Preliminary Regulatory Impact Analysis

Department of Health and Human Services
Food and Drug Administration

FSMA Supplemental Notice of Proposed Rulemaking for Current
Good Manufacturing Practice and Hazard Analysis and Risk-Based
Preventive Controls for Food for Animals

Docket No. FDA-2011-N-0922

Preliminary Regulatory Impact Analysis
Preliminary Regulatory Flexibility Analysis
Preliminary Unfunded Mandates Reform Act Analysis

Economics Staff
Office of Planning
Office of Policy, Planning, Legislation and Analysis
Office of the Commissioner

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Submit either electronic or written comments on the preliminary regulatory impact analysis by
75 days after publication of the supplemental notice of proposed rulemaking in the Federal
Register.
Instructions: All submissions received must include the Agency name and Docket No. FDA2011-N-0922 and RIN for this rulemaking. All comments received may be posted without
change to http://www.regulations.gov, including any personal information provided.

Submit electronic comments in the following way:
Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting
comments.

Submit written comments in the following ways:
Mail/Hand delivery/Courier (for paper or CD-ROM submissions): Division of Dockets
Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061,
Rockville, MD 20852.

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Table of Contents
I. Introduction and Summaries
A. Summary of Proposed Changes
B. Summary of October 29, 2013 Proposed Rule
1. Compliance Costs
2. Benefits
C. Summary of Total Costs and Benefits of Provisions in the Supplemental Notice of
Proposed Rulemaking
1. Compliance Costs
2. Benefits
II. Preliminary Regulatory Impacts Analysis
A. Need for Regulation
B. Number of Facilities
C. Cost of Potential New Requirements in Supplemental Notice of Proposed Rulemaking
1. Product testing
a. Labor Costs
b. Capital Costs
c. Total Product Testing Costs
2 Environmental Monitoring
3. Supplier Program
a. Written Procedures
b. Verification Activities for Suppliers
i. Audits of Suppliers
ii. Supplier Verification Activities Other than Audits
iii. Verification activities for suppliers that are qualified
facilities
iv. Total Costs of Supplier Program
4. Economically Motivated Adulteration
a. Compliance Costs
5. Review of Records
6. Summary of Costs of Potential New Requirements
D. Analysis of Alternatives
1. Food Safety and Food Hygiene Training
III. Small Entities Affected
A. Description and Number of Small Entities
B. Impacts on Small Entities
C. Regulatory Relief for Small Entities
IV. Anticipated Modifications to Our Estimate of the Cost of the Final Rule

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I. Introduction and Summary
FDA has examined the impacts of the proposed rule under Executive Order 12866,
Executive Order 13563, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Unfunded
Mandates Reform Act of 1995 (Public Law 104-4). Executive Orders 12866 and 13563 direct
Agencies to assess all costs and benefits of available regulatory alternatives and, when regulation
is necessary, to select regulatory approaches that maximize net benefits (including potential
economic, environmental, public health and safety, and other advantages; distributive impacts;
and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. OMB has
determined that this proposed rule is an economically significant regulatory action as defined by
Executive Order 12866.
The Regulatory Flexibility Act requires Agencies to analyze regulatory options that
would minimize any significant impact of a rule on a substantial number of small entities.
Because the proposed rule would impose annualized costs that range from $13,200 to $18,300 on
many small entities, the Agency determined that the proposed rule, if finalized, may have a
significant economic impact on a substantial number of small entities.
Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires that Agencies
prepare a written statement, which includes an assessment of anticipated costs and benefits,
before proposing “any rule that includes any Federal mandate that may result in the expenditure
by State, local, and tribal governments, in the aggregate, or by the private sector, of
$100,000,000 or more (adjusted annually for inflation) in any one year.” The current threshold
after adjustment for inflation is $144 million, using the most current (2013) Implicit Price
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Deflator for the Gross Domestic Product. FDA expects this proposed rule may result in a 1-year
expenditure that would meet or exceed this amount.

A. Summary of Proposed Changes
The 2013 proposed rule Current Good Manufacturing Practice and Hazard Analysis and
Risk-Based Preventive Controls for Food for Animals (Preventive Controls Rule) as analyzed in
our original Proposed Regulatory Impact Analysis (Ref. 1) would include requirements for
facilities subject to subpart C to maintain a food safety plan, perform a hazard analysis, and
institute preventive controls for the mitigation of those hazards. Our original PRIA included a
more detailed analysis of each of the provisions, some of which is further detailed in the 2011
Eastern Research Group (ERG) report, “Economic Analysis of Proposed Animal Feed
Regulation – A Cost Analysis for the Livestock Feed and Pet Food Industries"(Ref. 2). The
supplemental notice of proposed rulemaking includes potential additional requirements for
facilities subject to subpart C to institute product testing, environmental monitoring, a risk-based
supplier program, and preventive controls to help prevent economically motivated adulteration
(EMA). Further, the supplemental notice of proposed rulemaking defines a very small business
as one with total annual sales of animal food of less than $2.5 million, adjusted for inflation. If
these provisions were adopted, facilities would also be required to monitor their preventive
controls, verify that they were effective, take any appropriate corrective actions, and maintain
records documenting these actions.

The estimated costs of the supplemental notice of proposed rulemaking equal the sum of
the costs of the 2013 proposed rule and the potential additional requirements added by the
supplemental notice of proposed rulemaking. Total one-time compliance costs are estimated at
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$79.91 million for the supplemental NPRM. Total annual costs are estimated at $82.07 million.
Discounting the one-time costs over 10 years at a 7 percent discount rate and adding the annual
costs results in a total annualized compliance cost estimate of $93.45 million (see Table 1).
Discounting the one-time costs over 10 years at a 3 percent discount rate and adding the annual
costs results in a total annualized compliance cost estimate of $91.44 million.
FDA estimates the total annualized costs of the potential additional requirements at $5.81
million (over 10 years at a seven percent discount rate) for those animal food manufacturing
facilities that would be subject to subpart C. The individual costs and cost total are listed below:
Product Testing costs:

$131,400

Environmental Monitoring:

$368,200

Supplier Program:

$734,300

Economically Motivated Adulteration:

$4,316,700

Review of Records for these Provisions:

$258,400

Total Costs of Potential New Requirements:

$5,809,000

FDA is unable to quantify the benefits of the supplemental NPRM. The supplemental
NPRM may result in fewer instances of contaminated animal food. Any such reduction in
contaminated animal food would reduce the risk to animals, to humans handling animal food,
and to humans consuming food products of animal origin, which in turn would generate social
benefits in the form of potential improvements in public (human and animal) health.

Table 1. Industry Compliance Costs and Benefits of Supplemental NPRM ($ million)

Total Costs

1-Time Cost

Annual Cost

$79.91

$82.07

6

Total
Annualized
Cost at 7%1
$93.45

Total
Annualized
Cost at 3%1
$91.44

Benefits

Improved food safety systems can reduce the risks of recalls,
adverse health effects related to contaminated food, and
reduce losses of contaminated food ingredients and animal
food products.
1. Total annualized cost equal to annualized 1-time cost plus annual cost.

