Report on New Zealand’s Dairy Food Safety Regulatory System - Executive Summary

In early August 2013, the biggest food safety scare in New Zealand’s history followed a suspicion that infant formula and possibly other products, too, were infected with botulism-causing Clostridium botulinum. The source of the suspected contamination was whey protein concentrate made by dairy co-operative Fonterra, the output of which constitutes nearly 90 per cent of the country’s dairy production.

Three weeks later, two United States laboratories confirmed the whey protein concentrate had never posed any food safety risk. But that news came too late to prevent widespread concern among parents and caregivers, as well as significant economic harm and damage to reputations. The impact was particularly significant in relation to infant formula, an area of growing importance for New Zealand, with an estimated $1 billion worth of exports per year.

The particulars of the incident are for the next stage of this independent Government Inquiry, pending completion of a compliance investigation by the Ministry for Primary Industries into the facts. The Inquiry’s first task is confined to reporting on the adequacy of, and recommending any changes to, New Zealand’s regulatory and best practice requirements for dairy food safety.

Though not yet possessing the full facts, the Inquiry must answer the question: Was the incident due in any way to a crisis or failure in the regulatory food safety system governing the dairy industry? Our conclusion is no. The immediate causes of this incident appear to lie elsewhere.

However, as with any system, improvements are possible and this review provides the opportunity to do exactly that. This is especially important when New Zealand’s prosperity depends heavily on the continued success of the dairy sector. By far the majority of the recommended improvements are unconnected to this incident and relate to the challenges that lie ahead.

The Inquiry focused its attention on seven key areas, outlined here: 

Regulatory design: The regulatory framework that governs dairy food safety strikes the right balance between outcome-based and prescriptive standards. New Zealand’s regulatory model is consistent with international principles. To date, New Zealand is the only country to have achieved systems recognition with the United States, and one of three countries having similar agreements with the European Union. New Zealand’s regulatory system is considered among the best in  the world.

The centrepiece of the framework is the risk management programme. All those in the sector support the continued use of such programmes, subject to certain adjustments. Chief among these is a simplification of dairy regulations – especially the tertiary layer with its dozen or more instruments of different types. The Ministry for Primary Industries is already undertaking this work, but it should be accelerated for completion within two years.  Risk management programmes, limited to food safety and related regulatory matters, should then follow simplified regulations: section 7.

Role of the regulator: No changes are needed to the ministry’s statutory roles – most importantly in this context as regulator of food safety – apart from assuming responsibility for crisis response planning. Other recommendations aim to achieve a more integrated focus by the ministry on the dairy sector and food safety generally; greater clarification of its various roles, which can conflict (trade facilitator and food safety regulator); strengthened dairy processing and regulatory capability and capacity (particularly given the dramatic growth in dairy exports); and a higher priority for risk communication.

Greater prominence for its food safety role is also desirable, which is, in part, a reason for recommending  that a Food Safety and Assurance Advisory Council be established. Such a council would give the ministry the benefit of independent, strategic advice on food safety issues and risks from senior and experienced individuals, whether from a business, scientific, or regulatory perspective. Additional funding for food safety is recommended for particular needs: more dairy-related and food safety capability; an expanded China and new markets team; contracting experts to assist with redrafting the tertiary regulations; and for the Food Safety and Assurance Advisory Council: section 8.

Role of verifiers: Verifiers check that dairy processing operators are complying with their risk management programmes. That system of verification is sound and the process is rigorous. There is unanimous support for continued contestable verification by third parties, not by the regulator. Some suggested improvements are recommended to strengthen the verification process, in particular: greater clarity of the verifier’s role as agent of the regulator; verifier supervision of novel or improvised product reworking; and better ministry analysis of audit data: section 9.  

Testing: quality and integrity: In the 2012-2013 season, dairy processors completed millions of tests at a cost of about $64 million. The Inquiry is confident the regulatory framework for dairy testing is appropriate and that few improvements are necessary. Laboratory accreditation  is strong and effective. Mandatory testing of all dairy products for sulphite-reducing clostridia (SRC) is unnecessary. Examining the value of SRC testing for consumer-sensitive products such as infant formula may be warranted, however: section 10.

