# Co-Packing and Contract Manufacturing Agreements

Why the regulatory framing has to be resolved before the commercial terms can be finalized.

A co-packing agreement is a commercial contract, but it is not only a commercial contract. Under the SFCA and SFCR, the regulatory obligations that attach to a food product (licensing, preventive controls, traceability, investigation and notification, recall management) follow the party conducting the regulated activities. The first questions are which party holds any required SFC licence, whose preventive controls govern the manufacturing activities, who keeps the traceability records, and who must investigate, notify the Minister, and act if a product risk arises under SFCR s. 82. A co-packing agreement that does not resolve these questions has a gap that surfaces at the worst possible time.

Commercial lawyers who draft these agreements often handle the commercial terms competently but miss the food-specific regulatory layer. That is the specific gap this practice fills.

## Regulatory Role Allocation

The determination of which party bears which regulatory role depends on the structure of the relationship. CFIA's licensing guidance provides the operative logic: if the facility operator or its staff perform the processing and packaging, the facility needs the licence; if the food business or its staff perform the processing using shared equipment, the food business needs the licence. CFIA's labelling guidance similarly recognizes that the responsible name on the label can be either the person who carried out the activity or the person for whom it was carried out.

Three common operating models illustrate how this works in practice.

Co-packer-led model. The co-packer holds the SFC licence, maintains the PCP, and manufactures under its own food safety system. The brand owner provides specifications and receives finished product. The co-packer will often be the regulated operator; the brand owner's regulatory exposure is limited but not zero (labelling responsibility, traceability as the next link in the chain).

Brand-owner-led model. The brand owner holds the licence and maintains the PCP. Another party provides the facility and equipment, but the brand owner's staff or controlled processes govern the manufacturing. The brand owner is likely to bear the full regulatory burden despite not owning the physical plant.

Split-responsibility model. Elements of the regulatory burden are distributed: one party holds the licence, another manages specific PCP components, a third handles labelling. This model creates the most coordination risk and requires the most precise contractual allocation.

## Key Agreement Elements

Quality specifications and the quality agreement. The quality agreement is distinct from the commercial agreement. It sets out product specifications, testing requirements, acceptance criteria, and the process for handling deviations. It should be a scheduled document within the co-packing agreement, not a separate handshake arrangement.

Records, audit rights, and regulator communications. The contract must address who can access batch records, deviation reports, testing results, complaint files, supplier information, and CFIA-facing correspondence. The SFCR traceability rules require documents to be kept and, when requested, produced to the Minister within 24 hours in most cases. Both parties need to know who holds which records and who can produce them on that timeline.

Change control. Who approves ingredient substitutions, supplier changes, packaging changes, process adjustments, label revisions, and specification changes? What happens if a change is made without approval? This is one of the most common ways co-packing relationships slide from a clean commercial arrangement into a regulatory problem. Drift over time is harder to manage than initial allocation.

Recall obligations. The contract can allocate cost, cooperation, and notice mechanics between the parties. It cannot contract out of the underlying statutory duty of the relevant operator or licence holder to investigate, notify, and act under SFCR s. 82. The recall allocation must be consistent with the regulatory role allocation. (see [Product Recalls: A Practical Guide](https://food.gsjameson.com/food-safety/product-recalls).)

Formulation and IP. Ownership of the formulation, recipes, and process specifications must be addressed, including what happens on termination. The party that controls the formulation is often best positioned to shape critical PCP inputs, though the PCP obligations still track the actual regulatory role allocation.

Insurance. Product liability and recall insurance should be allocated with minimum coverage levels and evidence of coverage requirements.

Termination. What happens to existing inventory, work in progress, formulations, and regulatory registrations when the relationship ends?

## Common Failure Patterns

The agreement is silent on who holds the licence and who maintains the PCP. Both parties assume the other is handling it. The gap surfaces during a CFIA inspection or a recall.

The co-packer makes an ingredient substitution or process change without the brand owner's knowledge or approval. The product no longer meets the specification, the label, or the PCP. Neither party catches it until a complaint or a test result.

The brand owner cannot produce records to CFIA within the required timeline because the co-packer holds the records and the contract does not give the brand owner audit access or impose a production obligation on the co-packer.

## Where Counsel Fits

Counsel's value is in integrating the regulatory layer with the commercial terms. The regulatory framing (who is the operator, who holds the licence, who bears the PCP and recall obligations) constrains what the commercial terms can say. A co-packing agreement that allocates recall costs to one party while assigning the statutory obligation to the other creates an internal contradiction that matters when a recall happens.

GSJ&Co. drafts and reviews co-packing agreements for both brand owners and contract manufacturers. The firm's practice covers the regulatory role allocation, the quality agreement, records and audit provisions, change control, recall obligations, and the food-specific insurance and termination issues that commercial counsel typically do not address. Contact info@gsjameson.com or 647-638-3994.

## Primary Authorities

- Safe Food for Canadians Act (S.C. 2012, c. 24) and Safe Food for Canadians Regulations (SOR/2018-108): licensing (Part 3, ss. 26-43), investigation and notification (ss. 82-85), PCP requirements (ss. 86-89), traceability (ss. 90-92). https://laws-lois.justice.gc.ca/eng/acts/S-1.1/

- CFIA licensing guidance: determination of which party requires a licence based on who conducts the regulated activities.

CFIA labelling guidance: responsible-name requirements for the person who carried out or for whom the activity was carried out.

- Food and Drug Regulations (C.R.C., c. 870): compositional and safety standards. https://laws-lois.justice.gc.ca/eng/regulations/C.R.C.,_c._870/

Last updated: March 2026. This page is maintained by GSJ&Co. and updated when there are material changes to the regulatory framework governing co-packing and contract manufacturing.