Customer Assurance for Food Packaging Materials: Points to Consider
By Keller and Heckman LLP’s Packaging Practice Group
Customer requests for assurances of regulatory compliance for food-contact materials are quite common in the United States. Most suppliers consider providing assurance to be simply one part of the customer relations process underlying sales.
In general, suppliers can appropriately honor reasonable requests for assurances of a product's compliance with applicable regulations and relevant quality specifications. Assurance can take a variety of forms; the form most suitable to a given situation will depend on the customer's requirements and what a supplier's policies allow in the way of a response to such customer requests.
The common approaches to customer assurance with respect to the U.S. Food and Drug Administration (FDA) and U.S. Department of Agriculture (USDA) compliance of food-packaging materials, and the major issues involved in each approach, are discussed below.
A. Forms of Assurance
1. Section 303 Guaranty
Some companies use a carefully prepared guaranty form, developed along the lines set forth in Section 303(c)(2) of the Federal Food, Drug and Cosmetic Act (hereinafter, "FD&C Act"), to provide assurance that a food-packaging material complies with the FD&C Act.
Section 303(c)(2) provides that no person shall be criminally penalized for introducing adulterated or misbranded food, drugs, devices, or cosmetics into interstate commerce
"if he establishes a guaranty or undertaking signed by, and containing the name and address of, the person residing in the United States from whom he received in good faith the article, to the effect ... that such article is not adulterated or misbranded, within the meaning of this Act. ..."
Thus, the so-called "Section 303(c) guaranty" assures good-faith purchasers who subsequently introduce products into interstate commerce that they will not suffer criminal prosecution if a food, drug, device, or cosmetic is adulterated or misbranded.
Typically, this type of guaranty is drafted to be effective only for the purposes of Section 303. Accordingly, the guaranty protects the customer only against criminal prosecution by FDA. It does not protect a marketer from having a product seized by FDA or from having the product's use or shipment enjoined by a court at FDA's request. In addition, the guaranty is void if the purchaser further processes the product in any way, or acts as more than a mere conduit through which the product reaches the consumer.1 In virtually every case, a packaging material will be modified in some way by the customer-including being filled with a product-with the result that the strict Section 303 guaranty will not be effective even against criminal prosecution. In addition, as most often drafted, a Section 303 guaranty does not provide a customer with any right to collect from the supplier in the event of civil liability related to the packaging.
2. Company Letter of Assurance
The most common form of assurance is a simple letter from the supplier to its customer advising that the packaging material in question is in compliance with the FD&C Act and all applicable FDA food additive regulations.
There are no strict rules as to what this letter should contain but, typically, an assurance letter specifies the packaging material (by trade name) and the intended use covered by the assurance. "Intended use" includes any limitations on the types of food that may be packaged with the material, limitations on the temperature at which it will be used, and any other special limitations on the use of the material, such as thickness or the existence of a functional barrier.
If one or more specific food additive regulations apply to the packaging for its intended use, it is common practice to cite the applicable regulations. From the supplier's perspective, this may increase the customer's comfort level, and may be a convenient way to advise customers of limitations, as limitations are often specified in the regulations. In this way, the supplier may provide a form letter of compliance to many customers without needing to spell out specific limitations or inquiring about customers' particular intended uses.
On the customer side, it is important to check regulations cited by suppliers to determine the existence of any limitations. For instance, a reference to 21 C.F.R. § 175.105—a regulation on adhesives—must always be correlated with the intended use, since this regulation clears materials only when separated from food by a functional barrier or when used in other specified conditions that limit potential migration.
3. Third Party Confirmation — Opinion Letters from Counsel
While confirmation from a third party—such as outside food and drug counsel or FDA—is not legally required, it may be necessary for marketing purposes. Before seeking official FDA concurrence, however, it may be wise to ask your food and drug counsel to issue an "opinion letter" stating that the product complies with applicable laws and regulations.
Letters from counsel may or may not contain detailed information about a product. For example, Keller and Heckman LLP issues both "long-form" and "short-form" opinion letters. The long form letters explain in detail the legal and scientific bases for concluding that a particular product complies with the applicable laws and regulations. The short form letters merely state the conclusion without providing the detailed information on the product that a company may wish to keep confidential. Because of Keller and Heckman's extensive experience representing companies on food-packaging matters, the firm's opinion letters are widely recognized in the packaging and food and drug industries, and often are sufficient for customer assurance purposes.
