Congress told the U.S. Food and Drug Administration (FDA) to require importers, beginning no later than July 2012, to verify the safety of each shipment entering the U.S. Those who relied upon independent private inspections (“3rd party certification”) were to be rewarded with expedited entry through customs. Independent inspections were to be mandatory for those importing foods the FDA listed as “high risk.” Congress intended this program to be a model for all federal agencies that regulate increasingly complex global supply chains. In our new fiscal environment, every one of them will have to do so with fewer resources. FDA has finally gotten around to proposing rules. Public comments are due by November, but FDA has told a federal judge that the rule is unlikely to be finalized until the summer of 2015. So far, the proposal is little more than a hollow shell of bureaucratic procedures for granting and rescinding accreditation of the inspectors. FDA postpones deciding what the required qualifications are and obscures what these inspectors are supposed to do. The proposed rule fails to strengthen existing substantive international standards for food products and is silent on when and how FDA might try to do so. Expedited entry may not be much of an incentive. Customs & Border Protection routinely provides immediate delivery for produce and other perishables. Treaties promise speedy customs for food products from several South American countries. Our European trade partners are demanding equal treatment. Perhaps most important, Customs has its own incentive program (“C-TPAT”) that prefers importers who submit to anti-terrorism inspections at their overseas facilities. This preference will undoubtedly come first since Congress made Customs (not FDA) the lead agency for food security. The rulemaking notice does not indicate that FDA has even started to talk to Customs about what opportunities for expedited entry might be left. Instead of looking for additional incentives, FDA seems to be lowering the bar for the inspectors. Its “preliminary impact analysis” assumes that every one of the world’s 71 accrediting bodies will apply for, and receive, FDA recognition and that they will continue to accredit the existing 568 inspection firms, each of which will serve 25 percent more clients. This hardly seems desirable. John Yasuda’s recent doctoral dissertation for the University of California paints a bleak picture of the integrity of national accreditation in China. We need look no further than the Peanut Corporation of America to see that standards (and continuing surveillance) of accredited auditors needs to be greatly increased. FDA rejects even the foundational requirements of the International Organization for Standardization (ISO) as adding “requirements that are not relevant to our program and might unnecessarily create disincentives to participation.” Inspectors audit food-processing facilities according to “schemes.” ISO provides the basic rules for food product and system certifications, which are fleshed out in schemes like SQFI’s 200-page code or BRC’s Standard No. 6. But these are all annual “food management system” audits that focus on checking sanitation procedures and looking for ways to improve. The existing options are not “product certifications,” which include frequent testing of samples from the plant and the marketplace. As ISO explains, system certifications do “not attest to the safety or fitness of the products of an organization in the supply chain.” As to regulatory requirements, system audits examine “methods of compliance” and assess “commitment,” but it is beyond their scope to find whether the firm and its shipments actually comply with regulatory demands. The industry would prefer that a single audit satisfy as many governments and customers as possible. So, one anticipated product of this rule-making was an “FDA addendum.” This would have tightened accreditation, banned conflicts of interest, and instructed inspectors to add specific testing procedures and to apply food-specific standards.  Compliance would have been a condition for certifying food for entry into the U.S. Additional protocols and substantive standards are logically essential since many of the requirements of the Food, Drug, and Cosmetic Act are specific to the U.S. For these reasons, there appears to be a substantial appetite for a comprehensive revision of testing protocols to meet the special needs of FDA.  Yet, the proposed rule does not solicit comment on any substantive or procedural standards, or even suggest how and when the FDA might provide mandatory guidance in the future. The vacuum created by FDA’s failure to meet Congressional deadlines and lack of specificity is being filled by other nations and institutions. Food safety schemes are being overhauled now, and these schemes are occupying the marketplace.  SQFI, an American scheme owner, was forced to incorporate HACCP (hazard analysis) specifications from the Codex Alimentarius Commission, because that FDA rule is also overdue. The Global Food Safety Initiative, based in France but including participation by American firms, is “benchmarking” schemes – which basically places it in the position of adding requirements to the ISO foundation that all scheme owners will incorporate (and all accredited inspectors will use).  This is the role that the FDA could have, and should have, played. Our major trading partners, such as the European Union, are already demanding exclusions from FSMA requirements. Their resistance to unilateral FDA actions will only grow more intense as they continue to influence GFSI and other standards-writing organizations. As a practical matter, it seems inevitable that piecemeal changes dictated by the FDA down the road are less likely to be universally accepted and applied. Ironically, FDA has rejected one of the strongest tools available – demanding financial accountability. When inspection firms pay for their mistakes, they are less likely to have conflicts of interest, present themselves as easy graders, or just cut corners in their inspections. For many years, ISO has instructed accreditors to require every inspection firm to demonstrate financial fitness “on an ongoing basis, [so that] commercial, financial or other pressures do not compromise its impartiality.” In particular, the inspection firm must maintain “adequate reserves or insurance … to cover liabilities.” In a footnote, FDA affirmatively dismisses this effective and established protection against low-quality audits as a “disincentive to participation.” Inspection firms should guarantee their product. FDA should add a requirement that the inspection firm indemnify other defendants in a tort claim up to a specified sum, perhaps $1 million. This would not change primary liability, which would continue to be determined by state law and/or arbitration award. But once damages were awarded, the inspection firm would automatically be the first to pay for damages based on risks that it should have detected. This protects the impartiality of the firm because it provides an incentive to ensure that every facility it audits is, in fact, safe. It would not be a cap, since, in most jurisdictions, the inspector (and others in the supply chain) would continue to be liable for negligence. To require a guarantee is sound economics and consistent with Congress’ instruction to require fee structures to protect consumers from conflicts of interest. Compared to the consumer, the retailer, the distributor and the importer, it is the inspection firm that is best suited to identify safety risks. The inspection firm can, and will, insure (or self-insure) to meet this responsibility. This makes the insurance company another accreditor. The insurance company will assess the inspection firm based on the perceived risk associated with the food, the country in which the inspection occurs, and the error experience and expectations for the particular firm. Requiring guaranteed inspections is not a “disincentive to participation;” it helps provide the incentive the program needs to work. Companies in the supply chain will now demand the voluntary certifications. The costs of this insurance can work their way back through the supply chain without arbitrary incidence of a distributor or retailer who relied upon the inspector’s failure. (FDA should also make more explicit that the inspection firm must also, as a condition of accreditation, waive sovereign immunity and any other jurisdictional defenses.) FDA’s delays forfeit American leadership at the time when the international community is making fundamental changes in the control of food pathogens in international trade. The more details are deferred or left unstated, the less likely FDA will be to regain its role as the international lead regulator.