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1993 legislative and regulatory outlook.

The politics will change, but the critical industry issues still will be labeling, advertising & food safety

When President-elect Bill Clinton takes office on January 20, 1993, and the 103rd Congress begins its work, there'll be some changes made. The politics in Washington and the priorities of the Federal regulatory agencies and Congressional committees will be considerably different from the national agenda of recent years. A new Administration, claiming to have an electoral mandate, will be eager to make good on its campaign promises. Undoubtedly, early focus will be on unemployment, the deficit, and related economic woes. Similarly, the newcomers to Capitol Hill will be looking for ways to prove that they, indeed, can do a better job than those they unseated. With the President and the majorities in both Houses of Congress coming from the same political party, gridlock will no longer be an excuse for indecisiveness.

All in all, one should expect near head-spinning legislative and regulatory activity in the coming year. This is not to say, however, that excessive regulation will become the law of the land. Regardless of what some might believe to be the new President's true indination, to a great extent the Clinton Administration is being ushered into town with the support of moderates. If the President-elect is the savvy politician and survivor many believe him to be, he will want to demonstrate that he understands the potentially adverse effects that overregulation can have on the U.S. economy.

On the other hand, Congress, both senior members and freshmen, still will have favorite issues--including some with direct regulatory impact. With the same party in power on the Hill and on Pennsylvania Avenue, more bills will become laws, and new laws will lead to new or amended regulations.

For the food industry, the dynamics in Washington will change, but the issues will not. For at least the fourth year in a row, food labeling will be a hot topic. This will be followed closely by a reevaluation of advertising regulation and a review of the laws under which pesticides are approved and food safety is guaranteed.

Renewed attention to the scope of FDA's enforcement authority--possibly in the context of the budget debate-can be expected, along with consideration of packaging and solid waste disposal regulations--a predictable favorite issue of Vice President-elect Gore. Last, but by no means least, will be Congressional and Administrative attention to implementation of international agreements intended to enhance free and fair trade. Food labeling Under the Nutrition Labeling & Education Act of 1990, the Food & Drug Administration was required to adopt regulations mandating, among other things, complete nutrition labeling of virtually all foods under that Agency's jurisdiction. Although, strictly speaking, meat and poultry products regulated by the U.S. Department of Agriculture are not covered by that law, USDA had intended to work cooperatively with FDA in the issuance of compatible regulations so that all foods on supermarket shelves would be regulated in a uniform manner. The new law dictated issuance of final regulations by November 8, 1992.

FDA announced proposed regulations in early November 1991, just before the first deadline established by the NLEA. FDA took the position that this satisfied the statute, even though there are some who argue that actual publication of the proposed rules in the Federal Register nearly three weeks after this public announcement did not pass legal muster. Because of the impasse between FDA and USDA concerning certain elements of the final rules--including a dispute over the best format for displaying nutrition information--FDA missed the November 8, 1992 final rules deadline.

The NLEA provides that, unless final regulations were promulgated by November 8, 1992, the proposed rules would go into effect by operation of law. In the Federal Register of November 27, 1992, FDA acknowledged that the so-called "hammer" had fallen, and the rules proposed by the Agency in November 1991 became final. The Agency also announced in this notice, however, that revised regulations based upon the proposed rules and the literally thousands of comments submitted thereon would soon be issued in either final or proposed form.

On November 30, 1992, President Bush met with his advisors, Secretary of Health & Human Services Sullivan, and Secretary of Agriculture Madigan in an effort to resolve the outstanding issues. The President's decision was subsequently announced by Secretary Sullivan on December 2, clearing the way for the issuance of new labeling rules. At press time, however, no decision was made as to whether FDA would publish its rules as final or as "tentative" final rules subject to further comment. That decision would depend upon a determination of whether it would be legal for FDA to issue final rules, given that the proposed rules technically became final in November.

