In 2006, 205 people in the U.S were sickened and 3 died in an E. coli O157:H7 outbreak linked to baby spinach grown in California.  In the aftermath, both the Food and Drug Administration (FDA) and California’s Department of Health Services conducted extensive investigations into the outbreak to determine how leafy green produce could become contaminated with a microorganism normally found in the stomach of animals.

While investigators were able to successfully track the contaminated spinach to one specific field in California, and identify potential health risks such as the presence of cattle feces and wild pigs, the investigators had less success identifying the exact method by which E. coli contamination had occurred.

In response, California, the largest producer of leafy green vegetables in the nation with roughly a 75 percent market share, created its own statewide Leafy Green Marketing Agreement. Arizona, the second largest producer of leafy green vegetables with roughly a 15 percent market share, followed suite creating its own statewide program in September of 2007.

Unfortunately, despite the widespread adoption of these voluntary programs at the state level, foodborne illnesses linked to leafy green vegetables continue to be a problem across the country. In 2010, E. coli-tainted romaine lettuce was recalled in 23 states after 19 people became seriously ill in Ohio, New York and Michigan.

Just this last October, the U.S. Food and Drug Administration (FDA) discovered Listeria bacteria during a random sample of romaine lettuce grown in California.   And as recently at this past New Year’s Eve, “a Texas company recalled 228,360 lbs. — 114 tons — of spinach because it tested positive for E. coli O157:H7.”

In response to industry interest, the U.S. Department of Agriculture’s Agriculture Marketing Service (AMS) published an Advance Notice of Proposed Rulemaking (ANPR) on Oct. 4, 2007 to explore the idea of implementing a national marketing agreement focused on reducing microbial contamination in leafy green vegetables.

AMS received more than 3,500 public comments on the ANPR. On June 10, 2009, the agency received a petition for rulemaking and a request for a public hearing on a proposed National Leafy Green Marketing Agreement (NLGMA). The proposed marketing agreement was submitted to AMS “by a group of producers, handlers, and interested persons representing a cross-section of the national fresh and fresh-cut produce industry.”

This initial proposal was designed to operate in a similar manner to voluntary marketing agreements previously implemented in California and Arizona following the 2006 outbreak.

While many in the leafy green industry praised the proposal as a huge leap forward for product safety, the proposal was also met with stiff resistance from many farmers, especially small-scale producers. The new rules also came under attack by consumer food safety advocates who were upset that the proposed rules would essentially allow the industry to police itself.

After taking comments and holding public hearings on the issue, the AMS proposed a revised NLGMA in the spring of 2011.  This report provides an overview of how marketing agreements function in general, provides a detailed examination of the latest proposed NLGMA rules, and examines whether criticism for the latest proposed rule is legally and/or factually justified.

Marketing Orders and Agreements 

The Agricultural Marketing Agreement Act of 1937 (codified at 7 U.S.C. Chapter 26A) provides authority for federal marketing orders administered by the USDA.  Under the supervision of the AMS, marketing orders have currently been established for milk as well as numerous fruits, vegetables, and other specialty crops.  Not counting milk and the latest NLGMA proposal, there are currently 32 active marketing orders and agreements.

Marketing orders and agreements provide legal tools for agricultural producers, aggregators, processors, manufacturers, and retailers to work together to mitigate financial turmoil in the supply chain. A new marketing order or agreement must be developed by industry representatives, and then proposed to the AMS. The agency will then hold a public hearing and take public comments prior to making a final decision on whether to proceed with a rulemaking.

Prior to a proposed program being implemented, the regulation must be approved in a referendum by a two-thirds or larger majority of producers. Once a marketing order or agreement is approved, local committees appointed by the Secretary of Agriculture provide administration of the program. 

Marketing orders and agreements are binding on all “handlers” in the geographic area covered by the order.   In general, a handler is anyone who receives the commodity from producers, and is responsible for grading, packing, transporting, or placing the farm products into commercial channels.