The legal bases for a Keller and Heckman opinion that a particular product complies with applicable laws and regulations vary. It may be that the particular product is the subject of an explicit FDA clearance, i.e., the components of the product are cleared under an applicable FDA regulation, are the subject of a Food-Contact Notification that has become effective, or are exempt under the Threshold of Regulation. In other cases, a product may not be subject to premarket clearance by FDA under the FD&C Act based on one of the various exemptions from such clearance. These exemptions include the "no migration-no food additive" exemption; the "generally recognized as safe" (GRAS) exemption; the "basic resin" doctrine; and the "housewares" exemption. For a detailed discussion of these various exemptions, see the article "Fathoming Food Packaging Regulation Revisited," available elsewhere on PackagingLaw.com (see link below).
4. Third Party Confirmation — Official FDA Concurrence
If a substance used in a food-contact application is not already regulated under a specific provision in the food additive regulations, is not the subject of a Threshold of Regulation exemption or an effective Food-Contact Notification, or is not covered under one of the exemptions or exclusions mentioned above, it is necessary to obtain FDA clearance for the substance before it can be used in food-contact applications. Sometimes, however, explicit FDA sanction also is necessary for customer assurance purposes.
The current options available for obtaining FDA concurrence include Food-Contact Notifications (FCNs), FDA opinion letters, and, in exceptional cases, Threshold of Regulation exemption letters, Food Additive Petitions, and GRAS Notifications.
Under the FCN program, a manufacturer or supplier of a food-contact material may submit a notification to FDA regarding the identity and use of a new food-contact substance, along with information supporting the conclusion that the substance is safe for the intended use. Companies may begin marketing the new food-contact substance, or materials made with it, 120 days after filing the notification, unless the agency determines that, based on the information and data submitted in connection with the notification, such use has not been shown to be safe. The submission of an FCN is allowed for any uncleared food-contact substance, with limited exceptions.2 FDA opinion letters are an option only in limited circumstances. The agency is now restricting issuance of opinion letters to recycling and other manufacturing process issues.
Under the GRAS Notification system, if a manufacturer determines that a substance is "generally recognized as safe" (GRAS), the company may submit a notification to the agency of the basis for the company's GRAS determination. This approach is not used now for food-contact materials since FDA is not required at this time to respond to GRAS Notifications within a particular time frame, unlike the situation with the FCN program and its fixed 120-day review period. In addition, all information in a GRAS notification is made publicly available. On the other hand, trade secret and confidential business information in an FCN is not disclosed to the public.
As a side note, FDA's letters responding to GRAS notifications are less than perfect for customer assurance. The agency indicates in these letters that it has no objection at this time to the company's determination of GRAS status. Although it takes some explaining to convince customers that this is a positive response, GRAS Notifications remain useful for some direct additives as a faster alternative to the Food Additive Petition.
The Threshold of Regulation exemption process also remains technically available for food- packaging materials. This is the process by which FDA formerly exempted from the food additive petition process food-contact materials that involve very low human exposure. This was once a useful way to obtain a clearance more quickly than would be the case with a food additive petition, but the process has no fixed deadline and has become largely obsolete with the advent of Food-Contact Notification.
As explained in footnote 2, the Food Additive Petition process is still around for food packaging materials, but only when required by FDA for special cases.
5. Packaging for USDA-Inspected Meat and Poultry Products
The customer assurance options discussed above also will satisfy the USDA Food Safety and Inspection Service's (FSIS) policy on guaranties that packaging suppliers for meat and poultry products must provide.
Specifically, 9 C.F.R. §317.24 of USDA's regulations requires a supplier to guarantee that the packaging material complies with the FD&C Act and all applicable food additive regulations. This regulation also states that such guaranties must identify the packaging materials and conditions of use and must be signed by an authorized official of the supplying firm.
Any form of guaranty, including a Section 303 guaranty or a letter of assurance (from the supplier), should be satisfactory to FSIS inspectors at meat and poultry plants. At this time, USDA does not review the substantive correctness of the assurances on a routine basis, although the agency could check into one if it has reason to be suspicious.
B. Liability Issues
Aside from their effect on FDA's enforcement posture, guaranties and assurances also may be a factor in allocating liability for products that do not comply with FDA's requirements.
Guaranties provide a contractual basis for customers to seek compensation from suppliers for non-complying materials, and have been interpreted as separate from any other limitations on liability. Thus, there may be no liability limitation for breach of the guaranty or assurance unless it is specifically stated or incorporated by reference to another document (such as an invoice or shipping document) that contains a limit.
