REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

On the situation regarding the implementation of beef labelling systems in the different Member States As laid down in Article 19 (3) of Council Regulation (EC) No 820/97

(presented by the Commission)

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

On the situation regarding the implementation of beef labelling systems in the different Member States As laid down in Article 19 (3) of Council Regulation (EC) No 820/97

1. Introduction

2. Operation of the labelling Schemes

3. Administration of the National Labelling Schemes

3.1. Management structure

3.2. Submission and approval procedure for specifications

3.3. Control procedures and their consequences

4. Administration of labelling on beef from other Member States and Third Countries

4.1. Mutual recognition between Member States

4.2. Labels on beef from Third Countries

5. Impact of the Beef Labelling Legislation

6. Evaluation of the future direction for Beef Labelling Policy

6.1. Legal aspects

6.2. Status of the Bovine Identification Dossier

6.3. The Commission's proposals

6.3.1. Proposal 1: Laying down general rules for a compulsory system but introducing

compulsory indications in two separate steps

6.3.2. Proposal 2: Temporary prolongation of the current labelling provisions

1. Introduction

In accordance with Article 19 (3) of Council Regulation (EC) No 820/97, Member States were required to submit individual reports to the Commission on the implementation of beef labelling in their territory by 1 May 1999. Subsequently, since the Commission is in turn required to report back and make proposals to Council on the same subject, before the Council's self-imposed deadline of 1 January 2000 for taking a decision on the general rules for a compulsory beef labelling system, the aim of this report is three-fold:

_ to review the implementation of beef labelling across the EU,

_ to assess the impact that the legislation has had on the EU beef industry and its operators,

_ to describe how the Commission sees the policy moving forwards, through new proposals, based on the experience gained so far and an appreciation of the technical and economic constraints in the beef industry in the near and mid-term future.

However, the technical and political components of this report would not be complete without reference to the proceedings that have taken place concerning the legal base of the regulation since its adoption on 21 April 1997.

In summary, following the adoption by the Council of Regulation (EC) No 820/97, which used Article 43 of the Treaty of Maastricht as its legal base, the Commission took the Council to the European Court of Justice, pleading that the whole regulation should have been based on Article 100A (i.e. co-decision procedure) because when the Treaty of Amsterdam came into force, Article 152 would be the appropriate legal basis as the measure primarily concerned public health.

However, it should be noted that, at the time of writing, the Court's judgement in Case C-269/97 is still pending.

2. Operation of the labelling Schemes

The present labelling system is based on the principle that, if operators or organisations wish to provide information on a label concerning "the origin or certain characteristics or production conditions of the labelled meat or of the animal from which it derives", they must do so according to the rules laid down in Regulation (EC) No 820/97. Thus, since 1 July 1997, the date of entry into force of the regulation, this voluntary system of labelling has been applicable in all Member States.

However, by virtue of Article 19(4) of the same regulation, Member States "where there is a sufficiently developed identification and registration system for bovine animals" could "impose a compulsory labelling system for beef from animals born, fattened and slaughtered on their territory". They could also determine which items of information were compulsory.

Three Member States have so far taken advantage of this clause and submitted their specifications to the Commission for approval. On 13 October 1998, the compulsory systems submitted by France and Belgium were approved by Commission Decision C(1998) 3050, while the Finnish system was approved on 14 December 1998 [Commission Decision C(1998) 4040].

In essence, the three systems are focussed on origin. The French system also includes a compulsory indication of the category of the animal (e.g. young bull, steer, cow, heifer, bull) and the production orientation of the breed (e.g. beef or dairy breed type). The Belgian system specifies the type of information required at each step in the marketing chain (e.g. abattoir, wholesaler and retailer) and includes compulsory indications of identification of individual or lot, identity of the responsible body and date of slaughter. The Finnish system rests solely on the indication of "Finnish beef", though other indications covered by Regulation (EC) No 820/97 are permitted.

3. Administration of the National Labelling Schemes

3.1. Management structure

The Competent Authorities and control authorities assigned by each Member State for the implementation of Council Regulation (EC) No 820/97 can be found in Table 1.

3.2. Submission and approval procedure for specifications

The reports received from Member States show that the appointed Competent Authorities have gained valuable experience over the last two years in the management and assessment of the specifications submitted to them by operators wishing to apply for prior approval of their beef label. The Competent Authorities have either dedicated departments in their administration to beef labelling matters or have specifically appointed inter-service committees in the framework of their national legislation.

All Member States have successfully developed thorough administrative procedures to handle such applications and the number of dossiers received reflects the different ways in which the Member State administration has presented the labelling regulation to their beef industry and how they have responded to it. In relation to dealing with submissions that contain unacceptable deficiencies or errors, the commonly adopted approach has been to communicate those deficiencies to the operator specifying the improvement required, leaving the operator to decide whether to withdraw the application or incorporate the necessary changes. Consequently, relatively few applications were rejected outright.

