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The Food and Drink Federation (“FDF“) has published a report on the potential impact of rules of origin on UK food and drink exporters in the likely event that the UK ceases to be part of the EU customs union after Brexit.

Rules of origin are the detailed content requirements that determine whether goods are produced “locally” in order to benefit from preferential tariff rates. Food manufacturing is an internationalized business, with UK producers regularly sourcing ingredients from across the EU and globally, often because sourcing equivalent ingredients in the UK would not be economically or practically feasible.

To date, the UK has benefited from the absence of origin requirements for trade within the EU. However, after Brexit, while it is expected that the EU and UK will negotiate largely or complete free tariffs on food and drink under a preferential free trade agreement (“FTA“), the ability of UK exporters to benefit from those rates will depend on whether their goods meet the criteria to be classified as UK products. Depending on the outcome, many UK producers who have built supply and distribution models on the basis of the single market framework may find that they no longer comply with the permitted levels of global ingredients and may therefore be ineligible for preferential trade terms and tariffs.

Because the EU and the UK are likely to maintain high basic tariffs for food and drink products, the margin between preferential treatment and non-preferential treatment is likely to be considerable. As a result, FDF argues that producers excluded from preferential terms will face a ‘hidden hard Brexit’ and may face costly restructuring of supply chains, absorption of higher costs or de facto barring from EU-UK trade, potentially requiring a restructuring of operations to avoid cross-border trade altogether.

To reduce this risk, the report sets out eight rules of origins provisions that the UK should seek to include in an EU-UK FTA to ensure any new origin rules are suitable for the globalized industries they will impact. The proposals include:

  • a de minimis allowance for non-local content in all goods, set at 10% of the value in addition to any other product-specific allowances;
  • cumulative origin requirements, meaning that goods originating in either the UK or EU are treated as originating in both for the purposes of meeting origin requirements;
  • origin protocols reflecting the unique value added by high quality manufacturing, established brands and other forms of technological input that often characterize the EU and UK food and drink sectors and contribute to a price premium for these goods; and
  • a simplification of the administrative burden of complying with origin requirements through wider use of self-certification, extended validity for origin designations and exemptions for low value shipments.

As a major producer and exporter of food and drink both to the EU and globally, failure to secure preferential treatment under an FTA will be costly for the UK and could have knock-on effects across the food and drink sector. Any solution will need to effectively balance the importance of encouraging local production with the reality of global production in order to prevent serious disruption to existing supply and distribution chains.

The full report is available here.

Today, the European Commission published a new Regulation tightening the restrictions on the use of Bisphenol A (BPA) in food contact materials.

BPA is used in a number of food contact applications, such as polycarbonate plastic produced for articles that are intended to be reused, such as water dispensers, kitchenware, plastic bottles, etc.  BPA is also used to manufacture coatings for food and drink cans.  BPA can migrate into food from the material or article with which it is in contact, resulting in exposure to BPA for consumers of those foods.

Currently a prohibition on the use of BPA in the manufacture of polycarbonate infant feeding bottles is in place in the EU on the basis of the precautionary principle.  The new Regulation extends this ban by also prohibiting the use of BPA to manufacture infant cups as well as the migration of BPA from coated materials containing food intended for infants and children 0–3 year olds.
Based on an updated review of exposure data carried out by the European Food Safety Authority (EFSA), the new Regulation lowers the regulatory limit (specific migration limit or ‘SML’) for BPA and extends this restriction to coating materials, which are used to line food and drink cans.  A specific migration limit of 0,05 mg of BPA per kg of food (mg/kg) has been set for the migration into or onto food of BPA from varnishes or coatings applied to materials and articles. In addition, the new Regulation provides that no migration of BPA is permitted from varnishes or coatings applied to materials and articles specifically intended to come into contact with infant formula, follow-on formula, processed cereal-based food, baby food, food for special medical purposes developed to satisfy the nutritional requirements of infants and young children or milk-based drinks and similar products specifically intended for young children.

