Other complex machines are available in the wage packaging industry, such as the vertical shape sealing machine.B. This machine produces plastic bags from a roll of film and fills the bags at the same time with liquid or solid products. Also, if your product is a cosmetic or food product containing a particular recipe or blend, you may need to share it with your co-packer, which means they are in business secrets. This is another reason why you need to make sure your agreement is complete. The agreement must indicate who is responsible for quality control and how often product inspections must be carried out and recorded. The Co-Packer must check at least all co-packaged products prior to release to ensure that the product meets the specifications. The agreement should also specify the factors for which a product becomes defective or non-compliant and which covers the costs of disposing or post-retirement of rejected products. Intellectual property – A good confidentiality agreement can properly protect your business secrets at the beginning of the relationship. Before manufacturing, it is not uncommon for product formulas to be modified to accommodate the copacker`s equipment and personnel. Formula changes can be “assigned” to the distributor in a copacker agreement if they are minor.
If the formula changes are more substantial, it may be advisable to enter into a product development agreement before the copacker agreement. Non-compete clauses or non-circumvention clauses may complement these agreements in order to continue to protect the distributor from commercial interference. Undeclared allergens. Undeclared allergens are the leading cause of product recalls in the United States. These allergens are usually introduced by accident, such as when a manufacturer changes ingredient suppliers and does not reflect on the effects of labelling. A full specification requires that a copacker use only the ingredients indicated in the agreement, and no substitute can be produced unilaterally. Undeclared allergens are one of the main causes of food recalls. A list of approved suppliers is a simple tool used in co-packing to prevent accidental falsification of food with undeclared allergens. A co-packer agreement should require manufacturers to use ingredients only from a limited group of suppliers.
If suppliers are serious and widely used, the co-packer should have no problem ordering enough ingredients before manufacturing. When it comes to the law, in most cases, the manufacturer is legally responsible for all risks associated with a product, even if the co-packer played a role in managing those risks, so you need to make sure that your agreement is watertight and explicit. There are different ways, such as co-packers to pay for services; it can be a fixed price per unit (by volume), a flat fee per hour (hours, weekly, monthly) or a combination of fixed and variable taxes. The agreement should reflect the price structure that best suits the type of services provided and packaged products. It is always good to have in the agreement a clause specifying when rates can be adjusted (for example. B once a year) and this can trigger a price increase (for example. B, raising the minimum wage, inflation or increasing the cost of raw materials). During the conclusion of a business relationship, both parties may be exposed to certain non-public and confidential information, such as sales numbers, technical specifications, business plans and financial data. The provisions of the agreement should provide that confidential information should not be used or disclosed to a third party, unless otherwise agreed upon.