FDA has examined the impacts of the final rule under Executive Order 12866 and the Regulatory Flexibility Act. Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects; distributive impacts; and equity). The Regulatory Flexibility Act (Pub. L. 96-354) requires analyzing options for regulatory relief for small businesses. The Unfunded Mandates Reform Act requires (in Section 202) that agencies prepare an assessment of anticipated costs and benefits before proposing any rule that may result in an annual expenditures by State, local and tribal governments, in the aggregate, or by the private sector, of $100,000,000, (adjusted annually for inflation). That Act also requires (in Section 205) that the agency identify and consider a reasonable number of regulatory alternatives and, from these alternatives, select the least costly, most cost-effective, or least burdensome alternative that achieves the objective of the rule. Even though FDA finds that the costs of this final rule may be below $100 million a year, estimating these costs is a difficult task involving uncertainties. This analysis, together with the preamble published in the Federal Register and supporting analysis and materials, constitutes a final RIA. Therefore, FDA has treated the final rule as an economically significant regulatory action under Executive Order 12866. Consequently, the agency has completed this full Regulatory Impact Analysis which demonstrates that this rule is consistent with the principles set in the Executive Order and in these two statutes. In addition, this document has been reviewed by the Office of Management and Budget as an economically significant regulatory action under Executive Order 12866. FDA has concluded that the net benefits of this rule (benefits minus costs) are largest for the regulatory option selected as specified by Executive Order 12866 FDA has also concluded that, pursuant to the Unfunded Mandates Act, the regulatory option selected is the least burdensome option to accomplish the goal of controlling all physical, chemical and microbiological hazards reasonably likely to be present in seafood. As a part of the preamble to the proposed regulation, FDA published a summary of the Preliminary Regulatory Impact Analysis (PRIA) and placed on file with FDA's Docket Managements Branch the complete PRIA.
FDA has fully reviewed the information on which the PRIA was based,
the comments on the PRIA, and other available information on the
costs and benefits of HACCP for the seafood industry. Based on
this review, FDA has arrived at two estimates of the costs in this
final rule as well as upper and lower estimates of benefits. The
estimates of costs and benefits are summarized in table 1.
Table 1.
SUMMARY OF TOTAL COSTS AND BENEFITS
(in millions of dollars)
YEAR
COSTS FROM
FDA MODELS
COSTS
ADJUSTED
FROM NMFS
MODEL
BENEFITS
LOWER
BENEFIT
UPPER
1
$69
$162
$73
$108
2
$42
$91
$73
$108
3
$41
$83
$85
$156
4
$38
$80
$87
$158
TOTAL*
$677
$1,482
$1,435
$2,561
* The total defines the total discounted costs and benefits beyond
the fourth year and discounted at 6%.
Preliminary Regulatory Impact Analysis (PRIA)
As a component of the proposal, FDA published a summary of a PRIA
with preliminary estimates of costs and benefits. The PRIA
included two sources of cost data. The first source included
reported costs of implementing HACCP by companies with a total of
64 processing plants. The second source was a NMFS study that was
based on a report prepared for the National Marine Fisheries
Service (NMFS). The total domestic costs that were estimated in
the PRIA were those that were derived from the NMFS study and were
estimated to be $139 million, or about $24,000 per plant in the
first year. The costs reported by industry in the PRIA were in the
$1,000 to $5,000 range annually for the majority of the firms.
Benefits that were quantified were denoted as safety benefits from
reducing the incidence of foodborne disease and health benefits
resulting from increased consumption of seafood. Safety benefits
were reported to be between $15 and $75 million per year whereas
potential health benefits, deriving from an increase in consumer
confidence in the safety of seafood, were between $3 and $14
billion.
The benefits of this final regulation include a reduction of foodborne disease associated with seafood consumption, a cost saving resulting from a more efficient HACCP certification program for exported seafood, a reduction in federal and state enforcement actions and potential health benefits deriving from improved consumer confidence in the safety of seafood. FDA, in consultation with CDC, has estimated that there are approximately 114,000 cases of foodborne illness each year associated with seafood. This represents an increase in the estimate provided in the PRIA of 33,000 cases (upperbound 80,000 cases). Most of the increase results from new information provided to FDA increasing the numbers for Hepatitis A, Norwalk virus (12,400 to 100,000) and Vibrio vulnificus. HACCP is expected to reduce between 20,000 and 59,000 of all cases each year by the third year of its operation resulting in benefits ranging between $45 to $116 million. However, most commenters who responded to the PRIA on this subject felt that reducing illnesses associated with seafood could not be affected by mandatory HACCP for processors. Comments on this subject noted that shellfish was already controlled by the Interstate Shellfish Sanitation Commission and that most problems were associated with harvesting illegally from closed waters. As enforcement of shellfish harvesting in these waters is a state function, commenters felt that federal HACCP for processors would not affect illnesses from this source. Other commenters noted that, for all kinds of seafood, the majority of problems arise from recreational harvesting or abuse by consumers or restaurants, all sources of problems outside of the scope of this rule. FDA has explained that, in fact, harvesting from illegal waters and recreational harvest which finds its way into commercial channels will be affected by the source control and recordkeeping provisions of the rule. In addition, the FDA scientific panel (a group of internal experts composed of epidemiologists, microbiologists and a seafood industry expert) took these factors into account in it's initial estimate of reduced cases. In addition, the Model Food Code, while not part of this regulation, addresses mishandling by restaurants. One particular problem that many commenters addressed was the problem of Vibrio vulnificus associated with Gulf of Mexico oysters. FDA believes that better processing controls such as icing and individual quick freezing (IQF) will reduce the number of illnesses by up to half by the third year of operation. Another benefit of this rule includes $20 million per year due to a less expensive FDA federally overseen HACCP program than the NMFS HACCP program. Because exporters must have a federally overseen HACCP program to continue to export to EU, Japan or Australia, this represents a savings to society. These benefits were qualitatively mentioned in the PRIA but not quantified. FDA fully expects that, as HACCP is implemented in the seafood industry, the need for Federal enforcement activity outside of verification inspections and general surveillance will be reduced because of better compliance by the industry. This reduction could be perhaps by as much as half of the current number of enforcement actions. Although only qualitatively mentioned in the PRIA, this benefit has been estimated to be $22 million due to fewer recalls, detentions, seizures and fewer injunctions against processors of non-molluscan seafood and seafood products such as finfish and crabmeat. States also will have fewer enforcement actions although FDA does not have sufficient data with which to quantify this benefit. In the proposed rule, FDA estimated large benefits from improvements in consumer confidence in seafood, between $3 and $14 billion. These benefits would be realized as consumers who were previously concerned about the safety of seafood became confident via the HACCP program that seafood was safe. Greater confidence in seafood would cause consumers to increase their consumption of lower fat/lower cholesterol seafood products and decrease consumption of higher fat meat and poultry. The overall decrease in fat consumed would cause a decrease in cases of coronary heart disease and cancer. Commenters pointed out some of the weaknesses in this argument including the possibility that increased prices that will result from this rule may more than offset the increase in demand for seafood and that seafood as prepared may not be much lower in fat, if at all, than meat and poultry as prepared. FDA continues to believe that this rule will promote increased confidence in seafood products although FDA cannot estimate any increase in seafood prices. Because of the many variables associated with the link between increased consumer confidence leading to increased consumption of seafood and the final link to coronary heart disease and cancer, FDA is not quantifying this benefit in this final RIA. Finally, FDA reports other benefits not quantified such as improved operational efficiencies and employee morale and decreased spoilage of finfish due to extended shelf-life. For example, Processors have confirmed to FDA the possibility that there may be "re-engineering" types o f benefits associated with these regulations.
The final rule covers both foreign and domestic seafood
manufacturers, repackers, warehouses, and U.S. importers.
Establishments that might generally be described as common
carriers, grocery stores, supermarkets, food service
establishments, or other types of retail establishments are not
covered by this final rule. Although distributors (unless they are
warehouses) and harvesting vessels are also not covered directly by
the final rule, they will be affected in those cases where
processors adopt HACCP controls that ensure that proper harvesting
and handling practices are carried out.
The range of costs for an average plant are reported in the chart
below.
Table 2
Average Per Plant Cost Estimates
Year
Adjusted NMFS
Model
FDA Model
Plants
First Year
$23,000
$6,400
Subsequent years
$13,000
$4,800
As table 2 indicates, there is still uncertainty surrounding the
cost estimates. There is no single source of data that FDA has
found to be entirely satisfactory for developing an estimate of
costs for these regulations. Because there is not yet an adequate
database of actual costs from firms that have implemented HACCP,
and no database of costs from firms that have fully implemented
these final regulations, many of the estimates for this program
were modeled. FDA has found that different models produce
different cost estimates. Consequently, this RIA contains a range
of costs as derived from two different models.
Firstly, in estimating the cost of this rule, FDA has relied
heavily on estimates and information contained in reports prepared
under a grant from the National Marine Fisheries Service (NMFS) of
the National Oceanic and Atmospheric Administration. The approach
used to furnish estimates of the costs and economic impacts of the
Model Seafood Surveillance Project (MSSP) HACCP-based program on
manufacturers is based on data and cost estimates collected at the
plant level. NMFS randomly selected, for field visits, a sample of
130 plants from the seafood manufacturers listed in the NMFS
database. These plants were not operating under HACCP. The costs
estimated were based on private contractor estimates of the costs
of the HACCP program designed by the National Marine Fisheries
Program. While there are many similarities between the MSSP and
the requirements of this regulation, there are some significant
differences, including coverage of nonsafety hazards such as
decomposition and fraud (which FDA did not include in its own
estimate taken from the MSSP study). Thus, this source of
information consisted of data, in terms of the distribution of
processing types and information on current conditions in the
industry (plant, equipment and practices relative to HACCP), and
engineered estimates on needed plant and equipment changes as well
as HACCP costs expenditures.
In areas where FDA had better data than that used in the reports
for NMFS, it used this information including data from its field
surveys on current practices or conditions in the industry in
general. For example, the NMFS estimated that there were 2,800
domestic seafood processing plants in 1989, whereas FDA counted
4,846 plants in 1992 for both the PRIA and this RIA. Another
source of uncertainty in the analysis is that the sample taken from
a universe of 2,800 plants may not be representative of a sample
that could be drawn from 4,486 plants. Where gaps in the NMFS
estimates exist that could not be filled in by information from FDA
field surveys, a number of assumptions detailed throughout this
analysis have been made for the purposes of this economic
assessment, this was also done in the PRIA. Average plant costs
estimated from this source are estimated to be $23,000 in the first
year and $13,000 in subsequent years.
In addition to the cost estimate based on the MSSP modeling, FDA
has provided an alternative model that gives the basis for a second
cost estimate for these regulations. In this model, FDA's seafood
experts estimated the cost of compliance with these regulations by
creating two hypothetical small seafood processors that the agency
believes to be representative of a significant portion of the
seafood industry.
One of the model processors is assumed to be in substantial
compliance with existing GMP requirements. Therefore, the costs
experienced by that firm are attributable exclusively to the
establishment and maintenance of a HACCP system. The other
processor has GMP deficiencies that the agency believes are
commonly displayed by seafood processors, although no major plant
or equipment changes such as those reported in the MSSP report
($40-45 million) are assumed to be required. This model processor
is identical to the other processor except for the GMP deviations.
The costs calculated for this second firm represent costs
associated with the establishment and maintenance of HACCP as well
as costs associated with the correction and monitoring of
sanitation conditions.
Reports received by FDA on the actual costs of implementing HACCP
experienced by a number of seafood processors generally corroborate
the results of this modeling across the seafood industry. The
majority of firms that could estimate their start up costs
indicated costs in the $1,000 to $5,000 range. The rest appear to
be roughly equally divided between costs that are below and above
this range. Whereas some firms reported costs less than $1,000
others reported costs in excess of $20,000. In subsequent years,
some firms reported costs that exceed first year costs.
While the models were limited to certain types of small operations,
the firms for which FDA has received cost information that
represent a cross section of processing operation types, including
canned, fresh, frozen, smoked/salted, molluscan shellfish, and
cooked, ready-to-eat products as well as warehouses and repacking
operations. While this information is neither sufficiently
detailed nor complete enough to calculate costs of the proposed
regulations that will be incurred by the entire seafood industry,
it indicates that the FDA modeling is reasonable and that the cost
estimate for the regulations as extrapolated from the FDA modeling
should be included in this RIA.
In order to estimate an average plant cost from these theoretical
models FDA has assumed, based on its inspection experience, that
20% of the firms are similar to the model plant that needs to make
some GMP improvements and that 80% of the firms are similar to the
plant that is in compliance with existing GMPs. The agency has
also assumed that the cost of compliance of large firms is equal to
that of small firms. Average plant costs estimated in this manner
are $6,400 in the first year and $4,800 in subsequent years.
FDA used the two hypothetical models of small plants to represent
all small processors. The total cost of this regulation using this
hypothetical method of cost modeling is $75 million in the first
year and $28 million in the fourth year and beyond. However,
implicit in these calculations is the assumption that the small
plant models of two plants that (1) cut and package tuna that is
received frozen (no hazards) and (2) distribute frozen orange
roughy fillets (a product for which there are hazards) can
represent the universe of different types of processors such as raw
molluscan shellfish, cooked shrimp, surimi, smoked fish or breaded
fish processors. The agency recognizes the difficulty with these
projections. Nonetheless, the modeling demonstrates that
processors may have costs that are significantly below the averages
estimated by means of the MSSP report.
Virtually all commenters who addressed the PRIA's cost estimates,
including the MSSP estimates, stated their belief that the cost
estimates in the PRIA were underestimated. However, based on
agency experience, FDA assumes that most commenters who submit
comments on costs are on the high end of the distribution.
Based on the FDA model, total domestic costs are estimated to be
$64 million in the first year, $39 million in the second year, $41
million in the third year and $38 million in the fourth and
following years. Total foreign processor costs passed on to U.S.
consumers are estimated to be $5 million in the first year and $3
million in the second year and zero beyond the second year.
Based on the NMFS model taken from the sample plants, total
domestic costs estimated for harvesters, manufacturers, importers,
repackers, and warehouses will be $144 million in first year, $71
million in second year, $83 million in third year and $80 million
in the fourth and following years. Total foreign processor costs
passed on to U.S. consumers are estimated to be $18 million in
first year and $10 million in second year. The agency expects that
there will be no costs to foreign processors attributable to this
rule after the second year.
There are several major differences between the preliminary
economic analysis and this final analysis of this regulation.
Firstly, cost estimates have been made for several items for which
no cost estimates were previously made. They include cost
estimates of verification, analytical testing and controls for V.
vulnificus. Secondly, the agency has reduced its estimates of
costs for several items from the estimates previously made. They
include costs to importers, costs of writing HACCP plans, costs to
processors that export and foreign plant costs.
FDA has also completed a final Regulatory Flexibility Analysis that
examines the impacts of the rule on small businesses. Although
much of the costs of compliance with this rule are fixed costs, and
therefore affect small businesses disproportionately, FDA believes
that various factors will help small firms comply without undue
economic hardship. These factors include providing two years to
comply from the date of publication of this rule (applies to all
firms, regardless of size), provision of a hazard guide which can
be used to create a HACCP plan, and other organizational help such
as the Seafood Alliance. First year average cost estimates for
small firms range from as low as $5,600 to $12,400 in the FDA model
plant estimates (depending upon the extent of compliance with
GMP's) to $23,000 estimated in the MSSP model. However, some
plants with no GMP deficiencies and no hazards may have minimal
costs whereas others with severe plant and equipment problems may
have much higher costs. FDA estimates that 140 small firms will go
out of business for every per 1% increase in the price of seafood
although FDA is unable to estimate the actual price increase that
will result from this regulation. If demand increases for seafood,
this will mitigate some of the price effects.
In estimating the cost of this rule, FDA has relied heavily on estimates and information contained in reports (the Kearney reports) prepared for the National Fisheries Education and Research Foundation, Inc. (NFERF) by A.T. Kearney, Inc. (Contract No. NA88AA-H-SK006). NFERF, which is associated with the National Fisheries Institute, commissioned the reports after receiving a grant from the National Marine Fisheries Service (NMFS) of the National Oceanic and Atmospheric Administration. These reports estimated the incremental costs beyond those now being incurred by seafood processors for implementing the specific HACCP-based system developed for the National Marine Fisheries Service's Model Seafood Surveillance Project (MSSP). The approach taken by A.T. Kearney, Inc. to furnish estimates of the costs and economic impacts of the MSSP HACCP-based program on manufacturers is based on estimates and data collected at the plant level. To perform in-plant, on-site analysis, NMFS randomly selected for field visits a sample of 130 plants from the seafood manufacturers listed in the NMFS database. These plants were not operating under HACCP. Information on sanitation, processing and economic conditions was collected from each individual plant. Controls now in place and records currently being kept were taken into account. Estimates were then made of the costs to these firms to install and implement MSSP HACCP systems. The numbers of small and large firms were estimated using the percentages of firms in various industry segments with less than $1,000,000 in annual gross revenue ($2,000,000 in annual gross revenue for plants manufacturing breaded, cooked or raw shrimp) reported in the Kearney reports. The primary benefits estimated in the PRIA were the safety benefits, the reduction in foodborne disease caused by seafood consumption. The estimates derived for these benefits used, among other sources, a report commissioned by FDA from Research Triangle Institute entitled "Estimating the Value of Consumer's Loss from Foods Violating the FD&C Act." This model had five components: 1) identify adverse health effect(s) from a violation, 2) describe impacts on health, 3) estimate changes in health status, 4) estimate utility losses, and 5) estimate dollar values of utility losses. FDA has used the same methodology in this final RIA. The first component of the model is the annual incidence of foodborne disease that results from seafood consumption. Next, each case of illness was "valued" by examining consumers' loss in terms of medical expenses, lost productivity and pain and suffering. Where loss of life was an outcome of a foodborne disease, $5 million was used to value that outcome. Morbidity losses and medical expenses were directly estimated. Lost productivity and pain and suffering were indirectly estimated as time endured (days, weeks) being sick in relative states (mild, moderate, severe or death) of discomfort and inability to work. FDA then used an internal panel of experts to determine, hazard by hazard, the number of cases of illness expected to be avoided by the proposed regulation each year. In the final rule, FDA has consulted with CDC on these estimates. Multiplying each avoided case by the cost of the illness gives the total safety benefit to be derived by this rule. For example, FDA has estimated that between 4,000 and 6,000 cases of scombrotoxin poisonings will be avoided as vessels and processors take better care to ice certain kinds of finfish such as tuna and mackerel to prevent histamine formation. Scombrotoxin poisoning is generally a mild illness that lasts only a day or so. Costs of lost productivity and pain and suffering are valued at approximately $340 per case with total benefits estimated to be between $1,354,377 and $2,031,566.
FDA received approximately 230 comments on issues involving the
PRIA which are summarized and analyzed below.
MARKET FAILURE
No comments were received that directly addressed the issue of
whether or not the food safety issues addressed in this proposal
are adequately addressed by the seafood market. Some commenters
did address this indirectly and those comments are discussed in the
preamble to the final rule. FDA continues to believe that seafood
safety is a problem that should be addressed by Federal regulation.
ESTIMATION OF COSTS AND BENEFITS
Both costs and benefits of HACCP are difficult to predict, and this
difficulty is reflected in the comments. Costs and benefits of
HACCP will depend on several factors. First, the first edition of
the FDA Fish and Fishery Products Hazards and Controls Guide (the
Guide) that the agency will publish prior to the effective date of
but after publication of this rule will help firms to do a hazard
analysis and create their HACCP plan. Second, enforcement of HACCP
by both Federal and State regulators presents a different kind of
challenge from more prescriptive types of regulations and thus
makes cost estimation more difficult. Third, and most importantly,
because processors are responsible for operating their own HACCP
systems, the numerous decisions that domestic and foreign producers
make will ultimately determine the costs and benefits of HACCP.
These decisions reflect changing information and technologies.
Thus, unlike traditional regulation, where there is either an
established performance level or required technology, HACCP is a
flexible, interactive system that will evolve as conditions
warrant. This system presents greater challenges for a benefit-cost analysis, w
hich must predict the actions of affected entities.
With this HACCP program in place, a retrospective look will help
with future efforts at mandating HACCP for other sectors of the
food industry and for better estimating future costs and benefits
of HACCP programs.
