CONSUMER FOOD SAFETY: COUNTRY OF ORIGIN LABELING, BLOCKCHAIN & TRACEABILITY
From fruits and vegetables to meat and poultry, consumers today have an enhanced awareness of and desire for increased food safety and food security. Concerns about the global food supply due to poor safety practices, lack of enforcement, counterfeit, adulterated or diluted goods have increased in the past few years.
New Trade Deal with China Raises Concerns about Food Safety for American Consumers
In mid-2017, a trade arrangement was made with China. This allowed export of $2.5 billion in US beef to China and enabled the Chinese to export cooked poultry to the United States. The United States is the largest poultry producer in the world and exports more poultry than any other country except Brazil. The People’s Republic of China (PRC) had only been permitted to export processed poultry products to the United States if the poultry was raised and slaughtered in the United States or other eligible countries. This was primarily due to concerns over avian influenza transmission from raw poultry. Avian influenza can infect humans: 1557 human cases of AH7N9 flu and 370 deaths have been confirmed by China.
Country of Origin (COO) is a term used internationally to refer to the location of where a product is manufactured, produced, processed or grown, or to be simplistic, originated. When food products are shipped for import or export, a Country of Origin Certificate is required. Here are a few reasons why this is needed:
Duty is determined based on COOThe import and export of goods is controlled in some cases and quotas or embargoes may be in placeBusiness owners may be entitled to a preferential duty program through trade agreements or under U.S. Customs law.Helps to streamline the process of clearing customs smoothly
The USDA Country of Origin Labeling law (COOL) mandates that retailers including most grocery stores and supermarkets identify the country of origin on specific foods:
Muscle cuts and ground lamb, chicken, goat, wild and farm-raised fish and shellfish, perishable agricultural commodities peanuts, pecans, ginseng and macadamia nuts.
Although the COOL regulation does not stipulate the exact size or placement of COOL declarations, the rule specifies that the statements must be “legible and placed in a conspicuous location where they are likely to be read and understood by a customer.” The COOL declarations can be on a placard, sign, label, twisty tie, pin tag, band or other format.
Because of the change in country of origin labeling, commonly referred to as COOL, consumers will no longer know if all the poultry they purchase for their consumption came from China. Food safety awareness is a critical issue for consumers. COOL took effect in 2013 and mandated that packaging state the country or countries in which animals were born, raised and slaughtered. Industry surveys indicate that approximately 90% of American consumers want meat labeled with country of origin information.
Although the USDA stopped enforcing COOL requirements for beef and pork in 2015, chicken remains on the list of food items covered by COOL, however this is not true of all types of poultry. Whether you consider this issue to be food politics or food defense, the bottom line is advancing food safety for all consumers.
A new regulation proposed by the USDA Food Safety and Inspection Services amends the inspection regulations to make the PRC eligible. Not yet passed, this lifts the requirement that poultry processed and exported to the U.S. must be raised and slaughtered in the U.S. or an approved country. This would mean that poultry raised and harvested in China could be used. This has been opposed by the Consumers Union in the United States, the policy and mobilization arm of Consumer Reports as well as other consumer groups and former food safety officials. Arguments have been made that China has made minor changes in improving food safety but lacks the consistent oversight and enforcement of its regulations.
In response to numerous scandals, China passed its most comprehensive food safety regulation to date and it took effect on October 1, 2015.
The USDA released a clean audit report for the PRC a month after the comment period was finalized on the proposed rule that would enable China to export poultry raised in the PRC. The report is based on inspection by FSIS auditors of four Chinese poultry facilities and two microbiology laboratories. In opposition to the new rule that would open the $30 billion American poultry market to China, The Center for Foodborne Illness Research and Prevention (CFI) noted that inspecting such a small number of facilities was insufficient to provide adequate data and make such a consequential decision that would impact American consumers.
Their dissent to the favorable decision also included questions as to whether the USDA has the required resources to conduct audits “at the frequency needed to ensure the safety of Chinese products”.
