Issue Number 3: 6th February 2015
- The US Environmental Protection Agency approved the use of an alternative renewable biomass tracking programme for soybean biodiesel from Argentina
- The EU Commission is called to propose rules on mandatory country of origin labelling for meat used as an ingredient
- Edible insects in the EU: safety assessments, legal loopholes and business opportunities
- Recently Adopted EU Legislation
The US Environmental Protection Agency approved the use of an alternative renewable biomass tracking programme for soybean biodiesel from Argentina
On 27 January 2015, the US Environmental Protection Agency (hereinafter, EPA) approved the use of an alternative renewable biomass tracking programme for soybean biodiesel, which was submitted by Camara Argentina de Biocombustibles (known in English as the Argentine Chamber of Biofuels, and referred to as CARBIO). The programme allows the use of an independent third-party to certify that exporters of Argentinean soybean biodiesel are using ‘renewable biomass’, as defined in the Renewable Fuel Standard (hereinafter, RFS). The approval by the US EPA should reduce the burden of compliance on Argentinean soybean biodiesel producers.
The RFS was created under the Energy Policy Act of 2005 and is administered by the US EPA. It requires ‘renewable fuel’ to be blended into transportation fuels (i.e., motor-vehicle fuels and fuels for non-road, locomotive, and marine engines) in increasing amounts each year. Originally, the blending levels were to increase from 4 billion gallons in 2006 to 7.5 billion gallons in 2012. In 2007, the Energy Independence and Security Act amended the RFS by raising the blending obligations from 2008 through 2012, while also extending the RFS through 2022. The current RFS requires 36 billion gallons of renewable fuel to be used per year by 2022. In order to qualify as a ‘renewable fuel’ under the RFS, a fuel must: 1) be produced from renewable biomass (including, inter alia, “planted crops and crop residue harvested from existing agricultural land cleared or cultivated prior to December 19, 2007 and that was nonforested and either actively managed or fallow on December 19, 2007.”); 2) be used to replace or reduce quantity of fossil fuel present in, inter alia, a transportation fuel; and 3) have lifecycle greenhouse gas (hereinafter, GHG) emissions that are at least 20% less than the average lifecycle GHG emissions for their fossil fuel counterpart, as calculated from 2005 (i.e., the baseline). The EPA keeps a list of default GHG emissions savings values for each type of fuel. If a fuel does not qualify as renewable under the default value assigned by the EPA, then parties may petition for the approval of a new renewable fuel pathway if there are significant differences between their fuel production processes and the fuel production processes already considered by EPA.
The RFS also includes recordkeeping requirements applicable to obligated parties, as well as producers, importers and exporters of ‘renewable fuel’, which, in part, are meant to ensure that ‘renewable fuels’ under the RFS programme be made only from ‘renewable biomass’, as defined in the regulation. Parties may complete these compliance requirements themselves or submit a plan to the US EPA for the approval of an alternative renewable biomass tracking programme. These programmes assign compliance to third-party auditors, thereby reducing the burden on producers, importers and exporters. On 29 August 2012, CARBIO submitted such a plan to the US EPA, which covers the whole soybean biodiesel supply chain from soybean production through intermediate processing, to biodiesel production. Under the CARBIO Alternate Biomass Tracking Programme (hereinafter, CARBIO ABTP), an independent surveyor (i.e., Peterson Control Union) will, among other requirements, carry out a survey plan that includes visiting all relevant biodiesel producers and crushing plants, together with 5% of the feedstock suppliers. Any feedstock suppliers that are not subject to an audit in any given year will, instead, be subject to a desk audit for the product transfer documents. The CARBIO ABTP also includes a land use compliance plan, which relies on satellite imagery and waybill tracking documents. In accordance with the definition of ‘renewable biomass’, lands used for soybean biodiesel have been, or will be, classified by CARBIO as “go areas” or “no go areas”, depending on whether or not fuel derived from crops grown in these areas qualify as ‘renewable fuel’ under the RFS. To account for this differentiation, CARBIO will have to use a dedicated data management system.