Because the announcement that the FDA/USDA dispute had been settled was generally well-received by consumer groups and most segments of the food industry, an immediate challenge to publication of final rules is not likely. Publication of the rules is expected before President Bush leaves office on January 20, 1993. Secretary Sullivan also announced that food companies would have until May 1994 to comply with the new labeling regulations.

The NLEA directed FDA to adopt regulations mandating nutrition labeling, the declaration of all ingredients in standardized foods, definitions (i.e., descriptors) of certain terms used to characterize the levels of particular nutrients in foods, and the declaration of the percentage of fruit or juice in beverages and related products. The NLEA also prescribed parameters for making label claims about the relationship of certain foods to the prevention of disease. The regulations proposed by FDA to implement the NLEA, as well as those ultimately issued in final form, will be compatible with the NLEA mandate. USDA is expected to issue final rules consistent with those of FDA.

Reacting to the White House's resolution of the FDA/USDA impasse, C. Manly Molpus, President of the Grocery Manufacturers of America, stated: "The President's action dears the way for over 4000 pages of FDA regulations involving hundreds of issues to be published. It permits industry to begin the massive job of changing over 257,000 different labels. While we do not agree with each and every decision, we will now start the enormous job of providing this new information to consumers as quickly as possible."

It now appears that an end is in sight with respect to implementation of the NLEA. Companies soon will be able to begin the overwhelming task of making label changes and adjusting marketing strategies in time for the compliance deadline.

Food advertising

The last time the rules regulating food advertising really were scrutinized was in the late 1970s. At that time, the Federal Trade Commission held a series of hearings on a proposed trade regulation rule that would have mandated the disclosure of nutrition information in food advertisements and established certain other restrictions as well. Also during that period, the FTC proposed a trade regulation rule governing advertising to children that would have affected food advertisements. Both proposals eventually were withdrawn. For the last decade or so, food advertising has been scrutinized on a case-by-case basis and subject to a number of FTC enforcement actions, but no significant changes in FTC regulations have been considered.

Generally speaking, food labeling includes any graphic material that describes and accompanies a food product. Under some circumstances, this may extend to food advertisements. The FDA has primary jurisdiction over food labeling regulation, whereas the FTC is responsible for ensuring that food advertising is not deceptive, false, or misleading. The FDA and FTC have operated quite effectively under a Memorandum of Understanding dividing their jurisdictional responsibilities. This MOU was renewed last Summer when the agencies agreed to refer to one another's attention complaints about a product's labeling or advertising, as the case may be.

The FTC abandoned its nutritional advertising rulemaking proceeding primarily in recognition that labeling and advertising represent two very different forms of communications devices for which different regulatory approaches are appropriate. Notwithstanding these differences and the commitment of both agencies to cooperate in the review of food promotional campaigns, some members of Congress have tried to force the FTC to apply, in its evaluation of food advertising, the same standards that govern food labeling.

One bill considered in the House of Representatives would have required the FTC to judge food advertising by virtually all the rules established by the NLEA as applicable to nutrition and disease-related claims in food labeling. This bill died when Congress adjourned.

Another bill introduced in the Senate in effect would have given the FDA jurisdiction over food advertising. Congress also adjourned without enacting this measure.

One of the reasons that food advertising received attention in Congress last year on the heals of the NLEA's enactment was because of the pressure applied by State Attorneys General. These officials have been very active in the regulation of food promotional campaigns at the State level. Several members of the National Association of Attorneys General, for example, have made food advertising regulation the principal consumer protection plank in their platforms. Since Federal laws governing advertising do not explicitly preempt or supersede State initiatives in this area, State officials have been virtually unfettered in their efforts.

The combined efforts of the Congressional advertising opponents and State Attorneys General can be expected to continue. In response, the FTC will be pushed to intensify its own enforcement practices. In short, food advertising regulation likely will receive the same level of attention that food labeling received in recent Congressional sessions. The challenge to the food industry will be to ensure, to the extent possible, that food advertising regulation (1) is uniform nationally, and (2) recognizes that advertising and labeling are different media that merit different regulatory approaches.

