Don't Eat Poop! A Food Safety Podcast

DEP E104
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[00:00:00]

Introduction to Customs and Duties
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David Lennarz: So a shipment arrives, you're the seller to me, Matt. I give the documents to my customs broker, you invoice me at 75 cents, and I pay that 25 percent duty on that because it's a new duty, so that product's costing me a dollar according to what we present to customs, and then I go and sell it on. But, you know, I actually still have to pay you the dollar, right?

Because you're not going to be, as a supplier, you're not going to be willing to adjust your price downward 25%. And so there, it's essentially, you've got two invoices. I'm paying one, I show the government, and I'm paying duty on that, and I'm paying you on the real one.

Matt Regusci: Wouldn't a simple audit be able to tell the difference though?

David Lennarz: Yeah, but you got to have CBP officials to go in and actually...

Francine L Shaw: You got to have people available to do the audit, and we just fired all them.

David Lennarz: Yeah.

Matt Regusci: We got fired. Well, I guess some didn't get fired. [00:01:00] A lot of them quit, though. A lot of them was quit.

intro: Everybody's gotta eat, and nobody likes getting sick. That's why heroes toil in the shadows, keeping your food safe at all points, from the supply chain to the point of sale. Join industry veterans Francine L. Shaw and Matt Ragushi for a deep dive into food safety. It all boils down to one golden rule, don't.

Eat poop. Don't eat poop.

Special Guest: David Lennarz
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Matt Regusci: Hello. Hello, Francine.

Francine L Shaw: Good morning, Matt.

Matt Regusci: And then we have a very special guest today. We have David Lennarz. David, how are you?

David Lennarz: I am doing well. Glad to see you, Matt.

Matt Regusci: David and I have crossed paths with each other in multiple different ways for multiple years. David, I'm going to go on a limb here and I'm going to say that you are one of the most important, least known people [00:02:00] in the American food and cosmetic industry.

David Lennarz: Well, I think that's a little strong, but we certainly very focused in what we do and publicity around what we do has not been our priority. Our priority has really been helping our clients, which are in the food and beverage, cosmetic medical device and drug industries. Helping them comply with FDA regulations.

So 22 years in doing that, and we're now a team globally of pushing 400 people. And we have some incredible expertise. But, yeah, we haven't felt a real need to make ourselves known in the press as far as what we do and how we help companies. But ultimately, our mission is certainly to help our clients, but what does that ultimately do? [00:03:00] It is helping keep American consumers healthy and safe.

And we've expanded that mission recently through some acquisitions in Europe as well. So, we're now assisting American companies and other companies around the world with their exports into Europe also.

Registrar Corp: Helping Companies with FDA Compliance
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Matt Regusci: And so Registrar's Corp is that commercial BDO, those that know, know BDO.

Registrar's Corp is that internationally for companies that want to get their products into the United States via FDA guidelines or their FDA regulated in any shape or form. They know to call you and your team basically helps them in the process of getting their products here. Correct?

David Lennarz: Yeah, think of us as the H&R block, right?

You don't want to file your taxes. You take them a little shoe box and you give it to them and you pay their reasonable bill and they do everything for [00:04:00] you. Essentially, that's what we do for FDA, companies regulated by FDA.

Matt Regusci: And so you mainly work in food and cosmetics, correct?

David Lennarz: So food is our largest sector, and it's logical in that we all eat three times a day.

It's the sector that has the most players in it, most companies involved in it internationally and domestically. Second, close behind is the cosmetics industry, also a pretty substantial industry as far as size, number of companies. And then medical devices and drugs fall in line after that, just by nature that it's a smaller industry in not necessarily money size, but in the number of companies that have to meet the various FDA requirements, right?

So, and of food and beverage about 70 percent of our clients are located outside the United States.

Matt Regusci: Right?

David Lennarz: They're looking to export their [00:05:00] products here and the remainder are U.S. Companies, large and small startups, right on through to multinationals that we help here in the U.S.

Matt Regusci: And you basically are helping them walk through the process of FDA registration and keeping everything up to date for re registration year after year?

