Seafood Marketing: Combating Fraud and Deception

Seafood Marketing: Combating Fraud and Deception

Order Code RS22642
April 11, 2007
Seafood Marketing:
Combating Fraud and Deception
Eugene H. Buck
Specialist in Natural Resources Policy
Resources, Science, and Industry Division
Summary
Media attention has focused on recent incidents of economic fraud relating to
seafood. The extent of this fraud is not well documented and, in many cases, may not
be intentional. In addition, some new treatment procedures by the seafood industry are
being questioned for their potential to deceive consumers. This report reviews recent
incidents of fraud and deception and examines several policy issues. Congress may
become involved in oversight of how federal agencies are addressing these issues, and
legislation related to these concerns may be introduced.
Media attention has focused on recent incidents of fraud relating to seafood —
restaurants serving lower-priced fish than identified on menus, lower-priced species
marketed commercially as higher-priced species, packaged weights of seafood less than
labeled weights, and excessive water added to seafood to increase total product weight —
raising public concern. Although such apparent fraud may not be intentional and its
extent is not well documented, these concerns have the potential to erode consumer
confidence in seafood. Congress is facing questions of whether the law applicable to
fraudulent seafood sales and marketing is clear and enforceable, whether agency
enforcement efforts targeting seafood fraud are adequate, and whether the penalties for
seafood fraud offenses are a deterrent.
Fraudulent or Deceptive Practices
Mislabeling or Substituting Species. The flesh of many fish species is similar
in taste and texture and, therefore, it is difficult to identify species from fillets, especially
after preparation for consumption. Thus, it is relatively easy to substitute an inexpensive
species for one of higher value. Over the nine-year period of FY1988-FY1997,
investigations by the National Marine Fisheries Service’s National Seafood Inspection
Laboratory found that 37% of fish and 13% of other seafood (e.g., shellfish, edible

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seaweed) were mislabeled.1 The primary federal law that addresses mislabeling is the
Food, Drug, and Cosmetic Act of 1938 (FDCA; 21 U.S.C. §§301 et seq.), which is
administered by the Food and Drug Administration (FDA).
This fraud can be perpetuated several different ways. Unfair and deceptive trade
practices occur when restaurants misrepresent menu items to their patrons by substituting
other (often less expensive) fish for an item described as a higher-valued species. This
fraud also occurs at the manufacturing level, as in American Samoa, where a dozen tuna
cannery workers were accused of falsely labeling cans as tuna when the cans were actually
filled with less expensive wahoo, and selling it to local stores.2 In addition, food service
entities can be victimized, if they pay several times what they should due to bait-and-
switch tactics of unscrupulous vendors, while legitimate suppliers lose an equivalent
amount of business to competitors who undercut them by quoting one item and replacing
the higher-valued species with an inexpensive one.
In February 2007, WKRG-TV (Mobile, AL), using DNA testing, found that only one
in ten samples advertised as grouper actually were this fish, prompting state agriculture
inspectors to target 35 Gulf of Mexico restaurants and seafood markets for sampling.3
Alabama state law makes a restaurant or distributor subject to a fine of $5,000 per offense
for selling falsely labeled seafood products. In a similar media investigative report, 17
of 24 Tampa, FL, area restaurants were selling less-desirable species as grouper.4 These
media investigations have not been limited to the Gulf area.5 These problems can arise
from substitution at the restaurant level, misrepresentation by the restaurant supplier, or
product misidentification anywhere earlier in the harvesting/processing process. It is
often difficult to determine who is at fault, especially if there is collusion.
Other instances of mislabeling include imported farmed salmon being falsely
identified as wild Alaska salmon and frozen seafood being marketed as fresh product.
Since large quantities of seafood are imported for U.S. consumption, some portion of the
mislabeling problem undoubtedly originates with foreign suppliers. Table 1 provides a
list of the most commonly substituted species.6 The problem of species substitution is not
only concentrated with certain species and products because of their differing values, but
also is more pervasive for species with easily mistaken substitutes.
Low Weights or Undercounting. Inaccurate (low) counts or net weights (“short
weighting”) result in consumers receiving less for their money than advertised and
1 See [http://sst.ifas.ufl.edu/22ndAnn/file08.pdf].
2 “Chicken of the Sea Embroiled in Labeling Scam,” Associated Press (March 21, 2007).
3 See [http://www.wkrg.com/servlet/Satellite?pagename=WKRG%2FMGArticle%2FKRG_Basic
Article&c=MGArticle&cid=1149193401779&path=%21news%21local].
4 See [http://pqasb.pqarchiver.com/sptimes/access/1230334761.html?dids=1230334761:
1230334761&FMT=FT&FMTS=ABS:FT&date=Mar+10%2C+2007&author=CURTIS+
KRUEGER&pub=St.+Petersburg+Times&edition=&startpage=1.A&desc=%27Grouper%27+
costs+restaurants].
5 Others have been reported in Portland, OR, [http://www.kptv.com/print/11072970/detail.html];
and in Phoenix, AZ, [http://www.kpho.com/print/10371007/detail.html], for example.
6 See [http://www.cfsan.fda.gov/~frf/econ.html].

