India’s Agricultural Exports and United States Sanitary and other Regulatory Measures:

i

India’s Agricultural Exports and United States

Sanitary and other Regulatory Measures: Special Focus on Exports in Spices and Vegetable Products from

Maharashtra and Gujarat

Authors

Dr. Murali Kallummal Associate Professor,

Centre for WTO Studies, IIFT

Ms. Hari Maya Gurung Research Fellow,

Centre for WTO Studies, IIFT

Draft Paper

Presented at International Conference on

Indian Agriculture Sector under Trade Liberalisation and WTO:

Issues and Challenges

Session 6: Agriculture and Indian Economy December 11 -12, 2014

New Delhi

ii

Table of Contents

Introduction ......................................................................................................... 1

Data Sources and the Methodology................................................................ 4

State-wise trends of India’s Exports ................................................................. 5

Sectoral Trends in the US Refusals across Agricultural Sectors ................. 10

Comparison of Firm-level Refusal of Consignments from two States ......... 13

Sector I- Spices, Flavours and Salts Exports ................................................... 14

Public Health Concerns for the US .............................................................. 15

Other Serious Public health concerns ........................................................... 16

Questionable - may require further research ............................................. 16

Labelling and Process and Production related Issues ................................ 16

Sector II - Vegetable and Vegetable Products Exports .............................. 17

Labelling and Process and Production related Issues ................................ 18

Process Related Issues .................................................................................. 18

Labelling Related Issues ............................................................................... 18

Packaging Related Issue ............................................................................... 19

Public Health Concerns for the US .............................................................. 19

Questionable - may require further research ............................................. 19

By way of Conclusion ........................................................................................ 20

Recommendations and Policy Suggestion....................................................... 21

1

India’s Agricultural Exports and United States

Sanitary and other Regulatory Measures: Special Focus on Exports in Spices and Vegetable Products from

Maharashtra and Gujarat

Murali Kallummal

Hari Maya Gurung

Introduction

Protectionism is defined as the economic policy of restraining trade between countries. The

methods can be tariffs on imported goods, restrictive quotas, and a variety of other

government regulations designed to allow inputs in order to create fair competition between

imported and domestically produced goods and services.

The voluntary tariff liberalisation by individual countries and the corresponding tariff

liberalisation efforts under the WTO’s Uruguay Round1 and other Plurilateral and other

NAMA sectoral2 together leads to an imbalance in the global market access. This imbalance

was caused by another hidden important trade policy measure, that was hidden until now, this

was the behind the border measures known as non-tariff measures (NTMs). There was a

dramatic shift towards the increased use of such non-tariff measures by the governments to

protect the health and safety of their citizens and the environment.3

In the present world with the decrease in an average MFN tariff rates, behind the border

qualitative measures are increasing and becoming important factor in the determination of

market access for any country’s exports. These NTMs are standards/regulations/legislations

which are primarily applied on the domestic sales of the products which get applied on

imported products too. The analysis of NTMs are difficult because of their opaque nature

which arises from many reasons like: non-association of these measures to product[s] at dis-

aggregated tariff lines or harmonised nomenclature; multiple standards on the same set of

products4 and the differential interpretations drawn at the border on the issue of compatibility.

1 The inclusions of sectors like agricultural and textiles and clothing through removal of quota and import

bans/restrictions; tariffication was adopted to liberalise global trade. 2 The Plurilateral like information technology agreement (ITA-1) and the attempts to bring tariff disciplines

under the Doha Round for the 14 Sectorals proposal had some impact on tariff liberalisation- moving the

average tariffs downwards. 3 Chapter 8,

4 See Kallummal, 2013,

2

Under a high applied tariff regime, (before 1995) the countries resorted to lesser application

of NTMs in order to provide protection to those sectors which they considered sensitive.

However, in the recent years there has been a surge in non-tariff measures of all kinds in

these sectors. The non-tariff measures like sanitary and phytosanitary (SPS) and technical

barriers to trade (TBT) are applied on imported products so as to protect human, animal, plant

life and the environment. A more stringent regulatory policy is largely driven by factors like:

higher standards of living; national security or cultural reasons. Therefore, there is a

perception that these may have boosted consumers’ demand for high-quality and so-called

safe goods. Encouraged by the modern societies with higher incomes the standards have

been tuned to address these issues, which has led to growing regulations on water, air, and

soil pollutants led by the unhealthy process of production, which gets transmitted through

trade under a free trade regime.

Quote:

In a world where many forms of protection – including tariffs – are constrained

by WTO disciplines the NTMs are the new frontier of trade policy. NTMs that are

poorly designed or captured by special interests can hurt competitiveness and

fragment markets; whereas well-designed ones can effectively overcome

informational and other market failures. Assisting governments in the design of

NTMs is a critical challenge for donors and development agencies. However,

many issues relating, for example, to regional harmonisation and the interaction

of NTMs with market structure are still imperfectly understood. 5

The countries notification of standards under the WTO can be broadly categorised two

categories: international standards or harmonised standards; and national standards. National

standards provide a much greater level of protection than Codex, IPPC or OIE "trade

barriers" unless the WTO decides that the stricter national standard is based on a proper "risk

assessment". It demonstrates that the standard, guidelines or recommendations by the three

sisters of SPS Agreement does not provide sufficient protection or that the country

maintaining the stricter standard has other scientific justification. Article 2.4 of the TBT

Agreement provides that countries shall use Codex or other international standards "as a basis

for their technical regulations except when such international standards or relevant parts

would be an ineffective or inappropriate means for the fulfilment of a" legitimate objective.

To quote

…as explained above, under Article 2 of the SPS Agreement, a food safety

measure -- even if it does not treat imports differently than domestic products -- is

illegal if it is maintained "without sufficient scientific evidence." Article 5 of the

5 Jurgen, et all., 2012, Editor(s)Non-Tariff Measures - A Fresh Look at Trade Policy's New Frontier, world Bank.

3

SPS provides that "Members shall ensure that such measures are not more trade-

restrictive than required to achieve their appropriate level of sanitary or

phytosanitary protection, taking into account technical and economic feasibility."6

At the border and behind the border measures in the developed countries have been stringent,

the case of EU was highlighted by Kallummal, et.all., in 2012.7 In the total refusal of imports

by the US, Food and Drug Administration (FDA) from across the Globe, nearly 2,96,294

consignments were refused market access in the US during the period of January 2002 to

June 2014. Mexico was on the top with 84,733 consignments8 refused followed by China

with 23,533 with refused consignments and India closely behind with 23,208 consignments

refused.

