Q: What is the significance of the European Commission’s new policy on quality standards for fruits and vegetables? (Marketing Standards for Fruits & Vegetables). With rules effective as of July 1, what does the industry need to know?
A: Binard: We’re not sure we understand what the EU Commission is doing. There are a number of problems we identified. Before the change in the EU rules, 36 products were subjected to detailed specification marketing standards. Most were very similar to those of the UNEC (United Nations Economic Commission for Europe). The new EU rules eliminate obligatory detailed standards for most products.
A: Rosseneu: The old EU standards were a version of UNEC standards to harmonize trade. The reference to UNEC standards is still in the current legislation. The big difference is the UNEC standards are voluntary and the EU standards are mandatory, so we are obliged to comply with them.
Trade partners and private entities can use the UNEC standards as a reference. UNEC standards are still valid, and most retailers will have stricter standards. However, with the EC’s removal of specific marketing standards for most products, their mandatory character is eliminated and not binding anymore. [Editor’s note: see description of fresh quality standards here]
A: Binard: The old EU rules set up a common language — what is Class 1, what is Class 2, etc., so there was no real concern to market access. The EU, in an administrative simplification, pushed to get rid of marketing standards. It made the proposal last December to withdraw 26 products from the detailed specification. The only 10 remaining are the larger commodities — apples, pears, bananas, citrus, tomatoes, peaches, nectarines, etc. For the other ones, the EU is repealing the compulsory rules and basically leaving it to the trade or sector to decide what could be put on the market. This action is more ideological than pragmatic. It collected a lot of criticisms in member states and the sector. The move is more politically motivated than really demanded by the sector.
Q: Political in what way?
A: Binard: This is a populist approach. The Commission wanted to demonstrate it was allowing more and cheaper fruit in the market. In crisis, it was using the argument that it was important to relax standards and open availability. Despite the huge lack of support for the EU proposal from the sector and various countries, the new rule has become legislation. July 1 was the kickoff date.
A: Rosseneu: Of course there are regulations that are too burdensome or really heavy, and maybe some are obsolete. But throwing away most EU obligatory detailed marketing standards is not the best way to deal with so-called red tape. With quality, sizing and grading provisions, everyone was talking the same language and expectations.
Today, with the new EU rules, you just have a little sentence that product should be ripe, a very subjective matter, while in the old standards you had either minimum sizes to insure no unripe fruit or minimum sugar levels for taste, etc. The new ruling creates uncertainty and gives no assurance of quality. The ruling might compromise the quality of fruit for sale in the market. We wouldn’t like consumers biting into unripe fruit with low sugar content. From a compliance standpoint, the new standard is so basic, as long as the product is not rotten, it passes!
Q: How do governmental proceedings work when implementing a rule such as this? Wouldn’t strong opposition from the fruit and vegetable sector and member states carry weight in the final legislation?
A: Rosseneu: The majority of the sector was against the EC proposal and expressed its disapproval in a string of press releases. A vote also was taken by the 27 member states of the EU, represented by agricultural commissions. Ministries of agriculture from the various member states participated, with the number of votes weighted by country. The votes were 107 in favor, 216 against and 22 abstentions. The majority was against it, but it was not a qualified majority. It would have needed a qualified majority to at least block the proposal. [Editor’s note: see minutes of standing committee that took the vote here].
A: Binard: In regard to the decision-making process, the EC did not conduct an impact assessment. To act according to the general interest and principal of better regulation, it should always conduct an analysis of the consequences of the measure. And that has not been done. We think this is a big mistake.
Q: What could such an analysis potentially reveal?
A: Binard: The new EU rule doesn’t consider the principle of a good functioning single market. There are 27 countries… product in Spain could travel freely to Germany, and the rule of acceptance was the same in France and the U.K.
The removal of mandatory detailed standards for most products is leaving quite a lot of interpretation to the rules in different countries. You could have some of the countries that will accept product and others that won’t. This could be a major problem; hopefully product on the market will be of good quality and it won’t be a problem, but of course this is unknown.
Q: How does this impact U.S. exporters?
