Supply chain disruptions: FDA guidance and temporary policies

Feature Articles

| 19 July 2022 | By Tony Subketkaew, JD, Joanna Pearce, JD 

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The COVID-19 pandemic caused one of the most prominent displays of supply chain disruption in the modern era. However, the US Food and Drug Administration (FDA) found ways to allow for regulatory flexibility by issuing guidance documents while still managing to protect consumers from adulterated and misbranded food.
 
Keywords – COVID-19, FDA, food, guidance, pandemic, supply chain
 

Introduction

The complexity of modern supply chains is never more evident than when disruptions demonstrate in real time how many interdependent processes and entities have to come together to deliver a finished product to the end consumer. Today’s consumers enjoy access to products made with components that can originate from multiple countries. A cheese pizza can be made with tomatoes grown in China, cheese from Italy, spices from India, and flour made from wheat grown and processed in the United States. This gives consumers access to a quality product comprised of the best, most cost-effective, globally sourced ingredients.
 
However, this supply chain complexity has drawbacks, which have been amplified and highly evident during the pandemic. Due to the perishable nature of most foods, manufacturers keep limited inventory on-hand, often receiving ingredients just before combining them with others and processing them into finished foods. Complex supply chains that source ingredients globally are particularly vulnerable to the risks associated with “just-in-time” sourcing. One crucial missing ingredient can prevent a manufacturer from meeting its supply commitments, especially if an acceptable alternative ingredient is not available domestically or a substitution is cost prohibitive. On the supplier side, limited inventory may force suppliers to make difficult decisions, such as choosing which customers will have their orders filled or whether to reduce supply across the board to all customers.
 
On top of these business considerations, there are also regulatory considerations. The FDA regulates a massive portion of the US economy, with FDA-regulated products accounting for about 20 cents of every dollar spent by US consumers and 15% of US imports and exports.¹ The agency’s policies during the pandemic addressed the confluence of regulatory and business considerations to mitigate problems caused by supply chain issues. This article will highlight some of the specific steps taken by the FDA to provide flexibility in the form of guidance to affected regulated entities.

Regulatory background

At the most basic level, the FDA enforces the Federal Food, Drug, and Cosmetic Act (21 USC Ch. 9),² the FDCA) to ensure that food is neither adulterated nor misbranded. Adulterated food is food that is unsafe, contains harmful ingredients, or lacks valuable constituents (21 USC §342).² Misbranded food, on the other hand, is food that is marketed in a deceptive way, such as with a false or misleading label (21 USC §343).² In other words, adulterated food is typically food that presents a safety risk, while misbranded food is an inaccurate representation of the actual food product. The FDCA prohibits adulterating or misbranding food and introducing, delivering for introduction, or receiving adulterated or misbranded food in interstate commerce, among other acts (21 USC §331).²
 
The volume of food regulated by the FDA is massive, and it has limited enforcement resources. As such, the agency has to be judicious about how it employs its enforcement resources, and often adopts a risk-based approach to target violations with the most potential to negatively impact public health.
 
FDA relies heavily on voluntary compliance from industry to strategically achieve its goals of protecting public health. Food recalls are a prominent example of how FDA relies on voluntary compliance to protect consumers. Notably, FDA did not gain the authority to order mandatory food recalls until the enactment of the Food Safety Modernization Act (FSMA; 21 USC §350l).² However, even with this authority, the majority of recalls are still voluntarily initiated by food manufacturers. This solution is appealing to both the FDA and industry. Because the recall is voluntary, the agency does not have to establish that there is a reasonable probability that the food is adulterated or misbranded and that the use of such food will result in serious adverse health consequences, as required by the statute. This frees up enforcement resources for the FDA and achieves the ultimate goal of getting adulterated or misbranded products off the shelves. On the industry side, manufacturers are able to control the messaging surrounding the recall and frame the recall as demonstrating their commitment to high standards for their products and protecting their valued customers.
 

