THIS MONTH:
NEWS:
PRODUCT SPOTLIGHT:
Jonathan M. Cohen
The first decade of the 21st century saw the expansion of food product recalls and product-liability claims to an increasingly broad array of companies and industries. Many of the trends that caused product-liability concerns to grow more prevalent in the 2000s threaten to make the 2010s a decade of unprecedented product-related risk. The lessons from the 2000s, however, also provide companies with opportunities to improve their management approaches for product-related risks that the new decade might bring.
Growing Trends
One important trend in the 2000s was that a growing number of companies began to rely on increasingly broad supply chains, which in turn created new, and sometimes unpredictable, risks. This trend materialized in two key ways. First, many companies began to rely on foreign suppliers for products or product components, including those manufactured in China and other nations. For most companies, foreign suppliers created substantially increased efficiency and improved products. For some companies, however, foreign supply chains resulted in increased exposure to product-related risks.
Most notably, companies relying on Chinese-manufactured products recently have faced significant product-liability risks arising from those products. Companies in a wide array of industries have seen recalls and claims arise from Chinese-made products, including recalls caused by the presence of lead paint on children’s toys and melamine in baby formula and pet food.
Similarly, changes in the way that companies obtain components for their products even from domestic producers have resulted in significant new risks. Because supply chains have broadened, problems experienced even by small domestic manufacturers can mushroom into disproportionately widespread product recalls and claims.
For example, in the late 2000s, a small peanut-butter manufacturer, Peanut Corporation of America (PCA), allowed its product to become tainted with Salmonella. Although PCA manufactured only a tiny percentage of national peanut butter production, companies nationwide integrated PCA’s peanut butter into their own products. As a result, those companies incurred massive recall costs and potential tort liability, and even companies with no PCA exposure saw sales of peanut butter products severely decline. Ultimately, the peanut butter industry reportedly lost more than $1 billion.
Changes in the way that the supply chain functions have rendered some traditional risk-spreading techniques less effective. For example, many companies that distribute or incorporate products manufactured by other companies historically have relied on indemnification agreements. However, products made by manufacturers in some countries, such as China, may enjoy limited liability as a legal or practical matter, limiting the value of any indemnity that they provide. Likewise, small, domestic companies with few assets and little insurance might be unable to pay their indemnity obligations. The broadening supply chains thus may significantly decrease the value of indemnification agreements.
A Time to Act
To counteract these trends, companies should support indemnities with stalwart vigilance in supervision of the production and shipment of their supplies, requirements that suppliers acquire insurance that protects the downstream company and increased attention to whether the downstream company’s own insurance provides adequate protection should indemnities and the supplier’s insurance policies prove insufficient.
It also may be important to require suppliers to include their downstream customers not only as beneficiaries of an insurance policy, but also as expressly named insureds that have the right to recover directly from the insurer for the downstream company’s own product-related claims and losses. Frequently, smaller suppliers might welcome the opportunity to work in cooperation with their larger corporate customers to put into place adequate recall and liability insurance programs.
In addition, companies with broad supply chains must understand how a supplier’s bankruptcy might affect indemnification agreements and insurance rights and proceeds. One important consequence of bankruptcy may be that companies that share insurance policies with bankrupt suppliers might face the risk that the bankruptcy might freeze access to that policy until the bankruptcy is resolved. Companies potentially competing for insurance proceeds with a bankrupt supplier should examine the options to prevent or ameliorate such an outcome. One potential option would be to participate on a bankruptcy committee to ensure that the company has an opportunity to protect its rights fully. Bankruptcy also presents opportunities for mass-tort defendants. In the 2000s, bankruptcy became an important strategic tool that many product-liability defendants used.
New Risks
Besides broadening supply chains, fast-paced technological innovations also have created new product-related risks. For example, the food industry already has seen risks resulting from the expansion of the use of genetically modified seeds, plants and even livestock. In December 2009, one manufacturer of genetically modified rice was held liable to pay approximately $2 million to two Missouri farmers after an experimental genetically engineered variety of rice contaminated their crops. That manufacturer faces hundreds more similar claims by other farmers. The insurance industry and other commentators have identified other developing technologies, such as the use of nanotechnology, as creating the potential for new liabilities.