Steven C. Anderson, President of the American Frozen Food Institute, explained: "The FTC has not only ample authority, but substantial expertise in the regulation of food advertising. Unlike a label, which presents information that consumers can read at their leisure, advertisements can only provide short, simple messages. It is both unwise and unrealistic to try to regulate these devices as if they were the same. Furthermore, since food advertisements often are viewed coast-to-coast, they must be evaluated under uniform national regulatory standards."

Packaging, pesticides, and food safety

For years, Congress and the Federal agencies primarily responsible for regulating the nation's food supply have debated how best to ensure food safety without jeopardizing the availability of beneficial foods and food ingredients. Current law--most notably the Federal Food, Drug & Cosmetic Act and its Delaney Clause, which prohibits use at any level in foods any substance found to cause cancer in man or animals-sometimes stands in the way of FDA's approving the use use of wholesome, nutritious, and, from a practical standpoint, safe food ingredients. Because of today's scientific detection capabilities, for example, a chemical that offers consumer benefits might be found to have carcinogenic properties that present risks--albeit negligible ones.

The Delaney Caluse has become particularly problematic in the Environmental Protection Agency's establishment of tolerances for pesticide residues. That Agency is legally allowed to set such tolerances for pesticide chemicals used in raw agricultural commodities--even if they are carcinogenic--because the Delaney Clause does not apply to these substances. Carcinogenic pesticides may be used on agricultural crops so long as EPA has determined that (1) a tolerance is sufficiently limited so as to protect the public health, and (2) the pesticide is necessary for the production of an adequate, wholesome, and economical food supply. In other words, EPA may establish a tolerance, if the pesticide's benefits outweigh its risks.

The law also allows processed foods made from a raw agricultural commodity to include residues of the pesticide-- nothwithstanding the Delaney Clause--so long as the residue in the processed food does not exceed the tolerance established for the raw agricultural commodity. If it does exceed the tolerance, however, the residue at the higher level becomes a food additive which, if carcinogenic, is prohibited by the Delaney Clause. The result is known as the Delaney Paradox.

Traditionally, EPA avoided the Delaney Clause by establishing tolerances for carcinogenic pesticide residues (even if found at higher levels in a processed product than in the raw agricultural commodity from which the product was produced), if the Agency was satisfied that the risks presented by the substance could be considered de minimus. Last Summer, however, the United States Court of 1 Appeals for the Ninth Circuit found this policy to be unlawful, forcing EPA to apply the Delaney Clause strictly. As a result, the continued legal viability of numerous important pesticides has been placed in question. In effect, creative lawyering to get around the draconian Delaney Clause has met disfavor in the courts.

Because of the broad significance of the Ninth Circuit decision, the Justice Department is expected to appeal the case to the U.S. Supreme Court. The food industry will file an amicus curiae brief in support of EPA's position, arguing that the Agency's de minimus policy is legally justified and essential from a practical standpoint.

The need to modernize the food safety laws--something that has been debated at least since FDA proposed to ban saccharin in the mid-l970s-- has now become compellingly apparent. Over the years, several bills have been considered by Congress to amend the law to regulate food additives and pesticide residues in a more compatible fashion and to recognize and accept a certain degree of risk-- especially where outweighed by a substance's consumer benefits. The recent legal development adds impetus to amendment of the food safety laws during the 103rd Congress.

Arguing for revision of the food safety laws during the new Congress, AFFI's Steve Anderson commented: "The time has come for Congress to repeal the Delaney Clause and adopt a reasonable and scientifically sound standard for the evaluation of food ingredients and pesticide residues. Unless the risks presented by a substance are measured realistically, and the substance's benefits are taken into account in approving it for use or establishing tolerances, the availability of many fruits and vegetables will be jeopardized."

