The by-products, which are used for animal feeding, were found to contain high levels of dioxins.
As a result, the European Rapid Alert System for Food and Feed was immediately activated. All movement of animals from 162 farms in the Netherlands, eight in Belgium and three in Germany, which received the animal feed, has been blocked by the authorities.
The national authorities of the Member States concerned are currently tracing the food chain. According to the European Commission though, consumer health and safety has not as yet been called into question.
Tracing the products through the food chain has revealed that the Dutch company used so-called potato separator clay from a German company to separate high-quality potatoes from lower quality ones.
This clay was found to be contaminated by dioxins and appears to have in turn contaminated the potato by-products.
Sampling and analysis of the potato by-products delivered to the farms as well as of the farms' products of animal origin is ongoing. Results should disclose in the coming days whether restrictions on some farms can be lifted. So far, analysis of the Dutch company's potato products intended for human consumption indicates that they do not contain unacceptable levels of dioxin.
"Member State authorities and the Commission are co-operating closely to ensure that safety of consumer is not jeopardised," said commissioner David Byrne on Friday.
"Together we will act swiftly yet responsibly. So far, our system of traceability and alert notifications is working well. It is vital that the confidence of the consumer in our food chain is maintained."
The commission has also asked for the distribution list of the German clay company to verify whether more food operators purchased the clay to separate foods. In addition, the commission has requested all Member States to investigate whether separation processes using clay are current practice within their territories.
The discovery of contamination at the Dutch plant and the subsequent tracing operation is a timely reminder that European Union traceability legislation for food products comes into effect in January 2005.
The new regulations from Brussels require traceability for the stages directly preceding and following each stage in the value-adding chain. This means that companies need to have in place a system that enables them to quickly and comprehensively trace products throughout the supply chain.
The European Commission has also taken steps to improve visibility of the supply chain. It recently introduced TRACES, an IT system designed to improve the management of animal movements both from outside the EU and within the EU.
The system is designed to simplify existing systems and create better tools for managing animal disease outbreaks.
The new database is designed to reduce red tape for both economic operators and competent authorities. For example, a consignment of animals moving from Spain to Italy via France can be managed with TRACES using just one electronic form rather than the separate systems and paperwork that would previously have been involved.
For example, if a dealer is transporting a consignment of cattle from Spain to Italy via France, he can fill in all details of the consignment online, sending this electronic form to the relevant Spanish competent authority. The electronic form is controlled and if the animals comply with the relevant requirements, the form is validated.
As soon as validation is given, TRACES sends the information to the competent authority at the destination, to the central competent authority in France and to all staging points, so that controls can be made en route and at the final destination. In case of a disease outbreak, it is easy to trace the consignment backwards and forwards. TRACES will therefore create a single central database to track the movement of animals and certain types of products. THE EU says that this will improve the amount and quality of information to trace animal movements, along with the exchange of information between national and EU authorities.