Fonterra Cooperative Group has suspended a distribution agreement with China’s Jiawai after Shanghai food safety officials and police announced the arrest of 19 people suspected of repackaging expired milk powder from New Zealand.

Jiawai had been an authorised distributor in China for Fonterra since March but the product was believed to have been onsold by a former Jiawai employee prior to any contact with the New Zealand company, Fonterra said. The product had been in the resale market, having been sold over and over, and until the investigation was complete it wasn’t possible to say where the distribution chain had descended into criminality, the company said.

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