Regulatory Options
The agency raised and received comment on a number of regulatory
options in the PRIA. The most significant two options raised were
regulating only high risk products or the most serious hazards and
providing regulatory relief for small businesses. The first option
is inconsistent with the objective of this regulation, to control
all physical, chemical or microbiological hazards reasonably likely
to be present in seafood products. Although FDA has not granted
relief only for small business, FDA has extended the compliance
date for all firms from one to two years. COSTS
As explained more fully below, FDA used modeling techniques and the
experience reported by seafood firms to produce estimates that are
in general agreement and that are approximately one fourth of those
in the PRIA, ranging from a total of $677 million to $1.4 billion
(discounted). Moreover, these estimates are also consistent with
the estimates made for NMFS of implementing HACCP by small
processors. Even though FDA found that the costs of this final
rule may be below $100 million, estimating these costs is a
difficult task involving many uncertainties. For example, the
agency recognizes that the final rule may affect in a material way
seafood processors such that FDA has treated this final rule as a
significant regulatory action under Executive Order 12866.
Consequently, the agency has completed a full Regulatory Impact
Analysis.
While there is some experience with HACCP in the seafood industry,
that experience is limited, and one may be uncertain about being
able to generalize from it to all processors because the first
firms to initiate HACCP are likely to be those who derive the
greatest economic advantage from implementing it. In the PRIA, FDA
was reluctant to rely only on the results of the limited experience
with HACCP in the seafood industry. Thus, FDA balanced the
reports of some seafood firms, which showed that the costs of HACCP
were low, with a study of the costs of HACCP that had been done
under contract with NMFS. This study showed significantly higher
costs (as reflected in the range of cost estimates summarized
above) but had several limitations in terms of its applicability to
this cost analysis. For example, none of the plants that were the
subjects of the study had actually implemented HACCP, and the
system whose costs were studied was significantly broader in scope
than the system embodied in Part 123 (this final rule). FDA had to
extract the relevant requirements in order to produce cost
estimates. Moreover, some of the controls in the NMFS study are
more expensive than controls that processors could select under the
FDA program. Despite these facts, the cost estimates in the PRIA
were based on the results of the NMFS study because FDA considered
it to represent the best evidence available.
FDA used three separate estimates of the costs in the PRIA to
ensure that the uncertainties in the estimates of the costs that
would be imposed by adoption of this regulation were accounted for.
The first is the cost comments that were received on the PRIA. FDA
took advantage of them whenever they were supported by data. The
second is modeling by FDA experts based on their experience with
hazards and controls in the seafood industry, working with aquatic
species and the public health problems that they present,
inspecting and studying both seafood plants and low acid canned
food (LACF) plants (which have operated under HACCP principles for
almost two decades), and participating in the FDA-NMFS seafood
pilot. The results of this modeling are detailed below. The third
source is information that FDA received about firms that have
actually implemented HACCP.
Adjusted Cost Estimates from the NMFS Report
Table 3 summarizes the specific cost estimates that FDA arrived at
using data from the NMFS model with cost refinements received from
commenters and FDA seafood industry experts. The refinements in
the estimates from the PRIA are fully explained below. These
adjusted cost estimates from the NMFS model result in per plant
costs for domestic manufacturers of $23,000 in the first year and
$13,000 in subsequent years. Total costs for compliance with these
regulations using the adjusted NMFS data are shown in table 3.
Table 3
Disaggregated Costs from Adjusted NMFS Model
First Year Costs
Domestic manufacturers and importers: $112 million
Major plant repair and renovation: $ 13 million
Sea Grant expertise: $ 1 million
Repackers and warehouses: $ 14 million
Harvesters for rejected raw product: $ 1 million
Shellfish vessels: $ 3 million
Foreign processors: $ 18 million
First Year TOTAL: $162 million
Second Year Costs
Domestic manufacturers: $ 65 million
Sea Grant expertise: $ 1 million
Repackers and warehouses: $ 14 million
Shellfish vessels: $ 1 million
Foreign processors: $ 10 million
Second Year TOTAL: $ 91 million
Third Year Costs
Domestic manufacturers: $ 65 million
Sea Grant expertise: $ 1 million
Repackers and warehouses: $ 14 million
IQF Shellfish plants: $ 3 million
Third Year TOTAL: $ 83 million
Fourth Year (and subsequent years) Costs
Domestic manufacturers: $ 65 million
Sea Grant expertise: $ 1 million
Repackers and warehouses: $ 14 million
Fourth Year TOTAL: $ 80 million
Total Discounted Costs
Beyond the fourth year and discounted at 6%, the costs are $1,482
million. The agency requested that commenters supply data on a number of
cost categories for which it did not have sufficient data to make
estimates, as well as on all other aspects of the analysis. It is
important to remember that these comments and FDA's response to
them generally involve either costs that the agency estimated from
the NMFS model or that the agency was not able to estimate in the
PRIA. For this RIA, the agency has revised the cost estimate from
the NMFS model partly on the basis of these comments and partly on
the basis of differences between the proposal and the final
regulations. As mentioned above, this estimate is then compared to
a second cost estimate, based on the FDA modeling as supported by
reported industry costs. A discussion of the comments received on
costs in the PRIA follows.
Cost of Creating a HACCP Plan
A number of commenters stated that FDA underestimated the amount of
time (24 and 72 person hours, respectively for simple and complex
plans) required to develop a HACCP plan. In the PRIA all plants
producing cooked crustaceans; smoked, cured and dried fish; stuffed
specialty products; and surimi analog products were assumed to have
complex plans. Another commenter said that FDA's estimates were
"about right." One commenter from the National Marine Fisheries
Service stated that, based on their experience with the NMFS HACCP-based Inspect
ion Program, "it takes a significant amount of time to
develop a workable, effective HACCP plan." One large seafood
processor that produces a variety of products stated that FDA's
estimates should be doubled to 48 person hours for simple plans and
144 hours for complex plans "if the [plan developer| has been
trained in HACCP and has a working knowledge of HACCP before
creating a program."
The NMFS commented that, based on its experience, the development
of a HACCP plan takes considerable time and effort. FDA has stated
in this final rule that HACCP plans are not required when the
conclusion of a hazard analysis is that there is no reasonable
likelihood of a safety hazard to be controlled. However, FDA
believes that NMFS' comment is due primarily to the fact that the
NMFS' HACCP plans cover quality and economic adulteration issues as
well as safety measures required by this rule. FDA believes that
the seafood industry is dominated by firms that would have
relatively simple HACCP plans if safety were the only issue. This
is the primary reason why these costs were reduced from the NMFS
estimate in FDA's analysis of the costs of HACCP. Moreover, the
agency is convinced that two factors will have a bearing on the
time necessary to develop a HACCP plan. First, FDA's Guide will
enable the rapid development of plans in many cases. Second, the
training in HACCP being developed by the Seafood HACCP Alliance
(the Alliance) is expected to include the drafting of actual HACCP
plans. Processors with simple plans should have a major portion of
their plans already drafted by the completion of the course.
However, FDA is convinced by the majority of commenters which
stated that FDA had underestimated the time to prepare a HACCP
plan. Thus, FDA is revising its estimates to 24 person hours for
simple plans and 144 hours for complex plans. FDA believes that
the vast majority of plants will be developing simple HACCP plans.
FDA anticipates that complex HACCP plans will be confined to 25% of
the plants in the following categories: cooked crustaceans;
smoked, cured and dried fish; stuffed specialty products; and
surimi analog products. Plans for the other 75% of plants in those
categories, as well as for all plants in other categories, should
be relatively simple.
One comment from an Extension/Sea Grant Seafood Processing
Specialist addressed FDA's assertions that Sea Grant seafood
specialists would be available to act as inexpensive consultants
and processing authorities helping small processors develop HACCP
plans and assisting them in verification activities. The commenter
stated that "Local area Sea Grant Extension offices do not usually
house seafood specialists and therefore will not be a good source
of process authorities unless new staff are hired and unless those
new staff are attached to some research group which has the ability
and budget for testing and research. Inland processors have very
little access to Sea Grant Extension offices."
However, the agency remains convinced that Sea Grant will provide
such services to processors as it has committed itself to do
through its participation in the Alliance. Sea Grant seafood
specialists are, in fact, located in many seafood processing areas.
Nonetheless, the cost to society is approximately the same whether
it is paid by processors or by taxpayers for the support of the Sea
Grant program. The agency erred by not including an estimate of
the cost of assistance from Sea Grant in the PRIA. If the cost to
Sea Grant of providing assistance to processors is $500 per plant
and one half of the small plants (1923 plants) per year receive
assistance from Sea Grant Seafood Specialists, then the annual
social cost of assistance from this source will be approximately $1
million. While this shifts a portion of the cost from processors
and importers to Sea Grant, there is no net effect on the overall
estimated costs of this regulation.
Plants Already Operating under HACCP
For the purpose of estimating costs in the PRIA, the agency assumed
that none of the 4,846 plants were operating under HACCP. FDA is
revising that assumption based on the fact that 439 plants now
shipping to the EU will need to have HACCP systems in place by
January 1, 1996. The cost of establishing such systems would be
incurred by these processors irrespective of the issuance of these
regulations. Additionally, as of July 1995, 80 processors were
operating under the NMFS HACCP program and 90 more were expected to
be by the end of 1995 for a total of 170. Allowing for an assumed
50% overlap with the processors that ship to the EU, this adds an
additional 85 plants to the 439 plants now shipping to the EU that
will implement HACCP by the end of the year regardless of the
implementation these regulations. This means that a total of 524
plants (439 + 85) may be expected to have HACCP in place by the end
of 1995.
For the purposes of this analysis, FDA has assumed that all of
these plants fall into the category that the agency has classified
as large, although, in fact, some exporters could actually be
classified as small. Based on this assumption, the number of large
plants in each category of seafood manufacturer has been reduced by
a factor of 524/1000 (the fraction of large manufacturers that will
have implemented HACCP by January 1, 1996). The agency recognizes
that even these plants may need to make some minor changes based on
the requirements of this rule. These changes are estimated to be
$1,000 per plant per year, or the equivalent of 15 minutes of
managerial labor time at $15 per hour per day.
Cost of Corrective Actions
A number of commenters challenged FDA's assumption that the annual
per plant cost will be $1,000 for taking corrective actions when
deviations from critical limits occur. A few commenters indicated
that critical limit deviations occur daily. A few other commenters
indicated that the cost of responding to deviations from critical
limits would be approximately $10,000 in the early phase of
implementation because of destroyed or reworked product, analytical
tests, production down-time, and labor time spent investigating the
cause, severity, and consequence of the deviations. A few
commenters indicated that costs could be even higher for large
plants processing products with a high retail value in cases where
product must be destroyed. However, one commenter from one of the
largest meat and seafood processing companies in the US stated
that, after operating under HACCP for a number of years, the cost
of responding to critical limit deviations is approximately $1,000
per year.
FDA agrees with the comment that pointed out that the cost of
taking corrective actions will be correlated with the value of a
firm's output. Thus, if a relatively large firm reports annual
corrective action costs of $1,000, it is reasonable, all other
things being equal, to assume that smaller firms will have lower
annual costs for corrective actions.
In response to the comments that stated that deviations from
critical limits occur every day, the agency observes that the
monitoring and recordkeeping features of HACCP are intended, in
part, to enable processors to spot trends in processing parameters
that, if properly responded to, will prevent deviations from
occurring every day. FDA expects that deviations will become much
less frequent under a well-running HACCP system.
Nonetheless, based on the data submitted, the agency is revising
its estimate of the cost of corrective actions. The agency has
estimated that the average cost of responding to critical limit
deviations will be $2,000 per plant in the first year, and $1,000
in the following years. FDA believes that firms that experience
$10,000 in corrective action costs in a year have significant
control problems that must be remedied regardless of whether HACCP
is remedied or not.
Cost of Verification
Several commenters challenged the absence of a cost associated with
changes in the HACCP plan once the original plan had been put in
place. One comment, from a very large seafood processor, stated
that "The Agency has also underestimated the costs of verifying the
adequacy of a HACCP plan. Verification activities may include
shelf-life testing, pathogen challenge testing, and certain in-line
and finished product testing. Manufacturers often modify product
formulations, processes and production equipment. It is common
that at least one such change takes place each year. We feel that
the HACCP-related cost of verification activities is approximately
$5,000 initially, and $1,000 thereafter for each product/production
line combination on an annual basis."
The agency agrees that HACCP plans will need to be verified, and
possibly altered, every time a plant produces a new product or
substantially changes its production process. Depending upon the
circumstances, plans may also have to be verified after taking a
corrective action. Whether the plan would then require alteration
that would involve notable cost to the processor would depend on
whether the hazards and controls for those hazards had changed.
Based on FDA's own inspection experience, not all plants would be
expected to make such changes in a given year. Many, if not most,
would be expected to process the same products from the same
sources for many years.
In the final rule, the agency is requiring that the HACCP plan be
reviewed annually as part of the verification activity. As the
preamble to the final regulations points out, much of the annual
verification can be informal. The regulations are deliberately
flexible on this point in order to allow processors to develop
verification systems that are appropriate to their operations.
FDA's preliminary cost estimates were based on information in the
agency's databases that seafood plants produce, on average, two
different types of products (for example, shucked oysters and
cooked crabs). Using this data and the per product/production line
estimates supplied by the commenter, the verification cost for the
average plant with two product/production line combinations would
be estimated to be $10,000 in the first year and $2,000 thereafter.
However, based on the changes made in this final rule, the agency
now estimates that the per plant cost of verification activities is
approximately $1,000 per year. In the agency's judgement, this
amount should be sufficient for verification of the HACCP plan
covering the entire plant. The agency believes that the size and
complexity of the types of seafood produced by the commenter are an
explanation for the higher reported costs. For example, shelf-life
testing and pathogen challenge testing should not be necessary for
most products.
Verification - Cost of Analytical Testing
In the PRIA, FDA made no estimate of the cost of analytical testing
but asked for and received numerous comments on this cost. The
comments can be grouped into two sets, those relating to analytical
testing of seafood in general, and those relating to testing for
mercury in particular species.
In regard to testing seafood in general, many commenters stated
that it is not unusual for processors to receive raw products from
many different suppliers in the same year. Commenters stated that
the per sample testing cost ranges from $50 to $450. Several
commenters stated that, on average, the cost per sample is $250.
All of the commenters that remarked on this issue expressed concern
that the suggested testing frequencies described in the Guide would
place a financial burden on seafood processors significant enough
to threaten their viability. Based on firm costs calculated by
several commenters, testing costs ranged from $5,340 annually for
a small plant with an undocumented number of species and suppliers
to $22,500 annually for a small plant with three suppliers of ten
species.
As previously mentioned, finished product testing is identified in
the final rule as a verification procedure at the option of the
processor. FDA believes that many processors will choose other,
less costly verification options. Where testing proves necessary,
FDA believes that the frequency of testing will vary greatly (e.g.,
from several samples per year to verify the performance of a new
supplier to one sample per lot as is currently practiced by the
canned tuna industry for histamine analysis). Many of these
analyses will not be new costs as processors are now doing some
testing. The testing recommendations in the draft Guide are being
reviewed and cost considerations, as described in the comments,
will be carefully considered and balanced against public health
needs before making recommendations for testing in the first
edition of the Guide. Table 4 identifies the ten most commonly
consumed species of fish and their likely analytical testing needs
for: industrial and agricultural chemical contaminants (Chemical),
methyl mercury (MeHg), marine toxins (Toxin), histamine, food and
color additives used in feed (Additive), parasites, aquaculture
drugs (Drug), and microbial pathogens associated with the harvest
water (Pathogen). The table does not reflect analytical testing
that may be performed to verify the control of hazards that are
introduced during processing, such as pathogens introduced during
the processing of a cooked, ready-to-eat product. On average, FDA
expects that processors will collect and analyze four additional
samples per year at a total cost of $1,000 per plant per year.
Table 4
Likely Analytical Testing Relating to the Control of Species-Related Hazards i
n the Ten Most Commonly Consumed Types of Fish
Types
Chemical
MeHg
Toxin
Histamine
Additive
Parasite
Drug
Pathogen
tuna
No
No1
No
Yes2
No
No
No
No3
shrimp
No4
No
No
No
Yes5
No
No4
No4
cod
No
No
No
No
No
No
No
No
pollock
No
No
No
No
No
No
No
No
flatfish
No6
No
No
No
No
No
No
No
clams
Yes7
No
Yes7
No
No
No
No
Yes7
catfish
Yes8
No
No
No
No
No
Yes8
No
salmon
No9
No
No
No
No9
No10
No9
No3
crabs
No
No
No
No
No
No
No
No
scallops
No
No
Yes11
No
No
No
No
No3
1 Not likely for most tuna species. However, methyl mercury
testing may be performed as a verification function in some large
species of tuna.
2 Histamine testing may be performed as part of a system of
monitoring (as it is now in the canned tuna industry), corrective
action, or verification.
3 Not likely for most tuna, salmon, or scallop products.
However, pathogen testing may be performed as a verification
function in tuna, salmon, or scallop intended for raw consumption.
4 Not likely for wild caught shrimp. However, chemical
contaminants, drug residue and salmonella testing may be performed
as a verification function in aquacultured shrimp where there is
reason to suspect a problem.
5 Sulfite testing may be performed as a raw material monitoring
method or may be performed as a verification function in wild
caught shrimp.
6 Not likely for most flatfish. However, chemical contaminant
testing may be performed as a verification function for near-shore
species of flatfish.
7 Chemical contaminant, toxin, and/or microbiological testing
may be performed as a verification function for clams. However,
such testing is routinely performed by State Shellfish Control
Agencies as part of their growing water classification efforts, and
it is likely that most processors will rely upon this effort.
8 Chemical contaminants and drug residue testing may be
performed as a verification function in aquacultured catfish where
there is reason to suspect a problem.
9 Not likely for wild caught salmon. However, chemical
contaminants, food and color additives, and drug residue testing
may be performed as a verification function in aquacultured salmon
where there is reason to suspect a problem.
10 Not likely for most salmon products. However, parasite
testing may be performed as a verification function for salmon
intended for raw consumption.
11 Toxin testing may be performed as a verification function for
whole scallops. However, such testing is routinely performed by
State Shellfish Control Agencies, and it is likely that most
processors will rely upon this effort.
Cost of Consumer Complaint Evaluation
A number of commenters stated that setting up and operating
consumer complaint evaluation systems could range from $25,000 to
$100,000 per year. The agency estimated $1,000 for this purpose.
In the final rule the agency has changed its expectations for the
handling of consumer complaints so that consumer complaint handling
and evaluation should not be as costly as it would have been had
the provisions in the proposal been finalized. Plants will be
expected to evaluate consumer complaints for their relevance to
food safety concerns, however, plants need not have detailed
written operating procedures as to how that will be done. The
agency also notes that many processors never receive consumer
complaints, primarily because many products lack brand names.
Moreover, most processors of branded products already evaluate
consumer complaints on a regular basis. The agency believes that,
given these facts and the changes in the regulation, the average
per plant cost of the additional activities required by this rule
is $100 annually.
Cost of Monitoring and Recordkeeping and Hiring Personnel
As more fully discussed in the preamble of the final rule, many
commenters addressed the monitoring and recordkeeping requirements.
Some provided unsubstantiated estimates of the cost of these
provisions of the rule. Approximately half of the commenters,
however, agreed with FDA's estimate of approximately 650 person
hours per plant per year. In the absence of additional data, the
agency is retaining its original estimate.
Numerous commenters stated that the amount of extra labor needed
for monitoring and recordkeeping would cause processors to have to
hire another employee. Some of the commenters on this topic stated
that the agency had not estimated the cost of hiring a full-time
employee. Other commenters stated that they could not afford to
hire an additional employee and that the need to do so would cause
financial hardship. FDA acknowledges that some processors may need
to hire more workers as a result of this rule. However, the FDA
believes that, in many cases, employees already working at or near
critical control points (CCPs) can monitor those points as they
should be doing now in most cases and by only making a brief
notation of the result of that monitoring. In most cases only
simple recordkeeping is needed.
If processors choose to hire workers to work more hours than the
additional hours needed to satisfy the monitoring and recordkeeping
requirements of this rule, then it would presumably be because the
processors decide to employ workers for reasons beyond the
requirements of this regulation. Therefore the agency rejects the
comments that the cost of this regulation is more than the
additional hours estimated for monitoring and recordkeeping.
Cost of Temperature Monitoring and Recording Equipment
Many commenters stated that temperature recording devices cost
$1,000 each to purchase and install. Based on information cited in
the preamble to the proposed rule, FDA's preliminary cost analysis
assumed that 35% of the plants would need to purchase and install
two temperature recording devices costing $1,000 each. The agency
recognizes that some plants may need to install more than two
devices, while other plants may only need to install one device.
