No Current FDA Plans to Regulate FTZ Admission, Says Agency Official

The Food and Drug Administration has no pending plans to get into regulating admission of goods into foreign-trade zones through electronic filing of CBP Form 214, said John Verbeten, director of the program development and implementation branch of FDA’s Division of Import Operations. Getting involved in the FTZ import process would play havoc with shipments of inadmissible product into FTZs that are then offered for import after being transformed into FDA-approved merchandise, said Verbeten at the National Association Foreign-Trade Zones’ 2014 Regulatory and Legislative Seminar on Feb. 11 in Washington, D.C. Absent overwhelming pressure from industry, FDA would currently rather not get involved, he said.

“There are very real reasons why we want to allow this to happen,” said Verbeten as he discussed FDA’s policy of making admissibility decisions for merchandise when it leaves an FTZ, as opposed to when it enters. “There is a lot of work that gets done on products that are otherwise inadmissible, to then make them into something that is admissible,” he said. “If we had to make a determination on the product’s admissibility at the time it went into a foreign-trade zone, a lot of that stuff would probably have to stop; or you’d have to do something which is not fun like work with our import for export process, which I wouldn’t wish upon anybody,” said Verbeten.

Verbeten cautioned that FDA’s current reluctance to involve itself in FTZ admission procedures isn’t guaranteed to last forever. “If the pressure gets to be so great where the industry as a whole wants FDA to make its admissibility determinations at the time a product is being brought into a foreign-trade zone … we may end up going that way,’ he said. The development of Participating Government Agency (PGA) data processing capabilities in the Automated Commercial Environment (ACE) would facilitate such a move, he noted. “But I don’t believe that we’re looking to make a change either,” said Verbeten.

Movement Into FTZs Doesn’t Satisfy Export or Destroy Requirements

While Verbeten reiterated that FDA limits its involvement in imports to inside U.S. Customs Territory, he said the same isn’t true for exports. When FDA finds that a product isn’t admissible, it will not allow it to move to an FTZ instead of being exported or destroyed, even if it is given FTZ privileged status, said Verbeten. While FDA defines the importation of a product to occur when it crosses into U.S. Customs Territory, it does not consider a move to an FTZ to be an export, even though it is leaving U.S. Customs Territory. The reason is that FDA takes its definition for export from an early 20th century Supreme Court ruling that defines exportation as “the separation from the mass of goods owned by the United States into another entity,” said Verbeten. Taking a product from U.S. Customs Territory into an FTZ does not constitute separation from the mass of goods owned by the U.S., he said.

Two other factors bolster FDA’s policy of not allowing movement to FTZs to satisfy exportation requirements, with limited exceptions, said Verbeten. First, the decision of the U.S. Court of Appeals for the D.C. Circuit in Cook v. FDA limited the agency’s flexibility by requiring FDA to refuse admission of products it has found to be noncompliant (see 13080701). “So that’s going to keep us from deciding it’s going to go into the foreign-trade zone, and maybe they’ll manipulate it in some way to make it compliant,” said Verbeten. “We’re not going to get ourselves involved in that situation.” Another issue is that, by the time FDA refuses admission, it has already gone through a full process detention a hearing, and the opportunity for an importer to correct the problem. “By the time we get to refusal, we’ve said this product cannot come into the country, and we’re not going to dance around so much with it anymore,” said Verbeten. “We consider it final.”

New Secure Supply Pilot Program Hits Snags

Verbeten noted that FDA recently began its Secure Supply Chain Pilot program, which provides for expedited entry for finished drug products and active pharmaceutical ingredients (APIs) from participating importers (see 13081918). The main benefit to importers is a system entry decision -- all other drug shipments must be held for review by human FDA personnel, said Verbeten. The two year pilot “is a big step forward for the agency, and for the Center for Drug Evaluation and Research,” he said. But even in its earliest stages, one pilot participant may already be confirming some agency fears, said Verbeten. An importer is “using codes that they should not be using to get stuff through quicker, which is the big fear for FDA,” he said. “This is why I talked to the center for drugs about this for seven years, and it’s just now happening this week,” said Verbeten.