[Federal Register Volume 59, Number 49 (Monday, March 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5902]
[[Page Unknown]]
[Federal Register: March 14, 1994]
_______________________________________________________________________
Part IV
Department of Health and Human Services
_______________________________________________________________________
Food and Drug Administration
_______________________________________________________________________
21 CFR Part 101
Food Labeling; Nutrition Labeling, Small Business Exemption; Proposed
Rule
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration
21 CFR Part 101
[Docket No. 94N-0031]
RIN 0905-AD08
Food Labeling; Nutrition Labeling, Small Business Exemption
AGENCY: Food and Drug Administration, HHS.
ACTION: Proposed rule.
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SUMMARY: The Food and Drug Administration (FDA) is proposing to amend
its food labeling regulations to modify the basis on which low-volume
food products of small businesses are exempted from the requirements
for nutrition labeling. The proposed regulations will also establish a
notification procedure for small businesses to claim exemption for
their qualifying food products. This proposal is in response to the
Nutrition Labeling and Education Act Amendments of 1993 (the 1993
amendments).
DATES: Written comments by May 13, 1994. The agency is proposing that
any final rule that may issue based on this proposal become effective
upon its publication in the Federal Register.
ADDRESSES: Written comments may be sent to the Dockets Management
Branch (HFA-305), Food and Drug Administration, rm. 1-23, 12420
Parklawn Dr., Rockville, MD 20857.
FOR FURTHER INFORMATION CONTACT: Gerad L. McCowin, Center for Food
Safety and Applied Nutrition (HFS-151), Food and Drug Administration,
200 C St. SW., Washington, DC 20204, 202-205-4561.
SUPPLEMENTARY INFORMATION:
I. Background
On November 8, 1990, the Nutrition Labeling and Education Act of
1990 (Pub L. 101-535) (the 1990 amendments) was enacted. This new law
amended the Federal Food, Drug, and Cosmetic Act (the act) in a number
of important ways. One of the most notable aspects of the 1990
amendments is that they added section 403(q) to the act (21 U.S.C.
343(q)). This section provides that, with certain exceptions, a food--
that is, both a food in conventional form and a dietary supplement of
vitamins, minerals, herbs, or other similar nutritional substances--is
misbranded unless its label or labeling bears certain nutrition
information (nutrition labeling).
The 1990 amendments, however, also provide an exemption from
mandatory nutrition labeling for small businesses. Section 403(q)(5)(D)
of the act provides that:
[I]f a person offers food for sale and has annual gross sales
made or business done in sales to consumers which is not more than
$500,000 or has annual gross sales made or business done in sales of
food to consumers which is not more than $50,000, the requirements
of subparagraphs (1), (2), (3), and (4) [the provisions that
establish the nutrition labeling requirement] shall not apply with
respect to food sold by such person to consumers unless the label or
labeling of food offered by such person provides nutrition
information or makes a nutrition claim.
In the Federal Register of November 27, 1991 (56 FR 60366 at
60376), in a document entitled ``Food Labeling; Reference Daily Intakes
and Daily Reference Values; Mandatory Status of Nutrition Labeling and
Nutrient Content Revision'' (hereinafter referred to as ``the mandatory
nutrition labeling proposal''), FDA proposed to reflect this provision
of the 1990 amendments in Sec. 101.9(j)(1) of its regulations (21 CFR
101.9(j)(1)).
Many comments to the mandatory nutrition labeling proposal stressed
that the dollar exemption limits that FDA proposed to implement in the
1990 amendments were too low. The comments argued that the sum of the
analytical, printing, and other costs of nutrition labeling are
prohibitively expensive for low-volume products. FDA found that these
comments were persuasive, and that some adjustment to this exemption
was necessary. Additionally, FDA participated in a series of public
forums that had been scheduled by the United States Department of
Agriculture to discuss the small business issue. These forums were held
in May 1992 in Kansas City, MO; Atlanta, GA; and San Francisco, CA. In
the Federal Register of May 6, 1992 (57 FR 19410), FDA announced its
participation in the public forums and requested comment on a number of
issues concerning exemption of food products of small businesses.
The agency compiled the information that it received in response to
the notice and at the public forums. This information helped form the
basis for the agency's ``Final Regulatory Flexibility Analysis of the
Regulations Implementing the Nutrition Labeling and Education Act of
1990'' (Ref. 1). FDA announced the public availability of this analysis
in the Federal Register of July 6, 1993 (58 FR 36205).
In adopting the exemption for food labeled by small businesses in
its final rule on nutrition labeling of January 6, 1993, entitled
``Food Labeling: Mandatory Status of Nutrition Labeling and Nutrient
Content Revision, Format for Nutrition Label'' (58 FR 2079 at 2144)
(hereinafter referred to as ``the mandatory nutrition labeling final
rule''), FDA stated that it was constrained by the requirements of
section 403(q)(5)(D) of the act. Therefore, the agency adopted the
exemption for small business, as it had proposed the exemption, as part
of the mandatory nutrition labeling final rule in Sec. 101.9(j)(1)(i).
This exemption (as corrected on August 18, 1993 (58 FR 44063 at 44083))
states:
Food [is exempt from Sec. 101.9 Nutrition labeling of food when]
offered for sale by a manufacturer, packer, or distributor who has
annual gross sales made or business done in sales to consumers that
is not more than $500,000 or has annual gross sales made or business
done in sales of food to consumers of not more than $50,000,
Provided, That the food bears no nutrition claims or other nutrition
information in any context on the label or in labeling or
advertising. Claims or other nutrition information subject the food
to the provisions of this section.
The agency stated, however, that it would make changes in Sec. 101.9
with respect to products labeled by small businesses if Congress were
to amend the statute.
The agency established the same exemption in Sec. 101.36(f)(1) (21
CFR 101.36(f)(1)) for dietary supplements of vitamins and minerals in a
final rule entitled ``Food Labeling; General Requirements for Nutrition
Labeling for Dietary Supplements of Vitamins, Minerals, Herbs, or Other
Similar Nutritional Substances'' that it published in the Federal
Register of January 4, 1994 (59 FR 354) (hereinafter referred to as
``the dietary supplement final rule''). Under that final rule,
Sec. 101.9(j)(1) applies to dietary supplements of herbs and of other
similar nutritional substances manufactured, packed, or distributed by
small firms.
At about the same time that FDA published the mandatory nutrition
labeling final rule, a number of small businesses and the trade
associations that represent them made a concerted effort to bring their
concerns about the exemption from nutrition labeling for food products
of small businesses and about their problems in meeting the
requirements of the new law to the attention of Congress. In response
to these concerns, a bill was introduced and passed to provide relief
to small businesses. In presenting this bill for consideration in
Congress, Congressman Dingell noted that:
Over the last two years, it has become evident that,
unfortunately, the NLEA exemption for small businesses was too
limited. It became clear that many small food businesses simply
could not comply with the law's requirements in the timeframe
allowed. Some very small businesses may have great difficulty
complying at all. Concerns about this matter have been raised to
FDA's attention and ours. They are legitimate concerns and they
should be addressed. The bill we are introducing today addresses
companies with small numbers of employees and products sold in
relatively small quantities.
* * * * *
These amendments will provide greatly needed help to small
businesses for whom a more realistic deadline for NLEA compliance is
essential. Small specialty food manufacturers and retail
confectioners, many of whom rely on low-volume sales of seasonal
products, will be able to spread the cost of product analysis and
printing over a 2- or 3-year period. This literally will allow them
to stay in business. According to the Retail Confectioners
Association, for example, a 1-year delay in NLEA implementation
saves hundreds of millions of dollars.
(139 Congressional Record E 2016 (August 5, 1993).) On August 13, 1993,
the President signed the 1993 amendments into law (Pub. L. 103-80).
The 1993 amendments establish a new exemption for low-volume food
products that will be available to manufacturers, packers, and
distributors based on the number of people that they employ. In
creating this new exemption, Congress was responding to the information
presented to it that: (1) It can cost several thousand dollars to
change the label of a food product to bring it into compliance with the
requirements for nutrition labeling; (2) many small businesses simply
cannot comply with the requirements within the time frames allowed; and
(3) the cost of complying with the nutrition labeling requirements will
be prohibitive for small businesses with a low volume of products at
low profits (Refs. 2 through 4). By providing additional time before
low-volume food products of small businesses must conform with the
requirements for nutrition labeling, the 1993 amendments will permit
small firms to use up stocks of labels, thereby reducing the costs of
label inventory disposal, and to avoid having to compete for design and
printing resources with larger firms. By providing that food produced
by firms having fewer than 100 employees and selling fewer than 100,000
units of a food product will not have to be nutrition labeled (at least
until 2002), the 1993 amendments save such firms the expense of
nutrient analysis and preparation of new labels for those products.