Here are some of the food safety issues identified with the PRC:Chinese Government Does Not Adequately Oversee and Enforce Food Safety Protection Laws
Dealing with international organizations and countries can be tricky. Often enforcement efforts do not match those required in regulations intended to prevent foodborne pathogens and unsafe foods. Food protection safety practices may not receive the proper diligence and oversight. Food safety practices differ from country to country, often due to culture. FSIS, the USDA Food Safety and Inspection Service involved with ensuring food safety, noted on at least six separate occasions in 2004, 2005, 2010 and 2013 that the PRC system has serious deficiencies in the poultry slaughter/food safety system. The deficiencies were found to be in six areas, two of which were corrected in 2015. Although the 2015 China Food Safety Law was passed and represents advancement in Chinese food safety, there remains doubt about the ability of the PRC to enforce food safety laws. This has proven to be true over its long history. The PRC has proven to be unable to control what is added to food and sold to consumers. As of 2017, the FDA republished Import Alert #99-30 which stated that the agency “still had concerns over the safety of milk-derived ingredients and finished food products containing milk from the PRC”. The FDA Import Alert was updated January 18, 2018 and states that “FDA analyses have detected melamine and cyanuric acid in a number of products that contain milk or milk-derived ingredients, including candy and beverages.” In addition, FDA Import Alert states that “the problem of melamine contamination in Chinese food products is a recurring one.” In September 2008, the FDA became aware of infant illnesses in China linked to the consumption of infant formula containing melamine. More than 53,000 illnesses and four infant deaths were attributed to this issue.
Heavy Metals and Toxic Residue from Antibiotics Found in Poultry
When raised, if birds are treated with antibiotics inappropriately, there may be contaminants including heavy metals and antibiotic residue in poultry meat. The toxic residue can build up in tissues and persist in muscle, organs and eggs. In the United States, strict regulations exist for the administration of antibiotics but China does not tend to aggressively enforce such regulations.
Because of the lack of environmental regulations and respective oversight, water and soil is often contaminated with heavy metals including cadmium, arsenic, lead and mercury. This happens as industry use of heavy metals becomes increasingly widespread without the type of regulatory oversight found in most other countries. Soil and water around heavy industry areas such as mines becomes contaminated.
As time progresses, heavy metals may accumulate in vegetation and get into animal feed and animal tissues.
According to a 2016 media release with data attributed to the PRC Ministry of Water Resources, 70% of the Chinese population drinks water from underground sources, and 80.2% of this is unfit to drink. The underground wells supply water to farms, factories and households. Ammonia, nitrites and nitrates were found to be the major pollutants and heavy metals and toxic organic compounds were found in some areas. Because this water is used by farms and factories, it seems likely that polluted water is used to feed and care for animals in the supply chain as well as for food processing, causing additional concerns for food safety.
While cooking poultry eradicates most bacteria and viruses including avian flu, in cases of cross-contamination with raw poultry or feathers or lack of proper cooking, these substances can cross the species barrier and potentially make humans ill.
What Does This Mean for the Food Supply Chain?
With 120 million hectares of farmland, China produces food for nearly 20% of the world’s population. Although the country itself is huge, the amount of arable land, land that can be ploughed and used to grow crops, is small. Only approximately 15% of the total land area can be cultivated. The amount of land that can be cultivated to grow food and the increasing Chinese population and dietary preferences are two of the forces driving change. Today the PRC is using land and agricultural reforms, technology to increase food production in small spaces, market controls and vast amounts of pesticides and fertilizer to boost food production and address supply shortages. Urban farm vertical agriculture “plant factories” have sprung up in an effort to use new techniques to grow higher quality foods in abundance.
The Chinese economy is undergoing rapid transformation. As it transitions from a manufacturing and construction led economy to a consumer led economy, further improvements in health, food safety and cold chain storage conditions are necessary to sustain the growth and changes.
With an expanding middle class and huge volume of consumers eager for fresh food online, China has new challenges to solve in supply chain and logistics. First, transportation and logistics systems, including those needed for last mile delivery need to be strengthened and that requires substantial investment on the front end. In China, the market for fresh food online delivered quickly is anticipated to nearly triple in size in 2018 to $35.6 billion U.S. Due to the need for front end investment however, profitability will not be immediate.
Chinese consumers’ taste and food preferences are changing. As the economy has improved and the number of consumers and size of the middle class has increased, so has the appetite for fresh and imported foods. Food scares were covered by local TV stations and social media spread news about food safety problems like wildfire. Today’s Chinese consumer is more aware of food safety problems and is hesitant to trust the government about its reassurances. In the past few years, the Chinese government has executed a campaign to encourage its citizens to reduce intake of meat and unhealthy foods and eat more fruit and vegetables for better health. Within the middle class, it is a matter of status and wealth to adopt a Westernized diet. It is easy to see that the food supply chain in China has many challenges to overcome. Of these, the problem of food decay, the number one reason for food safety risks and waste of resources may be the most critical to solve.
Cold Chain Logistics in China
As China continues to develop, its need for cold storage facilities and logistics will also increase. Today, cold chain logistics in China is still in the early stages of development. The Chinese government is motivated to invest heavily in food safety and health care programs and is advancing development of the cold chain. A study published by Markets and Markets, India reported that the shelf life and marketable time of fruits and vegetables could be extended from one to three days if the perishable goods were transported and stored in appropriate refrigerated conditions. This could decrease operating costs of fresh food retailers by 30-50%.