The regulation of pesticides and food safety generally, however, will not be the only food/environmental issues catching the interest of the new Congress. The disposal of solid waste, including food packaging materials, also is becoming an increasingly popular subject of discussion in Washington. In light of Vice President-elect Gore's well-known environmental protection agenda, even more focus on this issue would not be surprising.

Specific solid waste recycling and reuse targets would have been mandated by the Resource Conservation & Recovery Act, had the statute been reauthorized last Congress. A RCRA bill and proposed amendments were intensely debated by both the House and Senate, and the Senate actually passed a somewhat limited version of the proposed legislation (as did a relevant House committee). As Congress left town, however, final action on RCRA reauthorization had not occurred.

In light of the strong interest in packaging recyclability and reuse, the concerns about the possible effects of packaging on the environment, and the growing demands for a national solid waste disposal program, the new Congress can be expected to reconsider the legislative proposals that were introduced last year. The change in Administration and makeup of Congress could affect the scope and mandate embodied in this legislation.

FDA enforcement and user fees

One of the most intense debates affecting the food industry during last Congress involved proposed legislation that would have expanded substantially FDA's enforcement powers. Among other things, bills approved by committees having jurisdiction in both the House and Senate would have authorized FDA to (1) prevent the shipment of products believed by an FDA inspector to be adulterated or misbranded, (2) order product recalls without realistic opportunity for judicial review, and (3) demand that food manufacturers keep even more records and make them available upon request of an FDA inspector. FDA's Commissioner, and even some of his designees, would be empowered to subpeona confidential company records with little practical protection for trade secrets. Even the imposition of civil fines by FDA, and not by the courts, would have been authorized under the proposed legislation.

With a strong and unified front, the food industry successfully countered arguments that FDA needs more authority to enforce the law. The bills that passed committee never came to the floor of either the House of Senate for consideration.

Jim Shufelt, President of the Snack Food Association, commented: "FDA already has an impressive arsenal of enforcement powers, as much as any Federal agency can possibly justify. What was particularly disturbing about the proposed legislation was that its proponents offered no convincing evidence that the Agency has used its existing authority effectively, or even tried to do so."

It was initially in the context of the FDA enforcement debate that a suggestion of increasing FDA's budget-- and doing so by shifting some of the government's costs to the regulated industry--surfaced. Proposed legislation imposing so-called "user fees" on food manufacturers--charging them for plant registration, product approval applications, and import authority-were considered. With the food industry's opposition, this proposal was defeated, and the FDA ultimately received its appropriations without the assessment of user fees. This was notwithstanding the imposition of user fees to cover government services considered to benefit prescription drug manufacturers with the enactment of the Prescription Drug User Fee of 1992.

A renewed push for broader FDA enforcement powers and an even stronger effort to make the food industry pay directly for certain regulatory programs can be expected in the new Congress. As Congress seeks to cut the Federal deficit without affecting regulatory programs, the concept of user fees will become increasingly popular.

The meat and poultry processing segments of the food industry have faced user fee proposals to fund mandatory inspection by the U.S. Department of Agriculture many times in recent years. USDA already is confronting some meat/poultry inspector staff shortages, and some legislators and government officials are suggesting the inspected industry should pay inspection costs.

George B. Watts, President of the National Broiler Council, the national trade association representing poultry processors, remarked: "The law requires that USDA inspect meat and poultry products before they may be marketed. The numerous inspection requirements with which companies comply have been dictated by the government. The way to reduce the costs of this public program is to make it more efficient, not to increase the regulated industry's financial burden. The law makes quite clear that USDA is obligated both to provide the necessary level of inspection and to fund it."

International trade

As if the Clinton Administration and the new Congress will not have enough to do domestically, they will face a continual threat of international economic turmoil as agreements between the United States and the nation's trading partners around the world are negotiated and implemented. Most prominently at issue will be either renegotiation or Congressional approval of the North American Free Trade Agreement (NAFTA), and completion of negotiations (followed by Congressional approval) of any agreement ultimately reached as a result of the Uruguay Round of talks under the General Agreement on Tariffs and Trade (GATT).

