By Laura Bentele, Timothy Bergere and Amy Pauli

Law360 (March 3, 2021, 5:03 PM EST) --

Laura Bentele

Timothy Bergere

Amy Pauli

Numerous issues arising out of the COVID-19 pandemic, along with the recent change in presidential administration and the growth in certain types of litigation, will result in another tumultuous year for the agribusiness and food industries.

The U.S. Food and Drug Administration and related regulatory bodies will continue to take center stage. Companies and individuals connected to the industry should prioritize compliance tuneups and vigilance in watching for regulatory shifts and litigation trends.

Appointments, Nominations and Other Changes

The Biden administration ushered in changes to the leadership of key regulatory bodies affecting the agribusiness and food industries. To date, President Joe Biden has named a number of nominees and appointees to key cabinet and regulatory posts, including:

• Tom Vilsack, confirmed as secretary of the U.S. Department of Agriculture on Feb. 23;

• Xavier Becerra, whose nomination for secretary of the U.S. Department of Health and Human Services is pending in the U.S. Senate;

• Michael S. Regan, whose nomination to serve as administrator of the U.S. Environmental Protection Agency is also pending in the Senate; and

• Rochelle Walensky, appointed director of the Centers for Disease Control and Prevention on Jan. 20.

Biden has not yet formally identified a permanent U.S. Food and Drug Administration commissioner, though FDA veteran Janet Woodcock has been appointed as interim commissioner.

The new administration has further committed to restore funding of various programs coming out of federal agencies, such as USDA conservation programs. However, it is unknown whether large-scale structural changes made to federal agencies in the last four years, including the move of the USDA's Economic Research Service from Washington, D.C., to Kansas City, Missouri, will be reversed.

COVID-19 Initiatives and Countermeasures

A number of initiatives and countermeasures related to COVID-19 will also be significant this year, including the following:

• Acceleration of development of vaccines and treatments for COVID-19 will continue to be central, with emphasis placed on the FDA's authority to issue emergency use authorization, or EUA, while also ensuring that products moving through this process are sufficiently safe and effective before distribution. EUA review is a mechanism used to facilitate the availability of medical treatments and countermeasures during public health emergencies. Although EUA authority enables the FDA to allow the use of unapproved medical products, or unapproved uses of approved medical products, in emergency circumstances, it does not obviate rigorous testing of such products.

• The public health emergency resulting from the COVID-19 pandemic, which was set to expire on Biden's first full day in office, has been extended by the HHS for another 90 days, and is likely to remain in place for the entirety of 2021. The public health emergency will facilitate expedited FDA review of vaccines and treatments for COVID-19, among other public health measures.

• Emphasis on expansion of COVID-19 vaccine distribution, and production of personal protective equipment, will continue.

• Modification of the FDA's temporary policies and guidance for manufacturers of products such as hand sanitizer, which may include potential fees, increased oversight and regulatory burdens, are to be expected.

Most sectors of the economy have become accustomed to closely watching COVID-19 policy developments. In 2021, companies should maintain their focus to stay on top of updates.

Consumer Fraud Claims

Class actions targeting highlighted ingredients, health representations and "natural" statements on human food and animal food product labels continued to be popular with plaintiffs in 2020, and will likely remain so throughout 2021.

These types of cases exploit broad state consumer protection laws, with attractive attorneys' fees allocations, and definitional gray areas or silence from the FDA, in order to claim that consumers have been deceived, misled or otherwise damaged by food, beverage, supplement or pet food manufacturers.

One specific category of products which may receive increased attention from plaintiffs attorneys specializing in consumer fraud claims are personal and surface area cleaning products. As a result of the COVID-19 pandemic, there was a rush to market for companies to introduce sanitizing products.

Depending on the purpose of the products and nature of claims made, such products may be subject to regulation by the EPA and/or the FDA. Plaintiffs attorneys have already begun to target producers and distributors of these products who were less than rigorous in evaluating and supporting labeling claims — for example, that a product kills 99.9% of bacteria.

There will likely be many companies in 2021 who receive demand letters invoking consumer fraud statutes, even if they were diligent in ensuring regulatory compliance. As ever, keeping a close watch on labeling claims is crucial to avoid being surprised by a consumer class action demand letter arising from an aggressive marketing approach.

Enhanced Regulation of Human Food and Supplements

During the Trump administration, the number of compliance inspections and enforcement actions decreased dramatically as a result of budgetary and headcount reductions at federal agencies like the FDA, the EPA and the USDA. It is predicted that the Biden administration will amplify federal regulation of food products and dietary supplements.

Having signed nearly as many executive orders as record-holder President Franklin Roosevelt signed in his first month in office, Biden will likely continue to use executive orders to adjust prior policies and redirect funds to federal agencies, in order to return to enforcement efforts initiated during the Obama administration.

In particular, efforts to provide a federal definition of "natural" and redefine the term "healthy" may be resumed under the Biden administration. Similarly, formal guidance and regulations regarding products containing hemp and CBD, which have been pending since the reclassification of hemp in the 2018 Farm Bill, may be advanced in 2021.

There may also be a renewed focus on food safety, in light of the fact that Biden was involved in the enactment of the Food Safety Modernization Act during the Obama administration. For example, the FDA's New Era of Smarter Food Safety initiative, paused so the agency could focus on the COVID-19 pandemic response, will likely continue to develop a blueprint for food safety plans during the next decade.

FDA and USDA facility inspections could also increase, following the stabilization of the pandemic. In the event that execution of safety plans and procedures have softened during a period of limited enforcement, now is the time to tighten up safety programs.

