CPSC Enforcement Action Against Michaels Highlights Importance of Proper Reporting

By Elliot Belilos

The U.S. Consumer Product Safety Commission (CPSC) recently filed an action in federal court against Michaels Stores, Inc., seeking civil penalties for allegedly untimely reporting injuries from a vase sold in the stores and, notably, for allegedly falsely reporting the incidents as a retailer rather than as the manufacturer of the product.  According to the Complaint, Michaels misrepresented to the Agency the company’s role in the distribution chain, allowing another company, The Gerson Company (“Gerson”) to report as the manufacturer even though Michaels was the importer of record (and, as a result, the statutory “manufacturer”).

CSPC asserts that Michaels engaged Gerson to contract to have the vase made overseas exclusively for Michaels, but that Michaels was the importer of record, a fact that CPSC alleges Michaels withheld from the Agency in its 15(b) report.  CPSC asserts that Michaels purposefully withheld that information so that Gerson would be the recalling entity, and that the recall would have been more successful had the more well known Michaels been the recalling entity.

This case bears watching as it moves forward.  Certainly companies that are importers of record for products manufactured overseas need to understand that they are deemed to be the manufacturer of those products under the Consumer Product Safety Act (CPSA), and that any report to the CPSC should properly reflect their role in the distribution chain.

Elliot Belilos represents companies on consumer product safety compliance issues, including reporting obligations to the CPSC and corrective actions, up to and including recalls.  Elliot can be reached at ebelilos@ofwlaw.com.

John Block: GMOs Under Assault

By John R. Block

We can’t seem to silence or satisfy the loud scream of opposition to GE crops. The reason probably is that up until now we have ignored them. It’s time to stand up and set the record straight.

GE food is safe and even beneficial according to 88% of scientists. We have conducted more than 1,000 studies. We have been eating GE food for more than 20 years – no one has gotten sick.

The fact is that for thousands of years, farmers have been improving crops through selective breeding. That process alters genes. We have found that in the laboratory we can do it faster.

Never mind the facts, the critics are beating the drums. Three states have passed labeling laws. Vermont is in the lead as they begin to implement their law. It sounds simple. Just label the food if it has GMO products in the food.

It’s not that simple. Vermont has a long list of exemptions. Animal products are exempt – beef, pork, chicken, dairy. But keep in mind the animals were fed GMO corn and soybean meal.

Trying to get out ahead of everyone, Chipotle recently announced that it has gone GMO free. But it’s not really free. The soft drinks are made with GMO corn sweetener. The burritos have GMO corn-fed beef, pork, chicken, and GMO sour cream.

The U.S. Congress is considering as many as 30 bills to deal with the GMO debate. You may wonder where all of this noise is coming from. Yes, there are individuals that sincerely are concerned about GMO safety. However, the organic companies (some of them are huge) are helping to push the false argument about risk. If they succeed, they can sell more product and make more money.

This debate is not over. You will soon read about the next step in plant technology – gene editing. Gene editing is a more precise way to alter plant traits.

The leading critics of GMOs are totally inconsistent. First, they support the science on global warming, but ignore the science on GMOs. Next, they pretend to care about the poor, but genetic engineering helps the poor by keeping the cost of food down. The world will not produce enough food without new technology. Finally, if they want to reduce the use of chemicals and energy, GE also does that.

Stay tuned.

John Block was Secretary of the U.S. Department of Agriculture from 1981-1985, where he played a key role in the development of the 1985 Farm Bill.

John Block: “COOL” Isn’t Cool

By John R. Block

As a farmer, we understand that if you have something that doesn’t work, you fix it. It will just cost you money if you ignore the problem. Somehow, the federal government doesn’t seem to understand that common sense fact.

The Country of Origin Labeling (COOL) law was first passed in 2002. Canada and Mexico have been challenging the law now for 13 years. The World Trade Organization (WTO) just this week ruled it to be a violation of U.S. international trade obligations. We are a member of the WTO and therefore should live within the rules. That is our obligation, and we expect other countries to do the same.

