FDA Guidance on Voluntary Recalls and Smarter Food Safety

Voluntary recalls are a key tool that the Food and Drug Administration (“FDA”), and FDA-regulated companies, use to protect public health.  Voluntary recalls are also a corporate nightmare, and can be extremely taxing on supply chain relationships.  For industries and products where recalls are common – such as food and drugs – supply chain partners should negotiate responsibility for recalls at the start of their relationship and be prepared to act quickly if a recall is initiated.

The Draft Guidance on Initiation of Voluntary Recalls Under 21 CFR Part 7, Subpart C (“Draft Guidance”) is the FDA’s most recent move towards updating the FDA recall process.  In the FDA Statement announcing the Draft Guidance, the FDA explained that, once finalized, it “will provide industry with clear information on ways to prepare, plan, and work with the FDA to ensure voluntary recalls are initiated properly and promptly.”

The Draft Guidance provides recommendations related to training, record keeping, and recall procedures, and outlines specific steps that companies should take to be “recall ready.”  These recommendations are structured as a Q & A, addressing four questions:

  • How should a firm in a product distribution chain prepare to facilitate timely initiation of a voluntary recall?
  • What should a firm do if there is an indication of a problem with a distributed product?
  • How should a firm initiate a voluntary recall?
  • How does FDA work with a recalling firm to initiate a voluntary recall in a timely manner?

Public comments will be accepted until June 24, 2019.  The Draft Guidance, including information for submitting comments, is located here.

The FDA recently issued another Statement “on steps to usher the U.S. into a new era of smarter food safety.”  Pursuant to the 2011 FDA Food Safety Modernization Act (FMSA), the FDA has proposed and finalized regulations establishing “science- and risk-based standards for the production and transportation of domestic and imported foods.”  Recognizing the new opportunities and risks presented by innovation and increasingly global distribution networks, the FDA has announced a “New Era of Smarter Food Safety” with a goal to augment FDA “efforts implementing important FSMA requirements while also leveraging . . . the use of new and emerging technologies.”  As a first step, the FDA intends to create a “Blueprint for a New Era of Smarter Food Safety” that will include issues related to traceability, digital technologies, and evolving food business models.

Cross-Post: DOJ Updates Guidance for Corporate Compliance Programs

This week, the US Department of Justice (DOJ) announced an update to its 2017 guidance on how the DOJ will evaluate the effectiveness of a company’s corporate compliance program. The updated compliance guideline (Updated Guidance) is twice the length of the original and utilizes a more instructive approach, serving as a roadmap to prosecutors, and prudent companies.

Our colleagues Colin Jennings, Ayako Hobbs, and Elizabeth Weil Shaw have prepared a summary and analysis of the DOJ’s 18-page Updated Guidance, focusing on the important lessons a company can learn about the key elements necessary for a robust and effective compliance program.  You can read and download their summary and analysis here.

President Trump Threatens to Increase Tariffs on $525 Billion of Chinese Goods

In a series of tweets posted on May 5, President Trump threatened to raise tariffs on $200 billion of Chinese goods from 10% to 25%, effective this Friday, May 10. He further threatened a 25% tariff on an additional $325 billion of Chinese goods that are currently untaxed, stating it could happen “shortly.” It is unclear whether U.S. officials will actually impose the substantial tariff change this coming Friday, or if it is simply a tactic to apply pressure in trade talks. Trump has previously proposed raising tariffs on Chinese goods to 25% but postponed implementation due to progress in trade talks between the two countries (https://www.businessinsider.com/trump-china-tariff-increase-delayed-past-march-1-deadline-2019-2).

Trump stated in his tweets, “The Trade Deal with China continues, but too slowly, as they attempt to renegotiate.” According to a recent WSJ report (https://www.wsj.com/articles/u-s-china-conclude-productive-trade-talks-but-sticking-points-remain-11556718515), the two countries have made significant headway towards a trade deal, but several issues remain including the use of tariffs as an enforcement measure, China’s industrial policy of granting subsidies to certain companies, and intellectual property protection. Chinese negotiators were scheduled to travel to Washington D.C. on May 8 to continue negotiations, but as of Monday, commentators are unsure if Chinese negotiators will keep their plans. It remains to be seen how President Trump’s latest threats will affect the course of negotiations.

US and EU Release Preliminary Tariff Lists Amid WTO Aircraft Subsidies Disputes

As a tactic in the ongoing civilian aircraft subsidies dispute between the US and the EU at the World Trade Organization, the US government has proposed a preliminary list to tax about US$11 billion worth of products exported to the US from the EU.  The product list includes two sections, one focusing specifically on products from France, Germany, Spain and the UK, and the other includes a wide-range of consumer goods (foods, drinks, textiles, handbags, etc.) from all 28 EU member states.  On April 17, 2019, the EU launched a public consultation period on a preliminary list of products from the US to be considered for countermeasures.  The proposed list includes a variety of agri-food products, aircrafts and chemicals, among others, that represent about US$20 billion in US exports to the EU.