NAFTA is intended to enhance trade between the United States and Mexico and to build upon the existing U.S./Canada Free Trade Agreement. It was introduced into Congress on September 17, 1992, following agreement by negotiators for the three countries. Under the "fast track" procedures adopted by Congress for consideration of trade legislation, the President was authorized to sign the Agreement as early as December 17, 1992, or as late as May 1, 1993. The actual time of signing will depend to a great extent upon whether Presidentelect Clinton successfully dissuades President Bush from signing the Agreement, thereby giving the new President the opportunity to spearhead Congressional consideration.

Among other things, NAFTA would reduce significantly several tariffs and other trade barriers that traditionally have restricted the flow of goods between Mexico and the U.S. Many American farmers, especially those growing fruits and vegetables in Florida and Texas, are concerned that lower Mexican wage rates will cost them jobs. However, proponents of NAFTA argue that U.S. agricultural exports (especially of value-added products) will benefit from increasing demand in Mexico. The labor issue, in part couched as a food safety concern, certainly will permeate the NAFTA debate on Capitol Hill.

The fast track procedures generally require an up or down vote. That is, the role of Congress is to enact implementing legislation, but not to change the deal. Some members of Congress already have criticized the Agreement, and one leading member of the Senate Trade Subcommittee introduced a resolution at the end of the 102nd Congress that would allow amendments to NAFTA concerning environmental protection, rules of origin, dispute resolution, labor standards, and adjustment assistance for workers adversely affected by the Agreement.

President-elect Clinton has voiced support for NAFTA, but only conditionally. He also has called for supplemental agreements on environment, labor, and import surge protection, as well as for other measures to help U.S. workers who might be adversely affected. Thus, regardless of when the Agreement is signed, the Congressional implementation process could well be rocky. NAFTA is highly controversial with several of President-elect Clinton's constituencies, and already the focus of attack by members of his own party.

NAFTA may well turn out to be the least of the international trade controversies confronting the new Administration and Congress in the coming year. Although the U.S. and the European Community narrowly averted a trade war involving agricultural commodities and food products in late November 1992, all is far from settled as the very confrontational Uruguay Round GATT negotiations continue.

For many years, the U.S. and EC have fought over the EC Common Agricultural Policy that provides for subsidization of EC agricultural products-considered by the U.S. and even GATT panels as constituting unfair trade practice. Elimination of the agricultural subsidies has been the primary U.S. objective in the Uruguay Round. Although EC and U.S. negotiators claimed to have resolved their differences in an effort to reach a satisfactory conclusion of the Uruguay Round, the EC's concessions came only days before a deadline imposed by the U.S. threatening substantial retaliation against EC exports. Moreover, the announced agreement immediately generated opposition by EC member countries, raising serious qustions as to its viability.

The Uruguay Round negotiations were placed on hold when the Europeans, to the detriment of U.S. exporters, refused to honor their commitments to modify EC policies concerning production and subsidization of oilseeds. This was following a 1989 GATT panel ruling that the EC subsidies were unlawful and a March 1992 GATT panel determination that modifications made by the EC had been inadequate. The U.S. threatened to impose 200% duties on EC exports of white wine, rapeseed oil, and wheat gluten--products having an average annual U.S. import value of nearly $300 million. The duties imposition was scheduled to begin December 5, 1992, unless the EC changed its ways. Other products, including industrial goods, also were targeted for possible retaliation.

With a trade war looming, the U.S. and EC on November 20, 1992, announced that an agreement had 'been reached that would both resolve the oilseeds dispute and make way for a successful conclusion to the Uruguay Round. Although the details of the agreement still were to be worked out, it appeared that the EC finally was ready to yield substantially to the U.S. with respect to domestic support, export subsidies, and market access. This announcement immediately drew strong objection from France and others, signaling that implementation of a U.S./EC Agreement will be very difficult at best.