This week, for the third time, the WTO ruled against us. That ruling gives Canada and Mexico the legal right to retaliate. Canada already has a list of proposed restrictions, which will result in a dramatic cut in our exports to Canada and Mexico. That is serious. Canada and Mexico are our number 1 and 2 export markets. Besides, they are our closest neighbors.

Senator Pat Roberts (KS) had this to say: “If Congress doesn’t act swiftly, retaliation will wreak havoc on the U.S. economy.” I think we should be aware that if we don’t fix this law, it will cost us millions of dollars in ag exports as well as other exports.

The law today requires that meat from a calf born in Canada and shipped to the U.S. bare a label that reads “Born in Canada, raised and slaughtered in U.S.”  Just imagine the cost and confusion that can cause.  What about the Montana farmer who imports Canadian calves and mixes his own U.S. calves with the Canadian calves?  By law, he would have to keep track of them and market them separately. The U.S. processing plant would then have to process them separately. That would be the only way to ensure the Canadian label was on the Canadian steak.

Consumers say they have the right to know where that animal has been. Why? It isn’t worth the hassle. USDA just released new study results that point out the COOL labeling policy costs consumers nearly 8 billion dollars over 10 years.

We don’t need to try and change COOL. We’ve tried that before. COOL isn’t cool. Just get rid of it.

John Block was Secretary of the U.S. Department of Agriculture from 1981-1985, where he played a key role in the development of the 1985 Farm Bill.

FDA Releases Draft Guidance on Compounding Animal Drugs

By Tish Eggleston Pahl

Yesterday, FDA released a Draft Guidance for Industry on Compounding Animal Drugs from Bulk Drug Substances (Draft Guidance).  The Federal Register notice accompanying the Draft Guidance can be found here.  The agency also withdrew its previous Compliance Policy Guide (CPG) 608.400, Compounding of Drugs for Use in Animals.

Though FDA has been actively implementing Title I of the Drug Quality and Security Act (DQSA) and exercising its new, clearer authority over outsourcing facilities and compounding pharmacies, the new §503B and amended §503A of the FD&C Act do not apply to the compounding of animal drugs. Arising from FDA’s recent, vigorous oversight of compounding pharmacies and outsourcing facilities, the Draft Guidance reflects the agency’s current, and more sophisticated, thinking about compounding.

The Draft Guidance describes the conditions under which FDA does not intend to initiate enforcement action against State-licensed pharmacies, licensed veterinarians, and facilities registered as outsourcing facilities under §503B of the FD&C Act that compound animal drugs from bulk drug substances. Outsourcing facilities are new entities created under the DQSA that, if they follow cGMPs and other requirements, are permitted to compound sterile injectable drugs for humans without FDA pre-approving an application under §505 and without the “adequate directions for use” required by §502(f)(1).  The Draft Guidance sets out pre-conditions for the exercise of enforcement discretion for each type of entity – State-licensed pharmacies, licensed veterinarians, and outsourcing facilities.  Unlike pharmacies and veterinarians, outsourcing facilities will only be permitted to compound from bulk substances identified in the to-be-developed Appendix A.

FDA separately seeks comments on the list of acceptable bulk substances to add to the Appendix A list.  The agency also asks for comments on various other issues, including:

  • The significance of drug shortages to animal drug compounding;
  • The appropriate standards for compounding by licensed veterinarians;
  • Possible limitations on total drugs to be compounded and whether they may be transferred or sold to others; and
  • Whether the agency needs to address repackaging of animal drugs, as it did for human drugs.

For compounders of animal drugs, these are significant documents that warrant close inspection.  FDA will be accepting comments for 90 days.

