Almost two years have passed since The Food Safety Modernization Act of 2011 (FSMA) was singed on January 4, 2011. Nine months after the signing, in September 2011, FDA announced the implementation of the fee provisions of section 107 of FSMA, where the U.S. Agent representing foreign food facility would be held responsible for the fees incurred in connection to reinspection and reinspection related costs. This week marks the kick-off of the FDA’s Biennial Registration Renewal for Food Facilities, and presents a great opportunity for U.S. Agents representing foreign food facilities to review their terms of representation.
Prior to FSMA, U.S. Agent representing foreign food facility, acted merely as an information conduit. U.S. Congress decided to enhance the role of U.S. Agent, stating that “For fiscal year 2010 and each subsequent fiscal year, the Secretary shall … assess and collect fees from … the United States agent … for each foreign facility subject to a reinspection in such fiscal year, to cover reinspection-related costs for such year.” See 21 USC 379j–31.
Also, prior to FSMA, U.S. Agent could assist in registering and represent the foreign food facility for indeterminate amount of time. U.S. Congress decided that it would be better to require foreign food facility to re-register once every two years, starting this week: “During the period beginning on October 1 and ending on December 31 of each even-numbered year, a registrant that has submitted a registration … shall submit to the Secretary a renewal registration …” See 21 U.S.C. 350d(a).
Both events present a good opportunity for U.S. Agents and Foreign Food Facility Operators to reevaluate the terms of their relationship, because the registration renewal cannot be done without current or prospective U.S. Agent. Assuming that the relationship is of contractual nature, the new contract should incorporate new risks (and therefore new costs) associated with foreign food facility representation by the U.S. Agent. The risk is heightened by the FSMA provisions, which talk about U.S. Agent responsibilities, but lack effective procedural requirements. It would be fair, for example, for Congress to prescribe notice requirements, where FDA would have to notify the U.S. Agent that the principal failed the initial inspection. That notice requirement is missing in legislation, and, to author’s knowledge, FDA does not have a regulatory procedure in place requiring such notice. If the notice would have been required, U.S. Agent would be in better position to re-access its terms with the foreign food facility operator, increasing fees reflecting the increased risk of business relationship or possibly withdrawing from representation prior to risking the reinspection fees. Where federal law and federal regulator stops short, the law of private contract should take place. And the best time to do it is now. If the agency agreement provisions do not contain mandatory notice requirement by Principal in case of FDA inspection, it is probably a good idea to add them. Additionally, it may be a good idea to provide a clause that automatically voids the contract in case of (1) failure of the principal to provide Notice, and (2) failure of the Principal to pass the initial inspection. Of course, FDA may still hold U.S. Agent liable pursuant to joint and several liability created by FSMA, but it is still an argument which FDA would need to address. These clauses should not displace the “standard” indemnification clauses of the agreements that many U.S. Agents probably already have in place.
Furthermore, since FSMA prescribes biennial registration, then it is probably a good thought to conform the life of the contract to correspond to congressionally mandated cycle as well (i.e. “the period beginning on October 1 and ending on December 31 of each even-numbered year”).