Supply Chain Compliance and Crisis Response for Food Series (Part 1): It's never too late to mend the fold after the sheep are lost, don't wait for empty flowers and broken branches

LABEL： Agriculture and food , Compliance business , Corporate and M&A ,

Food safety is greater than the sky. When it comes to discussing food safety, the phrase 'not a single snowflake is innocent during an avalanche' becomes particularly vivid.

The recent joint investigation report on food safety incidents during transportation has attracted widespread attention and profound reflection from all sectors of society. Multiple parties have been held accountable and fined accordingly, and some individuals have entered criminal investigation procedures. This incident once again highlights the importance and urgency of food safety issues.

From the fields to the table, the food supply chain involves countless links. In addition to the main links such as raw material procurement, food processing, and production, food also involves warehousing, transportation, container packaging, and repackaging under specific circumstances. These intermediate links are like the blood vessels of the human body and play an important role in the supervision of the food safety chain, which cannot be ignored. In history, food safety accidents caused by intermediate links in the supply chain are not uncommon.

The intermediate links in the food supply chain often involve multiple parties, including upstream and downstream companies, as well as multiple suppliers in the intermediate chain. In reality, various situations may vary greatly. This article takes the food safety incidents that occur during the transportation process of third-party logistics transportation enterprises as an example, focusing on the responsibility content, responsibility boundary identification, response measures, and risk prevention suggestions of relevant parties. It is divided into two parts. The first part will explore the obligation boundaries and responsibility identification risk factors of each party in the food supply chain, as well as crisis response. The second part mainly focuses on the responsibility content and risk prevention suggestions of all parties when a transportation safety incident occurs.
1、 The main body and role of intermediate links in the supply chain

The various parties and relationships involved in the typical intermediate links of the food supply chain can be briefly illustrated as follows.

           

For the convenience of analyzing and analogizing actual scenarios, we assume that both upstream and downstream enterprises are engaged in food production and operation ("food enterprises"), and assume that third-party enterprises are responsible for transporting food between upstream and downstream enterprises. In practice, if downstream enterprises are trading enterprises, the relevant responsibility chain will extend to the food production enterprises that ultimately use the relevant food raw materials.
2、 The boundary of obligations and responsibilities of all parties in the event of pollution in the intermediate stage

A typical misconception is that since an event is caused by a third party such as the transportation company, it naturally has nothing to do with upstream and downstream enterprises.

In the event of pollution in the intermediate transportation process, the first and foremost parties are obviously the transportation party and related individuals. However, in addition to the responsibility of the transportation party, upstream and downstream food enterprises will also inevitably be involved, facing corresponding investigations, assuming corresponding obligations, and even assuming substantive responsibility in specific circumstances. Starting from the obligations of third-party enterprises and upstream and downstream enterprises in food safety, we will explore the risk point boundaries of each party in practice.
（1） Third party enterprises

The current laws and regulations do not set specific licensing or qualification requirements for enterprises engaged in food transportation. However, in the process of providing food transportation services, enterprises still need to strictly fulfill their legal obligations. Transportation enterprises can examine whether they have violated specific obligations and assume corresponding responsibilities.

1. Universality requirements: In addition to general requirements related to road transportation, cargo transportation, etc., transportation enterprises should comply with the relevant provisions of the Food Safety Law and GB14881-2013 National Food Safety Standard General Hygiene Specification for Food Production, including: (1) ensuring that containers, tools, and equipment used for storing, transporting, and loading and unloading food are safe, harmless, and kept clean to prevent food contamination; (2) Meet the special requirements for temperature, humidity, etc. required for food safety, and select suitable storage and transportation conditions based on the characteristics and hygiene needs of the food. If necessary, equip with insulation, refrigeration and other facilities; (3) Do not store or transport food together with toxic, harmful, or odorous substances.

In addition, the "List of Food Safety Risk Control" released by the State Administration for Market Regulation in May this year further stipulates the requirements for the transportation process, including cleaning and inspection of transportation vehicles, strict implementation of workplace management and loading and unloading operation norms, to avoid product contamination.

2. Specific requirements: For some foods, there are stricter transportation obligations in specialized laws and regulations. For example, the "Regulations on the Administration of Grain Circulation" and the "Measures for the Supervision of Grain Quality and Safety" provide detailed regulations on the transportation of grains such as wheat, rice, and corn, including: non specialized transportation vehicles (vehicles, ships) must be equipped with necessary bedding and moisture-proof equipment, which should comply with national standards and policy requirements; It is prohibited to use contaminated transportation vehicles, containers, or packaging materials to transport food, and they must not be mixed with toxic and harmful substances for transportation. In addition, the "Guidelines for Grain Transportation Technology (Trial)" proposes further requirements: (1) prohibit the use of packaging materials, containers, and transportation vehicles that do not meet quality and food safety standards; (2) Packaging materials and carriers that have been loaded with fertilizers, pesticides, fiberglass, and other toxic and harmful substances, as well as live animals and other contaminated materials, must be thoroughly cleaned or disinfected to ensure that they meet food safety standards before they can be used for grain transportation.
（2） Upstream and downstream enterprises