FDA believes that the preliminary cost estimates appropriately
accounted for the cost of temperature monitoring and recording
devices. Nonetheless, no plant is required to have a temperature
recording device under these regulations so long as they can
effectively monitor their CCPs through other means (e.g., high
temperature alarms for coolers). This is one example of how
processors have a range of choices available to them that makes it
difficult to assign a single overall cost for these regulations
with certainty.
Cost of Record Storage Space
One commenter requested that FDA include an estimate of the rental
cost of space needed to keep records required by this rule. In its
preliminary cost estimate the agency included costs for storage
cabinets for records in cases where the reports for NMFS indicated
that they were necessary. The agency acknowledges that large
plants may generate large volumes of records. However, FDA
encourages processors to keep simple records wherever appropriate,
and that complex and lengthy notations should be the exception, not
the rule. In any event, in the absence of data in these comments
with which to make new estimates of costs, the agency finds that it
has no basis to alter its previously estimated cost of record
storage. Furthermore, the NMFS study was based on a form of HACCP
which included quality and economic adulteration that would
generate far more records than the HACCP system being mandated in
these regulations (i.e., safety only).
In addition, it should be noted that the final regulations have
added some flexibility to records storage in remote locations by
deleting the proposed requirement that records from remote
processing facilities be returned to those facilities during the
processing season. Now records from remote sites may be
transferred to more convenient locations under certain
circumstances and may remain at those locations. Therefore, FDA
concludes that the costs of record storage are minimal.
Cost of Training
Several commenters stated that to ensure that they could operate in
compliance with the regulation, each plant would need two HACCP
trained individuals. FDA does not rule out the possibility that
some firms will need more than one HACCP trained individual. Such
firms may be among the larger and more complex seafood operations.
However, the final regulation differs from the proposal in two key
respects that should affect the number of trained individuals that
processors need. First, as discussed in detail in the preamble of
the final rule, the agency is requiring, among other things, only
that a HACCP trained individual review the monitoring records of
CCPs weekly rather than before shipment of the product to which the
records relate. This modification from the proposal should reduce
the need for a trained individual to be on site continually and
should lower costs. Second, the final regulation no longer
requires that each processor employ at least one trained
individual, only that certain functions be performed by a trained
individual. Thus, processors who do not need a HACCP trained
individual on site all the time may purchase the services of a
trained third party on an as needed basis. Shared purchasing of
third parties should also decrease the average number of trained
individuals needed per processor. Therefore, FDA estimates that,
on average, small processors will need to have only one individual
trained per plant. The agency assumes, for the purpose of this
analysis that all large plants have already employed HACCP trained
individuals.
In terms of the number of employees per plant that must be trained,
several commenters believed the agency's estimate of $900 to train
a single individual in HACCP to be too low. No additional data
were submitted by these commenters. The agency notes that the most
recent quoted prices for HACCP courses have increased, but does not
find that its original estimates need to be increased significantly
to reflect these price increases. Thus, based on the cost cutting
measures discussed in the final rule regarding the Alliance
Steering Committee curriculum, and the lack of additional data from
commenters, the agency continues to believe that training a single
individual by a cost-conscious processor will not exceed $1,000.
Several commenters stated that for HACCP to be successful, all
plant employees should receive some type of training in HACCP. The
agency agrees that HACCP works best when plant employees working at
CCPs are taught the purpose of HACCP, their particular
responsibilities, and how they fit into the HACCP system. Such
training need not be as extensive as for the individuals fulfilling
the role of the HACCP-trained individual identified in the rule.
In its preliminary cost estimate, FDA based its estimate of
training needs on the judgement of the inspectors involved in
producing the reports for NMFS. From the sample of plants in each
seafood category, FDA extrapolated to training needs for the entire
seafood industry. Nonetheless, although the cost of training
production workers in HACCP responsibilities was not separately
described in the preliminary cost analysis, those costs were
included in the above estimate.
Cost of Major Plant Repair, Renovation and Reconstruction
Several commenters criticized FDA for rejecting the estimate of the
reports for NMFS that a total of $40 to $45 million would need to
be spent for major plant repair, renovation and reconstruction.
The agency stated that it believed that $13 million was a more
accurate estimate. The commenters all described their anticipated
need for major plant repairs with the highest estimated cost being
$200,000. The NMFS studies, on the other hand, reported only two
plants that needed major repairs -- one with estimated costs of
$441,000 and the other with estimated costs of $500,000. The
highest amount provided by a commenter represents only 45% of the
lower cost of the two plants ($441,000) described in the NMFS
reports. The agency is satisfied that the two plants described in
the NMFS reports were gross anomalies, and the agency stands by its
initial judgement that the cost of major plant repair, renovation
and reconstruction is a one-time cost of $13 million.
Cost of Creating Sanitary Zones
Many commenters stated that the creation of sanitary zones in
existing plants could cost as much as $200,000. These commenters
described the cost of building new walls and purchasing separate
refrigerators for cooked and raw products. In the final rule, the
agency is not requiring the creation of sanitary zones and includes
no such costs for creating sanitary zones in its cost estimate.
Importer Costs
Many commenters stated that they believed that FDA had
underestimated the costs to importers. One commenter stated that
"Many small seafood firms import products from over 25 countries"
and that they cannot afford to provide the surveillance necessary
to ensure compliance. Some commenters estimated that annual costs
could go as high as $200,000 per importer. No data was included
with these comments to support the estimates, and FDA believes that
this estimate is unrealistically high. Nonetheless, FDA has
considered the various comments received concerning importers.
Importers are now required only to conduct verification activities
(unless they also meet the definition of a processor), and HACCP
training is not required for importers. In fact, FDA plans to
include in the forthcoming first edition of the Guide specific
materials related to importer's verification procedures.
Although FDA believes that US importers are likely to incur some
additional costs from implementation of the regulation, the
requirements to importers are much less than were originally
proposed. In the absence of an active, functioning and enforceable
MOU between the FDA and the country from which the products are
being imported, importers must have written product specifications
to ensure that the product is not adulterated under section 402(a)
or 402(c) of the Federal Food Drug and Cosmetic Act and take one or
more affirmative steps to ensure that the products being imported
were processed under HACCP and sanitation controls. Most importers
already have written product specifications covering safety and
quality. FDA estimates that importers that do not currently have
written purchasing specifications could develop them in about two
hours of managerial time per product. In many cases, importers
could use existing Federal tolerances, action levels and guidelines
relating to safety standards, as described in the preamble to the
final rule. On average the cost of writing and updating product
specifications could be conservatively estimated at $500 per
importer. The regulation describes several affirmative steps that
importers may take. The least costly option described in the
regulation is for the importer to maintain on file a copy, in
English, of the foreign processor's HACCP plan and a written
guarantee from the foreign processor that the imported product is
being processed in accordance with that HACCP plan. The cost of
taking this step should be very small.
Several commenters questioned the agency's estimate of the number
of importers. These commenters stated that it appeared that the
agency had only included importer establishments and left out
processors who also import. These commenters stated that some
processors purchase raw materials directly from foreign suppliers.
The agency concedes that it did not include as importers processors
that purchase products directly from foreign suppliers. The agency
does not have exact data on the number of these entities but is
estimating that there are approximately 1,000 total importers. The
agency estimates that the aggregate cost to all importers is
$500,000 annually.
Cost of Processing Authorities
Several commenters questioned the ability of firms to hire
processing authorities for $1,000. These commenters provided no
information as to the cost of processing authorities. In the
absence of more information, the agency will retain the initial
estimate of $1,000.
Cost of Changing Suppliers
One commenter asserted that the cost of changing suppliers would
range from $15,000 to $50,000 instead of the $1,000 that the FDA
used in its preliminary cost estimate. In the absence of more
supporting documentation for these estimates, the agency is not
convinced that such a large expenditure would be required to find
a different supplier. The agency also believes that the need to
change suppliers will diminish as mandatory HACCP takes effect and
suppliers themselves begin to practice HACCP.
Cost of Preventing Viral Contamination of Shellfish Harvesting
Areas
The agency believes that some portion of viral infections from raw
molluscan shellfish will be prevented by eliminating the fecal
contamination of molluscan shellfish growing waters caused by the
harvesting vessels operating in those waters. One of the most
significant ways that viral diseases (e.g., illnesses related to
Norwalk and hepatitis A viruses) could be reduced is if molluscan
shellfish processors only receive raw product from harvesters that
have a means of containing human waste so that it is not discharged
overboard. If there are 10,000 harvesting vessels operating
nationally in these waters and 50% of them do not have some means
of containing waste, then these 5,000 vessels could remedy this
situation by purchasing a 5 gallon sealable bucket (approximately
$5), as proposed by the FDA to the ISSC. FDA believes that this
is an acceptable option for handling waste on harvesting vessels
with no other means of controlling waste. The total cost of adding
such facilities is negligible relative to the overall estimates of
the costs of this regulation.
Cost of Controlling Vibrio vulnificus
As the preamble to the proposed regulations pointed out, FDA does
not expect processors to install impractical controls for hazards
or to have controls that are beyond known technology. The agency
does expect processors to be aware of new developments regarding
controls and to integrate them into their HACCP systems where
practical. Moreover, where definitive controls do not yet exist
for a hazard, FDA expects that processors will take any reasonable,
prudent measures available that will reduce the risk of a hazard.
For V. vulnificus in raw molluscan shellfish, the preamble noted
that time and temperature controls constituted such prudent
measures. As better controls become available, the preamble
advised, processors of these products should incorporate them.
Better control strategies must reduce V. vulnificus infections to
achieve the benefits claimed for this regulation later in this
analysis.
Foodborne cases of infections with V. vulnificus and deaths are
associated with the consumption of raw molluscan shellfish taken
from the Gulf of Mexico between the months of April and November.
The current state of knowledge regarding factors leading to V.
vulnificus infection is incomplete. However, epidemiologic and
ecologic studies suggest that risk of infection increases with
increasing bacterial cell numbers in oysters. While data do not
support establishment of an infectious dose, reduced exposure to
the pathogen through reduction in cell counts in meats showed a
reduction in the risk of infection. It is a common practice in
many food processing plants, as well as clinical settings, to
attempt to reduce risks from bacterial pathogens by taking actions
which either will prevent proliferation of the bacteria, or which
will actually decrease the number of bacteria.
Interstate molluscan shellfish shippers could insist that
harvesters rapidly chill oysters at the harvesting location rather
than dockside. Although normal cooling will not reduce the numbers
of V. vulnificus cells, reduction would occur if raw molluscan
shellfish are cooled to 13�C or below. Another possible control
step is for shippers to insist that vessels without cooling
capabilities relay their harvest to refrigerated vessels or spend
a short amount of time in the harvesting area, so that the harvest
is quickly delivered to dockside refrigeration. Both control steps
could be costly to molluscan shellfish harvesters. In places where
the harvesting areas are located far from shore, shortening the
time spent at the harvesting area may not be effective since,
regardless of the time spent in the harvesting area, the shellstock
would still be out of the water for the full duration of the trip
to the dock. In the calculation of the benefits for this
regulation, FDA has assumed that 50% of all molluscan shellfish
shippers will employ time and temperature controls for the first
two years that this regulation is in effect in an effort to control
V. vulnificus.
If 50% of the shippers require, as a matter of purchasing
specifications, rapid chilling of the harvest, it may affect 50% of
the estimated 2,500 harvesting vessels operating in the Gulf of
Mexico. A few of the 1,250 oyster dredging vessels operating in
the Gulf currently use on-board refrigeration units for rapidly
cooling shellstock. These units cost approximately $5,000 each.
However, because of the large size of the units relative to the
limited deck area of many dredges, perhaps only 300 vessel
operators will install on-board refrigeration. The majority are
expected to relay to appropriate vessels or to land their product
in a shorter time after it has been harvested. For the 1,250
tonging vessels that operate relatively close to the landing sites,
shorter harvesting periods are the most feasible alternatives. FDA
estimates the cost of such an operational change to be $1,000
because of additional fuel and smaller output per unit of labor and
capital. If 1,000 of the tonging vessels shorten their times in
the harvesting areas, then the total cost for both dredges and
tongers is estimated to be $2.5 million for the first year. In
subsequent years, the cost is $1 million per year for tonging
vessels (without including the extra fuel costs for powering the
refrigeration units on dredges).
However, in order to reduce the number of cases of V. vulnificus to
between 20% and 50% of existing cases, FDA assumes that
manufacturers will employ more extensive processing changes. Some
firms may build new facilities capable of individually quick-
freezing (IQF) oysters. Such expenditures for plant and equipment
would amount to approximately $150,000 per firm. With an average
yearly Gulf Coast output of 18 million pounds of oyster meat, and
considering that approximately half of this product is be harvested
during the warm weather months, if half of the warm weather product
is subjected to an IQF process, then approximately 4.5 million
pounds of oyster meat would need to be quick-frozen. If there were
no transportation problems this quantity of product could be
processed by only a few IQF plants. Several such plants currently
exist along the Gulf Coast, with under-utilized capacity in the
warm weather season. However, almost all of the existing plants
are freezing other species. Thus, it is likely that for logistical
reasons, as many as eighteen IQF processing plants (one for each
major Gulf Coast oyster harvesting area) would be needed for a
total cost of approximately $3 million (excluding the costs of
energy and refrigerants). This analysis does not account for the
additional costs of processing oysters through IQF, for which FDA
has no information.
Another control that interstate molluscan shellfish processors
could employ is to cease marketing raw shellstock harvested from
the Gulf of Mexico from April through October. This option would
have a significant impact on those areas of the Gulf region where
the harvesting, processing, shipping and sale of molluscan
shellfish play an important part in the local economies.
The agency is currently in the process of studying the costs of
controlling V. vulnificus using actions such as the ones mentioned
above. (Contract No. 223-91-2238, Task Order No. 4, "Cost Analysis
of Options Affecting Seasonal Gulf Oyster Marketing")
Cost Effects of the Regulation on Quality
A few commenters expressed concern that compliance with the draft
Guide for tuna would require that products be frozen in order to
prevent histamine growth, and that for swordfish the mercury
testing expectations would reduce freshness due to the time needed
to perform the test. The agency is in the process of revising the
draft Guide and will take these comments into account. In summary,
the first edition of the Guide will make it clear that these
species do not need to be frozen. In addition, the agency does not
believe that there will be deterioration in product quality as a
result of any product testing that may be necessary for methyl
mercury because product need not be held pending analysis.
Cost to the Federal Government
Several commenters were dissatisfied with the agency's statement
that all Federal government costs that result from this regulation
will be covered by existing appropriations. These commenters
stated that the relevant issue is the government resources that
will be devoted to seafood inspection as a result of this
regulation that otherwise would have been devoted to the inspection
of other FDA regulated products. FDA agrees that this description
relates to the opportunity cost of this regulation and that it is
relevant. The question of agency resources that may be spent on
seafood inspections is more fully discussed in the preamble to the
final regulations. However in summary, the agency believes that
there is enough flexibility in a HACCP-based inspection system to
accommodate whatever resource situation exists in the agency at the
time of implementing HACCP.
Cost of Refrigeration
Many commenters stated that, in order to meet the requirements in
the Guide that refrigerated products be held at or below 40�F, they
would need to purchase new or additional refrigeration units.
Commenters generally agreed that the cost of new refrigeration
units is $50,000 per unit. FDA's preliminary cost analysis did not
include estimates of costs of increased refrigeration, but
specifically requested information from commenters. To estimate
the number of plants that will need new refrigeration units, FDA
has used data obtained from its High Risk Survey. That survey of
442 processors of temperature sensitive shellfish and specialty
products found that 6% of the storage refrigerators were operating
above 45�F and 14% were operating at or above 41�F and at or less
than 45�F.
For the purposes of this analysis, FDA assumes that one-tenth of
the refrigerating units operating above 45�F will need to be
replaced, as it is possible that they either cannot achieve 40�F or
the units would be so inefficient at achieving that temperature
that replacement would be the lowest cost option. This suggests
that 0.5% of processors of cooked, ready-to-eat and smoked fish
products (7 plants) will need to purchase new refrigeration units.
Assuming each plant needs only a single new refrigeration unit, the
total cost for new refrigeration units is $353,000.
The agency assumes that the estimated 14% of processors of cooked,
ready-to-eat and smoked fish products that have coolers operating
at or above 41�F, but at or less than 45�F and 90% of the 6% of the
units that are operating above 45�F, could achieve the 40�F setting
by one or more of the following: lowering the temperature at which
the current refrigeration units are set to operate, changing
operating procedures (e.g., keeping cooler doors closed or
prechilling product with forced air or ice), or making repairs to
the units. In some cases this would require more electricity,
parts replacement, or other repairs. Because the amount of
electricity needed to attain a given temperature is determined by
so many variables, each with a wide variance, the agency is not
attempting to estimate the extra cost of electricity and thus, this
may be a source of underestimation. However, this underestimate
may be partially offset by the possibility that the new
refrigeration units purchased by 0.5% of the processors of cooked
ready-to-eat and smoked fish products will be more energy efficient
than the older units they replace.
Attribution of Costs to Other Laws and Regulations
Several commenters disagreed with the agency's decision to
attribute all the costs of HACCP implementation in Alaskan plants
to an Alaskan State law that requires all processors to operate
under HACCP plans. The commenters objected that the Alaskan law
has only been applied to Alaskan seafood canning operations, though
it was enacted several years ago. Because this law has been
enforced only on canneries since its enactment, only Alaskan
canneries have incurred any HACCP costs related to the law. The
FDA agrees with these commenters. For determining both costs and
benefits, the agency uses as its baseline the best estimate of the
practices, activities, expenditures and cases of illness that exist
prior to the regulation or are predicted to change because of
market behavior. Just as the agency has not decreased its estimate
of the benefits of this regulation in anticipation of the Alaskan
law, the agency will also not decrease its estimate of the cost of
this regulation because of the possible implementation of the law.
The inclusion of costs that will be incurred by Alaskan firms in
the analysis adds 497 to the number of domestic plants affected by
the rule.
Cost of Controls on Vessels Harvesting Scombrotoxin Forming Species
Several commenters stated that the cost of temperature controls on
vessels that harvest scombrotoxic species would be approximately
$10,000 per year. Several commenters reported that the "cost of
installing a deck chill tank on albacore tuna trollers was not
included in the cost estimate. Recording time and temperature in
such a deck tank will probably be the only way for fishermen to
document that they have properly handled their fish. An insulated
ice chill tank made of stainless steel might cost $5,000." A few
commenters also reported that costs of temperature recorders and
labor for monitoring account for an additional $5,000 for a total
of $10,000. One commenter suggested that one half of the boats
might need to make this expenditure, and another commenter reported
that 8,000 vessels were involved in harvesting scombrotoxin forming
species.
FDA believes that the vast majority of scombrotoxic fish species
harvesting vessels probably already are taking proper precautions
to avoid this problem. Because scombrotoxin is at least partially
correlated with decomposition, it is in each harvester's best
interest to control this hazard. Illnesses are not always from
well established commercial fishing vessels, but can also be
associated with poor handling practices on sport fishing vessels
and by irregular suppliers of finfish into interstate commerce.
FDA expects that, under a system of HACCP controls, processors will
require that all vessels that supply them with raw materials keep
records of properly handled seafood before selling their catch.
FDA has no good data on the numbers of vessels that annually supply
scombrotoxic fish species into interstate commerce but, for the
purposes of this analysis, will assume that 100 small vessels will
need to make additional investments. It is assumed that $500 will
cover the annual cost of ice supplies, containers to hold the ice,
thermometers and catch/temperature log books to meet purchasers
specifications or approximately $50,000 per year (for the
industry).
If the foreign fleet is of the same size and condition as the
domestic fleet, the total cost for scombroid fish harvesting
vessels is $100,000 per year. However, consistent with assumptions
made elsewhere in this document (that only 25% of foreign costs are
passed on to US consumers), FDA assumes that only $12,500 of the
foreign vessel costs will be passed on to U.S. consumers.
Unintended Cost Consequences of Holding Processors Responsible for
Transporter Handling of Product
Two comments from Hawaii expressed concern that if processors need
to place time and temperature controls on airlines that transport
products to the US mainland, the airlines would likely refuse to
carry seafood. The commenters stated that air carriers find it
difficult to handle such cargos under current circumstances and
that air carriers do not want to take cargo that needs special
attention. In the absence of data to support these concerns, the
agency is unable to verify this cost.
Cost of Administrative Overhead
Two commenters questioned why FDA used rates for administrative
overhead that are significantly below the rates that the agency
uses for estimates of its own financial costs. In the PRIA, the
agency used a 20% administrative overhead factor for first year
processor costs and a 10% administrative overhead factor for
processor costs in succeeding years. The commenters noted that,
for its own activities, the agency uses an annual factor ranging
from 70% to 110%. In general, the commenters are close to the
overhead factors used by the agency in its own activities.