The role of FDA guidance

Another major way the FDA achieves voluntary compliance is through enforcement discretion. When it announces that it intends to exercise enforcement discretion, that does not mean that the practice to which such enforcement discretion applies is fully compliant with FDA regulations. Rather, enforcement discretion is the agency’s way of acknowledging that there may be some scenarios in which practices may technically violate regulatory requirements, but nevertheless warrant accommodations from the FDA. The agency formally issues enforcement discretion policies in the form of agency guidance, and the guidance documents typically include specific criteria that must be met to be eligible for enforcement discretion. For example, the agency prominently issued an enforcement discretion guidance for face coverings that could potentially be regulated as medical devices to address supply issues for such products during the pandemic.³
 
Enforcement discretion guidance documents are valuable to industry because they serve as a blueprint for how companies can reduce their risk profile in the FDA’s view. Practically speaking, enforcement discretion guidance often outlines safe harbors upon which industry can rely until new guidance or formal rulemakings supersede the guidance. Enforcement discretion guidance documents also help the FDA achieve voluntary compliance by providing industry with, as it often notes in such documents, the agency’s current thinking on a topic while leaving open the possibility that an “alternative approach” can satisfy regulatory requirements. In contrast to regulations and statutes that are typically written at a high level, guidance documents tend to be more prescriptive and provide specific examples of how to comply with FDA requirements, sometimes in a question-and-answer format.
 

FDA guidance for supply chain issues during the pandemic

Temporary policy for nutrition labeling of certain packaged food⁴
During the pandemic, it seemed that more restaurants were selling both packaged versions of their typical dine-in offerings as well as food ingredients for home use. These practices were the result of the FDA’s temporary packaged food guidance.⁴ This relatively short guidance had a considerable impact on revenue streams for restaurants and food manufacturers. In normal circumstances, packaged food products regulated by the FDA are required to include specific information on the label, including a nutrition facts label, as required by 21 CFR §101.9(a)(1).² However, restaurants frequently change menu offerings and may not have the ability or expertise to accurately generate a nutrition facts label for each iteration of their products, which can make it difficult for restaurants to sell packaged food products directly to consumers.
 
The packaged food guidance allowed the agency to both combat food waste and provide alternative revenue streams for restaurants affected by the pandemic. In the guidance, the FDA recognized that “restaurants may have purchased food, including ingredients, that they can no longer use to prepare restaurant food and instead wish to sell directly to consumers or other businesses” and created a flexible solution to help both restaurants and food manufacturers. To accommodate restaurants and food manufacturers, the agency announced its intent to exercise enforcement discretion for foods that lacked a nutrition facts label when sold by restaurants or food manufacturers as long as the labels did not include any nutrition claims and included the following other information required by the regulations:

• A statement of identity;
• An ingredient statement;
• The name and place of business of the food manufacturer, packer, or distributor;
• The net quantity of contents; and
• Allergen information required by the Food Allergen Labeling and Consumer Protection Act.

 
The packaged food guidance also allowed for the sale of food that is not labeled for retail sale, such as food labeled for use in restaurants. In practice, this allowed restaurants that purchased wholesale ingredients to sell the same ingredients directly to consumers without retail labeling, which created another potential revenue stream for restaurants adversely affected by the pandemic.
 
Temporary policy for certain food labeling requirements⁶
On the food manufacturing side, the FDA’s temporary policy on certain food labeling requirements, specifically minor formulation changes and for food sold through vending machines, referred to here as the “formulation guidance,” allowed restaurants and manufacturers to fill gaps in the supply chain created by COVID-related disruptions.
 
The agency provided some historical background in the formulation guidance for its food labeling regulations, noting that they were created to meet evolving consumer demands for more information about products, especially with regard to nutrition content. The FDA also acknowledged that the pandemic caused significant supply disruptions and shortages for specific ingredients, prompting manufacturers to take appropriate steps to reformulate their existing products. Industry requested regulatory flexibility from FDA for minor formulation changes that would technically result in incorrect labeling but would ultimately not pose a health or safety issue or cause significant changes to the final product. The formulation guidance was FDA’s response to that request.
 
