Issue Number 4: 26th February 2016
- Geographical indications, ‘food fraud’ and the fight against ‘Italian sounding’ products
- Ecuador begins phasing out its controversial safeguard measures
- New EU rules on veterinary medicines: is ‘prevention-rather-than-cure’ sufficient to fight antimicrobial resistance?
- Recently Adopted EU Legislation
Geographical indications, ‘food fraud’ and the fight against ‘Italian sounding’ products
While the EU approved two new Geographical Indications (hereinafter, GIs) from third countries, the issue of the protection of legitimate Italian products against ‘rip-off Italian products’ with Italian-sounding names has taken centre-stage again. Italian Member of the European Parliament (hereinafter, MEP) Nicola Danti in February called on the EU to take action against this ‘odious and unfair commercial practice’. According to his statements, the issue not only affects Italian producers and the entire European agro-food sector, but also the credibility and trust in the products sold on the internal market in general. MEP Danti underlined that national solutions and enforcement authorities may not be in the right position to adequately deal with this issue and that the EU should finally step in.
The delicate issue of protecting certain products through GIs plays a major role in EU internal policies, as well as in ongoing trade negotiations. The approach aims at supporting regional specialities, while at the same time enhancing and safeguarding their reputation. In the EU, Regulation (EU) No. 1151/2012 of the European Parliament and of the Council of 21 November 2012 on quality schemes for agricultural products and foodstuffs maintains the protection of GIs. This regulation designates two types of GIs: 1) a PDO, which applies to foodstuffs that are produced, processed and prepared in a given geographical area using recognised ‘know-how’; and 2) a PGI, which indicates a link with the area in at least one of the stages of production, processing or preparation. Additionally, names that have become generic (e.g., Dijon mustard) and names that conflict with the name of a plant variety or an animal breed may not be registered as GIs in the EU.
The issue of ‘Italian sounding’ products has been raised the past (see Trade Perspectives, Issue No. 5 of 6 March 2015). However, an increasing economic impact suggests that it may now be time for the EU Commission to take action on such attacks on the reputation and competitiveness of European agricultural and food products. The continuous granting of GIs to products originating in third countries should go hand-in-hand with an enhanced protection of products originating in the EU, in the internal market and beyond. The importance of the issue of GIs can be witnessed by the EU Commission’s recent approval, on 18 February 2016, of two products from Cambodia and Turkey to the register of Protected Designations of Origin (hereinafter, PDOs). Until now, only 23 geographical indications originating from third countries were approved for registration in the EU. Such products benefit from the same level of protection and added-value on the market as over 1,300 products originating in the EU that are already protected. More specifically, the recently added GIs include pepper berries from Cambodia and dried figs from Turkey. The 'Mrech Kampot' / ‘Poivre de Kampot’ are pepper berries of the Kamchay and the Lampong varieties originating in southern Cambodia and are the first ever Protected Geographical Indication (hereinafter, PGI) from Cambodia to be registered. At the same time, the EU Commission approved 'Aydin Inciri’, a variety of sun-dried fig that is produced in the Turkish province of Aydin. This is only the second Turkish product to be protected under the EU quality schemes after ‘Antep Baklavasi’ / ‘Gaziantep Baklavasi’ (PGI), which was registered in December 2013.
The protections afforded to GIs under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (hereinafter, TRIPs Agreement) also include indications other than specific text, such as letters, general text, symbols, images or colours that imply a particular country or place of origin. Nonetheless, in practice, it appears that such an interpretation is rarely, if ever, enforced. The definition of GIs used in the TRIPs Agreement merged the legal concepts of ‘indications of source’ and ‘appellations of origin’. The former appears in the Paris Convention for the Protection of Industrial Property of 1883, while the latter appears in the Madrid Agreement for the Repression of False or Deceptive Indications of Source on Goods of 1891 and the Lisbon Agreement for the Protection of Appellations of Origin of 1958. However, as mentioned above, GIs still cover a broader range of references than appellations of origin because appellations of origin require the specific use of a geographic name. Under the protections afforded to GIs in most countries, the use of these terms is generally limited to producers from specific regions that use certain processing techniques. Many businesses in the EU are also harmed by competitors that, instead of using specific protected terms, include on their product labels or marketing material images of famous European landmarks, letters and symbols, general terms or proper names associated to European heritage and colour schemes or images of flags from certain European countries.