For upstream and downstream enterprises, the agreement between them regarding the responsible transportation entity is often an easily identifiable matter and can also serve as a starting point for determining the responsibilities of all parties, but the actual operation is far more complex than this. Even if one party is responsible for transportation, the other party still bears varying degrees of responsibility that cannot be shirked, and entrusted transportation itself cannot simply exempt the responsibility of the entrusting party. The specific legal risk points are analyzed as follows:
Risk identification factor 1: Agreement agreement

In the sales agreements of upstream and downstream enterprises, the responsible party for transportation is usually agreed upon, which is also the commissioning party of the actual carrier company. The identification of the transportation commissioning party plays a primary role in post event accountability and is also one of the basis for identifying the responsible party for food safety. Therefore, clarifying the party responsible for transportation and the corresponding responsibilities arising from food safety will play a primary role in determining the administrative and even criminal responsibilities of upstream and downstream enterprises after the incident occurs.

Of course, it should be noted that the agreement on the responsible parties of upstream and downstream enterprises in the food transportation process plays a key role in determining the responsible party and does not exempt any legal obligations. In the food industry with strict supervision, there are multiple mandatory legal obligations and corresponding responsibilities in specific links such as production, processing, sales, and operation. Therefore, the agreement between the two parties does not mean that one party can lie flat and completely exempt from liability. As analyzed later in the text.

In addition, besides determining administrative and criminal responsibilities, the agreements reached by all parties will also have a substantial impact on the mutual recovery between them. After one party of the upstream and downstream enterprises assumes illegal liability, the prior agreement in the agreement terms, taking into account the degree of fault of both parties, will greatly affect whether that party can recover from other parties and how to recover. This has been repeatedly verified in judicial practice.

In any situation, it is crucial to establish a mature and comprehensive agreement in advance.
Risk identification factor 2: Delivery control and procurement control legal obligations

As a part of the production and operation process control, upstream food production enterprises bear the obligation of "formulating and implementing delivery controls" as stipulated in Article 46 of the Food Safety Law. However, this provision is only a general provision, and relevant laws and regulations have not further elaborated on the specific connotation of this obligation, especially in the connection between upstream enterprises and third-party enterprises, where there is significant flexibility from legislation to law enforcement practice. The General Rules for the Examination of Food Production Licenses (2022 Edition) and the Notice on Issuing Relevant Forms for Food Production and Operation Supervision and Inspection issued by the State Administration for Market Regulation require the selection of appropriate transportation methods for "delivery control" based on product characteristics, storage requirements, and transportation conditions, and the maintenance of delivery records. In practice, food production enterprises have been found to have violated their delivery control obligations by failing to keep delivery records and have been subject to administrative penalties. In addition, the food safety responsibility list of food production enterprises released by multiple market supervision and administration bureaus clearly requires the establishment and improvement of product delivery and transportation management systems, and the monitoring of the transportation environment for products with special transportation conditions.

According to policies and law enforcement practices in multiple regions, the boundaries of delivery control obligations for food companies are relatively vague and flexible. It is extremely dangerous to assume that one's own party is not responsible for transportation and therefore does not assume responsibility. Whether upstream enterprises are aware of the behavior of third parties, whether they have long ignored inspections, or even continue to tolerate non compliant operations, can all become reasons for upstream enterprises to bear responsibility.

Similar to the delivery control obligations of upstream enterprises, downstream enterprises also have multiple procurement control obligations in the receiving process. Regarding the transportation connection process between third-party enterprises and downstream enterprises, regulations such as the Food Safety Law, the Measures for the Supervision and Inspection of Food Production and Operation, the Food Safety Risk Control List, and the Notice on Issuing Relevant Forms for Food Production and Operation Supervision and Inspection have stipulated more detailed operational requirements for downstream production and sales enterprises, including: (1) feeding control obligations: purchasing and accepting received food and raw materials through sensory inspection and other inspection methods; (2) Obligations of purchase and sales process control: Ensure that food containers, packaging materials, etc. are non-toxic, harmless, clean, odorless, and comply with relevant national laws, regulations, and standards. In addition, Articles 50 and 53 of the Food Safety Law stipulate the obligation of downstream enterprises to inspect and record incoming goods, and shall inspect and record the supplier's license, as well as the food factory inspection certificate or other qualified certificates.

