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The New World of Food Safety in the United States: Are you ready? 1

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Page 1: AmCham Seminar

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The New World of Food Safety in the United States:

Are you ready?

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Outline

• A New Era of Food Safety

• Consequences

• Food Safety Legislation

• Impact on Chinese Exporters

•Leavitt Partners Solutions

Page 3: AmCham Seminar

The Changing Food-Safety Landscape in the U.S.

• Global food supply

• Changing science

• Consumer expectations

• Media influence

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The Global U.S. Food Supply

GrowerManufacturer/

ProcessorWarehouse Importer

Food Service

Retail

GrowerManufacturer/

ProcessorWarehouse Distributor

FOREIGN

DOMESTIC

254,000 Facilities

2 million Farms167,000 Facilities

114,000 Facilities

935,000 Facilities

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The Global United States Food Supply

• In 2009, China supplied: 16 percent of fish and shellfish; 12 percent of spices; 9 percent of fruit; 8 percent of nuts; 5 percent of vegetables; 4 percent of sweeteners

and candy; and 2 percent of grains imported to the United states.

CANADA

EU-2

7*

MEX

ICO

CHINA, P

EOPLE

S REP

UBLIC

BRAZIL -

4,000

8,000

12,000

16,000

U.S

. Do

llars

in M

illio

ns

U.S. Food Imports – Top Five Countries (2009)

Source: USDA Economic Research Service http://www.ers.usda.gov/Data/foodimports/

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Changing Science of Food Safety

•New risks identified with foods (peanut butter, cookie dough).

•Greater capacity to link food with illness.

•Ability to measure lower levels of chemicals.

•Greater fidelity of epidemiology.

•Improvements in genetic testing.

10 Foods Linked to New Outbreaks of Foodborne Illness in the United StatesSince 2006

Bagged spinach Carrot juice Peanut butter Canned chili sauce

Broccoli powder on snack food Pot pies Dog Food

Hot peppers White pepper Raw cookie dough

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Consumer Expectations Have Shifted in the United States

• Americans expect all types of food will be available all the time.

• Zero tolerance for unsafe food.

• Consumers place responsibility for safe food on the producer.

• Increased desire for local and unprocessed food.

• European-style “Chemophobia.”

• Consumers have the ability to damage a brand.

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Influence of the Media on Food Safety in the U.S.

• The U.S. media, especially television, has changed: • Faster; • 24-hour news cycle;• Focused on health and food;• Looks to blame;• Variation in bias and selective reporting.

• Social media gives individual citizens a mechanism to broadly report food-related illness and destroy a brand.

• Yet, American media still retains a vast capacity to educate.

Page 9: AmCham Seminar

Food Safety Is Constantly in U.S. Headlines

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Outline

•A New Era of Food Safety

• Consequences

• Food Safety Legislation

• Impact on Chinese Exporters

• Leavitt Partners Solutions

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The Changing Food-Safety Landscape has Significant Consequences for Industry

• Damage to Brands

• Additional regulatory oversight:• Recalls;

• Warning letters;

• Import Alerts.

• Food Safety Modernization Act

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One Incident Can Mean Overnight Harm to a Brand

• Survey of consumers following 2010 egg recall in the United States found:

> 14 percent of those surveyed have stopped eating eggs entirely;

> 19 percent of those surveyed have stopped preparing eggs for their children; and

> 44 percent of those surveyed have little or no confidence in egg producers to do the right thing.

Source: http://www.hsph.harvard.edu/news/press-releases/2010-releases/egg-recall-poll.html

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Percent change in expenditures on bagged spinach following 2006 outbreak announcement

% c

han

ge

in e

xpen

dit

ure

-70

-60

-50

-40

-30

-20

-10

0

Overnight harm to a brand and industry: The Case of Spinach

Source: http://www.ers.usda.gov/amberwaves/march10/features/OutbreakSpinach.htm

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Aggressive and Swift Enforcement Actions by U.S. Government

•U.S. regulatory agencies are cracking down on unsafe food and fraudulent claims (Federal Trade Commission, Occupational Safety and Health Administration, United States Department of Agriculture).

•August 2009: U.S. FDA announced significant changes to enforcement posture.

•These changes will result in faster, more frequent enforcement actions.