Apart from GIs, there are various other legal frameworks that refer to products’ origin and quality, at various regulatory levels and pursuing specific objectives. These include, most notably, the concept of rules of origins, which is critical to establish the customs treatment and applicable tariffs to traded products, trademarks granted to specific products, as well as the concept of ‘made in’-labelling, which represents a marking and often a valuable marketing technique, and the more recent proliferation of country-of-origin-labelling (COOL). This diversity of frameworks concerns different aspects of products’ marketability, but the distinctions are not always obvious and may lead to an increased confusion and insecurity for consumers. Thus, at least products covered by GIs should allow consumers to determine the quality and origin of the respective product.
In the US, GIs are recognised as a sub-category of trademarks (i.e., GIs may be registered as ‘collective’ or ‘certification’ marks). Like in the EU, names that have become generic (or names that have already been trademarked) may not receive GI-equivalent protection in the US. A decisive question is whether or not certain terms and names associated with food products are deemed ‘generic’. Parmesan cheese is a good example. In the EU, Parmigiano Reggiano was granted PDO status, and according to EU jurisprudence, ‘Parmesan’ in Europe only refers to Parmigiano Reggiano and cannot be used for imitation Parmesan. However, cheese manufacturers in the US claim that parmesan is a generic name for a certain type of cheese, while consumers associate more specific traits with products labelled as such.
MEP Danti’s assertions are supported by a study commissioned by the Parmigiano Reggiano Consortium and presented in Rome in December 2015, and which will also be presented in Brussels in early 2016. According to the study, the use of Italian sounding elements (i.e., flag, monuments, works of art, national symbols) strongly deceives consumers. More specifically, the study surveyed American consumers showing them two distinct packs of ‘Parmesan’ produced in the US. While one pack did not make any reference to Italy, the other pack showed a picture of the Italian flag. According to the study, 38% of surveyed consumers stated that the product originated in Italy even with respect to the pack without any specific reference to Italy. This can be attributed to the fact that, for 66% of surveyed US consumers, the term ‘Parmesan’ is not generic, but actually identifies a hard cheese with precise geographical origin, identified by 90% as Italian. However, even more notably and showcasing the relevance of Italian sounding elements and their high potential for deception of consumers, 67% of surveyed US consumers believed that the second pack with ‘Italian sounding’ elements was an authentic Italian product.
These perceptions have significant consequences for Italian manufacturers and, more generally, affect all countries with traditional foods and regional specialties registered as GIs. Italian producers have been particularly outspoken regarding this issue. This is no surprise, as Italy holds by far the highest number of protected products in the EU. Italy has registered 279 products, followed by Spain with 185, a staggering number, if compared to Denmark, which has registered only 6 to date. Some claim that this stark difference in the number of registrations may cause unfortunate differences in the legal protection offered by individual EU Member States. Food law experts claim that the issue of Italian sounding (or any other origin, for that matter) products may not be adequately treated by courts outside of southern Europe, especially due to the unfamiliarity with the issue and the relevant legal frameworks. In fact, the legal framework laid down in Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market (the so-called ‘Unfair Commercial Practices Directive’) is quite clear: Article 6.1(b) states that commercial practice shall be regarded as misleading if it contains false information and is, therefore, untruthful or in any way, including in the overall presentation, and thereby deceives or is likely to deceive the average consumer. The enumerated characteristics susceptible to deceive consumers include the geographical or commercial origin.
The financial and economic consequences for affected producers are significant. According to MEP Danti, the negative commercial impact of Italian sounding products amounts to EUR 70 billion per year. Indeed, the Italian food industry federation Federalimentare estimated that the impact of this ‘food fraud’ amounted to EUR 18 billion during 2013 with respect to sales in the US alone. With respect to Parmigiano Reggiano, which is frequently the victim of Italian sounding ‘generics’ labelled ‘Parmesan’, according to the Parmigiano Reggiano Consortium, 100,000 tonnes of products are sold in the US that bear the name of ‘Parmesan’ and which include packaging that makes reference to Italy. At the same time, just 6,500 tonnes of legitimate Parmigiano Reggiano were exported from Italy to the US, which amounts to almost 20% of total Parmigiano Reggiano exports. Hence, due to the strong demand for Italian products, as the example of ‘Parmesan’ illustrates, combatting Italian sounding products may lead to a strong boost in demand and may have a significant impact on trade.
