Overview
The novel coronavirus of 2019-2020 has impacted nearly every industry throughout the world, fundamentally changing the way that we do business. One of the earliest effects felt in the United States occurred in March 2020, when rapid and unexpected changes in consumer behavior led to the temporary lack of availability of certain foods and consumer products, including the packaging that holds these items. We would later learn that, in many instances, these perceived shortages were not, in fact, shortages at all. Instead, the lack of availability of product was simply the result of an unexpected and rapid increase in the frequency and quantity of purchases that stretched the national and global supply chain to – and in many cases – beyond its limit.
But it didn't have to be that way. These so-called shortages, and the consumer perceptions that led to a cycle of additional panic buying and further unavailability of product, were a direct result of economic-based decisions made by supply chain engineers, plant management, and executives over many decades, in an attempt to minimize costs – including fixed and variable operating expenses associated with storing raw materials, maintaining warehousing space, and accounting for unsold inventory.
The novel coronavirus has exposed fundamental questions about the way companies that manufacture food and food packaging maintain their own inventory control systems, and the methods that they use to procure raw materials to produce intermediate products (such as films, resins and additives) or finished packaging. In many instances, the effects of these practices have raised difficult questions about the balance between efficient manufacturing and a regulated company's responsibility to ensure that it meets the minimum requirements set forth by a regulator. In the specific case of food and food packaging, both of which are regulated in the United States by the Food and Drug Administration (FDA), the novel coronavirus – and the recent impact to the supply chain – has laid bare the inherent balance, and occasional struggle, between good supply chain engineering and good manufacturing practice.
The Drive Toward Standardization
The effects that we are experiencing as consumers in 2020 find their roots in decisions made by manufacturers in the late 1950s and early 1960s. During that time, countries around the world were rapidly adapting to post-war globalization and the implementation of trade agreements that would allow a greater number of companies to reach an even larger number of potential consumers around the globe. Along with this increased reach and availability of product came competition and pressure to reduce inefficiencies in the manufacturing process, including the costs of labor, inventory, WIP, and transportation of finished goods. To survive in a crowded field, companies needed to produce and deliver goods to consumers faster, cheaper, and more efficiently than their competition.
The need for standardization was most readily apparent in complex manufacturing processes, where finished products were engineered using a significant number of globally-sourced raw materials. These finished products were often high-value goods that were expensive to produce, store, and maintain until they were delivered to a distributor or consumer. Not surprisingly, therefore, many of the earliest concepts of standardization and efficiency, including principles such as Just-in-Time (JIT) manufacturing (that would later be replaced with broader concepts such as lean manufacturing and the implementing quality control procedures of Six-Sigma) first appeared in the automotive industry, and then evolved into the electronics industry. Over time, these principles would become universally incorporated into nearly all types of consumer product manufacturing process, including food and food packaging.
Economics vs. Regulatory Compliance - a Necessary Balancing Act
Lean manufacturing and the practices that support the evolution of the concept, have remained relatively constant throughout the decades. In the broadest sense, only the technology and mathematical modeling systems used to design and implement these practices have changed. Since the beginning, the overarching goal of lean manufacturing has been to minimize "waste." Waste can take a number of forms throughout the supply chain, including physical scrap, increased production times, higher material costs, and lower productivity and throughput. Waste is unavoidably inherent to every manufacturing process and remains prevalent even in light of recent events.
Nevertheless, the extent to which a company embraces lean manufacturing to reduce waste reflects a necessary trade-off between efficiency and elasticity in the supply chain. Improvements in efficiency and the standardization of a manufacturing process often result in the reduction of available options when something goes wrong. In fairness, while few companies could have anticipated a global disruption of the scope and magnitude caused by the novel coronavirus, the effects felt by businesses and consumers were readily magnified by supply chain decisions and systems that were put in place with the best of economic intentions in the years and decades prior.
While concepts such as lean manufacturing and Good Manufacturing Practice (GMP) are applied in different ways across the supply chain, from raw material procurement through finished good manufacturing, their principles are universal. At each decision point in a manufacturing process, a company must determine how many alternatives to make readily accessible and available – recognizing that every additional option necessarily results in a corresponding incremental increase in cost to the process or the product.