In practical operation, for downstream enterprises engaged in the production and processing of food, their feeding control is directly related to the quality and safety of the finished products on the subsequent production line; For downstream enterprises that only engage in trade, whether the procedures for receiving finished products are strict and standardized will directly affect the continued circulation of food in the supply chain. Therefore, downstream enterprises must not take the above-mentioned purchase control obligations lightly.
Risk identification factor 3: Third party fault does not affect the strict safety responsibility of upstream and downstream enterprises

Both as food producers and operators, upstream and downstream enterprises bear strict food safety responsibilities. The food safety responsibility of upstream enterprises is difficult to fully transfer to subsequent enterprises with the multiple circulation of food in the supply chain. If the upstream enterprise is at fault, even if the relevant evidence can prove that the pollution occurred in the subsequent stage, the upstream enterprise still needs to bear responsibility. Even in multiple cases, due to the lack of conclusive evidence indicating that pollution occurred in subsequent stages, even if upstream enterprises have taken measures such as sample retention, factory inspection, providing certificates of conformity, and record keeping, regulatory authorities will still hold upstream enterprises responsible for food safety. The common criteria for relevant departments to determine illegality include: (1) producing and operating food contaminated with packaging materials, containers, transportation vehicles, etc. [5]; (2) Production and operation of food and food additives that are corrupt, spoiled, rancid, moldy, infested with insects, contaminated, mixed with foreign objects, adulterated, or have sensory abnormalities; (3) Food that does not comply with laws, regulations, or food safety standards in production and operation does not constitute a crime; (4) Adding chemicals other than food additives and other substances that may harm human health to food does not constitute a crime, etc. Therefore, upstream enterprises must take proactive measures to face the complex challenges of food quality and safety management.

Downstream enterprises also face severe challenges in handling food and raw materials from upstream or third-party enterprises. If downstream enterprises process and produce contaminated food or raw materials from upstream or third parties, they have been punished in previous law enforcement practices based on "food producers and operators purchasing or using food raw materials, food additives, and food related products that do not meet food safety standards" [9] and "producing and operating food that does not comply with laws, regulations, or food safety standards" [10]. Similarly, if downstream enterprises sell actual contaminated food provided by upstream or third parties, they have also been punished based on clauses such as "food producers and operators purchasing or using food raw materials, food additives, and food related products that do not meet food safety standards" [11], "adding chemicals and other substances that may harm human health other than food additives to food" [12], and "producing and operating food that does not comply with laws, regulations, or food safety standards" [13]. However, the Food Safety Law provides a certain degree of exemption from punishment for food operators who fulfill their obligations of purchasing inspection [14]: If a food operator fulfills their obligations such as purchasing inspection, has sufficient evidence to prove that they did not know that the purchased food did not meet food safety standards, and can truthfully explain the source of their purchase, they can be exempted from administrative punishment. However, if food operators cause personal, property or other damages, they shall still bear civil liability for compensation. It is worth noting that the above exemption clauses greatly test the establishment and implementation of a company's food safety system, otherwise it is difficult to achieve the level of sufficient evidence required by regulations.
Risk identification factor 4: Risks under entrusted transportation mode

In the context where upstream and downstream enterprises entrust third-party enterprises, it is a common question whether the entrusting party can be exempted from some legal responsibilities.

According to the relevant provisions of the Implementation Regulations of the Food Safety Law [15], the commissioning party must review the food safety guarantee capability of the entrusted party and supervise the entrusted party to transport according to food safety requirements. Obviously, even if the transportation party violates the agreement or regulatory requirements and causes food contamination, the commissioning party still bears the responsibility of supervision and management. In previous law enforcement practices [16], regulatory authorities believe that if upstream enterprises fail to review the qualifications of the entrusted party, supervise the transportation of the entrusted party, etc., it constitutes failure to fulfill their delivery control obligations in accordance with the law; In another case [17], the entrusted party did not transport the food in accordance with the requirements of food labeling and did not take insulation or refrigeration measures. Based on this, the regulatory authorities determined that downstream enterprises did not audit the entrusted party's food safety assurance capabilities and did not supervise the entrusted party's storage and transportation of food in accordance with food safety requirements. It can be seen that in any situation, having a third party responsible for actual transportation does not mean that upstream and downstream enterprises can simply be exempted from liability.
Risk identification factor 5: Whether there is a sound food safety system

A food safety incident ultimately occurred, and potential loopholes in the food safety system cannot be avoided. In the investigation process of food safety accidents with significant impact, the scope of investigation by relevant departments may expand from direct issues to the food safety system. In addition to the flexibility of the investigation itself, the problems existing in the food safety system can be used to prove that the enterprise has violated regulations, leading to the occurrence of food safety incidents, and thus serving as the basis for punishment and accountability.