With a burgeoning consumer economy, expanding middle class and a hunger for perishable goods, Chinese consumers are eager for higher standards for safety, health and quality of life. Cold chain logistics is problematic in China. With a growth rate exceeding 20% over the past five years, the Chinese cold chain market is anticipated to continue to grow and evolve, largely due to the increased demand for fresh food and drugs that require temperature and humidity control.
Current estimates place the amount of perishable goods that are transported within China in refrigerated conditions at only 20%. The rate of spoilage for perishable goods is 20-30%. One of the primary reasons for food quality decline is temperature fluctuation during transport and storage. At this point, although there has been investment in cold chain logistics in China, it has failed to keep pace with demand. This is also complicated by the lack of supporting infrastructure. For example, major international air cargo gateways often lack cold chain facilities on site and airports that do have coolers are at or exceeding capacity. Cold chain logistics do not extend far beyond airport gateways.
Because of the shortage of cold chain capabilities, there are limitations on the volume of fresh food that can be shipped to China. Perishables that are shipped to China must be sold and consumed quickly to avoid spoilage and waste. Although the cold storage construction doubled in China each year from 2008 to 2012, considerable shortage of facilities remains. Cold storage warehouses tend to be concentrated more along coastal areas.
46% of the total storage capacity is situated in East China. The mid-west is the origin of the wholesale fresh produce market. Unfortunately, there is a shortage of refrigerated warehouses in this geographic area.
According to a survey conducted by the China Cold Chain Alliance, 58% of the cold storage warehouses were owned by third party cold storage companies. Currently, food and pharmaceutical companies tend to use 3PL cold storage warehouses
For perishable food produced in China, the lack of cold chain facilities has resulted in considerable loss of quality and quantity before the goods reach consumers. According to a report authored by Wang Wei, a Professor & Director of Meet Proceeding Key Lab. Of Sichuan Province and Faculty of Bio-industry of Chengdu University, 90% of meat products, 80% of aquatic products and most dairy and bean products are transported and sold without cold-chain assurance. The lack of cold chain facilities and logistics is one of the primary reasons for “food incidents” that occur periodically in China. According to this report, the cold chain adoption rate in China is approximately 15% with a post-production loss rate of 25-30%.
Food Supply Chain Traceability and Visibility Across the Globe Benefits Consumers
Food safety scares in the U.S., Europe and Asia have sounded alarm bells across the globe. Like it or not, we live in an interconnected world, one in which food is transported, imported, and exported to reach the plates of consumers. In only the United States, every year approximately 48 million people experience foodborne illness. Of this, more than 100,000 people are hospitalized, and thousands die. Food safety recalls are a matter of special focus for consumers and time is of the essence in getting products off the shelves before they affect human or pet health.
Pair this concern with advances in technology and Smartphone use and there is both challenge and opportunity. Across the globe, there are Smartphone apps such as HarvestMark that enable consumers to have visibility into the origin and transport history of individual food purchases as well as of specific food items. The technology exists that can provide real time visibility of food products, complete with history across the supply chain down to the ingredient level. This can reduce traceability to minutes not days. Saving time in processing food recalls saves lives. Using mobile apps, software and other systems to provide real time data visibility and communication can reduce the incidence of food borne illness in populations. Real time visibility relies on accurate, timely product traceability.
Traceability and Food Safety Helped by Blockchain in China
In addition to the issue of food safety, food fraud has a significant impact on human and pet health. Some food products are especially at risk for being diluted, adulterated or counterfeited. These include: olive oil, fish, milk, organic produce, fruit juice, honey, coffee and tea and spices. Having tools that enable the tracing of products along the supply chain from the point of origin to the point where they are consumed is critical and can uncover potential food safety problems.
Walmart China learned the lesson about the lack of accurate traceability in 2011 when the Chonqing authorities demanded temporary closure of 13 stores due to failure to comply with food regulations. Walmart was found to have improperly labeled and sold non-organic pork as an organic product. The stores were closed for 15 days and Walmart paid a fine of $423,000 US. In the PRC, Walmart has experienced numerous food scandals and the impact has proved costly. To combat some of these issues, Walmart boosted its investment in food safety to $48.2 million US between 2013 and 2015, three times their original commitment. DNA testing on meat products as well as additional food testing and supplier audits were part of this funding.