David Lennarz: Yeah, so that's certainly one piece of what we do. So I would lump that more into Bioterrorism Act compliance. So just like with the Food Safety Modernization Act, which you're familiar with, the Bioterrorism Act has multiple aspects to it, all of which have been implemented over the years. So there is a registration component, there is a requirement to have what's called a U.S. Agent, if you're located outside the United States, to act as a communications link between FDA and that foreign company, if FDA has a question about a shipment, if they want to schedule an inspection, that's part of our role as [00:06:00] U.S. Agent. And then other components of the Bioterrorism Act, like prior notice, where a company has to notify FDA before each and every shipment arrives in the United States, so FDA can use its limited resources to target inspections in our ports of entry based on risk, right?

And so Bioterrorism Act, that's one piece. One thing that obviously we help around for the Food Safety Modernization Act, which you guys are very familiar with.

Matt Regusci: The foreign supplier verification rule in particular.

David Lennarz: Foreign supplier verification program, the requirements to have food safety plans, if your product's not regulated under HACCP.

You'll need to operate under and have food safety plans. Obviously see other components of FSMA, like 204, that's still out there, right? So we help in all of that. We have experts in not just the whole registration process and [00:07:00] maintaining that, but we have folks who do literally thousands of product reviews around labeling and ingredient reviews.

We do thousands of product reviews a year. We have an entire team folks with Masters and PhDs in food science that are helping companies write HACCP plans, write food safety plans, foreign supplier verification programs, implementing them.

Food Safety and Regulatory Training
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David Lennarz: And then we also have a whole division around training. So folks love to learn and understand how different regulations impact them and how to comply with those.

And five years ago now, we acquired a training company that had been around for about 15 years and they only did virtual learning, 100 percent online, asynchronous learning. And we actually bought them right before COVID, which turned out to be good timing. And when in person sort of [00:08:00] training went away, we have now about 200 different course and course packages around safety and regulatory.

Matt Regusci: And that was originally FSMA 22000.com, right? .com, right?

David Lennarz: Yeah, it, it was, and they did a lot of ISO courses as well, and those two co-founders joined us coming up, I guess about five years ago. And so we've really blown out those course offerings because again, educating folks in the industry. Your best customer is an educated customer and ultimately we like to be able to serve that up to them, keeps them engaged with us, it's great content, it's great learning.

We're the only 100 percent online FSPCA recognized provider of the PCQI course. A lot take our course. Up until our course, you would have to. literally fly somewhere and park yourself for [00:09:00] three days on a holiday and express and take a  PCQI course. Or you could do a blended course where some of it was studying on your own and then you had someone on screen.

We developed a course that met FDA criteria for being interactive enough. To make it a hundred percent online for this PCQI requirement. And to this day, it's been out on the market now about three years. We're the only company that provides that. And it's an amazing course. It's not only great in what it is it's also in Spanish and in Chinese, two of obviously huge markets as far as trading partners go.

Matt Regusci: Yeah.

Francine L Shaw: Good for you. That's fabulous. That's amazing.

David Lennarz: Yeah. And we have other courses that are also niche but require folks to generally travel like Better Process Control School. So this is for low-acid acidified foods.

Typically, these courses are run at [00:10:00] universities. You go down to University of North Carolina and, and, and again, yoU.S.Pend four or five days in a classroom. We developed and again, had reviewed by FSPCA and FDA reviewers, a fully online Better Process Control School course. So we commercialized that as well and again, saves people tons of time and money and we believe 'em to be equally instructional compared to an in-person course and self-paced, obviously go back and look at things again. So yeah, we're pretty excited. So that's the second thing we do as a company regulatory training.

ComplyHub: Monitoring and Risk Assessment
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David Lennarz: The third area is we have developed a number of software products on the client facing side. Our clients can access all of their registration information and other things we do for them through our client portal, MyFDA.[00:11:00]

And then secondly, we've developed a software called ComplyHub. And Matt, I think we talked to you about this previously. But ComplyHub essentially goes out and aggregates lots of data that FDA and other organizations publish about companies because let's face it, nothing good is generally published by FDA.

There's not a, an equivalent to a warning letter on the good side that says this company is fantastic.

Matt Regusci: You got the FDA award. Here's...

David Lennarz: Exactly, but I like that idea. That's actually something.

Francine L Shaw: That would be amazing, you know.