Marketing orders are distinguished from marketing agreements, in that marketing agreements are binding only on handlers who are signatories of the agreement. Handlers must comply with the grade, size, quality, volume, and other requirements established under the specific program. 

Proposed National Leafy Greens Marketing Agreement (NLGMA)

Like all marketing agreements, the proposed NLGMA is intended to be a voluntary program so handlers can choose whether or not they wish to participate in it.  Unlike other marketing agreements, the NLGMA has little to do with balancing financial interests in the supply chain, but is focused entirely on providing a legal structure for farmers and handlers to efficiently comply with a new system of national food safety requirements impacting all leafy green vegetables.

While no specifics are given in the proposal, such food safety requirements would be based on the FDA’s Good Agricultural Practices (GAPs), Good Manufacturing Practices (GMPs), and the USDA’s Good Handling Practices (GHPs).

Under the current proposal, the marketing agreement would be governed by a 26-member Board of Directors appointed by the Secretary of Agriculture. The Board would be responsible for making policy recommendations to the Secretary for final review and ap
proval. Any major changes to the agreement, including the Board’s recommended food safety requirements and exemptions, would be sent out for public comment prior to its adoption.

Board members would be apportioned from eight administrative zones, with state’s divided into groups based on geographic and climate differences. Each administrative zone would be assigned representation on the Board relative to the amount of leafy green vegetables produced within that zone. For example, administrative zone 1 — which includes Hawaii and California — would receive 4 representatives as California produces roughly 75 percent of all leafy green vegetables grown in the country.

In addition, the Board would include 10 designated grower representatives, with two of the 10 grower positions designated for small farmers. No company would be allowed to have more than one representative on the board, even if its operations included multiple farms in different administrative zones.

A Technical Review Committee (TRC) would assist the Board in developing guidelines and procedures. The TRC would consist of members who represent production, handling and food safety experts from each zone (including organic and small business interests), experts from the USDA’s agencies, and other federal agencies such as the FDA and EPA. The TRC also would have the authority to work collaboratively with industry stakeholder groups, local and state authorities, and others interested parties whose expertise the TRC might require. 

The proposed NLGMA would cover a wide range of fresh leafy green vegetables and their varieties, including: arugula, cabbage, chard, cilantro, endive, escarole, kale, lettuce, parsley, radicchio, spinach, and “spring mix” — an industry term that describes mixtures of baby lettuces, mustards, chards, spinach, and chicories that vary based on availabilities. These vegetables could be whole or fresh-cut, or in bulk or packaged form. Under the proposed NLGMA, the Board could recommend, subject to USDA approval, the addition or removal of any leafy green vegetable from this definition.

Handlers of fresh leafy green vegetables in the 50 states and the District of Columbia, also known as the production area, would be eligible to become signatories. Once becoming a signatory, participants would only handle leafy green vegetables from producers or other handlers that are also in compliance with the NLGMA.

Signatories who handle product imported from outside the United States would be required to demonstrate that those products also meet the requirements of the NLGMA. Compliance by signatories with the terms of the agreement would be mandatory. A signatory would be obligated to participate for no less than one crop year in the program. After the initial year, participants would have the opportunity to withdraw or opt out of the program.

While the program is voluntary for handlers of all sizes, any producer who sells to a handler that is a signatory to the NLGMA would be required to adhere to the marketing agreement.  Small farmers participating in farmers markets, CSAs, or other direct sales to consumers may choose not to participate in the marketing agreements, provided they don’t sell any of their leafy green vegetables to a signatory handler.

Once adopted, all signatory handlers and their growers would be subject to an audit by the AMS Inspection Service. AMS Inspection Service would have the authority to accredit other entities and license their auditors to audit on its behalf, including National Organic Program (NOP) certified agents, FDA inspectors, and third-party auditing services accredited by FDA.