Mike’s Legacy

By Marshall L. Matz, as published in Agri-Pulse

Michael B. Jandreau, the visionary leader of the Lower Brule Sioux Tribe in South Dakota for almost 40 years, passed away last month at the age of 71.  Known to all as “Mike” he believed that Indian Tribes had to establish a private sector economy on the Reservations if they were to participate in the American dream. The historic treaties of the 1800’s between Tribes and the United States, while still very important, were not enough to prepare Indian people for the 21st century.  For rural Tribes, that means a focus on agriculture.

Jandreau testified before Congress and the South Dakota Legislature many times in support of Tribal sovereignty but he also believed that the treaties were not a business plan. The Tribes needed to develop a private sector economy to benefit all Tribal members.   In 2004, he made history as a Tribal Chairman by telling the Senate Committee on Indian Affairs: “Sovereignty is the key to tribal existence.  But, in the long run, for sovereignty to survive, there must be economic sovereignty as well.  We must develop a private sector economy.”

Jandreau again emphasized the importance of the private sector when he addressed the Senate Committee on Indian Affairs a few years later: “It is painful to read The World is Flat and to read that the United States is outsourcing jobs to China and India when many Indian Reservations have an unemployment rate over 80% and a third world standard of living.”

Tribes located in the Missouri River Valley may face the most difficult challenge of all Reservations given their remote locations.  The unemployment rates on rural Reservations, along with social indicators like infant mortality, diabetes, and suicide rates, are closer to those of the third world than those of the United States.  Tribal members face the Hobson’s choice of leaving their families and culture or staying on the Reservation and a life with less potential than other Americans.  Only a private sector economy can solve these problems and agriculture has the best potential in these rural areas.

USDA photo by Ken Hammond.

USDA photo by Ken Hammond.

Mike foresaw the reservation’s agriculture potential not only in growing larger volumes of agricultural commodities on Tribal and Reservation lands, but also in adding value to those commodities on the Reservation itself.  Processing the commodities created good jobs for Tribal members and pride in what was produced in the name of the Tribe.

Under Jandreau’s leadership, Lower Brule established a successful Farm Corporation and one of the most diverse and innovative economies of any Reservation in the Nation. The Lower Brule Farm Corporation grows edible beans, has a commercial buffalo herd and is the largest producer of popcorn in the country.  The farm has expanded to some 40,000 acres with 10,000 acres under irrigation. They sell popcorn nationwide to the major brands and also market under their own brand name “Lakota Foods.”

As important as agriculture is to Lower Brule, Mike also understood that agriculture alone could not raise the standard of living for Tribal members to parity with surrounding non-Indian communities. He shrewdly recognized that the Indian Reorganization Act of 1934 empowered tribes to team up with the private sector to develop off-reservation businesses that could supplement on-reservation services.  It took a full decade and trips to the Supreme Court to bring land into trust near the Reservation on Interstate 90 in South Dakota that can be developed into Tribal businesses.

Jandreau successfully urged the Congress to enact the Lower Brule Infrastructure Development Trust Fund Act, the Wildlife Habitat Restoration Act and the Wakpa Sica Reconciliation Place, among other pieces of legislation.  Wakpa Sica seeks to help all Tribes of the Great Sioux Nation by providing support for Tribal Courts in order to attract investment to the Reservations.

His unfulfilled dream was an Indian Agriculture Act (IAA). Upon his motion, the National Congress of American Indians passed a resolution urging the United States Congress to “make the Indian Agriculture Act a title in the 2012 Farm Bill.”

While pieces of an IAA were included in the last Farm Bill, Jandreau always looked to the future. Rural, agriculture-based Tribes need extension services, loan guarantees, irrigation, infrastructure, and better internet, among other things, to underpin a farm economy.  South Dakota State University and Mike were working together to improve extension services on all South Dakota Reservations.

Agriculture Secretary Tom Vilsack has been very responsive to Tribes, but to solve a challenge of this magnitude, it will take a Presidential initiative that brings together all Departments of Government.  The White House Rural Council has established a focus on Tribes for this exact reason.

