Food and Beverage News and Trends

This regular publication by DLA Piper lawyers focuses on helping clients navigate the ever-changing business, legal and regulatory landscape. With this issue, we are expanding our coverage to include late-breaking developments in Canada. 

• Bird flu spreads. The outbreak of highly pathogenic H5N1 avian flu that first appeared in Indiana in early February has now been found in commercial flocks in Iowa, South Dakota, and Missouri. The strain has also been detected in backyard flocks and pet birds in other states in the eastern half of the US and Canada, as well as in commercial flocks. Most recently, more than 5 million chickens were euthanized at a commercial egg-laying operation in Buena Vista County, Iowa. At this writing, nearly 12.6 million chicken and turkeys in at least eight US states have been culled in the outbreak. Unusually, this strain of avian flu is severely affecting wild birds, which have become a vector for its spread as the spring migration proceeds. No human cases of these avian influenza viruses have been detected in the United States. Meanwhile, scientists at the University of Wisconsin School of Veterinary are working to develop a vaccine to protect domestic birds. The goal, the researchers say, is to create technology that would shield flocks while being inexpensive enough to be economically viable.
• FDA issues positive ruling for bioengineered cattle. The FDA, on March 7, issued a ruling that meat from cattle bioengineered to have shorter hair – a so-called slick coat – poses a low risk to consumers who eat it. The agency said this was the first time it has made such a low-risk determination in a bioengineered animal intended for food use. The bioengineered cattle were developed via CRISPR technology to more easily withstand hot weather. Steven Solomon, director of the FDA’s Center for Veterinary Medicine, said, “Today's decision underscores our commitment to using a risk and science-based, data-driven process that focuses on safety to the animals containing intentional genomic alterations and safety to the people who eat the food produced by these animals.” However, the swift decision was also criticized for the lack of transparency in the review process. Meat from the bioengineered cattle could reach the market as soon as next year.
• FDA is asked to increase budget for diet-related chronic illnesses. On March 14, three well-known figures in the food world wrote an op-ed article in Stat magazine calling on new FDA Commissioner Robert Califf to meet what they say is a massive new health challenge by “harnessing the FDA’s effective but underused food-regulatory powers, which were created with FDA itself for a similar food crisis more than 100 years ago.” The writers – former US Senator Bill Frist of Tennessee, former Surgeon General Jerome Adams, and Harvard adjunct nutrition professor Jerold Mande – said in the article that, right now, “food-related illnesses are once again a leading cause of poor health, illness, and death. Today, more people die every day from diet-related chronic illnesses than die in a year from foodborne acute illness caused by contaminants the FDA and USDA regulate, making the food industry once again a major underregulated contributor to disease.” The article pointed out that only seven percent of the FDA’s budget is being used to prevent diseases caused by processed foods.
• FDA sets out guidance for companies on how to conduct voluntary product recalls. On March 3, the FDA issued final guidance on how companies should conduct voluntary recalls. The guidelines, intended to help companies, including those in the pet food industry, to effectively remove contaminated products from the market, are part of the FDA’s Foodborne Outbreak Response Improvement Plan, released in December 2021. The final guidance includes steps companies can take to develop their recall policies and procedures. Specifically, the guidance provides companies with advice on managing proper product coding, maintaining distribution records, and using electronic communications to identify product information needed for recalls. It also encourages quick action when initiating a recall and emphasizes the importance of doing so before completing a full investigation of the contamination.
• Changes being made to Canada’s National Import Service Centre (NISC) phone line. Canada’s NISC will implement changes to its phone line, which is used to process import request documents and data sent by the importing community across Canada. The role of staff at the NISC is to review import documents and data and return a decision electronically to the Canada Border Services Agency, which then relays the decision to the client or the broker/ importer. The NISC also handles inquiries related to import requirements for all commodities regulated by the Canadian Food Inspection Agency (CFIA), and when necessary, coordinates inspections for import shipments. Beginning March 21, 2022, NISC has introduced an automated response to facilitate self-service options for importers. Callers will now be greeted by a pre-recorded message and offered options on how to access resources online. Importers who require further assistance will be provided a direct call-back option.