The approval of the CARBIO ABTP may also have implications for the renewability classification of biodiesel exported from Argentina to the EU. In the EU, standards comparable to those found in the RFS for renewable biofuel are the ‘sustainability criteria’ for biofuels contained in the EU’s Fuel Quality Directive and in the Renewable Energy Directive. In the EU, the Fuel Quality Directive lays down technical specifications with respect to the quality of fuel used in transportation including, inter alia, a requirement for EU Member States to reduce by 6% the greenhouse gas intensity of transportation fuels by 2020 (see Trade Perspectives, Issue No. 18 of 7 October 2011). The Renewable Energy Directive establishes a common framework for the promotion of energy from renewable sources so as to meet the EU’s climate change and energy policy objectives. Both directives employ the use of ‘sustainability criteria’ for determining whether a biofuel is to be considered in line with the environmental objectives pursued. Unlike the US, where the threshold GHG emissions savings under the US EPA’s RFS is 20%, in the EU ‘sustainable’ biofuels must reduce GHG emissions by at least 35%. As specified in Annex V of the Renewable Energy Directive, soybean biodiesel has been assigned a default GHG emissions savings value of 31%. Said default value has created market access issues for soybean biodiesel exported from Argentina, which led to the filing of a request for WTO consultations by Argentina in May 2013. Absent a re-calculated default value, or a lower threshold for GHG emissions savings, to be deemed ‘sustainable’ under the EU’s legal framework, biofuel must either be approved on a shipment-by-shipment basis or be included as part of a voluntary scheme approved by the EU (see Trade Perspectives, Issue No. 11 of 31 May 2013). However, as indicated in Annex V of the Renewable Energy Directive, the methodology for the calculation of GHG emissions savings includes factors such as “annualised emissions from carbon stock changes caused by land-use change” and “emission saving from soil carbon accumulation via improved agricultural management”. Given the data management system that CARBIO will already be implementing to track the origin of its feedstock under the plan approved by the US EPA, it may be worth exploring whether said tracking system could be sufficiently adjusted so as to obtain the approval of a similar voluntary scheme in the EU. The EU has not approved a previous proposal by CARBIO to apply a voluntary scheme, but, if approved in the EU, the new system put in place by CARBIO may have the potential to ease the burden on Argentinean exporters of soybean biodiesel, who currently must be approved on a shipment-by-shipment basis.
The approval by the US EPA of the CARBIO ABTP for soybean biodiesel may also be useful for producers and exporters of other types of biofuels. For example, in 2011, the US EPA published its findings regarding the lifecycle GHG emissions reductions from various biofuels, including palm oil, which did not satisfy the 20% threshold. Countries such as Malaysia and Indonesia, that are world leaders in the production and exportation of palm oil, questioned the arbitrary nature of the definition of ‘renewable fuel’ under the RFS, including the threshold and calculation methodology of the 20% GHG emissions savings requirement. The EPA commissioned a peer-reviewed report, published in December 2014, which confirmed the EPA’s previous findings (see Trade Perspectives, Issue No. 1 of 9 January 2015). Although the EPA has yet to formally release a final decision based on the report, it appears as though producers and exporters of biofuels that do not meet the renewability criteria of the RFS will have to explore other options. The CARBIO ABTP does not directly address the 20% GHG emissions reduction threshold, but the related calculations are fundamentally intertwined with the classification of ‘renewable biomass’. As seen in the CARBIO ABTP, relevant producers and exporters may also be able to implement the use of “go areas” and “no go areas” depending on whether they improve the calculation of GHG emissions saving for a specific biofuel.
In addition to any potential implications that the approval of the CARBIO ABTP may have, it also highlights the underlying divergence between renewability or sustainability criteria for fuels in different countries, especially the EU and the US. The diverging regulations, adopted in legislation addressing the renewability of fuel sources, create fragmented levels of market access for biofuels throughout the world. As more countries enact laws in this field, and others amend laws already in place, the divergence appears to be growing. This can only have a negative impact on trade in biofuels. The regulatory frameworks for renewable fuels have been designed to achieve generally similar objectives, yet they use values and metrics that differ significantly. The improvement of the environment is a global issue and countries should work together to set up global standards. One such opportunity to positively affect the biofuels industry is the Transatlantic Trade and Investment Partnership, which is currently being negotiated by the EU and the US. Another could be the plurilateral Environmental Goods Agreement being negotiated by a group of 14 Members of the WTO (see Trade Perspectives, Issue No. 23 of 12 December 2014). Interested parties should monitor the negotiations and actively seek out solutions aimed at converging the vastly different frameworks currently in place.