In Member States like Belgium, France, Luxembourg and Austria a handful of global submissions, each covering a large number of individual operators, have been processed. On the other hand, Member States like Germany, Finland and the United Kingdom have received many submissions (> 200) which reflects a greater diversity of interest in the beef sector and a more individualised treatment of each dossier. Most Member States have received fewer than 100 submissions. The number of applications handled by each Member State to date is found in Table 1.

With regard to the type of indications that operators have voluntarily submitted for approval, the most popular terms refer to various aspects of quality, breed and feeding system, including organic produce. A list of the most popular terms used by Member States can be found in Table 2.

It is to be noted that the interpretation of which indications are acceptable falls under the responsibility of Member States. Each Competent Authority has had to determine whether an indication is admissible under Regulation (EC) No 820/97, whether it is already covered by the regulations and directives quoted in Article 12 or whether it is misleading or insufficiently clear. This has not always been a straightforward task and some Member States have commented that the establishment of definitions at a European level would greatly help their interpretation of these terms.

In terms of the scope of labelling, most Member States report a high degree of integration of the producer-final consumer chain in their labelling systems and are satisfied with the amount of information reaching the point of sale.

Finally, the problems befalling small commercial outlets are given special emphasis by Member States who are aware of the administrative load and high costs, especially with respect to controls, that arise for such operators. Most Member States ask for a simplification of procedures in this domain.

3.3. Control procedures and their consequences

The majority of Member States, where voluntary labelling operates, only approve self-regulating labelling specifications that depend on controls being made by independent bodies. In this respect, the procedures set up for recognising the independent control bodies have not raised problems. While few are approved as of yet, most of the organisations so far involved in controlling beef labelling are in line for complying with standard EN/45011 by the end of this year.

Of the Member States operating voluntary labelling, only the Competent Authority in Denmark, and one autonomous community in Spain, have taken responsibility for controls.

On the other hand, the three Member States operating compulsory systems rely on controls made or co-ordinated by their Competent Authority, since they are considered as part of the statutory requirements for marketing of beef in those countries.

In terms of the global enforcement of beef labelling standards, three levels of control can be identified which, across the Member States, resulting in varying penalties, ranging from fines, withdrawal of labels or withdrawal of merchandise. At the first level, Competent Authorities check on the work of the independent bodies and, in some cases heavy fines can be imposed where incorrect operation of a specification is detected. Secondly, errors in labelling can be identified in the reports of the independent bodies, but, under the principle of "self-regulation", such infractions attract lower penalties. Finally, all Competent Authorities, where either voluntary or compulsory labelling operates, have empowered the food or health standard authorities in their territory to verify by "spot-checks" that labelling is correctly carried out at the point of sale, in accordance with Regulation (EC) No 820/97.

In economic terms, Member States report that, while implementation of Regulation 820/97 has taken place at a time when standards for ensuring traceability in the beef sector have been constantly improving, in particular through the increasing application of informatics, control requirements (and hence costs) are seen as excessively high. Indeed, in the case of small operators and butchers, control requirements are considered to actively discourage their participation in beef labelling and has been identified as a particularly serious obstacle to the policy's future.

Finally, owing to the short period in which the majority of labelling specifications currently approved has been operational, most Member States report only a handful of infractions, with the exception of France where the compulsory system has been policed on a wide scale.

4. Administration of labelling on beef from other Member States and Third Countries

4.1. Mutual recognition between Member States

Across the EU, Member States report that relatively few specifications have been interchanged with a view the procedure of mutual recognition, as laid down in Article 14 of the regulation. This is largely for two reasons. Firstly, few voluntary specifications have included the production and/or sale of beef in two or more Member States. Secondly, where across border labelling has taken place, Competent Authorities have administered the specifications directly on the basis of the operator proving through an official certificate his permission to label in a certain way in his home country.

The only problem to come to light is that, occasionally, the degree of precision of the indications approved by each Member State could be improved. Any difference, however small, in the wording on labels, compared to the approved specification, create difficulties for the Competent Authority of the importing country to accept that label.

Therefore, the limited number of dossiers that required approval through mutual recognition means that the simplified procedure laid down in Article 14(3) has not been problematic. However, Member States are aware that any move to a compulsory system would increase the workload of mutual recognition enormously and that simplified procedures would have to be adopted.

4.2. Labels on beef from Third Countries

By virtue of Article 15 of Regulation (EC) No 820/97, the Commission has received and approved the labelling notification from 12 Third Countries, namely: Argentina, Australia, Botswana, Brazil, Canada, Namibia, New Zealand, Paraguay, Swaziland, Uruguay, USA and Zimbabwe. A summary of the Third Country notifications can be found in Table 3.