In Table 1a, FDA provides the accounting information.
Table 1a. Summary of Benefits, Costs and Distributional Effects of Supplemental NPRM
Category

Benefits

Annualized
Monetized
$millions/year
Annualized
Quantified
Qualitative

Transfers

Effects

Year
Dollars
2012
2012

Units
Discount
Rate
7%
3%

Period
Covered
10 years
10 years

2012
7%
2012
3%
Improved food safety systems can
reduce the risks of recalls, adverse
health effects related to
contaminated food, and reduce
losses of contaminated food
ingredients and animal food
products.
2012
7%
$93.45

10 years
10 years

Monetized
2012
3%
$91.44
$millions/year
Annualized
2012
7%
Quantified
2012
3%
Qualitative
Federal
2012
7%
Annualized
2012
3%
Monetized
To:
$millions/year
Other
2012
7%
Annualized
2012
3%
Monetized
To:
$millions/year
State, Local or Tribal Government: No effect
Small Business: The proposed rule may have a
significant impact on a substantial number of small
entities that manufacture/process, pack, and hold
animal food.
Wages: No estimated effect
Growth: No estimated effect

10 years

Annualized

Costs

Primary
Estimate

B. Summary of October 29, 2013 Proposed Rule
1. Compliance Costs
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10 years

10 years
10 years
10 years
10 years

10 years
10 years

Notes

Estimates assume all
foreign costs are
passed on to US
consumers.

FDA summarizes its previous estimate of the costs of the October 29, 2013 proposed rule
that would cover animal foods under the very small business exemption of less than $2,500,000
in annual sales of animal foods per firm. In the PRIA for the 2013 proposed rule (Ref 1), FDA
did not provide the detailed summary of industry compliance costs for the co-proposal in which
the very small business definition was set at less than $2.5 million, but rather provided these
details only for the co-proposal in which the definition was set at less than $500,000. Table 2
below shows the detailed summary of industry compliance costs for the 2013 proposed rule.
Total one-time compliance costs were estimated at $74.71 million for the co-proposal for
very small businesses with animal food sales set at less than $2,500,000. Total annual costs were
estimated at $76.28 million. Discounting the one-time costs over 10 years at a 7 percent discount
rate and adding the annual costs resulted in a total annualized compliance cost estimate of $86.92
million (see Table 2). Discounting the one-time costs over 10 years at a 3 percent discount rate
and adding the annual costs resulted in a total annualized compliance cost estimate of $85.04
million.
Table 2. Industry Compliance Costs of the October 29, 2013 Proposed Rule (VSB < $2,500,000)
($ million)

$0.83
$2.13
$1.09

Total
Annualized
Cost at 7%1
$1.19
$2.16
$1.09

Total
Annualized
Cost at 3%1
$1.20
$2.16
$1.09

$0.28

$0.03

$0.07

$0.06

$0.22

$3.92

$3.95

$3.94

$3.26
$4.83

$7.39
$0.84
$0.04

$7.39
$1.31
$.0.73

$7.39
$1.22
$0.61

$2.86

$2.35

Rule Provision

1-Time Cost

Annual Cost

Validation of food safety plan
Process control monitoring
Process control monitoring –
verification
Sanitation Controls – writing procedures
for food contact surfaces and crosscontamination
Sanitation controls – monitoring and
verification
Subpart B – additional sanitation labor
Training for qualified individuals
Attesting to qualified status and
changing product labels
Administrative review of rule

$2.50
$0.22

$20.07

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Subtotal

$31.37

$16.46

$20.93

$20.14

Hazard Analysis
Preventive Controls
Recall Plan
Monitoring
Corrective Action
Recordkeeping

$14.03
$4.10
$0.05
$2.53

$1.77
$22.28
$1.37
$0.83
$5.36
$2.71

$1.77
$24.28
$1.95
$0.83
$5.72
$2.71

$1.77
$23.92
$1.85
$0.83
$5.65
$2.71

ERG Subtotal

$20.72

$34.31

$37.26

$36.74

Facilities subject to both part 117 and
part 507

$5.01

$5.65

$6.36

$6.23

$64.55
$22.37
$86.92

$63.11
$21.94
$85.04

ERG Analysis of process controls draft
(Includes food safety plan reanalysis
and corrective actions)2

Domestic Manufacturers
$57.09
$56.42
Foreign Manufacturers
$17.62
$19.87
Total
$74.71
$76.28
1. Total annualized cost equal to annualized 1-time cost plus annual cost.
2. Based on a working version of a process control draft rule.

2. Benefits
As described in the original PRIA (Ref 1), FDA lacks sufficient data to quantify the
potential benefits of the 2013 proposed rule. The causal chain from contaminated animal food to
human and animal health and welfare can be identified but not quantified. Because no data exists
to quantify the likelihood of hazards that might be found in different animal foods, we are unable
to estimate the effectiveness of the requirements of the proposed rule to reduce potential adverse
health effects in humans or animals. Nevertheless, the 2013 PRIA described how improved
animal food safety systems can reduce the number of recalls, reduce the risk of adverse health
effects related to contaminated animal food, and reduce the losses of contaminated animal food.
Furthermore, better control over the supply chain could reduce the opportunity for economically
motivated adulteration, such as the melamine added to wheat gluten that resulted in
contamination of pet foods.
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C. Summary of Total Costs and Benefits of Potential New Requirements in Supplemental Notice
of Proposed Rulemaking
1. Compliance Costs
Table 3 summarizes the estimated cost of this supplemental NPRM, including the
following additional annualized costs for potential new requirements that have been added in the
supplemental NPRM.

Product Testing costs:

$131,400 (domestic and foreign)

Environmental Monitoring:

$368,200 (domestic and foreign)

Supplier Program:

$734,300 (domestic and foreign)

Economically Motivated Adulteration:

$4,316,700 (domestic and foreign)

Review of Records for these Provisions:

$258,400 (domestic and foreign)

Table 3. Industry Compliance Costs of Supplemental Proposed Rule (VSB < $2,500,000) ($
million)

$0.83
$2.13
$1.09

Total
Annualized
Cost at 7%1
$1.19
$2.16
$1.09

Total
Annualized
Cost at 3%1
$1.20
$2.16
$1.09

$0.28

$0.03

$0.07

$0.06

$0.22

$3.92

$3.95

$3.94

$3.26
$4.83

$7.39
$0.84
$0.04

$7.39
$1.31
$.0.73

$7.39
$1.22
$0.61

$0.10
$0.27
$0.12

$2.86
$0.10
$0.27
$0.54

$2.35
$0.10
$0.27
$0.46

Rule Provision

1-Time Cost

Annual Cost

Validation of food safety plan
Process control monitoring
Process control monitoring –
verification
Sanitation Controls – writing procedures
for food contact surfaces and crosscontamination
Sanitation controls – monitoring and
verification
Subpart B – additional sanitation labor
Training for qualified individuals
Attesting to qualified status and
changing product labels
Administrative review of rule
Product Testing
Environmental Monitoring
Supplier Program

$2.50
$0.22

$20.07

$2.92

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Economically Motivated Adulteration
Review of Records

$0.46

$3.07
$0.19

$3.14
$0.19

$3.13
$0.19

Subtotal

$34.75

$20.02

$24.96

$24.09

Hazard Analysis
Preventive Controls
Recall Plan
Monitoring
Corrective Action
Recordkeeping

$14.03
$4.10
$0.05
$2.53

$1.77
$22.28
$1.37
$0.83
$5.36
$2.71

$1.77
$24.28
$1.95
$0.83
$5.72
$2.71

$1.77
$23.92
$1.85
$0.83
$5.65
$2.71

ERG Subtotal

$20.72

$34.31

$37.28

$36.75

Facilities subject to both part 117 and
part 507

$5.39

$6.08

$6.85

$6.71

Domestic Manufacturers
Foreign Manufacturers
Total

$60.85
$19.06
$79.91

$60.42
$21.65
$82.07

$69.09
$24.36
$93.45

$67.55
$23.90
$91.44

ERG Analysis of process controls draft
(Includes food safety plan reanalysis
and corrective actions)

FDA displays summary estimates of the costs of our original PRIA and our supplemental
PRIA using a very small business definition of $2,500,000. The difference between our original
estimate and the supplemental PRIA estimate is that we included the additional cost estimates for
product testing, environmental monitoring, supplier verification and economically motivated
adulteration and records review for these provisions.

