime. Although few consumer groups cited specific protection that would be jeopardized under the NLEA food labeling preemption provisions, all pointed out that the role of the State agencies in responding to emerging issues in food labeling could be curtailed by preemption. In their view, limits on the States' role might hasten the obsolescence of Federal policies by preventing regulatory innovation; they might also hamper the ability of States to enforce current Federal law and directly undermine the policy objectives set forth in NLEA (Haas, 1991; Lindan, 1991; Mitchell, 1990).

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Food Labeling: Toward National Uniformity The Committee believes that FDA's rules must take into account genuine local needs that are based on evidence to justify preemption or exemption of State requirements. A background paper prepared for the Committee reviewed the recommendations of a report on the petition process prepared by the National Food Processors Association (NFPA, 1991) and commented on the State petition process in general (Bryson, 1991). The paper concluded that the petition process could be a workable procedure but predicted that it would neither be expedient nor easy to implement. One NFPA recommendation suggested that the procedural provisions in 16 CFR Part 1061 [Consumer Product Safety Commission (CPSC)] could provide the basis for similar provisions that FDA could adopt to implement NLEA Section 403A(b). The Bryson paper concluded that this suggestion had merit despite the difficulties experienced by States in providing "adequate" information to enable CPSC to act on their requests. Bryson urged FDA to require only necessary and reasonable information and specify the criteria that will be used to grant or deny an exemption request. The paper suggests that it is incumbent on FDA not to arbitrarily require further information if it is clear that the State submission has met the stated requirements; in addition, the agency should work diligently to finalize its decision on a State exemption request within 180 days after receipt of the request. The paper concluded that, ideally, FDA, industry, consumers, and the State should work together to develop the regulation that specifies the information to be provided in a State preemption exemption request. The NFPA study also recommended that the CPSC regulation (16 CFR §1061.9) pertaining to the burden on interstate commerce be incorporated into FDA regulations. The Bryson paper emphasized, however, that the decision to exempt a State from preemption must be based primarily on issues of consumer protection and concerns about overburdening interstate commerce should be of secondary importance. With respect to NLEA Section 403A(b)(3), which states that the State requirement must be designed to address a particular need for information that is not met by the FDCA requirement, NFPA suggested that if a State does, in fact, demonstrate that a particular need is not met by Federal law, FDA must propose an amendment of its regulation to meet that need, rather than authorize a State exemption from preemption. The Bryson paper concluded that the position taken by NFPA is particularly meritorious. The paper specifically noted that FDA must be alert to recognize instances in which States have identified a regulatory need that has nationwide implications and it should move promptly to propose Federal adoption. Bryson also provided the following suggestions and conclusions:

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Food Labeling: Toward National Uniformity Requests for exemption should be reviewed by an advisory panel that includes at least one State agency representative. States must actively participate in the new Federal process. States may decline to participate, but if they do, they run the chance of losing even more than the preemption established by NLEA. FDA is urged to work with the States, solicit their input, utilize the committee process, develop models, and establish an office in the Center for Food Safety and Applied Nutrition to receive and assist in finalizing State submissions. Organizations of food and drug officials will need to take an active role in representing the States on NLEA matters. The paper supported an AFDO request that FDA designate a specific staff person in the Division of Federal-State Relations as a single point source of information on NLEA for State regulatory agencies (Bryson, 1991, pp. 12–13). On November 27, 1991, FDA published a proposed regulation for the petition process concerned with preemption of State requirements. For any State statute or regulation that will be preempted under the provisions of NLEA, the petition process serves as a mechanism by which States can request FDA to exempt them from the effective dates for preemption of a specific State provision. Under this proposal, if a State submits a petition for exemption from Federal preemption under NLEA Section 403A(b) by May 8, 1992, the State requirement will not be preempted until after November 8, 1992, or FDA acts on the petition—whichever is later. (FDA, 1991b) The State requirement must meet three criteria to be granted an exemption: it must (1) not cause any food to be in violation of any applicable requirement under Federal law, (2) not unduly burden interstate commerce; and (3) address a particular need for information that has not been met by the existing requirements of Federal law. The petition must also identify and document the State requirement for which exemption is sought; identify the Federal requirement that is believed to preempt the State requirement; describe the rationale of the State requirement and compare it with the Federal requirement; address with specificity the grounds for exemption from preemption stated in NLEA; and discuss the particular information need that the State requirement is designed to meet that is not met by the Federal law.