In their reports, Member States indicate few problems relating to Third Country labels. However, some Member States comment that the indications given in the notifications could be more precise since problems do occasionally rise at a practical level when the imported beef is not labelled in exactly the same way as that approved by the Commission. In case of doubt, Competent Authorities have to refuse the labelling which can cause difficulties at the trade level until such time as the operator in the exporting country either corrects his labels or requests from his national authorities a modification to that Third Country's notification.

5. Impact of the Beef Labelling Legislation

Member States were requested to indicate their views on that Regulation (EC) No 820/97 has had on their beef industries since its introduction in mid-1997. The main impressions that can be gained from the reports are summarised below.

On whether the policy has fully met its objectives:

- Only Denmark, France and Italy state unconditionally that the legislation has effectively helped restore consumer confidence and/or improve beef consumption while Spain and Austria qualify their positive evaluation of the policy. Spain considers that the policy still needs time to show its effect while Austria notes that, in an unexpected and undesirable way, Regulation 820/97 has deterred certain Austrian operators who previously labelled under national laws because of the extra cost and administrative burden laid down in the European system.

- The remainder of Member States consider that the impact of the legislation has been insignificant or, more explicitly, that there is no evidence to indicate any positive outcome from its introduction (e.g. the view of Ireland, Netherlands and United Kingdom).

Consequently, comments made by Member States on the reaction of consumers are also mixed:

- Member States like Germany, France, Luxembourg, Austria and Finland feel that their consumers are well informed and take a positive view of beef labelling, though in the case of Germany this enthusiasm has waned to some degree since late 1998.

- Other Member States report that their consumers, even when well informed, have not notably changed their patterns of consumption for beef. For example, Italy recognises that the European initiative on beef labelling needs greater diffusion amongst consumers if it is to have a real impact.

In response to the Commission's request that Member States should specify whether the beef labelling policy has created any unexpected side-effects, several notable comments were made:

- Ireland, the Netherlands and the United Kingdom pointed to the fact that labelling for origin has had, in their opinion, the undesirable tendency of promoting a re-nationalisation of the EU beef market.

- Denmark, France, Austria and the United Kingdom indicate that the increased administrative and control procedures arising from beef labelling have reduced the ease with which operators can trade freely between themselves and has made management of meat supplies more problematical and bureaucratised.

- Finland mentioned that their consumers have felt confused by the fact that, while beef originating in Finland is compulsorily labelled, beef coming into Finland is not necessarily labelled under the rules currently operating under Regulation (EC) No 820/97.

- The United Kingdom, while accepting that Regulation (EC) No 820/97 has improved the general level of labelling of beef, is concerned that the investment made by operators and controllers involved in this commercial activity has created a number of legitimate expectations which could condition future development of the policy.

Finally, Member States reserved their strongest comments for their assessment of the high costs associated with the current labelling legislation and the heavy administrative burden placed on both the public and the private sector. They do admit, however, to having few criteria or independent market studies for judging if the policy has been cost-effective.

6. Evaluation of the future direction for Beef Labelling Policy

While taking note of the opinions expressed by Member States, the Commission has also had to base its view of the way forward for beef labelling on an appreciation of the legal background of Regulation (EC) No 820/97 and the status in technical terms of Bovine Identification in the EU. Indeed, these two elements show themselves to be so important to future policy that they have heavily conditioned the options available to the Commission for making proposals.

6.1. Legal aspects

As it currently stands, Article 19 of Regulation (EC) No 820/97 states that:

_ The voluntary labelling system currently operating in most Member States will automatically lapse at the end of 1999.

_ The regulation provides for the adoption of the general rules of a compulsory system by qualified majority of the Council.

However, the Commission took the Council to the European Court of Justice when Regulation (EC) No 820/97 was adopted under the former Article 43 of the Treaty. The judgement on Case C-269/97 is still pending. Thus, in the Commission's proposals, in line with the official Commission position before the Court on this matter, Article 152 of the new Treaty is taken as the legal basis because it covers all measures where the primary aim is protection of public health and closely involves the European Parliament by way of the co-decision procedure provided by Article 251 of the Treaty.

The Commission therefore proposes that Regulation (EC) No 820/97 should be repealed and replaced by a Regulation, based on Article 152 of the Treaty, and which shall include the general rules for the compulsory beef labelling system.

6.2. Status of the Bovine Identification Dossier

Any evaluation of the present and future of beef labelling, particularly with regard to traceability, requires an assessment of the implementation of Title I of Regulation (EC) No 820/97 (Bovine Identification and Registration) across the EU.