The new Regulation will apply from 6 September 2018.  As from that date, business operators will have to ensure, among other, that varnished or coated materials and articles are in compliance with the new rules and are accompanied by a written declaration of compliance containing:

  • details on the business operator issuing the declaration of compliance;
  • details on the business operator which manufactures or imports the coated material or article;
  • details on the varnished or coated material or article itself;
  • confirmation that the varnish or coating applied meets applicable restrictions; and
  • specifications on the use of the coated material or article (e.g., the type of food with which it is intended to be in contact, the time and temperature of treatment and storage in contact with food, the highest food contact surface area to volume ratio for which compliance has been verified).

At the present time, no total ban on the use of BPA applies as there is insufficient information on replacement substances and more assessment would need to be carried out on their safety and effectiveness before BPA could be fully replaced.  At the same time, the European Commission has mandated EFSA to undertake a full re-evaluation of BPA again on the basis of the results of anticipated new studies and scientific data to address the remaining uncertainties. This work is due to start in spring 2018.  Upon completion,  the Commission will decide what if any further action is necessary to protect consumers as regards BPA in food contact materials.

After three years of negotiations, the European Union is nearing the end of a long process to simplify and harmonize the rules for organic food production and the labeling of organic products. Council Regulation (EC) 834/3007 currently defines the minimum standards for organic products that are produced, manufactured, imported into, sold or traded within the EU, as well as the national inspection and certification systems that ensure that these requirements are met.

However, the past decade has seen a 125% growth in the value of the organic food market, with the amount of land used for organic farming growing at around 400,000 hectares per year. The European Commission has now recognized that the current rules need to be updated to support the long term development of organic production in the EU.   One of the key aims of the new regulations will be to ensure that the EU organic logo offers consumers the same guarantee of quality across Europe, including in respect of products imported from outside the EU.

The new rules will:

  • Create an EU-wide set of rules for all organic producers and products. Any necessary exceptions will be limited in time, regularly assessed and applied to all producers to ensure fair treatment.
    Apply equally to non-EU farmers who export their goods to the EU, phasing out the 60+ different “equivalence” standards currently applying to imported organic foods and levelling the playing field between EU and non-EU producers.
  • Enable farmers to apply for group certification for their products, thereby reducing costs and making it easier to join the organic scheme.
  • Apply to new products like salt, cork and essential oils and enable further products to be added in response to consumer demand.
  • Allow national authorities the discretion to reduce controls and inspections on farms from every year to every two years for producers with no record of non-compliance after three consecutive controls.
  • Reinforce the rules on precautionary measures to avoid accidental contamination by pesticides, giving consumers confidence that no pesticides have been used in the production of organic foods.

Following the European Parliament’s first reading, the proposed regulations will come into force on 1 January 2021, repealing Council Regulation (EC) 834/3007.

Please see here for more information on the new proposals.

The European Commission has published a draft implementing Regulation setting out the proposed official EU list of authorized novel foods.

A ‘novel food’ is a food or ingredient that has not been consumed to a significant degree in the EU prior to 15 May 1997. These include products traditionally eaten outside the EU prior to this date, such as chia seeds, argan oil and noni fruit juice, as well as foods produced using innovative processes, such as UV-treated mushrooms.

Currently, food manufacturers looking to use a novel food or ingredient in their products have to obtain prior authorisation from the first country in the EU in which the food/ingredient will be marketed. That authorization applies across the EU but is personal to the applicant, so other companies wishing to use the same food/ingredient have to apply for a separate authorization.

Click here to read more. 

This post originally appeared on Hogan Lovells Focus on Regulation.

Initial responses to the European Commission’s public consultation on how to make the EU food supply chain fairer suggest that, bar retailers, the majority of significant stakeholders (including Member States, farmer groups, agricultural organizations and NGOs) are in favor of action at EU level to increase fairness and balance in the food supply chain.

The EU-wide consultation has so far received record numbers of contributions. It was prompted by concerns that differences in bargaining power between farmers and SMEs and their economically stronger commercial partners has resulted in unfairness and unequal distribution of value across the chain.

The consultation follows the Agricultural Markets Task Force, set up by Commissioner Hogan last January, and seeks input on the necessity and expediency of measures to address the current imbalance. Views are also sought on ways to improve market transparency across the food supply chain and the potential use of value sharing agreements, already used in sectors such as sugar, to ensure that bonuses and losses resulting from evolutions in market prices are shared.

The on-going consultation ends on 17 November 2017. The full consultation document is available here.

This post originally appeared on Hogan Lovells Focus on Regulation blog.