If a label does not accurately represent a food – such as by not accurately representing the ingredients –the food is potentially misbranded under the FDCA (21 USC §343)² FDA reminded manufacturers in the formulation guidance that there are alternative ways to achieve labeling compliance, such as by relabeling products or stickering over previous labeling to reflect revised formulations. The agency also noted that there is already some flexibility built into the regulations. For example, under 21 CFR §101.22,⁵ most flavors and spices may be collectively declared as “natural flavor,” “artificial flavor,” or “spices,” respectively, on a label’s ingredient list even if some of the spices or flavors within the formulation change. In addition, 21 CFR §101.100⁵ exempts certain types of ingredients from the declaration requirement, such as incidental additives and processing aids. Lastly, ingredients such as fats, leavening agents, yeast, and firming agents may be declared with “and/or” under 21 CFR §101.4(b).⁵
 
Nevertheless, the FDA also uses the formulation guidance to provide enforcement discretion to manufacturers who make minor formulation changes to address supply disruptions or ingredient shortages caused by the pandemic, without making corresponding updates to the product’s label. However, the agency identifies several guardrails, or factors, that manufacturers must follow to take advantage of such enforcement discretion:

• Safety – The substitute ingredient cannot increase the safety risk of finished food, such as by containing a food allergen, gluten, sulfites, or other allergenic ingredients;
• Quantity – The substitute ingredient must generally be present at levels of 2% or less by weight in the finished food;
• Prominence – Similar to the Quantity factor, the substitute or omitted ingredient must not be replacing a major ingredient, such as rice flour replacing wheat flour in a baked product or margarine replacing butter in a product labeled “made with real butter;”
• Characterizing or ingredient in name – Along the same lines as the Prominence factor, the substitute or omitted ingredient cannot replace a key ingredient in the product’s name, such as the raisins in raisin bread;
• Claims – The substitute or omitted ingredient cannot affect voluntary nutrient content claims or health claims on the product’s label; and
• Nutrition/function – The substitute or omitted ingredient cannot have a significant impact on the nutrition or functionality of the finished product.

 
Overall, these factors reflect the FDA’s commitment to protect the public from adulterated or misbranded food. The Safety factor prohibits manufacturers from adulterating a food by not appropriately declaring substituted allergenic ingredients (such formulation changes would require relabeling or using an updated sticker label) whereas the other factors all address the potential misbranding of the product. While small formulation changes without corresponding labeling changes could potentially cause the reformulated food to be technically misbranded, the formulation guidance provides flexibility for manufacturers by signaling that such potential technical violations would be minor enough to warrant enforcement discretion from the FDA as long as manufacturers follow the factors outlined in the formulation guidance.
 
To further aid industry, the rest of the formulation guidance also provides specific examples of formulation changes that are eligible for enforcement discretion.
 
The FDA emphasizes that ingredient reductions or omissions must be temporary only and should not significantly change the order of predominance in the product’s ingredient list. As a reminder, 21 CFR §101.4(a)⁵ requires that ingredients be listed on the label in descending order of predominance by weight. The agency provides several examples of acceptable omissions or reductions in the formulation guidance, including reducing/omitting a specific vegetable in a vegetable quiche that contains small amounts of multiple vegetables; reducing/omitting dehydrated vegetables or fruits in a soup; and reducing/omitting flavors, spices, colors, oleoresins, or oils in a chocolate chip cookie.
 
FDA’s guidance on substitutions is more nuanced. For colors, manufacturers may substitute colors not subject to certification for certified colors or other colors not subject to certification. Certified colors are synthetic in nature and require approval from the FDA before their use in food. However, color additives derived from natural sources (such as vegetables, minerals, or animals) are exempt from the certification requirements. Therefore, these exempt color additives can be substituted for certified colors or other exempt color additives in finished food products under the formulation guidance. Acids, such as lactic, malic, or citric acid, may also be substituted for one another without label changes as long as they are used in accordance with current good manufacturing practices.
 
Manufacturers may substitute different varieties of the same ingredient under the formulation guidance as well, even if the ingredients are present at more than 2% in the formulation. For example, manufacturers can use different varieties of mushrooms in products that simply declare “mushrooms” in the list of ingredients. Even if the label declares the ingredient with more specificity, such as “habanero peppers” instead of just “chili peppers,” such a substitution would still be acceptable. Note, however, that FDA limits this type of substitution to the ingredient list; if the label includes a claim elsewhere highlighting the specific ingredient, such as “made with habanero peppers,” then substituting another type of pepper would not be acceptable under the formulation guidance.
 
Manufacturers may also substitute similar ingredients with different origins in foods that identify ingredients with a specific geographical origin, such as “California raisins.” However, FDA makes clear in the formulation guidance that this enforcement discretion only extends to FDA requirements; country of origin labeling requirements enforced by the US Department of Homeland Security’s Customs and Border Protection and the US Department of Agriculture’s Agricultural Marketing Service may still apply.
 