Original Total Annualized Costs

$86.92 million

Re-proposed Total Annualized Costs

$93.45 million

Difference in Total Annualized Costs

$6.53 million

2. Benefits
The changes in the provisions of the supplemental NPRM do not compel FDA to change
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its conclusion that it lacks sufficient data to quantify the potential benefits of the supplemental
NPRM. FDA remains unable to estimate the effectiveness of the requirements of the
supplemental proposed rule to reduce potential adverse health effects in humans or animals.

II. Preliminary Regulatory Impacts Analysis
A. Need for Regulation
As described in the original PRIA (Ref 1) this regulation is required by the FDA Food
Safety Modernization Act, Section 103 of which states that FDA must establish through
rulemaking, science-based minimum standards for conducting a hazard analysis, documenting
hazards, implementing preventive controls, and documenting the implementation of the
preventive controls. As a potential part of such standards, in the supplemental notice of proposed
rulemaking we are providing an opportunity for public comment on potential requirements for product
testing programs, environmental monitoring programs, supplier programs, and hazards that may be
intentionally introduced for purposes of economic gain.

Private markets operating within the framework of the legal system promote the health
and safety of consumers. Limitations of both the marketplace and the legal system, however, can
result in inadequate control of some health and safety hazards, and reduce societal welfare.
In a perfectly competitive market in which consumers and producers both have
sufficient information, the optimal level of production of animal foods that are manufactured,
processed, packed or held will be provided at an optimal level of safety. In these markets,
however, consumers and producers may not have sufficient information on the safety attributes
of foods. Although producers do have an incentive to put safety programs into place, the lack of
awareness and information about the risk suggests that an inefficiently high demand may exist
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for animal food products that are produced without using adequate measures to prevent food
borne illness, adulteration, or contamination. Because the demand for many manufactured or
processed animal foods may not be sufficiently affected by safety considerations, incentives to
invest in safety measures from farm to fork is diminished. Consequently, the market may not
provide the incentives necessary for optimal food safety.
With sufficient information for consumers and producers, a legal system that awards
compensation for harm done due to unsafe foods has the potential to remedy market
imperfections by providing producers with incentives to provide the level of safety that is best
for society. Currently, the legal system does not ensure the optimum level of safety for animal
foods because both the cause and source of a foodborne illness may not be known to the
purchaser or consumer of the food. Even in cases where consumers are aware that a pet’s illness
was contracted from a specific food, it is often difficult to determine who is ultimately
responsible for the illness, since the particular source of contamination is not known in many
circumstances.
Similarly, markets characterized by branding may remedy market imperfections and
result in optimum levels of safety, if the illnesses or adverse consequences from the animal foods
can be linked to a brand or establishment. However, as noted above, in many cases it is difficult
to determine the source of contamination. In addition, branding is not used universally across the
animal food sector and investments in branding vary substantially across the food sector. As a
result, it is unlikely that the existence of brands in the animal food sector creates the optimal
level of safety for society.

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In sum, the imperfect information about the risk associated with manufactured or
processed animal foods means that neither the legal system nor the marketplace may be able to
provide adequate economic incentives for the production of safe animal food. The
Government may therefore be able to improve social welfare through targeted regulation.

B. Number of Facilities
In Table 4, FDA shows its previous estimate of the number of qualified and nonqualified facilities affected by the 2013 proposed rule, assuming a definition of very small
business involving less than $2,500,000 in annual sales of animal foods per firm. This estimate is
used in this supplemental PRIA.
Table 4. Number of Facilities Affected by Supplemental Proposed Rule with VSB<$2,500,000
Sector

Type

Commercial Livestock
Feed Manufacturing

Large Mills
Medium Mills
Small Mills
Wholesalers
Integrators
Large Operations
Small Operations
Large Suppliers
Medium
Suppliers
Small Suppliers

Other Livestock Feed
Manufacturing
Pet Food Manufacturing
Ingredient Suppliers

Total Domestic
Manufacturers
Foreign Manufacturers
Total

Foreign
Manufacturers

Number of
Non-qualified
Facilities
98
291
1,575
414
546
42
74
4
49

Number of
Qualified
Facilities
0
0
2,279
471
0
0
270
0
0

Total
Facilities

49
3,143

123
3,144

172
6,287

1,182

661

1,843

4,325

3,805

8,130

98
291
3,854
886
546
42
344
4
49

Does not include non-employer establishments for wholesalers - very low average sales indicate low probability that
these establishments manufacture or process animal food.

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In the original PRIA, FDA calculated the costs of the rule assuming that no qualified
facilities were part of a multi-facility firm because it lacked the data to determine the number of
those facilities. FDA acknowledged that this would result in an overcount of qualified facilities,
and therefore an undercount of those facilities subject to subpart C of the 2013 proposed rule. As
shown above in Table 4, FDA retains those estimates for this supplemental NPRM.
As an alternative, FDA considers a scenario that assumes that there are 1.5 facilities per
firm (which is likely a high estimate for very small businesses) along with the proposed
exemption for very small businesses at less than $2.5 million in annual animal food sales. Under
this scenario, total annualized compliance costs would rise by less than ten percent, without
considering possible offsetting costs such as lower rule review costs per facility and other
efficiencies that may be available to multi-facility firms.
FDA discusses its intention to further address the issue of the number of qualified and
non-qualified facilities based on the very small business definition for the final rule later in this
document.
C. Cost of Potential New Requirements in Supplemental Notice of Proposed Rulemaking
As mentioned above, the supplemental NPRM includes additional potential
requirements for facilities subject to subpart C. These include product testing, environmental
monitoring, a risk-based supplier program, a requirement to institute controls to help prevent
economically motivated adulteration (EMA), and a review of records for verification.
The CGMPs for animal food in the supplemental NPRM have narrowed their focus and
would appear to reduce the burden when compared to the CGMPs contained in the 2013 NPRM.
The PRIA for the 2013 proposed rule, however, contained only a broad overview of the
compliance efforts that would be required, with a subject matter expert (SME) estimate of an
15