Blockchain: The Basics
Blockchain is a technology that acts as a public electronic ledger. Broken down, a block is an unchangeable, time-stamped record of new transactions. Each time a block is completed, it is added to the chain. This creates a chain of blocks=a blockchain. While information on the blockchain is publicly available, it does not rely on a single computer or server to function, making transactions transparent. Every block either allows either an open or controlled set of users to participate in the specific ledger. A specific participant is linked to each block. When new data is entered, it can never be erased and blockchain can only be updated with the consensus of the participants in the blockchain system. The system is valuable because it provides an accurate, verifiable record of every transaction ever made in the system.
In blockchain, a peer-to-peer network, the blockchain users are the administrator and blockchain databases are managed autonomously for the interchange of information between various parties. “Smart contracts” can be created using blockchain networks.
Walmart has demonstrated their interest in blockchain by participating in trials and pilot studies. In 2016, IBM and Walmart collaborated on a blockchain trial to digitally track the movement of Chinese pork in the supply chain. Following the successful trial, Walmart indicated interest in accelerating the use of blockchain in China and promised to invest $25 million US by 2020 to encourage more technological innovation in Chinese food safety. The Chinese government is interested in improving traceability and food safety and with the tech-savvy Chinese consumers, blockchain seems to have potential to win over skeptical shoppers worried about the quality of domestically produced food products.
Following the successful trial with blockchain in tracing Chinese pork, the Walmart Vice President of Food Safety had his team trace a package of sliced mangoes back to its point of origin. This effort took 6 days, 18 hours and 26 minutes. Walmart wanted to compare this traditional method of traceability with blockchain. Walmart engaged with IBM, developer of a blockchain solution. Using its solution, IBM was able to trace the mango package in only 2.2 seconds.
In August 2017, a consortium of industry power players agreed to apply Blockchain technology to the challenge of enabling food traceability in China and improve food safety for consumers. IBM, Walmart, and Chinese retailer JD.com along with Tsinghua University National Engineering Laboratory for E-Commerce Technologies have formed a Blockchain Food Safety Alliance to improve the ability of tracking food shipments and food product recalls in China. JD.com is one of China’s largest retailers and is a member of the NASDAC-100 and a Fortune 500 company. The project is ongoing.
In another pilot study, IBM and ten retailers including Dole, Nestle, Unilever, Driscoll’s, Golden State Foods, Kroger, McCormick and Company, McLane Company, Tyson Foods and Walmart.
Each participating company would be able to see where food products originated, handled, stored, inspected and every step in-transit to the store using distributed ledger technology (DLT). The companies were attracted to the concept of blockchain for its ability to maintain unchangeable, secure digital records and ability to improve the traceability of food products. An array of critical information can be stored on the blockchain including but not limited to: farm origins, factory data, expiration dates, storage temperatures, shipment and delivery date information, safety certifications of facilities and more. This project is also ongoing.
IBM blockchain uses Hyperledger Fabric, a Linux-based business blockchain framework with modular architecture that allows components including membership services and consensus to be plug-and-play. IBM reportedly launched the first fully integrated, enterprise-grade production blockchain platform in conjunction with consulting services around the time of the pilot study.
Food safety awareness is central to consumers, supply chain companies and governments across the globe. Food imports to the United States have tripled in the past fifteen years and reached $119 billion in 2017. The wide variety of food products available to consumers can seem staggering. American consumers want more choices and have clearly embraced imported food products. But are all food safety regulatory systems across the world equal? What does this mean for consumers?
Different countries have different laws and regulatory systems. The U.S. federal government agencies work with other countries and monitor food products inbound to the United States. According to the FDA, although 2% of all imported food products are tested in a laboratory, other methods are used to identify potential risks. The FDA uses a risk-based screening tool named PREDICT to identify high-risk food items then decide if further action is needed. The FDA inspects facilities in foreign countries, however in limited numbers. According to the Government Accountability Office (GAO), the number of inspections were less than .5% of the 285,977 foreign food and feed facilities that are registered with the FDA. A 2015 GAO report on food safety found that the FDA has not been keeping pace with the number of inspections mandated, largely due to funding.
Consumers expect their food supply to be safe and healthy. Studies show that consumers want country of origin labeling. They like to use their Smartphones to retrieve information about products as well as about orders, shipments and deliveries and use mobile apps and software to do this. Relying on social media, consumers often spread the word about food recalls and alerts and issues such as listeriosis outbreaks, foodborne outbreaks and unsafe foods for humans and pets.
New and emerging technologies including blockchain can play a vital role in enabling the flow of real time information to both companies and consumers, help ensure food safety and increase awareness about food recalls. Food industry companies including major retailers, food producers and technology providers are working together to test solutions including blockchain to improve.