ILLICIT TRADE IN FOOD AND FOOD FRAUD
By Francesca Consorte
The World Trade Organization (WTO) has, for the first time, published a study on the illicit trade in food and food fraud. The publication includes contributions from WTO experts and other important international organizations, including the private sector (TRACIT, FAO, ISF, SSAFE, and UNICRI https://www.wto.org/english/res_e/booksp_e/itfff_ch_introduction_e.pdf). Therefore, it does not represent the official WTO position on the topic, but it conveys valuable insights from the authors, who, while acknowledging the important role of international trade in reducing global hunger, also highlight how its pathological deviations—such as illicit trade in food and food fraud—cause considerable harm. The latter not only impacts international trade itself but also takes on a "global" dimension, posing a serious threat to achieving 11 of the United Nations' Sustainable Development Goals (see Chapter 3). For example, the publication repeatedly emphasizes how fraudulent and fake food and beverages can harm food safety and public health, while also pointing out how these illicit practices negatively affect legitimate trade activities and increase trade costs (due to more intensive controls and trade barriers). Furthermore, they have a detrimental impact on tax revenues and government expenditures, limiting investments aimed at promoting social welfare. Various stakeholders may suffer from these illicit practices, including consumers (e.g., in terms of both health and economical harm), farmers and agricultural companies (e.g., in terms of brand trust and competitive disadvantage compared to those engaging in fraud). Illustrating the significant impact of these negative effects is the estimated annual global cost of the phenomenon, which, according to the publication, could amount to $30-50 billion, excluding the losses related to illicit trade in alcoholic beverages (see Chapter 1). In conclusion, the illicit practices examined represent an obstacle to eradicating hunger and poverty, improving health, raising consumer awareness, and ultimately undermine sustainable economic growth.
The WTO has long been committed to combating these illicit practices, and through a series of measures it has adopted, the Organization provides tools and insights that can help in addressing them. This is done with the understanding that an effective global response must be based on a combination of factors, such as the adoption of regulatory measures, tools to ensure law enforcement, cooperation at the industry level and at the international level, and consumer “education”. More precisely, the publication aims to stimulate discussion from new perspectives and encourage reflection on potential future actions by the WTO.
Analyzing some specific issues addressed by the authors, one particularly interesting topic concerns the "boundaries" of illicit food trade and food fraud practices. While it does not aim to fill the gap of a harmonized legal definition of the phenomenon at the international level, the publication is of great interest in this regard, as it presents various definitions of such illicit practices, highlighting their "variable" nature.
More specifically, one of the most comprehensive definitions of food fraud is identified in the 2019 Transnational Alliance to Combat Illicit Trade (TRACIT) report, which defines the phenomenon as the “intentional substitution or dilution of an authentic food or ingredient with a cheaper product (such as replacing extra virgin olive oil with a cheaper oil), flavour or colour enhancement using illicit or unapproved substances, or substitution of one species with another” (p. 12). The publication also highlights how the TRACIT definition includes the smuggling of agricultural products, a practice " typically driven by a disparity between the price of a good at its origin and its destination where it may be prohibited, or by price differentials deriving from government subsidies" (p. 12).
Examining the definitions of illicit trade and food fraud with particular reference to the U.S. and European legal systems reveals distinct approaches. The U.S. Food and Drug Administration (FDA) considers "economically motivated adulteration" (EMA) «“when someone intentionally leaves out, takes out, or substitutes a valuable ingredient or part of a food” or “when someone adds a substance to a food to make it appear better or of greater value”. Other types of EMA include misbranding violations and adulteration of other products, such as animal food and cosmetics» (p. 12). In contrast, the publication (p. 12) recalls that the EU considers food fraud as «suspected intentional action by businesses or individuals for the purpose of deceiving purchasers and gaining undue advantage there from, in violation of the rules referred to in Article 1(2) of Regulation (EU) 2017/625 on EU agri-food chains» (https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32017R0625#d1e1146-1-1).
