States, Feds on Regulatory Collision Course

With the U.S. presidential election over, let the hand-wringing begin. Between now and January — less, considering the upcoming holiday breaks — what will a lame-duck Congress accomplish on the numerous and important issues facing it: sequestration/budget cuts, entitlements, the debt ceiling, tax rates, Hurricane Sandy relief, appropriation bills, infrastructure funding, permanent normal trade relations for Russia, and cybersecurity. 
 
There’s little reason to think the lame-duck Congress will get through more than one or two of these significant issues, and is more likely to focus on Band-Aid solutions rather than considered resolution. On top of the ceaseless bickering between the parties, add the election outcome: 242-193 for Republicans in the House and 53-45 for Democrats in the Senate (with two independents). 
 
The number of seats per party in each house hasn’t changed much from 2010, although the holders of some of those seats will be different. As such, some old faces will depart, and some new ones will arrive. Staffers on the losing end will be looking for new jobs, and it’s those people who do most of the serious work. The combination of these factors, plus the limited time until the next session of Congress starts on Jan. 3, doesn’t bode well for serious discussion or reasoned solutions.
 
At the state level, though, there’s no shortage of activity. Just as many social issues are being brought to the state level for solution, so, too, it seems, are attempts to enact laws impacting commercial issues of national consequence. In 2011, for example, the California Legislature enacted the California Transparency in Supply Chains Act of 2010, which put the burden on large corporations to police their supply chains so as to combat human trafficking.
 
This year’s election brought us Proposition 37, or the “California Right to Know Genetically Engineered Food Act.” Proponents argued that some 50 countries, including Japan and the European Union, require sellers of genetically engineered foods to label their foods appropriately, so why not require that of California sellers? Opponents argued the law was poorly written and exempted only selected foods and, frankly, made no sense in how it would be applied. The measure was defeated by some 550,000 votes (with about 9 million cast).
 
So why talk about a losing proposition? Because proponents already are discussing introducing similar measures in two years in Washington, Oregon, Vermont and Connecticut, and perhaps again in California. There is also talk about the opposition seeking to insert language in the Farm Bill to limit the authority of federal agencies to regulate genetically engineered crops, while proponents seek to pressure the Food and Drug Administration to take regulatory action. So, if proponents can’t get what they want at the federal level, why not try the states?
 
For now, the FDA has no labeling requirements for genetically engineered food, although if a product contains specific allergens, the agency exercises its jurisdiction. The U.S. Department of Agriculture imposes limitations if the genetically engineered crop causes harm to other plants, and there are concerns about resistance to pesticides and quality issues with genetically engineered crops. For 20 years, however, the FDA has said there is no difference between genetically engineered and natural plants when it comes to quality.
 
So, why is there so much hullabaloo surrounding this proposal? Regretfully, these types of proposals are typically written to favor specific parties within an industry. In the case of Proposition 37, it’s clear the organic community got together and flexed its muscles, but in so doing, the shortcomings of the proposal became evident. The proposal started by saying if a crop was genetically engineered, it should be so labeled and could not say it is “natural,” “naturally grown,” “naturally made” or “all natural.”
 
That seems logical, but the biases were glaring in the exemptions. Specifically, an animal fed or injected with genetically engineered feed would be exempt. Similarly, a crop or raw agricultural commodity or food was exempt if it was not “knowingly or intentionally” genetically engineered, or had not been “knowingly or intentionally” commingled with food that may have been genetically engineered.
 
Alcoholic beverages were also exempt, as were processed foods (at least until July 1, 2019), provided no genetically engineered ingredient accounted for more than 0.5 percent of the total weight or the processed food did not contain more than 10 such ingredients. Organic foods would be exempt, as would medical food and any food not packaged for retail sale and intended for immediate human consumption or which is served, sold or otherwise provided for in a restaurant or other food facility. 
 
Retailers bore the burden of compliance but could rely on declarations from others in the supply chain that would have recordkeeping responsibility, but does anyone doubt such a setup is rife for mischief? Further, state or local authorities and consumers could sue for violations, so more class-action cases could result and attorneys’ fees and injunctive relief are possible.
 
What the proposal did was exempt such food as beef, chicken, cheese, beef, wine, liquor and food sold at restaurants, but not pet food. As much as two-thirds of the food sold and consumed in California would fall under one of the exemptions, according to estimates. This outcomes leads to the obvious question: What are you regulating and why?
 
There may be merit to proposing that genetically engineered food be labeled, especially assuming a more even-handed proposal, but is this an issue a state should regulate? Isn’t this more properly addressed at the national level? If you have a series of patchwork laws that are somewhat different in each state (or even identical), doesn’t that run afoul of the Commerce Clause of the U.S. Constitution, which leaves to the federal government the regulation of interstate commerce?
 
Yes, states have a public health interest, but much of the food sold in California is imported, so if that or any other state has its own rules, would sellers avoid that market? What happens if the seller doesn’t meet the state-mandated marking requirement — a farmer sells his food product intended for sale in, say, Idaho, but the owner of the Idaho market makes a deal with his buddy in California to sell him that food, for example? Who is responsible for relabeling it? Who has to satisfy the recordkeeping requirements? Who bears the cost?
 
It may well be that some of the issues facing our country are better left to the states, but food labeling isn’t one of them, so the next time you head to the polls, beware what’s on your ballot!
 
Susan Kohn Ross is an international trade attorney with Mitchell Silberberg & Knupp in Los Angeles. Contact her at skr@msk.com

 

 

 

 

 

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