“Companies must have a realistic expectation that if they are crossing the line, they will be caught, and

that if they fail to act, we will”

- U.S. FDA Commissioner Margaret Hamburg (8/6/09)

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More Recalls of Food in the United States

2007 2008 2009 20100

200

400

600

800

1000

1200

1400

1600

1800

Recalls of Food Regulated by U.S. FDA

Class IClass IIClass III

Source: US FDA

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Increased number of Warning Letters

2007 2008 2009 2010100

120

140

160

180

200

220

Warning Letters Issued by U.S. FDA

Source: US FDA

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U.S. FDA Import Alerts

•Import alerts allow U.S. FDA to detain incoming products without physical examination, and can apply to

> Firms;

> Products;

> Countries.

•Import Alerts on Chinese products: > Milk Products, milk-derived ingredients, finished food products that

contain milk from China, because of melamine;

> Animal feed from China, because of the presence of Salmonella.

> All vegetable-protein products from China for animal or human use, because of melamine;

> Aquacultured catfish, basa, shrimp, dace, and eel from China, because of the presence of unapproved animal drugs.

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Outline

•A New Era of Food Safety

• Consequences

• Food Safety Legislation

• Impact on Chinese Exporters

• Leavitt Partners Solutions

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Food Safety Modernization Act

• Signed into law on January 4, 2011.

• Most sweeping overhaul of the food safety system since 1938.

• Several provisions are already in effect:

• Increased frequency of mandatory inspections by U.S. FDA;

• Expanded access by U.S. regulators to companies’ records;

• Authority for U.S. FDA to issue import certifications;

• Authority for U.S. FDA to issue mandatory recalls of food products;

• Fees on producers and importers;

• Prohibition on “port-shopping”; and

• Whistleblower protection.

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Raises the bar for entry of products into the country

Shifts accountability to importers

Creates incentive program to expedite entry

Impact of New Legislation on Chinese Exporters

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PRESENT REQUIREMENTS

• Companies that export to the United States must register with U.S. FDA• Firms must submit Prior Notice before shipping• Compliance with U.S. Food, Drug and Cosmetic Act

NEW REQUIREMENTS

Biennial registration Changes to Prior Notice Changes to access to firms’ records by U.S. FDA Increased frequency of mandatory inspections

Required Preventive Controls Food-safety plan Hazard AnalysisPreventive Controls Strategies to mitigate intentional adulteration New standards for produce (fresh fruits and vegetables)Sanitary transportation Record-keeping requirements

Import Requirements Import certifications Importer verification Voluntary Qualified Importer Program

Third Parties and Laboratories Third-party certification Laboratory accreditation

Significant Changes

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Whom does the new law affect?

• Farmers and growers

• Manufacturers and processors

• Importers

• Laboratories

• Third-party certification bodies

• Foreign Governments

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Facility Registration -- July 2011

• Facilities must update their registration every two years

• U.S. FDA may suspend registration if it determines food has reasonable probability of causing serious adverse health event for humans or animals

Prior Notice -- July 2011

• As part of the prior-notice requirements, importers will be required to disclose to U.S. FDA if the food offered for import was refused by any other county.

New Requirements for Export

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Records Access – Now

• If U.S. FDA has a reasonable belief an article of food will cause severe adverse health consequences, a facility must provide U.S. FDA access to all records:

(1) Relating to that article of food;

(2) Relating to any other article of food that might have been affected in a similar manner.

• Makes access to firms’ records easier for U.S. FDA.

Increased Frequency of Mandatory Inspections by U.S. FDA

• U.S. FDA must target inspection resources based on risk;

• U.S. FDA may use third-party certification bodies and agreements with foreign governments to perform inspections;

• Firms that refuse inspection may be denied authority to import into the United States.

New Requirements for Export

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0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Increase in Inspections of Foreign Food Producers by U.S. FDA

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Prerequisite Programs (Good Manufacturing Practices, GMPs)

• Sanitation procedures;

• Training in hygiene for supervisors, managers, and employees;

• Environmental monitoring;

• Recall plans; and

• Supplier-verification activities.

Hazard Analysis and Critical Control Points (HACCP)

• Focus on biological, chemical, physical, and radiological hazards;

• Hazards can occur naturally, be unintentionally introduced, or be intentionally introduced;

• Producers must identify preventive controls for critical control points (i.e., HACCP or “HACCP-like”)

New Requirements: Preventive Controls

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Implement: Implement preventive controls to assure identified hazards are significantly minimized or prevented.