Implementation of USDA's National Bioengineered Food Disclosure Standard

The National Bioengineered Food Disclosure Standard Act of 2016 preempted a patchwork of state regulations targeting bioengineered, or BE, food products. As a result of the act, the USDA promulgated the National Bioengineered Food Disclosure Standard, or NBFDS, outlining labeling and disclosure requirements for various BE food products.[1]

The final regulations define BE food as "food that contains genetic material that has been modified through in vitro recombinant deoxyribonucleic acid (rDNA) techniques and for which the modification could not otherwise be obtained through conventional breeding or found in nature."[2] Food products meeting this general definition are defined by certain categories.

However, there are exemptions for (1) food served in a restaurant or similar retail food establishment; (2) very small food manufacturers; (3) food containing an inadvertent or technically unavoidable amount of BE substances, up to 5% of each ingredient; (4) food derived from an animal which consumed feed containing a BE substance; and (5) food certified under the USDA's Agricultural Marketing Service's National Organic Program.[3]

The BE food definition does not include food where it is not possible to detect modified genetic material. The issue of detectability is a critical concept affecting whether a refined or processed food product that includes an ingredient expressly identified as a BE substance is nevertheless exempt from the disclosure requirement.

Under the NBFDS, a BE substance can be established as not detectable through (1) records verifying the substance is sourced from a non-BE crop; (2) records verifying that the food has undergone a process validated to make any BE component substance undetectable; or (3) records confirming the absence of a BE substance through testing.[4]

The mandatory disclosure requirement applies to human food products that fall within the jurisdiction of both the FDA and the USDA. All food products subject to the NBFDS must have compliant labeling after Jan. 1, 2022. As a result, in 2021, producers, importers and retailers — if they have not already done so — should consider assessing whether the human food products they sell qualify as BE.

If a certain food product requires a BE disclosure, then appropriate labeling modifications should be made. Even if mandatory disclosure is not required, a "derived from BE" voluntary disclosure may still be appropriate. In the event BE disclosure is not relevant to a given product, a recordkeeping system supporting that conclusion is essential.

Producers, importers and retailers with human food products subject to NBFDS should set in motion compliance plans now. Though the current labeling deadline is not until next year, now is the time to consult counsel on the applicability of NBFDS to your products, draft compliant labels and draft messaging around the new standard.

EPA's Enhanced Enforcement of FIFRA

EPA and state enforcement actions aimed at products making pesticidal claims are on the rise. The EPA, under provisions of the Federal Insecticide, Fungicide and Rodenticide Act, or FIFRA, has been aggressively searching for new COVID-19-related cleaning products making pesticidal claims, such as "kills bacteria and viruses," "disinfects," and "prevents COVID-19."

These products have been in great demand by retailers and consumers since the outbreak of COVID-19, leading to many new entrants in the market — some of whom are not familiar with the EPA's strict regulation of products which make pesticidal claims. New pesticide products require a significant lead time to get through the FIFRA approval process.

Although the EPA has an expedited review process for COVID-19 disinfectants, it continues to closely regulate labels and claims, including iconography. This trend is expected to continue into 2021, as the EPA and the FDA catch up with the flood of new entrants into the market.

In particular, Section 13(a) of FIFRA authorizes the EPA to issue stop sale, use or removal orders to any person with a pesticide in their ownership, custody or control, if the agency has reason to believe that the pesticide is not registered, and is therefore not authorized for distribution in commerce.

Beginning in June of last year, the EPA began issuing stop sale orders to major online marketplaces due to the proliferation of individuals and companies selling unregistered pesticide products. In February, the EPA issued a modified directive to one company, adding 70 additional products to the list of suspected unregistered pesticides.

Import Restrictions

The EPA has taken action at the U.S. border as well, issuing refusal to admit orders for unregistered pesticides flagged by U.S. Customs and Border Protection, with whom the agency has been working closely since last spring. Other products have been forced into quarantine in bonded warehouses until they could be relabeled, at considerable cost and expense to the importers.

In most of these cases, the EPA is also pursuing civil penalties, which are often in the six-figure range. The problem has been so extensive that in January, the agency updated guidance issued last October, warning importers and distributors of their FIFRA obligations for certain types of disinfectant products, such as UV lights.

The EPA and the FDA have been working closely with CBP to identify personal health and pesticidal products flooding into the U.S. from overseas markets without meeting over-the-counter drug requirements. Most recently, the FDA placed all alcohol-based hand sanitizers from Mexico on an import alert to prevent such products from entering U.S. markets until the agency is able to review their safety.

Efforts to stem the flow of noncompliant products will likely continue, as the agencies involved develop more sophisticated methods of catching products at border entry points. Companies that wish to bring imported products into the U.S. pesticide market should keep in mind that early errors can be costly, and significantly delay product rollouts.

Conclusion

The major themes for the agribusiness and food industries right now are unquestionably the COVID-19 pandemic response, continuing litigation over labeling and a renewed emphasis on regulatory enforcement. But a greater degree of predictability can be expected, as the pandemic gradually comes under control and the Biden administration rolls out agency changes.

The key takeaway for companies and practitioners is that an ounce of prevention through proactive compliance programs will be worth a pound of cure — which may require breaking habits formed over the last several years.

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Laura Bentele and Timothy Bergere are partners, and Amy Pauli is an associate, at Armstrong Teasdale LLP.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] 7 CFR Part 66.

[2] 7 CFR 66.1(1)(i).

[3] 7 CFR 66.5.

[4] 7 CFR 66.9.

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