• Canada to support youth jobs in agri-food sector. Canada’s Minister of Agriculture and Agri-Food has announced that the federal government will contribute up to $3.7 million to improve the Youth Employment and Skills Program (YESP) and support 300 youth jobs in the agriculture sector. The YESP is part of an Employment and Social Development Canada initiative to help young people gain information, skills, experience and abilities to successfully transition into the labour market. In the past two years, it has helped to create almost 1,000 agricultural jobs across Canada. Employers who hire Canadian citizens, permanent residents or refugees between 15 and 30 years old for agricultural jobs may receive a wage subsidy of 50 percent, up to $14,000. Employers who are Indigenous individuals or organizations, and employers who hire youth facing barriers, such as a person who is a member of a visible minority or living in a low-income household, will be eligible for compensation of 80 percent of the cost of salaries and benefits, up to $14,000. An additional $5,000 in funding may be provided to applicants to address barriers to employment, such as relocation. The YESP is an important tool for the agricultural sector, which continues to face difficulty accessing labor. Applications for the current intake closed on March 21.

• California AG announces end to sales of “drinkable sunscreen.” Rob Bonta, California’s attorney general, announced on May 16 that it has reached a settlement in a deceptive advertising investigation of Dermatology Industry Inc., an Orange County-based company, to end the sales and marketing of UVO, a “drinkable sunscreen.” The beverage – a peach and orange flavored drink containing vitamins, minerals and antioxidants – was marketed with such tag lines as “Drink your sun protection” and “Protects and Repairs Your Skin from Sun Damage.” The company claimed UVO “is the first drinkable supplement to provide sun protection,” that drinking it conferred t”3-5 hours of sun protection from head to toe including your eyes,” and “if you drink UVO you will have baseline protection that will help minimize the likelihood of burning even if you forget to use sunscreen.” Dermatology Industry did not admit the allegations, but, it said, consented to the agreement to avoid the cost of litigation. Bonta said, “We may want a shortcut, but the truth of the matter is: There’s no evidence that alternative sunscreen products like UVO’s so-called ‘drinkable sunscreen’ provide protection. You’ve got to wear your sunscreen, not drink it.”
•  Court tosses out lawsuit against Oregon Chai’s “Slightly Sweet” tea. On March 7, the US District Court for the District of Southern New York rejected a lawsuit filed against Oregon Chai which alleged that the company’s description of its product as “Slightly Sweet” was misleading because it falsely implied the product was low in sugar. In dismissing the case, the court adopted the findings from a magistrate judge’s report which held that the "Slightly Sweet" language is mere puffery because "it provides no objective measurement or indication of the amount of sugar in the product and refers instead to a subjective claim about the Product's level of sweetness that cannot be proven either true or false.” The district court also noted that any question in the mind of a consumer about the amount of sugar in the product can be resolved simply by looking at the nutritional information on the package.
• Appeals court affirms dismissal of case against dog food maker. Responding to a lawsuit against Champion Petfoods USA Inc, the US Court of Appeals for the Eighth Circuit on March 8 affirmed a lower court’s dismissal of the case. The plaintiffs had taken issue with Champion’s claims for its dog food on several grounds, but the appeals court agreed that all should be dismissed, finding that none of the statements were actually deceptive or misleading. For example, the court found that it was not plausible to say that a reasonable consumer would interpret the term “fresh regional ingredients” to mean that the dog food was made only with ingredients that were fresh and regional. The court also held that the phrase “nourish as nature intended” was non-actionable puffery, “too vague to be proved or disproved.”
• Three states may be on the way to legalizing the sale of raw milk. Missouri, Georgia and Alaska may soon decide to permit retail sales of unpasteurized milk and cream. On March 2, a committee of the Missouri General Assembly voted 8-1 to recommend passage of a bill to permit sale of raw milk and cream, and the Georgia House passed a similar measure on March 3. Alaska is also thinking of legalizing the product and is using an administrative rulemaking process rather than a legislative one. The Missouri bill would legalize the sale of “Grade A” retail raw milk and cream produced in Missouri at grocery stores, restaurants, soda fountains, or any similar establishments – only if the milk carries a specific warning label.
• Two US jurisdictions act in favor of healthier kids’ restaurant meals. On March 1, the County Council of Montgomery County, Maryland, approved by an 8-1 vote a piece of legislation intended to encourage healthful eating by children at restaurants. The bill requires that healthy drinks like water, juice or milk be the default beverage offered with restaurant kids’ meals in the county. It also requires that at least one meal on the kids’ menu must meet expert nutrition standards. That meal option must also include at least two or more of the following: one-quarter cup of unfried vegetables or fruits; a whole grain product; a lean protein. On March 4, the St. Louis, Missouri board of aldermen approved by a 25-1 margin a bill requiring healthy drinks – water, lowfat or nonfat milk, or a six-ounce container of fruit juice without added sugar – to be the default beverages provided with kids’ meal combos sold in city eateries. The bill’s sponsor, Alderman Sarah Martin, said parents can still choose to swap in other beverages for their children’s meals. “This is in no way a mandate,” she said. “This is just an opportunity for us to weigh in and improve the public health of our community.”