Monitor : Monitor the effectiveness of controls, and establish corrective action plans.

Verify: Validate and document the preventive controls have the desired effect in reducing risk.

Document: Create (and share with U.S. FDA upon request) a written FOOD-SAFETY PLAN that documents and describes the facility’s preventive-controls procedures

New Requirements: Preventive Controls

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Protection against intentional contamination

• U.S. FDA will issue guidance on mitigation strategies; and

• U.S. FDA will issue regulations on who is required to implement those mitigation strategies.

Performance Standards

• U.S. FDA will review foodborne contaminants, and issue guidance and regulations, as necessary, to reduce risks.

Recordkeeping Requirements

• U.S. FDA must begin developing regulations for additional record-keeping requirements for high-risk food; and

• U.S. FDA can develop a model product-tracking system.

New Requirements: Preventive Controls

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Standards for the safety of produce (fresh fruits and vegetables)

• U.S. FDA will establish minimum standards for the safe production and harvesting of produce, to cover

– Soil amendments;

– Hygiene;

– Packaging;

– Temperature controls;

– Animal encroachment; and

– Water.

Sanitary Transportation

• U.S. FDA will issue regulations to require shippers, carriers by motor vehicle or rail vehicle, receivers, and other persons engaged in transportation of food use sanitary practices.

New Requirements: Preventive Controls

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Raises the bar for entry of products into the country

Shifts accountability to importers

Creates incentive program to expedite entry

Impact of the Food Safety Modernization Act

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Import Certificates

• U.S. FDA may require imported food to be certified by an accredited third-party auditor (which could be a foreign government), to ensure compliance with U.S. laws.• Certificates can apply to a specific shipment of food, or to a facility. • Requirement for certification is based on:

> Known safety risks associated with the food;> Know safety risk of the country, territory, or region of origin; and > Strength of the food-safety system in the country, territory, or region of origin.

• Entry of product into the United States may be delayed until certification is obtained.

Importer Verification

• Importer-verification program requires U.S. FDA to develop a program to assure products entering the United States are not adulterated or misbranded, and have been produced in accordance with U.S. laws and regulations:

> U.S. FDA must publish regulations in one year; and> The new regulations will become effective in two years.

Increased Accountability for Importers

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Voluntary qualified importer program:– U.S. FDA is supposed to establish the program by mid-2012;

– Will provide path for expedited entry for qualified facilities;

– Third-party audit to determine compliance (by foreign governments or private third-parties)

– Importer pays fee to cover administrative costs;

– Importers will have to verify their suppliers are producing products in compliance with U.S. laws and regulations; and

– If an importer is involved in a recall or outbreak in the United States, it will lose the ability to participate in the qualified program.

Compliance + Participating Importer + Qualified Foreign Facility

= Expedited Entry

Opportunities for Expedited Entry

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• U.S. FDA will recognize accreditation bodies and third-party auditors.

•Third-parties can be a foreign government or a private entity.

•U.S. FDA will use third-party audit certifications to ensure products offered for import are in compliance with U.S. laws and regulations, and to determine if a facility is eligible to offer food for import under the voluntary qualified importer program.

•U.S. FDA will be looking for outside parties to assist in providing coverage of the food supply, particularly beyond U.S. borders.

Third-Party Certification

“The voluntary third-party certification guidance that we issued in January 2009 gives us a solid foundation for moving forward, and should give you a sense of how we have approached recognition, or

indirect accreditation, to date.”- Mike Taylor, FDA Deputy Commissioner for Foods, 2/17/11

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• U.S. FDA must develop a program for accrediting laboratories.

•The program will have model standards, which will include: • Sampling and analytical procedures;

• Internal quality systems; and

• Training for individuals who conduct sampling and analysis.

• Both domestic and foreign laboratories are eligible to participate, and both must meet the model standards.

• U.S. FDA must establish the program by January 2013.

• By July 2013, laboratories will have to receive accreditation by U.S. FDA to conduct regulatory testing for food imported into or sold in the United States.

Accreditation of Laboratories

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Outline

•A New Era of Food Safety

• Consequences

• Food-Safety Legislation

• Impact on Chinese Exporters

• Leavitt Partners Solutions

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• Seafood (fish, shrimp, shellfish), both wild-caught and farm-raised;

• Fresh fruits and vegetables;

• Nuts;

• Spices; and

• Low-acid canned foods.

