June 2008 Edition

                                          What's Happening at the FCC

Product of Canada – New Labeling Proposal

The Government of Canada tabled a proposal in May to modify the guidelines regarding the use of “Product of Canada” on food labels.

“Product of Canada” is a claim and as such is voluntary. However, in making the claim, the regulations require that the claim not be” false or misleading”. With respect to fish and seafood products, currently the “Product of Canada” claim can be used if the last substantial transformation of the product occurs in Canada.

The Proposal

“Product of Canada”: This claim would be available for products where virtually all the inputs are Canadian – significant components; ingredients; processing, labour, etc. There would be “very little” foreign content. Minor additives and spices which cannot be sourced in Canada would be excluded from the calculation.

“Made in Canada”: This claim applies to other products where the last substantial transformation occurred in Canada. Two options are proposed (i) “Made in Canada from domestic and imported ingredients”; (ii) “Made in Canada from imported ingredients”.

Other Qualified Claims

The following claims would continue to be available – “Processed in Canada”; “Packaged in Canada”.

The Fisheries Council of Canada is reviewing the proposal with its Market Access/ Trade Policy Committee and the Technological Committee.

Russian Inspection Audit

Discussions are proceeding to finalize arrangements for the Russian veterinary service to audit the CFIA seafood inspection regime. The audit will take place June 16-27. Russia identified 38 plants as plants of interests to them. From that list CFIA, Ottawa in consultation with CFIA regional officials chose 11 plants.

Plants in Nova Scotia, Newfoundland, British Columbia and Winnipeg have been selected. The Russian team will be accompanied by a CFIA, Ottawa official as well as CFIA official(s) from the respective regional offices. CFIA officials are contacting the companies identified above to go over details, etc. in preparation for the audit.

DFO to Review License Fees

DFO is undertaking a review of its fishing license fees. The fees have not been adjusted in 13 years. License fees paid by fleets vary across the country from 1% to 7% of the landed value.

DFO is looking at a number of options:

• across the board fee of 2% of landed value (apparently the 2% figure would generate for DFO the same amount of revenue that the current system of varying percentages provide);
• fee based on DFO fleet cost & earnings surveys. This approach does not seem feasible as it depends on voluntary participation of fleets;
• net profit approach based on the model used in Iceland;
• formula based on income reported to Revenue Canada. This approach does not seem feasible as it would require an agreement with Revenue Canada which is highly unlikely.

DFO Policy apparently favors the across the board 2% approach. However, Minister Hearn stated recently he prefers the net profit approach. He wants the department to develop the modalities, have the consultations, and introduce a net profit approach in the 2009 fishery. Minister Hearn likes the net profit approach because it can directly take into account the cost-price squeeze that is currently impacting much of the fishery. DFO expects to have consultations on the issue in the Fall.

With respect to the net profit model, Iceland Fisheries estimates the landed value of the quota (Iceland’s fisheries are ITQ fisheries) then subtracts 40% for crew plus an additional 15% for other costs. In addition, there is an adjustment for fuel costs based on the $US dollar cost of a barrel of fuel in Rotterdam. The licence fee is then set at 6% of the net figure, scheduled to rise to 9.5% over time.

New R&D Funding for the Canadian Fishing Industry.

In the 2008 Federal Budget, the government provided $34 million/yr over five years to the Natural Sciences and Engineering Council (NSERC) for industry driven R& D projects in the manufacturing, auto, forestry, and fisheries sectors. The FCC Oceans Use/Science Committee is working with NSERC and DFO to develop a guidance proposal for approval by NSERC at its mid-June Council meeting.

NSERC has a range of programs. However, the consensus is that the most relevant program is the Strategic Partnership program which does not need a cash contribution from the industry partner. Discussions are finalizing. It has been generally agreed that the priority research areas should be (i) operational efficiency and technological development, (ii) strategic issues in resource and ecosystems sustainability.

NSERC Council will be reviewing an overview proposal in mid-June. If approved, research proposal would have to be submitted by October with funding decisions made in February 2008.

Canada-Peru Free Trade Agreement

Canada & Peru have completed a free trade agreement. The agreement becomes effective on January 1, 2009 with fish and seafood tariffs being eliminated immediately on January 1, 2009.

China Promotion

The Canadian Embassy in Beijing along with 4 Canadian Consulates in China will be working with Chinese hotels and restaurants in five cities (Beijing, Shanghai, Guangzhou, Chongqing, and Hong Kong) on a menu promotion campaign for Canadian seafood, Canola oil, and other food ingredients. If you want your company products to be specifically promoted in the 5 city campaign, the cost is $3,000. If interested contact Maggie Xu in the Canadian Embassy in Beijing at HYPERLINK "mailto:Yao.hu@international.gc.ca" Yao.hu@international.gc.ca

US Seafood Market: Retail vs. Foodservice

It appears it is a misconception that more seafood is sold through the foodservice sector than is sold at retail. Although food service sales amount to $46 billion with retail sales at $22 billion, the difference in the value figures seems to be attributable to higher prices for seafood in restaurants and other foodservice outlets. Looking at the values at the wholesale level, the retail and the foodservice sectors buy about the same amount each - about $16 billion. These wholesale figures are a more accurate measure of how much each sector actually buys and sells, meaning the US market is evenly divided between foodservice and retail.

Russian Seafood Market

Seafood imports into Russia are increasing rapidly despite Russia being ranked 8th in the world regarding seafood harvest. Two factors are at play. Russia’s processing plants, many bordering on neglect, are not able to produce products of the quantity and quality now demanded by the financially invigorated Russian consumer. As well, the Russian fishing fleets prefer to deliver their catches, particularly expensive species, to foreign ports because of strict regulations in place in Russian ports. For example, Russia’s harvest of about 4 million tones of shrimp is almost all landed directly into Japan, Korea, and the USA. Meanwhile the Russian shrimp market is supplied from Denmark, Canada, and Norway.

It’s estimated that the 2007 import market amounted to about 1.2 million tones, exceeding $1.8 billion.

France Moving Toward Sustainability Label

The French Fisheries Ministry has announced it will create its own seafood eco-label and seek Marine Stewardship Council (MSC) for 10 of its inshore fisheries over the next 3 years. $490 million has been allocated to the initiatives. In France, government approved quality labels are not uncommon such as “Label Rouge” and “Agriculture Biologique (AB)”.

FCC 2008 Conference, Quebec City, October 21-23