Regardless of the substance of any international trade agreement, its strength is only as good as the commitment of the trading partners to honor its terms. Unfortunately, the U.S. and the EC, natural and mutually dependent trading partners, have a long history of conflict--especially when it comes to domestic agricultural support programs.

According to Jula Kinnaird, President of the National Pasta Association, an organization that itself has prevailed in a GATT challenge to agricultural subsidies: "The United States has always been willing to compete aggressively in the world market on a level playing field. If the Europeans are truly willing to agree to a set of rules that guarantee fair trade, all the effort that has gone into the Uruguay Round will have been worthwhile."

In summary

The Clinton Administration and the 103rd Congress will bring change to Washington in many respects. New faces, new enthusiasm, new rhetoric, new perspectives, and new agendas will be evident. For at least the first "100 days" of the new Administration, Congressional attention will focus on the economy. After the initial flurry of activity, all bets are off.

For the food industry, the politics will change, but not the issues. Labeling, advertising, and food safety will continue to be the big topics, with FDA enforcement, user fees, and international trade closely following. The one thing on which the industry can depend is that food issues will continue to be targeted by legislators and regulators.

Gary Fay Kushner is a partner in the Washington, DC law firm of Hogan & Hanson.

NLEA regs released--at last

Lisa R. Van Wagner, Washington Correspondent It was the White House to the rescue on December 2, 1992, as President Bush broke the deadlock between Secretary of Agriculture Edward Madigan and Secretary of Health & Human Services Louis Sullivan. The President gave Sullivan the go-ahead to announce the new food labeling regulations--with some compromise changes.

The format of the new label will be the same for all processed foods-- whether they are regulated by the Food & Drug Administration or by the Department of Agriculture (meat and poultry products). The new label features a percent daily value for nutrients based on a 2000-calorie amount, as was recommended by FDA. As part of the compromise, the format also lists daily reference values for a diet of 2500 calories--as requested by USDA. A footnote explaining how many calories are contained in a gram of fat, carbohydrates, and protein also has been added to the format.

The deadline for compliance with the changes has been extended to May 1994, but as Secretary Sullivan emphasized, "There's nothing that prevents manufacturers from putting these labels on before the effective date."

Due to some unresolved procedural questions, it is unclear when the regulations will be published as law in the Federal Register. "FDA must not delay another minute in publishing these rules in the Federal Register so we can get on with the enormous task of relabeling America's food supply," urged John Cady, President and CEO of the National Food Processors Association. Although pleased that the regulations have been released, Cady charged that the compromise label format is cluttered and hard for consumers to understand.

Proposed ban on tin-coated lead foil

The Food & Drug Administration has proposed to prohibit use of tin-coated lead foil capsules (cork and neck covetings) on wine bottles. The action is based on evidence that the lead in these coverings may become a component of the wine. Once the final rule is promulgated, FDA will consider wine to be adulterated if a tin-lead foil capsule is applied to the bottle.

For details about the proposal, contact Michael Kashtock, Center for Food Safety & Applied Nutrition (HFF-312), FDA, 202/485-0229.

Greenlight for gellan gum

FDA has approved the safe use of gellan gum as a stabilizer and thickener in foods, generally. This action responds to a petition filed by Kelco, a division of Merck & Co., Inc. In 1985, Kelco petitioned the agency for gellan gum clearance. Limited approval for use in icings, glazes, frostings, and non-standardized jams and jellies was obtained in September 1990. Now, with this new general clearance, Kelco expects that gellan gum will find application as a gelling agent and texturizer in a broader range of foods--for example, sauces, low-fat spreads, puddings, toppings, fillings, and various microwaveable foods.

For details about the final rule, contact Blondell Anderson, Center for Food Safety & Applied Nutrition, FDA, 202/2 54-9515.
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Title Annotation:Food Regulations; includes article on the issuance of new labeling regulations
Author:Kushner, Gary Jay; Van Wagner, Lisa R.
Publication:Food Processing
Date:Jan 1, 1993
Words:4666
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