Jandreau proposed paying for increased services by using a portion of the revenue from the sale of electricity generated by the dams along the Missouri.  His thinking was that the water belonged to Indians (under the Winters Doctrine), the dams flooded Tribal land and, therefore, the revenue should be shared with the Tribes.  The Western Area Power Administration, WAPA, earns a billion dollars a year from the sale of electricity.  The revenue is not shared with the Tribes and, in fact, the Tribes have to pay for electricity.

Mike received many awards and commendations over his life but his true legacy lies not in the past but in his vision for the future: A comprehensive Indian Agriculture Act, completing the Wakpa Sica Reconciliation Place, attracting private capital to the Reservations, and distributing the Keepseagle vs. USDA litigation funds to the farmers who were damaged.  As Mike noted in closing his testimony to Congress, “The Reservations are a part of the United States, but we are not a part of the U.S. economy.”

Marshall Matz started his career with South Dakota Legal Services on the Crow Creek Reservation before moving to the Senate Committee on Agriculture.  He currently specializes in agriculture at OFW Law in Washington, D.C.

May 19 Webinar on the Drug Supply Chain Security Act

Tish Eggleston Pahl will be speaking on May 19 at a webinar on dispenser obligations under the Drug Supply Chain Security Act (DSCSA).  The webinar is sponsored by the Healthcare Distribution Management Association (HDMA).  This “DSCSA Overview for Dispensers” continues HDMA’s education and outreach on the pharmacy and hospital–related implementation requirements under the DSCSA.  Particular focus will be on the data requirements for dispensers that go into effect on July 1 and also will address many of the questions that HDMA received during its previous April 21 webinar for dispensers.

Topics will include:

  • The loan or sale of medication from one dispenser to another;
  • The definition of “dispenser” and whether hospital and clinic pharmacies qualify;
  • Questions pertaining to suspect and illegitimate products;
  • Data that must be provided with the product, including questions about lot number and data pertaining to returned products;
  • Exempt products and transactions;
  • Questions around authorized trading partners and more.

The webinar is free.  More information about the webinar and how to sign up is available here.

John Block: Down on the Farm

By John R. Block

I was on the farm last week and early this week. My timing was right. I wanted to be there for the corn planting. We finished and started on soy beans. I have never seen the seeds go in the ground under better conditions. That rich, black dirt was not cloddy, not too wet. It would crumble in your bare hands. The day I got to the farm, the corn was not up. But when I left this week, I could mow it. To look at those green sprouts peeking up out of that rich earth is a beautiful sight.

Think about all the time and effort and money spent in getting the crop this far. Last fall, we put lime on some fields where the soil tests told us it was needed. We applied phosphate and potash at just the right amount to meet fertility needs. With GPS and accurate soil tests, we can apply the right amount in the right place. That’s precision farming.

We knifed into the soil “honey” from our hog barns. That is powerful fertilizer. Finally, anhydrous ammonia, our source of nitrogen, was put on the fields. We did all of that last fall. We won’t see any return on our investment until this fall.

When the corn gets up a foot high this spring, we will spray for weeds. With genetically engineered seed, we don’t use anywhere near the amount of weed spray that we did 30 years ago. The critics of GE crops are making a big mistake. GE allows us to dramatically reduce the amount of chemicals to grow a crop. We don’t use the energy. In days back, we would have to cultivate the growing crop twice. And, we would still have weeds and grass in the corn rows.

Farmers are better stewards of their land than they have ever been. We have technology that makes it possible. We value our land and livestock. That’s how we make our living.

Of course, there are exceptions, but I can’t imagine a farmer mistreating his animals. I love our pigs. They are beautiful – so healthy. They are gaining weight and growing faster than I have ever seen. Sometimes, I think it may be the feed. It is a balanced ration. Corn, soybean meal and distillers dried grain (DDG). DDG is the high protein feed left over after making ethanol out of corn. It has become a very popular and valuable livestock feed.