Companies developing or relying on emerging technologies should review their insurance policies to ensure that the policies cover losses and liabilities resulting from those technologies. Generally, a company’s liability policies and property damage policies cover new risks of loss unless expressly excluded. However, as the insurance industry hones in on new potential sources of loss, insurers might attempt to require policyholders to accept exclusions or other coverage limitations intended to address those risks. Policyholders should resist new exclusionary language.
Policyholders also should recognize that insurers sometimes seek to rely on language that the insurer inserted to address one, specific risk as a basis to apply to other risks, even where the language had not been intended to apply to those new risks. Policyholders should be careful to ensure that any language that they agree to include be written carefully and narrowly.
If a claim from a new technology arises, policyholders also should be vigilant to obtain all of the coverage to which they are entitled. Insurers might attempt to rely on exclusions or other policy terms already present in many standard insurance policies to limit available coverage. For instance, carriers might try to argue that the release of genetically modified materials into the supply chain constitutes pollution that triggers standard-form pollution exclusions. Policyholders should be prepared for such arguments, and they should recognize that insurers’ similar arguments have failed in other contexts.
Many of the new challenges in the 2010s likely will be extensions of trends that have been developing for many years. By learning the lessons of the past and effectively applying them to risk management, companies can avoid common pitfalls to thrive in the new decade. ♦
Jonathan M. Cohen is a partner in the Washington, D.C. office of Gilbert LLP, whose practice focuses on the resolution of complex, multiparty disputes involving insurance and bankruptcy issues and food companies. He can be reached at cohenj@gotofirm.com.
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Azfar A. Khan, M.Sc.
Food safety involves everyone in the food chain. We only know whether the food we are eating is safe if we have some knowledge about food-related hazards. In this article, the nature of food-related hazards, how they can be identified and how they can be controlled will be discussed.
The need for food safety was felt in the late 1950s when astronauts were sent into space. They had to be provided with food that was free from all types of hazards. For this purpose, Pillsbury was awarded the contract to produce hazard-free food. Stringent safety requirements were placed upon this company. As a result, Pillsbury developed a process that would prevent the occurrence of food safety hazards. Hence, the basis for a food safety standard was created.
The main contributing factors of foodborne diseases are pathogens that enter the food supply via various sources. Once aware of these sources, we can control them and effectively prevent our food products from becoming contaminated. In general, one should be more particular about the safety of food than the food itself.
Imported food is a potential source of foodborne diseases. It is the responsibility of government agencies to ensure that imported food has not been subjected to unsafe doses of poisonous pesticides and fertilizers. In one instance, a country exported cough syrup that contained engine oil, resulting in the deaths of more than 50 people. The imported food should be thoroughly tested before it is allowed to be consumed by the public. Testing should be carried out by a laboratory that is accredited in accordance with the requirements of the International Laboratory Management System (ISO 17025).
Certain countries export food items yet have no unified food standard of their own. At a minimum, they can adopt the already existing international food safety standard, such as HACCP (Hazard Analysis and Critical Control Points). However, it is difficult to perform a 100% analysis of all the food items due to the huge costs involved. In the U.S., only 5% of all food is inspected by the U.S. Food and Drug Administration, whereas 95% goes unchecked. In a supermarket in Chicago, I happened to buy some pastries whose expiration date was found to be over by just 1 day. When I pointed this anomaly out to the manager, he was extremely apologetic and thankful; he then disposed of the entire lot in front of me. Perhaps, this was just an inadvertent omission. Another example is when Salmonella was found in contaminated peanut butter products recently, President Obama showed his concern about the country’s decades-old food safety system which he said was a “hazard to public health” and in need of an overhaul. Such change is beginning to happen.
Food goes through various stages from “farm” to “fork,” including growing, cutting, storing, washing, preserving, chilling, cooking and serving. Pathogens can enter food at any of these stages. Our aim should be, as much as possible, to prevent such entry into the food supply. HACCP, which also focuses on prevention and not endproduct testing, builds food safety into the manufacturing process.
