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This article has been written by Parimi Bala Venkata Mahesh pursuing a Diploma in Corporate Law & Practice: Transactions, Governance and Disputes course from LawSikho.

This article has been edited and published by Shashwat Kaushik.

Introduction

A food supply chain simply means a series of events where the production reaches the  ultimate consumer, supply chains make it possible for the production to get the consumer  through different stages in a chain of events and include agriculture -Processing-Packaging  & Distribution-Wholesaler-Retailer-Consumer, in modern world of packaged and processed foods, the role of food processing industries also attained great significance As the food supply chains play an important role in making the produce reach consumers, the  governments took on the role of regulating the food supply chains at every stage of the process in the public interest. In this article, we will discuss what is to be considered legally at every stage of a food supply chain to make it sustainable in the long term.

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What is a sustainable food supply chain

‘Sustainable’ literally means ‘to be able to maintain something at a certain level’.  To  demystify this and to understand it with relevance to food supply chains, ‘sustainability’  means to utilise the input resources as per the current requirement without wastage and saving some of them for future use, which makes the food supply chain sustainable in the long term.  ‘Sustainable’  in the sense of business also means  ‘survival in the long term’ and this is relevant here because food supply chains include so many intermediaries, which are businesses in the food industry and in order to make them survive in the long term, the utilisation of nonrenewable resources needs to be regulated.

What are supply chain compliances

 As mentioned earlier, due to the significant importance the food supply chains have to make  the produce available to the consumer and their role in modifying the actual produce to edible  goods. The governments are obligated to regulate these food supply chains at every stage of  the process in the public interest and those regulations are made possible by making relevant  laws, rules, regulations, and orders that are industry-specific and are different for different  stages of production and supply in a food supply chain. With the passage of these laws, every person who is involved in a food supply chain is obligated to comply with or adhere to the relevant laws that are specific to their industry or stage of production. Such legal obligation was created on these intermediaries in a food supply chain and failure of which will lead to huge penalties.

Legal considerations

 In order to make a food supply chain sustainable in the long term, i.e., to make a food business long-lasting, adhering to the law is a must, and as said earlier, there are relevant laws at every stage in a food supply chain that are to be adhered to. In this article, we will discuss what is to be considered legally to start and sustain a production, processing, distribution, wholesale, or retail unit involved in a food supply chain individually at every stage.

Production

Production is mostly from agricultural activity and to bring sustainability to the agricultural  process, natural resources like water, land, etc. are to be utilised without wastage and the  pollutants arising out of the process that pollute water, soil and air are to be controlled and  the same is legally mandated.

Processing

Processing the agricultural produce is more of an industrial activity and such industries, in  order to be sustainable in the long term, have the obligation to comply with the relevant  industry-specific laws; some of them are as follows:

 Labour laws

Industries require large human capital to perform their regular industrial activity and the  inclusion of humans will create an obligation for those industries to adhere to the provisions of the following legislative labour enactments.

  • Code on Wages,2019.
  • Code on Social Security, 2020.
  • Industrial Relations Code, 2020.
  • Working Conditions Code, 2020.

Environment laws

Industries involved in food processing utilise more nonrenewable resources like coal  &  diesel to run large industrial machinery and doing so will not only affect the proper and  efficient utilisation of non-renewable resources but also affect the environment as a whole as  they release dangerous fumes and contaminants into air and water, respectively. Such  industries have an obligation to adhere to the following laws.

  • Environment Protection Act, 1986.
  • The Air (Prevention and Control of Pollution) Act, 1981.
  • The Hazardous Waste Management Rules, 2016.
  • The National Green Tribunal Act, 2010.

Packing and distribution

The utilisation of packaged foods has increased in recent times. People are more likely to buy packed food as they are getting benefits of easy carriage, i.e., flexibility and consume that food whenever and wherever they want without any impediments. The following are the legal considerations that are to be considered before setting up a food packaging and distribution unit.

Labelling requirements

In consumer interest, the following are to be labelled on a package of food compulsorily as  per the Food Safety and Standards (packaging and Labelling)  Regulations, 2011.

  • FSSAI Licence number
  • Ingredients list
  • Country of origin
  • Lot identification / Batch number
  • Company address
  • Manufacturing and Expiring date  
  • Nutrition details, etc.

Weights and measurements

Weight and measurement, as the case may be, need to be accurate and be labelled on the  package and the law regulating the same is as follows:

Legal Metrology Act, 2009

 Manufacturing, packing, and selling any pre-packaged commodity is prohibited unless it is in  standard quantity and carries all prescribed declarations relating to weights and  measurements. Any advertisement mentioning the retail price of packaged commodities  should also contain the net quantity thereof.

Legal Metrology (Packaged Commodities) Rules, 2011

If any pre-packaged commodity is packed with error in net quantity beyond the limit  prescribed in the Rules, it is a punishable offence.

Contracts

Contracts are a part and parcel of almost every business’s day-to-day activities and the law  regulating different contracts entered into by a packaging and distributing business is as  follows:

International trade

The Foreign Trade (Development and Regulation) Act, 1992, along with the  Export-import Policy  provides a legal framework for international trade.