However, in the absence of data supplied by commenters, FDA is not
persuaded to change the overhead rates used in the PRIA for seafood
processors. Administrative costs of government and of seafood
processors are unlikely to be similar. In addition, some of the
activities for which costs are estimated could be reasonably
construed to include administrative activities whereas FDA's
administrative activities are more narrowly defined.
Furthermore, the agency will be providing processors with
administrative assistance in the form of the Guide. FDA has held
several meetings around the country to explain the proposed
regulation, as well as sending speakers to numerous meetings with
trade associations. The agency expects to engage in extensive
outreach soon after the final regulations are issued. In all of
these ways the agency is assisting the managerial implementation of
the rule, which will reduce the administrative overhead costs.
Nevertheless, the agency acknowledges that these estimates must not
be considered to be precise estimates of the total administrative
cost. The agency concludes that the estimates used in the PRIA,
20% of all other costs in the first year and 10% thereafter, are
essentially correct and will use these estimates in the analysis.
Cost of Smoked, Cured & Dried Fish Guidelines
A few commenters wrote to state that under this regulation they
would have to reformulate their smoked fish products due to the
recommendation that brine be refrigerated. These comments did not
provide any information as to the number of plants that would need
to reformulate or the cost of reformulation. The agency
acknowledges that some products may need to be reformulated and
that reformulation is not without cost. However, without any data
on the cost and number of products to be reformulated, FDA will not
make an estimate of the reformulation cost of smoked fish products.
The final regulations contain a performance standard for these
products that require them to be free of botulism toxin through the
shelf life of the product. Any reformulation that will be required
of processors will depend on whether they can meet this standard
with their existing formulations.
FDA has included in the RIA the cost of labeling smoked fish
products with a statement containing the information that the
product is to be kept refrigerated at 38�F or below. The costs are
$168,000, the lower bound of the $168,000 to $2.5 million estimated
in the PRIA. Based on FDA's inspection experience the agency
believes that 75% of the products already bear such a statement.
The labeling change is estimated to result in a one-time cost of
$1,000 per small plant.
Foreign Plant Costs
FDA has estimated that, on average, foreign plant costs will be
half that of domestic plant costs, due to generally lower labor
costs in foreign countries. Based on information from US Customs
Service databases on imports into the US, the agency estimates that
6,000 foreign firms ship seafood products to the US. The agency
believes that this is a generally accurate estimate of the number
of foreign plants that export to the US, since one processing plant
may supply several exporters and one exporter may purchase product
from several processing plants.
One commenter challenged the agency's assertion in the PRIA that
additional costs that will be incurred by plants now exporting to
the EU should not be attributable to this regulation. The
commenter stated that none of the EU member nations have yet
enacted HACCP requirements. But in fact, an EU directive has been
enacted to require member nations to enact HACCP requirements for
seafood within a short period of time. The agency is counting
compliance costs with this regulation by foreign processors and
vessels for the first two years. This attribution reflects some
uncertainty as to these estimates. The first uncertainty is that
the agency is not able to accurately estimate how much of the
foreign cost of this rule will be passed on to US consumers. In
this analysis the agency has assumed 25% of the foreign costs would
be passed on. The second uncertainty is that the agency does know
how many of the foreign plants that export to the US are not
exporters to the EU. The third uncertainty is that the agency does
not know to what extent the exact HACCP requirements that EU
nations place on importers will match the exact requirements of
this rule.
Because it is highly unlikely that the entire output of the plants
that export to the US is devoted to supplying the US market, FDA
attributes only a portion of the costs incurred by foreign
processors and vessels to this regulation. The agency believes
that foreign plants that make expenditures to comply with this
regulation will spread the costs of compliance over all of their
output rather than only over the portion of output that is shipped
to the US. FDA has assumed that 25% of the costs of compliance
will be passed on to US consumers. Based on these assumptions, the
agency finds that the relevant foreign costs of this regulation are
$18 million in the first year and $10 million in the second year.
Cost Estimates Based on the FDA Model
In addition to the cost estimate based on the NMFS modeling
(described above), FDA is presenting a second cost estimate for
these regulations. The uncertainties associated with the choices
that will be made by seafood processors for controlling hazards
justify providing a range of potential costs based on more than one
model.
In examples created by seafood experts within FDA, the cost of
compliance with these regulations was estimated for two small
seafood processors that the agency believes to be representative of
a significant portion of the seafood industry. One of the plants
is assumed to be in substantial compliance with existing GMP
requirements. Therefore, the costs experienced by that plant are
attributable exclusively to the establishment and maintenance of a
HACCP system. The other plant has some Current Good Manufacturing
Practice (CGMP) deficiencies that the agency believes are typical
of those displayed by seafood processors. This plant is identical
to the first plant except for the CGMP deviations. The costs
calculated for this second plant represent the costs associated
with the establishment and maintenance of HACCP as well as costs
associated with the correction and monitoring of CGMP deficiencies,
i.e., poor sanitation conditions.
The models concern two plants that cut and package tuna which is
received frozen and that also distribute orange roughy fillets.
The complexity of the processing operations, and the nature and
number of hazards, are assumed to be equivalent to those of the
other types of operations. FDA recognizes the difficulty in fully
validating this assumption. Nonetheless, the results of this
modeling demonstrate that processors may have costs that are
significantly below the averages estimated with adjustments to the
NMFS report. Moreover, as discussed later, data received about
firms that have implemented HACCP are generally supportive of the
results of this modeling.
Small Plant Cost Example 1
This is the example of a plant that is a processor of frozen tuna
steaks and distributor of imported orange roughy fillets who
receives all fish frozen. This plant is located in a major seafood
processing region, so there is no need for plant personnel to
travel to other cities to receive training. It would be available
locally. This processor operates 280 days per year. The plant
manager is paid $15 per hour and production workers are paid $8.50
per hour. No food safety hazards are reasonably likely to occur in
orange roughy, so a written hazard analysis shows hazards for tuna
only.
This processor has no need to make GMP improvements so the plant
costs are limited to the following:
1. Training: ($760) This is calculated as follows: $400 tuition
plus the opportunity cost of training time (24 hours x $15 per
hour). The processor is expected to do most of the hazard
analysis during the class.
2. HACCP Plan Refinement: ($240) This is calculated as taking 16
hours billed at $15 per hour using the Guide.
3. Plant Sanitation Audit: ($0) This is done 3 times daily for 20
minutes each time. However, because the firm is modeled as
being in compliance with existing GMPs, it is assumed that
these audits are already being done. It is assumed that there
is a negligible cost for recordkeeping.
Critical Control Points
4. Receiving CCP (histamine): ($3,200) This processor gets a
freezing log from the tuna harvester and makes a visual check
of the fish to see that they are frozen. The processor keeps
a copy of the freezing log and makes a note of the visual
check. The fish are then transferred to a plant freezer. The
monitoring takes 15 minutes per lot for 4 lots per day.
Similar monitoring is already occurring and the marginal cost
for the recordkeeping is negligible.
The processor drills a representative sample of each lot and
performs an organoleptic examination for decomposition of the
tuna. It is assumed that this monitoring is not being done
previous to this regulation and takes 20 minutes per lot for
4 lots per day. Monitoring is billed at $8.50 per hour.
Also, there is a cost for a new drill ($50), and it is assumed
that recordkeeping costs are negligible.
5. Cutting CCP (metal fragments): ($0) A worker checks the saw
blade at every break to look for broken saw teeth and keeps a
log of checking on the teeth. Monitoring takes a few minutes
per break. It is assumed that there is a negligible marginal
cost for the monitoring and recordkeeping. Fish is weighed,
packed, labeled and returned to the freezer.
Corrective Actions
6. Problems with incoming product: ($0) It is expected that
product rejects in the first year would be higher but they
would return to current levels in the second year as
harvesters became aware of the processor's new requirements.
The total cost for the industry is $1 million for the first
year and zero in the following years. Because harvesters and
not processors bear the cost of rejected raw product, this
cost is included in table 5 as a separate line item and not in
table 4 which includes only costs borne by processors.
7. A saw tooth breaks every two years: ($20) A worker needs to
examine potentially affected product every two years. This is
expected to take 4 hours billed at $8.50 to check two hours
worth of cutting.
Verification
8. Record review: ($400) This involves a review of 5 sanitation
records, 5 receiving records, and a log book for the cutting
operation. These are expected to be very simple (e.g.,
records with check marks). Consequently, this review is
expected to take 30 minutes per week billed at $15 per hour.
9. Review hazard analysis & HACCP plan: ($60) This is expected to
take 4 hours per year at $15 per hour.
10. Administrative changes - 20% of all of the other costs in the
first year and 10% in the second year.
Small Plant Cost Example 2
The categories of costs that are different from Example 1 are
explained below. Beyond these differences the plants are assumed
to be identical.
1. Plant Sanitation Audit: ($2,800) This will need to be done 3
times daily taking approximately 20 minutes for each audit. It is
assumed that some minimal sanitation assessment is already being
done once per day, but an additional 40 minutes would be required
to perform three adequate audits. Again, it is assumed that there
is a negligible cost for recordkeeping.
2. Extra Equipment Cleaning and Sanitizing: ($2,480) This is
assumed to take 1 hour per day billed at $8.50 per hour.
Additional water, and cleaning and sanitizing materials are assumed
to cost $100.
3. Eliminate Fly Infestation: ($330) Torn screens need to be
repaired taking 2 hours billed at $8.50 per hour. Screening
materials assumed to cost $15 are needed. An exterminator to apply
pesticides costs $300.
Table 5 represents the models described above in tabular form.
Table 5
FDA Models of Small Plants
Small
Plant 1
(No GMP
Costs)
Small
Plant 1
(No GMP
Costs)
Small
Plant 2
(GMP
Costs)
Small
Plant 2
(GMP
Costs)
CATEGORY
Year 1
Year 2 -
Year 1
Year 2 -
Training
760
0
760
0
HACCP Plan
Refinement
240
0
240
0
Sanitation
Audit
0
0
2800
2800
Receiving CCP
3200
3200
3200
3200
Cutting CCP
0
0
0
0
Sawtooth
Monitoring
20
20
20
20
Record Review
400
400
400
400
HACCP Plan
Review
60
60
60
60
Equipment
Cleaning
0
0
2500
2500
Eliminate
Pests
0
0
330
0
Administration
940
370
2100
900
PER PLANT
COSTS
$5,600
$4,000
$12,400
$9,900
Extrapolation to Total Industry Cost
In order to estimate an average plant cost from these FDA model
plants, FDA assumed that, based on the results of the agency's
1990/1991 survey of the seafood industry, 20% of the small firms
are similar to the model plant that requires some CGMP improvements
(Small Plant 2) and that 80% of the small firms are similar to the
model plant that is in compliance with CGMPs (Small Plant 1).
These estimates (20% and 80%) come from FDA's survey of the seafood
industry.
The agency has also assumed that the cost of compliance for large
firms is the same as that of small firms. There are offsetting
considerations that have led the agency to make this assumption in
this model. For example, agency experience suggests that it is
likely that small firms will, on average, have larger sanitation
costs and thus incur greater expenses to rectify existing CGMP
deviations. Large firms, on the other hand, are more likely to
have a greater number of products and processing lines, resulting
in greater costs of plan development and monitoring. However, the
agency believes that large firms are more likely to already have
preventive controls, formalized sanitation programs, and
recordkeeping systems in place than small firms. Additionally,
large firms are more likely to take on new monitoring regimes with
their existing quality control and production staffs than are small
firms. The agency believes that these considerations counteract
each other and should result in equal costs for large and small
firms.
To complete the FDA model, FDA assumed that exporters (one half of
the 1,000 large firms) would only need to spend $1,000 in order to
comply with this rule. Combining the two plant total costs as
reported in Table 5 and weighting the proportion of the industry
they are assumed to represent, average plant costs are estimated to
be $6,400 in the first year and $4,800 in subsequent years.
The foreign processor costs associated with this rule and passed on
to US consumers are estimated to be 13% of the average domestic
plant costs. The total cost of this regulation using this method
of cost modeling is $69 million in the first year and $38 million
in the fourth year and beyond.
Total costs for compliance with these regulations using the FDA
model are shown in table 6. Table 6
Disaggregated Costs from FDA Model
First Year Costs
Domestic manufacturers and importers: $ 32 million
Major plant repair and renovation: $ 13 million
Sea Grant expertise: $ 1 million
Repackers and warehouses: $ 14 million
Harvesters for rejected raw product: $ 1 million
Shellfish vessels: $ 3 million
Foreign processors: $ 5 million
First Year TOTAL: $ 69 million
Second Year Costs
Domestic manufacturers: $ 23 million
Sea Grant expertise: $ 1 million
Repackers and warehouses: $ 14 million
Shellfish vessels: $ 1 million
Foreign processors: $ 3 million
Second Year TOTAL: $ 42 million
Third Year Costs
Domestic manufacturers: $ 23 million
Sea Grant expertise: $ 1 million
Repackers and warehouses: $ 14 million
IQF Shellfish plants: $ 3 million
Third Year TOTAL: $ 41 million
Fourth Year (and subsequent years) Costs
Domestic manufacturers: $ 23 million
Sea Grant expertise: $ 1 million
Repackers and warehouses: $ 14 million
Fourth Year TOTAL: $ 38 million
Total Discounted Costs
Beyond the fourth year and discounted at 6%, the costs are $677
million. Comparison of Costs of the NMFS and FDA Models
Table 7 provides a summary of the combined estimates of average
domestic seafood manufacturer plant costs. As the table makes
clear, there is still some uncertainty surrounding the cost
estimates. There is no single source of data that FDA has found to
be entirely satisfactory for estimating the costs for the
regulations. FDA has provided estimates based on two models, as
described above, that provide a range of possibilities.
In Table 7 the first column reports plant costs developed by making
adjustments to the data in the NMFS reports. The second column
reports the model plant average presented by FDA.
Table 7
Per Plant Cost Estimates for Domestic Manufacturers
Year
Adjusted NMFS
Model
FDA Model
Plants
First Year
$23,000
$6,400
Subsequent years
$13,000
$4,800
There are a number of explanations that would account for the
uncertainty between the FDA and NMFS models. Virtually all of the
difference can be explained by the two different estimates of what
it would take to come into compliance with 21 CFR Part 110 (FDA's
CGMP regulations). In the case of the NMFS study, the contractors
estimated the cost of coming into full compliance with all CGMPs.
Using this methodology, they found that approximately 80% of the
plants were out of compliance. On the other hand, the FDA model
uses the results of FDA's own survey of the industry, which only
listed plants as being out of compliance if the CGMP violations
were related to potential contamination of the seafood product. In
this case, FDA found that only about 20% of the firms were out of
compliance. In addition, the FDA cost model assumes the simplest,
least expensive corrective action to solve the CGMP violation. The
NMFS model did not use the same approach in all cases.
Other Cost Reports
Reports received by FDA on the cost of implementing HACCP discussed
below appear generally to support the results of the FDA modeling
across the seafood industry. While the modeling was limited to
certain types of small operations, the firms for which FDA has
information on reported actual costs represent a cross section of
processing operation types, including canned, fresh, frozen,
smoked/salted, molluscan shellfish, and cooked, ready-to-eat
products as well as warehouses and repacking operations. It should
be noted that these costs are reported only as an additional source
of information. They were not used to generate FDA's model plants.
The cost information obtained from industry includes responses to
a 1991 evaluation questionnaire from 4 firms that participated in
the FDA/NOAA seafood HACCP pilot in 1990-1991. It also includes
information provided to FDA from 7 firms through the assistance of
the National Food Processors Association. (These seven firms
operate a total of 44 processing plants.) It further includes
information from two seafood trade associations, the National
Fisheries Institute and the New England Fisheries Development
Association (NEFDA), which provided FDA with summary information
about member firms that had implemented HACCP systems. The two
seafood trade associations provided information on 16 firms. NEFDA
operated a HACCP pilot with member firms through a Federal grant.
All of this information was received by FDA before the publication
of the proposed regulations and was reported in the PRIA. After
the publication of the proposal, FDA received information from a
large processor-exporter on its HACCP start-up costs. This
processor reported start up costs of $1,000 per plant. In total,
FDA has information on 86 plants.
Many of these firms have implemented HACCP as participants in pilot
programs, the NOAA fee-for-service program, or the State of Alaska
program, and therefore their HACCP systems have been subject to
some form of third party verification. Virtually all of these
plants have developed HACCP plans, many of which included CCPs for
quality or economic fraud or both in addition to safety. In this
respect, many firms implemented a more extensive form of HACCP than
is being mandated by FDA.
More complete information on start-up costs received from 22 firms
who have implemented HACCP is summarized in table 8. Some of these
costs are for multi-plant firms and some for firms operating only
one plant. Table 8
Start-up Costs
# Firms Start-up costs
4
< $1,000
15
$1,000-$5,000
1
$5,0000-$10,000
1
$10,000-$15,000
1
> $20,000
FDA notes that there are several uncertainties with these data.
The agency does not have sufficient information to extrapolate the
costs observed by these firms to the entire industry. FDA also
does not know the extent of previous HACCP-type activities in these
firms so that they may have different incremental costs than the
industry average. Additionally, for costs in subsequent years,
some of the firms reported costs that exceeded the start-up costs
shown in Table 8 although some were below, and it is not clear if
costs that might be incurred in order to comply with CGMPs are
represented. Nevertheless, the range of reported start-up costs
are consistent with the FDA model for a processing operation that
is in full compliance with CGMPs.
Notably, the estimates developed for NMFS of the costs of operating
HACCP systems for small businesses are consistent with the FDA
model and with the costs reported by firms actually operating HACCP
systems as discussed above. Thus, three independent sources of
information suggest that average annual HACCP costs, at least for
small businesses, are within a range of $3,000 to $6,000 per plant
if sanitation costs are not included. Although the HACCP cost
estimates made for NMFS did not include certain aspects of a HACCP
system such as HACCP plan development, plan verification, and
taking corrective actions, the estimates did include the costs of
operating HACCP systems for quality and economic adulteration in
addition to safety. The FDA HACCP system involves safety only and
is therefore less expensive in that respect.
It is also worth noting that three independent sources (FDA's own
inspection experience, NMFS' inspection experience with plants
purchasing its voluntary inspection services, and the contractor's
report for NMFS) confirm the existence of sanitation deficiencies
in some seafood plants. Since FDA holds that these conditions must
be corrected under existing requirements, then the costs associated
with these corrections will be borne by processors regardless of
whether sanitation provisions are included in the seafood HACCP
regulations or somewhere else. Sanitation controls for processors
may address a number of enteric pathogens discussed elsewhere in
this analysis including Salmonella, Shigella, hepatitis A, Listeria
monocytogenes, campylobacter, and Clostridium botulinum.
Contamination may come from either the raw product or from poor
hygiene practices such as insufficient control of vermin (flies and
rodents) or insanitary water. In addition, poor sanitation may
cause contamination of the product with pesticides, lubricants,
cleaning compounds, or other toxic substances because of improper
labeling, storage or use. The sanitation control system in the
seafood HACCP regulations is based on the monitoring of sanitation
conditions by processors. FDA is not aware of any method for
processors to take control of the sanitation conditions within
their plants other than by a method that involves routine
monitoring. Recording the results of these observations, as
required by the regulations, need involve only minimal additional
cost.
Seafood Prices
A number of commenters referred to the effect that the regulation
will have on the price of seafood that consumers experience at the
retail level. The PRIA presumed that most of the cost of
compliance of the proposed regulations would be passed on to
consumers. It calculated that if the domestic industry passed on
to consumers all of the costs estimated in the PRIA, prices for
domestically produced seafood would increase by less than 1% in the
first year and less than 0.5% in succeeding years. The PRIA noted
that price changes of such magnitude are unlikely to have a
significant impact on general seafood purchases.
Some commenters claimed that all of the cost of the regulation
would be born by processors, and that none of the increase in cost
would be passed on to consumers. These commenters explained that
seafood is currently at a disadvantage compared to other flesh
foods for consumers' food dollars because seafood has a higher
price per pound. If the relative price of seafood were to increase
further, consumers would eat less seafood. These commenters also
explained that domestic seafood processors are at a competitive
disadvantage compared with seafood that can be imported at low
cost. If domestic processors were to raise their prices, seafood
imports would take an even larger part of the seafood market away
from domestically produced seafood.
Other commenters said that processors will pass on all of the cost
of the regulation, and that the regulation will cause the consumer
price of seafood to rise. Some said that the price increase would
be large enough to cause a decrease in seafood consumption.
