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Confusion Over Coming FSVP Requirements Persists as FDA Looks Set to Take Soft Enforcement Approach

Weeks out from the first compliance date for new requirements under the Foreign Supplier Verification Program on May 30, confusion persists among the trade community as to what must be done to comply and who is required to do it. Despite pleas from the NCBFAA for a “soft landing” (see 1705020041), the Food and Drug Administration has so far not explicitly indicated a policy of enforcement discretion, though agency officials have agreed to be “mindful” of the rule’s impact on industry (see 1704040024). Given the rule’s complexity and past experience, FDA will likely take a lenient approach, using the initial compliance period for education, though particularly egregious cases could see early enforcement.

The FSVP regulations require that food importers verify their suppliers’ compliance with food safety requirements that are at least equivalent to U.S. regulations (see 1511160014). That includes hazard analysis, supplier evaluation and verification activities, and recordkeeping, all of which must be performed by a “qualified individual,” though modified requirements and exemptions may apply. Filers must submit additional data elements for food imports subject to FSVP, including the name, address and DUNS number of the “FSVP importer,” which may be different from the importer of record.

“It’s a big change from what we’re doing now,” said Ken Olsson, president of the Cheese Importers Association of America. Importers need much more documentation from their suppliers, he said. For example, cheese importers already have third-party audits of their suppliers to satisfy their customers, but now they’ll need to get their suppliers’ Hazard Analysis and Critical Control Point (HACCP) plans, Olsson said. “This is so complex, that I have a feeling that a lot of guys at FDA don’t really understand this yet either. There’s going to be a learning curve for a lot of people, including at the regulators.”

“Right now there’s a lot of confusion and misunderstanding about what the rule is and what the rule isn’t,” said John Johnson, lawyer with FDAImports.com. Beyond understanding what is required to comply, the rule also presents other challenges. For example, the staggered compliance dates, which run from May 2017 through July 2020, depending on the product and the size of the supplier (see 1602120038), mean the same importer may have different compliance dates for different suppliers. Some importers of food are not subject to the rule at all. It could be that the “importers themselves are large enough that you would think they’d be subject to FSVP, but none of the suppliers” are subject to preventive controls regulations, for example, he said.

“I don’t think people are ready for the full impact of this,” said Amy Magnus of A.N. Deringer, who is vice president of the National Customs Brokers & Forwarders Association of America. The definition of the FSVP importer as a party with a financial interest in the goods, rather than the importer of record of the shipment, means some in the supply chain may not be fully aware of their obligations under FSVP, she said. In many cases the importer of record will, in fact, be the buyer, and will also be the FSVP importer. But the FSVP importer must be U.S.-based, so if there’s a non-resident importer of record the FSVP importer will actually be the U.S. buyer, Magnus said. And if the goods are imported by a non-resident importer of record, but haven’t yet been sold, there must be a U.S. agent named as the FSVP certifier.

That creates an issue for customs brokers, who must file new data elements on the FSVP importer’s identity beginning on May 30, because neither are parties with which the broker has a relationship. Particularly in the case of non-resident importers, when the buyer must serve as FSVP importer, that buyer might not be aware of its increased responsibility. Brokers usually have a relationship with the importer of record, not the U.S. buyer. “There are importers of food items into the United States that haven’t grasped the level of responsibility they’re going to be faced with in May,” she said. All brokers need to do is make sure they have the information of the certifying official on entry documentation, Magnus said. “But if I’m putting names on an entry and the people don’t understand their level of responsibility, then I’m not doing a good level of service to my client.”

Another caveat is that some U.S. importers won’t be in a position or won’t be comfortable with verifying their suppliers’ compliance, and will instead hire outside assistance. But even in those cases, assuming it’s the buyer, the importer of record will retain their regulatory responsibilities as the FSVP importer and must be named as such, Magnus said.

Given these complexities, FDA is likely to take a soft approach to enforcement, at least at first, said Ben England, CEO of FDAimports.com. The phased-in enforcement of FSVP “makes it very difficult to enforce in real time,” he said. England, who spent nearly two decades with the agency, expects FDA will take a similar approach to how it implemented seafood HACCP regulations in the late 1990s, progressing from untitled letters to warning letters before eventually moving to import alerts. At first, unless the situation is especially egregious, FDA may “use the opportunity for education,” telling the importer “'to get it straightened out by the next time I see you.’” FDA did not comment.

Inspections will likely occur away from the border, meaning shipments will probably not be held up to examine FSVP compliance, England said. They will instead be similar to what FDA does with seafood HACCP importer inspections. If FDA finds a problem it may place an importer’s future shipments on hold. Border inspections will likely remain confined to issues like microbes, decomposition and pesticides, he said. Once import alerts are eventually issued, they will apply to specific importer-supplier combinations, meaning suppliers could switch to different importers, though that may not be easy in some supply chains, England said.

“FDA at the outset is going to be trying to educate people,” the Cheese Importers Association of America's Olsson said. “They understand this is a big change in the way we’ve been doing things.” As with any new rules, “there will be a learning period. FDA understands that, and I don’t think they’re really going to crack down too hard on people if the paperwork is wrong. They’ll direct you in what you have to do.”

That doesn’t mean FDA won’t enforce FSVP on importers at all. “Discretion doesn’t mean everyone gets a pass, it just means that they’ll let you go this time,” England said. “You could have some enforcement actions early according to the degree to which you’re completely ignoring the requirement,” he said. “I don’t think there’s a lot of major enforcement that happens even this year. But we are way beyond the time when importers should be on the train.” Importers should have been preparing for a year or two at least, figuring out what they are required to do and communicating with their suppliers. “It’s not going to be easy if they continue to delay.”

Right now, customs brokers need to be reaching out to their clients, and getting information from them on who will serve as the FSVP importer contact, including the identity of the U.S. agent or buyer in cases where the goods haven’t been sold or are brought in by non-resident importers, Magnus said. Brokers need to be sending their clients information on the new regulations, though what FDA has issued so far has been sparse, she said. In preparation for filing, brokers need to get an overt statement from the importer of record as to who will serve as FSVP importer on a given shipment.

On the other hand, brokers should not put themselves in the position of telling the importer how to comply with FSVP, England said. “They shouldn’t allow themselves to get to a place where the importer is coming to them and saying, ‘what do we have to do to comply,’” he said. “That’s a bad outcome, because the broker is probably not going to be in a position to answer that question accurately, and they’re not going to get paid for it, and if they get it wrong they could end up in a lot of trouble,” he said. “The most they can do is, be telling their importers, ‘make certain that you understand what the FSVP requirements are and comply with those requirements and provide us with this data,’” England said. “Brokers shouldn’t go any further than that because, if they do, they run into potential liability with the importer.”