This presents the potential to streamline the audit process facing many producers in today’s market, thus improving operations and reducing costs.  For example, the proposal would permit the program to evolve whereby an organic producer could include the NLGMA food safety standards as a component of the overall organic system plan and receive a single audit.

The proposed NLGMA “would provide the Board authority to establish marketing research and development projects, and or promotional activities, including paid advertising, to assist or promote the efficient adoption, implementation, and marketplace acceptance of the agreement and leafy green vegetables.” A Research and Development Committee would assist the Board in carrying out these actions.

The costs of these programs and the audit verification fees would be paid for through assessments of the signatory handlers.  The price of these assessments would be recommended by the Board and must be approved by the USDA.  These assessments would not be allowed to exceed $0.05 per 24-pound carton equivalent of leafy green vegetables. As assessments are based on the volume of a handler’s transactions, large handlers would pay more assessments than small handlers participating in the program.

The AMS believes the proposed NLGMA will have a number of important benefits for producers, handlers, and consumers.  “A primary benefit of the proposed agreement is the reduced likelihood of food contamination outbreaks in leafy green vegetables… in the United States.”

This would not only benefit consumer health, but also the economic viability of the industry since it is estimated “that a food contamination outbreak could lead to a 10 percent long-term reduction in demand for leafy green vegetables.” The 2006 E. coli outbreak alone was estimated to have cost leafy green producers $12 million dollars, and U.S. retailers as much as $63 million in lost profits.

Criticism of the Latest NLGMA Proposal

Both proponents and opponents of the latest NLGMA agree that food safety is a priority that needs to be better addressed by regulation.  There is also no question that the most recent NLGMA is a more well thought out and balanced version of the regulation that what was initially proposed in 2009.

Yet, critics of the latest proposal — including the National Sustainable Agriculture Coalition (NSAC) and the National Organic Coalition (NOC) — contend that the AMS failed to adequately address at least four main concerns:

– whether the AMS is the proper agency to handle food safety regulation governing leafy green vegetables

–  whether a marketing agreement is the proper regulatory tool to carry out national food safety regulations

– whether Congress has already addressed this particular food safety issue with the Food Safety and Modernization Act passed in December of 2010

– whether the NLGMA still unfairly burdens small to medium sized producers who wish to participate in the program

Is AMS the Proper Agency to Oversee Leafy Greens?

Three federal agencies are traditionally involved in U.S. food regulations.  In general terms, the USDA is responsible for all issues involving meat, poultry, dairy and eggs.  In contrast, the FDA is responsible for all other food and food additives.  Finally, the Federal Trade Commission (FTC) is involved in the regulation of food advertising.

The proposed NLGMA even recognizes the FDA’s expertise in food safety regulations involving leafy green vegetables as the AMS intends the Board’s final food safety regulations to reflect the FDA’s published GAPs and GMPs, in addition to the USDA’s GHPs.  It also makes clear that the AMS intends to follow any existing or ne
w FDA regulations that would impact food safety regulation or audits carried out by the agency.

In contrast, AMS has not traditionally been involved in food safety regulations or their enforcement, even within the USDA. Instead the AMS is involved mainly in assisting producers to market their products. This includes providing standardization, grading and new services for its five commodity programs — dairy, fruit and vegetable, livestock and seed, poultry, and cotton and tobacco.  It also includes overseeing the National Organic Program (NOP) and facilitating both domestic and international marketing efforts for U.S. agriculture.

Which is not to say that either USDA as a whole, or AMS in particular, lack expertise when it comes to developing or enforcing new production standards.  After all, in addition to developing marketing orders and agreements, AMS is also responsible for helping to create international quality standards for agricultural products.

Its role in overseeing NOP has also provided it the opportunity to implement a farm-based audit program designed to facilitate the needs of both small and large producers. In addition, the USDA as a whole has been heavily involved in the implementation of the Hazard Analysis Critical Control Point system (HACCP) currently utilized in meat, seafood, dairy, and juice production. This flexible system of scientifically based production standards — designed to reduce microbial contamination during processing — has been widely adopted by the food industry in Europe and much of the United States.