David Lennarz: So we go out and we grab all of this information and we augment it. We clean it up because it's coming from different databases, it's typically a mess, companies can have multiple FEI numbers and all kinds of craziness. So we then actually role in shipment history. So we have millions of rows of [00:12:00] shipment data about products coming into the United States from that specific company and then using patented algorithms that we developed with our food safety experts and our tech team.

We create a risk score. We have scored every company in the food industry based on risk, meaning what kind of problems have they had in particular with FDA. And that risk course is impacted by the volume of products they're shipping, right? A company that ships 10 times a year and has had a lot of problems with FDA is going to score a lot worse than a company that ships a thousand times a year and has had one problem.

We licensed this information through a platform to importers and retailers. And think about importers. Most large retailers, most retailers are direct importers as [00:13:00] well. They're sourcing from all over the world. So think Walmarts, the Dollar Trees, the TJ Maxx s, they're all importing direct. Importers then, and retailers, have access to monitor their supply chain for FDA compliance, which helps them meet the requirements under the foreign supplier verification program to be monitoring their supply chain.

So when FDA comes knocking on the door and says, This particular shipment on this particular day, we'd like to see that you have a foreign supplier verification program for this. Part of that is this requirement to monitor that company that they're purchasing from. Obviously, it all starts with getting a food safety plan, taking that food safety plan, reviewing it, writing your own foreign supplier verification program.

And part of that is monitoring your supplier.

Matt Regusci: Right.

David Lennarz: And so the software essentially does that monitoring part for them. [00:14:00] Think of it as a credit score monitoring service, right? If you have a credit score service you use, you get a little notice that says, Hey, your credit score just changed because of something you did, right?

It's not that different. It says, Hey, one of your importers just went on import alert, and here's why. And that should trigger a company to sit there and say, Eh, maybe I need to reassess whether I want to keep purchasing from this supplier. And then the other cool thing that software does is it actually has a tool called Supplier Finder.

Which lets me say, well, this supplier of apricot jam from Mexico just had a bad inspection, his risk score, and he's now at a 52, which is high. I should try and look for other apricot jam suppliers that can ship me products that have a better [00:15:00] risk score and maybe even they do more volume so I can increase my purchases and my sales.

So there is a tool that suggests and allows users to then search for alternative suppliers of the same product with better risk scores.

Matt Regusci: How many suppliers do you work with approximately?

David Lennarz: Thousands? Hundreds of thousands are on it. Yeah, we have risk scores around hundreds of thousands.

Matt Regusci: That is insane. So, but how many companies do you actually work with?

That was, yeah, so we now tens of thousands, right?

David Lennarz: Registrar Corp ourselves, we work with about 32, 000 clients, 33, 000 companies a year. Companies using this particular ComplyHub software now numbers in the thousands. And really, the impetus or the real driving force of the adoption of the software has been because of the Foreign Supplier Verification Program, which [00:16:00] for the first time, as you guys know, brought importers and retailers under the regulatory authority of FDA.

Yeah. Prior to FSMA, importers didn't have to do anything, right? Sure. They had to make sure they had proper labeling, but they didn't register with FDA. FDA had no idea who the importers are until time of entry, but there's no record of what they do, what they bring in. Same with retailers. A retailer pre-FSMA didn't have to register with FDA and pretty much put all the burden back on their supply chain to meet requirements.

FSMA changed that and in that it said, okay, well, if you're importing product, you, the importer now, you need to have a foreign supplier verification program and all the components that go with that. And so that really allowed us to capture an entirely new customer [00:17:00] base around importers up to the final consumer level of retailers, essentially.

Challenges in the Food Supply Chain
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Matt Regusci: So let's use... Francine and I did a bunch of episodes, a few of them, at least on the WanaBana cinnamon issue with the applesauce is right. Which is right in your ball court, right? So tell us a little bit about what do you think went wrong there? And did that kind of highlight to a lot of your customers what some of their risks might be?

And what were those risks?

David Lennarz: Yeah, I think the story basically there is, as you well know, there is a real lack of transparency in the food supply chain, right?

Matt Regusci: Oh, in first off context, I'm talking about the lead in the cinnamon from Ecuador. And they were basically, they were adulterating the cinnamon to make it look like there was basically heavy metals in there to make it heavier ways into a bunch of kids and a lot of other people and true [00:18:00] story.