India and China have recorded almost similar scale of refusal with completely large

differences in terms of market access with China having an edge in terms of value and

quantity of exports to the US. The impacts of all these border measures have been the trends

seen in nominal exports by India to the US and EU. There has been a decrease in shares over

the period of six decades. Clearly in terms of percent shares to total imports of the US it has

seen a decreasing trend from 43 percent in 1962 to 12 percent in 2013 and a similar drop was

observed in case of EU from 14 to 8 percent respectively.

Interestingly, it suggested an increase in agricultural products export refusals by the FDA in

US, see Figure 1(a). However, this increase in agricultural products was primarily driven by

an increase seen in the primary products refusal by the US, see Figure 1 (b). Here there is as

need to identify how many of these actions were genuinely required to protect health of US

citizens? It would be also important to understand and check the notifications notified by US

to the WTO to analyse whether the refusals were WTO compatible or not? Another aspect is

to improve quality and processes of India’s exports, it would trace repeated offences recorded

by India’s exports to US market.

This paper will therefore analyse the impact of refusals of India’s agricultural products

exports to the United States based on the OASIS Refusal database of Food and Drug

Administration (FDA). The analysis will be carried-out for nearly one decade beginning from

6 CSPI, 2000, ‘The Impact of the TBT and SPS Agreements on Food Labelling and Safety Regulations’, A

Report by the Centre for Science in the Public Interest, March. 7 Kallummal Murali, Aditi Gupta and Poornima Varma, 2013, “Agricultural Trade from South-Asia and the

Impact of SPS Measures: A Case Study European Rapid Alert System for Food and Feed (RASFF)”, Journal

of Economic Policy and Research, vol. 8, no. 2, pp. 8 The case of Mexico has been highly unusual, it recorded 62,496 consignments refusals in one year (2011).

In an economic analysis it can only be considered as a spike or aberration to the normal trend over the

decade.

4

2002 to 2014. As it is evident that the FDA classification of food products includes certain

non-agricultural products too, the total 63 category refusals by the FDA have been divided

into two categories; 34 agricultural products and 29 non-agricultural products.

(a)

(b)

Figure 1: Trends in the US, FDA Refusal of Indian Agricultural Exports. Source: Based on the US Oasis database.

This paper analyses the impact of refusals on India’s exports have adversely impacted exports

with the US over the years. An analysis is also carried out in detailed manner which provides

explanation of differences at the sectoral level (43 FDA pre-defined categories) and India’s

State-wise (31)9. While the total US FDA refusals have increased at exponential growth rate

of 5.4 percent, there has been particularly negative impact on the agricultural and allied

sectors refusal which has seen almost 8 percent. This was nearly 4 times that of the

exponential growth rate of non-agricultural refusals as per the US, FDA. The US, FDA

refusal of primary agricultural products has seen a phenomenal surge in the latter half of the

decade.

Data Sources and the Methodology

The paper based on the data collected from two primary sources. The first being information

on the refusals was collected from the online database of the United States, Food and Drug

Administration (FDA). These are known as Import Refusal Reports for OASIS or OASIS

Reports. The data was collected on monthly basis and it contained information on the

refusals for all countries for the period of 2002 to 2013. India’s information was used in the

writing of this paper. The complete list for India was 22,319 consignments refused by the

9 Includes Union Territories also.

5

US, FDA, which has been divided into non-agriculture10

and agricultural products by the

authors. The second source is WITS online data, which was used for estimating the exports

by India to the United States. Using these two secondary data sources we have carried out

this study.

We have divided our objectives into four specific objectives and they are the following:

Objectives

1. To analyse the state-wise trends seen in the US, FDA refusals;

2. To analyse the sectoral trends in terms of the US, FDA refusals;

3. To identify the top refusal reasons in the India’s agricultural exports – also will look

at two top state-wise differentials;

4. To suggest policy recommendation for boosting exports (short-term and long-term)

based on the results of 1 to 3 objectives.

Therefore, this paper will also look at the various measures that have shown a prominence in

different sectors and states. By doing so, it would highlight the regional and Sectoral trends

of India and the movements observed in terms of reasons for the export refusal. Finally, it

would conclude by making policy suggestions based on the trends observed in the Region-

wise, State-wise, Sectoral trends.

State-wise trends of India’s Exports

Behind the border measures have been one of the biggest stumbling blocks in the India and

United States bilateral trade. As also discussed in the introduction, the US, FDA refusal of

total global imports were nearly 0.2 million number of consignments citing the SPS

measures, during the period of January 2002 to June 2014. The top three countries which

recorded consignment refusal were Mexico with 84.7 thousand consignments refused,

followed by China with 23.5 thousand and marginally below it was India with 23.3 thousand

consignments refused.

In this paper, we want to understand the reasons for India’s export refusal by the US behind

border measures. The numbers of consignments refused in the US were under 1,511 different

10

The non-agriculture contained some thirty products like: anaesthesiology; animal devices & diagnostic products; antibiotics (human/animal); bio & licensed in-vivo & in-vitro diagnostics; cardiovascular; Chemistry; Colour Additives; Food/Drug/Cosmetic; Dental; Dietary Conventional Food/Meal Replacements; Dressing/Condiment; Ear, Nose & Throat; Gastroenterological & Urological; General & Plastic Surgery; General Hospital/Personal Use; Haematology; Human and Animal Drugs; Ionizing Non-Medical Devices and Components; Light Emitting Non-Device Products; Microbiology; Neurological; Obstetrical & Gynaecological; Ophthalmic; Orthopaedic; Pathology; Pharmacy Necessary & Ctnr For Drug/Bio; Physical Medicine; Radiological; Toxicology and Type A Medicated Articles.

