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What can I do to comply with the amendments to the Food Chain Act?

| News | Agrifood

José Miguel Soriano analyses the rule with which the Government seeks equity and a fair distribution of costs but which still does not satisfy producers and distributors

A little over three months have passed since the entry into force of Royal Decree 5/2020, which established important modifications to the Food Chain Law, enough time to see that the novelties introduced, with the best of intentions, are not satisfying any of the operators in the chain, throwing legal insecurity in equal parts to producers and distributors. The fact is that, in an attempt to ensure equal negotiation, fair relations and a fairer distribution of costs, in anticipation of the transposition of Community Directive 2019/633 on unfair commercial practices, it introduces far-reaching changes which, however, are not accompanied by the clarity and certainty required by the changes and demands, such as the fact that "each operator in the chain must pay the operator immediately preceding it a price equal to or higher than the effective cost of production of that product", on pain of significant economic and reputational penalties.

The result of these measures is producing, perhaps unintentionally, a pseudo-intervention of the market, with the deficiencies that this always generates. It is true that these measures could apparently be aimed at protecting small and medium-sized producers and farms, but the reality is that they have a perverse and contrary effect, since large producers, per se, are more efficient than a small farm in producing the same product, enjoying a competitive advantage in the sales chain. And this is without going into detail on the stimulus that these measures give to concentrations of production or competitive disadvantages in relation to third markets that do not have these restrictions or the strict health obligations and quality controls of our products.

In any case, the modifications are legal obligations in force, which affect all operators in the food chain under the real threat of significant sanctions ranging from 3,000 to 1,000,000 euros and the corresponding publication in registers for further derision. The question that arises is: What tools are available to comply with such requirements, given the insecurity and vagueness of terms such as "effective cost of production", while also providing procedural security? The casuistry is immense, think of the infinity of contracts and their circumstances; in deferred contracts with a fixed price; in deferred contracts with variable prices; in the storage of products already sold; in the idiosyncrasy of each industry, etc. However, and despite these difficulties, there are procedural means that make it possible, with some guarantee, to protect operators in the food chain. Thus, a detailed (i) study of the contract in the light of the Chain Law, Law 12/2013, is recommended in order to comply with all its requirements -there are still contracts with certain deficiencies- and then (ii) analysis and comparison of said contract under the obligations of Royal Decree 5/2020 for after applying (iii) a legal and economic audit, to determine the effective cost of production of the product in question and (iv) all of this, that is to say, using the relevant documentary and technical means of evidence that provide the necessary traceability to protect against possible inspections and complaints. In short, it requires a pre-processing "tailor-made suit" that provides legal certainty, not only to the selling operator, but also to the buying operator, which the Royal Decree in question does not provide.

At the same time, it is necessary to work on structural solutions, since currently the aforementioned Royal Decree 5/2020 on urgent measures in the field of agriculture and food is being processed as a Bill in the Congress of Deputies, and this legislative window should be used to provide clarity to a Royal Decree that, loaded with good intentions, lacks certainty. Likewise, this legislative unknown is completed with Directive 2019/633, on unfair commercial practices, which must be transposed before May 1st 2021, and which will mean an important modification of the Chain Law 12/2013, whose public consultation period has recently ended. Who gives more?

In short, the Spanish agri-food sector not only contributes a very high percentage to the national GDP, but also demonstrates day after day, and even more clearly in this period of reclusion, that it is an essential service for Spain and its citizens, requiring a clear and modern regulation in its commercial transactions that it lacks today, placing operators in situations of defencelessness, insecurity and sanctions, always dependent on the interpretation of the Administration.

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