Both theories have some merit, although neither is completely
correct. The agency agrees that, all other things remaining the
same, an increase in the price of seafood will decrease seafood
consumption and increase the consumption of other flesh foods.
However, the decision of a consumer to purchase a product depends
on a number of factors.
Seafood includes many species which vary significantly across types
of products and over time in price per pound. Such diversity of
price makes it clear that there is not perfect substitution among
the flesh foods. Nevertheless, databases on food consumption are
equally clear at showing that as people have increased their
consumption of various seafood products, they have reduced their
consumption of meat and poultry.
There are other non-price factors in the consumption decision. A
consumer survey found that taste, quality, and freshness were rated
above price in decisions to order seafood in a restaurant or to
purchase for preparation at home. In a survey of retailers'
experiences, consumers ranked quality ahead of price in making
seafood selections and rated the need for information on cooking as
a concern equal to price.
Another relevant consideration is the fact that a disproportionate
percentage of seafood is consumed in restaurants as a luxury item
where the cost of the raw material plays a smaller role in
influencing the purchasing decisions of consumers.
All of this information is consistent with other data in this
analysis that suggests that a 1% change in price results in less
than a 0.5% change in seafood consumption.
Another major factor that lessens any competitive cost advantage
that meat and poultry products might gain from an increase in the
price of seafood is that USDA is proposing similar HACCP
regulations for meat and poultry. USDA's proposal, if finalized
for meat and poultry products, suggests that all segments of the
flesh food market may face cost increases in the near future. It
is entirely possible that the price of seafood relative to meat and
poultry will not change. The agency agrees that some seafood
imports have a cost advantage over domestically produced seafood,
primarily due to lower labor and capital costs of production.
However, because the regulation applies to imports as well as
domestic products and because exporters from and importers to EU
member nations will soon be under HACCP requirements and
experiencing increased costs, it is reasonable to assume that the
price of imported seafood relative to domestic seafood will not
change.
In the short run, the ability of producers to pass on cost
increases is largely determined by the elasticity of demand (the
degree to which consumers reduce their consumption of a good in
response to a given increase in price) and the elasticity of supply
(the degree to which producers increase their production of a good
in response to a given increase in price). The elasticity of
demand is determined in turn by, among other things, the presence
or absence of close substitutes. Thus, for example, if there are
close substitutes and the price of a good goes up, consumers will
not continue to consume the higher priced good but switch to one of
the substitutes.
If manufacturers know that consumers will not switch to a
substitute when there is a price increase, then they are free to
pass along all of the increased costs (from complying with the
regulation) in the form of price increases. However, where there
are substitutes for seafood, such as other flesh foods, consumers
respond to price increases by reducing their consumption of the
higher priced good. Rather than attempting to pass on all of the
costs of the regulation in the form of higher prices, producers
must accept reduced profits and bear some, if not all, of the
burden of the cost increase.
In very competitive markets, such as the market for flesh food,
where meat, fish, and poultry are substitutes, producers bear the
entire burden of any increases in fixed costs. Fixed costs are
costs that do not change, despite the size of the firm and changes
in the level of output. Examples of fixed costs are costs of
plant, equipment, and management; much of these costs are expected
to be borne by processors. Because large firms spread fixed costs
over larger output, they are more able to pass on these costs than
are smaller firms.
In addition, also in the short run, producers may bear some portion
of the variable costs that cannot be profitably passed on to
consumers. Variable costs are costs that vary with changes in the
amount of output. Examples of variable costs are costs of raw
materials and hourly labor. However, it is likely that much of the
variable costs will be passed on to consumers.
When firms in a competitive market cannot pass on all of a cost
increase in the short run, profits decline. Beyond some point
profits become either so low or negative that the firm is forced to
close (discussed more fully in the Regulatory Flexibility Analysis
below). In the long run, the exit of these marginal firms reduces
the industry supply of seafood and permits the remaining firms to
raise prices to cover the full costs of production, both variable
and fixed costs. Thus, in the long run, seafood prices will rise
by the full cost of the regulation.
A few commenters requested a better analysis of price changes.
These commenters criticized the approach used to estimate price
increases in the Executive Summary of the PRIA. Rather than
dividing the estimated domestic cost of the regulation by the total
domestic production, the commenters suggested estimating price
changes for each market segment. The advantages of this approach
are that different types of seafood are treated separately (the
change in the price of frozen tuna might be very different from the
change in the price of ready-to-eat shrimp cocktail) and that
different sized firms are treated separately (small firms may be
forced to raise prices more than large firms).
FDA agrees that this method of determining price changes is more
appropriate than the method employed in the PRIA. However, FDA did
not receive any information from commenters that would enable the
agency to calculate prices in this manner. It is worth noting,
however, that the NMFS reports did take product type into account
when estimating price increases. That contractor estimated a range
of price increases from negligible to 1.3%, depending on the
product. Again, it is important to note that that study included
costs for the control of types of hazards not covered by this final
regulation.
Finally, while the methodology used in the PRIA might not produce
accurate price changes, it suggests that overall price increases
due to this regulation could well have a negligible effect on
demand.
Unquantified Costs
Several commenters suggested that costs of litigation of issues are
unquantified costs of this regulation. The agency agrees that
these are real costs and that it would be difficult to quantify
them. Other costs that FDA has either not quantified or quantified
in the PRIA but were later challenged as wrong by commenters
without supplying sufficient data to change, include:
o Record storage costs which were not fully quantified.
o The cost of the repair of current refrigerators, and the
cost of operating current refrigeration units at lower
temperatures.
o Time and temperature controls on airlines.
o The cost and number of smoked, cured and dried fish that
must be reformulated.
o The cost of operating IQF molluscan shellfish plants.
BENEFITS
Benefits that will be realized as a part of this rule include both
those which FDA has quantified and those which have remained
unquantified. All benefits are shown in the table 9:
TABLE 9
TYPE OF BENEFIT
LOWER BOUND
UPPERBOUND
Safety Benefits - (decreased
illness and death)
$45 million
(4th year)
$116 million
(4th year)
Export Benefits (elimination
of duplicative effort)
$20 million
$20 million
Reduced Enforcement Costs
$22 million
$22 million
Increased Consumer Confidence
in Seafood
Unquantified
Better Process Control
(Reduced processing costs)
Unquantified
Improved Employee Morale
Unquantified
Reduced Rent Seeking
Unquantified
For the four unquantified benefits, FDA is more convinced that
positive benefit will obtain from increased consumer confidence and
better process control, as opposed to the latter two, improved
employee morale and reduced rent seeking, which FDA regards as
being more speculative.
In the PRIA, FDA estimated that the proposed option, which is being
adopted in this final rule, would, (1) reduce the amount of seafood
related illness, (2) generate nutrition benefits as a result of the
increased consumption of seafood (brought about by a decrease in
consumer anxiety about seafood) with a concomitant decrease in the
consumption of meat and poultry, (3) reduce the amount of rent
seeking (rent seeking is a term economists have applied to
activities which do not contribute to societal welfare but only
seek to transfer resources from one party to another), and (4)
generate export benefits to firms by allowing U.S. exporters to
continue to export to countries that require Federal oversight and
certification of HACCP programs.
In addition to the benefits cited in the PRIA, the agency is
claiming benefits derived from reduced enforcement costs, and is
discussing other unquantified benefits of finalizing this rule.
The agency has fully considered all of the comments on benefits.
What follows is FDA's conclusion as to how these benefits should be
valued.
(1) Safety Benefits (reduced seafood-related illness)
A number of commenters did not view HACCP as having large, or in
fact any benefits in terms of either improved safety or consumer
confidence. As discussed in the preamble to the final regulations,
FDA reasserts the benefit of HACCP with respect to illness
reduction. Part of the commenters concern may be the result of a
misconception on the part of the commenters of how mandatory HACCP
is intended to work: dividing responsibility between the
government and industry. For example, it is likely that new
technology or information will become available in the future that
will allow industry to more readily control hazards at CCPs than is
currently possible. Because HACCP systems of preventive controls
are operated by the processors themselves, they will need to avail
themselves of new technologies and information as they become
available. No additional regulation will be necessary to ensure
the adoption of new technologies. The role of the government will
be to confirm that hazards are controlled to the maximum extent
practicable with the prevailing knowledge and technology.
For example, at present there is no quick, inexpensive test to
determine if finfish are contaminated with ciguatera. If one is
developed in the near future, it would be advantageous to
processors for whom control of ciguatera is necessary to avail
themselves of that test to reduce the probability of a hazard being
present in their product. FDA's role would be to verify that
processors are, in fact, controlling the hazard. This verification
will take into account whether the best practical technology is
being used where it would produce superior assurances of safety
than other forms of control. In the interim, processors should
refrain from purchasing certain species of fish that have been
caught on reefs that are known to be ciguatoxic at the time of
harvest.
The introduction of superior technologies that can be used to
control ciguatera under the HACCP framework should eventually
reduce or eliminate ciguatera intoxications. However, as with any
innovation, the timing of development of such technologies is
difficult or impossible to predict. Therefore, it is also
difficult to predict costs and benefits of the adoption of future
innovations. For the most part, FDA has not attempted to speculate
on these innovations, and costs and benefits are estimated only for
known control technologies. However, because some information is
known about the control of Vibrio vulnificus, and because
innovative techniques are being explored now, FDA has made a
preliminary attempt in this analysis to explore costs and benefits
of future actions which may occur to control this hazard.
Comments Pertaining to the Baseline Number of Cases
One commenter said that it is improper to lump all seafood species
together in the baseline figure as many species may not be
responsible for any illness. FDA agrees that it would be desirable
to link illness data to a seafood species or a finished product
type to the extent possible. This is addressed in table 11.
One commenter said that the number of illnesses reported reflect an
individual's perception that the illness resulted from the last
food consumed.
FDA's method of calculating the baseline illnesses should have
minimized this problem. The baseline illnesses were calculated
from the data reported to the Centers for Disease Control and
Prevention (CDC). To the extent this bias exists in CDC's data,
then this criticism is correct. However, the CDC data, upon which
the baseline illnesses are based, are contributed by State
epidemiologists and other public health professionals. Although
there is some difficulty with diagnostic tests that are performed
to identify the cause of illness so that some illnesses are
misreported, sufficient screening by qualified health professionals
before data entry minimizes the risk of improperly attributing the
source of the illness reported to CDC.
One comment suggested that FDA should include in its benefits
tables other hazards addressed by the regulation including
"chemicals, drugs and decomposition." Another comment mentioned
that mercury, PCBs, amnesic shellfish poisoning (ASP) and
environmental contamination should be included. Other commenters
also addressed hazards covered in the Guide but not in the economic
impact assessment, again including hazards such as mercury and
other chronic chemical hazards.
FDA has not included as part of the benefit analysis any chemicals
(such as mercury), pesticides, animal drugs, food or color
additives or decomposition. Because the manner in which risk
assessment is performed for exposure to chemicals, additives and
drugs, it is difficult to predict a baseline number of illnesses
from exposure to these hazards. If, however, this regulation
prevents chronic illnesses from chemicals, pesticides and drugs
which may result in death, the benefits would be large. FDA and
CDC estimate that there are approximately 20 cases per year of
Neurotoxic Shellfish Poisoning, Amnesiac Shellfish Poisoning and
Demoic Acid poisoning from shellfish each year. Table 9 lists all
of these illnesses under "Other Marine Toxins."
Decomposition not involving safety is outside the scope of this
rulemaking. FDA notes however, as a secondary effect, these
regulations could reduce the amount of low quality seafood due to
decomposition in the marketplace. For example, the controls for
histamine that will be put in place to meet the requirements of
these regulations could improve the quality of histamine-producing
species as well as their safety. A reduction in decomposition
could similarly be expected in such products as cooked, ready-to-eat seafood, mo
lluscan shellfish and smoked fish as a result of
time-temperature controls intended to prevent pathogen
proliferation. Although FDA has not quantified this benefit, the
agency believes that it may be substantial.
One commenter noted that no illnesses are associated with L.
monocytogenes. FDA is also unaware of any domestic occurrence of
listeriosis associated with the consumption of seafood. However,
listeriosis has been attributed to the consumption of smoked
mussels in New Zealand, a product also distributed in the U.S. It
has been difficult to study attributable risks for listeriosis
because of the lengthy incubation period (3 weeks) and because the
milder gastrointestinal syndrome has only recently been identified.
Therefore, it is likely that listeriosis may be considerably
underreported. FDA believes that current measures to control L.
monocytogenes will control potential cases of listeriosis but has
not attempted to ascribe any numbers of illnesses or benefits at
this time.
Control for this pathogen will be necessary in some seafood
products. FDA has not included as a benefit to consumers a
reduction in the numbers of cases of listeriosis, but has included
benefits to the industry, shown in tables 16, 17, and 18 (and
ultimately consumers) through reduced regulatory action relative to
products contaminated with L. monocytogenes. The reduction in
regulatory actions and contamination from L. monocytogenes can be
attributed to the identification of hazards and improved control
measures mandated by the regulation, especially with respect to
sanitation.
One commenter stated that "statistics related to foodborne illness
caused by recreationally harvested seafood should be separated from
illnesses caused by commercial products." The commenter's point
was to ensure that consumer perceptions of the safety of commercial
seafood are based on accurate data. Other commenters also
suggested that seafood illnesses traced to both recreational
harvest and from closed or unauthorized areas be separated.
Finally one commenter cited an article in the Journal of Food
Technology (February, 1994. p. 117) that states that "only three
percent of reported seafood illnesses are due to commercial
processing. The remainder is due to home handling preparation or
other reasons." Other commenters pointed to abuse by food service
operations as the other main source of seafood illness.
FDA agrees that this sort of exercise, separating illnesses by the
various types of cause, would be useful but does not believe that
this would be possible given the fragmentary nature of the reported
illness data. For example, for some types of hazards, such as
Neurotoxic Shellfish Poisoning (NSP) and Paralytic Shellfish
Poisoning (PSP), virtually all illnesses may be attributable to
recreational harvesting. For other hazards, such as Vibrios, there
is unlikely to be any difference in the numbers of illness per
pound of product harvested whether it is from recreational or
commercial harvest, because vibrios can be ubiquitous and cannot
now be well detected before harvesting. Regarding the point the
commenter made as to harvest from closed or unauthorized areas, FDA
is convinced from experience that much of this harvest finds its
way into commercial channels illegally, and although it is not now
possible to determine the actual amount of this harvest relative to
that which is legally harvested. Much of the catch from
recreational harvest also ends up in commercial channels. It is
clear that although some qualitative information concerning the
causes of these illnesses is known, it is difficult to precisely
determine the ultimate cause. Moreover, the numbers of cases of
illness averted as reported in this RIA take into account, to the
fullest extent possible, the likely contribution of recreational
harvests. That is, the estimates of the illnesses averted did not
include those caused by recreational harvest that do not end up in
commercial channels.
Regarding the food journal article, the issue of how much illness
is caused during food processing was recently addressed by CDC.
According to CDC, the view that processors are involved in less
than 10% of foodborne illnesses involves a misinterpretation of CDC
data. That agency has called for CCPs to minimize risk.
One comment suggested that FDA should use the actual number of
illnesses relative to the time frame of the most recent or improved
regulations for shellfish, 1989 to present. The comment was
referring to a significant revision to the Manual of Operations of
the National Shellfish Sanitation Program that occurred in 1986-1987. Another c
ommenter disagreed with FDA's baseline estimate of
33,000 cases of seafood induced illness. Using estimated ratios of
all reported foodborne to actual foodborne illness, this commenter
suggested inflation factors of 361/1 to 4,500/1 to be applied to
CDC's reported cases.
FDA has taken into account the most recent figures of illness for
shellfish in its estimates and FDA has consulted with CDC on these
numbers. In addition, FDA disagrees with using the inflation
factors on the seafood baseline number of illnesses in this
fashion. FDA has, however, increased the baseline of some of the
illnesses. In general, however, FDA believes it is more
appropriate to inflate reported cases of foodborne disease caused
by seafood by hazard rather than by ratios appropriate for all
foodborne illness as the commenter suggests.
Comments Pertaining to the Number of Cases of Foodborne Disease
Reduced by HACCP for Processors
In the PRIA, FDA published both a qualitative description of how
HACCP would work to decrease the number of foodborne disease cases
caused by seafood, as well as quantitative estimates of the number
of cases reduced. A number of commenters addressed both the broad
issues contained in this exercise as well as more specific hazards,
species and control measures.
One commenter noted that FDA should confirm the number of cases
reduced by "an independent source before proceeding with the
regulations." In response, FDA has consulted with CDC on the
number of cases. In addition, the proposal gave all affected
parties the opportunity to comment on every aspect of FDA's
analysis.
Many comments addressed the regulatory option of mandatory HACCP
for high risks species only and identified raw molluscan shellfish,
scombrotoxin-forming species and tropical reef species prone to
ciguatera as the only species that should be subject to mandatory
HACCP. FDA agrees that these species represent the highest risk
species in terms of reported illness, but has concluded that HACCP
should be the rule rather than the exception for seafood. HACCP
differentiates itself on the basis of risk and complexity of
seafood processing such that the burdens are commensurate with the
number and type of hazards and controls. Many comments supported
the conclusion that HACCP should not be for high risk species only.
No data were submitted to suggest that the marginal costs of
control for other species would outweigh the marginal benefits.
Several commenters noted that a 23% increase in seafood consumption
in a 10 year period (ending 1989) was not accompanied by an
increase in reported seafood illness. FDA finds that reported
illness from seafood most likely does not vary consistently with
consumption because of the vagaries of the current reporting system
for foodborne disease. FDA also finds that there may be multiple
reasons for the lack of increase in reported illnesses. One would
be that the seafood industry, consumers and retailers have done a
better job controlling hazards in this period than in previous
periods. Another may be that the proportion of public health
dollars devoted to foodborne disease case studies declined during
this period and was devoted to other problems. Without more
information, it is not possible to interpret the lack of
correlation between consumption rates and illness rates.
Shellfish illnesses
Most of the comments centered on how effective HACCP would be with
respect to preventing disease caused by raw molluscan shellfish.
The preamble to the final regulations addresses many of these
comments and this issue at length. Key aspects of this analysis
are summarized below.
FDA proposed to require that processors of raw molluscan shellfish
identify in their HACCP plans how they are controlling the origin
of the molluscan shellfish they process. The controls included
accepting only molluscan shellfish from waters that are approved by
a shellfish control authority and that are properly tagged or
labeled from a licensed or certified harvester or other processor.
FDA also proposed to provide in Federal regulations a system of
tagging and labeling as a means of source identification.
A number of comments noted that the proposed requirements for
molluscan shellfish are warranted because of the association of
these products with illness. One commenter noted that Federal
regulations relating to source of origin controls for raw molluscan
shellfish would enable FDA to lend support to the States in the
administration of the Federal-State cooperative program for
molluscan shellfish. The comment from the Interstate Shellfish
Sanitation Conference (ISSC) stated that "The Conference has long
recognized and supported expansion of FDA authority to assist
States in assuring the safety of molluscan shellfish."
Other commenters perceived no appreciable safety benefit from these
provisions, asserting that the source of most existing illnesses
from shellfish consumption is outside of these controls. The
commenters focused on three problems with the harvesting of
shellfish that cause illness: illegal harvesting from waters that
are closed, harvesting from waters that are inappropriately
classified, and recreational harvesting.
Commenters asserted that the first problem, illegal harvesting from
closed waters, is a State enforcement problem. Commenters noted
that shellfish tagging and labeling is already required by the NSSP
so that contaminated shellfish can be traced back and that
processors already are in receipt of the these documents. Several
commenters noted that only enhanced law enforcement by the States
would appreciably solve this problem.
Other commenters pointed out that waters that are inappropriately
classified is, again, the job of the States and that the proposed
provisions would not address this problem. Some commenters
believed that a better use of societal funding would be to enhance
State funds.
Finally, many commenters asserted that most of the problem with
harvesting was caused by recreational and subsistence fishing,
which fall largely outside the scope of these regulations. Some
commenters argued that this source of shellfish was
disproportionately responsible for illnesses. One commenter cited
statistics from the National Academy of Sciences report, entitled
Seafood Safety, which noted that this source of seafood represents
one-fifth of the fish and shellfish eaten in the United States.
This statistic includes both fish and shellfish although FDA is
unaware of the exact percentage of molluscan shellfish which is
harvested by recreational and subsistence fishermen.