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Food Labeling: Toward National Uniformity Also required is a claim for categorical exclusion of an environmental assessment, identification of the person and address to be notified, and a certification by the petitioner that the petition includes all information and views relied on in its development. Under the proposed regulations, FDA would provide one of three responses to the petitioner within 90 days: the agency tentatively determines that the petition merits the granting of an exemption and intends to publish a proposed regulation to grant exemption in the Federal Register; the agency denies the petition and states the reasons for such denial; or the agency provides a tentative response stating why it has been unable to reach a decision on the petition. Exemptions would be granted only to the petitioner State. If the issue is national in scope, FDA would consider amending the Federal requirement. In proposing its regulations on exemption from preemption, FDA relied in part on the policy in Executive Order 12612 on federalism, "that preemption of State law shall be restricted to the minimum level necessary to achieve the objectives of the statute." As a corollary to this proposition, FDA stated that exemption from preemption should be liberally granted in line with statutory objectives (FDA, 1991b). As proposed, the petition process provides a mechanism by which States can address their particular needs both before preemption takes effect and afterward, should the need arise. Hawaii's labeling requirement for poi is a case in point. The Committee understands the need of consumers in Hawaii to have such protection when purchasing a product of historical importance to local cultural and ethnic needs. This type of importance and history of use could most certainly be supported by the State through citations to its published literature, annual sales figures, demographic data, and other similar sources. The Committee believes it is important for States to use this mechanism to deal with their particular local needs and unanticipated future issues that may be national in scope but yet have not been addressed by FDA. The petition process or other mechanisms should also allow States to suggest those instances in which they believe some informational requirements may be considered candidates for Federal adoption. In this way, the States may still serve as the front line of consumer protection that they have been in the past. For its part, FDA must ensure that the process' requirements for information are clear to the States and follow its own time schedule for action on petitions. The agency needs to make decisions as rapidly as possible and not use a tentative response of "unable to make a decision" (item no. 3 above) to place a State on hold for months. FDA also

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Food Labeling: Toward National Uniformity should use petitions as a way to evaluate its own activities in regard to adequate implementation of the various misbranding provisions of FDCA. ECONOMIC IMPACT OF NONUNIFORMITY One of the issues that industry representatives continued to raise was the substantial costs entailed in nonuniform State food labeling requirements. Although most costs could be expressed as dollar amounts, the managerial frustrations associated with nonuniformity cannot and should not be discounted. In pursuing this issue, the Committee was advised by industry that the economic impact of nonuniformity of Federal and State requirements for food labeling is very significant and under extreme conditions can be tremendous. The Committee questioned nine food companies and two trade associations on the costs of nonuniformity. Each organization was asked to provide any information available on the costs of monitoring individual State legislative and regulatory activities, product negotiations with individual States having unique labeling requirements, legal confrontations over individual State requirements, and retrieval, relabeling, and scrapping of products and labels. The companies and trade associations contacted included: Borden Foods General Mills Grocery Manufacturers of America Kellogg Company Kraft General Foods, Inc. Land O'Lakes National Food Processors Association Pepsico-Frito Lay Procter & Gamble Quaker Oats Company RJR Nabisco Each company and association provided comments to the Committee on condition that the data be compiled and used to represent industry-wide experience. All of the respondents agreed that the costs of these activities are borne by the food manufacturer but that in many cases they are passed on to the consumer as an increment in the price of processed food. None of the companies and associations could provide total dollar costs for the four activities of interest. All concluded, however, that significant continuing costs occur as a result of nonuniformity of Federal and State requirements. Industry incurs these costs in particular in the monitoring of States' activities and product negotiations with States that have unique requirements. Several companies discussed the cost of legal confrontations over individual State

