China Food Law: Year in Review 2016 - Out with the Monkey, In with the Rooster: A look back and a look ahead on China's Food Safety System
A version of this article was also published on Law360, to read that version, click here.
In China, 2016 may have been the Year of the Monkey, but the Chinese authorities were not monkeying around with the food industry when it published many of its revised and updated food safety laws and standards. President Xi Jinping clearly raised the bar when he announced that food safety is now a top priority in China; he followed up his comments with what is now commonly referred to as the "Four Most Rigors": (1) the most rigorous standards; (2) the most rigorous scrutiny; (3) the most rigorous punishment; and (4) the most rigorous accountability. The continued implementation of China's amended Food Safety Law ("FSL") and publication of hundreds of revised and updated food safety standards completes the Year of the Monkey, and with the start of the Year of the Rooster, we are likely to see the "Four Most Rigors" put into action.
At the central level, a Draft Implementing Regulation of the Food Safety Law [1], which provides further requirements to implement the FSL, was published for public comment in October 2016 (See detailed review of the Draft in our prior CRM Alert- Last Chance to Comment on China's Implementing Regulation of the Food Safety Law). At the local level, some governments (e.g., Shanghai [2] and Shenzhen [3]) also issued their own FSL implementing measures to accommodate to the local practice. These regional measures sometimes contain additional requirements which impose a heavier regulatory burden on the food industry.
We summarize below some of the most important regulatory changes that took place in 2016, followed by the changes that we can expect to see in 2017. For instance, great effort has been made to regulate food imported via cross-border E-commerce (CBEC) and online distribution. Reforms have been carried out in the sectors of health food, infant and young children milk powder (hereinafter "baby formula"), and food for special medical purposes (FSMP) to ensure product safety and quality.
- Classification of food safety risk, as indicated in the FSL,[4] is the cornerstone for the management of food production and operation in China. On September 9, 2016, the China Food and Drug Administration (CFDA) published Administrative Measures for the Risk Classification of Food Production and Operation ("Measures"),[5] which provides guidance on how to classify safety risks associated with different food producers and operators. The classification results will impact the frequency, methods as well as target of inspections by local food agencies. For example, a food producer classified as highest risk level will be inspected at least 3 to 4 times a year.
- Credit status of a food producer/operator becomes more and more important for doing business in China, as it will have a long-term impact. Notably, the credit information of a food producer will be shared with banks and tax departments which may, conceivably, impact a company's financial performance. Details to evaluate credit status of a food company have been established both at the central[6] and local levels.
- New food production and operation licensing system has been built up in the amended FSL under which the previous food distribution license and restaurant service license are now combined and subject to one food operation license. Specific requirements, including some local measures (e.g., Shanghai[7]), for obtaining a license under the new system have become available.[8]
- Routine and unannounced food supervision and inspection has been intensified by the Central Government. For example, beginning on May 1, 2016, inspection on food catering service providers may focus on their control of food raw materials, management and publication of their use of food additives.[9] Unannounced inspection can be performed after the reporting of food safety complaints.[10] A table that summarizes priority inspection items for food producers and operators was published by CFDA in May 2016.[11] Some innovative administrative measures were developed, including allowing food agencies during inspection to use non-GB standardized supplementary test methods.[12]
- Food Traceability is another focal point of food safety management by the Chinese Government. In early 2016, the Office of State Council directed [13] the expedition of establishing a baby formula traceability system, and CFDA followed by issuing a notice[14] regarding the guidance of recordkeeping by baby formula producers. CFDA also issued a draft Guiding Opinion on risk control and recordkeeping in general food production and operation,[15] which aims to achieve full traceability of baby formula, vegetable oil, wheat flour and rice by the end of 2020.
- Cleanup of national food safety standards continued in 2016. The national food safety standard (also known as "GB" Standards) system has been further optimized to cover all food categories and major hazardous factors through a process of consolidation, optimization, deletion and revision of approximately 5,000 food related GBs. So far, more than 1,000 new national food safety standards have been published.[16]
- Food importers are now issued an Inspection and Quarantine Certificate for Entry Commodity once their product passes the inspection and quarantine procedures at port. Importers are obligated to conduct audits on overseas food exporters and producers. When imported food is found non-compliant with applicable GB standard(s), the importer must stop the import and recall the product.[17] The Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) maintains a blacklist of overseas food producers, exporters and Chinese importers based on their import/export records and compliance of the products exported to China.[18]
- Food distributed online remained in the regulatory spotlight in 2016. Various rules have been drafted to regulate foods sold via these unconventional channels. CFDA published Investigation Measures on Illegal Behavior against Online Food Safety,[19] which targets online food distribution throughout the country. The document specifically discusses what product information and marketing claims may or may not be declared online.