FDA has studied these comments and continues to conclude that these
regulations provide a significant potential for reducing illnesses
associated with molluscan shellfish. The special provisions for
the source control of raw molluscan shellfish in these regulations
reflect the view of many of the comments, as well as the
conclusions of the National Academy of Sciences, that the key to
the safety of raw molluscan shellfish for most illnesses is the
water. The comments correctly point out that a significant
Federal-State cooperative program is in place to, among other
things, evaluate, classify and patrol the growing waters for these
products. As with any program, these activities have their
strengths and weaknesses and FDA will continue to work toward
improvements in all areas. The agency expects that the provisions
in these regulations will complement the efforts of the States in
ways that will enhance the Federal-State cooperative program for
raw molluscan shellfish. For example, the tagging requirements
enable FDA to take action against untagged or improperly tagged
shellfish that escape State control.
The fact that the growing waters are an important key to molluscan
shellfish safety does not mean that illnesses are not preventable
through responsible behavior by the processors, through which the
majority of raw molluscan shellfish pass. Under these regulations,
failure by processors to use only shellfish that originate from
approved waters and have been properly tagged can now result in
Federal regulatory action against the product or processor. This
change should provide a significant incentive to processors to
ensure that they are receiving shellfish that meet these
requirements. FDA has reason to believe that some processors are
currently aware of illegal harvesting by their suppliers. These
provisions build in additional incentives not to accept shipments
that are harvested illegally.
FDA acknowledges that this regulation will not address either
inappropriately classified waters or recreational harvest. In the
PRIA, FDA included a chart that was used to ascertain how many
illnesses would be prevented by the proposed rule. Both on this
chart and in the analysis, FDA noted that this rule will not
address illnesses arising from either problem. Similarly table 9
in this final RIA continues to reflect this consideration.
Finally, while the agency acknowledges that direct funding to State
programs would be advantageous, the lack of such funding should not
preclude other significant measures such as HACCP.
Vibrio vulnificus
All commenters who addressed the issue believed that the number of
cases of V. vulnificus would not be affected by mandatory seafood
HACCP. One commenter noted the discrepancy between FDA's assertion
that the infectious dose is unknown and the assertion that control
of temperature during harvest and storage will have public health
benefits.
FDA notes that this bacterium occurs naturally in estuaries. The
populations rise and fall with the season and are influenced also
by other environmental parameters such as temperature and salinity.
Persons at high risk are those with liver damage (usually by
alcohol) or other disease states such as diabetes, various immune
deficiencies, and gastric disorders including low acidity. In such
individuals, septicemia may result and of those with septicemia,
about 50% will die (approximately 40% of all cases).
FDA believes that mandatory seafood HACCP will have an immediate
and ultimately dramatic impact on V. vulnificus. FDA believes that
oyster processors who receive product from the Gulf of Mexico are
not controlling hazards to the extent that it is practicable but
will be required to use state-of-the-art control methods as a
result of this final rule.
Control of V. vulnficus via HACCP is flexible, however in that it
allows processors to use the most effective and practical method
available. Chilling, freezing, cooking, education of high-risk
consumers and selective harvesting are all potential means of
controlling illness from this bacteria. The agency believes that
these approaches and other new innovations yet be developed will
reduce V. vulnificus illness. The benefits from reduced vibrio
illnesses arrived at by the agency in this regulatory impact
analysis are based on the use of chilling 50% of the oysters taken
from the Gulf of Mexico in the first two years after the effective
date of the final rule and using more extensive controls such as
individual quick freezing (IQF) or equivalent techniques for the
third year and beyond.
The relationship of mandatory seafood HACCP to V. vulnificus and a
discussion of potential controls for this pathogen are addressed in
the cost section of the economic analysis.
Viruses
One commenter stated that post-process HACCP controls will not
effectively reduce viruses or reduce the incidence of outbreaks
but that State control and patrol of open and closed waters is the
key to regulation of molluscan shellfish and viruses. Another
commenter suggested that food handlers preparing salads in
restaurants and drug abusers may present a greater risk than
seafood for Hepatitis A. One commenter said that because enforce-
ment of illegal harvesting laws or classification criteria are not
addressed, no cases of Norwalk Viruses will be affected. Another
said that because temperature controls do not affect Norwalk and
Norwalk-like viruses, HACCP controls will not affect the number of
incidents. Another commenter said that Norwalk is more likely due
to taking shellfish illegally from fecally contaminated waters than
from contamination from food handlers.
FDA notes that Hepatitis A and Norwalk are viruses which, among
seafoods, are primarily borne by raw molluscan bivalve shellfish
(e.g., clams and oysters) and enter the growing waters from human
fecal contamination. While other foods and food handlers, as
suggested by one commenter, may be more common vehicles for
Hepatitis A, cases do occur from shellfish.
The agency recognizes that the principal control mechanism for
viruses is to prevent shellfish harvesting from contaminated
waters. (Viruses can also be transmitted by molluscan shellfish
from infected processing plant employees.) The present shellfish
program, which is largely State enforced, includes requirements for
tags which are placed on individual sacks of freshly harvested
shellfish. These tags include the location and date of the harvest
and the name of the harvester.
One way in which shellfish are taken from contaminated water
includes illegal harvesting from waters that have been designated
by States as being contaminated and closed for harvesting.
Additionally, harvesters may have contaminated the water during
harvesting by disposing of waste in these areas. This may be
caused by simple negligence or failure to have proper sanitary
facilities on board boats. Although these regulations do not
specifically require processors to refuse to accept product from
boats without sanitary facilities in good working order, it is a
likely outcome of the requirements of the regulation because this
the only way processors can fulfil this requirement of the
regulation.
Scombrotoxin
One commenter noted that, "Recreational fishers routinely consume
their catch, give it away and/or sell it to wholesalers, retailers,
restaurants and even directly to consumers. Many of the histamine
illnesses may be traced back to this harvesting sector that seeks
and harvests many of the scombroid toxin forming species." One
commenter noted that the only effect the regulation might have on
scombrotoxin is through a "secondary effect on the handling of
scombroid species on fishing vessels." One commenter noted that
handling by restaurants and the consumer of finfish was the "real
danger." Another commenter said that mackerel produced in Florida
had no recorded scombroid illnesses. However, one commenter said
that scombroid poisoning is produced, to a large extent by
mackerel. They went on to say that "Over half of the total
mackerel caught are allocated to recreational fishermen." Another
noted that, "According to the State of Florida, 68% of the two
species prone to scombroid problems (Bluefish and King Mackerel)
are caught by recreational fishermen."
One commenter said that the best way to prevent histamine formation
was, "required rapid chilling of fish on the charter boats . . .
and very tight control of purchases by restaurants and consumers
from unlicensed sport fishermen, i.e., those outside the HACCP
purview.."
Another commenter said there was a widespread use of refrigeration
and ice in commercial channels for scombroid forming species. They
went on to say, "Notable in the CDC records on histamine poisoning
is the number of cases related to consumption of bluefish in New
York State. . .caught by individuals and either do not enter the
commercial channels or do so in an unconventional way."
Illnesses from fish that have experienced decomposition occur most
frequently among species in which elevated levels of histamine are
present as a result of spoilage. These illnesses are referred to
as scombrotoxin poisoning.
FDA recognizes that mishandling of recreationally caught fish, and
mishandling of fish by the final consumer can contribute to the
total number of scombrotoxin illnesses. Thus, not all illnesses
will be prevented under a mandatory HACCP system. Historically,
however, over half of reported outbreaks of histamine poisoning
have been attributed to tuna, virtually all of which is commercial-
ly harvested. Tuna is the leading seafood in terms of U.S. seafood
consumption. While the number of illnesses relative to the amount
of tuna consumed is low, the absolute number of illnesses is large
and would be reduced by processors assuring that tuna received
meets the specific documented controls in the processor's HACCP
plan for keeping the seafood catch cool.
From 1968 through 1986, 187 outbreaks of scombrotoxin poisoning
were reported to CDC. Of these, 71 were attributed to mahi mahi,
64 to tuna and 11 to bluefish. The remaining were distributed
among a number of other species, most of which are recognized
scombroid fish.
The agency believes that the creation of the hazard is entirely
under human control; rapid cooling of fish and maintaining the fish
under suitably chilled conditions virtually assures that the fish
will be free of this hazard. Thus, in theory, adherence to
requirements under a mandatory HACCP system, coupled with good
time/temperature controls at retail as contained in FDA's Model
Food Code, should entirely eliminate this hazard from commercial
channels. Again, the figures provided in table 9 for the number of
cases averted through the application of HACCP principles take into
account the prevalence of recreational harvests.
Ciguatera
Some commenters said the proposed regulation will "likely have
little impact on the number of cases of ciguatera poisoning." One
commenter further noted that the majority of Amberjack associated
ciguatera intoxication comes from recreationally caught fish. In
Hawaii, for example, 22 of 29 cases of ciguatera originated from
fish caught by recreational fisherman which did not enter commer-
cial channels.
FDA acknowledges that much ciguatera arises from recreational
catch. However, some recreationally caught finfish does enter
commercial channels. Upon implementation of mandatory HACCP,
processors and importers will be expected to take positive actions
to know the source of potentially toxic fish. Because there are no
practical tests available now for ciguatera toxin, processors will
have to rely on establishing that fish are not obtained from areas
where the ciguatera toxin is clearly identified. However, as such
tests become available, FDA anticipates that they will be used
where needed for screening purposes, which will decrease the
incidence rate of ciguatera poisoning as a result of consumption of
commercially caught seafood. Again, the figures provided in table
9 for the number of cases averted through the application of HACCP
principles take into account the prevalence of recreational
harvests being marketed in commercial channels and the estimated
impact of mishandling at retail.
Anasakis Simplex
One commenter noted that the parasite Anasakis Simplex was most
commonly found in non-edible tissue and not in the edible muscle in
marine fish. This commenter believed that this was not a "likely
hazard" for most fish if cooked. Another comment noted that
reported illness from parasites are rare and are associated
exclusively with unfrozen, raw or undercooked fish.
FDA agrees that the risk of consuming this parasite is rare and
that is reflected in the small baseline numbers of illnesses
reported in the table 9. Parasites were identified in the draft
Guide as a food safety hazard only for those products that are
consumed raw. They are, however, routinely found in the edible
portion of fish.
Revised Safety Benefits
In the tables below, FDA presents revised estimates of the benefits
of mandatory HACCP for seafood processors. Several changes from
the preamble to the proposal are noteworthy. First, based on the
comment that said that FDA had underestimated the number of cases,
FDA has reestimated the baseline numbers of cases for certain
illnesses. These estimates have the concurrence of CDC. Next,
some changes were made to the valuations of particular cases, as
better information was obtained concerning the probabilities of
death per type of illness. Finally, as mentioned above, some
changes have been made to the estimates of the percentages of the
illnesses reduced.
Although Canada, for example, has mandatory HACCP for its seafood
processors, no data exist on the efficacy of HACCP. Therefore, for
the percentages of the illnesses reduced, FDA sought three
different types of experts (seafood experts, epidemiologists
familiar with microbial hazards, and microbiologists) to address
the efficacy of seafood HACCP. Each of these experts reviewed the
literature on each type of hazard as well as the requirements of
HACCP. The ranges reflect likely upper and lower bounds on how
effective HACCP will be at controlling production deficiencies by
processors, including indirect controls exerted by processors on
the owners of harvesting vessels. In addition, the tables reflect
the fact that some of the cases of illness are not addressable by
this rule as they are caused by either consumer or restaurant
mishandling or poor fishing practices by recreational fishermen.
In order to calculate the number of cases (annual cases resulting
from exposure to hazards associated with seafood consumption) that
would be reduced by HACCP, each of the four experts followed a
series of methodical steps. The first was to determine the types
of seafood associated with each hazard. The second step consisted
of reviewing the various aspects of the rule to determine the areas
of seafood harvesting and processing that the rule could affect.
The third step was to eliminate those cases that could not be
affected by the rule.
These would be cases that seafood processors could neither
eliminate through processing nor prevent from being introduced,
either by their own staff or by control over raw materials. Cases
caused or controlled by factors outside of the HACCP system include
recreational harvest (approximately 20% of all seafood harvested)
that does not pass through processing plants and problems caused by
restaurant, supermarket or consumer improper cooking or
mishandling. In addition, there will be some types of hazards that
will not, for the foreseeable future, be controllable by means
other than avoiding contaminated waters, which will not be 100%
effective (ciguatera, for example). Until rapid, inexpensive tests
are developed, HACCP cannot be 100% effective at controlling these
hazards.
Once each expert had accounted for those cases that could not
potentially be reached by this rule, the experts then assessed the
likely effectiveness of control steps associated with broad
sanitation improvements and mandatory controls on specific hazards
and specific species.
Ciguatera: Both the lower and upper bound reductions in illness
are relatively small in the near term because there does not yet
exist a rapid, inexpensive test for this toxin. Processors and
commercial fishermen must rely on information about whether
geographic areas are ciguatoxic. Moreover, many illnesses are
attributable to recreational harvest.
Hepatitis A virus: This illness derives mostly from molluscan
shellfish. For molluscan shellfish, the controls are harvesting
from approved waters and good sanitation in the plant. These
regulations specifically involve both types of controls. The upper
bound number is 50% of the total estimated number of illnesses
largely because of the problems that states have in patrolling and
controlling illegally harvested molluscan shellfish.
Norwalk virus: This illness derives from raw molluscan shellfish
that are contaminated from human pollution in harvesting areas.
Control involves harvesting from approve waters. These regulations
include this kind of control. The upper bound number is 50% of the
total estimated number of illnesses largely because of the problems
that states have in patrolling and controlling illegally harvested
molluscan shellfish and because of the uncertainty of the control
of sewage from harvesting and recreational vessels.
Vibrio vulnificus: This illness essentially derives from eating
raw molluscan shellfish from the Gulf of Mexico. Vibrio vulnificus
is a naturally occurring, ubiquitous, marine organism. The lower
and upper bound numbers reflect the fact that controls are newly
emerging for this organism and still have uncertainties associated
with them.
Table 10 sets out the new estimates of baseline cases of foodborne
disease related to HACCP and the range of cases averted by HACCP.
Table 10
NUMBER
NUMBER
ESTIMATED
OF CASES
OF CASES
NUMBER OF
AVERTED
AVERTED
HAZARD
CASES
(LOWER)
(UPPER)18
Anasakis
100
25
60
Campylobacter
jejuni
200
100
150
Ciguatera
1,600
96
200
Clostridium
botulinum
10
3
5
Clostridium
perfringens
200
100
150
Diphyllobothrum
latum
1,000
250
600
Giardia
30
15
23
Hepatitis A
Virus
1,000
150
500
Other
Marine Toxins
20
0
1
Norwalk Virus
100,000
15,000
50,000
Other Vibrios
1,000
200
500
Paralytic
Shellfish
Poisoning
10
0
1
Salmonella non-
typhi
200
100
150
Scombrotoxin
8,000
4,000
6,000
Shigella
200
100
150
Vibrio
vulnificus
(3rd year)
60
12
30
Total
113,630
20,151
58,520
Table 11 reflects revised estimates of the total cost of
seafood illness.
Table 11
TOTAL
VALUE
COST
PER CASE
OF SEAFOOD
HAZARD
AVERTED
ILLNESS
Anasakis
$1,703
$170,332
Campylobacter jejuni
$9,390
$1,877,924
Ciguatera
$15,247
$24,395,438
Clostridium botuli-
num
$223,252
$2,232,524
Clostridium perfrin-
gens
$6,551
$1,310,164
Diphyllobothrum
latum
$2,753
$2,752,617
Giardia
$6,104
$183,112
Hepatitis A Virus
$22,669
$22,668,870
Other Marine Toxins
$269
$5,380
Norwalk Virus
$575
$57,500,000
Other Vibrios
$2,955
$2,954,842
Paralytic Shellfish
Poisoning
$92,356
$1,200,628
Salmonella non-typhi
$8,199
$1,639,756
Scombrotoxin
$339
$2,708,755
Shigella
$16,750
$3,349,961
Vibrio vulnificus
$2,008,917
$120,535,039
Total
$245,485,342
Table 12 shows the estimates of the efficacy of mandatory seafood
HACCP at reducing foodborne disease in the third year following the
date of implementation (undiscounted).
Table 12
LOWER
UPPER
HAZARDS
BOUND
BOUND
ESTIMATE
(3rd year)
ESTIMATE
(3rd year)
Anasakis
$42,583
$102,199
Campylobacter jejuni
$938,962
$1,408,443
Ciguatera
$1,463,726
$3,049,430
Clostridium botulinum
$558,131
$1,116,262
Clostridium perfringens
$655,082
$982,623
Diphyllobothrum latum
$688,154
$1,651,570
Giardia
$91,556
$137,334
Hepatitis A Virus
$3,400,331
$11,334,435
Other Marine Toxins
$0
$269
Norwalk Virus
$8,625,000
$28,750,000
Other Vibrios
$590,968
$1,477,421
Paralytic Shellfish
Poisoning
$0
$46,178
Salmonella non-typhi
$819,878
$1,229,817
Scombrotoxin
$1,354,377
$2,031,566
Shigella
$1,674,981
$2,512,471
Vibrio vulnificus
(3rd year)
$24,107,004
$60,267,519
Total
$45,010,733
$116,097,537
Finally, in response to the comments, FDA has attempted in table 13
to associate particular hazards with categories of seafood (to the
extent the data allow).
Table 13
HAZARDS
ESTIMATED
NUMBER OF
CASES
AFFECTED
SPECIES
Anasakis
100
Raw Finfish
Campylobacter jejuni
200
Cooked Ready-to-Eat
Fish, Smoked Fish,
Molluscan Shellfish
Ciguatera
1600
Tropical, reef
associated species
of finfish
Clostridium botulinum
10
Vacuum Packaged
Fish, Smoked and
Salted Fish
Clostridium perfringens
200
Cooked Ready-to-Eat
Fish, Smoked Fish,
Molluscan Shellfish
Diphyllobothrum latum
1000
Raw Finfish
Giardia
30
Cooked Ready-to-Eat
Fish, Smoked Fish,
Molluscan Shellfish
Hepatitis A Virus
1000
Cooked Ready-to-Eat
Fish, Smoked Fish,
Molluscan Shellfish
Other Marine Toxins
20
Molluscan Shellfish
Norwalk Virus
100,000
Molluscan Shellfish
Other Vibrios
1,000
Cooked Ready-to-Eat
Fish, Smoked Fish,
Molluscan Shellfish
Paralytic Shellfish
Poisoning
10
Molluscan Shellfish
Salmonella non-typhi
200
Cooked Ready-to-Eat
Fish, Smoked Fish,
Molluscan Shellfish
Scombrotoxin
8,000
Scombroid Species
of Finfish
Shigella
200
Cooked Ready-to-Eat
Fish, Smoked Fish,
Molluscan Shellfish
Vibrio vulnificus
60
Molluscan Shellfish
Total
113,630
Summary of Safety Benefits
By year, the safety benefits are shown in table 14 (undiscounted).
Table 14
Safety Benefits
Lower Bound
Upper Bound
Year
Benefits
Benefits
1
$32,957,233
$67,897,751
2
$32,957,233
$67,897,751
3
$45,010,733
$116,097,537
4 and beyond
$45,010,733
$116,097,537
(2) Nutrition Benefits from Mandatory Seafood HACCP and Increased
Consumer Confidence
In the PRIA, FDA estimated what the potential nutrition benefits
might be if reduced consumer anxiety over seafood safety led to
increased sales. FDA hypothesized that this might lead to
consumers eating lower fat meals (on average) as they replaced
higher fat meat and poultry with lower fat seafood. If such a
scenario were to be realized, a series of assumptions must hold
true. In this final rule, those assumptions will be articulated
and examined via the comments on the PRIA.
1. There are some consumers who believe seafood is of poor quality
(which includes being unsafe) and who would eat it if they thought
it was of higher quality. Obviously, some people think seafood is
of poor quality but would not eat it if even if it were of higher
quality. (It should be noted that the term "quality" as used here
refers to the way consumers think about seafood, so that organolep-
tic qualities are being mixed with safety concerns).
FDA reported in the PRIA the preliminary results of a survey in
which consumers, on average, said they believed seafood to be the
cause of foodborne illness approximately 1 out of every 3 times
(33%) they became ill. Comparing that figure to FDA's estimates
and those reported in Seafood Safety, which estimated that seafood
is responsible for 3-4% of foodborne disease, FDA concluded that
consumers think that seafood is much less safe than it actually is.
FDA has analyzed the consumer survey results more critically and
finds that 17% of self-reported foodborne disease is attributed to
consumption of fish. Even so, FDA concludes from these results
that consumers overestimate the proportion of illnesses caused by
seafood. Thus there are a considerable number of people who might
buy more seafood if they believed seafood was safer as a result of
this rule.