In the specific case of products regulated by FDA, a company faces additional responsibilities to ensure that their manufacturing methods comply with a "minimum standard of care," universally identified throughout the various subsets of regulated products through a GMP regulatory requirement. The processes and procedures necessary to achieve GMP vary depending on the type of product regulated by the agency. For example, pharmaceutical products are subject to rigorous standards across nearly all aspects of the supply chain and manufacturing process, including highly-specific controls on the materials used to produce the product, the manufacturing facility, and the transportation and handling of finished product. FDA-regulated products such as food and food packaging, tobacco products, and cosmetics are subject to varying degrees of product and process control, which are generally reflective of the relative degree of risk that those products present to the health and safety of the consumer when used as intended (or of equal importance, when misused in a reasonably foreseeable way).
For this reason, principles of supply chain engineering often align, but occasionally conflict with GMP requirements. It is ultimately the responsibility of the manufacturer, distributor, or any other company that touches the product to ensure that relevant regulatory requirements are appropriately balanced with the inherent need to maximize efficiency. Within the scope of food packaging, in particular, the novel coronavirus should provide an opportunity for converters and manufacturers of finished materials and articles to revisit and give thoughtful consideration to the structure of their own supply chains, the materials that they use in their manufacturing processes, and the number of alternatives that are readily available for substitution where necessary.
Food Packaging: The Substitution Conundrum
Within the scope of food packaging, one of the most critical decisions that a company faces is determining the composition and technical properties of the finished product and the raw materials necessary to manufacture it. From a cost standpoint, companies understandably strive for economic efficiency (i.e., to identify the least expensive option that will accomplish the intended technical effect).
From an FDA standpoint, however, it is critical to understand that the regulatory status of the raw material (i.e., the clearance or exemption upon which a company relies) determines, to a large extent, whether substitutions are permitted when they should become desirable or, in the case of disruptions in the supply chain caused by the novel coronavirus, necessary. From a regulatory perspective, not all food contact substances are treated equally from a substitution standpoint. Therefore, specific consideration should be given not only to the physical and chemical properties that a particular substance imparts to the finished product and the relative cost of the material, but also the basis upon which the substance has achieved its suitable FDA status as (or is appropriately exempted from the definition of) a "food additive" for the intended use.
Under Section 201(s) of the Federal Food, Drug, and Cosmetic (FD&C) Act, the term "food additive" is defined, in part, as "any substance the intended use of which results or may reasonably be expected to result, directly or indirectly, in its becoming a component of or otherwise affecting the characteristics of any food." Therefore, food packaging, or individual components thereof (including raw materials) may be considered a "food additive" by indirectly migrating from the packaging to food, unless an applicable exemption applies. Clearances or authorizations that may be relied upon by any company are "generic" in nature and substitutions are generally permitted (subject to applicable limitations discussed below). In contrast, substances that are the subject of "proprietary" regulatory clearance mechanisms may not be as easily substituted; and the substitution of substances that are the basis of "self-determined" exemptions or exceptions must necessarily be evaluated on a case-by-case basis. For each of the regulatory clearance mechanisms identified below, a company should ask and understand: "Can I Substitute?"
Food Additive Regulation (Generic)
Substances that are the subject of a food additive regulation appear in Title 21 of the Code of Federal Regulations (21 C.F.R.). The food additive regulations were developed by FDA in response to the 1958 amendments to the FD&C Act, and represent a culmination of the agency's evaluation of various Food Additive Petitions (FAP) submitted by industry, and the identification of relevant substances and uses by the agency itself. These FDA "clearances" appear in 21 C.F.R. Parts 170-186, and may be relied upon by anyone.
- Can I Substitute? Companies are permitted to substitute one listed substance for another in the manufacture of a finished food-contact material or article, provided that the substance is listed in an applicable food additive regulation for the intended use. This includes substitutions of a listed substance produced by two separate manufacturers, as well as the replacement of one listed substance with another listed substance that accomplishes the same or a similar technical effect in food packaging. While food additive regulations are not specific to any one manufacturer or supplier, it remains the responsibility of the user of the substance to ensure that applicable compositional and end-test requirements are met, where applicable, and that the material is of a suitable purity for use in food-contact applications. Importantly, however, substances listed for one specific application generally may not be used in an application not covered by the food additive regulation, unless an applicable cross-referencing provision applies.