Under the new provisions, persons that claim an exemption for a
low-volume food product must file with FDA an annual notice claiming
the exemption, with the first such notice due by May 7, 1994 (section
403 (q)(5)(E)(iii) of the act), that is, before the first 12-month
period during which the nutrition labeling regulations will be in
effect. Although the filing of the notice is necessary for an
exemption, the agency notes that, under section 403 (q)(5)(E)(i)(I) and
(q)(5)(E)(ii) of the act, a product would not be exempt if its labeling
provides nutrition information or bears a nutrient content or health
claim.
The requirement that the labeling of a product not include
nutrition information creates an anomalous result. FDA is aware that a
number of small businesses market low-volume food products whose
labeling bears nutrition information in accord with the pre-1990
amendment nutrition labeling requirements of the agency's regulations.
Because such products bear nutrition information, they would not be
eligible for the exemption in section 403(q)(5)(E). Such a result makes
little sense under the 1993 amendments, however; small firms with low-
volume products, to which Congress was attempting to provide some
relief, would be penalized for having provided nutrition information,
exactly what Congress was trying to encourage, in the past. Such firms
would be presented with the choice of either removing the nutrition
information from the labeling of eligible products, which would impose
costs that Congress was trying to protect these firms from having to
expend, or marketing misbranded products.
FDA is considering providing relief in such cases under
Sec. 101.9(g)(9). Under this section of its regulations, FDA may permit
alternative means of compliance or additional exemptions to deal with a
situation when it is not technologically feasible, or some other
circumstance that makes it impracticable, for firms to comply with the
requirements for nutritional labeling in Sec. 101.9(c). FDA is
currently limiting the permission that it grants for alternative means
of compliance or additional exemptions in response to requests under
Sec. 101.9(g)(9) to those cases that involve technological problems.
However, based upon the comments that it receives in response to this
proposal, FDA will consider whether the cost to a small business of
changing the labeling of a low-volume food product in response to the
1993 amendments represents a circumstance that makes it impracticable
for the firm to comply with the requirements of Sec. 101.9(c) and for
which FDA may permit alternative means of compliance or provide an
exemption. FDA will consider modifying Sec. 101.9(g)(9) in such a
manner as it finds appropriate based on consideration of comments, to
accommodate this situation.
To ensure that the regulations implementing the 1993 amendments are
in place as close as possible to May 8, 1994, the date of applicability
for the nutrition labeling regulations, FDA is proposing that any final
rule that may issue in response to this proposal become effective upon
its publication in the Federal Register. The agency believes that it is
in the public interest to have a final rule in place as quickly as
possible so that people will know exactly what they must do to claim
the exemption and to minimize the possibility that eligible firms will
fail to file their claims for exemption in a timely manner. Therefore,
FDA tentatively concludes that there is good cause to dispense with the
normal 30-day period between publication of a final rule and its
effective date. Given the small amount of time before May 8, 1994,
however, FDA recommends that persons that want to file notices with FDA
to claim the small business exemption follow the procedures proposed
below.
II. The Proposal
A. Application of Existing Small Business Exemption From Nutrition
Labeling Requirements
In establishing the regulations that provide exemptions for foods
labeled by small businesses, i.e., Sec. 101.9(j)(1) for foods in
conventional food form and dietary supplements of herbs and of other
similar nutritional substances and Sec. 101.36(f)(1) for dietary
supplements of vitamins or minerals, FDA interpreted the 1990
amendments as applying to food offered for sale by manufacturers,
packers, and distributors. However, the Statement of Explanation for
H.R. 2900 (the bill that became the 1993 amendments) states that this
interpretation was an inappropriate extension of the law: ``[T]he
statutory language provides that this exemption applies only to
retailers (`person[s who] offer[] food * * * to consumers').'' (139
Congressional Record H6358 (August 6, 1993).)
Recognizing that manufacturers, packers, and distributors may have
reasonably relied on the small business exemption provided in
Sec. 101.9(j)(1), Congress, in section 2(a)(1) of the 1993 amendments,
provided that the exemption in section 403(q)(5)(D) of the act will
continue to be available until May 7, 1995, in accordance with the
regulation, that is, based on gross sales made or business done to the
consumer by manufacturers, packers, and distributors that do not sell
directly to the consumer. Section 2(a)(2) of the 1993 amendments
further provides that after May 8, 1995, this exemption will only be
available with respect to food offered for sale by a person who makes
direct sales to consumers.
FDA is proposing to modify Secs. 101.9(j)(1) and 101.36(f),
consistent with the provisions of section 2(a) of the 1993 amendments,
to establish May 7, 1995, as the date after which the exemption
provided in section 403(q)(5)(D) of the act will not be available to
food labeled by manufacturers, packers, and distributors but will only
be available to food offered for sale by a person who makes direct
sales to consumers. The agency is revising the numbering of
Secs. 101.9(j)(1) and 101.36(f) to accommodate the proposed
modifications.
B. New Small Business Exemption From Nutrition Labeling
The 1993 amendments added new section 403(q)(5)(E) to the act. This
section provides an exemption for low-volume food products of small
businesses from the mandatory nutrition labeling requirements of
section 403(q)(1) and (q)(2) of the act. FDA is proposing to amend
Sec. 101.9(j) by adding a new paragraph (j)(18) to reflect this
exemption. Under proposed Sec. 101.9(j)(18), qualification for the
exemption for a low-volume food product is based on four factors: (1)
The number of units of that food product sold in the United States; (2)
the average number of full-time equivalent employees of the person
claiming the exemption, e.g., the firm or corporation; (3) the absence
of other nutrition information or nutrition claims in the labeling for
that food product; and (4) the timely filing with FDA of a notice
claiming the exemption. FDA is also proposing similar revisions to
Sec. 101.36(f) to provide this exemption from the requirements of
section 403(q)(1) and (q)(2) of the act for low-volume food products
that are dietary supplements of vitamins or minerals.
1. Definitions
For the purposes of this regulation, FDA is proposing in
Sec. 101.9(j)(18)(vi)(A), (j)(18)(vi)(B), and (j)(18)(vi)(C) (and also
Sec. 101.36 (f)(2)(vi)(A), (f)(2)(vi)(B), and (f)(2)(vi)(C)) to adopt,
with minor changes, the definitions for ``unit,'' ``food product,'' and
``person'' respectively, as established by the 1993 amendments in
section 403(q)(5)(E)(vi) of the act. Also, the agency is proposing a
definition for the term ``average number of full-time equivalent
employees'' in Secs. 101.9(j)(18)(vi)(D) and 101.36(f)(2)(vi)(D).
a. Unit. The agency is proposing to define in
Secs. 101.9(j)(18)(vi)(A) and 101.36(f)(2)(iv)(A) the term ``unit'' to
mean ``the packaging or, if there is no packaging, the form in which a
food product is offered for sale to the consumer.'' This definition
reflects section 403(q)(5)(E)(vi)(I) of the act. Consistent with this
definition, any completely labeled package such as a can, bottle, box,
or bag of a food product that is presented for sale to the consumer is
a unit of that product. Thus, for example, for soft drinks, a 12-pack
or a 24-pack of 12-ounce (oz) cans that are fully labeled would
represent 12 or 24 units, respectively, of that soft drink because each
can is in a form in which it can be offered for sale to the consumer.
On the other hand, in the case of a package containing six 4-oz
containers of pudding, the individual containers of which are not
completely labeled (i.e., it complies with the provisions of
Sec. 101.9(j)(15)), the package of six would constitute one unit. The
difference between these two examples is that in the second case, the
packaging of the product, as it is presented to the consumer, is as an
individual unit of six containers (a multiunit retail food package),
whereas in the first instance, the 12-pack or 24-pack is a convenience
used by the manufacturer to deliver 12 or 24 individual units of the
product to the consumer.
The agency recognizes that there also may be occasions where a food
product is sold in bulk or in individual pieces rather than in
packaging; e.g., flour may be sold from bulk containers in a grocery
store. Such products are not exempt from nutrition labeling but must
have the nutrition information provided on the bulk container from
which the food is dispensed (Secs. 101.9(j)(16) and 101.36(g)). Under
the proposed definition for ``unit,'' a person will have to determine
the number of units of product sold in the United States not in
packaging on the basis of the typical sales practice for the food
product. For example, if 2,000 pounds of flour are sold from bulk
displays at grocery stores, and the typical practice for sales to
consumers is to price the flour on a per pound basis, then the bulk
sales would represent 2,000 units.
