Julia Harvey is a law student at NYU School of Law and guest contributor on this blog.
On September 9, 2020, USDA announced a new final rule that aligns egg safety inspection practices with those already used in other USDA-regulated industries including meat and poultry. The rule requires egg production facilities to develop and implement Hazard Analysis Critical Control Point (HACCP) programs and Sanitation Standard Operating Procedures (SSOPs) to monitor the safety of their product. In effect, the rule shifts much of the burden of safety inspection and documentation from federal inspectors to the egg processing plants themselves. The new rule applies only to those egg facilities that are regulated by the USDA, meaning those that produce egg products (e.g., frozen, liquid, and dried egg products). The rule does not apply to shell egg producers.
Although one of the benefits of the new rule USDA cites is cost savings to the government, the rule effectively shifts this regulatory cost onto egg producers. Small egg production facilities may not be able to shoulder this financial burden in an increasingly competitive industry. Creating an HACCP plan requires conducting scientific studies (or providing scientific substantiation), developing and implementing monitoring and recordkeeping systems, and may necessitate hiring consultants to ensure that plans meet regulatory requirements. Comments responding to the notice of proposed rulemaking raised these concerns. Experts believe that the implementation of HACCP programs in slaughterhouses contributed to a steep decline in the number of operations in the early 2000s, where smaller facilities were bought up by larger producers or run out of business. The same may be true of egg producers under this rule.
In fact, of the 83 egg production facilities in the country that are currently regulated by USDA, 49 are categorized as “small” operations, and 19 are categorized as “very small” operations. Small operations are those with between 10 and 500 employees, and very small operations are those with fewer than 10 employees or less than $2.5 million in annual sales. The egg industry has experienced significant consolidation and vertical integration in recent decades, leaving these smaller operations even more vulnerable to takeover by larger companies if they cannot absorb new regulatory costs. The top ten egg companies control over 50% of the egg market in the United States, up from 30% twenty years ago. Regulatory schemes that favor large operations will only accelerate this process.
USDA claims that most egg production facilities already have at least some HACCP programming in place in order to meet existing consumer demands, mitigating the burden. However, that does not account for additional documentation and reporting requirements that facilities will be required to implement. This also does not account for the operational changes required of facilities that will be coming under USDA regulation for the first time—the rule also expands the definition of “egg products” to include operations that were previously regulated only by the FDA.
In response to these concerns, USDA has released draft guidance for small and very small producers to meet the new rule requirements. While efforts to address the needs of small producers are welcome, this guidance falls short of providing template HACCP plans that these producers can adopt or modify.
The COVID pandemic has exacerbated financial stresses for companies that produce egg products like liquid eggs, which disproportionately sell to food service providers, rather than to end users. The simultaneous pressure to expend precious resources under this new regulatory framework may push some producers over the edge. Ultimately, if USDA is interested in supporting small egg production operations under this new regulatory scheme, additional supports and programs must be made available to shoulder the burden that is being placed on them.
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