additional labor hour per facility per week. While the supplemental NPRM contains a narrower,
more focused set of CGMPs that in all likelihood would reduce the compliance burden when
compared with the 2013 NPRM, the uncertainty surrounding the original compliance cost
estimate leads FDA to retain its 2013 compliance cost estimate.
1. Product testing
a. Labor Costs
FDA considered requiring verification by scientifically valid in-process or finished
product testing, where appropriate, in its October 29, 2013 proposed rule. In the supplemental
NPRM, we offer a potential product testing provision that could be used to verify that preventive
controls are effectively and significantly minimizing or preventing the occurrence of identified
hazards, when implemented appropriately based on the facility, the animal food, and the nature
of the preventive control.
The 2011 ERG report (Ref 2) includes a testing model that identifies Salmonella as the
pathogen for which some facilities would likely test. ERG judges that the only facilities that
would need to undertake Salmonella testing of either in-process or finished products would be
some of the small pet food manufacturers and small ingredient suppliers. ERG also includes salt
testing for those medium and small feed mills and wholesale facilities that do some mixing, but
do not currently have a procedure for testing. FDA, however, assumes that no salt testing would
be required as a preventive control verification activity, as salt testing is used to determine the
uniformity of a mixed feed, rather than to identify animal food hazards. The ERG testing model
also includes moisture testing for some medium and small ingredient manufacturers that do not
currently have a procedure for moisture testing, and urease testing for some ingredient
manufacturers of all sizes that do not currently have a procedure for urease testing (see the
16

testing cost section in the 2011 ERG report, and Appendix A of the report, for a full explanation
of the testing program) (Ref 2). FDA, however, would not expect urease and moisture testing to
be implemented as an activity for verification of preventive control implementation and
effectiveness because urease testing of soybeans and moisture testing of ingredients are typically
used to determine ingredient quality rather than to identify the presence of a hazard. Therefore,
urease and moisture testing were not included in any compliance costs from the ERG testing
model.
As shown in Table 5, FDA estimates that 102 non-qualified small pet food manufacturers
and 67 non-qualified small ingredient supplier facilities would be subject to proposed subpart C.
ERG reports that only these two types of facilities do not currently test animal food products for
Salmonella but might decide to do so under proposed section 507.49(a)(2), if finalized. ERG
estimates that 20% of both small pet food manufacturers and small ingredient suppliers would
have at least a partially insufficient Salmonella testing regimen of animal food products
(imperfect compliance), resulting in about 20 small pet food manufacturers and about 13 small
suppliers that would need to perform additional testing. The ERG report also estimates that of
these facilities, the small pet food manufacturers would be 30% out of compliance (or perform
about 70% of the necessary testing), while the small supplier facilities would be 100% out of
compliance (or perform none of the necessary testing). The ERG report estimates that a pet food
manufacturing facility without any current testing would require 667 hours to comply, and an
ingredient supplier would require 50 hours to comply. The ERG test model uses a labor scale
factor based on the relative sizes of the estimated tonnages of output of facilities within a
category (e.g., small and large pet food manufacturers). For small pet food manufacturers, this

17

labor scale factor is 1, while for small ingredient suppliers it is 0.63.1 The results of these factors
is about 200 hours of labor for Salmonella testing at the small pet food manufacturers, and about
31 hours of labor for Salmonella testing for small ingredient suppliers (see Table 5).
In total, FDA used the factors from the ERG testing cost model (excluding the salt,
urease and moisture testing costs) and the combined 169 small pet food manufacturers and small
ingredient manufacturer facilities to project an additional $102,100 in annual labor costs for the
potential new requirement of product testing.
Table 5. Potential Product Testing Provision Labor Costs
Small Pet Food Small Ingredient
Manufacturers Manufacturers
102
67

Number of Non-qualified Facilities
Percent of Facilities out of Perfect Compliance with
Supplemental NPRM
Number of Facilities that Would Need Additional

20%

20%

20

10

667

50

30%

100%

Testing
Total Hours of Testing that Would Be Necessary Per
Facility
Of Those out of Perfect Compliance, Percentage of
Non-compliance with Supplemental NPRM

1

The ERG report estimates that a feed mill of medium size produces 33,000 tons of feed per year, and that an
ingredient supplier of medium size produces 60,000 tons of feed ingredients per year. These primary estimates are
given a labor scale factor of 1.0. ERG then estimates the animal feed tonnages produced for large mills, small mills,
wholesalers and integrated facilities, and assigns them a labor scale factor equal to their estimated animal feed
tonnage divided by the tonnage of the primary feed mill. It does the same for large and small ingredient suppliers
based on the animal feed tonnage of the primary ingredient supplier. These labor scale factors are then used to
increase or decrease the labor hours at each facility, but only for those compliance activities whose costs are judged
to be dependent on the size of the facility.

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Labor Scale Factor

1.00

0.63

Number of Hours of Labor for Facility to Comply with

200

31

Hourly Labor Cost (Includes Overhead)

$22.61

$22.61

Labor Costs per Facility

$4,500

$700

Total Labor Costs by Facility Type

$92,600

$9,500

Supplemental NPRM

Total Labor Costs1

$102,100

1. Total cost may not be exact due to rounding.

Total labor costs for domestic facilities are estimated at $74,200.
b. Capital Costs
FDA uses many of the same cost model factors, along with additional factors, for
estimating the capital costs of product testing as it does for the labor costs of product testing. In
this case, FDA uses the Salmonella test kit cost estimate from the ERG report, adjusted for
inflation to 2012 dollars, of $4.34. ERG developed estimates of 1,000 Salmonella tests per small
pet food manufacturer and 46 Salmonella tests per small ingredient manufacturer (Ref 2). The
annual capital costs of product testing for Salmonella at facilities that would need additional
testing is estimated at about $1,300 per small pet food manufacturing facility, and at about $200
per small ingredient supplier facility. The total capital costs of the potential product testing
requirements needed to comply with the supplemental NPRM is estimated at about $26,700 for
small pet food manufacturers, and at about $2,700 at small ingredient manufacturers, with a
combined total of about $29,400 (see Table 6).

Table 6. Potential Product Testing Provision Capital Costs
19

Small Pet Food Small Ingredient
Manufacturers Manufacturers
102
67

Number of Non-qualified Facilities
Percent of Facilities out of Perfect Compliance with
Supplemental NPRM
Number of Facilities that Would Need Additional

20%

20%

20

13

Total Number of Annual Tests per Facility

1,000

46

Of Those out of Perfect Compliance, Percentage of

30%

100%

Number of Tests for Facility to Comply with
Supplemental NPRM
Product Test (Salmonella) Cost

300

46

$4.34

$4.34

Capital Costs for Product Testing per Facility that
Would Need Additional Testing
Total Capital Costs for Product Testing by Facility

$1,300

$200

$26,700

$2,700

Testing

Non-compliance with Supplemental NPRM

Type
Total Capital Costs1

$29,400

1. Total cost may not be exact due to rounding.

The compliance costs for domestic facilities are estimated to be $21,300.
c. Total Potential Product Testing Provision Costs
The total cost of the potential product testing provision is estimated at about $131,500,
with the majority resulting from labor costs of sampling the animal food products and testing
those samples. For domestic facilities, the total compliance cost estimate for product testing
would be $95,500.
The ERG cost model includes the cost of both writing the procedures for product testing
and writing and implementing the procedures for corrective actions that would be taken as a
20