While awaiting a new guidance document on food fraud from the Codex Alimentarius Commission, the report underscores the importance of the 1979 “Code of Ethics for International Trade in Food including Concessional and Food Aid Transactions” (https://www.fao.org/fao-who-codexalimentarius/sh-proxy/es/?lnk=1&url=https%253A%252F%252Fworkspace.fao.org%252Fsites%252Fcodex%252FStandards%252FCXC%2B20-1979%252FCXC_020e.pdf).
This document specifies that international food trade should «be conducted on the principle that all consumers are entitled to safe, sound and wholesome food and to protection from unfair trade practices» (p. 13). Additionally, the publication refers to the important definition by Spink and Moyer (2011), which states: «Food fraud is a collective term used to encompass the deliberate and intentional substitution, addition, tampering, or misrepresentation of food, food ingredients, or food packaging; or false or misleading statements made about a product for economic gain» (p. 12).
Lastly, although less emphasized, the definition from International Organization for Standardization, Standard ISO 22380:2018, in ‘Security and Resilience: Authenticity, Integrity and Trust for Products and Documents – General Principles for Product Fraud Risk and Countermeasures’ states that food fraud is the use of «adulterant-substances (dilution, substitution, concealment and unapproved enhancements); mislabeling and misbranding; gray market or parallel trade; smuggling; theft; simulation; production over-run; and intellectual property rights counterfeiting» (p. 21, fn 4). It is also interesting to note that the publication suggests a possible expanded definition of "food crime" that could include «illicit activities related to illegal livestock slaughter (such as falsified halal or kosher labels), the collection or farming of food resources in protected areas, illegal fishing, and the use of child or illegal migrant labor to harvest or produce food» (p. 19). The report also highlights, in several sections, how illicit trade and food fraud are exacerbated by the illegal trade in seeds, agrochemicals, and pesticides. Finally, it is interesting to note that the ‘Codex Committee on Food Import and Export Inspection and Certification Systems’ (CCFICS) has indicated, in its draft guidelines, that fraud can concern both the quality and/or identity of the product and can be linked to either the product itself or the production process (p. 50).
Turning now to analyze the actions of the WTO, the publication highlights that, as already mentioned, the organization has not formulated a specific definition of illicit trade in food products or food fraud. However, it has provided and continues to provide Member States with an effective legal framework to combat such phenomena on a daily basis. In this regard, a number of agreements are cited as examples which, in different ways, help to combat agro-food offenses and fraud in the sector (Chapter 2). These include the “Agreement on Agriculture”, which discourages illicit drug cultivation in developing countries (https://www.wto.org/english/docs_e/legal_e/14-ag_01_e.htm), the “Agreement on Trade Facilitation”, which, among other things, encourages the transparency of customs information, thereby reducing the risk of illicit practices, including corruption (https://www.wto.org/english/docs_e/legal_e/tfa-nov14_e.htm), the “Customs Valuation Agreement”, which provides standards for determining the value of imports, making it possible to detect products with prices not aligned with standards and therefore the result of probable illegal activity (https://www.wto.org/english/res_e/publications_e/ai17_e/cusval_e.htm), the “Agreement on Preshipment Inspection”, which, by prescribing standard practices and minimum requirements for pre-shipment inspections, makes these inspections more efficient (https://www.wto.org/english/docs_e/legal_e/21-psi_e.htm), the “Agreement on the Application of Sanitary and Phytosanitary Measures”, which can be useful in countering certain forms of illicit agro-food trade by avoiding unnecessary barriers through the promotion of science-based measures (Art. 2.2), a result of the precautionary principle (https://www.wto.org/english/docs_e/legal_e/15sps_01_e.htm), the “Agreement on Technical Barriers to Trade”, which deals with product conformity assessment procedures and measures on food labeling (https://www.wto.org/english/docs_e/legal_e/17-tbt_e.htm), and the “Agreement on Trade-Related Aspects of Intellectual Property Rights” (TRIPS) (https://www.wto.org/english/docs_e/legal_e/27-trips_01_e.htm). Finally, the new “Agreement on Fisheries Subsidies” (not yet in force) could also be relevant, considering that – should the definition of illicit trade in agro-food products be extended to the illegal collection of natural resources – it establishes rules prohibiting subsidies to the phenomenon of ‘illegal’ fishing that leads to the depletion of global fish stocks (https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN22/33.pdf&Open=True)