Good brand. I think WanaBana was a good brand. They just, it comes down to highlighting of the supply chain weaknesses. So I just want to give context for those that didn't know what this was about.

David Lennarz: Yeah. And I think, again, this goes back to what FSMA 204 is trying to solve for. Right. If you look at the challenges that regulators have around food safety issues, recalls a product, right? It's indiscriminate. We see a company will say, well, we're recalling all of these literally thousands when it could potentially be much more targeted.

Secondly, it's an inefficient process. We had a client out of Vietnam that was exporting frozen tuna, which had high levels of histamine.

And there was a massive food safety outbreak. Um, consumers in the [00:19:00] West, California and other states who, you know, became very sickened after consuming this. And it took FDA weeks and weeks, if not really even months. To do their whole trace back to figure out where this was coming from through the supply chain.

And so 204 is... the promise of 204, the vision of 204. Of course is to make that whole process a lot faster and a lot more efficient. Now we can get into is 204 going to happen? That's an entirely different question and I definitely have some predictions on that. Bottom line is, I think products, software like ComplyHub, like software that we're seeing around that companies are out there working hard to commercialize around 204, are designed to make these issues around things like the [00:20:00] cinnamon a little more... should happen less now.

Customs Fraud and Tariffs
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David Lennarz: Yeah, food fraud is a different topic, right? If you're intentionally looking to commit food fraud, adulteration, or just plain fraud that's a little more challenging than your average contaminated food sadly, there's a lot of smart people out there who try and purposefully commit fraud and they can be hard to catch.

Matt Regusci: Right.

David Lennarz: And a lot of that is around country of origin and things like that. I think if you want to segue way over into tariffs. I think there's a high likelihood that there will be a lot of fraud committed by companies changing value of products on their invoices to avoid paying tariffs. Super simple. I buy something from you for a dollar 25 percent tariff.

I'm going to tell you to send me an invoice that says it's really, I'm only [00:21:00] paying you 75 cents for it. And then I'm actually going to wire you the dollar, right? It's customs fraud, but it, it happens. And I've spoken to some companies that are very concerned about this in the food industry, because they know of other companies that actually engage in this, that this will, and would certainly happen more as tariffs are implemented.

Matt Regusci: So explain the custom fraud one more time. Just walk through that a little bit slower so that our listeners can get a better grasp of this. And then also, then I want to move into, what do you think about actual adulteration, food fraud that could be happening as well. Corn oil with, or not corn oil. Yeah, corn, some sort of oil that is made to look like extra virgin olive oil or something that is made to look like honey or whatever.

David Lennarz: Yeah. So on the custom side, when a product arrives, a shipment arrives in the U.S., the [00:22:00] importer presents to their customs broker certain documents so that a submission can be made to CBP saying a container of honey from China has arrived in the U.S. And part of one of those documents will be an invoice to have the value of that shipment.

And in the case of a tariff, and there may already be import duties. There are lots of duties already on food products coming into the U.S. And it varies by country, it varies by product. So what Trump is doing or planning to do isn't... it's nothing new. It's just obviously changing the, the percentages essentially.

So a shipment arrives, you're the seller to me, Matt. I give the documents to my customs broker. You invoiced me at 75 cents. And I paid that 25 percent duty on that because it's a new [00:23:00] duty. So that product's costing me a dollar according to what we present to customs. And then I go and sell it on but, you know, I actually still have to pay you the dollar.

Right? Cause you're not going to be as a supplier, you're not going to be willing to adjust your price downward 25%. And so there it's essentially, you've got two invoices. I'm paying one. I show the government and I'm paying duty on that, and I'm paying you on the real one.

Matt Regusci: Wouldn't a simple audit be able to tell the difference though?

David Lennarz: Yeah, but you got to have CBP officials to go in and...

Francine L Shaw: You've got to have people available to do the audit and we just fired all them.

David Lennarz: Yeah.

Matt Regusci: They got fired. Well, I guess some did get fired. A lot of them quit though. A lot of them just quit.

