The Genetically Modified and Novel Foods (Labelling) (Wales) Regulations 2000

Friday 12 October 2001

Regulatory Impact Assessment

Title of the regulatory proposal
The Genetically Modified and Novel Foods (Labelling) (Wales) Regulations 2000

Purpose and intended effect of the proposal
(i) Objective
To consolidate and amend genetically modified (GM) and novel food labelling requirements by

1. making continued provision in Wales for the enforcement of EC Regulation (1139/98) on the labelling of foodstuffs containing GM soya or maize and the labelling requirements in Article 8(1) of Council Regulation 258/97 concerning novel foods and novel food ingredients; and
2. making provision in Wales for the implementation and enforcement of EC Regulation 49/2000 which amends Regulation 1139/98 and the enforcement of EC Regulation 50/2000 on the labelling of foodstuffs and food ingredients containing additives and flavourings that have been genetically modified or have been produced from genetically modified organisms.

(ii)Issue
EC Regulation 49/2000 amends EC Regulation 1139/98 on the labelling of foods and food ingredients containing GM soya and maize by :

1. Extending the scope of the labelling requirements to include foods and food ingredients containing GM soya and maize which are to be delivered as such to mass caterers.
2. Introducing a de minimis threshold of 1% for the adventitious contamination of soya and maize from non GM sources, below which labelling will not be required.
3. Making provision for the formulation at EC level of a negative list of food ingredients, or foods comprising a single ingredient, which do not require labelling, because they contain no novel DNA or protein resulting from genetic modification of soya or maize.

EC Regulation 50/2000 requires the labelling of foods and food ingredients that contain additives or flavourings which are, contain, or are produced from, genetically modified organisms (GMOs). The Regulation applies to foods which are intended for mass caterers and the final consumer.

EC Regulations 49/2000 and 50/2000 have been made pursuant to the Food Labelling Directive (79/112/EEC), as amended. The Regulations are directly applicable in all Member States, so national legislation need only make appropriate provision for enforcement of the EC Regulations. Enforcement will be by Local Authorities, or Port Health Authorities where appropriate. Separate provisions will be made in England, Scotland and Northern Ireland.

(iii) Risk assessment

Failure to provide the means to enforce the EC Regulations would lead to challenge from the European Commission and could lead to demands for judicial review from consumer organisations.

Options and issues of equity and fairness
The UK is obliged to enforce the EC Regulations by introducing suitable legislative provisions. The Genetically Modified and Novel Foods (Labelling) (Wales) Regulations 2000 seek to do this in Wales in the most effective and efficient way, by bringing together the labelling requirements for GM and novel foods under the one Statutory Instrument, rather than a further amendment to the Food Labelling Regulations 1996.

The Food Labelling Directive permits Member States to derogate from the provisions of EC Regulation 49/2000 and 50/2000 in respect of food sold to the ultimate consumer or to mass caterers without pre-packaging or which is packaged on the sales premises. This derogation was not used in respect of the original implementation of Regulation 1139/98 and will not be used in respect of the amendment (Regulation 49/2000) or Regulation 50/2000 either. This is because of the considerable demand from the public and consumer bodies for all foods containing GM materials to be clearly labelled. The Regulations give the same level of flexibility in providing information on GM additives and flavourings to consumers as is provided for foods containing GM soya or maize, where these are sold loose or pre-packed for direct sale (ie through restaurants etc).

In the course of preparing this Statutory Instrument it has become apparent that there is a provision in the Food Labelling Regulations 1996, as amended, (FLR) that does not have an EC base in law. At present the FLR (Regulation 36 as read with 23(1)(b)) allows some flexibility in the manner of labelling for flour confectionery wrapped in transparent packaging. While this flexibility was continued as part of the implementation of EC Regulation 1139/98 (because implementation was by way of the FLR), now that we are making a free standing SI implementing GM labelling rules, its legal status is open to question. Therefore we propose not to allow that flexibility in respect of implementation of these new EC Regulations, and also to remove the flexibility provided for previously in respect of flour confectionery containing GM soya and maize. Similar provisions in the FLR will be reviewed in the forthcoming exercise to consolidate those Regulations. We expect that many flour confectionery products will be able to take advantage of other flexible provisions relating to manner of labelling e.g. those relating to sales of foods pre-packed for direct sale. Flour confectionery which is packed in a crimp case only can take advantage of the flexible rules relating to the manner of marking of loose foods.

Benefits
Regulation 49/2000 represents a clarification in the rules relating to labelling of food and food ingredients containing GM soya or maize. The extension of the requirements to those supplying food for mass caterers will assist those caterers in complying with the current legal requirements as the suppliers will be legally obliged to disclose the GM content of foods to such caterers. In turn, this will assist in the availability of information to the consumer. The threshold will help to clarify existing labelling requirements.

