The Ministry for Primary Industries announced yesterday it had revoked export certificates for products made from two batches of lactoferrin produced by Westland Milk Products after testing by Chinese authorities found elevated nitrate levels - which were not picked up in testing in New Zealand before the product was sent.
The announcement comes after the Government asked lawyer and director Miriam Dean to chair the Government review into the Fonterra food scare.
The inquiry will be jointly led by Primary Production Minister Nathan Guy and Food Safety Minister Nikki Kaye.
The ministers issued a statement yesterday stating it would be ''a joint ministerial-led government inquiry'' divided into two parts.
The first part would look at how the potentially contaminated whey protein concentrate entered the New Zealand and international markets and how it was addressed.
The other part would look at regulatory best practice requirements, including the response of regulators.
The inquiry would report back on any recommended legal, regulatory or operational changes, they said.
Following the latest incident, Mr Key said the products posed no food safety risk and all the lactoferrin had been traced and quarantined in China.
He did not know why testing in New Zealand had not picked up the elevated nitrate levels before the products were exported, which would be investigated.
However, the latest development comes after China put in place import bans on Fonterra whey powder and set up greater testing of other dairy products from New Zealand in the wake of the discovery some Fonterra whey was contaminated with a bacterium that causes botulism.
Mr Key said the lactoferrin problem was a different issue to that posed by the botulism scare because it was not a food safety issue and the products had not reached consumers.
''But it is certainly unhelpful and couldn't come at a worse time. Clearly, we are operating in a more sensitive environment, so it's particularly unhelpful.''
The Chinese authorities were working closely with New Zealand and had so far treated it as a technical breach of export regulations rather than a food safety issue.
Labour primary industries spokesman Damien O'Connor said the revocation of the export certificates showed the extra scrutiny New Zealand was under.
''It is terrible timing when New Zealand's reputation is already on the line. The public must be assured New Zealand products are being tested to the highest standards and accurate beyond challenge.''
Primary Industries Ministry acting director Scott Gallacher said the affected products had all gone to China in exports by Westland Milk and Tatua Co-operative Dairy, which had used some of the lactoferrin in their products.
Ministry staff had visited Westland's factory and the problem appeared to be an isolated event.
• An emergency Work and Income grant was given to a concerned infant formula buyer in Dunedin after the Fonterra botulism contamination scare earlier this month.
A Ministry of Social Development spokesman said the Work and Income special needs grants covered the cost of returning recalled infant formula or buying new infant formula.
The grants were available to New Zealanders with urgent and necessary needs who had no other way to meet emergency costs, he said.
The grants did not have to be repaid.
The amounts paid for the product recall were not available.
