Agenda Item 5	Conference Room Document 22 English only

FAO/WHO Regional Conference on Food Safety for Asia and the Pacific

Seremban, Malaysia, 24-27 May, 2004

A Performance – Based Approach to Food Safety Regulatory Inspections

(New Zealand)

Introduction

The cost of regulatory compliance inspections is of concern to those involved the food industry. As food safety knowledge increases and new processes are introduced, inspections are required to be more intensive and inspectors are required to have more technical knowledge. This results in increased costs to processors, exporters, importers and regulators.

This paper proposes a method of using inspection resources in an efficient manner by applying a performance-based approach to food regulatory inspections. This approach can be used for a number of regulatory inspection activities.

The Performance – Based System

Performance – based inspection systems are those where the frequency and intensity of inspections is based on the:

• Food safety risk involved with the product (e.g. fresh meat for human consumption compared with processed pet food), and the
• The performance of those producing the product. Good performance is rewarded by fewer inspections and therefore less cost, and poor performance receives intensified inspections at greater cost. We all want to be able to confidently manage risks and reduce costs of regulation, while ensuring consumers are provided with the safest food possible.

Key Elements

Performance based systems must have:

• Clearly defined audit / inspection procedures and frequencies
• Clearly defined pass / fail criteria
• Meaningful and useful performance ratings.

The programme must be robust so that any actions taken based on the results of the programme can be justified nationally and internationally. It must also provide meaningful data on the performance of those that are audited or inspected.

Food Safety Regulatory Applications for Performance – Based Systems

Performance – based systems can be applied to:

• Processing verification / inspections
• Import Inspection and testing
• Approval of exporter's establishments
• Acceptance of new species/products from exporting countries
• Enforcement of new regulations on exporting countries (by providing evidence of performance which can allow exemptions to be made for a country or countries).

Example

Performance-based Verification (PBV) of Animal Product Processing in New Zealand

The New Zealand Food Safety Authority (NZFSA) PBV programme is an example of a performance-based system in action. This programme was introduced in 1999 after consultation with the animal product industry. It took approximately two years for all parties to become familiar with it, and has been subject to much discussion. It has been revised and is working efficiently although there is still some debate on inspection frequencies.

The programme covers the verification by NZFSA inspectors (both veterinarians and other inspectors) of processors' Risk Management Programmes (registered by NZFSA) for processing animal products for human or animal consumption. The verification also includes processors compliance with overseas market access requirements. It is important to note that every verification audit visit is paid for by the processor being audited.

The PBV programme is currently split into a series of verification steps which have an associated audit frequency. Each Risk Management Programme is allocated a verification audit step. The steps are:

After 3 consecutive acceptable audit outcomes, the reward for performance is that the processor moves up a step, for example, from Step 3 to Step 4, and therefore is audited less frequently. If a processor fails an audit e.g. on Step 3, they move to Step 2. This increases costs and subjects the processor to more intense audit.

There may be sanctions applied for failure at any step. However, when a processor reaches Step 1, then the processor must provide NZFSA with a management plan to address the fundamental failure of the processor to process in accordance with the approved Risk Management Programme.

The development of the programme included decisions on:

• A starting audit frequency for processors – depending on risk of product processed and compliance history.
• The number of steps and verification frequencies for each step
• The pass/fail criteria for audits
• The criteria for moving from step to step
• The actions/sanctions for reaching the minimum step.

When the programme was introduced all processors began at a frequency consistent with their previous compliance rating. Producers of animal products such as meat and bone meal started at a higher step, i.e. fewer audits, than slaughter and boning operations. Some considerations / decisions were:

• That the highest audit frequency was practical – decided as one audit per 2 weeks.
• That the lowest frequency still provided adequate compliance assessment.
• The pass criteria was 'processing was in substantial compliance with requirements'.

In New Zealand, the ability to reduce compliance costs is a very strong motivator, and the PBV system has contributed to the ongoing performance improvement of New Zealand animal product processing. Also there is increased financial and market pressure on poorer performers to improve performance, as markets take note of the PBV step individual processors are on.

Some processors have made savings of up to 50% in compliance costs. These are those that have taken an especially active role in managing their own compliance, rather than relying on the regulator (NZFSA) to identify compliance deficiencies.

So the advantages of a performance-based verification system for food processing are:

• Reduced compliance costs for good performers. Good performers actively manage their own compliance, with the result being fewer non-compliances at regulatory inspection. This is important, as it is this that improves the safety and quality of food.
• Poor performers can be targeted and there is factual evidence of this and so any sanctions can be justified.
• Improved performance by processors will ultimately improve food safety and quality for both domestic consumers and consumers in export countries.

Other Possible Applications of the Performance-based Approach

Import Inspection and Testing

Initial inspection frequencies can be based on previous country import inspection history.

Benefits are:

• The regulatory focus is on countries of highest food safety risk, which will receive increased inspections on product from those countries
• Importer costs are reduced if importing from good performing countries, because of fewer regulatory inspections
• Importers move towards importing from good performing countries because inspection costs are less
• Fewer import inspections means the flow of product from good performing countries can be quicker through ports, and therefore reach markets in a fresher state.
• Importing countries can ultimately apply very low frequency inspections or no inspection, if the confidence in a product from a country, or all product from that country, is of good quality and considered safe (this can be managed by customer response).
• Importing countries ultimately provide safer food to their consumers using this approach.

Approval of Establishments in Exporting Countries

When an importing country approves approving establishments in exporting countries, consideration should be given to the performance of the competent authority of the exporting country.

A rating for exporting countries applied by importing countries can be applied retrospectively applied based on previous country inspection records. Any performance-based system should also include import compliance history when deciding starting frequencies. A performance-based system used for this purpose could be linked to the results of a performance-based system used for import inspection and testing.

This system can provide evidence, i.e. a good rating, for the importing country to be able to approve establishments and new processes for export to their country, without the need for an inspection visit specifically for that purpose. Alternatively, it can provide evidence that an inspection visit is needed.

Inspection visits of importing countries will always occur. However there is a cost saving to both countries if these can be limited and if they are not required for every new establishment or every new species/product. Any country inspection should always audit a representative sample of establishments, and use this as a basis of acceptance of all similar establishments within the country. The inspection should also assess the effectiveness of the regulatory system. Is it adequate?

Advantages of using a performance based system for this purpose:

• The inspection resources of an importing country can be best directed towards those countries of higher import risk.
• It allows an importing country to make quick, justifiable decisions on approvals.
• Performance –based ratings can be used to decide whether exporting countries should be required to apply new regulations introduced by an importing country. Regulations that are designed to prevent inferior quality food from entering a country are often based on the controls required to prevent import of inferior product from the poorest performing countries.

Sometimes proposed regulations do not allow discretion for exempting good performing countries from the requirements of the regulations. Once these regulations become law, it can be difficult or impossible for an importing country to exempt a country from them, or to accept an equivalent system. The use of performance – based ratings provide performance data that can be useful in deciding on country exemptions from regulations or requirements.

Summary/Conclusion

The application of a performance-based approach to food safety regulatory inspections can:

• Focus resources on high risk poor performers
• Detect more non-compliant product
• Reduce compliance costs
• Reward good exporters / countries
• Reduce importers inspection costs
• Increase imports from compliant countries
• Improve product flow through ports
• Provide more confidence in quality of domestic and imported food and therefore provide safer food for consumers.