To be eligible for an exemption from the provisions of Secs. 101.9
or 101.36, as discussed in more detail below, the total number of units
of a product sold in all of its forms (i.e., various sizes) must be
less than the applicable number of units for the exemption. For
example, a firm may manufacture a beverage in 10-oz bottles, 12-oz
cans, 16-oz bottles, 1-liter (L) bottles, and 2-L bottles. In
determining whether the beverage would be eligible for an exemption,
the firm would total the number of units of each of the various sizes
of containers sold in the United States, and if the total number of
units for all five types of packages is less than the applicable
amount, e.g., less than 600,000 in the case of proposed
Sec. 101.9(j)(18)(i)(A), then the beverage would be eligible for
exemption.
b. Food product. The agency is proposing to define in
Secs. 101.9(j)(18)(vi)(B) and 101.36(f)(2)(vi)(B) the terms ``food
product'' and ``food product that is a dietary supplement of vitamins
or minerals'' to mean ``food in any sized package which is manufactured
by a single manufacturer or which bears the same brand name, which
bears the same statement of identity, and which has similar preparation
methods.'' This definition reflects section 403(q)(5)(E)(vi)(II) of the
act. Whether two units of a food are units of the same food product or
are units of different food products for the purposes of proposed
Secs. 101.9(j)(18) and 101.36(f)(2) depends on how they compare under
the factors listed in this definition. If two units of a food are the
same under each of these three factors, then they would represent two
units of the same food product. However, if the two units of a food
differ in one or more respects under these three factors, then they
would represent one unit of two different food products.
Although the terms ``single manufacturer'' and ``same brand name''
are self-explanatory, the agency believes that it is useful to provide
more detail on the terms ``statement of identity'' and ``similar method
of preparation'' and to provide some examples of the relationship
between units and food products. In discussing the definition for
statement of identity, the Statement of Explanation for H.R. 2900
explains that by statement of identity, it intended that FDA use the
definition of ``statement of identity'' in its regulations under
Sec. 101.3(b) (21 CFR 101.3(b)) (139 Congressional Record H6358 (August
6, 1993)). Section 101.3(b) provides that:
(b) Such statement of identity shall be in terms of:
(1) The name now or hereafter specified in or required by any
applicable Federal law or regulation; or, in the absence thereof,
(2) The common or usual name of the food; or, in the absence
thereof,
(3) An appropriately descriptive term, or when the nature of the
food is obvious, a fanciful name commonly used by the public for such
food.
Thus, under proposed Secs. 101.9(j)(18) and 101.36(f)(2), in
determining whether a food is the same food product as another food for
determining the number of units sold, a firm should refer to
Sec. 101.3(b) to determine whether the two foods have the same
statement of identity.
The agency interprets the term ``similar preparation methods'' to
extend to all aspects in the manufacture of the food product, from the
initial steps of determining the ingredients to be used, i.e.,
formulation, to interim treatment steps of the ingredients, such as
blanching, to all of the various steps used in the processing of the
finished food to be sold to the consumer. Because each of these steps
may have an effect on the nutrient content of the finished food
product, units of foods that differ with respect to particular steps in
their manufacture should be considered by a firm to constitute units of
different food products for the purpose of its determining the
approximate number of units of food products sold in the United States.
The agency provides the following examples to describe the
circumstances in which two units of a food would be two units of the
same food product, or, alternatively, one unit each of two different
food products: A firm would count two units of a food with the same
statement of identity and similar methods of preparation as two units
of the same product if they both bear the same brand name even though
they were manufactured by two different firms. A private label
manufacturer would have to count as units of the same food all
production with the same statement of identity (presuming similar
method of preparation) even if it is packing the food products under
the brand names of five different firms. On the other hand, even if two
units of food are made by the same firm (or have the same brand name)
and have the same statement of identity, they would not count as units
of the same food product if there were differences in their method of
preparation, such that the nutrition profiles of the two products are
different, (one ice cream product was made with nuts and the other was
not) or different manufacturing processes were used (e.g., one was
canned while the other was frozen).
c. Person. The agency is proposing to define in
Secs. 101.9(j)(18)(vi)(C) and 101.36(f)(2)(vi)(C) the term ``person''
to mean ``all domestic and foreign affiliates of the corporation, in
the case of a corporation.'' This aspect of the definition reflects
section 403(q)(5)(E)(vi)(III) of the act. FDA is also proposing to
include within the coverage of this term companies that are not
corporations by including the following language in these regulations:
``* * * and all affiliates of that firm or other entity, when referring
to a firm or other entity that is not a corporation.'' Section 201(e)
of the act (21 U.S.C. 321(e)) defines ``person'' as including an
individual, partnership, corporation, and association.
In the 1993 amendments, Congress clarified the definition of
``person'' to remove any ambiguity as to the entities that a
corporation should include in determining the average number of its
full-time equivalent employees. Congress said the employees of each of
its affiliates should be counted by a corporation. The agency is
proposing to include the sentence noted above in its regulation to
provide parallel coverage of persons that are not corporations.
d. Full-time equivalent employee. The agency is proposing in
Secs. 101.9(j)(18)(vi)(D) and 101.36(f)(2)(vi)(D) to define the term
``full-time equivalent employee'' to mean all individuals employed by
the person claiming the exemption and to establish a formula for use by
a person to calculate the average number of its full-time equivalent
employees. The agency is proposing that the average number of full-time
equivalent employees of a company be determined by dividing the total
number of hours of salary or wages paid to individuals that render
services to a company by the number of hours of work in a year, 2,080
hours (i.e., 40 hours x 52 weeks). Under this formula, a person would
base the average number of full-time equivalent employees on a typical
work-year and on the total hours worked by individuals employed by the
firm and, as noted above, by all of its affiliates. The average number
of full-time equivalent employees would be calculated based on all
employees of a firm, including production workers, office staff,
salesmen, and distribution staff, including any contract personnel.
Under the proposed formula, a foreign firm, as well as a domestic firm,
will have to calculate the average number of its full-time equivalent
employees based on the total numbers of individuals employed by that
firm and its affiliates, regardless of whether their operations are
related to sales of food products in the United States.
2. Small Business Food Labeling Exemption Notice
The 1993 amendments provide that the exemption contained in section
403(q)(5)(E) of the act shall only be available to a person that files
a notice with FDA to claim the exemption for one or more of its low-
volume food products before the beginning of the 12-month period during
which the exemption is to be in effect. The agency is proposing
requirements concerning the filing of this notice in
Secs. 101.9(j)(18)(iv) and 101.36(f)(2)(iv). In addition to the name
and address of the firm claiming exemption for certain of its food
products, under the proposed regulations, the notice must include the
average number of full-time equivalent employees of the firm, and, for
each food product for which an exemption is claimed, the approximate
number of units sold by the firm over the 12-month period preceding the
period for which the exemption is claimed. FDA intends to treat all
information received in such notices in accordance with its public
information regulations, 21 CFR part 20, particularly Sec. 20.61 Trade
secrets and commercial or financial information which is privileged or
confidential.
Upon the filing of the notice establishing that a product meets the
requirements for an exemption, the food product will be exempt from the
requirements for nutrition labeling specified in Sec. 101.9 or
Sec. 101.36 during the 12-month period for which the exemption is
claimed. There is no requirement for agency action, review, or approval
before the exemption is effective.
Recognizing that a person is subject to criminal liability for
submitting false information to the Federal Government (18 U.S.C.
1001), FDA is proposing to require that a notice of claimed small
business exemption contain a signed certification of the accuracy of
the submission by a responsible individual for the company submitting
the notice (proposed Sec. 101.9(j)(18)(iv)(F) and
Sec. 101.36(f)(2)(iv)(F). Additional information to support the
validity of the information provided in the notice may be required
under section 403(q)(5)(E)(iii)(IV) of the act.
Section 403(q)(5)(E)(iii)(IV) of the act provides that a notice of
a claimed small business exemption shall ``contain such information''
as FDA (by delegation from the Secretary) may require ``to verify the
information required'' about the number of full-time equivalent
employees and unit sales of food products if the agency ``has
questioned the validity of such information.'' Because the notice
cannot include information that FDA has not yet required--that is, that
FDA has not yet identified as necessary to verify the information in
the notice--a two-step process is necessary to implement this
provision. The agency must first review the notice and decide whether
any verifying information is necessary and then be given access to that
information. The agency is considering defining in this rulemaking the
procedure through which it will obtain the verifying information that
the statute clearly states that it may require.