6

violations under various Sections of the US domestic laws11

of Food and Drugs Authority

(FDA) which concerns the quality of India’s exports. These can be broadly classified under

six broad heads which are misbranding, adulteration, unapproved new drugs, non-standards,

failure to file initial report, adulteration and misbranding.

Figure 2: India’s Total Refusals 2002 to 2013 Source: Compiled by the authors based on FAS online database of Refusals by US, FDA.

Figure 2, clearly indicates that between 2003 and 2004 there was a surge in the refusals by

the US (FDA); from 1068 consignments it nearly doubled and was at 2548 consignments

refused in the 2004.

Table 1 reveals that eight states had above 1,000 refusals for the period of 2003 to 2013.

These states are Maharashtra with 6,333 consignments followed by Gujarat with 3,787

consignments, Delhi with 2,133 consignments, Karnataka with 1,902 consignments, Andhra

Pradesh with 1,544 consignments, Tamil Nadu with 1,330 consignments, Haryana with 1,140

consignments and Kerala with 1,108 consignments.

The Maharashtra topped with 6,333 consignments refused and having 28.4 percent share in

the total followed by Gujarat with 3,787 consignments having a share of 16.percent in the

total refusals; together the two states had a cumulated share of 45 percent of the total refusal

by the US in the total products exported from India.

11

The authority sections are 201, 501, 502, 503, 505, 510,513-516, 701, 704, 801 of the Federal Food, Drug

and Cosmetic Act (21 U.S.C. 321, 351, 352, 353, 360, 360c-360f, 360h-360j, 371, 374, 376, 381); Sections

215, 301, 351, 352 of the Public Health Services Act (42 U.S.C. 216, 241, 262, 263); Sections 2-12 of the

Fair Packaging and Labelling Act (15 U.S.C. 1451-1461).

9781068

2548

1777

20111885

1541 1549

2034

2420 2384

2124

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

INDIA'S REFUSAL OF EXPORTS: NO. OF CONSIGNMENTS

(2002 T0 2013)

7

Table 1: Trends in the State-Wise Refusal of India’s Exports to the US (Number of Consignments)

States 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Grand Total

Maharashtra 333 321 661 485 711 500 563 467 584 614 561 533 6,333

Gujarat 131 134 350 213 280 180 210 310 442 477 500 360 3,587

Delhi 96 117 190 236 195 223 121 124 219 147 263 202 2,133

Karnataka 32 73 664 150 88 150 153 138 165 148 64 77 1,902

Andhra Pradesh 77 96 146 127 154 251 73 67 98 188 133 134 1,544

Tamil Nadu 68 62 102 153 122 154 49 73 132 174 118 123 1,330

Haryana 34 53 29 118 143 110 59 46 46 58 187 257 1,140

Kerala 39 85 92 64 66 56 110 97 55 165 126 153 1,108

West Bengal 73 61 142 56 42 81 80 48 88 43 51 37 802

Uttar Pradesh 18 13 36 85 54 36 20 46 34 44 67 60 513

Punjab 11 2 23 38 20 11 20 30 32 75 114 52 428

Madhya Pradesh 1 6 18 15 15 33 22 20 21 70 72 28 321

Rajasthan 8 5 3 16 4 9 6 20 39 23 15 20 168

Uttarakhand 1 8 12 9 5 13 27 48 17 20 160

Odisha 16 11 47 22 13 2 7 18 8 11 155

Himachal Pradesh 2 5 3 6 7 9 9 11 39 36 27 154

Goa 2 1 9 8 10 7 6 3 14 46 27 6 139

Chandigarh 29 10 1 3 11 16 11 14 3 2 100

Unspecified 4 1 10 1 44 20 12 1 5 98

Assam 1 1 6 7 15 4 7 1 7 3 14 66

Dadra & Nagar Haveli 1 3 4 3 11 2 2 3 5 6 6 46

Puducherry 2 1 3 1 8 4 5 3 3 3 2 1 36

Jammu & Kashmir 1 1 5 1 1 6 1 1 17

Sikkim 2 2 9 13

Daman & Diu 2 2 2 1 3 1 1 12

Bihar 1 8 1 10

Chhattisgarh 1 1 2

Jharkhand 1 1

Meghalaya 1 1

Grand Total 978 1,068 2,548 1,777 2,011 1,885 1,541 1,549 2,034 2,420 2,384 2,124 22,319 Source: Compiled by the authors based on FAS online database of Refusals by US, FDA..

8

Table 2, analyses the trends in agricultural products12

export refusal by the US, FDA. The

analysis reveals that three states had above 1,000 refusals for the period of 2003 to 2013.

These were identical states as seen in the case of all commodities. The states like Maharashtra

with 3,824 consignments followed by Gujarat with 2,767 consignments and Delhi with 1,360

consignments. The Maharashtra topped with 27.9 percent share in the total refusals of India’s

exports followed by Gujarat with 20.2.percent share of the total refusals; together the two

states had a cumulated share of 48.1 percent of the total refusal by the US, FDA. Therefore,

with almost 50 percent of agricultural products being refused belonging to these two states an

analysis of these two states would provide key for unlocking answers to bulk of India’s

agricultural exports refusals.

In the agricultural sector the total refusals increased from 627 consignments in 2002 to 1,214

consignments by 2006, only to drop to 949 consignments by 2009. Thereafter the refusals

increased to touch the highest refusal of 1,593 consignments by 2012, in 2013 the total

refusals showed a marginal 1535 consignments. Therefore, the decadal trend suggests an

increasing refusal having a sudden decrease in the refusals, clearly suggesting there was

lesser targeting of the exports in agricultural products from India.

However, the India’s agricultural exports has consistently increase from 0.6 US$ billion in

2003 to US$ 6.8 billion in 2012, only to decrease to nearly US$ 4 billion in 2013. India’s

agricultural exports grew at a growth rate of 22.6 percent during the decade of 2003 to 2013.

