Imagine that you're waiting for an international hop order to clear customs and you receive a panicked call from your broker. She tells you that the U.S. Food and Drug Administration (FDA) tested the hops for pesticide residues and found some that are not approved for use on hops in the United States. The government will not allow the hops to be imported. What are you to do?
First, by way of background, under the Federal Food, Drug, and Cosmetic Act (FFDCA), FDA is primarily responsible for testing foods and food ingredients for adulterants (think contaminants) when they are imported. It is generally believed that the FDA tests, at most, 10 percent of imported food. If the FDA has a particular concern with a food, however, it may test more frequently.
As part of this testing, the FDA may look for microbiological contamination (e.g., E. coli O157:H7) and/or pesticide residues. Technically, the Environmental Protection Agency (EPA) sets pesticide residue levels, which are then enforced mainly by the FDA. As part of its pesticide testing, the FDA often runs a multiresidue screen that looks for many pesticide residues at the same time. If it has a particular concern with a pesticide that is not part of the multiresidue screen, it will have the explicit analysis done for that pesticide. The FDA specifically looks to see if the pesticide residues are within the maximum allowed; i.e., are within the tolerance. If the residues exceed the tolerance or if there is no tolerance, the FDA can declare the food that bears the residue "adulterated" under the FFDCA. An importer cannot bring an adulterated food into the U.S. and a producer (such as a brewer) cannot introduce an adulterated food into commerce.
This scenario occurred on a large scale as recently as 2012. The FDA was advised that certain orange juice and orange juice concentrate contained residues of carbendazim, a fungicide. Although there are tolerances for carbendazim on some fruits (apples, bananas, grapes, peaches, strawberries) there is no tolerance for carbendazim in or on oranges, including juice and concentrate. Consequently, the FDA declared the imported orange juice and concentrate adulterated and did not allow its importation. The Administration then implemented a "test and hold" policy for imported shipments of orange juice to determine if they contained the pesticide. This significantly bottlenecked imports of orange juice and orange juice concentrate and disrupted supply chains and production.
Further, once the FDA became aware of the practice of treating oranges with the pesticide, it began to look at retail for orange juice products that contained residues of carbendazim. The FDA's interest in the finished products made from ingredients that it deems adulterated is often of greater concern to producers than the inability to import a raw material. After all, the value of a distributed product (such as beer) is usually much greater than the raw material (such as hops) and could trigger a costly and disruptive recall. For the orange juice industry, fortunately the FDA did not require a recall because the FDA, in conjunction with the EPA, determined that the carbendazim levels detected posed no safety concern.
Given this possibility, though, what should responsible brewers do to protect themselves?
First, know your brokers/suppliers. Ask them for a Certificate of Analysis (CoA) that the raw material has been tested for contaminants. And don't rely only on the CoA; periodically have raw materials checked by a lab.
Next, require written security in the form of a legal document known as a "guaranty" that your raw materials meet U.S. law, and specifically that they are not adulterated or misbranded under the FFDCA. Include this guaranty in your contract or purchase orders. If your suppliers are based in the U.S., or have a U.S.-based agent, have that U.S. entity provide an FDA guaranty. Having this document on file can provide some legal protection against future FDA enforcement action. More importantly, it could provide a basis for recourse against your supplier should the raw materials it provides prove to be adulterated or misbranded.
The guaranty can be limited to a specific shipment or delivery. If so, it can be part of or attached to the invoice or bill of sale covering the shipment or delivery. The FDA's suggested form for the shipment limited guaranty provides:
[Supplier name] hereby guarantees that no article listed herein is adulterated or misbranded within the meaning of the Federal Food, Drug, and Cosmetic Act, or is an article which may not, under the provisions of section 404, 505, or 512 of the act, be introduced into interstate commerce.
[Signature and post office address of the supplier]
Alternatively, the guaranty can be general and continuing. In this case, the guaranty is considered to have been given at the date the item was shipped or delivered by the supplier. The FDA's suggested form for the general and continuing guaranty provides:
The article comprising each shipment or other delivery hereafter made by [Supplier] to, or in the order of [your name and post office address] is hereby guaranteed, as of the date of such shipment or delivery, to be, on such date, not adulterated or misbranded within the meaning of the Federal Food, Drug, and Cosmetic Act, and not an article which may not, under the provisions of section 404, 505, or 512 of the act, be introduced into interstate commerce.
[Signature and post office address of supplier]
For purposes of preventing penalties under the FFDCA, the guarantor must have a U.S. address. In other words, the FDA considers a guaranty legitimate only if made by a U.S. supplier or agent. On a commercial basis, however, the guarantor does not have to be U.S.-based in order for you to potentially have a remedy on the basis of the guaranty. So even if the guaranty comes from a non-U.S. company, it can possibly provide a basis for indemnification and other claims arising from a breach of the guaranty by the supplier.
In summary, to protect your business against the threat of adulterated raw materials, know what is allowed in your raw materials and products; require your supplier to comply with U.S. law, including the FFDCA and pesticide tolerances; and establish preventive programs and testing programs to provide yourself with assurance that your raw materials and finished products are in compliance with U.S. law.
Originally published in the November/December 2015 issue of The New Brewer.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.