result of the product testing. As such, FDA has not included additional cost estimates to account
for those efforts here.
2. Environmental Monitoring
Environmental monitoring programs, when implemented appropriately based on the
facility the food, and the nature of the preventive controls, could be used to verify that the
preventive controls are effectively and significantly minimizing or preventing the occurrence of
identified hazards. Not all facilities would need to conduct environmental monitoring if this
potential requirement is finalized; only those facilities where pathogens need to be addressed in
the food safety plan would be expected to conduct such testing.
Effective environmental pathogen controls would be product, process, and plant specific.
Effective environmental pathogen control would not target all pathogens that could potentially
come from the environment, but rather those that are significant hazards based on product and
production procedures. FDA subject matter experts (SMEs) currently expect that Salmonella
would be the organism of concern for certain dry animal food products, and estimate that these
facilities would conduct such testing on a monthly basis as a minimum frequency.
FDA uses the sampling time, testing time and capital cost estimates that ERG developed
for the raw material testing and product testing regimen in the process controls final report to
estimate the testing costs of the potential environmental monitoring requirements(Ref. 2). These
factors sum to about $19.20 per sample tested using a quick time test that is performed at the
facility. FDA bases its estimate of 15 samples per month on information from its SMEs. The
result of these two factors is about $290 per month per facility for environmental testing for
Salmonella. FDA SMEs currently expect that only pet food manufacturing facilities would be
required to perform Salmonella testing. FDA estimates that about 160 facilities would be subject
21

to this requirement. Based on the current compliance estimates from an ERG survey of facilities
producing human foods (Ref. 3), FDA estimates that 105 facilities (or 66%) of the 160 would
need to begin environmental monitoring. Total annual testing costs for this alternative are
estimated at about $368,200, or about $3,500 per facility that would need to begin environmental
monitoring if these provisions were to be included in the final rule (see table 7).
Table 7. Annual Cost of Potential Environmental Monitoring Provision
<20
20 to 99
employees employees
No. of facilities subject to proposed part
507
41
61
Percent that currently test
No. of facilities that would need to begin
testing
Cost per facility for annual testing
Total testing costs for environmental
monitoring1
1. Total cost may not be exact due to rounding.

100 to 499
employees

>500
employees

57

Total

1

21%

28%

50%

32
$3,496

44
$3,496

28
$3,496

1
$3,496

$113,100

$153,600

$99,600

$1,800

160

62%
105

$368,200

The compliance costs for domestic facilities are estimated to be $267,600. FDA seeks
comment and data concerning other facility types (for example, manufacturers of (1) milk
replacers for dairy calves, and (2) spray dried plasma products) that would also be likely to
conduct the potential environmental monitoring activities as preventive control verification.
3. Supplier Program
Supplier controls when implemented appropriately, are an important preventive control
that can ensure that significant hazards will be significantly minimized or prevented for those
raw materials and ingredients for which the receiving facility has identified a significant hazard
when the hazard is controlled before receipt of the raw material or ingredient. If the potential
requirement for a supplier program is finalized, a receiving facility would not be required to
establish and implement a supplier program for raw materials and ingredients for which there are
no significant hazards, for which the preventive controls at the receiving facility are adequate to
22

significantly minimize or prevent each of the significant hazards, or for which the receiving
facility relies on its customer to control the hazard and annually obtains from its customer
written assurance that the customer has established and is following procedures (identified in the
written assurance) that will significantly minimize or prevent the hazard.
If the potential supplier program provision is finalized, the receiving facility would be
required to conduct one or more of the following verification activities, with certain exceptions:
onsite audits, sampling and testing of the raw materials or ingredients, reviewing supplier food
safety records, or other supplier verification activities as appropriate based on the risk associated
with the ingredient and the supplier. When a hazard controlled by the supplier is one for which
there is a reasonable probability that exposure to the hazard will result in serious adverse health
consequences or death to humans or animals, the receiving facility would need to have
documentation of an annual onsite audit of the supplier (unless the facility documents that other
verification activities and/or less frequent onsite auditing of the supplier provide adequate
assurance that the hazards are controlled).
As noted above, a receiving facility would not be required to establish and implement a
supplier program for raw materials and ingredients for which the receiving facility relies on its
customer to control the hazard and annually obtains from its customer written assurance that the
customer has established and is following procedures (identified in the written assurance) that
will significantly minimize or prevent the hazard. Under this baseline condition, compliance
with the proposed supplier program would likely be less costly than when compliance would
require those verification activities whose costs are estimated later in this section of this analysis.
FDA does not have any data with which to estimate the percent of facilities that would not be
required to perform the verifications activities discussed below, and does not include a
23

percentage in its cost estimation. As such, the cost totals for this section may represent the high
end of the range of true compliance costs.
FDA also cannot say which individual facilities or facility types would implement
preventive controls to significantly minimize or prevent significant hazards. The likelihood of all
significant hazards being significantly minimized or prevented by the receiving facility would
depend greatly on the products produced at each facility and how those products are produced.
For this analysis we assume as a baseline that no specific industry or facility has a complete
written supplier program in place, which may result in an overestimate of actual compliance
costs for this provision. FDA requests comment on both the likelihood that specific facilities or
industries would not need a supplier program because all hazards are reduced or eliminated at the
receiving facilities, and the number or percent of receiving facilities whose customers could
provide a written assurance that each has established and is following procedures that would
significantly minimize or prevent these hazards.
a. Written Procedures
If the potential supplier program is finalized, receiving facilities that determine they need
a supplier program would need to have the program in writing. Such a written program, in
determining the appropriate verification activities, would consider the severity of the hazards
applicable to the raw material and ingredients, where the preventive controls for those hazards
are applied for the raw material and ingredients, the supplier’s procedures, processes, and
practices related to the safety of the raw material and ingredients, applicable FDA food safety
regulations and information relevant to the supplier’s regulatory compliance with those
regulations, the supplier’s food safety performance history, results of testing raw materials and
ingredients, responsiveness of the supplier in correcting problems, and any other factors as
24

appropriate and necessary. If finalized, FDA estimates that it will take a production manager 16
hours to write such a program. FDA asks for comment on the time it would take to develop the
written procedures for a supplier program. FDA estimates this cost for all facilities that
manufacture animal food and are registered in the Food Facility Registration (FFR) database.
The database likely over-represents the real number of facilities that would need to take action to
comply that would incur costs due to the number of receiving facilities that may determine they
have no significant hazards or they have preventive controls adequate to significantly minimize
or prevent each of the significant hazards. Table 8 shows the cost of writing a program for these
facilities.
Table 8. Potential Supplier Program – Written Procedures
<20 employees
Total Number Of Domestic
Manufacturing Facilities
Number of hours to write
program
Wage rate
First year cost
First year costs annualized over
10 years
Annualized cost per affected
facility

20 to 99
employees

100 to 499
employees

>500
employees

Total
4,325

1,073

2,588

662

1

16

16

16

16

$58
$997,200

$58
$2,404,700

$58
$614,900

$58
$1,300

$4,018,000

$142,000

$342,400

$87,600

$200

$572,100

$132

$132

$132

$132

FDA estimates one-time compliance costs for domestic facilities at $2,920,000, which
equates to an annualized cost of $415,700 over 10 years at a 7% discount rate (and $342,300 at a
3% discount rate).
b. Verification activities for suppliers
If the potential supplier program is finalized, facilities would need to have verification
activities for their raw material or ingredient suppliers. Verification activities would be required
unless all significant hazards in the raw materials or ingredients are controlled by the receiving
25