Thus, while AMS may not be the foremost expert in food safety regulation involving leafy green vegetables, the agency certainly has both the scientific expertise and experienced personnel to carry forth all the provisions proposed under the NLGMA.

Are Marketing Agreements the Proper Regulatory Tool for Food Safety Regulations?

When considering whether it is appropriate to use a marketing agreement to address food safety, it is important to examine how Congress has historically created food safety legislation.  Over the past hundred years, Congress has passed many acts to improve food safety in this country, including the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act, the Egg Products Inspection Act, the Federal Meat Inspection Act of 1906, the Poultry Products Inspection Act of 1957, and most recently, the Food Safety Modernization Act of 2010.

In almost all cases, these acts did not set forth specific food safety laws, but delegated the responsibility to the FDA or the USDA. This was not an ethical consideration, but a practical consideration as Congress has generally relied on agency expertise to formulate science based standards for the safety of the public. Proponents of using a marketing agreement to enact food safety regulation thus contend that it is simply another example of how an agency can use its scientific expertise to carry out the intent of Congress under the Agricultural Marketing Agreements Act of 1937. 

Critics of the recently proposed NLGMA provide two separate reasons why a marketing agreement is the wrong regulatory tool for food safety: (1) it is unethical to make food safety a marketing issue, and (2) Congress never intended marketing agreements to address food safety issues as just another quality issue.

The first question is challenging, as there is neither one set of ethical standards that society adheres to under all circumstances, nor one type of regulatory tool that Congress always uses to address food safety issues.  However, in its public comment to proposed NLGMA, NSAC stated the problem as thus:

“The members of the National Sustainable Agriculture Coalition have issued a statement containing 16 core principles about food safety. The very first of those principles states: Food safety is noncompetitive and transparent. Everyone who lifts a fork has a right to safe and healthy food, just as they have a right to choose foods based on the qualities most important to them. “Food safety” should not be a competitive marketing food-trait, lest the most vulnerable people end up with access to only the least safe food, or simply fewer choices. Every person has a right to expect the safest possible food, and a right to absolute transparency about its production processes, no matter what they can afford to pay for it. Completely open, public information about what makes a food ‘safe’ is not negotiable.” 

While this argument is compelling, it does seem to suggest that the secret goal of the NLGMA is to create a more expensive, less microbial contaminated food, which will then be marketed to consumers as a superior product compared with those leafy green vegetables not produced under the program.

Given that marketing agreements are generally only targeted toward producers and handlers, not consumers, this is more than a little incongruous. The proponents of the NLGMA stated at the public hearing that the promotion and advertising to be conducted under the program would be targeted at those within the leafy green vegetable industry, and not consumers.

There is also nothing in the record that would suggest that the general public would be any more aware of the NLGMA than they are aware of other marketing orders and agreements regulating the sale of milk and other agricultural products. Moreover, even if consumers did believe there were tangible health benefits to eating NLGMA-certified leafy green produce, it would certainly not be any more of a competitive advantage than what is already enjoyed by organic and local food producers who often advertise that their product is healthier and safer than conventionally produced foods.

Yet even if it is not unethical, there is still the question of whether Congress ever intended AMS to utilize marketing agreements to address food safety as just another quality issue.

 In its public comment to the proposed NLGMA, NSAC stated the problem as thus:

“The House version of what became the 2008 Farm Bill (Food, Conservation, and Energy Act of 2008) authorized the implementation of specialty crop marketing agreements for food safety.  Industry sought this amendment precisely because they believed, correctly, that current law did not provide for comprehensive food safety controls via marketing agreements.

After heated debate, the Conference Committee rejected the House provision, precisely based on the argument that marketing agreements are not the right instrument to address food safety concerns and that the Agricultural Marketing Service is not a food safety agency.