Information in the notice could be verified either by requiring the
submission of supporting documentation or by inspecting that
documentation at a firm's place of business. In some circumstances,
inspection of records will be more practicable than submission, and
vice versa. FDA is thus considering requiring that any company that
claims the small business exemption provide the agency with access to
its records that support the information contained in the exemption
notice if the agency finds that such access is necessary to verify the
information contained in the notice. In some situations, the agency may
instead require the submission of supporting information to the agency.
FDA tentatively finds that it has ample legal authority to impose these
requirements.
Under section 701(a) of the act (21 U.S.C. 371(a)), FDA has the
authority to adopt by regulation requirements that are necessary for
the efficient enforcement of the act, including section
403(q)(5)(E)(iii)(IV) of the act. (See Weinberger v. Hynson, Westcott &
Dunning, Inc., 412 U.S. 609, 617 (1973); United States v. Nova Scotia
Food Products Corp., 568 F.2d 240, 246 (2d Cir. 1977).) Courts have
recognized FDA's authority to impose records inspection requirements
where they effectuate the goals of the act. (See Toilet Goods
Association v. Gardner, 387 U.S. 158, 163-64 (1967); National
Confectioners Association v. Califano, 569 F.2d 690, 693 & n.9 (D.C.
Cir. 1978).) Implementing section 403(q)(5)(E)(iii)(IV) of the act
through the sole method of requiring submission of verifying
information to the agency could be unduly burdensome for both the
agency and the companies claiming the small business exemption. For
example, the agency could determine, under section
403(q)(5)(E)(iii)(IV) of the act, that information in a particular
notice must be verified by examining a firm's payroll records and
invoices. Copying all of these documents and submitting them to the
agency could present difficulty for a small business claiming the
exemption. This difficulty could be avoided if FDA examined the
relevant documents at the firm's premises. Moreover, verifying the
information contained in notice of claimed exemption by inspecting
documents at the firm's place of business, and copying only those
needed, would in many cases be a more efficient use of the agency's
investigational resources. This approach is consistent with FDA's
actions in other areas where it has required that records be made
available to agency employees. (See, e.g., 21 CFR 108.25(g) (acidified
foods); 108.35(h) (thermal processing of low-acid foods); 172.320
(amino acids).)
The agency points out that its contemplated approach is fully
consistent with Congress' desire, as reflected in the legislative
history of the 1993 amendments, that the small business exemption be
obtained in a simple and straightforward manner without complicated
reporting. (See 139 Congressional Record E 2016 (August 5, 1993)
(statement of Rep. Dingell) (``The system is a simple one that does not
require complicated reporting or a response from FDA.''); see also 139
Cong. Rec. S 10817 (August 6, 1993) (statement of Sen. Kennedy) (The
1993 amendments ``provide[] a straightforward system under which a
company simply notifies the FDA that one or more of its products
qualify for an exemption''); id. at S 10818 (statement of Sen. Hatch).)
Under the approach that the agency is considering, a company would
merely have to file a simple notice with the agency. It would then be
up to the agency to determine whether any matter needs verification and
to take steps to view the documentation required to verify the relevant
information.
FDA requests comments on the approach described above. Based on its
review of the comments, the agency may provide in the final rule that
companies claiming the exemption will be required to permit inspection
of supporting documentation or to submit any required information to
the agency, as appropriate. Given the late date of this proposal,
however, the agency would not make these requirements effective for
notices of exemption for 1994-95. Many small firms, in contemplation of
the fact that most small businesses must file a notice, have already
filed notices without any indication from the agency as to how it
intends to enforce the implementation requirements. Because FDA
believes that people should have full notice of the requirements that
will apply to them when they file a notice of exemption, and because
requiring small firms to refile based on any final rule would
significantly undercut the efficient enforcement purposes of a records
access requirement, FDA would make these requirements applicable to
notices seeking exemption beginning with the period from May 8, 1995,
to May 7, 1996. Nevertheless, companies filing for an exemption would
still be subject to the statutory requirement in section
403(q)(5)(E)(iii)(IV) of the act, and, although the procedural
requirements for complying with this section would not be effective
until 1995, companies should still be prepared to provide information
to FDA to support their notices of exemption should FDA question the
validity of any information contained in those notices.
Reflecting new section 403(q)(5)(E)(iii) of the act, the agency is
providing in proposed Secs. 101.9(j)(18)(iv) and 101.36(f)(2)(iv) that
a firm that is not an importer and that has an average of fewer than 10
full-time equivalent employees does not have to file notice for any
product for which it has sales of less than 10,000 units in any year
for it to be eligible for the small business exemption for that
product. The agency would suggest, however, that such a company submit
a notice to the Office of Food Labeling (HFS-150), Center for Food
Safety and Applied Nutrition, Food and Drug Administration, 200 C St.
SW., Washington, DC 20204, to establish a record that it is claiming a
small business exemption for some or all of its products. (The Office
of Food Labeling is the office within FDA that has responsibility for
food labeling issues.) The agency intends to make available to FDA and
State enforcement offices a list of the names and addresses of firms
that have claimed the small business exemption and the names of the
products for which they have claimed the exemption. The agency intends
to include on this list the names of firms that have fewer than 10
employees and sales of fewer than 10,000 units of a particular product.
Such firms are not required to file a notice but can choose to do so
voluntarily. FDA believes that the appearance of a product's name on
the list will eliminate any questions about its eligibility for an
exemption. Thus, even though not required, the submission of a notice
of a claimed small business exemption for a food product may be in the
best interest of a firm. FDA also intends to include in the list the
names of firms eligible for the small business exemption provided in
Secs. 101.109(j)(1)(i) and 101.36(f)(2)(i) if they file notice with the
Office of Food Labeling.
All notices must be filed by May 7, 1994, for the 12-month period
beginning May 8, 1994, the date that the new mandatory nutrition
labeling regulations become effective. The notice is to be filed with
the Office of Food Labeling (address above).
FDA recognizes that time is growing short for the filing of notices
to FDA, and that firms may be anxious to file the notice for claimed
exemption. As an interim measure and to assure that all necessary
information is submitted, FDA suggests that firms follow the procedures
proposed in this document if they file a notice with FDA before the
agency issues final regulations.
Because it has received numerous inquiries as to whether a form
exists for the submission of the notice, FDA is providing in Appendix I
of this document, a model form, along with instructions for completing
it in Appendix II of this document. This model form may be used by
firms to supply notice of their claimed exemptions. FDA advises,
however, that it is not necessary to use this form. The agency also
advises that the small business exemption for a food product will be in
effect once a notice has been filed with FDA, even though it may be
necessary for the Office of Food Labeling to work with the firm that is
filing the notice to address deficiencies in the notice. Although no
action by the agency is required, FDA will attempt to review all
notices to ensure that they are complete and to notify companies of the
receipt of the notice, and whether additional information needs to be
submitted.
3. Eligibility for the Small Business Exemption
In proposed Secs. 101.9 (j)(18)(i) and (j)(18)(ii) and in 101.36
(f)(2)(i) and (f)(2)(ii), FDA is incorporating into its regulations the
statutory limits on the number of units sold that would qualify a food
product as a low-volume food product eligible for exemption from the
nutrition labeling requirements established by section 403(q)(1) and
(q)(2) of the act. Proposed Secs. 101.9 (j)(18)(i) and (j)(18)(ii) and
101.36 (f)(2)(i) and (f)(2)(ii) also reflect the statutory limits on a
firm's average number of full-time equivalent employees that would
qualify it as a small business whose products are eligible for an
exemption.
The act provides for phased-in coverage of foods that were first
introduced into interstate commerce before May 8, 1994. Under section
403(q)(5)(E)(ii)(I) of the act, a food product is eligible for
exemption from the nutrition labeling requirements from May 8, 1994, to
May 7, 1995, if fewer than 600,000 units of that product were sold in
the United States between May 8, 1993, and May 7, 1994, and the person
claiming the exemption for that product employed fewer than an average
of 300 full-time equivalent employees during that time. The agency
recognizes that there are some products that will have come onto the
market before May 8, 1994, for which there will not be a full year of
sales on which to determine whether they qualify for an exemption as a
low-volume food. The agency is proposing that a food for which there is
not 12 months of sales before May 8, 1994, will qualify as a low-volume
food eligible for an exemption if the sales of the food during the
period in which the exemption will apply, May 8, 1994, to May 7, 1995,
are reasonably anticipated to be less than 600,000 units. This
treatment of products sold before May 8, 1994, but without a full year
of sales history before that date, is consistent with that of products
not sold in the 12-month period before an exemption is claimed under
section 403(q)(5)(E)(i)(IV) of the act.
