Shellfish imported from South Korea is the latest food safety issue in the news. Oysters, clams, mussels and scallops are being recalled due to possible contamination with norovirus. From the FDA press release:

The U.S. Food and Drug Administration is urging food distributors, retailers, and food service operators to remove from sale or service all fresh, frozen, canned, and processed oysters, clams, mussels, and whole and roe-on scallops (molluscan shellfish) from Korea that have entered the United States. [Emphasis mine]

Note the permissive language “urging”. That puts it far too politely. In light of last year’s Food Safety Modernization Act, when the FDA “urges” you to do anything, drop everything and comply.

The revised Act gives the FDA mandatory recall over all food products. According to the FDA’s recall FAQ, the mandatory recall authority went active the minute it was signed into law. Under Food Drug and Cosmetic Act §423(a), food businesses are first given the opportunity to cease distribution and conduct a voluntary recall of an article of food. If the business refuses to or does not voluntarily cease distribution or recall such food in a timely manner, the Agency can assert its mandatory recall prerogative.

The FDA’s new mandatory recall power really takes all the volition out of a “voluntary” recall. When the FDA says “recall, or else we will”, that just makes things less “voluntary”, no? I’m sure that with a mandatory recall looming over their heads, the shellfish distributors that are tracking down all these oysters probably don’t feel like they have much say in the matter. Essentially, they have been ordered to undertake a very expensive operation by the FDA.

A voluntary recall can wreak financial havoc on a food business. Almost no general liability insurance policy covers product recalls. Recall insurance is a separate risk management product that covers things like the cost of shipping bad food back up the supply chain to be re-processed or destroyed.

A mandatory recall would complicate things further – general liability policies will specifically exclude losses resulting from government seizure or impoundment. Considering that mandatory food product recall is a new invention, case law is yet unclear whether mandatory recall constitutes such an excludable loss. When in doubt, my guidance is always to err on the side of purchasing insurance.

If any food business is not covered for economic losses like these, they should consider it an existential threat.