Put simply, the leafy green and other specialty crop industry associations lost in their legislative campaign to change the law to provide authority for food safety marketing agreements such as the pending NLGMA.  In order to save face, the industry scrambled to get language added to the Conference Report indicating that some marketing orders already issued by USDA have included “quality related provisions intended to enhance the safety of commodities” and that therefore the proposed statutory change was unnecessary.

This “cover your losses” report language flies in the face of the industry’s arguments in pursuing the amendment to begin with, and is at any rate irrelevant to the current consideration of the NLGMA. &n
bsp;The NLGMA is not a broad marketing agreement that happens to touch on a few quality-related provisions that have some effect on food safety. It is through and through a food safety agreement, period.”

While this legislative history may be 100 percent accurate, it does not change the wording of the Act, or the broad delegation Congress originally gave to USDA and AMS to create marketing agreements.  In 1937, Congress created the Act to protect farmers from price fluctuations created by market disruptions that impacted interstate commerce.

To accomplish this goal, Congress delegated to the Secretary of Agriculture several important duties, including the powers to: (1) “establish and maintain such orderly marketing conditions for agricultural commodities in interstate commerce as will establish, as the price to farmers, parity prices”, and (2) protect producers and consumers from “unreasonable fluctuations in supplies and prices.”

Given the detrimental impact of food safety outbreaks on agricultural markets, it is a problem that clearly falls within scope of the Act, regardless of later Congressional hearings and discussions.  There is also no language in the Act that would exempt food safety issues from the wide range of other qualities issues covered under the Act. Therefore, the AMS is well within its delegated duties to utilize marketing agreements to address purely food safety related issues.  Not because they are a quality issue, but because they directly impact the price of leafy green vegetables in interstate commerce.

Did Congress Already Address This Issue in the FSMA?

There is no question that the Food Safety Modernization Act of 2010 (FSMA) was the most important food safety legislation passed by Congress in decades.  The real question is whether Congress fully addressed the food safety issue the NLGMA intended to regulate, thus making the proposed NLGMA conflict with the governing law.

In brief, the FSMA directs the FDA to: (1) develop preventative science based food safety standards for covered facilities, (2) conduct regular inspections of covered facilities to hold them accountable, and (3) require importers to perform supplier verification activities. It also provides FDA with mandatory recall authority and requires enhanced collaboration activities with other state and federal agencies involved in food safety.

Looking at the plain language of both the NLGMA and FSMA, there is some clear overlap when it comes to regulating leafy green vegetable producers and handlers. Under the FSMA, FDA is directed to develop preventative science based food safety standards for these groups and conduct regular inspections.  Under the NLGMA, the AMS will be developing preventative science based food safety standards and conducting annual audits.  In a best-case scenario, the two sets of rules would be identical and no conflict of law would be created.

Moreover, if the rules drafted under the NLGMA are more stringent than those drafted by FDA, then both systems could mutually exist and complement each other.  After all, the NLGMA is a voluntary system so if its handlers and growers want to hold themselves to higher standards than the FDA then who is to complain.

On the other hand, if any of the food safety standards promulgated under the NLGMA are lower than those produced by FDA, than the rules promulgated by FDA would clearly take precedence.   This is for two reasons: (1) the FSMA was passed by Congress more than 70 years after the Agricultural Marketing Adjustment Act of 1937, and (2) FSMA is a more clear delegation of Congressional power when it comes to developing science based food safety standards.

FDA also has mandatory recall authority if food produced under the NLGMA is not sufficient to meet FDA standards. Yet, such an outcome will only occur if the two agencies completely ignore each other’s rule making processes, and this seems unlikely since the FSMA clearly directs agencies to work more closely on issues regarding food safety.