States 2002 2005 2010 2013

India's State-

wise Refusal of

Exports for 2002

to 2013

Cumulative

Share

Maharashtra 193 273 389 351 3,824 27.9

Gujarat 112 149 403 279 2,767 48.1

Delhi 42 148 142 128 1,360 58.0

Karnataka 16 92 102 38 895 64.5

Kerala 38 38 43 149 870 70.9

Haryana 22 82 34 233 843 77.0

Tamil Nadu 36 101 90 94 786 82.8

Andhra

Pradesh 38 62 32 100 740

88.2

West Bengal 59 25 24 19 425 91.3

Punjab 10 18 16 51 309 93.5

Uttar Pradesh 14 24 32 45 306 95.8

Madhya

Pradesh 9 11 17 169

97.0

Odisha 16

6 10 138 98.0

12

The definition of FDA is different from the WTO understanding on agriculture and non-agricultural products.

9

Rajasthan 1 10 18 11 83 98.6

Chandigarh 28

11

81 99.2

Uttarakhand

13 6 50 99.6

Others 2 1 11 4 61

India's

Refusal of

Exports

627 1,032 1,377 1,535 13,707

Table 2: Trends in the State-Wise Refusal of India’s Exports to the US (Number of

Consignments) Source: Compiled by the authors based on FAS online database of Refusals by US, FDA.

Note: Other include states like Goa, Himachal Pradesh, Puducherry, Dadra & Nagar Haveli, Jammu &

Kashmir, Bihar, Sikkim and unknown.

Figure 3: India's Exports to US: Values in US$ billion

Source: Compiled by the authors based on online WITS COMTRADE.

Therefore, prima facie with the composition of agricultural exports remaining the same the

year to year variation witnessed in refusals behind the borders clearly suggested unjustified

restrictions on India’s bilateral exports with the US.

The analysis of India’s export based on the composition clearly indicates that there has been

negligible variation in the composition of 2003 and 2013. Having a very low coefficient of

variation in six out of the total seven sections under the agricultural exports, clearly

suggesting a low variation in the composition of exports to US, during the period of 2003 to

2013: Live Animals (38.5); Veg. Products (12.0); Oil (36.5); Processed Food (33.6);

Chemicals (39.2); leather and leather products (130.9) and Silk, cotton and vegetable fibres

(86.0).

10

Figure 4: Composition of India’s Agricultural Exports to the US Source: Compiled by the authors based on WITS COMTRADE.

Nearly, all of the agricultural products are wholly owned products of India13

and further most

of these are exported after certified by bodies like: Agricultural and Processed Food Products

Export Development Authority (APEDA), Marine Products Export Development Authority

(MPEDA), Export Inspection Council of India (EIC), etc. Therefore, with no variation in

composition of agricultural exports and considering the country exporting has

remained the same the variation in the refusals by the US, FDA can only be construed

as protectionist measure under the garb of the SPS Measures.

Sectoral Trends in the US Refusals across Agricultural Sectors

Over the decade of 2002 to 2013, sectors that were identified as impacted were based on two

criteria’s they are increase in refusal and their relative shares in total number of

consignments14

refused of India’s exports. Vulnerability with respect to any sector was not

easy to identify as there were direct linkage to the value lost owing from refusals under any

sector. So we followed certain steps to identify using indirect methods that kept certain broad

trends in the total refusals and exports under the sector.

Sectors 2002 2005 2010 2013 India's Refusal Cumulative

13

Except for Cashew when exported in the form of roasted, salted and other processed forms. 14

Total sectors that was defined by the US FDA was 63 sectors of this total agricultural sectors were identified

as 33 sectors.

11

of Exports

(No. of

Consignments)

Share %

Spices, Flavours And Salts 131 178 526 426 3668 26.8

Bakery Prod/Dough/Mix/Icing 74 239 107 134 1477 37.5

Whole Grain/Milled Grain Prod/Starch 28 40 66 390 1179 46.1

Vegetables/Vegetable Products 90 65 105 77 1090 54.1

Snack Food Item 27 139 82 57 977 61.2

Fishery/Seafood Prod 99 80 34 75 963 68.2

Fruit/Fruit Prod 48 68 93 99 909 74.9

Vit/Min/Prot/Unconv Diet(Human/Animal) 27 63 82 89 857 81.1

Mult. Food Dinner/Grave/Sauce/Special 18 23 55 27 448 84.4

Nuts/Edible Seed 15 24 60 25 369 87.1

Candy W/O Choc/Special/Chew Gum 19 49 28 16 330 89.5

Soft Drink/Water 10 12 26 17 264 91.4

Miscellaneous Food Related Items 15 8 16 11 174 92.7

Food Sweeteners (Nutritive) 3 2 19 9 163 93.9

Macaroni/Noodle Prod 3 1 28 11 152 95.0

Vegetable Oils 6 7 10 8 124 95.9

Beverage Bases/Concentrated/Nectar 3 8 4 14 110 96.7

Choc/Cocoa Prod 1 9 11 79 97.3

Milk/Butter/Dried Milk Prod 6 15 4 7 70 97.8

Cereal Prep/Breakfast Food 2 5 7 61 98.2

Ice Cream Prod 6 4 54 98.6

Cheese/Cheese Prod 3 2 4 1 45 98.9

Soup 1 2 1 39 99.2

Others 1 6 6 19 105 100.0

Refusal of Exports (in Consignments) 627 1032 1377 1535 13707

Table 3: Trends in the Sectoral Refusal of India’s Exports (Number of Consignments)

Source: Compiled by the authors based on FAS online database of Refusals by US, FDA.

Note: Others include sectors like: Food Additives (Human Use) , Coffee/Tea, Vegetable Protein Prod,

Gallatin/Rennet/Pudding Mix/Pie Filling, Filled Milk/Imitation Milk Prod, Baby Food Prod, Alcoholic

Beverage, Tobacco Products, Animal Feed(Non-Medicated) and Pet/Laboratory Animal Food.

As the first step the vulnerability is measured primarily based on combined trends observed

in total number of consignments refused entry at the sectoral level, measured in terms of

shares, and the trends over the decade which is measured in terms of growth rates and finally

the probable value of exports impacted.

Sector based on US FDA 2003 2005 2010 2013

Total

Exp.

