import rejections of agricultural and food products from...

Institute of Developing Economies, JETRO

1

Import Rejections of Agricultural and

Food Products from East Asia:

Issues and Future Challenges

Kaoru Nabeshima

IDE-JETRO

June 19, 2014


Regional Trade Standards Compliance

Report (TSCR) – East Asia 2013

In collaboration with UNIDO

The aim to complement the

overall global trend seen in the

global report and provide East

Asian perspectives

The report covers the following

countries

ASEAN, China, Japan, and

Korea

It analyzes the rejections of

imports data from four

important markets: Australia,

EU, Japan, and US.

2


Challenges of Import Rejections

In 2010, an estimated US$123 million worth of agriculture and food

products (fish and fishery products, nuts and seeds, herbs and

spices, and fruits and vegetables) were rejected at the borders of

four markets (Australia, EU, Japan, and US).

The reasons for these rejections are because these did not comply

with the food safety regulations in these markets.

In particular, residual traces of agricultural chemicals and veterinary drugs

The border rejections are just a tip of an iceberg.

A larger amount of potentially exportable goods are rejected within the supply

chain

Given that agriculture and food product exports are significant

components of exports of developing countries, strengthening their

compliance capacities is a critical issue for their development.

3


Import Rejection Data

Data obtained from:

Australia

EU

Japan

US

Time Coverage:

2002-2010 (Japanese data from 2006 onward)

Dimensions of data

Product

Country of Origin

Reasons for Rejection

4


Indicators for Port Rejections

Number of rejections

Simple sum of number of rejections

Unit rejection rates

Number of rejections per US$1million of imports to take account

of difference in trade volume

Relative rejection rates

Ratio of a country’s share in total rejections to its share of

imports

5


During 2006-2010, 5 East Asian countries appear

in Top 10 countries with reported cases of

Japanese import rejections

6

Rank Country Cases

1 China 1,646

2 US 804

3 Vietnam 563

4 Thailand 548

5 Ghana 338

6 Ecuador 202

7 Indonesia 188

8 Italy 184

9 South Korea 180

10 Canada 138


More than 1/3 of rejections are

fish and fishery products

7

36.4%

28.3%

19.9%

9.2%

4.3% 1.9% Fish and fishery products Fruits and vegetables Cereals and bakery products Nuts and edible seeds Herbs and spices

Other processed food


Bacterial contamination and pesticide residues top

the causes for rejections during 2006 and 2010 in

the Japanese Market

8

0 500 1000 1500

Veterinary drugs residues

Hygienic condition/controls

Mycotoxins

Additive

Pesticide residues

Bacterial contamination


Example:

Fish and Fishery products in

the Japanese Market

9


Fish and fishery products imported from

China are detained the most

10

0

20

40

60

80

100

120

140

160

180

# o

f cases

2006

2007

2008

2009

2010


But, fish and fishery products imported from

Vietnam are detained more frequently in Japan

compared to other countries

11

0.00000

0.05000

0.10000

0.15000

0.20000

0.25000

2006

2007

2008

2009

2010

Per US$ million imports


Relative performance of East Asian countries in

fish and fishery sectors

(Japanese market, 2006-2010)

12

CN

TH

VN

IDKR

PH

MY

MM

HK

-5

-4

-3

-2

-1

1

2

3

4

5

-

-

-

-

-

-

-

-

-

-

-5 -4 -3 -2 -1 1 2 3 4 5

+ + + + + + + + + +

Ln S

hare

of D

ete

ntio

ns

Ln Share of Imports

Bad

performer

Good

performer

Small exporter Large exporter

East Asian

countries are

represented

by the

triangle

marker and

other

countries by

dots


Average Number of Detentions of

Malaysian Products in 4 markets

13

0

10

20

30

40

50

60

70

AU EU JP US

AU: 2003-2010

EU: 2002-2010

JP: 2006-2010

US: 2002-2010


Reasons for Rejections

In the Australian market

Labeling is most often cited

In the EU market

bacterial contamination and

additives

In the Japanese market

additives and bacterial

contamination

In the US market

labeling, adulteration/

missing documents, and

hygienic control/conditions

14

0% 20% 40% 60% 80% 100%

US

JPN

EU

AUS


Malaysia’s relative performance in

Australia is on par with its export share

CNJP

THPH MYVNID

HK SG

MM

-5

-4

-3

-2

-1

1

2

3

4

5

-

-

-

-

-

-

-

-

-

-

-5 -4 -3 -2 -1 1 2 3 4 5+ + + + + + + + + +Ln

Shar

e of

De

ten

tio

ns

Ln Share of Imports

Large exportersmall exporter

Good Performer

Bad Performer

15


Malaysia’s relative performance in EU

is better than its export share

CN

ID

THVN

MYPH

JP

SG

HK

MM

KH -5

-4

-3

-2

-1

1

2

3

4

5

-

-

-

-

-

-

-

-

-

-

-5 -4 -3 -2 -1 1 2 3 4 5+ + + + + + + + + +Ln

Share

of Detentions

Ln Share of Imports


Good Performer

Bad Performer

16


Malaysia’s relative performance in

Japan is better than its export share

CN

VN TH

IDPH

MYMMHK

SG

LA

-5

-4

-3

-2

-1

1

2

3

4

5

-

-

-

-

-

-

-

-

-

-

-5 -4 -3 -2 -1 1 2 3 4 5+ + + + + + + + + +Ln

Share

of Detentions

Ln Share of Imports


Good Performer

Bad Performer

17


Malaysia’s relative performance in US

is better than its export share

18

CN

THIDVN

MY

PHJP

SG

HK

KH

MM

-5

-4

-3

-2

-1

1

2

3

4

5

-

-

-

-

-

-

-

-

-

-

-5 -4 -3 -2 -1 1 2 3 4 5+ + + + + + + + + +

Ln S

har

e of

De

ten

tio

ns

Ln Share of Imports


Good Performer

Bad Performer


We focused on the following

supply chain for detail analysis

Case studies of pangasius and shrimp industries in

Vietnam conducted by Aya Suzuki (Tokyo University)