The EU Commission is called to propose rules on mandatory country of origin labelling for meat used as an ingredient
On 21 January 2015, Members of the EU Parliament’s Committee on the Environment, Public Health and Food Safety (i.e., ENVI Committee) tabled a motion for a resolution urging the EU Commission to put forward a legislative proposal incorporating mandatory country of origin labelling (hereinafter, COOL) for meat used as an ingredient in processed foods. The MEPs’ document follows a report that the EU Commission submitted to the EU Parliament and the EU Council in December 2013, elaborating on the consequences of making COOL compulsory for this sort of meat (hereinafter, the EU Commission’s report). The EU Commission’s report concluded, in relevant part, that there was a need for EU Institutions to further discuss the relevant issues and, on that basis, that the EU Commission would consider the appropriateness of tabling a legislative proposal.
There is a number of food products that are subject to mandatory COOL in the EU, including honey, fruits and vegetables, fish and olive oil. Concerning meat, COOL was made mandatory for unprocessed fresh beef and beef products in the aftermath of the bovine spongiform encephalopathy (i.e., BSE) crisis by means of Regulation (EC) No. 1760/2000 of the European Parliament and of the Council of 17 July 2000 establishing a system for the identification and registration of bovine animals and regarding the labelling of beef and beef products and repealing Council Regulation (EC) No. 820/97. In addition, the Food Information Regulation (hereinafter, FIR) further requires that unprocessed fresh, chilled or frozen meat of swine, poultry, sheep and goats be accompanied by a COOL indication (the relevant implementing rules, which will apply as of 1 April 2015, are contained in Commission Implementing Regulation (EU) No. 1337/2013 of 13 December 2013 laying down rules for the application of Regulation (EU) No. 1169/2011 of the European Parliament and of the Council as regards the indication of the country of origin or place of provenance for fresh, chilled and frozen meat of swine, sheep, goats and poultry, see Trade Perspectives, Issue No. 23 of 13 December 2013). Likewise, the FIR requires that COOL be mandatory in instances where a failure to provide such information could mislead consumers. The scope of mandatory COOL in the EU stands to be further expanded by specific provisions in the FIR that enable the EU Commission to table legislative proposals on mandatory COOL for, inter alia, other types of meat, milk, unprocessed foods and meat used as an ingredient in processed foods (as sought by the ENVI Committee MEPs).
The introduction of COOL requirements has consistently proved to be a controversial matter, as shown by the FIR’s negotiating history, which evidences severe disparities of opinion at the very heart of EU Institutions, EU Member States and relevant stakeholders. Should the EU Commission embrace the concerns of the ENVI Committee’s MEPs and develop a draft instrument making COOL for meat used as an ingredient mandatory, it should take into account the EU’s international trade obligations. In this respect, there is a number of lessons learnt from the US experience on mandatory COOL for certain agricultural commodities, which gave rise to a landmark WTO dispute triggered in 2008 that has not yet concluded.
The US – COOL dispute originates from a series of US statutory provisions pertaining to certain mandatory COOL measures, which required consumers to be informed at the retail level of the country of origin of certain commodities, including beef and pork. In relevant part, the US COOL measures sought to define the ‘origin’ of meat on the basis of the country or countries where the production steps, involving the animals from which the meat was derived, took place. This included, specifically, the animal’s (i) birth; (ii) raising; and (iii) slaughter. In order to comply with the COOL measures, meat producers were required to monitor and segregate the origins of different cattle and hogs for purposes of classifying the meat into specific categories (i.e., ‘United States country of origin’, ‘Multiple countries of origin’, ‘Imported for immediate slaughter’, ‘Foreign country of origin’ or ‘Ground meat’). Following challenges by Canada and Mexico, a WTO panel found that the US measures were, in relevant part, contrary to Articles 2.1 and 2.2 of the WTO Agreement on Technical Barriers to Trade (i.e., TBT Agreement), to the extent that they accorded less favourable treatment to imported Canadian and Mexican cattle and hogs over those of domestic US origin, and that the measures did not fulfil the legitimate objective of providing information to consumers, respectively (see Trade Perspectives Issue No. 22 of 2 December 2011). The Appellate Body upheld (albeit on different grounds) the panel’s findings on the violation of Article 2.1, but reversed those with respect to Article 2.2 of the TBT Agreement, although it was unable to complete the legal analysis under such provision (see Trade Perspectives, Issue No. 14 of 13 July 2012).
