Even with the best prevention efforts, food sometimes becomes contaminated. Recalls and consumer notification are important tools to prevent illness once contamination has occurred. They also help ensure that the responsible firms bear more of the cost of failing to prevent contamination than they otherwise would.

The FSMA enhances FDA’s power to respond to problems when contamination occurs in three ways. First, the Act gives FDA mandatory recall authority. Currently, FDA cannot require a recall, though firms generally do so voluntarily when requested by FDA. The second, and more significant, change is that new provisions make it easier for FDA to detain products may violate food safety law or to suspend a facility’s registration, thus preventing it from legally distributing food. Third, under the FSMA, FDA will develop standards for displaying information about recalls both on the Internet and in grocery stores.

The financial impact of recalls and consumer notification on businesses that do not produce contaminated products depends on the information consumers receive and how they respond. ERS research on the sales impacts of major food safety incidents over the past 10 years suggests that consumers have responded to recalls and outbreaks in a measured way that has limited spillover effects. In the cases studied, sales dropped significantly for a few weeks following the incidents, though in some cases a small decline in demand continued for as much as 8 months.

Traceability Systems Need To Vary by Product

For recalls to be effective, firms need to be able to trace product distribution. Traceability systems are also crucial to speedy identification of the source of contamination in CDC outbreak investigations. The FSMA directs FDA to establish pilot programs to evaluate alternative methods of tracing at least three different types of foods. Based on knowledge gained from these pilot programs, FDA will develop rules to improve product tracing systems for most of the U.S. food supply, building on and enhancing existing systems.

In 2004, ERS researchers studied traceability systems for U.S. produce, cattle/beef, and grain and oilseeds. They found the diverse characteristics of the three commodities—the perishability of produce; the need to prevent theft and credibly assert livestock breeding lineage; and the ability to blend, grade, and store grain—led to the development of very different traceability systems in the three sectors.

Three broad conclusions can be drawn from this research. First, uniform systems applied across all sectors of the food industry are likely to be more costly and less effective than ones that recognize the unique characteristics of different sectors. Second, government-mandated traceability systems need to allow firms flexibility to adjust to changing technology and changing consumer demand. Third, the private sector has been successful in developing traceability systems that meet private-market needs, even evolving new organizational structures, like contracts, cooperatives, and vertical integration to facilitate traceability. But, markets have not been as effective in encouraging traceability that meets public needs related to food safety.