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Food Labeling: Toward National Uniformity requirements and the cost of product retrieval, relabeling, and, at times, scrapping a product and/or its labels. In all cases, examples were cited, but total cost information for all labeling activities concerned with nonuniformity could not be provided. The Committee recognized that the cost figures provided by the industry were principally anecdotal. However, in the absence of any formalized data, and recognizing the conservative nature of the figures, the Committee concluded that they would serve to adequately illustrate the concerns of industry. The Committee also recognized that nonuniform State requirements could result in significant savings for consumers in such aspects as reduced health costs, while at the same time, resulting in higher food costs. There was no information available to the Committee for evaluation of the costs and benefits to consumers of nonuniform food label requirements. Monitoring of Individual State Legislative and Regulatory Activities The magnitude of this activity for a particular firm depends on the types of foods it manufactures. For example, dairy products and dairy substitutes shipped in interstate commerce generally require greater monitoring because this group of foods is especially governed by unique statutes, regulations, and standards that have been established in some States. The volume of State legislation on labeling—and the concomitant need for monitoring by industry—is reflected in a recent FDA summary of its State legislative monitoring activities. The summary covers 12 major subject areas for the past 2 years. In 1990, the FDA State Program Coordination Branch tracked approximately 3,500 State bills related to food and drugs, of which 109 were concerned with food labeling and 11 were enacted (FDA, 1991a). In 1989, more than 3,000 bills were tracked; 118 related to food labeling, and IS were enacted (FDA, 1990a). Most large companies reported having from 1 to 10 employees who monitor State activities at a cost of approximately $80,000 per person. (One large company reported that it also monitors State activities through outside legal counsel at a cost of about $350,000 per year.) Smaller companies frequently employ outside legal or other professional counsel in monitoring, particularly if their food products fall into categories for which some States have unique requirements. One medium-sized manufacturer estimated that it maintains the equivalent of 4 full-time professionally trained people simply to monitor State legislative and regulatory activities, particularly in the dairy products category. A number of companies maintained that many small manufacturers do not have full-time professional people to follow

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Food Labeling: Toward National Uniformity State activities but instead rely on industry precedents in the labeling of their foods. FDA lists approximately 20,000 food manufacturers in its inventory of firms that are subject to Federal regulation (FDA, 1990b). If one assumes that, among these firms, only 1,000 of them have an average of one professional person on staff or serving them as outside counsel to monitor State activities, and each of these people is paid a salary plus benefits averaging $80,000, the cost of monitoring for nonuniformity of Federal and State requirements would total approximately $80 million per year. It should be noted that not all of this cost would be focused on State activities related to food labeling requirements. Some of the monitoring activities performed by these individuals would be related to Federal food regulatory activities or Federal and State issues other than labeling of foods. Some of the activities would be expected to continue even if uniformity was established; however, the estimate of 1,000 food processors with professional monitoring capability—and costs—is probably quite conservative, suggesting that the true cost of monitoring is much higher than projected. Product Negotiations with Individual States Having Unique Labeling Requirements Negotiations often precede the introduction of a new product in States that have unique requirements for foods in the category into which the new product falls. Frequently, this activity will require as many as three or four meetings involving as many as three or four professional people from the manufacturer's staff and/or the firm's legal counsel. Frequently negotiations are related to foods in the category of dairy products and substitutes, but a number of other negotiations involve the naming of foods that contain artificial flavors and the selection of unique package designs. Some manufacturers report that they cannot sell a new dairy product in a particular State until that State establishes a standard for the new product, which often requires repeated meetings and negotiations involving both corporate personnel and outside legal counsel. The Committee was unable to obtain information on the cost to States of having to carry out such negotiations, because costs are not allocated to specific sections of the law. The total amount is undoubtedly substantial, however, even if measured only in terms of the time spent by State regulators. In responding to the Committee's questions, some companies commented that negotiations with States having unique requirements impeded the development of new foods. They argued that the uncertainties of State requirements limited the choice of ingredients and thereby delayed the

