Food Fraud Quick Bites - What Is on the Food Fraud Horizon?

https://foodsafetytech.com/column/what-is-on-the-food-fraud-horizon/

People like to ask “what is the next melamine?” Of course, this is an impossible question to answer. However, methods of perpetrating food fraud are rarely novel. Even melamine had a history of use in feed products for nitrogen enhancement.

Examples of recurring food fraud in recent history include:

Herbs and spices: High-value commodities, especially when sold in dried, flaked or ground form, have been targets of fraud for ages. Although recent work looking specifically at oregano shed new light on the problems in that particular herb, the group as a whole is long known to be prone to substitution with other plant material and addition of dyes to improve color. Lead chromateand lead oxide have both been used in spices to add color. A recent study in the United States conducted testing on spices recovered from the homes of children diagnosed with lead poisoning and determined that some lead poisoning cases can be attributed to high levels of lead in spices consumed by children.

Milk: Milk has been repeatedly prone to the addition of protein-mimicking compounds such as urea, the addition of other fats such as vegetable oil, and the addition of preservatives such as formaldehyde. Melamine addition to milk discovered in 2008 was not entirely novel. The addition of melamine to artificially enhance the apparent protein content of a product was documented in scientific papers in the 1980s.¹

Meat: The two main concerns with meat fraud are species substitution and misrepresentation of production practices. The recent scandals involving horse meat and sick cows slaughtered for meat illustrate the continuing incentive to substitute less expensive species and to misrepresent the production practices of meat.

Liquor: Alcoholic beverages are also a high-value target, especially if they are a popular brand. Counterfeit alcohol is a common form of food fraud cited in the Food Fraud Database. Unfortunately, the use of methanolin unregulated liquor production repeatedly results in illnesses and deaths in consumers.

What forms of food fraud will be common in the coming years? Millennials reportedly place value on sustainability, convenience, high protein, and production practices such as organic and “local.” Verifying claims around production practices through long food supply chains is notoriously challenging. Increasing interest by consumers in these types of label claims may increase this type of fraud in the future.

Reference

1. Bisaz, R., and A. Kummer. “Determination of 2, 4, 6-triamino-1, 3, 5-triazine (melamine) in potatoe proteins.” Mitt. Gebiete Lebensm. Hyg 74 (1983): 74-79.

UK government offers no-deal Brexit advice to food companies

The UK government has issued advice to the country's food producers in the event of the country leaving the EU on 29 March without a trade deal.

The Government's guidance covers areas such as importing and exporting, food labelling, marketing standards and employing EU nationals.

The advice was published today (13 March), following the vote in the House of Commons last night in which UK Prime Minister Theresa May's Withdrawal Bill was defeated by 149 votes. The defeat makes a no-deal Brexit a real possibility.

The guidance on importing and exporting includes prompting businesses to get a UK Economic Operator Registration and Identification (EORI) number so they can continue to import or export goods and apply for authorisations.

The Government also advises businesses decide if they want to hire an import-export agent, or make the declarations themselves. It suggests companies contact the organisation that moves their goods (for example, a haulage firm) to find out what information they need to make the declarations for those goods, or if they will need to make them themselves.

On labelling, the Government says the rules for what producers must show on food labels will change for some food and drink products if the UK leaves the EU without a deal.

The changes include country-of-origin labelling, food business operator (FBO) address labelling, use of the EU emblem, use of the EU health and identification marks, use of the EU organic logo and use of the geographical indication (GI) logo.

On marketing standards it advises some of the processes food producers follow will change if the UK leaves the EU without a deal. Products that may be subject to changes include fruits and vegetables, beef and veal, eggs and poultry meat.

On employing EU workers, the Government guides that if the UK leaves the EU without a deal, citizens from the bloc who are resident in the UK before 29 March 2019 will be able to apply to the EU Settlement Scheme to get settled or pre-settled status, which will mean they can continue to live, work and study in the UK.

If the UK leaves the EU without a deal, there will be a new process for EU citizens arriving in the UK before 31 December 2020. From 1 January 2021, a new skills-based immigration system will launch.

https://www.just-food.com/news/uk-government-offers-no-deal-brexit-advice-to-food-companies_id141131.aspx

Study shows surprising environmental impact of organic farming

Growing organic crops takes a bigger toll on the environment than growing crops conventionally, according to a study [ https://www.nature.com/articles/s41586-018-0757-z ]  published recently in the journal Nature.

