The regulatory minefield Australian companies must navigate to export agricultural goods to China — where licences can seemingly be suspended at random and rules can change overnight — has caught out another dairy company, with global giant Parmalat slapped with a suspension of its fresh milk licence.
Just days after infant milk formula group Bellamy’s had its crucial licence to export milk powder to China suspended without warning on the back of a complaint by a mystery whistleblower, Parmalat has been whacked with a similar suspension by the Chinese authorities for its fresh milk factory in South Australia.
Parmalat, the Italy-based dairy operator whose popular Australian dairy brands include Pauls, Vaalia, Oak flavoured milk, Lemnos fetta, Ski yoghurt and top-selling Connoisseur ice cream, was suspended for overheating pasteurised milk at its Clarence Gardens site in Adelaide.
The all-powerful Certification and Accreditation Administration of the People’s Republic of China (CNCA), which is authorised by China’s State Council to administer the importation of key food products, was unhappy with the temperatures Parmalat was heating its milk to.
This followed a recent audit of its South Australian factory by Chinese regulators. The suspension was broadcast to the industry via the CNCA website.
While the higher temperatures meet Australian standards, Parmalat is now scrambling to review its practices in light of the suspension as it works to remove the block on exports of drinking milk to China.
Only last week Bellamy’s was shocked to discover a factory in Victoria it had just bought control of for $28.5 million had also had its export licence suspended by the CNCA. The infant milk formula group is unaware of what the problem is, but it is known a complaint was made by an unnamed person.
Meanwhile, Bellamy’s has lined up a subunderwriter to prepare for the possibility it will be forced to hand back as much as $45.5m to shareholders. The cash was raised last week in a rights issue to fund the 90 per cent stake in Camperdown Powder.
The federal government signed a free trade agreement with China, its biggest trading partner, in December 2015. The move was meant to remove barriers to trade and smooth the way for exports and investments.
Parmalat is the latest Australian company to feel the pinch of Chinese regulations, with the CNCA disagreeing with the temperature the dairy group’s fresh milk in South Australia is heated to to extend its shelf life.
Parmalat Australia chief executive Craig Garvin told The Australian the heat applied to its SADA milk, sourced in South Australia, met Australian and global standards but for some reason had fallen foul of CNCA’s guidelines.
“The issue here is from the processing perspective … you will heat-treat it which is a standard global process,” Mr Garvin said.
“The Chinese regulators have come and done an audit and they’ve decided they have temperature limitations that they are happy with versus the heat we did, so the point of difference is what is the temperature that is OK for them.”
Because of the heat applied to Parmalat’s milk, the CNCA also objected to its labelling of the milk as “fresh” when it is sold into China.
“It is not a case of us putting something in there that is not fresh milk — it’s fresh milk — there is just a point of difference on heat temperatures,” Mr Garvin said. “They (China) have a particular way of looking at this and standards, and they will say with tolerance, well, we don’t agree with that so we have got a problem and the licence is suspended.’’
Scott Waldron, senior research fellow at the University of Queensland’s School of Agriculture and Food Sciences, said Chinese regulations were often a moveable feast where rules were applied or not applied at will, disrupting trade relations and business plans.
“The Chinese government is under a lot of pressure, especially in agriculture, because it has to balance or juggle the interests of producers — and there are hundreds of millions of them — and consumers.
“On the consumer side the price is going through the roof in agricultural products and there are food safety concerns, so they’ll have a whole series of regulations that to us can look convoluted … but the way they are applied can be discretionary,’’ Dr Waldron told The Australian.
“They can be strategically applied, or not applied … that’s the problem and obviously that disrupts trade and causes uncertainty.’’
This week Bellamy’s biggest shareholder, entrepreneur Jan Cameron, lamented the Chinese government’s power over the Australian economy.
Mr Garvin said he was confident Parmalat could meet the CNCA’s temperature guidelines.
He said the free trade agreement signed with China didn’t mean it would always be smooth sailing: “There is a willingness on the part of the Chinese to work with us but it (free trade deal) doesn’t give you a free rein.”