Doing Business in India – food labelling fiasco threatens to dampen the festive spirits

1st October marks the beginning of a month of festivities in India, including Dussehra, Diwali, Eid, various regional festivals. There has been a growing demand in India for the products of foreign 1^st October marks the beginning of a month of festivities in India, including Dussehra, Diwali, Eid, various regional festivals. There has been a growing demand in India for the products of foreign food and beverage brands and for international business which export to and sell their products in India, October can be one of if not the most lucrative month of the year.

This year, the Indian Food Safety and Standards Authority introduced new labelling laws under the Food Safety and Standards Act and started enforcing them stringently from July 2014. As a result, consignments of products supplied by many well-known foreign brands have been stuck at various ports or sent back due to labelling errors.

Many international companies are reluctant, understandably, to make changes to their product packaging and labeling just for the Indian market. However, this reluctance needs to be weighed carefully against the currently high risk of having products impounded by customs and stored in conditions that are likely to spoil the products, resulting in financial losses and a loss of opportunity during the lucrative festival period.

For foreign brands which use third party arrangements such as licensing, franchising, agency or distribution, it is important to consider who bears the legal responsibility and cost of clearing the products for import and that ensuring the products are in compliance with all local laws. Brands and their partners must also remain mindful of applicable anti-bribery legislation in their dealings with the authorities.

A number of affected brands and businesses have approached the authorities in an attempt to find a solution to the ill-timed and over-zealous enforcement of the labelling regulations. However, for the time being, the reality is that these requirements must be adhered to if businesses wish to import and sell their products in India.

With every opportunity comes a challenge and brands and licensees (particular those in the food and beverage sector) should ensure that these risks are identified and the burden is shared appropriately in their commercial contracts. In addition, forewarned is forearmed, and it is important to put in place processes to monitor these developments and plan accordingly.

If you would like more information on the labelling requirements or have any other query relating to doing business in India, please do not hesitate to contact Gordon Drakes or Lisa Sen.