2. HACCP will make seafood safer.
Most of the comments on this assumption are discussed in the
previous discussion relating to the efficacy of HACCP for seafood
safety. One commenter said that the public does not consider
"rotten fish" a safety issue. Several commenters indicated that,
because safety was unlikely to be seriously affected, consumer
confidence was unlikely to increase.
FDA does not agree with this opinion. The reduction of illnesses
as a result of the implementation of HACCP standards have been
previously discussed. FDA's analysis in this RIA demonstrates
that, over time, seafood safety will improve as a result of HACCP.
The requirements to improve plant and equipment, monitor sanitation
and CCPs such as time and temperature requirements, will all help
to make seafood safer. In addition, as better testing methods
become available for detection of various viruses and pathogens and
as more information about sensitive subpopulations and other CCP
technologies become known, seafood safety will improve.
In addition, the seafood safety debates in the Congress dating back
to the 1980s, as well as concerns expressed by consumer organiza-
tions and the media, demonstrate the possibility that consumer
confidence is affected by the perception of the adequacy of the
seafood safety system. Most bills concerning seafood safety
introduced from the 1980s onward would have authorized either a
mandatory HACCP system for seafood or the key elements of such a
system. If properly implemented and verified, the very existence
of an internationally recognized, state-of-the art system of
preventive controls for seafood to ensure safety should also
increase consumer confidence.
3. Those consumers who believe that seafood has quality problems
will, in some fashion, learn about FDA's HACCP rule.
One commenter said that public education about the hazards of
seafood was a "complex issue" but that it was being started.
The agency agrees that the public should have information about the
HACCP system that will be in place for seafood. Knowledge of the
facts about food safety and the controls that are in place to
ensure safety clearly affects consumer confidence. The issue of
education is addressed at greater length in the preamble to the
final regulations.
4. Because of what consumers learn about FDA's HACCP rule, their
confidence in the quality (again, including safety) will increase,
which will lead them to buy more seafood.
There were three sets of comments addressing whether or not this
regulation would increase consumer confidence and cause consumers
to buy more seafood. Some commenters believed that the regulation
would increase consumer confidence in the safety and quality of
seafood; others believed it would do so only if the final regula-
tions were structured in a certain fashion; and some believed that
it would not improve consumer confidence. A broader discussion of
these comments is included in the preamble to the final regula-
tions, but they are briefly summarized here as they are a component
of the economic benefits analysis.
Some commenters believed that the regulations as proposed would
serve to increase consumer confidence in seafood although not all
commenters included the link to increased demand for seafood. For
those that believed that the regulation should be structured in a
particular way to improve consumer confidence, they wanted, among
other things, to include consumer labeling, mandatory contracts
with the government, increased funding for FDA, more extensive
HACCP than that being proposed and education of fishermen. Some
commenters asserted that the regulation would not increase consumer
confidence in seafood. One factor mentioned was that consumer
anxiety about the safety of seafood was primarily due to media and
government reporting about seafood safety and that only changes in
this reporting would have any effect. Others believed more broadly
that government could not address this problem, that private
industry must do it.
FDA has considered all of the comments on this issue and has
concluded that consumer confidence will derive and increase from
the existence of an effective system that demonstrably provides an
assurance of safety. Through the notice and comment process, FDA
believes it has created the framework for such a system.
5. The increase in consumer confidence will increase demand for
seafood more than the reduced quantity demanded (caused by a price
increase as a result of HACCP costs).
One commenter believed that sales would not increase as a result of
this regulation. Still others believed that these benefits were
too speculative to be included. One suggested that FDA look to see
if sales of low acid canned food (LACF) increased as a result of
the HACCP-like regulations FDA promulgated. Another commenter said
that it was impossible to predict whether sales would go up or down
with prices and consumer confidence both increasing. Another
commenter said that more seafood will not be consumed until the
price of seafood relative to other flesh foods decreases. The
commenter noted, "At present, seafood is the most expensive muscle
food at the retail level...".
One commenter noted, "The actual benefits of increased consumption
of seafood needs to be more critically examined--especially in
light of FDA's own unwillingness to permit various health
claims--and if prices rise, consumption might actually decrease."
FDA was unable to obtain sales data for low acid canned foods
before and after the LACF regulations and no data were supplied
with the comment. FDA acknowledged in the PRIA that, in fact,
higher prices will have a partial offsetting effect on any
increases in demand due to an increase in consumer confidence. FDA
did not receive comments nor does the agency have any data to
confidently predict the ultimate quantity of seafood sold as a
result of this regulation and is unable to determine if any
increase in consumer confidence will offset a price increase
resulting from HACCP costs. However, as noted in the Cost section
of this analysis, while the methodology used in the PRIA to
evaluate possible price changes might not be entirely accurate, it
still suggests that overall price increases due to this regulation
could well have a negligible effect on demand.
6. When consumers buy more seafood, they substitute away from
higher fat flesh proteins, particularly meat and poultry.
One commenter said that FDA must take into account that people who
are now vegetarians may switch away from vegetables to eat more
fish, which would increase the amount of fat in their diet.
FDA is unpersuaded by the first argument. It is unlikely that
consumers now consuming a vegetarian diet would switch to higher
fat seafood simply because its perceived safety had increased. At
this time the agency believes that it is impossible to predict any
the total quantity of fish that would be substituted for meat and
poultry or any other foodstuff.
7. Meat and poultry, as prepared, are higher fat flesh proteins.
One commenter noted that seafood is eaten fried more often than
other foods like beef and poultry and that seafood as served is not
lower in fat than meat and poultry.
FDA agrees that in some instances, seafood as prepared may be
higher in fat than meat and poultry as prepared. In addition, the
agency acknowledges that to make predictions about the potential
health benefits from switching to seafood from meat and poultry,
all aspects of the nutrient and other food component profiles of
seafood as prepared would have to be examined. For example, there
could be health effects from differing intakes of calories, total
fat, saturated fat, dietary cholesterol and contaminants.
The agency believes that it is impossible at this time to predict
the type of exchange that could occur with regard to the nutrient
and contaminant profile of the foods as prepared. For example, one
cannot assume that an individual who consumed only meat and/or
poultry that was broiled would also choose that manner of prepara-
tion of seafood. An example of an exchange that would lead to a
higher fat intake from fish would be to switch from a 1/4 pound
hamburger with 18 grams of fat to a fish sandwich having 21 grams
of fat, resulting in a 3 gram increase in fat. Alternatively, an
exchange that would lead to a lower fat intake from fish would be
to switch from a 7 ounce trimmed sirloin steak to a broiled fish
containing less than 5 grams of fat. It is not clear how consumers
would substitute seafood for other flesh foods. Furthermore, one
study noted that fish eaten fried or with heavy sauces may nullify
the beneficial effects of seafood. For example, a typical fried
fish platter of which more than 1/3 is expected to be breading or
batter, may contain 24 grams of fat. In addition, different
servings of fish may contribute varying amounts of fat, such as
broiled salmon (21 grams of fat) versus blackened catfish (15 grams
of fat) because the serving sizes of salmon are typically larger.
FDA concludes that this substitution has too many unknown variables
such that FDA is unable to make a determination about the health
effects of consumer substitution of flesh proteins at this time.
8. Less fat in the diet leads to reduced coronary heart disease
(CHD) and cancer. There were no direct comments on this issue and
FDA continues to maintain this position.
Finally, there were two comments on the consumer confidence benefit
analysis itself.
One commenter believed that it was imperative that FDA do a better
job calculating consumer behavioral changes. This commenter said,
"The proposal estimates the direct costs for the domestic industry,
but fails to discuss 'market effects' in detail, particularly in
the area of consumer behavior. There is an effort to relate the
proposed regulations to the Nutrition Labeling and Education Act of
1990, but it was unclear how the two are correlated. This
oversight is serious because the proposed regulations could have a
profound effect on how Americans incorporate seafood into their
food and culture." Another called for a "reasonable analysis of
the effect of price changes on the market--and the consumer's
perceptions of benefits." This commenter called the analysis,
"incredibly superficial, incomplete and self-serving."
FDA acknowledged in the PRIA that the entire estimate of nutrition
benefits resulting from increased sales of seafood at the expense
of meat and poultry sales is speculative. Although the agency
believes that increased consumer confidence would result from
having a state-of-the-art HACCP system in place for the seafood
industry, no data were received to confidently predict the ultimate
increase in the quantity of seafood sold as a result of this
regulation. Sales data of this type were also not available before
or after the agency initiated its low acid canned food regulations.
Finally, the agency was unable to determine if any increase in
consumer confidence would offset a price increase resulting from
HACCP costs.
Another comment suggested that FDA had double counted benefits by
including both increased consumer confidence and reduction in
anxiety. FDA acknowledges they were used in error in the PRIA as
synonyms and were double counted. However, reduced consumer
anxiety was qualitatively mentioned in the PRIA and is not being
counted here such that this is not consequential to the findings in
this regulatory impact analysis.
Because there are too many unknown variables surrounding these
substitutes and the lack of sales data, the agency is unable to
quantify this benefit.
(3) Rent Seeking
Rent seeking activities were characterized in the proposal as
"public and private resources (which) have been expended in
attempts to alter the level of regulatory effort toward seafood
safety, as well as alter which Federal agency should oversee the
industry." "Rent seeking" is a term economists have applied to
activities that do not contribute to societal welfare but only seek
to transfer resources from one party to another. An example often
given is lobbying to change the ownership of a government granted
special privilege so that profits change hands. In many cases,
however, it is difficult to distinguish between activities that
ultimately indirectly benefit society from those that only transfer
profits. The proposal hypothesized that one benefit of the
regulation was to reduce the social costs of rent seeking.
One commenter noted that the reason large firms support HACCP is
because they must have HACCP to export to Europe. The commenter
noted that mandated HACCP would "ensure that all domestic process-
ing firms face the same costs, thereby reducing any competitive
disadvantage."
FDA does not agree that this is a justification for HACCP. The
reason for implementing HACCP is to reduce the incidence of
foodborne disease. However, FDA agrees that this "rent-seeking"
argument may explain some support for HACCP by larger exporting
firms. It is important to note, however, that there are some small
firms who also export to Europe.
Another commenter addressed the issue directly. The commenter
said, "The implementation of HACCP, while reducing some types of
rent seeking activities, may increase others - particularly in
other food industries as they attempt to jockey in position for
HACCP programs or exemptions from HACCP as FDA looks to expand to
other foods."
FDA agrees that this benefit is speculative at best and that this
type of behavior may not decrease but only switch to new areas.
(4) Export Benefits
In the PRIA, FDA asserted that one benefit (unquantified) of the
rule was to allow firms now exporting to the EU to continue to do
so because of the EU requirement for a Federally overseen voluntary
HACCP program. Several commenters noted that some countries that
import seafood from the U.S. are beginning to require HACCP. One
commenter noted that more than 30% of seafood produced in the
United States is exported. The same commenter noted the disruption
in trade when French authorities did not coordinate their seafood
safety requirements with "other officials." Several commenters
noted the need for more Memoranda of Understandings (MOUs) between
the U.S. and other countries for seafood. One suggested that such
MOUs be based upon HACCP as defined by various international
bodies. Finally, one commenter noted that FDA "should take into
account how the international community is implementing HACCP
before the agency imposes regulations that may create unnecessary
trade barriers."
As discussed in the PRIA, this program will benefit those seafood
processors who are exporting to nations requiring HACCP. However,
as also noted in the PRIA, there is in place a Federally overseen
HACCP program, specifically, the program being offered to proces-
sors by the National Marine Fisheries Service (NMFS).
FDA has made an estimate of the cost savings to exporting firms of
being in FDA's mandatory program in lieu of the NMFS program. The
costs of overseeing the program differ significantly between the
two agencies. FDA believes that the HACCP-based inspection system
has enough flexibility to accommodate whatever level of resources
the agency may have. As FDA continues to perform seafood inspec-
tions, if the NOAA program were used to certify seafood exporters,
there would be duplicative expenditures by Federal agencies. The
alternative to NMFS review (if FDA were not to adopt this
regulation) would be inspection of product that is offered for
entry into the EU on an entry-by-entry basis and the payment of a
significant fee for these inspection services. With approximately
2 billion pounds being exported each year, this savings of
resources amounts to, at a minimum, $20 million per year.
In addition, although the EU has announced the requirement that
HACCP be in place by January 1, 1996, adoption of a U.S. plan
reduces some of the uncertainty for U.S. firms and firms exporting
to the U.S. concerning the ultimate form of an internationally
agreed upon HACCP requirement.
5. Reduced Enforcement Costs
Commenters qualitatively mentioned other benefits including fewer
product recalls and other enforcement actions. FDA agrees that
there will be fewer product recalls, seizures, injunctions and
detentions of seafood and seafood products. As examples of what
benefits could have accrued in 1994, the agency has calculated the
value of each of these actions and addressed them below.
Seizures
A seizure is a civil action designed to remove violative goods from
consumer channels. Table 15 shows the actions and their associated
costs that follow a determination that a violation exists and that
goods should be seized. Table 15
Seizure Steps
ACTION HOURS/OTHER COST
1. Federal personnel collect and
analyze samples, write up recom-
mendations (program and general
counsel), review the case and
make recommendations to the US.
attorney.
120
$12,840
2. U.S. attorney files complaint
and Court orders goods arrested
16
$1,712
3. U.S. Marshal and other Feder-
al official seizes goods at lo-
cation
8
Travel
$856
$200
4. Firm hires attorney to con-
test/accept action
16
$1712
5. Food is reconditioned by firm
or;
16 firm
16 Federal
lower valued
food
$1712
$1712
6. Food is denatured (converted
to a non-food use) or;
16 firm
8 Federal
lower valued
food22
$1712
$856
7. Food is destroyed
8 firm
8 Federal
lost food22
$856
$856
Table 16 shows the seizures in 1994.
Table 16
Seizures
PROBLEM
#
ADMINISTRATIVE
COSTS
ACTION
TOTAL
Decomposition
(Destroy)
5
$17,320
$46,565
$320,925
Filth (Denature)
3
$17,320
$8709
$78,087
Chemicals (De-
stroy)
2
$17,320
$10,108
$54,856
Other (Destroyed)
4
$17,320
$14,212
$126,128
Total
14
$579,996
Assuming that half of all seizures are prevented each year, the
benefits are expected to be approximately $290,000 each year.
Detentions
A detention is a procedure for preventing violative products from
entering the United States. Table 17 shows the actions and their
associated costs that follow a determination that a sample is
violative, the following actions take place.
Table 17
1994 Detention Steps
ACTION HOURS/OTHER COST
1. Federal personnel send a
detention notice to the im-
porter w/ an opportunity to
introduce testimony
2
$214
2. Importer hires attorney
and introduces evidence.
Submits response application
16
$1712
3. Determination of action
to take.
24
$2,568
4. Reshipment allowed, or
10
Travel
Cost to Reship
$1070
$200
5. Product is denatured, or
8
Loss of value
Cost of denatu-
ring
Reselling costs
$856
6. Goods are destroyed under
Federal supervision
16
Loss of product
Table 18
1994 Detentions
#
DETENTION
DETENTION
REASON
DET.
QUANTITY
DOLLARS27
DISPOSITION
ADMIN
Borates
25
21,484
$1,827,173
$183,017
$112,350
C. botulinum
1
113,790
$363,434
$363,434
$4,494
E.coli/colifo-
rms
14
254,774
$742,786
$149,413
$62,916
Histamines
2
98,023,014
$1,361,714
$273,199
$8,988
Lead
2
102,188
$87,440
$9,044
$8,988
Listeria/Other
Pathogens
51
2,792,808
$21,369,692
$4,274,794
$229,194
Mercury
11
7,338,900
$12,720,272
$1,272,327
$49,434
Poison-
ous/Deleteri-
ous sub-nec
7
180,000
$446,025
$446,025
$31,458
Salmonel-
la/arizona
129
221,543,300
$76,137,973
$15,228,451
$579,726
Staphylocci
6
55,810
$199,550
$40,766
$26,964
Sulfites
23
713,653
$8,100,620
$810,362
$103,362
Unsafe food
additives -
NEC
5
67,160
$540,201
$540,201
$22,470
276
$23,591,033
$1,240,344
Assuming just half of these detentions are prevented by HACCP,
benefits to the Federal government and industry would be approxi-
mately $12 million per year.
Automatic Detentions
Automatic detentions place each lot of imported products on
detention upon arrival at the border until the importer has
demonstrated that the products do not violate the FD&C Act. This
is normally done by the importer hiring independent labs to sample
each lot. Table 19 shows the number and types of relevant
automatic detentions that took place in 1994.
Table 19
Automatic Detentions
#
SAMPLE
STORAGE
REASON
A.D.s
COST
COST
Borates
53
$132,500
$182,717
C. botulinum
104
$260,000
$36,343
E.coli/coliforms
8
$20,000
$74,279
Histamines
63
$157,500
$136,171
Lead
1
$2,500
$8,744
Listeria/Other Patho-
gens
236
$590,000
$2,136,969
Mercury
397
$992,500
$1,272,027
Pesticide - chloro-thalanil
1
$2,500
$50
Poisonous and Delete-
rious sub-nec
4
$10,000
$44,603
Salmonella/arizona
759
$1,897,500
$7,613,797
Staphylocci
0
$0
$19,955
Sulfites
12
$30,000
$810,062
Underprocessed
3
$7,500
$15,454
Unsafe food additives
- NEC
3
$7,500
$54,020
1644
$4,110,000
$12,405,191
Again assuming that half of the above automatic detentions are
eliminated each year, then the benefits will be approximately $6
million per year.
Recalls
The costs of recalls to a firm vary from inexpensive notification
of consignees to several million dollars, depending on the nature
of the hazard, the type of seafood, the cost and amount of product
involved, and the distribution chain of the product. The costs of
a recall include searching for the recalled products, removing them
from retail and wholesale outlets, replacing the adulterated
product, effectiveness checks, and disposal or reconditioning. In
some cases recalls cause marketing disruptions, loss of shelf
space, and subsequent losses in sales via publicity.
FDA costs include investigative and analytical time and expenses,
administrative costs, cost of samples, and auditing time.
FDA assumes that the costs of recalls borne by firms are directly
related to the distribution costs associated with the products and
to the size of the contaminated lots. Distribution costs account
for about one-third of the final value of seafood. FDA assumes
that the firm must bear the full amount of the distribution costs
of the recall. In addition, the other costs listed above raise the
total cost of recalls borne by firms to one-half the value of the
product. FDA uses one-half the value of the product as the base
for the estimate of total recall costs. The total recall cost of
seafood processing firms in 1994 is estimated to be $2,461,906, as
shown in table 20. FDA audit checks for seafood took 474 hours in
1994. FDA assumes that total FDA costs per recall were propor-
tional to audit hours. The cost per hour of an audit check is
$107, giving an FDA audit cost of $50,718 (474 x 107). FDA
collected 72 samples at $250 per sample, giving sample costs of
$18,000 (72 x 250). FDA thus estimates additional costs due to
recalls to be $68,718 ($50,718 + $18,000). The total recall cost
is estimated to be $2,530,624 ($2,461,906 + $68,718). Again, the
estimate for the purpose of this benefits analysis assumes that
half of all recalls will be prevented or about $1,250,000.
Table 20
Recalls
Fish
Hazards
Amount
Total
Canned tuna
filth, decom-
posed,
punctured
cans, short
weight
6599
cases
$150,687
Crab
L.
monocytogenes
16,156
lbs.
$64,624
Escolar fish
decomposed,
scombroid,
illness
1,719
lbs.
$1,614
Herring,
salted Schmaltz
L.
monocytogenes
1,200 lbs
$1,740
Hilsha fish
salmonella
2,000 lbs
$2,100
Lobster
L.
monocytogenes,
salmonella
25,920
lbs
$243,648
Mahi mahi,
fresh
decomposed
575 lbs
$834
Nova chips
L.
monocytogenes
54 lbs
$157
Oysters,
shellstock
V. vulnificus
9,219,430
lbs
$1,843,886
Oysters, shucked
V. vulnificus
21,944
lbs
$87,776
Sardines,
flat fillets
rusty, leaky,
decomposed
33,600
13 oz
cans
$50,400
Smoked catfish,
salmon,
sturgeon, tuna
L.
monocytogenes
1,060 lbs
$2,963
Tuna steaks
decomposed
7,110 lbs
$11,477
Total
$2,461,906
Injunctions
Injunctions are the most severe form of domestic penalties whereby
a firm is enjoined from producing/distributing a product until a
violation is remedied. There are approximately 5 injunctions by
FDA against seafood products each year costing the firm an average
of about $70,000 and FDA an average of about $30,000 each or about
$500,000 per year. These costs include court costs, analytical
testing costs, inspections costs, and lost production costs.
