Melamine scare highlights importance of due diligence

Processors importing ingredients should strengthen due diligence to avoid costly health threats and product recalls associated with contamination by potentially harmful substances, according to law firm Eversheds.

That was the lesson of the recent melamine scare in which babies in China consuming milk formula containing harmful levels of the substance became sick and, in some cases, died, the company said.

Richard Matthews, expert in Eversheds’ Food Sector Group, said: “It is crucial that thorough due diligence is carried out on any foreign manufacturer or supplier. This concerns not just understanding first hand the supplier’s quality control procedures, insurance arrangements and previous claims record, but also consideration of the experience and integrity of management.

“Would the supplier be able to absorb the costs of future changes to quality procedures? Does it have the assets to meet a significant claim arising out of a product incident?”

Importers should also ensure they have sufficient contractual protection, said Matthews. “A detailed specification should be agreed, including the testing methodology to be undertaken. Advance thought should also be given to areas of developing science - either in terms of identifying new contaminants or methodologies which detect substances at smaller concentrations.”

Manufacturers dealing with imported material should not assume that it does not contain certain materials, but should seek an express warranty that the product complies with European food regulations. It should also comply with legislation in all Member States in which the end product is marketed.

Any contract should include the right to appoint a local agent or representative to audit overseas premises at short notice and the right to be informed of changes to the manufacturing process. “It should also oblige the supplier to make available test results and batch information on demand,” said Matthews.