From the information supplied by Member States, and the Commission's own enquiries, evident progress has been made by Member States [1] since those parts of Directive 92/102 concerning bovines were replaced by Regulation (EC) No 820/97 in 1997. However, some shortcomings from the point-of-view of its application for beef labelling purposes, have been identified, that can be summarised as follows:

[1] As Member States are still in the process of implementing this legislation, the state-of-play described in this report may have evolved since the date the text was drafted in June 1999.

_ Passports including all information pertinent to origin, used for animals within a Member State or for those subject to intra-Community trade, are operational in most Member States only for animals born after 1 January 1998.

_ However, Member States do not necessarily retain all the information they receive about such animals when they re-issue a new passport. At best, but certainly not in all cases, the number of the holding from which the animal last came is retained on the new passport.

_ Furthermore, the lack of a uniform format of passport and of an EU-wide code for identifying holdings can give rise to practical difficulties regarding the complete transfer of all information about an animal to the receiving Member State.

_ Databases are fully or close to being operational in about 8 Member States but only Belgium, Luxembourg and the Netherlands have a means of interchanging information electronically.

_ The remaining Member States are to a greater or lesser extent ready to be operational by the end of 1999 but full data on origin will definitely not be available on the databases for all Member States before then.

The Commission therefore concludes that most Member States:

_ either due to lack of information or lack of access to it, as from 1.1.2000, do not know for each animal slaughtered, its place of birth and all the places it has been held in during it life

_ cannot meet the commitment laid down in Article 19 of Regulation 820/97 that introduces automatically a compulsory beef labelling system, based on origin, on 31/12/99.

_ by not being in a position to implement reliably compulsory labelling would provoke an unsatisfactory situation of confusion, unfairness and uncertainty for the entire EU beef sector, from producer to consumer.

6.3. The Commission's proposals

Therefore, the Commission, taking into account these important legal and technical aspects, considers that the most appropriate way forward at this stage is to make two proposals, both through co-decision between Council and Parliament, as follows:

6.3.1. Proposal 1: Laying down general rules for a compulsory system but introducing compulsory indications in two separate steps

The proposed way of doing this is to:

_ Retain the usable parts of Regulation (EC) No 820/97 (i.e. Bovine Identification and Registration and parts of Beef Labelling) in a new text. Only one minor change from the current text of Regulation (EC) No 820/97 is proposed in Title I (Bovine Identification and registration). It is proposed to postpone in Article 4 (7), by one year (i.e. until 31.12.2001), the date of submission to Council of a report on electronic identification. This is because delays have been incurred in the start up of the Commission's IDEA Project, a pilot study currently testing the technology on one l million animals in 6 Member States and from which results are expected in late 2001.

_ Propose that text as a new regulation (adopting Article 152 as the legal bases).

_ Add realistic general rules for the compulsory labelling system such that Bovine Identification and Beef Labelling remain in the same regulation. The reason for this is that labelling is so dependent on traceability through a reliable system of identification that the two are virtually inseparable.

This approach has the advantage that it maintains the momentum set up by the present beef labelling policy and the legitimate expectations of consumers and of operators who have invested in labelling in the beef sector would remain intact because there is a move to a compulsory system.

The Commission considers that, in a first step, the compulsory indications should focus on information that is reliably available for all animals at the point of slaughter (e.g. date of slaughter, place of slaughter, type of animal).

The other compulsory indications related to origin, which cannot for technical reasons be introduced from the start, are then foreseen in the proposal with entry into force on 1.1.2003.

The voluntary arrangements, for all indications other than origin (e.g. breed, feeding system etc) should be retained, as at present, but with a simplified administrative system for approval.

However, due deadline of 31.12.99 established in Regulation (EC) No 820/97 for taking a decision on such a compulsory system and the lack of time available for Council and Parliament to discuss this proposal, the Commission proposes that a second proposal be adopted before the end of the year.

6.3.2. Proposal 2: Temporary prolongation of the current labelling provisions

This proposal consists of an amendment to Regulation (EC) No 820/97 prolonging the existing provisions for labelling until the first proposal on the rules for a compulsory system has been adopted.

Rapid adoption of the proposal is necessary to avoid a collapse in the current voluntary labelling system and its automatic substitution with a compulsory system with no general rules to guide it.

However, if Council and Parliament fail to come to a decision before 31.12.99, the Commission has to reserve the possibility to present to Council an urgent proposal, for adoption before the end of the 1999, based on the existing Article 19 of Regulation (EC) No 820/97 (i.e. a decision reached by qualified majority of the Council on a proposal from the Commission). Such a proposal would be made in order to avoid a legal void through the automatic lapse in the voluntary system.

Table 1

BEEF LABELLING REPORT

Competent Authorities, Control Bodies and Numbers of Applications

>TABLE>

Table 2

BEEF LABELLING REPORT

Types of indications

>TABLE>

Table 3

BEEF LABELLING REPORT

Third Countries, Competent Authorities and indications given

>TABLE>