Fonterra is reviewing its rules for milk powder resellers in China, after 19 people were arrested for on-selling milk powder that should have been thrown out.

Fonterra says it does not know if anyone has fallen ill from consuming its expired milk powder, as the NZ dairy giant tries to come to terms with the latest scandal to engulf the Chinese food industry.

Chinese police on Monday (NZT) arrested 19 people in Shanghai for selling about 300 tonnes of expired Fonterra milk powder, Shanghai Daily reported.

The suspects were allegedly managing a company, which was packaging expired products of the New Zealand dairy company - one of the most popular brands in China - into smaller packages for resale below market prices, according to media reports.

FAIRFAX The suspects were allegedly managing a company, which was packaging expired products of New Zealand dairy company Fonterra.

After a months-long investigation, the police discovered that one of the suspects sold the expired products to another company, who in turn allegedly resold almost 200 tonnes to distributors in Shanghai and in the Jiangsu, Henan and Qinghai provinces, who sold them on e-commerce platforms or in wholesale.

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SUPPLIED Fonterra milk powder being bagged at Waikato's Te Rapa processing plant.

The authorities have seized 100 tonnes of these products and have shut down the websites selling them.

Fonterra spokeswoman Maree Wilson said on Monday night it supported the enforcement steps taken by Chinese officials.

"The Chinese authorities have acted strongly and swiftly to investigate and arrest the people they believe are responsible for this and we fully support their actions.

"Food safety is our top priority and we are committed to providing safe and high quality dairy products.

"We work actively with our direct customers to ensure the integrity of our products. This includes providing guidelines on how to manage expired product in a responsible way.

"In this case there appears to have been criminal activity much further along the supply chain.

"While we believe this is an isolated criminal incident, we are reviewing the case internally."

It's the latest scandal to hit China's beleaguered food industry, where food safety incidents, including sale of adulterated or expired products have been on the rise.

The dairy sector has been among the worst affected by such incidents.

In 2008, six babies died and 300,000 were affected by melamine-contaminated baby milk powder produced in China, prompting many Chinese citizens to begin turning to foreign milk products.

Fonterra milk products were pulled off shelves in 2013 when it emerged they were potentially contaminated with botulism.

Testing showed the risk of botulism never existed and none of the products were contaminated, but the false alarm prompted a review of New Zealand's food safety system.

Wilson said Fonterra was not directly involved in this case - the issues related to alleged criminal activity much further along the supply chain - and the company was alerted to the issue by Chinese media reports.

Wilson said that, to Fonterra's knowledge, the milk powder was not being resold with Fonterra packaging.

It was not aware of anyone falling ill as a result of consuming the expired milk powder, she said.

*Audio courtesy of RNZ