1. Focused Mitigation Strategies to Protect Food Against Intentional Adulteration 1 Regulatory Impact Analysis Summary

2. Overview Annualized Costs –$180 million for domestic firms –$370 million in total annualized costs Benefits –Lower chance of successful terrorist attacks –$130 billion per catastrophic attack prevented Breakeven Analysis: Benefits are larger than costs if the rule prevents a catastrophic attack every 350 years 2

3. Domestic Cost Overview Exempt Firms –Learn and document: $3 million –Average: $63 per firm Covered Firms –Learn, train, document: $11 million –Mitigation strategies: $63 million –Monitoring and corrective action: $100 million –Average: $38,000 per firm Total: $180 million annual domestic costs 3

4. Primary Data Sources Dun & Bradstreet Global Business Database (2011) BLS, Occupational Employment Statistics (2012) FDA, Operational and Administrative System for Import Support (2011) Institute of Food Technologists, Modeling the Costs of Food Defense Practices (2011) 4

5. Small Business Provisions Very Small Business Exemption –47,000 firms with < $10 million in annual food sales not covered –Reduces annualized domestic costs by $650 million –Only reduces coverage of the rule by 3% Small Businesses (<500 employees) have an additional year to comply 5

6. Mitigation Cost Data Survey of industry practices conducted by Institute of Food Technologists and Research Triangle International 70% average adoption rate of the mitigation strategies studied No specific focused mitigation strategies are required, facilities covered by the proposed rule have flexibility 6

7. Small Business Cost Estimate Total Annualized Cost: $13,000 –One facility: $11,400 for mitigation, monitoring, and corrective action –100 employees: $340 for training –$1,400 learning and documentation Given $10 million exemption, costs will be less than 0.13% of total sales 7

8. Benefits Lowers probability of catastrophic terrorist attacks on food that could cause: –5,000 fatalities –100,000 illnesses –Major economic disruption Lowers probability of less sophisticated terrorist attacks that could cause: –10 fatalities –1,000 illnesses 8

9. Break-even Analysis Value of a statistical life: $8.1 million Monetized benefit of preventing a catastrophic attack is $130 billion Benefits are larger than costs if the annual reduction in the chance of a catastrophic terrorist attack is –1 in 350 (average estimate) –1 in 270 to 1 in 730 (range based on sensitivity analysis of possible costs) 9

10. Key Results 97% of the food market will be protected while minimizing costs to small businesses A small reduction in attack risk makes benefits exceed costs in every sensitivity analysis scenario 10

11. Some Areas for Comments Data on current industry practices –Costs –Adoption rates –Best practices Benefits methodology and available data Costs to comply with the rule 11