and Vu Hoang Nam (Foreign Trade University) with

assistance from VASEP and other local researchers in

the summer of 2012

Case studies of frozen vegetables and eels exports from

China conducted by Nanae Yamada (IDE) and Romio

Mori (JETRO) in the summer of 2012

19


Vietnamese Shrimp Case

20


Supply Chain of Cultured Shrimp in Vietnam

21

Farmers

• Extensive

and Intensive

farming

• Large and

small scale

Traders

• Aggregates

shrimp from

various

farmers

Processors

• Process

shrimps

according to

buyer

specifications

Exporters

• EU, US

markets

• Japanese

market

• Environment

• Inputs

• Disease

Hygiene Control Throughout the Supply Chain

• Input control

• Traceability

• Certification

• Testing

• Production

Process

• Inputs

• Input control

• Process

management

• Traceability

• Certification

• Testing

• Labels

• Documents

• Inspections

• Traceability

• Certification

• Testing

Acto

rs

Issues

Actions

• Hygiene

Control

• Transportation

methods

• Certification

• Traceability


Problem Areas for Cultured

Shrimp Industry in Vietnam Improper use of feeds and inputs

Detections of ethoxyquin, trifluralin, and

enrofloxacin

Aggregation of shrimp from various ponds

Shrimp is prone to diseases, therefore, better

to buy from many different farmers to

minimize the risk→less likely to vertically

integrate→traceability difficult to implement

22


Responses by the Vietnamese authority and firms

Strengthening inspections by public agency

the National Agro-Forestry-Fisheries Quality Assurance

Department (NAFIQAD) under the Ministry of Agriculture and

Rural Development (MARD).

Stringency of inspection following that of EU

Banning substances that are banned in importing

markets

Plans to develop VietGAP

Larger firms are introducing some form of traceability

system to tighten their control on supply chain.

Larger firms vertically integrating, although maintain

contract farms outside.

23


Chinese Frozen Vegetable

Case

24


Vegetable distribution system for

domestic/global market in China

25

Large-scale farms Household farms

International Market Domestic Consumers

Customs & Quarantine Restaurant and Catering

Farmers Cooperatives Brokers

Processors Free Market

Rural Wholesale Market Agribusiness & MNCs Agricultural

area

Distributors

Urban Wholesale Market Urban

area Free Market Supermarkets, retailers

Source: created by reporter.

Distribution

channel for

global

market

Distribution

channel for

domestic

market


Solutions adopted by the

Chinese government

Compartmentalization:

permit exports only from certified farms and

processing manufacturers

Increased and strengthened inspection

throughout the production process

Promoted the development of

agribusiness and vertically integrated

agricultural system by assisting lead firms

26


Inspection system for export

vegetables Contract farm/ Direct-managed farm

Control by administrative regulation: Farm registration/

Traceability system establishment

Input control by firm

Voluntary sample testing before harvesting by firm

Processing

Voluntary sample testing before processing/finished products by

firm

Quality control by HACCAP, ISO

Customs & Quarantine

Sample testing by CIQ & firm before shipping

Similar system is in place for eel

27


Summary of Findings from Case Studies

Largest knowledge gap exists at the farmer’s level, making the

supply chain management difficult

Increasingly vertically integrating to ensure traceability

The implication is bifurcation of the sectors into export and domestic

markets.

More strict food safety standards in China and Vietnam are

adopted/considered along with:

Better agricultural practices, strengthening of inspections, providing

testing services, better control of allowed substances

Some producers find it difficult to

Keep up with changing requirements in importing countries

Obtain multiple certificates

Some countries find it beneficial to have MNCs in food processing

sectors for technology transfer.

28


Thank You Regional Trade Standards Compliance Report (TSCR) – East Asia 2013

http://www.ide.go.jp/Japanese/Publish/Download/Collabo/UNIDO_2013.html

For details on case studies, please see the following IDE Working Papers:

Aya Suzuki and Vu Hoang Nam “Status and Constraints of Costly Port Rejection: A Case from the Vietnamese Frozen Seafood Export Industry” IDE

Discussion Papers series No.395, March 2013.

http://www.ide.go.jp/English/Publish/Download/Dp/395.html

Nanae Yamada and Shuyan Sui “Response of Local Producers to Agro-food Port

Rejection: The Case of Chinese Vegetable Exports” IDE Discussion Papers

series No.390, February 2013.


Romio Mori, Kaoru Nabeshima and Nanae Yamada "Food Safety Control

System of Chinese Eel Export and its Challenges“, IDE Discussion Paper No.

418, May 2013.


29

http://www.ide.go.jp/Japanese/Publish/Download/Collabo/UNIDO_2013.html