A: Rosseneu: U.S. suppliers to the EU would have to comply with the new rules. From a quality standpoint, not much changes because most U.S. products have higher quality standards already exceeding the old more stringent EU standards. It might be that some retailers that only asked for compliance on the 36 product standards mandated in the old EU rules will now broaden the scope of products it examines for compliance.
For import procedures, it might become more burdensome for U.S. exporters, depending on the country. While all countries need to comply to the new EU rules, each member state is free to determine how to implement those rules. The UK seems the best place to go because it only wants you to provide certification for the 10 products that still require the official EU detailed marketing standards.
A bunch of other countries said all products need to be certified for the very basic standard. If you go to Belgium, the country requires notification for 36 products, but in the Netherlands you have to certify all products. We would have liked to see the rules carried out in a uniform way, with the same procedures for imports across member states.
A: Binard: So the first issue is the unscientific decision-making process at the EU level, and the second is the loss of common interpretation about quality among countries. The third concern is that the elimination of detailed rules could also lead to retailers drawing up their own specifications.
Q: Don’t they do that anyway? I thought retailers required varying quality specifications and product standards based on their particular business strategies. Frederic, you point out that many retailers demand stricter standards of their suppliers than the common marketing specifications…
A: Binard: That is true to a certain extent, but what constituted quality and how those attributes were defined, Class 1, Class 2, etc., were all undisputed.
Proliferation of private specifications is a fear we have. We won’t say it will necessarily occur. The differentiation in standards could create all kinds of problems and confusion, such as what labeling is used on the box.
Q: To clarify, EU’s detailed marketing standards now only affect 10 products. What is required of all other products?
A: Binard: What is happening is to compensate for the withdrawal of 26 products from the detailed specifications; any fruits and vegetables to be placed on the market have to comply to a general marketing standard. This amounts to very basic provisions in terms of marking, having minimum quality in tact, and marketable quality, and a few tolerances of quality within one same consignment.
It means a number of products not controlled at all will have to demonstrate minimum quality and maturity requirements, and also marking of origin, which most are already doing.
Q: Why is that so bad? Shouldn’t all products at least meet a minimum standard?
A: Binard: The new rules will not simplify the process as intended, but rather increase administrative and financial burdens for the sector. We estimate new controls and paperwork will have to be introduced for up to 400 fruit and vegetables to verify that all products are sound, safe and of marketable quality.
A: Rosseneu: A further concern is that retailers will start their own little systems, and all transparency could be lost with no clear picture of the market anymore. There is a real risk of each retailer creating their own scheme.
The ruling also allows member states to permit the retail sale of product not complying with the remaining standards, as long as it is for private use and used for processing. Previously this option wasn’t available. Sainsbury’s could be capable of selling misshapen produce as long as it was clearly intended for personal use by the consumer and for processing.
Q: Do you anticipate retailers will capitalize on this provision and merchandise product this way?
A: Rosseneu: We don’t know if all retailers want to do this. We imagine hard discounters would, but we are not sure if the premium retailers would do this throughout the year. It might entail additional market pressure. Misshapen produce will be sold at very low prices. The UK and Germany, which are big consumer markets, as well as Cyprus and Denmark, are countries that have said yes you may do it, but we don’t know if retailers will actually proceed. But there has been interest from Sainsbury’s, which has been very active on that front, and we presume others will go there as well. A lot of countries had last minute legislation to make it happen.
Q: Is the main issue that consumers may mistake odd lots of produce meant for processing for fresh market consumption?
A: Rosseneu: Normally it should be quite straight-forward for home processing, so the lower quality is not as much the issue, but we’ll still have to see how it ends up in the stores and how it is presented to consumers. But labeling should be sufficient to have consumers aware these are not for fresh consumption. The concern is the additional volumes that will push down prices for all categories.
Q: From a trading/logistics standpoint, are there other financial issues?
A: Binard: On a compensation basis, it means all imported goods will have to be certified or demonstrate complying with these minimum standards, and therefore a document issued by an authority will have to be provided. First, a number of countries indicate that to issue a document, there will be a cost. There could be small exotic consignments attracting additional cost that we didn’t have in the past. Also, there is the concern of capacity of member states to issue documents in a timely manner. If suddenly they have to issue a great number of documents, maybe they won’t be equipped to do so.