Threshold of Regulation Exemption (Generic)
In 1995, FDA promulgated its "Threshold of Regulation" rule (see 21 C.F.R. §170.39), which provided the agency with the flexibility to exempt certain substances from the need for a specific regulatory clearance under limited circumstances, upon request. FDA's Threshold of Regulation exemption policy reflected the agency's evolving understanding of chemistry and toxicology, whereby FDA recognized that exposures to de minimis levels of certain substances in the diet resulting from their use in food packaging applications would not present a health or safety concern. Threshold of Regulation exemptions are granted by FDA on a case-by-case basis, and generally require that: (1) the substance is not a carcinogen (and does not exhibit any unique toxicological concern at low levels in the diet); and (2) the substance is present in the diet at a sufficiently low level when used as intended.
- Can I Substitute? Although Threshold of Regulation exemption requests are made by specific companies, once authorized by FDA, they may be relied upon by anyone. Similar to food additive regulations, however, Threshold of Regulation exemption clearances are limited to the specific intended use described therein, and it remains the responsibility of the user of the substance to ensure that the material is of a suitable purity for use in food-contact applications.
Food Contact Notification (Proprietary)
In response to industry concerns regarding the formal (and time-consuming) notice and comment rulemaking process that food additive regulations required and the limited scope of Threshold of Regulation exemptions, FDA developed its Food Contact Notification (FCN) program as a more streamlined and efficient manner of evaluating the suitable status of a specific intended use of a food contact substance. Under the FCN program, a notifier submits data to FDA describing the identity, intended use, and safety profile of the food-contact substance (and its impurities and byproducts, as the case may be), as well as certain information demonstrating consistency and control over the manufacturing process. If FDA does not object to the notification within 120 days of submission, the FCN automatically becomes effective. Effective FCNs are listed on FDA's Inventory of Effective Food Contact Substance Notifications (FCN Inventory).
The FCN program differs from the Food Additive Regulation and Threshold of Exemption processes described above in a number of respects. Most notably, an FCN clearance is proprietary to the notifier and/or manufacturer, and may be relied upon only by the company that submitted the FCN and its customers. While notifiers enjoy a limited degree of exclusivity with regard to an FCN clearance for this reason, manufacturers of finished food contact materials and articles must exercise caution to ensure that the use of a substance otherwise authorized by an FCN is actually manufactured or distributed by the listed supplier. Companies (including manufacturers, distributors, or end-users) that wish to obtain clearance for an identical substance that already appears on FDA's FCN Inventory may file their own FCN by submitting their own manufacturing specifications (commonly referred to as a "me-too" FCN), or may cooperate with a listed notifier to obtain clearance to purchase the material from the listed notifier, and then supply the listed material to itself. In either case, the notifier is permitted to incorporate previously-evaluated toxicology information (on file with FDA) by reference, potentially reducing some of the administrative requirements for second-comers.
- Can I Substitute? Because of the proprietary nature of FCNs, companies generally may not substitute raw materials unless the substituted product is also the subject of an FCN (or another applicable clearance or exemption). In addition, certain food contact substances may be listed in multiple FCNs but for different applications, use levels, food types, and temperature conditions of use. Therefore, specific care and caution should be exercised when relying upon and substituting a food contact substance that is the subject of an FCN.
No Migration (Self-Determination)
It is well-established that, if a substance is not reasonably expected to become a component of food under the intended conditions of use, it does not meet the definition of the term "food additive" under the FD&C Act, and is not required to be the subject of a food additive regulation. FDA has never specifically defined the relevant criteria or threshold for this so-called "No Migration" position; therefore, industry relies on various sources of guidance and direction from the historical record to make a self-determination.
Therefore, each substance must be evaluated on a case-by-case basis using well-established and internationally-recognized scientific risk assessment principles. A "No Migration" position must necessarily consider the safety profile of the food contact substance itself and any impurities and byproducts that may remain available to migrate to food under the intended conditions of use. Certain applications (i.e., infant applications and high-volume general population uses, such as water and soda bottles), often warrant a higher degree of scrutiny and a lower threshold for concluding that the substance does not migrate to food under the intended conditions of use.