A more appropriate application of the concept of GIs, as articulated in the TRIPs Agreement, would enlarge the focus from the registered terms themselves to include the improper use of indications that reference geographical areas. Therefore, current negotiations for bilateral trade agreements need not only focus on GIs themselves, but also provide for enhanced implementation and protection of protected products. Still, while in the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada, the EU was able to secure protection for the term ‘Feta’, albeit only against new producers, it agreed to let those producers use terms such as ‘feta-like’ or ‘feta-style’ leading to a rather limited protection. Government officials and negotiators of future trade agreements should explore further strategies to better recognise the full range of issues and legal questions surrounding GIs. Such strategies may even extend to other legal areas, such as misleading advertising, rules of origin, ‘made-in’, etc. Another approach for countries intending to protect and support their regional and national specialties, could be the introduction of an internationally registered trademark managed by a national government. Regardless of the means, a solution should prevent the ‘food fraud’ by way of use of letters, general text, symbols, images or colours that mislead consumers as to the origin of certain food products. Although various trade agreements, most notably the Transatlantic Trade and Investment Partnership (TTIP) currently being negotiated between the US and the EU, will likely remain in the negotiation stage for at least the remainder of 2016, interested parties should act quickly and reach out to relevant government officials so as to ensure that their business interests are properly considered during the negotiations. A balance needs to be achieved between the too limited de jure protection through GIs and the de facto discrimination stemming from, e.g., ‘Italian sounding’ products. Alas, a more inclusive approach will be the only way to deliver on the adequate protection and boost trade in national/regional specialty products. Creative approaches exist and can be structured, particularly in the context of trade negotiations.
Ecuador begins phasing out its controversial safeguard measures
Reports indicate that on 17 February 2016, at a meeting of the WTO Committee on Balance-of-Payment Restrictions, delegates of Ecuador informed WTO Members that it has started to dismantle its controversial regime of import surcharges, with the aim of phasing it out completely by the end of June 2016. Although the phasing out of the measures by Ecuador is, to some extent, a successful resolution of the issue, exporters from, inter alia, the EU have endured significant commercial damages and remain negatively affected by the measures, which are highly questionable with respect to Ecuador’s WTO obligations and vis-à-vis those undertaken bilaterally with the EU.
Ecuador’s safeguard measures came into effect on 11 March 2015 and, according to Ecuador’s original notification to the WTO, were to apply for a period up to 15 months. Said notification was provided to the WTO on 2 April 2015, where Ecuador justified its decision to introduce temporary safeguard measures as a way to regulate the general level of imports and resolve Ecuador’s critical balance-of-payments (hereinafter, BOP) problems (see Trade Perspectives, Issue No. 8 of 17 April 2015). In particular, according to Ecuador’s WTO notification, the restrictions were introduced under the provisions of Article XVIII.B of the WTO General Agreement on Tariff and Trade 1994 (hereinafter, GATT) on governmental assistance to economic development. These provisions and other related instruments (i.e., the Understanding on the Balance-of-Payments Provisions) allow WTO developing-country Members, in certain circumstances, to deviate temporarily from the obligations of the GATT (i.e., Articles II and XI of the GATT) when experiencing BOP difficulties. Under the relevant WTO rules, Ecuador had the burden of showing that its import restrictions did not exceed those necessary to forestall the threat of, or to stop, a ‘serious decline’ in its monetary reserves, or to achieve a reasonable rate of increase in its reserves.