With a view to comply with the recommendations and rulings of the WTO Dispute Settlement Body (DSB), the US issued, in May 2013, an amended COOL system. In principle, the new measures intended to provide for enhanced clarity, by requiring labels to clearly indicate every country where a production stage has taken place. However, in October 2014, a compliance panel, which was convened under Article 21.5 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (i.e., DSU) found that the amended COOL scheme continued to violate WTO law, including Article 2.1 of the TBT Agreement. The compliance panel was unable to conclude whether the measure was more restrictive than necessary within the meaning of Article 2.2 of the TBT Agreement (see Trade Perspectives, Issue No. 20 of 31 October 2014).
While the Appellate Body report is pending, it appears that Article 2.1 of the TBT Agreement remains an important obstacle for COOL measures to be WTO-consistent. In its original report, the Appellate Body noted that the compliance costs associated to the recordkeeping and verification requirements under the US scheme were higher for operators processing meat from different origins and, therefore, created an incentive for US producers to use only domestic livestock. The Appellate Body established that “the regulatory distinctions imposed by the COOL measure amount to arbitrary and unjustifiable discrimination against imported livestock”, thereby violating Article 2.1 of the TBT Agreement. In addition (and although this aspect could not be further analysed by the Appellate Body and the compliance panel in the context of the US – COOL dispute) a possible violation of Article 2.2 of the TBT Agreement could also be established inasmuch as a COOL scheme could eventually be found to create unnecessary obstacles to international trade by being more trade-restrictive than necessary.
Arguably, the details of the traceability system on which any COOL scheme rests are central to determine whether such scheme affords less favourable treatment to imported than to domestic goods. In its report, the EU Commission acknowledged the need for an effective traceability system to ensure the passing of origin information along the food chain. However, it also noted that the existing traceability requirements in the EU are “not adequate” for that purpose, to the extent that, inter alia, they are aimed at ensuring food safety and not at tracing origin. In this sense, the COOL scheme that will start to apply in the EU on 1 April 2015 for swine, poultry, sheep and goats meat provides for COOL based on the animals’ rearing period, while it asserts that providing mandatory information on the animal’s place of birth “would require the establishment of new traceability systems”. Arguably, the absence of enhanced traceability requirements dating back to the animals’ birth, coupled with the derogations foreseen for, inter alia, meat from non-EU countries (while parallel features of both are present in the US scheme), could render the EU’s scheme, in the context of a potential assessment against WTO law (including under Articles 2.1 and 2.2 of the TBT Agreement), WTO-compatible.
However, reinforced traceability appears to be fundamental if mandatory COOL of meat used as an ingredient is finally required. Indeed (as evidenced by the fact that this type of meat is excluded from the scope of the US COOL scheme), there are important technical difficulties that affect mandatory COOL of meat used as an ingredient, including that, when it arrives at the processing stage, meat from different suppliers is, in most cases, mixed. Arguably, the difficulty to comply with more stringent traceability requirements (together with the key role that these requirements may play in a potential determination of the legality of the scheme) may create a disincentive for the EU Commission to embark, despite the MEPs’ calls, on the development of a draft instrument to render mandatory the COOL for meat used as an ingredient. In the meantime, businesses operating in the concerned sectors are advised to closely monitor all developments as well as to actively partake in related discussions and other lobbying activities. Ultimately, business operators stand to bear the burden of any potential scheme that fails to properly address the specificities and industrial realities of the products at hand.