Solus Agreements and Trade Restriction agreements

As per Section 27 of the Indian Contracts Act, 1872, every agreement in restraint of trade is  enforceable when such conditions stipulated in the agreement are reasonable and are not  making any absolute restrictions to trade as a whole.

Intellectual property laws

Intellectual Property Laws have a greater significance in the packaging industry as the  packaged commodity on its face displays a brand name and some graphics or pictures which  are considered intellectual property and the same as a matter of right to the creator, if  registered, are secured under the following laws.

The Trademarks Act, 1999

Protects trademarks, which include logos, symbols, designs, or words that distinguish  a brand from its competitors.

The Patents Act, 1970

 Protects innovative recipes, methods of production, or the structure of food. Patents  can also be awarded for packaging, machinery, and novel processes.

Wholesale and retail trade

 Wholesalers and retailers are the intermediaries who play a major role in making it possible  that the consumer receives the end product and such wholesalers and retailers also have some legally mandated obligations to adhere to the following laws.

Shops and establishments licence

 Wholesalers and retailers are required to priorly take the license required under the Shops and Establishments Act, which is different for different states and union territories and such  a license is a mandatory requirement to sell goods.

Goods and service tax (GST) registration

 Every wholesale and retail business that exceeds the relevant threshold turnover limits as  stipulated in the GST Act, 2017 and the rules made thereunder is obligated to register in  the GST portal and get a GSTIN (GST Identification Number) and is also obliged to display the  same in a viewable premise in his business place.

E-commerce regulations

 In accordance with growing technology, the scope of electronic commerce transactions is also increasing significantly and to safeguard the consumers in such e-commerce transactions, the following laws need to be adhered to by the e-commerce sellers and service providers.

  • Information Technology Act, 2000. Provides the legal framework for e-commerce  transactions
  • Digital Personal Data Protection (DPDP) Act, 2023. Applies to e-commerce  businesses that collect personal data for activities like customer support, signing up and payment facilitation.

General legal considerations for a food supply chain as a whole

There are some general legal considerations that are to be adhered to by all the participants  in a food supply chain, irrespective of the stage they are at in a supply chain or the industry  they are dealing with; some of them are as follows:

Food safety laws

Ultimately, the food that is being processed is for the end use by the consumers, who are public at large and in the public interest. Laws are enacted to ensure food safety and  standard, which are to be adhered to by the food processing industries. Some of them are as follows:

The Food Safety and Standards Act, 2006

The Food Safety and Standards Rules, 2011, and several regulations are made to regulate the food businesses and in order to do so, the central government, i.e., the Ministry of Health and Family Welfare, under the authority given by the act, made relevant regulations from time to time; some of them are:

Licensing and registration requirements

 Every person who is in the business of processing or selling food has an obligation to get a license under the provisions of the Food Safety and Standards Act, 2006 and the  Food Safety and Standard (Licencing and Registration of Food Businesses)  Regulations, 2011.

The Central Licensing Authority, under the Ministry of Health and Family Welfare,  grants  license to the food businesses in a supply chain; some of those businesses  are,

  • All food businesses, including re-labellers and re-packers, fall under the requisite criteria.
  • All importers and 100% export-oriented units.
  • All business units manufacturing any article of food
  • Business units related to food operating in more than one State

Sanitary and hygiene requirements

As stipulated in relevant regulations thereof under the food safety and standard act, every  food business needs to adhere to those sanitary and hygiene requirements; some of them are:

  • No person employed should be suffering from an infectious disease.
  • Workers have fingernails trimmed and clean.
  • Vehicles used to transport food must be kept in good repair and kept clean.
  • Records of pesticide / insecticide used along with dates and frequency
  • Food handlers to be provided with protective clothing, head coverings, face masks,  gloves, and footwear
  • Provide training to food handlers in food hygiene, food safety and many others as may be required by relevant regulations.

IPC provisions on food adulteration

Section 272 of the Indian Penal Code stipulates that whoever adulterates any article of food,  so as to make such article noxious as food, intending to sell such article as food, or knowing it to be likely that the same will be sold as food, shall be punished with imprisonment of either description for a term which may extend to six months, or with a fine which may extend to one thousand rupees, or with both.

Organisational compliances

 Every stage in a food supply chain except the production from agriculture requires an  organisational structure like a company or a limited liability partnership (LLP) to involve in  active business and such organisational business structures have their own specific special  laws to comply with, like the Companies Act, 2013, and the Limited Liability Partnership Act,  2008 etc. Some of the compliance requirements for a company registered under the Companies Act, 2013 are as under

  • Filing returns with the Income Tax authorities
  • Statutory Audits
  • Annual ROC (Registrar of Companies) filings
  • GST Compliance if the annual turnover exceeds certain threshold limit
  • Appointment of independent directors 
  • Maintenance of statutory registers etc.