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Food Labeling: Toward National Uniformity completion of new food formulations. They further noted that if these negotiations are not carried out prior to the introduction of the product, they run the risk that a State with unique requirements may take exception to a product's labeling. When this occurs, product retrieval, relabeling, and legal confrontations can result. Again, manufacturers could not provide total costs for these negotiations. However, an estimate of $2.5 million is not unreasonable, if one assumes that during the past 3 years, half of all large and medium-sized companies (approximately 500 firms) have averaged one such negotiation at a minimum cost of $5,000 (for travel, personnel, and legal costs). Legal Confrontations Over Individual State Requirements Over the years, legal confrontations have generally resulted when manufacturers are confronted with a State's unique requirements for food product names and labeling claims. Such activities can be extremely costly to manufacturers both in the legal and corporate efforts that are expended and the damage done to the reputation of otherwise safe and wholesome foods. One large processor estimates that it spent about $10 million over a relatively short period of time on legal confrontations with a single State. The cost to the State was also undoubtedly significant, considering the time and effort expended by State officials in prosecuting the case. This example is unquestionably one of the most extreme in recent years, but it clearly demonstrates the impact such disagreements can have on the overall cost of food processing. Most companies make every effort to avoid litigation with States; nevertheless, some issues are of such importance to a company that litigation is the only means of resolution. Considering the lack of data in this area, it is not possible to estimate the total costs of such activities to industry. Product Retrieval Relabeling, and Scrapping of Product and Labels These activities generally occur when there has been a breakdown in communication between the State taking action and the company involved. Sometimes the company is not aware of the State's particular requirement and simply distributes the food without recognizing the risk. An example of missed communication occurred in the case of such product names as ''chocolate,'' "chocolate flavored," and "artificially chocolate flavored" foods. The industry has generally followed Federal guidelines in naming these foods; thus, "chocolate" is used in labeling when standardized chocolate is

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Food Labeling: Toward National Uniformity used as the flavor, "chocolate flavored" is used when cocoa is the basic flavor, and "artificially chocolate flavored" is used when the product contains an imitation chocolate flavor. In the past, some States have disagreed with this rationale and insisted that "chocolate" be used only when standardized food chocolate is the basic flavoring; ''artificial" or ''imitation" chocolate must be used in all other flavor systems, including the use of cocoa. Some States have also taken exception to package size and design, initiating action on the grounds that the product was slack filled or deceptive in design, even though Federal requirements (which may be the minimum) were met. Retrieval of food products is a difficult task and frequently requires the efforts of sales, manufacturing, and outside personnel. One complicating factor is that product distribution systems often serve multiple States. In those instances, stocks of products in adjoining States, and sometimes ones that are even quite distant from the State in question, must be examined and removed from the system. Products retrieved from a State can be distributed to other States that do not have such a requirement, but this kind of transfer can only be done on a temporary basis because most distribution systems cannot efficiently separate stocks being sent to individual States. As a result, most companies will relabel their entire product to avoid any further problems in the State with unique requirements. Frequently, large label inventories are on hand when the State files a notice of its action, necessitating the destruction of the old labels when the new ones become available. Disposal of retrieved products can also be a problem for the food industry. Relabeling previously packaged products is a costly operation because either the old label must be removed and replaced with the approved one or the entire contents must be repackaged and labeled in accordance with a State's requirements. To avoid this expense, firms often find it more expeditious to scrap the retrieved food in a landfill or give it to appropriate charities. There is no way to estimate the total cost of these actions to the industry, but individual companies have reported on occasion up to as much as $100,000 in product retrieval and scrapping costs and $100,000 in label scrapping costs alone. These costs can be particularly burdensome to small companies that cannot otherwise absorb expenses of this magnitude but must pass them on to consumers in future production. The Practical Value of Uniform Labeling In comments to the Committee, industry made it clear that many manufacturers feel that the economic impact of nonuniformity has been part