The impact stems from the fact that more land is typically required for organic growing—something that really shouldn’t be all that surprising, according to researcher Stefan Wirsenius, an associate professor at Chalmers University of Technology in Sweden and one of the study’s authors. Still, however, for many, the research results were unexpected and alarming.

“People have been not only surprised, but also rather upset, even angry,” says Wirsenius. “Quite a few have seen it as an ‘attack’ on organic farming. Our research just points out something that should be very obvious: that using more land for the same output, which organic farming does because of its lower yields per area, has consequences in terms of carbon storage.

“Our study,” he continues, “shows that organic peas, farmed in Sweden, have around a 50% bigger climate impact than conventionally farmed peas. For some foodstuffs, there is an even bigger difference. For example, with organic Swedish winter wheat, the difference is closer to 70%.”

The researchers developed a new metric called “Carbon Opportunity Cost” to use in their assessment of environmental impact. Wirsenius explains that when land is converted from forest to farmland, the deforestation means that carbon stored in the previously existing forest is converted to carbon dioxide, which increases atmospheric carbon dioxide levels. What’s more, the researcher says, by continuing to use land for agricultural crops, the opportunity for carbon storage that could be achieved if the land were allowed to revert to forest is lost. According to Wirsenius, existing methods for assessing the climate impacts of different land use fail to consistently account for the effects of carbon storage.

“What I hope that people would take home from this research is that there is almost always a carbon storage cost of using land, regardless of purpose,” he says.

https://www.nature.com/articles/s41586-018-0757-z

Brexit - Litigation Risk for the Food and Beverage Industry?

AUTHOR(S): Michael Finn Partner – Dublin michael.finn@matheson.com

PRACTICE AREA GROUP: Commercial Litigation and Dispute Resolution, Food and Beverage

The food and beverage industry, Ireland’s largest indigenous sector, is currently facing into an unprecedented challenge with the UK’s imminent departure from the EU. The UK market is by far the most important export market for this sector with an export value of €4.4 billion (1). The precise impact Brexit will have, and the opportunities it may present, is unclear..

The withdrawal agreement (2) envisages specific provisions for the food and beverage industry at the time of the UK’s exit from the EU, but this, of course, is subject to that agreement being adopted.

As is well publicised, Ireland’s food and beverage industry has been contingency planning for some time in the event that the withdrawal agreement is not adopted. Notwithstanding these contingency plans, there is an increased litigation and regulatory risk for this sector as a direct result of Brexit. For example, the sector may be facing an increased risk of contractual disputes between supply chain partners or logistics service providers as a result of delays at custom points.  For those in the industry whose contingency plans involve the stockpiling of certain essential goods or materials, there is an increased risk of disputes with insurers (aside from the increased exposure to theft or fraud) in the event that insurance cover is not increased to take account of the additional stock and there is a loss. Directors and officers should also bear in mind that they are at increased risk of potential litigation from shareholders stemming from the level of contingency planning for Brexit.

There is also exposure to potential disputes or regulatory investigations over compliance with the post-Brexit regulatory requirements in the UK.

What happens in the event of no-deal?

The UK government has published a number of technical notices to UK food and beverage producers which provide guidance in the event of a “no-deal” scenario. While these notices are addressed to UK producers, they do however offer some guidance for Irish producers.

The key areas focused on in these notices are:

• geographical indications (“GI”);
• export and import of animal products;
• labelling; and
• tariffs and customs duties.

GI

A GI is a sign or labelling placed on products that have a specific geographical origin and as a result possess certain qualities, characteristics, or reputation attributable to that particular place.  A notice published on 5 February 2019 (3) indicates that the UK will have its own GI scheme that will mirror that in the EU, ie using the same classes provided by the EU scheme.  UK producers will have three years to comply with the UK GI logo scheme.  The notice states that Irish whiskey, cream and poteen produced in Ireland will have EU and UK GI protection and will not be required to apply for further protection.  UK producers will have to reapply to the European Commission in order to regain EU protection and the right to use the EU GI logo.

Export and Import of Animal Products

The UK Government has stated that in the event of a “no-deal” withdrawal, the health and identification marks required on the labelling of animal products produced in the UK must be updated, removing EU references (4).

