Know the Risks: From Farm to Fork - Navigating the New FDA Traceability Requirements for Food Companies

In this edition of "Know the Risks," my conversation with Lisa Hartkopf explores the latest developments in food traceability requirements and the actions companies must take to comply with recent regulatory changes such as the FDA's Food Traceability Final Rule under the Food Safety Modernization Act (FSMA).

The industry faces significant challenges in adapting to these changes, with varying levels of maturity across different supply chain nodes. Organizations are now required to track their supply chain one step back and one step forward, tracing the origin of ingredients and their distribution. Non-compliance could lead to severe consequences, including operational shutdowns and civil penalties.

Read our full conversation below to understand how companies can tackle this issue and learn the importance of tech-enabled traceability not only for compliance but also for improving overall food safety and supply chain management.

Food safety is a top risk for food and beverage consumer packaged goods (CPG) companies. How are organizations adapting to meet current food traceability requirements?

Lisa: Today’s food traceability requirements mandate that organizations track the supply chain one step backward and one step forward. From a manufacturing perspective, this means tracing the origin of ingredients and tracking where they are sent. Companies need to capture essential data, such as quantity received, date received and supplier information.

While these are basic requirements, many organizations are still handling them through manual data entry when receiving or shipping products. Despite the availability of technologies like radio-frequency identification (RFID) readers and advanced shipping notices (ASNs), there has been sporadic adoption of these tools for electronic data transfers between companies.

Food traceability plays a critical role during product recalls. Could you provide insights into the recent regulatory changes and their impact on the industry?

Lisa: When it comes to recalls, companies often find themselves scrambling to locate the affected product. If the product is still within the company’s network — such as in a warehouse or distribution center — it can typically be found quickly. However, if the product has left the network, companies may struggle to track it due to insufficient information, taking from a few days to several weeks to fully reconcile a recall. Finding the last few cases can take weeks and with food safety, reconciling down to the very last item is critical if there’s potential for food borne illness.

On January 20, 2023, the Food and Drug Administration (FDA) released a final rule on requirements for additional traceability records for certain foods, known as the Food Traceability Final Rule, i.e., Section 204 of the Food Safety Modernization Act (FSMA). Companies must comply by January 20, 2026. This rule strengthens existing traceability requirements for products identified as high-risk to consumers.

For each critical tracking event (CTE) — which includes receiving, shipping and any significant product transformation (e.g., mixing, baking or commingling) — companies must capture key data elements (KDEs). These include the shipment date, quantity, location, batch number, shipping address of the last known product location and a contact number for that location. Additionally, a traceability lot code (TLC) must be maintained to connect information across the supply chain. This lot code must be preserved until the product is changed or transformed, ensuring connectivity.

Foods included on the FDA Food Traceability Final Rule’s food traceability list (FTL):

•       Fresh fruits

•       Fresh vegetables

•       Fresh herbs

•       Shell eggs

•       Fresh/frozen seafood

•       Nut butters

•       Ready-to-eat salads

•       Pasteurized and unpasteurized milk

•       Cheeses: fresh, soft, semisoft and unripened cheeses

 Organizations will be required to respond to the FDA within 24 hours with any requested information in an electronically storable spreadsheet.

Exemptions to the FDA rule*

•       An economic annual sales revenue that is less than $250k.

•       Any entity involved in a supply chain where the FTL product is frozen, freeze-dried, dried or a “kill step” is applied to reduce the presence of microorganisms.

•       Farms that sell directly to the consumer.

•       Farms that grow but do not harvest raw ingredients.

•       Retailers with less than 10 FTE.

•       Farms with average revenue of less than $25,000 on three-year rolling basis.

* Additional exemptions may be applicable based on the nature of operations.

The new rule could render the company’s current supply chain systems obsolete or non-compliant if they are unable to meet the detailed requirements for newly identified high-risk foods under the traceability regulations. Non-compliance could result in operational shutdowns, disruptions, reputational damage and potential civil penalties from the FDA.

The recent changes in food traceability regulations seem significant and could lead to end-to-end process re-engineering. How challenging is it for companies to comply and what is the current maturity level across the industry?

Lisa: This regulation applies to all entities involved in the manufacturing, processing, packing and holding of foods listed on the FDA’s FTL that are consumed in the United States. Companies are adopting different strategies to comply with this regulation. Some are implementing processes across all their stock-keeping units (SKUs) throughout the entire supply chain, covering all ingredients and products. Others are taking a more gradual approach, focusing only on the SKUs or plants affected by the FTL.

Compliance presents different challenges across the supply chain.

Harvesters/retailers: Harvesters, at the start of the food chain, and retailers, at the end, primarily face data management challenges. They need to develop better technology or platforms to record all relevant shipping and receiving information. For instance, a grocery store receives materials from numerous suppliers, leading to significant data variability, e.g., each bill of lading, invoice and packing slip might have different fields. Integrating this data across all suppliers is crucial for effective management of KDEs.

Manufacturers: Traceability in manufacturing is particularly challenging due to both food transformation and data management complexities. Continuous manufacturing lines make it difficult to maintain consistent batch tracking, especially when products are transformed or commingled mid-process.

Centralized kitchens: Centralized kitchens can increase efficiency but also add complexity in terms of traceability as KDEs for the transformation and shipping CTEs must be tracked. Products made on-site and sold directly to customers don’t require further traceability, simplifying the process by eliminating the need to track transformation or shipping.

Looking ahead to 2025, what advice would you give companies regarding food traceability compliance?

Lisa: Timeline to adoption is short; January 20, 2026, is fast approaching.

Start now if you haven’t already begun. There is a lot of work to be done across all nodes of the supply chain, not just within the organization but throughout the entire ecosystem. It’s important to understand what your suppliers, both upstream and downstream, are doing to enhance traceability. Companies need to grasp the full scope and complexity of the supply chain.

Additionally, the FDA may expand the FTL in the future. The current list is limited and there’s still a long way to go before full compliance is achieved.

My take:

The new requirements outlined in the final rule will enable quicker identification and swift removal of potentially contaminated food from the market, thereby reducing the incidence of foodborne illnesses. Currently, the regulation is limited to certain food products, but the FDA may expand the FTL in the future. The sooner companies start adapting their supply chain processes in key activities, the better prepared they will be to meet these requirements.

Traceability is vital in a modernized food system. While the necessary technology exists, many companies are still relying on manual processes and have yet to adopt technological solutions on a broad scale.

What are the risks? Failure to comply with the rule could result in discontinued operations, operational disruptions, reputational damage and potential civil penalties from the FDA.

What’s the action? The train has left the station and there’s no turning back. Regulation will continue to shape the food industry.  Companies must establish processes to effectively remove harmful products from the market. Beyond meeting regulatory requirements, the FDA has highlighted technology-enabled traceability as a cornerstone of their Smarter Era of Food Safety initiative. Companies have recognized that tech-enabled traceability can help reduce risks, protect their brand, improve inventory management and enhance reporting.

Compliance with these regulations is a top priority for food companies. They should view this as an opportunity to transform their processes, as change is inevitable.

The views reflected in this article are the views of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.