One of the easiest ways to control infection within our control is hand washing. This simple habit requires only soap and warm water. Throughout the day, germs accumulate on your hands from a variety of sources, such as direct contact with people, foods, surfaces contaminated with bacteria, etc. If you do not wash your hands frequently, you can infect yourself with these germs by touching your eyes, mouth or nose, which then act as carriers of food-related illnesses.
In food safety, there are four cardinal principles, pertaining to food handling, cooking and storage, which are considered important in preventing foodborne diseases. These principles are the following:
Clean — Wash hands and surfaces.
Separate — Do not cross-contaminate.
Cook — Cook food to proper temperatures.
Chill — Promptly cool in refrigerator.
Bacteria are not visible to the naked eye, nor can we smell or taste them; hence, we should be watchful of their presence at every step of the food preparation process and follow the above proven principles to keep our food safe.
In third-world countries, there is no concept of awareness about food safety. For example, I visited a country where I observed that the size of the spinach displayed in a vegetable shop was abnormal and its color was dark green. Upon closer investigation, it was revealed to my horror that all vegetables in the area were being grown in fields where the effluent from all the tanneries was being discharged. This spinach was laden with heavy metals. I also observed that the poultry in this area were drinking water from the same contaminated fields; their meat and eggs were also being consumed by the people of the area. The buffaloes were also drinking this same water and providing milk that was being consumed by the population.
To avoid foodborne diseases, the following precautions should be clearly communicated by the food industry to the consuming public:
• Always check the expiration date on food items before purchase.
• Do not store raw and cooked foods in the same place.
• Before purchasing packages of poultry or meat, ensure that the packages are not torn or leaking.
• While purchasing eggs, only select those that are refrigerated.
• Wrap meat and poultry properly for storage.
• Wash your hands before and after handling food.
• Cook your food thoroughly at required temperature.
We only know whether the food we are eating is safe if we have some knowledge about food-related hazards. By learning about such risks, how to identify them and how to control them, we will be able to ensure safe food for all consumers. ♦
Mr. Azfar A. Khan, M.Sc., is a consultant who conducts awareness courses on ISO 22000, ISO 9001, ISO 14001, OHSAS 18001, SA 8000 and Internal Quality Auditing. He can reached at azfar44@hotmail.com; Tel: +92-300-5122864.
NEWS:
As part of its recent commitment to foster a more open and robust dialogue with the produce industry on traceability, the Produce Traceability Initiative (PTI) Steering Committee has announced the results of a survey of more than 260 industry members selling in the U.S.
Designed to evaluate the adoption of the PTI and identify additional support needs for companies doing business in the U.S., the survey’s results indicate that the majority of those polled are making progress toward implementing chain-wide, electronic traceability. Conducted by the Produce Marketing Association (PMA) and the United Fresh Produce Association (United Fresh), the survey was complemented by a similar poll of retailers and foodservice outlets that was conducted by the not-for-profit standards organization GS1 US. The Steering Committee also recently reaffirmed its dedication to developing a closer relationship with GS1 US to bring that group’s expertise and operational support to the PTI.
Both survey summaries are available on the Produce Traceability Initiative Web site at www.producetraceability.org. For more information on the PTI or GS1 US surveys, contact the following staff at each organization:
• GS1 US: Jon Mellor, jmellor@gs1us.org, 609.620.4656
• PMA: Julia Stewart, jstewart@pma.com, 302.738.7100 ×3008
• United Fresh: Ray Gilmer, rgilmer@unitedfresh.org, 202.303.3425.
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The Global Food Safety Initiative (GFSI) has announced recent progress in driving convergence between food safety schemes, following the benchmarking of the FSSC 22000, PrimusGFS, SQF 1000 and Synergy 22000 schemes. These schemes now fully meet the GFSI requirements, laid out in the Guidance Document Version 5.
This benchmarking process has been completed using an internationally accepted set of food safety requirements, based on industry best practice and sound science, which are developed through a consensus building process by key stakeholders in the food supply chain. These requirements can be found in the GFSI Guidance Document Version 5 and addendum that are freely available for download on www.mygfsi.com.