Our colleagues Frank R. Samolis, George N. Grammas, Wolfgang A. Maschek, Robert MacLean, Jane Haxby, and Ludmilla L. Kasulke have prepared an update on the proposed tariff lists, including key highlights from the lists, the potential impact of the tariffs to the transatlantic business sectors, next steps in the regulatory process and how we can help.  The update may be read here.

President Trump Signs Memo Focused on Combating Counterfeit Goods, Impacting Supply Chains

On April 3, President Trump signed a memorandum calling for the Department of Homeland Security to prepare a report with recommendations to prevent the trafficking and sale of counterfeit goods in the American marketplace. The Department of Homeland Security is to work with the Commerce Department, the attorney general, and other federal agencies to prepare the report within 210 days. The memorandum requests the report to “identify appropriate administrative, statutory, regulatory, or other changes, including enhanced enforcement actions, that could substantially reduce trafficking in counterfeit and pirated goods or promote more effective law enforcement regarding trafficking in such goods.” Further, the report’s recommendations should be based on available data, but also identify further data to collect and share amongst federal agencies.
Peter Navarro, the director of the White House National Trade Council, commented that the memorandum acts as a “warning shot across the bow,” for e-commerce marketplaces to self-regulate in this area, or otherwise the government will intervene. He stated the memorandum targets third-party marketplaces including eBay, Amazon, and Alibaba, as well as third-party payment processors and customs brokers. According to the memorandum, the Government Accountability Office performed an investigation by purchasing products from third-party marketplaces in categories of frequently counterfeited goods. It found that more than forty percent of the goods were counterfeit. A recent report from the Organization for Economic Co-operation and Development estimates counterfeit and pirated goods account for 3.3% of global trade.
This obviously impacts supply chains. Often, U.S. manufacturers simply assume that the components that go into their finished products are authentic. But the OECD report shows that this is not always the case. Therefore, U.S. manufacturers that import from regions where counterfeiting is prevalent need to take advantage of their contractual inspection and auditing rights. U.S. manufacturers that do not have broad inspection and auditing rights need to insert such rights in their next round of contracting exercises. At the very least, U.S. manufacturers need to ensure that they have robust indemnification provisions that allow them to recover for any counterfeiting violations against component suppliers.

Brexit: Deal or “No Deal”? Preparing for a “No Deal” Brexit

Our colleagues Matthew LewisMatthew Kirk, and Robert MacLean have prepared another in-depth analysis of the current status of Brexit.  You can read and download the full update here.
The range of options, and timescales, days after the UK should have left the EU, remains as wide as ever. We are still some way from knowing what future trading relationships will look like. Any final “no deal” preparatory steps should be taken between now and 12 April – it is not our predicted outcome, but the chances of it happening have increased. Our pulse update focuses on:
What Could Happen?
The effective deadline for the UK government and Parliament to decide a way forward is Friday 5 April, possibly slipping to Monday 8 April. The European Council will meet on 10 April to assess the situation and decide whether to extend the Article 50 deadline beyond 12 April. It is impossible to predict what governmental and parliamentary manoeuvres will lead to this week.
Top 10 Impacts of Tariffs on Imports
Changes to UK import policy in the event of a “no deal” Brexit will mean an increase in tariff costs on a range of imports from the EU (including some important products for retailers such as meat, dairy, fish, clothing and ceramics) and a reduction in tariff costs on a much wider range of products from outside the EU.
Impact of a “No Deal” on UK/ EU Borders
A “no deal” Brexit will mean a sharp end to “free circulation” of goods inside the EU’s single market, with goods traded between the EU and UK being treated as “imports” and “exports”. This will involve a complete reconfiguration of existing customs formalities carried out at EU and UK borders, with the introduction of import declarations, customs checks and – potentially – customs duties.

When Politics Affects Supply Chains

According to recent WSJ reporting , immigration issues at the Mexico-US border are disrupting commercial trade, as US Customs and Border Patrol agents who typically handle trade traffic have been redirected to migrant issues. This redistribution of resources has reportedly caused a pile up of truck traffic and delay of inspections for agricultural and automotive components. This has reportedly resulted in an estimated tens of millions of dollars in losses for supply chain partners. Who is saddled with the risk of loss when politics impacts the flow of goods at international borders?
This complicated question involves the convergence of trade policy, supply chain contract rights, and insurance coverage, such that each instance of loss must be determined on a case-by-case basis. If trade partners have force majeure provisions in their contracts – and even if they don’t! – suppliers may be excused temporarily or permanently by border actions beyond their control. (In the US, courts do not take a uniform view as to whether political risk constitutes a force majeure event.) On the other hand, carriers may be looped into the equation, if their carrier agreements broadly assign them risk of loss during transit. In addition, smart shippers will require carriers to have insurance coverage for situations such as this – so in some instances, insurance companies (and their reinsurers) may bear the ultimate risk.
As border tensions heat up, we expect more impacts to North American supply chains. Supply chain partners should develop multi-tiered strategies to minimize loss, allocate risk, and cover potential liabilities.