Another problem we’ve identified: some of the countries could decide according to their experience, a product can enter the country without a certificate. In the new rules, it’s been foreseen that on the basis of risk-analysis, a country could make exceptions for particular products, say papaya. Take the Netherlands, which is importing a lot of product. It may decide, based on past records, that there are no problems with the imports of papaya. It could determine it won’t control papaya imports in the future and won’t issue this document or certificate.
Q: So, if the Netherlands wasn’t the product’s final destination, could the problem occur later on?
A: Binard: The product will circulate to other member states, and these states may say they have been experiencing a lot of problems with papayas, where a certificate is necessary. But the distributor/importer wouldn’t have that certificate. So the goods distributed in Rotterdam face no problem, but in Paris, the inspector says papaya is a problem and we need a certificate. And there is no control.
Overall, we see problems of cost, lack of harmonization, inconsistent reasoning for the list of products subject to marketing standards and other complex issues regarding labeling. What should traders put on the box? What information is necessary? These standards are not compulsory. It could create uncertainty in the provisions of the EU standard being selectively implemented.
These are reasons we have doubts. Will the new rules bring simplicity and clarity or create confusion on quality? It could be that people want to make soup and are content with unusual sizing or misshapen vegetables. Imperfect organic produce was unable to be put in the market. The Commission is defending and justifying its position on that basis.
Q: Won’t supply and demand issues weed out some of these problems?
A: Binard: We are concerned lower quality will find its way on the market. Even if some retailers are upholding higher standards, we have wholesalers distributing fruit to many channels with no incentive to produce quality.
Logically people who want the industry to work well, will have good quality, making sure they don’t have produce on the market in undesirable volume, which before was used for processing. The problem now is that more of that product will be found on the fresh market.
Q: You mentioned that no analysis was conducted before the rule went into affect, but will there be a study conducted to assess the impact over time?
A: Binard: Specifically for fruits and vegetables, the Commission has been working on an impact assessment that will be conducted in the next six months. We must watch this closely and provide our view. The impact assessment was launched in May on quality of agricultural products.
In the document, there’s an added section on marketing standards, which is contradictory. It is very strange for the Commission to say it has decided on major reform of fruit and vegetables standards last December, and in May open the debate on what can be gained from marketing standards.
These two debates remain open. There is no coordination within the same department. You have major reform for fruits and vegetables in December when launching in May a major debate on agricultural product. Then, you include a position of open debate on whether marketing standards are useful, extremely useful or not necessary at all. The same department is conducting two antagonistic policies. The Commission has taken a decision on something they want to learn more about.
Q: What can Freshfel do to influence actions moving forward?
A: Binard: We’ve identified a number of gaps and are trying to find practical solutions. We don’t challenge reform, which is necessary. We can’t live in static rule, but the decision taken was without a good understanding of the needs of the sector.
Q: How did EC hone the list of fruits and vegetables that would remain subject to the detailed marketing standards and those that would be repealed?
A: Binard: They’ve decided detailed marketing standards must be upheld for 10 commodities. It seems arbitrary. Did they just choose a round number? Why not 15? The Commission says the 10 commodities account for 75 percent of the trade of countries, which will be safeguarded with detailed standards.
It’s a little strange. It demonstrates the illogical handling of the issue. The Commission has been purely political and not practical or listening to the sector. All organizations of the sector have been unanimous that the move taken is wrong.
Q: Is there historical precedence for this ruling or is there something else going on here? Could you put this new regulation in context?
A: Binard: There has been a strong position by the Commission to be liberal, eliminate unnecessary rules, and simplify the process. Similar positions have been taken for cars, chemicals, and computers, based on a general tendency to simplify rules and fade out any unnecessary public authority intervention.
One of the practical examples the Commission took was the case of fruits and vegetables. The principle is there, but the implementation in our sector is not necessarily a good example of what could be done to improve functioning of the sector. We are looking at the specificity of applying the objective.
Q: Do you anticipate any noticeable impact in the near term. When will you know if your worst fears have been realized?