Implementation of food safety standards: Many parties expressed the view that New Zealand’s food safety system is “as good as anywhere in the world”. Indeed, New Zealand could not be ranked as one of the world’s leading food exporters without the equivalent status for its food safety systems. Still, the Inquiry emphasises the need for all participants in the dairy sector to foster a stronger food safety culture. It is also important for the ministry to have a full range of compliance and enforcement tools at its disposal when something goes wrong. Some expansion of these tools – and alignment between differing pieces of legislation – is recommended: section 11.

Tracing, recalling products and crisis planning: Tracing food in the event of a problem is essential, but it can be a real challenge. The Inquiry recommends lifting the dairy sector’s ability to trace products and ingredients, a task best achieved by collaboration between industry and government, in particular through a working group focusing on regulatory and worldwide best practices. Any solution could well be a model for other food sectors. Recalling food faces similar hurdles. One recommendation is more standardised recall provisions; another is simulated recall testing in conjunction with more contingency planning: section 12.

Infant formula: This is a special case. Work is under way, both here and abroad, on possible revisions to infant formula regulations. The Inquiry recommends the ministry continue to prioritise this work and complete the revision of food safety-related regulatory requirements for the manufacture of infant formula (and, if appropriate, infant formula ingredients) within six months: section 13.

Broader themes: The Inquiry’s work also brought to light some wider issues. It was said the greatest risks to industry lie ahead, not behind. The ministry, with other government and industry support, should scan the horizon to identify emerging risks at all stages from the farm to consumers. Examples include new detection methods, increasingly complex dairy processing plants and the impact of social media channels.  A high-level risk register would be useful.

Another theme to emerge from interviews and in submissions is the shortage of people with dairy processing and regulatory expertise at every level of the regulatory sector. The range of problems and possible solutions put before the Inquiry suggests that all parties should join forces to develop a strategic plan, with clearly differentiated short, medium and long-term goals, to build up capability. A working group is recommended.

Insufficient investment in food safety research – the dairy industry included – was yet another commonly expressed view. New Zealand must be a visible leader in food safety science and research. The Inquiry recommends establishing a centre of food safety science and research, which could be a virtual centre.

Many food safety centres of excellence exist overseas, and collaboration on particular programmes could include such an overseas centre. Collaborating with a Chinese research institute, for example, would seem a particularly good opportunity. Precedents for virtual centres in New Zealand include the New Zealand Agricultural Greenhouse Gas Research Centre and Better Border Biosecurity (B3) – a collaborative arrangement among science agencies.

Adequate funding for food safety science and research is especially important in light of the fact that food makes up half of the country’s merchandise export value, or $25 billion annually. The strong support shown by participants for this proposal leaves the Inquiry in no doubt as to how such a centre would be received by the food sector, including the dairy industry. A suggested minimum level of funding is $5 million annually.

China is fast overtaking Australia as New Zealand’s largest market, with exports in October 2013 exceeding $1 billion, a new record. The Inquiry heard repeated calls for a boost in ministry resources in key and emerging markets, especially China. An expanded China team must be able to cultivate connections and build trust with Chinese leaders in a position to make decisions. It is not a ministry-only effort but a whole-of-government effort that is required, involving collaboration with the Ministry of Foreign Affairs and Trade and New Zealand Trade and Enterprise.

Collaboration is needed at all levels in the dairy sector: between regulators; between the ministry and industry; and within the wider dairy industry. Ultimately, New Zealand’s reputation for safe dairy food relies on each participant doing the right thing every time. More collaboration is a necessary step in that direction.

Food safety incidents will always occur and the Inquiry will examine responses to the incident in stage two. It heard mixed views on the effectiveness of all parties’ crisis management processes. No one in the sector should hold back from tackling crisis planning, pending the Inquiry’s next phase.

In summary, the Inquiry’s findings and recommendations should renew confidence in New Zealand’s dairy food safety system and encourage all participants to work together to ensure that:

• New Zealand’s dairy food safety regulatory system continues to be among the best in the world
• New Zealand’s dairy food remains among the safest in the world.