Focused Mitigation Strategies to Protect Food Against Intentional Adulteration

1. Regulatory ImpactAnalysis Summary Focused Mitigation Strategies to Protect Food Against Intentional Adulteration

2. Overview • Annualized Costs • $180 million for domestic firms • $370 million in total annualized costs • Benefits • Lower chance of successful terrorist attacks • $130 billion per catastrophic attack prevented • Breakeven Analysis: Benefits are larger than costs if the rule prevents a catastrophic attack every 350 years

3. Domestic Cost Overview • Exempt Firms • Learn and document: $3 million • Average: $63 per firm • Covered Firms • Learn, train, document: $11 million • Mitigation strategies: $63 million • Monitoring and corrective action: $100 million • Average: $38,000 per firm • Total: $180 million annual domestic costs

4. Primary Data Sources • Dun & Bradstreet Global Business Database (2011) • BLS, Occupational Employment Statistics (2012) • FDA, Operational and Administrative System for Import Support (2011) • Institute of Food Technologists, Modeling the Costs of Food Defense Practices (2011)

5. Small Business Provisions • Very Small Business Exemption • 47,000 firms with < $10 million in annual food sales not covered • Reduces annualized domestic costs by $650 million • Only reduces coverage of the rule by 3% • Small Businesses (<500 employees) have an additional year to comply

6. Mitigation Cost Data • Survey of industry practices conducted by Institute of Food Technologists and Research Triangle International • 70% average adoption rate of the mitigation strategies studied • No specific focused mitigation strategies are required, facilities covered by the proposed rule have flexibility

7. Small Business Cost Estimate • Total Annualized Cost: $13,000 • One facility: $11,400 for mitigation, monitoring, and corrective action • 100 employees: $340 for training • $1,400 learning and documentation • Given $10 million exemption, costs will be less than 0.13% of total sales

8. Benefits • Lowers probability of catastrophic terrorist attacks on food that could cause: • 5,000 fatalities • 100,000 illnesses • Major economic disruption • Lowers probability of less sophisticated terrorist attacks that could cause: • 10 fatalities • 1,000 illnesses

9. Break-even Analysis • Value of a statistical life: $8.1 million • Monetized benefit of preventing a catastrophic attack is $130 billion • Benefits are larger than costs if the annual reduction in the chance of a catastrophic terrorist attack is • 1 in 350 (average estimate) • 1 in 270 to 1 in 730(range based on sensitivity analysis of possible costs)

10. Key Results • 97% of the food market will be protected while minimizing costs to small businesses • A small reduction in attack risk makes benefits exceed costs in every sensitivity analysis scenario

11. Some Areas for Comments • Data on current industry practices • Costs • Adoption rates • Best practices • Benefits methodology and available data • Costs to comply with the rule