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anticipated. These instances, although commonly reported, also constitute mislabeling
offenses under the FDCA.
Table 1. Examples of Commonly Substituted Seafood
(less expensive products are in column A)
A
B
Rockfish
Red Snapper
Yellowtail
Mahi Mahi
Mako Shark
Swordfish
Oreo Dory or John Dory
Orange Roughy
Alaska Pollock
Cod
Sea Bass
Halibut
Arrowtooth Flounder
Dover Sole
Black Drum
Red Drum
White Perch or Zander
Lake or Yellow Perch
Paddlefish or other fish roe
Caviar (Sturgeon species)
Sauger or Alaska Pollock
Walleye
Pacific Salmon
Atlantic Salmon
Pink Salmon
Chum Salmon
Skate Wings
Scallops
Steelhead Trout
Salmon
Imported Crabmeat
Blue Crabmeat
Farm-Raised Salmon
Wild-Caught Salmon
Over-Treating or Added Water Weight. Overbreading may cause consumers
to pay shrimp prices for excess bread crumbs. The FDA standard for breaded shrimp
requires that such a product contain at least 50% shrimp. Frozen fillets, shrimp, crab legs,
and other products are normally protected from dehydration (freezer burn) while frozen
by the application of a light glaze of ice; a packer then includes more product in the
package to compensate for the weight of the glaze. Excessive amounts of glaze
(overglazing) not compensated for in this manner can deliberately be used to increase the
apparent weight, and therefore the apparent value, of the delivered product.
In addition, sodium tripolyphosphate (STP) can be used to maintain and retain
moisture in seafood products. Prolonged soaking of seafood in STP-water solution can
result, for example, in Atlantic sea scallops with excessive water, adding to the product’s
total weight and constituting economic fraud. Seafood treated with STP must be
accurately labeled to identify this treatment.
Altered Color. Some aquaculture operations add the color additives canthaxanthin
and/or astaxanthin to feed to impart a more orange color to fish flesh of salmon and/or
trout. The flesh of the farmed varieties of these fish would (if not for these color
additives) be a less appealing pale white. Without additives, farmed salmon and trout lack
the natural orange flesh color because they do not ingest astaxanthin, an antioxidant that
wild salmon and trout receive through their diet of shrimp, krill, and plankton. Since the
diet of farmed salmon lacks the natural pigments, these fish may be fed an artificial
astaxanthin, such as Carophyll Pink, to enhance their flesh color.