Again, if this rule reduced injunctions by half, societal savings
would be $250,000.
Total enforcement benefits are the sum of all of the reduced
enforcement costs estimated to be approximately $20 million per
year.
(6) Other Benefits
Commenters also mentioned benefits including better process control
(resulting in lower production costs) and improved employee morale.
FDA believes that there may be "re-engineering" types of benefits
associated with these regulations. For both seafood and other
foods for which HACCP has been implemented, FDA has received
information that firms have found cost-saving innovations in other
areas as they implement HACCP. These innovations are considered
trade secrets by firms and thus, their description (actual process
innovations) and quantification is impossible as firms have not
released this data into the public domain. This phenomenon
involves unexpected savings and efficiencies as a result of
establishing a new system in a processing operation. The majority
of firms that have previously instituted HACCP reported that they
believed that the advantages they derived from HACCP were worth the
costs to them in terms of better control over their operations,
better sanitation, and greater efficiencies, such as reduced waste.
Virtually all foresaw long-term benefits from operating under
HACCP.
Improved employee morale depends on how HACCP is implemented. If,
for example, employees are (1) empowered to participate in day-to-day monitoring
of CCPs, (2) empowered through corrective action
plans to participate in corrective actions including shutting down
a line when a critical limit has been exceeded, and (3) are
rewarded for this decision rather than penalized or forced to
rigorously defend their actions, then employee morale may increase.
Such an increase in morale, may lead to greater productivity.
However, it is in the direct financial interest of every company to
maintain employee morale such that any additional benefit from this
regulation is likely to be small.
A final benefit will be realized for finfish where processing
plants and vessels, in an effort to control for histamine forma-
tion, keep fish cooled from harvest to retail. This will simulta-
neously decrease the decomposition rate that causes seafood to be
thrown out because of organoleptic problems. The same situation
exists relative to cooked, ready-to-eat products and smoked fish.
One retailer cited losses of 4% to 8% of all seafood because of
decomposition. If some of this decomposition begins prior to
arrival at the retail level and is reduced in any degree by this
regulation, benefits could potentially be large.
However, FDA recognizes that there is also a short term cost (e.g.,
as molluscan shellfish harvesters attempt to supply processors with
untagged shellfish or from vessels without sanitary facilities
aboard and find the harvest rejected). The same will also be true
for finfish which have not been properly temperature controlled
from harvest to processor. These harvests will be discarded
although this behavior is not expected to occur often, or more than
once in any instance.
Costs and Benefits of Sanitation
A portion of the costs and benefits of this rule derive from
improvements in the facilities and CGMPs in seafood plants.
Although all food manufacturing plants are required to produce food
under sanitary conditions now, FDA's experience, and that of
others, indicate that many seafood processors are not producing
seafood under those conditions. The sanitation standard operating
procedure development, monitoring and recordkeeping provisions of
this rule are expected to drive processors to improve their
sanitation conditions and thus reduce the need for FDA to enforce
CGMPs through regulatory actions. These provisions will produce
net increases in societal welfare with accompanying costs and
benefits.
Current good manufacturing practices include such things as
cleanliness and habits of personnel, the conditions of buildings
and facilities, equipment, production and process controls, and
conditions of warehousing and distribution of the product. It is
difficult to differentiate between costs and benefits that are
HACCP-related and those that are sanitation-related. For example,
processors are required under HACCP to keep records that show that
CGMPs such as "Measures such as sterilizing, irradiating, pasteur-
izing, freezing, refrigerating, controlling pH or controlling aw
that are taken to destroy or prevent the growth of undesirable
microorganisms, particularly those of public health significance,
shall be adequate under the conditions of manufacture, handling,
and distribution to prevent food from being adulterated within the
meaning of the act" are being followed. However, the benefits
derive from making plant and processing changes, uncovering
problems in processing due to recordkeeping and taking corrective
action which prevents hazardous seafood from being sold. Thus,
HACCP and CGMPs are inextricably intertwined and it is difficult to
calculate the marginal benefits and marginal costs of each.
Costs and Benefits Attributable to Foreign Governments
FDA has reported the portion of the increased costs that are
expected to be passed on to U.S. consumers by foreign processors.
The justification for this action is that FDA has not included
safety benefits that foreign consumers may enjoy when foreign firms
that export to the U.S. introduce HACCP into their plants. FDA has
also included, as a benefit of this regulation, reduced enforcement
actions towards products produced by foreign firms and reduced
illnesses that U.S. consumers suffer from imported seafood.
In a benefit-cost analysis, costs and benefits are attributable to
choices made among competing options. However, in this rule, there
are difficulties in assigning the costs and benefits to choices
made by the U.S. FDA to require HACCP of domestic and foreign
seafood processors. This difficulty arises because other countries
either already require HACCP or have indicated that they will do so
in the near future - for both their domestic and imported seafood
products. No costs or benefits should be ascribed to choices made
by the U.S. government in this rule that affect firms already
complying with foreign regulations, if the regulations are the same
and no changes need to be made to be comply with the U.S. regula-
tion.
Thus, foreign firms in those countries who export to the U.S. may
be required to comply first with the U.S. plan or first with their
own country's plan; the timing is impossible to predict. However,
FDA does have evidence from the European Union that the seafood
produced by the following countries shown in table 21 (at least
seafood for export) has met the EU standard for HACCP. Table 21
Costs and Benefits of HACCP for Molluscan Shellfish
Table 22 lists the safety benefits derived from regulating
molluscan shellfish based on the assessment by a panel of FDA
scientists in consultation with CDC. The percentages listed in
table 22 are intended to show the most likely source of hazards,
not that these hazards may not occur in other species. These
percentages are not to be considered precise.
Table 22
MOLLUSCAN
MEAN
HAZARDS
SHELLFISH
BENEFITS
(percent)
Anasakis
0%
$0
Campylobacter jejuni
50-75%
$762,907
Ciguatera
0%
$0
Clostridium botulinum
0%
$0
Clostridium perfringens
50%
$409,426
Diphyllobothrum latum
0%
$0
Giardia
0%
$0
Hepatitis A Virus
70-90%
$6,290,611
Other Marine Toxins
100%
$135
Norwalk Virus
100%
$18,687,500
Other Vibrios
80%
$827,356
Paralytic Shellfish
Poisoning
100%
$23,089
Salmonella non-typhi
50-75%
$666,151
Scombrotoxin
0%
$0
Shigella
50-75%
$1,360,922
Vibrio vulnificus
100%
$36,160,512
Safety benefits for control of molluscan shellfish range from $26
to $105 million per year (from the third year and beyond). Reduced
enforcement activities directed currently directed against
molluscan shellfish will save an additional $2 million per year
such that benefits range from $28 to $107 million per year.
Total costs adjusted from the NMFS model for molluscan shellfish
harvesters and processors are estimated to be $60 million in the
first year. These costs drop to $32 million after the third year.
FDA is unable to break out the marginal benefits and marginal costs
of requiring HACCP for other species at this time, however, as this
analysis shows, the marginal benefits of requiring HACCP for
molluscan shellfish clearly exceeds the marginal costs.
FINAL REGULATORY FLEXIBILITY ANALYSIS
The Regulatory Flexibility Act (P.L. 96-354) requires analyzing
options for regulatory relief for small businesses. In the PRIA,
FDA listed for comment a series of regulatory options on how to
grant regulatory relief for small firms. In that document, FDA
defined small firms as having less than $1 million in annual gross
revenue (for non-shrimp processors) and less than $2 million for
shrimp processors. In the PRIA, regulatory options for small
business relief included:
o Requiring HACCP-type controls for those CCPs in individu-
al plants that have a history of failure.
o Exempting very small processors from the requirements in
the proposed regulatory option.
o Allowing a longer implementation period such that HACCP
requirements may be phased in over a longer period of
time.
o Providing generic HACCP plans (without mandatory control
points) for certain types of operations, providing
Federal verification, or less frequent monitoring of
CCPs.
FDA received a large number of comments on these options and on the
costs that small businesses would incur as a result of the proposed
option.
Many commenters stressed the increased cost of paperwork that would
be imposed by HACCP. The main increased cost according to
commenters was recordkeeping, which the agency interprets as
including monitoring. According to several commenters, many small
firms would need to hire an additional employee simply to comply
with the HACCP reporting requirements. For firms with 10 or fewer
employees (some said 25 or fewer), the cost of hiring another
worker would be extremely burdensome. Some commenters pointed out
that the HACCP paperwork costs were in addition to the paperwork
burden of local and State regulations.
FDA acknowledges that some processors may need to hire more workers
as a result of this rule. However, the FDA believes that, in many
cases, employees already working at or near critical control points
(CCPs) can monitor those points as they should be doing now in most
cases, and by only making a brief notation. In most cases only
simple recordkeeping is needed.
Several commenters mentioned other potentially large overhead
costs. Monitoring and compliance were often mentioned. Commenters
wrote that correcting a problem identified by HACCP could require
them to re-model plants. Other commenters mentioned additional
refrigeration ("need to triple refrigeration capacity") as the
major compliance cost likely to be imposed by HACCP.
FDA does not believe that any plant needs to be re-modeled solely
based on these regulations. FDA has estimated estimates of the
additional refrigeration elsewhere in this document.
Other overhead costs mentioned in comments included training costs
for employees responsible for the various HACCP requirements. Some
commenters argued that FDA should not treat training costs as a
one-time cost. According to these commenters, employee turnover in
small firms makes it more likely that HACCP training would be an
ongoing expense. Some commenters noted that firms with fewer than
10 employees would find training costs particularly burdensome.
FDA has revised it's analysis to reflect employee turnover and the
need for on-going training. Because of the various ways in which
employees may be trained, the numerous locations throughout the
country where employee training will be offered and the additional
length of time given to firms to comply with this rule, FDA
believes that the training burden has been minimized.
Testing, according to several comments, could be a potentially
large expense for small businesses. Tests for mercury, in
particular, were said to be costly. As noted in the preamble to
the final rule, FDA is revising the Guide taking into account these
comments and other data.
FDA has tried to take account of all of these comments in the cost
estimates presented above and summarized below.
FDA received comments on whether there should be exemptions for
processors based on either the size of the processor or the degree
of risk associated with the product or process. For example, one
commenter supported the exemption of small firms on the basis that
small firms that represent 75% of the industry in terms of the
number of plants, produce less than 10% of the seafood consumed.
FDA has concluded that there should be no exemptions for small
firms. Small processors often engage in relatively high risk
seafood processing, and an exemption based on size could inappro-
priately exempt high risk operations. An exemption based on risk
might entail knowing which seafood might be responsible for a
reported and confirmed illness. The agency finds however that
because underreporting and skewed reporting of foodborne illnesses
occurs it is not always directly possible to relate the reported
illnesses to risk. This subject is also discussed at length in the
preambles to both the proposed and final rule.
Other commenters favored a tiered HACCP, i.e., stagger the period
of time ("two to five years") allowed to implement HACCP. The
smaller the firm, the longer the period before full HACCP compli-
ance would be required.
FDA believes that the time allowed from publication of this final
regulation to the effective date, two years, should be a sufficient
amount of time for firms to implement HACCP. The preamble to the
final regulation addresses the issue of the effective date in
greater detail.
One comment recommended that no firms be completely exempt, but
that some firms would be subject to different HACCP requirements
depending on size. The smaller the firm, the less strict the
record-keeping, testing, and monitoring requirements. The use of
a short form for record-keeping and informal monitoring was
supported in some comments.
FDA notes that HACCP depends on the degree of risk and complexity
of processing and that HACCP requirements for each plant are
calibrated based on these factors. Whether the plant is large or
small, if there are few hazards and simple processes, HACCP
requirements are inherently minimal. If there are no hazards, no
HACCP plan is required. Overall, however the agency believes that
some smaller firms are associated with simpler processes and that
the HACCP system already accommodates the commenter's concern.
Some commenters suggested that FDA provide HACCP help for small
producers. Such help could consist of subsidies ("grant money")
for training HACCP personnel or of FDA provided training personnel.
FDA does not have sufficient funding to provide such help but
believes that provision of the Guide should help small processors
substantially. FDA points out that the Guide and the training and
other work products of the Seafood HACCP Alliance (which has large
Federal input) constitutes a form of subsidy of significant value.
Commenters opposed to small business exemptions stressed that HACCP
was a safety measure and that small plants were as responsible for
safety as large plants. Some commenters suggested that small
plants were more than proportionally responsible for unsafe
products, such as contaminated shellfish. According to these
comments, if HACCP was indeed to be a public health measure, it
should not recognize size distinctions among processors.
The agency notes that small seafood processors produce the vast
majority of seafood types that account for most of the food-associated reported
illnesses. For example, the vast majority of
molluscan shellfish and cooked, ready-to-eat seafood products are
disproprotionately produced by small firms. FDA recognizes that
these illnesses do not necessarily result because they are
manufactured by small businesses, rather the phenomenon is an
artifact of the way the industry is organized, the vast majority of
firms are small businesses. In point of fact, hazards such as
viruses, which cause the largest number of illnesses and Vibrios,
which cause the most severe illness, are already present in the
water and the problems associated with controlling these hazards
would be same whether processed by small or large processors.
Furthermore, a processing failure at a small plant will, by
definition, cause fewer illnesses than a similar processing failure
at a large plant because of the difference in volume. As evidenced
by the previous discussion of individual hazards, FDA believes
these hazards are controllable and must be addressed in a HACCP
plan by either large or small processors.
Other commenters justified equal treatment for small and large
processors on the grounds that different treatment for small
businesses subjected large businesses to unfair competition.
Several commenters argued that HACCP costs would be proportional to
output and would therefore not burden small processors relative to
large processors. Small firms were likely to have simpler
production processes, with fewer CCPs. The result would be simpler
HACCP plans and record-keeping.
FDA disagrees that HACCP costs are, in general, proportional to
output although some HACCP costs, such as corrective action, could
well be related to volume. HACCP costs are related to complexity
of processing and numbers and types of hazards associated with the
seafood product. Although FDA continues to believe that safety
concerns are paramount, it admits that there are disproportionately
higher fixed costs imposed on small firms by this type of regula-
tion which will give large firms an advantage over their smaller
rivals in terms of being able to pass on costs.
Some commenters suggested that the overall FDA cost estimates for
small business were too small. The extra overhead costs of
paperwork, testing, or construction alone were alleged to be enough
to cause many small processors to go out of business. FDA has
reestimated the effects on small processors below, but has not made
an estimate of plant closure.
Many commenters raised the possibility that mandatory HACCP would
drive small firms out of business. One commenter stated that in
Florida alone approximately 100 blue crab and shellfish plants may
fail under HACCP. Some commenters argued that the jobs lost
through the destruction of small businesses were an additional
HACCP cost. Some commenters stated that in some areas (Hawaii,
North Carolina, Florida, the Gulf) HACCP would cause a large
decline in local employment.
The seafood industry is characterized by (approximately) constant
costs in the long run. Constant cost industries pass cost
increases on to consumers in the form of higher prices. FDA
recognizes, however, that it will in general not be true that each
and every processing plant passes on all of its increased costs.
The seafood industry is composed of a wide distribution of firms
with many different kinds of products, GMP problems and baseline
HACCP practices such that there will be considerable variation in
the cost increases in the short run.
In the seafood industry, size will largely determine the unit cost
increases brought about by this regulation. Because most of the
costs of HACCP are not tied to output, the smaller the output of a
processor, the higher its per unit cost increase caused by HACCP.
The ability to spread the HACCP costs over a large output will
enable large seafood processors to incur lower unit cost increases
than small firms. Small processors are therefore at greater risk
due to compliance with this rule.
In the long run, as processors adopt HACCP and attempt to pass
costs on to consumers, the retail price of seafood will rise. In
the absence of an increase in consumer demand that may result from
this regulation, as the price of seafood rises, consumers will
purchase less seafood. As producers fail to sell all of the
seafood offered at the higher price, output must fall. Moreover,
output must decrease in the highest cost sector of the industry,
generally small processors. Although it is possible that small
processors will cut back production but stay in business, the small
profit margins of some small seafood producers strongly implies
that the reduction in output will come about because small
processors go out of business.
For every 1% increase in the price of seafood, approximately 140
small processors could go out of business. The estimated number
comes from the following calculation. FDA has estimated that as
costs are passed on, HACCP will raise the price of seafood to
consumers. The price elasticity of demand, which is the percentage
change in quantity purchased divided by the percentage change in
price, is estimated to be -0.37 for seafood. A 1% increase in the
price consumers pay for seafood should therefore reduce the
quantity purchased by 0.37% (1% times -0.37). Although close to
80% of seafood processors are classified as small, small processors
account for only 10% of total industry output. If the entire
reduction in output attributable to HACCP will be borne by small
processors, and if, for example, there is a 0.37% decline in total
processing output, there would be a decline in the output of small
processors of 3.7% (0.37% divided by 10%). If the decline in the
number of processors were proportional to the decline in the output
of small processors, the reduction in the number of processors
would be 3.7% in the case of a 1% price increase. FDA is uncertain
as to what price increase will actually occur, but as reported
earlier, the NMFS report estimated price increases of negligible to
1.3% for the various industry sectors.
The agency finds that the number of small seafood processors that
go out of business will be determined by the cost per unit (or per
plant) of implementing HACCP, the effect of HACCP on seafood
prices, the ability of small plants to pass costs on to consumers,
and the current practices of the plants. The analysis has assumed
that the regulation will have no positive effect on the demand for
seafood. If the regulation in fact increases consumer confidence
in seafood sufficiently to increase the demand for seafood, then
the effect on small business would be less.
FDA believes that the survival of individual small firms will vary
by firm and market characteristics and cannot be predicted. Some
firms will be able to implement HACCP at low cost, as they have
already fulfilled many of its basic requirements. The closer a
firm's current practices are to HACCP, the lower the cost of HACCP
and the more likely is firm survival. Some small firms occupy
market niches that allow them to pass on more of their costs than
the industry average, increasing their likelihood of survival.
The final rule is expected to create jobs in some areas and
eliminate jobs in other areas. For instance, jobs will be created
to do HACCP-related activities both within the seafood industry and
within those supporting industries that supply GMP-related capital.
Moreover, if increased consumer confidence were translated into
increased seafood demand, as discussed elsewhere in this analysis,
this increased demand tends to boost industry employment. On the
other hand, added regulatory costs raise the cost of producing
seafood and lead to higher prices, which reduces the quantity of
seafood sold and the labor needed to produce this output. The more
sensitive consumers are to price increases, the greater the
reduction in the quantity of seafood purchased and produced. The
resultant effect on industry employment will depend on whether
those factors tending to enhance the demand for labor offset those
factors tending to reduce the demand for labor.
The effect of HACCP on small seafood processors depends on their
costs of compliance and on the changes in the relative price of
seafood. FDA expects the relative price increase attributable to
HACCP to be small. For many small firms, the flexibility built
into the regulation strongly implies that HACCP costs will be low.
In consideration of small firms, the agency has extended the
effective date to 2 years from publication. FDA will also be
publishing the Guide that will provide small processors with
valuable information for developing and implementing HACCP.
Additionally, the agency, in cooperation with Sea Grant universi-
ties and others through the Seafood HACCP Alliance, will be
providing to small firms assistance on training and other needs.
FDA recognizes that HACCP is an innovative regulatory system that
has not been applied on a large scale to ongoing commercial
enterprises in the United States. For this reason all of the
agency's estimates of firm behavior, costs and benefits necessarily
involve substantial uncertainty. As explained in this Regulatory
Impact Analysis, FDA has used modeling techniques and informed
judgements rather than firm empirical data to estimate many
effects. In order to determine the accuracy of these estimates,
and also to assist in possible mid-course corrections, FDA and HHS
plan to conduct an evaluation study during the first few years
after the effective date of these regulations. This study could
focus on each major type of one-time or continuing compliance cost,
on different types of firms, on different sizes of firms (with
particular attention to the smallest firms), and on both costs
required by the regulation and on costs that firms may incur
unnecessarily. It could also address the ability of firms to
understand and implement HACCP properly, and any other problems
that may impede rapid and inexpensive implementation. This study
could also include an exploratory analysis of benefits, addressing
both improvements in processing as measured by elimination of
hazards and, to the extent permitted by existing data systems,
early trends in reported incidence of illness caused by seafood.
Contact sbf@cfsan.fda.gov for more information about the above studies.
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