Ideal Processing State Configuration / by Francisco Blaha

Following on my post on the Ideal Coastal State set up for a CDS, I follow here the same principle but for a Processing State, based on what I wrote in our recent FAO book for a CDS and that I adapted a bit for the Pacific context for a report I have done for FFA.

Way more important than you think

Way more important than you think

The “processing state” concept is not yet recognized in international fisheries law – yet it is the most important state type in terms of country-level traceability solutions in support of a CDS.

While many Processing States are, by de facto, Port states, this is not always the case. Yet the responsibilities as a processing State are supplementary to those as a port State. The processing State can also be a part – or a specific form – of the market state, such as the end-market state in which products are consumed and from which they do not re-emerge in trade. 

For a CDS, it is important to distinguish the functions of the processing state from those of the port state and end-market state, so that functions can be assigned to a specific state-type overseeing transactions in parts of the supply chain under their purview, and to present them without repetition of each state type. In doing this, it must be borne in mind that any territory may be a flag State, a port State, a processing state and an end-market state concurrently. 

In simple supply chains (as in most of the Pacific Islands with processing industry) where the 1stbuyer is also the processor and the exporter, and no splits occur after importation, the CDS collects the information that enables tracing of the product. 

In more complex supply chains (such as the one in Thailand or Vietnam), where products are imported into national markets and where changes of ownership subsequently occur, are fully not traced by the CDS. This implies that exporters will be different from importers, which is where challenges emerge.

A CDS must be able to detect mass-balance violations at the country level – more product being exported than was imported – by means of certificates. But in complex national supply chains, where products under single certificates are split among several buyers, the CDS cannot establish what action, seller, buyer, processor or exporter is responsible for a mass-balance inconsistency detected at the time of exportation. 

The CDS can only detect problems with the balance of products intended for export, which may result from simple clerical error or from a laundering attempt somewhere in the national market system.

In complex national supply chains, which are the norm in advanced processing states, tools must be developed to trace the movement of products from the entry gate to the exit gate so that inspections can establish where anomalies occur and who is responsible for them. Without such traceability tools it may be impossible for a competent authority to establish the nature and cause of discrepancies.

Processing state authorities organization
The involvement of fishery authorities in processing is recent, and many older fishery regulatory frameworks are concerned only with fishing and landing, though a few require export permits largely for statistical and revenue-gathering purposes.

Processing is generally the preserve of food safety authorities, for whom traceability is important in terms of consumer safety, information and product origin. Such authorities already have data records, traceability systems and control structures in place.

Another set of fishery-specific controls with a different focus is therefore needed, which may be challenging in the processing environment. The focus of fisheries inspectors has hitherto been harvesting and landing operations, so their work often ends at the dock. But even trained fisheries inspectors who understand processing operations and can investigate company records, inventory systems and processing practices are limited in the range of their knowledge. It is therefore important that fisheries authorities collaborate with food-safety, health and customs authorities in joint working groups and inspections.

Authorization of imports
In a CDS it is important to differentiate between fish landed by fishing vessels and imports arriving through commercial ports, which may have been partially processed beforehand.

Requests for approval of importation should ideally be made before shipment and definitively before arrival. This enables processing states to establish the legality and acceptability of products in accordance with their system of checks and approval.

In most countries, importers must be registered for customs and tax purposes, and hence records are available. In some jurisdictions, only licensed importers under the control of the processing state are allowed to import seafood products against a set of requirements, that establish the identities of businesses and physical persons, ensure that records are maintained of inbound shipments, receipts, inbound lot IDs, lot splits and contact details of suppliers and buyers. 

Registration and licensing of storage and processing premises
Regardless of whether fish are imported or landed, in most countries fish storage and processing premises in the export value chain are licensed and under the control of health authorities; particular conditions apply according to type of processing.

Many of the license conditions refer to the safety controls, traceability of raw materials and market access requirements to be met for certification. An existing comprehensive traceability and record-keeping system at the industry level provides a favourable environment for CDS.

Four of the six PICs countries that have processing facilities are authorized to export to the European Union. Because of the EU system for granting seafood import authorizations, these states are in practice processing states, and traceability is hence part of their regulatory frameworks.

