Food Safety Regulations Series: China
Monday, December 18th, 2017
Food is certainly not a concept that is unfamiliar to any, but food safety regulations might be trickier to navigate. By Farah Nazurah
Food law is used to apply to legislation which regulates the production, trade and handling of food and hence covers the regulation of food control, food safety and relevant aspects of food trade. And different countries might have different food safety standards that exist to ensure safe and quality food production.
To better understand the food regulatory landscape in Asia, APFI has spoken to law firms that specialise in food law from five different countries across Asia, which include China, Thailand, Vietnam, Singapore and the Philippines. We hope that through this series, manufacturers in the food and beverage industry will have garnered a better understanding of food safety law and how to ensure their entire supply chain adheres to each respective country’s local food regulations.
In the first part of the series, we look at China. James Jiang and Jacob Harding, lawyers from McDermott Will & Emery China Office, share their advice.
Tell us a bit more about the firm.
MWE China Law Offices is a China-licensed law firm established in 2007 with its headquarters in Shanghai and an office in Beijing.
Since being founded, the firm has operated in strategic alliance with the international law firm McDermott Will & Emery. This was the first time that a western law firm established a formal joint-management relationship with a mainland Chinese firm. The firm now has more than 1,000 lawyers, 10 offices in the US, eight offices in Europe, and two offices in Asia, with its core businesses and branches located around the globe. Together, both firms have worked in an integrated manner on numerous high-profile cases in China and internationally.
We advise numerous multinational and domestic companies on food safety matters. Most notably, James H. Jiang, partner and head of the firm’s food, beverage and agribusiness practice group, handled numerous high-profile food safety cases, which led to the amendment of China’s Food Safety Law.
How do food regulation and registration vary depending on the product or category?
China's food safety regulatory system can be viewed from a vertical and horizontal perspective. The vertical perspective is the allocation of regulatory and supervisory power, while the horizontal perspective is the regulatory framework and how it operates.
Regarding the allocation of power, the China Food and Drug Administration (CFDA) assumes the function of the food safety supervising agency at the national level, and holds the main responsibility of providing unified supervision and administration of food safety and effectiveness during production, circulation, and consumption. At each local level, local Food and Drug Administrations exist to supervise and administer food safety at the local level.
Horizontally, the Food Safety Law that was recently revised in October 2015 is the baseline of the food safety regulatory framework in China and provides the basic structure for food safety. Local governments further define and develop detailed provisions as the specific local circumstances require, such as the Shanghai Food Safety Regulation. There are also distinct food safety standards issued for different categories of food products.
Prior to the Food Safety Law, the supervision of food safety emphasised pre-approval but lacked regular market supervision. Under the current law, the emphasis is on ongoing supervision and strict punishment for violations. This change allows for quicker implementation of new projects, but increases the needs for legal compliance reviews to limit risk exposure for violations of the law and other applicable regulations.
The Food Safety Law utilises a licensing system for the production and business operation in the food industry. Regarding production, the Administration of Food Production Licensing Measures divides food products into 31 categories, including processed grain, edible oil, meat, dairy, beverage, cookies, frozen food, candy, liquor products, etc., of which each category is subject to special regulations for the production license.
The Administration of Food Distribution Licensing Measures divides food distribution into the 10 categories, including sales of pre-packaged food, bulk food sales, special food sales, and other food sales, and requires food business owners to register for food distribution licenses.
Have you seen a growth in the number of food and beverage companies entering the market in China?
In recent years, there have been a number of developments that have led to rapid and consistent growth in the food and beverage industry, particularly the increased discretionary income and demand of Chinese consumers in conjunction with technological developments. Consider, for example, in 2018, China’s imported agricultural products market is expected to grow to US$150 billion and China’s imported food market is expected to grow to US$80 billion.
These trends have made the country one of the most critical markets for the food and beverage industry. Thus, we have seen a consistent increase in food and beverage companies entering the China market, with mixed results due to the nation’s unique factors, including the legal environment and consumer profile.
The companies that we have seen have recent success share a number of common themes: understanding of the legal environment, successful localisation of leadership, and adapting to the local e-commerce practices.
China’s food safety regulatory landscape is not the same as in other jurisdictions and companies that focus on and make efforts to avoid the China-specific risks are at an advantage. In terms of business, we have seen a trend in recent years for localisation of leadership and sales staff (as well as product sourcing) of imported food brands. This helps these companies better meet the needs of the local market and, when done successfully, has allowed those companies to quickly gain a large share of the Chinese market.
The most recent market disruption has been the rise and impact of e-commerce. China has an extremely developed e-commerce system and consumers have significant expectations for the speed of delivery and increasing expectations of product quality. We are seeing more foreign and domestic companies entering the market with a specific target on their e-commerce.
What regulatory hurdles should manufacturers be aware of when entering the food market in China?
China’s food safety regulatory environment operates differently than many other jurisdictions in the world and focuses on the country’s unique features. Moreover, there is a massive amount of laws and regulations relevant to food and beverage—China’s national standards alone currently include more than 1,200 items, and this does not account for the provincial, local, industrial standards, etc. The legal requirements related to food tend to be rigid and technical, with strict penalties for violations, as well as potential civil liabilities. Thus, it is important for companies to work closely with experienced counsel to limit risks.
This can be illustrated with two common issues we see in our practice: food label compliance and professional consumers. The Food Safety Law provides detailed and strict provisions regulating food labelling, and China’s advertising law also has rigid restrictions regarding packaging and marketing language. It can be challenging for companies to avoid errors on food labels, which creates a compliance risk for a technical violation with limited damage.
Professional consumers tend to be well educated in the food safety laws and regulations, target companies and products, make purchases, and then sue for compensation based on technical violations. The current Consumer Rights Protection Law provides for civil penalties up to three times the price of the products and the current Food Safety law provides for civil penalties up to ten times the price of the unsafe food products. This is a constant threat to those in the food and beverage industry because of the amount of laws with which the products have to comply.
In addition, because of the particular food safety risks in this industry in the country, it is important for companies to review their contracts with suppliers and distributors, with a specific focus on the Food Safety Law.
Do you foresee any major changes in China’s food industry in the next five to ten years?
Food safety is one of the most important issues in China and consumers are very sensitive to these issues. The legal environment in the food and beverage industry is developing quickly and will reflect the consumers’ as well as society’s concern for food safety. In the next five years, China will enact more than 300 national standards related to food safety.
We can expect that the legislative bodies will have to work to keep up with changes in the industry and market consumption. For example, there is currently a trend for e-commerce platforms to develop ‘fresh’ distribution combined with brick-and-mortar shops. Both the e-commerce and food safety issues will need to be regulated. Thus, there will likely be a blending of regulation related to such platforms, distribution, storage, and food safety.
Are there any other thoughts you would like to share with our readers?
The China food and beverage industry is an important market and the consumers have grown to be extremely picky. The Chinese consumer wants fresh, high-quality, and fashionable food products. This creates opportunities and challenges for companies in the market. The best piece of advice we can give is to consult with a lawyer specialised in food safety to navigate the legal environment because the market itself provides enough challenges for a company to be successful.
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