Some Chinese products will receive additional attention from U.S. FDA

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What does this mean for your business?

• You must be in compliance with all of the new requirements, or you will not be able to export to the United States.

• Your firm will face additional scrutiny (regulatory, industry, third-parties) to ensure you are meeting the new requirements.

• Failure to meet the new requirements will inhibit your access to the U.S. market, and erode consumer confidence in your brand.

• You must act proactively to gain access to the upcoming expedited-entry programs and maintain your competitive place in the U.S. market.

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Manufacturers and Processors

Challenges: • Compliance;• Verification;• Expedited Entry.

Regulator Navigation and Information: Companies must analyze forthcoming rules and regulations to demonstrate what the impact of the new U.S. law will be on their business.

Assessment: Firms should conduct a gap analysis of their current procedures with preventive-control requirements, and immediately address any gaps identified.

Food-Safety Plans: Companies need to draft and maintain a food-safety plan.

Import requirements: Firms need a strategy for meeting the new U.S. requirements and navigating the application process.

Resolution of Problems and Management of Crises: Companies should have a plan in place to deal with any unexpected problems with their shipments.

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Third-Party Certification Bodies

Challenges: • Accreditation;• Importer verification;• Import certificates;• Voluntary qualified importer program.

Regulatory navigation and information: Firms should analyze the requirements of and application for the U.S. FDA certification program.

Assessment: Third-party certifiers should assess their current programs and standards against U.S. FDA program requirements and standards.

Resolution of problems and management of crises: Companies should have a plan in place to deal with any unexpected problems with shipments they certify.

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Laboratories

Challenges: • Accreditation;• Validate preventive controls;• Import certification, verification, and testing of voluntary qualified importers.

Regulatory navigation and information: Labs need to analyze the requirements of and application for the U.S. FDA accreditation program.

Assessment: Labs should assess their current program and standards against U.S. FDA program and standards.

Resolution of problems and management of crises: Labs should have a plan in place to deal with any unexpected problems with shipments they test, or with their own accreditation.

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What should you be doing now?

Monitor the implementation of the new U.S. legislation:◦ The impact of much of the legislation depends on how U.S. FDA drafts

regulations;◦ Implementation also depends on U.S. FDA’s financial resources.

Provide input to the U.S. FDA rule-making process:o Every regulation will have a public-comment period.

Understand what you need to do to comply with the new requirements.

Stay in front of changes:◦ Understand and respond to the changing dynamics in the United States◦ Review your current business and identify vulnerabilities and opportunities

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Outline

• Leavitt Partners Team

• A New Era of Food Safety

• Consequences

• Food-Safety Legislation

• Impact on Chinese Exporters

• Leavitt Partners Solutions

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Leavitt Partner Food Safety Service Offerings

Information &

Awareness

Assessments

Food Safety Plans

Import Requirement

s & Certification

Problem Resolution

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Leavitt Partners Global Food-Safety Solutions

Our global food-safety solutions combine extensive experience in navigating the U.S. regulatory system with an in-depth knowledge of

food-safety science, systems and vulnerabilities to help clients maintain and expand their presence in the global food market.

Proactive Leadership in a

Global Food Market

In-Depth Knowledge

of Food-Safety

Systems

Experience Navigating

U.S. Regulatory

System

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Leavitt Partners Global Food-Safety Team

• Our Team brings together high-level government officials and food-safety experts. Previous roles include

• Secretary of U.S. Health and Human Services (HHS);

• Chief of Staff to the Secretary of HHS;

• Associate Commissioner for Foods at U.S. FDA;

• Director of Global Health Affairs at HHS.

•In their previous roles, our team was responsible for • Leading the development and implementation of the U.S. Import-Safety Action

Plan and Food-Protection Plan

• Leading the U.S. side in negotiations with the Chinese Government (Ministries of AQSIQ and Health/SFDA) that led to the landmark Memoranda of Agreement on food, animal feed, drugs, and medical devices formally signed in Beijing in December 2007.

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Michael O. Leavitt, Founder and ChairmanSecretary, U.S. Dept. Health and Human ServicesAdministrator, Environmental Protection AgencyGovernor of UtahPresident and CEO, Leavitt Group (1985-1993) -Second largest private insurance brokerage currently in the U.S.