David Lennarz: So now how does it work in how should it work and how certainly will the majority of companies make it work because [00:24:00] customs fraud, this exact fraud is punishable by criminal penalties. So you can end up in jail. How it should work or will work is all of a sudden there's a much bigger duty. And I'm going to say to Matt, who's charging me a dollar for the product. I'm going to say, Matt, I've now got to pay 25 cents on that dollar in new duties because I'm buying it from you from China, and I need you to reduce my price by 15 cents. So then that leaves me hanging for 10 cents increase in the price. I'm gonna bite some of that. I'll say, all right, I'm gonna lose some of the money on this. I'll bite 5 cents of it, and then I'm gonna go upstream to my buyers and I'm gonna say, Hey distributor, you need to share, and you're gonna eat two and a half percent of this, or two, two and a half cents.

And they're gonna go onto the retailer and say, sorry, retailers. You're going to have to pay a [00:25:00] little bit more for this product. So it's not as though tariffs are just going to all land in the consumer's lap. But as we know, the food industry is a very low margin business, especially when you get to the retail level.

And the bottom line is, the entire supply chain is going to be impacted.

Francine L Shaw: In essence, it's not a whole lot different than the, and this is very common in the food service industry, where restaurants will keep two separate sets of books, one for the IRS, and then one that they keep for themselves when they try to sell their business, which doesn't always work for the banks. So, very similar.

Legal Implications and Consumer Impact
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David Lennarz: Again, it's against the law. It's this is nothing new. So it really takes someone who's willing to break the law that's going to engage in this. And there certainly are folks out there, but for the most part, players are going to be honest. I do think that it will [00:26:00] impact pricing at the consumer level.

I don't think there's any question about that. And I think the fallacy is they're not going to be buying an American grown avocado, right? There's just not enough. The volume isn't there, the production isn't there and won't be. So... so I think some industries will suffer and that's going to be one of the effects of tariffs.

Avocado Industry Challenges
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Matt Regusci: Just to give some context in Michoacan alone in Mexico, there are 30, 000 growers. that are in like one or two, three associations that provide us avocados all year round. And that's also a crazy business because it's run by the drug lords. It's really hard to get in there and do a lot of stuff, but the amount of avocados consumed by Americans is so much that...

Where I used to live in California, half the hills at least are used in avocado production. And it's still not enough for the consumers of the United States. So yeah, it's crazy. Sorry.

Francine L Shaw: I live in Pennsylvania. I can't plan an avocado tree. [00:27:00]

Matt Regusci: You just plant a cow. Is that right? But that's the plant based meat.

David Lennarz: You got to go with apples.

Francine L Shaw: Yeah, really. Apple.

FDA Changes and Business Impact
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Francine L Shaw: So how do you think with the resignation of Jim Jones and the cuts within the FDA, will that have a positive impact on your business?

David Lennarz: Well, it's...

Francine L Shaw: Will it not impact your business at all?

David Lennarz: The bottom line is with two things. One, I think it's a little early. We don't really know.

I think it's safe to assume there's more change to come. All right. Kennedy's only been in a week. Right? So, secondly, it's interesting because. I think we'll see some work around, obviously, healthy products. So what could that mean? That's one of his stated goals, right? Right. Make America healthy again. So, front of package [00:28:00] labeling, right?

That's proposed already. Probably a great idea. I would love to have seen the U.S. Adopt the European model where it's even simpler to tell whether a product is good or bad for you. But I think this is a step in the right direction because it dumbs it down to a high, medium, low sort of standard around the key things that impact our health, like sodium and sugar and fats.

Right. And so having that front and center. On a product for consumers who are pretty lazy and aren't going to flip the thing around and really try and understand what's in that product. I think that's a good thing. Would that be great for our business? Absolutely. It literally means millions of products, labels change, right?

So...

Matt Regusci: You're right.

David Lennarz: We do thousands [00:29:00] of product reviews a year. We would be crazy busy.

Matt Regusci: But if anybody needs a job. Go to David Lennarz's LinkedIn page.

David Lennarz: That's right. We'll train you. So I think that's one area.

Dietary Supplements Regulation
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David Lennarz: I think another area that has long been under regulated, I would still call it the Wild West, is dietary supplements.

Yes. The dietary supplement industry, as we know is very large in size, significant, and I think that there could be movement towards finally getting a little more regulation around actually what are in the supplements that thousands, millions of Americans consume every day. There's two parts to that. One part is what they say is in the product. And you gotta know that. And right now, FDA doesn't know [00:30:00] that there's no place they capture that.