The legal basis of Ecuador’s controversial safeguard measure is provided in Resolución No. 011-2015, adopted on 6 March 2015 by Ecuador’s Foreign Trade Committee (i.e., Comité de Comercio Exterior, and hereinafter, COMEX). Said measure was approved following the application of safeguard measures on products originating from Peru and Colombia within the framework of the Cartagena Agreement signed among Bolivia, Colombia, Ecuador, Peru and Venezuela. The regional safeguard consists of an ad valorem surcharge of 7% for products imported from Peru and of 21% for products imported from Colombia. Ecuador justified the measure on the basis of the alleged devaluations of the currencies in these two countries, according to a mechanism foreseen in Article 98 of the Cartagena Agreement. This measure, which entered into force on 5 January 2015, was terminated with COMEX Resolución No. 010-2015 of 6 March 2015. However, on the same day, Resolución No. 011-2015 was adopted and new safeguard measures started to apply as of 11 March 2015. Resolución No. 011-2015 was subsequently amended by Resolución No. 016-2015, which added 13 more tariff lines and removed 6 from the list. In particular, the safeguard measures under the amendment take the form of ad valorem tariff surcharges of four levels: 5%, 15%, 25% and 45%, applied to 2,962 10-digit subheadings, or approximately 38% of a total of 7,581 subheadings, amounting to over 30% of imports recorded in 2014. The measures are applied with respect to affected imports from all sources, with the exception of Bolivia and Paraguay, inasmuch as these are considered less-developed countries of the Latin American Integration Association and in light of Resolución 70 of the Committee of Representatives of the Latin American Integration Association (ALADI).
WTO Members first discussed the issue of Ecuador’s controversial safeguard measures at a meeting of the WTO Committee on Balance-of-Payment Restrictions on 29-30 June 2015. A background document prepared by the WTO highlights that, in terms of share of value of trade per category, the product categories mostly affected by the measure are: clothing; and beverages, spirits and tobacco (with the safeguard measures affecting 100% of the value of imports of these product categories), followed by dairy products (88.9%), sugars and confectionary (85.7%), fruits, vegetable and plants (84%), textiles (70%), leather, rubber and footwear (61.9%). Several WTO Members claimed that the safeguard measures are causing financial and commercial burdens to their exporters and urged Ecuador to remove them as soon as possible. They also urged Ecuador to implement economic reforms and to remain consistent with WTO rules, while looking for less trade-distortive measures.
The WTO Committee on Balance-of-Payments Restrictions later resumed consultations with Ecuador on the safeguard measures in question. At a meeting on 16 October 2015, Ecuador shared a plan to phase out the import surcharges by June 2016, and announced that the surcharges on final consumer goods would be reduced from 45% to 40%, starting in January 2016. Some WTO Members strongly supported Ecuador’s measure, while others called for its immediate removal. Several other WTO Members reiterated serious concerns, including on whether the measure could be economically justified, whether it is in line with WTO rules, and on its negative impact on export from other WTO Members. At the most recent meeting of the WTO Committee on Balance-of-Payments Restrictions on 17 February 2016, Ecuador announced that, on 31 January 2016, it followed through with its 5-percentage-point reduction of the import surcharge on final consumer goods. Ecuador reiterated that it will phase out the 5% surcharge (i.e., the surcharge on ‘non-essential capital and primary capital goods’) by April, and reduce monthly by a third the remaining surcharge rates before phasing them out by the end of June 2016. Members of the WTO Committee on Balance-of-Payments Restrictions called for a fourth consultation with Ecuador to take place in June 2016 when Ecuador is due to have finished dismantling its import surcharge regime.
The consultations with Ecuador by WTO Members in the WTO Committee on Balance-of-Payments Restrictions were, to some extent, successful, insofar as it appears that Ecuador will phase out its controversial safeguard measures in June 2016. However, according to the International Monetary Fund (hereinafter, IMF), Ecuador’s problems were not entirely due to external factors, referring, in particular, to the structural adjustment measures that Ecuador committed to adopt following recommendations by the IMF Board in 2014. Accordingly, the measures maintained by Ecuador targeted products in a way that is highly questionable in terms of their WTO legality, as noted by WTO Members that raised concerns before the WTO Committee on Balance-of-Payments Restrictions, and thus will result in 15 months of WTO inconsistencies at the expense of exporters from other WTO countries. In addition, Ecuador’s safeguard measures arguably also violate the terms of the ‘standstill Regulation’ (i.e., Regulation (EU) No. 1384/2014 on the tariff treatment for goods originating in Ecuador) that the EU agreed to adopt in order to extend Ecuador’s preferential access into the EU Market (access equivalent to that obtained by GSP+ beneficiaries in the EU). Under the terms of the ‘standstill Regulation’, the EU Commission should have applied greater pressure to Ecuador in a forum outside the confines of the WTO, and thus limit the negative impact on its own businesses that export relevant products to Ecuador. Sadly, this has not happened or, at least, has not produced any tangible result.