Regulation 50/2000 represents a widening of information available to the consumer. It will also bring GM additives and flavourings labelling rules in line with those for food containing GM soya or maize. It is not however possible to quantify the benefits although they are likely to be viewed as being considerable by those consumers who wish to avoid foods containing GM materials. Businesses are expected to benefit through improved consumer confidence in knowing which products contain GM ingredients.

Compliance costs for businesses
Industry did not estimate costs for businesses as part of the consultation on the draft Regulatory Appraisal. Therefore, it has not been possible to provide figures in this section. However, we suggest that costs will not be great, since the majority of businesses will already be providing labelling information, either in complying with EC Regulation 1139/98, or to comply with contractual obligations.

(i) The affected business sectors
Around 15,000 food businesses will be affected, subject to them using food and food ingredients containing GM soya or maize. The majority of these businesses are catering establishments, the rest being mainly manufacturers and retailers.

Further sectors affected by the new Regulations will be businesses supplying food for mass caterers, as well as businesses supplying food containing GM additives and flavourings intended for final consumers or mass caterers. Businesses in the bakery trade could be affected by the removal of flexible manner of labelling arrangements for flour confectionery which contains GM soya or maize and is in wholly transparent packaging, but which does not fall within the definition of prepacked for direct sale. It should be noted that flour confectionery which is packed in a crimp case only can take advantage of the flexible rules relating to the manner of loose foods.

(ii) Compliance costs for a typical business
The food industry is very diverse and the impact of the new requirements will vary according to the present practices of individual businesses, the number and types of products which they produce and the commercial decisions which they take. It should be noted that the majority of food businesses affected by the new regulations will already be labelling products under Regulation 1139/98.

(iii)Compliance costs for businesses not previously affected by Regulation 1139/98
Compliance costs will be incurred for businesses selling foods for mass caterers. Such businesses will be required to provide additional labelling information, possibly by the re-printing of existing labels. Those businesses will also be required to contact their own suppliers to establish the GM content of the foods they sell. It should be noted that many businesses will already be doing so to comply with contractual obligations.

(iv)Compliance costs in respect of de minimis threshold
The costs of compliance in respect of the threshold is likely to be cost neutral in many respects. However, the costs of testing to ascertain the level of GM soya and maize in a food ingredient are currently £100 ? £200 per test.

(v)Compliance costs in respect of EC Regulation 50/2000
The cost of compliance in respect of Regulation 50/2000 will vary according to the present practices of individual businesses, the number and types of products which they produce and the commercial decisions which they take. Businesses will be required to provide additional labelling information, possibly by the re-printing of existing labels. Businesses may also be required to contact suppliers to establish the GM content of the foods they sell. It should be noted that many businesses will already be doing so to comply with contractual obligations.

(vi)Compliance costs in respect of removing the flexible manner of marking rules for flour confectionery which contains soya and maize and is in wholly transparent packaging but which is not prepacked for direct sale
The main businesses affected by this could be the bakery trade. It is expected that businesses will be able to take advantage of other arrangements for flexible manner of marking (ie in respect of non pre-packed foods and foods pre-packed for direct sale). Flour confectionery packed in a crimp case only can take advantage of the flexible manner of marking rules relating to loose foods. There may, however, be some businesses that still nee to make arrangements for compliance, and the costs are estimated to be small, since the requirement to provide labelling information for such products remains; it is only the manner of marking such products which will change. Therefore, systems for establishing the GM content of such products should already be in place.

Total compliance costs
Regulations 49/2000 and 50/2000 do not apply to foods lawfully manufactured and labelled in the EC or lawfully imported into the EC and put into free circulation prior to 10 April 2000; therefore no goods will need to be recalled. Interested parties have been kept informed of progress on the EC legislation, and should be aware of (and therefore had the opportunity to prepare for) the coming into force of these regulations. Manufacturers of flour confectionery packed in wholly transparent packaging were made aware in the recent consultation that the flexibility provisions previously granted to them are being removed for those products which do not fall within the definition of prepacked for direct sale. Flour confectionery which is packed in a crimp case only can take advantage of the flexible rules relating to the manner of marking of loose foods.

The majority of businesses affected by the new Regulations will already be labelling food under Regulation 1139/98. Businesses selling food to the ultimate consumer, without themselves processing the food further, are unlikely to incur extra costs in respect of the new regulations.

