A Rockier Road When it Comes to Food Safety
FSMA’s new foreign supplier verification act, as well as strained resources, may cause retailers to reconsider importing directly.
New regulations under the Food Safety Modernization Act (FSMA) governing the import process promise to throw a stone in the already rocky path of direct international sourcing.
“The FDA’s FSMA rule on Foreign Supplier Verification Programs (FSVP) does create a regulatory hurdle to those importing food,” says Jim Gorny, vice president of food safety and technology for the Produce Marketing Association in Newark, DE. “Under the rule, importers must have in place a program to verify their foreign suppliers are producing food in a manner that provides the same level of public health protection as the preventative controls or produce safety regulations.”
The rule requires importers perform certain risk-based activities and have documentation to verify food imported into the United States has been produced in a manner that meets applicable U.S. safety standards, according to the FDA.
“If you’re buying direct it’s now your legal responsibility to ensure whoever you’re buying from is producing safely and according to regulations,” says Bruce Peterson, president of Peterson Insights in Bentonville, AR. “The FSVP adds to the daunting factor of importing by increasing the liability of the importer.”
“Most retailers don’t have the resources to fully develop suppliers, so buyers poach them from an intermediary who already potty-trained them.”
— John Pandol, director of special projects for Pandol Bros.
Gorny says the potential liability ranges from a warning to criminal charges. “FDA has a series of remedies to deal with noncompliance,” he says. “At the lowest, the importer gets a warning letter. FDA can also administratively detain product or prevent you from importing foods into the United States. The law also does allow for criminal prosecution but that is generally for something very egregious — FDA doesn’t use it lightly.”
Peterson notes it’s not just the monetary or criminal cost, but also the image cost. “These large national brands invest a lot in their brands, so they need to be sure they are protecting that brand,” he says.
Risk Versus Reward
A big buying organization is always aware of the potential for litigation and the risk management of it, points out Reggie Griffin, owner of Reggie Griffin Strategies in Bluffton, SC. “The question you have to ask yourself is do you save enough to warrant the risk of liability?”
Peterson relates the example of how years ago retailers used to make fresh-squeezed orange juice. “The government came along with increased regulation, so we stopped fresh squeezing juice because we couldn’t justify it anymore with those added regulations. Anytime regulations become more stringent it forces you to reassess what you’re doing,” he said
The added regulations of the FSVP have spawned a whole new segment in the import sector. Gorny speculates this could lead to a whole cottage industry sprouting up to fill the void and needed service. “Already we see service providers stepping up — for example, the Assistance program from Decofrut of Santiago, Chile. The entire world is becoming so much more specialized, and this offers an opportunity.”
Decofrut’s assistance service, developed in conjunction with Fruits Safety SpA, aims to help importers implement the FSVP program quickly and efficiently. “Run by highly qualified staff, the service entails a complete and permanent follow-up of all foreign suppliers and their packing plants,” says Manuel Alcaino, Decofrut’s president. “The required documentation will then be processed and made available to the importer. Assistance will initially be available for importers working with companies in Chile and Peru — two of the leading counter-seasonal suppliers of produce to the United States.”
An increasingly competitive retail environment combined with strained resources implies limited availability of the means for true direct international sourcing.
“Although there are exceptions to the norm, most retailers are aggressively cutting costs, including staff, so the ability to layer on a complete new skill set and workload becomes more difficult,” says Wayne McKnight of McKnight Insights & Solutions in Niagara-on-the-Lake, Ontario, Canada.
According to Peterson, retail staff goes through a learning curve when procuring a product directly. “Where that really comes into play is when you start buying internationally,” he says. “There is a lot more involved with international direct, including currency exchanges, border requirements, and phytosanitary and sanitary regulations. Retailers must weigh their financial commitment to truly implement all this.”
Limited resources may also affect a retailer’s ability to find new growers. John Pandol, director of special projects for Pandol Bros. in Delano, CA, maintains despite titles such as “supplier development,” most chains really don’t have this capability. “Retailers largely identify, contact and poach growers from their existing importers,” he says. “Once, after presenting an offshore program to a retail buyer, I had the unpleasant experience of finding one of the principal growers in the parking lot waiting for a meeting with the same buyer. Most retailers don’t have the resources to fully develop suppliers, so buyers poach them from an intermediary who already potty-trained them.”
McKnight sees a huge knowledge gap in order to engage with the right sources, align expectations and invest in the capability to do it right, with compliance dialed in. “Although retail wants to do more, most are not currently committed to investing in that capability,” he says. “It requires investment in the five enablers: people (knowledge, skill sets and temperament), systems (ability to engage, track and measure throughout total supply pipe with longer lead times, multiple currencies and robust forecasting), infrastructure (ability to handle import containers, various global shipping methods, timely repack and regrade capabilities), logistics (various modes outside of home country, legal title and accountability) and new work processes (extended lead times and commitments, new mind sets on safety stocks, contingency planning).”
Perhaps this is why companies such as Seald Sweet find themselves in a perfect niche for serving many retail needs. “Importers provide value to both grower and retailer,” says Kelly Dietz, vice president business development for Seald Sweet, Vero Beach, FL. “We handle the hard stuff in the middle and make sure it all comes together, allowing retailers to focus on taking care of their customers and growers on taking care of their farms/ranches.