Outside of the controversial safeguard measures at issue, reports suggest that Ecuador has been applying, in recent years, a range of other trade restrictive or distortive measures, such as customs measures, technical regulations and other requirements, affecting imports of a number of products in its territory. Ecuador’s practices have, in fact, given rise to a number of specific trade concerns, some of which were expressly discussed within the WTO Committee on Technical Barriers to Trades. The adoption of safeguard measures is reportedly viewed, by many of the affected EU industries, as the last ‘act’ of an increasing protectionist trend, rather than a measure truly and solely aimed at addressing BOP issues. Affected stakeholders must remain vigilant of Ecuador’s legislative decisions and urge their respective Governments to consider all options when policing overly-restrictive and/or unjustified trade-related measures.
New EU rules on veterinary medicines: is ‘prevention-rather-than-cure’ sufficient to fight antimicrobial resistance?
On 17 February 2016, the EU Parliament’s Environment, Public Health and Food Safety Committee (hereinafter, ENVI Committee) voted on a report regarding a new EU veterinary medicines regulation that proposes, inter alia, limiting the use of existing antimicrobial medicines. While a preventive use of antibiotics must be allowed only for individual animals, when a veterinarian can justify the treatment, antibiotics must not be administered prophylactically, and the treatment of herds with antibiotics may only be a last resort. To combat the growing antimicrobial resistance (hereinafter, AMR), the report calls for new means. The report received broad consensus in the ENVI Committee and was approved by a vote of 60 to 2.
The EU Commission’s Proposal for a Regulation of the EU Parliament and of the Council on veterinary medicinal products (hereinafter, the Veterinary Medicines Proposal), adopted on 10 September 2014, is part of a new legislative framework on veterinary medicinal products and medicated feed. It is accompanied by a Proposal for a Regulation of the EU Parliament and of the Council on the manufacture, placing on the market and use of medicated feed and repealing Council Directive 90/167/EEC (hereinafter, the Medicated Feed Proposal) (see Trade Perspectives, Issue No. 17 of 19 September 2014). The principal objectives of the new framework are to improve the health and well-being of animals with better treatments for diseased animals, to combat AMR, to keep antibiotics effective for people and animals alike in the EU, and to foster innovation (inter alia, by extended data protection for certain veterinary medicines). The Veterinary Medicinal Products Proposal aims, in particular, at increasing the availability of medicines in the EU to treat and prevent diseases in animals, while the Medicated Feed Proposal aims at harmonising rules at the EU level.
Antimicrobials are powerful medicines that kill microorganisms or inhibit their growth. Antimicrobial medicines can be grouped according to the microorganisms against which they primarily act (for example, antibiotics are used against bacteria and antifungals against fungi). However, misuse of antimicrobials and overuse on farm animals can spur resistance and spread to humans in many ways, but most likely via food intake. AMR is threatening many medical advances, such as surgery and chemotherapy. The European Centre for Disease Control (ECDC) recently warned that bacteria in humans, food and animals continue to show resistance to the most widely-used antimicrobials. Scientists say that resistance to ciprofloxacin, an antimicrobial that is critically important for the treatment of human infections, is very high in Campylobacter, thus reducing the options for effective treatment of severe foodborne infections. Multi-drug-resistant Salmonella bacteria continue to spread across Europe. AMR looms as a serious threat to health and intestinal bacteria resistant to antibiotics have been detected in animals, humans and food. Indeed, the use of antimicrobials, both in humans and in farm animals, must be reduced.