The authorities responsible for seafood safety in each country must guarantee that all operators in its supply chain comply with EU requirements, of which traceability is one. EU market access conditions require that all elements of the production chain under the control of the competent authority are uniquely identified and that all product lots are traceable at all stages of production, processing and distribution. This ensures that the components of the production chain can be tracked through lot splits and mixing.

Many of the KDEs reflect those needed in CDS. When implementing the EU regulation governing traceability and labelling, for example, the following data must be made available:

  • identification number of each lot;
  • external identification number and name of the fishing vessel;
  • the FAO alpha-3 code of each species;
  • the date of catches or the date of production;
  • the quantities of each species by net weight in kg or number of individuals; and
  • the names and addresses of suppliers.

An additional regulation requires the following:

  • the commercial designations of species and scientific names;
  • the production method – caught at sea, caught in freshwater or farmed;
  • the FAO sub-area where the product was caught or farmed;
  • the category of fishing gear used;
  • whether or not the product has been defrosted; and
  • the date of minimum durability, where appropriate.

With regard to regulatory control by processing states, the EU imposes controls to be followed by local authorities and food business operators to ensure that all production chain components are compliant with its rules. This establishes that the competent authority automatically carries out official controls with a frequency based on risk assessments. The controls can be imposed at any stage of the production chain.

Fish storage and processing premises involved in the export supply chain need to be licensed and under the control of the fisheries authority. Non-compliance with license conditions should automatically result in sanctions, enforcement measures and even suspension of the licence.

Control over distribution and transfers
Control by fisheries authorities over the distribution and movements of fish is critical in that the volumes declared must be identified, taking into account splits of lots and sub-lots along the distribution chain. It is hence important that transactions between licensed processors or cold stores are controlled and approved by the authorities.

Control of storage and processing premises
In principle, “processing” means any action that substantially alters an initial product. It can be as simple as transforming a fish from “whole” to “gutted” or “filleted” and includes changes by processes such as cooking, canning, drying and extrusion or a combination of such processes. In some cases “non-transforming” operations such as grading and packing are referred to as processing, but they have no effect on product or unit weight. By-products of processing such as guts, frames and heads should be included in national traceability systems because they are usually sold for pet food, rendering or fishmeal processing.

Because processing implies a change in weight from “unprocessed” to “processed” product there are opportunities for laundering by introducing IUU fish into processing and then declaring inflated processing yields or declaring deflated processing losses.

Fishery authority controls should ideally be established in two areas:

  • Cold stores and stock inventory. As previously discussed, in a CDS it is essential to identify the “ownership” of all stored raw materials and products, whether they are in processors’ premises or off-site storage facilities. Most companies have inventories that enable rapid identification of location, type of product, species, volumes and number of pallets, bins or boxes. Fishery authorities must regularly inspect processing establishments and cold stores to verify the accuracy of records and inventories, either jointly with the health authorities or under a Memorandum of Understanding that provides for action on its behalf.
  • Processing yields are critical in a CDS to enable estimates of the weight of product at different stages of processing. There are two important uses of yield factors: 
    • stimating the volume of round fish caught if on-board processing alters the original volume, this is particularly important as a catch-monitoring tool. Figures obtained from back-calculation can be cross-checked with logbook entries to monitor their accuracy and consistency; and
    • monitoring processing yields throughout the supply chain to ensure that laundering of non-originating material into the supply chain can be detected: this enables fishery authorities to detect non-originating materials being laundered as an operator processes unreported raw product into finished products, giving rise to unusually high processing yields.
  • Without the reporting and monitoring of yield factors, supply chains are open to fraud because laundering attempts cannot be detected automatically.

Health regulations require operators to identify and check products or raw materials to be dispatched and to record the details of what leaves the premises independently of destinations. Regular joint verifications by fishery and health authorities before dispatch and physical checks of consignments loaded are a simple way to ensure traceability and confirm that the correct volumes and species are recorded.

In many countries exporters must be registered and licensed, and health certificates required by national or foreign markets and certificates of origin for trade and tariffs must accompany seafood exports. The issue of health and origin certificates must be carried out in compliance with the relevant regulations. The identification of consigners is essential.

These certifications include KDEs shared with CDS such as species, volumes, origin, and type of processing, so it is essential to work in coordination with health and customs authorities. Data can be verified against shipping and commercial documents such as bills of lading and insurance papers during validation of export trade certificates regardless of product category or degree of processing.