facility, the ingredient does not contain a significant hazard, or the customer of the receiving
facility provides a written assurance that it has established and is following procedures to
significantly minimize or prevent the hazard. As noted above, this analysis assumes that none of
these three conditions would be met at any receiving facility and each will undergo some
verification activity, resulting in the high end of the range of costs.
The owner, operator, or agent in charge of a receiving facility would be required to
conduct, or obtain documentation of, an initial onsite audit of a supplier before using a raw
material or ingredient from that supplier and periodic onsite audits, when the hazard is one for
which there is a reasonable probability that exposure to the hazard would result in serious
adverse health consequences or death to humans or animals. If a supplying facility is not
controlling significant hazards, the receiving facility would need to take prompt action, which
may include discontinuing the use of the supplier, to ensure the raw materials or ingredients from
the supplier do not cause animal food that is manufactured or processed by the receiving facility
to be adulterated. Based on the experience of FDA SMEs, FDA estimates that the ingredient
suppliers subject to proposed part 507 comprise all raw material or ingredient supplier facilities
supplying all those other facilities subject to proposed part 507. A proportionate number of
foreign manufacturing facilities have been added to this total. This estimate also assumes that the
remaining supplier facilities also supply food manufacturing, processing, packing, and holding
facilities that would be subject to a similar alternative to the proposed rule for human food and
would therefore be subject its supplier approval program. Their supplier program compliance
costs are not included in this analysis.
i. Audits of suppliers
FDA estimates that supplying facilities would undergo one audit annually to satisfy an
26

alternative requirement that receiving animal food facilities verify their suppliers of raw
materials and food ingredients. The estimate of one audit per year will overstate auditing
frequency in cases where the ingredient is not one for which there is a reasonable probability that
exposure to the hazard will result in serious adverse health consequences or death to humans or
animals. In those cases, an audit would be required periodically, which would likely be less than
once per year, resulting in compliance costs that would be lower than those estimated below.
In developing its cost estimates (see Table 9), FDA uses the assumption developed for
the cost analysis of the supplemental notice of proposed rulemaking for human food that a
supplier having a single audit done under certain rigors would satisfy multiple customers.
Further, FDA uses the responses to the GMP survey of human food processors (Ref. 3) to
estimate the percent of facilities that do not currently conduct audits. And last, FDA further bases
its costs estimates on the costs per facility developed for the audits of human food processors.
FDA requests public comments and data on these assumptions.

Table 9. Annual Cost of Raw Material and Ingredient Supplier Audits for a Potential Supplier
Program Provision

No. of supplier facilities subject to proposed
part 507
Percent of facilities that do not currently
conduct audits
No. of facilities that would need to conduct
audits
Cost per audit
Travel and incidental expenses per audit
Total cost of audit annually
Annual cost per affected facility

<20
employees

20 to 99
employees

100 to 499
employees

>500
employees

56

83

0

0

43%

21%

14%

0%

24
$2,625
$625
$79,100
$3,250

17
$3,750
$625
$75,300
$4,375

0
$4,375
$625
$0
N/A

0
$5,000
$625
$0
N/A

FDA estimates compliance costs for domestic facilities at $112,200.
27

Total
139

42

$154,400

Some supplier facilities may fail audits conducted and would need to take corrective
actions to fix problems at the facility, assuming the facility wants to remain a supplier. After
corrective actions have occurred, the supplying facility would need to be re-audited. FDA does
not have information on the number of facilities that would fail an audit, undertake corrective
actions, and then be re-audited. Since supplying facilities will likely have done all that would be
required to pass an audit in the course of complying with this requirement, it is unlikely that a
significant number would need to be re-audited.
As another alternative to an audit, a receiving facility would be allowed to rely on the
results of an inspection of the supplier by FDA or, for a foreign supplier, by FDA or the food
safety authority of a country whose food safety system FDA has recognized as comparable or
determined to be equivalent to that of the United States when certain other conditions are met.
FDA does not know the percent of suppliers that would be able to use this alternative approach.
For those that could, however, compliance costs would be reduced as the audit costs would not
be incurred.
ii. Potential Supplier Verification Activities other than Audits
If the hazard to a raw material or ingredient is not one for which there is a reasonable
probability that exposure to the hazard would result in a serious adverse health consequence or
death to humans or animals, then, under this potential alternative, the receiving facility would
have the choice of the following as a supplier verification activity: (1) auditing the supplying
facility periodically, (2) sampling and testing the raw materials or ingredients before use, (3)
periodically reviewing the supplier’s food safety records (e.g., audits of their suppliers), or (4)
other appropriate supplier control verification measures based on the risk associated with the
ingredient and the supplier. The cost analysis for the analogous potential requirement in the
28

supplemental NPRM for human foods assumed that this potential requirement would likely be
addressed by testing ingredients from suppliers. FDA assumes manufacturers of animal food
would do the same to comply with this potential requirement. The ERG analysis of the process
controls draft for animal foods included a raw material testing regimen for those hazards that
were identified in the hazard analysis as being likely to occur (see Appendix A of the ERG report
(Ref. 2) for a full description of the animal feed testing model). Using that cost model on the
4,325 facilities from the FFR database (including both domestic and foreign) that would be
subject to this proposed rule if finalized results in ingredient testing costs of about $18.3 million.
Since that analysis already accounts for raw material and ingredient testing costs, where
appropriate, and those costs are already included in this analysis, no additional testing costs are
added here for the supplier program.
iii. Potential Verification activities for suppliers that are qualified facilities
This alternative would provide an optional set of verification activities for suppliers that
are qualified facilities. If the potential supplier program provision is finalized, receiving facilities
with suppliers that satisfy the criteria to be considered a “qualified” facility would have the
option of submitting documentation at the end of each calendar year that their suppliers meet the
definition of a qualified facility. Additionally, the receiving facility would need to obtain written
assurance at least every 2 years that the supplier is producing raw material or ingredients in
compliance with the applicable FDA food safety regulations and that the raw material or ingredient is
not adulterated under section 402 of the Federal Food, Drug, and Cosmetic Act. A brief description of

the processes and procedures that the supplier is following to ensure the safety of the animal food
would be required.
We previously calculated (in the section of the October 29, 2013 PRIA on qualified
29

facilities) the cost for all qualified facilities to document that they meet the definition of a
qualified facility. FDA estimates that there may be a small number of affected suppliers that
would be qualified under the very small business definition of having less than $2,500,000 in
total annual sales of animal food. Following the FDA cost estimate of the revised PRIA for the
human food supplemental notice of proposed rulemaking, FDA presents the cost estimate for
qualified supplying facilities to create a written assurance (to be given to their receiving facility
customers) to describe the processes and procedures that the supplier is following to ensure the
safety of the animal food. FDA estimates that these few qualified supplier facilities would
require about two hours to assemble this documentation to be submitted to their receiving facility
customers every other year (see Table 10).
Table 10. Annual Cost of Potential Supplier Approval Program for Qualified Facilities
< 20 employees
No. of Qualified
Suppliers
Hours to Prepare
Documentation
Hourly Wage
Total cost
Average annual cost

134

20 to 99
employees
0

100 to 499
employees
0

>500
employees
0

2

2

2

2

$58
$15,500
$7,800

$58
$0
$0

$58
$0
$0

$58
$0
$0

Average cost per
facility per year

$58

$0

$0

$0

Total
134

$15,500
$7,800

FDA estimates compliance costs for domestic facilities at $7,200 annually.

iv. Total Costs of Potential Supplier Program Provisions
FDA estimates the total costs of the supplier program would be the sum of the costs of
the written procedures and the verification activities. Total annualized costs are estimated at
$734,300 per year in Table 11.
30

Table 11. Potential Supplier Program Costs Summary
< 20
employees
$142,000

20 to 99
employees
$342,400

100 to 499
employees
$87,600

>500 employees

Total

Annualized Costs of
$200
$572,100
Written Program
Annual Costs of
$79,100
$75,300
$154,400
Auditing Suppliers
Annual Cost for
$7,800
$7,800
Qualified Supplier
Facilities
Total Supplier
$228,900
$417,700
$687,600
$200
$734,300
Program Costs
FDA does not separately include the $18.3 million in raw ingredient testing costs at receiving facilities for the
supplier program because these costs have previously been included as process controls in the cost model.

