Scotland's food and drink sector, like many others, faces continued uncertainty as the Brexit debate rolls on. The extension agreed until 31 October 2019 means that one cliff-edge has been avoided, but you cannot bet against businesses again facing the prospect of a no deal Brexit in a few months' time. In the meantime there is little clear advice about how businesses can prepare for selling their produce in the EU, an unsatisfactory position for a sector which needs to plan ahead in relation to production, packaging and sales.
There are many issues, but an obvious one is what should go on labels if and when the UK eventually leaves the EU. Although the UK government is emphasising that it will encourage pragmatic enforcement of food labelling rules and that there will be a transition period wherever possible, the EU's approach will depend on whether a deal which addresses labelling issues is agreed before 31 October 2019 (or by any further extension).
One basic but key question is what address(es) to put on the label of a food product. Currently, in order to legally sell pre-packaged products in the EU, you must place the name and address of a "food business operator" on the label. This is the operator under whose name or business name the food is marketed or, if that operator is not established in the EU, the importer into the EU. At the moment, this requirement can easily be met by using a UK address. In order to export food to the EU following a no deal Brexit, UK businesses will still have to comply with this mandatory requirement of EU law. It will no longer be enough to include only a UK name and address on the label.
Identifying which EU address to put on the label in this scenario may not be obvious and may depend on how your business and route to market is structured. If you have an existing EU hub for importation and distribution (for example, your own subsidiary or a single importer/distributor in the EU) it may be straightforward to use that company's address. If not, UK government advice is that businesses may need to consider a single hub or importer.
However, many businesses do not operate on the basis of a single EU hub or importer. Goods may enter continental Europe in different ways. Different addresses on labels for each importer may be the clear way to achieve compliance, but may not be practical or desirable for many reasons, including provenance.
A single address (which could be a newly incorporated company or existing subsidiary in an EU Member State), which ensures that consumers and authorities in the EU have an appropriate point of contact in relation to the product, would seem to be a pragmatic and low-risk approach which meets the aim of the relevant food information rules.
However, the reaction of the enforcing authorities across the EU and at customs cannot confidently be predicted. Enforcement of the mandatory food information rules is left to individual Member States. Penalties can be applied for failing to comply with mandatory food information. Currently in Scotland, for example, a person is guilty of an offence for failing to display a mandatory name and address and can be fined up to £5,000. In England and Wales, improvement notices can be used requiring the label to be changed. It is an offence to fail to comply with those notices. Other Member States will have their own rules and enforcement priorities. One might expect enforcement to focus on issues most likely to cause consumer harm, such as incorrect ingredients, rather than a more technical breach in relation to which address should appear on a label.
To complicate matters further, businesses will have to place a UK address on the products in order legally to sell pre-packaged products in the UK. This means that many products will require two addresses, in order to be sold in both the UK and the EU.
Businesses have also expressed concern in relation to the additional cost and burden the following labelling changes will have if the UK exits with no deal:
- Country of origin labels – Food or ingredients produced in the UK following a no deal Brexit could no longer be labelled as of "EU" origin. Businesses would need to change this to "UK" origin for sale in the UK or "non-EU" for certain products to be sold in the EU. Products with the UK mark cannot be sold in the UK until the UK has officially left the EU, although there will be a transition period.
- Products protected by geographical indications (GI) – There are currently 86 UK GI, with 15 relating to Scottish products, for example Arbroath smokie, Scotch whisky and Stornoway black pudding. These will continue to be protected in the UK. However, it is less clear whether they will also continue to receive protection in the EU. In the worst case scenario fresh applications to the EU may be required to be submitted. The EU logo for products protected by GI will also need to be replaced with a UK one. The transition period for this UK requirement is currently proposed by the UK government to be until 2022.
- Packaging of meat, fish and dairy – If you are a producer of fish, meat and/or dairy, the current health/indication mark required by EU law may need to be changed. The current oval shape and the approval number will stay the same; however, the use of "EU" will no longer be correct. You cannot use packaging with the UK mark on it prior to Brexit and there will be no phasing in of the change.
Clearly there may be a range of issues depending on the products, many of which have specific and detailed EU rules with which to comply. The recent political developments may raise hopes that a pragmatic way forward can still be found which avoids a no deal and minimises the impact of Brexit on Scotland's food and drink sector. Adopting the Withdrawal Agreement would mean no changes to labelling are necessary until the end of the agreed transition period (and potentially beyond that if the terms of a deal on the UK's future relationship with the EU so permit). However, until a deal is finally concluded businesses have no option but to continue with their contingency planning.