Labelled for Integration

Source: Asia Pacific Food Industry, March 2015

The AEC may be looming near, but the lack of harmonised standards and regulations still serve as a trade barrier that prevents the food industry from realising its full potential by Sherlyne Yong.

On August 8, 1967, five countries came together in Bangkok, Thailand to form a collective that sought for collaboration, economic and social growth, as well as peace and stability in Southeast Asia. Together, Indonesia, Malaysia, Philippines, Singapore and Thailand became the founding fathers of the Association of Southeast Asian National (ASEAN).

Nearly five decades on with another five more member states (Brunei, Vietnam, Laos, Myanmar and Cambodia) joining the fore, the association is seeking a new frontier – regional integration through the ASEAN Economic Community (AEC).

Upon its formation, the AEC will transform ASEAN into a region with free movement of goods, services, investment, skilled labour and a freer flow of capital. It plans to achieve this by creating the following:

(a)  a single market and production base,

(b)  a highly competitive economic region,

(c)  a region of equitable economic development, and

(d)  a region fully integrated into the global economy.

In particular, food and agriculture has been marked as one fo the two priority integration sectors that the AEC is looking at. After all, around 38 percent of ASEAN’s population is employed in this sector.

Currently, the sector only contributes 4.3 percent of the value of total ASEAN exports and only 2.5 percent of total intra-regional trade. The value of ASEAN agri-food exports has grown stability since 2008, rising from US$38.2 billion to US$53.25 billion in 2011, but there remains significant untapped potential.” Said Pushpanathan Sundram, principal advisor to the ASEAN Food and Beverage Alliance (AFBA) and former Deputy-Secretary General of ASEAN.

He believes that much more can be done since the agri-food sector takes up only a small portion of total ASEAN exports, a despite it achieving the highest growth rate in 2011 Trade is also likely to increase due to rising populations, an emerging middle class, and a growing industry in the region.

With the sector influencing much of growth, trade, investment and employment among ASEAN nations, it makes sense for the industry and it makes sense for the industry and governments to work towards a free flow of agriculture and food products.

To achieve this and enjoy the benefits of regional integration however, the food industry must first overcome what is arguably its biggest impediment – variances in food standards and labelling.

Food Standard

To safeguard consumer interests and public health, governments typically rely on food standards to endure that potentially harmful substances are restricted in products meant for public consumption, and that consumers have adequate information to make informed choices.

Variances in Labelling

One of the main areas where variances occur is in nutritional labelling. Manufacturers often have to rehash product development or packaging to fit the labelling requirements of the country they are entering.

According to AFBA, some of the common challenges faced in this area are variances in mandatory and voluntary labelling requirements, minimum and maximum limits for vitamins and minerals, tolerance levels, and nutrition reference value (NRV) in relation to health claims and nutrition panel formats.

For instance, apart from Malaysia, nutrition labelling is mostly voluntary except for selected food items. In Indonesia, nutritional labelling is only mandatory for foods that claim to be enriched or fortified with vitamins, minerals and other nutrients, while in Singapore, it is only compulsory when nutrition claims are made.

In a case study released by AFBA, it was revealed that a company with a manufacturing base bad to formulate its products using four different recipes just to enter eight target markets. This was due to the differing maximum and minimum limits for vitamins and minerals in each market, which inadvertently increased the complexity of recipe management, cost and timeframe involved, as the various markets had different testing parameters, safety and efficacy requirements.

At the same time, variances in tolerance levels post an additional challenge to manufacturers who are using a single recipe across countries. For instance, most ASEAN countries require that the product contain at least 80 percent of the declared value of nutrient. But different requirements are imposed for naturally occurring nutrients as opposed to fortified ones, such as in Singapore, where fortified foods must contain 100 percent of the declared nutrient value.

Due to the variances, manufacturers often adhere to the strictest requirements in a bid to save cost while gaining access to more than one market. Despite this, there are still cases where incurred costs are unavoidable.

Customising labels is one such area. Companies have to make alterations to their packaging even if the recipe is the same, because some countries required the percentage of NRV to be stated on nutrition fact panels, but NRVs differ between countries.

