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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
Institute of Developing Economies, JETRO
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
Institute of Developing Economies, JETRO
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
Institute of Developing Economies, JETRO
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
Institute of Developing Economies, JETRO
Indicators for Port Rejections
Number of rejections
Simple sum of number of rejections
Unit rejection rates
Number of rejections per US$1million of imports to take account
of difference in trade volume
Relative rejection rates
Ratio of a country’s share in total rejections to its share of
imports
5
Institute of Developing Economies, JETRO
During 2006-2010, 5 East Asian countries appear
in Top 10 countries with reported cases of
Japanese import rejections
6
Rank Country Cases
1 China 1,646
2 US 804
3 Vietnam 563
4 Thailand 548
5 Ghana 338
6 Ecuador 202
7 Indonesia 188
8 Italy 184
9 South Korea 180
10 Canada 138
Institute of Developing Economies, JETRO
More than 1/3 of rejections are
fish and fishery products
7
36.4%
28.3%
19.9%
9.2%
4.3% 1.9% Fish and fishery products Fruits and vegetables Cereals and bakery products Nuts and edible seeds Herbs and spices
Other processed food
Institute of Developing Economies, JETRO
Bacterial contamination and pesticide residues top
the causes for rejections during 2006 and 2010 in
the Japanese Market
8
0 500 1000 1500
Veterinary drugs residues
Hygienic condition/controls
Mycotoxins
Additive
Pesticide residues
Bacterial contamination
Institute of Developing Economies, JETRO
Example:
Fish and Fishery products in
the Japanese Market
9
Institute of Developing Economies, JETRO
Fish and fishery products imported from
China are detained the most
10
0
20
40
60
80
100
120
140
160
180
# o
f cases
2006
2007
2008
2009
2010
Institute of Developing Economies, JETRO
But, fish and fishery products imported from
Vietnam are detained more frequently in Japan
compared to other countries
11
0.00000
0.05000
0.10000
0.15000
0.20000
0.25000
2006
2007
2008
2009
2010
Per US$ million imports
Institute of Developing Economies, JETRO
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
Institute of Developing Economies, JETRO
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
Institute of Developing Economies, JETRO
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
Institute of Developing Economies, JETRO
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
Institute of Developing Economies, JETRO
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
Large exportersmall exporter
Good Performer
Bad Performer
16
Institute of Developing Economies, JETRO
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
Large exportersmall exporter
Good Performer
Bad Performer
17
Institute of Developing Economies, JETRO
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
Large exportersmall exporter
Good Performer
Bad Performer
Institute of Developing Economies, JETRO
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
Institute of Developing Economies, JETRO
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
Institute of Developing Economies, JETRO
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
Institute of Developing Economies, JETRO
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
Institute of Developing Economies, JETRO
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
Institute of Developing Economies, JETRO
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
Institute of Developing Economies, JETRO
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
Institute of Developing Economies, JETRO
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
Institute of Developing Economies, JETRO
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.
http://www.ide.go.jp/English/Publish/Download/Dp/390.html
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.
http://www.ide.go.jp/English/Publish/Download/Dp/418.html
29