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Top Story: Swindling on the rise

Enforcing labeling laws is not an FDA priority and takes a backseat in government food inspections

By Steven Hedlund
June 01, 2005

No protein offers nearly as many choices as seafood, available in an infinite variety of species from around the globe. But one of seafood's greatest attributes is also one of its biggest drawbacks.

Because many species share taste and texture characteristics, the opportunities to profit from substituting a pricey species for an inexpensive one are endless. It’s easy for a supplier to fool an unsuspecting chef or retailer, and it’s even easier for a chef or retailer to dupe the average consumer.

Species substitution is perhaps the most common form of economic fraud in the seafood industry, and an increasing number of suppliers, chefs and retailers worry that the illegal practice is becoming more widespread.

That’s because there are more incentives to cheat today than there were just a few years ago, they say. Among the factors that encourage cheating:

• The industry is becoming more competitive due, in part, to the depreciating dollar.

• Demand is strengthening, and prices are rising for prized fish such as grouper and red snapper — the poster child of species substitution — because availability is limited due to the tightly regulated domestic harvests.

• Antidumping tariffs, which are new to the seafood industry, are encouraging foreign and domestic suppliers to mislabel fish such as basa.

And the press is taking notice. In the past six months, at least a dozen media outlets, from the New York Times to WKRG in Mobile, Ala., have run or in mid-May were planning to run exposés on the findings of private-lab tests commissioned to determine whether fish purchased at local restaurants and grocery stores was accurately labeled. The results were far from flattering.

“I’ve received more calls from the media asking about [species substitution] in the last three months than in my previous two years here,” says John Connelly, president of the National Fisheries Institute in McLean, Va.

“Ultimately, [consumers] lose faith in the seafood industry if they feel they’re being cheated in some way.”

In April, NFI formed a task force to develop strategies to crack down on species substitution and other forms of economic fraud, such as failing to accurately label seafood that’s been treated with carbon monoxide or soaked in tripolyphosphate to lengthen shelf life (both practices are allowed in the United States).

The task force will report to NFI’s executive committee in July and to its board of directors at the group’s annual meeting in October.

“This issue has generated more interest [from members] than anything in my two-plus years at NFI. Members who were quiet are now stepping forward to voice their concern,” says Connelly.

“This will catch up with us in the long term if we don’t do something,” he adds. “We need to make sure consumers know we’re committed to selling the product we say we’re selling. It’s absolutely our responsibility to ensure we get what we’re paying for, and it’s our responsibility to educate consumers.”

Consumers perceive that species substitution is on the rise, simply because a growing number of media outlets are reporting on the subject (see sidebar, page 28).

Whether the illegal practice is actually becoming more frequent is difficult, if not impossible, to know for certain. But industry members say species substitution is getting out of hand.

Case in point: A chef pays $8 a pound for what are marketed as fresh grouper fillets. But he actually gets $2-a-pound Lake Victoria perch fillets that were previously frozen and treated with carbon monoxide (previously frozen seafood must be labeled as such).

That’s exactly what happened to an unsuspecting Midwestern chef who dealt with an unfamiliar vendor, says Bob Sullivan, president of The Plitt Co. He sells fresh grouper fillets for at least $10 a pound.

Economic fraud costs the Chicago distributor $1.2 million a year, estimates Sullivan. That includes sales he loses when a competitor undercuts him by replacing a pricey species with an inexpensive one.

“It’s getting worse, not better,” says Sullivan. “Companies that play by the rules get screwed. The customer says, ‘Hey, why is the other guy selling this fillet for $2 less?’

More suppliers are cheating because the industry’s becoming more competitive, says Sullivan.

The depreciating dollar is partly to blame. The weaker the dollar, the less expensive it is for foreign buyers to purchase U.S.-caught seafood. For example, the dollar has been trading at more than $1.25 per euro since November 2004, compared to $1.09 per euro in September 2003.

What’s more, availability of prized fish such as grouper and red snapper is limited because the domestic fisheries are tightly regulated, and fresh product isn’t available year-round.

The Gulf of Mexico grouper fishery is closed from Feb. 15 to March 15 to protect spawning fish, and the deep-water grouper fishery usually ends by mid-summer when the 1-million-pound quota is met (deep-water species include misty, snowy, yellowedge, speckled-hind and Warsaw grouper).