- GMO issues are always among the hot topics of public debate in China. In 2016, the Ministry of Agriculture (MOA) amended the Regulations on Administration of Agricultural Genetically Modified (GM) Organisms Safety[20] and the safety evaluation guidelines for GM plants and microorganisms. Safety evaluation guidelines for GM animals also were issued. MOA also commented on several issues surrounding GM products, including its potential consideration of establishing a specific tolerable limit to mandate GM labeling and detailing rules for claiming "non GMO".[21]
- Management of Cross-border E-commerce (CBEC) has been reshaped by a series of new policies adopted by the Chinese Government in the spring of 2016. While the reforms mainly focus on adjustment to applicable tax policies last April, China published the List of Products Eligible for CBEC (known as the "Positive List" by the industry) in two batches to clarify products that can or cannot be imported through CBEC. These new rules have completely changed the regulatory landscape of CBEC and brought significant changes to the industry, such as demanding approvals for special foods and cosmetics, as well as medical devices (please see our prior CRM Alert- Regulatory Landscape of Cross-Border E-Commerce in China Enters a New Spring for more details of the reforms). CBEC policies and practices may vary at the local level. Industry is advised to closely monitor the local regulatory developments.
- Health foods are subject to "two-track" system review (i.e., registration and notification) under the new regulatory scheme in China. CFDA published the Measures for the Administration of the Registration and Notification of Nutrition Supplements (entered into force on July 1, 2016) which set forth the basic procedural requirements for health food registration and notification. Several supporting (draft) guidance documents have also been published in 2016 to implement this "two-track" system, such as the draft Catalogue of Health Food Ingredients (1st Batch), draft Catalogue for the Auxiliary Materials, and Opinions on the Management of Health Food Functional Claims (please see our prior CRM Alert- China Announces New Draft Regulations on Health Foods for more details), and draft Working Rules for Health Food Notification.
- Baby formula products became one of the targets in CFDA's regulatory developments in 2016. In addition to the existing manufacturing site registration, recipe registration was newly required. Small and middle-sized baby formula producers face great difficulty surviving and, if they cannot meet the new requirement, they may find it difficult to remain in the market after 2017, when the grace period for recipe registration elapses. In addition, CFDA strengthened their scrutiny on the labeling of baby formula. They asked infant formula producers to conduct self-inspection of product labels.[22] Overseas producers were instructed to submit their self-inspection results via their sales agency to the local FDA within 15 days after the self-inspection is completed.
- Foods for special medical purposes is a new focus of China. Pre-market registration of FSMP with CFDA became mandatory on July 1, 2016. Registration guidelines are included in the Administrative Measures for Registration of Formulated Foods for Special Medical Purposes.[23] Domestic producers must file for registration before applying for their FSMP production permits (please see our prior CRM Alert- CFDA Measures on Foods for Special Medical Purposes Take Effect for more details of the Measures).
- Food packaging materials continued to be one of the targets for regulation and standard optimization of the Chinese authorities. In 2016, the Chinese Government took a major step forward in the evolution of its food-contact regulatory scheme by finalizing a number of important new Standards, including GB 9685-2016 Standard on the Uses of Additives in Food Containers and Packaging Materials. These Standards contain some additional changes from the draft versions and most of them will take effect on April 19, 2017 (except GB 4806.1-2016 and GB 9685-2016, of which the effective date is 6 months later, i.e., October 19, 2017) (please see our prior CRM Alert- All Wrapped Up: China Finalizes Long-Awaited Standards for Food Packaging for more details of finalized new standards applicable to food-contact materials marketed in China).
Looking ahead to 2017
After two versions of the draft Implementing Regulation of Food Safety Law were provided to the public for comments,the finalized version should be published in 2017. Accordingly, a range of draft regulations has been published at the beginning of 2017 to guide the implementation of the FSL and strengthen food safety management, such as the long-awaited CFDA rules to detail health food notification,[24] management measures for recipe registration of baby formula,[25] regulations to govern online catering services,[26] inspection norms for production license of FSMP,[27] as well as the measures to investigate and punish food safety fraud.[28]
Meanwhile, we expect to see more GBs being revised and published in 2017. Notably, some key food standards are under revision and encompass all food categories, e.g., GB 14880-2012 Standard for the Use of Nutritional Fortification Substances in Foods, GB2760-2014 Use of Food Additives and GB7718-2011 Labeling of Prepackaged Foods. Product specific standards, such as GB 10765-2010 Infant Formula and GB 25192-2010 Processed Cheese,[29] also are on the list of standards to be amended.
2017 is also likely to be the year in which the industry receives answers to how the new CBEC policy is going to roll out, as the grace period will elapse by the end of the year. It still remains unclear at the moment whether any flexibility will be created for the custom clearance of products distributed via CBEC and whether standard conformity and Chinese labeling will be mandated on CBEC products after 2017.
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We will, of course, provide further updates as the regulations develop. Should you have any questions regarding food safety laws in China, please do not hesitate to contact David Ettinger (ettinger@khlaw.com), Jenny Li (li@khlaw.com) or Yin Dai (dai@khlaw.com) at Keller and Heckman's Shanghai Representative Office, or your ordinary contact at Keller and Heckman LLP.