Due to the common acceptance of GFSI-recognized schemes in the global market place, this move will help to drive cost efficiency and consistency in supply chains around the world when sourcing food and deliver greater confidence to the end users of third party certification, while providing flexibility and choice for retailers and manufacturers alike.
Jürgen Matern, Chairman of the GFSI Board of Directors and Vice President, Strategic Quality Management, Metro AG said, “The GFSI Board of Directors is pleased to recognize the development of this scheme which has been a true collaboration of stakeholders across the whole food chain.”
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The 18th Edition, Revision 3, of the Official Methods of AnalysisSM (OMA) is now available. In addition to the print product, the new revision is available online at eoma.aoac.org.
Edited by George Latimer (retired, Office of the Texas State Chemist), this version includes new and updated material since the last printing in 2007, including the following:
• Nineteen First Action Methods, with collaborative study references to the Journal of AOAC INTERNATIONAL
• Approximately 30 methods approved as Final Action by the AOAC Official Methods Board (in addition, ~ 20 other methods now include Final Action dates)
• Twelve methods significantly revised/modified (~ 50 other methods include minor editorial revisions)
• Two methods repealed (determined to be no longer relevant).
EtQ’s Food Safety Management software provides applications specifically engineered to support compliance initiatives such as Hazard Analysis Critical Control Points (HACCP), Safe Quality Food (SQF), and ISO 22000. EtQ helps maintain quality to these initiatives while providing a workflow platform to adapt to changing business processes, without programming. EtQ’s food safety system is fully integrated with modules such as Risk Assessment, CAPA, and HACCP to incorporate safety and quality into each step of the process. For more information visit us on the web at www.etq.com/food.
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High-quality Detectors and Light Sources
Hamamatsu provides high-quality detectors, cameras, and light sources for food inspections and agricultural sorting using X-rays and infrared light. Choose from a variety of high-sensitivity X-ray line scan cameras and microfocus X-ray sources (MFX) to integrate into an X-ray inspection system. For infrared food inspection, we offer image sensors with high sensitivity to infrared. We also offer high-brightness LEDs emitting at the near-infrared range. For more info about these products, go to http://sales.hamamatsu.com/info/food.
Visit Hamamastu Website
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QuickScan – the Next Level in Quantification and Traceability
Responding to industry concerns over global food safety and quality, EnviroLogix offer the QuickScan testing system for mycotoxins, GMOs and contaminants. QuickScan is a highly flexible and precise test-strip reading system that enables quantification and traceability of test results. Multiple toxin tests can be run simultaneously, with results stored in the PC-based system within seconds. In addition, EnviroLogix offers QuickTox for Melamine, a 5-minute on-site test to screen for contamination in milk and animal feed ingredients. The test is convenient, easy to use, and detects melamine at relevant industry thresholds. For more information, contact Simon Varney, product line manager.
Visit Envirologix Website
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TISCOR Releases InspectNTrack for Your Integrated Pest Management Needs
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TISCOR is pleased to announce the InspectNTrack software system for your food processing pest management needs. With over twenty-eight years of experience, our products are used by thousands of facilities to automate their safety equipment inspections. We understand that assurance of inspection is vital to food safety and are excited to work with you to make your facility audit ready! With a software system designed for inspections, InspectNTrack ensures yours are always on-time and accurate. Utilizing a Pocket PC, InspectNTrack allows inspectors to carry a device capable of passing or failing inspections, entering notes, and creating reports.
Visit our Website for Your Free Demo!
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FOOD SAFETY TRAINING • ISO 22000 ● PAS 220 ● FSSC 22000 ● HACCP
New to ISO 22000, PAS 220 or FSSC 22000? Interested in transitioning to FSSC 22000? Preparing for an internal audit or gap analysis? Looking to lead an ISO 22000 or FSSC 22000 audit team?
From Appreciation & Interpretation to Lead Auditor, LRQA offers you the training your food safety team needs to understand the importance and benefits of these industry leading standards.
Through accelerated learning techniques, you’ll gain knowledge of management principles, processes, business benefits, the relationship of these standards to the GFSI, and more.
Maximize your skill set as a management systems professional. Register for one of our Public or On-Site training courses today!
Visit LRQA's Food Safety Training Page
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