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Food Labeling: Toward National Uniformity of the cost of food manufacturing in the United States. Industry has known that disparities existed, and generally firms have taken action to avoid confrontations. If a company did run afoul of a unique State requirement, it paid the consequences and took appropriate action to avoid a recurrence. Occasionally, however, situations would arise that pointed up the undesirable costs and administrative problems that are present when great disparities exist. State regulators may also be uncomfortable with the broad differences between Federal and State requirements that they must enforce. Some of them privately recognize that the differences often stem from laws or regulations that protect home State industries; they may also consider a lack of adequate or clear guidance from Federal agencies to be part of the problem (Corbin, 1991; Sowards, 1991). In either case, in their comments to the Committee, industry representatives showed that they believed that State officials are frequently uncomfortable when they are forced to take a position that appears to be at variance with that of the rest of the country (e.g., States with unique dairy requirements). The industry's concern over nonuniformity can be even better understood when it is recognized that there are at least 77,600 food labels that are used by some 20,000 food processing firms (FDA, 1990b). A single label printing change incurs an estimated cost of $1,000 to prepare a new single-color label printing plate. Some food manufacturers produce private-label brands for the retail market and other processors; as a result, a single label change may affect all the brands the manufacturer produces. Many foods are also produced in multiple sizes and flavors, and label changes frequently will be required for all of them. The cost of new labels to meet individual State requirements is not insignificant, but it can appear as a subordinate cost when label and product inventories must be scrapped to meet a State's requirements. States and consumer groups have often suggested that industry should produce multiple labels to meet the requirements of individual States. This approach has been considered many times by food companies, and virtually all have concluded that the distribution system in the United States would be unable to efficiently deliver the properly labeled food to the State(s) having different requirements. Supermarket chains and manufacturers have warehouses that frequently serve multiple States. In practical terms, multiple labels for the same, food could not be segregated to ensure that the appropriately labeled food reached its proper destination. The timing of current efforts to improve uniformity of Federal and State labeling requirements also has implications for U.S. participation in the international marketplace. Europe is now attempting to standardize labeling and other requirements for food products. Through the Codex Alimentarius

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Food Labeling: Toward National Uniformity and other agencies, the United States ultimately will be drawn into this activity. It seems appropriate that the nation resolve its internal labeling differences in preparation for effective participation in the international food trade. COMMITTEE OBSERVATIONS The new authority granted to FDA by NLEA will undoubtedly strain its resources at the same time that it affects the authority of States through preemption of their regulations and provisions. State officials and consumer groups have expressed concern over these changes because of their strong belief that implementation of the labeling provisions of FDCA is directly related to the level of enforcement applied by regulators. The Committee believes that the implementation of NLEA should not adversely affect the established cooperative efforts of FDA and the States. The importance of accessible administrative procedures for the exemption petition process and State enforcement of Federal requirements cannot be overemphasized, and FDA must respond to such requests from States in a timely manner. At the same time, the Committee recognizes that nonuniformity in food labeling has the potential to increase the cost of food to consumers. Any increased cost as a result of nonuniformity is significant, if the interests of consumers are not being served. It is not possible, however, to weigh the costs and benefits of allowing nonuniform State regulations generally or specifically under the six provisions studied in this report. Therefore, the ultimate judgment about consumer benefit may turn out to be largely a matter of preference. Finally, although NLEA assigns responsibilities to FDA that will require the support of the States to fulfill, the responsibility for ensuring that NLEA works goes beyond FDA and the State regulatory agencies. Federal and State legislators and administrators must recognize the importance of food labeling to consumers and provide the resources necessary for meaningful nationwide enforcement activities. REFERENCES AFDO (Association of Food and Drug Officials). 1991. Letter to Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, Washington, D.C. July 1. Bryson, C.F. 1991. State Preemption Under Nutrition Labeling and Education Act of 1990. Paper prepared for the Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, Washington, D.C. Unpublished. Burditt, G., Burditt, Bowles, & Radzius, Chartered. 1991. Letter to Burton I. Love, Chair, Food Labeling and Standards Committee, Association of Food and Drug Officials. Feb. 4.