• Iowa “ag-gag” law struck down. The District Court of the Southern District of Iowa on March 14 issued an order finding Iowa’s second so-called “ag-gag” law unconstitutional because it violates the First Amendment. The law, the court concluded, is not enforceable because it discriminates among different types of speech on the basis of content and viewpoint. Challenged by a number of animal-protection nonprofits, the law prohibited the use of deception for the purpose of gaining access to or obtaining employment with an agriculture production facility “with the intent to cause physical or economic harm or other injury.” According to the law, that includes committing unauthorized actions like videotaping inside a facility once a person is employed there. The court determined that in order to find someone guilty under the law, the person’s intent and attitude toward agriculture must be examined, an inquiry that is prohibited under the First Amendment.
• US appeals court affirms dismissal of complaint over labeling of beef products. On March 11, the US Court of Appeals for the Tenth Circuit affirmed a district court order dismissing a complaint against various beef producers for allegedly using deceptive and misleading labels on their beef products. The plaintiffs had contended that the “Product of the U.S.A.” label on defendants’ beef products is misleading and deceptive because the beef products actually do not originate from cattle born and raised in the United States. However, the court also found that the claims of deceptive labeling are expressly preempted by federal law since the federal agency tasked with ensuring that meat labels are not misleading or deceptive preapproved the labels at issue. Furthermore, the appeals court noted, the governing federal statutory scheme, the Federal Meat Inspection Act, includes an express preemption provision that prohibits states from imposing any labeling requirements in addition to or different from the federal requirements.
• Rising strain on global wheat and maize markets. Speaking in Brussels on March 24, President Biden warned that the world will experience food shortages as a result of Russian’s invasion of Ukraine. “The price of the sanctions is not just imposed upon Russia,” he said.  “It’s imposed upon an awful lot of countries as well, including European countries and our country.”  During this week’s G-7 summit, President Biden and Prime Minister Trudeau discussed increasing agricultural production, and Biden urged nations worldwide to drop trade restrictions that could limit food exports.On March 11, 2022 the United Nations World Food Programme warned that the Russian invasion of Ukraine will have major implications for food security across the world. The main expected effect on global food security will appear in global grain and energy markets, affecting local food prices, and, ultimately, populations’ access to food. The UN World Food Programme is asking that Canada and other major wheat exporters urgently work to address the shortage. Canada’s Agriculture Minister Marie-Claude Bibeau stated, “While Canada, as a leading global agri-food exporter of many key products, is working with its allies on how it can assist efforts, Canadian wheat production was significantly reduced due to last year’s drought and there is not a significant amount of wheat uncommitted and available to the market until the next harvest.” Notably, both Ukraine and Russia are among the top five exporters for global wheat and maize markets. In addition, Russia and Ukraine are major exporters of sunflower and barley, accounting for more than three-quarters and one-third of supplies to international markets, respectively. The Russian military invasion brought shipments from Ukraine to a halt; spring planting in Ukraine will be at best delayed; and Russian grain deals have been paused amid uncertainty and sanctions. Furthermore, the cost of insurance for vessels entering the Black Sea has significantly increased (and see the next item regarding fertilizer costs). International grain prices reflect these disruptions, with major export quotations for wheat up by 28 percent on two weeks.
• Soaring cost of fertilizer. Inflation is affecting the cost of farming and thus of food, and the most dramatic price change is being seen in the rising cost of fertilizer. On Friday, March 18, the fertilizer Index jumped almost 10 percent to an all-time high. Propelling this price surge is the Ukraine crisis: Russia is a leading exporter of key fertilizer ingredients like urea and ammonia, as well exporting about a fifth of the fertilizer the world uses. Svein Tore Holsether, the CEO of major fertilizer producer Yara International, stated last week, "We are going to have a food crisis. It's a question of how large.” On March 11, Yara International announced that it would no longer source ingredients from Russia. US and EU sanctions, Holsether said, have created a moral dilemma for fertilizer makers, because such moves contribute to worldwide inflation in the price of fertilizer. Prices for the most commonly used commercial fertilizers had already more than doubled between 2020 and 2021, and nitrogen fertilizer, which accounts for more than 50 percent of the commercial fertilizer used by farmers, is expected to see price increases of more than 80 percent this year. Observers note that the soaring cost of fertilizer may limit the extent to which wheat exporters such as the US, Canada and Brazil can make up the global shortfall.