And then secondly, is it actually in the product at the percentages that a company says that are actually, you know, safe, right? So step one is getting dietary supplement listings required. And that's similar to drug products, medical devices to cosmetics, which came into force two years ago. There was the omnibus budget bill, which included both cosmetics and dietary supplements.

At the last minute, dietary supplements were stripped out of it. But there has been a call for more strictly regulating dietary supplements for many years. And this, to me, really a partisan issue. This is a safety issue, and I think we [00:31:00] could see under RFK a push towards stronger regulations around dietary supplements.

Francine L Shaw: I think for me, what it is even more concerning is that the average consumer doesn't even understand that they're not regulated.

David Lennarz: Yeah, a hundred percent.

Francine L Shaw: And

David Lennarz: 100%. And I think, yeah, I just actually saw an article today in Fortune Magazine about this online version about how certain supplements have been linked to liver disease.

And one of the comments in the article was that most consumers think that FDA approves dietary supplements. FDA approves very few things. They approve pharmaceutical drug products, and they approve certain medical devices, and they approve or review certain new dietary ingredients, new ingredients. So for their, the generally [00:32:00] recognized as safe new food ingredients.

Matt Regusci: They do regulate one more thing, which is claims. So if you're a dietary supplement and you don't put any claims on there and it's just a bunch of sugar and baking soda, the placebo effect could be strong and the FDA really isn't going to check any of that. If you then put on your package that this product cures cancer, the FDA will be on that like white on rice.

David Lennarz: Agree, but this is the problem because this is where the issue lies is that again, FDA doesn't know what's in that product. And obviously if you're literally doing what you just said, that's also just fraudulent. People don't expect to be buying sugar and flour or whatever in a supplement. They actually expect it's going to have something that is beneficial to them.

Francine L Shaw: And consumers think if you can buy it on the shelf at Walmart or at Target or order it through Amazon, that it's safe. And you know, it may not be, you don't know. [00:33:00]

David Lennarz: 100%. And then the second part of it is again, not only do you... Step one is to understand what the products are, who's producing them, right?

Because right now, all a dietary supplement company needs to do is register their facility with FDA. They don't have to say what they're producing in that facility. They don't have to submit a label. They don't have to submit the ingredients that are going in the product, right? Step one is require at least to know what's in the product.

Step two is you got to do testing. You've got to have some testing around products and to actually see if what is claimed to be in it is actually in it in the, in safe percentages. So we'll see if Kennedy moves in that direction at all. It again, there's been legislation almost every year. For the last 10 to 15 years around stricter regulation of dietary supplements, [00:34:00] but every time it comes up, it doesn't, you know, move forward in Congress to actually end up becoming law.

Matt Regusci: And the lobby's just super strong, aren't they?

David Lennarz: It's not honestly that unlike what we see with the vape industry. The vape industry came on so strong, so fast that FDA was really just caught flat footed and there wasn't a political willpower to regulate it. And by the time there was even talk around regulating it, it was a multi billion dollar industry with thousands of players and an incredibly strong lobby.

So here we are today with the vape industry, largely unregulated.

Matt Regusci: Surprised and shocked that the tobacco and nicotine lobby is strong. They've been strong before it was even a thing to have a ton of money being spent into buying off politicians. Tobacco industry was. I think George Washington [00:35:00] was part of that. That's how long that industry is.

David Lennarz: That's because he was growing this stuff.

Matt Regusci: That's because he was growing it. Conflict of interest though.

Francine L Shaw: 40 minutes into it. And that's the first sarcasm. You've done so well.

Matt Regusci: Oh man, it's crazy.

Food Industry Regulations and Tariffs
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David Lennarz: So let me touch on where I think other changes back to the new administration, where might FSMA go, right? The one main component out there, Matt, that you are very close to and know very well is, you know, section 204 around traceability.

Matt Regusci: Yeah. So FSMA 204 is the new traceability rule that the FDA rolled out. Under Frank Yiannis. My former partner, Andy Kennedy, and I started a company called New Era Partners a while ago that we connected with iFoodDS, iFoodDS owns New Era Partners, and you and I had multiple conversations about working together on that because you work with a whole lot of those companies that would be part of FSMA [00:36:00] 204.

So just wanted to give some context about this before you launch into what you think is going to happen when there, because that will be interesting. Is that rule going to actually happen on January 20th, 2026?