(vii)Additional costs
Those businesses affected (i.e. those selling food to the ultimate consumer, not pre-packed or pre-packed for direct sale) are of course already complying with 1139/98. The additional cost for reprinting menus etc. is unlikely to be any higher than similar costs incurred in respect of the implementation of EC Regulation 1139/98 which was estimated at £1m ? 2m. The financial impact of EC Regulation 50/2000 on such businesses will be less than the original cost of complying with Regulation 1139/98.

Impact on small businesses
Many small businesses in various sectors of industry are involved in the manufacture or sale of foods containing GM soya or maize. The extension of the requirements of Regulation 1139/98 to include foods sold for mass caterers, and the implementation of EC Regulation 50/2000, will result in more small businesses being affected.

Small business litmus test
A number of trade associations were contacted requesting that each nominate two small businesses to participate in the exercise. Only three of these associations responded positively. As a result, six small businesses were contacted: three restaurants, a hotel, a bakery and a patisserie. Three businesses (two restaurants and a patisserie) responded.

a)One restaurateur commented that the new Regulations would have little impact on his business, as he currently avoided using GM ingredients, and had good systems in place for ensuring non-GM supplies. The widening of the labelling requirements to include suppliers could only help in this regard. Since he used no processed ingredients, he doubted he would be affected by the requirement to label GM additives and flavourings.

b)Another restaurateur estimated the likely costs as detailed below. Her remarks indicate that the business has already implemented systems to take account of the requirements of the Food Labelling (Amendment) Regulations 1999, and that these would form a strong foundation for meeting the new requirements. However, it was noted that there is ongoing time spent in keeping up to date on GM issues in order to inform the customer as necessary.

Initial training costs in man hours lost - £800
Administration costs - £150
Ongoing costs per annum - £600

c)The patisserie owner also stated his intention not to use any supplies containing GM products. He commented that the new laws place another burden on small businesses, in that he needed to check each of his supplies to ensure their produce was not GM. He identified costs as follows:

Purchase of labelling machine - £1000
Costs of labels - 1.5p per product
Wrapping material, and labour incurred in wrapping - 1.5p per product

Other costs
There is a possibility that at least part of the costs of complying with these Regulations could be passed on to consumers, particularly by small businesses which are less able to absorb additional costs. However as the majority of food manufacturers and retailers are already labelling foods under Regulation 1139/98, additional impact in this area seems unlikely.

Impact on Local Enforcement Authorities
Local enforcement authorities and port health authorities currently have responsibility for enforcing Regulation 1139/98. They will therefore have systems in place for routine checks on relevant businesses. The extension of the requirements of Regulation 1139/98 to include foods sold for mass caterers will mean that the number of businesses requiring enforcement checks will increase. Since Regulation 1139/98 is currently enforced largely through the inspection of paperwork, it seems likely that Regulation 50/2000, if enforcement bodies follow similar procedures, will not create a great burden in itself, although backup testing may be necessary. Any extra costs will be met by re-prioritising within authorities? existing inspections programmes so that the measure is resource neutral.

Results of consultations
Over 100 copies of the consultation pack were sent to interested parties on 15 February, with comments invited by 28 March. 3 Responses were received. The responses generally indicated no significant objections to the Statutory Instrument; however, clarification has been sought on a number of issues, and concerns have been raised, particularly relating to the need to ensure that the levels of GM contamination are kept to a minimum and that the Commission follow up its commitment to review the threshold figure of 1% within two years.

Summary of recommendations/conclusions
EC Regulations 49/2000 and 50/2000, are directly applicable and legally binding in the UK. Omitting to provide appropriate enforcement measures would leave the UK open to legal challenge by the EC Commission. In order to provide for enforcement of these requirements, national Regulations specifying offences need to be introduced as soon as possible. Penalties consistent with the other offence provisions of the Food Labelling Regulations 1996 (as amended) will be imposed.

The EC Regulations apply automatically. However, under the Food Labelling Directive, Member States can derogate from Regulations 49/2000 and 50/2000 in respect of foods sold to the ultimate consumer or mass caterers without pre-packaging or food pre-packed for direct sale. It is proposed however, that this derogation should not be taken up in Wales, in line with the approach taken in the original implementation of 1139/98. The National Assembly feels this is justified in the interest of provision of information to the public.

Enforcement, sanctions, monitoring and review
The Genetically Modified and Novel Foods (Labelling) (Wales) Regulations 2000 provide offences for non compliance with the EC Regulations. Penalties and enforcement requirements are consistent with other food labelling rules, as contained in the Food Labelling Regulations 1996 (SI 1996/1499), as amended. Enforcement will be by Local Authorities and port health authorities.

The National Assembly intends to issue revised Guidance Notes to accompany the Regulations, which will shortly be issued for consultation.