Trade perspective on LLP threshold setting and implementation

www.igtcglobal.org ● [email protected]

Trade perspective on LLP threshold setting and implementation

Global Low Level Presence Initiative MeetingRome

Tyler BjornsonRepresentative, International Grain Trade Coalition

19 February 2016


Today’s presentation

1. About IGTC

2. Bulk Handling & Fungibility

3. Limits of Testing and Sampling

4. Marketing Thresholds

5. Case Studies on Low Level Presence (LLP)

6. Conclusions

COCERAL

GAFTA

NAEGA, NCGA, NGFA, USGC, USW, CRA, USSEC

,

ANIAME, APPAMEX

SESPA

East African Grain Council

ABIOVE ANEC

CECCIARA

GTA, AGEA

CGC

IGTC - 24 Trade Associations 8000 Busineses/ 85Countries

CNFACNAGS

SOPA

CAPECO

3

Geneva, Switzerland

RGU


IGTC Focus

Encourage policy and commercial practices that support global trade in grain, oilseeds, pulses and

derived products

Bulk handling systemSeeding Harvesting Farm Storage Primary elevator

Ocean Vessel

Rail loading

Barge loading Terminal Transfer elevator

Loading barges Grain Processor


Why do we Need an International LLP Approach?

• Grain trade is global and bulk in nature• Increase in biotech varieties commercialized• More LLP situations to be expected• Affects both GM and Non GM shipments

LLP = trace amount of GM event authorised in country of export, but not in country of import

Full safety approval in country of origin allows room for collaborative approach between governments


Insufficient LLP PoliciesImpacts

Failure to proactively develop a transparent LLP policy could lead to

• cancellation of contracts

• risk premiums and supply shortages for the country of import

• significant issues across the value chain – from farmers to consumers.


Fungibility• What is Fungibility:

– A good or asset's interchangeability with other individual goods/assets of the same type. Simplifies the exchange/trade process, as interchangeability assumes that everyone values all goods of that class as the same

• In the international movement of grain, fungibility refers to all grain in the system being basically the same.

• Example: No.1 canola, it does not matter where the canola was grown - all canola designated as No.1 canola is worth the same amount.


Fungibility• Farmers have widely embraced growing a

generic product, with clear specifications.

• For those who originate and handle grain, fungibility has been a key attribute to enable efficient supply chains

• For both domestic and international customers these generic grains have enabled access to a safe, low cost and predictable food supply chain

• Segregation is the exception, not the rule


Fungibility and LLP

• LLP is highly likely. Zero presence impractical

• LLP polices are required because of growth of biotech crops and acreage.

• Solutions must retain ‘fungibility’ of commodity

• Segregation is practically unachievable without enormous cost


Testing and sampling is not the solution

• Testing for GMOs is not generally predictable– High variability between labs– Lots of technical issues still be resolved

• Testing costs and risks are greater at low thresholds– Sampling has a significant effect and existing

marketing thresholds reflect that– GMO testing is more variable and unpredictable

at low levels

• Setting LLP thresholds should recognize the need for predictability in testing– 5% thresholds to reduce sampling and testing

variability– Certificate Final at origin approach can help

manage predictability


Setting LLP Threshold

• The safety of the biotech product has already been determined

– Safety assessment consistent with CODEX has been conducted by at least one competent authority;

– Additional risk assessment can be employed consistent with CODEX LLP risk assessment annex

• Marketing thresholds seek to the balance objective of high quality with the operational reality & cost

• Trade enabling

An LLP threshold is a ‘marketing threshold’ and not a safety threshold


Marketing Thresholds to Address LLP

• Thresholds applied to grain are NOT unique:

• Apply to trade in virtually all commodities

• Most countries have domestic thresholds related to grain products

• Many of these thresholds are endorsed by international bodies (IPPC, CODEX, BSP, WHO, ISO, etc. )

• Generally in 3-8% range

• Cover numerous aspects – E.g. (Everything from colour and varietal purity to presence of rocks, insect bodies, animal feces)


Marketing Thresholds to Address LLP

• Thresholds are a reflection of decades of experience in the global grain trade and reasonably achievable levels:

• Balance of quality and practicality;

• Zero is fundamentally recognized as unattainable;

• Fungibility of commodity needs to be preserved.

• Many existing thresholds carry the unique challenges of a potential 5% LLP threshold (it is NOT unique):

• No visual distinguishability;

• Challenges with testing;

• Costly to try to remove or segregate


Examples of Marketing Thresholds Today

• U.S. Number 1,2,3 and 4 soybeans allow for 1.0,2.0,3.0 and 5% of foreign material respectively;

• Canadian canola grades allow 5% of “inconspicuous admixture” related to visually indistinguishable varieties of various mustards and carinata that may be present in canola;

• Australian grain trading standards for Malt Barley 1 and Malt Barley 2 have a minimum varietal purity of 95%;

• USDA National Organic Program. The USDA Organic Seal may appear on organic agricultural products that are certified 100% organic or products that are certified as containing at least 95% organic ingredients;

• Australian standards for canola include a 10% tolerance for defective canola kernels of which 3.0% may be diseased, immature, weather damaged and otherwise materially damaged. 5.0% may be sprouted and 2.0% may be green.


Utilizing Existing Regulatory Frameworks

Rationale for marketing thresholds applies equally to LLP:

• No safety issues

• Balance of high quality objective vs. practicality and cost

• LLP can be implemented within most existing legislative and regulatory frameworks;

• Risk-based management facilitates the establishment of low level presence thresholds once CODEX safety assessment is complete.

• Most regulatory compliance agencies around the world utilize risk based regulation and use in various circumstances.


Responsibility across the chain

• Once a LLP threshold is established in country of import, compliance must be the responsibility of the full export supply chain in country of origin

• Stewardship practices in country of export will be primary focus of compliance measures mitigating the need for enforcement at point of import


Case studies


Flax - LinseedCDC Triffid caseconsequences

Economic and financial losses

• Linseed arrivals from Canada placed under quarantine

• Additional quantities held due to the risk of finding traces of triffid

• Extra costs related to recalled and destroyed products

• Costly consumer claims and complaints• Extra storage and testing / sampling costs


Flax - LinseedCDC Triffid case consequences

Economic and financial losses

•Lack of supply to satisfy the EU demand (decrease of the imports from Canada, not enough linseeds from alternative origins and EU production)

•Steep price appreciation of linseed, linseed oils and meal caused by the sudden supply squeeze

• Decreased EU linseed crush oil production:• Rising import demand for linseed

oil and sharp slow down of the EU linseed oil export

• Direct and indirect job losses

• Decreased profitability of operating in the linseed market

• Increased competition coming from foreign operators and loss of market share of the linseed supply chain

Maize MIR162

• Agrisure Viptera MIR162• Multiple claims from grain producers and

grain traders: USD 2.9 billion

Conclusions1. The risk is real – case studies show significant costs are

apparent2. International grain trade anchored in fungibility of grain

supplies. Grain segregation reduces efficiency of grain movement and drives up costs;

3. Zero tolerance for LLP is impractical, unrealistic and not grounded in science based risk management;

4. Testing and sampling is inconsistent, unpredictable and costly;5. Risk-based compliance approach can be accommodated

within existing GM regulatory frameworks – no regulatory or legislative change needed;

6. Marketing thresholds are common in international grain trade


Thank You!For cost effective, uniform, transparent, predictable, practical and proportionate

measures facilitating trade and investment while protecting agriculture, promoting

economic growth and global food security, while maintaining high quality, safe products

throughout the value chain.

Trade perspective on LLP threshold setting and implementation

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