2003 to

2013

(US$

mil.)

Share to

Total

Exports

(%)

Exp. G.

Rates

(%)

Alcoholic Beverage 1.0 1.5 1.6 2.8 18.7 0.09 8.6

Animal Feed (Non-Medicated) 0.0 0.0 0.0 0.0 0.3 0.00 17.7

Bakery Prod/Dough/Mix/Icing 1.7 3.5 10.1 22.8 100.8 0.46 27.5

Beverage Bases/Conc/Nectar 7.2 10.2 48.5 92.1 386.4 1.78 32.1

Byprodcts For Animal Foods 0.4 0.3 1.7 8.7 27.9 0.13 51.7

Candy W/O Choc/Special/Chew Gum 1.9 3.3 0.8 2.1 17.4 0.08 -5.0

Cheese/Cheese Prod 0.1 0.1 0.3 0.5 2.7 0.01 27.4

Choc/Cocoa Prod 0.3 0.4 5.8 12.0 33.7 0.16 37.3

Coffee/Tea 21.1 28.2 55.7 69.6 473.8 2.18 12.5

Dressing/Condiment 4.2 6.2 26.5 23.0 184.8 0.85 23.6

Egg/Egg Prod 0.2 0.1 0.0 0.0 2.0 0.01 -46.3

Food Sweeteners (Nutritive) 5.3 0.8 2.0 7.9 65.8 0.30 14.1

12

Fruit & Fruit Products 5.5 6.7 16.4 21.8 150.0 0.69 15.2

Gelatin/Rennet/Pudding Mix/Pie Filling 13.2 22.7 35.6 31.4 334.1 1.54 9.4

Macaroni/Noodle Prod 1.5 3.7 4.9 10.0 55.1 0.25 16.5

Meat, Meat Products and Poultry 2.7 0.2 0.8 0.1 7.6 0.04 -17.2

Milk/Butter/Dried Milk Prod 0.6 6.5 1.4 4.5 31.4 0.14 3.3

Miscellaneous Food Related Items 8.4 8.9 11.3 15.6 130.7 0.60 5.9

Mult Food Dinner/Grav/Sauce/Special 10.3 10.2 37.9 63.1 349.6 1.61 25.5

Nuts & Edible Seed 222.8 306.0 254.6 458.4 3536.7 16.27 5.2

Prep Salad Prod 9.6 9.2 11.6 0.2 121.0 0.56 -16.5

Snack Food Item 0.6 0.3 2.3 12.4 40.8 0.19 45.5

Soft Drink/Water 0.2 0.3 1.7 2.4 13.4 0.06 26.2

Spices, Flavours and Salts 70.2 90.0 192.4 344.0 2256.2 10.38 18.9

Tobacco Products 14.7 12.5 22.0 33.7 258.0 1.19 10.8

Vegetable & Vegetable products 115.9 184.5 358.9 2180.2 10701.5 49.24 40.6

Vegetable Oils 28.3 36.0 62.7 113.5 671.0 3.09 12.6

Vegetable Protein Prod 12.8 57.9 46.7 68.9 482.7 2.22 7.4

Vit/Min/Prot/Unc. Diet(Human/Animal) 0.3 0.2 2.2 0.8 13.8 0.06 8.9

Whole Grain/Milled Grain Prod/Starch 24.7 39.0 52.7 207.4 873.7 4.02 21.8

Agriculture (as per the WTO definition) 21.0 31.2 25.6 58.7 392.4 1.81 8.8

Total Exports from India 606.7 880.7 1,294.5 3,868.5 21,733.9 100.00 22.6

Table 4: Value of Exports from India in terms of sectors (Value in US$ Mil.)

Source: Compiled by the authors based on FAS online database of Refusals and WITS COMTRAD.

Note: Others include sectors like: Food Additives (Human Use) , Coffee/Tea, Vegetable Protein Prod,

Gallatin/Rennet/Pudding Mix/Pie Filling, Filled Milk/Imitation Milk Prod, Baby Food Prod, Alcoholic

Beverage, Tobacco Products, Animal Feed(Non-Medicated) and Pet/Laboratory Animal Food.

The primary criterion was the quantum of refusals across sector based on these four sectors

was identified, this is indicated as criterion I in the Table 4 below. Further, three more

criterions were selected for filtering out those two sectors which would be the true

representative of the sample for analysing the impacts of SPS measures based US, FDA

refusals on India’s agricultural exports.

Spices, flavours and salts was the sector with highest refusals with nearly 27 percent share of

the total agricultural refusals with decadal trends suggesting a positive growth of nearly 15

percentages; thus indicating that the refusal have shown an increase from 131 consignments

in 2002 to 426 consignments by 2013. This sector also had almost 11 percent exports values

and suggested an increase with nearly 19 percent growth rates. Therefore, the spices,

flavours and salts is an important sector when India’s exports is considered.

The second in the list is vegetable and vegetable products which had 8 percent of the total

refusals under the agricultural refusals and was almost constant in terms of trend with growth

rate of 0.1 percentages; the consignments refused by the US were 90 in numbers in 2002 and

was 77 in 2013. However, in terms of exports values the vegetable and vegetable products

accounted for nearly 50 percent of India’s exports and had a growth over the years of nearly

41 percent. Therefore, based on the four criteria we have identified two sectors ie., spices,

flavours and salts and vegetable/vegetable products. Proper weightage was given to all the

13

four criteria’s for the selection of the two sectors for further analysis to be carried-out at the

firm level.