A: Binard: We’ll have to wait and see. There won’t be an earthquake of change. A lot of questions remain unanswered. Now that the rule is in place, what should everyone do, and what implication will it have on the market?
In terms of costs, it is up to 20 Euro per document or certificate. I imagine it will have different implications based on size of consignment. It could end up being quite an important amount of money, depending on how countries will apply it. Undesirable products could penetrate the fresh market, it could push prices down, and lower quality product could be offered to consumers at discounters or the corner shop, which could serve to undermine the overall image of the industry.
We need to have constant and tasty quality product on the market. The new rule could potentially challenge that.
A: Rosseneu: The EU Commission argues the new rule will cut out food waste. Rubbish food was going to animals. In the credit crunch, the EU said it can ensure people don’t give up on fruits and vegetables. It’s a populist measure and sounds good on the surface, until you dig deeper.
It certainly sounds like quite a mess.
We are not sure, though, that the mess is actually because cosmetically challenged product is being allowed for fresh market sale to consumers. That could have been accomplished by keeping all the old marketing standards and simply allowing an additional standard for any sound product.
The mess is because every country now is making its own rules, and requirements for paper work seem likely to increase. The whole issue is a logistical nightmare.
But it is easy for the industry to overreach. Yes, a few standards may have had something to do with ripeness but most — in Europe as in the US — have to do with cosmetics. If, in fact, Sainsbury’s wants to sell a cauliflower of less than 11 centimeters to consumers, it is not entirely clear why the full weight of the state needs to be arrayed against the idea.
Of course, it is not at all clear that consumers will want “witches’ fingers” carrots with multiple fingers or “ogres’ toenails” curved cucumbers — but if they do that really is not a problem that needs to be solved.
We remember when Ronald Reagan was President and he got caught in a controversy over whether kiwi growers should be allowed to restrict the sale into the fresh market of very small kiwifruit and misshapen kiwifruit such as kiwifruit fans. Despite his free-market principles, President Reagan decided not to draw the line in the kiwi patch and allowed the restriction.
But it was the growers pushing for the right to restrict volume. In Europe the industry was divided. The Times of London article we referenced above quotes another association:
In Britain the move will help all growers whether they follow organic or conventional production methods. Patrick Holden, the director of the Soil Association, which champions organic produce, was delighted. Three years ago his own organic carrots grown in the hills of West Wales were rejected by Sainsbury’s for being “too wonky”.
He said: “This will be a fantastic step, especially for organic growers. We are about inner quality, not outer appearance — that is our hallmark. Fresh, local and seasonal is better than a bland but cosmetically perfect piece of fruit or veg.”
The National Farmers’ Union said in a statement: “Farmers and growers work extremely hard to produce quality food but nature does not always comply with a perfectly rounded sprout and poker-straight carrot.
“It is good to hear that people will be given the chance to buy odd-shaped fruit and veg and see they taste just as good. It will help eliminate waste, which has to be good news for consumers and British growers.”
Actually, we are unaware of any shortages in the UK of fresh produce. If all this product was being held off the market for cosmetic reasons and now it will be offered to consumers, the impact of much more supply and a relatively fixed number of mouths to feed means that prices will likely fall substantially.
So the Soil Association may regret its own success at lobbying.
Be that as it may, the drive for local inevitably means embracing standards different than the cosmetically perfect product that high tech centralized packing lines can produce.
When UglyRipe tomatoes were being restricted, it was clear that the cosmetic standards developed for regular tomatoes didn’t make sense in an environment where we are having an explosion of local production, heirloom varieties, etc., and standards will have to change.
The Europeans, though, seem to have thrown out the baby with the bath water. Yes, there is no reason to prohibit the sale of produce based on what some judge to be cosmetic imperfections. However, there is enormous value added through common standards. That anyone in the world can order a trailer of Washington Extra Fancy Red Delicious Apples and know precisely what they are buying reduces costs to consumers all over the world. The EU would do well to recognize that it can both broaden consumer options and maintain efficient trading through standards.
Many thanks to Philippe Binard and Frederic Rosseneu as well as to Freshfel Europe for helping to keep the trade informed on this important issue.