FDA estimates total compliance costs for the potential supplier program for domestic
facilities at $535,100.
4. Economically Motivated Adulteration
The supplemental NPRM adds the proposed requirement that the hazard analysis
consider hazards that may be intentionally introduced for purposes of economic gain. In this
section, we estimate the additional costs of this requirement. The additional costs result from the
time to conduct a more thorough hazard identification, and the actions that are likely to be taken
to reduce any hazard that is identified as significant. The additional benefits would be reduced
chances of injury or death to animal and humans.
FDA SMEs consider that the most likely type of intentional adulteration which many
animal food facilities would determine to be a hazard significant enough to include in their food
safety plans would be the use of non-protein nitrogen (NPN), e.g., melamine, in some animal
food ingredients.
a. Compliance Costs
FDA estimates that all animal food facilities conducting a hazard analysis would incur
additional costs to determine if there are any incoming ingredients for which it is known or
31

reasonably foreseeable that the ingredients may contain hazards that were deliberately introduced
for economic gain, and if so, whether they are significant. While some facilities may already
conduct such an analysis, FDA has no data to estimate the number of those facilities. To the
extent that manufacturers are already conducting such analyses, the actual costs of the rule would
be lower than our estimates.
FDA estimates that this would add an average of two hours to the initial hazard analysis
of each process. FDA also estimates that this requirement would add an average of an additional
half-hour to the average initial writing time of each hazard analysis. Further, FDA estimates that
this requirement would add a half-hour to the average time it takes to conduct the updated hazard
analysis every other year (as was estimated in the original 2013 PRIA), and 0.1 hours to the time
required to write down the updated hazard analysis. FDA bases its labor cost on that of an
industrial production manager of $58 (including all benefits and other overhead costs). FDA
requests comments on these estimates.
The compliance costs for the additional NPN testing are based on FDA SME’s
understanding that NPN testing would occur when receiving facilities are establishing a new
supplier relationship. FDA estimates that this would affect five to ten new suppliers annually for
each facility that would test for NPN. FDA further estimates that the receiving facility would
take about 4 samples to test for NPN. A small sample of testing lab prices shows that the average
price for NPN testing is $30 (Ref. 4). Total annualized costs over 10 years at a seven percent
discount rate are estimated at $4,316,700, as shown in Table 12. Using a 3% discount rate over
10 years, this cost is estimated at $4,300,900.

Table 12. Compliance Costs for Requirements to Address Economically Motivated Adulteration
32

No. of Employees per Facility

<20

20-99

100-499

>500

Totals

Number of Facilities

1,073

2,588

662

1

4,325

Wage Rate

$58

$58

$58

$58

Conducting the Initial Hazard Analysis
Labor Hours per Facility

2

2

2

2

One-Time Cost

$124,600

$300,600

$76,900

$200

$502,300

Annualized Cost

$17,800

$42,800

$10,900

<$100

$71,500

Writing the Initial Hazard Analysis
Labor Hours per Facility

0.5

0.5

0.5

0.5

One-Time Costs

$31,200

$75,100

$19,200

<$100

$125,600

Annualized Costs

$4,400

$10,700

$2,700

<$100

$17,900

Conducting Hazard Analysis Update
Labor Hours per Facility

0.5

0.5

0.5

0.5

Annual Frequency

0.5

0.5

0.5

0.5

Annual Costs

$15,600

$37,600

$9,600

<$100

$62,800

Writing Hazard Analysis Update
Labor Hours per Facility

0.1

0.1

0.1

0.1

Annual Frequency

0.5

0.5

0.5

0.5

Annual Costs

$3,100

$7,500

$1,900

<$100

$12,600

Total Costs - Economically Motivated Adulteration in Hazard Analysis
Total Annualized Costs (one-

$40,900

$98,600

$25,200

<$100

$38

$38

$38

$38

1,073

2,588

662

1

$30

$30

$30

$30

time costs annualized plus
annual costs
Average Annualized Cost per
facility

Non-Protein Nitrogen Testing (NPN)
Facilities that Could Require
Testing
Cost per NPN Test

33

$164,700

Annual Number of New

8

8

8

8

Number of Samples per Facility

4

4

4

4

Annual Cost

$1,030,400

$2,484,900

$635,400

$1,300

Average cost per facility

$960

$960

$960

$960

Total Annualized Costs (one-

$1,071,300

$2,583,500

$660,600

$1,400

Suppliers per Facility

$4,152,000

$4,316,700

time costs annualized plus
annual costs)

FDA estimates total annualized costs for domestic facilities at $3,137,000 over 10 years
at a seven percent discount rate.

5. Review of Records for Potential New Requirements
Proposed section 507.49(a)(4)(ii) would require that, should these provisions be adopted,
records of calibration, product testing, environmental monitoring and supplier verification
activities be reviewed to ensure that they are complete, that the activities occurred in accordance
with the food safety plan, that the preventive controls are effective, and that appropriate
decisions were made about corrective actions. Verification of implementation and effectiveness
requires records review for calibration, product testing, environmental monitoring, and supplier
verification activities. According to the expert elicitation for human food production facilities,
the number of verification records kept and the time spent in review of these records depends on
the size of the facility. Based on responses to the ERG survey of human food production
facilities, FDA estimates that the percentage of facilities without these verification records varies
from about 39% of those with fewer than 20 employees to less than one percent for those with
100 or more employees. This equates to about 950 facilities, all of which would be out of
34

compliance with the record review verification requirements. Although the review time would
likely vary among facilities, FDA uses the estimates from the analysis of the alternative to the
proposed rule for human foods that range from 0.25 to 1 hour per month reviewing these records.
FDA expects this review to be performed by a production manager with an hourly wage rate of
$58 per hour. FDA estimates total annual industry costs for the potential provision to review
records would equal about $258,400 (Table 13). Although the 2011 ERG report contains over $6
million in annual recordkeeping costs, it does not appear that these costs include a review of the
records as required by the revised proposed rule.
Table 13. Cost of Review of Records of Potential Provisions
> 500
employees
1
0%

Total

1,073
39%

Facilities with
20-99 employees
100-499
employees
2,588
662
20%
<1%

424

525

3

0

952

0.25

0.50

0.57

1.00

$58
$174
$73,800

$58
$348
$183,100

$58
$397
1,600

$58

< 20 employees
Total number of facilities
% without verification
records
Facilities that would need to
begin reviewing records
Hours per month reviewing
records
Wage rate – hourly
Annual cost per facility
Total annual cost by size of
facility

$0

4,325

$258,400

Compliance costs for domestic facilities are estimated at $187,600.