- Can I Substitute? A company that relies on a self-determined "No Migration" position for a substance used in the manufacture of a food contact material or article may substitute a different substance at their discretion, but the replacement substance must necessarily be subject to the same degree of risk and safety assessment as the original substance. Companies should give careful consideration to the potential differences between substances and their replacements (e.g., the molecular weight profile of the substance, where the replacement may have a higher or lower propensity to migrate than the original substance), in addition to any impact on the technical suitability and properties of the finished food contact material or article when the replacement is used as intended. The company should maintain the basis for its "No Migration" conclusion in its file (whether by way of self-determination or evaluation and assessment by outside counsel), in the event that support for this conclusion is requested by FDA or the company's customers.
Generally Recognized as Safe (Generic or Self-Determination)
Substances that are Generally Recognized as Safe (GRAS) under their intended conditions of use are exempt from the definition of "food additive" under the FD&C Act. Section 201(s) of the FD&C Act defines a GRAS substance as one that is "generally recognized, among experts qualified by scientific training and experience to evaluate its safety, as having been adequately shown through scientific procedures (or, in the case of a substance used in food prior to January 1, 1958, through either scientific procedures or experience based on common use in food) to be safe under the conditions of its intended use."
Substances that are listed or affirmed as GRAS for direct addition to food appear in 21 C.F.R. Parts 182 and 184 of the food additive regulations. Generally speaking, and by way of cross-reference, substances that are listed or affirmed for direct addition to food also are considered GRAS when used in food packaging applications.
Separately, companies are permitted to independently determine that their intended use of a substance in the manufacture of food contact materials and articles is GRAS. A GRAS position is a self-determination of fact that is not required to be confirmed by FDA. General recognition of safety requires a "common knowledge" that there is a reasonable certainty that a substance is not harmful under the conditions of its intended use. For substances not widely used in food prior to 1958, general recognition based on "scientific procedures" requires the same quantity and quality of scientific evidence as is required to obtain a food additive regulation for the substance.
- Can I Substitute? Companies may rely on GRAS listings and affirmations in 21 C.F.R. Parts 182 and 184, respectively, and generally speaking, may substitute listed and affirmed substances without limitation. Consistent with GMP, companies should use only the minimum amount of a GRAS listed or affirmed substance necessary to accomplish the intended technical effect in the finished product. Companies that rely on a self-determined GRAS position may similarly substitute other substances that also rely on a self-determined GRAS position, but each GRAS position must necessarily be considered and evaluated on a case-by-case basis.
Reasons to Try
To maintain consistency and elasticity in the supply chain, companies should carefully consider the number of raw materials that they have readily-available to manufacture food packaging. Ideally, companies should identify at least one or two alternative materials that accomplish the same or similar technical effect in the finished product as the original, and should preemptively establish a suitable FDA regulatory basis for concluding that the alternative(s) may be used as intended.
Companies should keep in mind that, even where the basis for a suitable FDA regulatory status is proprietary to the notifier or manufacturer (i.e., in the case of an FCN), companies have the option to submit their own FCN for an internally-produced or "self-supplied" product, and the incremental cost associated with the availability of the alternative may well-offset the cost of future supply chain disruptions.
As companies begin to identify suitable alternatives and begin to incorporate these alternatives into their supply chains, they should remember that FDA's GMP and suitable purity requirements continue to apply. That is, companies should use only the minimum amount of any substance that is necessary to accomplish the intended technical effect, and the substance must be of a suitable purity (i.e., with regard to the presence of impurities, byproducts, and other starting substances) when used as intended in a finished food contact material or article.
The economic consequences of years of cost minimization-based decision making in manufacturing became readily apparent when the unexpected shock of the novel coronavirus impacted the supply chain across entire industries. To avoid a similar situation in the future, companies should avoid cost minimization as the sole basis for decision making and instead consider adopting a different economic concept – the efficient frontier – as an alternative with regard to raw material alternatives. That is, companies should seek to identify a reasonable balance between maintaining a suitable number of raw materials that will ensure a sufficiently high degree of elasticity in the supply chain, and the incremental costs of establishing a suitable FDA status for each. Companies that are willing to identify and try alternatives while things go right will benefit greatly the next time that things go wrong, and the exercise of identifying alternatives will continue to drive food packaging product innovation for years to come.