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More recently, fish fillets have been treated with carbon monoxide (CO) to give fish
flesh a fresher-appearing reddish tint.7 The growing use of CO (“tasteless smoke” or TS)
as a “pigment fixative” has alarmed some consumer advocates who say it deceives
shoppers who depend on color to help them avoid spoiled fish. Those critics are
challenging the FDA and the seafood industry, saying the agency has violated its own rules
by allowing this practice without a formal evaluation of its impact on consumer safety.
FDA considers tuna to be misbranded if it is treated with either TS or CO but not labeled
to indicate that it contains a preservative, and thus purports to be unprocessed, fresh, or
fresh-frozen tuna.8 All processed seafood involving CO or TS require label declarations
under 21 C.F.R. part 101.
Transshipment to Avoid Import or Customs Duties. Transshipment occurs
when foreign producers ship goods to a second country en route to the United States.
Although transshipment is generally legal and commonly used in the ordinary course of
business, it is illegal if it is done for the purpose of circumventing trade laws and other
applicable trade restrictions. It has been reported that shrimp from China and Thailand
have been shipped to the United States by way of Indonesia to avoid paying antidumping
duties levied by the United States on shrimp imported from China and Thailand, but not
on shrimp imported from Indonesia.9
Industry Initiatives
On October 13, 2006, concerns that seafood fraud has and could increasingly erode
consumer confidence in seafood led the National Fisheries Institute (NFI) to announce an
initiative to promote economic integrity within the seafood industry.10 Implementation of
this initiative is scheduled for summer 2007, concentrating on three primary areas:
! transshipment of products subject to antidumping and countervailing
duties;
! mislabeling of products or species substitution; and
! mislabeling of weights or counts of products.
NFI intends to pursue this initiative (1) by obtaining commitments from the CEOs of NFI
member companies to comply with current law and regulation and (2) by developing an
accountability system that would reward “good actors” and identify “bad actors.” Such
an accountability system would involve screening by a Better Seafood Bureau,
independent third-party audits of processes and products, and a member review process.
7 See [http://www.sushiman.net/ahi/carbon_monoxide_trea.htm].
8 See FDA Import Bulletin #16B-95, available at [http://seafood.ucdavis.edu/Guidelines/fda
bulletin16b.htm].
9 See [http://www.atimes.com/atimes/Southeast_Asia/HC22Ae01.html]. Further information is
contained in out-of-print CRS Report RS21776, Shrimp Trade Dispute: Chronology, by Eugene
H. Buck, available from the author.
10 See [http://www.aboutseafood.com/assets/files/nfi_annrpt06d2.pdf].

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Applicable Law
With the increasing media attention to this issue, Congress may face questions
concerning current law applicable to seafood marketing and fraud. The issues to consider
include whether current law applicable to fraudulent seafood sales and marketing is clear
and enforceable; whether federal agency enforcement efforts targeting seafood fraud are
adequate; and whether the penalties for seafood fraud offenses are a deterrent.
Customs and Border Protection. Transshipment to avoid paying import or
customs duties is illegal whenever it circumvents trade laws and other applicable trade
restrictions.11 The applicable law and regulation may vary, depending upon the trade
agreement existing between the United States and another nation as well as the status of
any antidumping and countervailing duties currently in force for particular products
imported from designated nations.
FDCA. The FDCA, as amended, gives FDA authority over most food regulation and
includes a series of definitions elaborating on the concepts of adulteration and
misbranding, control over all labeling of foods traveling in interstate commerce, detailed
regulation of issues concerned with safety and wholesomeness of foods, and enforcement
remedies available to the agency, when needed.12
The substitution of a less expensive fish or seafood item for a more expensive one
in interstate commerce constitutes fraud and is prohibited under §403 of the FDCA (21
U.S.C. §343). Thus, FDA becomes involved when interstate or international transport is
involved. About 85 of FDA’s roughly 1,350 inspectors work primarily with seafood.
Labeling violations are one of the infractions checked by the agency, and FDA has issued
an import alert on species substitution, providing guidance to agency field personnel
regarding the manufacturers and/or products at issue.13 However, enforcement of
economic fraud and labeling laws has taken a backseat to protecting the security of the
U.S. food supply.14
State Weight and Measures Statutes. Individual states enforce laws on
intrastate business and commerce to assure that products are correctly labeled for weight
and count.
Conclusions
Although it is not clear whether the amount of fraud and deception in seafood sales
and marketing is increasing, media attention to this issue has raised its profile with the
public. The economic integrity initiative of the National Fisheries Institute has the
potential to increase attention within the seafood industry on this issue as well as to
address eroding consumer confidence in fair marketing of seafood produce. In response
11 Section 592 of the Tariff Act of 1930 (19 U.S.C. §1592).
12 CRS Report RL33559, Food Safety: National Uniformity for Food Act, by Donna V. Porter.
13 For FDA import alert #16-04, see [http://www.fda.gov/ora/fiars/ora_import_ia1604.html].
14 “Species Substitution: Labeling Law Not An FDA Priority...,” Santa Monica Seafood SeaLog
(April 2006).

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to increased public concern, Congress may face questions concerning current law
applicable to seafood marketing and fraud and might conduct oversight into whether
current law applicable to fraudulent seafood sales and marketing is clear and enforceable,
whether federal agency enforcement efforts targeting seafood fraud are adequate, and
whether the penalties for seafood fraud offenses are a deterrent. In addition, increased
funding may be an issue so that agencies can more systematically monitor the situation,
better determine the scope and scale of this type of problem, and develop new programs
that address this fraud.