On the other hand, at present, there is an insufficient number and range of medicines to prevent and treat animal diseases in the EU, in particular for animals considered to be minor species (such as bees, fish, goats, and turkeys). The lack of suitable veterinary medicines results in poorer animal health and welfare, increased risks for human health, and economic and competitive disadvantages for EU farmers. The Veterinary Medicines Proposal builds upon existing EU rules in this area, which ensure that only medicines that have been granted a marketing authorisation can be placed on the market. However, the rules on the marketing authorisation procedure and the monitoring of side effects (i.e., pharmacovigilance) are revised with the aim of ensuring the development of suitable medicines for animals in the EU. Currently, a number of medicines are used both for animals and humans (i.e., shared-class antimicrobials). To combat AMR and to help keep antimicrobials effective in humans and animals, the Veterinary Medicines Proposal introduces the possibility of restricting the authorisation and use in animals of certain antimicrobials that are reserved to treat human infections.
The EU Parliament’s ENVI Committee’s vote tightens the original EU Commission’s Veterinary Medicines Proposal. To help tackle AMR, the revised proposal would empower the EU Commission to designate antimicrobials that are to be reserved for human treatment. Online sales of antimicrobial and prescription-only veterinary medicinal products will also be prohibited under the new legislation. MEPs suggest that veterinary medicines must always serve to improve performance or compensate for poor animal husbandry. The prophylactic use of existing antimicrobial medicines (i.e., as a preventive measure, in the absence of clinical signs of infection) to single animals should be restricted and should only be allowed when fully justified by a veterinarian. Metaphylactic use (i.e., treating a group of animals when one shows signs of infection) must be restricted to clinically-ill animals and to single animals that are identified as being at a high risk of contamination, in order to prevent bacteria from spreading further in the group.
To balance banning certain antimicrobials for use in animals, the revised proposal aims at helping to improve the availability of veterinary medicines and drive innovation forward, so as to expand the therapeutic arsenal available to veterinarians. The ENVI Committee’s report also calls for incentives to develop new antimicrobials and other medicines. To achieve innovation and to encourage research into new antimicrobials, the proposal advocates incentives, including longer periods of protection for technical documentation on new medicines, commercial protection of innovative active substances, and protection for significant investments in data generated to improve an existing antimicrobial product or to keep it on the market.
The emphasis on ‘prevention-rather-than-cure’, in terms of good animal husbandry, and the key role of veterinarians in prescribing antimicrobials, are to be welcomed. The parallel development of detailed guidelines for the prevention of diseases is, of course, also important. However, there are concerns regarding banning certain antimicrobials for use in animals. Stricter controls may be a more proportional measure, but the outright ban of certain substances (reserved for human treatment) is a concern because, if an animal is sick, it needs to be treated. The development and production of veterinary medicinal products is considerably more complicated than that of medicinal products for human use, as human beings all belong to a single species, whereas animals are of many different species, which makes the market considerably more fragmented. There is clearly a lack of investment and lack of veterinary medicines in specific fields and it appears that the amended proposal on veterinary medicines does not fully address this. The period of protection of technical documentation may not provide sufficient incentive for the development of new veterinary medicinal products. There appears to be an urgent need for more investigation and development of new veterinary medicines, hence of regulatory incentives to encourage and reward such undertakings.
Farmers and veterinarians need help to eliminate continuous use of shared-class antimicrobials for therapy purposes by developing new animal-only antibiotics. Animal should never be treated with a shared-class antimicrobial if an animal-only option exists. Animal-only antimicrobials optimise animal welfare without compromising use of antibiotics in humans. Alternatives must be created (i.e., viable non-antimicrobial development projects that address diseases where there are few, or no, alternatives to shared-class antimicrobials).
The report on the amended proposal on veterinary medicines will be debated and put to a vote during the March/April plenary sessions of the EU Parliament for final approval. Changes will need to be approved by the EU Council of Ministers to be enacted. The EU Commission has proposed that the Veterinary Medicines Proposal shall apply two years after its entry into force (i.e., 20 days after the publication in the EU’s Official Journal). Stakeholders with an interest in the legislative procedure are advised to closely monitor any forthcoming developments and swiftly interact with the relevant authorities in order to address matters of scientific, regulatory or commercial interest.
Recently Adopted EU Legislation
Trade Remedies
Food and Agricultural Law
Trade-Related Intellectual Property Rights
Ignacio Carreño, Tobias Dolle, Anna Martelloni, Bruno G. Simões and Paolo R. Vergano contributed to this issue.
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