Harmonisation

As evident by the examples above, the regulations and standards among Southeast Asian nations are far from being interchangeable. Even if all legislation was drafted based on the same guidelines and follow the same principles of hygiene, food safety, and consumer protection, inherent differences apply due to national requirements.

And this, if not addressed, can prove to be an obstacle to trade in the region, with an adverse impact on the region’s vision of a singular market. With the harmonisation of standards, all the efforts that ASEAN member states have previously put into removing tariff barriers will come to naught.

In a paper, Simon Pettman from Europian Advisory Services (EAS) suggested that ASEAN member states could do the following:

(a)   Harmonise national standards with relevant internationals ones, such as the Codex Alimentarius;

(b)   Encourage participation in the development of international standards, especially those that are relevant to ASEAN trade;

(c)   Adopt conformity assessment procedures that are in keeping with international standards and guides, or keep differences to a minimum wherever full conformity is not possible because of difference in legitimate objectives;

(d)   Put into practice Mutual Recognition areas where appropriate, using the ASEAN Framework Agreement on MRAs as the basis and;

(e)   Encourage cooperation among National Accreditation Bodies and National Metrology Institutes in ASEAN to enable the implementation of MRAs.

For instance, nutritional labelling is only mandatory in Singapore when health claims have been made, even though the Codex has updated its guidelines to recommend compulsory nutrition labelling even without health claims, in light of the fact that the world is gradually moving towards mandatory nutrition labelling.

While harmonisation is touted as one of the last building blocks toward a single ASEAN community, it is understandably a lengthy process due to the nuances involved.  In the meantime, MRAs are used to recognise equivalents despite differences in regulations between jurisdictions.

One such example is the mutual recognition of test results and certificates among member states by the ASEAN Consultative Committee for Standard and Quality (ACCSQ), which simplifies procedures and reduces transaction costs. Companies often incur extra costs from duplicative testing procedures that stem from different conformity assessment systems.

Moving forward, the next step that ASEAN can take is to develop MRAs on: standard, additives and contaminants, so that products which comply with regulations in one country are considered as such across the board; and labelling, so that manufacturers and distributors can do away with the extra costs and effort involved with customising labelling for specific markets.

At the end of the day, the harmonisation of standards and regulations will do much more than eliminate the barriers faced by food industry. It will benefit consumers by giving them more choice, nations by boosting economic growth, and the region, by bringing it closer to the rest of the world through the creation of a single, open market that is easy to trade with.

Annexes

1.         5 Priority Areas that Harmonisation Food Standards Harmonisation

According to the ASEAN Food and Beverage Alliance (AFBA), the following are five areas that governments and organisations should work on to achieve true integration in the food industry.

       I.     Nutrition Labelling– the labelling of products differs from country to country, including guidelines for standards on limits for minerals, variances in NRV and Nutrition Information Panels. By standardising one ASEAN format or recognising ASEAN Member State formats in the region, companies can export products quickly and with ease.

      II.     Pre-market Registration– some countries require pre-market registration (as opposed to post-market notification) for a product, which requires all product information and packaging to be submitted prior to a product being approved for sale. This can significantly delay bringing a product to market, which increases costs for companies operating across multiple countries. This could be overcome by a single market registration that is recognised across ASEAN.

     III.     Import/Export Certification – Currently, companies that import or export food products across multiple ASEAN markets are required to complete inspection and certification in each country where a product is traded. Given there are any similarities across ASEAN and common international guidelines for this process, the recognition of a common process from one country to another will significantly reduce resources invested in completing this process.

   IV.     Authorisation of food ingredients and additives – There is no standard approval process for an authorised ingredient in one country to be marketed or sold in another country. Through, a common standard, ASEAN can enable the industry to develop a standard product for the ASEAN region.

    V.     Contaminant limit and analytical methods – There are no uniform standards around contaminants limits among member states and often the analytical method for testing may very. By harmonising this process, companies can simplify product formulation and development across ASEAN, while continuing to protect consumer safety.

2.         Nutrients to be included in Nutrition Information Panel.

[* Source: Food & Nutrition Consultants]

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