Regulatory Impact Analysis: produce safety rule

01/11/2013 03:19:00 PM
Tom Karst

Below are excerpts from the regulatory impact analysis of the produce safety rule, a small bite indeed of the 388 page-document. Consider this a preamble to an introduction.

 From the FDA:

E.  Summary of Costs and Potential Benefits of the Proposed Rule

In this section, we summarize the costs and benefits of the proposed rule. In section IV.G of this document, we provide a more thorough summary of the costs and potential benefits of the proposed rule.

The estimated illnesses attributable to produce RACs other than sprouts, fresh-cut, and sprouts are 3.1 million, and the baseline estimate for preventing all illnesses associated with microbial contamination of FDA-regulated produce is $1.88 billion.

The proposed regulation covers produce responsible for about $1.61 billion of this estimate. We do not expect that this proposed rule will eliminate all foodborne illness linked to covered produce. Instead, we expect that the proposed produce safety regulation will prevent about 65% of this illness burden from recurring. The effectiveness of this regulation and the corresponding reduction in food contamination and foodborne illness is estimated to be $1.04 billion, annually.

We estimate that the total first year costs for domestic farms to implement the proposed rule (if the compliance period were to be the same for all farms, with no staggered compliance) would be approximately $699.7 million, and that the total recurring costs to farms would be $365.65 million per year as shown in Table 10. We estimate that the annualized costs of the proposed rule would be approximately $459.60 million per year using a discount rate of 7 percent for all future years. We obtain a total cost of approximately domestic $419.28 million per year using a discount rate of 3 percent for all future years. The annualized costs for foreign farms are estimated to be about $170.62 million per year using a 7% discount rate and $135.74 million per year using a 3% discount rate.


Although, the RIA calculates the cost of the proposed regulation with a small farm cutoff of $25,000 in annual revenue, we consider multiple cutoffs for this size threshold and present estimates for $50,000; $100,000; $250,000; and $500,000 in Table 12. Selecting $50,000 as the threshold for coverage would require 11,958 fewer farms to be covered by the proposed rule, resulting in a total of 28,253 farms covered. This change would cover 1.3 percent fewer produce acres. We estimate that the total annual cost for farms under this scenario is approximately $348 million.

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