Flours present unique issues under the formulation guidance because some are subject to standards of identity under 21 CFR part 137. For example, bleached flour must be labeled with the bleaching ingredient in the ingredient statement and the word “Bleached” next to the name of the food under 21 CFR §137.105(b)(2).⁵ The formulation guidance allows for substituting unbleached flour for bleached flour in products that are named “bleached flour” or that declare the same in the list of ingredients. FDA justifies this enforcement discretion by noting that bleaching is purely for aesthetic purposes and does not affect the safety or nutritional profile of the finished flour.
 
FDA provides additional considerations for the substitution of fats and oils. Specifically:

• The substituted fat/oil must not be a prominent ingredient;
• The oil must be highly refined;
• The substitution must not present an allergenic risk;
• The replacement fats/oils must be derived from the same category of vegetable, animal, or marine oils; and
• The oils must have a similar fatty acid profile to minimize the impact on the food’s nutritional profile.

 
This specific portion of the formulation guidance also served as the basis for the FDA’s policy response to the sunflower oil shortage caused by the war in Ukraine. Ukraine supplies almost half of the world’s sunflower oil, whereas Russia accounts for about 25% more. Together, almost 75% of the world’s sunflower oil supply is sourced from two countries currently at war.⁷
 
In an e-mail response to questions from industry about the sunflower oil shortage, the FDA noted that the sunflower oil shortage due to the war was not directly covered by the formulation guidance (which is primarily targeted at supply chain issues caused by the pandemic), but the FDA referenced the same principles outlined in the formulation guidance as applicable to sunflower oil substitutions. However, the FDA’s response also outlined the following additional considerations:

• Most importantly, FDA encourages manufacturers to request enforcement discretion for sunflower oil substitutions on a case-by-case basis. Manufacturers wishing to request enforcement discretion must provide the following information to FDA in a formal request:

  • An explanation of why enforcement discretion is being requested and why stick-on labeling is not feasible;
  • The name of the product(s);
  • The ingredient being replaced, the substitute ingredient, the percentage of the ingredient in the finished formulation, and the impact of the substitution on the nutrition facts label;
  • Current labels and proposed labels (if available);
  • The total number of labels for each affected product; and
  • The estimated amount of time that current inventory will last.

• The substitute oil must also not cause statements on the label to be false, such as “non-GMO” claims when a GMO oil is substituted for a non-GMO sunflower oil; and
• The enforcement discretion is not available for infant formula.

 
Temporary policy on preventive controls; food supplier verification onsite audit requirements⁸
The pandemic presented unique challenges for manufacturers that, by regulation, are required to audit their suppliers. However, the FDA’s onsite audit guidance on preventive controls and Foreign Supplier Verification Program (FSVP) onsite audit requirements aimed to address some of these challenges.
 
Under the agency’s Preventive Controls for Human Foods Rule (PC rule), receiving facilities (i.e., facilities subject to preventive control requirements that manufacture or process raw materials or other ingredients that they receive from suppliers) are sometimes required to perform onsite audits of their suppliers. Specifically, if a receiving facility imports a raw material or ingredient that poses a hazard that the supplier will control, and there is a reasonable probability that exposure to the hazard will result in serious adverse health consequences or death to humans, the receiving facility must perform an onsite audit of the supplier under 21 CFR §117.430(b)(1).⁵
 
Also in that regard, the FDA’s Foreign Supplier Verification Program regulations require importers to ensure that the food they import is produced under a regulatory scheme that offers the same level of public health protection as US regulatory requirements. Similar to the audit requirement under the PC Rule, when a foreign supplier is responsible for controlling a hazard in a food for which there is a reasonable probability that exposure to the hazard will result in serious adverse health consequences or death, the importer must perform an onsite audit of the supplier before importing the food and at least annually thereafter unless the importer makes an adequate written determination that other activities would be appropriate (21 CFR §1.506(d)(2)).⁵ Another way importers may demonstrate compliance with most FSVP requirements is by meeting the supply chain requirements in 21 CFR part 117, subpart G (21 CFR §1.502(c)(3)).⁵
 