In response, critics of the NLGMA point out that the FSMA also included the Tester Amendment which exempted qualified facilities–either a very small businesses or those making less than $500,000/yr.–from much of the new regulation.  In its public comments, NSAC framed the issue as thus:

“We have sought repeated unqualified assurances from USDA that all of the protections carefully built into the FSMA by Congress to protect the interests of small and mid-sized farms, diversified farming operations, direct market operations, and local food producers would be fully recognized and scrupulously respected under the NLGMA. No such unqualified assurances were forthcoming. In fact, to the contrary, we were told by the Administrator that the ultimate decisions on issues like this would rest with the Review Committee and that while it is assumed that FDA regulations and implementation process will be adopted by the NLGMA, there is a chance these particular issues would be among those that the NLGMA might amend through the process established in the proposed Agreement.”

The problem with this line of argument is that the NLGMA is a voluntary system, whereas the FSMA is a mandatory system.  As such, the two systems of regulation are not really in conflict as no qualified facilities exempted under the FSMA have to participate in the NLGMA, and those facilities who choose to participate under the NLGMA essentially consent to be bound to USDA-AMS rulemaking. 

This will be an important consideration to many small to medium sized operations who will need to balance the economic benefits of participating in the NLGMA, with the increased financial costs associated with annual audits and bringing their operations into compliance.

An Unfair Burden to Small- and Medium-Sized Operations?

As the NLGMA does not contain any specific production standards to date, it is difficult to know with any certainty what its financial costs will be for producers and handlers involved in the program.

In general terms, three financial costs are anticipated for those who wish to participate: (1) the initial costs of bringing one’s operation into compliance with the program, (2) the cost of annual audits, and (3) the annual costs of maintaining compliance as the program evolves and changes.  These additional costs could potentially be balanced out by increased market stability, and a greater ability for participants to sell product into both domestic and international markets.

Based on cost estimates from a University of California report, AMS estimates “the total one-time modification costs at the farm level” to be “between $1.2- and $3.0 million, and an estimated average range of $14-$34 per acre for modification costs.” On top of this initial cost would be annual compliance costs estimated at $2.7- to $4.4 million, or $30-50 per acre.

Of course, these estimates do not include the costs for California and Arizona producers currently involved in state marketing agreements. The producers from these two states are estimated to have spent $6.1- $14.7 million to bring their operations into compliance with their current rules, and spend between $13- to $21.7 million in annual compliance costs.

Annual handler assessments for the program would range between $5.7- to $28.6 million depending upon the whether the assessment was the program minimum of $0.01 per carton, or the program maximum of $0.05 per carton.

Based on these estimates, a hundred acre leafy green vegetable operation in Arkansas would spend between
$1,400 to $3,400 in one-time compliance costs and between $3-5000 annually to maintain compliance.  Such costs are hardly insignificant for small to medium sized operations, especially for those who might otherwise be exempt from similar regulations under the Tester Amendment of the FSMA.

The only silver lining is that the proposed NLGMA is a voluntary program for handlers to participate in. As such, producers should definitely discuss their financial operations with their handlers to determine whether the economic benefits of participating in the NLGMA would offset their estimated costs. 

Will Leafy Greens Producers Support the Agreement?

In drafting its proposed marketing agreement, the NLGMA has provided producers and handlers with one potential tool to help reduce foodborne contamination in their production systems.

Whether it becomes law will ultimately depend upon what changes the agency makes after the latest round of public comments, and whether the proposed marketing agreement will be supported by a 2/3 majority of all leafy green vegetable producers in the nation.  The effectiveness of such an agreement is also difficult to estimate, as the Board will need to be appointed and make its recommendation to the Secretary of Agriculture.

This will lead to yet more rulemaking, and additional opportunities for public comment.  As such, proponents and opponents of the NLGMA should not expect any final food safety production standards for at least another 18 to 24 months.

————————–

Judd Jensen is pursuing his LL.M.  in Agricultural and Food Law at the University of of Arkansas.  Prior to returning to law school, he worked in food safety and quality assurance for nearly a decade.