The agency is proposing to provide for this exemption in
Sec. 101.9(j)(18)(i)(A). The agency notes that this proposed provision
is not applicable to dietary supplements of herbs and other similar
nutritional substances, and that FDA is not proposing to include a
parallel provision in Sec. 101.36(f) for dietary supplements of
vitamins or minerals, because the mandatory labeling requirements do
not become effective for dietary supplements until July 1, 1995.
Under section 403(q)(5)(E)(ii)(II) of the act, the exemption for a
food first introduced into interstate commerce before May 8, 1994,
narrows in the second year that section 403(q) of the act is
applicable. Such a food will continue to be eligible for exemption from
nutrition labeling between May 8, 1995, and May 7, 1996, only if there
were fewer than 400,000 units of that product sold in the United States
between May 8, 1994, and May 7, 1995, and if the firm that claims an
exemption for the product employed an average of fewer than 300 full-
time equivalent employees during that period. The agency is proposing
to reflect this provision in Secs. 101.9(j)(18)(i)(B) and
101.36(f)(2)(i)(A) of its regulations.
The exemption narrows even further in the third year. Under section
403(q)(5)(E)(ii)(III) of the act, a food introduced into interstate
commerce before May 8, 1994, is eligible for exemption from the
requirements for nutrition labeling between May 8, 1996, and May 7,
1997, if there were fewer than 200,000 units of that food product sold
in the United States, and if the firm that claims an exemption for such
product employed an average of less than 200 full-time equivalent
employees, between May 8, 1995, and May 7, 1996. The agency is
proposing to reflect this provision in Secs. 101.9(j)(18)(i)(C) and
101.36(f)(2)(i)(B) of its regulations.
Under section 403(q)(5)(E)(i) of the act, all other food products
are eligible for exemption from the requirements for nutrition labeling
in section 403(q)(1) and (q)(2) of the act for any 12-month period if
there were fewer than 100,000 units of that food product sold in the
United States during the preceding 12 months by the firm claiming the
exemption, and if that firm employed an average of less than 100 full-
time equivalent employees during that preceding 12-month period. Under
section 403(q)(5)(E)(i) of the act, newly marketed food is eligible for
exemption if fewer than 100,000 units of that food product are
reasonably anticipated to be sold, and if the firm claiming the
exemption employs an average of less than 100 full-time equivalent
employees, during the 12-month period for which the exemption is
claimed. The agency is proposing to reflect these provisions in
Secs. 101.9(j)(18)(ii) and 101.36(f)(2)(ii) of its regulations.
If adopted, the proposed regulations will operate in the following
way: A person with an average of 250 full-time equivalent employees
between May 8, 1993, and May 8, 1994, may file a notice with FDA
claiming an exemption from the requirements of Sec. 101.9 for the
period from May 8, 1994, to May 7, 1995, for each of its products whose
sales were less than 600,000 units during the period from May 8, 1993,
to May 7, 1994. The filing of the notice will serve to establish the
exemption for the food product (assuming no nutrition information or
health or nutrient content claims are provided in the labeling of the
product). If a product were not offered for sale for the entire year
preceding May 8, 1994, the firm could claim a small business exemption
for that food product if the number of units of that product sold in
the United States during the time period from May 8, 1994, to May 7,
1995, is reasonably anticipated to be fewer than 600,000 units.
If that firm continues to have less than 300 employees, e.g., 275
full-time equivalent employees, for the period of May 8, 1994, to May
7, 1995, it may file by May 7, 1995, a new notice to claim an exemption
for the period from May 8, 1995, to May 7, 1996, for any product for
which it sold less than 400,000 units in the United States during the
period of May 8, 1994, to May 7, 1995 and where labeling does not bear
nutrition information or health or nutrient content claims. However, if
the firm continues to have more than 200 full-time equivalent employees
for the time period of May 8, 1995, to May 7, 1996, the firm will not
be eligible to claim a small business exemption for its products after
May 8, 1996. Under section 403(q)(5)(E)(iv) of the act, within 18
months after that date, it will have to bring the labels of its
products into compliance with the provisions of Secs. 101.9 and 101.36.
On the other hand, a firm with less than 200 full-time equivalent
employees during the period of May 8, 1995, to May 7, 1996, e.g., 175
employees, would be eligible to file a notice by May 7, 1996, to claim
a small business exemption for the time period May 8, 1996, to May 7,
1997, for any product that was on the market before May 8, 1994, and of
which it sold fewer than 200,000 units during the period of May 8,
1995, to May 7, 1996. Only those firms having less than 100 full-time
equivalent employees would be able to file a notice to claim a small
business exemption for a 12-month period after May 8, 1997, and then
only for products having approximate annual sales of less than 100,000
units.
Under proposed Secs. 101.9(j)(18)(ii) and 101.36(f)(2)(ii), a
person that is planning to introduce a new food product into interstate
commerce effective August 1, 1994, (i.e., after May 8, 1994) and that
has, for example, an average of 50 full-time equivalent employees
(during the period of August 1, 1993, to August 1, 1994) may file a
notice with FDA by July 31, 1994, claiming an exemption for that
product from the requirements of Secs. 101.9 or 101.36 for the period
from August 1, 1994, until July 31, 1995, if it reasonably anticipates
selling fewer than 100,000 units of that product during the period from
August 1, 1994, to July 31, 1995. As discussed above, the filing of the
notice serves to establish the exemption for the food product. If the
firm continues to have less than 100 employees, e.g., only 55 full-time
equivalent employees, and continues to sell less than 100,000 units of
the product in the United States, the firm will be able to annually
claim an exemption.
The agency is proposing in Secs. 101.9(j)(18)(iii) and
101.36(f)(2)(iii), consistent with the provisions of section
403(q)(5)(E)(iv) of the act, that a small business exemption for a
product shall expire 18 months after the date on which the average
number of full-time equivalent employees or number of units of food
products sold in the United States exceed the numbers necessary for a
food to be eligible for an exemption. For example, under the provisions
of proposed Secs. 101.9(j)(18)(iii) and 101.36(f)(2)(iii), an exemption
for a low-volume food product for the time period between May 8, 1994,
and May 7, 1995, expires 18 months after the date on which sales of
that food product exceed 600,000 units, or the average number of full-
time equivalent employees of the firm claiming the exemption exceeds
300. Alternatively, the exemption shall expire 18 months after the
ending date of the 12-month period that the food product was exempt
under Secs. 101.9(j)(18) or 101.36(f)(2). This provision will provide
to a small business approximately the same amount of time after the
eligibility for exemption ends that firms that did not qualify for a
small business exemption had to bring the labels of their products into
compliance with section 403(q) of the act after the publication of
final rules implementing that section of the act.
The agency is proposing in Secs. 101.9(j)(18)(iv) and
101.36(f)(2)(iv) to require that the certification statement include a
commitment on the part of the person claiming an exemption that he or
she will notify FDA if the number of units of a food product sold, or
the average number of full-time equivalent employees employed, by the
person exceeds the applicable numbers. Having made such a commitment, a
failure to notify the agency that the food is no longer eligible would
subject the person to action under Title 18 of the United States Code.
4. Modification of Exemption Eligibility Requirements
Section 403(q)(5)(E)(v) of the act provides that FDA may by
regulation lower the requirements pertaining to the average number of
full-time equivalent employees or the number of units of food products
requirements for eligibility for exemption for any food product first
introduced into interstate commerce after May 8, 2002. Under the act,
before FDA can lower these requirements, it must determine that the
cost of compliance with the lower requirements will not place an undue
burden on persons that would be affected by the lower requirements. FDA
is proposing to reflect this provision in Secs. 101.9(j)(18)(v) and
101.36(f)(2)(v) of its regulations.
III. Economic Impact
FDA has examined the economic impact of the proposed rule as
required by 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 agencies to analyze options for regulatory relief
for small businesses. The agency finds that the only significant
economic effect of this rule is the benefit that it creates by reducing
labeling costs for newly exempted companies. This benefit is the result
of statutory provisions and not FDA discretion. However, because this
benefit is large and affects small businesses, we are providing the
following voluntary economic impact analysis and regulatory flexibility
analysis that meet the requirements of Executive Order 12866 and the
Regulatory Flexibility Act.
There are two types of costs in this regulation: (1) Costs to
comply with the notification requirement, and (2) costs of lost
nutrition benefits. FDA estimates that the volume of food products
produced by manufacturers, packers, or distributors eligible for the
exemption being proposed in Secs. 101.9(j)(18) and 101.36(f)(2)
constitutes less than 1 percent of the U.S. diet. Thus, any lost
nutrition benefits are likely to be small. The 1993 amendments require
that any small firm (except for very small firms with very low-volume
food products) that has low-volume food products that are eligible for
exemption from nutrition labeling notify FDA of the volume of sales of
such products and the number of its full-time equivalent employees if
the product is to be exempt.
