On December 29, 2011, LawCustoms discussed registration technicalities by U.S. Agents with Food and Drug Administration (FDA) in the article “Non-U.S. Food Facility Registration Cancellation.” The article noted that FDA recommends foreign food facilities not to cancel their registration, stating that “food facilities should register only once.” The article also noted that this interpretation may be impractical in light of the contractual relationship between many U.S. Agents and foreign food establishments.
If the U.S. Agent withdraws from representing foreign food facility, that Agent must notify FDA. 21 C.F.R. Sec. 1.234(a). If the facility, was registered online through FDA Industry Systems, then Agent has two practical ways of notifying FDA of its withdrawal. First, the Agent can cancel the registration notwithstanding FDA’s recommendation to the contrary. Second, the U.S. Agent or the foreign food facility may update the Section 7 of the registration form, which deals with the United States Agent. The problem with the second option is that Section 7 cannot be left blank. According to FDA, the system will not allow Section 7 be left blank. However, what if the U.S. Agent, who follows FDA’s recommendation, would like to delete his information from Section 7 (i.e. perform and update) and thereby withdraw from representation? Unless that Agent has information about other U.S. Agent on the standby, FDA system will not allow it: Section 7 may not be left blank. This means that the U.S. Agent, in order to fulfill his/her compliance with 21 C.F.R. Sec. 1.234(a), must resort back to the first option and cancel registration altogether. In order to do that, the U.S. Agent should contractually stipulate with foreign food facility the clause, where the foreign food establishment authorizes U.S. Agent to go into the system and cancel the registration upon the Agent’s withdrawal.
The concept of withdrawal is not merely about 21 C.F.R. Sec. 1.234(a) compliance and meeting FDA’s notification requirements. Since October 1, 2011 the U.S. Agent incurs the financial liability from FDA, which resulted from the non-compliance of the foreign food establishment principal. The liability stems from the Food Safety Modernization Act of 2011. Section 107 of the act deals with fees. Among other things, Section 107 states: “the responsible party for each domestic facility * * * and the United States agent * * * for each foreign facility subject to a reinspection in such fiscal year, to cover reinspection-related costs for such year.” According to FDA, the agency began implementation of Section 107 on October 1, 2011. This means, that if a foreign food facility did not pass the FDA inspection and the FDA inspector(s) is/are going for reinspection, the U.S. Agent will be responsible for the reinspection fee. The fee imposed upon the U.S. Agent by FDA, if a foreign travel is required, is currently at hefty $335 per hour. 76 Fed. Reg. 45822 (August 1, 2011).
For the foregoing reasons, U.S. Agents of the foreign food establishments should cancel their representation as soon as it ends. During the period of their representation, U.S. Agents may want to contractually limit their financial exposure through indemnification clauses.
Examples of indemnification clauses:
“PRINCIPAL shall hold AGENT harmless from and will fully indemnify AGENT for any and all claims for penalties, and/or other charges or claims of whatever nature, including fees assessed by FDA or other U.S. government agencies, in connection with Agent’s services.”
“AGENT’s liability for PRINCIPAL’s acts and/or omissions shall not exceed ____. In no event shall AGENT be liable for consequential, special, or indirect damages in the performance of services under this Agreement.”