Watching the 2015 crop grow this summer will be exciting. I’m sure we will be praying for rain in July. It’s in God’s hands now.

John Block was Secretary of the U.S. Department of Agriculture from 1981-1985, where he played a key role in the development of the 1985 Farm Bill.

Spotlight on Compliance of Wood Products

By Elliot Belilos

In the wake of the recent 60 Minutes piece that highlighted alleged elevated formaldehyde in the Chinese-made wood flooring imported by Lumber Liquidators, all manufacturers and importers of consumer products containing compressed wood need to ensure that their products comply with the California Air Resources Board (CARB) limits regarding formaldehyde emissions.  And while the formaldehyde limits now only apply to products sold in California, those limits are soon to become the law nationwide, as EPA is finalizing regulations (expected by the end of the year) that largely parallel the CARB regulations.  The EPA regulations are being promulgated under 2013 amendments to the Toxic Substances Control Act.  All consumer goods that contain hardwood plywood (HWPW), particleboard (PB), medium density fiberboard (MDF) are affected.

Reasonable Prudent Precautions

For importers of HWPW, PB and MDF and finished products containing these materials, the Airborne Toxic Control Measures (ATCM) imposes no obligation to test, but importers must take “reasonable prudent precautions” to ensure that the products are compliant, which at a minimum, requires the importer to instruct (in writing) each supplier that the goods it supplies to the importer comply with the applicable emission standards, and obtain written documentation from each supplier that this is so. ATCM § 93120.6(b). In addition to certification from the supplier that all composite wood components are CARB 2 compliant, it would be advisable to require suppliers of products with composite wood components to provide copies of test reports that demonstrate CARB 2 compliance. Since the manufacturer is required to test for CARB 2 compliance, those test reports should be available – if not available, that should at least raise a red flag.

Recordkeeping Requirements

Importers of finished goods containing composite wood components must maintain records showing the date of purchase and the supplier of each shipment of goods containing HWPW, PB or MDF and document the precautions taken to ensure that the composite wood in the finished goods comply with applicable emission standards. These records must be kept in electronic of hard copy form for a minimum of two years and provided to CARB or local air district personnel upon request. ATCM § 93120.6(b).

Statement of Compliance

For each composite wood product or finished good made with composite wood, the importer must state on the bill of lading or invoice that the composite wood products or components comply with the CARB 2 emission standards.

Facility Inspections

Importers may be inspected by CARB or local air district personnel. In the course of an inspection, the importer may be subject to a records audit and product sampling.

Verification Testing

As noted above, there is no requirement that importers conduct independent testing of composite wood components of finished goods. Nonetheless, an importer of composite wood products or finished goods with composite wood components is still at risk for penalties even if it takes the “reasonable prudent precautions” described above. Those reasonable prudent precautions may serve to mitigate penalties levied by CARB, but penalties could still be levied if CARB were to determine that the composite wood is not compliant despite the certification and test reports provided by the supplier.  As a result, it may help to further mitigate potential liability to conduct some independent testing to confirm compliance.

In addition to the potential liability Lumber Liquidators is facing regarding alleged CARB emissions noncompliance, the Justice Department recently announced that it is investigating whether the Company violated the Lacey Act by importing endangered species of wood and the U.S. Consumer Product Safety Commission (CPSC) is investigating whether the Company’s products run afoul of CPSC regulations.

If you are a manufacturer or importer of consumer products that contain wood, it is important that you understand the laws and regulations that affect your products.  In the wake of the investigations surrounding Lumber Liquidators, your products are in the regulatory spotlight.

Elliot Belilos represents companies in the areas of product safety and compliance.  You can reach him at ebelilos@ofwlaw.com.

John Block: Raisins

By John R. Block

The U.S. Supreme Court decides a lot of very serious, high-profile cases – gay marriage for example. However, recently, they heard one about raisins. Yes – raisins.