Some firms will not have products that are eligible for the new
small business exemption, and some will not take advantage of the
exemption from nutrition labeling for one of the following reasons: (1)
They make nutrient content claims, (2) they make health claims, (3)
they decide to label to be competitive with other labeled products, or
(4) retailers they sell to insist on nutrition labeling.
Assuming that 50 percent of all firms that could claim the small
business exemption will decide not to do so for one of the reasons
listed above and will, as a result, provide nutrition labeling for
their products, it is estimated that approximately 4,500 firms will
remain that have products that are eligible for exemption and not label
their products with nutrition labeling in the first 2 years during
which nutrition labeling is required by Secs. 101.9 and 101.36. The
agency further estimates that this figure will reduce to 4,000 firms
for the third year during which nutrition labeling is required and to
3,200 firms for subsequent years. Those firms that choose not to label
will be responsible for annually gathering sales and employee data and
notifying FDA of their claim for exemption.
First, firms will have to read and analyze the regulation. Second,
they will have to determine the average number of full-time equivalent
employees they employed in the previous year. Because most firms keep
payroll records of expenses only, this will require some conversion.
Third, firms will have to determine which of their products qualify for
exemption. Again, records of dollar sales are normally kept and, as
prices may have changed throughout the year, some analysis may be
required for each product that the firm believes to be exempt. This
activity may be reasonably expected to take an average of 8 hours per
firm although FDA solicits comment on this figure. If costs to perform
this activity (plus overhead) average approximately $46 per hour (the
value used by FDA in calculating costs for reporting under the
Paperwork Reduction Act of 1980), then the first year costs to firms
that decide to file a notice of exception are expected to be
approximately $1,656,000. This cost will drop to approximately
$1,472,000 and $1,177,640 in subsequent years as the number of firms
filing a notice decreases as discussed above. The proposed rule
reflects the statute's removal of coverage for manufacturers, packers,
and distributors under the exemption based on gross value of sales or
business done after May 8, 1995. The agency believes that this will
result in minimal cost to industry because almost all firms that might
have been covered by that exemption will be covered by the new
exemption provisions.
Federal costs for implementing the notification system in terms of
setting up the system, handling mail, recording firms and products, and
providing information concerning exempted firms will approximate
$207,000. Thus, it is reasonable to expect that total costs of the
notification provision will be less than $2 million for the first year
and decrease substantially in subsequent years.
The benefits of this regulation are likely to be very large. First,
many small manufacturers noted the impossibility of labeling their low-
volume products in comments to the rule.
Assuming that the costs of labeling are about $3,000 per product
and that there is an average of 20 products per firm, cost savings from
not labeling the products that are exempt are estimated to be between
$275 million and $360 million. In addition, this law and regulation
prevent both the lost value to consumers of products that would no
longer be available and the costs of losing many small businesses.
IV. Environmental Impact
The agency has determined under 21 CFR 25.24 (a)(8) and (a)(11)
that this action is of a type that does not individually or
cumulatively have a significant effect on the human environment.
Therefore, neither an environmental assessment nor an environmental
impact statement is required.
The proposed actions pertaining to food labeling meet the criteria
in 21 CFR 25.24(a)(11) for exclusion from preparation of an
environmental assessment and an environmental impact statement. The
proposed regulations pertaining to the small business notification
procedure meet the criteria for exclusion described in 21 CFR
25.24(a)(8).
V. Paperwork Reduction Act
This proposed rule contains information collections that are
subject to review by the Office of Management and Budget (OMB) under
the Paperwork Reduction Act of 1980 (44 U.S.C. 3507). Therefore, in
accordance with 5 CFR part 1320, the title, description, and respondent
description of the information requirements are shown below with an
estimate of the annual collection and information burden. Included in
the estimate is the time for reviewing instructions, searching existing
data sources, gathering necessary information, and completion and
submission of the request.
Title: Food Labeling; Nutrition Labeling, Small Business Exemption.
Description: The proposed rule provides the procedures for the
submission of a notice of a claim by a company of an exemption from
FDA's regulations for mandatory nutrition labeling. FDA action on the
notice will be limited to review for completeness and acknowledgement
that the notice had been received and was or was not adequate.
The 1993 amendments revise the basis for a small business exemption
provided by section 403(q)(5) of the act. This new provision, section
403(q)(5)(E) of the act, provides an exemption for a food product based
on the number of employees of the company and the number of units sold
on an annual basis. Under the 1993 amendments, to qualify for an
exemption, a person must file the notice mentioned in the preceding
paragraph with FDA before the time period for the claimed exemption.
Proposed Secs. 101.9(j)(18)(iv) and 101.36(f)(2)(iv) reflect the
information identified in section 403(q)(5)(E) of the act as necessary
as part of the notice for a claimed small business exemption.
Description of Respondents: Persons and businesses, particularly
small businesses.
Estimated Annual Reporting and Recordkeeping Burden
------------------------------------------------------------------------
Annual Average
number of Annual burden Annual
Section respondents frequency hours per burden
response hours
------------------------------------------------------------------------
101.9 and 101.36.... 4,500 1 8 36,000
------------------------------------------------------------------------
The agency expects that the number of respondents and corresponding
annual burden hours will decrease over succeeding years as the basis
for additional exemptions changes. By May 1997, FDA estimates that
approximately 3,200 companies may be filing notices to claim the
exemption with a corresponding annual burden hours of approximately
25,600 hours.
The agency has submitted copies of the proposed rule to OMB for its
review of these recordkeeping requirements. Interested persons are
requested to send comments regarding this estimated burden, including
suggestions for reducing this burden to FDA's Dockets Management Branch
(address above), and to the Office of Information and Regulatory
Affairs, OMB, rm. 3208, New Executive Bldg., Washington, DC 20503,
ATTN: Desk Officer for FDA.
VI. Effective Date
Because of the shortness of time until the date on which notices
must be filed with the agency to claim the new exemptions, FDA is
proposing to make these regulations effective on the date of
publication of the final rules in the Federal Register. As stated
above, FDA tentatively concludes that it has good cause for this
action.
VII. Comments
Interested persons may, on or before May 13, 1994, submit to the
Dockets Management Branch (address above) written comments regarding
this proposal. Two copies of any comments are to be submitted, except
that individuals may submit one copy. Comments are to be identified
with the docket number found in brackets in the heading of this
document. Received comments may be seen in the office above between 9
a.m. and 4 p.m., Monday through Friday.
Because of the shortness of the time until firms must begin filing
notice of claimed exemptions with the agency, FDA will not be able to
extend the comment period beyond that date. Also, the agency is
advising that it may not be able to consider any comments received at
the Dockets Management Branch after the close of business on May 13,
1994.
VIII. References
The following references have been placed on display in the Dockets
Management Branch (address above) and may be seen by interested persons
between 9 a.m. and 4 p.m., Monday through Friday.
1. Final Regulatory Flexibility Analysis of the Regulations
Implementing the Nutrition Labeling and Education Act of 1990.
2. 139 Congressional Record-Extension of Remarks, E2015-2018, August
5, 1993.
3. 139 Congressional Record--House, H6358-6360, August 6, 1993.
4. 139 Congressional Record--Senate, S10817-10818, August 6, 1993.
List of Subjects in 21 CFR Part 101
Food labeling, Reporting and recordkeeping requirements.
Therefore, under the Federal Food, Drug, and Cosmetic Act and under
authority delegated to the Commissioner of Food and Drugs, it is
proposed that 21 CFR part 101 be amended as follows:
PART 101--FOOD LABELING
1. The authority citation for 21 CFR part 101 continues to read as
follows:
Authority: Secs. 4, 5, 6 of the Fair Packaging and Labeling Act
(15 U.S.C. 1453, 1454, 1455); secs. 201, 301, 402, 403, 409, 701 of
the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321, 331, 342,
343, 348, 371).
2. Section 101.9, effective May 8, 1994, is amended by revising
paragraph (j)(1) and by adding a new paragraph (j)(18) to read as
follows:
Sec. 101.9 Nutrition labeling of food.