The Gulf red snapper fishery is open only the first 10 days of the month until the 4.7-million-pound quota is reached.

Suppliers who mislabel seafood to evade tariffs are also perpetuating the influx of species substitutions, says Matt Fass, VP of Maritime Products International, a Newport News, Va., importer.

Such is the case with Vietnamese basa, which the DOC slapped with tariffs in 2003 as a result of the U.S. catfish industry’s antidumping petition. Suppliers who label basa (Pengasius bocourti) and tra (P. hypophthalmus) as grouper, for example, hinder the effort to grow the market for a fish that’s new to U.S. consumers, says Fass, who imports basa.  What’s worse, the government doesn’t have the means to enforce labeling violations, he adds.

“I do think it’s more prevalent today,” says Fass. “You have more species and options out there because of aquaculture, and the industry is even more competitive than it used to be. So there’s more incentive to do things the quickest and easiest way possible. It’s going on at a level that we’ve never seen before.”

But according to the Food and Drug Administration, the agency responsible for monitoring the U.S. food supply, mislabeling isn’t a major problem. In fact, says the FDA, it’s on the decline.

Of the 6,200 seafood products the FDA inspected at the port of entry in fiscal 2003, about 2,000, or 32 percent, were mislabeled. In 2004, about 1,600, or 28 percent, of the 5,700 seafood products the FDA inspected were mislabeled.

Through May 5, about 500 were found to be mislabeled. At a rate of 72 per month, the agency is on pace to find 864 mislabeled products in 2005.

Labeling violations, one of many infractions the FDA checks for during inspections, range from species substitution to the size of the typeface used on the label. Looking for labeling violations at U.S. processing facilities is also part of mandatory HACCP [hazard analysis critical control point] inspections.

The FDA conducted 2,887 such inspections in 2004 and expects to perform 3,120 in 2005 and 2,960 in 2006.

However, the agency doesn’t track the number of mislabeled products it finds during HACCP inspections.

“We’re seeing improvement,” says a spokesman for the FDA’s Center for Science and Applied Nutrition in Silver Spring, Md. “Overall, there isn’t a huge labeling problem. The overwhelming majority of problems are resolved when brought to the attention of [perpetrators].”

The percentage of mislabeled products discovered at the port of entry is high because the FDA singles out companies with a history of labeling violations, says the FDA spokesman.

“We target companies we deem problematic,” he explains. “If we looked at all imports, we believe the numbers would be much, much lower.”

Even if mislabeling is on the decline as the FDA suggests, the agency acknowledges that the enforcement of labeling laws takes a backseat to protecting the U.S. food supply, especially after the Public Health Security and Bioterrorism Preparedness and Response Act was enacted in 2002 in the wake of the Sept. 11, 2001, terrorist attacks.

“Our resources are finite,” says the FDA spokesman, “so we focus our enforcement actions on areas where there’s a food-safety issue. Our goal is to remove unsafe food from the market.”

Of the roughly 1,350 inspectors the FDA currently employs, 650 work primarily with food and only 85 work primarily with seafood.

“Since the ’90s, food safety has been the FDA’s priority,” concurs George Haines, chief approving officer of the Department of Commerce’s voluntary Seafood Inspection Program in Pascagoula, Miss.

“Labeling isn’t a safety issue [in the majority of cases]. It’s an economic-fraud issue. So it has taken a backseat.

“Whether [mislabeling] is more or less prevalent than in the past is a difficult question to answer,” says Haines. “Prior to HACCP, the FDA committed considerable dollars toward it.

“But it’s become less of a priority because of shrinking dollars. That’s not to say the FDA doesn’t look into labeling violations through HACCP. It’s just less of a priority than it used to be.”

Because the FDA’s resources are limited, industry members say it’s their responsibility to do a better job of policing themselves.

“If you ever get caught cheating, we’ll never do business with you again,” says Plitt’s Sullivan. “It’s not worth cheating. You’ve got to come to work every day and say, ‘Hey, I’m proud of what I do.’”

“The majority does it right,” adds Troy Turkin, executive VP of sales and marketing for Newport International, a Tierra Verde, Fla., crabmeat importer. “It’s a few bad apples. They’re the ones that tarnish the industry’s reputation.”

