Kronfågel reported these cases to the police, but it never became clear how the pieces of glass got into the chicken. The events attracted a great deal of attention from the media, but Kronfågel’s rapid and professional actions seem to have preserved the brand’s good name.
One of the largest recalls in history involved peanuts. The FDA (Food and Drug Administration) detected salmonella in a peanut production plant belonging to the Peanut Corporation of America. In January 2009, the PCA issued a voluntary recall on all peanut products manufactured at the plant because of potential salmonella infection.
In February 2009, the State of Texas ordered the PCA to cease manufacture of all food products at the plant, and to issue an immediate recall of all products made there since March 2005. (Source:
www.fda.gov)
Product safety in the EU
The EU Directive on Product Safety (2001/95/EC, GPSD) sets safety requirements for goods and services sold to consumers within the EU. Under the Directive, manufacturers of consumer products are obliged to recall hazardous products from consumers. All EU member states have incorporated the Directive into their national legislation. In Sweden, the Product Safety Act, 2004:451, has been updated.
In the EU there is a hazardous consumer products reporting system known as RAPEX (Rapid Alert System for Non-Food Products), which reports actions on hazardous products ordered by national authorities within the EU as well as voluntary measures taken by manufacturers and distributors.
The aim of RAPEX is to prevent the marketing and use of consumer products that present a serious risk to the health and safety of consumers. The information in RAPEX is publicly available and can be found on the Internet at ec.europa.eu/rapex
Because the consequences of recalls can be very serious for companies, every product manufacturing company should be considering taking out recall insurance which can help to cover the costs if a company is forced to recall products.
If P&C’s new recall condition
In spring 2009, If launched new Nordic recall conditions, REC 1:1. They consist of a broadly-termed named perils wording comparable with the best recall wordings in the market.
The wording is on claims made basis with a 12-month reporting period. It is triggered by a safety defect in an insured product. It covers costs due to first and third-party recalls. Consumer products as well as non-consumer products are covered.
The main wording covers pre-recall expenses, various recall expenses, disposal and destruction costs, non-recoverable fees, and brand protection expenses.
With endorsements we also give cover for contamination, loss of net profit, costs of repair and dismantling/replacing the recalled product, product extortion and malicious tampering, adverse publicity, extra governmental recall, and first-party recall for motor vehicles and motor vehicle components.
Food and Fodder
One issue that is always current in the EU is food safety. There is great sensitivity to the anxiety that is generally felt about food safety after the scaremongering reports on food scandals such as mad cow disease (BSE), foot and mouth disease, bird flu, and dioxin poisoning.
A comprehensive review of legislation in the EU was completed in 2002, where the focus lay on animal feed because fodder contamination had been the cause of all major food scandals in recent years.
The EU also has a reporting system for hazardous food and fodder products. It is known as RASFF (Rapid Alert System for Food and Feed) and is a system for early warning and exchange of information on products that might offer a serious risk to human health. All member states including Norway, Iceland, and Liechtenstein have access to the system. The Internet address of RASFF is ec.europa.eu/rasff
In the RASFF annual report for 2008, it is clear that most notifications in 2008 concerned products in which mycotoxins had been traced.
Mycotoxins are poisons formed by several types of moulds that grow on food and other organic materials. Consuming these substances can damage the internal organs of animals and humans. The forms of mycotoxins encountered in Sweden occur chiefly in rice, peanuts, and grain.
Liability for damages in the food and fodder sectors
In accordance with European Parliament and Council Regulation (EG) No 183/2005 on establishing requirements for animal feed hygiene, the Commission wrote a report in August 2007 to the European Parliament and Council on existing statutory regulations in member states and at Community level.
The report dealt with liability for damages in the food and fodder sectors and has as its objective the preparation of an effective system of financial guarantees for animal feed companies. The Commission will also issue proposals for legislation if necessary.
When near-accidents occur on a large scale, society must bear the costs of recall, transport, storage, and destruction of fodder, food, and animals as well as the costs of analysis and other administrative expenses. Who should pay?
Because the question is complex, the Commission proposed a wide general debate on the various alternatives for financing. The aim should be to avoid public resources being used in near-accidents in the animal feed sector.
Alternative financial guarantees for feed manufacturers in the Commission’s report
Conceivable forms of financial guarantees are insurance (voluntary or compulsory), bank guarantees, and pools or special funds with public support.
Compulsory insurance where all members of the animal feed sector are covered can be a solution. It is then necessary to find insurers who offer these insurance products in all the countries concerned.
Voluntary insurance is another possibility. However, there is still the question as to what should be accepted as a financial guarantee for those who choose not to take out insurance.
Up to now, those involved have been able to handle lesser risks themselves, and it seems probable that they will continue to do so in future. However, they still need protection against the costs and consequences of more extensive recalls. An insurance solution with a relatively high deductible can provide a suitable solution.
Financial guarantees in the form of bank deposits mean that substantial amounts of money must be set aside to provide cover in the event of a recall. Normally, major recalls cannot be financed with bank deposits.
A combination of insurance and bank deposits may be a possibility. Bank deposits can then be used to cover costs of lesser, ‘normal’ recalls, with insurance helping to cover the costs of major recalls.
If a mutual fund (pool) becomes an alternative, then probably all EU member states will take part so that a base will be built up that is large enough to ensure the payout capability of the mutual fund.
However, alternative special funds mean a significant national involvement, which is in opposition to the principle of the free market.
Proposals for any legislation on financial guarantees for animal feed manufacturers are expected to be made in 2010.
Source: KOM (2007) 469 final.
Further information
