On May 4, the Agricultural Marketing Service (AMS) of the U.S. Department of Agriculture announced a proposed rule to establish a national disclosure standard for foods that may contain bioengineered ingredients. AMS now seeks comment on this proposed “National Bioengineered Food Disclosure Standard.”
Given the important role bioengineering plays in the country’s agriculture and food production industries, the AMS proposed rule would apply to many of the foods purchased or consumed each year in the United States. Since AMS must adopt some form of disclosure standard by July 29, 2018, industry members may wish to take advantage of this final opportunity to share their perspectives with regulators.
Why is the federal government imposing a new disclosure requirement for bioengineered foods?
Food brings people together, not only as friends and families, but as participants in the national economy. According to the USDA’s Economic Research Service, agriculture, food and related industries contributed about $992 billion dollars to the gross domestic product of the United States in 2015 — about 5.5 percent of the economy. Within that industry, demand for foods perceived as healthier or more natural has grown rapidly since the 1990s.
Unfortunately, increased interest in “natural” foods among some consumers has led to a corresponding increase in criticism that some industry members market their products in a false or misleading manner. Many of the complaints take the form of class-action lawsuits brought under various states’ consumer protection laws. Others have taken the guise of consumer pushes for state regulatory action. Both circumstances risk subjecting an interstate industry to a patchwork of inconsistent laws and regulations.
Congress took action to limit the potential burden of inconsistent state regulations in 2016 by enacting Public Law 114-216. Passed in response to a 2014 Vermont statute that attempted to impose disclosure requirements on any foods made with bioengineered ingredients, Public Law 114-216 amended the Agricultural Marketing Act of 1946 to charge the USDA with creating a National Bioengineered Food Disclosure Standard. The legislation also included two separate express pre-emption provisions, codified at 7 U.S.C. §§ 1639b(e) and 1639i(b), which prevent states from adopting non-identical disclosure requirements.
Who would need to comply with the proposed rule?
The proposed rule would affect retailers who package or sell food in bulk as well as many manufacturers of foods packaged for retail. The standard would not apply to food served in restaurants or other, similar retail establishments.
The proposed rule would not affect all retailers or manufacturers. It would exempt “very small food manufacturers,” defined as those manufacturers whose annual receipts total less than $2.5 million. As AMS noted, this exemption is substantially broader than a similar FDA regulation, 21 C.F.R. § 101.9(j)(1)(i), which exempts those whose annual gross sales do not exceed $500,000 from complying with certain nutrition labeling requirements. AMS estimates that this broader exemption would spare about 74 percent of manufacturers from the costs of regulatory compliance. At the same time, the disclosure standard would still apply to about 96 percent of all food products sold and about 99 percent of all sales.
AMS has solicited comments on alternative “very small manufacturer” definitions based on different total sales receipt values, including lowering the threshold to mirror the FDA’s $500,000 gross sales cutoff or raising the threshold to $5 million. According to the USDA’s estimates, a reduction in the threshold would provide regulatory relief to only 45 percent of manufacturers, while still applying to 99 percent of products sold and nearly every sale. Raising the threshold, however, could increase the regulatory relief to 81 percent of manufacturers while still covering approximately 94 percent of products sold and 98 percent of sales. By the USDA’s own calculations, these alternate thresholds may have little practical effect as it relates to the consumer in the marketplace (affecting between 94 percent and 99 percent of products, and 98 percent and nearly 100 percent of sales). The alternate thresholds, however, may affect over one-third of manufacturers (approximately 36 percent), either by imposing these regulatory burdens on 55 percent of manufacturers (with a $500,000 threshold) or by affording relief to 81 percent of manufacturers (with a $5 million threshold).
How would the proposed rule work in practice?
AMS has proposed a somewhat unusual regulatory scheme that takes the guesswork out of regulatory compliance by doing most of the guesswork for regulated businesses.
In essence, AMS proposes to keep two lists of crops and agricultural products for which bioengineered strains are typically cultivated in the United States. The first of these lists — the “highly adopted” list — includes those crops for which at least 85 percent of all commercially available, cultivated varieties (cultivars) were derived through bioengineering. The second, “not highly adopted” list includes crops for which less than 85 percent of domestically harvested cultivars are bioengineered. AMS plans to update these lists on an annual basis.
At this point, AMS’s proposed rule would list canola, field corn, cotton, soybeans and sugar beets as “highly adopted” commercially available bioengineered foods. Its “not highly adopted” list would include non-browning cultivars of apples, sweet corn, papayas, potatoes and summer squashes.
Rather than trying to parse the regulatory definition of bioengineering, most manufacturers can simply compare their ingredients to the crops on each of AMS’s two lists. If a product is manufactured using an ingredient from the “highly adopted” list — for instance, chips made with cornflower — the manufacturer must disclose that the food contains bioengineered ingredients. On the other hand, a food produced using only crops from the “not highly adopted” list — for example, potato chips fried in peanut oil — need disclose only that it “may” be a bioengineered food or contain a bioengineered ingredient.
Manufacturers are excused from disclosure if they maintain records verifying that their foods or ingredients were not made from bioengineered cultivars. Manufacturers are also exempt from the disclosure requirements for foods certified under the National Organic Program.
What about meat, eggs and milk?