Edible insects in the EU: safety assessments, legal loopholes and business opportunities
Throughout the world, 2 billion humans voluntarily consume approximately 2,000 different species of edible insects because of their taste and nutritional qualities. In the EU, this practice, known as entomophagy, is not yet very popular. However, the number of entomophagists in Europe does appear to be growing, in part because insects serve as a more environmentally friendly alternative to meat. To address this type of cuisine, Belgium, an EU Member State, drafted an opinion entitled, ‘Food safety aspects of insects intended for human consumption’, which was published on 29 January 2014. The opinion addresses whether the human consumption of insects presents a risk for public health, or more specifically, which microbiological, chemical, physical and parasitological risks or hazards to humans are associated with the consumption of insects. In the EU as a whole, the legal framework surrounding entomophagy is uncertain. However, depending on the insect and product at issue, producers, suppliers and sellers of insects intended for human consumption have a variety of regulatory options to consider.
The Belgian opinion, approved by the Scientific Committee of the FASFC (Belgium’s Federal Agency for the Safety of the Food Chain) on 12 September 2014 and validated by the Board of the Superior Health Council on 3 September 2014, states that in the search for alternative dietary protein sources, insects appear to offer great potential. Currently, there are no specific regulations in Belgium or in the EU, relating to the breeding and marketing of insects destined for human consumption. However, trade in a number of such insect species is tolerated in Belgium. The opinion concludes that there is only little scientific literature available on the food safety of insects and more research on the microbial and chemical safety of insects destined for human consumption is needed in order to guarantee safety of entomophagy on a large scale. The opinion discusses the potential microbial, chemical (including allergens) and physical hazards specifically related to the consumption of insects. These hazards depend on the insect species, the cultivation conditions (feed and environment) and the subsequent processing, and can largely be controlled by the adequate application of good hygiene and manufacturing practices during breeding and marketing of insects. Nevertheless, the opinion concludes that a heating step before consumption is indispensable as well as the mentioning of appropriate storage and preparation conditions on the label. In addition, the label should contain a warning for possible allergic reactions by persons allergic to seafood and/or dust mites. On 27 May 2014, the EU Commission requested (under Article 29 of Regulation (EC) No. 178/2002 of the European Parliament and of the Council laying down the general principles and requirements of food law) the European Food Safety Authority (hereinafter, EFSA) to issue an initial scientific opinion on the safety risks arising from the production and consumption of insects as food and feed. The deadline for EFSA’s scientific opinion is 30 September 2015.
In addition to any potential opinions or assessments by the EU or individual EU Member States, producers, suppliers and sellers of insects and insect-based products intended for human consumption should be aware of general EU food regulations, EU rules for the approval of novel foods and the authorisation for the consumption in the EU of traditional foods from third-countries.
First, Regulation (EC) No. 178/2002 of the European Parliament and of the Council laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety provides the general legal framework in the EU for all foods, including insect-based food for human consumption. Regulation (EC) No. 178/2002 defines food as any substance or product, whether processed, partially processed or unprocessed, intended to be, or reasonably expected to be ingested by humans. Food does not include live animals unless they are prepared for placing on the market for human consumption. Regulation (EC) No. 178/2002 basically provides that food must be safe. General hygienic conditions are set out in Regulation (EC) No. 852/2004 of the European Parliament and of the Council on the hygiene of foodstuffs and Regulation (EC) No. 183/2005 of the European Parliament and of the Council laying down requirements for feed hygiene.
Second, insects and insect-based food are usually considered a novel food in the EU. Regulation (EC) No. 258/97 of the European Parliament and of the Council concerning novel foods and novel food ingredients provides that food or food ingredients, which have not been used before 15 May 1997 for human consumption to a significant degree within the EU, are novel foods or novel food ingredients. Under Regulation (EC) No. 258/97, a risk assessment must be undertaken for all novel foods or novel food ingredients and an authorisation may be granted by the EU Commission before they are allowed to be placed on the market. This authorisation concerns the conditions of use, the designation of the novel food or novel food ingredient and the specific labelling requirements. Currently, there is legal uncertainty as to whether whole insects or preparations thereof fall within the scope of Regulation (EC) No. 258/97. In principle, the novel foods regulation is designed to apply to all new foods before they are introduced into the EU, and this would include foods obtained from insects that have not been previously used as food sources in Europe. However, due to an apparent oversight in the wording, the scope of Regulation (EC) No. 258/97 currently covers foods ‘obtained from animals’, but it does not mention ‘entire’ animals, such as larvae and insects. In fact, Article 1(2)(e) of Regulation (EC) No. 258/97 refers to the category of ‘food ingredients isolated from animals’. On 18 December 2013, the EU Commission drew up a new proposal for the revision of the Novel Foods Regulation. Article 2(2)(a) of the proposal defines novel food more broadly as food that was not used for human consumption to a significant degree within the EU before 15 May 1997. According to this draft, all species and forms of insects would be considered ‘novel foods’, unless it can be shown that they were consumed to a significant extent by humans in the EU before 15 May 1997. This new Regulation still has to be approved by the European Parliament and the Council of the European Union. It is foreseen that such approval may occur by July 2015.