David Lennarz: I think not.

Matt Regusci: That. I don't think so.

David Lennarz: There you go. There's my prediction, but I will say this. We should have more insight into this in the next 60 days.

So I will refrain from a definitive opinion. But I think in the next 60 days, I'll probably be ready to give a definitive opinion. I think that there's a high likelihood it will just be further delayed. We saw last week, Food Marketing Institute came out. Their chief scientist or chief food safety person came out in a letter and said, it's a great thing 204, but none of us are ready and this is going to be impossible to put in place by the deadline. And so all it's going to take is enough effort from [00:37:00] associations like that, large food companies to say, we're just inundated with requirements. This is one that's going to be expensive. It's complicated, incredibly complex. We're going to need some extra time.

Give us a couple more years.

Francine L Shaw: Do you feel like with all the changes that are being made within the new administration that companies are going to need more support from private consultants and things of that nature being that there. Because regardless of what happens with regulatory, if they want to export their goods, they still need to follow regulation.

David Lennarz: Yeah, I don't see anything. Those tailwinds aren't changing. But whether you're a democrat or republican, whether you're trying to get rid of regulations or whether you're willing to add new [00:38:00] ones, bottom line is just like we all count on the FAA to make sure when our plane takes off, we're going to land safely.

It's not that different for food. There are certain things that are sacred in what we do that we would all really have serious concern if things like the FAA went away or FDA went away. This impacts us at our core well-being, and I'm not saying there aren't other agencies out there that don't perform incredible missions.

But I think that when it comes to things like our safety, we're all aligned there, right? We all want safe products. And look, if you're a Trump Administration and want to have more products produced in the U.S., one of the things you're going to do is make sure that the products that are coming from [00:39:00] overseas truly are safe and have any kind of barriers, whether it's a tariff or whether it's a safety requirement, that's a way to support your goal of having more products produced here.

We're never going to stop importing products. Yeah, right. Our store shelves would probably you'd see about half of the products on a store shelf because even though a base product that you think could be made here, the problem is there are ingredients to make that product. Sure. Right. But it's made with five different ingredients coming from three different countries.

Francine L Shaw: And it's not just the ingredients, but you've got the packaging and you've got all of these other components that have to come from somewhere. The machinery that it takes to make the packaging and that it's just so widespread. There's so much more than just what you immediately think about.

David Lennarz: And steel that trickles right down to the food industry as well.

What do we think? A [00:40:00] third of the products that we consume are maybe 25 percent depending on your diet are in a can and the price for producing cans absolutely will go up. And what does that do? That passes on to the food. Manufacturers got to buy that can to put the peaches or green beans in, and that increases their cost, which impacts us at the retail level as well.

It certainly will trickle up to us as consumers.

Matt Regusci: And to your point, I think some of the people listening might not even know that ongoing long term tariffs, not the ones that have just been implemented by Trump, have been in existence in the food industry since the beginning. And the easiest one to track, which I think a lot of people could understand, is sugar.

The reason why our corn industry is the way the corn industry is because of a lot of things. One is the corn lobby is amazing and we have huge tariffs on [00:41:00] sugar. And that's why we have so much corn syrup and everything. Is because corn syrup is a cheaper version because of the tariffs. I don't know if it would be cheaper if we didn't have tariffs on sugar.

And that's why we have corn syrup and everything. Another way in which our government uses regulations to create tariffs is by, for instance, creating corn ethanol. And so now you have a lot of land that would be used for food is now being used for fuel in a country in the United States where we have like one of the top four or five reserves in the world.

There's a lot of things that happen in the food industry that drive prices to increase. By, not just by tariffs, but by regulations that are fascinating.

David Lennarz: Well, I think another example that a lot of folks are probably not aware of, the seafood industry. And it's not just seafood, but I'll use seafood as an example.

In addition to just tariffs, there are also anti [00:42:00] dumping duties around a lot of products. These are taxes on commodity specific items, like certain fish, that are clearly being produced and dumped on the market at prices that theoretically are below what it would even cost to produce them. And there are duties that are put on those products.

That's part of the job of our government is to look at what products are being dumped here and to institute duties on those.

