By Araya & Cia partner Matias Araya

One in every six North Americans is currently affected by food borne disease and around 3,000 deaths each year are linked to contaminated food borne illnesses in the United States, hence the reason for the enactment of the Food Security Act in July this year. This includes an 18-month period to establish a series of regulations to start implementing the law, which will start impacting directly on exporters.

The main objective of this law, following a chain of disease outbreaks that the U.S. has witnessed over the past years due to contaminated food, is precisely to prevent food contamination problems by increasing risk controls in processing plants and food production processes in order to achieve food safety.

U.S. food importers will be obliged to make sure their food suppliers, such as Chilean exporters, comply with all the requirements established by law and the regulations they dictate (Importer Accountability). Importers will be directly responsible for breaches, especially if there is a recall of contaminated products, which could put the health of the civilian population or animals at risk. Under this law, that can be ordered by the FDA (Food and Drug Administration), if it considers that there is a breach of food safety.

It has been customary in the last five years to observe that with both U.S. supermarkets that import products directly and those that source through importers that manage programs with them, that they are very concerned about civil liability insurance and facing potential damages that could come directly to the supermarkets as a consequence of contaminated products that are traded by them.

The lawsuits that individuals could exercise against supermarkets makes these institutions concerened and seek to protect themselves from potential legal action, in such a way as to pass responsibility onto importers, who in turn could pass the same responsibilities onto our exporters.

One example is the recent outbreak of listeria that was detected in melons traded by Wal-Mart supermarkets, originating from products grown by the company Jensen Farms which were traded by Frontera. This has led to a lawsuit against Wal-Mart, Jensen Farms and Frontera by a number of consumers who have had health effects as a result of consuming these products. Clearly, this event generated a chain of responsibilities that eventually ends in the direct responsibility of the producer that grew the contaminated product.

However, the fact that through this law they have given extraordinary powers to the FDA to recall products which are supposedly contaminated from the shelves of supermarkets, will generate a higher demand for the use of civil liability insurance on the part of North American importers and their suppliers.

The fact that an importer can be expressly made liable for breaches, even if the responsibility is with a third party abroad which exported to the U.S., will without a doubt lead to a higher demand for the use of civil liability insurance to facilitate the payment of any compensation, and thus the importer affected by the contamination of a product can remain free from damages, when it hasn't had responsibility.

All of this leads to effects on the exporter who today is starting to formally assume greater responsibilities.

As legal counsel for a large number of Chilean exporters of agricultural products, we are starting to find the reaction from U.S. importers has been to make more demands in terms of food security and compliance with the new law. Of course they are demanding the implementation of good agricultural practices (GAP) and good manufacturing practices (GMP), issues that our exporters have been applying for many years, but there are also a number of new demands, requiring the existence of certified audits by inspection companies recognized by the FDA, conducting random samples of products to be analyzed for possible contamination.

In addition they are demanding the implementation of the PTI (Produce Traceability Initiative), an issue that is recognized by the new food safety law, taking the initiative led by a number of supermarkets in the U.S., which seeks to implement capture systems and the registration of standardized information throughout the production process, allowing them to obtain essential information for food safety, trade issues, labor, etc.

In sumary, we can see that the implementation of the new food safety law in the U.S. is leading importers to make more safeguards, as it makes them directly responsible for any potential food contamination, and they are also looking to protect themselves from potential product recalls and damage lawsuits. This higher responsibility passed by importers onto exporters means they then have to adopt new additional safeguards, especially civil liability insurance which could cover them from claims related to contamination and the withdrawal of food products.

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