In an unusual move, American food-processing company OSI Group LLC vehemently disputed a Chinese court’s ruling that it had sold “inferior products” to fast-food chains in China including McDonald’s Corp. and KFC parent Yum Brands Inc. and claimed it had been the subject of a smear campaign, according to The Wall Street Journal.
The Shanghai Jiading People’s Court said in a statement Monday that it fined two of OSI’s units—one in Shanghai and another in Hebei province—2.4 million yuan ($365,000) and sentenced 10 people to prison, including Australian Yang Liqun, a general manager at OSI in China, who was sentenced to three years, followed by deportation. The other nine defendants face sentences from 19 months to 32 months, the statement said.
China had been OSI’s key growth market but its business there was decimated after a 2014 television report purported to show workers in its Shanghai plant doctoring the production dates of meat to resell chicken nuggets and patties that had passed their sell-by dates.
Shortly after the ruling, the Aurora, Ill.-based company said it planned to appeal. It said the Chinese authorities unjustly held OSI employees for 17 months and barred OSI’s senior leaders and reporters from attending the trial.
OSI also said it planned to take legal action against Dragon TV, the state-run broadcaster that aired the 2014 report, saying it “made false and incomplete accusations that ignored facts and Chinese law,” the statement said.
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Editors Insight: This report should serve to remind companies active in the global food supply chain that they need to be prepared when operating in foreign markets. This is an important story as many companies have plans to expand global business. The U.S. government is encouraging this by championing trade agreements.
OSI Group believes Chinese authorities and a TV station acted improperly in producing a TV report in 2014 and the company is incurring major costs in appealing this court ruling. Internal OSI documents reviewed by The Wall Street Journal indicate that a disgruntled former OSI employee and a pair of journalists using fake identification staged the damaging TV report.
Whatever the outcome of this appeal, American companies with foreign operations need to understand not only the food safety laws which in some cases are different from U.S. laws, but the cultures they are dealing with.
The Acheson Group, a consulting firm for food and beverage companies and those providing technical support to the food industry, provided a good primer on doing business in China from a food safety professional’s perspective that examines cultural differences between the U.S. and China as well as Asia. To Download the report, click here.
2-2-16 By Elliot Maras