New tax powers put U.S. importers, suppliers at risk

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New tax powers put U.S. importers, suppliers at risk

U.S. importers will soon face new challenges under the Food Safety Modernization Act, which will likely have flow-on impacts for suppliers.

As of Oct. 1 the law will grant broad authority to the Food and Drug Administration (FDA) to ensure rapid responses to emergencies, with the right to tax importers if shipments don't meet requirements after re-evaluations.

The FDA could potentially tax importers when products have been re-labelled, if they try to enter fruit into the market when under FDA detention, or if the administration has to oversee the destruction of rejected products.

According to FDA guidelines, inspections will cost US$224 per hour and US$335 if inspectors need to travel to another country, where of course the likelihood of rejection is always possible.

Ignacio Berasaluce, product manager of Chilean packing company Empack, told that labels will be a key issue under the new legislation.

"If it's not clearly identified there are two options: the FDA reviews it and a tax is paid, or if you don't pay it doesn't enter," says Berasaluce.

"The payment will go directly away from the profits of the business - you always have to do the right thing."

The new regulations will carry right through to the first step of the supply chain, which leads Berasaluce to believe exporters will likely transfer costs onto producers.

He says one of the problems facing the U.S. is that each manufacturer uses a different nomenclature to generate labels and codes, including information requested by the United States Deparment of Agriculture (USDA).

This difference in labelling has spurred industry players like Berasaluce to promote a standardized system, pointing to the benefits of the Product Traceability Initiative (PTI).

Under the initiative, each product has a unique barcode identifying the batch, which can then be processed by supermarkets when entering warehouses.

"We will begin to identify the exporter by first name and surname, which shows to the consumer we are taking responsibility, who could then complain to the manufacturer and not necessarily the supermarket."

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