However, the pandemic presented new challenges that interfered with industry’s ability to conduct onsite supplier audits. For one, travel was significantly restricted. Jurisdictions enacted a multitude of local, state, and national restrictions dictating who could travel and for what reasons. These restrictions also led to the FDA postponing domestic and foreign routine surveillance inspections in May of 2020. The agency acknowledged these travel difficulties in the onsite audit guidance, specifically pointing to the US government’s Do Not Travel advisory to China and Italy’s internal travel restrictions.⁹
 
The onsite audit guidance provided enforcement discretion for entities required to perform onsite audits, but only when:

• The entity has determined that an onsite audit is an appropriate verification activity for an approved supplier, and this determination is reflected in a written food safety plan or FSVP;  
• The supplier is due for an onsite audit in a locale that is covered by a travel restriction related to COVID-19;  
• The travel restriction makes it impracticable for the entity to conduct or obtain the onsite audit; and  
• The entity temporarily selects an alternative verification activity or activities, such as sampling and testing or reviewing food safety records and modifies its food safety plan or FSVP accordingly. The alternative verification activity should provide sufficient assurance that the hazard is being controlled by the foreign supplier while the onsite audit is delayed.  

The onsite audit guidance also advised entities to resume onsite audits “within a reasonable period of time after it bec[ame] practicable to do so” and to revert their written policies to reflect such changes.
 

Conclusion

Although the aforementioned policies provided industry with much-needed flexibility during the pandemic, the ephemeral nature of each policy is reflected in the first two words of each guidance –   “temporary policy.” While the pandemic will eventually come to an end, the FDA’s responsive policy initiatives have the potential to be a formative experience for the agency. Before, such disruptions were either less significant in scale or so short-lived that they did not warrant adjusting regulatory policies. Even though no one wishes to see future pandemic-scale disruptions to the food supply chain, the agency now has valuable real-world experience with agile policymaking to help it address such disruptions if the need arises.
 
Every guidance document described in this article maintains the FDA’s commitment to public health by protecting the food supply from misbranded and adulterated food while providing industry with practical compliance alternatives to minimize supply disruptions. Whether it is allowing for formulation changes so long as the labeling would not deceive consumers or proposing alternative verification activities for receiving facilities, the agency has demonstrated that it wants to be a valuable partner to industry by listening to industry needs and providing workable solutions. Going forward, if the need for similar guidance is ever necessary, the FDA has the expertise and tools in place to be the policymaking leader our country needs in times of crisis.
 
Acronyms and abbreviations
FDA, [US] Food and Drug Administration; FDCA, Federal Food, Drug, and Cosmetic Act; FSMA, Food Safety Modernization Act; FSVP, Foreign Supplier Verification Program; PC [Rule], Preventive Controls for Human Foods Rule
 
About the authors
Tony Subketkaew, JD, is an associate in the Washington, DC, office of Haynes Boone. He is a member of the Food, Beverage, and Restaurant Practice Group and counsels clients on regulatory and advertising issues for FDA-regulated products. Subketkaew started his career at the FDA as a Presidential Management Fellow and has been working in regulatory affairs for more than 8 years. He received a JD from The Ohio State University’s Moritz College of Law and a master of arts in teaching from Johns Hopkins University. Subketkaew is an active member of the Food and Drug Law Institute, the Council for Responsible Nutrition, and the FDA Alumni Association. He can be reached at Tony.Subketkaew@haynesboone.com
 
Joanna Pearce, JD, is an associate in the Dallas, Texas, office of Haynes Boone, where she began her career in 2018. She assists clients with both transactional and regulatory matters as a member of the Food, Beverage, and Restaurant Practice Group. Pearce received her JD, magna cum laude, from Southern Methodist University’s Dedman School of Law and is an active member of the Food and Drug Law Institute. She can be reached at Joanna.Pearce@haynesboone.com
 
Citation Subketkaew T, Pearce J. Supply chain disruptions: FDA guidance and temporary policies. Regulatory Focus. Published online 30 June 2022.
 
References
All references accessed and/or verified on 21 June 2022.
 

1. Food and Drug Administration. FDA at a glance: Regulated products and facilities. Last updated November 2021. https://www.fda.gov/media/154548/download
2. US Code Title 21. https://www.law.cornell.edu/uscode/text/21
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5. CFR – Code of Federal Regulations Title 21. https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfcfr/cfrsearch.cfm 
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