Labelling

Unless the EU and the UK reach an agreements in advance of 29 March 2019 whereby both recognise each other’s standards, the EU emblem must be removed from products produced in the UK, and the EU organic logo must be removed on organic products produced in the UK.  References will also need to be removed from all food and beverage labels, including products where some ingredients are made in EU countries (5).

The food and beverage industry will also have to consider any UK legislation that is enacted in relation to labelling and whether current EU labels would be compliant.  If the UK enacts legislation that is not in compliance with EU laws, and further if current EU compliant labels are prohibited by such legislation, producers will have to modify labelling of products being sold in the UK market.

Any product that have been placed in the UK market on or before 29 March 2019 will be acceptable to be sold until those stocks are exhausted, regardless of whether the labelling complied with UK legislation.  The European Commission has published guidance in relation to the concept of goods placed on the market prior to the withdrawal date (6).  This publication also offers guidance in relation to considering whether goods will be subject to the payment of imports and export tariffs and duties.

Tariffs & Custom Duties

The UK Government also states (7) that customs and excise duties, and declarations that apply currently between the UK and non-EU countries will cease to apply between the UK and the EU from 30 March 2019.  Trade will therefore be on the default World Trade Organisation terms, which are often significant for food and drinks products.   The WTO's "most favoured nation" rule provides that the UK cannot simply lower these tariffs for the EU, or any other specific countries, unless it agrees a trade deal with that country.  For UK food and beverage producers exporting to the EU, the tariffs will be on average 35.9% on dairy products, 15.5% on animal products, and 21.1% on sugars and confectionary.  Lower tariff rates are set on cereals, fish, and fruit and vegetables (8).

There will be further logistical difficulties in the event of a “no-deal” Brexit, when exports and imports will be required to cross border control points and deal with further administrative burdens.  On top of the payment of VAT, customs and tariffs, and paperwork requirements, product checks such as veterinary checks will have to be carried out.  It is also possible that Irish cargo travelling through the UK by land, on the way to the EU, will have to go through two custom controls, when entering the UK and when leaving the UK to enter the EU. This will greatly increase the cost and time for importing and exporting food and drink produce, especially as such delays will impact the short shelf life of these products.

What happens in the event of a negotiated exit?

In the event that the UK does ratify a withdrawal agreement prior to 29 March 2019, there is likely to be a transition period during which the laws of the EU will still apply to the UK.  This would likely be the best possible outcome for the industry.  This transition period may be in place until 31 December 2020, and may be extended further.  During this period EU law will apply to and in the UK.  Further, if a backstop is agreed upon, a single customs territory between the EU and the UK will be created during the transition period, which shall apply until an agreement has been reached following 31 December 2020.  If no such agreement can be reached, the provisions set out in the withdrawal agreement shall apply following the termination of the transition period.

For the food and beverage industry this means that the current status quo will be maintained, and it will not be until 2021 when changes will be seen in relation to food and drink legislation and labelling, and customs and excise duties.

The Irish Government has published a contingency plan in the event of a “no-deal” Brexit, in the form of a Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Bill 2019, and a Brexit Contingency Action Plan (9).  The Bill provides for amendments to existing legislation that will be required in the event of a “no-deal” Brexit.  The contingency plan offers some guidance to Irish citizens and industries, and sets out steps being taken by the Irish Government that are relevant to the food and drinks industry.

For example, the Government is increasing staffing and ICT systems in Revenue and at ports and airports, including veterinary staff, to ensure that any necessary infrastructure will be in place and operational by 29 March 2019 in order to reduce delays expected as a result of import and export controls.  The Government is also considering the disruption to the so-called land bridge that is used by Irish importers and exporters to transport goods through the UK to international markets, and locating new routes that could be used following Brexit.  Further, the EU has confirmed that the UK can join the Common Transit Convention.  This reduces the requirement for additional customs checks for goods passing through one country on the way to their final destination in another.  This will hopefully enable Irish carriers to continue using the UK as a route to continental Europe, and offers some certainty for carriers focused on this route.

Summary 

Whether the UK will leave the EU on 29 March 2019 and be it with or without a withdrawal agreement, or whether the Brexit process will be extended, remains uncertain.  However, it is clear that the impact of any of these scenarios will be felt by the Food and Beverage industry.  This will be seen in all aspects of production and trade from ingredients, labelling, distribution and customs checks, insurance and the payment of tariffs and excise duties.  Certainly, the ratification of a withdrawal agreement would provide certainty.  However, the food and beverage industry should be prepared in either event, to adjust current trading patterns, plan for increased costs, consider potential UK legislation regarding packaging and labelling, and also potential litigation as a result.

