Thursday, May 31, 2007

Importing Food from China: Due Diligence Necessary

In one of my previous posts, I discussed the food and drug safety laws and the weak enforcement of them. Here I want to address what a foreign importer could do in light of the less than perfect track record of the Chinese food & drug producers/exporters.

More often than not, most people in the U.S. do not realize the extent of America’s dependence on Chinese food imports. According to a news report from National Public Radio last week,

China has become the leading supplier of many food ingredients, such as apple
juice, a primary sweetener in many foods; garlic and garlic powder, a major
flavor agent; sausage casings and cocoa butter.

China now supplies 80 percent of the world's ascorbic acid — vitamin C. It's used as a preservative and nutritional enriching agent in thousands of foods. One-third of the world's vitamin A now comes from China, along with much of the supply of vitamin B-12 and many health-food supplements, such as the amino acid lysine.

The fact of the matter of is globalization has linked people together in amazing ways, and food imports from China will continue to grow despite the bad press and weak Chinese law enforcement.

However, foreign import companies can take effective measures to reduce risks of exposure to liability and loss of credibility to customers. Preventive measures seem especially sensible and prudent to do following the massive pet food recall in the United State. I have not heard or read about lawsuits filed by pet owners, but one can expect the sellers and importers of the pet foods to have suffered a decrease in consumer confidence in the pet food.

Precautionary Measures to Take:

A. Conduct Due Diligence

· Refer to the United States Food & Drug Administration Website for updated information on food refusals by country of origin. It also makes sense to speak to FDA officials to find out who the repeat Chinese offenders are and stay away from them when importing from China.

· Check with U.S. Customs and Border Protection (Commercial Enforcement Division) to ascertain whether a certain Chinese exporter has a history or record of exporting substandard food or food ingredients to the U.S.

· Before executing a contract, travel to the producer’s manufacturing facility in China to examine the method, process, and overall food quality. This might be the most expensive way to conduct due diligence, but it is probably the most effective simply because you will be able to find out the salient problems.

B. Contractual Protection

· Provide in the contract that the delivery of food or food products with dissatisfactory quality pursuant to United States standards constitutes a material breach of the contract

· Indemnify yourself in the contract in case of latent food quality issues

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