What limitations on liability should a company incorporate into the assurance? This is really a matter for sound business judgment, balancing the risk of liability with the risk of losing business by attempting to limit liability. It is not common practice for packaging material suppliers to include limitations on liability in their customer assurance documents with respect to FDA or USDA compliance. The best course is simply for a company to make a conscious decision as to how much liability to assume and not unintentionally leave itself open to unlimited liability.
With food packaging materials, the discovery of non-compliance after food has been packaged can lead to claims for direct damages (the value of the packaged food) far out of proportion to the value of the packaging materials themselves. In addition, claims by customers may include additional consequential or incidental damages such as loss of future sales from damage to a brand's reputation with consumers. Bottom line: if there is a problem, the damages can add up fast in the absence of some limitation. One limitation that is not too unusual is to the value of the packaging material supplied.
Unintentionally allowing the creation of an "implied warranty of fitness for a particular purpose," as provided for in Section 2-315 of the Uniform Commercial Code (UCC), should particularly be avoided. The warranty of fitness for a particular purpose arises when goods are sold for a particular purpose known to the seller and the warranty has not been expressly disclaimed. Whether or not this warranty arises in any particular case is a question of fact. When this warranty does arise, however, it follows that the seller will be responsible for consequential damages associated with a breach of the warranty. Section 2-715 of the UCC provides for such consequential damages, stating in pertinent part "[c]onsequential damages resulting from the seller's breach include ... injury to person or property proximately resulting from any breach of warranty."
An example from the case law is Water Works & Industrial Supply Co. v Wilburn, 437 S.W.2d 951 (Ky. 1968). That case involved the construction of a water main that later experienced a series of blowouts and had to be dug up and repaired. The contractor sued the Water Works & Industrial Supply Co., alleging that it had furnished the wrong type of gaskets. The supply company sought to avoid consequential damages by pointing to its contract, which contained an express warranty of material and workmanship of the goods furnished, with liability being restricted to the replacement cost of the gaskets. In that case, the court found that an implied warranty of fitness did exist, and the language of the contract was not sufficient to exclude it. The gasket supplier was, therefore, responsible for much more than the replacement cost of the gaskets.
This lawsuit, and the relevant provisions of the UCC, demonstrate that it is necessary to expressly exclude the implied warranty of fitness for a particular purpose if your company wishes to avoid the potential of consequential damages. Section 2-316 of the UCC provides that, to exclude or modify any implied warranty of fitness, the exclusion must be in writing and conspicuous. Nevertheless, such disclaimers of warranty are not commonly included in assurances of FDA compliance of packaging materials.
Furthermore, no language can completely safeguard your company from possible liability in connection with its sale of food-contact materials. Depending upon the facts and the law of any particular jurisdiction, a customer might sue under a theory of negligence rather than for breach of contract. Furthermore, as we noted above, some customers may not react favorably to any liability-limiting language, and business considerations typically require companies to accept some level of risk in dealing with customers in the food industry.
Fortunately, significant claims relating to the regulatory compliance of food packaging are not common. In addition, diligence in establishing and documenting a proper basis for compliance is the best defense to potential liability.
C. Authority to Issue Assurance
There are no particular legal requirements as to which personnel within a company should be authorized to issue a guaranty or letter of assurance, but the responsibility should be given to identified personnel within a company. Also, it is advisable to communicate within a company as to who is authorized to issue the letters and the procedures for ensuring that the letters are based on a correct interpretation of the laws and regulations. Finally, keep records of what assurances and limitations on liability have been provided to customers, including the bases for the assurances, particularly if there is no expiration date on the assurances. People come and go more frequently these days, and companies risk losing institutional memory.
One final question that arises from time to time is whether compliance assurances (including Keller and Heckman opinion letters) must be renewed periodically. If the assurance has no expiration date (neither our letters nor FDA clearances have finite lives, but some company assurances do), there is no legal obligation to renew the assurance. However, some customers, reluctant to rely on an assurance that bears a date going back a few years, may request renewal of an assurance.
In addition, if a company has changed the formulation or the manufacturing process over the years, assurances may no longer be valid. There should be a procedure in place for the impact of such changes on regulatory clearances to be evaluated by the appropriate personnel—preferably before the changes are made.
1See United States v. Crown Rubber Sundries Co., 67 F. Supp. 92 (N.D. Ohio 1946).
2Specifically, if the cumulative dietary exposure of the food-contact substance (from both food and food-contact uses) exceeds 1 part per million (ppm), or if FDA receives a two-year study it has not previously evaluated as part of a filing and the study is not clearly negative for carcinogenicity, it is entitled under its guidance document and proposed rules to insist that a substance be the subject of a food additive petition.