Selected Sectors/

Criterion

Refusals to the

total agricultural

refusals

Decadal Gr.

trends in

refusals: 2003

to 2013

Exp. values

coverage

Gr. Trends in

values of

exports

I II III IV

Spices, Flavours & Salts 26.8 14.7 10.4 18.9

Bakery Prod/Dough/Mix/Icing 10.8 0.3 0.5 27.5

Whole Grain/Milled Grain Prod/Starch 8.6 25.8 4.0 21.8

Vegetables/Vegetable Products 8.0 0.1 49.2 40.6

Snack Food Item 7.1 5.3 0.2 45.5

Coverage 61.2 9.2* 64.3 30.9*

Table 5: Trends in the Sectoral Refusal of India’s Exports (Number of Consignments) Source: Authors compilation. Note: * = Average

Comparison of Firm-level Refusal of Consignments from two

States

Based on the previous analysis two sectors were identified and these were Spices, flavour and

salts and Vegetable and vegetable products. The analysis conducted till now showed how

India’s exports could have been negatively impacted by the FDA by applying behind the

border measures which were based on the SPS and TBT regulations. Based on the data

provided on the number of consignments refused as described in previous section we have

identified two sectors which would be the true representative samples.

The total coverage of all refusals in the case of spices, flavours and salts in the state of

Gujarat is 1248 consignments and the state of Maharashtra is 1008 consignments; these are

exports consignments from individual exporting agencies/corporate companies.

In the Table 6, for simplification purposes, we selected the top ten reasons for each states

(Gujarat and Maharashtra) after removing for the duplicates entry we are left with 16 unique

reasons. The coverage of these 16 unique reasons has been 81 percentages in the case of

Maharashtra and 90 percentages in the case of Gujarat.

Therefore, the analyses of these 16 unique reasons for refusals in the case of spices, flavours

and salts reveals some very disturbing facts. This could be any of the following: the way

India has cleared its exports or the export certification; or the packaging or transportation

related issues; and finally it could be even be protectionism at the US borders. These border

measures could be categorised into three broad categories: 1) public health concerns –

which are of serious nature and only solution is to improve our production processes or

14

improvement in the packaging would be required; 2) questionable measures – these are

maximum residual limits(MRL) based measures which needs to be studied and analysed

further and should not be taken at the face value; and, 3) labelling and processing related

issues- these TBT measures wherein two prone approach would be required - look at the

WTO compatibility issues15

; and secondly to confirm with the US requirements.

Sector I- Spices, Flavours and Salts Exports

The sector of spices, flavour and salts recorded the highest refusal by the US, FDA in

numbers and shares. Suggesting moderate share to the total value of the agricultural exports

with 11 percent shares and the trend of positive growth in number of consignments refused

during 2002 to 2013.

Reasons for Refusals Gujarat Maharashtra The article appears to contain Salmonella, a poisonous and deleterious

substance which may render it injurious to health. 484 517

The article is subject to refusal of admission pursuant to section 801(a)(3)

in that it appears to be adulterated because it contains a pesticide

chemical, which is in violation of section 402(a)(2)(B).

350 94

The article appears to consist in whole or in part of a filthy, putrid, or

decomposed substance or be otherwise unfit for food. 55 44

The article appears to be misbranded in that the label or labeling fails

to bear the required nutrition information. 4 39


decomposed substance or be otherwise unfit for food. The article

appears to contain Salmonella, a poisonous and deleterious substance

which may render it injurious to health.

63 39

The article appears to be, or to bear or contain a color additive which is

unsafe within the meaning of Section 721(a). 67 33

The article appears to contain Salmonella, a poisonous and deleterious

substance which may render it injurious to health. The article appears to

consist in whole or in part of a filthy, putrid, or decomposed substance or

be otherwise unfit for food.

23 18

It appears the food is fabricated from two or more ingredients and the

label does not list the common or usual name of each ingredient. 2 11

The article appears to bear or contain a food additive which is unsafe

within the meaning of Section 409. Contains The article contains

Saccharin, a non-nutritive sweetener, and its label or labeling fails to bear

the required warning statement.

0 9

The article appears to contain an artificial coloring and it fails to bear

labeling stating that fact. 16 9


to bear the required nutrition information. The article appears to contain

Salmonella, a poisonous and deleterious substance which may render it

injurious to health.

1 8

The article appears to contain an artificial coloring and it fails to bear

labeling stating that fact. The article appears to be, or to bear or contain a

color additive which is unsafe within the meaning of Section 721(a).

21 6

The article appears to be, or to bear or contain a color additive which is

unsafe within the meaning of Section 721(a).The article appears to 21 4

15

There is a need to analyse these issue further to identify the notification made to WTO under the SPS and TBT Committees.

15

contain an artificial coloring and it fails to bear labeling stating that fact.

The article appears to be a raw agricultural commodity that bears or

contains a pesticide chemical which is unsafe within the meaning of

Section 408(a).

18 7

The article is subject to refusal of admission pursuant to section 801(a)(3)


chemical, which is in violation of section 402(a)(2)(B). The article is

subject to refusal of admission pursuant to Section 801(a)(3) in that it

appears to contain an unsafe food additive within the meaning of Section

409 [Adulteration, Section 402(a)(2)(C)]. It contains:

13 0


decomposed substance, or is otherwise unfit for food in that it appears to

contain foreign objects. The article appears to contain Salmonella, a

poisonous and deleterious substance which may render it injurious to

health.

11 2

Total Consignments Refused 1,149 840

Table 6: Consignments of Spices, Flavours and Salts Exports and Reasons for the US,

FDA Refusals (No. of Consignments)

Source: Compiled by the authors based on FAS online database.

Public Health Concerns for the US

The refusal reasons were: the article appears to contain Salmonella, a poisonous and

deleterious substance which may render it injurious to health. In the case of Gujarat this

was cited in 484 consignments while in Maharashtra it was cited in 517 consignments. This

was recorded as the top most reason in both the states.

Some of the other serious public health concerns for refusals of India’s exports were:

1. The article appears to consist in whole or in part of a filthy, putrid, or decomposed

substance or be otherwise unfit for food.


substance or be otherwise unfit for food. The article appears to contain Salmonella,

a poisonous and deleterious substance which may render it injurious to health.

3. The article appears to contain Salmonella, a poisonous and deleterious substance

which may render it injurious to health. The article appears to consist in whole or in

part of a filthy, putrid, or decomposed substance or be otherwise unfit for food.


substance, or is otherwise unfit for food in that it appears to contain foreign objects.