This article was co-authored by Senior Associate, Aoife McCluskey.

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1. “Brexit – the challenge for the food and drink sector” https://www.fooddrinkireland.ie/Sectors/FDI/FDI.nsf/vPages/Key_pillars~brexit/$file/Brexit+-+the+challenge+for+the+food+and+drink+sector.pdf
2. https://ec.europa.eu/commission/sites/beta-political/files/draft_withdrawal_agreement_0.pdf
3. https://www.gov.uk/guidance/protecting-food-and-drink-names-if-theres-no-brexit-deal
4. https://www.gov.uk/government/publications/importing-animals-and-animal-products-if-theres-no-brexit-deal/importing-animals-and-animal-products-if-theres-no-brexit-deal
5. https://www.gov.uk/government/publications/producing-and-labelling-food-if-theres-no-brexit-deal/producing-and-labelling-food-if-theres-no-brexit-deal
6. https://ec.europa.eu/info/sites/info/files/qa_brexit_industrial_products_en.pdf
7. https://www.gov.uk/government/publications/trading-with-the-eu-if-theres-no-brexit-deal/trading-with-the-eu-if-theres-no-brexit-deal
8. https://www.wto.org/english/res_e/booksp_e/tariff_profiles18_e.pdf
9. https://www.dfa.ie/media/dfa/eu/brexit/brexitcontingency/No-Deal-Brexit-Contingency-Action-Plan-December-

EC Publishes 12th Amendment to the Plastics Regulation

The European Commission published the 12th amendment to the Plastics Regulation (EU) No 10/2011 on January 11, 2019, in the Official Journal of the European Union.  This amendment, Commission Regulation (EU) 2019/37, adds new substances to the list of substances that may be used in food contact materials (also referred to as the positive list or the Union list), makes corrections to pre-existing substances on the positive list, and clarifies what food simulants should be used for the overall migration testing of milk products.

Based on favorable scientific opinions from the European Food Safety Authority (EFSA), the Commission added the following substances to the positive list in Annex 1 of the Plastics Regulation:

• Poly((R)-3-hydroxybutyrate-co-(R)-3-hydroxyhexanoate), which is a biodegradable (co)polymer obtained from microbial fermentation used in the manufacture of packaging articles intended to be in contact with whole fruit and vegetables;
• Dimethyl carbonate as a monomer; and
• Isobutane as a foaming/blowing agent only.

Commission Regulation (EU) 2019/37 will enter into force 20 days after publication in the Official Journal of the European Union (i.e., on January 31, 2019) and it includes an exhaustion of stocks clause.

La UE ultima la aprobación de la Directiva sobre prácticas desleales en la Cadena Alimentaria

https://mailchi.mp/cms-asl.com/alerta-productos-de-consumo-novedades-enero-2019-2133233?e=ade680c64d

El Parlamento Europeo ha dado luz verde a la negociación final de la propuesta de Directiva Europea relativa a las prácticas comerciales desleales en las relaciones entre empresas en la cadena de suministro alimentario (la propuesta de Directiva), que tanto revuelo está causando en el sector. 

Mediante esa Directiva, la Comisión Europea (CE) propone prohibir las prácticas comerciales desleales más perjudiciales en la cadena de suministro con el fin de garantizar “un trato más justo para las pymes alimentarias agrícolas”. 

En particular, la Directiva contempla la prohibición de (i) las demoras en los pagos de productos perecederos, (ii) las cancelaciones de última hora, (iii) las modificaciones unilaterales o retroactivas de los contratos y (iv) la posibilidad de obligar al proveedor a hacerse cargo de los gastos de los productos perdidos. 

Además, otras prácticas solo se permitirán si están sujetas a un acuerdo previo, claro y sin ambigüedades, entre las partes. Entre otros, que el comprador devuelva productos alimenticios no vendidos al proveedor o que cargue al proveedor unos gastos por asegurar o mantener un acuerdo de suministro de productos alimenticios; o que el proveedor corra con los gastos de promoción o comercialización de los productos alimenticios vendidos por el comprador. 

