American Journal of Law & Medicine

The Food Safety Modernization Act: Implications for U.S. Small Scale Farms

The Food Safety Modernization Act (FSMA) reforms law governing the safety of human and animal foods produced for consumption in the United States. Recognizing the challenges that the proposed regulations would impose on small farms, Congress included an amendment to exempt small farms from the full scope of FSMA requirements. This special treatment and other issues left unaddressed by FSMA, however, present challenges for buyers of small farm products and is inducing a private sector response to these regulatory gaps. This Article reviews the current treatment of small farms under FSMA and explores some key impacts and implications of FSMA on these organizations. Particular consideration is given to the unintended consequences of the Tester-Hagan Amendment and the unaddressed issue of liability for foodborne illness.

I. INTRODUCTION

The United States Centers for Disease Control and Prevention (CDC) estimates that 48 million instances of foodborne illnesses occur each year resulting in 128,000 hospitalizations and 3,000 deaths. (1) The value of medical costs, productivity losses, long-term mental and other health impacts, and the costs of premature deaths stemming from these events are substantial. Illnesses attributable to the fourteen pathogens that account for a majority of foodborne illness have recently been estimated to cost the United State economy $14 billion and cause of loss of 61,000 quality-adjusted life years (QALY) annually. (2)

The potential for a foodborne illness incident to have a broad and significant impact has been compounded by the integration and globalization of food supply chains. An incident involving produce, for example, which historically would likely have affected only consumers proximate to a farm, now has the potential to impact consumers in far removed areas. In addition, as more products are marketed through food wholesalers and other distributors, which aggregate products from many suppliers, (3) identifying the source of an incident is often challenging and requires time. Many additional consumers may be affected during this time.

Recognizing the numerous and extensive impacts of foodborne illness, Congress passed the Food Safety Modernization Act (FSMA) in January 2011 to reform food safety oversight in the United States. (4) Through this legislation, the focus of United States food safety policy will shift from reacting to foodborne illness events to preventing them. The implications and requirements of this legislation are extensive. FSMA authorizes, for the first time, the FDA to oversee some on-farm activities. (5) For the farms, food handlers, processors, transportation services, and other firms in the food sector that must implement the new regulations, these proposed requirements affect an extensive range of business and production practices. Management and operational activities addressed in the FDA regulations include recordkeeping and traceability practices, worker training, hazard analysis and monitoring procedures, treatment of agricultural water and soil amendments, and sanitary equipment design and maintenance. (6)

The effect of FSMA on farming establishments will vary depending on the size and scope of the operation. As of 2012, there were 2.1 million establishments in the United States engaged in some form of farming activity. (7) Large-scale farm operations account for 9.9% of these establishments, but are the source of 79% of the country's agricultural production. (8) Most of these firms are already in compliance with proposed FSMA requirements; for these firms, the largest expected effect of FSMA will be the burden of demonstrating and documenting compliance.

This is not true of small farms. Small farms account for 91% of all farms and 23% of agricultural production. (9) For a majority of these operations, the proposed regulations will require some, if not substantial, costly changes to their operational and administrative practices. For this reason, FSMA includes language that permits exemptions for and differential treatment of small farms. (10) Through the rulemaking process, however, qualification for small farm special treatment has been made more complex and will grant reprieve to fewer farms than was originally intended. (11)

In spite of their diluted scope, these exemptions are important both to small farms and the buyers of their products. Small farms feel that this differential treatment is needed to help them remain profitable. Some business buyers, however, perceive that special regulatory treatment may increase the likelihood that small farms will produce unsafe products, consequently reducing the buyers' own product quality and exposing them to liability. As a result, some food buyers are responding by introducing their own new or augmented requirements for their small farm suppliers. (12) Moving forward then, small farms will face a more complex set of food-safety requirements, due in part to FSMA and in part to the private sector's response to both this regulation and related marketplace food safety expectations. (13)

This paper examines several key implications of FSMA for small farms. First, this paper considers the status and marketing effects of small farm exemptions from FSMA. These exemptions are likely to induce unanticipated changes in procurement policies of business buyers, and may induce changes in the production portfolio and growth strategies of small farms. Second, the paper explores the related issue of liability for foodborne illness. This matter was left unaddressed by FSMA. Among market responses to this liability risk is an expanding demand from business buyers and market facilitators for the use of food product liability insurance (FPLI). The increasingly prevalent requirement that small farms obtain coverage under this relatively new insurance instrument has important implications for food production costs, marketing costs and strategies, and consumer access to products from small farms.

II. SMALL FARM FSMA EXCEPTIONS THROUGH THE TESTER-HAGAN AMENDMENT TO S.510 AND FSMA IMPLEMENTATION RULES

Due to the importance of small farms to the economic, environmental, social, and agricultural sectors, considering the implications of FSMA on these enterprises is particularly important. While they account for a relatively small proportion of U.S. farm sales, (14) and produce many products less efficiently than do large farms, these operations fill an important role in the national food system. Due to their small size, these farms are relatively flexible in their production activities and have a comparative advantage in producing highly differentiated products for niche markets. …

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