The food safety system itself is a systematic engineering, covering a wide range of content from raw material supply to finished product delivery. From the perspective of the theme of this article, we have listed the following highly relevant content related to product delivery:

1. Obligations related to the establishment of food safety administrators [18]: Food enterprises have the obligation to establish food safety administrators [19] and develop corresponding "Responsibilities of Food Safety Directors" and "Code of Conduct for Food Safety Officers". Enterprises should provide training and assessment for food safety administrators in accordance with the law, implement relevant performance guarantee and reward mechanisms, and keep records and archives of the above content for future reference.

2. Obligations related to the food safety self inspection system: Food enterprises shall organize regular inspections and evaluations on their own in accordance with relevant food safety requirements. Focus on checking whether the production and operation conditions have changed, whether they no longer meet food safety requirements, and whether there is a potential risk of food safety accidents. For the general risks identified during the inspection, immediate rectification should be carried out; If there is a potential risk of food safety accidents, production and operation should be immediately stopped and reported to the regulatory authorities.

3. Obligations related to the risk control list: In May of this year, the State Administration of Market Regulation released the first batch of 33 "Food Safety Risk Control Lists", involving 31 types of food products and targeting food enterprises of different business formats and sizes. This means that enterprises need to refer to the "List" and establish a targeted and widely covered internal risk prevention and control mechanism to systematically examine and manage risk points in various links of food production, covering the entire chain of food safety related risks from food raw material purchase, warehousing, standard application, production, storage, sales, transportation, delivery, recall, harmless disposal, labeling, promotion, training, etc.

4. Obligations related to the formulation and implementation of the "Three Major Systems": The "Three Major Systems" include three work systems: "daily control", "weekly investigation", and "monthly scheduling". Among them, "daily control" refers to the food safety officer conducting daily inspections based on the risk control list and recording them in a timely manner, forming the "Daily Food Safety Inspection Record"; Weekly inspection "refers to the analysis and judgment conducted by the food safety director (food safety officer) based on enterprise self inspection," daily control "and other daily inspection work, in order to solve food safety risks and hazards, and form the" Weekly Food Safety Inspection and Governance Report "; Monthly scheduling "refers to the main person in charge listening to the food safety director's report on food safety management work, conducting monthly summaries, and assigning key tasks for the next month.

Food companies need to assess whether their existing systems and implementation can withstand corresponding inspections and evaluations in the event of related liability accidents.
3、 How to deal with food safety crisis?

Consumers' sensitivity to food safety issues is increasing day by day. Once there are quality and safety issues with imported food, it will not only bring direct economic losses, but also damage the brand reputation and image of enterprises, and may result in a series of obligations to stop production and operation, product recalls, and related legal responsibilities.

We suggest that relevant enterprises take the following measures in a timely manner:

Establish a joint working group to coordinate and handle matters uniformly. Food safety incidents often involve multiple parties, and it is important to avoid independent handling by different departments. In the event of a major case, a joint crisis response team should be established as soon as possible, covering core functional departments such as legal, compliance, public relations, and business. If necessary, external experts should be quickly introduced to coordinate and take response actions. All publicly available statements or documents are recommended to be jointly reviewed by the legal and public relations departments.

Handling of products involved: If the enterprise is found to be at fault through self investigation or investigation by regulatory authorities. Regarding the food raw materials and finished products involved, all controlling parties in the supply chain should seal the problematic food as soon as possible, avoid further entering the market, promptly notify the upstream and downstream enterprises involved in the supply chain to stop production and operation, and consumers to stop consumption, and retain corresponding supporting documents. In addition, according to relevant laws and regulations such as the "Food Recall Management Measures" and the "Implementation Opinions of the State Food and Drug Administration on Implementing the" Food Recall Management Measures ", all products involved, whether they have already arrived at the consumer end or are still under the control of other producers and operators, must be recalled. Regarding the practical experience of food recalls, we have previously written a specialized practical article titled "It's Never Too Late to Make Up for the Lost Sheep - A Detailed Discussion on Food Recalls".

Quickly investigate and gather evidence, with a focus on basic legal analysis: Enterprises need to establish a legal bottom line thinking and take the legal fundamentals of the case itself as the starting point for handling the case. Correspondingly, after the occurrence of the case, the company should quickly ascertain the facts and restore the cause of the accident. In specific circumstances, corresponding preservation measures should be taken to fix the relevant facts and evidence. At the same time, enterprises should conduct key point investigations both internally and externally, analyze the legal fundamentals of the case based on the investigation results, understand the strengths and weaknesses of the enterprise in the legal aspect, and use this as a starting point to develop an overall response plan as soon as possible, taking into account the situation of various lines and resources.

Prepare in advance and handle supervision calmly: Based on the actual situation, communicate with regulatory authorities in a timely manner, cooperate with investigations, and keep detailed records for future reference and analysis. If necessary, key questions and answers for internal reference can be prepared in advance to respond to possible inquiries and inspections, including detailed descriptions of the incident, emergency measures taken and their solutions, and future improvement plans