US Supply Chains Face Tariff Increase on Beef Exports to Japan, Unlike Member Countries of the CPTPP

Cows

US beef companies shipping to Japan likely will have to pay higher tariffs beginning in May due to the United States’ rejection of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). To protect its own beef industry, Japan increases tariffs on frozen beef imports if import volumes pass a certain threshold, which Japan is now approaching. However, Japan exempts CPTPP members from the tariff increases. Hence, most major beef exporters to Japan, such as Canada, New Zealand, and Mexico will be exempt from the tariff increases.
The United States therefore faces a tariff increase from 38.5% to 50% on beef exports through March 2020 (relative to the 26.6% tariff imposed on CPTPP members). To some extent, this has happened before; Japan’s tariff increase on beef was most recently triggered in 2017. However, at that time, the United States’ main beef competitors were subject to the same increase as non-US suppliers.
This also may be the tip of the iceberg. CPTPP members may have a competitive tariff advantage over US suppliers in Japan for other food products, including wheat and pork. These issues will likely loom over the upcoming trade talks between the United States and Japan. Negotiations regarding a free trade agreement between the US and Japan are set to begin in April, and President Trump plans to visit Japan in May.

Brexit: Where Do We Stand at the End of February?

What Next?

The UK is scheduled to leave the EU on March 29, 2019, but so far the UK has failed to ratify a Withdrawal Agreement.  Whether the UK will leave with or without a deal remains unclear, and the analysis changes on a near-daily basis.  Regardless of outcome, however, the nature of the UK’s future trading relationship with the EU will need to be determined in a relatively short period, and the product of those negotiations will form the basis of the UK’s future trading relationships with the rest of the world, including the United States.  The UK will also have the opportunity to act in other areas post-Brexit – such as tax policy, immigration, and supervision of regulated industries.  These developments will significantly impact many global supply chains.

Our colleague Ambassador Matthew Kirk has prepared another in-depth analysis of the current status of Brexit, posted on our dedicated Brexit Legal Page, which you can read below.

Where are we now?

The UK’s progress towards leaving the European Union has been a tortuous and turbulent affair. It has been marked by Prime Minister Theresa May’s Government suffering repeated heavy defeats in Parliament, which would normally have led to a change of policy if not of Government, but carrying on with its Brexit stance unchanged. So you could be forgiven for assuming that a series of votes initiated by backbenchers at the end of February in which the Government suffered no defeats would also signal no change. Not so. Even more paradoxical, the significant change to the Government’s approach at the end of February may make the outcome the Government has been aiming for all along a little more likely.
What happened? In mid-February, the Government headed off a serious push to give Parliament more influence over the process through an amendment tabled by Labour’s Yvette Cooper, by promising more opportunities to vote at the end of the month. Amid rumblings of discontent among the hitherto loyal Brexit Delivery Group (100+ Leave and Remain supporting Conservative MPs who have supported the PM throughout) and the threat of mass resignations of Ministers, at the end of February the PM effectively adopted the Cooper amendment as her own policy, which led Cooper to propose a further amendment designed to bind the PM to stick to her commitment – this passed with a very comfortable majority, though around 110 Conservatives failed to support it (most abstained, 22 voted against).
What does it all mean? On 12 March, Parliament will vote again on the Withdrawal Agreement, with whatever adaptations the Government has been discussing with the EU (see below for the likely status of these). If Parliament accepts, this will form the basis for the UK’s departure from the EU. If not, on 13 March Parliament will vote whether to proceed to leave the EU with no deal. If Parliament declines to do that, it will vote on 14 March whether the Government should request an extension to the Article 50 deadline of leaving the EU on 29 March.
If the Withdrawal Agreement does not pass on 12 March, it is virtually certain that Parliament will then vote against “no deal” and to ask for a delay to the Brexit process, in the belief that the EU will grant such a delay. The risk of a “no deal” exit on 29 March has therefore been reduced to close to zero (though of course the EU has also to agree any delay – see below), but, as the PM was at pains to stress in Parliament, delay does not remove “no deal” at the end of the delay period. The Parliamentary arithmetic however seems inexorable. It is doubtful that, as some have asserted, the risk of “no deal” was putting much pressure on the EU side of the negotiation: the EU can read the Parliamentary arithmetic as well as anyone. The moves in Parliament at the end of February increase the likelihood that Parliament will assert the majority against “no deal” Brexit into the future.
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Brexit: Where Do We Stand at the End of January?

The UK is scheduled to leave the EU on March 29, 2019.  At this time, however, the UK has failed to ratify a Withdrawal Agreement, risking a “no-deal” exit.  Whether the UK will leave with or without a deal remains unclear, and the analysis changes on a near-daily basis.  Regardless of outcome, however, the nature of the UK’s future trading relationship with the EU will need to be determined in a relatively short period, and the product of those negotiations will form the basis of the UK’s future trading relationships with the rest of the world, including the United States.  The UK will also have the opportunity to act in other areas post-Brexit – such as tax policy, immigration, and supervision of regulated industries.  These developments will significantly impact many global supply chains.
Our colleagues on both sides of the Atlantic, in particular Ambassador Matthew Kirk and Donald Moorehead,  have prepared an in-depth analysis of the current status of Brexit.  More information can be found in the attached briefing.

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