While awaiting the harmonisation of EU legislation on novel foods, trade in some insects is tolerated on the Belgian national territory. This does, however, not apply to ingredients that were isolated or extracted from insects, such as protein isolates. The Netherlands appear to take a similar approach to entomophagy. On the other hand, in a statement issued on 22 December 2014, Luxembourg’s food safety authority announced that the sale of edible insects is prohibited without specific EU Commission approval. In its statement, Luxembourg refers to surveys undertaken in 2010 and 2011, which concluded that insects had not been historically consumed in the EU and were, therefore, subject to novel foods approval. In fact, insects are not widely consumed across the EU. However, there are some exceptions, including the cockchafer (May beetle) soup consumed in France and Germany, the Sardinian sheep milk cheese casu marzu (containing live insect larvae) and sugared butterfly wings (of the species of Zygaena) in the Carnia region of Italy. Reportedly, Chinese yellow scorpions have been sold in the UK since the early 1990s (they come coated in chocolate, in alcohol or in lollies) and eggs of giant toasted ants have been sold in brine in the UK since 1996. Also, roasted crickets are considered by some as delicacy.
Third, producers, suppliers and sellers of insects intended for human consumption may soon be able to take advantage of EU rules for ‘traditional foods’ from third countries. As stated above, entomophagy is quite common in other parts of the world. The EU Commission’s proposal on novel foods provides for a simplified authorisation procedure for traditional foods from a third country, derived from primary production and with a history of safe food use in a third country. History of safe food use in a third country means that the safety of the food in question has been confirmed with compositional data and from experience of continued use for at least 25 years in the customary diet of a large part of the population of a third country.
An additional point to consider is that, according to the 2013 Food and Agriculture Organisation of the United Nations (FAO) Forestry Paper No. 171 entitled ‘Edible insects: future prospects for food and feed security’, it is widely accepted that by 2050 the world will host 9 billion people and, in order to accommodate this number, current food production will need to almost double. For purposes of meeting the food and nutrition challenges of today and tomorrow (as land is scarce and expanding the area devoted to farming is rarely a viable or sustainable option, oceans are overfished and climate change and related water shortages could have profound implications for food production), FAO argues that there is a need to re-evaluate what we eat and how we produce it. Edible insects have long been a part of human diets, but in some societies there is a degree of distaste for their consumption. Innovation in mass-rearing systems has begun in many countries. According to FAO, insects offer a significant opportunity to merge traditional knowledge and modern science in both developed and developing countries.
Alternative sources of food proteins are becoming increasingly important. Reportedly, insects as an alternative protein source to produce nutritional and sustainable meals, are an industry estimated to be worth €300 million within the next 15 years. Edible insects are quite nutritious and, with a composition similar to meat, they contain proteins, vitamins, minerals and fatty acids. In Europe, food manufacturers would first have to overcome consumer resistance, if entomophagy were to become more popular. The current loophole in the EU novel foods regulation and different interpretations by EU Member States leave manufacturers of insect-based food without legal certainty. Further efforts should be made in order to eliminate such legal uncertainty and establish a proper EU regulatory framework at a time when human consumption of insects and insect-based products looks poised to become more popular, either because of trend or necessity.
Recently Adopted EU Legislation
Trade Remedies
Customs Law
Food and Agricultural Law
Ignacio Carreño, Eugenia Laurenza, Anna Martelloni, Blanca Salas, Bruno G. Simões and Paolo R. Vergano contributed to this issue.
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