By statute, no food derived from an animal can be considered “bioengineered” merely because the animal consumed a bioengineered substance. So a company that sells eggs will not need to verify that every batch of corn in its chicken feed was harvested from a non-bioengineered cultivar.
Generally speaking, the disclosure standard would apply to foods that would otherwise be governed by the Federal Meat Inspection Act, the Poultry Products Inspection Act or the Egg Products Inspection Act only if the predominant ingredient would independently be governed by Food, Drug, and Cosmetic Act (FDCA) labeling requirements. The exceptions to this guideline are soups, stews and other products where the predominant ingredient is stock, broth or water. In that case, the disclosure standard applies only if the second-most predominant ingredient would be subjected to the labeling requirements of the FDCA.
What does the mandatory disclosure look like?
This is the part of the regulation that is most innovative — or, depending on point of view, the most controversial.
The proposed rule allows covered manufacturers to select among several alternative disclosure methods. Manufacturers can opt to use one of two types of explicit disclosures on the product. This includes a textual disclosure on its label — “contains bioengineered food ingredients,” for example. But they can also opt to include a “B.E.” mark that AMS specifically designed in an effort to avoid disparaging bioengineered foods.
Manufacturers also have the option to provide additional information through a phone number or digital link without explicitly disclosing on the product itself that the product is or contains bioengineered ingredients. Manufacturers may direct consumers to text a short code to a specified phone number in order to receive an immediate disclosure. Manufacturers can also use a “Quick Response” code or other printed digital link, which consumers can then scan to access a webpage disclosing information about the product’s bioengineered ingredients. A statement such as “scan here for more food information” must appear in close proximity to the URL or QR code along with a telephone number that consumers can call for disclosure information.
Notably, the word “bioengineered” does not need to appear anywhere near the text-message or digital disclosures on a package. Congress expressly limited the accompanying text so consumers are invited to scan, call or text for “food information.”
For any manufacturer hesitant to include the explicit disclosures out of concern that consumers may be wary of a product because of an explicit bioengineered marking, the manufacturer should consider that only a small fraction of products and sales will be exempt from disclosure. As discussed above, related to exemption thresholds, the USDA estimates that the final proposed rule would cover at least 94 percent of food products and at least 98 percent of sales. Thus, consumers are likely to encounter bioengineered foods in almost every shopping experience. The cost of maintaining electronic and text message disclosures (and the means to effectuate them) may ultimately be outweighed by the omnipresence of bioengineered foods in the typical shopping experience.
How are other stakeholders reacting to the proposed rule?
Interested groups have already begun to weigh in on the rule. The American Farm Bureau Federation hailed the proposed rule as “a positive first step in a process that is important to farmers and consumers alike.” The AFBF described the proposed rule as one “based on sharing factual information” that would “provid[e] consumers access to information about their food purchases while also allowing farmers and ranchers to embrace the sustainable tools of modern agriculture.”
Others have not been so quick to praise the proposed rule. The Center for Food Safety has critiqued the proposed rule for disallowing what it describes as the “well-established terms” of genetic engineered, GE or GMO and instead using only the terms bioengineered or BE. The center’s executive director is concerned that this switch could lead to consumer confusion. At least one agricultural supplier of non-bioengineered cultivars has likewise urged the USDA to amend the proposed labeling requirement to include a warning that bioengineered foods are, according to that company, “not proven safe.”
Still others took a more measured approach — welcoming the release of the proposed rule as the next step in developing a national standard. The Grocery Manufacturers Association stated that its comments to the USDA “will reflect the ongoing commitment of [their] member companies to providing consumers with the transparency they need to make informed product choices.”
The proposed rule likely will continue to provoke a diverse array of opinions between now and the July 3 deadline for comments.
Would this standard end consumer class actions over allegedly misleading labels on bioengineered foods?
While this regulation is a step in the right direction, strict compliance with the rule might not be a panacea against state consumer protection claims.
Congress’s twin pre-emption provisions will almost certainly defeat any attempt to impose additional disclosure requirements under state law. The Eastern District of Washington recently held in Maple v. Costco Wholesale Corporation that a similar pre-emption statute prohibited claims that a beverage’s label needed additional caffeine content disclosure statements beyond what is required under FDA regulations. Courts likely will also conclude that Public Law 114-216 pre-empts claims that manufacturers must disclose anything about their use of bioengineered ingredients beyond what the national standard requires.
However, a court still might refuse to dismiss a state consumer protection claim under certain circumstances, and plaintiffs’ legal theories will most certainly continue to evolve in these cases. Because labels and other circumstances vary from case to case, it is also difficult to generalize how such claims might fare in the future.
The promulgation of the National Bioengineered Food Disclosure Standard likely will be one part of the process that ultimately will clarify how manufacturers, retailers and consumer communicate with one another about bioengineered foods. In the meantime, manufacturers should remain aware of some continuing risk in this area from consumer class actions.
What are the next steps?
AMS will continue to accept comments on the proposed rule until July 3, 2018. Affected industry member can share their comments or concerns with AMS before this deadline through the administrative website portal at www.regulations.gov. Industry members may alternatively mail their comments to:
1400 Independence Avenue Southwest
Washington, D.C. 20250
To ensure that comments are timely processed, each comment should reference the docket number (AMS-TM-17-0050) and cite the relevant portion of the Federal Register (National Bioengineered Food Disclosure Standard, 83 Fed. Reg. 19,860 (May 4, 2018)).