Consumer protection

 The Consumer Protection Act, 2019 was enacted by the government of India in order to  safeguard consumer interests against the exploitation of the producers and sellers. The act  created some obligations to comply with for the businesses involved in selling goods and  services to consumers. They made the rules thereunder to safeguard the consumers and some of those rules, which are to be adhered to by the businesses are as follows:

Law relating to Advertisements

The Advertising Standard Council of India (ASCI) stipulates the following:

  • Caution and care should be observed in the advertising of packaged foods, especially  ones containing high fat, Sugar and Salt.
  • Advertisements should not be misleading or deceptive.
  • Advertisements for food or beverages unless nutritionally designed as such should not be promoted or portrayed as meal replacement.
  • Wine, alcohol, liquor or other intoxicants.
  • Infant milk substitutes, feeding bottles or infant food.

Law relating to logistics

 As the term ‘food supply chain’ means to supply food from the producer to the consumer either in the original form or any other modified or improved form, and such supply is only possible with making the food travel through one stage to another, and such transportation is made through logistics, and there are laws to regulate logistic businesses, most of the food  businesses outsource the logistic work, which makes those businesses not to comply with any of the relevant laws, but some businesses have their own logistic division, and those businesses need to adhere to the following:

  • Carriage by Road Act, 2007: The Carriage by Road Act, 2007 was brought about to outline the carriers liability in case of any mishappening to the goods for loss, damage, or delay of goods during transportation. The Act also gives the definition of some important terms such as ”carrier”, “consignor,” “goods”, etc. The Act also has provisions stating the rights of the consignor and the consignee and the right to claim for compensation. One important aspect of this Act is that it also addresses the issuance of insurance for goods in transit.
  • The Railway Act, 1989: The Railway Act, 1989, was brought about with the goal of regulating the operation and management of Indian Railways, which is quite a big transport network system. The Act contains provisions stating the responsibilities and liabilities of the railway staff for the safe and timely transportation of the goods. The Act also contains provisions that state the conditions under which the railway administration would be liable to pay for damages, loss or delay in transportation. This Act also explains the procedure for filing a claim in case of damages or losses.
  • The (Indian) Bill of Lading Act, 1856: This Act was brought about with the aim of regulating the use of bill of lading in India. It is a kind of legal document which acts as proof of contract of carriage between the shipper and the carrier to prevent any disagreements. This bill of lading contains all the details relating to the the shipment and other important points such as dispute resolution mechanism, compensation in case of damages, etc.
  • The Carriage by Air Act, 1972: The Carriage by Air Act was brought about with the goal of regulating the carriage of goods by air. This act is based on the Warsaw Convention. It applies to the carriage of good by air between two or more countries which are a member to the conventions. The Act contains provisions for loss, damage or compensation in case of any misahappening to the goods or if the owner suffers any losses due to delay in transports of the goods, it also mandates for the use of air waybill as a contract and specifies the time limit for filling claims in case of damage against the carrier.

Labour laws

Even though greater significance was given to the labour laws in the industrial sector, all the  stages in a food supply chain that employed a notable human workforce or such number of  human workforce as specified under each act specifically stipulated in it for the same to be  applicable. Labour laws are as follows:

  • Code on Wages, 2019 : The Code on Wages 2019 is brought about with the aim of regulating the laws related to wages and bonuses. Some of the main aims of this Act are ensuring minimum wages to workers, timely payment of wages, equal pay for all workers, and preventing discrimination on grounds of gender, race, caste or creed. This Act also covers all the major definitions of wages, fixed minimum wage, deduction from wage, and overtime. 
  • Code on Social Security, 2020: The Code on Social Security is brought about with various goals but the most important one is regulating the social security laws. This Act covers issues such as funds, gratuity, maternity benefits, pension schemes, etc. The main aim of this Act is to ensure social security for workers, both male and female and their families because they are the downtrodden class of society and also deserve to live a basic and healthy life.
  • Industrial Relations Code, 2020: The Industrial Relations Code was brought about with the aim of regulating industrial relational laws like trade unions, collective bargaining and dispute resolution. One of the main goals of this Code is to make harmonious industrial relations, create more trade unions, and establish methods for peaceful resolution of disputes apart from the traditional court ones like conciliation, arbitration or mediation.
  • Working Conditions Code, 2020: The Working Conditions Code, 2020, was created with the aim of regulating the working conditions of the labourers, including their place of work. This Code ensures that all the workers should get good living conditions for their well-being and health in all the sectors, including factories, mines, offices, construction sites, etc. The Code also has provisions for overtime, leaves, welfare facilities, and the prevention of occupational diseases.

Conclusion

To make a food supply chain sustainable in the long term, two things need to be done at all the stages in such a food supply chain. The first one is to utilise the non-renewable and natural resources to their maximum extent carefully and not wastefully and also need to leave behind some for future generations and the second thing is that all the business units involved in a food supply chain need to adhere to and comply with applicable laws. Such adherence and compliance will lead to making a food business more long-lasting as no legal penalties or fines, as the case may be, are levied.

References

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