La propuesta incluye asimismo disposiciones para garantizar su aplicación, como la capacidad de las autoridades nacionales de imponer sanciones en casos de infracción. En concreto, los organismos de control del cumplimiento deberán disponer de los poderes necesarios para abrir una investigación por iniciativa propia o sobre la base de una denuncia, recabar información, poner término a una infracción e imponer sanciones y publicar las decisiones adoptadas para que tengan un efecto disuasorio. 

Cabe resaltar que la ley española de medidas para mejorar el funcionamiento de la cadena alimentaria (Ley 12/2013)  (“LCA”), que se adoptó con el fin de proteger a las pequeñas y medianas empresas en las negociaciones con los grandes grupos industriales españoles e internacionales, incluye ya varias de las disposiciones contempladas por la nueva Directiva. 

Así, la LCA iría incluso más allá que las medidas incluidas en la propuesta de Directiva, dado que, en España, existe la obligación de formalizar por escrito las relaciones comerciales que afectan a la contratación, así como de incluir expresamente en los contratos sus elementos esenciales (identificación de las partes, objeto, precio, condiciones de pago, entrega de productos, derechos y obligaciones, duración y causas y efectos de la extinción). 

En todo caso, hay ciertos aspectos de la propuesta de Directiva que, de adoptarse, mejorarían el sistema actual, por ejemplo, la posibilidad de presentar una denuncia de forma anónima, o la obligación de publicar las multas adoptadas por los organismos encargados de velar por el cumplimiento de las normas establecidas por la Directiva, garantizando así el efecto disuasorio de las sanciones –que, a día de hoy, no se conocen–.

Por último, cabe resaltar que España ha solicitado incluir una prohibición general de la venta a pérdida en la Directiva, como la que contemplaba la Ley de Ordenación de Comercio Minorista y que fue declarada contraria a la Directiva 2005/29/CE relativa a las prácticas comerciales desleales de las empresas en sus relaciones con los consumidores en el mercado interiorpor el Tribunal General de la Unión Europea (TGUE) en su sentencia de 19 de octubre de 2017 en el caso Europamur Alimentación. 

A este último respecto, el Gobierno de España publicó, el 7 de diciembre de 2018, el Real Decreto-Ley 20/2018, de medidas urgentes para el impulso de la competitividad económica en el sector de la industria y el comercio en España, por el que adapta la Ley de Ordenación del Comercio Minorista a lo dispuesto en el caso Europamur y a la Directiva de prácticas comerciales desleales. Para más información en este sentido, ver aquí.

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Kraft Heinz's recipe turns sour

Source: https://www.just-food.com/alerts/viewmail.aspx?id=106134&list=2

It's fair to say your correspondent’s jaw almost hit his keyboard yesterday when Kraft Heinz made its latest stock-market filing.

The Kraft cheese, Heinz ketchup and Oscar Mayer meats maker raised eyebrows across the industry, with a multi-faceted announcement that included an SEC probe into the company’s procurement, fourth-quarter profits that missed expectations, an outlook for 2019 that also disappointed Wall Street and the small matter of a US$15bn write-down on certain assets.

Shares in Kraft Heinz tumbled post the closing bell being rung in New York yesterday and they've continued to slide today, down more than 27% at the time of writing.

"Our model is working," Kraft Heinz CEO Bernardo Hees insisted as he spoke to stunned analysts after the announcement.

But such an announcement will naturally prompt questions about the strategy of Kraft Heinz and its owners Berkshire Hathaway and 3G Capital. Kraft Heinz's modus operandi has been built on M&A and then driving synergies from the transactions to grow margins. 

Its margin improvement has been strong – and has in recent years prompted almost all listed majors to take long, hard looks at their own cost base. 

However, the question about Kraft Heinz has always been about its long-term growth. Savings can only go so far. Management has, in recent quarters, sought to emphasise the work the company was putting in to try to grow its sales. On an organic basis, Kraft Heinz's sales grew 2.4% in the fourth quarter year-on-year.

Nevertheless, Kraft Heinz is facing questions on Wall Street a

bout its strategy. "All said, while a challenging industry backdrop is likely partly to blame, frankly, we believe some of Kraft Heinz's issues are distinct," Barclays analyst Andrew Lazar wrote today.

It also appears clear the fabled 3G model of M&A plus synergies equalling profits and returns to investors has not proved the right recipe for a business laden with centre-store, legacy brands facing a squeeze from the rise of private label in its home market on one side and, in the US and in a number of markets around the world, the growing popularity of smaller, more agile, on-trend insurgent brands on the other.