The Raisin Program dates back to the Great Depression of the 1930s. President Roosevelt cut the production of many farm products to reduce surplus and raise farm prices. My grandfather told me that they even killed baby pigs.

In the recent case, almost 80 years later, the government came to get raisins from the Marvin Horne farm in California. He said “no.” They fined him $700,000 and now they are in court. Under the Raisin Program, the annual crop is reviewed by the Raisin Administrative Committee. Then, the Department of Agriculture decides what percent of the farmer’s crop must be handed over to the government. The government can then give raisins to the School Lunch Program or maybe sell them and give the farmer some of the money.

Justice Breyer argued, “The government was not taking the raisins and giving the farmer nothing. He benefited from higher prices.”

Conservative Justices consider the Raisin Program to be an unconstitutional taking of private property without just compensation. Justice Roberts complained, “You come up with the truck and you take their raisins – probably in the dark of night.”

Justice Kagan pointed out, “We think this is a ridiculous program, but the ridiculousness or sensibleness of a program is not for us to decide.”

The court verdict should be announced by July. Now, to set the record straight – we have had government production control programs for years and years. Most of those control programs have been eliminated, but not all. A few years ago, the “UglyRipe® tomato,” grown in Florida, was not allowed to be sold out of that state. OFW Law was asked by a company growing the UglyRipe® tomato to help them. The Tomato Marketing Order that they were under would not allow them to sell the UglyRipe® tomato in any other state – just Florida. I did work with the USDA and eventually they lifted the Order. I saw UglyRipe® tomatoes in the supermarket here in Virginia last week.

I am not a big supporter of these government control programs. Maybe they served a purpose in the Great Depression. That’s not today. We have moved beyond that. Let the free market work.

What would your reaction be if the government came and took some of your corn after you harvested it?

John Block was Secretary of the U.S. Department of Agriculture from 1981-1985, where he played a key role in the development of the 1985 Farm Bill.

Hand Washing: A Simple Step

By Barbara J. Masters, D.V.M.

How many of you have ever sat in a public location, such as the airport, and watched the number of people that enter the restroom talking on their cell phone?  Creepy, huh?  Not nearly as creepy as the same number of people that exit a very short time later still talking on their cell phone.  I always question how they washed their hands.

According to the Center for Disease and Prevention (CDC), “Washing hands prevents illnesses and spread of infections to others.”  It is a simple step we can all take before, during, and after preparing food, before eating, after using the toilet or assisting a child use the toilet, after blowing your nose, coughing, or sneezing, after touching animals or animal food or animal waste, and after touching garbage.  Washing hands keeps them clean and prevents the spread of bacteria that can make people sick.

It is especially critical to wash your hands when preparing food to prevent the spread of common foodborne bacteria such as E. coli O157:H7 and Salmonella.  To wash your hands, use soap and warm water and lather your hands for at least twenty seconds.  It is important to get the back of your hands, between fingers and under your nails.  If you are not certain how long twenty seconds is, hum “Happy Birthday” two times while washing.

If you are out on a picnic or do not have access to soap and water, then use of a hand sanitizer can be substituted.  If you must use a sanitizer, first wipe hands with a paper towel or a napkin to remove the visible dirt.  Then apply the sanitizer and rub hands together until the sanitizer dries.

The CDC has promotional materials that can be utilized to encourage hand washing at your work site or in schools.  Clean hands are a simple step we can all take to improve public health.

About Dr. Masters

Mixed in with the attorneys at OFW Law is the former USDA Food Safety Inspection Service’s (FSIS) Administrator, Dr. Barbara Masters.  Dr. Masters is a veterinarian who spent eighteen years with FSIS – the final three years as Acting Administrator and Administrator.  During her rise to the Administrator’s position, Dr. Masters served as the Deputy Assistant Administrator for Office of Field Operations.  While in these key leadership positions at FSIS, Dr. Masters’ primary focus was on the implementation of science-based policies for the protection of public health.