Michael P. Doyle, PhD, Senior AdvisorRegents Professor and Director, Center for Food Safety, UGAAssistant Professor, University of Wisconsin-MadisonSenior project leader, Ralston Purina CompanyFellow, American Academy of Microbiology & Institute of Food TechnologyPhD, University of Wisconsin

Kari Barrett, Senior DirectorSenior Advisor, FDA Deputy Commissioner for FoodsDeputy Chief of Staff, FDA Director of Regulatory and Technical Affairs -American Chemistry Council Masters of Public Policy, University of Maryland

Susan C. Winckler RPh JD, Senior AdvisorChief of Staff, Food and Drug AdministrationDirector of Policy Communications, FDAVP for Policy and Communications, American Pharmacists Assoc.Licensed Pharmacist, University of Iowa; J.D., Georgetown University

Catherine Adams Hutt PhD, Senior AdvisorChief Quality Officer -McDonald’s Corporation and Coors Brewing CompanyAssistant Administrator, US Department of Agriculture Food SafetyPhD, University of Illinois

Rich McKeown JD, President and CEOChief of Staff, U.S. Dept. Health and Human ServicesChief of Staff, Environmental Protection AgencyChief of Staff, Governor’s Office, State of UtahCommissioner, Utah State Tax Commission

David W. K. Acheson MD, Managing Director Associate Commissioner of Foods, Food & Drug Admin. -Highest food position for the FDAChief Medical Officer, FDA, Center for Food SafetyAssociate Professor, Tufts University; Univ. of MarylandMedical Doctor, University of London Medical School

Charles E. Johnson CPA, Senior AdvisorAssistant Secretary of Health and Human Services for LegislationCFO, Environmental Protection AgencyPresident, Huntsman Cancer FoundationDirector, Board of Directors of KPMG -31 years in various leadership roles at KPMG

Bill Steiger PhD, Senior Advisor for International AffairsDirector, Office of Global Health Affairs, HHSMember of Executive Board, World Health OrganizationPresident, Pan-American Health OrganizationPhD Latin American History, UCLA

Alissa Van Wie MPH, DirectorProgram Analyst, Office of Foods, FDAPresidential Management Fellow, Office of the Commissioner, FDAResearch Assistant, State Health Access Data Assistance Center, UMMasters of Public Health, University of Minnesota

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Leavitt Partners Information Services

• Updates on regulatory actions, statements, guidance documents and regulations.

• Interpretation of what these changes mean to firms that export food to the United States.

• We can provide information in person, by webinar, by telephone, or through written documents.

• Information will be available at a high level to anyone who is interested:

• www.leavittpartners.com

• Subscribe to our newsletter

• More detailed information related to specific firms is available by request.

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Leavitt Partners Assessment Services

• We can conduct a gap analysis to determine what a firm will need to do to be in compliance with new regulatory requirements:

• Validation and verification of equipment;

• Examination of environmental risks;

• Review of supply-chain management.

•Example:

•Identified gaps and suggest detailed solutions; and

•Identified best-practices, and suggest specific actions

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Leavitt Partners Food-Safety Plan Services

• We can provide support and guidance to assist firms in writing food-safety plans that meet the requirements of the new U.S. legislation.

• We can provide guidance on conducting risk assessments, and validating and documenting hazards and preventive controls

• Example:

• Evaluated the hazards and critical control points of a nut industry;

• Developed suggested risk-mitigation strategy, and identified industry best-practices.

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Leavitt Partners Import Requirements Services

• We can provide direction and support to firms to obtain appropriate certification to meet the new U.S. requirements.

• We can develop protocols and provide tools to assist firms in meeting the requirements for importer verification.

• We can provide infrastructure to firms to capture and submit the necessary information to use the upcoming opportunities for expedited export to the United States.

• We can assist third-parties in evaluating and developing an audit program that aligns with

U.S. FDA requirements.

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Leavitt Partners Problem Resolution Services

• We offer assistance in navigating the U.S. regulatory system.

• We can address issues that threaten a firm’s ability to export food to the United States:

• Import bulletins;

• Import Alerts;

• Recalls; and

• Illness linked to a product.

• Expertise:

• The Leavitt Partners team members all have experience in dealing with domestic and international food-safety crises.

• The team has continuing interactions with current U.S. regulators and policy-makers.

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Thank You

Contact us:

Web: www.leavittpartners.com

Email: [email protected]