This column is intended to help our readers get to know the AmCham Shanghai committee heads. In this issue, we talk with David Ettinger, managing partner for Keller and Heckman law Firm. He is the chair of the AmCham Shanghai Food, Agriculture & Beverage Committee.
The United States FDA Food Safety Modernization Act goes into effect in 2017. What does this mean for China’s food market?
FDA’s Food Safety Modernization Act (FSMA) and implementing rules will have a widespread impact on companies exporting food to the U.S. For example, the new Foreign Supplier Verification Program (FSVP) under FSMA establishes a set of requirements, which directly or indirectly impact Chinese companies exporting food to the U.S. For instance, a supplier in China exporting foods to the U.S. may receive a request from the U.S. importer to conduct an on-site audit as part of the importer’s obligations under FSVP. Under the FSVP program, the definition of “food” includes food packaging materials, so companies in this sector will be subject to the same requirements.
The Chinese government has done a lot to guide the industry here to meet the U.S. FSMA’s requirements. For instance, the Certification and Accreditation Administration of China published a Chinese translation of the FSMA documents, and various educational seminars are being organized. This past April, experts from the U.S. Food Safety Preventive Controls Alliance and Chinese Academy of Inspection and Quarantine jointly conducted a FSMA training session in Beijing. Trainings like this should greatly enhance compliance awareness of the new U.S. laws for Chinese companies exporting food to the U.S..
China’s Food Safety Law was revised in 2015 with stricter regulations for food safety. In what ways has China cracked down and are they working?
The new FSL puts a fair amount of emphasis on record keeping and traceability, the concern being, when there is a food safety problem, it becomes important to identify its source and to control the outbreak. Much of the language in the FSL was already in the 2009 version, but the new law put more requirements into place and implemented more severe penalties for failure to comply. One area of notable interest is that the FSL not only put more accountability on the industry, it also deals with false or exaggerated media reports by including language that will hold the media accountable, including dismissal of employment and if the news is reported and later found to be false or based on unsubstantiated rumors. This is particularly important because a company’s brand is, for obvious reasons, critical, and too often companies are finding themselves reported in the media for allegations that turn out not to be true. Such false reports spread quickly and can have a severe impact on a company’s reputation and business.
The new FSL also puts more attention on the management of baby formula milk powder and expands its regulatory scope to cover food traded online. For example, the soon-to-be established baby milk powder formulation registration mechanism will greatly reduce the number of formulations and brands that are currently on the market. Only those players with the capability to control product safety and quality will remain in the market.
Food safety is, of course, always a top concern, but I think the new Food Safety Law attracted a lot of media attention and put it under a greater spotlight. As a food lawyer, I have received many questions since the new law was released that likely should have been asked years ago, so at least the question and dialogue are front and center. Many foreign companies have entered China assuming that if their ingredients are legal, for example, in the U.S. or EU, they must be legal here, but that’s simply not true. There are many ingredients that are legal elsewhere, but prohibited in China. I have found that if companies want to succeed in China, they must have flexible business models, which may include product reformulation.
I do think the ‘crack down’ as you put it, is working. You see this in different ways, however. For example, more and more companies are conducting self-inspection on factory operations on a more frequent basis and taking corrective measures, when needed, to improve food safety management.
In addition to industry response to the stricter regulations, consumers are taking action to ‘oversee’ food safety. If you just look at what’s going on in Shanghai, the Shanghai FDA has reported that it received about 300,000 complaint calls related to food safety via its hotline since it was set up about four years ago. The agency also reported that, when the complaints led to violations of food safety, it has issued rewards to over 3,400 individuals worth nearly RMB2.4 million.
Many multinationals in China, such as Walmart, have increased spending on their own food inspections. With the newest set of regulations, is this standard practice still necessary?
At this point, I believe it is still very good practice to invest time and money in food inspection programs – this eventually should lead to suppliers taking on their own individual responsibility. If a supplier knows that they are going to be inspected by their customers, they are more likely to get it right on their own so that they can continue the supplier-customer relationship. This should continue until the recognition and observance of food safety becomes more a part of the everyday mindset.
It’s worth noting that the new Food Safety Law, in fact, requires that food producers and operators establish a food safety self-check system and conduct routine inspection and evaluation of the food safety conditions. In this regard, self-inspection is actually mandatory for a food operator.
Is there an uneven playing field when comparing domestic and international companies’ experience with the Food Safety Law?
There is definitely an uneven playing field. In my experience, the implementation of these laws is very inconsistent, which is one of the biggest challenges in operating a business in China. Local authorities often have different interpretations of the law. I see this most in the area of the “professional consumer.” This is the consumer that makes a living reporting typically foreign products that allegedly do not comply with the regulations. We have seen many foreign companies summoned into local FDA offices for allegations that are often innocuous issues that usually relate more to technical noncompliance than a health or safety concern – like when the font size on the label is not correct. I’m not seeing this happen to domestic companies. Professional consumers are likely targeting foreign brands because they know they have the deep pockets.
Is there language in the new law to prevent this kind of bounty hunting among professional consumers?
Yes, there is. Previously, a successful claim raised by a professional consumer could receive ten times the value of the product they purchased. Under the new law, that amount will not be rewarded unless the claim reported is related to food safety and misleads consumers. I think this is a very good change because it shows that the authorities were seeing some abuse here and, while the eyes and ears of consumers is important and can help foster food safety, the system also needs to be fair to the industry.
In recent years there has been more awareness of cadmium levels in China’s waterways and rice paddies. Is China taking this seriously enough?
There have been various reports of high levels of cadmium and heavy metals, much of which can occur naturally in the soil – so the adage ‘it’s the dose that makes the poison’ is important here. While I don’t know all of the details of what actually occurred, I do know China is responding to it. The new Measures for the Supervision and Administration of Marketing of Edible Agricultural Products went into effect on March 1, 2016, and these measures specify supervision responsibilities for central and local government agencies, and highlight obligations for operators and sellers of edible agricultural products to ensure safety and quality. So, for example, rice manufacturers now need a certificate of origin to ensure that the rice is manufactured properly. I’m optimistic that the situation will improve.
How can AmCham contribute to improved food safety in China?
It’s important to continue to promote conversation and dialogue within membership. I was at a recent industry event where a food processor explained that his company rewards its employees with cash bonuses when they take action to help improve safety and sanitation in the plant. I think that’s a great idea because it shifts the model from ‘whistleblower’ to giving employees incentives to help the company do better and help play a more proactive role in making sure daily operations are resulting in the highest level of food production and safety. This is the kind of idea that we can learn from engagement with each other – AmCham creates a forum for engagement and open dialogue, and we all benefit from that.