Seemingly, more industry members are protecting themselves from the few bad apples. Lisa Goche, president of Surefish, a private lab in Seattle with offices in Alaska, Vietnam and Korea, says demand for the company’s services related to labeling have increased in recent months.

“Though I can’t say whether mislabeling is more or less prevalent today than, say, five years ago, it certainly seems to be getting more attention,” she notes.

“Misrepresentation of species, net weight, etc., whether intentional or inadvertent, constitutes economic fraud. Therefore, [suppliers] should ensure labeling accuracy if for no other reason than the fact that [mislabeling is] illegal.

“Beyond that, [suppliers] who care about their reputation and keeping important customers will pay attention to this issue,” says Goche. “Many large buyers have very strict labeling and traceability requirements and conduct audits themselves or use third parties to ensure compliance.”

Among those buyers is Wild Oats, one of the country’s largest natural-foods retailers, with 112 stores in 24 states and British Columbia. Jonathan Copeland, the Boulder, Colo., company’s national seafood category manager, personally inspects his suppliers’ facilities and product to ensure he gets what he pays for.

“We’re very strong on traceability,” says Copeland. “If I was in any one of our stores, within 10 minutes I could tell you where our seafood was caught [or farmed]. It’s part of being honest and truthful. Our customers expect it.”

In the end, it’s the consumers and their trust in seafood that matter. If they feel they’re being cheated at the retail counter or in a restaurant, they’ll simply choose another protein.

And then buyers will have a lot more to worry about than differentiating grouper from Lake Victoria perch.

Sidebar 

Will Gergits, co-founder of Therion International, a private Saratoga Springs, N.Y., lab, has handled a flood of calls from the press lately. In the past six months, nine TV stations have asked Gergits to use DNA testing to identify the species of fish they purchased at local establishments. The TV stations then aired the results on the evening news.

It all started with KARE in Minneapolis-St. Paul last December. The TV station reported that six of the 13 local restaurants it bought fish from were menuing the less-expensive zander, imported from Europe, as walleye, a Midwest favorite. TV stations in Cleveland, Milwaukee and Grand Rapids, Mich., aired similar exposés about zander and walleye.

Then in March, KSDK in St. Louis unveiled that three of the seven local restaurants and supermarkets it purchased fish from were selling lane snapper or horse mackerel as red snapper. Concurrently, WKRG in Mobile, Ala., reported that three of the eight local restaurants and seafood markets it bought fish from were marketing Pacific perch, tilapia or another of the 100-plus species of snapper as red snapper.

The reports follow last July’s University of North Carolina study that found 17 of the 22 fish researchers purchased weren’t red snapper, though all were labeled as such. The fish were bought from nine East Coast and Midwest vendors and identified through DNA testing. Only American red snapper (Lutjanus campechanus) can be legally marketed as red snapper.

“It makes for a good story,” says Gergits. “It was a winner [for KARE]. That’s why [KSDK and WKRG] wanted to repeat it.”

It’s not over. At press time, TV stations in four Southeast cities — Mobile, Ala., Savannah, Ga., Spartanburg-Greenville, S.C., and Greenville, N.C. — were planning to air exposés about red snapper during May sweeps, says Gergits.

Perhaps the most scathing report about mislabeling ran on the front page of the Sunday, April 10, edition of the New York Times, which has a Sunday circulation of nearly 1.7 million. Six of the seven local retailers the newspaper bought fish from were marketing farmed salmon as wild. Craft Technologies, a private Wilson, N.C., lab, determined whether the fish was wild-caught or farm-raised by comparing the levels of natural and artificial pigments, or carotenoids.

“Based on what we did, there was misrepresentation going on,” says Neal Craft, the company’s president. “Someone somewhere [along the distribution chain] was taking advantage of [consumers].”

Since the Times exposé, others representing “a range of interests” have asked Craft to test “a number of” samples of salmon labeled as wild, says Craft, who declined to be more specific.

“Anything like [the Times exposé] does nothing but hurt consumer confidence,” says Matt Fass, VP of Maritime Products International in Newport News, Va. “I didn’t think it was an accurate portrayal of the industry [as a whole]. But it’s out there, and that’s the bottom line.” — S.H.

June 2005 - SeaFood Business

 

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