Definition of “Very Small Business” – Preventive Controls Rule


IMPORTANT: This text has been updated to reflect changes in the proposed FSMA rules as of October 2014.


Background

To avoid a “one-size-fits-all” approach to regulation, Congress included specific options and considerations for small and very small businesses in the Food Safety Modernization Act (FSMA).

Congress required the Food and Drug Administration (FDA) to define “small business” and “very small business” for the purposes of the Produce Rule and the Preventive Controls Rule.  Part of a facility’s eligibility for certain modified requirements and longer compliance periods under the Preventive Controls Rule depends on the definitions of “small business” and “very small business.”

Specific to the Preventive Controls Rule, under FSMA, facilities that are very small businesses are eligible for modified requirements to the Hazard Analysis and Risk-based Preventive Controls (HARPC) requirements. Additionally, small and very small on-farm businesses that conduct low-risk processing activities are exempt from the HARPC requirements.  Finally, small and very small businesses have a longer time frame for complying with the regulations once they go into effect.

Definition of “Very Small Business” in the Preventive Controls Rule

In the proposed Preventive Controls Rule, FDA defines “small business” as a business with fewer than 500 employees.  For the definition of “very small business,” FDA originally presented three options based on total food sales.

In the re-proposed Preventive Controls Rule, FDA has selected the option with the highest threshold: a “very small business” has less than $1,000,000 in total annual sales of human food.  This threshold is calculated based on total sales of human food, not all food.

This is not the same as calculating sales based on covered – or regulated – product.  “Human food” still includes other non-processed food products that will count toward the threshold (e.g. dairy, livestock, produce, hay, grain commodities, etc.). Animal food is the only type of food that is no longer included in the calculation.

FDA estimates that food processing sector businesses (including some farms) that fall within this very small business definition produce less than one percent of all food produced in the U.S., by dollar value. It is important to note that the structure of the food processing sector is different from the structure of the farm sector, and that 54 percent of farms in the U.S. have gross sales of under $1,000,000.

Under the Preventive Controls Rule, very small businesses are eligible for modified requirements to the HARPC requirements.  Very small businesses are eligible for an exemption from the HARPC requirements if the only processing activities they conduct are low-risk processing activities Finally, very small businesses have additional time to come into compliance with the regulations when they go into effect.

Being eligible for modified requirements or exemptions means that very small businesses would have decreased compliance costs.  Given that the costs of complying with the Preventive Controls Rule are high and may result in facilities going out of business, the option to comply with less costly, modified requirements for very small and small facilities is important.

Interaction with Definitions in the Proposed Produce Rule

In the proposed Produce Rule, FDA provides different definitions for “very small” and “small.”  The proposed Produce Rule defines a “very small” farm as a farm that generates $250,000 or less in produce sales on a rolling basis for the previous three years.  A “small” farm is one that generates $250,001-$500,000 in produce sales on a rolling basis for the previous three years.  These definitions do not align with the definitions in the Preventive Controls Rule.

For farms that may be subject to both the Produce Rule and the Preventive Controls Rule, it is not clear which definitions will apply. FDA says that it will try to coordinate the definitions in the final versions of the regulations, but at this point it is not clear which definitions will apply to farms subject to both rules.

FDA Needs to Hear from YOU About the Definition of “Very Small Business”:

FDA is actively seeking comment on its revised definition of “very small business.” Organizations and individuals who want to limit regulatory alternatives for small facilities and apply a “one-size-fits-all” approach to food safety regulations will urge FDA away from this revised threshold. FDA needs to hear from farmers and on-farm processors about what a realistic threshold is.

Here are some questions to guide your comments on this part of the proposed Preventive Controls Rule if you operate a facility, including an on-farm facility:

  • Would you be considered a very small business under FDA’s current definition?
  • If FDA calculated the definition of “very small business” not based on all human food but based on processed (or covered) human food, how would that change your status, if at all?
  • If you support the definition of a “very small business” at $1,000,000, be sure to specifically state that.
  • If you are a farm mixed-type facility and both rules apply to you, is it clear which definition you would fall under?

How do I submit a comment to FDA?

Our step-by-step instructions show you how.

Additional Resources

 

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