The article appears to contain Salmonella, a poisonous and deleterious substance


16

Other Serious Public health concerns

5. The article appears to be misbranded in that the label or labeling fails to bear the

required nutrition information. The article appears to contain Salmonella, a

poisonous and deleterious substance which may render it injurious to health

Questionable - may require further research

These are refusal reasons that would need further analysis and should not be taken at the face

value.

6. The article is subject to refusal of admission pursuant to section 801(a)(3) in that it

appears to be adulterated because it contains a pesticide chemical, which is in

violation of section 402(a)(2)(B).

7. The article appears to be a raw agricultural commodity that bears or contains a

pesticide chemical which is unsafe within the meaning of Section 408(a).



violation of section 402(a)(2)(B). The article is subject to refusal of admission

pursuant to Section 801(a)(3) in that it appears to contain an unsafe food additive

within the meaning of Section 409 [Adulteration, Section 402(a)(2)(C)]. It contains:

Labelling and Process and Production related Issues


required nutrition information.

10. The article appears to be, or to bear or contain a color additive which is unsafe

within the meaning of Section 721(a).

11. It appears the food is fabricated from two or more ingredients and the label does

not list the common or usual name of each ingredient.

12. The article appears to bear or contain a food additive which is unsafe within the

meaning of Section 409. The article contains Saccharin, a non-nutritive sweetener,

and its label or labeling fails to bear the required warning statement.

13. The article appears to contain an artificial coloring and it fails to bear labeling

stating that fact.

14. The article appears to contain an artificial coloring and it fails to bear labeling

stating that fact. The article appears to be, or to bear or contain a color additive which

is unsafe within the meaning of Section 721(a).

17

15. The article appears to be, or to bear or contain a color additive which is unsafe

within the meaning of Section 721(a).The article appears to contain an artificial

coloring and it fails to bear labeling stating that fact.

To summarise the spices, flavours and salts have shown relatively high cases of public health

concern for the US market. It appears to be dangerous to argue that these are minor offences

and may be corrected with proper packaging solutions. The labelling and process and

production related issues itself stands to be a major issue when it comes to the refusals. So as

the issues of packing are streamlined the prevalence of these refusal in the future may come

down.

Sector II - Vegetable and Vegetable Products Exports

The vegetable and vegetable products exports had the largest share in nominal value terms

and had coverage close to 50 percent of the total agricultural exports to the US during 2003 to

2013. However, in terms of refusals this sector did not show any change in trend during the

same period.

Reasons for Refusals Gujarat Maharashtra The article is subject to refusal of admission pursuant to section 801(a)(3)


chemical, which is in violation of section 402(a)(2)(B).

90 46

It appears that the manufacturer has not filed information on its

scheduled process as required by 21 CFR 108.25(c)(2) or 108.35(c)(2). 78 15

The article appears to be a raw agricultural commodity that bears or

contains a pesticide chemical which is unsafe within the meaning of

Section 408(a).

39 12


decomposed substance or be otherwise unfit for food. 6 11


scheduled process as required by 21 CFR 108.25(c)(2) or 108.35(c)(2).

It appears the manufacturer is not registered as a low acid canned food or

acidified food manufacturer pursuant to 21 CFR 108.25(c)(1) or

108.35(c)(1).

46 10

The article appears to bear or contain a food additive which is unsafe

within the meaning of Section 409. 8 5

It appears the manufacturer is not registered as a low acid canned food

or acidified food manufacturer pursuant to 21 CFR 108.25(c)(1) or

108.35(c)(1).

7 2

The article appears to contain Salmonella, a poisonous and deleterious

substance which may render it injurious to health. 16 1

The article appears to have inadequate processing in having been

prepared, packed, or held under insanitary conditions whereby it may

have been rendered injurious to health.

4 0


scheduled process as required by 21 CFR 108.25(c)(2) or

108.35(c)(2).The article appears to contain a chemical preservative and it

fails to bear labeling stating that fact including its function.

3 0

The article appears to be misbranded in that the label or labeling fails 0 11

18

to bear the required nutrition information. The food appears to be

represented as a food for which a definition and standard of identity have

been prescribed by regulations as provided by section 401 and the food

does not appear to conform to such definition and standard.


to bear the required nutrition information. 1 6

It appears the food is fabricated from two or more ingredients and the

label does not list the common or usual name of each ingredient. 0 5

It appears the manufacturer is not registered as a low acid canned food

or acidified food manufacturer pursuant to 21 CFR 108.25(c)(1) or

108.35(c)(1).It appears that the manufacturer has not filed information on

its scheduled process as required by 21 CFR 108.25(c)(2) or 108.35(c)(2).

3 4

301 128

Table 7: Consignments of Spices, Flavours and Salts Exports and Reasons for the US,

FDA Refusals (No. of Consignments)

Source: Compiled by the authors based on FAS online database.

Labelling and Process and Production related Issues

Process Related Issues

1. It appears that the manufacturer has not filed information on its scheduled

process as required by 21 CFR 108.25(c)(2) or 108.35(c)(2).

2. It appears that the manufacturer has not filed information on its scheduled process

as required by 21 CFR 108.25(c)(2) or 108.35(c)(2). It appears the manufacturer is not

registered as a low acid canned food or acidified food manufacturer pursuant to 21

CFR 108.25(c)(1) or 108.35(c)(1).

3. It appears that the manufacturer has not filed information on its scheduled process

as required by 21 CFR 108.25(c)(2) or 108.35(c)(2). The article appears to contain a

chemical preservative and it fails to bear labeling stating that fact including its

function.

Labelling Related Issues


required nutrition information. The food appears to be represented as a food for

which a definition and standard of identity have been prescribed by regulations as

provided by section 401 and the food does not appear to conform to such definition

and standard.


required nutrition information.

19

6. It appears the food is fabricated from two or more ingredients and the label does

not list the common or usual name of each ingredient.

Packaging Related Issue


substance or be otherwise unfit for food.

8. It appears the manufacturer is not registered as a low acid canned food or

acidified food manufacturer pursuant to 21 CFR 108.25(c)(1) or 108.35(c)(1).

9. The article appears to have inadequate processing in having been prepared,

packed, or held under insanitary conditions whereby it may have been rendered

injurious to health.