6. Summary of Costs of Potential New Requirements
The sum of the total annualized costs of the five supplemental provisions is estimated
at $5.81 million (over 10 years at a seven percent discount rate) for those animal food
manufacturing facilities that would be subject to subpart C. The individual costs and cost total
are listed below:
Product Testing costs:

$131,400
35

Environmental Monitoring:

$368,200

Supplier Program:

$734,300

Economically Motivated Adulteration:

$4,316,700

Review of Records for these Provisions:

$258,400

Total Costs

$5,809,000

D. Analysis of Alternatives
1. Food Safety and Food Hygiene Training
FDA considered requiring mandatory education and training requirements for facility
personnel in proposed§ 507.14(b) for both the original October, 2013 NPRM and the
supplemental NPRM. If it had been required, plant management would need to provide
education and training to ensure that personnel engaged in manufacturing, processing, packing or
holding of animal food have the education or experience needed to perform these duties. Also,
personnel involved in animal food manufacturing, processing, packing, or holding would need to
receive appropriate training on the principles of food hygiene and food safety, including the
importance of employee health and personal hygiene.
FDA retains its original assumptions and total compliance cost estimate for this
alternative (Ref 1). In sum, the total annual cost of both the principles of food safety and the food
hygiene, including personal hygiene, is estimated to be $11.05 million.

III. Small Entities Affected
The Regulatory Flexibility Act requires agencies to prepare a regulatory flexibility
analysis if a rule is expected to have a significant economic impact on a substantial number of
36

small entities. The discussion in this section and the previous sections constitutes the initial
regulatory flexibility analysis.
One requirement of the Regulatory Flexibility Act is a succinct statement of any
objectives of the rule. FDA has been directed by Congress in the Food Safety Modernization Act
of 2011 (FSMA) to issue regulations that establish science-based minimum standards for
conducting a hazard analysis, documenting hazards, implementing preventive controls, and
documenting the implementation of the preventive controls for those facilities that are required
to register with FDA under section 415 of the FD&C Act. Satisfying the mandate of Congress is
a primary objective of this proposed rule.
A. Description and Number of Small Entities
The Regulatory Flexibility Act also requires a description of the small entities that would
be affected by the rule and an estimate of the number of small entities to which the rule would
apply. Section III (A) of the PRIA of the October 29, 2013 proposed rule discusses the relevant
categories of the North American Industrial Classification System (NAICS) in which the
facilities subject to the proposed rule are designated, and their corresponding size categories as
defined by the Small Business Administration (SBA). For both the 2013 proposed rule and this
supplemental NPRM, a substantial number of facilities would be expected to qualify as small
businesses under the SBA definitions.
B. Impacts on Small Entities
Section III (B) of the PRIA of the October 29, 2013 proposed rule presents the
compliance costs as a percentage of the average value of shipments by the number of employees
using 2007 Census data. That assessment concluded that among the various types of industry
facilities affected by that proposed rule, there could be significant impacts on a substantial
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number of those facilities. While the proposed changes in the supplemental NPRM would result
in fewer facilities subject to subpart C than in the original proposed rule, a substantial number of
facilities that are considered small entities under the SBA definitions could still incur significant
economic impacts.
C. Regulatory Relief for Small Entities
Substantial relief from the compliance costs of this supplemental NPRM would be
provided to those firms that meet the criteria for qualified facilities, by exempting them from
subpart C – Hazard Analysis and Risk-Based Preventive Controls, as discussed elsewhere in this
analysis. Those businesses that meet the requirements of qualified facilities would incur
annualized costs of about $1,800, composed of the annualized costs of (1) the initial review of
the rule, (2) the additional labor for sanitary efforts under subpart B, and (3) the costs to attest to
their qualified status. About $400 of this is the annualized cost of the initial review of the rule,
which as stated previously, most likely overstates the cost for qualified firms since they would be
exempt from subpart C which contains substantial parts of the rule.
The proposed rule would also allow small businesses, defined by the 2013 proposed rule
as employing fewer than 500 persons, two years after publication of any final rule issued to
comply with the requirements of the rule if finalized. And very small businesses, defined under
the supplemental NPRM as those facilities with gross annual sales of animal food of less
$2,500,000 (adjusted for inflation), would have three years after publication of the final rule to
comply with the requirements of the rule if finalized. This would give the three year transition
period to 3,805 facilities, including the 1,386 non-employer facilities.

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IV. Anticipated Modifications to the Estimate of the Cost of the Final Rule
For the final rule, FDA anticipates making several modifications to our estimate of the
cost of our proposed rule, including the provisions in the supplementary proposal. Based on
comments received from both the 2013 proposed rule and the supplemental NPRM, and other
additional information, FDA anticipates improving our cost estimates to more accurately reflect
real world practices. FDA anticipates that most, although not all, of the adjustments will increase
the estimate of the cost of the final regulation.
FDA will revise its estimate of the total number of covered facilities based on the latest
data from the FFR database. We expect the total number of covered facilities to increase at least
slightly.
FDA will modify its method for determining the number of qualified and non-qualified
facilities. As stated earlier in this document, FDA originally made its estimate for qualified
facilities acknowledging it would result in an overcount because it did not have the data to
account for the existence of multi-facility firms. FDA intends to revise its estimate by reviewing
more recent proprietary data on those subsets of manufacturer categories with significant
numbers of facilities that are currently defined as qualified at the $2.5 million sales level for very
small businesses. The effect of this adjustment will likely be that more facilities would be
required to comply with the proposed rule at any given definition of “very small business.”
Assuming this change can be made, the costs of the rule would likely increase. If FDA cannot
revise its estimates using the proprietary data, it will make an estimate based on the revisions to
the human food qualified facilities revisions and its understanding of any relevant differences
between the human food industry market structure and the animal food industry market structure
that could impact the number of qualified facilities. The scenario assuming 1.5 facilities per firm,
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presented previously in this document, showed that the existence of multi-facility firms would
increase the total costs of the rule, but likely not significantly. FDA has not been able to make a
more precise adjustment for this revised proposed rule.
FDA anticipates increasing all the wage rates used in our estimates. The increase will
occur due to inflation and also due to a change in our estimate of the costs of total labor
overhead. FDA is still in the process of coordinating the firm coverage among the multiple
regulations required by FSMA. As the provisions of the individual rules are revised and updated,
FDA will evaluate the coverage to ensure the various components of the rules are consistent and
not redundant. Based on public comments or other new information, FDA may adjust its estimate
of the additional efforts necessary to comply with this supplemental NPRM at those facilities that
manufacture both food for humans and food for animals.
Based on public comments and other information, FDA may revise its estimate of
product testing costs to account for the value of holding animal food products while awaiting the
results of product testing.
Finally, FDA expects changes to our estimates based on potential new sources of
information, such as new studies or industry data, in addition to other information from
comments we are still reviewing on the original proposal.

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References
1. FDA. Preliminary Regulatory Impact Analysis – Current Good Manufacturing Practice and
Hazard Analysis and Risk-Based Preventive Controls for Food for Animals available under
Docket FDA-2011-N-0922.
2. Economic Analysis of Proposed Animal Feed Regulation – A Cost Analysis for the Livestock
Feed and Pet Food Industries, Final Report, April 12, 2011, ERG, Lexington, MA. FDA contract
HHSF 2232008100171, task order no. 15.
3. 2010 Nationwide Survey of Food Industry Safety Practices, Draft Final, ERG, January 10,
2011, contract number 223-01-2461, task order 7, ERG task number 0152.00.007.001.
4. NPN Pricing Sample Document. Prices of seven commercial laboratories for testing of nonprotein nitrogen in June 2014.

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