Questionable assumptions in the SFCR

I thought that I had pretty much finished commenting on the Safe Foods for Canadian Regulations (SFCR) as they were presented in Canada Gazette Part 1 (CG1), until I re-read the cost-benefit section. Many of the cost-benefit “estimates,” or should I call them “assumptions,” the CG1 authors make are, in my opinion, questionable.

Some readers may think, “What difference does it make since they make the rules and we all have to comply?” However, the harsh reality is that it makes a huge difference. Economies of scale figure prominently in food safety. Although larger firms spend more on food safety compliance, their average compliance cost per unit of product is much lower than it is for smaller firms, where the cost of complying can make a huge difference if the prices of your goods become uncompetitive or profits shrink to nothing. We all know what happens then and it’s never good.

Some of the estimates, or assumptions, made in CG1 will also impact the Canadian Food Inspection Agency’s (CFIA) ability to carry out its mandate. Let me first give some examples which will affect industry, and then finish with some examples which will affect regulators.

Cost-benefit to industry

A recent article in the Journal of Food Science entitled “Costs of Food Safety Investments in Meat and Poultry Slaughter Industries” (Vol. 82, No. 2, 2017, pages 260 to 269) gives an excellent review of the cost of food safety in this industry. Given that the USFDA and the CFIA have agreed that the food safety programs in each country are “equivalent,” I believe that the cost estimates in this peer-reviewed article would apply to this industry in Canada. Canadian costs could be much higher for some items due to currency valuation.

The article reports that “the cost of developing food safety plans, such as HACCP, SSOP and sampling plans, can range from approximately $6,000 to $87,000, depending on the type of plan and establishment size.” Bear in mind that this estimate is for each program and not for an entire food safety program encompassing all elements. These numbers are in stark contrast to the $260 annualized cost “to develop and document a PCP” incorporating all program elements as was reported in CG1. The cost for developing each element of a food safety program in other industries will be less than those for meat and poultry, but will be over 10 times higher than the $260 annualized cost published in CG1.

Innovation

Innovation is the key to the long-term success of food processors. Most innovations in our industry directly or indirectly affect a food safety program, and when they do, a new or at least updated PCP must be created. CG1 estimates that approximately 3,576 PCPs will be developed in 2018 in an industry with an estimated 21,025 establishments as a direct result of the SFCR. I believe that this number grossly underestimates the number of PCPs that will be created and updated in 2018 through innovation and the SFCR.

Given that small- to medium-sized establishments (SMEs) are more innovative, these sectors of our industry will be most impacted by the SFCRs and will have the biggest business challenges. The CFIA will need to find a way to provide incremental support to SMEs in order for these sectors to prosper under the new regulations.

Impact on the CFIA

The CG1 states, “However, the CFIA would not require any additional food safety program or inspection funding or resources from current levels, as the proposed Regulations would allow the CFIA to operate more efficiently and redistribute its food safety resources more strategically.” In my opinion, I can’t see this happening for a variety of reasons. One such reason is that all importers will have to be registered and, consequently, come under CFIA surveillance. Many importers have little, if any, food safety expertise and food safety programs, and are reluctant to embrace the proposed regulations until they take effect. The prediction that the CFIA review times for importers will be reduced under the SFCR is highly unlikely. Enforcing importer compliance will take significant incremental CFIA resources to level the playing field between importers and domestic producers.

 Dr. R.J. (Ron) Wasik PhD, MBA, CFS, is president of RJW Consulting Canada Ltd. Contact him at rwasik@rjwconsultingcanada.com