10. It appears the manufacturer is not registered as a low acid canned food or

acidified food manufacturer pursuant to 21 CFR 108.25(c)(1) or 108.35(c)(1).It

appears that the manufacturer has not filed information on its scheduled process as

required by 21 CFR 108.25(c)(2) or 108.35(c)(2).

Public Health Concerns for the US

11. The article appears to contain Salmonella, a poisonous and deleterious substance


Questionable - may require further research



violation of section 402(a)(2)(B).

13. The article appears to be a raw agricultural commodity that bears or contains a

pesticide chemical which is unsafe within the meaning of Section 408(a).

14. The article appears to bear or contain a food additive which is unsafe within the

meaning of Section 409.

To summarise in the section of vegetable and vegetable products reasons for refusal of export

from India’s top two states at the prima-facia seems not of serious nature. As 16

consignments which belonged to Gujarat and one consignment of Maharashtra appears to

contain salmonella, a poisonous and deleterious substance which may render it injurious to

health where found as reasons; this was only one of the 14 reasons. While close to 13

reasons for refusals are manageable by way of packaging solutions.

20

By way of Conclusion

This paper clearly establishes that there is substantial coverage of exports which is refused.

From across the global, the top three countries which recorded consignment refusal were

Mexico with 84.7 thousand consignments refused, followed by China with 23.5 thousand and

marginally below it was India with 23.3 thousand consignments refused. The total US FDA

refusals have increased at exponential growth rate of 5.4 percent; there has been particularly

negative impact on the agricultural and allied sectors refusal which has seen almost 8 percent.

Eight states of India had above 1,000 refusals for the period of 2003 to 2013. These states are

Maharashtra with 6,333 consignments followed by Gujarat with 3,787 consignments, Delhi

with 2,133 consignments, Karnataka with 1,902 consignments, Andhra Pradesh with 1,544

consignments, Tamil Nadu with 1,330 consignments, Haryana with 1,140 consignments and

Kerala with 1,108 consignments.

While ranking the Maharashtra topped with 6,333 consignments refused and having 28.4

percent share in the total followed by Gujarat with 3,787 consignments refused having a

share of 16.percent in the total refusals; together the two states had a cumulated share of 45

percent of the total refusal by the US in the total products exported from India.

Nearly, all of the agricultural products are wholly owned products of India16

and further most

of these are exported after certified by bodies like: Agricultural and Processed Food Products

Export Development Authority (APEDA), Marine Products Export Development Authority

(MPEDA), Export Inspection Council of India (EIC), etc. Therefore, with no variation in

composition of agricultural exports and considering the country exporting has remained the

same the variation in the refusals by the US, FDA can only be construed as protectionist

measure under the garb of the SPS Measures.

Spices, flavours and salts was the sector with highest refusals with nearly 27 percent share of

the total agricultural refusals with decadal trends suggesting a positive growth of nearly 15

percentages; thus indicating that the refusal have shown an increase from 131 consignments

in 2002 to 426 consignments by 2013.

The second in the list is vegetable and vegetable products which had 8 percent of the total

refusals under the agricultural refusals and was almost constant in terms of trend with growth

16

Except for Cashew when exported in the form of roasted, salted and other processed forms.

21

rate of 0.1 percentages; the consignments refused by the US were 90 in numbers in 2002 and

was 77 in 2013.

As there was no comparable datasets, mapping export refusals by the US, FDA to that of

India’s exports to the US; the Sectoral categorised based the premise that anything which is

consumed by human being and animals and the exports are based on HS codes. Another

issue is that while the information on refusal are indicated in number of consignments and

exports are in values and quantity. Therefore, nearly all these refusals would fall under the

preview of analysis and studies to be undertaken by the Government of India. As these are

questionable as they undermine the system of export inspection put in place India for a long

time. However, considering the SPS agreement which support the use of risk based standards

the US can resort to such actions only if they are notified to the WTO.

Recommendations and Policy Suggestion

There is a need to identify how many of these actions were genuinely required to protect

health of US citizens? It would be also important to understand and check the notifications

notified by US to the WTO to analyse whether the refusals were WTO compatible or not?

Another aspect is to improve quality and processes of India’s exports, it would trace repeated

offences recorded by India’s exports to US market. The following are the key

recommendation that emerge from this study:

1. There is a need to seek data which are directly comparable, for example: when

exports happen in value terms the refusal should also reflect the same unit and not

consignments as is presently available;

2. An urgent need to carry-out follow up using primary surveys to seek information on

verification of the costs for the identified firms in this study;

3. SPS and TBT notifications of the measures notified to the WTO will have to be

carried out to find out if US was acting contrary to the claims for refusals of exports;

4. Each sector would have different solutions there cannot be one size fit all solution to

the problem of NTMs like SPS and TBT measures. The treatment provided would

need to differ depending upon the nature of these measures.; and

5. There is urgent need for the improvement/tightening of domestic regulations and

processes in the certification process of exports in particular and in general an urgent

need to increase in quality awareness across the industry.

22

Select Reference

CSPI, 2000, ‘The Impact of the TBT and SPS Agreements on Food Labelling and Safety

Regulations’, A Report by the Centre for Science in the Public Interest, March.

Dhar Biswajit and Murali Kallummal, 2007, "Trade policy off the hook: The making of

Indian trade policy since the Uruguay Round", pp 183 -237, in edited book by

Halle Mark and Wolfe Robert, ‘Process Matters: Sustainable Development and

Domestic Trade Transparency’, International Institute for Sustainable

Development (USD), Geneva. www.iisd.org/pdf/2007/process_matters.pdf

Dhar Biswajit and Murali Kallummal, 2007, "Taming Non-Tariff Barriers: Can WTO find

a solution?" published by Trade and Investment Division, United Nations

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Jurgen, R. et all., 2012, Editor(s)Non-Tariff Measures - A Fresh Look at Trade Policy's New

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working paper September, an earlier version was published at ARTNET Working

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http://networkideas.org/featart/sep2012/fa26_Murali_Kallummal.htm

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Trade”, ISBN 978-3-659-40808-3, Lambert Academic Publishers, Germany.

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