Matt Regusci: The Florida Tomato Association is constantly talking about Mexico dumping tomatoes on the market, and it just happens to be that poor Florida has the exact same season for tomatoes as Mexico does.

And so they're, yeah, anti dumping is a fascinating.

David Lennarz: Yeah, so that's something, to your point, that's been around a long time. [00:43:00] That's not a new thing. And again, lots of products have had just normal tariffs on them at some level. Yeah. There are obviously...

Matt Regusci: We also have the, and this started back during the great depression that people don't know as well as the food industry, particularly the agricultural industry is the... I think the only industry that is allowed to collude in the United States. In fact, not only are they allowed to collude, but the government provides money for collusion. And what do we mean by that is everybody's heard of the farmers getting paid to lay land fallow. Why is that? Because they want to drive the prices up to a profitable level so that farmers don't go out of business, which was awesome back when what, like 80 percent of our population were farmers?

But now it's like 1 percent of our population are farmers. And so we're paying to lay land fallow. So the products are more expensive so that we don't have that anti [00:44:00] dumping, but in the United States, so we're not creating so much product in the United States that the price is driving down to decrease profitability.

So yeah. Very complex, our food industry. It is.

Future of Food Safety and Inspections
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Matt Regusci: So I know for time, cause you only have a few minutes left here, but I really want to know over the last 22 years of Registrar Corp. So you started off registering people. So you've been in this for a very long time. What is the biggest thing that you have seen change in the industry via like the FDA stuff? What is the biggest thing that you've changed? And the second question is moving forward because we have so much change is happening right now. If you were the soccer of food safety and let's say RFK Jr. said, David, I love the work that you've done over the last two decades.

You are my man and I will allow you to do whatever you want. What would be the thing that you would change?

David Lennarz: Yeah. So to your first question, what's changed the most? I [00:45:00] would say there, believe it or not, I think there is a lot more transparency, you know, just through FDA's databases than say 20 years ago. So that's a good thing.

Secondly, what would I do? I think the most important place to put resources is on the front line. When we talk about recalls and food safety issues, what you don't want to be cutting, but where you want to double down on is the number of inspectors and investigators. FDA was faulted recently for falling way short around the number of drug facility or drug establishment inspections that they were mandated to do by Congress.

Yeah, just didn't get them done. And their answer is we don't have the resources. It's not that dissimilar in food. And so I think that [00:46:00] I would really focus on getting people trained up and out in the field. A lot of this is done currently. I would make sure it continues is how do you build an inspectional force quickly is you utilize experts at the state level, right?

Most states have their Department of Ags and in their Department of Ags, they have a food safety inspection service or equivalent utilizing those folks. Secondly, there's existing regulations that allows FDA to utilize foreign governments inspectorates. Okay, so, look, European Union has a very robust food safety system, far more, frankly, I think, than the U.S. They have teams of people that are capable and they are going out to the companies in [00:47:00] their country. And that information just isn't necessarily being shared or put into a kind of a format that is shareable for FDA to utilize. But right there, it ramps up your ability to really control products at origin, which is where most of the issues start.

Matt Regusci: 100 percent agree. I think Francine and I both have been nodding our heads. For those that follow Francine and I on LinkedIn know that 100 percent that we folks did a lot of stuff on like, why are we dropping 37 million from state budgets when they're your frontline inspectors, it just makes zero sense and the multiplier effect of those people as well, because they're, um, they're significantly less expensive than the FDA full-time employees, they already live there, so it’s not like they’re traveling around to do these things.

David Lennarz: Yeah, so it saves tax dollars.

Matt Regusci: Yes.

David Lennarz: So, yeah, I [00:48:00] think that to me is the single most and again, maybe we'll see under RFK, maybe the new commissioner who will almost certainly be. nominated to lead FDA next week. We'll come in or maybe it's even this week. We'll come in and say, yeah, we need to double down on frontline stuff. This is the most important thing.

We shall see.

Matt Regusci: We shall see.

Conclusion and Final Thoughts
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Matt Regusci: Well, thank you, David. Anything else, Francine, before we let him go?

Francine L Shaw: I don't think so. Thank you so much.

David Lennarz: Absolutely. Good to see you both. And we'll see you out and about at some event, I'm sure, in the future.

Matt Regusci: Positive. Okay, and David, before you go, we have some advice for you. Don't eat poop.