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Food Labeling: Toward National Uniformity Corbin, L. 1991. Presentation by Leroy Corbin, Pennsylvania Department of Agriculture before the Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, May 30. Crawford, B., Florida Department of Agriculture and Consumer Services. 1991. Letter to Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, Washington, D.C. July 5. CSPI/CNI/CFA/NCL (Center for Science in the Public Interest, Community Nutrition Institute, Consumer Federation of America, and the National Consumers League). 1991. Statement of Sharon Lindan, Assistant Director for Legal Affairs, CSPI, on behalf of CSPI/CNI/CFA/NCL at the Public Meeting of the Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, Washington, D.C. May 30. DHHS (Department of Health and Human Services). 1991. Final Report of the Advisory Committee on the Food and Drug Administration . Washington, D.C.: Government Printing office. FDA (Food and Drug Administration). 1990a. Annual Report on State Legislation for the Year 1999. State Program Coordination Branch, Division of Federal-State Relations. Rockville, Md.: FDA. FDA. 1990b. Food Labeling; Reference Daily Intakes and Daily Reference Values; Mandatory Status of Nutrition Labeling and Nutrient Content Revision; Serving Sizes; Proposed Rules. Fed. Reg. 55:29475–29533; July 19. FDA. 1991a. Annual Report on State Legislation for the Year 1990. State Program Coordination Branch, Division of Federal-State Relations. Rockville, Md.: FDA. FDA. 1991b. Food Labeling; General Provisions; Nutrition Labeling; Nutrient Content Claims; Health Claims, Ingredient Labeling; State and Local Requirements; and Exemptions; Proposed Rules. Fed. Reg. 56:60366–60878; Nov. 27. Gardner, S., and T. Guarino, Grocery Manufacturers of America. 1991. Letter to the Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, Washington, D.C. June 19. Haas, E., Public Voice for Food & Health Policy. 1991. Letter to the Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, Washington, D.C. July 10. Harden, B., Maryland Department of Mental Health and Hygiene. 1991. Letter to the Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, Washington, D.C. May 30. Heffron, E.C., Michigan Department of Agriculture. 1991. Letter to the Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, Washington, D.C. July 11. Lindan, S., Center for Science in the Public Interest. 1991. Letter to the Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, Washington, D.C. May 15. Masso, T., Minnesota Department of Agriculture. 1991. Letter to the Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, Washington, D.C. Sept. 10. McClellan, D., Utah Department of Agriculture. 1991. Utter to the Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, Washington, D.C. July 8. Mitchell, Charles P. 1990. State regulation and federal preemption of food labeling. Food Drug Cosmetic Law J. 45:123–141. NFPA (National Food Processors Association). 1991. Letter to Dockets Management Branch (HFA-305), Food and Drug Administration, re: Docket 91 N-0038. May 13. Niles, R, Georgia Department of Agriculture. 1991. Letter to the Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, Washington, D.C. June 17. Rudd, J., Arizona Consumers Council. 1991. Letter to the Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, Washington, D.C. July 15.

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Food Labeling: Toward National Uniformity Sevchik, J., New York Department of Agriculture and Markets. 1991. Letter to the Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, Washington, D.C. July 30. Silverglade, B.A. 1990. Preemption-The Consumer Viewpoint. Food Drug Cosmetic Law J. 45:143–149. Sowards, R.D., Association of Food and Drug Officials. 1991a. Presentation before the Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, Washington, D.C. May 30. Sowards, R.D., Association of Food and Drug Officials. 1991b. Comments provided to the Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, Washington, D.C. July 1. Thompson, M., Special Counsel, Arnold & Porter. 1991. Letter to G. Burditt, Burditt, Bowles, and Radzius, Chartered. April 17. U.S. Congress, Senate. 1990. Nutrition Labeling and Education Act of 1990. Congressional Record. S16608–16611. Oct. 24. Wilms, H., Division of Federal-State Relations, Food and Drug Administration. 1991a. Uniformity of Federal and State enforcement procedures. Presentation before the Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, Washington, D.C. May 29. Wilms, H., Division of Federal-State Relations, Food and Drug Administration. 1991b. Uniformity of Federal and State enforcement procedures. Written comments submitted to the Committee on State Food Labeling, Food and Nutrition Board, Institute of Medicine, Washington, D.C. May 29. Young, F.E., Food and Drug Administration. 1989. Speech to the American Legislative Exchange Council, Washington, D.C. April 28.

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