* * * * *
(j) * * *
(1) (i) Until May 7, 1995, food offered for sale by a manufacturer,
packer, or distributor who has annual gross sales made or business done
in sales to consumers that is not more than $500,000 or has annual
gross sales made or business done in sales of food to consumers of not
more than $50,000, Provided, That the food bears no nutrition claims or
other nutrition information in any context on the label or in labeling
or advertising. Claims or other nutrition information subject the food
to the provisions of this section;
(ii) Food offered for sale by a person who makes direct sales to
consumers who has annual gross sales made or business done in sales to
consumers that is not more than $500,000 or has annual gross sales made
or business done in sales of food to consumers of not more than
$50,000, Provided, That the food bears no nutrition claims or other
nutrition information in any context on the label or in labeling or
advertising. Claims or other nutrition information subject the food to
the provisions of this section;
(iii) For purposes of this paragraph, calculation of the amount of
sales shall be based on the most recent 2-year average of business
activity. Where firms have been in business less than 2 years,
reasonable estimates must indicate that annual sales will not exceed
the amounts specified. For foreign firms that ship foods into the
United States, the business activities to be included shall be the
total amount of food sales, as well as other sales to consumers, by the
firm in the United States.
* * * * *
(18) Food products that are low-volume (that is, they meet the
requirements for units sold in paragraph (j)(18)(i) or (j)(18)(ii) of
this section); that, except as provided in paragraph (j)(18)(iv) of
this section, are the subject of a claim for an exemption that provides
the information required under paragraph (j)(18)(iv) of this section,
that is filed before the beginning of the time period for which the
exemption is claimed, and that is filed by a person that qualifies to
claim the exemption under the requirements for average full-time
equivalent employees in paragraph (j)(18)(i) or (j)(18)(ii) of this
section; and whose labels, labeling, and advertising do not provide
nutrition information or make a nutrient content or health claim.
(i) For food products first introduced into interstate commerce
before May 8, 1994, the product shall be exempt for the period:
(A) Between May 8, 1994, and May 7, 1995, if, for the period
between May 8, 1993, and May 7, 1994, the person claiming the exemption
employed fewer than an average of 300 full-time equivalent employees
and fewer than 600,000 units of that product were sold in the United
States or, if the product was not offered for sale for a full year
before May 8, 1994, it is reasonably anticipated that fewer than
600,000 units of the product will be sold between May 8, 1994, and May
7, 1995;
(B) Between May 8, 1995, and May 7, 1996, if, for the period
between May 8, 1994, and May 7, 1995, the person claiming the exemption
employed fewer than an average of 300 full-time equivalent employees
and fewer than 400,000 units of that product were sold in the United
States; and
(C) Between May 8, 1996, and May 7, 1997, if, for the period
between May 8, 1995, and May 7, 1996, the person claiming the exemption
employed fewer than an average of 200 full-time equivalent employees
and fewer than 200,000 units of that product were sold in the United
States.
(ii) For all other food products, the product shall be eligible for
an exemption for any 12-month period if, for the preceding 12 months,
the person claiming the exemption employed fewer than an average of 100
full-time equivalent employees and fewer than 100,000 units of that
product were sold in the United States, or in the case of a food
product that was not sold in the 12-month period preceding the period
for which exemption is claimed, fewer than 100,000 units of such
product are reasonably anticipated to be sold in the United States
during the period for which exemption is claimed.
(iii) If a person claims an exemption under paragraphs (j)(18)(i)
or (j)(18)(ii) of this section for a food product and then, during the
period of such exemption, the number of full-time equivalent employees
of such person exceeds the appropriate number, or the number of units
of the food product sold in the United States exceeds the appropriate
number, or, if at the end of the period of such exemption, the food
product no longer qualifies for an exemption under the provisions of
paragraphs (j)(18)(i) or (j)(18)(ii), such person shall have 18 months
from the date that the product no longer qualified as a low-volume
product of a small business to comply with this section.
(iv) A notice shall be filed with the Office of Food Labeling (HFS-
150), Center for Food Safety and Applied Nutrition, Food and Drug
Administration, 200 C St. SW., Washington, DC 20204 and contain the
following information, except that if the person is not an importer and
has fewer than 10 full-time equivalent employees, that person does not
have to file a notice for any food product with annual sales of fewer
than 10,000 total units:
(A) Name and address of firm requesting exemption;
(B) Names of the food products (including the various brand names)
for which exemption is claimed;
(C) Name and address of the manufacturer of the food products for
which an exemption is claimed, if different than the firm that is
claiming the exemption;
(D) The number of full-time equivalent employees. Provide the
average number of full-time equivalent individuals employed by the
person and its affiliates for the 12 months preceding the period for
which a small business exemption is claimed for a product. The number
of full-time equivalent employees is to be determined by dividing the
total number of hours of salary or wages paid to individuals that
render services to the company by the number of hours of work in a
year, 2,080 hours (i.e., 40 hours x 52 weeks);
(E) Approximate total number of units of the food product sold in
the United States in the 12-month period preceding that for which a
small business exemption is claimed: Provide the approximate total
number of units sold, or expected to be sold, in a 12-month period for
each product for which an exemption is claimed. For products that have
been in production for 1 year or more before the period for which
exemption is claimed, the 12-month period is the period immediately
preceding the period for which an exemption is claimed. For other
products, the 12-month period is the period for which an exemption is
claimed; and
(F) The notice shall be signed by a responsible individual for the
person who can certify the accuracy of the information presented in the
notice. The individual shall certify that the information contained in
the notice is a complete and accurate statement of the number of full-
time equivalent employees of the firm and its affiliates and of the
number of units of the product for which an exemption is claimed sold
by the firm. The individual shall also state that should the average
number of full-time equivalent employees or the number of units of the
food products sold in the United States by the firm exceed the
applicable numbers for the time period for which exemption is claimed;
the firm will notify FDA of that fact and of the date on which the
number of employees or number of products sold included the standard.
(v) FDA may by regulation lower the employee or units of food
products requirements of paragraph (j)(18)(ii) of this section for any
food product first introduced into interstate commerce after May 8,
2002, if the agency determines that the cost of compliance with such
lower requirement will not place an undue burden on persons subject to
it.
(vi) For the purposes of this paragraph, the following definitions
apply:
(A) Unit means the packaging or, if there is no packaging, the form
in which a food product is offered for sale to consumers.
(B) Food product means food in any sized package which is
manufactured by a single manufacturer or which bears the same brand
name, which bears the same statement of identity, and which has similar
preparation methods.
(C) Person means all domestic and foreign affiliates of the
corporation, in the case of a corporation, and all affiliates of a firm
or other entity, when referring to a firm or other entity that is not a
corporation.
(D) Full-time equivalent employee means all individuals employed by
the person claiming the exemption. This number shall be determined by
dividing the total number of hours of salary or wages paid to
individuals that render services to the person by the number of hours
of work in a year, 2,080 hours (i.e., 40 hours x 52 weeks).
* * * * *
3. Section 101.36, effective July 1, 1995, is amended by revising
paragraph (f) to read as follows:
Sec. 101.36 Nutrition labeling of dietary supplements of vitamins or
minerals.
* * * * *
(f)(1) Until May 7, 1995, dietary supplements of vitamins or
minerals are exempt from this section when they are offered for sale by
a manufacturer, packer, or distributor who has annual gross sales made
or business done in sales to consumers that is not more than $500,000
or has annual gross sales made or business done in sales of food to
consumers of not more than $50,000, Provided, That the food bears no
nutrition claims or other nutrition information in any context on the
label or in labeling or advertising. Claims or other nutrition
information subject the food to the provisions of this section.
(i) Dietary supplements of vitamins or minerals are exempt from
this section when they are offered for sale by a person who makes
direct sales to consumers who has annual gross sales made or business
done in sales to consumers that is not more than $500,000 or has annual
gross sales made or business done in sales of food to consumers of not
more than $50,000, Provided, That the food bears no nutrition claims or
other nutrition information in any context on the label or in labeling
or advertising. Claims or other nutrition information subject the food
to the provisions of this section.
(ii) For purposes of this paragraph, calculation of the amount of
sales shall be based on the most recent 2-year average of business
activity. Where firms have been in business less than 2 years,
reasonable estimates must indicate that annual sales will not exceed
the amounts specified. For foreign firms that ship food into the United
States, the business activities to be included shall be the total
amount of food sales, as well as other sales to consumers, by the firm
in the United States.
(2) Dietary supplements of vitamins or minerals that are low-volume
food products (that is, they meet the requirements for units sold in
paragraph (f)(2)(i) or (f)(2)(ii) of this section); that, except as
provided in paragraph (f)(2)(iv) of this section, are the subject of a
claim for an exemption that provides the information required under
paragraph (f)(2)(iv) of this section, that is filed before the
beginning of the time period for which the exemption is claimed, and
that is filed by a person that qualifies to claim the exemption under
the requirements for average full-time equivalent employees in
paragraph (f)(2)(i) or (f)(2)(ii) of this section; and whose labels,
labeling, and advertising do not provide nutrition information or make
a nutrient content or health claim.
(i) For food products that are dietary supplements of vitamins or
minerals first introduced into interstate commerce before May 8, 1994,
the supplement shall be exempt for the period:
(A) Between May 8, 1995, and May 7, 1996, if, for the period
between May 8, 1994, and May 7, 1995, the person claiming the exemption
employed fewer than an average of 300 full-time equivalent employees
and fewer than 400,000 units of that product were sold in the United
States; and
(B) Between May 8, 1996, and May 7, 1997, if, for the period
between May 8, 1995, and May 7, 1996, the person claiming the exemption
employed fewer than an average of 200 full-time equivalent employees
and fewer than 200,000 units of that product were sold in the United
States.
(ii) For all other food products that are dietary supplements of
vitamins or minerals, the supplement shall be eligible for an exemption
for any 12-month period if, for the preceding 12 months, the person
claiming the exemption employed fewer than an average of 100 full-time
equivalent employees and fewer than 100,000 units of that product were
sold in the United States, or in the case of a dietary supplement that
was not sold in the 12-month period preceding the period for which
exemption is claimed, fewer than 100,000 units of such product are
reasonably anticipated to be sold in the United States during the
period for which exemption is claimed.
(iii) If a person claims an exemption under paragraphs (f)(2)(i) or
(f)(2)(ii) of this section for a dietary supplement food product and
then, during the period of such exemption, the number of full-time
equivalent employees of such person exceeds the appropriate number, or
the number of units of the dietary supplement sold in the United States
exceeds the appropriate number, or, if at the end of the period of such
exemption, the dietary supplement no longer qualifies for an exemption
under the provisions of paragraphs (f)(2)(i) or (f)(2)(ii) of this
section, such person shall have 18 months from the date that the
supplement no longer qualified as a low-volume food product of a small
business to comply with this section.
(iv) A notice shall be filed with the Office of Food Labeling (HFS-
150), Center for Food Safety and Applied Nutrition, Food and Drug
Administration, 200 C Street SW., Washington, DC 20204 and contain the
following information, except that if the person is not an importer and
has fewer than 10 full-time equivalent employees, that person does not
have to file a notice for any dietary supplement of vitamins or
minerals with annual sales of fewer than 10,000 total units:
(A) Name and address of firm requesting exemption;
(B) Names of the food products (including the various brand names)
for which exemption is claimed;
(C) Name and address of the manufacturer of the food products for
which an exemption is claimed, if different than the firm that is
claiming the exemption;
(D) The number of full-time equivalent employees. Provide the
average number of full-time equivalent individuals employed by the
person and its affiliates for the 12 months preceding the period for
which a small business exemption is claimed for a product. The number
of full-time equivalent employees is to be determined by dividing the
total number of hours of salary or wages paid to individuals that
render services to the company by the number of hours of work in a
year, 2,080 hours (i.e., 40 hours x 52 weeks);
(E) Approximate total number of units of the food product that is a
dietary supplement of vitamins or minerals sold in the United States in
the 12-month period preceding that for which a small business exemption
is claimed. Provide the approximate total number of units sold, or
expected to be sold, in a 12-month period for each product for which an
exemption is claimed. For products that have been in production for
more than 1 year before the period for which exemption is claimed, the
12-month period should be the period preceding the period for which an
exemption is claimed. For other products, the 12-month period should be
the period for which an exemption is claimed; and
(F) The notice shall be signed by a responsible individual for the
person who can certify the accuracy of the information presented in the
notice. The individual shall certify that the information contained in
the notice is a complete and accurate statement of the number of full-
time equivalent employees of the firm and its affiliates and of the
number of units of the product for which an exemption is claimed sold
by the firm. The individual shall also state that should the average
number of full-time equivalent employees or the number of units of the
food product sold in the United States by the firm exceed the
applicable numbers for the time period for which exemption is claimed,
the firm will notify FDA of that fact and of the date on which the
number of employees or number of products sold exceeded the standards.
(v) FDA may by regulation lower the employee or units of a food
product that is a dietary supplement of vitamins or minerals
requirements of paragraph (f)(2)(ii) of this section for any product
first introduced into interstate commerce after May 8, 2002, if the
agency determines that the cost of compliance with such lower
requirement will not place an undue burden on persons subject to it.
(vi) For purposes of this paragraph, the following definitions
apply:
(A) Unit means the packaging or, if there is no packaging, the form
in which a dietary supplement of vitamins and minerals is offered for
sale to consumers.
(B) Food product that is a dietary supplement of vitamins or
minerals means a food (supplement) in any sized package which is
manufactured by a single manufacturer or which bears the same brand
name, which bears the same statement of identity, and which has similar
preparation methods.
(C) Person means all domestic and foreign affiliates of the
corporation, in the case of a corporation, and all affiliates of a firm
or other entity, when referring to a firm or other entity that is not a
corporation.
(D) Full-time equivalent employee means all individuals employed by
the person claiming the exemption. This number shall be determined by
dividing the total number of hours of salary or wages paid to
individuals that render services to the person by the number of hours
of work in a year, 2,080 hours (i.e., 40 hours x 52 weeks).
* * * * *
Dated: March 9, 1994.
David A. Kessler,
Commissioner of Food and Drugs.
Donna E. Shalala,
Secretary of Health and Human Services.
Note: The following Appendixes will not appear in the annual
Code of Federal Regulations.
Appendix I--Model Small Business Food Labeling Exemption Notice
(Please Type or Clearly Print)
1. Name of Firm--------------------------------------------------------
2. Firm Address--------------------------------------------------------
____________ State ____ ZIP--------------------------------------------
3. Name of Food Product for which Exemption is Claimed. (Use
continuation sheets as necessary)
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----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
4. Name and address of the manufacturers of the products listed in
item 3 if different than the firm listed in item 1. (Use
continuation sheets as necessary)
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
5. Average number of Full-Time Equivalent Employees ________ (For
time period of May 8, 1993, to May 7, 1994)
6. Approximate Total Number of Units sold in United States between
May 8, 1993, and May 7, 1994. (Use continuation sheets as necessary)
No. of Units Product
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
7. The undersigned certifies that the above information is a true
and accurate representation of the operations of ________.
(Name of firm)
The undersigned will notify the Office of Food Labeling of the date
on which the average number of full-time equivalent employees or the
number of units of food products sold in the United States exceeds
the applicable number for the exemption which is being claimed
herein.
----------------------------------------------------------------------
(Signature)
----------------------------------------------------------------------
(Title)
Appendix II--Model Small Business Food Labeling Exemption Notice
Instructions for Completion
(Send to: Office of Food Labeling (HFS-150), Center for Food Safety
and Applied Nutrition, Food and Drug Administration, 200 C St. SW.,
Washington, DC 20204)
1. Name of Firm: Enter recognized legal name of firm.
2. Firm Address: Enter mailing address for principal place of
business.
3. Name of the food product for which exemption is claimed.
Enter the name of each food product for which an exemption is
claimed. Continuation sheets may be used if necessary.
4. Name and address of manufacturer: Provide the names and
addresses of the manufacturers of the food products for which an
exemption is being claimed if they are different than the firm that
is submitting the claim for exemption.
5. Number of Full-Time Equivalent Employees: Enter the
approximate average number of persons employed by the firm for the
year preceding the year for which an exemption is claimed. The
average number should include all persons employed by the firm and
its affiliates. The average number of employees may be calculated by
using the following formula: Total number of employee/hours paid
divided by 2080 hours a year = Average number of full-time
equivalent employees. Employee hours should include overtime paid to
employees.
6. Approximate Total Number of Units Sold in United States
between May 8, 1993, and May 7, 1994: Enter the total number of
units sold in the United States between May 8, 1993, and May 7, 1994
for each product listed under item 3 for which a small business
exemption is being claimed. Continuation sheets may be used if
necessary. A food product is a food in any sized package which is
manufactured by a single manufacturer, or which bears the same brand
name; which bears the same statement of identity; and which has
similar preparation methods. The approximate total number of units
is the summation of all units of the various package sizes of the
food product in the form in which the food product is sold to
consumers.
7. Certification. The form is to be signed by a responsible
individual for the firm that can certify the authenticity of the
information presented on the form. The individual signing the form
will commit to notify the Office of Food Labeling when the numbers
of full-time equivalent employees or total numbers of units of
product sold in the United States exceed the applicable numbers for
an exemption.
[FR Doc. 94-5902 Filed 3-9-94; 4:18 pm]
BILLING CODE 4160-01-P
